What changed in this filing

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Item 1. Legal Proceedings

2024-04-24 compared with 2023-10-25 · 195 added, 216 removed, 420 unchanged (49% of the section changed)

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Patent Litigation

On June 6, 2019, we filed a patent infringement lawsuit against a competitor, NXP, USA Inc., and on October 4, 2019, NXP USA, Inc.

and its parent NXP Semiconductors N.V., filed a patent infringement lawsuit against us.

Both we and NXP subsequently filed additional lawsuits against each other.

While two of these lawsuits have gone to trial and verdicts have been rendered, the ultimate outcome of our patent dispute with NXP remains uncertain, and we may file additional lawsuits against NXP USA, Inc.

and/or its parent or they may file additional lawsuits against us.

Between 2019 and 2023, we were engaged in multiple patent lawsuits with subsidiaries of NXP N.V., or NXP, our primary endpoint IC competitor.

On March 13, 2024, we and NXP entered into a Settlement and Patent Cross-License Agreement dated March 13, 2024, or the Settlement Agreement which resolved all outstanding litigation and proceedings between us.

For further information on these lawsuits, please refer to Note 6 of our condensed consolidated financial statements included elsewhere in this report.

Ris k Factors.

You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

and our financial statements and related notes.

If any of the events described in the following risk factors and the risks described elsewhere in this report occur, then our business, operating results and financial condition could be materially impacted.

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We operate in a very competitive market.

Our principal current competitors are:

in endpoint ICs, NXP, EM Microelectronic, Kiloway, Quanray, Fudan Microelectronics Group and Alien;

in reader ICs, ST, Phychips, Iotelligent and MagicRF;

in readers and gateways, Zebra.

Our primary competitors are:

• Endpoint ICs:

NXP, EM Microelectronic, Kiloway, Quanray, Shanghai Fudan Microelectronics Group, Alibaba and Alien.

• Reader ICs:

Phychips Inc, Shanghai Fudan Microelectronics Group and MagicRF.

• Readers and gateways:

• Test and measurement systems:

These competitors include companies that have much greater financial, operating, research and development, marketing and other resources than us.

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Further, the Chinese government has made development of the Chinese semiconductor industry a priority, potentially increasing competition for us globally while possibly restricting our ability to participate in the Chinese market.

RAIN adoption is concentrated in key industries and the extent and pace of RAIN market adoption beyond those industries is uncertain.

Our financial performance depends on the pace of end-user RAIN adoption in key industries such as retail apparel, our largest market, retail general merchandise and SC&L.

Although RAIN has been adopted to some degree by end users in those industries, those end users as well as the industries themselves are subject to business cycles and macroeconomic trends.

Continued RAIN adoption by those end users and in those industries may be at risk if and when downcycles occur.

Outside those key industries, the RAIN market is still developing.

RAIN adoption, as well as adoption of our platform and products, depend on many factors, including the extent to which end users understand and embrace the benefits that RAIN offers;

whether the benefits of RAIN adoption outweigh the cost and time to replace or modify end users’

existing systems and processes;

and whether RAIN products and applications meet end users’

current or anticipated needs.

We have, at times, anticipated and forecasted a pace of end-user adoption that exceeded the actual pace.

RAIN adoption is concentrated in key markets and the extent and pace of RAIN market adoption beyond those markets is uncertain.

Our financial performance depends on the pace of end-user RAIN adoption in key markets, such as retail apparel, our largest market, retail general merchandise and SC&L.

Although RAIN has been adopted to some degree by end users in those markets, those end users as well as the markets themselves are subject to business cycles and macroeconomic trends.

Continued RAIN adoption by those end users and in those markets may be at risk if and when negative business or economic conditions arise.

The RAIN opportunity is still developing.

RAIN adoption, as well as adoption of our platform and products, depends on many factors, including the extent to which end users understand and embrace the benefits that RAIN offers;

whether the benefits of RAIN adoption outweigh the cost and time to replace or modify end users’ existing systems and processes;

and whether RAIN products and applications meet end users’ current or anticipated needs.

We have, at times, anticipated and forecasted a pace of end-user adoption that exceeded the actual pace of adoption.

We expect continued difficulty forecasting the pace of adoption.

As a result, we may be unable to accurately forecast our future operating results including revenue, gross margins, cash flows and profitability, any or all of which could negatively impact our financial performance.

We are expected to introduce new products and product enhancements on a regular basis.

We must regularly introduce new products and product enhancements to compete effectively.

We introduce new products and services to advance our business, satisfy increasingly demanding end-user requirements and grow RAIN market adoption.

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Whether our new products and services will succeed is uncertain.

Our success in developing the technologies, processes or capabilities necessary or desired for new or enhanced products and services, or licensing or otherwise acquiring them from third parties, and our ability to introduce new products and services before our competition, depends on many factors, including:

our ability to identify new product capabilities or services that will be widely adopted;

Our success developing the technologies, processes or capabilities necessary or desired for new or enhanced products and services, or licensing or otherwise acquiring them from third parties, and our ability to introduce new products and services before our competition, depends on many factors, including:

• our ability to identify new product capabilities or services that end users will widely adopt;

• our timely and efficient completion of the design process;

• our timely and efficient implementation of manufacturing, assembly and testing procedures;

our attainment of appropriate product or service performance levels and product certification;

• our attainment of appropriate product or service performance levels and product certifications;

• partnering successfully with others to deliver complementary products or services;

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• the effectiveness of our marketing, sales and service.

When we introduce new products, our success in ramping adoption depends, in part, on us making those products easy to deploy by our partners and their end users.

For example, for our new M700-family endpoint ICs and E-family reader ICs, we continue supporting our partners to produce high-performing, high-quality products.

When we introduce new products, our success in ramping adoption depends, in part, on us making those products easy for our partners and end users to deploy and use.

For example, for our new M800-family endpoint ICs, we are currently significantly supporting our inlay partners to produce high-performing, high-quality inlays.

Until our partners are able to deploy our products widely, adoption and our operating results could suffer.

Our abilities to deliver platform solutions at scale are nascent.

Our abilities to deliver enterprise solutions at scale are nascent.

We believe we are still at a very early stage in our ability to deliver enterprise solutions.

We are developing solutions for retail self-checkout and loss prevention and SC&L package routing that have been, or that we expect to be, deployed by the industry-leading enterprise end users for whom we are developing the solutions.

We are developing solutions for retail self-checkout and loss prevention and SC&L package routing that have been, or that we expect to be, deployed by the industry-leading enterprise end users.

However, to fully capitalize on our platform's potential, we must make our current offerings repeatable across multiple enterprises as well as deliver additional solutions to enterprise needs.

If we do not succeed in identifying, developing and deploying enterprise solutions across a range of industries and customers, then our business prospects will suffer.

Delivering solutions that address enterprise needs requires a network of partner products and services that complement our own product offerings and that together address complex enterprise needs.

Convincing enterprises to engage us to solve their business problems –

including evaluation, design, deployment, operations and partner services, including leveraging RAIN data into the enterprise's information systems, requires tight coordination among our and our partners' sales, marketing, operations and engineering teams.

Although we today have partners who successfully introduce our platform, or aspects of it, to their customers, their knowledge of our platform and RAIN in general is still nascent.

We must also develop relationships with top-tier solution partners to gain access to and address challenging new use cases.

If we do not succeed in identifying, developing, selling and deploying enterprise solutions, particularly solutions that rely on autonomous reading, with top-tier partners and across a range of markets and end users, then our business prospects will suffer.

Delivering enterprise solutions requires a network of partner products and services that complement our own product offerings and that together address the enterprise needs.

Convincing enterprises to engage us to solve their business problems – including evaluation, design, deployment, operations and services, as well as integrating RAIN data into the enterprise's information systems, requires tight coordination among our and our partners' sales, marketing, operations and engineering teams.

We, or our partners, may be unable to successfully acquire customers for our enterprise solutions, or successfully address our market opportunity.

Although we today have partners who can successfully introduce our platform, or aspects of it, to their customers, their knowledge of our platform and RAIN in general is still nascent.

If we do not build our network of solutions, and partners to deliver those solutions, and broaden our efforts to deliver solutions that leverage our platform in large, complex enterprise opportunities, then our business prospects will suffer.

We rely on endpoint IC sales to generate most of our revenue.

We derive, and expect to continue to derive, most of our product revenue from our endpoint ICs.

We derive, and expect to continue to derive, most of our revenue from our endpoint ICs.

If demand declines, or if we are unable to procure enough wafers to meet the demand we have, or if we are unable to raise prices to offset cost increases, then our business and operating results will suffer.

In addition, the continued adoption of, and demand for, our existing endpoint ICs, as well as for our new endpoint ICs, derives in part from our ability to continually innovate and to demonstrate the benefits of using our endpoint ICs with our reader ICs, readers and gateways.

If we fail to establish the benefits of using our endpoint ICs with our platform, then we may be unsuccessful in countering competitive pressures to lower prices for our endpoint ICs and our business and operating results could be adversely affected.

The selling prices of our products could fluctuate substantially.

The ASPs of our products has historically decreased with time, to meet end-user demands, to encourage adoption, to address macroeconomic conditions or to respond to market pressure from our competition.

However, that trend is not constant and we have

also increased prices from time to time.

Although we expect further price decreases in the long term, we raised prices in 2021 and 2022 to accommodate higher product costs.

In addition, the continued adoption of, and demand for, our endpoint ICs, derives in part from us demonstrating the benefits of using our systems.

If we fail to establish those benefits then we may be unsuccessful in countering competitive endpoint IC price pressures and our business and operating results could be adversely affected.

The average selling prices of our products could fluctuate substantially.

The average selling price, or ASP, of our products has historically decreased with time or to meet end-user demands, encourage adoption, address macroeconomic conditions or respond to competitive pressure.

As demand for older products declines, or as competition from competitors with lower product costs or lower profitability expectations increases, or during times of oversupply, ASPs may decline quickly.

To compete profitably we must continually improve our technology and processes and reduce unit costs in line with lower selling prices.

If we are unable to offset ASP reductions with increased sales volumes or reduced product costs, then our revenue and gross margins will suffer.

Though less common, we have also increased prices from time to time, especially during times of increasing wafer costs.

For example, we raised prices in 2021, 2022 and 2023 to accommodate higher costs.

We may be required to raise prices again if macroeconomic conditions, including inflation, create upward pressure on our product costs.

If we are unable to offset ASP reductions with increased sales volumes or reduced product costs, or if we are unable to successfully increase ASPs to offset cost increases, then our revenue and gross margins will suffer.

When demand for older products declines, or during times of increased market inventory, ASPs may decline quickly.

To sell our products profitably we must continually improve our technology and processes and reduce costs in line with the lower selling prices.

If we and our product suppliers and manufacturers cannot create and implement processes or improve efficiencies sufficient to maintain our margins, then we may be unable to sell our products profitably.

Pricing commitments and other restrictive provisions in our customer agreements could adversely affect our operating results.

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Changes in our product mix could adversely affect our overall gross margin.

We generate most of our revenue from endpoint IC sales which have, for the most part, lower gross margins than our systems product sales.

Endpoint IC sales, which constitute and likely will continue to constitute the majority of our product revenue, have, for the most part, lower gross margins than our systems product sales.

Our overall product gross margins are affected by product mix, which can fluctuate based on demand and supply, competitive pressures and end-user needs and demand.

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Poor product quality could result in significant costs to us and impair our ability to sell our products.

Our products must meet demanding specifications for quality, reliability and performance.

Our products must meet increasingly demanding specifications for quality, reliability and performance.

Our products are both highly technical and deployed in large, complex systems in which errors, defects or incompatibilities can be problematic for our partners and end users.

If we are unable to correct errors, defects, incompatibilities or other problems in our products, we could experience:

If we are unable to identify or correct errors, defects, incompatibilities or other problems in our products, we could experience:

• loss of customer orders or customers;

lost or delayed market acceptance or sales;

• lost or delayed market acceptance (either of our products and solutions or RAIN generally);

• lost or delayed sales;

• loss of market share;

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• increased insurance costs.

Moreover, if we encounter product quality issues, then we may be required to incur significant time and costs to diagnose, test and fix the issues, and these efforts could further constrain our ability to supply our partners and end users with new products until we have resolved the issues.

Moreover, if we encounter product quality issues, then we may be required to incur significant time and costs to diagnose, test and fix the issues.

There can be no assurance that such remediation efforts would be successful.

Even if successful, these efforts could further constrain our ability to supply our partners and end users with new products until we have resolved the issues.

End users and partners must design our products into their products and business processes.

Persuading end users or partners to design our products into their business processes or products requires educating them about RAIN’s and our products’

They may use other technologies or products and may not feel the need to learn about how RAIN or our products can improve their business processes or products.

Even when convinced, they often undertake long pilot programs or qualification processes prior to placing orders.

These pilot programs or qualification processes can be time consuming and expensive, and there is no assurance they will result in an order for our products.

If we fail to develop new products that adequately or

competitively address end users’

or our partners’

needs, then we may not receive product orders, which could adversely affect our business, prospects and operating results.

Persuading end users or partners to design our products into their business processes or products requires educating them about RAIN’s and our products’ value.

They may use other technologies or products and may not be receptive to introducing RAIN into

their business processes or products.

Even when convinced, they often undertake long pilot programs and qualifications prior to placing orders.

These pilot programs and qualifications can be time consuming and expensive, and there is no assurance they will result in an order for our products.

If we fail to develop new products that adequately or competitively address end users’ or our partners’ needs, then we may not receive product orders, which could adversely affect our business, prospects and operating results.

Our visibility into the length of the sales and deployment cycles for our products is limited.

We have limited visibility into end user sales and deployment cycles, and these cycles are often longer than we anticipate.

Many factors contribute to our limited visibility, including the time our partners and end users spend evaluating our products, the time educating them on RAIN’s benefits and the time integrating our products with end users’

The length and uncertain timing of the sales and deployment cycles can lead to delayed product orders.

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Significant changes in RAIN standards bodies, standards or qualification processes could impede our ability to sell our products and services.

We participate in developing RAIN industry standards, including with GS1 and ISO, and have designed our products to comply with those standards, and we have historically taken a leadership position in standards development.

In the future, we could lose that leadership position, our influence in standards development could diminish, or we could choose not to participate in certain standards activities.

We have historically taken a leadership position in developing RAIN industry standards, including with GS1 and ISO, and have designed our products to comply with those standards.

We could lose that leadership position;

our influence in standards development could diminish;

or we could choose not to participate in certain standards activities.

New or changed industry standards could affect us negatively.

If industry standards diverge from our or the RAIN market’s needs, then our products may fail to keep pace with the market or cause end users to delay their deployments.

Moreover, the adoption or expected adoption of new or changed standards could slow sales of our existing products before we can introduce new products that meet the new or changed standards.

New standards or changes to existing standards could also limit our ability to implement new features in our products.

The lost opportunities as well as time and expense to develop new products or change our existing products to comply with new or changed standards could be substantial, and we may not ultimately succeed in developing products that comply with new or changed standards.

Certain organizations develop requirements for RAIN tags and test tags against those requirements.

As one example, the ARC Program at Auburn University, develops tag performance and quality requirements for end users that engage them.

For example, the ARC Program at Auburn University develops tag performance and quality requirements for end users that engage them.

Some participants in the RAIN market are ARC sponsors, but we are not among them.

Some other organizations perform this function as well.

ARC or a similar organization could develop specifications that some or all of our endpoint ICs fail to meet.

ARC or a similar organization could develop specifications that some or all of our endpoint ICs fail to meet or could delay approval of tags incorporating our endpoint ICs, which could negatively impact market acceptance of our products.

Changes in government spectrum regulations or in their enforcement could adversely affect our ability to sell our products.

Government radio regulations require that our readers and gateways be certified for spectral compliance where they are sold or operated.

Our readers and gateways are collectively certified for use in more than 40 countries worldwide, including the United States, Canada, Mexico, China, Japan, South Korea and every country in the EU.

If one of our reader or gateway products is found to be noncompliant despite being certified, we could be required to modify field-deployed readers or gateways and could spend significant resources and miss sales opportunities in the process.

Government regulations may change, possibly without notice, requiring us to redesign our products to conform with the new regulations or constraining our ability to incorporate new features into our products.

Such changes could cause us to incur significant

costs, including costs associated with obsolete inventory.

Regulatory changes may also cause us forego opportunities to improve our products, potentially delaying our time-to-market.

If spectrum regulations change, or if our products are found to be noncompliant despite being certified, we could need to redesign our products, potentially resulting in significant costs, including costs associated with obsolete inventory.

Regulatory changes may also cause us to forego opportunities, adversely affecting our business.

Sales of some of our products could cannibalize revenue from other products.

Some of our partners develop products using some of our products that compete with other of our products.

Some of our partners develop products that compete with our products.

For example, some of our OEM partners use our reader ICs to build and sell readers and gateways that compete with our readers and gateways.

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If we fail to manage such conflicts successfully, then our business and operating results could be negatively affected.

Our licensing program is nascent.

While we believe we have valuable RAIN intellectual property and aspire to monetize that intellectual property by licensing it to third parties, including third parties who compete with us to some extent, our experience in doing so is nascent, and our ability to grow licensing revenue remains subject to numerous risks and uncertainties.

To materially grow our licensing program and revenues, we will need to maintain and grow our intellectual property portfolio and continue to research and develop RAIN innovations that will generate and maintain demand for licenses to our technology and features.

We will also need to develop and maintain an ability to monitor intellectual property use by others and possibly seek enforcement action against those who attempt to improperly use our intellectual property.

These enforcement actions could require significant investments in management time and attention, and cash as we incur legal and other expenses.

They could also compete with our objectives in other areas of our business such as wanting to maintain close, strategic relationships with important partners or end users of our products.

These are just some of the risks and uncertainties we face with respect to our nascent licensing program.

We currently derive a substantial share of our licensing revenues from NXP, our primary endpoint IC competitor, based on our Settlement Agreement with them.

For more information regarding the terms of our Settlement Agreement with NXP, please refer to Note 6 of our condensed consolidated financial statements included elsewhere in this report.

If NXP were to breach its license payment obligations, or if NXP were to design out our intellectual property and exercise its right to terminate our license before the end of the 10-year term of the agreement, our licensing revenues would decline, and our overall results of operations and cash flows would suffer.

Risks Relating to Our Personnel and Business Operations

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• Some products have long lead times, and we place orders for them many months before our anticipated delivery dates to our customers.

If we inaccurately forecast customer demand, then we may be unable to meet our customers’

delivery requirements or we may accumulate excess inventory, increasing our costs.

If we inaccurately forecast customer demand, then we may be unable to meet our customers’ delivery requirements or we may accumulate excess inventory, increasing our costs.

• Supply disruptions may affect our ability to meet partner or end-user demand, whether in a cost-effective manner or at all, potentially causing those partners or end users to cancel orders, qualify alternative suppliers or purchase from our competitors.

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If our suppliers fail to manufacture our products at reasonable prices or with satisfactory quality levels, then our ability to bring those products to market and our reputation could both suffer.

If supplier capacity diminishes, whether from equipment failures, closures, bankruptcy, capacity allocation, in response to Covid-19, catastrophic loss of facilities or otherwise, then we could have difficulty fulfilling orders, our revenue could decline and our growth prospects could be impaired.

If supplier capacity diminishes, whether from equipment failures, closures, bankruptcy, capacity allocation, in response to public health events (such as Covid-19), catastrophic loss of facilities or otherwise, then we could have difficulty fulfilling orders, our revenue could decline and our growth prospects could be impaired.

Transitioning our product manufacturing to new providers would take many months and, in the case of ICs, could take years.

Any transition would require a requalification by our customers or end users, which could also adversely affect our ability to sell our products as well as our operating results.

Shortages of silicon wafers and components used in our readers and gateways may adversely affect our ability to meet demand for our products and adversely affect our revenue and/or gross margins.

The semiconductor industry has experienced many periods of capacity shortfall and experienced another fairly recently due to increased post-Covid demand.

In particular, in both 2021 and 2022 we experienced tight wafer availability, and our foundry partner raised prices.

Although wafer availability has improved in 2023, supply/demand imbalances could still occur, constraining wafer availability.

We procure wafers on a purchase-order basis from our foundry partners;

consequently, wafer supply is not contractually guaranteed and there can be no assurance that we will receive adequate wafer supply from our foundry partners if and when wafer shortages occur.

Wafer shortfalls limit sales and may cause market-share losses if we are unable to supply enough products or our customers purchase competing products or, alternatively, may artificially increase bookings as customers over-order our products, followed by sales declines in future periods as they consume their accumulated inventory.

Additionally, if we are unable to raise our prices to cover our higher costs, our gross margins and other financial results could suffer.

To guard against wafer shortages, we may invest in inventory to support anticipated business growth, like we did with endpoint IC inventory in 2017 and 2020.

However, maintaining high inventory levels can increase expenses or increase reserves, and exposes us to a higher risk of product obsolescence as we introduce new products and technologies, all of which could negatively affect our business.

We may not be able to adequately anticipate the scope or nature of business growth, which could potentially result excess or obsolescent inventory.

For example, in 2022, we saw greater demand for our 300mm M700 wafers, but due to inventory and supply limitations, we were required to transition some potential customers back to our prior-generation 200mm Monza R6 product family, despite M700 being our primary market demand.

If we are unable to sell the inventory we purchased, or if we must sell such inventory at lower process—whether as a result of excess, obsolescence, or other factors—then our business will be negatively impacted.

To convert the wafers we receive from our foundry partner into saleable products, we and several third parties perform additional procedures, such as testing, thinning, dicing and bumping the ICs.

If we or our partners are unable to efficiently perform these post-processing procedures, or if we experience any capacity constraints with respect to these post-processing procedures, then we may be unable to keep up with demand for our products and our financial results will suffer.

Shortages of silicon wafers or components used in our readers and gateways may adversely affect our ability to meet demand for our products and adversely affect our revenue and/or gross margins.

We expect wafer capacity in the semiconductor nodes we use to be tight for the foreseeable future.

We procure wafers on a purchase-order basis, so our wafer supply is not guaranteed, and we may not receive adequate supply from our foundry partners when shortages occur.

Wafer shortfalls limit sales and may cause market-share losses.

They may also artificially increase bookings as customers over-order our products, and then cause sales declines as those customers consume their accumulated inventory.

Additionally, if our suppliers charge us more but we are unable to raise our prices to cover those higher costs, our gross margins and other financial results could suffer.

To guard against wafer shortages, we may invest in inventory to support anticipated business growth, like we did with endpoint IC inventory in 2017, 2020 and late 2022/early 2023.

To convert the wafers we receive from our foundry partner into saleable ICs, we perform additional steps including testing, thinning, bumping and dicing.

If our third-party suppliers are unable to efficiently perform these steps, or if we experience any capacity constraints with respect to these steps, then we may be unable to satisfy demand for our products, adversely affecting our financial results.

We may be unable to accurately anticipate the scope or nature of business demand, which could cause excess or obsolescent inventory.

We maintain inventory to meet customer demand, but high inventory levels can increase expenses or reserves and expose us to a higher risk of product obsolescence when we introduce new products and technologies, all of which could negatively affect our business.

For example, in 2022 we had strong demand for our M700 ICs, but due to limited 300mm wafer supply, we transitioned some customers back to our prior-generation 200mm Monza R6 product family.

If we are unable to sell the inventory we purchased, or if we must sell it at lower prices, then our business will be negatively impacted.

We have also experienced shortages and price increases for components we use in our readers and gateways, as well as in packaging and test capacity for our reader ICs, and we may continue to experience such shortages and price increases in the future.

Any such shortages or price increases will negatively impact our product availability and costs.

If we are unable to procure sufficient components and to increase our prices to cover our increased costs, then our financial results will suffer.

Any such shortages or price increases will negatively impact our product availability and costs and our financial results will suffer.

We bear inventory risks due to our reliance on partners to sell and distribute our products.

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Acquisitions could result in operating difficulties, dilution and other harmful consequences.

We regularly evaluate potential strategic transactions, and we may pursue one or more transactions if complementary to our business.

We regularly evaluate potential strategic transactions, and we may pursue them if complementary to our business.

For example, in April 2023 we completed our acquisition of Voyantic Oy, a global provider of RFID (primarily RAIN and NFC) inlay and label design, manufacturing and test systems.

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Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.

Covid-19 has adversely affected our business, and the magnitude and duration of continued Covid-19 effects on our business are uncertain.

Since 2020, Covid-19 has created significant worldwide economic volatility, uncertainty and disruption, and, while improving, those effects may persist or return.

The Covid-19 risks we continue to monitor include:

uncertain product demand globally;

product availability delays and shortages;

challenges in effectively managing our inventory due to uncertain supply or demand;

partner-requested preordering or rescheduling as a result of supply concerns, possibly distorting channel inventory, either positively or negatively;

increased operating and product costs;

delays in research and development efforts, which, in turn, could delay new product introductions or product enhancements;

maintaining employee engagement and productivity in a remote or hybrid work environment.

The extent to which Covid-19 will continue impacting market demand and our future results is still unclear, and risks associated with Covid-19 remain.

Changes in global trade policies could have a material adverse effect on us.

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and Chinese industrial policy also contribute to uncertainty regarding the global trade environment.

Other causes of uncertainty include the effects of sanctions and other actions taken against Russia because Russia invaded Ukraine.

While we do not today have business with Russian partners or end users, the effect of these sanctions on global trade and macroeconomic conditions generally—such as increases in the cost of energy and inflation—could nevertheless negatively affect our business.

Other causes of uncertainty include the effects of sanctions and other actions against Russia after Russia invaded Ukraine.

While we do not today have business with Russian partners or end users, the effect of these sanctions on global trade and macroeconomic conditions generally—such as increasing energy costs and inflation—could nevertheless negatively affect our business.

We are subject to risks inherent in operating abroad and may not be able to successfully maintain or expand our international operations.

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• misappropriation of our intellectual property;

inflation and fluctuations in foreign currency exchange rates and interest rates;

restrictions, or changes thereof, on foreign trade or investment, including currency-exchange controls, including as a result of sanctions against Russia as a result of Russia invading Ukraine;

changes in a country’s or region’s political, regulatory, legal or economic conditions, including, for example, global and regional economic disruptions caused by any future public health outbreaks or pandemics, including a resurgence in Covid-19 cases;

• inflation and fluctuations in foreign currency exchange and interest rates;

• restrictions, or changes thereof, on foreign trade or investment, including currency-exchange controls, including as a result of sanctions against Russia;

• changes in a country’s or region’s political, regulatory, legal or economic conditions, including, for example, global and regional economic disruptions caused by any future public health outbreaks or pandemics, including a resurgence of Covid-19;

• political, social and economic instability abroad;

wars and other armed conflicts;

and terrorist attacks and security concerns in general, including Russia invading Ukraine, China threatening Taiwan and the conflict in the Gaza Strip;

wars and other armed conflicts, such as those in Ukraine and the Gaza Strip;

geopolitical tensions, such as those between the United States, China and Taiwan;

and terrorist attacks and security concerns in general;

• differing regulations with regard to maintaining operations, products and public information;

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We must export and import our products in compliance with U.S.

export controls, including the Commerce Department’s Export Administration Regulations and economic and trade sanctions established by the Treasury Department’s Office of Foreign Assets Controls, as well as similar controls established in the countries in which we do business.

For example, the U.S.

Commerce Department recently issued rules regarding semiconductor- and supercomputer-related products and restrictions against sending certain chips and chip-related technology and software to China without an export license.

In addition, after Russia invaded Ukraine, the United States and other countries imposed economic sanctions and export control restrictions against Russia and Belarus, as well as against certain Russian nationals and entities.

Commerce Department recently strengthened rules regarding semiconductor- and supercomputer-related products and restrictions against sending certain chips and chip-related technology and software to China without an export license.

The modifications included an expansion of the products and destinations that require licensing.

In addition, the United States and other countries continue to expand the economic sanctions and export control restrictions imposed against Russia and Belarus and certain Russian nationals and entities after Russia invaded Ukraine.

We must undertake additional diligence efforts to comply with these rules, which may be time-consuming and result in delayed or lost opportunities.

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For more information, see “Changes in global trade policies could have a material adverse effect on us.” Any changes in our product or in export or import regulations or legislation;

shift or change in enforcement;

or change in the countries, persons or technologies targeted by these regulations could delay us introducing new products in international markets, decrease use of our products by, or decrease our ability to export or sell our products to, existing or potential customers with international operations, adversely affecting our business and results of operations.

Instability or deterioration in the political, social, business or economic conditions in key jurisdictions could harm our supply or deployment of products.

Deterioration in the political, social, business or economic conditions in any jurisdictions in which we have significant suppliers, distributors or end users—including as a result of natural disasters, labor strikes, public health crises, geopolitical events or other developments—could slow or halt product shipments or disrupt our ability to manufacture, test or post-process our products, as well as our ability to effectively and timely execute on end user deployments.

shifts or changes in enforcement;

or changes in the countries, persons or technologies targeted by these regulations could delay us introducing new products in international markets, decrease use of our products by, or decrease our ability to export or sell our products to, existing or potential customers with international operations, adversely affecting our business and results of operations.

Instability or deterioration in the political, social, business or economic conditions in key jurisdictions could harm our supply or development of products.

Deterioration in the political, social, business or economic conditions in any jurisdictions in which we have significant suppliers, distributors or end users—including as a result of natural disasters, labor strikes, public health crises, geopolitical events or other developments—could slow or halt product shipments or disrupt our ability to manufacture, test or post-process our products., as well as our ability to effectively and timely execute on end user deployments.

We outsource our manufacturing and production to suppliers in a small number of Asian jurisdictions including Thailand, Malaysia, Taiwan and China.

Some of these jurisdictions have experienced, and may yet experience, restrictions related to Covid-19.

Some of these jurisdictions have experienced significant restrictions during the Covid-19 pandemic.

These jurisdictions have also experienced significant changes in political, social, business or economic conditions in the past and may experience them in the future.

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Any such developments could materially and adversely affect our business, financial condition and results of operations.

Our business operations could be disrupted by natural disasters.

In addition to the pandemic risk discussed earlier under “—Covid-19 has adversely affected our business, and the magnitude and duration of continued Covid-19 effects on our business are uncertain,”

other disasters, whether natural or manmade, could decrease demand for our products, disable our facilities, disrupt operations or cause catastrophic losses.

Our business operations could be adversely affected by public health outbreaks and pandemics, or by natural disasters.

Starting in 2020, Covid-19 created significant worldwide economic volatility, uncertainty and disruption, and presented our business with several risks and challenges.

Although the Covid-19 global health emergency officially ended in 2023, experts caution that Covid-19 remains a public health risk, and the extent to which any public health outbreak or pandemic could impact future market demand and our business results is uncertain.

In addition, other disasters, whether natural or manmade, could decrease demand for our products, disable our facilities, disrupt operations or cause catastrophic losses.

We have facilities in areas with known seismic activity, such as our headquarters in Seattle, Washington.

We have facilities in areas with known flooding, such as our office in Shanghai, China.

We have a wafer testing and dicing subcontractor in Thailand, a region with a known, and recent, history of flooding.

A loss at any of these or other of our or our suppliers’

facilities could disrupt operations, delay production and shipments, reduce revenue and engender potentially large expenses to repair or replace the facility.

We have a wafer post-processing subcontractor in Thailand, a region with a known, and recent, history of flooding.

A loss at any of these or other of our or our suppliers’ facilities could disrupt operations, delay production and shipments, reduce revenue and engender potentially large expenses.

We do not carry insurance covering potential losses caused by pandemics, earthquakes, floods or other disasters.

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Sales concentration to a small number of OEMs decreases our bargaining power and increases the risk that our pricing or sales could decline based on actions taken by our competitors or our own failure to compete effectively.

Our competitors’

relationships with, or acquisitions of, these partners or distributors could interfere with our relationships with them.

Our competitors’ relationships with, or acquisitions of, these partners or distributors could interfere with our relationships with them.

Any such interference could impair or delay our product sales or increase our cost of sales.

We engage directly with end users to adopt our products in large projects.

These projects, often involving large purchases of our readers and gateways, are often discrete deployments that can result in significant sales for periods of time.

We engage directly some with end users.

Their projects, often involving large purchases of our readers and gateways, are often discrete deployments that can result in significant sales for periods of time.

They also increase the volatility of our revenue and operating results.

If we are unable to replace project-based revenue with new revenue streams, or if end users with large projects change or delay them without giving us with adequate notice, then our sales could decline from period to period and harm our stock price.

If we are unable to replace project-based revenue with new revenue streams, or if end users with large projects change or delay those projects without giving us with adequate notice, then our sales could decline from period to period and harm our stock price.

Our ability to affect or determine end-user demand is limited in part because we sell and fulfill primarily through partners and rarely directly to end users.

End users drive demand for our products but because we sell our products primarily through partners, we are one step removed from those end users and often unable to directly assess and affect their demand.

Our partners may choose to prioritize selling our competitors’

products over ours, or they may offer products that compete with our products or limit sales of our products.

Our partners may choose to prioritize selling our competitors’ products over ours, or they may offer products that compete with our products or limit sales of our products.

If our partners do not sell enough of our products or if they choose to decrease their inventories of our products, then our sales to those partners and our revenue will decline.

Our partners may not properly forecast end users’

demand for our products.

Our partners may not properly forecast end users’ demand for our products.

Our partners may purchase more of our products than they need to satisfy end-user demand, increasing their inventory and reducing our future sales to them.

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The cost of developing and maintaining these partner relationships may go unrecovered and our efforts may not generate a corresponding revenue increase.

Occasionally we also engage directly with end-users, often at their request, to help them develop solutions for challenging use cases.

Such direct engagements could cause, or could be perceived to cause, conflicts with partners that could harm our partner relationships and our business, results of operations or financial condition.

If we fail to maintain or enhance our brand recognition or reputation on which our business depends, then our business could be harmed.

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• successfully differentiating our products from those of our competitors;

appropriately managing both positive and negative publicity.

• managing both positive and negative publicity.

Product supply shortages have challenged our ability to meet market needs and we have increased prices in response to our suppliers increasing their prices to us.

Our inability to supply partners and end users with products they need, and/or our need to

increase our prices could result in long-lasting, negative consequences to our relationships with those partners and end users, to RAIN adoption and to our business overall.

Our inability to supply partners and end users with products they need, and/or our need to increase our prices could result in long-lasting, negative consequences to our relationships with those partners and end users, to RAIN adoption and to our business overall.

Increasing attention to environmental, social and governance matters may cause us to incur additional costs or expose us to additional risks.

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Moreover, with the continued evolution of ESG practices and reporting and disclosure requirements, our costs related to those ESG practices and reporting and disclosure requirements could increase, which could negatively affect our operating results.

For example, the SEC has adopted final rules regarding climate-related disclosures in public companies’ periodic reporting, and compliance with these rules—including the implementation of necessary internal controls and reporting procedures—may lead to increased expenses and additional demands on our management and board of directors.

Risks Relating to Our Intellectual Property

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We have historically focused on filing U.S.

patent applications, for many reasons, including the fact that most RAIN products are used in or imported into the United States.

We have only a small number of foreign patent applications or foreign patents.

patent applications, for many reasons, including the fact that a significant portion of RAIN products are used in or imported into the United States.

We have only a small number of foreign patents and applications.

We also only have registered trademarks and domain names in select countries where we believe filing for such protection is appropriate.

By focusing our intellectual property protection on the United States and a small number of foreign countries, we have limited ability to assert that intellectual property outside the United States, including in some significant foreign markets such as China.

By focusing our intellectual property protection on the United States and a small number of foreign countries, we have a limited ability to assert that intellectual property outside the United States, including in some significant foreign markets such as China.

Moreover, the global manufacturing and distribution systems for tags or labels incorporating our endpoint IC products could complicate our efforts to enforce our U.S.

As we increasingly work with third parties, possibly including parties that compete with us to an extent, to advance our technical innovations and features, we cannot guarantee that our efforts to protect our intellectual property will be completely effective.

We cannot guarantee that:

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• our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties;

any of our pending or future patent applications will be issued or have the coverage we originally sought;

• any of our pending or future patent applications will issue or have the coverage we originally sought;

• our intellectual property rights can or will be enforced, particularly in jurisdictions where competition may be intense or where legal protections may be weak;

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Our failure to identify unauthorized use of, or otherwise adequately protect our intellectual property could adversely affect our business.

We may become party to intellectual property disputes which could be time consuming, costly to prosecute, defend or settle, result in the loss of significant rights, and adversely affect RAIN adoption or adoption of our products or platform.

We are engaged in several patent infringement lawsuits against NXP USA, Inc., a Delaware corporation, and certain of its affiliates.

For further information regarding this litigation, please refer to Note 6 of our consolidated financial statements included elsewhere in this report.

Our litigation with NXP, including any appeals, has contributed, and may continue to contribute, to increased legal expenses and demands on our management team’s time, and could negatively impact our relationships with partners or end users.

While we have obtained favorable jury verdicts in prosecuting our patent infringement claim against NXP in California and in defending against NXP’s patent infringement claim against us in Washington, post-trial rulings have limited some of these favorable verdicts and and all such verdicts remain subject to appeal.

Moreover, these jury verdicts can provide no assurance regarding the results of our other ongoing litigation involving NXP.

If we are unsuccessful in prosecuting our patent-infringement claims against NXP or in defending ourselves against NXP’s counterclaims, or to the extent we cannot maintain the validity and enforceability of our patents, then we could see a material adverse effect on our business, results of operations or financial condition.

Patent litigation is inherently complex and uncertain.

We may or may not prevail in patent-related proceedings and our intellectual property could be weakened.

If any pending or future proceedings result in an adverse outcome, then we could be required to:

We have been and may in the future be party to intellectual property disputes which could be time consuming and costly to prosecute, defend or settle, result in the loss of significant rights, and adversely affect RAIN adoption or adoption of our products or platform.

Patent litigation is complex and uncertain.

We may or may not prevail in patent-related proceedings and such proceedings may result in increased legal expenses, additional demands on our management’s time and attention, and negative effects on our

relationships with partners or end users.

If any pending or future proceedings result in an adverse outcome, our intellectual property could be weakened and we could be required to:

• cease manufacturing, using or selling the infringing products, processes or technology;

• pay substantial damages for infringement;

expend significant resources to develop non-infringing products, processes or technology;

• expend significant resources to develop noninfringing products, processes or technology;

• license technology from the party claiming infringement, which license may not be available on commercially reasonable terms or at all;

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Even if we do prevail in patent-related proceedings, verdicts and judgments can be modified or even reversed by trial or appellate courts.

License agreements entered in settlement of patent litigation, particularly any entered into with our competition, may not be as effective over the long term in providing us with all the benefits we bargained for when we entered into them.

Many companies in our industry, as well as nonpracticing entities, hold patents and other intellectual property rights and may pursue, protect and enforce those intellectual property rights.

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If we decline to accept an invitation to license or to refute an asserted claim, then the offering or claiming party may pursue litigation against us.

Intellectual property disputes have adversely affected RAIN adoption in the past.

As one example, in 2011, Round Rock Research filed lawsuits against 11 end users, including Walmart and Macy’s, for RAIN-related patent infringement.

Intellectual property disputes have adversely affected RAIN adoption in the past and could disrupt growth prospects in the future.

In 2011, Round Rock Research filed lawsuits against 11 end users, including Walmart and Macy’s, for RAIN-related patent infringement.

Despite the subsequent availability of an industry-wide license, we believe those lawsuits adversely affected demand for our products from 2011 to 2019.

The licensed Round Rock patents expired in 2019.

However, we, our partners, suppliers or end users could be involved in similar disputes in the future which could adversely affect our operating results and growth prospects.

Subsequent litigation, including our patent litigation against NXP between 2019 and early 2024, may not have had as pronounced effects on demand as the Round Rock litigation, but could have dampened RAIN growth particularly in categories beyond those where RAIN is already established such as retail apparel.

We, our partners, suppliers or end users could continue to be involved in intellectual property disputes in the future which could adversely affect our operating results and growth prospects.

Many of our agreements require us to indemnify and defend partners and end users from third-party infringement claims and pay damages in the case of adverse rulings.

These damages could be sizable and disproportionate to the business we derive from those partners or end users.

Moreover, we may not know whether we are infringing a third party’s rights due to the large number of RAIN-related patents or to other systemic factors.

For example, patent applications in the United States are maintained in confidence for up to 18 months after filing or, in some instances, for the entire time prior to patent issuance.

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The standards body may require that the license be granted to members, as in the case of GS1, or to all parties, as in the case of ISO, that implement the protocol or standard.

As a participant in developing GS1 EPCglobal UHF Gen2, UHF Gen2 V2, tag data standards, low-level reader protocol and other GS1 EPCglobal protocols, we agreed to license to other GS1 EPCglobal members, on a royalty-free basis, those of our patents necessary to practice those protocols, subject to us receiving reciprocal royalty-free rights from the other GS1 EPCglobal member practicing the protocol.

As a participant in developing GS1 EPCglobal UHF Gen2, UHF Gen2 V2, UHF Gen2 V3, tag data standards, low-level reader protocol and other GS1 EPCglobal protocols, we agreed to license to other GS1 EPCglobal members, on a royalty-free basis, those of our patents necessary to practice those protocols, subject to us receiving reciprocal royalty-free rights from the other GS1 EPCglobal member practicing the protocol.

As a participant in developing ISO standards, we agreed to license on a RAND basis those of our patents necessary to practice those standards, subject to us receiving a reciprocal RAND license from the other entity practicing the standard.

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Such uncertainty could complicate us asserting our not-necessary patents against others, or to use those patents in our own defense, thereby devaluing our intellectual property.

Further, some GS1 EPCglobal members declined to license their intellectual property on royalty-free terms, instead retaining the right to license their technology on RAND terms.

Further, some GS1 EPCglobal members declined to license their intellectual property on royalty-free terms, instead retaining

the right to license their technology on RAND terms.

These members may choose to assert their intellectual property, in which case we will need to defend ourselves within the confines of the GS1 and ISO intellectual property policies.

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Our products, processes and technology sometimes use or incorporate software that is subject to an open-source license.

Certain open-source licenses require a user who intends to distribute the open-source software as a component of the user’s software to disclose publicly part or all of the user’s source code.

In addition, certain open-source software licenses require the user of such software to make derivative works of the open-source software available to others at low or no cost.

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These concerns include unauthorized parties potentially collecting personal information or personal data, tracking consumers, stealing identities or causing other issues relating to privacy or data protection.

Any such incident could cause our or our partners’

or end users’

operations to be disrupted and subject us or them to regulatory investigations or proceedings and claims, demands or litigation;

Any such incident could cause our or our partners’ or end users’ operations to be disrupted and subject us or them to regulatory investigations or proceedings and claims, demands or litigation;

consequently, we could face potential liability and significant costs and expenses to remediate or otherwise respond to the incident.

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and fines, penalties or other liabilities.

Any actions or concerns about security and privacy may be expensive to defend, cause us to expend substantial time and resources and damage our reputation and operating results or could negatively impact overall RAIN industry development, even if unfounded.

We cannot be sure that any limitation-of-liability provisions in our customer and user agreements, contracts with third-party vendors and service providers or other contracts are enforceable or adequate or would protect us from any liabilities or damages against claims relating to a security breach or other privacy- or security-related issue.

Government regulations and guidelines and other standards relating to consumer privacy may adversely impact adoption of our products, require us to make design changes or constrain our ability to implement new and desired product features, and actual or alleged violations of laws relating to privacy or information security may result in claims, proceedings and liability.

Our partners and end users are subject to laws and regulations related to collecting, storing, transmitting and using personal information and personal data, as well as to additional laws and regulations that address privacy and security related to RFID in general.

Any actions or concerns about security and privacy may be expensive to defend, cause us to expend substantial time and resources and damage our reputation and operating results or negatively impact overall RAIN industry development, even if unfounded.

We cannot be sure that any limitation-of-liability provisions in our agreements with customers, contracts with third-party vendors and service providers or other contracts are enforceable or adequate or will protect us from any liabilities or damages against claims relating to a security breach or other privacy- or security-related issue.

Government regulations and guidelines and other standards relating to consumer privacy and cybersecurity may adversely impact adoption of our products, require us to make design changes or constrain our ability to implement new and desired product features, and actual or alleged violations of laws relating to privacy or cyber security may result in claims, proceedings and liability.

Because RAIN is a type of RFID, we believe these laws and regulations apply to RAIN.

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More generally, the data security and privacy legislative and regulatory landscape in the United States, EU and other jurisdictions continues evolving.

Aspects of key privacy laws and regulations—including the California Consumer Privacy Act of 2018, the California Privacy Rights Act, other similar state privacy laws enacted in numerous states, and the General Data Protection Regulation—remain unclear as of the date of this report and continue evolving, potentially with far-reaching implications.

Laws and regulations relating to privacy, data protection and security;

Aspects of key privacy laws and regulations—including the California Consumer Privacy Act of 2018, the California Privacy Rights Act, similar privacy laws enacted in other states and the EU General Data Protection Regulation—remain unclear as of the date of this report and continue evolving, potentially with far-reaching implications.

Laws and regulations

relating to privacy, data protection and security;

related industry standards and guidelines;

and continued evolution of these laws, regulations, standards, guidelines and other actual and asserted obligations, as well as their interpretation and enforcement, may require us to modify our products, practices and policies, which we may not be able to do on commercially reasonable terms or at

all, and otherwise could cause us to incur substantial costs and expenses.

Any failure or perceived failure by us or any third parties with which we do business to comply with these laws and regulations or other actual or asserted obligations may result in claims or litigation;

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Accidental or willful security breaches or incidents, or unauthorized access to our facilities or information systems, or to others used in our business, could compromise the security of those facilities or information systems and the confidentiality, integrity and availability of confidential, personal or proprietary information.

These risks may be heightened in connection with Russia’s invasion of Ukraine.

The consequences of loss, misuse, corruption or other unauthorized processing of confidential, personal or proprietary information could include, among other things, unfavorable publicity, reputational damage, difficulty marketing or selling our products, customer allegations of breach of contract, loss or theft of intellectual property, claims and litigation, governmental and regulatory investigations and other proceedings and fines, penalties and other damages and liabilities.

These risks may be heightened in connection with geopolitical tensions and events.

The consequences of loss, unavailability, misuse, corruption or other unauthorized processing of confidential, personal or proprietary information could include, among other things, unfavorable publicity, reputational damage, difficulty marketing or selling our products, customer allegations of breach of contract, loss or theft of intellectual property, claims and litigation, governmental and regulatory investigations and other proceedings and fines, penalties and other damages and liabilities.

Any of these consequences could have a material adverse effect on our business, financial condition, reputation and business relationships.

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Our platform operates in conjunction with, and depends on, third-party products, services and components for security.

The cybersecurity threat environment continues to evolve considering the increase in remote work and heightened activity by state-sponsored actors.

If we, our platform, or any of the third parties on which we rely suffers a security breach or incident, vulnerability, error, ransomware or malicious event, then we could face increased costs, claims, liability, reduced revenue and harm to our reputation.

We incur significant costs to detect and prevent security breaches and other security-related incidents.

The cybersecurity threat environment continues evolving, especially with heightened activity by state-sponsored actors.

If we, our platform, or any of the third parties on which we rely suffers or is believed to have suffered a security breach or incident, vulnerability, error, ransomware or malicious event, then we could face increased costs, claims, liability, reduced revenue and harm to our reputation.

We devote resources to detect and prevent security breaches and other security-related incidents.

In the event of an actual or perceived security breach or incident we may need to expend significant resources to mitigate, notify third parties of, and otherwise address the breach or incident, its root cause and take steps to prevent further breaches or incidents.

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• fluctuations or delays in RAIN adoption and deployment by end users;

changes in the pace or direction of major deployments, whether due to macroeconomic conditions or enterprise-specific events or circumstances;

• changes in the pace or direction of major deployments, whether due to macroeconomic conditions or enterprise-specific events or circumstances, and our, or our partners', ability to win business from these deployments;

• fluctuations in demand for our products or platform, including by tag OEMs and other significant partners and end users on whom we rely for a substantial portion of our revenue;

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We may need to raise additional capital, which may not be available on favorable terms or at all.

In the future we may raise capital, including pursuant to shelf registration statements we may file from time to time with the SEC, potentially diluting our stockholders, restricting our operations or otherwise adversely affecting our business.

In the future, we may need to raise additional capital, including pursuant to shelf registration statements we may file from time to time with the SEC, potentially diluting our stockholders, restricting our operations or otherwise adversely affecting our business.

Debt financing, if available, may include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, expending capital or declaring dividends, or may impose financial covenants that limit our ability to achieve our business objectives.

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Federal Income Tax

Our ability to use net operating losses to offset future taxable income may be limited.

As of December 31, 2022, we had federal net operating loss carryforwards, or NOLs, of $249.3 million and federal research and development credit carryforwards of $22.3 million, which we may use to reduce future taxable income or offset income taxes.

Our ability to use net operating losses and research and development credits to offset future taxable income and income taxes may be limited.

As of December 31, 2023, we had federal U.S.

net operating loss carryforwards, or NOLs, of $230.5 million and U.S.

federal research and development credit carryforwards of $30.5 million, which we may use to reduce future taxable income or income taxes.

We have established a valuation allowance against the carrying value of these deferred tax assets.

The NOL and federal research and development credit carryforwards began expiring in 2020.

federal NOLs and U.S.

federal research and development credit carryforwards began expiring in 2020.

Under Sections 382 and 383 of the U.S.

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Our NOLs may also be limited under state law.

As a result of these limitations, we may not be able to utilize a material portion of, or possibly any of, the NOLs and credit carryforwards to offset future taxable income or income taxes.

As a result of these limitations, we may not be able to utilize a material portion of, or possibly any of, our NOLs and/or credit carryforwards to reduce future taxable income or income taxes.

We could be subject to additional income tax liabilities.

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We are subject to tax laws, regulations and policies of several taxing jurisdictions.

Changes in tax laws, as well as other factors, could cause us to experience fluctuations in our tax obligations and effective tax rates and otherwise adversely affect our tax positions and/or our tax liabilities.

For example, in August 2022 the United States enacted a 1% excise tax on stock buybacks and a 15% alternative minimum tax on adjusted financial statement income as part of the Inflation Reduction Act of 2022.

CHIPS and Science Act, enacted August 9, 2022, provides tax credits for semiconductor manufacturing activities within the United States, but because we outsource our semiconductor manufacturing we do not expect to be entitled to these tax credits.

For example, in August 2022, as part of the Inflation Reduction Act of 2022, the United States enacted a 1% excise tax on stock buybacks and a 15% alternative minimum tax on adjusted financial statement income.

Additionally, beginning in 2022, the Code eliminated the right to deduct research and development expenditures and instead requires taxpayers to capitalize and amortize U.S.

and foreign research and development expenditures over five and 15 tax years, respectively.

We have accounted for these changes in accordance with our understanding of the guidance available as of the date of this filing and as described in more detail in our financial statements.

The CHIPS and Science Act, enacted August 9, 2022, provides tax credits for semiconductor manufacturing activities within the United States, but because we outsource our semiconductor manufacturing we do not expect to be entitled to these tax credits.

Many countries, as well as organizations such as the Organization for Economic Cooperation and Development, have proposed changes to existing tax laws, including a proposed 15% global minimum tax.

Any of these developments or changes in federal, state or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results.

Any of these developments or changes in U.S.

federal, state or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results.

There can be no assurance that our effective tax rates, tax payments or tax credits and incentives will not be adversely affected by these or other developments or changes in law.

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We could also be subject to sanctions or investigations by The Nasdaq Stock Market, the SEC and other regulatory authorities.

We have incurred, and in the future will incur, high costs associated with being a public company.

We have incurred significant legal, accounting and other costs associated with public-company reporting requirements.

We ceased to be an “emerging growth company”

on December 31, 2021, and are no longer eligible for the reduced disclosure requirements and exemptions applicable to “emerging growth companies.”

Our loss of this status has required additional management attention and increased our costs, including legal, accounting and investor-relations-related costs.

We cannot predict or accurately estimate the additional costs we are likely to incur from being a public company or the timing of these costs.

We have and will continue to incur costs associated with accepted corporate governance requirements, including those of the SEC and The Nasdaq Global Select Market.

We expect those governance requirements to lead to ongoing legal and financial costs and make some activities more time consuming and costly.

They may also increase the difficulty and expense for us to obtain director and officer liability insurance.

Although we monitor developments with respect to those requirements, we cannot predict or accurately estimate the additional costs we are likely to incur or the timing of these costs.

Risks Relating to Owning or Trading Our Securities

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• changes in governmental regulations or in the status of our regulatory approvals;

unstable political and economic conditions, including instability resulting from wars and other armed conflicts, such as Russia invading Ukraine, China threatening Taiwan, and the conflict in the Gaza Strip;

• unstable political and economic conditions, including instability resulting from wars and other armed conflicts, such as those in Ukraine and the Gaza Strip, or geopolitical tensions, such as those between the U.S., China and Taiwan;

• the trading volume of our stock;

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• general economic conditions and slow or negative growth in the markets in which we operate.

Technology stocks like ours have experienced extreme price and volume fluctuations, often unrelated or disproportionate to the company’s underlying operating performance.

Stock price volatility can cause stockholders to institute securities class-action litigation or stockholder derivative litigation, as occurred to us between 2018 and 2020.

If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management, harm our operating results and negatively impact the trading price of our common stock.

Transactions relating to the 2021 Notes may affect our stock’s value.

If any of our stockholders were to sue us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management, harm our operating results and negatively impact the trading price of our common stock.

Transactions relating to the 2021 Notes may affect our stock’s value.

If the 2021 Notes are converted by holders, then we are entitled to deliver cash, stock or any combination of cash or stock, at our election.

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Our principal stockholders and management own a significant percentage of our stock and are able to exercise significant influence over matters subject to stockholder approval.

As of September 30, 2023, our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 54.6% of our stock.

As of March 31, 2024, our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 51.0% of our stock.

As a result, our executive officers, directors and principal stockholders may be able to significantly influence, in their capacity as stockholders, matters requiring approval by our stockholders, including electing directors and approving mergers, acquisitions or other transactions.

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Anti-takeover provisions in our charter documents and under Delaware or Washington law could prevent, delay or impede an acquisition of us and constrain our stock price.

Provisions of our certificate of incorporation and our bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests.

Provisions of our certificate of incorporation and our bylaws may delay or discourage transactions involving an actual or potential change in our control or in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests.

These provisions could therefore adversely affect our stock price.

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• provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

divide our board of directors into three classes, each of which stands for election once every three years (subject to gradual declassification beginning at the 2021 annual meeting of stockholders, such that our board of directors will be fully declassified beginning at the 2023 annual meeting of stockholders);

• restrict the forum for certain litigation against us to Delaware;

• require that any action taken by our stockholders be effected at a duly called annual or special meeting of stockholders and not by written consent;

provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice;

• provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice;

• do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any uncontested election of directors to elect all of the directors standing for election, if they should so choose);

• provide that special meetings of our stockholders may be called only by the chair of the board, our chief executive officer or the board of directors.

stockholder for a period of three years following the date on which the stockholder became an “interested”

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future.

These provisions prohibit a “target corporation”

from engaging in any of a broad range of business combinations with any stockholder constituting an “acquiring person”

for a period of five years following the date on which the stockholder became an “acquiring person.”

Our bylaws include provisions that could limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

These provisions prohibit a “target corporation” from engaging in any of a broad range of business combinations with any stockholder constituting an “acquiring person” for a period of five years following the date on which the stockholder became an “acquiring person.”

Our bylaws include provisions that could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our bylaws provide that, unless we otherwise consent in writing, the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf;

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or any action asserting a claim against us that is governed by the internal affairs doctrine.

The choice of forum provision may limit stockholders’

ability to bring a claim in a judicial forum favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

The choice of forum provision may limit stockholders’ ability to bring a claim in a judicial forum favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

Alternatively, if a court were to find the choice of forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

Unregistered Sales of Equit y Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

Unregistered Sales of Equit y Securities and Use of Proceeds.

Defaults Upon Senior Securities.

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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 1. Legal Proceedings