Item 1A. Risk Factors
ITEM 1A: RISK FACTORS.
The following risk factors do
not purport to be a complete explanation of the risks involved in our business.
WE MAY NEED ADDITIONAL FINANCING
FOR PRODUCT DEVELOPMENT. Our financial resources are sufficient for our current operational needs; however, the amount of funding required
to develop and commercialize our products and technologies is highly uncertain. Adequate funds may not be available when needed or on
terms satisfactory to us. Lack of funds may cause us to delay, reduce and/or abandon certain or all aspects of our development and commercialization
programs. We may seek additional financing through the issuance of equity or convertible debt securities. In such event, the percentage
ownership of our stockholders would be reduced, stockholders may experience additional dilution, and such securities may have rights,
preferences, and privileges senior to those of our Common Stock. There can be no assurance that additional financing will be available
on terms favorable to us or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to
fund our expansion, take advantage of desirable acquisition opportunities, develop, or enhance services or products or respond to competitive
pressures. Such inability could have a materially adverse effect on our business, results of operations and financial conditions.
WE MAY INFRINGE THE INTELLECTUAL
PROPERTY RIGHTS OF OTHERS. The industry in which we operate has many participants that own, or claim to own, proprietary intellectual
property. In the past we have received, and in the future may receive, claims from third parties alleging that we, and possibly our customers,
violate their intellectual property rights. Rights to intellectual property can be difficult to verify and litigation may be necessary
to establish whether or not we have infringed the intellectual property rights of others. In many cases, these third parties are companies
with substantially greater resources than us, and they may be able to, and may choose to, pursue complex litigation to a greater degree
than we could. Regardless of whether these infringement claims have merit or not, we may be subject to the following:
o
We may be liable for potentially substantial damages, liabilities, and litigation costs, including attorneys’ fees;
o
We may be prohibited from further use of the intellectual property and may be required to cease selling our products that are subject to the claim;
o
We may have to license third-party intellectual property, incurring royalty fees that may or may not be on commercially reasonable terms. In addition, there is no assurance that we will be able to successfully negotiate and obtain such a license from the third party;
o
We may have to develop a non-infringing alternative, which could be costly and delay or result in the loss of sales. In addition, there is no assurance that we will be able to develop such a non-infringing alternative;
o
The diversion of management’s attention and resources;
o
Our relationships with customers may be adversely affected; and
o
We may be required to indemnify our customers for certain costs and damages they incur in such a claim.
In the event of an unfavorable
outcome in such a claim and our inability to either obtain a license from the third party or develop a non-infringing alternative, then
our business, operating results and financial condition may be materially adversely affected and we may have to restructure our business.
Absent a specific claim for infringement
of intellectual property, from time to time we have and expect to continue to license technology, intellectual property, and software
from third parties. There is no assurance that we will be able to maintain our third-party licenses or obtain new licenses when required
and this inability could materially adversely affect our business and operating results and the quality and functionality of our products.
In addition, there is no assurance that third party licenses we execute will be on commercially reasonable terms.
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Under purchase orders and contracts
for the sale of our products we may provide indemnification to our customers for potential intellectual property infringement claims for
which we may have no corresponding recourse against our third-party licensors. This potential liability, if realized, could materially
adversely affect our business, operating results, and financial condition.
WE OPERATE IN AN INTENSIVELY COMPETITIVE
MARKET. The wireless broadband data access market is highly competitive, and we may be unable to compete effectively. Many of our competitors
or potential competitors have significantly greater financial, technical, and marketing resources than we do. To survive and be competitive,
we will need to continuously invest in research and development, sales and marketing, and customer support. Increased competition could
result in price reductions, and smaller customer orders. Our failure to compete effectively could seriously impair our business.
WE OPERATE IN THE HIGH-RISK TELECOM
SECTOR. We are in a volatile industry. In addition, our revenue model is evolving and relies substantially on the assumption that we will
be able to successfully complete the development and sales of our products and services in the marketplace. Our prospects must be considered
in the light of the risk, uncertainties, expenses, and difficulties frequently encountered by companies in the early stages of development
and marketing of new products. To be successful in the market we must, among other things:
o
Complete development and introduction of functional and attractive products and services;
o
Attract and maintain customer loyalty;
o
Establish and increase awareness of our brand and develop customer loyalty;
o
Provide desirable products and services to customers at attractive prices;
o
Establish and maintain strategic relationships with strategic partners and affiliates;
o
Rapidly respond to competitive and technological developments;
o
Build operations and customer service infrastructure to support our business; and
o
Attract, retain, and motivate qualified personnel.
We cannot guarantee that we will
be able to achieve these goals, and our failure to achieve them could adversely affect our business, results of operations, and financial
condition. We expect that revenues and operating results will fluctuate in the future. There is no assurance that any or all our efforts
will produce a successful outcome.
WE OPERATE IN THE HIGH-RISK HARDWARE
DESIGN INDUSTRY. We are in a volatile industry. In this industry it should be expected that:
o
Latent design flaws can be discovered, even after a device has been certified;
o
Latent component defects can be discovered in critical systems, including batteries, LCDs, chargers, and other systems;
o
Manufacturing defects and flaws will occur during device production.
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WE OPERATE IN THE HIGH-RISK SOFTWARE
INDUSTRY. This industry has numerous and significant known risks. In this industry it should be expected that:
o
Latent design flaws and security defects will be discovered, even after a device has been tested and approved;
o
Code within a program will fail to operate as intended due to updates or changes in other systems;
o
Hacking and malicious actions by outside parties can damage or alter coding and system integrity.
POTENTIAL DESIGN AND MANUFACTURING
DEFECTS COULD OCCUR. Our product and service offerings may have quality issues from time to time, due to defects in software design, hardware
design or component manufacturing. As a result, our products and services may not perform as anticipated and may not meet customer expectations.
Component defects could make our products unsafe and create a risk of environmental or property damage and personal injury. There can
be no assurance we will be able to detect and address all issues and defects in the hardware, software, and services we offer. Failure
to do so could result in widespread technical and performance issues affecting our products and services. In addition, we may be exposed
to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, and/or
intangible assets, and significant warranty and other expenses, including litigation costs and regulatory fines.
WE OPERATE IN A FIELD WITH RAPIDLY
CHANGING TECHNOLOGY. We cannot be certain that our products and services will function as anticipated or be desirable to our intended
markets. Our current or future products and services may fail to function properly, and if our products and services do not achieve and
sustain market acceptance, our business, results of operations and profitability may suffer. If we are unable to predict and comply with
evolving wireless standards, our ability to introduce and sell new products will be adversely affected. If we fail to develop and introduce
products on time, we may lose customers and potential product orders.
WE DEPEND ON THE DEMAND FOR WIRELESS
NETWORK CAPACITY. The demand for our products is completely dependent on the demand for broadband wireless access to networks. If wireless
operators do not deliver acceptable wireless service, our product sales may dramatically decline. Thus, if wireless operators experience
financial or network difficulties, it will likely reduce demand for our products. These are beyond our ability to control and can either
increase or decrease demand for our products.
PANDEMIC OUTBREAKS CAN CAUSE VOLATILE
CHANGES IN THE MARKET. Demand for wireless access can rise and fall greatly during times of pandemic outbreaks, such as COVID-19, as more
people may be required to work remotely, and schools may be required to operate remote classrooms. When an outbreak ends, or becomes more
controlled, demand for wireless devices could decline rapidly, decreasing demand for our products. Pandemic outbreaks can also disrupt
supply chains, manufacturing operations, and shipping. These disruptions can make product fulfilment difficult, delayed, or impossible.
All these changes are beyond our ability to control and can cause revenue and income to change dramatically.
WE DEPEND ON COLLABORATIVE ARRANGEMENTS.
The development and commercialization of our products and services depend in large part upon our ability to selectively enter and maintain
collaborative arrangements with developers, distributors, service providers, network systems providers, core wireless communications technology
providers and manufacturers, among others.
THE LOSS OF ANY OF OUR
MATERIAL CUSTOMERS COULD ADVERSELY AFFECT OUR REVENUES AND PROFITABILITY, AND THEREFORE SHAREHOLDER VALUE. We depend on a small
number of customers for a significant portion of our revenues. For the year ended June 30, 2024, net revenues from our two largest
customers represented 68% and 23% of our consolidated net sales, respectively. We have a written agreement with each of these
customers that governs the sale of products to them, but the agreements do not obligate them to purchase any quantity of
products from us. If these customers were to reduce their business with us, our revenues and profitability could materially
decline.
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OUR PRODUCT DELIVERIES ARE
SUBJECT TO LONG LEAD TIMES. We often experience long lead times to ship products, often more than 45 days. This could cause us to
lose customers, who may be able to secure faster delivery times from our competitors and require us to maintain higher levels of
working capital.
OUR PRODUCT-TO-MARKET CHALLENGE
IS CRITICAL. Our success depends on our ability to quickly enter the market and establish an early mover advantage. We must implement
an aggressive sales and marketing campaign to solicit customers and strategic partners. Any delay could seriously affect our ability to
establish and exploit effectively an early-to-market strategy.
AS OUR BUSINESS EXPANDS INTERNATIONALLY,
WE WILL BE EXPOSED TO ADDITIONAL RISKS RELATING TO INTERNATIONAL OPERATIONS. Our expansion into international operations exposes us to
additional risks unique to such international markets, including the following:
o
Increased credit management risks and greater difficulties in collecting accounts receivable;
o
Unexpected changes in regulatory requirements, wireless communications standards, exchange rates, trading policies, tariffs, and other barriers;
o
Uncertainties of laws and enforcement relating to the protection of intellectual property;
o
Language barriers; and
o
Potential adverse tax consequences.
Furthermore, if we are unable
to further develop distribution channels in countries in North America, the Caribbean and South America, EMEA (Europe, the Middle East
and Africa), and Asia, we may not be able to grow our international operations, and our ability to increase our revenue will be negatively
impacted.
We believe that our products are
currently exempt from international tariffs. If this were to change at any point, a tariff of 10%-25% of the purchase price could be imposed.
If such tariffs are imposed, they could have a materially adverse effect on sales and operating results.
GOVERNMENT REGULATION COULD RESULT
IN INCREASED COSTS AND INABILITY TO SELL OUR PRODUCTS. Our products are subject to certain mandatory regulatory approvals in the United
States and other regions in which we operate. In the United States, the Federal Communications Commission regulates many aspects of communications
devices. Although we have obtained all the necessary Federal Communications Commission and other required approvals for the products we
currently sell, we may not obtain approvals for future products on a timely basis, or at all. In addition, regulatory requirements may
change, or we may not be able to obtain regulatory approvals from countries other than the United States in which we may desire to sell
products in the future.
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EVENTS THAT COULD REDUCE OR IMPAIR
OUR ABILITY TO GENERATE REVENUES.
o The marketability of our products may suffer if wireless telecommunications operators do not deliver acceptable wireless services.
o If customers do not adopt our software, we may not be able to monetize these software assets and realize a key part of our growth
and profitability strategy.
o The market for the products and services that we offer is rapidly evolving and highly competitive. We may be unable to compete effectively.
o If we fail to develop and maintain strategic relationships, we may not be able to penetrate new markets.
o If we fail to develop and timely introduce new products and services or enter new markets for our products and services successfully,
we may not achieve our revenue targets, or we may lose key customers or sales, and our business could be harmed.
EVENTS THAT COULD IMPAIR OUR ABILITY TO
DEVELOP, MANUFACTURE AND DELIVER OUR SOLUTIONS.
o We rely on third parties to manufacture and warehouse many of our products, which exposes us to a number of risks and uncertainties
outside our control.
o We depend on sole source suppliers for some components used in our products. The availability and sale of those services would be
harmed if any of these suppliers is not able to meet our demand and alternative suitable products are not available on acceptable terms,
or at all.
o Natural disasters, public health crises, political crises and other catastrophic events or other events outside of our control could
damage our facilities or the facilities of third parties on which we depend, and could impact consumer spending.
o If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely
deliver our products, and our operating expenses could increase.
o We may be unable to adequately control the costs or maintain adequate supply of components and raw materials associated with our operations.
o If we do not effectively manage our sales channel inventory and product mix, we may incur costs associated with excess inventory or
lose sales from having too few products.
o Product liability, product replacement or recall costs could adversely affect our business and financial performance.
o We rely on third-party software and other intellectual property to develop and provide our solutions and significant increases in
licensing costs or defects in third-party software could harm our business.
o Our solutions integrate with third-party technologies and if our solutions become incompatible with these technologies, our solutions
would lose functionality, and our customer acquisition and retention could be adversely affected.
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LEGAL AND REGULATORY CHANGES THAT COULD
REDUCE OR IMPAIR OUR ABILITY TO OPERATE.
o Evolving regulations and changes in applicable laws relating to data privacy may increase our expenditures related to compliance efforts
or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition.
o Enhanced United States fiscal, tax and trade restrictions and executive and legislative actions could adversely affect our business,
financial condition, and results of operations.
o The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely
impact our financial results.
o An assertion by a third party that we are infringing its intellectual property could subject us to costly and time-consuming litigation
or expensive licenses and our business could be harmed.
o If we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be harmed.
POTENTIAL NEGATIVE IMPACTS RELATED TO INTERNATIONAL
OPERATIONS.
o Due to the global nature of our operations, we are subject to political and economic risks of doing business internationally.
o Weakness or deterioration in global economic conditions or jurisdictions where we have significant foreign operations could have a
material adverse effect on our results of operations and financial condition.
o Weakness or deterioration in global political conditions where we have significant business interests could have a material adverse
effect on our business, results of operations and financial condition.
o Fluctuations in foreign currency exchange rates could adversely affect our results of operations.
o Unionization efforts in certain countries in which we operate could materially increase our costs or limit our flexibility.
o Our international operations may increase our exposure to potential liability under anti-corruption, trade protection, tax and other
laws and regulations.
o A governmental challenge to our transfer pricing policies or practices could impose significant costs on us.
EVENTS THAT COULD HARM BUSINESS DEVELOPMENT ACTIVITIES AND
IMPAIR OR REDUCE REVENUE.
o We may acquire companies and businesses, and/or divest assets or businesses. The completion of acquisition or divestiture transactions
could have an adverse effect on our financial condition.
o If our goodwill and acquired intangible assets become impaired, we may be required to record a significant charge to earnings.
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POTENTIAL EVENTS THAT COULD NEGATIVELY IMPACT
THE VALUE OF OUR SECURITIES.
o Our share price has been highly volatile in the past and could be highly volatile in the future.
o Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
o The price of our stock may be vulnerable to manipulation, including through short sales.
o Ownership of our common stock is concentrated, and as a result, certain stockholders may exercise significant influence over the Company.
o We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment
will depend on appreciation, if any, in the price of our common stock.
o If financial or industry analysts do not publish research or reports about our business, or if they issue negative or misleading evaluations
of our stock, our stock price and trading volume could decline.
o If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to report our financial
results timely and accurately, which could adversely affect investor confidence in us, and in turn, our results of operations and our
stock price.
o If the accounting estimates we make, and the assumptions on which we rely, in preparing our financial statements prove inaccurate,
our actual results may be adversely affected.
o Changes to the accounting systems or new accounting system implementations may be ineffective or cause delays in our ability to record
transactions and/or provide timely financial results.
o Any changes to existing accounting pronouncements or taxation rules or practices may cause adverse fluctuations in our reported results
of operations or affect how we conduct our business.
o Our quarterly operating results have fluctuated in the past and may fluctuate in the future, which could cause declines or volatility
in the price of our common stock.