What changed in this filing

/stocks — the workspaceLOADING

Item 1. Legal Proceedings

2024-10-23 compared with 2024-07-24 · 48 added, 30 removed, 580 unchanged (12% of the section changed)

49 unchanged sentences

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

Our abilities to deliver enterprise solutions at scale are nascent.

Our ability 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.

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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 or could delay approval of tags incorporating our endpoint ICs, which could negatively impact market acceptance of our products.

If ARC or a similar organization fails to certify or delays certifying tags incorporating our endpoint ICs, adoption and sales of our products could suffer.

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

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 European Union, or the EU.

Our products operate in spectrum bands in which governments permit the use of RFID/RAIN technology.

If spectrum regulations or the application or enforceability or such regulations should change, or if our products were 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.

In April 2024, NextNav Inc.

asked the Federal Communications Commission, or the FCC, to initiate a proceeding that would consider whether to reconfigure the 902–928 MHz ISM spectrum, or Lower 900 MHz Band, in which RAIN and other unlicensed

services operate to enable a terrestrial backup to the U.S.

Global Positioning System.

To pay for the backup system, NextNav also asked for a license to use certain spectrum bands, including parts of the Lower 900 MHz Band used for RAIN operations, to deliver 5G broadband services.

If approved as proposed, this ISM spectrum reconfiguration could interfere with RAIN radio transmissions and negatively impact the RAIN industry.

We and other RAIN providers and end users, as well as other Lower 900 MHz Band users, have already registered our opposition to NextNav’s petition and asked the FCC to reject it quickly.

If the FCC declines to do so then we expect there to be a protracted decision-making process.

The FCC would be required to consider all relevant comments and material of record before it decides whether to proceed with the proposal, issue a new or modified proposal, or take no action on the proposal.

The fate of NextNav’s petition is uncertain at this time, but if the FCC were to adopt NextNav's proposal and customers were not able to consistently use our RAIN products without interference, then our business would be significantly and negatively affected.

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

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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 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.

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, integrated-circuit (IC) post-processing capacity 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.

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

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

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

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.

18 unchanged sentences

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.

Distributors may, subject to time and quality limitations, return products in exchange for other products.

Our reserve estimates for products stocked by our distributors are based primarily on reports provided to us by those distributors, typically monthly.

If the inventory and resale information our partners and distributors provide is inaccurate, or if we do not receive it in a timely manner, then we may not have a reliable view of products being sold to end users which could negatively impact our operating results.

If our partners overestimate demand, they may invest in building too much capacity, which would put pricing pressure on the RAIN industry.

In the short term, our partners might purchase more of our products than they need, increasing their inventory and reducing our future sales to them, and distributors may, subject to time and quality limitations, seek to return products in exchange for other products.

If our partners underestimate demand, we may not be able to satisfy their needs and that of their customers, and adoption might suffer.

In either case, our business and operating results could be negatively affected.

Our growth strategy depends in part on the success of strategic relationships with third parties and their continued performance and alignment.

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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.

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

Investors, governmental and nongovernmental organizations, partners and end users are increasingly focusing on environmental, social and governance, or ESG, practices.

3 unchanged sentences

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.

We are subject to disclosure and reporting requirements for companies that use “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in their products, whether or not these products are manufactured by third parties.

These requirements could affect the sourcing and availability of minerals that are used in the manufacture of our products.

We have to date incurred costs and expect to incur significant additional costs associated with complying with the disclosure requirements, including for example, due diligence in regard to the sources of any conflict minerals used in our products, in addition to the cost of remediation and other changes to products, processes or sources of supply as a consequence of such verification activities.

Additionally, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement.

We may also face challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free.

Risks Relating to Our Intellectual Property

If we are unable to protect our intellectual property, then our business could be adversely affected.

If we are unable to protect and enforce our intellectual property, then our business could be adversely affected.

Our success depends in part upon our ability to obtain, maintain and enforce our patents, copyrights, trade secrets, trademarks and other intellectual property rights and prevent third parties from infringing, misappropriating or circumventing those rights.

We have historically focused on filing U.S.

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

patent applications, for many reasons, including the fact that a significant portion of RAIN products are sold for use in 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 a limited ability to assert intellectual property rights 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.

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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 intellectual property rights due to the large number of RAIN-related patents or other systemic factors.

Moreover, we may not know whether we are infringing a third party’s intellectual property rights due to the

large number of RAIN-related patents or 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.

13 unchanged sentences

Third-party licenses for patents, software and other technology important to our business may not continue to be available on commercially reasonable terms or may not be available at all.

Loss of any such licenses could cause manufacturing interruptions or delays or reductions in product shipments until we can develop, license, integrate and deploy alternative technologies, if even possible, which could harm our business and operating results.

Loss of any such licenses could cause manufacturing interruptions or delays or reductions in product shipments until we can develop, license, integrate and deploy alternative technologies which, if even possible, could harm our business and operating results.

Our use of open-source software may expose us to additional risks and weaken our intellectual property rights.

28 unchanged sentences

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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Additionally, if we fail to develop products that meet end-user privacy requirements, then end users may choose not to use our products.

Although the Gen2 V3 protocol includes features for addressing consumer privacy and authenticating a tag, and although we have incorporated custom features in our products to further protect consumer privacy, a third party may still breach these features, including as implemented in our products, in which case our reputation could be damaged and our business and prospects could suffer.

Although the Gen2 V3 protocol includes features for addressing consumer privacy and authenticating a tag, and although we have incorporated custom features in our products designed to further protect consumer privacy, a third party may still breach these features, including as implemented in our products, in which case our reputation could be damaged and our business and prospects could suffer.

A breach of security or other security incident impacting our systems or others used in our business could have an adverse effect on our business.

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Risks Relating to Our Financial Position and Capital Needs

We have a history of losses and have only achieved profitability intermittently.

We have a history of losses and have only achieved profitability periodically.

We cannot be certain that we will attain or sustain profitability in the future.

We have incurred losses since our inception in 2000, with a net loss of $43.4 million for the year ended December 31, 2023, and an accumulated deficit of $430.2 million as of December 31, 2023.

Although we reported GAAP net income for the first and second quarters of 2024, there can be no assurance that we will be able to sustain profitability in the future.

Although we reported GAAP net income for the first three quarters of 2024, there can be no assurance that we will be able to sustain profitability in the future.

Our ability to attain or sustain profitability depends on numerous factors, many of which are out of our control, including continued RAIN industry adoption and us maintaining or growing our market share.

7 unchanged sentences

These fluctuations make financial planning and forecasting difficult.

These fluctuations may also cause unanticipated decreases in our

available cash, which could negatively affect our business and prospects.

These fluctuations may also cause unanticipated decreases in our available cash, which could negatively affect our business and prospects.

Material factors that contribute to fluctuations in our operating results include:

8 unchanged sentences

• delays in our product-shipment timing, customer or end-user sales or deployment cycles, or work performed under development contracts;

• intellectual property disputes involving us, our partners, end users or other participants in our industry;

• intellectual property disputes involving us, our partners, end users or other participants in our industry, or the timing of license payments for our intellectual property;

• adverse outcomes of litigation or governmental proceedings;

39 unchanged sentences

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.

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.

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

Any of these developments or changes in U.S.

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This activity could cause a decrease in our stock price.

For more information on the 2019 Notes, the 2021 Notes and the capped-call transactions, see Note 8 of our consolidated financial statements included elsewhere in this report.

For more information on the 2019 Notes, the 2021 Notes and the capped-call transactions, see Note 7 of our condensed consolidated financial statements included elsewhere in this report.

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 June 30, 2024, our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 46.6% of our stock.

As of September 30, 2024, our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 47.2% 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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If we are unable to generate sufficient cash flow, then we may be required to pursue other alternatives, such as selling assets, restructuring indebtedness or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Our ability to refinance any of our indebtedness, including the 2021 Notes, will depend on the capital markets and our financial condition at that time.

Our ability to refinance any of our indebtedness, including the 2021 Notes, will depend on the

capital markets and our financial condition at that time.

We may not be able to pursue these alternatives on favorable terms or at all, which could result in us defaulting on our debt obligations.

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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.

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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any action asserting a breach of fiduciary duty;

any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws;

asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws;

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

6 unchanged sentences

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