ITEM 1 A - RISK FACTORS
+Added: The cost of delivered product from our EMS providers is a direct function of their ability to buy components at a competitive price and to realize efficiencies and economies of scale within their overall business structures.
+Added: During 2021 there was a worldwide shortage of semiconductor, memory and other electronic components affecting many industries, from automotive to technology providers.
+Added: Even though this shortage has eased in 2022, the shortage continues to impact our operation.
+Added: If the shortage continues or worsens it will impact our EMS providers significantly.
+Added: If our EMS providers are unsuccessful in obtaining component parts at efficient costs or at all, our delivered costs could rise or we may not be able to fulfill orders on time or at all, affecting our gross margins, profitability and ability to compete.
+Added: In addition, if the EMS providers are unable to achieve greater operational efficiencies, delivery schedules for new product development and current product delivery could be negatively impacted.
+Added: EMS providers often require long range forecasts to help them plan their operations as well as to allocate their resources.
+Added: We are tied to these forecasts through contracts as well as to maintain harmony in business relationships.
+Added: Our ability to react to actual demand from our customers and order optimum levels of inventory is severely limited due to these forecasts provided to the EMS providers.
+Added: Our inability to accurately forecast our future demands could lead to either excess inventory causing potential inventory obsolescence and cashflow problems or shortage in inventory causing potential loss of revenue.
+Added: Additionally, the sourcing and availability of raw materials necessary for our EMS providers to manufacture certain of our products, including "conflict minerals" has been and could continue to be significantly constrained, which is likely to result in continued elevated price levels.
+Added: Furthermore, compliance with SEC disclosure and reporting requirements in the future regarding the use of "conflict minerals" mined from the Democratic Republic of Congo and adjoining countries could adversely affect the sourcing, supply and pricing of materials used in our products.
+Added: As a result, we may not be able to obtain the materials necessary to manufacture our products, which could force us to cease production or search for alternative supply sources, possibly at a higher cost.
+Added: Such disruptions may have a material adverse effect on our business, financial condition, results of operations and cash flows.
COVID-19 has caused and may continue to cause unanticipated fluctuations in our gross margins, which can result in unanticipated fluctuations in our operating results.
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Changes in trade policy, including tariffs and the tariffs focused on China in particular, and currency exchange rates also have adverse impacts on our gross margins.
−Removed: The COVID-19 pandemic is putting pressure on our gross margins as well as causing us to face uncertain product demand and incur increased air freight and other costs to fulfill sell through demand, replenish channel inventory, and maintain market share.
+Added: The COVID-19 pandemic put pressure on our gross margins and caused us to face uncertain product demand and incur increased air freight and other costs to fulfill sell through demand, replenish channel inventory, and maintain market share.
+Added: ITEM 1 A - RISK FACTORS
The impact of these factors on gross margins can create unanticipated fluctuations in our operating results, which may cause volatility in the price of our stock.
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These factors have adversely impacted our operating results in prior periods and could also impact us again in the future.
−Removed: Global economic concerns, such as the varying pace of global economic recovery, European and domestic debt and budget issues, the slowdown in economic growth in large emerging markets such as China and India, and international currency fluctuations, may continue to create uncertainty and unpredictability in the global and national economy.
+Added: Global economic concerns, such as rising inflation rates, the varying pace of global economic recovery, European and domestic debt and budget issues, the slowdown in economic growth in large emerging markets such as China and India, and international currency fluctuations, may continue to create uncertainty and unpredictability in the global and national economy.
A global economic downturn would negatively impact technology spending for our products and services and could materially adversely affect our business, operating results and financial condition.
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the inability of our customers to obtain credit to finance purchases of our products and services, customer or partner insolvencies or bankruptcies, decreased customer confidence to make purchasing decisions resulting in delays in their purchasing decisions, decreased customer demand or demand for lower-end products, or decreased customer ability to pay their obligations when they become due to us.
+Added: Our operations may be impacted by the Russian invasion of Ukraine
+Added: On February 24, 2022, Russia launched an invasion of Ukraine which has resulted in increased volatility in various financial markets and across various sectors.
+Added: The United States and other countries, along with certain international organizations, have imposed economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to the invasion.
+Added: The extent and duration of the military action, resulting sanctions and future market disruptions in the region are impossible to predict.
+Added: Moreover, the ongoing effects of the hostilities and sanctions may not be limited to Russia and Russian companies and may spill over to and negatively impact other regional and global economic markets of the world, including Asia, Europe and the United States.
+Added: The ongoing military action along with the potential for a wider conflict could further increase financial market volatility and cause negative effects on regional and global economic markets, industries, and companies.
+Added: It is not currently possible to determine the severity of any potential adverse impact of this event on our financial condition or results of operations.
We are a smaller Company than some of our competitors and may be more susceptible to market fluctuations, other adverse events, increased costs and less favorable purchasing terms.
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Additionally, we cannot assure you that we will not incur material charges in future periods to reflect additional costs associated with any future acquisitions we may make.
+Added: ITEM 1 A - RISK FACTORS
Profitability could be negatively impacted if we do not adequately forecast the demand for our products and are unable to monetize our long-term inventories.
−Removed: We hold approximately $ 3.6 million in long-term inventories.
+Added: As of December 31, 2022 we held approximately $ 2.7 million in long-term inventories.
There can be no assurance that we will be able to successfully anticipate changing consumer preferences and product trends or economic conditions and, as a result, we may not successfully monetize our long-term inventory.
Inventory levels in excess of consumer demand may result in inventory write-downs and the sale of excess inventory at discounted prices, which could have an adverse effect on the image and reputation of our brands and negatively impact profitability.
−Removed: Conditions in China, India, Russia, Spain, United Arab Emirates and Vietnam may affect our operations.
+Added: Conditions in India, Spain, and United Arab Emirates may affect our operations.
We have different teams working outside the U.S.
−Removed: in China, India, Russia, Spain, United Arab Emirates and Vietnam offering various services.
+Added: in India, Spain, and United Arab Emirates offering various services.
Our ability to operate the Company smoothly may be affected significantly if either one or more of these countries are adversely impacted by political, economic, security and military conditions in these countries.
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Our international business is subject to the financial and operating risks of conducting business internationally, including the following:
−Removed: ITEM 1 A - RISK FACTORS
unexpected changes in, or the imposition of, additional legislative or regulatory requirements;
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disruption in services due to natural disaster, economic or political difficulties, transportation, quarantines or other restrictions associated with infectious diseases.
+Added: ITEM 1 A - RISK FACTORS
We may not be able to hire and retain qualified key and highly-skilled technical employees, which could affect our ability to compete effectively and may cause our revenue and profitability to decline.
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Risks Relating to Share Ownership
−Removed: Our common stock trades at prices less than $1.00 which is the minimum bid price requirement under Nasdaq’s continued listing standards, as such our common stock may be subject to delisting from the Nasdaq Capital Market.
−Removed: On March 22, 2022, we received a letter (the “Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) informing us that because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, we are not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).
−Removed: The last reported closing price of our common stock on the Nasdaq Capital Market on March 30, 2022 was $0.89 per share and has been below the $1.00 closing bid price since February 7, 2022.
−Removed: In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), we have a period of 180 calendar days from March 22, 2022, or until September 19, 2022, to regain compliance with the Minimum Bid Price Requirement.
−Removed: If at any time before September 19, 2022, the closing bid price of our common stock closes at or above $1.00 per share for a minimum of 10 consecutive trading days (which number days may be extended by Nasdaq), Nasdaq will provide written notification that we have achieved compliance with the Minimum Bid Price Requirement, and the matter would be resolved.
−Removed: If compliance is not achieved within the 180-day period, Nasdaq would provide written notification to us that our common stock is subject to delisting.
−Removed: In the event that we fail to regain compliance with Nasdaq continued listing standards by the expiration of the applicable cure period or any extension period, Nasdaq will commence suspension and delisting procedures with respect to our common stock, which could impair the value of your investment.
−Removed: If our common stock is delisted from Nasdaq Capital Market in the future, such securities may be traded on the over-the-counter markets.
−Removed: Such alternative markets, however, are generally considered to be less efficient than, and not as broad as, Nasdaq.
−Removed: Accordingly, delisting of our common stock from Nasdaq could have a significant negative effect on the trading volume, liquidity and market price of our common stock.
−Removed: In addition, the delisting of our common stock could adversely affect our ability to raise capital on terms acceptable to us or at all and could reduce the number of investors willing to hold or acquire our common stock.
As a result of Edward D.
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Bagley’s interests and the interests of his family and their family trusts may not be consistent with those of our other stockholders.
−Removed: ITEM 1 A - RISK FACTORS
Global Financial, Economic and Social Conditions Could Deteriorate.
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Government efforts to contain the spread of the coronavirus through lockdowns of cities, business closures, restrictions on travel and emergency quarantines, among others, and responses by businesses and individuals to reduce the risk of exposure to infection, including social distancing in the form of reduced travel, cancellation of meetings and public and private events, and implementation of work-at-home policies, among others, have caused significant disruptions to the global economy and normal business operations across a growing list of sectors and countries, including in the United States.
+Added: ITEM 1 A - RISK FACTORS
The foregoing have, and are likely to continue to adversely affect business confidence and consumer sentiments, and have been, and may continue to be, accompanied by significant volatility and declines in financial markets and asset values.
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The sale of additional shares of our common stock could have a negative effect on the market price of our common stock.
−Removed: The sale of substantial amounts of our common stock in the public market, such as the Rights Offering that we completed in December 2018, Notes and Warrants that we issued in December 2019 , and Common Stock and Warrants that we issued in 2020 and 2021 could adversely affect prevailing market prices and could impair our ability to raise capital through the sale of our equity securities.
+Added: The sale of substantial amounts of our common stock in the public market, such as the Rights Offering that we completed in December 2018, Notes and Warrants that we issued in December 2019 , Common Stock and Warrants that we issued in 2020 and 2021, and exchange of common stock for the cancellation of short-term bridge loan could adversely affect prevailing market prices and could impair our ability to raise capital through the sale of our equity securities.
Most shares of common stock currently outstanding are eligible for sale in the public market, subject in certain cases to compliance with the requirements of Rule 144 under the securities laws.
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The issuance of such shares could dilute the voting power of the currently outstanding shares of our common stock and could dilute earnings per share.
−Removed: Because we do not intend to pay dividends on our common stock, stockholders will benefit from an investment in our stock only if it appreciates in value.
−Removed: We currently intend to retain all future earnings, if any, for use in the operations and expansion of the business.
−Removed: As a result, we do not anticipate paying cash dividends in the foreseeable future.
+Added: Because we have suspended the payment of dividends on our common stock, stockholders will benefit from an investment in our stock only if it appreciates in value unless a decision is made to reinstate dividend payments.
Any future determination as to the declaration and payment of cash dividends will be at the discretion of our board of directors and will depend on factors the board of directors deems relevant, including among others, our results of operations, financial condition and cash requirements, business prospects, and the terms of our secured convertible notes and other financing arrangements.
−Removed: Accordingly, realization of a gain on stockholders’ investments will depend on the appreciation of the price of our stock.
−Removed: There is no guarantee that our stock will appreciate in value.
+Added: Accordingly, unless a declaration and payment of cash dividends is made, realization of a gain on stockholders’ investments will depend on the appreciation of the price of our stock.
+Added: There is no guarantee that our stock will appreciate in value or a dividend declaration will be made.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.
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The price of our stock could decline if one or more equity analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
−Removed: Write off of capitalized legal expenses related to our defense of patents could negatively impact our net income and stockholders' equity.
−Removed: Our intangible assets include capitalized legal expenses net of amortization of $22.6 million related to our defense of patents from infringement by our competitors.
−Removed: Legal expenses have been capitalized upon satisfaction of two conditions:
−Removed: (a) a determination being made that a successful defense of this litigation is probable, and (b) that the monetary benefits arising out of such successful defense will be in excess of the costs for the defense.
−Removed: If either one of these conditions fail to be satisfied in the future, the carrying amount in the books may have to be written off either completely or partially.
−Removed: There can be no assurance that we will be successful in the defense of these litigation claims, in whole or in part.
Our certification of incorporation designates the Court of Chancery in the State of Delaware as the sole and exclusive forum for certain actions or proceedings that may be initiated by our stockholders, which could discourage claims or limit stockholders’ ability to make a claim against the Company, our directors, officers, and employees.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.