INVE 10-K & 10-Q changes, risk factors and insider trading

Changes in managementU.S. followingtrade policy and the Assetimpact Saleof tariffs may adverselyhave affecta material adverse effect on our business.business and results of operations.

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. During fiscal years 20242025 and 2023,2024, 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. Global economic 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. Price increases may not successfully offset cost increases or may cause us to lose market share and, in turn, may adversely impact our operations. In fiscal year 2025, we were impacted by increases in U.S. tariffs applicable to products manufactured in Thailand, which created additional uncertainty in our supply chain and pricing environment. For additional information regarding our exposure to U.S. trade policy changes and tariffs, see the risk factor entitled “—Changes in U.S. trade policy and the impact of tariffs may have a material adverse effect on our business and results of operations.”

A material disruption or loss at anyour of oursole manufacturing facilitiesfacility could materially adversely affect our business, results of operations and financial condition.

WeAny maintain manufacturing facilitiesinterruptions in Singapore and Thailand. If any or a portion of our facilities were to suffer a disruption, shutdown or catastrophic loss due to fire, flood, earthquake, terrorism or other natural or man-made disasters, including manufacturing challenges such as equipment or IT failure, or if one of our facilities is found not to be in compliance with regulatory requirements, we may not be able to timely supply our customers. Thailand, for example, is a region with a known, and recent, history of flooding. Interruptions to production could disrupt our operations, harm our reputation, delay production and shipments, delay or reduce sales and revenue and adversely affect our ability to attract or retain our customers. InSuch addition, any interruption in production capabilityinterruptions could also require us to makeincur substantialsignificant capital expenditures. If our manufacturing facility becomes unavailable, we may be unable to secure a new manufacturing facility on acceptable terms, or at all. The disruption or loss of production in one or both of our manufacturing facilitiesfacility for more than a short period of time could have a material adverse effect on our liquidity, financial position and results of operations. Any losses due to these events may not be covered by our existing insurance policies or may be subject to deductibles.

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. 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 impactimpacted our ability to meet product demand in a timely fashion. This shortage may persist for an indefinite period of timefashion and has and may continue to havehad a negative impact on our revenue and operating results. Low inventory levels can affect our ability to meet customer demand, lengthen lead times and potentially cause us to miss opportunities, lose market share and/or damage customer relationships, also adversely affecting our business. 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.

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. If we are unable to meet end-user or customer volume or performance expectations, then our results of operations and business prospects may be adversely affected. In addition, given the uncertainties of the specific timing of our new customer deployments, we cannot be assured that we will have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future. We seek to mitigate those risks by being deeply embedded in our customers' design cycle, working with our chip partners on long lead time components, managing our limited capital equipment needs within a short cycle and expanding our facilities to accommodate several scenarios for growth potential. 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.

We may be subject to information technology system failures and network disruptions. Despite implementation of security measures, our systems are vulnerable to damagesdamage from computer viruses, computer denial-of-service attacks, worms, and other malicious software programs or other attacks, covert introduction of malware to computers and networks, unauthorized access, including impersonation of unauthorized users, efforts to discover and exploit any security vulnerabilities or securities weaknesses, and other similar disruptions. These types of attacks have increased, in general, as more businesses implement remote working environments. Our business is also subject to break-ins, sabotage, and intentional acts of vandalism by third parties as well as intentional and unintentional acts by employees or other insiders with access privileges. Customers’ network and storage applications may be subject to similar disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents. Data breaches and any unauthorized access or disclosure of information, employee information, or intellectual property could compromise our intellectual property, trade secrets, and other sensitive business information, any of which could result in legal action against us, exposure of our intellectual property to competitors, damages, fines, and other adverse effects. A data security breach could also lead to public exposure of personal information of employees, customers, and others. Any such theft, loss, or misuse of personal data collected, used, stored, or transferred by us to run our business could result in significantly increased security costs or costs related to defending legal claims.

Cyberattacks, such as computer viruses, or other forms of cyber terrorism, may disrupt access to our network or storage applications. Such disruptions could result in delays or cancellations of customer orders or delays or interruptions in the production or shipment of products. Data security breaches involving customers could affect their financial condition and ability to continue to purchase our products. In addition, cyberattacks may cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, and divert attention of management and key information technology resources. These incidents could also subject us to liability, expose us to significant expense,expenses, and cause significant harm to our reputation and our business.

We market and sell our products and solutions to customers in many countries around the world. 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 a manufacturing facilitiesfacility in Singapore and Thailand and engage contract manufacturers in multiple countries outside the U.S. 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:

We sell a significant portion of our products and solutions to partners in the channel, such as convertors.converters. Our products are components of solutions that these channel partners then sell to their end customers. Since we do not sell our products directly to the end customer, our lack of visibility could result in an unforeseen reduction in the amount of product we are able to sell, and our revenues could decrease. Some of these channel partners also sell our competitors’ products and;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.

The impact of health epidemics, pandemics and other outbreaks of infectious disease, such as the global pandemic caused by COVID-19,disease could negatively impact our operations, supply chain and customer base.

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. 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.disease. Our operations and supply chains for certain of our products may be negatively impacted by the regional or global outbreak of illnesses. 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. 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. Further, a recession, depression, excessive inflation or other sustained adverse market events resulting from the outbreak of infectious diseases that may occur, could materially and adversely affect our business and that of our customers or potential customers. We are unable to accurately fully predict the effect of any such health concerns on our business, which could be affected by other factors we are not currently able to predict, including the success of actions taken to contain or treat future outbreaks of infectious diseases and reactions by consumers, companies, governmental entities and capital markets.

the impact of increasing tariffs, and freight and logistics costs;

Any failure to implement and maintain effective disclosure controls and procedures and internal control over financial reporting, including identifying material weaknesses, could cause investors to lose confidence in the accuracy and completeness of our financial statements and reports, which could adversely affect the market price of our common stock. We could also be subject to sanctionsfines or investigations by Nasdaq,The Nasdaq Stock Market LLC ("Nasdaq"), the SEC and other regulatory authorities.

global developments, including war,war and military conflicts (such as the ongoing conflict in Iran and the surrounding region and the conflict between Russia and Ukraine), acts of terrorism, natural disasters, public health crises, and other such events; and general economic conditions and trends.

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. As of March 1,2, 2025,2026, 671, 2191,092,015 shares of common stock are reserved for future grants and outstanding equity awards under our equity incentive plans and 8,506,5568,756,341 shares of common stock are reserved for future issuance in connection with theother potential issuances, including conversion of our preferred stock. 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. In addition, any new securities that we issue may have rights senior to those of our common stock. The issuance of additional shares of common stock or preferred stock or other securities, or the perception that such issuances could occur, may create downward pressure on the trading price of our common stock.

Our certificate of incorporation and bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us or enter into a material transaction with us without the consent of our board of directors. These provisions include a classified board of directors andincluding limitations on actions by our stockholders by written consent. Delaware law imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. In addition, our board of directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. 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.

As disclosed in Note 3, Discontinued Operations, onOn September 6, 2024, we completed the sale of our Physical Security Business (as defined below),Business, which historically represented primarilyour Premises segment, as well as our Premisesaccess card and identity reader operations, which were historically part of our Identity segment. 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 healthcarehealthcare, industrylogistics, smart packaging industries and other high-value end markets. Our strategy is focused on developing highly engineered and specialized IoT inlays, tags, and labels for applications that provide significant value to our global customers. These specialty RFID IoT devices, including NFC, HF, DF, UHF and BLE technology are attached to or embedded into physical items, such as syringes,medical device consumables, pill containers, wine bottles, consumer appliances, and sports jerseys, providing those items with a unique digital identity. 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.

Following the completion of the Asset Sale, we continue to be a public company operating under the name Identiv, Inc. and continue to own the assets and liabilities of our business that were not sold to Buyer, which we refer to herein as the “IoT Business”. The discussion in this Item 2,7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, unless otherwise noted, relates solely to the Company’sour continuing operations.

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. Though we believe the number of opportunities for RFID-based solutions has increased, the evaluation period and customer adoption originally expected for certainnew applications hascan takentake longeranywhere thanfrom wesix anticipated.months to several years, depending on the industry.

We believe the underlying, long-term trend is continued RFID adoption across multiple verticals, but regulated industries like healthcare take longer to optimize the technology and fully understand the benefits. We also believe that expanding use cases fostersfoster adoption across verticals and into other markets.

Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we will 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. We attempt to mitigate those risks by being deeply embedded in our customers’ product design cycles,cycles and commercialization planning, working with our chip partners on long lead time components, managing our limited capital equipment needs within a short cycle and future proofing our facilities to accommodate several scenarios for growth potential.

To strengthen and grow our core channel business, we are prioritizing higher margin opportunities with existing customers and channel partners. Higher margin opportunities often involve complex devices as compared to standard specification products, and require a certain amount of customization for the customer. Increasing technological complexity often necessitates more development resources and longer evaluation periods to ensure the product meets customer needs. In choosing to prioritize higher margin opportunities, we have, and may continue to, decide not to support low-margin projects that may generate revenue. This couldhas and may continue to result in a negative impact on our operating results.

We have seen a large increase in global production capacity at several of our RFID competitors. This has resulted in competitive pricing pressure, and, in response, we have begun to exitexited some of our lowest margin business. ThisWe haslargely had,completed andthe weexit expectof willthis continuelow tomargin have,business aby negativethe impactend onof ourfourth operatingquarter results.2025.

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,Southeast Singapore, and Thailand.Asia. We 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. 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.

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, geopolitical activity, and the slowdown of economic activity around the globe. 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. 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. As of December 31, 2025, approximately 15% of our business is exposed to U.S. tariffs due to our manufacturing in Thailand.

Our business has and will continue to be affected by the Asset Sale. The Asset Sale included assets and operations that had historically represented the majority of our revenues, representing approximately 63% of our 2023 revenue, as well as a substantial portion of our assets, representing approximately 47% of our assets as of December 31, 2023.assets. The gross margin profile of our continuing business has and will continue to be significantly lower than our historical total gross margins prior to the Asset Sale across a lower revenue base. As a result, we expect our loss from continuing operations hasto andcontinue until we expectsubstantially itincrease willour continuerevenue to increaseachieve substantially.scale.

Net revenue was $21.5 million in 2025, a decrease of $5.1 million compared with $26.6 million in 2024, a decrease of $16.8 million compared with $43.4 million in 2023.2024. Net revenue in the Americas in 20242025 decreased 46%16% compared with 2023.2024. Net revenue in Europe, the Middle East, and the Asia-Pacific in 20242025 was $14.6$11.4 million, a decrease of 31%22% compared with $21.2$14.6 million in 2023.2024. The decrease was primarily due to substantially lower unit sales of RFID transponder products as we exit low margin business opportunities, as well as reduced sales to oneour largest customer, who was working through safety stock they built up in 2024 in anticipation of our customers undergoing a technologythe transition toof their next-generation (Gen 3) chip. We do not expect shipmentsproduction to thisour customerThailand while they work on producing their Gen 3 chip.facility.

Gross profit margin in 20242025 decreasedincreased to 1.3%6.1% from 13.8%1.3% in 2023.2024. The decreaseincrease in gross profit margin was primarily attributable to substantiallythe lowerreduction unitin salesfixed tomanufacturing oneoverhead costs at our discontinued Singapore operation beginning in the second half of our2025, customers,and asimproved discussed above, resulting in underutilizationutilization of our manufacturing production facilitiesfacility in SingaporeThailand. This improvement was partially offset by incremental costs related to the transition of production to our Thailand facility and Thailand.the Indual addition,manufacturing wesites recordedrequired aduring chargethe to cost of revenue of approximately $1.1 milliontransition in the fourthfirst quarterhalf of 2024, which included a $0.8 million of inventory on hand designated specifically for one customer that phased out of a legacy program earlier than expected, and $0.2 million attributable to customer specific manufacturing equipment that cannot re-purposed for other customer orders.2025.

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. 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. At the end of the second quarter of 2025, we ceased production of RFID transponder devices in our manufacturing facility in Singapore. We have requalified our customers in our Thailand production facility. Furthermore, at the end of the fourth quarter of 2025, we substantially completed all shutdown activities associated with our Singapore facility. As a result of the reduction of fixed costs in the second half of 2025 from our Singapore facility, we expect gross product margins to continue to increase overall after our RFID transponder production in transitioned from Singapore to our Thailand production facility. We anticipate this transition to be complete in the second half of 2025.2026.

Selling and marketing expenses in 20242025 increaseddecreased compared with 20232024 primarily due to higherlower publicprofessional relationsservice costsfees, partially offset byand lower advertising, trade show and travel related costs year over year.

General and administrative expenses in 20242025 increaseddecreased compared with 20232024 primarily due to higherstrategic payrollreview-related relatedcosts costs,incurred higherin stock-based compensation expense, and higher professional services fees2024 of $6.2 million associatedcompared with strategic review-related activities$864,000 incurred in 2024.2025.

Interest income (expense), net consists of interest income generated on our cash equivalents andnet of interest costs on our financial liabilities.liabilities and amortization of debt issuance costs in 2024. The increase in interest income (expense),income, net in 2025 compared with 2024 was primarily attributable to interest earned on our money market accountsaccounts, fixed term deposit accounts, and treasury bills partially offset by interest on our financial liabilities (amounts outstanding under our revolving loan facility were fully paid down in the third quarter of 2024). In February 2025, we did not renew our revolving loan facility with our lender.bills.

Income Tax Benefit (Provision)

We recorded an income tax provisionbenefit during the year ended December 31, 2024.2025. The effective tax rate for the year ended December 31, 2025 differs from the federal statutory rate of 21% primarily due to the change in the valuation allowance, stock-based compensation, adjustments to previously estimated state income taxes upon finalizing tax returns, and the provisions in certain foreign jurisdictions. The effective tax rate for the year ended December 31, 2024 differs from the federal statutory rate of 21% primarily due to thea change in the valuation allowance, stock-based compensation, and the provisions in certain foreign jurisdictions. 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.

As of December 31, 2024,2025, our working capital, defined as current assets less current liabilities, was $144.9$133.3 million, ana increasedecrease of $96.2$11.6 million compared to $48.7$144.9 million as of December 31, 2023.2024. As of December 31, 2024,2025, our cash and cash equivalents balance was $135.6$128.6 million.

On November 7, 2024, we announced that our board of directors authorized 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. 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. The Stock Repurchase Program has no expiration date and may be suspended or discontinued at any time without notice. During the quarteryear ended December 31, 2024, we repurchased 463,779 shares of common stock under the Stock Repurchase Program for total consideration of approximately $1.9 million. During the year ended December 31, 2025, there were no repurchases of shares of common stock under the Stock Repurchase Program.

We have historically incurred operating losses and negative cash flows from operating activities, and we expect to continue to incur losses in the future. As of December 31, 2024,2025, we had a total accumulated deficit of $340.1$358.1 million. During the year ended December 31, 2024,2025, we had a loss from continuing operations of $25.9 million which included strategic review-related costs of $6.2$18.0 million.

Cash providedused byin operating activities in 20232025 of $1.2$6.7 million was primarily due to a net loss of $5.5$18.0 million, more thanpartially offset by adjustments for certain non-cash items of $6.6$7.1 million, consisting primarily of depreciation, amortization, and stock-based compensation and gainan onincrease investment.in cash from net changes in operating assets and liabilities of $4.2 million.

Cash used in financing activities in 20242025 was $13.6 million, which consisted of net repayments of $10.1$0.4 million underrelated our revolving loan facility with our lender,to net share settlements of RSUs of $1.6 million, and repurchases of our common stock of $1.9 million.RSUs.

Cash providedused byin financing activities in 20232024 was primarily$13.6 duemillion, towhich consisted of net borrowingsrepayments of $9.9$10.1 million under oura revolving loan facility with our lender, proceeds received from the exercise of warrants of $1.0 million, partially offset byfacility, net share settlements of RSUs of $0.8$1.6 million, and repurchases of our common stock of $1.9 million.

We recognize revenue when we transfer control of promised products to our customers in an amount that reflects the consideration we expect to receive in exchange for those products. 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 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. Prepayments received from a customer in advance of the transfer of control of products to the customer are accounted for as deferred revenue.

Our provision for credit losses is based on our assessment of the collectibilitycollectability of customer accounts. We regularly review our receivables that remain outstanding past their applicable payment terms and establish an allowance and potential write-offs by considering factors such as historical experience, credit quality, age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. Although we expect to collect net amounts due as stated on the consolidated balance sheets, actual collections may differ from these estimated amounts.

We do not believe that noneany of the unrecognized tax benefits, excluding the associated interest and penalties, whichwere areable insignificant, mayto be recognized byat the end of 2024.2025.

We consider the earnings of all our non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. 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.

Our business and results of operations are subject to numerous risks, uncertainties, and other factors that you should be aware of. You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth in Part II, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, as amended, under the heading “Risk Factors”. There have been no material changes from the risk factors disclosed in our 2025 Annual Report on Form 10-K, as amended.amended, other than as set forth below. The risks, uncertainties and other factors described in the risk factors are not the only ones facing our company. Additional risks, uncertainties and other factors not presently known to us or that we currently deem immaterial may also impair our business operations. Any of the risks, uncertainties and other factors could have a materially adverse effect on our business, financial condition, results of operations, cash flows or product market share and could cause the trading price of our common stock to decline substantially.

This Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) contain forward-looking statements, within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements reflect current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “will,” “believe,” “could,” “should,” “would,” “may,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “project” or the negative of these terms or other similar expressions. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A of this Quarterly Report, and Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, as amended, under the heading “Risk Factors”. The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025, as amended. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID and BLE products in multiple industries. That pace, scope and depth has resulted in large fluctuations in our operating results.

We believe significantimprovements improvementover time in chip capabilities at lower costs hashave acceleratedincreased 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. Furthermore, we believe improvements in BLE chip capabilities, and the development of lower cost multi-component manufacturing processes have increased the opportunities for organizations to integrate BLE into their product and transport packaging to streamline supply chains, reduce shrink and wastage, support regulatory compliance, and increase operational efficiency. Though we believe the number of opportunities for RFID-basedRFID- and BLE-based solutions has increased, the evaluation period and customer adoption for new applications can take anywhere from six months to several years, depending on the industry.industry and application. BLE inlays and labels are a newer technology and product category, which carry additional market adoption risks as these solutions have not been widely scaled across multiple industries.

We believe the underlying long-term trend is continued RFID and BLE adoption across multiple verticals, but regulated industries like healthcare take longer to optimize the technology and fully understand the benefits. We also believe that expanding use cases foster adoption across verticals and into other markets.

If RFID and BLE market adoption, and adoption 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. In contrast, if our RFID and BLE sales exceed expectations, then our revenue and profitability may be positively affected.

Given the uncertainties of the specific timing of our new customer deployments,deployments for RFID and BLE solutions, we cannot assure you that we will 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. We attempt to mitigate those risks by being deeply embedded in our customers’ product design cycles and commercialization planning, working with our chip partners on long lead time components, managing our limited capital equipment needs within a short cycle and attempting to future proof our facilities to accommodate several scenarios for growth potential. These new customer deployments typically depend on new product development, and we cannot assure that technical product and manufacturing process development will result in meeting all product and cost requirements given the risks associated with development activities.

If end users with sizable projects change requirements or choose to delay them,them due to market conditions, strategic prioritization, or other reasons we may experience significant fluctuation in revenue on a quarterly or annual basis,basis. We have experienced such fluctuations, and expect to experience these fluctuations in the future, and we anticipate that uncertainty to continue to characterize our business for the foreseeable future.

RFID and BLE Device Production Transition

At the end of the second quarter of 2025, we ceased the production of our RFID and BLE devices in our manufacturing facility in Singapore. Our customers have been requalified in our manufacturing facility in Thailand. As a result, we are maintaining and producing products from one location.

To strengthen and grow our core channel business, we are prioritizing higher margin opportunities with existing customers and channel partners. Higher margin opportunities often involve complex devices as compared to standard specification products, and require a certain amount of customization or engineering new product development for the customer. Increasing technological complexity often necessitates more development resources and longer evaluation periods to ensure the product meets customer needs. In choosing to prioritize higher margin opportunities, we have, and may continue to, decide not to support low-margin projects that may generate revenue. This has and may continue to result in a negative impact on our operating results.

We have seen a large increase in global production capacity at several of our RFID competitors. This has resulted in competitive pricing pressure, and, in response, we exited some of our lowest margin business. We largely completed the exit of our lowest margin business by the end of fourth quarter 2025.of 2025, although we do still compete in some verticals that are highly competitive and are experiencing competitive pressure.

We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions. Our manufacturing operations are primarily performed at our manufacturing facility in Thailand, and to a lesser extent, with third-party contract manufacturers are in Southeast Asia. We 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 have and may continue to materially affect our business, results of operations, and financial condition.

Recently, the macroeconomic conditions described above have had a greater impact on our consumer-facing applications, where demand for higher-end products has softened, resulting in forecast adjustments for the second half of the year. We have also experienced price increases from several of our suppliers. As a result, we are assessing the impact on our product costs and have begun, and intend to continue to introduce price increases to help offset costs. Price increases, however, may not successfully offset cost increases and reduced demand, and could result in loss of market share, which may adversely impact our financial position, results of operations, and cash flows.

The imposition of, or increase in, tariffs applicable to us has and will continue to increase our costs unless we are able to offset them, including through leveraging tariff exemptions, optimizing our supply chain or sourcing from alternative suppliers, or increasing prices. In addition, tariff policies, rates, exemptions, and related trade restrictions have changed and may continue to change, which could increase the cost, uncertainty and complexity of our supply chain, sourcing, pricing and margin-management efforts. While we have developed a pass-through strategy intended to protect margins, the amount of Thailand-origin components required to obtain a valid certificate of origin remains uncertain, particularly in light of recent U.S. enforcement efforts aimed at preventing transshipment. We do not believe our activities constitute transshipments; however, in the event our products are determined to be transshipments, they would be subject to higher tariffs. There can be no assurance that we will be able to offset or mitigate the resulting increase in our costs, and if we are unable to pass on any cost increases or if supply and demand conditions do not support price increases for our products, our revenue and gross margin would be negatively impacted. As of MarchJune 31,30, 2026, approximately 10% of our business is exposed to U.S. tariffs due to our manufacturing in Thailand.

Our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 are as follows (in thousands, except percentages).

Net revenue was $7.4 million for the three and six months ended MarchJune 31,30, 2026,2026 anwas increase$5.7 ofmillion $2.1and $13.1 million, respectively, and increased by $641,000 and $2.8 million, respectively compared with net revenue of $5.3$5.0 million forand $10.3 million in the threecomparable monthsperiods ended March 31,of 2025. Net revenue in the Americas for the three and six months ended MarchJune 31,30, 2026 increased 142%54% and 102%, respectively, compared with the comparable periodperiods of 2025. The increase for the three months ended June 30, 2026 compared with the prior year period was due to higher unit sales of RFID transponder products, while the increase for the six months ended June 30, 2026 compared to the comparable prior year period was primarily due to one of our customers ordering their full-year volume in the first quarter of 2026, totaling approximately $2.8 million. Net revenue in Europe, the Middle East, and the Asia-Pacific for the three and six months ended MarchJune 31,30, 2026 was $2.0$2.9 million and $4.9 million, respectively, a decrease of 34%11% and 22%, respectively, compared with $3.0$3.2 million and $6.2 million in the comparable periodperiods of 2025. The decreasedecreases waswere primarily due to lower unit sales of RFID transponder productsproducts, asincluding wetransitioning exitedsales somefrom contract manufacturers in the Asia-Pacific region to shipping directly to one of our lowestlarge margin business startingcustomers in the first quarter of 2025.Americas.

Gross Profit (Loss) and Gross Margin

Gross profit for the three and six months ended MarchJune 31,30, 2026 was $1.3$916,000 and $2.2 million, respectively, compared with $132,000a gross loss of $474,000 and $342,000 in the comparable periodperiods of 2025. Gross profit (loss) 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.

Gross profit margin for the three and six months ended MarchJune 31,30, 2026 increased to 17%16% and 17%, respectively, from gross loss margins of 9% and 3% in the comparable periodperiods of 2025. The increaseincreases in gross profit margin waswere primarily attributable to cost savings and efficiencies achieved in procurement and production with the transition of production to our Thailand production facility, improved facility utilization, and the elimination of manufacturing production costs associated with our discontinued Singapore operation. In addition, the improvement in gross productprofit margin in the firstthree quarterand six months ended June 30, 2026 was the result of 2026 included the benefit of a chargecharges to cost of revenue of approximately $250,000$639,000 and $889,000, during the three and six months ended June 30, 2025, respectively, recorded for obsolete inventory at our Singapore production facility and a warranty claim from one of our customers of approximately $150,000 in the comparable prior year period.facility.

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. 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. At the end of the second quarter of 2025, we ceased production of RFID transponder devices in our manufacturing facility in Singapore. We have requalified our customers in our Thailand production facility. Furthermore, at the end of the fourth quarter of 2025, we completed the shutdown activities at our Singapore facility. As a result of the elimination of manufacturing production costs from our Singapore facility, we expect gross productprofit margins associated with our current customer base to continue to improve in 2026 but dowould expect some near-term variability in gross product margin asto the extent we scale production for a new large program in 2026.

Information about our operating expenses for the three and six months ended MarchJune 31,30, 2026 and 2025 is set forth below (dollars in thousands).

Research and development expenses for the three and six months ended MarchJune 31,30, 2026 increased in dollars compared to the comparable prior periodperiods in 2025 primarily due to an increase in payroll related costs and external contractor expenses.

Selling and marketing expenses for the three and six months ended MarchJune 31,30, 2026 decreased compared to the comparable periodperiods in 2025 primarily due to lower recruitingpayroll-related fees.costs, trade show and travel and entertainment costs, which is attributed to reduced headcount in sales and marketing year over year.

General and administrative expenses for the three and six months ended MarchJune 31,30, 2026 decreasedincreased in dollars compared to the comparable periodperiods in 2025 primarily due to lower stock-based compensation expense and external contractor and consulting expenses, partially offset by an increase inhigher strategic review-related costs of $363,000.$1.5 million and $1.9 million, respectively, partially offset by lower stock-based compensation expense, professional fees, and external contractor expenses.

Restructuring and severance expenses for the three and six months ended MarchJune 31,30, 2026 decreased in dollars compared to the comparable periodperiods in 2025 primarily due to severance costs of $312,000 and $334,000, respectively, and the impairmentimpairments of an operating lease right-of-use asset of $238,000$108,000 and $346,000, respectively, associated with the shutdown related activities and vacated production space at our Singapore manufacturing facility in the firstthree quarterand ofsix months ended June 30, 2025.

Information about our non-operating income (expense) for the three and six months ended MarchJune 31,30, 2026 and 2025 is set forth below (dollars in thousands).

Interest income, net consists of interest income generated on our cash equivalents net of interest costs. The decrease in interest income, net for the three and six months ended MarchJune 31,30, 2026 compared to the comparable periods of 2025 was primarily attributable to lower average monthly balances on our money market accounts and treasury bills.

As of MarchJune 31,30, 2026, our deferred tax assets are fully offset by a valuation allowance. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against all of our net U.S. and foreign deferred tax assets. We reassess the need for our valuation allowance on a quarterly basis. 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 three and six months ended MarchJune 31,30, 2026 and 2025. The effective tax rates for the three and six months ended MarchJune 31,30, 2026 and 2025 differ from the federal statutory rate of 21% primarily due to a change in valuation allowance, and the provision in certain foreign jurisdictions, which are subject to higher tax rates.

As of MarchJune 31,30, 2026, our working capital, defined as current assets less current liabilities, was $129.6$125.8 million, a decrease of $3.7$7.5 million compared to $133.3 million as of December 31, 2025. As of MarchJune 31,30, 2026, our cash and cash equivalents balance was $124.5$119.4 million.

Our Board of Directors intends to return up to $40 million of capital to stockholders, which may be accomplished through dividends or other distributions and share repurchases, including repurchases prior to the closing of the Asset Sale. On November 7, 2024, we announced that our boardBoard of directorsDirectors authorized a stock repurchase programprogram, effective November 15, 2024 (the “Stock Repurchase Program”)., pursuant to which we could repurchase up to $10.0 million of shares of our common stock. On June 24, 2026, our Board of Directors authorized an increase in the amount available under the Stock Repurchase Program to $40.0 million, in addition to approximately $1.9 million previously repurchased under 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. 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. The Stock Repurchase Program has no expiration date and may be suspended or discontinued at any time without notice. As of MarchJune 31,30, 2026, approximately $8.1$40.0 million remained available under the Stock Repurchase Program. During the three and six months ended MarchJune 31,30, 2026 and 2025, there were no repurchases of shares of common stock under the Stock Repurchase Program.

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. 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. 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 MarchJune 31,30, 2026, the amount of cash included at such subsidiaries was $10.9$17.0 million. 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. As of MarchJune 31,30, 2026, we had an accumulated deficit of $361.5$366.2 million. During the threesix months ended MarchJune 31,30, 2026, we had a net loss of $3.4$8.1 million.

The following summarizes our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Cash used in operating activities for the threesix months ended MarchJune 31,30, 2026 of $2.8$7.2 million was primarily due to a net loss of $3.4$8.1 million, a decrease in cash from net changes in operating assets and liabilities of $669,000,$1.8 million, partially offset by adjustments to net loss for certain non-cash items of $1.3$2.7 million, primarily consisting of depreciation, amortization, and stock-based compensation.

Cash used in operating activities for the threesix months ended MarchJune 31,30, 2025 of $3.3$6.8 million was primarily due to a net loss of $4.8$10.8 million; andpartially aoffset decreaseby an increase in cash from net changes in operating assets and liabilities of $178,000;$647,000 partially offset byand adjustments to net loss for certain non-cash items of $1.7$3.3 million, consisting of depreciation, amortization, stock-based compensation, and impairment of operating lease right-of-use asset.

Cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 and 2025 was $882,000$1.6 million and $553,000, respectively, which related primarily to capital expenditures for our manufacturing facility in Thailand.Thailand and our research and development facility in Germany.

Cash used in financing activities for the threesix months ended MarchJune 31,30, 2026 and 2025 was $350,000$441,000 and $169,000$354,000, respectively, which related to taxes paid associated with net share settlements of RSUs and PSUs.

During the three months ended MarchJune 31,30, 2026, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025, as amended.