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What changed in Identiv, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Identiv, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+485 added−329 removedSource: 10-K (2025-03-17) vs 10-K (2024-03-15)

Top changes in Identiv, Inc.'s 2024 10-K

485 paragraphs added · 329 removed · 153 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFactors that could cause our actual results to differ materially from our expectations include, but are not limited to our ability to successfully execute our business plan and sell our products; continued market acceptance and growth or expansion in our target markets; our ability to successfully compete; our history of losses; the effects of product and component shortages; our ability to obtain additional capital; the benefits and attributes of our products and services; the level of customer orders; the ability of our products to perform as expected; risks related to the recent COVID-19 pandemic; fluctuations in net cash provided and used by operating, financing and investing activities; sources and uses of our cash, and expense levels; the loss of significant customers or types of business; the impact of macroeconomic conditions, including inflation, on our business; and the risks discussed elsewhere in this Annual Report under the heading “Risk Factors”.
Biggest changeFactors that could cause our actual results to differ materially from our expectations include, but are not limited to our ability to successfully execute our growth strategy and business plan and develop, manufacture and sell products and solutions for targeted industry segments; our ability to successfully penetrate the healthcare industry and other high-value end markets; continued market acceptance and growth or expansion in our target markets; our ability to successfully compete; our history of losses; the impact of recent changes in management; the effects of product and component shortages; the benefits and attributes of our products and services; the level of customer orders; the ability of our products to perform as expected; fluctuations in net cash provided and used by operating, financing and investing activities; sources and uses of our cash, and expense levels; the loss of significant customers or types of business; the impact of macroeconomic conditions, including inflation, on our business; the sale of our Physical Security Business; and the risks discussed elsewhere in this Annual Report under the heading “Risk Factors”.
To ensure that products manufactured by third parties are consistent with internal standards, our quality control programs include management of all key aspects of the production process, including establishing product specifications, selecting the components to be used to produce 7 products, selecting the suppliers of these components and negotiating the prices for certain of these components.
To ensure that products manufactured by third parties are consistent with internal standards, our quality control programs include management of all key aspects of the production process, including establishing product specifications, selecting the components to be used to produce products, selecting the suppliers of these components and negotiating the prices for certain of these components.
The content on our website is not, nor should it be deemed to be, incorporated by reference into this Annual Report. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov. 8
The content on our website is not, nor should it be deemed to be, incorporated by reference into this Annual Report. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov. 6
The core of our proprietary technology is the combination of our advanced technical expertise combined with our intimate customer knowledge, enabling us to develop bring to market and sometimes patent products uniquely positioned to deliver benefits to customers.
The core of our proprietary technology is the combination of our advanced technical expertise combined with our intimate customer knowledge, enabling us to develop and bring to market (and occasionally patent) products uniquely positioned to deliver benefits to customers.
As of December 31, 2023, we had 394 employees, of which 78 were in research and development, 93 were in sales and marketing, 181 were in manufacturing and 42 were in general and administrative. We are not subject to any collective bargaining agreements and, to our knowledge, none of our employees are currently represented by a labor union.
As of December 31, 2024, we had 166 employees, of which 20 were in research and development, 15 were in sales and marketing, 106 were in manufacturing and 25 were in general and administrative. We are not subject to any collective bargaining agreements and, to our knowledge, none of our employees are currently represented by a labor union.
We have a portfolio of approximately 36 patent families (designs, patents, utility models, patents pending and exclusive licenses) in individual or regional filings, covering products, electrical and mechanical designs, software systems and methods and manufacturing process ideas for our various businesses. Additionally, we leverage our own ASIC designs for smart card interface in some of our reader devices.
We have a portfolio of three patent families (designs, patents, utility models, patents pending and exclusive licenses) in individual or regional filings, covering products, electrical and mechanical designs, software systems and methods and manufacturing process ideas for our various businesses.
These cautionary statements qualify all of the forward-looking statements included in this Annual Report. Identiv and the Identiv logo are trademarks of Identiv, Inc., registered in many jurisdictions worldwide.
These cautionary statements qualify all of the forward-looking statements included in this Annual Report. Identiv and the Identiv logo are trademarks of Identiv, Inc., registered in many jurisdictions worldwide. Certain product and service brands are also trademarks or registered trademarks of the Company, including SMARTAG and TAM.
We also deploy Premises software and systems teams in India, Vietnam, Mexico and the U.S. Proprietary Technology and Intellectual Property We currently rely on a combination of patent, copyright and trademark laws, trade secrets, confidentiality agreements and contractual provisions to protect our proprietary rights.
Proprietary Technology and Intellectual Property We currently rely on a combination of patent, copyright and trademark laws, trade secrets, confidentiality agreements and contractual provisions to protect our proprietary rights.
We design the systems, the antennas, software, security and physical form that connects the chips, accesses their capabilities, manages RF communications and power conversion, and creates the platform for the digital experience, all harmoniously integrated with the physical experience of the product.
Furthermore, the device must perform reliably in real-world environments. We design the systems, the antennas, software, security and physical form that connect the chips, access their capabilities, manage RF communications and 3 power conversion, and enable the platform for the digital experience, all harmoniously integrated with the physical experience of the product.
In addition, we may work with suppliers to improve process control and product design. For the majority of our product manufacturing, we utilize a global sourcing strategy that serves all business solution areas within the company, which allows us to achieve economies of scale and uniform quality standards for our products.
In addition, we may work with suppliers to improve process control and product design. For most of our product manufacturing, we utilize a global sourcing strategy which allows us to achieve economies of scale and uniform quality standards for our products. On an ongoing basis, we analyze the need to add alternative sources for both our products 5 and components.
By digitally enabling physical "things," we make them more secure, responsive, feature-rich, interactive and customer-connected. RFID powers a wide range of IoT applications, including customer engagement, product authenticity, enhanced consumer experiences, instrumentation and sensor enabling, brand protection, product tracking, and tamper detection.
RFID powers a wide range of IoT use cases, including product authenticity, customer engagement, enhanced consumer experiences, instrumentation and sensor enabling, brand protection, asset tracking, and tamper detection.
To date, we have experienced no work stoppages and believe that our employee relations are generally good. Corporate Information Our corporate headquarters are located in Fremont, California.
To date, we have experienced no work stoppages and believe that our employee relations are generally good. Corporate Information Our corporate headquarters is located in Santa Ana, California. We maintain research and development facilities in California, Germany, manufacturing facilities in Singapore and Thailand, and local operations and sales facilities in Germany and the United States.
We make this happen with our library of designs, patented technologies like tag-on-metal, and IP we have developed working with early adopters of RFID in multiple customer verticals including mobility and healthcare.
We have a broad portfolio of device designs, including patented technologies like tag-on-metal, and intellectual property ("IP") we have developed working with early adopters of RFID in multiple customer verticals including mobility and healthcare. We work closely with our customers to build the analog bridge and system to make the device function across radio frequencies.
We then work closely with our customers to build the complicated analog bridge and system to make the device function across radio frequencies. The result for the end user is an engaged, dynamic interaction with very high reliability, high data security and optimized power transfer.
The result for the end user is an engaged, dynamic interaction with very high reliability, high data security and optimized power transfer.
Our RFID devices are predominantly manufactured and assembled by our own internal manufacturing teams in Singapore and Thailand primarily using locally sourced components and are certified to the ISO 9001:2015 and ISO 14001:2015 quality manufacturing standard. Our premises sensors readers, controllers and software are manufactured primarily in California. Our video appliances are manufactured primarily in Wisconsin and Arizona.
Manufacturing and Sources of Supply Our RFID devices are predominantly manufactured by our own internal manufacturing teams, principally in Thailand and supported by Singapore, primarily using locally sourced components. Our production facilities are certified to the ISO 9001:2015 and ISO 14001:2015 quality manufacturing standard. We have implemented quality control programs to satisfy customer requirements for high quality and reliable products.
On an ongoing basis, we analyze the need to add alternative sources for both our products and components. For example, we currently utilize the foundry services of external suppliers to produce our ASICs for smart cards readers and RFID devices, and we use chips and antenna components from third-party suppliers.
For example, we currently utilize the foundry services of external suppliers to produce our ASICs for RFID devices, and we use chips and antenna components from third-party suppliers. Where possible, we have qualified additional sources of supply for components. Government Regulation Our business is subject to government regulation as discussed under “Risk Factors”.
We maintain research and development facilities in California, India, Germany, manufacturing facilities in Singapore and Thailand, and local operations and sales facilities in Germany, the United Kingdom, Hong Kong, Japan, Canada, and the United States. We were founded in 1990 in Munich, Germany and incorporated in 1996 under the laws of the State of Delaware.
We were founded in 1990 in Munich, Germany and incorporated in 1996 under the laws of the State of Delaware.
We would then typically run another rapid cycle of re-design, re-prototype, re-pilot, and re-production processes. We believe the design-through-production platform incentivizes our customers to continue working with us as they drive increasing functionality and better performance into the experiences for their customers.
We believe our design-through-production platform incentivizes our customers to continue collaborating with us as they seek to drive increasing functionality and better performance into the experiences for their customers. Market Drivers The emerging RFID market is driven by strong macroeconomic trends driving demand for RFID and related technologies like BLE.
Wherever possible, we have qualified additional sources of supply for components. Government Regulation Our business is subject to government regulation as discussed under "Risk Factors". Human Capital Our key human capital management objectives are to attract, retain and develop the highest quality talent.
Human Capital Our key human capital management objectives are to attract, retain and develop the highest quality talent.
Our devices can be attached to a prescription bottle, affixed to a shipment pallet, or embedded in an athletic jersey; they must then communicate through radio frequency (RF) and harvest power from the radio signal of a phone or reader in order to run the chip. Furthermore, the device must perform reliably in real-world environments.
Our RFID devices which include tiny, low-cost RFID chips with highly tuned and optimized antennas, systems, software and security can be attached or integrated into almost any physical object, such as a prescription bottle, a plastic pallet, or a smart home device; the devices then communicate through radio frequency (“RF”) and harvest power from the radio signal of a phone or reader in order to run the chip.
As technology improves and costs drop, we believe competitive pressures will drive adoption across each sector until virtually all physical items have a sensor-augmented, integrated, digital existence – a vision we share with leading semiconductor manufacturers.
The scale of the RFID market opportunity has the potential to reach hundreds of billions of units over time. As RFID technology improves and deployment costs decline, we expect competitive pressures to drive increased adoption across virtually every sector, so that nearly all physical items have a sensor-augmented, integrated, digital existence.
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Certain product and service brands are also trademarks or registered trademarks of the Company, including HIRSCH , ScramblePad , TouchSecure , Velocity, Velocity Vision, Velocity AI, Bitse.io, Freedom, Enterphone MESH, 3VR, VisionPoint, Thursby Software, and Thursby SubRosa .
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Overview Our vision is to shape a smarter, healthier, and more sustainable future by creating digital identities for everyday products. Our mission is to develop specialty radio-frequency identification ("RFID") and Internet of Things ("IoT") solutions that address our customers' most significant challenges and create new opportunities for them through the digitization and enhanced connectivity to the IoT.
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Overview Our mission is to software-enable the entire physical world. Our radio-frequency identification ("RFID") Internet of Things ("IoT") devices and IoT software platform are designed to digitally enable and secure any physical item.
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We design, produce, and sell RFID and Bluetooth Low Energy (“BLE”) enabled devices, primarily RFID inlays, tags, and labels that can be applied or incorporated into physical objects, providing them with a digital identity and the ability for our customers to track, monitor, authenticate, and engage with consumers.
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Our products enable unique and secure digital interaction with the physical world while simultaneously managing data flows from each physical object, thereby creating a software-enabled experience for the user that goes beyond a purely physical interaction. Our physical security systems secure virtually every aspect of places and our interaction with them.
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Our IoT devices have been integrated into more than a billion and a half applications globally. By digitally enabling physical objects to connect to the cloud or a device reader, we make those objects more secure, responsive, feature-rich, interactive and customer-connected.
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Our systems provide customers with identification, access control, video surveillance and analytics. The result is a secure and responsive experience between the user and the place they are accessing. We believe our systems are built to meet the needs of various stakeholders, from engineers, systems designers, installers, and administrators to systems managers and individual users.
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Our in-house research and development ("R&D") team and New Product Introduction (“NPI”) team enable us to transition from design and prototypes to pilot runs to full-scale production, delivering a high-quality, thoroughly tested product, ranging from standard specification to technologically complex custom devices.
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We execute our strategy of securing every place and thing through our two business segments: Identity segment for IoT and RFID-enabled solutions, and Premises segment for our physical security and access control. 3 • Identity: Our Identity business is focused on digitally enabling and securing every physical thing .
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Oftentimes, the customers' engineers seek to enhance the product, making modifications from lessons learned or in response to RFID chip suppliers launching next-generation chips with new functions, features, and price points. We support our customers with re-design, prototype, pilot, and production processes when requested.
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Our designs and products include RFID-enabled IoT solutions to make digital and physical devices secure, responsive, and meaningful for the end user. Our RFID units have been integrated into more than a billion and a half IoT items around the world. • Premises: Our Premises business is focused on securing every physical place .
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These trends include digitization and the continued expansion of IoT, enhanced security and anti-counterfeiting, regulatory compliance and safety, and sustainability and the circular economy. Further, the digital identities of products enabled by RFID and BLE technologies offer companies and consumers many compelling benefits, including real time tracking and supply chain visibility, enhanced security and authentication, and augmented consumer experiences.
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We offer what we believe to be one of the most comprehensive, end-to-end systems available from a single service provider in the physical security market. Our product portfolio includes identity credentials, access readers, access control systems, video management systems, and video analytics, deployed in a hyper-converged platform or a cloud-based architecture.
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This is a vision for the future that we share with leading semiconductor manufacturers who supply the chips embedded in our devices.
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Our platform is deployed across buildings worldwide, including sensitive government facilities, schools, utilities, hospitals, stores, and apartment buildings. Market Drivers Identity Segment: In our Identity segment, the emerging RFID market is driven by pervasive use cases to the extent they are adopted by companies and consumers.
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Growth Strategy “ Perform, Accelerate, Transform ” is the strategy framework that we launched in the fourth quarter of 2024 to strengthen and optimize the performance of our core “channel” business, accelerate our growth, and ultimately transform the business. First, Perform is focused on strengthening, optimizing, and growing our core “channel” business.
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For example, RFID devices can verify whether a syringe dispenses the exact right amount of a patient’s medication. Mobile phone accessories can work together intelligently with a person’s handset to create novel experiences and applications. Temperature-sensitive products can be tracked to ensure the shipment has stayed within its safety parameters and remains unspoiled.
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The objective of Perform is to grow our market share and increase our profitability in the channel.
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RFID-enabled smart packaging products allow service operators to remain in compliance with government regulations and, potentially, tax authorities. These examples demonstrate the scale of the RFID market opportunity of hundreds of billions of units over time.
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We intend to focus on higher margin opportunities with our existing customers and channel partners; expand gross margins by completing the transition to our manufacturing facility in Thailand; execute our new product development (“NPD”) projects with discipline; and delight our customers with excellent customer support and timely product delivery.
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Identiv enables tiny, low-cost RFID chips with highly tuned and optimized antennas, systems, software and security to become embedded in a wide range of products, providing a digital identity to almost any object on the planet. Premises Segment: Within our Premises segment, we believe the physical security market is undergoing a generational, technology-driven transformation.
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We are implementing a stage gate process to manage our NPD project pipeline, which is designed to focus our time and R&D resources on the projects with the highest probability of success and discontinue those that we deem financially or technically unviable.
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Fully integrated, software-defined, video, access and identity systems are being deployed to address evolving security threats that prior generations of security systems can no longer adequately secure. Lower cost of ownership, lower cost of administration, higher security and lower cost of upgrades and enhancements are the internal drivers of this technological transformation.
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Second, Accelerate is focused on specific initiatives intended to spur accelerated growth, each with a compelling return on investment.
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Cyber-attacks, identity cloning and user expectations are some of the external forces also driving this generational turnover of systems and expansion of their reach.
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We have identified three distinct initiatives to accelerate growth - one related to developing business within healthcare, a second related to developing business within several high value applications outside of healthcare, and a third related to expanding our BLE and multi-component technology platform.
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Our physical security platforms enable this transformation by encompassing each of the major components that work together to create a secure yet frictionless experience, tailored to the requirements of each customer and all stakeholders within each customer.
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Our healthcare growth initiative will focus on three priority areas - medication adherence for home use drug delivery devices, consumable authentication for medical devices and diagnostic test equipment, and condition monitoring for biologics and clinical specimens.
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Competitive Advantages Identity Segment: In the Identity segment, we believe our core differentiation is our best-in-class designs, technologies, and intellectual property ("IP") that enable the secure digital capabilities of RFID chips to work within the analog world of antennas, power harvesting, data conversion and security.
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We have confirmed through primary and secondary market research that each of these areas has significant unmet needs and a meaningful addressable market that can be addressed through RFID and BLE solutions. The second growth initiative will focus on non-healthcare high-value segments.
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We believe we deepen our value and competitive advantage by providing both the devices themselves in high volume, as well as the readers and programmers to personalize and read the RFID devices.
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We intend to address several specific use cases: inventory management of plastic pallets and bins in retail distribution centers; smart packaging for luxury products to combat counterfeiting; and home device consumable authentication to reduce counterfeiting and ensure proper assembly and use.
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Our RFID readers are among the most widely deployed for NFC (near-field communication) and high-frequency RFID programming and reading, which we believe gives us both credibility with our customers’ engineering 4 teams and the flexibility to add software value.
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Through our channel partnerships, we have early traction in each of these use cases and can see the value that RFID and BLE provides. We believe the EU’s forthcoming Digital Product Passport ("DPP") regulations also provide some significant tailwinds for growth in these areas. The third growth initiative is the expansion of our BLE/multi-component technology platform.
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Our vertical integration allows us to go directly from prototypes to pilot runs to volume production and deliver a high-quality product, even for the most complicated devices. Oftentimes, the customers' engineers want to improve the product, making adjustments from lessons learned or because our chip suppliers release new chips, new features, and new price points.
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BLE is a next generation technology for IoT, providing benefits for certain applications that are challenging to address with traditional RFID technologies.
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We anticipate this dynamic will accelerate, driven by improving semiconductor performance as outlined in industry-recognized Moore's Law, and by competitive forces created when any digitally-enabled product is launched, pressuring others to catch up or lose the market opportunity.
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We intend to continue expanding our BLE capabilities and technologies through our current NPD projects; our strategic partnerships with BLE chip providers; and our own go-to-market strategy within healthcare. 4 The third part of our strategic framework is Transform . This pillar is focused on inorganic growth opportunities.
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Premises Segment: In the Premises segment, we believe our competitive advantages are our technical depth and ability to offer a comprehensive, end-to-end product line with customization that meets the varying needs of our customers’ key stakeholders.
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Sales & Marketing Strategy Our current go-to-market strategy focuses on selling through the channel. Many of our customers — including RFID converter companies ("converters"), system integrators, and solution providers — market their services to original equipment manufacturers ("OEMs"). By positioning ourselves as a reliable supplier and trusted partner, we aim to be the clear choice for their future projects.
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Our platform encompasses the total digitization of physical places; it spans access control, video, analytics, access card readers, credentials, and hyperconverged appliances, with the ability to manage the system using on-premises, hybrid or cloud architectures, using hardware and software that are either enterprise-grade or small-business optimized.
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Additionally, we maintain strong relationships with key suppliers, creating further opportunities which we support through co-marketing initiatives and collaborative industry engagements. Our channel business relies on robust industry alliances, recognizing that delivering RFID solutions often requires collaboration among multiple companies.
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Our Premises products are developed and produced for high security applications and have met the requirements and are deployed in some of the most secure government facilities in the United States. We believe that a high-security foundation creates a solid base for all systems, whatever security level is needed.
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Given the strategic importance of these industry alliances, we have implemented partner marketing programs to enhance awareness of our capabilities and drive new opportunities for both Identiv and our partners. These initiatives include joint trade show participation, webinars, tech days, digital marketing campaigns, and press releases. Moving forward, we plan to broaden our strategic partnerships and increase co-marketing efforts.
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Our Premises products are built on Identiv-designed and built hardware that reduces component vulnerabilities. We believe this purpose-built solution is more secure than comparable systems, and provides customers with higher performance, while retaining the ability to improve and quickly integrate new security features. We also embed cybersecure technology into all our access control, credentials, and door readers.
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We are in the process of establishing a dedicated business development team to pursue opportunities within the six applications highlighted in the "Accelerate" pillar of our growth plan. This team will leverage the knowledge and expertise gained from developing RFID devices for specific customer applications, and will be tasked with driving growth across our target segments.
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From CAC/PIV credentials for US government customers to FICAM architecture that we helped to define, we believe our strong reputation in the physical security industry is a competitive advantage. Growth Strategy Identity Segment: Our Identity segment growth strategy is focused on pervasive deployment of high-end, sensor-enabled RFID devices in every physical thing.
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Research and Development We are a leader in designing and developing complex, specialty RFID- and BLE-enabled devices. Identiv is recognized for its rapid prototyping and design capabilities. Our R&D team is based in Germany, the region where RFID technology was originally developed, and in Southeast Asia, where the most advanced and flexible RFID production is centered.
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We are engaged with technology early adopters, built on our reputation as the go-to partner for technologically complex advanced RFID devices. We believe there are three growth drivers in RFID: customer launches, design wins and technology expansion.
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The R&D team is composed of a core antenna design team, software and encoding specialists, and an experienced team of lab technicians who are all grouped under our NPD organization. The NPD team is augmented by seasoned project managers and a growing product management organization. Our Southeast Asian R&D team is predominantly built around our New Product Introduction (NPI) organization.
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Use Case Examples • Mobile Accessories : Our RFID devices embedded in mobile phone accessories enable rich, extensible experiences on a mobile device with an RFID-enabled accessory. • Medical Devices : It is critical that a patient’s medication be dispensed at the right dosage and temperature.
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The NPI team locally interacts with the factory and transitions newly developed products into products which are supposed to be mass produced in our RFID inlay and label factory.
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Our RFID devices, when attached to a syringe, can enable doctors and their patients to monitor medical compliance. • Supply Chain Tracking : Our RFID devices, when attached to a shipment palette, enable a company to track the ambient conditions of goods in their supply chain, ensuring cold items remain cold and are delivered to the appropriate location. 5 Design Wins Design wins are the key to our leadership in the market as it expands.
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We have the capability to develop and deliver highly customized IoT solutions, leveraging antenna designs across near field communication ("NFC"), high frequency ("HF"), dual frequency ("DF"), and ultra-high frequency ("UHF") technologies, along with sensors, materials, and form factors, to meet stringent customer requirements.
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We believe our technical expertise, leadership, IP, active customer engagements and reputation across all facets of RFID provide a pipeline of design win opportunities. We also engage in non-recurring engineering ("NRE") projects with strategic customers, with the expectation that many of these projects evolve into design wins.
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More complex products, which require the assembly of multiple components including capacitors, resistors, batteries and bigger size integrated circuits ("IC") is a specialty Identiv has been focusing on for the last decade.
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Technology Expansion Our ability to secure additional design wins and successful customer launches relies upon our best-in-class engineering team and production capabilities, as well as new technologies that we design and incorporate as new capabilities for our customers. Premises Segment: In our Premises segment, our platform has the capability to secure virtually every place on the planet.
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In addition to its years of experience with printed batteries for active RFID and BLE solutions, our R&D team continuously evaluates alternate technologies and materials which would address our customer requirements. Our R&D team has a deep relationship with all major RFID, IoT and BLE chip manufacturers and evaluates next generation IC platforms prior to their mass market launch.
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Our platform is anchored by the reliability and robustness of our complete security solution.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFactors that have caused our results to fluctuate in the past and which are likely to affect us in the future include the following: • business and economic conditions overall and in our markets; • the timing and size of customer orders, including orders that may be tied to annual or other budgetary cycles, seasonal demand, product plans or program roll-out schedules; • the effects of U.S. government shutdowns, spending cuts and other changes in budget allocation or availability that create uncertainty for customers in certain parts of our business; • the absence of significant backlog in our business; • cancellations or delays of customer orders or the loss of a significant customer; • the length of sales cycles associated with our product or service offerings; • variations in the mix of products and services we sell; • reductions in the average selling prices that we are able to charge due to competition, new product introductions or other factors; • the impact of increasing freight and logistics costs; • our ability to obtain an adequate supply of quality components and to deliver our products on a timely basis; • our inventory levels and the inventory levels of our customers and indirect sales channels; • the extent to which we invest in development, sales and marketing, and other expense categories; • acquisitions, dispositions or organizational restructuring; • fluctuations in the value of foreign currencies against the U.S. dollar; 14 • the cost or impact of litigation; and • the write-off of trade receivables and investments.
Biggest changeIf our operating results in any future period fall below the expectations of securities analysts and investors, or the guidance that we provide, the market price of our stock would likely decline. 12 Factors that have caused our results to fluctuate in the past and which are likely to affect us in the future include the following: • business and economic conditions overall and in our markets; • the timing and size of customer orders, including orders that may be tied to annual or other budgetary cycles, seasonal demand, product plans or program roll-out schedules; • the absence of significant backlog in our business; • cancellations or delays of customer orders or the loss of a significant customer; • the length of sales cycles associated with our product or service offerings; • variations in the mix of products we sell; • reductions in the average selling prices that we are able to charge due to competition, new product introductions or other factors; • the impact of increasing freight and logistics costs; • our ability to obtain an adequate supply of quality components and to deliver our products on a timely basis; • our inventory levels and the inventory levels of our customers; • the extent to which we invest in research and development, sales and marketing, and other expense categories; • acquisitions, dispositions or organizational restructuring; • fluctuations in the value of foreign currencies against the U.S. dollar; • the cost or impact of litigation; and • the write-off of trade receivables and investments.
In addition, an outbreak of infectious disease could adversely affect some of the market verticals that we participate in as well as the general economies and financial markets of many countries, including those in which we operate, negatively impact supply and demand for our products and services, and result in delayed sales and extended payment cycles for our products and services.
In addition, an outbreak of infectious disease could adversely affect some of the market verticals that we participate in as well as the general economies and financial markets of many countries, including those in which we operate, negatively impact supply and demand for our products, and result in delayed sales and extended payment cycles for our products and services.
We may suffer a disruption if the supply of components causes us to be unable to purchase sufficient components on a timely basis. For example, the recent global semiconductor shortage that began in 2021 has and may continue to adversely impact our ability to meet product demand in a timely fashion.
We may suffer a disruption if the supply of components causes us to be unable to purchase sufficient components on a timely basis. For example, the global semiconductor shortage that began in 2021 has and may continue to adversely impact our ability to meet product demand in a timely fashion.
These provisions will apply even if the offer were to be considered adequate by some of our stockholders. Because these provisions may be deemed to discourage a change of control, they may delay or prevent the acquisition of our Company, which could decrease the value of our common stock. 18
These provisions will apply even if the offer were to be considered adequate by some of our stockholders. Because these provisions may be deemed to discourage a change of control, they may delay or prevent the acquisition of our Company, which could decrease the value of our common stock.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we identify one or more material weaknesses in our internal controls, our management will be unable to conclude that our internal control over financial reporting is effective.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we identify one or 14 more material weaknesses in our internal controls, our management will be unable to conclude that our internal control over financial reporting is effective.
We depend on a number of suppliers and contract manufacturers for the production of our products and components making us potentially vulnerable to supply disruption. Our reliance on suppliers and contract manufacturers for the production of our products and hardware components has and may continue to result in product delivery problems and delays.
We depend on a number of suppliers and contract manufacturers for the production of our products and components making us potentially vulnerable to supply disruption. Our reliance on suppliers and contract manufacturers for the production of our products and components has and may continue to result in product delivery problems and delays.
If a significant portion of operating expenses are incurred in a foreign currency such as the euro, Indian Rupee or Thai Baht, and revenues are generated in U.S. dollars, exchange rate fluctuations might have a positive or negative net financial impact on these transactions, depending on whether the value of the U.S. dollar decreases or increases compared to that currency.
If a significant portion of operating expenses are incurred in a foreign currency such as the Euro or Thai Baht, and revenues are generated in U.S. dollars, exchange rate fluctuations might have a positive or negative net financial impact on these transactions, depending on whether the value of the U.S. dollar decreases or increases compared to that currency.
Any of the foregoing could have a material adverse effect on our results of operations and could require us to pay significant monetary damages. We expect the likelihood of intellectual property infringement and misappropriation claims may increase as the number of products and competitors in the security market grows and as we increasingly incorporate third-party technology into our products.
Any of the foregoing could have a material adverse effect on our results of operations and could require us to pay significant monetary damages. We expect the likelihood of intellectual property infringement and misappropriation claims may increase as the number of products and competitors in the RFID market grows and as we increasingly incorporate third-party technology into our products.
The global nature of our business exposes us to operational and financial risks and our results of operations could be adversely affected if we are unable to manage them effectively. We market and sell our products and solutions to customers in many countries around the world.
The global nature of our business exposes us to operational, regulatory, political, and financial risks and our results of operations could be adversely affected if we are unable to manage them effectively. We market and sell our products and solutions to customers in many countries around the world.
In addition, from time to time, we may experience an unexpected increase or decrease in demand for our products resulting from fluctuations in our customers’ budgets, purchasing patterns or deployment schedules. These occurrences are not always predictable and can have a significant impact on our results in the period in which they occur.
In addition, from time to time, we may experience an unexpected increase or decrease in demand for our products resulting from fluctuations in our customers’ budgets, purchasing patterns or deployment schedules. These occurrences are not always predictable and have had, and may continue to have a significant impact on our results in the period in which they occur.
Our competitors may also be able to devote greater resources to the development, promotion and sale of products or solutions and may be able to deliver competitive products or solutions at a lower end user price.
Our competitors may also be able to devote greater resources to the development, promotion and sale of products and may be able to deliver competitive products at a lower end user price.
To date, we have not adopted a hedging program to protect against the risks associated with foreign currency fluctuations. 15 Risks Related to Our Intellectual Property, and Litigation We may not be able to protect our intellectual property rights, which could make us less competitive and cause us to lose market share.
To date, we have not adopted a hedging program to protect against the risks associated with foreign currency fluctuations. 13 Risks Related to Our Intellectual Property We may not be able to protect our intellectual property rights, which could make us less competitive and cause us to lose market share.
Sales of our products could decline and we could be subject to legal claims for damages if our products are found to have defects. Despite our testing efforts, our products may contain defects that are not detected until after the products have been shipped.
Sales of our products could decline and we could be subject to legal claims for damages if our products are found to have defects. Our products may contain defects that are not detected until after the products have been shipped.
Risks Related to Our Financial Results, Liquidity and Need for Additional Capital Our revenue and operating results are subject to significant fluctuations and such fluctuations may lead to a reduced market price for our stock. Our revenue and operating results have varied in the past and will likely continue to fluctuate in the future.
Risks Related to Our Financial Results Our revenue and operating results are subject to significant fluctuations and such fluctuations may lead to a reduced market price for our stock. Our revenue and operating results have varied in the past and will likely continue to fluctuate in the future.
Our key employees are employed on an “at will” basis, meaning either we or the employee may terminate their employment with us at any time. The loss of key employees could slow our product development processes and sales efforts or harm our reputation.
Our key employees are employed on an “at will” basis, meaning either we or the employee may terminate their employment with us at any time. The loss of or inability to hire or replace key technical employees could slow our product development processes and sales efforts or harm our reputation.
We could also be subject to sanctions or investigations by The Nasdaq Stock Market, the SEC and other regulatory authorities. We incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.
We could also be subject to sanctions or investigations by Nasdaq, the SEC and other regulatory authorities. We incur significant expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations. We incur significant legal, accounting, administrative and other costs and expenses as a public company.
During fiscal years 2023 and 2022, we were impacted by adverse macroeconomic conditions including but not limited to inflation, foreign currency fluctuations, and the slowdown of economic activity around the globe. Adverse conditions included experiencing delays and reductions in customer orders, shifting supply chain availability and component shortages. We also continue to be affected by supply chain challenges.
During fiscal years 2024 and 2023, we were impacted by adverse macroeconomic conditions including but not limited to inflation, foreign currency fluctuations, and the slowdown of economic activity around the globe. Adverse conditions included experiencing delays and reductions in customer orders, shifting supply chain availability and component shortages.
To support our global sales, customer base and product development activities, we maintain offices and/or business operations in several locations around the world, including the United Kingdom, Germany, Hong Kong, India, Japan, Singapore, Thailand, Canada, and the U.S. We also maintain manufacturing facilities in Singapore, Thailand and California and engage contract manufacturers in multiple countries outside the U.S .
To support our global sales, customer base and product development activities, we maintain offices and/or business operations in several locations around the world, including the Germany, Japan, Singapore, Thailand, and the U.S. We also maintain manufacturing facilities in Singapore and Thailand and engage contract manufacturers in multiple countries outside the U.S .
Any resulting quarantines, labor shortages or other disruptions to our operations, or those of our suppliers or customers, have and may continue to adversely impact our sales and operating results, including through additional expenses and strain on the business as well as our supply chain.
Any resulting quarantines, labor shortages or other disruptions to our operations, or those of our suppliers or customers, had adversely impacted our sales and operating results, including through additional expenses and strain on the business as well as our supply chain.
Our business and operations have and may in the future be adversely affected by health epidemics, pandemics and other outbreaks of infectious disease, such as the global COVID-19 pandemic.
Our business and operations have and may in the future be adversely affected by health epidemics, pandemics and other outbreaks of infectious disease, such as the global COVID-19 health emergency that officially ended in 2023.
If we or our prime contractor partners cannot obtain required government approvals under applicable regulations, we may not be able to sell our products in certain international jurisdictions. A significant portion of our revenue is through an indirect sales channel, and the loss of dealers, systems integrators, resellers, or other channel partners could result in decreased revenue.
If we or our prime contractor partners cannot obtain required government approvals under applicable regulations, we may not be able to sell our products in certain international jurisdictions. 11 A portion of our revenue is through channel partners, and the loss of channel partners could result in decreased revenue.
Managing our global development, sales, administrative and manufacturing operations places a significant burden on our management resources and our financial processes and exposes us to various risks, including: • longer accounts receivable collection cycles; • changes in foreign currency exchange rates; • compliance with and changes in foreign laws and regulatory requirements; • changes in political or economic conditions and stability, particularly in emerging markets; • difficulties managing widespread sales and manufacturing operations and related costs; • export controls; • natural disasters; • less effective protection of our intellectual property; and • potentially adverse tax consequences.
Managing our global development, sales, administrative and manufacturing operations places a significant burden on our management resources and our financial processes and exposes us to various risks, including: • longer accounts receivable collection cycles; • changes in foreign currency exchange rates; • compliance with and changes in foreign laws and regulatory requirements; • political, economic, and social instability, particularly in emerging markets; • difficulties managing widespread sales and manufacturing operations and related costs; • regulations or restrictions impacting trade, including import and export controls, economic sanctions, and tariffs; • natural disasters and outbreaks of disease; • reduced protection of our intellectual property; and • potentially adverse tax consequences.
We believe that the principal competitive factors affecting the markets for our products and solutions include: • the extent to which products and systems must support evolving industry standards and provide interoperability; • the extent to which products are differentiated based on technical features, quality and reliability, ease of use, strength of distribution channels and price; • the ability to quickly develop new products and solutions to satisfy new market and customer requirements; and • the total cost of ownership including installation, maintenance and expansion capability of systems.
We believe that the principal competitive factors affecting the markets for our products include: • the extent to which products must support evolving industry standards and provide interoperability; • the extent to which products are differentiated based on technical features, quality and reliability, ease of use, and price; and • the ability to quickly develop new products and solutions to satisfy new market and customer requirements.
Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.
In the event our independent registered public accounting firm is required to issue an attestation report on the effectiveness of our internal control over financial reporting, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.
We may issue additional shares of common stock or other securities that are convertible into or exercisable for shares of common stock in connection with the hiring of personnel, future acquisitions, and future financings or for other business purposes. If we issue additional securities, the aggregate percentage ownership of our existing stockholders will be reduced.
We may issue additional shares of common stock or other securities that are convertible into or exercisable for shares of common stock in connection with the hiring of personnel, future acquisitions, and future financings or for other business purposes. If we issue additional securities, existing stockholders may experience dilution.
Moreover, these rules and regulations applicable to public companies substantially increase our legal, accounting and financial compliance costs, require that we hire additional personnel and make some activities more time-consuming and costly.
Moreover, these rules and regulations applicable to public companies substantially increase our legal, accounting and financial compliance costs, require that we hire additional personnel and make some activities more time-consuming and costly. It may also be more expensive for us to obtain director and officer liability insurance.
Our failure to develop and introduce new products and services successfully on a timely basis and to achieve market acceptance for such products and services could have a significant adverse impact on our business, financial condition and results of operations.
Our failure to develop and introduce new products successfully on a timely basis and to achieve market acceptance for such products could have a significant adverse impact on our business, financial condition and results of operations. Our business, operations, and reputation may be adversely affected by information technology system failures, breaches, or network disruptions.
Any failure to effectively mitigate these risks and effectively manage our global operations could have a material adverse effect on our business, financial condition or operating results. 12 If current or future export laws limit or otherwise restrict our business, we could be prohibited from shipping our products to certain countries, which could cause our business, financial condition and results of operations to suffer.
If current or future export laws limit or otherwise restrict our business, we could be prohibited from shipping our products to certain countries, which could cause our business, financial condition and results of operations to suffer.
A significant portion of our business is conducted in foreign currencies, principally the euro, Indian Rupee and Thai Baht. Fluctuations in the value of foreign currencies relative to the U.S. dollar will result in currency exchange gains and losses in our reported results.
Fluctuations in the value of foreign currencies relative to the U.S. dollar will result in currency exchange gains and losses in our reported results.
As a result, adverse global and regional economic conditions may materially adversely affect our business, results of operations and financial condition. Such conditions, including but not limited to inflation, slower growth or recession, higher interest rates and currency fluctuations, and other conditions that may impact consumer confidence and spending may adversely affect demand for our products.
Such conditions, including but not limited to inflation, tariffs, sanctions or other trade restrictions, slower growth or recession, higher interest rates and currency fluctuations, and other conditions that may impact consumer confidence and spending may adversely affect demand for our products.
We may periodically engage in litigation as a result of these indemnification obligations. Our insurance policies exclude coverage for third-party claims for patent infringement. 16 We have in the past been named as a defendant in putative securities class action and derivative lawsuits.
We may periodically engage in litigation as a result of these indemnification obligations. Our insurance policies exclude coverage for third-party claims for patent infringement.
Item 1A. Risk Factors Risks Related to Our Customers, Products and Markets, and Our Business Adverse global and regional economic conditions have and may continue to materially adversely affect our business, results of operations and financial condition. We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions.
Adverse global and regional economic conditions have and may continue to materially adversely affect our business, results of operations and financial condition. We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions. Our manufacturing operations and third-party contract manufacturers are located in China, Singapore, and Thailand/Southeast Asia.
We believe that period-to-period comparisons of our operating results are not necessarily meaningful, but securities analysts and investors often rely upon these comparisons as indicators of future performance. If our operating results in any future period fall below the expectations of securities analysts and investors, or the guidance that we provide, the market price of our stock would likely decline.
We believe that period-to-period comparisons of our operating results are not necessarily meaningful, but securities analysts and investors often rely upon these comparisons as indicators of future performance.
As of March 1, 2024, 1,202,748 shares of common stock are reserved for future grants and outstanding equity awards under our equity incentive plans and an additional 8,231,477 shares of common stock are reserved for future issuance in connection with other potential issuances, including conversion of our preferred stock.
As of March 1, 2025, 671, 219 shares of common stock are reserved for future grants and outstanding equity awards under our equity incentive plans and 8,506,556 shares of common stock are reserved for future issuance in connection with the conversion of our preferred stock.
If end users with sizable projects change or delay them, we may experience significant fluctuation in revenue on a quarterly or annual basis, and we anticipate that such uncertainty and fluctuations may continue to characterize our business for the foreseeable future. 9 The impact of health epidemics, pandemics and other outbreaks of infectious disease, such as the global pandemic caused by COVID-19, could negatively impact our operations, supply chain and customer base.
If end users with sizable projects change or delay them, we may experience significant fluctuation in revenue on a quarterly or annual basis, and we anticipate that such uncertainty and fluctuations may continue to characterize our business for the foreseeable future. The loss of one or more significant customers could harm our business.
Volatility in our stock price may result from a number of factors, some of which are beyond our control, including, among others: • low volumes of trading activity in our stock; • technical trading patterns of our stock; • variations in our or our competitors’ financial and/or operational results; • the fluctuation in market value of comparable companies in any of our markets; • expected or announced news about strategic partner relationships, customer wins or losses, product announcements or organizational changes; • comments and forecasts by securities analysts; • litigation developments; • global developments, including war, acts of terrorism, contagions such as COVID-19, and other such events; and • general market downturns.
Volatility in our stock price may result from a number of factors, some of which are beyond our control, including, among others: • fluctuations in the trading volume of our shares or the size of our public float; • technical trading patterns of our stock; • variations in our or our competitors’ financial and/or operational results; • fluctuations in market value of comparable companies in any of our markets; • announcements of new offerings, products, strategic relationships, acquisitions, customer wins or losses, organizational changes, or other events by us or our competitors; • comments and forecasts by securities analysts; • litigation developments; • departures of key employees; • regulatory developments in the U.S., foreign countries, or both; • global developments, including war, acts of terrorism, natural disasters, public health crises, and other such events; and • general economic conditions and trends.
The recent COVID-19 pandemic and efforts to control its spread severely restricted the level of economic activity around the world, which has and may continue to impact timing of demand for our products and services.
The COVID-19 pandemic and efforts to control its spread severely restricted the level of economic activity around the world, which impacted the timing of demand for our products. Our operations and supply chains for certain of our products may be negatively impacted by the regional or global outbreak of illnesses.
As a result, our competitors may be able to respond more quickly to new or emerging technologies or standards and to changes in customer requirements.
Many of our current and potential competitors have significantly greater financial, technical, marketing, purchasing and other resources than we do. As a result, our competitors may be able to respond more quickly to new or emerging technologies or standards and to changes in customer requirements.
Also, if our stock price declines, it may result in difficulty attracting and retaining personnel as equity incentives generally comprise a significant portion of our employee compensation.
The loss of key sales personnel puts us at risk of losing customers that may choose to follow the sales person to the new company. Also, if our stock price declines, as it has recently, it may result in difficulty attracting and retaining personnel as equity incentives generally comprise a significant portion of our employee compensation .
Additionally, we may be subject to currency fluctuations, potentially adverse tax consequences, unexpected changes in regulatory requirements, tariffs and other trade barriers, export controls, natural disasters, or political and economic instability. Any significant delay in our ability to obtain adequate supplies of our products from our current or alternative manufacturers could materially and adversely affect our business and operating results.
Additionally, we may be subject to currency fluctuations, potentially adverse tax consequences, unexpected changes in regulatory requirements, tariffs and other trade barriers, import or export controls, natural disasters, or political and economic instability.
In the future, from time to time we may issue additional previously authorized and unissued securities, resulting in additional dilution of the ownership interests of our current stockholders. In addition, we have reserved shares of common stock for potential future issuance including stock issuable pursuant to our equity incentive plans and the conversion of our preferred stock.
We have reserved shares of common stock for potential future issuance including stock issuable pursuant to our equity incentive plans and the conversion of our preferred stock.
That pace, scope and depth continued to accelerate during 2023 which has caused large fluctuations in our operating results. If RFID market adoption, and adoption of our products specifically, does not meet our expectations, then our growth prospects and operating results will be adversely affected.
Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries. If RFID market adoption, and adoption of our products specifically, does not meet our expectations, then our growth prospects and operating results will be adversely affected.
To be competitive, we have to continually improve the performance, features and reliability of our products and services, particularly in response to competitive offerings, and quickly demonstrate the value of new products and services or enhancements to existing products and services.
The market for RFID and BLE IoT devices and solutions is characterized by rapid technological developments, frequent new product introductions and evolving industry standards. To be competitive, we have to continually improve the performance, features and reliability of our products, particularly in response to competitive offerings, and quickly demonstrate the value of new products or enhancements to existing products.
If we are unable to maintain effective indirect sales channels, there could be a reduction in the amount of product we are able to sell, and our revenues could decrease. We depend upon third-party manufacturers and a limited number of suppliers, and if we experience disruptions in our supply chain or manufacturing, our business may suffer.
We depend upon third-party manufacturers and a limited number of suppliers, and if we experience disruptions in our supply chain or manufacturing, our business may suffer.
Our manufacturing operations and third-party contract manufacturers are located in China, Singapore, and Thailand/Southeast Asia. We also purchase certain products and key components from a limited number of sources that depend on the supply chain, including freight, to receive components, transport finished goods and deliver our products across the world.
We also purchase certain products and key components from a limited number of sources that depend on the supply chain, including freight, to receive components, transport finished goods and deliver our products across the world. As a result, adverse global and regional economic conditions may materially adversely affect our business, results of operations and financial condition.
Our percentage of revenue and customer concentration is significant in certain of our businesses. Sales to our ten largest customers accounted for 30%, 25% and 32% of total net revenue in 2023, 2022 and 2021, respectively.
Sales to our ten largest customers accounted for 51% and 65% of total net revenue in 2024 and 2023, respectively. One customer accounted for 11% of net revenue in 2024, while one customer accounted for 32% of net revenue in 2023.
Competition for these employees is intense and many of our competitors may have greater name recognition and significantly greater financial resources to better compete for these employees. If we are unable to retain our existing personnel, or attract and train additional qualified personnel, our growth may be limited.
We have in the past, and may in the future, experience the loss of employees to our competitors. If we are unable to retain our existing personnel, or attract and retain additional qualified personnel, our growth may be limited.
Although we have taken steps to ensure we have adequate supply for expected customer demand, there can be no assurance that our efforts will be successful. If we are not able to get the necessary products and components on a timely basis, our business, financial condition and results of operations may be adversely affected.
Although we have taken steps to ensure we have adequate supply for expected customer demand, there can be no assurance that our efforts will be successful.
Any debt or equity securities issued may also provide for rights, preferences or privileges senior to those of our common stock and could impose significant restrictions on our operations. Fluctuations in foreign exchange rates between the U.S. dollar and other major currencies in which we do business may adversely affect our business, financial condition and results of operations.
Fluctuations in foreign exchange rates between the U.S. dollar and other major currencies in which we do business may adversely affect our business, financial condition and results of operations. A significant portion of our business is conducted in foreign currencies, principally the Euro and Thai Baht.
We cannot guarantee that future reductions in U.S. government budgets will not impact our sales to these government entities or that the terms of existing contracts will not be subject to renegotiation. Our loss of one or more significant customers could have a significant adverse impact on our business, financial condition and results of operations.
Our loss of one or more significant customers could have a significant adverse impact on our business, financial condition and results of operations. Our business will not be successful if we do not keep up with the rapid changes in our industry.
It may also be more expensive for us to obtain director and officer liability insurance. 17 General Risk Factors Our stock price has been and is likely to remain volatile. Over the past several years, The Nasdaq Capital Market has experienced significant price and volume fluctuations that have particularly affected the market prices of the stocks of technology companies.
Over the past several years, The Nasdaq Capital Market has experienced significant price and volume fluctuations that have particularly affected the market prices of the stocks of technology companies.
Some of these channel partners also sell our competitors’ products, and if they favor our competitors’ products for any reason, they may fail to market our products as effectively or to devote necessary resources that result in sales of our products, which could cause our sales to suffer.
Some of these channel partners also sell our competitors’ products and; if they favor our competitors’ products for any reason as part of their solution, in particular for standard specification designs, our sales could decline.
A failure to receive these government approvals or certifications or a negative audit result could result in a material adverse impact on our business, financial condition and results of operations.
Any failure to effectively mitigate these risks and effectively manage our global operations could have a material adverse effect on our business, financial condition or operating results.
Our financial performance depends on the extent and pace of RFID market adoption and end-user adoption of our RFID products and the timing of new customer deployments. Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries.
If we are not able to get the necessary products and components on a timely basis, our business, financial condition and results of operations may be adversely affected. 9 Our financial performance depends on the extent and pace of RFID market adoption and end-user adoption of our RFID products and the timing of new customer deployments.
System failures and disruptions could also impede the manufacturing and shipping of products, delivery of online services, processing of transactions and reporting of financial results. In addition, any such failures or disruptions could harm our reputation.
To the extent that any disruption or security breach results in a loss or damage to our technology infrastructure, systems, or data or inappropriate disclosure of confidential information or sensitive or personal information, it could impede the manufacturing and shipping of products, delivery of online services, processing of transactions and reporting of financial results.
Our success depends largely on the continued service and availability of key personnel. Our future success depends on our ability to continue to attract, retain, and motivate our senior management as well as qualified technical personnel, particularly software engineers.
Our future success depends on our ability to continue to attract, retain, and motivate our senior management as well as qualified sales and technical personnel in the RFID industry. Competition for these employees is intense and many of our competitors may have greater name recognition and significantly greater financial resources to better compete for these employees.
Increased competition and increased market volatility in our industry could result in lower prices, reduced margins or the failure of our product and service offerings to achieve or maintain market acceptance, any of which could have a serious adverse impact on our business, financial condition and results of operations.
If the growth of the RFID industry does not keep pace with the increased manufacturing capacity, this may result in downward pressure on pricing and reduced margins, each of which could have a serious adverse impact on our business, financial condition and results of operations . Our success depends largely on the continued service and availability of key personnel.
Removed
Our operations and supply chains for certain of our products or services may be negatively impacted by the regional or global outbreak of illnesses, including a resurgence of COVID-19 variants.
Added
Item 1A. Risk Factors Risks Related to our Business, Products, and Industry The growing number of competitors in the RFID industry is posing additional risks to our business. As the RFID industry continues to grow, there has been an increase in the number of companies entering the market, including from China.
Removed
Our business could be adversely affected by reductions or delays in the purchase of our products or services for government security programs in the United States and globally. We derive a substantial portion of our revenues from indirect sales to U.S. federal, state and local governments and government agencies, as well as from subcontracts under federal government prime contracts.
Added
Competitors have and may continue to sell products or solutions at low prices in order to gain market share, because they have lower costs than other competitors, or for other reasons. The number of contract manufacturers and the amount of manufacturing capacity has also increased significantly.
Removed
Large government programs are an important market for our business, as high-security systems employing physical access, smart card, RFID or other access control technologies are increasingly used to enable applications ranging from authorizing building and network access for federal employees to paying taxes online, to citizen identification, to receiving health care.
Added
Failure to expand our business to penetrate new markets and scale successfully within those markets may negatively impact our revenues and financial condition. Our growth strategy depends in part on our ability to penetrate emerging markets, such as the medical device market, and scale successfully within those markets.
Removed
We believe that the success and growth of our business will continue to be influenced by our successful procurement of government business either directly or through our indirect sales channels. Accordingly, changes in government purchasing policies or government budgetary constraints, including government shutdowns, could directly affect our financial performance.
Added
The medical device market and other new markets present distinct and substantial challenges and risks and will likely require us to develop new customized solutions to address the particular requirements of that market.
Removed
Sales to government agencies and customers primarily serving the U.S. government, including further sales pursuant to existing contracts, may be adversely affected by factors outside our control, such as, federal government shutdowns or other Congressional actions to reduce federal spending, and by adverse economic, political or market conditions.
Added
Additionally, these new market opportunities may be outside the scope of our proven expertise or in areas which have unproven market demand, and the utility and value of new products developed by us may not be accepted in the markets served by the new products.
Removed
A reduction in current or future anticipated sales to the U.S. government sector could harm our results of operations. Additionally, we anticipate that an increasingly significant portion of our future revenues will come from government programs outside the U.S., such as electronic national identity, eGovernment and eHealth programs.
Added
Our inability to gain market acceptance of new products could prevent us from scaling successfully within new markets and may harm our future operating results. Our future success also depends on our ability to manufacture new products to meet customer demand in a timely and cost-effective manner.
Removed
We currently supply smart card readers, RFID products and credential provisioning and management solutions for various government programs in Europe, Asia and Australia and are actively targeting additional programs in these and other geographic areas.
Added
Difficulties or delays in replacing existing products with new products we introduce or in manufacturing improved or new products in sufficient quantities to meet customer demand could diminish future demand for our products and harm our future operating results.
Removed
However, the allocation and availability of funding for such programs are often impacted by economic or political factors over which we have no control, and which may cause delays in program implementation, which could negatively impact our sales and results of operations.
Added
In addition, if the medical device market and other new market opportunities for our current and future products are smaller than estimated or do not develop as we expect, our growth may be limited and our business, financial condition and results of operations could be adversely affected.
Removed
Our U.S. government business depends upon the continuance of regulations that require federal agencies to implement security systems such as ours, and upon our ability to receive certain government approvals or certifications and demonstrate compliance in government audits or investigations.
Added
Even if the medical device market and other emerging markets develop as expected, we may not be able to achieve the high gross margins associated with such markets, or, if we do achieve such gross margins, we may not be able to sustain them .
Removed
While we are not able to quantify the amount of sales made to end customers in the U.S. government market due to the indirect nature of our selling process, we believe that orders from U.S. government agencies represent a significant portion of our revenues.
Added
Uncertainty regarding the use of proceeds from the Asset Sale and our future operations may negatively impact the value of our common stock.
Removed
The U.S. government, suppliers to the U.S. government and certain industries in the public sector currently fall, or may in the future fall, under regulations that require federal agencies to implement security systems that utilize physical and logical access control products and solutions such as ours.
Added
On September 6, 2024, the Company completed the sale of its physical security, access card, and identity reader operations and assets, including all outstanding shares of Identiv Private Limited, its wholly-owned subsidiary (the “Physical Security Business”) to Hawk Acquisition, Inc., a Delaware corporation (“Buyer”) and a wholly-owned subsidiary of Vitaprotech SAS, a French société par actions simplifiée and provider of security solutions, and Buyer assumed certain of the Company’s liabilities related to the Physical Security Business (collectively, the “Asset Sale”) pursuant to that certain Stock and Asset Purchase Agreement, dated as of April 2, 2024 (the “Purchase Agreement”), by and between the Company and Buyer.
Removed
These regulations include, but are not limited to, HSPD 12 and FIPS 201 produced by the National Institute of Standards and Technology (“NIST”). Discontinuance of, changes in, or lack of adoption of laws or regulations pertaining to security related to sales to end customers in the U.S. government market could adversely affect our sales.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2023, our major facilities consisted of the following: Location Function Square Feet Lease Expiration Fremont, California Corporate headquarters 3,082 November 2024 Santa Ana, California Administration; manufacturing; research and development 34,599 January 2028 Sauerlach, Germany European operations; research and development; sales 5,156 April 2026 Chennai, India Research and development 17,500 September 2024 Ayutthaya, Thailand RFID/NFC product manufacturing 22,604 March 2028 Singapore RFID/NFC product manufacturing 27,545 August 2026
Biggest changeAt December 31, 2024, our major facilities consisted of the following: Location Function Square Feet Lease Expiration Santa Ana, California (1) Corporate headquarters; administration; research and development; sales 5,000 January 2028 Sauerlach, Germany European operations; research and development; sales 5,156 April 2026 Ayutthaya, Thailand RFID/NFC product manufacturing; research and development 41,441 March 2028 Singapore RFID/NFC product manufacturing; research and development 27,545 August 2026 (1) With the closing of the Asset Sale in September 2024, we are currently subleasing approximately 5,000 square feet of this space from Hirsch, Inc., a member of the Vitaprotech Group.
ITEM 2. PROPERTIES Our corporate headquarters are located in Fremont, California and we maintain operational headquarters in Santa Ana, California. We lease additional facilities to house our engineering, sales and marketing, administrative and manufacturing functions.
ITEM 2. PROPERTIES Our corporate headquarters is in Santa Ana, California. We lease additional facilities to house our engineering, sales and marketing, administrative and manufacturing functions.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe outcome of such claims or other proceedings cannot be predicted with certainty and may have a material effect on our financial condition, results of operations or cash flows. We are not a party to any material legal proceedings as of December 31, 2023. 20
Biggest changeThe outcome of such claims or other proceedings cannot be predicted with certainty and may have a material effect on our financial condition, results of operations or cash flows. We are not a party to any material legal proceedings as of December 31, 2024. 18

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest change(NYSE: VZIO), a designer and manufacturer of entertainment-focused technologies, from 2015 to 2016 and at JustFab, Inc., an online subscription fashion retailer, from 2014 to 2015. He also served as Chief Accounting Officer and Corporate Controller at MaxLinear, Inc. (NYSE: MXL), a provider of radio frequency, analog, digital and mixed-signal integrated circuits, from 2011 to 2014.
Biggest changeHe also served as Chief Accounting Officer and Corporate Controller at MaxLinear, Inc. (NYSE: MXL), a provider of radio frequency, analog, digital and mixed-signal integrated circuits, from 2011 to 2014. From 1999 to 2011, Mr. Scarpulla held various roles in finance at Broadcom Corporation (Nasdaq: BRCM), a provider of semiconductor and infrastructure software solutions, including Director of Financial Reporting. Mr.
Humphreys holds a B.S. degree from Yale University and M.S. and M.B.A. degrees from Stanford University. Justin Scarpulla, 50, has served as our CFO since December 2021. Mr. Scarpulla previously served as Director of Finance at Space Exploration Technologies Corp., a company that designs, manufactures and launches advanced rockets and spacecraft, from May 2017 to December 2021.
Justin Scarpulla, 51, has served as our CFO since December 2021. Mr. Scarpulla previously served as Director of Finance at Space Exploration Technologies Corp., a company that designs, manufactures and launches advanced rockets and spacecraft, from May 2017 to December 2021. From May 2016 to May 2017, Mr.
From May 2016 to May 2017, Mr. Scarpulla served as Vice President of Accounting & Finance at Incipio, LLC, a designer and manufacturer of mobile device accessories and technologies. Mr. Scarpulla served as Vice President and Corporate Controller at Vizio, Inc.
Scarpulla served as Vice President of Accounting & Finance at Incipio, LLC, a designer and manufacturer of mobile device accessories and technologies. Mr. Scarpulla served as Vice President and Corporate Controller at Vizio, Inc. (NYSE: VZIO), a designer and manufacturer of entertainment-focused technologies, from 2015 to 2016 and at JustFab, Inc., an online subscription fashion retailer, from 2014 to 2015.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Information About Our Executive Officers Information concerning our executive officers as of March 1, 2024 is as follows: Steven Humphreys, 62, has served as our CEO since September 2015 and as a director since July 1996. Mr. Humphreys previously served as Chairman of the Board from September 2013 until September 9, 2015.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Information About Our Executive Officers Information concerning our executive officers as of March 1, 2025 is as follows: Kirsten Newquist, age 58, has served as our CEO and as a member of our board of directors since September 2024.
Scarpulla holds a B.A. in Accounting and Finance from California State University Fullerton. 21 PA RT II
Scarpulla is a Certified Public Accountant and started his career at Ernst & Young LLP. Mr. Scarpulla holds a B.A. in Accounting and Finance from California State University Fullerton. 19 PA RT II
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Previously, he also served as Lead Director from May 2010 until April 2013 and as Chairman of the Board from April 2000 to March 2007. Mr. Humphreys also served as President of the Company from July 1996 to December 1996 and as President and Chief Executive Officer from January 1997 to July 1999. From November 2011 to December 2014, Mr.
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Prior to that, from April 2024 to September 2024, she served as our President, IoT Solutions. Prior to joining the Company. Ms.
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Humphreys served as chief executive officer of Flywheel Software, Inc., a location-based mobile solutions company. From October 2008 until its acquisition by SMSC in February 2011, Mr. Humphreys served as Chief Executive Officer and President of Kleer Corporation, a provider of wireless audio technology.
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Newquist previously held various roles at Avery Dennison Corporation (NYSE: AVY), a global materials science and digital identification solutions company, including as Global Vice President, Global Healthcare and Product Line Management at Avery Dennison Smartrac from October 2022 to September 2023, Global Vice President/General Manager at Avery Dennison Medical from June 2016 to October 2022, Vice President, Global Business Development at Avery Dennison Medical from June 2011 to June 2016, and Director of New Growth Platforms at Avery Dennison Corporation from May 2007 to June 2011.
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From October 2001 to October 2003, he served as Chairman of the Board and Chief Executive Officer of ActivIdentity Corporation ("ActivIdentity"), a provider of digital identity solutions, a publicly-listed company until its acquisition by HID Global in December 2010. He also served as a director of ActivIdentity from March 2008 until December 2010. Previously, Mr.
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Prior to Avery Dennison, Ms. Newquist served as a Director at Copia Associates LLC, a private investment firm, from March 2005 to May 2007. From August 2001 to January 2005, Ms. Newquist served as Vice President, Corporate Development at Ancora Management Group, a mail services company that was acquired by Pitney Bowes Inc.
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Humphreys was President of Caere Corporation ("Caere"), a publicly-listed optical character recognition software company. Prior to Caere, he spent ten years with General Electric in a variety of factory automation and information technology positions, most recently leading the Information Delivery Services business unit of GE Information Services. Philanthropically, Mr.
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(NYSE: BPI), a global shipping and mailing company, in November 2004. She also served as Director of Project Management at Iwerks Entertainment, a designer and manufacturer of software-based entertainment attractions, from January 1990 to August 1996. Ms. Newquist holds a B.S. in Mechanical Engineering from Stanford University and an M.B.A. from the Anderson School at University of California, Los Angeles.
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Humphreys has been an elected public school board trustee and a contributor to a range of education-oriented charities. He also serves on the board of Summit Public Schools, a charter school system with schools across the West Coast, and developer of the Summit Learning System, developed in cooperation with Facebook and deployed in over 1,000 schools nationwide. Mr.
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From 1999 to 2011, Mr. Scarpulla held various roles in finance at Broadcom Corporation (Nasdaq: BRCM), a provider of semiconductor and infrastructure software solutions, including Director of Financial Reporting. Mr. Scarpulla is a Certified Public Accountant and started his career at Ernst & Young LLP. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−2 removed1 unchanged
Biggest changeThe table below sets forth information regarding the Company's purchases of its common stock during the three months ended December 31, 2023: Issuer Purchases of Equity Securities Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs October 1, 2023 – October 31, 2023 11,737 $ 7.63 — — November 1, 2023 – November 30, 2023 5,174 6.33 — — December 1, 2023 – December 31, 2023 37,101 7.00 — — Total 54,012 $ 7.07 — (1) Consists of shares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.
Biggest changeThe table below sets forth information regarding our purchases of common stock during the three months ended December 31, 2024: Issuer Purchases of Equity Securities Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (2) Average price paid per share Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs October 1, 2024 – October 31, 2024 5,068 $ 3.50 — $ — $ — November 1, 2024 – November 30, 2024 775 3.50 199,500 3.91 $ 9,220,684 December 1, 2024 – December 31, 2024 5,715 3.98 264,279 4.13 $ 8,130,420 Total 11,558 $ 3.74 463,779 $ 4.03 (1) Consists of shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Capital Market under the symbol “INVE.” According to data available at March 5, 2024, we had 106 registered holders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Capital Market under the symbol “INVE.” According to data available at March 5, 2025, we had 99 registered holders of our common stock.
Not represented in this figure are individual stockholders in Germany whose custodian banks do not release stockholder information to us. During the three months ended December 31, 2023, we repurchased 54,012 shares of our common stock.
Not represented in this figure are individual stockholders in Germany whose custodian banks do not release stockholder information to us. During the three months ended December 31, 2024, we repurchased 475,337 shares of our common stock.
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
The Stock Repurchase Program has no expiration date and may be suspended or discontinued at any time without notice. We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
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The following stock performance graph compares total stockholder returns for our common stock from December 31, 2018 through December 31, 2023 against the Nasdaq Market Composite Index and the RDG Technology Composite, assuming a $100 investment made on December 31, 2018. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
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(2) On November 7, 2024, we announced that our board of directors authorized a stock repurchase program (the “Stock Repurchase Program”). Under the Stock Repurchase Program, effective November 15, 2024, we may repurchase up to $10 million of shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions, or other means.
Removed
The stock performance shown on the graph below is not necessarily indicative of future price performance. 22 This stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
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The timing and amount of shares repurchased depends on a number of factors, including stock price, trading volume, general market and business conditions, liquidity and capital needs, and other factors. The Stock Repurchase Program does not obligate us to repurchase any specific dollar amount or acquire any specific number of shares of common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+238 added−63 removed27 unchanged
Biggest changeYear Ended December 31, 2023 2022 % Change Identity: Net revenue $ 68,117 $ 67,422 1 % Gross profit 14,679 15,153 (3 %) Gross profit margin 22 % 22 % Premises: Net revenue 48,266 45,493 6 % Gross profit 27,485 25,791 7 % Gross profit margin 57 % 57 % Total: Net revenue 116,383 112,915 3 % Gross profit 42,164 40,944 3 % Gross profit margin 36 % 36 % Operating expenses: Research and development 11,590 9,916 17 % Selling and marketing 22,555 20,730 9 % General and administrative 12,360 10,429 19 % Restructuring and severance 714 202 253 % Total operating expenses 47,219 41,277 14 % Loss from operations (5,055 ) (333 ) 1,418 % Non-operating income (expense): Interest expense, net (427 ) (143 ) 199 % Gain on investment 132 30 340 % Foreign currency gains, net 25 155 (84 %) Loss before income tax provision $ (5,325 ) $ (291 ) 1,730 % Geographic net revenue based on each customer’s ship-to location is as follows (in thousands): Year Ended December 31, 2023 2022 % Change Americas $ 84,512 $ 76,799 10 % Europe and the Middle East 17,880 15,900 12 % Asia-Pacific 13,991 20,216 (31 )% Total $ 116,383 $ 112,915 3 % As a percentage of net revenue: Americas 73 % 68 % Europe and the Middle East 15 % 14 % Asia-Pacific 12 % 18 % Total 100 % 100 % 26 Fiscal 2023 Compared with Fiscal 2022 Net Revenue Net revenue in 2023 was $116.4 million, an increase of 3% compared with $112.9 million in 2022.
Biggest changeYear Ended December 31, 2024 2023 % Change Net revenue 26,628 43,445 (39 %) Gross profit 340 6,010 (94 %) Gross profit margin 1 % 14 % Operating expenses: Research and development 3,887 4,399 (12 %) Selling and marketing 5,727 5,627 2 % General and administrative 18,147 9,332 94 % Restructuring and severance 540 157 244 % Total operating expenses 28,301 19,515 45 % Loss from continuing operations (27,961 ) (13,505 ) Non-operating income (expense): Interest income (expense), net 1,352 (427 ) (417 %) Gain on investment — 132 (100 %) Foreign currency gains (losses), net 788 (10 ) (7,980 %) Loss from continuing operations before income tax provision (25,821 ) (13,810 ) Income tax provision (90 ) (65 ) 38 % Net loss from continuing operations (25,911 ) (13,875 ) Net income (loss) from discontinued operations, net of tax: Income (loss) from Physical Security Business, net of tax (2,778 ) 8,386 (133 %) Gain on sale of Physical Security Business, net of tax 103,509 — 100 % Total income from discontinued operations, net of tax 100,731 8,386 Net income (loss) $ 74,820 $ (5,489 ) 23 Geographic net revenue based on each customer’s ship-to location is as follows (in thousands): Year Ended December 31, 2024 2023 % Change Americas $ 12,022 $ 22,266 (46 )% Europe and the Middle East 7,591 12,281 (38 )% Asia-Pacific 7,015 8,898 (21 )% Total $ 26,628 $ 43,445 (39 )% As a percentage of net revenue: Americas 45 % 52 % Europe and the Middle East 29 % 28 % Asia-Pacific 26 % 20 % Total 100 % 100 % Fiscal 2024 Compared with Fiscal 2023 Net Revenue Net revenue was $26.6 million in 2024, a decrease of $16.8 million compared with $43.4 million in 2023.
The preparation of these financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The preparation of these financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the 30 reported amounts of revenues and expenses during the reporting period.
Cash flows from investing activities Cash used in investing activities in 2023 of $4.2 million was due to capital investment expenditures in our manufacturing facility in Thailand, partially offset by $0.1 million related to additional proceeds received from an investment.
Cash used in investing activities in 2023 of $4.2 million was due to capital expenditures in our manufacturing facility in Thailand, partially offset by $0.1 million related to additional proceeds received from an investment.
We expect there will be variation in our total gross profit from period to period, as our gross profit has been and will continue to be affected primarily by varying mix among our products.
We expect there will be variation in our gross profit from period to period, as our gross profit has been and will continue to be affected primarily by varying mix among our products.
If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made. We recorded an income tax provision during the year ended December 31, 2023.
If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made. We recorded an income tax provision during the year ended December 31, 2024.
If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2023, will be accounted for as a reduction of income tax expense.
If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2024, will be accounted for as a reduction of income tax expense.
Impacts of Macroeconomic Conditions and Other Factors on our Business We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions. Our manufacturing operations and third-party contract manufacturers are located in China, Singapore, and Thailand/Southeast Asia.
Impacts of Macroeconomic Conditions and Other Factors on our Business We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions. Our manufacturing operations and third-party contract manufacturers are in China, Singapore, and Thailand.
We believe that none of the unrecognized tax benefits, excluding the associated interest and penalties, which are insignificant, may be recognized by the end of 2023.
We believe that none of the unrecognized tax benefits, excluding the associated interest and penalties, which are insignificant, may be recognized by the end of 2024.
We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.
We focus the majority of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.
Non-operating Income (Expense) Information about our non-operating income (expense) for the years ended December 31, 2023 and 2022 is set forth below.
Non-operating Income (Expense) Information about our non-operating income (expense) for the years ended December 31, 2024 and 2023 is set forth below.
However, our estimates are provisional and subject to further analysis. Generally, most of our foreign subsidiaries have accumulated deficits and cash and cash equivalents that are held outside the United States are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the United States.
Generally, most of our foreign subsidiaries have accumulated deficits and cash and cash equivalents that are held outside the United States are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the United States.
The stated contract value is generally the transaction price to be allocated to the separate performance obligations. Revenue is recognized net of any taxes collected from our customers that are subsequently remitted to governmental authorities.
The stated contract value was generally the transaction price to be allocated to the separate performance obligations. Revenue was recognized net of any taxes collected from customers that were subsequently remitted to governmental authorities.
We have access to the cash held outside the United States to fund domestic operations and obligations without any material income tax consequences. As of December 31, 2023, the amount of cash included at such subsidiaries was $7.8 million.
We have access to the cash held outside the United States to fund domestic operations and obligations without any material income tax consequences. As of December 31, 2024, the amount of cash included at such subsidiaries was $15.4 million.
Changes in currency valuation in the periods mainly were the result of exchange rate movements between the U.S. dollar, the Indian Rupee, the Canadian dollar, the Thai Baht, and the Euro.
Changes in currency valuation in the periods mainly were the result of favorable exchange rate movements between the U.S. dollar, the Euro and the Thai Baht.
These conditions have also impacted our suppliers, contract manufacturers, logistics providers, and distributors, causing increases in cost of materials and higher shipping and transportation rates, which then impacted the pricing of our products.
These conditions may also impact our customers, suppliers, contract manufacturers, logistics providers, and distributors, causing increases in cost of materials and higher shipping and transportation rates, which then impacts the pricing of our products.
The effective tax rate for the year ended December 31, 2023 differs from the federal statutory rate of 21% primarily due to stock-based compensation, and the provision in certain foreign jurisdictions partially offset by the change in the valuation allowance.
The effective tax rate for the year ended December 31, 2024 differs from the federal statutory rate of 21% primarily due to the change in the valuation allowance, stock-based compensation, and the provisions in certain foreign jurisdictions.
For such arrangements, we allocate the transaction price to each performance obligation based on relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, we estimate SSP using historical transaction data.
For such arrangements, the transaction price was allocated to each performance obligation based on its relative standalone selling price (“SSP”). Judgment was required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, the SSP was estimated using historical transaction data.
Our foreign currency gains and losses primarily result from the valuation of current assets and liabilities denominated in a currency other than the functional currency of the respective entity in the local financial statements. 29 Income Tax Provision Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Income tax provision $ 164 $ 101 $ 63 62 % As of December 31, 2023, our deferred tax assets are fully offset by a valuation allowance.
Our foreign currency gains and losses primarily result from the valuation of current assets and liabilities denominated in a currency other than the functional currency of the respective entity in the local financial statements. 26 Income Tax Provision Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Income tax provision $ 90 $ 65 $ 25 38 % As of December 31, 2024, our deferred tax assets are fully offset by a valuation allowance.
Management bases its estimates and judgments on historical experience and on various other factors, which we believe are reasonable based upon the information available to us at the time these estimates, judgments and assumptions are made.
Management bases its estimates and judgments on historical experience and on various other factors, which we believe are reasonable based upon the information available to us at the time these estimates, judgments and assumptions are made. Actual results may differ from these estimates under different assumptions or conditions.
Gross Profit and Gross Margin Gross profit for 2023 was $42.2 million, or 36% of net revenue, compared to $40.9 million or 36% of net revenue in 2022. Gross profit represents net revenue less direct cost of product sales, manufacturing overhead, other costs directly related to preparing the product for sale including freight, scrap, inventory adjustments and amortization, where applicable.
Gross Profit and Gross Margin Gross profit for 2024 was $0.3 million compared to $6.0 million in 2023. Gross profit represents net revenue less direct cost of product sales, manufacturing overhead, other costs directly related to preparing the product for sale including freight, scrap, and inventory adjustments, where applicable.
If our actual forfeiture rate is materially different from our estimate, our recorded stock-based compensation expense and operating results could be different. 36 Recent Accounting Pronouncements See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, in the accompanying notes to our consolidated financial statements in Item 8 of Part II of this Annual Report for a description of recent accounting pronouncements, which is incorporated herein by reference. 10b5-1 Trading Plans From time to time, our executive officers and directors have, and we expect they will in the future, enter into written trading plans pursuant to Rule 10b5-1 of the Securities and Exchange Act of 1934.
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, in the accompanying notes to our consolidated financial statements in Item 8 of Part II of this Annual Report for a description of recent accounting pronouncements, which is incorporated herein by reference. 32 10b5-1 Trading Plans From time to time, our executive officers and directors have, and we expect they will in the future, enter into written trading plans pursuant to Rule 10b5-1 of the Securities and Exchange Act of 1934. 33 ITEM 8 .
In instances where SSP is not directly observable, such as when the product or service is not sold separately, we determine the SSPs using information that may include market conditions and other observable inputs. The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSPs reflect the most current information or trends.
In instances where SSP was not directly observable, such as when the product or service was not sold separately, the SSP was determined using information that may have included market conditions and other observable inputs. The determination of SSP was an ongoing process and information was reviewed regularly in order to ensure SSPs reflected current information or trends. Note 4.
In contrast, if our RFID sales exceed expectations, then our revenue and profitability may be positively affected. 24 Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future or acquire inventory at costs to maintain gross margins.
Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future or acquire inventory at costs to maintain gross margins.
Within each product category, gross profit margins have tended to be consistent, but over time may be affected by a variety of factors, including, without limitation, competition, product pricing, the volume of sales in any given quarter, manufacturing volumes, product configuration and mix, the availability of new products, product enhancements, software and services, risk of inventory write-downs and the cost and availability of components. 27 Operating Expenses Information about our operating expenses for the years ended December 31, 2023 and 2022 is set forth below.
Within each product category, gross margins have tended to be consistent, but over time may be affected by a variety of factors, including, without limitation, competition, product pricing, the volume of sales in any given quarter, manufacturing volumes, product configuration and mix, the availability of new products, product enhancements, risk of inventory write-downs and the cost and availability of components.
We enter into contracts that can include various combinations of our products, software licenses, and services, which are generally capable of being distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, we allocate the transaction price of the contract to each performance obligation, generally on a relative basis using its standalone selling price.
The contracts entered into could have included various combinations of its products, software licenses, and services, which were generally capable of being distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the transaction price was allocated to each performance obligation, generally on a relative basis using its standalone selling price.
Selling and Marketing Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Selling and marketing expenses $ 22,555 $ 20,730 $ 1,825 9 % Percentage of revenue 19 % 18 % Selling and marketing expenses consist primarily of employee compensation as well as amortization expense of certain intangible assets, customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs.
Selling and Marketing Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Selling and marketing expenses $ 5,727 $ 5,627 $ 100 2 % Percentage of revenue 22 % 13 % Selling and marketing expenses consist primarily of employee compensation as well as amortization expense of certain intangible assets, customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs.
We are subject to income taxes in the United States and in numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits.
Significant judgments and estimates are required in determining the consolidated income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits.
However, there can be no assurance that additional capital will be available to us or that such capital will be available to us on acceptable terms. If we raise funds by issuing equity securities, dilution to stockholders could result.
We may also choose to finance our business through public or private equity offerings, debt financings or other arrangements. However, there can be no assurance that additional capital will be available to us or that such capital will be available to us on acceptable terms. If we raise funds by issuing equity securities, dilution to stockholders could result.
Purchases for inventories are highly dependent upon forecasts of customer demand. Due to the uncertainty in demand from our customers, we may have to change, reschedule, or cancel purchases or purchase orders from our suppliers. These changes may lead to vendor cancellation charges on these orders or contractual commitments.
Due to the uncertainty in demand from its customers, the Company may have to change, reschedule, or cancel purchases or purchase orders from its suppliers. These changes may lead to vendor cancellation charges on these purchases or contractual commitments.
The increase in interest expense in 2023 compared to 2022 was attributable to borrowings outstanding under our revolving loan facility with our lender in 2023. Gain on investment is associated with additional proceeds received in connection with the acquisition of a private company that we had invested in, which had been fully impaired and had no carrying value.
In February 2025, we did not renew our revolving loan facility with our lender. Gain on investment is associated with additional proceeds received in 2023 in connection with the acquisition of a private company that we had previously invested in, which had been fully impaired and had no carrying value.
Selling and marketing expenses in 2023 increased compared with 2022 primarily due to higher headcount and related payroll costs and higher travel related costs, partially offset by lower external contractor costs in 2023.
Selling and marketing expenses in 2024 increased compared with 2023 primarily due to higher public relations costs partially offset by lower travel related costs year over year.
On February 8, 2017, we entered into a Loan and Security Agreement (as amended or amended and restated from time to time, the “Loan Agreement”) with East West Bank (“EWB”).
On February 8, 2017, we entered into a Loan and Security Agreement (as amended or amended and restated from time to time, the “Loan Agreement”) with East West Bank (“EWB”). Following subsequent amendments, the Loan Agreement provided a $20.0 million revolving loan facility (at prime minus 0.25%) maturing on February 8, 2025.
General and Administrative Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) General and administrative expenses $ 12,360 $ 10,429 $ 1,931 19 % Percentage of revenue 11 % 9 % General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services.
General and Administrative Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) General and administrative expenses $ 18,147 $ 9,332 $ 8,815 94 % Percentage of revenue 68 % 21 % General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services.
If we were to use different assumptions or utilize different estimates, the amount and timing of our inventory write-downs could be materially different.
If we were to use different assumptions or utilize different estimates, the amount and timing of our inventory write-downs could be materially different. Adverse changes in our inventory valuations could have a material effect on our operating results and financial position.
Our Loan Agreement imposes restrictions on our operations, increases our fixed payment obligations and has restrictive covenants. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline.
In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline.
We continue to monitor the global supply chain challenges and its effect on our financial position, results of operations, and cash flows. More recently, we have also been impacted by other adverse macroeconomic conditions, including but not limited to, inflation, foreign currency fluctuations, and the slowdown of economic activity around the globe.
We have also recently been, and expect to continue to be, impacted by other adverse macroeconomic conditions, including but not limited to, inflation, foreign currency fluctuations, tariffs, global trade disruption, and the slowdown of economic activity around the globe.
Liquidity and Capital Resources As of December 31, 2023, our working capital, defined as current assets less current liabilities, was $48.7 million, a decrease of $3.0 million compared to $51.7 million as of December 31, 2022. As of December 31, 2023, our cash and cash equivalents balance was $23.3 million.
See Note 3, Discontinued Operations . Liquidity and Capital Resources As of December 31, 2024, our working capital, defined as current assets less current liabilities, was $144.9 million, an increase of $96.2 million compared to $48.7 million as of December 31, 2023. As of December 31, 2024, our cash and cash equivalents balance was $135.6 million.
We believe that it is more likely than not that the benefit from these NOL carryforwards will not be realized. Accordingly, we have provided a full valuation allowance on any potential deferred tax assets relating to these NOL carryforwards.
Accordingly, we have provided a full valuation allowance on any potential deferred tax assets relating to these NOL carryforwards.
Cash flows from financing activities Cash provided by financing activities in 2023 was primarily due to net borrowings of $9.9 million under our revolving loan facility with our lender, proceeds received from the exercise of warrants by 21 April Fund, LP and 21 April Fund, Ltd. of approximately $1.0 million, partially offset by taxes paid related to net share settlement of restricted stock units of $0.8 million.
Cash provided by financing activities in 2023 was primarily due to net borrowings of $9.9 million under our revolving loan facility with our lender, proceeds received from the exercise of warrants of $1.0 million, partially offset by net share settlements of RSUs of $0.8 million. Contractual Obligations We lease facilities, certain equipment, and automobiles under non-cancelable operating lease agreements.
If RFID market adoption, or customer adoption and development of our products specifically, does not meet our expectations then our growth prospects and operating results will be adversely affected. If we are unable to meet end-user or customer volume or performance expectations, then our business prospects may be adversely affected.
If we are unable to meet end-user or customer volume or performance expectations, then our business prospects may be adversely affected. In contrast, if our RFID sales exceed expectations, then our revenue and profitability may be positively affected.
Research and Development Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Research and development expenses $ 11,590 $ 9,916 $ 1,674 17 % Percentage of revenue 10 % 9 % Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products.
Research and Development Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Research and development expenses $ 3,887 $ 4,399 $ (512 ) (12 )% Percentage of revenue 15 % 10 % Research and development expenses consist primarily of employee compensation and fees for the development of our products.
Our Identity segment includes products and solutions enabling secure access to information serving the logical access and cyber-security market, and protecting connected objects and information using RFID embedded security. Our Premises segment includes our solutions to address the Premises security market for government and enterprise, including access control, video surveillance, analytics, audio, access readers and identities.
The Premises segment included the Company's solutions to address the premises security market for government and enterprise, including access control, video surveillance, analytics, audio, access readers and identities.
We were not in compliance with a financial covenant under the Loan Agreement as of December 31, 2023, which non-compliance was waived by EWB. As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant additional taxes related to such amounts.
As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant additional taxes related to such amounts. However, our estimates are provisional and subject to further analysis.
We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.
We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business. We have historically incurred operating losses and negative cash flows from operating activities, and we expect to continue to incur losses in the future.
Should we decide to repatriate foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States. 35 Goodwill Goodwill represents the excess of the aggregate of the fair value of consideration transferred in a business combination, over the fair value of assets acquired, net of liabilities assumed.
Should we decide to repatriate foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States. Leases We determine if an arrangement is a lease at inception.
We believe significant improvement in chip capabilities at lower costs, combined with the incorporation of the full NDEF (NFC data exchange format) protocol by Apple in its iPhone 12 and newer models and iOS 14 has accelerated the opportunities for product engineers to integrate RFID into their products to create new and more engaging customer experiences, product reliability and performance.
We believe significant improvement in chip capabilities at lower costs has accelerated the opportunities for product engineers to integrate RFID into their products to create new and more engaging customer experiences, reduce counterfeiting, and ensure proper product use and adherence.
Price increases may not successfully offset cost increases or may cause us to lose market share and, in turn, may adversely impact our financial position, results of operations, and cash flows. 25 Results of Operations The following table includes net revenue and net profit information by business segment and reconciles gross profit to income (loss) before income tax provision (in thousands, except percentages).
Price increases may not successfully offset cost increases or may cause us to lose market share and, in turn, may adversely impact our financial position, results of operations, and cash flows. 22 Effects of Asset Sale Our business has and will continue to be affected by the Asset Sale.
The following summarizes our cash flows for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ 1,157 $ (7,807 ) Net cash used in investing activities (4,152 ) (3,872 ) Net cash provided by (used in) financing activities 10,073 (1,039 ) Effect of exchange rates on cash, cash equivalents, and restricted cash 169 48 Net increase (decrease) in cash, cash equivalents, and restricted cash 7,247 (12,670 ) Cash, cash equivalents, and restricted cash, beginning of year 17,137 29,807 Cash, cash equivalents, and restricted cash, end of year $ 24,384 $ 17,137 31 Cash flows from operating activities Cash provided by operating activities in 2023 of $1.2 million was primarily due to net loss of $5.5 million, offset by adjustments for certain non-cash items of $6.6 million, consisting primarily of depreciation, amortization, stock-based compensation and gain on investment.
If we are not able to secure additional funding when needed, we may have to curtail or reduce the scope of our business or forgo potential business opportunities. 28 The following summarizes our cash flows for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Net cash provided by (used in) operating activities $ (15,433 ) $ 1,157 Net cash provided by (used in) investing activities 141,493 (4,152 ) Net cash provided by (used in) financing activities (13,634 ) 10,073 Effect of exchange rates on cash, cash equivalents, and restricted cash (864 ) 169 Net increase in cash, cash equivalents, and restricted cash 111,562 7,247 Cash, cash equivalents, and restricted cash, beginning of year 24,384 17,137 Cash, cash equivalents, and restricted cash, end of year $ 135,946 $ 24,384 29 Cash flows from operating activities Cash used in operating activities in 2024 of $15.4 million was primarily due to certain non-cash items of $90.9 million, consisting primarily of the gain on sale of our Physical Security Business of $103.5 million, as well as depreciation, amortization and stock-based compensation, partially offset by net income of $74.8 million and an increase in cash from net changes in operating assets and liabilities of $0.6 million.
In view of the rapidly changing business environment, we have experienced delays and reductions in customer orders, shifting supply chain availability, component shortages, and other production-related challenges. We are currently unable to determine if there will be any continued disruption and the extent to which this may have future impact on our business.
In view of the rapidly changing business environment, we have experienced delays and reductions in customer orders, shifting supply chain availability, component shortages, and other production-related challenges. We continue to monitor the global supply chain and its effect on our financial position, results of operations, and cash flows.
Net revenue in the Americas was $84.5 million in 2023, an increase of 10% compared with $76.8 million in 2022. Net revenue in Europe, the Middle East, and Asia-Pacific was approximately $31.9 million in 2023, a decrease of 12% compared with $36.1 million in 2022.
Net revenue in the Americas in 2024 decreased 46% compared with 2023. Net revenue in Europe, the Middle East, and the Asia-Pacific in 2024 was $14.6 million, a decrease of 31% compared with $21.2 million in 2023.
See Note 16, Commitments and Contingencies , in the accompanying notes to our consolidated financial statements. Our other long-term liabilities include gross unrecognized tax benefits, and related interest and penalties. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities.
These changes may lead to vendor cancellation charges on these orders or contractual commitments. See Note 16, Commitments and Contingencies , in the accompanying notes to our consolidated financial statements. Our other long-term liabilities include gross unrecognized tax benefits, and related interest and penalties.
Adverse changes in our inventory valuations could have a material effect on our operating results and financial position. 34 Income Taxes Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated current and future income taxes to be paid.
Income Taxes Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated current and future income taxes to be paid. We are subject to income taxes in the United States and in numerous foreign jurisdictions.
General and administrative expenses in 2023 increased compared with 2022 primarily due to higher headcount and related payroll costs, higher stock-based compensation costs, and professional services and legal fees of $0.4 million associated with strategic review-related activities incurred in 2023. 28 Restructuring and Severance Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Restructuring and severance expenses $ 714 $ 202 $ 512 253 % Restructuring expenses incurred in 2023 consisted of severance related costs of $421,000 and other restructuring related costs, including the write-off of capitalized software development costs of $333,000 associated with a specific product we had developed but were unable to sell.
General and administrative expenses in 2024 increased compared with 2023 primarily due to higher payroll related costs, higher stock-based compensation expense, and higher professional services fees of $6.2 million associated with strategic review-related activities incurred in 2024. 25 Restructuring and Severance Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Restructuring and severance expenses $ 540 $ 157 $ 383 244 % Restructuring expenses incurred in 2024 and 2023 consisted of severance related costs.
Cash used in operating activities in 2022 of $7.8 million was primarily due to net loss of $0.4 million, a decrease in cash from changes in operating assets and liabilities of $12.9 million, which included $9.3 million in strategic inventory purchases, partially offset by adjustments for certain non-cash items of $5.5 million, consisting primarily of depreciation, amortization, and stock-based compensation.
Cash provided by operating activities in 2023 of $1.2 million was primarily due to a net loss of $5.5 million, more than offset by adjustments for certain non-cash items of $6.6 million, consisting primarily of depreciation, amortization, stock-based compensation and gain on investment.
Factors Affecting Our Performance Market Adoption Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries. That pace, scope and depth accelerated during 2023 and 2022 causing large fluctuations in our operating results.
The discussion in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, unless otherwise noted, relates solely to the Company’s continuing operations. Factors Affecting Our Performance Market Adoption Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries.
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating results. As of December 31, 2023, we have federal and state income tax net operating loss (“NOL”) carryforwards of $89.0 million and $49.8 million, respectively, which will expire at various dates.
As of December 31, 2024, we have federal and state income tax net operating loss (“NOL”) carryforwards of $70.3 million and $25.0 million, respectively, which will expire at various dates. 31 We believe that it is more likely than not that the benefit from these NOL carryforwards will not be realized.
Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Interest expense, net $ (427 ) $ (143 ) $ 284 199 % Gain on investment $ 132 $ 30 $ 102 340 % Foreign currency gains, net $ 25 $ 155 $ (130 ) (84 )% Interest expense, net consists of interest on financial liabilities and amortization of debt issuance costs.
Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Interest income (expense), net $ 1,352 $ (427 ) $ 1,779 417 % Gain on investment $ — $ 132 $ (132 ) (100 )% Foreign currency gains (losses), net $ 788 $ (10 ) $ 798 (7980 )% Interest income (expense), net consists of interest income generated on our cash equivalents and interest costs on our financial liabilities.
Actual results may differ from these estimates under different assumptions or conditions. 32 Revenue Recognition We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to receive in exchange for those products or services.
Revenue Revenue Recognition Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products.
As of December 31, 2023, we had a total accumulated deficit of $414.9 million. 30 We believe our existing cash and cash equivalents, together with cash generated from operations and available credit under our Loan Agreement will be sufficient to satisfy our working capital needs to fund operations for the next twelve months.
We believe our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to satisfy our working capital needs to fund operations for the next twelve months and beyond. We may also use cash to acquire or invest in complementary businesses, technologies, services or products that would change our cash requirements.
Intangible Assets and Long-lived Assets We evaluate our identifiable amortizable intangible assets and long-lived assets for impairment in accordance with ASC 360, Property, Plant and Equipment, whenever events or changes in circumstances indicate that the carrying amount of such assets or intangibles may not be recoverable.
Leasehold improvements are amortized over the shorter of the lease term or their estimated useful life. Long-Lived Assets — The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Research and development expenses in 2023 increased compared with 2022 primarily due to higher headcount and related payroll costs, higher certification costs in line with our product development roadmap, higher subscription costs, as well as higher non-recurring engineering costs.
Research and development expenses in 2024 decreased compared with 2023 primarily due to lower headcount and payroll related costs related to reductions at our Singapore facility as we transition production and other operating related costs to our Thailand facility.
If such asset groups are considered to be impaired (i.e., if the sum of its estimated future undiscounted cash flows used to test for recoverability is less than its carrying value), the impairment loss to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.
An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value.
The effective tax rate for the year ended December 31, 2022 differs from the federal statutory rate of 21% primarily due to stock-based compensation, global intangible low taxed income ("GILTI") inclusions, and the provision in certain foreign jurisdictions partially offset by the change in the valuation allowance.
The effective tax rate for the year ended December 31, 2023 differs from the federal statutory rate of 21% primarily due to a change in valuation allowance, and the provision or benefit in certain foreign jurisdictions, which are subject to higher tax rates. 27 Income (Loss) from Discontinued Operations, net of tax Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Income (loss) from Physical Security Business, net of tax $ (2,778 ) $ 8,386 $ (11,164 ) (133 )% Gain on sale of Physical Security Business, net of tax $ 103,509 $ — $ 103,509 100 % Income (loss) from discontinued operations consists of the results of operations, net of tax, as well as the gain on sale of our Physical Security Business which we disclosed as discontinued operations.
Removed
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this Annual Report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2022, filed with the SEC on March 16, 2023.
Added
Overview Historically, we organized our operations into two reportable business segments: Identity and Premises. Our Identity segment included products and solutions that enabled secure access to information serving the logical access and cyber-security market, and protected connected objects and information using RFID embedded security.
Removed
You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for fiscal 2021 compared to fiscal 2022. Overview Identiv is a global provider of secure identification and physical security.
Added
Our Premises segment included the Company's solutions to address the premises security market for government and enterprise, including access control, video surveillance, analytics, audio, access readers and identities. As disclosed in Note 3, Discontinued Operations , on September 6, 2024, we completed the sale of our Physical Security Business (as defined below), which historically represented primarily our Premises segment.
Removed
We are leveraging our RFID-enabled physical device-management expertise as well as our physical access, video and analytics solutions to provide leading solutions as our customers, and our customers’ customers, embracing the IoT. Customers in the technology and mobility, consumer, government, healthcare, education and other sectors rely on Identiv’s identification and access solutions.
Added
As a result, we currently have one reportable segment: the IoT Business segment. The IoT Business segment develops, manufactures, and supplies specialty IoT solutions tailored for the healthcare industry and other high-value end markets.
Removed
Identiv’s platform encompasses RFID and NFC, cybersecurity, and the full spectrum of physical access, video, and audio security. We are bringing the benefits of the IoT to a wide range of physical, connected items. Identiv’s mission is to digitally enable every physical thing and every physical place on the planet.
Added
Our specialty RFID IoT devices, including NFC, HF, DF, UHF and BLE are attached to or embedded into physical items, such as syringes, pill containers, wine bottles, and sports jerseys, providing those items with a unique digital identity.
Removed
Our full continuum of security solutions is delivered through our platform of RFID-enabled devices, mobile, client/server, cloud, web, dedicated hardware and software defined architectures. In doing so, we believe that we will create smart physical security and a smarter physical world. Segments We have organized our operations into two reportable business segments, principally by solution families: Identity and Premises.
Added
These devices enable unique and secure digital interaction with the physical world while simultaneously capturing relevant data which can then be analyzed and managed by the end customer. We sell our products across multiple industries, focusing on pharmaceutical and medical devices, consumer electronics, mobile devices, wine and spirits, luxury goods, libraries, and logistics.
Removed
During 2023, we believe RFID deployments continued to occur at a much faster pace of growth than historically.
Added
Recent Developments Closing of Asset Sale On September 6, 2024, the Company completed the Asset Sale pursuant to the Purchase Agreement by and between the Company and Buyer. As consideration for the Asset Sale, the Company received approximately $143.9 million in cash.
Removed
As the market hit this pivot point, we expanded both our capacity and technical leadership. We track growth indicators including design wins, customer launches and technology launches. We have made investments in our technology, high quality and automation production facilities, and we believe that our competitive advantages will continue to drive growth.
Added
In connection with the closing of the Asset Sale, the Company and Buyer entered into a transition services agreement (the “Transition Services Agreement”). The Transition Services Agreement outlines the information technology, people, and facility support the Company will provide to Buyer for a period of 12 months to 18 months after the transaction closing date.
Removed
We believe the underlying, long-term trend is continued RFID adoption by multiple verticals. We also believe that expanding use cases fosters adoption across verticals and into other markets. In addition, we do not have any significant concentration of customers so we believe that our demand will continue to be resilient to the loss of any individual customer or application.
Added
In addition, at the closing of the Asset Sale, unvested restricted stock units (“RSUs”) held by employees who became employed by the Buyer (or an affiliate of Buyer) became fully vested, while RSUs held by our remaining employees and non-employee directors continue to vest according to their terms.
Removed
Seasonality and Other Factors In our business overall, we experience variations in demand for our offerings from quarter to quarter, and typically experience a stronger demand cycle in the second half of our fiscal year.

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