10-Q

June 30, 2023

December 31, 2022

Credit loss provision

Credit allowances

Total allowances

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-27115

PCTEL, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		77-0364943
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

471 Brighton Drive,
Bloomingdale, IL		60108
(Address of Principal Executive Office)		(Zip Code)

Registrant's Telephone Number, Including Area Code: (630) 372-6800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock

PCTI

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” "accelerated filer,” “smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 9, 2023, the registrant had 19,262,433 shares of common stock, $0.001 par value per share, outstanding.

PCTEL, INC.

Form 10-Q

For the Quarterly Period Ended June 30, 2023

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	Page
Item 1	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Stockholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4	Controls and Procedures	31

PART II	OTHER INFORMATION	32
Item 1	Legal Proceedings	32
Item 1A	Risk Factors	32
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3	Defaults Upon Senior Securities	32
Item 4	Mine Safety Disclosures	32
Item 5	Other Information	32
Item 6	Exhibits	32
Signatures		33

PART I – FINANCIAL INFORMATION

Item 1: Financial Statements (unaudited)

PCTEL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share data)



	June 30			December 31,
	2023			2022
ASSETS
Cash and cash equivalents	$	7,057		$	7,736
Short-term investment securities		26,586			22,254
Accounts receivable, net of allowances of $122 and $132 at June 30, 2023 and
December 31, 2022, respectively		12,856			18,853
Inventories, net		16,357			18,918
Prepaid expenses and other assets		1,372			1,861
Total current assets		64,228			69,622

Property and equipment, net		9,788			10,004
Goodwill		5,848			5,935
Intangible assets, net		853			1,045
Other noncurrent assets		2,802			3,269
TOTAL ASSETS	$	83,519		$	89,875
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	3,618		$	4,648
Accrued liabilities		7,634			12,605
Total current liabilities		11,252			17,253
Long-term liabilities		3,279			3,624
Total liabilities		14,531			20,877
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 shares authorized at
June 30, 2023 and December 31, 2022, and 19,263,534 and 18,748,529
shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		19			19
Additional paid-in capital		128,533			128,370
Accumulated deficit		(57,698	)		(57,941	)
Accumulated other comprehensive loss		(1,866	)		(1,450	)
Total stockholders’ equity		68,988			68,998
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	83,519		$	89,875

The accompanying notes are an integral part of these condensed consolidated financial statements.

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

REVENUES	$	20,578	$	24,976	$	43,551	$	47,518
COST OF REVENUES		10,483		13,549		21,924		26,758
GROSS PROFIT		10,095		11,427		21,627		20,760
OPERATING EXPENSES:
Research and development		3,130		3,356		6,114		6,605
Sales and marketing		3,220		3,908		6,781		7,310
General and administrative		2,854		3,451		6,460		6,694
Amortization of intangible assets		63		67		126		138
Restructuring expenses		0		317		0		1,252
Total operating expenses		9,267		11,099		19,481		21,999
OPERATING INCOME (LOSS)		828		328		2,146		(1,239	)
Other income, net		346		114		566		125
INCOME (LOSS) BEFORE INCOME TAXES		1,174		442		2,712		(1,114	)
Expense for income taxes		175		31		389		39
NET INCOME (LOSS)	$	999	$	411	$	2,323	$	(1,153	)

Net Income (Loss) per Share:
Basic	$	0.05	$	0.02	$	0.13	$	(0.06	)
Diluted	$	0.05	$	0.02	$	0.12	$	(0.06	)

Weighted Average Shares:
Basic		18,741		18,157		18,555		18,065
Diluted		18,821		18,157		18,630		18,065

The accompanying notes are an integral part of these condensed consolidated financial statements.

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022

NET INCOME (LOSS)	$	999		$	411		$	2,323		$	(1,153	)

OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustments		(459	)		(706	)		(416	)		(932	)

COMPREHENSIVE INCOME (LOSS)	$	540		$	(295	)	$	1,907		$	(2,085	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)


									Accumulated			Total
			Additional						Other			Stockholders'
	Common		Paid-In			Accumulated			Comprehensive			Equity of
	Stock		Capital			Deficit			Loss			PCTEL, Inc.

BALANCE at MARCH 31, 2023	$	19	$	127,938		$	(57,647	)	$	(1,407	)	$	68,903
Stock-based compensation expense		0		235			0			0			235
Issuance of shares for stock purchase plans and stock options		0		362			0			0			362
Cancellation of shares for payment of withholding tax		0		(2	)		0			0			(2	)
Dividends paid ($0.055 per share)		0		0			(1,050	)		0			(1,050	)
Net income		0		0			999			0			999
Change in cumulative translation adjustment, net		0		0			0			(459	)		(459	)
BALANCE at JUNE 30, 2023	$	19	$	128,533		$	(57,698	)	$	(1,866	)	$	68,988

BALANCE at MARCH 31, 2022	$	18	$	123,379		$	(58,299	)	$	(586	)		64,512
Stock-based compensation expense		1		1,085			0			0			1,086
Issuance of shares for stock purchase plans and stock options		0		404			0			0			404
Cancellation of shares for payment of withholding tax		0		(4	)		0			0			(4	)
Dividends paid ($0.055 per share)		0		(1,020	)		0			0			(1,020	)
Net income		0		0			411			0			411
Change in cumulative translation adjustment, net		0		0			0			(706	)		(706	)
BALANCE at JUNE 30, 2022	$	19	$	123,844		$	(57,888	)	$	(1,292	)	$	64,683

BALANCE at DECEMBER 31, 2022	$	19	$	128,370		$	(57,941	)	$	(1,450	)	$	68,998
Stock-based compensation expense		0		512			0			0			512
Issuance of shares for stock purchase plans and stock options		0		362			0			0			362
Cancellation of shares for payment of withholding tax		0		(711	)		0			0			(711	)
Dividends paid ($0.11 per share)		0		0			(2,080	)		0			(2,080	)
Net income		0		0			2,323			0			2,323
Change in cumulative translation adjustment, net		0		0			0			(416	)		(416	)
BALANCE at JUNE 30, 2023	$	19	$	128,533		$	(57,698	)	$	(1,866	)	$	68,988

BALANCE at DECEMBER 31, 2021	$	18	$	123,998		$	(56,735	)	$	(360	)		66,921
Stock-based compensation expense		1		1,859			0			0			1,860
Issuance of shares for stock purchase plans and stock options		0		404			0			0			404
Cancellation of shares for payment of withholding tax		0		(396	)		0			0			(396	)
Dividends paid ($0.11 per share)		0		(2,021	)		0			0			(2,021	)
Net loss		0		0			(1,153	)		0			(1,153	)
Change in cumulative translation adjustment, net		0		0			0			(932	)		(932	)
BALANCE at JUNE 30, 2022	$	19	$	123,844		$	(57,888	)	$	(1,292	)	$	64,683

The accompanying notes are an integral part of these condensed consolidated financial statements

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2023			2022

Operating Activities:
Net income (loss)	$	2,323		$	(1,153	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,082			1,562
Intangible asset amortization		161			177
Stock-based compensation		512			1,860
Loss on disposal of property and equipment		37			7
Restructuring costs		0			(328	)
Bad debt provision		10			17
Changes in operating assets and liabilities:
Accounts receivable		5,932			(614	)
Inventories		2,517			(715	)
Prepaid expenses and other assets		674			100
Deferred tax assets		217			0
Accounts payable		(975	)		435
Income taxes payable		(287	)		(1	)
Other accrued liabilities		(5,025	)		(900	)
Deferred revenue		64			(126	)
Net cash provided by operating activities		7,242			321
Investing Activities:
Capital expenditures		(901	)		(420	)
Purchase of short-term investments		(18,422	)		(15,587	)
Redemptions/maturities of short-term investments		14,090			15,623
Net cash used in investing activities		(5,233	)		(384	)
Financing Activities:
Proceeds from issuance of common stock		362			404
Payment of withholding tax on stock-based compensation		(711	)		(396	)
Principal payments on finance leases		(28	)		(37	)
Cash dividends		(2,080	)		(2,021	)
Net cash used in financing activities		(2,457	)		(2,050	)

Net decrease in cash and cash equivalents		(448	)		(2,113	)
Effect of exchange rate changes on cash		(231	)		(282	)
Cash and cash equivalents, beginning of period		7,736			8,192
Cash and Cash Equivalents, End of Period	$	7,057		$	5,797

The accompanying notes are an integral part of these condensed consolidated financial statements.

PCTEL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands except share and per share data and as otherwise noted)

1. Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal, recurring nature that are considered necessary for a fair presentation have been included. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

Throughout this Quarterly Report on Form 10-Q, including under Part 1, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we disclose certain impacts of the coronavirus (“COVID-19”) pandemic and the ensuing supply chain disruption, as well as macroeconomic trends, including inflationary pressures, an economic downturn and the potential for a recession. The full extent to which the COVID-19 pandemic and these macroeconomic trends will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that remain highly uncertain at this time.

Nature of Operations

PCTEL, Inc. (“PCTEL” or “the Company”) was incorporated in California in 1994 and reincorporated in Delaware in 1998. The Company is a leading global provider of wireless technology, including purpose-built Industrial IoT devices, antenna systems, and test and measurement solutions. PCTEL strives to solve complex wireless challenges to help organizations stay connected, transform, and grow and it has expertise in radio frequency ("RF,"), digital, and mechanical engineering. The Company has two product lines (antennas & Industrial IoT devices and test & measurement products).

The Company’s principal executive offices are located at 471 Brighton Drive, Bloomingdale, Illinois 60108. The telephone number at that address is (630) 372-6800 and the website is www.pctel.com. Additional information about the Company can be obtained on the Company’s website; however, the information within, or that can be accessed through, the Company’s website is not part of this Quarterly Report on Form 10-Q.

Basis of Consolidation

The unaudited interim condensed consolidated financial statements of the Company include the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, and the condensed consolidated statement of cash flows, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss), and the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2023 and 2022, respectively. The interim condensed consolidated financial statements are unaudited and reflect all adjustments of a normal recurring nature that are, in the opinion of management, necessary for a fair presentation of the interim period financial statements. The condensed consolidated balance sheet as of December 31, 2022 is derived from the audited financial statements as of December 31, 2022.

The unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The significant accounting policies followed by the Company are set forth in the 2022 Form 10-K. There were no material changes in the Company’s significant accounting policies during the three and six months ended June 30, 2023. In addition, the Company reaffirms the use of estimates in the preparation of the financial statements as set forth in the 2022 Form 10-K. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the 2022 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full period or any other interim periods.

Foreign Operations

Cross-border transactions, both with external parties and in our internal operations, result in exposure to foreign exchange rate fluctuations. We are exposed to currency risk by having foreign locations with suppliers and employees located outside the U.S. Fluctuations could have an adverse effect on our results of operations, cash flows and our balance sheet. We manage certain operating activities at the local level with revenues, costs, assets, and liabilities generally being denominated in local currencies. However, our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in exchange rates between

such local currencies and the U.S. dollar. Gains and losses resulting from transactions originally in foreign currencies and then translated into U.S. dollars are included in the condensed consolidated statements of operations. For the six months ended June 30, 2023, approximately 13% of revenues and 11% of expenses were transacted in foreign currencies as compared to 11% and 14% for the six months ended June 30, 2022. Net foreign exchange gains (losses) resulting from foreign currency transactions included in other income, net were $84 and $75 for the three months ended June 30, 2023 and 2022, respectively. Net foreign exchange gains (losses) resulting from foreign currency transactions included in other income, net were $74 and $73 for the six months ended June 30, 2023 and 2022, respectively.

Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This update clarifies the guidance in Topic 820 on the fair value measurement of an equity security that is subject to contractual restrictions that prohibit the sale of the equity security. This update also requires specific disclosures related to such an equity security including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. This ASU is effective for all public business entities in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on our consolidated financial statements and related disclosures.

2. Fair Value of Financial Instruments

The Company follows accounting guidance for fair value measurements and disclosures, which establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash equivalents are measured at fair value and investments are recognized at amortized cost in the Company’s financial statements. Accounts receivable is a financial asset with a carrying value that approximates fair value due to the short-term nature of these assets. Accounts payable, accrued employee compensation and certain operating liabilities are financial liabilities with a carrying value that approximates fair value due to the short-term nature of these liabilities.

3. Income (Loss) per Share

The following table is the computation of basic and diluted income per share:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Basic Income Per Share computation:
Numerator:
Net income (loss)	$	999	$	411	$	2,323	$	(1,153	)
Denominator:
Weighted shares outstanding - basic		18,741,208		18,156,561		18,554,854		18,064,616

Net income (loss) per common share - basic	$	0.05	$	0.02	$	0.13	$	(0.06	)
Diluted Income Per Share computation:
Denominator:
Weighted shares outstanding - basic		18,741,208		18,156,561		18,554,854		18,064,616
Restricted shares subject to vesting		80,067		0		75,079		0
Common stock option grants		55		0		37		0
Weighted shares outstanding - diluted		18,821,330		18,156,561		18,629,970		18,064,616

Net income (loss) per common share - diluted	$	0.05	$	0.02	$	0.12	$	(0.06	)

4. Cash, Cash Equivalents and Investments

The Company’s cash, cash equivalents, and investments consisted of the following:


	June 30,		December 31,
	2023		2022
Cash	$	4,519	$	5,780
Cash equivalents		2,538		1,956
Short-term investments		26,586		22,254
Total	$	33,643	$	29,990

Cash and Cash Equivalents

At June 30, 2023 and December 31, 2022, cash and cash equivalents included bank balances and investments with original maturities of less than 90 days. At June 30, 2023 and December 31, 2022, the Company’s cash equivalents were invested in highly liquid AAA rated money market funds that are required to comply with Rule 2a-7 of the Investment Company Act of 1940. Such funds utilize the amortized cost method of accounting, seek to maintain a constant $1.00 per share price, and are redeemable upon demand. The Company restricts its investments in AAA money market funds to those invested 100% in either short-term U.S. government agency securities or bank repurchase agreements collateralized by these same securities. The fair values of these money market funds are established through quoted prices in active markets for identical assets (Level 1 inputs). The Company’s cash in U.S. banks is insured by the Federal Deposit Insurance Corporation up to the insurable limit of $250.

The cash in foreign accounts was as follows:


	June 30,		December 31,
	2023		2022
China	$	2,728	$	2,672
Sweden		2,745		1,868
Total	$	5,473	$	4,540

As of June 30, 2023, the Company has no intention of repatriating the cash in its foreign bank accounts. If the Company decides to repatriate the cash in the foreign bank accounts, it may have trouble doing so in a timely manner. The Company may also be exposed to foreign currency fluctuations and taxes if it repatriates these funds.

Investments

At June 30, 2023 and December 31, 2022, the Company’s investments consisted of corporate bonds with ratings at the purchase date of A or higher and certificates of deposit. The investments at June 30, 2023 and December 31, 2022 were classified as held-to-maturity.

The bonds and certificates of deposit classified as short-term investments have original maturities greater than 90 days and mature within one year. The Company’s bond investments are recorded at the purchase price and carried at amortized cost.

Under ASU 2016-13, the Company classifies its held-to-maturity investment portfolio by the investment type and further classifies the corporate bonds by the bond ratings. For estimating potential credit losses, the Company considers historical loss data and bond rating, as well as current and future economic conditions.

Cash equivalents and investments were as follows at June 30, 2023 and December 31, 2022:


	June 30, 2023								December 31, 2022
	Level 1		Level 2			Total			Level 1		Level 2			Total
Cash equivalents:
Money market funds	$	2,538	$	0		$	2,538		$	1,956	$	0		$	1,956
Total Cash Equivalents	$	2,538	$	0		$	2,538		$	1,956	$	0		$	1,956
Short-Term Investments:
Corporate bonds	$	0	$	21,614		$	21,614		$	0	$	21,145		$	21,145
Certificates of deposit		4,972		0			4,972			1,109		0			1,109
Total Short-Term Investments	$	4,972	$	21,614		$	26,586		$	1,109	$	21,145		$	22,254
Cash equivalents and Investments - book value	$	7,510	$	21,614		$	29,124		$	3,065	$	21,145		$	24,210
Unrealized losses	$	0	$	(162	)	$	(162	)	$	0	$	(59	)	$	(59	)
Cash equivalents and Investments - fair value	$	7,510	$	21,452		$	28,962		$	3,065	$	21,086		$	24,151

The Company categorizes its financial instruments within a fair value hierarchy according to accounting guidance for fair value. The fair value hierarchy is described under the Fair Value of Financial Instruments in Note 2. For the Level 1 investments, the Company uses fair value estimates based on quoted prices in active markets for identical assets or liabilities. For the Level 2 investments, the Company uses quoted prices of similar assets in active markets. The fair values in the table above reflect net unrealizable losses of $162 and $59 at June 30, 2023 and December 31, 2022, respectively.

5. Goodwill and Intangible Assets

Goodwill

The change in the carrying amount of goodwill during the six months ended June 30, 2023 is as follows:


	Amount
Balance at December 31, 2022	$	5,935
Foreign currency translation		(87	)
Balance at June 30, 2023	$	5,848

The Company performs an annual impairment test of goodwill as of the end of the first month of the fourth fiscal quarter (October 31), or at an interim date if an event occurs or if circumstances change that indicate that an impairment loss may have been incurred. In performing the annual impairment test, the Company may consider qualitative factors that would indicate possible impairment. A quantitative fair value assessment is also performed at the reporting unit level. If the fair value exceeds the carrying value, then goodwill is not impaired, and no further testing is performed. If the carrying value exceeds the fair value, the implied fair value of goodwill is then compared against the carrying value of goodwill to determine the amount of impairment. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company considered the current and expected future economic and market conditions, including those related to the COVID-19 pandemic and their impact on each of the reporting units. Further, the Company assessed the current market capitalization and financial forecasts. There were no triggering events during the six months ended June 30, 2023 or June 30, 2022. The Company will continue to monitor goodwill for impairment going forward.

Intangible Assets

The Company amortized intangible assets with finite lives on a straight-line basis over the estimated useful lives, which ranged from one to five years.

The summary of amortization expense in the condensed consolidated statement of operations is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenues	$	17	$	19	$	35	$	39
Operating expenses		63		67		126		138
Total	$	80	$	86	$	161	$	177

The summary of other intangible assets, net is as follows:


	June 30, 2023						December 31, 2022
			Accumulated		Net Book				Accumulated		Net Book
	Cost		Amortization		Value		Cost		Amortization		Value
Customer contracts and relationships	$	17,491	$	17,145	$	346	$	17,512	$	17,091	$	421
Patents and technology		9,983		9,791		192		9,995		9,761		234
Trademarks and trade names		1,467		1,186		281		1,484		1,143		341
Other intangible assets		92		58		34		96		47		49
Total	$	29,033	$	28,180	$	853	$	29,087	$	28,042	$	1,045

During the six months ended June 30, 2023, the Company recorded amortization expense of $0.2 million. During the six months ended June 30, 2022, the Company recorded amortization expense of $0.2 million and foreign currency translation adjustment of $0.2 million.

The assigned lives and weighted average amortization periods by intangible asset category are summarized below:


Intangible Assets	Assigned Life	Weighted Average Amortization Period
Customer contracts and relationships	5 years		5.0
Patents and technology	5 years		5.0
Trademarks and trade names	5 years		5.0
Other intangible assets	.5 to 5 years		3.6

The future amortization expenses are as follows:


Fiscal Year	Amount
2023 (remaining six months)	$	156
2024		302
2025		296
2026		99
Thereafter		0
Total	$	853

6. Balance Sheet Information

Accounts Receivable

Accounts receivable are recorded at invoiced amounts with standard net terms that range between 30 and 90 days. The Company extends credit to its customers based on an evaluation of a customer’s financial condition and collateral is generally not required. The Company records reserves for credit losses and credit allowances that reduce the value of accounts receivable to fair value.

The allowances for accounts receivable consisted of the following:

The Company is exposed to credit losses primarily through the sale of products. The Company’s methodology for expected losses on accounts receivable uses historical collection experience, current and future economic market conditions, and a review of the current status of customers’ trade accounts receivable. Due to the short-term nature of accounts receivable, the estimate of the amount of accounts receivable that may not be collected is based on aging of the account receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company’s allowance for credit losses was $99 at June 30, 2023 and $92 at December 31, 2022.

The following table summarizes the allowance for credit losses activity during the six months ended June 30, 2023:



Balance at December 31, 2022	$	92
Current period allowance for credit losses		7
Balance at June 30, 2023	$	99

Inventories

Inventories are stated at the lower of cost or net realizable value and include material, labor and overhead costs using the first-in, first-out method of costing. Inventories as of June 30, 2023 and December 31, 2022 were composed of raw materials, work-in-process and finished goods. The Company had consigned inventory with customers of $0.1 million and $0.2 million at June 30, 2023 and December 31, 2022, respectively. The Company records allowances to reduce the value of inventory to the lower of cost or net realizable value, including allowances for excess and obsolete inventory. Reserves for excess inventory are calculated based on an estimate of inventory in excess of normal and planned usage. Obsolete reserves are based on identification of inventory where the carrying value is above net realizable value. The allowance for inventory losses was $3.3 million at June 30, 2023 and $3.1 million at December 31, 2022.

Inventories, net consisted of the following:


	June 30, 2023		December 31, 2022
Raw materials	$	8,197	$	9,064
Work-in-process		896		1,076
Finished goods		7,264		8,778
Inventories, net	$	16,357	$	18,918

Prepaid Expenses and Other Assets

Prepaid assets are stated at cost and are amortized over the useful lives (up to one year) of the assets.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. The Company depreciates computer equipment and software licenses over three to five years; office equipment, manufacturing and test equipment, and motor vehicles over five years; furniture and fixtures over seven years; and buildings over 30 years. Leasehold improvements are amortized over the shorter of the corresponding lease term or useful life. Depreciation expense and gains and losses on the disposal of property and equipment are included in cost of revenues and operating expenses in the condensed consolidated statements of operations. Maintenance and repairs are expensed as incurred.

Property and equipment consisted of the following:


	June 30, 2023			December 31, 2022
Building	$	6,922		$	6,922
Computers and office equipment		10,677			10,217
Manufacturing and test equipment		13,989			14,661
Furniture and fixtures		1,491			1,475
Leasehold improvements		1,965			1,965
Motor vehicles		20			20
Total property and equipment		35,064			35,260
Less: Accumulated depreciation and amortization		(27,046	)		(27,026	)
Land		1,770			1,770
Property and equipment, net	$	9,788		$	10,004

Depreciation and amortization expense was approximately $0.5 million and $0.8 million for the three months ended June 30, 2023 and 2022, respectively. Depreciation and amortization expense was approximately $1.1 million and $1.6 million for the six months ended June 30, 2023 and 2022, respectively. Amortization for finance leases is included in depreciation and amortization expense. See Note 10 for information related to finance leases.

Liabilities

Accrued liabilities consisted of the following:


	June 30, 2023		December 31, 2022
Inventory receipts	$	1,747	$	3,720
Payroll and other employee benefits		1,521		4,318
Paid time off		1,306		1,001
Deferred revenues		559		495
Professional fees and contractors		532		346
Operating leases		516		527
Income and sales taxes		286		836
Warranties		281		317
Employee stock purchase plan		224		232
Customer refunds for estimated returns		222		235
Real estate taxes		163		158
Finance leases		46		51
Other		231		369
Total	$	7,634	$	12,605

Long-term liabilities consisted of the following:


	June 30, 2023		December 31, 2022
Operating leases	$	3,039	$	3,327
Deferred revenue		167		181
Finance leases		49		73
Other		24		43
Total	$	3,279	$	3,624

7. Stock-Based Compensation

The condensed consolidated statements of operations include $0.2 million and $1.1 million of stock compensation expense for the three months ended June 30, 2023 and 2022, respectively. The condensed consolidated statements of operations include $0.5 million and $1.9 million of stock compensation expense for the six months ended June 30, 2023 and 2022, respectively. Stock compensation expense was lower during the three months and six months ended June 30, 2023 compared to the same period in 2022 primarily because of revisions to forecasts for performance-based share awards under long-term incentive plans and forfeitures. The Company accounts for forfeitures as they occur.

The stock-based compensation expense by type is as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
	2023			2022		2023			2022
Service-based awards	$	330		$	383	$	691		$	703
Performance-based awards (short-term incentive plan)		(6	)		263		109			343
Performance-based awards (long-term incentive plan)		(146	)		364		(406	)		671
Employee stock purchase plan		57			76		118			143
Total	$	235		$	1,086	$	512		$	1,860

Total stock-based compensation is reflected in the condensed consolidated statements of operations as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenues	$	66	$	31	$	94	$	96
Research and development		35		172		93		308
Sales and marketing		64		255		107		452
General and administrative		70		628		218		1,004
Total	$	235	$	1,086	$	512	$	1,860

The following table presents a summary of the remaining unrecognized share-based compensation expense related to outstanding share-based awards as of June 30, 2023:


Award Type	Remaining Unrecognized Compensation Expense		Weighted Average Life (Years)
Service-based awards	$	1,867		1.4
Performance-based awards	$	1,124		1.9

Service-Based Awards

Restricted Stock

The Company grants both service-based and performance-based stock awards to employees pursuant to the PCTEL, Inc. 2019 Stock Incentive Plan. When service-based restricted stock is granted, the Company records deferred stock compensation within additional paid-in capital, representing the fair value of the common stock on the date the restricted shares are granted. The Company records stock compensation expense on a straight-line basis over the vesting period of the applicable service-based restricted shares. For the annual awards granted to executives and key managers in the six months ended June 30, 2023 and 2022, the Company awarded long-term incentives comprised of one-third service-based restricted stock and two-thirds performance-based restricted stock. The Company awarded service-based restricted stock to all other participating employees.

The following table summarizes service-based restricted stock activity for the six months ended June 30, 2023:


	Shares			Weighted Average Fair Value
Unvested Restricted Stock Awards - December 31, 2022		354,037		$	6.12
Shares awarded		170,960			4.38
Shares vested		(165,475	)		6.77
Shares cancelled		(20,141	)		5.17
Unvested Restricted Stock Awards - June 30, 2023		339,381		$	4.98

The intrinsic value of service-based restricted shares that vested during the each of the six months ended June 30, 2023 and 2022 was $0.8 million.

Restricted Stock Units

The Company grants service-based and performance-based restricted stock units as employee incentives. Restricted stock units are primarily granted to foreign employees for long-term incentive purposes. Employee restricted stock units are service-based awards and are amortized over the vesting period. At the vesting date, these units are converted to shares of common stock. The Company records expense on a straight-line basis for restricted stock units on the same basis as for Restricted Stock awards as described above.

The following table summarizes the restricted stock unit activity during the six months ended June 30, 2023:


	Shares			Weighted Average Fair Value
Unvested Restricted Stock Units - December 31, 2022		35,253		$	5.42
Units awarded		6,200			4.21
Units vested/Shares awarded		(12,252	)		5.57
Unvested Restricted Stock Units - June 30, 2023		29,201		$	5.12

The intrinsic value of service-based restricted stock units that vested and were issued as shares during the six months ended June 30, 2023 and 2022 was $55 and $21, respectively.

Stock Options

The Company may grant employees stock options to purchase common stock. The Company issues stock options with exercise prices no less than the fair value of the Company’s stock on the grant date. Employee stock options are subject to installment vesting. Stock options may be exercised at any time prior to their expiration date or within 180 days of termination of employment, or such shorter time as may be provided in the related stock option agreement. The stock options outstanding at June 30, 2023 have a seven-year life. There was no activity related to stock options during the second quarter of 2023.

The following table summarizes information about stock options outstanding under all stock option plans at June 30, 2023:


	Options Outstanding and Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Contractual Life (Years)		Intrinsic Value		Weighted- Average Exercise Price
$ 5.06 - $ 6.98		4,000		0.92	$	0	$	6.02

The intrinsic value is based on the share price of $4.80 at June 30, 2023.

For outstanding employee stock options, the Company calculated the fair value of each stock option on the date of grant using the Black-Scholes option-pricing model. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models may not necessarily provide a reliable single measure of the fair value of the employee stock options. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility and expected option life.

The dividend yield rate is calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate is based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The expected volatility is based on a five-year historical period of the Company’s stock price. The expected life for options granted is based on historical data of employee exercise performance. The Company records expense based on the graded vesting method.

Performance-Based Equity Awards

Short-Term Incentive Plan

The Company granted short-term incentive awards to executives, key managers, and non-sales employees under the Company’s 2022 Short-Term Incentive Plan (“STIP”) based on upon achievement of specifically identified corporate annual 2022 adjusted EBITDA and revenue goals. In the first quarter 2023, bonuses for 2022 were paid 50% Company common stock and 50% in cash for executives and key managers, and 100% in cash for all other participants. The value of the common stock for 2022 bonuses was $1.2 million. The 2023 STIP awards, like the 2022 STIP awards, will be paid 50% in cash and 50% in the Company’s stock for executives and key managers.

Long-Term Incentive Plan

The Company grants performance-based awards to executives and key managers to encourage sustainable growth, consistent earnings, and management retention. Based on the fair value of the shares on the grant date, the Company records stock compensation expense over the performance period based on the estimated achievement of the award.

The following table summarizes the performance award activity:


	Awards at Target			Weighted Average Fair Value
Unvested Performance Awards - December 31, 2022		521,204		$	6.85
Awards granted		230,355			4.46
Awards vested		(53,345	)		8.70
Awards cancelled		(129,361	)		6.25
Unvested Performance Awards - June 30, 2023		568,853		$	5.52

The Company granted performance awards under its long-term incentive plan to executives in February 2023 (“2023 LTIP”) and non-executives in May 2023. The performance period for the 2023 LTIP is from January 1, 2023 through December 31, 2025. At target, the total fair market value of all performance based award issued in 2023 was $1.0 million based on the share price of $4.46 on the grant date. On the award date, the aggregate number of shares that could be earned at target was 230,355 and the maximum number of aggregate shares that could be earned was 403,121.

Under the 2023 LTIP and similar plans from 2022 and 2021, shares of the Company’s stock can be earned based on achievement of a three-year revenue growth target with a penalty if a certain Adjusted EBITDA level is not maintained. If the Company achieves less than the target growth over the performance period, the participant will receive fewer shares than the target award, determined on a straight-line basis. If the Company achieves greater than the target growth, the participant will receive more shares than the target award on an accelerated basis. Participants are required to be in service at the determination date of the award following the end of the performance period in order to receive the award. Shares earned will be fully vested shares. The Company records stock compensation expense over the performance period based on the Company’s estimate of the aggregate number of shares that will be earned under the incentive plan.

During the first quarter 2023, the Company issued 53,345 shares with an intrinsic value of $0.2 million related to achievement under the 2020 LTIP.

The following table summarizes the active performance-based long-term incentive plans at June 30, 2023:


			Number of Shares
	Share Price		That Could Be Earned:
LTIP award	on Grant Date		Target		Maximum		Performance Period
2021 LTIP	$	8.23		140,297		245,520	January 1, 2021 through December 31, 2023
2022 LTIP	$	4.83		214,951		376,164	January 1, 2022 through December 31, 2024
2023 LTIP	$	4.55		213,605		373,809	January 1, 2023 through December 31, 2025
				568,853		995,493

Employee Stock Purchase Plan (“ESPP”)

The ESPP enables eligible employees to purchase common stock at the lower of 85% of the fair market value of the common stock on the first or last day of each offering period. Each offering period is approximately six months.

Based on the 15% discount and the fair value of the option feature of the ESPP, it is considered compensatory. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model.

The Company calculated the fair value of each employee stock purchase grant on the date of grant using the Black-Scholes option-pricing model using the following assumptions:


	Employee Stock Purchase Plan
	2023			2022
Dividend yield		5.2	%		4.7	%
Risk-free interest rate		4.6	%		1.7	%
Expected volatility		48.7	%		48	%
Expected life (in years)		0.5			0.5

The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate was based on the U.S. Treasury yields with a remaining term that approximates the expected life of the purchased shares. The volatility was based on a five-year historical period of the Company’s stock price. The expected life was based on the offering period.

Board of Director Equity Awards

The Company grants restricted stock awards to members of its Board of Directors as an annual retainer and for committee service. These awards are shares of the Company’s stock that vest one year after issuance. In addition, new directors receive a one-time grant that vests over three years. In June 2023, the Company issued 95,966 shares to directors for their annual retainer and committee services. In addition, the Company issued 10,893 shares to its new director. The fair value of the service-based restricted shares for directors that vested during the six months ended June 30, 2023 was $0.6 million.

The following table summarizes the director awards activity:


	Shares			Weighted Average Fair Value
Outstanding - December 31, 2022		120,696		$	4.02
Shares awarded		106,859			4.59
Shares vested		(116,663	)		4.02
Outstanding - June 30, 2023		110,892		$	4.57

Employee Withholding Taxes on Stock Awards

For ease in administering the issuance of employee stock awards, the Company withholds shares of vested restricted stock awards, stock option exercises and short-term and long-term incentive plan stock awards for taxes. The Company withholds the number of shares it computes as having the value of the relevant withholding tax and remits the tax payment to the appropriate tax authority. For withholding taxes related to stock awards, the Company paid $0.7 million and $0.4 million during the six months ended June 30, 2023 and 2022, respectively.

8. Benefit Plans

Employee Benefit Plans

The Company’s 401(k) plan covers all U.S. employees beginning the first day of the month following the first month of their employment. Under this plan, employees may elect to contribute up to 15% of their current compensation to the 401(k) plan up to the statutorily prescribed annual limit. The Company matches employee contributions up to 4% of compensation and may also make discretionary contributions to the 401(k) plan. The Company also contributes to various retirement plans for foreign employees.

The Company’s contributions to retirement plans during the three and six months ended June 30, 2023 and 2022, respectively, were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
PCTEL, Inc. 401(k) profit sharing plan - US employees	$	187	$	187	$	444	$	406
Defined contribution plans - Foreign employees		57		62		110		135
Total	$	244	$	249	$	554	$	541

9. Commitments and Contingencies

Warranty Reserve and Sales Returns

The Company allows its major distributors and certain other customers to return unused product under specified terms and conditions. The Company accrues for product returns based on historical sales and return trends. The refund liability related to estimated sales returns was $0.2 million June 30, 2023 and December 31, 2022, respectively, and is included within accrued liabilities on the accompanying condensed consolidated balance sheets.

The Company offers repair and replacement warranties ranging from one to ten years for certain antenna products and test & measurement products. The Company’s warranty reserve is based on historical sales and costs of repair and replacement trends. The warranty reserve was $0.3 million at June 30, 2023 and 2022, respectively, and is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

The following table summarizes the warranty activity during the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
	2023			2022
Beginning balance	$	317		$	257
Provisions for warranties		60			41
Consumption of reserves		(96	)		(26	)
Ending balance	$	281		$	272

10. Leases

The Company has operating leases for facilities and finance leases for office equipment. Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company determines if an arrangement is a lease at inception of a contract.

Right of Use (“ROU”) assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the net present value of fixed lease payments over the lease term. The Company's lease term is deemed to include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. ROU assets also include any advance lease payments made and exclude lease incentives. As most of the Company's operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments on a collateralized basis. Finance lease agreements generally include an interest rate that is used to determine the present value of future lease payments. Operating fixed lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.

The Company's lease cost for the three and six months ended June 30, 2023 and 2022, respectively, included the following components:


	Three Months Ended June 30,					Six Months Ended June 30,
	2023		2022			2023		2022
Operating lease costs	$	133	$	130		$	268	$	258
Short-term lease costs		9		23			18		50
Variable lease costs		6		(2	)		7		2
Amortization of finance lease assets		13		16			27		35
Interest on finance lease liabilities		1		1			2		3
Total lease cost	$	162	$	168		$	322	$	348

The table below summarizes the Company's scheduled future minimum lease payments under operating and finance leases recorded on the balance sheet as of June 30, 2023:


Year	Operating Leases			Finance Leases
2023 (remaining six months)	$	286		$	25
2024		673			44
2025		583			26
2026		521			5
2027		505			0
Thereafter		1,674			0
Total minimum payments required		4,242			100
Less: amount representing interest		687			5
Present value of net minimum lease payments		3,555			95
Less: current maturities of lease obligations		(516	)		(46	)
Long-term lease obligations	$	3,039		$	49

The weighted average remaining lease terms and discount rates for all the Company’s operating and finance leases were as follows as of June 30, 2023:


		June 30, 2023
Weighted-average remaining lease term - finance leases		2.3 years
Weighted-average remaining lease term - operating leases		7.1 years
Weighted-average discount rate - finance leases		4.3%
Weighted-average discount rate - operating leases		5.0%

The table below presents supplemental cash flow information related to leases during the three and six months ended June 30, 2023 and 2022, respectively:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	181	$	186	$	434	$	386
Operating cash flows for finance leases	$	1	$	1	$	2	$	3
Financing cash flows for finance leases	$	14	$	18	$	28	$	37

The following table summarizes the classification of ROU assets and lease liabilities as of June 30, 2023 and December 31, 2022:


Leases	Consolidated Balance Sheet Classification	June 30, 2023		December 31, 2022
Assets:
Operating right-of-use assets	Other noncurrent assets	$	2,054	$	2,241
Finance right-of-use assets	Other noncurrent assets		92		120
Total leased assets		$	2,146	$	2,361
Liabilities:
Current
Operating lease liabilities	Accrued liabilities	$	516	$	527
Finance lease liabilities	Accrued liabilities		46		51
Noncurrent
Operating lease liabilities	Long-term liabilities		3,039		3,327
Finance lease liabilities	Long-term liabilities		49		73
Total lease liabilities		$	3,650	$	3,978

11. Income Taxes

The Company recorded an income tax expense of $0.4 million for the six months ended June 30, 2023, and income tax expense of $39 for the six months ended June 30, 2022. The income tax expense recorded for the six months ended June 30, 2023 and 2022 was lower than the statutory rate of 21% because the Company has a full valuation allowance on its U.S. deferred tax assets.

The Company had deferred tax assets net of deferred tax liabilities of $14.8 million and $15.3 million at June 30, 2023 and December 31, 2022, respectively. By jurisdiction, $12.0 million was associated with the U.S., $1.3 million was associated with China, and $1.5 million was associated with Sweden. The Company’s gross deferred tax assets consist of federal and state net operating losses (“NOLs”), credits, and timing differences.

The Company's valuation allowances are due to uncertainty regarding the utilization of the deferred tax assets. On a regular basis, the Company evaluates the recoverability of deferred tax assets and the need for a valuation allowance. Such evaluations involve the application of significant judgment. The Company considers multiple factors in its evaluation of the need for a valuation allowance. At June 30, 2023, the Company had a full valuation allowance on its U.S. and China deferred tax asset and a partial valuation allowance related to its net deferred tax assets for Sweden.

The Company’s federal NOLs generated in 2018 and later periods will not expire, but the Company’s NOLs generated through December 31, 2017 have a finite life primarily based on the 20-year carry forward of federal net operating losses. The timing differences have a ratable reversal pattern over 12 years. While the Company has recorded pre-tax book income for the prior three years and believes its financial outlook remains positive, it did not meet its revenue or earnings expectations for the U.S. jurisdiction. Additionally, the

Company recognized revenue for one-time projects in fiscal year 2022 that may not be repeated in 2023 or future years. Because of difficulties with forecasting financial results historically, and due to the uncertainties associated with macroeconomic conditions, the Company maintained a full valuation allowance on its U.S. deferred tax assets at June 30, 2023 and December 31, 2022. The Company’s performance versus its projections in both of the prior two years are considered significant negative evidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. While the Company believes its financial outlook remains positive, under the accounting standards, objective verifiable evidence will have greater weight than subjective evidence such as the Company’s projections for future growth. In addition, the Company faces uncertainties from recent macroeconomic conditions, including inflationary pressures, the economic weakness and the potential for a recession. As a result of all these factors, the Company maintained a full valuation allowance on its U.S. deferred tax assets at June 30, 2023.

Until an appropriate level of profitability is attained with corresponding utilization of its net deferred tax assets, the Company expects to maintain a full valuation allowance on its net deferred tax assets for the U.S. jurisdiction. Any U.S. or foreign tax benefits or tax expense recorded on its consolidated statements of operations will be offset with a corresponding valuation allowance until such time that the Company changes its determination related to the realization of deferred tax assets. In the event that the Company changes its determination as to the amount of deferred tax assets that can be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such a determination is made.

Since the Company completed the transition of manufacturing from its Tianjin facility to contract manufacturers in 2022, the Company does not expect sufficient profits to utilize its China deferred tax assets. The Company had a full valuation allowance on its China deferred tax at June 30, 2023 and at December 31, 2022. The Company maintained a partial valuation allowance on its Sweden deferred tax assets at June 30, 2023 and at December 31, 2022. Based on positive book and taxable income in 2021 and 2022 and because results exceeded projections, the Company reversed a portion of its valuation allowance related to Sweden deferred tax assets during 2022.

The analysis that the Company prepared to determine the valuation allowance required significant judgment and assumptions regarding future market conditions as well as forecasts for profits, taxable income, and taxable income by jurisdiction. Due to the sensitivity of the analysis, changes to the assumptions in subsequent periods could have a material effect on the valuation allowance.

The Company files a consolidated federal income tax return, income tax returns with various states, and foreign income tax returns in various foreign jurisdictions. The Company’s U.S. federal tax returns remain subject to examination for 2019 and subsequent periods. The Company’s U.S. state tax returns remain subject to examination for 2017 and subsequent periods. The Company’s foreign tax returns remain subject to examination for 2011 and subsequent periods. The Company’s gross unrecognized tax benefit related to income tax uncertainties was $1.0 million at June 30, 2023 and December 31, 2022.

12. Product Line and Geographic Information

Product Line Information:

The following tables are the product line revenues and gross profits for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30, 2023
	Antennas & Industrial IoT Devices			Test & Measurement Products			Corporate			Total

Revenues	$	14,359		$	6,230		$	(11	)	$	20,578
Gross Profit	$	5,548		$	4,503		$	44		$	10,095
Gross Profit %		38.6	%		72.3	%	NA				49.1	%


	Six Months Ended June 30, 2023
	Antennas & Industrial IoT Devices			Test & Measurement Products			Corporate			Total
Revenues	$	29,973		$	13,657		$	(79	)	$	43,551
Gross Profit	$	11,668		$	9,886		$	73		$	21,627
Gross Profit %		38.9	%		72.4	%	NA				49.7	%


	Three Months Ended June 30, 2022
	Antennas & Industrial IoT Devices			Test & Measurement Products			Corporate			Total

Revenues	$	17,555		$	7,431		$	(10	)	$	24,976
Gross Profit	$	5,626		$	5,759		$	42		$	11,427
Gross Profit %		32.0	%		77.5	%	N/A				45.8	%


	Six Months Ended June 30, 2022
	Antennas & Industrial IoT Devices			Test & Measurement Products			Corporate			Total
Revenues	$	34,657		$	13,014		$	(153	)	$	47,518
Gross Profit	$	10,873		$	9,921		$	(34	)	$	20,760
Gross Profit %		31.4	%		76.2	%	NA				43.7	%

Geographic Information:

The Company’s revenue from customers by geographic location, as a percent of total revenues for the three and six months ended June 30, 2023 and 2022, is as follows:


	Three Months Ended June 30,		Six Months Ended June 30,
Region	2023	2022	2023	2022
Europe, Middle East & Africa	26%	17%	23%	22%
Asia Pacific	5%	5%	9%	6%
Other Americas	3%	3%	3%	2%
Total Foreign sales	34%	25%	35%	30%

Customer Concentration:

The following table represents the customers that accounted for 10% or more of revenues during the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,		Six Months Ended June 30,
Revenues	2023	2022	2023	2022
Customer A	12%	17%	12%	14%

The following table represents the customers that accounted for 10% or more of total trade accounts receivable:


Trade Accounts Receivable	June 30, 2023	December 31, 2022
Customer A	14%	12%
Customer B	2%	12%
Customer C	6%	11%

13. Revenue from Contracts with Customers

Under Topic 606, a contract with a customer is an agreement that both parties have approved, that creates enforceable rights and obligations, has commercial substance, and specified payment terms, and for which collectability is probable. Once the Company has entered into a contract, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized as control of promised goods or services transfers to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The amount of revenue recognized takes into account variable consideration, such as

returns and volume rebates. A majority of the Company’s revenue is short cycle in nature with shipments within one year from order. The Company's payment terms generally range between 30 to 90 days.

All of the Company’s revenue relates to contracts with customers. The Company’s accounting contracts are from purchase orders or purchase orders combined with purchase agreements. The majority of the Company’s revenue is recognized on a “point-in-time” basis and a nominal amount of revenue is recognized “over time”. For the sale of antenna products and test & measurement products, the Company satisfies its performance obligations generally at the time of shipment or upon delivery based on the contractual terms with its customers. For products shipped on consignment, the Company recognizes revenue upon usage at the consignment location. For its test & measurement software tools, the Company has a performance obligation to provide software maintenance and support for one year. The Company recognizes revenues for the maintenance and support over this period.

The Company considers shipping and handling performed by the Company as fulfillment activities. Amounts billed for shipping and handling are included in revenues, while costs incurred for shipping and handling are included in cost of revenues. The Company excludes taxes from the transaction price. Cost of contracts include sales commissions. The Company expenses the cost of contracts when incurred because the amortization period is one year or less.

The Company allows its major distributors and certain other customers to return unused product under specified terms and conditions. The Company estimates product returns based on historical sales and return trends and records a corresponding refund liability. The refund liability was $0.2 million at June 30, 2023 and December 31, 2022, and is included within accrued liabilities in the accompanying condensed consolidated balance sheets. The Company records an asset based on historical experience for the amount of product it expects to return to inventory as a result of customer returns, which is recorded in inventories in the accompanying condensed consolidated balance sheets. The product return asset was $0.1 million at June 30, 2023 and December 31, 2022.

There were no contract assets at June 30, 2023 and December 31, 2022. The Company records contract liabilities for deferred revenue and customer prepayments. Contract liabilities are recorded in accrued liabilities in the accompanying condensed consolidated balance sheets. The contract liability was $0.8 million and $0.9 million at June 30, 2023 and December 31, 2022, respectively. The Company recognized revenue of $0.8 million and $0.6 million during the six months ended June 30, 2023 and 2022, respectively, related to contract liabilities that existed at the beginning of the period.

14. Subsequent Events

The Company evaluates subsequent events occurring between the most recent balance sheet date and the date that the financial statements are available to be issued in order to determine whether the subsequent events are to be recorded and/or disclosed in the Company’s financial statements and footnotes. The financial statements are considered to be available to be issued at the time that they are filed with the SEC. There were no subsequent events or transactions that required recognition or disclosure in the unaudited interim condensed consolidated financial statements.

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited interim condensed consolidated financial statements of PCTEL, Inc. (“PCTEL,” the “Company,” “we,” “our,” and “us”) and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements for the year ended December 31, 2022 contained in our 2022 Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify these forward-looking statements by words such as “may,” “will,” “plans,” “seeks,” “expects,” “anticipates,” “intends,” “believes” and words of similar meaning. Investors in our common stock are cautioned not to place undue reliance on these forward-looking statements. Specifically, these statements include, but are not limited to, statements concerning our future financial performance; growth of our antenna solutions and Industrial Internet of Things (“Industrial IoT”) business and our test & measurement business; customer inventory and supply chain matters; our ability to continue to innovate new products; our ability to expand product lines in the European market and through distribution channels; the impact of our transition plan for manufacturing inside and outside China; the impact of ongoing supply chain disruptions; the impact of geopolitical conditions, including the ongoing war in Ukraine and related sanctions and disruption in petroleum and other markets; the impact of macroeconomic conditions, including inflation, higher interest rates, economic weakness, and potential for a recession in the U.S.; the anticipated demand for certain products, including those related to public safety, Industrial IoT, 5G (e.g., the Gflex scanning receiver), agriculture and intelligent transportation; and the anticipated growth of public and private wireless systems. These statements are based on management’s current expectations and actual results may differ materially from those projected as a result of certain risks and uncertainties. Important factors that could cause such differences include, but are not limited to, the impact of adverse and uncertain economic and political conditions within and outside the U.S., including inflationary pressures, higher interest rates, economic downturn, the potential for a recession, and the ongoing war in Ukraine; customer inventory and supply chain matters; inflation and increase in product and material costs; competition within the wireless product industry; disruptions to our workforce, operations, supply chain and customer demand caused by the COVID-19 pandemic and the impact of the pandemic and the ensuing supply chain disruption on our results of operations, financial condition, and stock price; our ability to accurately forecast demand for our products; our ability to continue to successfully integrate Smarteq and any future acquisitions into our existing operations; the impact of uncertainty as a result of doing business in China and Europe; the impact of tariffs on certain imports from China; delays in our sales cycles; the impact of data densification and IoT on capacity and coverage demand; the impact of 5G; customer demand and growth generally in our defined market segments; our ability to access the government market and create demand for our products; the Company's ability to expand its European presence and benefit from additional antenna and Industrial IoT product offerings from Smarteq; and our ability to grow our business and create, protect and implement new technologies and solutions. These and other risks and uncertainties are detailed in our filings with the Securities and Exchange Commission (“SEC”). These forward-looking statements are made only as of the date hereof. We do not undertake, and expressly disclaim, any obligation to update or revise any forward-looking statements whether because of new information, future events or otherwise, except as may be required by applicable law. Investors should carefully review the information contained in Item 1A Risk Factors.

Business Overview

PCTEL is a leading global provider of wireless technology, including purpose-built Industrial IoT devices, antennas, and test & measurement products. We strive to solve complex wireless challenges to help organizations stay connected, transform, and grow. We believe we have a strong brand presence and expertise in radio frequency (“RF”), digital and mechanical engineering. We have two product lines (antennas/Industrial IoT devices and test & measurement solutions). Our antenna products include antennas deployed in small cells, enterprise Wi-Fi access points, fleet management, IoT applications, and transit systems. Our Industrial IoT devices include ruggedized access points, IoT interface cards and IoT sensor platforms for applications such as logistics, remote monitoring and control. Our test & measurement products are designed to improve the performance of wireless networks globally. Mobile operators, private enterprises, and network equipment manufacturers rely on our products to analyze, design, and optimize next generation wireless networks. We seek out product applications that command a premium for product design and performance, and we avoid commodity markets. Our strength is solving complex wireless challenges for our customers through our products and solutions. To this end, we are constantly seeking to innovate and improve antenna, Industrial IoT, and wireless testing products and capabilities to capture the opportunities of the rapidly evolving wireless industry. We focus on engineering, research, and development to maintain and expand our competitiveness.

Antennas and Industrial IoT Devices

PCTEL designs and manufactures precision antennas and Industrial IoT devices, and we offer in-house wireless product development for our customers, including design, testing, radio integration, and manufacturing capabilities. Market opportunities for this product line are driven by the increased use and complexity of wireless communications.

Our antenna portfolio includes Wi-Fi, Bluetooth, Land Mobile Radio (“LMR”), Tetra, Global Navigation Satellite System (“GNSS”), Cellular, Industrial, Scientific, and Medical (“ISM”), Long Range (“LoRa”), and combination antenna solutions. The market applications for our antennas include public safety communications, military communications, utilities & energy, precision agriculture, smart traffic management, Electric Vehicle (“EV”) charging stations, passenger and cargo vehicles, forestry machinery & off-road vehicles. For smart traffic management, we provide antenna systems for smart roadways and smart rail. Fleet antennas for public safety, including police vehicles, are a key market. We not only manufacture the antennas, but we also provide engineering and design to determine the layout of multi-antenna installations to minimize potential interference between each antenna element. Our customized solutions often result in general purpose products with advance capabilities, such as multi-element antenna systems in a single radome. These systems can include several LTE bands, Wi-Fi bands and GPS navigation elements, all in one housing. An antenna designed for one application can be modified to be used for other applications.

Our Industrial IoT device portfolio includes access points, radio modules, and sensor communication solutions. The market applications for our Industrial IoT devices include utilities and smart grid, oil and gas, manufacturing, logistics, industrial automation, smart metering, and asset tracking.

Our strategy is to provide a “toolbox” of hardware solutions to our existing OEMs and distributors for Industrial IoT systems. We provide all of the field hardware required for wireless Industrial IoT systems - antennas, ruggedized Wi-Fi access points, radio modules, and integrated wireless sensors for Industrial IoT. Our go-to-market strategy for this sector is to sell more RF hardware components to our customers that traditionally purchase antennas from PCTEL.

Consistent with our mission to solve complex network engineering problems and to compete effectively in the antenna market, PCTEL maintains expertise in the following areas: RF engineering, wireless network engineering, mechanical engineering, mobile antenna design, manufacturing, and product quality and testing. Competition among providers of antennas and Industrial IoT devices is fragmented. Competitors include Airgain, Amphenol, Panorama, Taoglas, and TE Connectivity.

Test & Measurement Products

PCTEL provides RF test & measurement products that improve the performance of wireless networks globally, with a focus on LTE, public safety, and 5G technologies. Market opportunities for this product line are driven by the implementation and roll out of new wireless technology standards (i.e., 3G to 4G, 4G to 5G) and new market applications for public safety and government. The market applications for our test & measurement equipment includes cellular testing, public safety and private radio network testing, federal government communications testing, and indoor building network testing. Our portfolio includes scanning receivers, scanning receiver software, public safety solutions, interference location systems, mmwave transmitters, and a cloud-based reporting platform.

Our scanning receivers are software defined radios used to 1) confirm adequate RF coverage during deployment, 2) identify interfering signals which decrease capacity, 3) troubleshoot system performance issues as networks expand, and 4) benchmark competing networks because our scanning receivers can scan all technologies across all frequencies during one test. They are necessary for initial network deployment and throughout the life cycle of the mobile network. Most of our 4G scanners can be upgraded to 5G via firmware. Our new Gflex scanning receiver includes advanced features to address 5G and broader critical communication and government applications such as signal intelligence.

We provide test & measurement equipment to test in-building communication capability important for first responders and to certify buildings meet certain in-building wireless communication standards. We provide test & measurement equipment to test public safety networks, including P25, Tetra and digital mobile radio (“DMR”).

Our cloud-based reporting platform for public safety. SeeHawk™ Central is a subscription-based service for test management, storage and analytics that allows stakeholders, including engineering service companies, building owners and government jurisdictions, to easily manage the data collection process and access final reports through an online map-based interface.

Consistent with our mission to solve complex network engineering problems and to compete effectively in the RF test & measurement market, we maintain expertise in the following areas: RF engineering, digital signal processing (“DSP”) engineering, wireless network engineering, mechanical engineering, manufacturing, and product quality and testing. Competitors for our test & measurement products include OEMs such as Anritsu, Berkley Varitronics, Digital Receiver Technology, Rohde and Schwarz, and Viavi.

Macroeconomic Conditions

We have been negatively impacted by adverse macroeconomic conditions. In particular, supply chain issues have impacted both PCTEL and our customers.

In response to supply chain issues, we have been carrying higher levels of inventory and have, in some instances, paid higher costs to secure components, particularly for our test & measurement products. This continues to negatively impact our margins. These supply

chain issues have been improving, and we expect that they will continue to improve. The continued impact on margins will depend on how quickly we work through higher cost inventory.

Our customers’ responses to supply chain issues have also negatively impacted PCTEL, particularly orders for our antenna products. Certain OEM customers increased their inventories of our products to higher-than-normal levels and have reduced their orders as they work through these inventories. In addition, our customers have faced constraints in their supply chains for other components of their systems, negatively impacting their need for our antennas. We have begun to see improvements in demand from some customers as they have been working down their inventories and supply chain constraints have been improving. We believe that market conditions will continue to improve as we expect that customers will continue to work through their inventories of our products and customer supply chains will continue to improve through the second half of the year and into 2024.

Results of Operations

Second Quarter Overview

Revenues for the three months ended June 30, 2023 were $20.6 million, a decrease of 17.6% compared to $25.0 million for the same period in 2022. By product line, revenues decreased by $1.2 million (16.2%) to $6.2 million for test & measurement products and decreased by $3.2 million (18.2%) to $14.4 million for antennas and Industrial IoT devices. The decrease in revenues for antennas and Industrial IoT devices was primarily due to lower revenues with antennas for enterprise and public safety and public applications. Customer inventory and supply chain issues discussed above contributed to the decline in revenues. Gross profits of $10.1 million for the quarter decreased by $1.3 million compared to the same period in 2022 due to the revenue decreases for both product lines. The gross profit was higher in the three months ended June 30, 2023 due to the higher gross margin percentage for antennas and Industrial IoT devices as a result of positive mix shift and improving supply chain conditions. Operating expense of $9.3 million was $1.8 million lower than in the second quarter of 2022. The decrease in operating expense is driven primarily by lower incentive compensation expenses, including sales commissions, and expenses for the short-term and long-term incentive incentive plans. For the three months ended June 30, 2023, expense accruals for the short-term incentive plan were lower by $0.7 million, expense accruals for the long-term incentive plan were lower by $0.6 million, and expenses for sales commissions were lower by $0.3 million compared to the same period on 2022. The net impact of these changes resulted in income before tax of $1.2 million for the second quarter of 2023 compared to the income before tax of $0.4 million in the second quarter of 2022.

Revenues for the six months ended June 30, 2023 were $43.6 million, a decrease of 8.3% compared to $47.5 million for the same period in 2022. By product line, revenues increased by $0.6 million (4.9%) to $13.7 million for test & measurement products and decreased by $4.7 million (13.5%) to $30.0 million for antennas and Industrial IoT devices. The increase in revenues for test & measurement products was driven by growth in products with 5G technologies. The decrease in revenues for antennas and Industrial IoT devices was primarily due to lower antenna revenues for enterprise and public safety applications. Customer inventory and supply chain issues discussed above contributed to the decline in revenues. Gross profits of $21.6 million increased by $0.9 million compared to the same period in the prior year, primarily due to the higher gross margin percentage for antennas and Industrial IoT devices. Operating expenses of $19.5 million were $2.5 million lower than the same period in the prior year due to lower variable compensation expenses and because the prior year included $1.3 million for restructuring expenses. For the six months ended June 30, 2023, expense accruals for the short-term incentive plan were lower by $0.6 million, expense accruals for the long-term incentive plan were lower by $1.1 million, and expenses for sales commissions were lower by $0.3 million compared to the same period on 2022. The net impact of these changes resulted in an increase in our income before tax of $3.8 million for the six months ended June 30, 2023 compared to the same period in 2022.

Our cash and investments increased by $3.4 million during the second quarter 2023 with reductions in inventories and accounts receivable. As of June 30, 2023, we had cash and investments of $33.6 million and no debt.

Revenues by Product Line


	Three Months Ended June 30,
	2023			2022			$ Change			% Change

Antennas & Industrial IoT Devices	$	14,359		$	17,555		$	(3,196	)		-18.2	%
Test & Measurement Products		6,230		$	7,431			(1,201	)		-16.2	%
Corporate		(11	)	$	(10	)		(1	)	not meaningful
Total	$	20,578		$	24,976		$	(4,398	)		-17.6	%

	Six Months Ended June 30,
	2023			2022			$ Change			% Change

Antennas & Industrial IoT Devices	$	29,973		$	34,657		$	(4,684	)		-13.5	%
Test & Measurement Products		13,657			13,014			643			4.9	%
Corporate		(79	)		(153	)		74		not meaningful
Total	$	43,551		$	47,518		$	(3,967	)		-8.3	%

Revenues decreased 17.6% for the three months ended June 30, 2023 compared to the same period in 2022 due to lower revenues for both i) antennas and Industrial IoT devices and ii) the test & measurement product lines. Revenues for the test & measurement product line decreased 16.2% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 due to lower revenues with OEM customers. For the three months ended June 30, 2023, revenues decreased for the antenna product line by 18.2% compared to the same period in 2022 due to lower antenna revenues for enterprise and public safety applications and due to higher customer inventory levels.

Revenues decreased 8.3% for the six months ended June 30, 2023 compared to the same period in 2022 as lower revenues for antennas and Industrial IoT devices offset higher revenues for test & measurement products. For the six months ended June 30, 2023, revenues decreased for antennas and Industrial IoT devices by 13.5% compared to the same period in 2022 as a result of lower antenna revenues for enterprise and public safety applications. Revenues for the test & measurement product line increased 4.9% for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 due to higher revenues in the U.S. for scanning receivers with 5G technologies.

Gross Profit by Product Line


	Three Months Ended June 30,
	2023		% of Revenues			2022			% of Revenues

Antennas & Industrial IoT Devices	$	5,548		38.6	%	$	5,626			32.0	%
Test & Measurement Products		4,503		72.3	%	$	5,759			77.5	%
Corporate		44	not meaningful				42		not meaningful
Total	$	10,095		49.1	%	$	11,427			45.8	%

	Six Months Ended June 30,
	2023		% of Revenues			2022			% of Revenues

Antennas & Industrial IoT Devices	$	11,668		38.9	%	$	10,873			31.4	%
Test & Measurement Products	$	9,886		72.4	%	$	9,921			76.2	%
Corporate	$	73	not meaningful			$	(34	)	not meaningful
Total	$	21,627		49.7	%	$	20,760			43.7	%

The gross profit percentage increased by 3.3% for the three months ended June 30, 2023 compared to the same period in 2022 due a higher gross margin percentage for antennas and Industrial IoT devices. The gross profit percentage for the antennas and Industrial IoT devices increased by 6.6% for the three months ended June 30, 2023 compared to the same period in 2022 primarily due to favorable product mix and lower logistics costs. The gross margin percentage for test & measurement products was lower by 5.2% in the second quarter 2023 compared to the prior year primarily due to product and customer mix as well as higher component costs.

The gross profit percentage increased by 6.0% for the six months ended June 30, 2023 compared to the same period in 2022 due to a higher mix of test & measurement products and due to a higher gross margin percentage for antennas and Industrial IoT devices. The gross profit percentage for antennas and Industrial IoT devices increased by 7.5% for the six months ended June 30, 2023 compared to the same period in 2022 due to favorable product mix and lower logistics costs. The gross profit percentage for test & measurement

products decreased by 3.8% for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to product and customer mix as well as higher component costs.

Consolidated Operating Expenses


	Three Months Ended June 30,					Three Months Ended June 30,		% of Revenues
	2023		Change			2022		2023			2022
Research and development	$	3,130	$	(226	)	$	3,356		15.2	%		13.4	%
Sales and marketing		3,220		(688	)		3,908		15.6	%		15.6	%
General and administrative		2,854		(597	)		3,451		13.9	%		13.8	%
Amortization of intangible assets		63		(4	)		67		0.3	%		0.3	%
Restructuring expenses		0		(317	)		317		0.0	%		1.3	%
Total	$	9,267	$	(1,832	)	$	11,099		45.0	%		44.4	%


	Six Months Ended June 30,					Six Months Ended June 30,		% of Revenues
	2023		Change			2022		2023			2022
Research and development	$	6,114	$	(491	)	$	6,605		14.0	%		13.9	%
Sales and marketing		6,781		(529	)		7,310		15.6	%		15.4	%
General and administrative		6,460		(234	)		6,694		14.8	%		14.1	%
Amortization of intangible assets		126		(12	)		138		0.3	%		0.3	%
Restructuring expenses		0		(1,252	)		1,252		0.0	%		2.6	%
Total	$	19,481	$	(2,518	)	$	21,999		44.7	%		46.3	%

Research and development expenses were lower by $0.2 million for the three months ended June 30, 2023, compared to the same period in 2022 due to lower expense accruals for incentive compensation and lower stock compensation expenses related to short-term and long-term incentive plans.

Research and development expenses were lower by $0.5 million for the six months ended June 30, 2023, compared to the same period in 2022 due to lower expense accruals for incentive compensation and lower stock compensation expenses related to short-term and long-term incentive plans.

Sales and marketing expenses include costs associated with the sales and marketing employees, product line management, and trade show expenses.

Sales and marketing expenses decreased $0.7 million for the three months ended June 30, 2023 compared to the same period in 2022 due to lower sales headcount and lower expenses for sales commissions, stock compensation, and marketing programs.

Sales and marketing expenses decreased $0.5 million for the six months ended June 30, 2023 compared to the same period in 2022 due to lower sales headcount and lower expenses for sales commission, stock compensation and marketing programs.

General and administrative expenses include costs associated with general management, finance, human resources, IT, legal, public company costs, and other operating expenses to the extent not otherwise allocated to business segments.

General and administrative expenses decreased by $0.6 million for the three months ended June 30, 2023 compared to the same period in 2022, primarily due to lower expense accruals for the short-term incentive plan expenses and lower stock compensation expenses related to both short and long-term incentive plans.

General and administrative expenses decreased by $0.2 million for the six months ended June 30, 2023 compared to the same period in 2022 as lower expense accruals for the short-term incentive plan and lower stock compensation expenses related to both short and long-term incentive plans. were offset by non-recurring legal expenses and professional fees of $0.7 million related to exploring strategic alternatives.

Amortization of intangible assets within operating expenses were approximately the same for the three and six months ended June 30, 2023 compared to the same periods in 2022.

Restructuring expenses relate to expenses for the transition of manufacturing operations from our Tianjin, China facility to contract manufacturers. Restructuring expenses of $0.3 million for the three months ended June 30, 2022 and $1.3 million for the six months ended June 30, 2022 consisted primarily of employee severance and payroll related costs associated with the termination of 69 employees in Tianjin. We completed the manufacturing transition during the first quarter 2022.

Other Income, Net


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Interest income	$	262		$	36		$	491		$	47
Foreign exchange gains		84			75			74			73
Other, net		0			3			1			5
Total	$	346		$	114		$	566		$	125
Percentage of revenues		1.7	%		0.5	%		1.3	%		0.3	%

Other income, net consists of interest income, foreign exchange gains, and interest expense. Interest income from investment securities increased during the three and six months ended June 30, 2023 compared to the same periods in the prior year, due to higher market interest rates. Foreign exchange gains during the three and six months ended June 30, 2023 and 2022 were related to changes in the exchange rate between the Swedish Krona and the U.S. dollar, as well as between the Chinese Yuan and the U.S. dollar.

Expense for Income Taxes



	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Expense for income taxes	$	175		$	31		$	389		$	39
Effective tax rate		14.9	%		7.0	%		14.3	%		(3.5	)%

We recorded income tax expense of $0.4 million and $39 for the six months ended June 30, 2023 and 2022, respectively. The expense recorded for the six months ended June 30, 2023 and 2022 differed from the Federal statutory rate of 21% primarily because we have a full valuation allowance on our U.S. deferred tax assets.

The deferred tax assets consist of U.S. deferred tax assets of $12.0 million and foreign deferred tax assets of $2.8 million. Our valuation allowances are due to uncertainty regarding the utilization of the deferred tax assets. On a regular basis, we evaluate the recoverability of deferred tax assets and the need for a valuation allowance. Such evaluations involve the application of significant judgment. We considered multiple factors in our evaluation of the need for a valuation allowance. At June 30, 2023 we had a full valuation allowance on our U.S. and China deferred tax assets and a partial valuation allowance related to our net deferred tax assets for Sweden.

We recorded pre-tax book income for the prior three years and we believe our financial outlook remains positive, but we did not meet our revenue or earnings expectations for our U.S. operations. Additionally, the Company recognized revenue for one-time projects in fiscal year 2022 which may not be repeated in 2023 or future years. Because of difficulties with forecasting financial results historically, and due to the uncertainties associated with inflationary and recessionary issues, the Company maintained a full valuation allowance on its U.S. deferred tax assets at June 30, 2023.

The Company maintained a full valuation allowance on its China deferred tax assets. Since the Company completed the transition of manufacturing from its Tianjin facility to contract manufacturers in 2022, the Company does not expect sufficient profits to utilize its China deferred tax assets. The Company maintained a partial valuation allowance on its Sweden deferred tax assets at June 30, 2023. Based on positive book and taxable income in 2021 and 2022 and because results exceeded our projections, the Company reversed a portion of its valuation allowance related to Sweden deferred tax assets during 2022.

The analysis that we prepared to determine the valuation allowance required significant judgment and assumptions regarding future market conditions as well as forecasts for profits, taxable income, and taxable income by jurisdiction. Due to the sensitivity of the analysis, changes to the assumptions in subsequent periods could have a material effect on the valuation allowance. See Note 11 to the condensed consolidated financial statements for more information related to income taxes.

Net Income (Loss)

We recorded net income of $1.0 million for the three months ended June 30, 2023 compared to net income of $0.4 million for the same period in 2022 primarily due to the favorable impact of lower operating expenses and higher other income. For the three months ended June 30, 2023, operating expenses were lower by $1.8 million due to lower expenses for variable compensation and restructuring expenses. For the three months ended June 30, 2023, stock compensation expenses related to incentive plans were lower by $0.8 million, commission expenses were lower by $0.3 million, and cash-based short-term incentive plan expenses were lower by $0.4 million compared to the same period in 2022. Other income increased due to higher interest income.

We recorded net income of $2.3 million for the six months ended June 30, 2023 compared to a net loss of $1.2 million for the same period in 2022 due to the favorable impact of higher margins, lower operating expenses, and higher other income. Operating expenses were lower by $2.5 million for the six months ended June 30, 2023 compared to the same period in 2022 due to lower variable compensation expenses and restructuring expenses, offset by expenses of $0.6 million to explore strategic alternatives. The prior year included $1.3 million of restructuring expenses. For the six months ended June 30, 2023, stock compensation expenses related to incentive plans were lower by $1.3 million, commission expenses were lower by $0.3 million, and cash-based short-term incentive plan expenses were lower by $0.4 million compared to the same period in 2022. Other income increased due to higher interest income.

Liquidity and Capital Resources


	Six Months Ended June 30,
	2023			2022
Net cash flow provided by (used in):
Operating activities	$	7,242		$	321
Investing activities	$	(5,233	)	$	(384	)
Financing activities	$	(2,457	)	$	(2,050	)
Net decrease in cash and cash equivalents	$	(448	)	$	(2,113	)


	June 30,		December 31,
	2023		2022
Cash and cash equivalents at the end of period	$	7,057	$	7,736
Short-term investments at the end of period	$	26,586	$	22,254
Working capital at the end of period	$	52,976	$	52,369

Overview

Our primary source of liquidity is cash provided by operations, with short-term swings in liquidity supported by a significant balance of cash and short-term investments. The balance has fluctuated with cash from operations, acquisitions and divestitures, payment of dividends and the repurchase of our common shares.

Within operating activities, we are historically a net generator of operating funds from our income statement activities. During periods of expansion, we expect to use cash from our balance sheet.

Within investing activities, capital spending historically ranges between 2.0% and 4.0% of our revenues and the primary use of capital is for manufacturing, engineering, and product development. We historically have made significant transfers between investments and cash as we rotate our large cash balances and short-term investment balances between money market funds, which are accounted for as cash equivalents, and other investment vehicles. We have a history of supplementing our organic revenue with acquisitions of product lines or companies, resulting in significant uses of our cash and short-term investment balances from time to time. We expect the historical trend for capital spending and the variability caused by moving money between cash and investments and periodic merger and acquisition activity to continue in the future.

Within financing activities, we have historically generated funds from the exercise of stock options and proceeds from the issuance of common stock through our Employee Stock Purchase Plan (“ESPP”). We have historically used funds to issue dividends and we periodically repurchase shares of our common stock through share repurchase programs.

At June 30, 2023, our cash, cash equivalents, and investments were approximately $33.6 million, and we had working capital of $53.0 million. Management believes our cash and investments provide adequate liquidity and working capital for the next twelve months from the date of this Quarterly Report on Form 10-Q to support our operations given our historic ability to generate free cash flow (cash flow from operations less capital spending).

Operating Activities:

Operating activities generated $7.2 million of cash during the six months ended June 30, 2023. We generated $4.1 million of cash from our statement of operations and generated $3.1 million from the balance sheet. The balance sheet reflects a net generation of cash primarily due to net decreases in accounts receivable and inventories offset by net increases accrued liabilities. Accounts receivable decreased by $5.9 million during the six months ended June 30, 2023 due to lower sequential revenues. Net inventories were $2.5 million lower at June 30, 2023 compared to year end 2022 primarily as a result of decreases in inventories for antennas and Industrial IoT devices.

Operating activities generated $0.3 million of cash during the six months ended June 30, 2022. We generated $2.1 million of cash from our statement of operations and used $1.8 million for the balance sheet. The balance sheet reflects a net use of cash due to net increases in accounts receivable and inventories and from payments of accrued liabilities. Accounts receivable increased by $0.6 million during the first half of 2022 due to higher sequential revenues. Net inventories were higher at June 30, 2022 compared to year end 2021 as increases for test & measurement products offset decreases for antennas and Industrial IoT devices. Inventories were higher for test & measurement products to allow us to maintain customer service levels while managing supply chain delays and component shortages. The net decrease in inventory for antennas and Industrial IoT devices was primarily due to the transition of manufacturing in China to contract manufacturers.

Investing Activities:

Our investing activities used $5.2 million of cash during the six months ended June 30, 2023. During the six months ended June 30, 2023, redemptions and maturities of our investments provided $14.0 million in funds and we rotated $18.4 million of cash into new investments. We used $0.9 million for capital expenditures during the six months ended June 30, 2023.

Our investing activities used $0.4 million of cash during the six months ended June 30, 2022. During the six months ended June 30, 2022, redemptions and maturities of our investments provided $15.6 million in funds and we rotated $15.6 million of cash into new investments. We used $0.4 million for capital expenditures during the six months ended June 30, 2022.

Financing Activities:

We used $2.5 million in cash for financing activities during the six months ended June 30, 2023. This use of cash primarily consists of $2.1 million for the quarterly cash dividends and $0.7 million for payroll taxes related to restricted stock awards, offset by proceeds of $0.4 million from the issuance of common stock for our ESPP.

We used $2.0 million in cash for financing activities during the six months ended June 30, 2022. We used $2.0 million for quarterly cash dividends and $0.4 million for payroll taxes related to restricted stock awards. Proceeds from the issuance of common stock for our ESPP provided $0.4 million for the six months ended June 30, 2022.

Material Cash Requirements

Our material cash requirements from known contractual and other obligations primarily relate to non-cancelable purchase obligations. Expected timing of those payments are as follows:


	Payments Due by Period
			Less than						After
	Total		1 year		1-3 years		4-5 years		5 years
Purchase obligations	$	16,712	$	16,532	$	180	$	0	$	0

Critical Accounting Policies and Estimates

We use certain critical accounting policies as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” of the 2022 Form 10-K, which is incorporated by reference in response to this item. There have been no material changes in any of our critical accounting policies and estimates since December 31, 2022. See Note 1 to the Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

As a "smaller reporting company," we are not required to provide disclosure in this Quarterly Report on Form 10-Q in response to this item.

Item 4: Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act, as amended (the “Exchange Act”) were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported within time periods specified in the SEC rules and forms.

In connection with the evaluation required by Rule 13a-15(d), management, with the participation of the Chief Executive Officer and Chief Financial Officer, has identified that there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1: Legal Proceedings

We may, from time to time, be the subject of various pending or threatened legal actions in the ordinary course of our business. All such matters are subject to many uncertainties and outcomes that are not predictable with assurance. To our knowledge, as of June 30, 2023, there were no claims or litigation pending against the Company that would be reasonably likely to have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Item 1A: Risk Factors

See Item 1A of our 2022 Form 10-K. As of June 30, 2023, there have been no material changes to the Risk Factors set forth in Item 1A of our 2022 Form 10-K.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None.

Item 6: Exhibits


Exhibit No.		Description

10.1*		Management Retention Agreement dated June 26, 2023 between PCTEL, Inc. and David A. Neumann superseding prior Management Retention Agreement
10.2*		Form of Management Retention Agreement for other Executive Officers
10.3*		Form of Severance Benefits Letter
10.4*		Indemnification Agreement with Directors and Executive Officers
31.1*		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following materials from PCTEL, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 formatted Inline XBRL (eXtensible Business Reporting Language): (i) the Unaudited Condensed Consolidated Statement of Operations, (ii) the Unaudited Condensed Consolidated Balance Sheet, (iii) the Unaudited Condensed Consolidated Statement of Stockholders' Equity, (iv) the Unaudited Condensed Consolidated Statement of Cash Flows, and (v) Notes to the Unaudited Condensed Consolidated Financial Statements.
104*		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). * filed herewith ** furnished herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:

PCTEL, Inc.,

a Delaware corporation

/s/ David A. Neumann

David A. Neumann

Chief Executive Officer
(Principal Executive Officer)

Date: August 9, 2023

/s/ Kevin J. McGowan

Kevin J. McGowan

Chief Financial Officer
(Principal Financial Officer)

Date: August 9, 2023

EX-10.1

EXHIBIT. 10.1

TIER I

PCTEL, INC.

MANAGEMENT RETENTION AGREEMENT

This Management Retention Agreement (the “Agreement”) is effective as of June 26, 2023 by and between David A. Neumann (the “Executive”) and PCTEL, Inc. (the “Company”).

R E C I T A L S

A. It is expected that the Company from time to time may consider a Change of Control (as defined below). The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to the Executive and can cause the Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

B. The Board believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue his/her employment and to motivate the Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

C. The Board believes that it is imperative to provide the Executive with certain benefits upon a Change of Control and severance benefits upon Executive's termination of employment following a Change of Control which provides Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

D. Certain capitalized terms used in this Agreement are defined in Section 4.

The parties hereto agree as follows:

Term of Agreement. This Agreement shall terminate upon the date that all obligations of the parties with respect to this Agreement have been satisfied.

At-Will Employment. The Company and Executive acknowledge that Executive's employment is and shall continue to be at-will, as defined under applicable law, and may be terminated by either party at any time, with or without cause or notice. If the Executive's employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, the Executive shall be entitled to such payments, benefits, damages, awards and compensation as provided pursuant to other written agreements between Executive and the Company.

Change of Control Severance Benefits.

(a)

Change of Control. Upon the occurrence of a Change of Control, the unvested portion of each of Executive’s outstanding equity awards (including, but not limited to, stock options and restricted stock grants) with a performance-based vesting schedule (an “Underlying Performance Award”) shall be automatically amended to convert to a time-based vesting schedule (the “Converted Awards”). Each Converted Award shall vest in substantially equal monthly increments over the performance period of the Underlying Performance Award, provided that Executive remains an employee of the Company through each such vesting date. Executive shall be given vesting credit from the commencement of the performance period of the Underlying Performance Award as if each Converted Award had been subject to a time-based vesting schedule from its grant date. For purposes of this Section 3(a), the Converted Award shall be the number of shares Executive would have received pursuant to the terms of the Underlying Performance Award for performance at target for the entire performance period (whether measured in one or more fiscal periods) in which the Change of Control occurs, regardless of any actual level of achievement subsequently determined. Converted Awards shall be subject to the provisions of Section 3(b)(iii). In the event of a conflict between the terms and conditions of the PCTEL, Inc. 2019 Stock Incentive Plan, as amended from time to time, or any subsequent stock incentive plan properly adopted by the Company’s shareholders (the “Stock Plan”), the agreements relating to Executive’s equity awards, and this Section 3(a), the terms and conditions of this Section 3(a) shall prevail and any subsequent documents that purport to modify this Agreement shall be without effect unless they specifically refer to this Agreement.

(b)

Involuntary Termination other than for Cause, Death or Disability or Voluntary Termination for Good Reason Following A Change of Control. If, within twelve (12) months following a Change of Control, Executive's employment is terminated (1) involuntarily by the Company other than for Cause, death or Disability or (2) by Executive pursuant to a Voluntary Termination for Good Reason, and in either case Executive enters into a standard form of release of claims with the Company pursuant to Section 3(g), the Company shall provide Executive with the following benefits upon such termination:

(i)

Severance Payment. Executive shall be entitled to receive a lump-sum cash payment in an amount equal to two hundred twenty-five percent (225%) of the Executive's annual base salary. Such severance payment will be made on the sixtieth (60th) day following the date of Executive’s termination of employment.

(ii) Continued Executive Benefits. Provided (1) Executive constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue Code of 1986, as amended (the “Code”) and (2) Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within the time period prescribed pursuant to COBRA, the Company will either pay or reimburse Executive for the cost of COBRA premiums for continued health (i.e., medical, dental and vision) coverage at the same level of coverage as was provided to Executive immediately prior to the Change of Control

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until the earlier of (x) twelve (12) months following the date of Executive’s termination, and (y) the date upon which Executive or Executive’s eligible dependents, as the case may be, become covered under another employer’s group medical, dental and vision insurance benefit plans. If such coverage included Executive’s eligible dependents immediately prior to the Change of Control, the payment or reimbursement for such coverage will also cover Executive’s eligible dependents.

(iii) Equity Compensation Accelerated Vesting. One hundred percent (100%) of Executive’s outstanding equity awards (including but not limited to stock options and restricted stock grants) with a time-based vesting schedule (including the Converted Awards) shall immediately accelerate and become completely vested.

(c)

Voluntary Resignation. If Executive's employment terminates by reason of the Executive's voluntary resignation (other than a Voluntary Termination for Good Reason), then Executive shall not be entitled to receive severance or other benefits except for those (if any) established under the Company's then existing severance and benefits plans or pursuant to other written agreements with the Company.

(d)

Disability; Death. If Executive's employment with the Company terminates as a result of the Executive's Disability, or if Executive's employment is terminated due to the death of the Executive, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) established under the Company's then existing severance and benefits plans or pursuant to other written agreements with the Company.

(e)

Termination for Cause. If Executive is terminated for Cause, then Executive shall not be entitled to receive severance or other benefits.

(f)

Termination Apart from Change of Control. In the event Executive's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the twelve (12) month period following a Change of Control, then Executive shall be entitled to receive severance and any other benefits only as established under the Company's then existing severance and benefits plans or pursuant to other written agreements with the Company.

(g)

Separation Agreement and Release. The receipt of any severance payments or benefits pursuant to this Agreement will be subject to Executive signing, delivering and not revoking a separation agreement and release of claims (in a form reasonably acceptable to the Company) provided that such separation agreement and release of claims is effective within sixty (60) days following Executive’s termination date. No severance pursuant to this Agreement will be paid or provided until the separation agreement and release of claims becomes effective. If the 60th day after the termination date is in the subsequent calendar year, no payment will be made prior to January 1 of such subsequent calendar year. If Executive should die before all of the severance amounts have been paid, such unpaid amounts will be paid in a lump-sum payment promptly following such event to

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Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

4. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Cause. “Cause” means (i) any material act (that remains uncured for thirty (30) days following written notice from the Company) which permits the Company to terminate a written employment agreement or similar arrangement between Executive and the Company, for “cause” or a substantially equivalent term as defined in such agreement or arrangement, or (ii) in the event there is no such agreement or arrangement, or the agreement or arrangement does not define the term “cause” or a substantially equivalent term, then “Cause” means: (A) an act of personal dishonesty taken by Executive in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of Executive, (B) Executive being convicted of, or a plea of nolo contendere to, a felony, (C) a willful act by Executive which constitutes gross misconduct and which is injurious to the Company, or (D) following delivery to Executive of a written demand for performance from the Company which describes the basis for the Company's reasonable belief that Executive has not substantially performed his duties, continued violations by Executive of Executive's obligations to the Company which are demonstrably willful and deliberate on Executive's part.

(b) Change of Control. “Change of Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities who is not already such as of the Effective Date of this Agreement; or

(ii) The consummation of the sale or disposition by the Company of all or substantially all the Company's assets (“Asset Sale”); provided, that, unless otherwise determined by the Board, an Asset Sale will not be deemed to occur if the voting securities of the Company outstanding immediately prior to such sale or disposition continue to represent at least fifty percent (50%) of the total voting power represented by the voting securities of the Company outstanding immediately after such sale or disposition; or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such

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surviving entity or its parent outstanding immediately after such merger or consolidation.

Notwithstanding the foregoing, a transaction will not be deemed a Change of Control unless the transaction qualifies as a change in control event within the meaning of Section 409A of the Code (“Section 409A”).

(h)

Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months;

(ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for at least three (3) months under the Company’s accident and health plan; or

(iii) Executive is determined to be totally disabled by the Social Security Administration.

(d) Voluntary Termination for Good Reason. “Voluntary Termination for Good Reason” means Executive voluntary resigns within thirty (30) days following the expiration of any cure period (as discussed below) after the occurrence of any of the following, without Executive’s written consent:

(i) a material diminution by the Company in the annual base salary of Executive as in effect immediately prior to such reduction (other than a reduction that applies to Company officers and/or managers generally);

(ii) a material change in the geographic location at which Executive must perform service (in other words, the relocation of Executive to a facility or a location more than fifty (50) miles from the then present location); or

(iii) any other action or inaction that constitutes a material breach by the Company of this Agreement;

provided, however, that before Executive’s employment may be terminated by a Voluntary Termination for Good Reason, (A) Executive must provide written notice to the Company, within ninety (90) days of the initial existence of the Voluntary Termination for Good Reason condition, setting forth the reasons for Executive’s intention to terminate his employment as a result of a Voluntary Termination for Good Reason, and (B) the Company must have an opportunity within thirty (30) days following delivery of such notice to cure the Voluntary Termination for Good Reason condition.

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For the avoidance of doubt, the voluntary resignation by Executive after the occurrence of either of the following shall not constitute grounds for a “Voluntary Termination for Good Reason”: (1) a reduction of Executive’s duties, titles, authority or responsibilities, relative to Executive’s duties, title, authority or responsibilities as in effect immediately prior to such reduction, as a result of (x) the Company being acquired and made part of a larger entity, or (y) a restructuring of the Company and/or its subsidiaries, or a restructuring of the Company’s employees’ functions, and/or reporting relationships; or (2) a material reduction of the facilities or perquisites (including office space and location) available to Executive.

Notwithstanding anything herein to the contrary, the Company agrees that it will not materially reduce Executive’s aggregate level of employee benefits, including bonuses, to which Executive was entitled immediately prior to such reduction with the result that Executive’s aggregate benefits package is materially reduced (other than a reduction that generally applies to Company officers and/or managers).

5. Non-Compete and Non-solicitation.

(a) Non-Compete. Executive agrees and acknowledges that Executive’s right to receive the payments and benefits set forth in this Agreement (to the extent Executive is otherwise entitled to such payments and benefits) shall be conditioned upon Executive not directly or indirectly engaging in (whether as an executive, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), nor having any ownership interest in or participating in the financing, operation, management or control of, any person, firm, corporation or business that is a Restricted Business; provided, however, that nothing in this Section 5(a) shall prevent Executive from owning as a passive investment less than one percent (1%) of the outstanding shares of the capital stock of a publicly-held company if (A) such shares are actively traded on the New York Stock Exchange or the Nasdaq Global Market and (B) Executive is not otherwise associated with such company or any of its affiliates. A “Restricted Business” is a business which is engaged in the design, development, manufacture, production, marketing, sale, licensing or servicing of any products, or the provision of any services, that are the same as or substantially similar to those of the Company, or a business which is otherwise one of the top 10 competitors of the Company as identified by the Company in its then most recent presentation to the Board of Directors of the Company. The Company will provide the names of such companies to Executive. Upon any breach of this section, all severance payments and benefits pursuant to this Agreement shall immediately cease.

(b) Non-Solicitation. During the twelve (12) months following the termination of Executive’s employment with the Company for any reason, Executive agrees and acknowledges that Executive’s right to receive the payments and benefits Executive is to receive herein (to the extent Executive is otherwise entitled to such payments and benefits), shall be conditioned upon Executive not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave his/her employment either for Executive or for any other entity or person.

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6. Section 280G. Notwithstanding any other provision of this Agreement to the contrary, in the event that the amount of severance and other benefits payable to Executive under this Agreement (including, without limitation, the acceleration of any payment or the accelerated vesting of any payment or other benefit), together with any payments, awards or benefits payable under any other plan, program, arrangement or agreement maintained by the Company or one of its affiliates, would constitute an “excess parachute payment” (within the meaning of Section 280G of the Code), the payments under this Agreement shall be reduced (by the minimum possible amount) until no amount payable to Executive under this Agreement constitutes an “excess parachute payment” (within the meaning of Section 280G of the Code); provided, however, that no such reduction shall be made if the net after-tax payment (after taking into account federal, state, local or other income, employment and excise taxes) to which Executive would otherwise be entitled without such reduction would be greater than the net after-tax payment (after taking into account federal, state, local or other income and employment taxes) to Executive resulting from the receipt of such payments with such reduction. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made in writing, by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

7. Section 409A.

(a) Amounts paid under this Agreement are intended to satisfy the requirements of the “short term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations and thus, will not constitute a “deferral of compensation” governed by Section 409A.

(b) Amounts paid under this Agreement that do not satisfy the requirements of the “short term deferral” rule as described in clause 7(a) above are intended to satisfy the requirements of the “separation pay plan” rule set forth in Section 1.409A-1(b)(9)(iii) of the Treasury Regulations, and thus, will not constitute a “deferral of compensation” governed by Section 409A.

(c) Amounts paid under this Agreement are intended to constitute “separate payments” for purposes of Treasury Regulation Section 1.409A-2(b)(2).

(d) The Company intends the amounts paid under this Agreement to satisfy either the “short term deferral” rule (described in clause 7(a) above) or the “separation pay plan” rule (described in clause 7(b) above) so that none of the severance payments and benefits provided hereunder will be deemed a deferral of compensation that is subject to the additional tax imposed under Section 409A and any ambiguities herein will be interpreted to satisfy the “short term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury

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Regulations, or alternatively, to satisfy the “separation pay plan” rule set forth in Section 1.409A-1(b)(9)(iii) of the Treasury Regulations. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment of severance or other benefits to Executive under Section 409A.

(e) To the extent (i) the requirements for the “short term deferral” rule and/or the “separation pay plan” rule are not satisfied, and (ii) Executive is a “specified employee” of the Company (or any successor entity thereto) within the meaning of Section 409A(a)(2)(B)(i) on the date of Executive’s termination (other than a termination due to death), then the portion of the severance payments payable to Executive, if any, under this Agreement, when considered together with any other severance payments or separation benefits that is deemed a deferral of compensation under Section 409A shall be delayed until the earlier of (A) the date that is six (6) months and one (1) day after the date of termination, or (B) the date of Executive’s death (such date, the “Delayed Initial Payment Date”), and the Company (or the successor entity thereto) shall (x) pay to Executive a lump sum equal to the amount Executive would have otherwise received on or before the Delayed Initial Payment Date, without any adjustment on account of such delay, as if the payments had not been delayed pursuant to this section, and (y) pay the balance of the payments in accordance with any applicable payment schedules set forth herein. Notwithstanding anything herein to the contrary, if Executive dies following his or her termination, but prior to the six (6) month anniversary of Executive’s termination date, then any payments which have been delayed in accordance with this clause will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death.

Successors.

(a)

Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any such successor to the Company which executes and delivers an assumption agreement consistent with this Section 8(a) or which becomes bound by the terms of this Agreement by operation of law.

(b)

Executive's Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

Notice.

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(a)

General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or one (1) business day following mailing via Federal Express or similar overnight courier service. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he/she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.

Notice of Termination. Any termination by the Company for Cause shall be communicated by a notice of termination to Executive given in accordance with Section 9(a). Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice). A termination by Executive pursuant to a Voluntary Termination for Good Reason shall be communicated by a notice of termination to the Company in accordance with Section 4(d) and Section 9(a).

Miscellaneous Provisions.

(a)

No Duty to Mitigate. Executive shall not be required to mitigate the value of any benefits contemplated by this Agreement, nor shall any such benefits be reduced by any earnings or benefits that the Executive may receive from any other source.

(b)

Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by two authorized officers of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c)

Integration. This Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements related to the subject matter of this Agreement whether written or oral, including any prior Management Retention Agreement. No waiver, alteration or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties (except that the Stock Plan may be revised or modified in accordance with its terms) and any subsequent documents that purport to modify this Agreement shall be without effect unless they specifically refer to this Agreement.

(d)

Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois.

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(e)

Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(f)

Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the date first set forth above.

PCTEL, INC. EXECUTIVE: David A. Neumann

By:/S/KEVIN J. MCGOWAN /S/DAVID A NEUMANN

Kevin J. McGowan

Vice President and Chief Financial Officer

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EX-10.2

EXHIBIT 10.2

TIER II

PCTEL, INC.

MANAGEMENT RETENTION AGREEMENT

This Management Retention Agreement (the “Agreement”) is effective as of [date] by and between [name] (the “Executive”) and PCTEL, Inc. (the “Company”).

R E C I T A L S

D. Certain capitalized terms used in this Agreement are defined in Section 4.

The parties hereto agree as follows:

Term of Agreement. This Agreement shall terminate upon the date that all obligations of the parties with respect to this Agreement have been satisfied.

Change of Control Severance Benefits.

(a)

(b)

(i)

Severance Payment. Executive shall be entitled to receive a lump-sum cash payment in an amount equal to two hundred percent (200%) of the Executive's annual base salary. Such severance payment will be made on the sixtieth (60th) day following the date of Executive’s termination of employment.

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(c)

(d)

(e)

Termination for Cause. If Executive is terminated for Cause, then Executive shall not be entitled to receive severance or other benefits.

(f)

(g)

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Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

4. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(b) Change of Control. “Change of Control” means the occurrence of any of the following events:

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surviving entity or its parent outstanding immediately after such merger or consolidation.

(h)

(iii) Executive is determined to be totally disabled by the Social Security Administration.

(iii) any other action or inaction that constitutes a material breach by the Company of this Agreement;

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5. Non-Compete and Non-solicitation.

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7. Section 409A.

(c) Amounts paid under this Agreement are intended to constitute “separate payments” for purposes of Treasury Regulation Section 1.409A-2(b)(2).

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Successors.

(a)

(b)

Notice.

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(a)

Miscellaneous Provisions.

(a)

(b)

(c)

(d)

Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois.

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(e)

(f)

Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the date first set forth above.

PCTEL, INC. EXECUTIVE:[name]

By:_________________________ _______________________________

[name]

[title]

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EX-10.3

EXHIBIT 10.3

[Date]

[Employee Name and Address]

Subject: Severance Benefit

Dear [Name of Employee]:

I am pleased to extend to you the below severance benefits which were approved by PCTEL, Inc.'s Board of Directors on May 23, 2023, and which will become effective upon your written acceptance of this letter. The offer letter that PCTEL, Inc. (“Company”) and you (“Employee”) signed on [Date of Offer Letter] provides that any changes, additions or modifications to the terms of your employment can only be made in writing signed by both parties.

Severance Benefits

(a) Termination by Company Without Cause and Apart From Change of Control. If, either prior to the occurrence of a Change of Control or after the twelve (12) month period following a Change of Control, Employee's employment is terminated (A) involuntarily by the Company for reasons other than Cause, death or Disability, or (B) by Employee pursuant to a Voluntary Termination for Good Reason, then Employee shall be entitled to receive the following benefits from the Company:

(i) Salary Continuation. Employee shall continue to receive Employee's then current Base Salary for a period of twelve (12) months following Employee's termination of employment by the Company for reasons other than Cause. All such severance payments shall be paid in accordance with the Company's normal payroll practices. Such continuation of Employee's Base Salary shall be in lieu of any and all other benefits which Employee is entitled to receive on the date of Employee's termination of employment pursuant to any Company severance and benefit plans and practices or pursuant to other agreements with the Company. Employee shall not be entitled to pro-rated payment of an annual bonus.

(ii) Benefits. Provided that Employee receives health insurance benefits (i.e., medical, dental and/or vision) through the Company on the date of Employee’s termination by the Company for reasons other than Cause (the “Termination Date”) and elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within the time period prescribed pursuant to COBRA, the Company will pay the cost of COBRA premiums for continued health coverage for Employee and any eligible dependents covered by Employee’s health insurance benefits immediately prior to the Termination Date at the same level of coverage as was provided to Employee immediately prior to the Termination Date. The Company shall continue to pay the cost of the COBRA premiums until the earlier of (A) twelve (12) months following the Termination Date, and (B) the date upon which Employee or Employee’s dependents become covered under another employer’s group health, dental and vision insurance benefit plans. For purposes of Title X of COBRA, the date of the qualifying event for Employee and his/her dependents shall be the Termination Date. Employee agrees to notify a representative of the Human Resources Department of the date upon which Employee or Employee’s dependents become covered under another employer’s group health, dental and vision insurance benefit plans if such date occurs prior to the end of the period specified in clause (A) above.

(iii) Partial Accelerated Vesting. All equity awards from the Company then held by Employee shall partially accelerate, or if Employee is then holding unvested shares, Company’s right to repurchase the then-unvested shares under each such equity award shall partially lapse, with respect to the number of shares under each such award that would have become vested or been released from such repurchase right under each respective equity award if Employee’s employment with the Company had continued for an additional twelve (12) months following Employee’s effective termination date for reasons other than Cause.

(b) Termination Following a Change of Control. If Employee’s employment is terminated within twelve (12) months following a Change of Control, the severance and other benefits to which Employee is entitled, if any, shall be governed by the Management Retention Agreement, as amended and restated (which includes the definition of Change of Control).

(c) Other Termination. If Employee's employment is terminated by the Company for Cause, or by Employee for any reason, including death or Disability but other than pursuant to a Voluntary Termination for Good Reason, then Employee shall not be entitled to receive the severance and other benefits discussed above, but may be eligible for those benefits (if any) as may then be required by law or established under the Company's severance and benefit plans and policies existing at the time of such termination.

Separation Agreement and Release. The receipt of any severance payments or benefits pursuant to this Letter Agreement will be subject to Employee signing, delivering and not revoking a separation agreement and release of claims (in a form reasonably acceptable to the Company), provided that such separation agreement and release of claims is effective within sixty (60) days following the Termination Date. No severance pursuant to this Letter Agreement will be paid or provided until the separation agreement and release of claims becomes effective. If the 60th day after the Termination Date is in the subsequent calendar year, no payment will be made prior to January 1 of such subsequent calendar year. If Employee should die before all of the severance amounts have been paid, such unpaid amounts will be paid in a lump sum payment promptly following such event to Employee’s designated beneficiary, if living, or otherwise to the personal representative of Employee’s estate.

Section 409A Compliance. To the extent (i) the requirements for the “short term deferral” rule and/or the “separation pay plan” rule are not satisfied, and (ii) Employee is a “specified employee” of the Company (or any successor entity thereto) within the meaning of Section 409A(a)(2)(B)(i) on the date of Employee’s termination (other than a termination due to death), then the portion of the severance payments payable to Employee, if any, under this Agreement, when considered together with any other severance payments or separation benefits that is deemed a deferral of compensation under Section 409A shall be delayed until the earlier of: (A) the date that is six (6) months and one (1) day after the date of termination, or (B) the date of Employee’s death (such date, the “Delayed Initial Payment Date”), and the Company (or the successor entity thereto) shall (x) pay to Employee a lump sum equal to the amount Employee would have otherwise received on or before the Delayed Initial Payment Date, without any adjustment on account of such delay, as if the payments had not been delayed pursuant to this section, and (y) pay the balance of the payments in accordance with any applicable payment schedules set forth herein. Notwithstanding anything herein to the contrary, if Employee dies following her termination, but prior to the six (6) month anniversary of Employee’s Termination Date, then any payments which have been delayed in accordance with this clause will be payable in a lump sum as soon as administratively practicable after the date of Employee’s death.

Definition of Terms:

The following terms referred to in this Letter Agreement shall have the following meanings:

Base Salary. “Base Salary” shall mean an amount equal to the Employee's Company annual salaried compensation.

Cause. “Cause” shall mean:

(i) any material act (that remains uncured for thirty (30) days following written notice from the Company) which permits the Company to terminate a written employment agreement or similar arrangement between Employee and the Company, for “cause” or a substantially equivalent term as defined in such agreement or arrangement, or

(ii) in the event there is no such agreement or arrangement, or the agreement or arrangement does not define the term “cause” or a substantially equivalent term, then “Cause” means: (A) an act of personal dishonesty taken by Employee in connection with her responsibilities as an employee and intended to result in substantial personal enrichment of Employee, (B) Employee being convicted of, or a plea of nolo contendere to, a felony, (C) a willful act by Employee which constitutes gross misconduct and which is injurious to the Company, or (D) following delivery to Employee of a written demand for performance from the Company which describes the basis for the Company's reasonable belief that Employee has not substantially performed her duties, continued violations by Employee of Employee's obligations to the Company which are demonstrably willful and deliberate on Employee's part.

Change of Control. “Change of Control” is as defined in the Management Retention Agreement (as amended and restated) entered into between Company and Employee.

Disability. “Disability” shall mean:

(i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months;

(iii) Executive is determined to be totally disabled by the Social Security Administration.

Voluntary Termination for Good Reason. “Voluntary Termination for Good Reason” shall mean that Employee voluntarily resigns within thirty (30) days following the expiration of any cure period (as discussed below) after the occurrence, without Employee’s written consent, of any of the following events:

(i) a material diminution by the Company in the Base Salary of Employee as in effect immediately prior to such reduction (other than a reduction that applies to Company officers and/or managers generally);

(ii) a material change in the geographic location at which Employee must perform service (in other words, the relocation of Employee to a facility or a location more than fifty (50) miles from Employee’s then present location); or

(iii) any other action or inaction that constitutes a material breach by the Company of this Agreement;

provided, however, that before Employee’s employment may be terminated by a Voluntary Termination for Good Reason:

(A) Employee must provide written notice to the Company, within ninety (90) days of the initial existence of the Voluntary Termination for Good Reason condition, setting forth the reasons for Employee’s intention to terminate her employment as a result of a Voluntary Termination for Good Reason; and

(B) the Company must have an opportunity within thirty (30) days following delivery of such notice to cure the Voluntary Termination for Good Reason condition.

For the avoidance of doubt, the voluntary resignation by Employee after the occurrence of either of the following shall not constitute grounds for a “Voluntary Termination for Good Reason”:

(1) a reduction of the Employee’s duties, title, authority or responsibilities, relative to the Employee’s duties, title, authority or responsibilities as in effect immediately prior to such reduction, as a result of (i) the Company being acquired and made part of a larger entity, (ii) a restructuring of the Company and/or its subsidiaries, or a restructuring of the Company’s employees’ functions, and/or reporting relationships; or

(2) a material reduction of the facilities or perquisites (including office space and location) available to the Employee immediately prior to such reduction.

Notwithstanding anything herein to the contrary, the Company agrees that it will not materially reduce Employee’s aggregate level of employee benefits, including bonuses, to which Employee was entitled immediately prior to such reduction with the result that Employee’s aggregate benefits package is materially reduced (other than a reduction that generally applies to Company officers and/or managers).

Please indicate your acceptance of the foregoing by signing and returning to me a copy of this Letter Agreement.

Very truly yours,

[Name]

[Title]

I accept and agree to the foregoing on _____________________.

_____________________________

[Name of Employee]

EX-10.4

EXHIBIT 10.4

PCTEL, INC.

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is made as of [date] by and between PCTEL, Inc., a Delaware corporation (the “Company”), and [Name] (“Indemnitee”).

RECITALS

WHEREAS, directors, officers, and other persons in service to publicly-held corporations and other business enterprises are subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the corporation or business enterprise itself;

WHEREAS, the Board of Directors of the Company (the “Board”) believes that highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, Indemnitee may be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (the “DGCL”), and the DGCL expressly provides that the indemnification provisions set forth therein are not exclusive, and thereby contemplates that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

WHEREAS, the Amended and Restated Certificate of Incorporation of the Company, as amended (the “Certificate of Incorporation”) eliminates the personal liability of directors to the fullest extent permitted by the DGCL;

WHEREAS, the Certificate of Incorporation and the Amended and Restated Bylaws of the Company (the “Bylaws”) require indemnification of the officers and directors of the Company to the fullest extent permitted by the DGCL;

WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities;

WHEREAS, it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, Indemnitee may not be willing to serve or continue to serve as an officer or director without the supplemental protections and indemnifications afforded to it under this Agreement; and

WHEREAS, the Company desires to enter into this Agreement in order to induce Indemnitee to serve or continue to serve as an officer or director of the Company.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or as an agent of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise (as defined below)) and Indemnitee. Indemnitee specifically acknowledges that if Indemnitee is employed with the Company (or any of its subsidiaries or any Enterprise), such employment relationship is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the Company, by the Certificate of Incorporation, the Bylaws and the DGCL. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as a director, officer or agent of the Company or any of its subsidiaries as provided in Section 16 hereof.

Definitions: As used in this Agreement:

(a)

References to “agent” shall mean any person who is or was a director, officer, or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of any Enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.

(b)

A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

(i)

any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company

representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;

(ii)

the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii)

a change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means members of the Board who either (A) at the beginning of such two-year period are members of the Board, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the members of the Board still in office who either were members of the Board at the beginning of such two-year period or whose election or nomination was previously so approved (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iv)

the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(c)

“Corporate Status” describes the status of a person who is or was a director, officer, employee or agent of the Company or of any subsidiary of the Company.

(d)

“Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e)

“Enterprise” shall mean any corporation, limited liability company, partnership, joint venture, trust or other enterprise of which Indemnitee is or was serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as an agent.

(f)

“Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent and (ii) for purposes of Section 14(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise.

(g)

“Independent Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporate and securities law and neither presently is, nor in the past three years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(h)

The term “Proceeding” shall include any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company and/or a subsidiary of the Company, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement or advancement of Expenses can be provided under this Agreement.

(i)

References to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company or a subsidiary of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor, by reason of Indemnitee’s Corporate Status. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute,

including, without limitation, any indemnification provided by the Certificate of Incorporation, the Bylaws, vote of the Company’s stockholders or Disinterested Directors or applicable law.

Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of Indemnitee’s Corporate Status. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Court of Chancery of the State of Delaware (the “Delaware Court”) or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Additional Indemnification.

(a)

Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) by reason of Indemnitee’s Corporate Status.

(b)

For purposes of Section 8(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

(i)

to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL; and

(ii)

to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers, directors, employees and agents.

Exclusions. Notwithstanding any other provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification payment in connection with any claim involving Indemnitee:

(a)

for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b)

for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or Section 904 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or

(c)

except as provided in Section 14(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any

Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

10.

Advancement of Expenses. Notwithstanding any provision of this Agreement to the contrary (other than Section 14(d)), the Company shall advance, to the extent not prohibited by law, the Expenses incurred and paid by Indemnitee in connection with any Proceeding (or any part of any Proceeding) not initiated by Indemnitee or any Proceeding initiated by Indemnitee with the prior approval of the Board as provided in Section 9(c), and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. The Company shall, in accordance with such request for advancement (but without duplication), either (i) pay such Expenses on behalf of the Indemnitee, or (ii) reimburse Indemnitee for such Expenses. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. In accordance with Section 14(d), advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement, except as may be expressly required by the DGCL. This Section 10 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9.

11.

Procedure for Notification and Defense of Claim.

(a)

Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement except to the extent that such delay materially and adversely affects the Company’s ability to participate in the defense of such Proceeding, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification and/or advancement of Expenses.

(b)

The Company will be entitled to participate in the Proceeding at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel chosen by the Company and reasonably satisfactory to Indemnitee.

After notice from the Company to Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s own expense; provided, however, that if (i) Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such Claim, (iii) any such representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, (iv) after a Change in Control, Indemnitee’s employment of its own counsel has been approved by the Independent Counsel, or (v) the Company shall not in fact have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel that is selected by Indemnitee and approved by the Company (which approval shall not be unreasonably delayed, conditioned or withheld) (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.

(c) The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Proceeding pursuant to which the Indemnitee is entitled to indemnification and that is effected without the Company’s prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Proceeding pursuant to which the Indemnitee is entitled to indemnification in any manner that would impose any Expenses, claims, liabilities and/or damages on the Indemnitee without the Indemnitee’s prior written consent.

12.

Procedure Upon Application for Indemnification.

(a) Upon written request by Indemnitee for indemnification pursuant to Section 11(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (D) if so directed by the Board, by the common stockholders of the Company by the affirmative vote of the holders of a majority in voting power of the Company’s outstanding common stock, present in person or represented by proxy; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such

determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied.

(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) hereof, the Independent Counsel shall be selected as provided in this Section 12(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) hereof and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

13.

Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or

Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) Subject to Section 14(e) (which section allows determination regarding Indemnitee’s entitlement to indemnification under this Agreement to be deferred until following the final disposition of the Proceeding), if the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the Indemnification Notice from Indemnitee therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such sixty (60)-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith reasonably requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; provided, further, that the foregoing provisions of this Section 13(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 12(a) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) of this Agreement.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company, any subsidiary of the Company or any other Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Company, any subsidiary of the Company or any other Enterprise in the course of their duties, or on the advice of legal counsel for the Company, any subsidiary of the Company or any other Enterprise or on information or records given

or reports made to the Company, any subsidiary of the Company or any other Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Company, any subsidiary of the Company or any other Enterprise, as applicable. The provisions of this Section 13(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) The knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Company or any subsidiary of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

14.

Remedies of Indemnitee.

(a) Subject to Section 14(e), in the event that (i) a determination is made pursuant to Section 12 that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 10, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12(a) within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 5, 6 or 7 or the second to last sentence of Section 12(a) within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Sections 3, 4 or 8 is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by the Delaware Court of Indemnitee’s entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 14(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to Section 12(a) that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 14 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made pursuant to Section 12(a) that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s

statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company if, in the case of indemnification, Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly successful on the underlying claims, then such indemnification shall be only to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

15.

Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Certificate of Incorporation, the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or any subsidiary of

the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding, including the settlement of any such proceeding and payment of plaintiffs’ attorneys’ fees, in accordance with the terms of such policies.

(c) In the event of any payment made by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving an Enterprise as an agent shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such Enterprise.

16.

Duration of Agreement; Successors and Assigns. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a director, officer, employee and/or agent of the Company or any subsidiary of the Company or (b) one (1) year after the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement relating thereto. The indemnification and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any subsidiary of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

17.

Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the

extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

18.

Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve or continue to serve as a director, officer, employee and/or agent of the Company and/or any subsidiaries of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director, officer, employee and/or agent of the Company and/or any subsidiaries of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws, any applicable directors’ and officers’ liability insurance policies and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

19.

Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

20.

Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed, or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

(a)

If to Indemnitee, as indicated on the signature page of this Agreement, or as Indemnitee shall otherwise provide to the Company.

(b)

If to the Company, to:

PCTEL, Inc.

471 Brighton Drive

Bloomingdale, IL 60108

Attn: General Counsel

Facsimile: (630) 233-8076

or to any other address as may have been furnished to Indemnitee by the Company.

21.

Applicable Law and Consent to Jurisdiction. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws.

22.

Counterparts. This Agreement and any amendments may be executed in one or more counterparts, all of which shall be considered one and the same agreement. Any such counterpart, to the extent delivered by fax, by .pdf, .tif, .gif, .jpg or similar attachment to email, or by a digital signature system (e.g., DocuSign) will be treated in all manner and respects as an original executed counterpart and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.

PCTEL, INC.

By:

Title:

Address: 471 Brighton Drive
Bloomingdale, IL 60108

AGREED TO AND ACCEPTED

INDEMNITEE:

(Signature)

(Printed Name)

(Address)

(Facsimile, if available)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Neumann, certify that:

I have reviewed this Quarterly Report on Form 10-Q of PCTEL, Inc.:

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2023

/s/ David A. Neumann

David A. Neumann

[Chief Executive Officer]
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin J. McGowan, certify that:

I have reviewed this Quarterly Report on Form 10-Q of PCTEL, Inc.:

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2023

/s/ Kevin J. McGowan

Kevin J. McGowan 

Chief Financial Officer
(Principal Executive Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PCTEL, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


	By:	/s/ David A. Neumann
DATE: August 9, 2023		DAVID A. NEUMANN
		[Chief Executive Officer] (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


	By:	/s/ Kevin J. McGowan
DATE: August 9, 2023		KEVIN J. MCGOWAN
		[Chief Financial Officer] (Principal Executive Officer)