FiEE, Inc.

Previous wording

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

Current wording

In our legacy business, we historically provided consumer networking and intelligent software service, including delivering comprehensive WiFi as a service platform to make everyone’s connected home safe and supportive for life and work.

Previous wording

Generally, our gross margin for a given product depends on a number of factors, including the type of customer to whom we were selling. The gross margin for products sold to retailers tended to be higher than for some of our other customers; but the sales, support, returns, and overhead costs associated with products sold to retailers also tended to be higher.

Current wording

Generally, our gross margin for a given product depended on a number of factors, including the type of customer to whom we were selling. The gross margin for products sold to retailers tended to be higher than for some of our other customers; but the sales, support, returns, and overhead costs associated with products sold to retailers also tended to be higher.

Previous wording

Our cash and cash equivalents balance on December 31, 2023 was $709 thousand compared to $530 thousand on December 31, 2022. On December 31, 2023, we had no outstanding borrowings. Our working capital was $(0.8) million as of December 31, 2023.

Current wording

Our cash and cash equivalents balance on December 31, 2024 was $30 thousand compared to $709 thousand on December 31, 2023. On December 31, 2024, we had no outstanding borrowings. Our working capital was $(0.3) million as of December 31, 2024.

Previous wording

The major changes in cash and cash equivalents during fiscal 2023 was a decrease of approximately $1.9 million in accounts receivables, a decrease of $15.5 million in inventory, an increase of $8.3 million in accounts payable, and a decrease of $3.2 million in accrued expenses. In fiscal 2023, the Company also had a net loss of $17.6 million, which contributed to a decrease in cash and cash equivalents.

Current wording

The major changes in cash and cash equivalents during fiscal 2024 was a decrease of approximately $3.2 million in accounts payable, a decrease of $0.7 million in accounts receivable, a decrease of $0.4 million in inventory, and decrease in accrued expense of $0.8 million, offset by $2.2 million in vendor forgiveness, net of asset transfers and proceeds from common stock and preferred stock of $3.5 million. In fiscal 2024, the Company also had a net loss of $4.2 million, which contributed to a decrease in cash and cash equivalents.

Previous wording

The Company’s ability to maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand and collect related receivables. The Company is evaluating options related to its liquidity. The Company will continue to monitor its costs in relation to its sales and adjust its cost structure accordingly.

Current wording

The Company’s ability to maintain adequate levels of liquidity depends in part on our ability to generate cash from operations and its ability to raise additional funds through equity or debt financing. The Company is evaluating options related to its liquidity. The Company will continue to monitor its costs in relation to its sales and adjust its cost structure accordingly.

Previous wording

In the years ended December 31, 2023 and 2022, we generated net sales of $26.1 million and $50.6 million, respectively.

Current wording

In the years ended December 31, 2024 and 2023, we generated net sales of $0.6 million and $26.1 million, respectively.

Previous wording

Following is a discussion of what we view as our more significant accounting policies and estimates. As described below, management judgments and estimates must be made and used in connection with the preparation of our consolidated financial statements. We have identified areas where material differences could result in the amount and timing of our net sales, costs, and expenses for any period if we had made different judgments or used different estimates.

Current wording

Following is a discussion of what we view as our more significant accounting policies and estimates pertaining to the operations of the Company. As described below, management judgments and estimates must be made and used in connection with the preparation of our consolidated financial statements. We have identified areas where material differences could result in the amount and timing of our net sales, costs, and expenses for any period if we had made different judgments or used different estimates.

Previous wording

**Revenue Recognition.**We primarily sell hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other channel partners via the Internet. The hardware products include cable modems and gateways, mobile broadband modems, wireless routers, MoCA adapters and mesh home networking devices. We also sell the Minim subscription service that enables and secures a better-connected home using the Minim AI-driven smart home WiFi management and security platform.

Current wording

**Revenue Recognition.**We primarily sold hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other channel partners via the Internet. The hardware products included cable modems and gateways, mobile broadband modems, wireless routers, MoCA adapters and mesh home networking devices. We also sold the Minim subscription service that enabled and secured a better-connected home using the Minim AI-driven smart home WiFi management and security platform.

Previous wording

The SaaS was offered over a defined contract period, generally one year. These services were available as an on-demand application over the defined term. The agreements included service offerings, which deliver applications and technologies via cloud-based deployment models that we develop functionality for, provide unspecified updates and enhancements for, and host, manage, provide upgrades and support for the customers’ access by entering into solution agreements for a stated period. The monthly fees charged to the customers are based on the number of subscribers utilizing the services each month, and the revenue recognized generally corresponds to the monthly billing amounts as the services are delivered. Customers do not have the contractual right or ability to take possession of the hosted software.

Current wording

The SaaS was offered over a defined contract period, generally one year. These services were available as an on-demand application over the defined term. The agreements included service offerings, which deliver applications and technologies via cloud-based deployment models that we develop functionality for, provide unspecified updates and enhancements for, and host, manage, provide upgrades and support for the customers’ access by entering into solution agreements for a stated period. The monthly fees charged to the customers were based on the number of subscribers utilizing the services each month, and the revenue recognized generally corresponded to the monthly billing amounts as the services were delivered. Customers did not have the contractual right or ability to take possession of the hosted software.

Previous wording

We consider each product and each service contract to be a distinct performance obligation. Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised products or services is transferred to the customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenue from product sales is recognized at a point in time when management has determined that control has transferred to the customer, which is generally when legal title has transferred to the customer. Revenue from SaaS contracts is recognized as the output of the service is transferred to the customer over time, typically evenly over the contract term. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Current wording

We considered each product and each service contract to be a distinct performance obligation. Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised products or services is transferred to the customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenue from product sales is recognized at a point in time when management has determined that control has transferred to the customer, which is generally when legal title has transferred to the customer. Revenue from SaaS contracts is recognized as the output of the service is transferred to the customer over time, typically evenly over the contract term. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Previous wording

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is also required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation. We use an observable price to estimate SSP for items that are sold separately. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs.

Current wording

Our contracts with customers often included promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is also required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation. We used an observable price to estimate SSP for items that are sold separately. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determined the SSP using information that may include market conditions and other observable inputs.

Previous wording

Product Returns. Products are returned by retail stores and distributors for inventory balancing and warranty repair or replacements. Analyses of actual returned product are compared to analyses of the product return estimates. We have concluded that the current process of estimating the return reserve represents a fair measure with which to adjust revenue. Returned goods are variable and under ASC Topic 606, Revenue from Contracts with Customers, are estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g., upon shipment of goods). Under ASC Topic 606, the Company monitors pending authorized returns of goods and, if deemed appropriate, records the right of return asset accordingly.

Current wording

Product Returns. Products are returned by retail stores and distributors for inventory balancing and warranty repair or replacements. Analyses of actual returned product are compared to analyses of the product return estimates. We have concluded that the process of estimating the return reserve represents a fair measure with which to adjust revenue. Returned goods are variable and under ASC Topic 606, Revenue from Contracts with Customers, are estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g., upon shipment of goods). Under ASC Topic 606, the Company monitors pending authorized returns of goods and, if deemed appropriate, records the right of return asset accordingly.

Previous wording

**Inventory Valuation and Cost of Goods Sold.**Inventory is valued at the lower of cost, determined by the first-in, first-out method, or its net realizable value. We review inventories for obsolete and slow-moving products and make provisions based on our estimate of the probability that the material will not be consumed or that it will be sold below cost. Additionally, material product certification costs on new products are capitalized and amortized over the expected period of value of the respective products.

Current wording

**Inventory Valuation and Cost of Goods Sold.**Inventory is valued at the lower of cost, determined by the first-in, first-out method, or its net realizable value. We reviewed inventories for obsolete and slow-moving products and made provisions based on our estimate of the probability that the material will not be consumed or that it will be sold below cost. Additionally, material product certification costs on new products were capitalized and amortized over the expected period of value of the respective products.

Previous wording

Our total net sales decreased year-over-year by $24.5 million or 48.4%. The decline in net sales is directly attributable to decreased sales of Motorola branded cable modems and gateways. In both 2023 and 2022, we primarily generated our sales by selling cable modems and gateways. Sales related to SaaS offerings were $1.6 million and $912 thousand in the years ended December 31, 2023 and 2022, respectively. The decrease in other networking products of $700 thousand in 2023 compared to 2022 is primarily due to a reduction in MoCA products and a refocus on new products introductions.

Current wording

Our total net sales decreased year-over-year by $25.5 million or 97.5%. The decline in net sales is directly attributable to decreased sales of Motorola branded cable modems and gateways. In both 2024 and 2023, we primarily generated our sales by selling cable modems and gateways. Sales related to SaaS offerings were $0.0 million and $1.6 million in the years ended December 31, 2024 and 2023, respectively. The decrease in other networking products of $0.6 thousand in 2024 compared to 2023 is primarily due to a reduction in MoCA products.

Previous wording

Cost of goods sold consists primarily of the following: the cost of finished products from our third-party manufacturers; overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics; third-party software licensing fees; inbound freight; import duties/tariffs; warranty costs associated with returned goods; write-downs for excess and obsolete inventory; amortization of certain acquired intangibles and software development costs; and costs attributable to the provision of service offerings.

Current wording

Cost of goods sold consisted primarily of the following: the cost of finished products from our third-party manufacturers; overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics; third-party software licensing fees; inbound freight; import duties/tariffs; warranty costs associated with returned goods; write-downs for excess and obsolete inventory; amortization of certain acquired intangibles and software development costs; and costs attributable to the provision of service offerings.

Previous wording

The decrease in gross profit was attributable to sales decline of Motorola branded cable modems and gateways, an inventory reserve on a single product, and increased freight and component costs. We outsource our manufacturing, warehousing, and distribution logistics. We believe this outsourcing strategy allows us to better manage our product costs and gross margin. Our gross margin can be affected by a number of factors, including fluctuation in foreign exchange rates, sales returns, changes in average selling prices, end-user customer rebates and other channel sales incentives, changes in our cost of goods sold due to fluctuations and increases in prices paid for components, overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or obsolete inventory.

Current wording

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

Previous wording

Gross profit and gross margin decreased in fiscal 2023 compared to the prior fiscal year, primarily due to the decline in net sales.

Current wording

Gross profit decreased and gross margin increased in fiscal 2024 compared to the prior fiscal year, primarily due to the decline in net sales offset by inventory reserves of $1.8 million in 2023.

Previous wording

Selling and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff, technical support expenses, and facility allocations. The following table presents sales and marketing expenses, for the periods indicated:

Current wording

Selling and marketing expenses consisted primarily of advertising, trade shows, corporate communications and other marketing expenses, product marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff, technical support expenses, and facility allocations. The following table presents sales and marketing expenses, for the periods indicated:

Previous wording

Sales and marketing expenses decreased in fiscal 2023, as compared to the prior year, primarily due to a decrease in marketing program campaigns of $2.0 million, personnel costs of $1.5 million, and Motorola royalty fees of $1.5 million.

Current wording

Sales and marketing expenses decreased in fiscal 2024, as compared to the prior year, primarily due to a decrease in Motorola royalty fees of $5.2 million, marketing programs of $2.1 million, personnel costs of $1.4 million, and other market support costs of $0.7 million.

Previous wording

General and administrative expenses decreased $1.4 million primarily due to a decrease of $1.4 million in personnel costs and $0.5 million in professional services fees, partially offset by an increase in insurance costs of $0.4 million.

Current wording

General and administrative expenses decreased $2.6 million primarily due to a decrease of $0.9 million in personnel costs, software costs of $0.9 million, $0.5 million in professional services fees, and $0.4 in other general and administrative support costs.

Previous wording

The decrease of $2.4 million was primarily due to personnel costs of $1.7 million, $0.2 million software licenses, and $0.2 million professional services fees.

Current wording

The decrease of $3.3 million was primarily due to personnel costs of $2.3 million, $0.2 million software licenses, $0.4 million professional services fees, and $0.4 million in other research and development support costs.

Previous wording

Other income (expense), net was an expense of $385 thousand in fiscal 2023 and expense of $392 thousand in fiscal 2022, primarily due to increased borrowing interest rates related to the SVB Loan Agreement.

Current wording

Other income (expense), net was an expense of $82 in fiscal 2024 and expense of $385 thousand in fiscal 2023, primarily due to the Company paying in full the outstanding balance of the SVB Loan Agreement in October 2023

Previous wording

**Income Tax Expense.**We recorded minimum state income tax for a few states and tax related to our operations in Mexico, which was $43 thousand and $112 thousand in fiscal 2023 and fiscal 2022, respectively.

Current wording

**Income Tax Expense.**We recorded minimum state income tax for a few states and tax related to our operations in Mexico, which was $11 thousand and $43 thousand in fiscal 2024 and fiscal 2023, respectively.

Previous wording

Our principal sources of liquidity are cash and cash equivalents, sales of inventory, borrowing under our line of credit, prior to repayment and termination, at December 31, 2023. As of December 31, 2023, we had cash and cash equivalents of $709 thousand and $0 in restricted cash as compared to $530 thousand in cash and cash equivalents and $500 thousand in restricted cash on December 31, 2022. On December 31, 2023, we had no outstanding borrowings and working capital of $(0.8) million. We have funded our operations.

Current wording

Our principal sources of liquidity are cash and cash equivalents. As of December 31, 2024, we had cash and cash equivalents of $30 thousand as compared to $709 thousand in cash and cash equivalents on December 31, 2023. On December 31, 2024, we had no outstanding borrowings and working capital of $(0.3) million. We have continued to fund our operations through proceeds of common and preferred stock.

Previous wording

Cash used in operating activities of $12.2 million for 2022 reflected our net loss of $15.5 million, adjusted for non-cash expenses, consisting primarily of $0.8 million of depreciation and amortization, $1.2 million of stock-based compensation expense, and a $0.1 million write-off of goodwill and intangible assets. Uses of cash included a reduction in accounts payable of $9.6 million and a decrease in accrued expenses of $0.8 million. Sources of cash included a decrease of accounts receivable of $2.2 million, a decrease in inventory of $6.7 million, and increase in deferred revenue of $671 thousand.

Current wording

Cash used in operating activities of $3.7 million for 2024 reflected our net loss of $4.2 million, adjusted for non-cash expenses, consisting primarily of $0.4 million of depreciation and amortization, $0.9 million of stock-based compensation expense, $(0.3) million credit losses, and $2.2 million in vendor forgiveness, net of asset transfers. Uses of cash included a reduction in accounts payable of $3.2 million, accrued expenses and other liabilities of $0.8 million, and prepaid expenses and other current assets of $0.1 million. Sources of cash included a decrease of accounts receivable of $1.0 million and inventory of $0.4 million.

Previous wording

Cash Flows from Financing Activities. Cash used in financing activities in 2023 consisted of $4.8 million in borrowing repayments under our SVB line-of-credit.

Current wording

Cash used in financing activities in 2023 consisted of $4.8 million in borrowing repayments under our SVB line-of-credit.

Previous wording

At December 31, 2023, we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months. Our ability to continue as a going concern will depend on our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce or contain expenditures and increase revenues. Based on these factors, management determined that there is substantial doubt regarding our ability to continue as a going concern. The Company will continue to monitor its costs in relation to its sales and adjust accordingly.

Current wording

At December 31, 2024, we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months. Our ability to continue as a going concern will depend on our ability to obtain additional equity or debt financing, attain further operating efficiencies, and generate cash from operations. Based on these factors, management determined that there is substantial doubt regarding our ability to continue as a going concern. The Company will continue to monitor its costs in relation to its sales and adjust accordingly.

Previous wording

Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of any future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, funds required to service our debt, the receipt of and time required to obtain regulatory clearances and approvals, our sales and marketing programs, our need for infrastructure to support our sales growth, the continuing acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment.

Current wording

Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of any future operating losses, the level and timing of future new formed operations to generate sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, funds required to service our debt, our sales and marketing programs, our need for infrastructure to support our sales growth, the acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment.

Previous wording

At December 31, 2023, we have Federal and state net operating loss carry forwards of approximately $76.9 million and $44.9 million, respectively, available to reduce future taxable income. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more likely than-not that the benefits from such assets will not be realized.

Current wording

At December 31, 2024, we have Federal net operating loss carry forwards of approximately $73.9 million available to reduce future taxable income. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more likely than-not that the benefits from such assets will not be realized.

Previous wording

In 2006, the Company entered into a maquiladora agreement with North American Production Sharing, Inc. (“NAPS”). This agreement provides that NAPS provide certain personnel and other services for a production facility in Mexico on our behalf. Although the maquiladora agreement expired on September 25, 2019, the agreement automatically renews annually unless otherwise cancelled per provisions in the agreement. Any related assets, liabilities, or expenses are reported in the accompanying financial statements. Additionally, the Company is obligated to pay future minimum required royalty payments associated with certain licensing agreements which are not included in our consolidated balance sheet.

Current wording

In 2006, the Company entered into a maquiladora agreement with North American Production Sharing, Inc. (“NAPS”). This agreement provided that NAPS provide certain personnel and other services for a production facility in Mexico on our behalf. Although the maquiladora agreement expired on September 25, 2019, the agreement automatically renewed annually unless otherwise cancelled per provisions in the agreement. The agreement expired and was not renewed in 2023. Any related assets, liabilities, or expenses are reported in the accompanying financial statements. Additionally, the Company was obligated to pay future minimum required royalty payments associated with certain licensing agreements which are not included in our consolidated balance sheet, refer to Note 7 in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.