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Item 1A. Risk Factors

2024-03-25 compared with 2023-03-29 · 110 added, 86 removed, 246 unchanged (44% of the section changed)

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In 2023, our top three customers accounted for 22%, 12% and 10% of our net revenues, respectively.

If we were to either lose one of our major customers or have a major customer significantly reduce its volume of business with us, our business, results of operations and financial condition would be harmed unless we are able to replace such demand with other orders promptly.

If we were to either lose one of our major customers or have a major customer significantly reduce its volume of business with us, our business, results of operations and financial condition would be harmed unless we were able to replace such demand with other orders promptly.

We expect to continue to be dependent on our major customers, the number and identity of which may change from period to period.

Because our customers generally do not provide us with firm, long-term volume purchase commitments, our customers, including our largest customers upon whom we may become dependent, can reduce or terminate altogether their business with us at any time.

We rely on third parties for the materials that we use to manufacture our products and a shortage of supply could adversely affect our revenues, operating results and customer relationships.

We rely on third parties for the materials that we use to manufacture our products, and supply shortages and price increases could adversely affect our revenues, operating results and customer relationships.

We rely on third-party suppliers for the raw material components of our products.

There are no assurances that our suppliers will be able to maintain an adequate supply of these raw materials to enable us to fulfill all of our customers’ orders on a timely basis.

A failure to obtain an adequate supply of the materials for our products could increase our costs, cause us to fail to meet delivery commitments and cause our customers to purchase from our competitors, which could adversely affect our operating results and customer relationships.

In some situations, we rely on a single supplier for raw material components of our products.

Any disruption in these supplier relationships could prevent us from maintaining an adequate supply of materials and could adversely affect our results of operation and financial position.

A failure to obtain an adequate supply of the materials for our products could increase our costs (because purchases on the spot market would likely be more expensive), cause us to fail to meet delivery commitments and/or cause our customers to purchase from our competitors, which could adversely affect our operating results and customer relationships.

Additionally, our sourcing operations may also be hurt by health concerns regarding the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics (including the outbreak of the coronavirus and its potential impact on our financial results) in countries in which our products are manufactured.

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Furthermore, changes in U.S.

trade policies, including new restrictions, tariffs or other changes could lead to additional costs, delays in shipments, embargos and other uncertainties that could negatively impact our relationships with our international suppliers and materially adversely affect our business.

We experienced delays in the receipt of certain goods and the supply of our products from international and domestic shipping origins as a result of the COVID-19 pandemic and more general global supply chain constraints in fiscal 2021, and to a lesser extent in fiscal 2022.

Depending on the continued extent and duration of these constraints and disruptions, our supply chain, results of operations (including sales) or future business may be materially and adversely impacted.

trade policies, including new restrictions, tariffs or other changes, especially as regards China, could lead to additional costs, delays in shipments, embargos and other uncertainties that could negatively impact our relationships with our international suppliers and materially adversely affect our business.

Depending on the continued extent and duration of these constraints and disruptions, our supply chain, results of operations (including sales) or future business could be materially and adversely impacted.

These and other issues affecting our international suppliers or internationally manufactured merchandise could have a material adverse effect on our business, results of operations and financial condition.

We do not have long-term fixed price contracts for the supply of our raw materials and components.

Accordingly, increases in prevailing market prices (including due to increases in transportation, shipping and freight costs) would have an adverse effect on our operations to the extent we were unable to pass on increases to our customers.

In some situations, we rely on a single supplier for raw material components of our products.

Any disruption in these supplier relationships could prevent us from maintaining an adequate supply of materials and could adversely affect our results of operation and financial position.

Disruptions in our manufacturing facilities or arrangements could cause our revenues and operating results to decline.

We manufacture of our products in Shenzhen, China and Newark, California.

We manufacture our products in Shenzhen, China;

Newark, California;

and Irvine, Scotland.

These facilities are vulnerable to damage from earthquakes, floods, fires, power loss and similar events.

They could also be subject to break-ins, sabotage and intentional acts of vandalism.

Our insurance may not cover such events and, if the event is covered, our insurance may not be sufficient to compensate us for any losses that may occur.

Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problem at either manufacturing facility could result in delayed shipment of products, missed delivery deadlines and harm to our reputation, which may cause our revenues and operating results to decline.

Performance, reliability or quality problems with our products may cause our customers to reduce or cancel orders which would harm our operating results.

Our insurance may not cover such events and, if the event is covered, our insurance may not be sufficient to compensate us

in full for any losses that may occur.

Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problem at any of our manufacturing facilities could result in delayed shipment of products, missed delivery deadlines and harm to our reputation, which could cause our revenues and operating results to decline.

Performance, reliability or quality problems with our products could cause our customers to reduce or cancel orders, which would harm our operating results.

We regularly introduce new products with new technologies or manufacturing processes.

Our products have in the past contained, and may in the future contain, errors or defects that may be detected at any point in the life of the product.

Detection of such errors could result in delays in shipping and sales during the period required to correct such errors.

Detection of such errors could result in delays in sales during the period required to correct such errors.

Defects may also result in product returns, loss of sales and cancelled orders, delays in market acceptance, injury to our reputation, injury to customer relationships and increased warranty costs, which could have an adverse effect on our business, operating results and financial condition.

In addition, events beyond our control, such as disruptions in operations due to natural or man-made disasters, inclement weather conditions, accidents, system failures, power outages, political instability (for example, the conflict between Russia and Ukraine), physical or cyber break-ins, server failure, work stoppages, slowdowns or strikes by employees, acts of terrorism, the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics (including the outbreak of the coronavirus and its potential impact on our financial results) and other unforeseen or catastrophic events, could damage our manufacturing facilities or our vendors’ fulfillment centers or render them inoperable, making it difficult or impossible for us or our vendors to process customer orders for an extended period of time.

In addition, events beyond our control, such as disruptions in operations due to natural or man-made disasters, inclement weather conditions, accidents, system failures, power outages, political instability, physical or cyber break-ins, server failure, work stoppages, slowdowns or strikes by employees, acts of terrorism, the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics and other unforeseen or catastrophic events, could damage our manufacturing facilities or our vendors’ fulfillment centers or render them inoperable, making it difficult or impossible for us or our vendors to process customer orders for an extended period of time.

For example, in March 2022, China imposed a multi-day lockdown in the city of Shenzhen due to a rise in the number of coronavirus cases, which required factories to close and disrupted our manufacturing operations in that city.

while China has now officially ended its “zero-COVID” policy, there can be no assurance that such a policy will not be reimposed at some time in the future if deemed necessary or desirable by the Chinese government, which could result in further lockdowns.

International conflicts such as between Russia and Ukraine, and tensions with countries such as Iran and North Korea, and resulting political uncertainties also could result in an increase in cyberattacks that could either directly or indirectly impact our operations.

Armed conflicts in the Middle East and between Russia and Ukraine, tensions between the U.S.

and countries such as Iran and North Korea and between other countries such as China and Taiwan, and disruptions to traffic through key shipping routes such as the Suez Canal, also could adversely impact our sales, shipping costs, and results of operations.

Such events may also result in delays in our or our vendors’ receipt of inventory and the delivery of merchandise between our customers, our stores and/or our partners and our distribution center and our vendors’ fulfillment centers.

We or our vendors could also incur significantly higher costs and longer lead times associated with distributing inventory during the time it takes for us or our vendors to reopen or replace our distribution center or any of their fulfillment centers.

We cannot guarantee that our solutions for new markets will be successful or that we will be able to continue to generate significant revenue from these markets.

We or our vendors could also incur significantly higher costs and longer lead times associated with distributing inventory during the time it takes for us or our vendors to reopen or replace any of our distribution centers or any of their fulfillment centers.

We cannot guarantee that our solutions for new markets will be successful or that we will be able to generate significant revenue from these markets.

Our HMI and gas-sensing solutions may not be successful in new markets.

Various target markets for our products and solutions may develop slower than anticipated or could utilize competing technologies.

Various target markets for our products and solutions may develop more slowly than anticipated or participants in those markets could choose to utilize competing technologies.

The markets for certain of our HMI products depend in part upon the continued development and deployment of wireless and other technologies, which may or may not address the needs of the users of these products.

The successful integration of gas sensors relies heavily on our customers’ investment in the required infrastructure to bring up a device or instrument and also on their competency and execution in development.

The performance of any gas sensor depends on the quality of its implementation and may vary depending on design decisions, tradeoffs, or lack of experience.

The markets for our gas and environmental sensors rely heavily on our customers’ investment in the required infrastructure for new devices or instruments and also on their competency and execution in development.

The performance of any sensor depends on the quality of its implementation and may vary depending on design decisions, tradeoffs, or lack of experience.

While we perform extensive engineering services for our customers and support them with reference materials and open-source designs, we cannot guarantee our customers’ success, and this remains a risk for our portfolio.

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● the ability of our technologies and product solutions to address the needs of these markets;

● the price and performance requirements of our customers and the preferences of end users; and

● the price and performance requirements of our customers and the preferences of end users;

● our ability to provide our customers with solutions that provide advantages in terms of size, power consumption, reliability, durability, performance and value-added features compared with alternative solutions;

The failure of any of these target markets to develop as we expect, or our failure to serve these markets to a significant extent, will impede our sales growth and could result in substantially reduced earnings.

● the effectiveness of our sales and marketing efforts in communicating all of these capabilities to the marketplace.

The failure of any of these target markets to develop as we expect, or any significant failure on our part to serve these markets, will impede our sales growth and could result in substantially reduced earnings.

We cannot predict the size or growth rate of these markets or the market share we will achieve or maintain in these markets in the future.

If we fail to maintain and build relationships with our customers, or if our customers’ products which utilize our solutions do not gain widespread market acceptance, our revenue may stagnate or decline.

If we fail to build and maintain relationships with new and existing customers, or if our customers’ products that utilize our solutions do not gain widespread market acceptance, our revenue may stagnate or decline.

We generally do not sell products to end-users.

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Despite our efforts to maintain and safeguard our proprietary rights, there are no assurances that we will be successful in doing so or that our competitors will not independently develop or patent technologies that are substantially equivalent or superior to our technologies.

If any of the holders of these patents assert claims that we are infringing them, we could be forced to incur substantial litigation expenses, and if we were found to be infringing on someone else’s patent, we could be required to pay substantial damages, pay royalties in the future or be enjoined from infringing in the future.

If any of the holders of these patents assert claims that we are infringing them, we could be forced to incur substantial litigation expenses, and if we were found to be infringing on someone else’s patent, we could be required to pay substantial damages, and pay royalties in the future, which would adversely impact our profitability, or be enjoined from infringing in the future, which could materially impede our ability to operate.

Our global operations require us to maintain intellectual property in a number of foreign jurisdictions, in particular in connection with our manufacturing facility in Shenzhen, China.

This may expose us to material risks of theft or compromise of proprietary technology and other intellectual property, including technical data, business processes, data sets or other sensitive information.

There is no assurance that we would be successful in enforcing our legal rights against the offending party in such circumstances.

Our success depends in part on our CEO and CFO, who simultaneously lead other public corporations.

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Hoffman, our Chief Financial Officer, simultaneously serve as officers and, in the case of Mr.

Bronson, a director, of Qualstar Corporation (OTCMKTS:

QBAK) and BKF Capital Group, Inc.

Bronson serves as President and Chief Executive Officer and as a director of Qualstar Corporation and as Chairman of the Board and Chief Executive Officer for BKF Capital Group, Inc., and Mr.

Hoffman serves as Chief Financial Officer of each of Qualstar Corporation and BKF Capital Group, Inc.

Bronson, as a director, of other affiliated companies.

Bronson serves as President and Chief Executive Officer and as a director of Qualstar Corporation (OTCMKTS:

QBAK) and as Chairman of the Board and Chief Executive Officer of BKF Capital Group, Inc.

BKFG), and Mr.

Hoffman serves as Chief Financial Officer of BKF Capital Group, Inc., and until August 2023, of Qualstar Corporation.

As a result, each of Messrs.

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or other organizations with which these officers are affiliated could have a disruptive effect, adversely impacting our ability to manage our business effectively and execute our business strategy.

Risks Related to Our Industry

If we are unable to keep pace with rapid technological change and gain market acceptance of new products, we may not be able to compete effectively.

Technology, both in our markets and in our customers’ markets, is undergoing rapid change.

In order to maintain our leadership position in our existing markets and to emerge as a leader in new markets, we will have to maintain a leadership position in the technologies supporting those markets.

Doing so will require, among other things, that we accomplish the following:

● accurately predict the evolving needs of our customers and develop, in a timely manner, the technology required to support those needs;

● provide products that are not only technologically sophisticated and well supported but are also available at a price within market tolerances and competitive with comparable products;

● establish and effectively defend our ownership on the intellectual property supporting our products;

● enter into relationships with other companies that have developed complementary technology on which our products also depend.

There is no assurance that we will be able to achieve any of these objectives.

Our markets are intensely competitive and many of our potential competitors have resources that we lack.

Our markets are competitive, and we expect competition in our newer markets to increase.

Our competitors include companies with similar products or technologies, companies that sell complementary products to our target markets and our customers themselves, who could choose to manufacture products that they currently buy from us.

Our competitors and potential competitors may have established business relationships that afford them a competitive advantage or may create technologies that are superior to ours or that set a new industry standard that will define the successful product for that market.

If any of our competitors establish a close working relationship with our customers, they may obtain advance knowledge of our customers’ technology choices or may be afforded an opportunity to work in partnership to develop compatible technologies and may therefore achieve a competitive advantage.

We may be unable to compete successfully against our current and future competitors.

We face risks associated with security breaches or cyber-attacks.

We face risks associated with security breaches or cyber-attacks of our computer systems or those of our third-party representatives, vendors, and service providers.

Although we have implemented security procedures and controls to address these threats, our systems may still be vulnerable to theft, loss or misuse of data, including proprietary or confidential information, relating to our business, products, employees, suppliers and customers;

Armed conflicts in the Middle East and between Russia and Ukraine, and tensions with countries such as Iran and North Korea and resulting geopolitical uncertainties also could result in an increase in cyberattacks that could either directly or indirectly impact our operations.

Although we have implemented security procedures and controls to address these threats, such as firewalls, encryption, access controls, and employee training, cybersecurity threats are dynamic and evolving and our systems may still be vulnerable to theft, loss or misuse of data, including proprietary or confidential information, relating to our business, products, employees, suppliers and customers;

disruption due to computer viruses and programming errors;

attacks by third parties including demanding ransom to return control of our systems and services;

attacks by third parties including destruction of data or demanding ransom to return control of our systems and services;

or similar disruptive problems.

If our systems, or systems owned by third parties affiliated with our company, were breached or attacked, the proprietary and confidential information of our company and our customers could be disclosed and we may incur substantial costs and liabilities, including the following:

If our systems, or systems owned by third parties affiliated with our company, were breached or attacked, the proprietary and confidential information of our company and our customers could be disclosed and we could incur substantial costs and liabilities, including the following:

● expenses to rectify the consequences of the security breach or cyber-attack;

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● loss of competitive advantage if our proprietary information is obtained by competitors as a result of such breach or attack;

● increased costs of cyber security protection;

● increased costs of insurance and cybersecurity protection;

● costs of incentives we may be required to offer to our customers or business partners to retain their business;

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As a result, any compromise to the security of our systems could have a material adverse effect on our business, reputation, financial condition, and operating results.

Risks Related to Our Industry

If we are unable to keep pace with rapid technological change and gain market acceptance of new products, we may not be able to compete effectively.

Technology, both in our markets and in our customers’ markets, is undergoing and will continue to undergo rapid change.

Doing so will require, among other things, that we accomplish the following:

● accurately predict the evolving needs of our customers and develop, in a timely manner, the technology required to support those needs;

● provide products that are not only technologically sophisticated and well supported but are also available at a price within market tolerances and competitive with comparable products;

● establish and effectively defend our ownership on the intellectual property supporting our products;

● enter into relationships with other companies that have developed complementary technology on which our products also depend.

There is no assurance that we will be able to achieve any of these objectives in whole or in part.

Our markets are intensely competitive and many of our potential competitors have resources that we lack.

Our markets are highly competitive, and we expect competition in our newer markets to increase.

Our competitors include companies with similar products or technologies, companies that sell complementary products to our target markets, and our customers themselves, who could choose to manufacture in-house products that they currently buy from us.

We may be unable to compete successfully against our current and future competitors.

Risks Relating to Ownership of Our Stock

There is a limited or no public market for our securities.

Our common stock is quoted on The Nasdaq Capital Market, where the daily trading volume has been low.

While our common stock is quoted on The Nasdaq Capital Market, the daily trading volume is typically very low.

This is due in part to the significant percentage (approximately 83% as of December 31, 2023) of our shares that are held by officers and directors and their affiliates.

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The lack of an active market may reduce the value of shares of our common stock and impair the ability of our stockholders to sell their shares at the time or price at which they wish to sell them.

An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to acquire or invest in other companies, products, or technologies by using our common stock as consideration.

An inactive market may also impair our ability to raise capital by selling our common stock (or other securities convertible into our common stock) and may impair our ability to acquire or invest in other companies, products, or technologies by using our common stock as consideration.

The price of our common stock may be volatile, and the value of a stockholder’s investment could decline.

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● an adverse impact on the company from any of the other risks cited herein.

In addition, if the market for technology stocks or the stock market, in general, experience a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, results of operations or financial condition.

In addition, if the market for technology stocks or the stock market, in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, results of operations or financial condition.

The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us.

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This could have a material adverse effect on our business, results of operations and financial condition.

The liquidation preference of the shares of our Series A Convertible Preferred Stock would reduce the amount available to our common stockholders in the event of our liquidation or winding up.

Holders of our Series A Convertible Preferred Stock have a liquidation preference equal to the greater of $25.00 per share plus any accrued and unpaid dividends, and such amount per share as would have been payable had all shares of Series A Convertible Preferred Stock been converted into our common stock in the event of our liquidation or winding up.

This means that those holders are entitled to receive the liquidation preference before any payment or other distribution of assets to our common stockholders, and the amount of any such payment or other distribution will be reduced by that amount.

The liquidation preference of shares of our Preferred Stock currently outstanding or issued in the future would reduce the amount available to our common stockholders in the event of our liquidation or winding up.

We currently have one series of Preferred Stock outstanding, the Series A Convertible Preferred Stock.

Holders of our Series A Convertible Preferred Stock have a liquidation preference equal to the greater of $25.00 per share plus any accrued and unpaid

dividends, and such amount per share as would have been payable had all shares of Series A Convertible Preferred Stock been converted into our common stock in the event of our liquidation or winding up.

The aggregate liquidation preference of the Series A Convertible Preferred Stock as of December 31, 2023 was $5 million.

We may also issue additional shares of preferred stock in the future.

While we cannot predict the amount of any such issuance or the liquidation preference of any such shares, the holders likely would be similarly entitled to preference upon any liquidation or winding up of the Company.

The issuance of shares of common stock upon conversion of the Series A Convertible Preferred Stock may cause immediate and substantial dilution to our existing stockholders.

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The issuance of shares of common stock upon conversion of shares of our Series A Convertible Preferred Stock will result in dilution to the interests of other common stockholders.

The same would be true of any shares of convertible preferred stock we may issue in the future.

Certain provisions in our Series A Convertible Preferred Stock may impact our ability to obtain additional financing in the future.

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If we are unable to obtain the consent of these stockholders in connection with future financings, we would be unable to issue capital stock that is on parity with or senior to the Series A Convertible Preferred Stock, which may prevent us from raising additional capital on acceptable terms, or at all.

If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline.

If securities or industry analysts do not publish research or reports about our business, or if they publish inaccurate or unfavorable research reports, our share price and trading volume could decline.

The trading market for our common stock, to some extent, depends on the research and reports that securities or industry analysts publish about us or our business.

We do not have any control over these analysts.

If one or more of the analysts who cover us should downgrade our shares or change their opinion of our business prospects, our share price would likely decline.

If one or more of these

analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

If one or more of the analysts who cover us downgrades our shares or changes their opinion of our business prospects, our share price would likely decline.

If one or more of these analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates on unfavorable terms to us.

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In addition, Mr.

Bronson has the ability to control the management and affairs of our company as a result of his position as our CEO and his ability to control the election of our directors.

Bronson has the ability to control the management and affairs of our company as a

result of his position as our CEO and his ability to control the election of our directors.

As a board member and officer, Mr.

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We do not intend to pay dividends on our common stock for the foreseeable future and, consequently, our common stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.

We have never declared or paid cash dividends on our common stock, and we do not anticipate paying any dividends on our common stock in the foreseeable future, if at all.

We have never declared or paid cash dividends on our common stock, and we do not anticipate paying any such dividends on our common stock in the foreseeable future, if at all.

The declaration, amount and payment of any future dividends on shares of our common stock, if any, is subject to the designations, rights and preferences of the Series A Convertible Preferred Stock and will be at the sole discretion of our board of directors, which may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by us to our stockholders or by our subsidiaries to us, and any other factors that our board of directors may deem relevant.

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or foreign governmental authorities could seek civil and/or criminal sanctions, including monetary fines and penalties, against us or our employees, as well as additional changes to our business practices and compliance programs, which could have a material adverse effect on our business, results of operations, or financial condition.

Competitors in foreign countries that are not subject to the FCPA or similar laws may have competitive advantages.

We cannot provide any assurance that current environmental laws and product quality specification standards, or any laws or standards enacted in the future, will not have a material adverse effect on our business.

Our operations are subject to environmental and various other regulations in each of the jurisdictions in which we conduct business.

Regulations have been enacted in certain jurisdictions which impose restrictions on waste disposal of electronic products and

electronics recycling obligations.

Regulations have been enacted in certain jurisdictions which impose restrictions on waste disposal of electronic products and electronics recycling obligations.

If we fail to comply with applicable rules and regulations in connection with the use and disposal of such substances or other environmental or recycling legislation, we could be subject to significant liability or loss of future sales.

General Risks

The ongoing, global coronavirus pandemic has significantly and adversely affected, and may continue to adversely affect, our business, financial position, results of operations, and cash flows.

The outbreak of the novel coronavirus (which causes the disease now known as COVID-19) was first identified in December 2019 in Wuhan, China, and together with its numerous variants has since spread rapidly across the world, including in all or most of the countries in which we, our clients, and our suppliers operate.

The COVID-19 pandemic has caused, and is expected to continue to cause, directly and indirectly, a global slowdown in economic activity, a decrease in consumer and industrial demand for a broad variety of goods and services, disruptions in global supply chains, and significant volatility and disruption of financial markets.

The global COVID-19 pandemic had a significant and adverse effect on, and may continue to adversely affect, our business, financial position, results of operations, and cash flows.

The persistent challenges stemming from the COVID-19 pandemic continue to pose significant risks to our business operations, financial performance, and outlook.

While there have been advancements in managing the spread of the virus and increasing vaccination rates, uncertainties remain regarding its long-term effects and potential resurgence.

The ongoing pandemic has the potential to continue to disrupt global supply chains, affect consumer behavior, cause significant volatility and disruption of financial markets and prompt regulatory responses, any and all of which can adversely impact our operations and financial position.

Because the severity, magnitude and duration of the pandemic and its economic consequences are uncertain, vary by region, and are rapidly changing and difficult to predict, its full impact on our operations and financial performance, as well as its impact on our near-term ability to successfully execute our strategic objectives, remains similarly uncertain and difficult to predict.

As the situation evolves, we face the risk of additional disruptions due to new variants of the virus, changes in public health guidelines, or unforeseen events that could further exacerbate operational challenges.

Moreover, economic recovery remains uneven across regions, which may continue to influence consumer spending patterns and market dynamics.

Further, the pandemic’s ultimate impact depends in part on many factors not within our control and which may vary by region (heightening the uncertainty as to the ultimate impact COVID-19 may have on our operations and financial performance), including, without limitation:

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and how significantly the number of cases increases as economies begin to open and restrictive governmental and business actions are relaxed.

In addition, the COVID-19 pandemic has recently subjected our operations and financial performance to several risks, including the following:

In addition, the COVID-19 pandemic subjects our operations and financial performance to several risks, including the following:

● Operations-related risks :

Our business is facing increased operational challenges including a heightened need to protect employee health and safety, office shutdowns, workplace disruptions, and restrictions on the movement of people, both at our own offices and at those of our clients and suppliers.

We have also experienced lower demand and volume for products and services, client requests for engagement deferrals or other contract modifications, and other factors related directly and indirectly to the COVID-19 pandemic that adversely impact our business.

During the early years of the pandemic, we experienced lower demand and volume for products and services, client requests for engagement deferrals or other contract modifications, and other circumstances related directly and indirectly to the pandemic that adversely impacted our business.

While these factors have begun to decline and projected demand for our products has stabilized, there can be no assurance that we will not again experience significant declines in product sales due to COVID-19.

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Such disruptions have and may continue to restrict our ability to provide products and services to our clients and have also and may continue to reduce demand for our products and services.

In addition, COVID-19 has adversely affected the global economy and the economies and financial markets of many countries, which may result in further economic downturn that could affect demand for our products and services and impact our operations.

In addition, the COVID-19 pandemic adversely affected the global economy and the economies and financial markets of many countries, and a re-emergence of the pandemic could result in further economic downturns affecting demand for our products and services and impact our operations.

● Employee-related risks :

We have experienced and expect to continue to experience disruptions to our operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to deliver our products and services in a timely manner or meet milestones or customer commitments.

We have experienced and may in the future experience disruptions to our operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to deliver our products and services in a timely manner or meet milestones or customer commitments.

The full extent of the effect of the pandemic on us, our customers, our supply chain and our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak or subsequent outbreaks.

We may continue to experience the effects of the pandemic even after it has waned, and our business, results of operations and financial condition could continue to be affected.

In particular, if COVID-19 continues to spread or re-emerges,

particularly in the United States, Singapore and China where our operations are most concentrated, resulting in a prolonged period of travel, commercial, social and other similar restrictions, we could experience, among other things:

We may continue to experience the effects of the pandemic even now that its severity has waned, and our business, results of operations and financial condition could continue to be affected.

In particular, if COVID-19 re-emerges with serious and widespread impact on public health, particularly in the United States, Singapore, China, and the United Kingdom where our operations are most concentrated, and results in a prolonged period of travel, commercial, social and other similar restrictions, we could experience, among other things:

● Adverse impacts on our operations and financial results caused by government and regulatory measures to contain or mitigate the spread of the virus, temporary closures of our facilities or the facilities of our customers or suppliers, which could impact our ability to timely meet our customers’ orders or negatively impact our supply chain;

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● Litigation, manufacturing delays and harm to our reputation resulting from any accident, illness, or injury to our employees related to COVID-19 that could negatively affect our business, results of operations and financial condition;

● Changes in prices of products and services may be impacted by worldwide demand and by the ongoing COVID-19 pandemic, which price increases could materially increase our operating costs and adversely affect our profit margin;

● Changes in prices of products and services impacted by worldwide demand and by the pandemic, which price increases could materially increase our operating costs and adversely affect our profit margin;

● Increased cybersecurity and privacy risks and risks related to the reliability of technology to support remote operations;

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The impact of COVID-19 can also exacerbate other risks discussed in this Risk Factors section and throughout this report.

Investors should carefully evaluate the potential implications of ongoing COVID-19 challenges on our financial performance, operational resilience, and competitive position when making investment decisions.

The extent and duration of these challenges remain uncertain, and our ability to effectively manage them will be critical to our long-term success.

If we fail to manage change successfully, our operations could be adversely impacted and our business could be impaired.

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Our revenue from international sales represents a substantial portion of our overall sales, and this trend will continue for the foreseeable future.

The majority of our manufacturing is currently performed in China.

The majority of our international manufacturing is currently performed in China and Scotland.

Our international operations involve a number of risks, including with respect to:

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Any of the above factors could adversely affect our operating results.

We expect to make acquisitions, which could involve certain risks and uncertainties.

We expect to make acquisitions in the future.

Political Instability and Uncertainty

The political landscape in the United States is characterized by increasing polarization, uncertainty, and volatility.

Political developments, including changes in leadership, shifts in policy priorities, and legislative gridlock, with increased risks of federal government shutdowns or debt defaults, could have significant implications for our business operations, regulatory environment, and financial performance.

The unpredictability of the political environment poses challenges in anticipating and mitigating risks effectively.

Uncertainty surrounding government policies and regulations, including those related to taxation, trade, healthcare, environmental protection, and labor practices, may impact our costs, operations, and market competitiveness.

Changes in government spending priorities or fiscal policies could also affect demand for our products/services, particularly in sectors dependent on government contracts or funding.

Furthermore, political instability and social unrest may disrupt supply chains, distribution networks, and consumer confidence, leading to operational disruptions, decreased consumer spending, and market volatility.

Heightened geopolitical tensions or domestic conflicts may also contribute to economic uncertainty and market fluctuations.

Acquisitions involve multiple risks and uncertainties.

We recently completed the acquisitions of SPEC, KWJ and Calman, and we expect to make further acquisitions in the future.

Acquisitions involve numerous inherent challenges, such as properly evaluating acquisition opportunities, properly evaluating risks and other diligence matters, ensuring adequate capital availability and balancing other resource constraints.

There are risks and uncertainties related to acquisitions, including:

difficulties integrating acquired technology, operations, personnel and financial and other systems;

difficulties integrating acquired technology, operations, personnel and financial and

other systems;

unrealized sales expectations from the acquired business;

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diversion of management attention from running our existing businesses and potential loss of key management employees of the acquired business.

In addition, internal controls over financial reporting of acquired companies may not be up to required standards.

In addition, internal controls over financial reporting of acquired companies may not comply with required standards.

Our integration activities may place substantial demands on our management, operational resources and financial and internal control systems.

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Several of our key management personnel have been with us throughout most of our history and have substantial experience with our business and technology.

If one or more of our key management personnel leaves Interlink and we are unable to find a replacement with the combination of skills and attributes necessary to execute our business plan, it may have an adverse impact on our business.

Our success will also depend, in part, on our ability to attract and retain additional qualified professional, technical, production, managerial and marketing personnel, both domestically and internationally.

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Such report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective.

This assessment must include disclosure of any material weaknesses in our internal control over financial

reporting identified by management.

This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management.

If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

As a non-accelerated filer, we are required to evaluate and report on the effectiveness of our internal control over financial reporting.

Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting;

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These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our board of directors, particularly to serve on our audit committee and compensation committee.

UNRESOLVED STAFF COMMENTS

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.

What changed 10-K

Item 1A. Risk Factors