The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this report.

•integrated circuits ("ICs"), on which our software and universal device control database is embedded, sold primarily to OEMs, video service providers, and private label customers;

•cloud-services that support our embedded software and hardware solutions (directly or indirectly) enabling software update and device provisioning services, as well as real-time device identification and system control with billions of transactions per year in device and data management;

•intellectual property that we license primarily to OEMs and video service providers;

•proprietary and standards-based RF sensors designed for residential security, safety and home automation applications;

•AV accessories sold, directly and indirectly, to consumers including universal remote controls, television wall mounts and stands and digital television antennas.

This device knowledge graph is backed by our unique device fingerprinting technology, which includes nearly 32.6 million unique device fingerprints across both AV and Smart Home devices.

To recap our results for the three months ended June 30, 2022:

•Net sales decreased 7.6% to $139.1 million for the three months ended June 30, 2022 from $150.5 million for the three months ended June 30, 2021.

•Our gross margin percentage decreased to 28.3% for the three months ended June 30, 2022 from 29.7% for the three months ended June 30, 2021.

•Income tax expense decreased to $1.6 million for the three months ended June 30, 2022 from $3.3 million for the three months ended June 30, 2021.

Our strategic business objectives for 2022 include the following:

COVID-19 Pandemic and Supply Chain Impact

Critical Accounting Policies and Estimates

See Note 1 contained in the "Notes to Consolidated Financial Statements" for a discussion of recent accounting pronouncements.

The following table sets forth our reported results of operations expressed as a percentage of net sales for the periods indicated.

Research and development ("R&D") expenses. R&D expenses increased to $8.6 million for the three months ended June 30, 2022 from $7.7 million in the prior year period. The increase in R&D expenses is due to an increase in product development activities.

Six Months Ended June 30, 2022 versus Six Months Ended June 30, 2021

Interest income (expense), net. Interest expense, net increased to $0.5 million for the six months ended June 30, 2022 from $0.2 million for the six months ended June 30, 2021, as a result of higher average loan balances and higher interest rates.

Our liquidity is subject to various risks including the risks discussed under "Item 3. Quantitative and Qualitative Disclosures about Market Risk."

See Note 8 contained in the "Notes to Consolidated Financial Statements" for further information regarding our Credit Line.

Sources and Uses of Cash

Our cash flows were as follows:

We anticipate meeting our material cash commitments with our cash generated from operations and available borrowing resources, including our Credit Line.

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