What changed in this filing

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Item 1A. Risk Factors

2021-08-27 compared with 2020-09-11 · 658 added, 653 removed, 69 unchanged (95% of the section changed)

We operate in a rapidly changing environment that involves

numerous risks and uncertainties.

Before deciding to purchase, hold or sell our common stock, you should carefully consider the

risks described in this section, as well as other information contained in this Report and in our other filings with the SEC.

section should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in Item

8 of this Report, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

included in Item 7 of this Report.

If any of these risks or uncertainties actually occurs, our business, financial condition, results

of operations or prospects could be materially harmed.

In that event, the market price for our common stock could decline and you

could lose all or part of your investment.

In addition, risks and uncertainties not presently known to us or that we currently

deem immaterial may also adversely affect our business.

The effect of COVID-19 and other

possible pandemics and similar outbreaks could result in material adverse effects on our business, financial position, results

of operations and cash flows.

The COVID-19 outbreak has spread globally and has led governments

and other authorities around the world, including federal, state and local authorities in the United States and abroad, to impose

measures intended to reduce its spread, including restrictions on freedom of movement and business operations such as travel bans,

border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines

and shelter-in-place orders.

Although many of these governmental restrictions have since been lifted or scaled back, a recent surge

of COVID-19 resulted in the reimposition of certain restrictions and may lead to other restrictions being implemented in response

to efforts to reduce the spread of COVID-19.

Given the dynamic nature of these circumstances and the related adverse impact these

restrictions have had, and may continue to have, on the economy generally, our business and the business of our suppliers, our

results of operations and financial condition may be adversely impacted by the COVID-19 pandemic.

Beginning in March 2020, most of our employees transitioned

to remote working arrangements, which are continuing through the date of this Report.

While remote working has not had a significant

adverse impact on our financial results or our operations to date, there can be no assurance that these arrangements will not ultimately

result in lower work efficiency and productivity, which in turn may adversely affect our business.

In addition, the COVID-19 pandemic

has resulted in industry events, trade shows and business travel being suspended, cancelled and/or significantly curtailed.

cessation of trade shows and business travel has resulted in and could continue to result in our lead pipeline being negatively

impacted, which has negatively affected and may continue to negatively affect our sales during fiscal 2020 and beyond.

In addition, the impact of the COVID-19 pandemic and measures

to prevent its spread subject us to various risks and uncertainties that could materially adversely affect our business, results

of operations and financial condition, including the following:

significant volatility or

decreases in the demand for our products or extended sales cycles;

changes in customer behavior

and preferences, as customers may experience financial difficulties and/or may delay orders or reduce their spending in light

adverse impacts on our ability

to distribute or deliver our products or services, including due to the negative impact of COVID-19 on air travel, as well as

temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers;

further disruptions in our

ability to manufacture our products, as some suppliers of materials used in the production of our products are located in areas

more severely impacted by COVID-19, which could limit our ability to obtain sufficient materials to produce our products;

volatility in the availability

of raw materials and components that our contract manufacturers purchase in China and volatility in raw material and other input

The duration and extent of the COVID-19

pandemic’s effect on our operations and financial condition will depend on future developments, which are highly uncertain

and cannot be predicted at this time, including new information which may emerge concerning the severity of COVID-19, actions taken

to contain COVID-19, any future resurgence of COVID-19 that may occur after the initial outbreak subsidies, and how quickly and

to what extent normal economic and operating conditions can resume.

Even after the COVID-19 pandemic has subsided, we may experience

adverse impacts to our business, financial condition, results of operations, and prospects as a result of its global economic impact,

including any economic downturn or recession that has occurred or may occur in the future.

The adverse impact of the COVID-19 pandemic

on our business, results of operations and financial condition could be material.

Certain of our products

are sold into mature markets, which could limit our ability to continue to generate revenue from these products.

Our ability to

sustain and grow our business depends on our ability to develop, market, and sell new products.

Certain of our products

are sold into mature markets that are characterized by a trend of declining demand.

As the overall market for these products decreases

due to the adoption of new technologies, we expect that our revenues from these products will continue to decline.

our future prospects will depend on our ability to develop and successfully market new products that address new and growing markets.

Our failure to develop new products or failure to achieve widespread customer acceptance of any new products could cause us to

lose market share and cause our revenues to decline.

There can be no assurance that we will not experience difficulties that could

delay or prevent the successful development, introduction, marketing and sale of new products or product enhancements.

that could cause delays include regulatory and/or industry approvals, product design cycle and failure to identify products or

features that customers demand.

In addition, the introduction and sale of new products often involves a significant technical evaluation,

and we often face delays because of our customers’

internal procedures for evaluating, approving and deploying new technologies.

For these and other reasons, the sales cycle associated with new products is typically lengthy, often lasting six to 24 months

and sometimes longer.

Therefore, there can be no assurance that our introduction or announcement of new product offerings will

achieve any significant or sustainable degree of market acceptance or result in increased revenue in the near term.

Our new software

offerings represent a new product line for us and are subject to the risks faced by a new business.

During the fiscal year

ended June 30, 2020, we continued to dedicate significant engineering resources to our management software platform, applications,

and SaaS offerings, including ConsoleFlow™.

Our management has limited experience in this marketplace.

These product and

service offerings will be subject to significant additional risks that are not necessarily related to our hardware products.

ability to succeed with these offerings will depend in large part on our ability to provide customers with software products and

services that offer features and functionality that address the needs of particular businesses.

We may face challenges and delays

in the development of this product line as the marketplace for products and services evolves to meet the needs and desires of customers.

We cannot provide assurances that we will be successful in operating and growing this product line.

In light of these risks

and uncertainties, we may not be able to establish or maintain market share for our software and SaaS offerings.

As we develop

new product lines, we must adapt to market conditions that are unfamiliar to us, such as competitors and distribution channels

that are different from those we have known in the past.

We have and will encounter competition from other solutions providers,

many of whom may have more significant resources than us with which to compete.

There can be no assurance that we will recover

our investments in this new product line, that we will receive meaningful revenue from or realize a profit from this new product

line or that diverting our management’s attention to this new product line will not have a material adverse effect on our

existing business, and in turn on our results of operations, financial condition and prospects.

We may experience

significant fluctuation in our revenue because the timing of large orders placed by some of our customers is often project-based.

Our operating results

fluctuate because we often receive large orders from customers that coincide with the timing of the customer’s project.

of our products and services may be delayed if customers delay approval or commencement of projects due to budgetary constraints,

internal acceptance review procedures, timing of budget cycles or timing of competitive evaluation processes.

In addition, sometimes

our customers make significant one-time hardware purchases for projects which are not repeated.

We sell primarily on a purchase

order basis rather than pursuant to long-term contracts, and we expect fluctuations in our revenues as a result of one-time project-based

purchases to continue in the future.

In addition, our sales may be subject to significant fluctuations based on the acceleration,

delay or cancellation of customer projects, or our failure to complete one or a series of significant potential sales.

a significant portion of our operating expenses are fixed, even a single order can have a disproportionate effect on our quarterly

revenues and operating results.

As a result of the factors discussed above, and due to the complexities of the industry

in which we operate, it is difficult for us to forecast demand for our current or future products with any degree of certainty,

which means it is difficult for us to forecast our sales.

If our quarterly or annual operating results fall below the expectations

of investors or securities analysts, the price of our common stock could decline substantially.

The lengthy sales

cycle for our products and services, along with delays in customer completion of projects, make the timing of our revenues difficult

We have a lengthy sales

cycle for many of our products that generally extends between six and 24 months and sometimes longer due to a lengthy customer

evaluation and approval process.

The length of this process can be affected by factors over which we have little or no control,

including the customer’s budgetary constraints, timing of the customer’s budget cycles, and concerns by the customer

about the introduction of new products by us or by our competitors.

As a result, sales cycles for customer orders vary substantially

among different customers.

The lengthy sales cycle is one of the factors that has caused, and may continue to cause, our revenues

and operating results to vary significantly from quarter to quarter.

In addition, we may incur substantial expenses and devote

significant management effort and expense to develop potential relationships that do not result in agreements or revenues, which

may prevent us from pursuing other opportunities.

Accordingly, excessive delays in sales could be material and adversely affect

our business, financial condition or results of operations.

The nature of our

products, customer base and sales channels causes us to lack visibility into future demand for our products, which makes it difficult

for us to predict our revenues or operating results.

We use forecasts based

on anticipated product orders to manage our manufacturing and inventory levels and other aspects of our business.

However, several

factors contribute to a lack of visibility with respect to future orders, including:

the lengthy and unpredictable sales cycle for our products that can extend from six to 24 months or longer;

the project-driven nature of many of our customers’

requirements;

we primarily sell our products indirectly through distributors;

the uncertainty of the extent and timing of market acceptance of our new products;

the need to obtain industry certifications or regulatory approval for our products;

the lack of long-term contracts with our customers;

the diversity of our product lines and geographic scope of our product distribution;

we have some customers who make single, non-recurring purchases;

a large number of our customers typically purchase in small quantities.

This lack of visibility

impacts our ability to forecast our inventory requirements.

If we overestimate our customers’

future requirements for products,

we may have excess inventory, which would increase our costs and potentially require us to write-off inventory that becomes obsolete.

Additionally, if we underestimate our customers’

future requirements, we may have inadequate inventory, which could interrupt

and delay delivery of our products to our customers, harm our reputation, and cause our revenues to decline.

If any of these events

occur, they could prevent us from achieving or sustaining profitability and the value of our common stock may decline.

We have a history

We have historically incurred

There can be no assurance that we will generate net profits in future periods.

Further, there can be no assurance

that we will be cash flow positive in future periods.

In the event that we fail to achieve profitability in future periods,

the value of our common stock may decline.

In addition, if we are unable to achieve or maintain positive cash flows, we would

be required to seek additional funding, which may not be available on favorable terms, if at all.

Delays in qualifying revisions of existing products for

certain of our customers could result in the delay or loss of sales to those customers, which could negatively impact our

business and financial results.

Our industry is characterized by intense competition, rapidly

evolving technology and continually changing customer preferences and requirements.

As a result, we frequently develop and introduce

new versions of our existing products, which we refer to as revisions.

Prior to purchasing our products, some of our customers require

that products undergo a qualification process, which may involve testing of the products in the customer’s system.

revision to a product’s hardware or firmware, changes in the manufacturing process or our selection of a new supplier may

require a new qualification process, which may result in delays in sales to customers, loss of sales, or us holding excess or obsolete

After products are qualified, it can take additional time before

the customer commences volume production of components or devices that incorporate our products.

If we are unsuccessful or delayed

in qualifying any new or revised products with a customer, that failure or delay would preclude or delay sales of these products

to the customer, and could negatively impact our financial results.

In addition, new revisions to our products could cause our

customers to alter the timing of their purchases, by either accelerating or delaying purchases, which could result in fluctuations

of our net revenue from quarter to quarter.

Delays in deliveries

or quality control problems with our component suppliers could damage our reputation and could cause our net revenue to decline

and harm our results of operations.

We operate in a rapidly changing environment that involves numerous

risks and uncertainties.

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described

in this section, as well as other information contained in this Report and in our other filings with the SEC.

This section should be read

in conjunction with the consolidated financial statements and accompanying notes thereto included in Item 8 of this Report, and “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Report.

If any of these risks

or uncertainties actually occurs, our business, financial condition, results of operations or prospects could be materially harmed.

that event, the market price for our common stock could decline and you could lose all or part of your investment.

In addition, risks

and uncertainties not presently known to us or that we currently deem immaterial may also adversely affect our business.

Risks Related to Our Operations and Industry

The effect of COVID-19 and other possible

pandemics and similar outbreaks could result in material adverse effects on our business, financial position, results of operations and

The COVID-19 outbreak has spread globally and has led governments and

other authorities around the world, including federal, state and local authorities in the United States and abroad, to impose measures

intended to reduce its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings,

business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders.

The recent surges of COVID-19, including due to more contagious and/or vaccine-resistant variants, have resulted in the reimposition of

certain restrictions and may lead to other restrictions being implemented in response to efforts to reduce the spread of COVID-19.

the dynamic nature of these circumstances and the related adverse impact these restrictions have had, and may continue to have, on the

economy generally, our business and the business of our suppliers, our results of operations and financial condition may be adversely

impacted by the COVID-19 pandemic.

Beginning in March 2020, most of our employees transitioned to remote

working arrangements, which are continuing through the date of this Report.

There can be no assurance that these arrangements will not

ultimately result in lower work efficiency and productivity, which in turn may adversely affect our business.

In addition, the COVID-19

pandemic resulted in industry events, trade shows and business travel being suspended, cancelled and/or significantly curtailed.

The cessation

of trade shows and business travel resulted in our lead pipeline being negatively impacted, which negatively affected our sales during

While some industry events, trade shows and business travel have resumed, if these activities are suspended, cancelled and/or

significantly curtailed in the future, whether due to surges of COVID-19 or otherwise related to the pandemic, our sales may continue

to be negatively impacted in the future.

In addition, the impact of the COVID-19 pandemic and measures to prevent

its spread subject us to various risks and uncertainties that could materially adversely affect our business, results of operations

and financial condition, including the following:

significant volatility or decreases in the demand for our products or extended sales cycles;

changes in customer behavior and preferences, as customers may experience financial difficulties and/or may delay orders or reduce their spending in light of COVID-19;

adverse impacts on our ability to distribute or deliver our products or services, including due to the negative impact of COVID-19 on air travel, as well as temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers;

further disruptions in our contract manufacturers’ ability to manufacture our products, as some contract manufacturers and suppliers of materials used in the production of our products are located in areas more severely impacted by COVID-19, which could limit our ability to obtain sufficient materials to produce and manufacture our products;

volatility in the availability of raw materials and components that our contract manufacturers purchase and volatility in raw material and other input costs.

The duration and extent of the COVID-19 pandemic’s effect on

our operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted at this

time, including new information which may emerge concerning the severity of COVID-19, actions taken to contain COVID-19, additional surges

of COVID-19 infections due to the rate of public acceptance and efficacy of COVID-19 vaccines or due to new and more contagious and/or

vaccine resistant variants, and how quickly and to what extent normal economic and operating conditions can resume.

Even after the COVID-19

pandemic has subsided, we may experience adverse impacts to our business, financial condition, results of operations, and prospects as

a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition could be material.

We may experience constraints

in the supply of certain materials and components that could affect our operating results.

Some of our integrated circuits

are only available from a single source and in some cases, are no longer being manufactured.

From time to time, integrated circuits, and

potentially other components used in our products, will be phased out of production by the manufacturer.

When this happens, we attempt

to purchase sufficient inventory to meet our needs until a substitute component can be incorporated into our products.

Nonetheless, we

may be unable to purchase sufficient components to meet our demands, or we may incorrectly forecast our demands, and purchase too many

or too few components.

In addition, our products use components that have been subject to market shortages and substantial price fluctuations

From time to time, we have been unable to meet customer orders because we were unable to purchase necessary components for

our products.

We do not have long-term supply arrangements with most of our vendors to obtain necessary components, including semiconductor

chips, or technology for our products and instead purchase components on a purchase order basis.

If we are unable to purchase components

from these suppliers, our product shipments could be prevented or delayed, which could result in a loss of sales.

If we are unable to

meet existing orders or to enter into new orders because of a shortage in components, we will likely lose net revenue, risk losing customers

and risk harm to our reputation in the marketplace, which could adversely affect our business, financial condition or results of operations.

For instance, we have recently experienced increased delays in shipments of semiconductor chips.

As a result, we have sought alternate

sources of certain components, which have been at a higher cost.

Because semiconductor chips continue to be subject to an ongoing significant

shortage, our ability to source components that use semiconductor chips has been adversely affected.

These supply interruptions have resulted

in increased component delivery lead times and increased costs to obtain components with available semiconductor chips.

To the extent

this semiconductor chip shortage or other shortages continue, the production of our products may be impacted.

Delays in deliveries or

quality control problems with our component suppliers could damage our reputation and could cause our net revenue to decline and harm

our results of operations.

We and our contract manufacturers

are responsible for procuring raw materials for our products.

Our products incorporate some components and technologies that are

only available from single or limited sources of supply.

Depending on a limited number of suppliers exposes us to risks,

including limited control over pricing, availability, quality and delivery schedules.

Moreover, due to our limited sales, we may

not be able to convince suppliers to continue to make components available to us unless there is demand for these components from

their other customers.

If any one or more of our suppliers cease to provide us with sufficient quantities of components in a timely

manner or on terms acceptable to us, we would have to seek alternative sources of supply and we may have difficulty identifying

additional or replacement suppliers for some of our components.

We may experience

constraints in the supply of certain materials and components that could affect our operating results.

Some of our integrated

circuits are only available from a single source and in some cases, are no longer being manufactured.

From time to time, integrated

circuits, and potentially other components used in our products, will be phased out of production by the manufacturer.

happens, we attempt to purchase sufficient inventory to meet our needs until a substitute component can be incorporated into our

Nonetheless, we may be unable to purchase sufficient components to meet our demands, or we may incorrectly forecast our

demands, and purchase too many or too few components.

In addition, our products use components that have been subject to market

shortages and substantial price fluctuations in the past.

From time to time, we have been unable to meet customer orders because

we were unable to purchase necessary components for our products.

We do not have long-term supply arrangements with most of our

vendors to obtain necessary components or technology for our products and instead purchase components on a purchase order basis.

If we are unable to purchase components from these suppliers, our product shipments could be prevented or delayed, which could

result in a loss of sales.

If we are unable to meet existing orders or to enter into new orders because of a shortage in components,

we will likely lose net revenue, risk losing customers and risk harm to our reputation in the marketplace, which could adversely

affect our business, financial condition or results of operations.

Our products incorporate some components and technologies that are only

available from single or limited sources of supply.

Depending on a limited number of suppliers exposes us to risks, including limited

control over pricing, availability, quality and delivery schedules.

Moreover, due to our limited sales, we may not be able to convince

suppliers to continue to make components available to us unless there is demand for these components from their other customers.

one or more of our suppliers cease to provide us with sufficient quantities of components in a timely manner or on terms acceptable to

us, we would have to seek alternative sources of supply and we may have difficulty identifying additional or replacement suppliers for

some of our components.

We outsource substantially

all of our manufacturing to contract manufacturers in Asia.

If our contract manufacturers are unable or unwilling to manufacture

our products at the quality and quantity we request, our business could be harmed.

If our contract manufacturers are unable or unwilling to manufacture our products

at the quality and quantity we request, our business could be harmed.

We use contract manufacturers

based in Asia to manufacture substantially all of our products.

Generally, we do not have guaranteed supply agreements with our

contract manufacturers or suppliers.

If any of these subcontractors or suppliers were to cease doing business with us, we might

not be able to obtain alternative sources in a timely or cost-effective manner.

Our reliance on third-party manufacturers, especially

in countries outside of the U.S., exposes us to a number of significant risks, including:

Generally, we do not have guaranteed supply agreements with our contract

manufacturers or suppliers.

If any of these subcontractors or suppliers were to cease doing business with us, we might not be able to

obtain alternative sources in a timely or cost-effective manner.

Our reliance on third-party manufacturers, especially in countries outside

of the U.S., exposes us to a number of significant risks, including:

reduced control over delivery schedules, quality assurance, manufacturing yields and production costs;

7 unchanged sentences

fluctuations in currency exchange rates;

changes in a country’s or region’s political or economic conditions;

effects of terrorist attacks abroad;

1 unchanged sentence

increased financial accounting and reporting burdens and complexities.

Any problems that we may

encounter with the delivery, quality or cost of our products from our contract manufacturers or suppliers could cause us to lose

net revenue, damage our customer relationships and harm our reputation in the marketplace, each of which could materially and adversely

affect our business, financial condition or results of operations.

From time to time, we

may transition the manufacturing of certain products from one contract manufacturer to another.

When we do this, we may incur substantial

expenses, risk material delays or encounter other unexpected issues.

Any problems that we may encounter

with the delivery, quality or cost of our products from our contract manufacturers or suppliers could cause us to lose net revenue, damage

our customer relationships and harm our reputation in the marketplace, each of which could materially and adversely affect our business,

financial condition or results of operations.

From time to time, we may transition

the manufacturing of certain products from one contract manufacturer to another.

When we do this, we may incur substantial expenses, risk

material delays or encounter other unexpected issues.

Certain of our products

are sold into mature markets, which could limit our ability to continue to generate revenue from these products.

Our ability to sustain

and grow our business depends on our ability to develop, market, and sell new products.

Certain of our products are sold

into mature markets that are characterized by a trend of declining demand.

As the overall market for these products decreases due to the

adoption of new technologies, we expect that our revenues from these products will continue to decline.

As a result, our future prospects

will depend on our ability to develop and successfully market new products that address new and growing markets.

Our failure to develop

new products or failure to achieve widespread customer acceptance of any new products could cause us to lose market share and cause our

revenues to decline.

There can be no assurance that we will not experience difficulties that could delay or prevent the successful development,

introduction, marketing and sale of new products or product enhancements.

Factors that could cause delays include regulatory and/or industry

approvals, product design cycle and failure to identify products or features that customers demand.

In addition, the introduction and

sale of new products often involves a significant technical evaluation, and we often face delays because of our customers’ internal

procedures for evaluating, approving and deploying new technologies.

For these and other reasons, the sales cycle associated with new

products is typically lengthy, often lasting six to 24 months and sometimes longer.

Therefore, there can be no assurance that our introduction

or announcement of new product offerings will achieve any significant or sustainable degree of market acceptance or result in increased

revenue in the near term.

Our software offerings

are subject to the risks that differ from those facing our hardware products.

We continue to dedicate significant

engineering resources to our management software platform, applications, and SaaS offerings, including ConsoleFlow™.

These product

and service offerings are subject to significant additional risks that are not necessarily related to our hardware products.

to succeed with these offerings will depend in large part on our ability to provide customers with software products and services that

offer features and functionality that address the needs of particular businesses.

We may face challenges and delays in the development

of this product line as the marketplace for products and services evolves to meet the needs and desires of customers.

We cannot provide

assurances that we will be successful in operating and growing this product line.

In light of these risks and uncertainties,

we may not be able to establish or maintain market share for our software and SaaS offerings.

As we develop new product lines, we must

adapt to market conditions that are unfamiliar to us, such as competitors and distribution channels that are different from those we have

known in the past.

We have and will encounter competition from other solutions providers, many of whom may have more significant resources

than us with which to compete.

There can be no assurance that we will recover our investments in this product line, that we will receive

meaningful revenue from or realize a profit from this new product line or that diverting our management’s attention to this product

line will not have a material adverse effect on our existing business, and in turn on our results of operations, financial condition and

We may experience significant

fluctuation in our revenue because the timing of large orders placed by some of our customers is often project-based.

Our operating results fluctuate

because we often receive large orders from customers that coincide with the timing of the customer’s project.

Sales of our products

and services may be delayed if customers delay approval or commencement of projects due to budgetary constraints, internal acceptance

review procedures, timing of budget cycles or timing of competitive evaluation processes.

In addition, sometimes our customers make significant

one-time hardware purchases for projects which are not repeated.

We sell primarily on a purchase order basis rather than pursuant to long-term

contracts, and we expect fluctuations in our revenues as a result of one-time project-based purchases to continue in the future.

our sales may be subject to significant fluctuations based on the acceleration, delay or cancellation of customer projects, or our failure

to complete one or a series of significant potential sales.

Because a significant portion of our operating expenses are fixed, even a

single order can have a disproportionate effect on our quarterly revenues and operating results.

As a result of the factors discussed

above, and due to the complexities of the industry in which we operate, it is difficult for us to forecast demand for our current or future

products with any degree of certainty, which means it is difficult for us to forecast our sales.

If our quarterly or annual operating

results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.

The lengthy sales cycle

for our products and services, along with delays in customer completion of projects, make the timing of our revenues difficult to predict.

We have a lengthy sales cycle

for many of our products that generally extends between six and 24 months and sometimes longer due to a lengthy customer evaluation and

approval process.

The length of this process can be affected by factors over which we have little or no control, including the customer’s

budgetary constraints, timing of the customer’s budget cycles, and concerns by the customer about the introduction of new products

by us or by our competitors.

As a result, sales cycles for customer orders vary substantially among different customers.

The lengthy sales

cycle is one of the factors that has caused, and may continue to cause, our revenues and operating results to vary significantly from

quarter to quarter.

In addition, we may incur substantial expenses and devote significant management effort and expense to develop potential

relationships that do not result in agreements or revenues, which may prevent us from pursuing other opportunities.

Accordingly, excessive

delays in sales could be material and adversely affect our business, financial condition or results of operations.

The nature of our products,

customer base and sales channels causes us to lack visibility into future demand for our products, which makes it difficult for us to

predict our revenues or operating results.

We use forecasts based on anticipated

product orders to manage our manufacturing and inventory levels and other aspects of our business.

However, several factors contribute

to a lack of visibility with respect to future orders, including:

the lengthy and unpredictable sales cycle for our products that can extend from six to 24 months or longer;

the project-driven nature of many of our customers’ requirements;

we primarily sell our products indirectly through distributors;

the uncertainty of the extent and timing of market acceptance of our new products;

the need to obtain industry certifications or regulatory approval for our products;

the lack of long-term contracts with our customers;

the diversity of our product lines and geographic scope of our product distribution;

we have some customers who make single, non-recurring purchases;

a large number of our customers typically purchase in small quantities.

This lack of visibility impacts

our ability to forecast our inventory requirements.

If we overestimate our customers’ future requirements for products, we may have

excess inventory, which would increase our costs and potentially require us to write-off inventory that becomes obsolete.

Additionally,

if we underestimate our customers’ future requirements, we may have inadequate inventory, which could interrupt and delay delivery

of our products to our customers, harm our reputation, and cause our revenues to decline.

If any of these events occur, they could prevent

us from achieving or sustaining profitability and the value of our common stock may decline.

Delays in qualifying revisions of existing products for certain

of our customers could result in the delay or loss of sales to those customers, which could negatively impact our business and financial

Our industry is characterized by intense competition, rapidly evolving

technology and continually changing customer preferences and requirements.

As a result, we frequently develop and introduce new versions

of our existing products, which we refer to as revisions.

Prior to purchasing our products, some of our customers require that

products undergo a qualification process, which may involve testing of the products in the customer’s system.

A subsequent revision

to a product’s hardware or firmware, changes in the manufacturing process or our selection of a new supplier may require a new qualification

process, which may result in delays in sales to customers, loss of sales, or us holding excess or obsolete inventory.

After products are qualified, it can take additional time before the

customer commences volume production of components or devices that incorporate our products.

If we are unsuccessful or delayed in qualifying

any new or revised products with a customer, that failure or delay would preclude or delay sales of these products to the customer, and

could negatively impact our financial results.

In addition, new revisions to our products could cause our customers to alter the timing

of their purchases, by either accelerating or delaying purchases, which could result in fluctuations of our net revenue from quarter to

We depend on distributors

for a majority of our sales and to complete order fulfillment.

We depend on the resale of products through distributor accounts

for a substantial majority of our worldwide net revenue.

We depend on the resale of products through distributor accounts for

a substantial majority of our worldwide net revenue.

In addition, sales through our top five distributors accounted for approximately

37% of our net revenue in fiscal 2021.

A significant reduction of effort by one or more distributors to sell our products or a

material change in our relationship with one or more distributors may reduce our access to certain end customers and adversely

affect our ability to sell our products.

Furthermore, if a key distributor materially defaults on a contract or otherwise fails

to perform, our business and financial results would suffer.

In addition, the financial health of our distributors and our

continuing relationships with them are important to our success.

Our business could be harmed if the financial health of these

distributors impairs their performance and we are unable to secure alternate distributors.

A significant reduction of effort by one or more distributors to sell our products or a material

change in our relationship with one or more distributors may reduce our access to certain end customers and adversely affect our ability

to sell our products.

Furthermore, if a key distributor materially defaults on a contract or otherwise fails to perform, our business

and financial results would suffer.

In addition, the financial health of our distributors and our continuing

relationships with them are important to our success.

Our business could be harmed if the financial health of these distributors impairs

their performance and we are unable to secure alternate distributors.

Our ability to sustain

and grow our business depends in part on the success of our distributors and resellers.

A substantial part of our revenues is generated through sales

by distributors and resellers.

To the extent they are unsuccessful in selling our products, or if we are unable to obtain and retain

a sufficient number of high-quality distributors and resellers, our operating results could be materially and adversely affected.

In addition, our distributors and resellers may devote more resources to marketing, selling and supporting products and services

that are competitive with ours, than to our products.

They also may have incentives to promote our competitors' products over our

products, particularly for our competitors with larger volumes of orders, more diverse product offerings and a longer relationship

with our distributors and resellers.

In these cases, one or more of our important distributors or resellers may stop selling our

products completely or may significantly decrease the volume of products they sell on our behalf.

This sales structure also could

subject us to lawsuits, potential liability and reputational harm if, for example, any of our distributors or resellers misrepresents

the functionality of our products or services to customers, violates laws or our corporate policies.

If we fail to effectively

manage our existing or future distributors and resellers effectively, our business and operating results could be materially and

adversely affected.

A substantial part of our revenues is generated through sales by distributors

and resellers.

To the extent they are unsuccessful in selling our products, or if we are unable to obtain and retain a sufficient number

of high-quality distributors and resellers, our operating results could be materially and adversely affected.

In addition, our distributors

and resellers may devote more resources to marketing, selling and supporting products and services that are competitive with ours, than

to our products.

They also may have incentives to promote our competitors' products over our products, particularly for our competitors

with larger volumes of orders, more diverse product offerings and a longer relationship with our distributors and resellers.

cases, one or more of our important distributors or resellers may stop selling our products completely or may significantly decrease the

volume of products they sell on our behalf.

This sales structure also could subject us to lawsuits, potential liability and reputational

harm if, for example, any of our distributors or resellers misrepresents the functionality of our products or services to customers, violates

laws or our corporate policies.

If we fail to effectively manage our existing or future distributors and resellers effectively, our business

and operating results could be materially and adversely affected.

Changes to the average

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reductions in the average selling prices and gross margins of our products.

We expect competition to continue to increase, and

we anticipate this could result in additional downward pressure on our pricing.

Our average selling prices for our products might

also decline as a result of other reasons, including promotional programs introduced by us or our competitors and customers who

negotiate price concessions.

To the extent we are able to increase prices, we may experience a decline in sales volumes if customers

decide to purchase competitive products.

If any of these were to occur, our gross margins could decline and we might not be able

to reduce the cost to manufacture our products enough or at all to keep up with the decline in prices.

If we are unable

to sell our inventory in a timely manner, it could become obsolete, which could require us to write-down or write off obsolete

inventory, which could harm our operating results.

At any time, competitive

products may be introduced with more attractive features or at lower prices than ours.

If this occurs, and for other reasons, we

may not be able to accurately forecast demand for our products and our inventory levels may increase.

There is a risk that we may

be unable to sell our inventory in a timely manner to avoid it becoming obsolete.

If we are required to substantially discount

our inventory or are unable to sell our inventory in a timely manner, we would be required to increase our inventory reserves or

write off obsolete inventory and our operating results could be substantially harmed.

We expect competition to continue to increase, and we anticipate

this could result in additional downward pressure on our pricing.

Our average selling prices for our products might also decline as a

result of other reasons, including promotional programs introduced by us or our competitors and customers who negotiate price concessions.

To the extent we are able to increase prices, we may experience a decline in sales volumes if customers decide to purchase competitive

If any of these were to occur, our gross margins could decline and we might not be able to reduce the cost to manufacture our

products enough or at all to keep up with the decline in prices.

If we are unable to sell

our inventory in a timely manner, it could become obsolete, which could require us to write-down or write off obsolete inventory, which

could harm our operating results.

At any time, competitive products

may be introduced with more attractive features or at lower prices than ours.

If this occurs, and for other reasons, we may not be able

to accurately forecast demand for our products and our inventory levels may increase.

There is a risk that we may be unable to sell our

inventory in a timely manner to avoid it becoming obsolete.

If we are required to substantially discount our inventory or are unable to

sell our inventory in a timely manner, we would be required to increase our inventory reserves or write off obsolete inventory and our

operating results could be substantially harmed.

Our failure to compete

successfully in our highly competitive market could result in reduced prices and loss of market share.

The market in which we operate is intensely competitive, subject

to rapid technological advances and highly sensitive to evolving industry standards.

The market can also be affected significantly

by new product and technology introductions and marketing and pricing activities of industry participants.

Our products compete

directly with products produced by a number of our competitors.

Many of our competitors and potential competitors have greater

financial and human resources for marketing and product development, more experience conducting research and development activities,

greater experience obtaining regulatory approval for new products, larger distribution and customer networks, more established

relationships with contract manufacturers and suppliers, and more established reputations and name recognition.

For these and other

reasons, we may not be able to compete successfully against our current or potential future competitors.

In addition, the amount

of competition we face in the marketplace may change and grow as the market for IoT and M2M networking solutions grows and new

companies enter the marketplace.

Present and future competitors may be able to identify new markets, adapt new technologies, develop

and commercialize products more quickly and gain market acceptance of products with greater success.

As a result of these competitive

factors, we may fail to meet our business objectives and our business, financial condition and operating results could be materially

and adversely affected.

Our products may

contain undetected software or hardware errors or defects that could lead to an increase in our costs, reduce our net revenue or

damage our reputation.

The market in which we operate is intensely competitive, subject to

rapid technological advances and highly sensitive to evolving industry standards.

The market can also be affected significantly by new

product and technology introductions and marketing and pricing activities of industry participants.

Our products compete directly with

products produced by a number of our competitors.

Many of our competitors and potential competitors have greater financial and human resources

for marketing and product development, more experience conducting research and development activities, greater experience obtaining regulatory

approval for new products, larger distribution and customer networks, more established relationships with contract manufacturers and suppliers,

and more established reputations and name recognition.

For these and other reasons, we may not be able to compete successfully against

our current or potential future competitors.

In addition, the amount of competition we face in the marketplace may change and grow as

the market for IoT and M2M networking solutions grows and new companies enter the marketplace.

Present and future competitors may be able

to identify new markets, adapt new technologies, develop and commercialize products more quickly and gain market acceptance of products

with greater success.

As a result of these competitive factors, we may fail to meet our business objectives and our business, financial

condition and operating results could be materially and adversely affected.

Acquisitions, strategic

partnerships, joint ventures or investments may impair our capital and equity resources, divert our management’s attention or otherwise

negatively impact our operating results.

We may pursue acquisitions, strategic

partnerships and joint ventures that we believe would allow us to complement our growth strategy, increase market share in our current

markets and expand into adjacent markets, broaden our technology and intellectual property and strengthen our relationships with distributors,

OEMs and ODMs.

For instance, we acquired Maestro, Intrinsyc and the Transition Networks and Net2Edge businesses of CSI in 2019, 2020 and

2021, respectively.

Our previous acquisitions have required, and any future acquisition, partnership, joint venture or investment may

also require, that we pay significant cash, issue equity and/or incur substantial debt.

Acquisitions, partnerships or joint ventures may

also result in the loss of key personnel and the dilution of existing stockholders to the extent we are required to issue equity securities.

In addition, acquisitions, partnerships or joint ventures require significant managerial attention, which may be diverted from our other

These capital, equity and managerial commitments may impair the operation of our business.

Furthermore, acquired businesses

may not be effectively integrated, may be unable to maintain key pre-acquisition business relationships, may not result in expected synergies,

an increase in revenues or earnings or the delivery of new products, may contribute to increased fixed costs, and may expose us to unanticipated

If any of these occur, we may fail to meet our business objectives and our business, financial condition and operating results

could be materially and adversely affected.

We may experience difficulties

associated with utilizing third-party logistics providers.

A majority of our physical inventory

management process, as well as the shipping and receiving of our inventory, is performed by third-party logistics providers in Los Angeles,

California and Hong Kong.

There is a possibility that these third-party logistics providers will not perform as expected and we could

experience delays in our ability to ship, receive, and process the related data in a timely manner.

This could adversely affect our financial

position, results of operations, cash flows and the market price of our common stock.

Relying on third-party logistics

providers could increase the risk of the following:

failing to receive accurate and timely inventory data, theft or poor physical security

of our inventory, inventory damage, ineffective internal controls over inventory processes or other similar business risks out of our

immediate control.

Risks Related to Technology, Cybersecurity and Intellectual Property

Cybersecurity breaches and other disruptions could compromise

our information and expose us to liability, which could cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive

data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners,

and personally identifiable information of our employees, on our networks and third-party cloud software providers.

Increased global information

technology (“IT”) security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems

and networks and the confidentiality, availability and integrity of our data.

There have been several recent, highly publicized cases

in which organizations of various types and sizes have reported the unauthorized disclosure of customer or other confidential information,

as well as cyberattacks involving the dissemination, theft and destruction of corporate information, intellectual property, cash or other

valuable assets.

There have also been several highly publicized cases in which hackers have requested “ransom” payments in

exchange for not disclosing customer or other confidential information or for not disabling the target company’s computer or other

The secure processing, maintenance and transmission of the information that we collect and store on our systems is critical to

our operations and implementing security measures designed to prevent, detect, mitigate or correct these or other IT security threats

involves significant costs.

Although we have taken steps to protect the security of our information systems, we have, from time to time,

experienced threats to our data and systems, including malware, phishing and computer virus attacks, and it is possible that in the future

our safety and security measures will not prevent the systems’ improper functioning or damage, or the improper access or disclosure

of personally identifiable information such as in the event of cyber-attacks.

In addition, due to the fast pace and unpredictability of

cyber threats, long-term implementation plans designed to address cybersecurity risks become obsolete quickly and, in some cases, it may

be difficult to anticipate or immediately detect such incidents and the damage they cause.

Any unauthorized access, disclosure or other

loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence

in our products and services, which could adversely affect our business.

If our products become subject to cybersecurity breaches, or

if public perception is that they are vulnerable to cyberattacks, our reputation and business could suffer.

We could be subject to liability or our reputation could be harmed

if technologies integrated into our products, or our products, fail to prevent cyberattacks, or if our partners or customers fail to safeguard

the systems with security policies that conform to industry best practices.

In addition, any cyberattack or security breach that affects

a competitor’s products could lead to the negative perception that our solutions are or could be subject to similar attacks or breaches.

Some of our software offerings may be subject to various cybersecurity

risks, which are particularly acute in the cloud-based technologies operated by us and other third parties that form a part of our solutions.

In connection with certain implementations of our management software

platform, application, and SaaS offering, ConsoleFlow, we expect to store, convey and potentially process data produced by devices.

data may include confidential or proprietary information, intellectual property or personally identifiable information of our customers

or other third parties with whom they do business.

It is important for us to maintain solutions and related infrastructure that are perceived

by our customers and other parties with whom we do business to provide a reasonable level of reliability and security.

Despite available

security measures and other precautions, the infrastructure and transmission methods used by our products and services may be vulnerable

to interception, attack or other disruptive problems.

If a cyberattack or other security incident were to allow unauthorized

access to or modification of our customers’ data or our own data, whether due to a failure with our systems or related systems operated

by third parties, we could suffer damage to our brand and reputation.

The costs we would incur to address and fix these incidents could

significantly increase our expenses.

These types of security incidents could also lead to lawsuits, regulatory investigations and increased

legal liability, including in some cases contractual costs related to customer notification and fraud monitoring.

Further, as regulatory

focus on privacy and data security issues continues to increase and worldwide laws and regulations concerning the protection of information

become more complex, the potential risks and costs of compliance to our business will intensify.

If software that we incorporate

into our products were to become unavailable or no longer available on commercially reasonable terms, it could adversely affect sales

of our products, which could disrupt our business and harm our financial results.

Certain of our products contain

software developed and maintained by third-party software vendors or which are available through the “open source” software

We also expect that we may incorporate software from third-party vendors and open source software in our future products.

business would be disrupted if this software, or functional equivalents of this software, were either no longer available to us or no

longer offered to us on commercially reasonable terms.

In either case, we would be required to either redesign our products to function

with alternate third-party software or open source software, or develop these components ourselves, which would result in increased costs

and could result in delays in our product shipments.

Furthermore, we might be forced to limit the features available in our current or

future product offerings.

Our products may contain

undetected software or hardware errors or defects that could lead to an increase in our costs, reduce our net revenue or damage our reputation.

We currently offer warranties

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Our products could contain undetected software or hardware errors or defects.

If there is a product failure, we might have to replace all affected products, or we might have to refund the purchase price for

Regardless of the amount of testing we undertake, some errors might be discovered only after a product has been installed

and used by customers.

If there is a product failure, we might have to replace all affected products, or we might have to refund the purchase price for the units.

Regardless of the amount of testing we undertake, some errors might be discovered only after a product has been installed and used by

Any errors discovered after commercial release could result in financial losses and claims against us.

product warranty claims against us could harm our business, reputation and financial results and cause the market price of our

common stock to decline.

Our inability to

obtain appropriate industry certifications or approvals from governmental regulatory bodies could impede our ability to grow revenues

in our wireless products.

The sale of our wireless

products in some geographical markets is sometimes dependent on the ability to gain certifications and/or approvals by relevant

governmental bodies.

In addition, many of our products are certified as meeting various industry quality and/or compatibility standards.

Failure to obtain these certifications or approvals, or delays in receiving any needed certifications or approvals, could impact

our ability to compete effectively or at all in these markets and could have an adverse impact on our revenues.

If software that

we incorporate into our products were to become unavailable or no longer available on commercially reasonable terms, it could adversely

affect sales of our products, which could disrupt our business and harm our financial results.

Certain of our products

contain software developed and maintained by third-party software vendors or which are available through the “open source”

software community.

We also expect that we may incorporate software from third-party vendors and open source software in our future

Our business would be disrupted if this software, or functional equivalents of this software, were either no longer available

to us or no longer offered to us on commercially reasonable terms.

In either case, we would be required to either redesign our

products to function with alternate third-party software or open source software, or develop these components ourselves, which

would result in increased costs and could result in delays in our product shipments.

Furthermore, we might be forced to limit the

features available in our current or future product offerings.

Significant product

warranty claims against us could harm our business, reputation and financial results and cause the market price of our common stock to

We may not be able to adequately

protect or enforce our intellectual property rights, which could harm our competitive position or require us to incur significant expenses

to enforce our rights.

We rely primarily on a combination

of laws, such as patent, copyright, trademark and trade secret laws, and contractual restrictions, such as confidentiality agreements

and licenses, to establish and protect our proprietary rights.

Despite any precautions that we have taken:

laws and contractual restrictions might not be sufficient to prevent misappropriation of our technology or deter others from developing similar technologies;

other companies might claim intellectual property rights based upon prior use that negatively impacts our ability to enforce our trademarks and patents;

policing unauthorized use of our patented technology and trademarks is difficult, expensive and time-consuming, and we might be unable to determine the extent of this unauthorized use.

Also, the laws of some of the

countries in which we market and manufacture our products offer little or no effective protection of our proprietary technology.

engineering, unauthorized copying or other misappropriation of our proprietary technology could enable third parties to benefit from our

technology without paying us for it.

Consequently, we may be unable to prevent our proprietary technology from being exploited by others

or abroad, which could require costly efforts to protect our technology.

Policing the unauthorized use of our technology,

trademarks and other proprietary rights is expensive, difficult and, in some cases, impracticable.

Litigation may be necessary in the

future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the

proprietary rights of others.

Such litigation could result in substantial costs and diversion of management resources, either of which

could harm our business.

Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating

our intellectual property, which may harm our business, financial condition and results of operations.

The impact of natural disasters and other business interruptions

could negatively impact our supply chain and customers resulting in an adverse impact to our revenues and profitability.

Certain of our components and other materials used in producing our

products are from regions susceptible to natural disasters.

A natural disaster could damage equipment and inventory at our suppliers’

facilities, adversely affecting our supply chain.

If we are unable to obtain these materials, we could experience a disruption to our

supply chain that would hinder our ability to produce our products in a timely manner, or cause us to seek other sources of supply, which

may be more costly or which we may not be able to procure on a timely basis.

In addition, our customers may not follow their normal purchasing

patterns or temporarily cease purchasing from us due to impacts to their businesses in the region, creating unexpected fluctuations or

decreases in our revenues and profitability.

Natural disasters in other parts of the world on which our operations are reliant also could

have material adverse impacts on our business.

In addition, our operations and

those of our suppliers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, cybersecurity breaches,

IT systems failure, terrorist attacks and other events beyond our control.

A substantial portion of our facilities, including our corporate

headquarters and other critical business operations, are located near major earthquake faults and, therefore, may be more susceptible

to damage if an earthquake occurs.

We do not carry earthquake insurance for direct earthquake-related losses.

If a business interruption

occurs, whether due to a natural disaster or otherwise, our business could be materially and adversely affected.

Risk Related to Liquidity and Capital Resources

We have a history of losses.

We have historically incurred

There can be no assurance that we will generate net profits in future periods.

Further, there can be no assurance that

we will be cash flow positive in future periods.

In the event that we fail to achieve profitability in future periods, the value

of our common stock may decline.

In addition, if we are unable to achieve or maintain positive cash flows, we would be required to

seek additional funding, which may not be available on favorable terms, if at all.

We may need additional capital and it may not be available on

acceptable terms, or at all.

To remain competitive, we must

continue to make significant investments to operate our business and develop our products.

Our future capital requirements will

depend on many factors, including the timing and amount of our net revenue, research and development expenditures, expenses associated

with any strategic partnerships or acquisitions and infrastructure investments, and expenses related to litigation, each of which could

negatively affect our ability to generate additional cash from operations.

If cash generated from operations is insufficient to satisfy

our working capital requirements, we may need to raise additional capital.

Looking ahead at long-term

needs, we may need to raise additional funds for a number of purposes, including:

to fund working capital requirements;

to update, enhance or expand the range of products we offer;

to increase our sales and marketing activities;

to respond to competitive pressures or perceived opportunities, such as investment, acquisition and international expansion activities.

We may seek additional capital from public or private offerings of

our capital stock, borrowings under our existing or future credit lines or other sources.

If we issue equity or debt securities to raise

additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences

and privileges senior to those of our existing stockholders.

In addition, if we raise additional funds through collaborations, licensing,

joint ventures, or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary

technologies, or grant licenses on terms that are not favorable to us.

There can be no assurance that we will be able to raise any needed

capital on terms acceptable to us, if at all.

If we are unable to secure additional financing in sufficient amounts or on favorable terms,

we may not be able to develop or enhance our products, take advantage of future opportunities, respond to competition or continue to operate

our business.

The terms of our amended and restated senior credit facility

and junior credit facility may restrict our financial and operational flexibility and, in certain cases, our ability to operate.

The terms of our amended and restated senior credit facility and junior

credit facility restrict, among other things, our ability to incur additional liens and indebtedness;

dispose of assets;

make investments;

pay dividends or make certain other restricted payments;

consummate certain asset sales;

enter into certain transactions with affiliates;

merge or consolidate with other persons;

or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of

or enter into certain speculative hedging arrangements.

Further, we are currently and may in the future be required to maintain

specified financial ratios, including pursuant to a maximum senior leverage ratio, a minimum fixed charge coverage ratio or a minimum

liquidity test.

Our ability to meet those financial ratios and tests can be affected by events beyond our control, and there can be no

assurance that we will meet those tests.

Pursuant to our amended credit agreement and the related loan and security agreement, we have

pledged substantially all of our assets to our senior lender, Silicon Valley Bank, and our junior lender, SVB Innovation Credit Fund VIII,

Risks Related to International

Rising concern

regarding international tariffs could materially and adversely affect our business and results of operations.

The current political

landscape has introduced significant uncertainty with respect to future trade regulations and existing international trade agreements,

as shown by the U.S.-initiated renegotiation of the North America Free Trade Agreement, and Brexit in Europe.

This uncertainty includes

the possibility of imposing tariffs or penalties on products manufactured outside the U.S., including the US government’s institution

of a 25% tariff on a range of products from China and subsequent tariffs imposed by the U.S.

as well as tariffs imposed by trading partners

goods, and the potential for increased trade barriers between the UK and the European Union.

The institution of trade tariffs

both globally and between the U.S.

and China specifically, carries the risk of negatively affecting the overall economic conditions of

both China and the U.S., which could have a negative impact on us.

We cannot predict whether,

and to what extent, there may be changes to international trade agreements or whether quotas, duties, tariffs, exchange controls or other

restrictions on our products will be changed or imposed.

If we are unable to source our products from the countries where we wish to purchase

them, either because of regulatory changes or for any other reason, or if the cost of doing so increases, it could have a material adverse

effect on our business, financial condition and results of operations.

Furthermore, imposition of tariffs may result in local sourcing

initiatives, or other developments that make it more difficult to sell our products in foreign countries, which would negatively impact

our business and operating results.

We face risks associated

with our international operations that could impair our ability to grow our revenues abroad as well as our overall financial condition.

We believe that our future

growth is dependent in part upon our ability to increase sales in international markets.

These sales are subject to a variety of

risks, including geopolitical events, fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers,

unexpected changes in regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences,

and export license requirements.

In addition, we are subject to the risks inherent in conducting business internationally, including

political and economic instability and unexpected changes in diplomatic and trade relationships.

In many markets where we operate,

business and cultural norms are different than those in the U.S., and practices that may violate laws and regulations applicable

to us such as the Foreign Corrupt Practices Act (the “FCPA”) unfortunately are more commonplace.

Although we have implemented

policies and procedures with the intention of ensuring compliance with these laws and regulations, our employees, contractors and

agents, as well as distributors and resellers involved in our international sales, may take actions in violation of our policies.

Many of our vendors and strategic business allies also have international operations and are subject to the risks described above.

Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if one

or more of our business partners are not able to successfully manage these risks.

There can be no assurance that one or more of

these factors will not have a material adverse effect on our business strategy and financial condition.

concern regarding international tariffs could materially and adversely affect our business and results of operations.

political landscape has introduced significant uncertainty with respect to future trade regulations and existing international

trade agreements, as shown by the recent U.S.-initiated renegotiation of the North America Free Trade Agreement, and Brexit in

This uncertainty includes the possibility of imposing tariffs or penalties on products manufactured outside the U.S., including

the US government’s institution of a 25% tariff on a range of products from China and subsequent tariffs imposed by the U.S.

as well as tariffs imposed by trading partners on U.S.

goods, and the potential for increased trade barriers between the UK and

the European Union.

The institution of trade tariffs both globally and between the U.S.

and China specifically, carries the risk

of negatively affecting the overall economic conditions of both China and the U.S., which could have a negative impact on

We cannot predict

whether, and to what extent, there may be changes to international trade agreements or whether quotas, duties, tariffs, exchange

controls or other restrictions on our products will be changed or imposed.

If we are unable to source our products from the countries

where we wish to purchase them, either because of regulatory changes or for any other reason, or if the cost of doing so increases,

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

Furthermore, imposition

of tariffs may result in local sourcing initiatives, or other developments that make it more difficult to sell our products in

foreign countries, which would negatively impact our business and operating results.

Our failure to comply

effectively with regulatory laws pertaining to our foreign operations could have a material adverse effect on our revenues and

We believe that our future growth

is dependent in part upon our ability to increase sales in international markets.

These sales are subject to a variety of risks, including

geopolitical events, fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes

in regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences, and export license requirements.

In addition, we are subject to the risks inherent in conducting business internationally, including political and economic instability

and unexpected changes in diplomatic and trade relationships.

In many markets where we operate, business and cultural norms are different

than those in the U.S., and practices that may violate laws and regulations applicable to us such as the Foreign Corrupt Practices Act

(the “FCPA”) unfortunately are more commonplace.

Although we have implemented policies and procedures with the intention of

ensuring compliance with these laws and regulations, our employees, contractors and agents, as well as distributors and resellers involved

in our international sales, may take actions in violation of our policies.

Many of our vendors and strategic business allies also have

international operations and are subject to the risks described above.

Even if we are able to successfully manage the risks of international

operations, our business may be adversely affected if one or more of our business partners are not able to successfully manage these risks.

There can be no assurance that one or more of these factors will not have a material adverse effect on our business strategy and financial

Foreign currency exchange

rates may adversely affect our results.

We are exposed to market risk primarily related to foreign currencies

and interest rates.

In particular, we are exposed to changes in the value of the U.S.

dollar versus the local currency in which our products

are sold and our services are purchased, including devaluation and revaluation of local currencies.

Accordingly, fluctuations in foreign

currency rates could adversely affect our revenues.

In particular, the uncertainty with respect to the ability of certain

European countries to continue to service their sovereign debt obligations and the related European financial restructuring efforts may

cause the value of the Euro and other European currencies to fluctuate.

If the value of European

currencies, including the Euro, deteriorates, thus reducing the purchasing power of European customers, our sales could be adversely

Risks Related to Regulatory

Compliance and Legal Matters

Our inability to obtain

appropriate industry certifications or approvals from governmental regulatory bodies could impede our ability to grow revenues in our

wireless products.

The sale of our wireless products in

some geographical markets is sometimes dependent on the ability to gain certifications and/or approvals by relevant governmental bodies.

In addition, many of our products are certified as meeting various industry quality and/or compatibility standards.

Failure to obtain

these certifications or approvals, or delays in receiving any needed certifications or approvals, could impact our ability to compete

effectively or at all in these markets and could have an adverse impact on our revenues.

Our failure to comply effectively

with regulatory laws pertaining to our foreign operations could have a material adverse effect on our revenues and profitability.

We are required to comply with

government export regulations in the sale of our products to foreign customers, including requirements to properly classify and screen

our products against a denied parties list prior to shipment.

We are also required to comply with the provisions of the FCPA and all other

anti-corruption laws, such as the UK Anti-Bribery Act, of all other countries in which we do business, directly or indirectly, including

compliance with the anti-bribery prohibitions and the accounting and recordkeeping requirements of these laws.

Violations of the FCPA

or other similar laws could trigger sanctions, including ineligibility for U.S.

government insurance and financing, as well as large fines.

Failure to comply with the aforementioned regulations could also affect our decision to sell our products in international jurisdictions,

which could have a material adverse effect on our revenues and profitability.

Our failure to comply effectively

with the requirements of applicable environmental legislation and regulation could have a material adverse effect on our revenues and

profitability.

We are required to comply

government export regulations in the sale of our products to foreign customers, including requirements to properly classify

and screen our products against a denied parties list prior to shipment.

We are also required to comply with the provisions of

the FCPA and all other anti-corruption laws, such as the UK Anti-Bribery Act, of all other countries in which we do business, directly

or indirectly, including compliance with the anti-bribery prohibitions and the accounting and recordkeeping requirements of these

Violations of the FCPA or other similar laws could trigger sanctions, including ineligibility for U.S.

government insurance

and financing, as well as large fines.

Failure to comply with the aforementioned regulations could also affect our decision to

sell our products in international jurisdictions, which could have a material adverse effect on our revenues and profitability.

Our failure to comply

effectively with the requirements of applicable environmental legislation and regulation could have a material adverse effect on

our revenues and profitability.

Certain states and countries

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friendly components.

For example, the European Union has the Waste Electrical and Electronic Equipment Directive, the Restrictions

of Hazardous Substances Directive, and the Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals.

In the future, China and other countries including the U.S.

For example, the European Union has the Waste Electrical and Electronic Equipment Directive, the Restrictions of

Hazardous Substances Directive, and the Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals.

In the future,

China and other countries including the U.S.

are expected to adopt further environmental compliance programs.

order to comply with these regulations, we may need to redesign our products to use different components, which may be more expensive,

if they are available at all.

If we fail to comply with these regulations, we may not be able to sell our products in jurisdictions

where these regulations apply, which could have a material adverse effect on our revenues and profitability.

Foreign currency

exchange rates may adversely affect our results.

We are exposed to market risk primarily related to foreign currencies

and interest rates.

In particular, we are exposed to changes in the value of the U.S.

dollar versus the local currency in which

our products are sold and our services are purchased, including devaluation and revaluation of local currencies.

Accordingly, fluctuations

in foreign currency rates could adversely affect our revenues.

In particular, the uncertainty with respect to the ability of

certain European countries to continue to service their sovereign debt obligations and the related European financial restructuring

efforts may cause the value of the Euro and other European currencies to fluctuate.

value of European currencies, including the Euro, deteriorates, thus reducing the purchasing power of European customers,

our sales could be adversely affected .

Current or future

litigation could adversely affect us.

We are subject to a wide

range of claims and lawsuits in the course of our business.

Any lawsuit may involve complex questions of fact and law and may require

the expenditure of significant funds and the diversion of other resources.

In order to comply with

these regulations, we may need to redesign our products to use different components, which may be more expensive, if they are available

If we fail to comply with these regulations, we may not be able to sell our products in jurisdictions where these regulations

apply, which could have a material adverse effect on our revenues and profitability.

Current or future litigation

could adversely affect us.

We are subject to a wide range

of claims and lawsuits in the course of our business.

Any lawsuit may involve complex questions of fact and law and may require the expenditure

of significant funds and the diversion of other resources.

The results of litigation are inherently uncertain, and adverse outcomes are

In particular, litigation regarding

intellectual property rights occurs frequently in our industry.

The results of litigation are inherently uncertain, and adverse outcomes

are possible.

Adverse outcomes may have a material adverse effect on our business, financial condition or results of operations.

There is a risk that other third

parties could claim that our products, or our customers’ products, infringe on their intellectual property rights or that we have

misappropriated their intellectual property.

In addition, software, business processes and other property rights in our industry might

be increasingly subject to third-party infringement claims as the number of competitors grows and the functionality of products in different

industry segments overlaps.

Other parties might currently have, or might eventually be issued, patents that pertain to the proprietary

rights we use.

Any of these third parties might make a claim of infringement against us.

The results of litigation are inherently uncertain,

and adverse outcomes are possible.

In particular, litigation

regarding intellectual property rights occurs frequently in our industry.

The results of litigation are inherently uncertain, and

adverse outcomes are possible.

Adverse outcomes may have a material adverse effect on our business, financial condition or results

of operations.

There is a risk that other

third parties could claim that our products, or our customers’

products, infringe on their intellectual property rights or

that we have misappropriated their intellectual property.

In addition, software, business processes and other property rights in

our industry might be increasingly subject to third-party infringement claims as the number of competitors grows and the functionality

of products in different industry segments overlaps.

Other parties might currently have, or might eventually be issued, patents

that pertain to the proprietary rights we use.

Any of these third parties might make a claim of infringement against us.

of litigation are inherently uncertain, and adverse outcomes are possible.

Responding to any infringement

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be time-consuming, costly and/or result in litigation;

divert management’s time and attention from developing our business;

require us to pay monetary damages, including treble damages if we are held to have willfully infringed;

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our business, financial condition or results of operations could be adversely affected

We may not be able

to adequately protect or enforce our intellectual property rights, which could harm our competitive position or require us to incur

significant expenses to enforce our rights.

We rely primarily on a

combination of laws, such as patent, copyright, trademark and trade secret laws, and contractual restrictions, such as confidentiality

agreements and licenses, to establish and protect our proprietary rights.

Despite any precautions that we have taken:

laws and contractual restrictions might not be sufficient to prevent misappropriation of our technology or deter others from developing similar technologies;

other companies might claim intellectual property rights based upon prior use that negatively impacts our ability to enforce our trademarks and patents;

policing unauthorized use of our patented technology and trademarks is difficult, expensive and time-consuming, and we might be unable to determine the extent of this unauthorized use.

Also, the laws of some

of the countries in which we market and manufacture our products offer little or no effective protection of our proprietary technology.

Reverse engineering, unauthorized copying or other misappropriation of our proprietary technology could enable third parties to

benefit from our technology without paying us for it.

Consequently, we may be unable to prevent our proprietary technology from

being exploited by others in the U.S.

or abroad, which could require costly efforts to protect our technology.

Policing the unauthorized

use of our technology, trademarks and other proprietary rights is expensive, difficult and, in some cases, impracticable.

may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine

the validity and scope of the proprietary rights of others.

Such litigation could result in substantial costs and diversion of

management resources, either of which could harm our business.

Accordingly, despite our efforts, we may not be able to prevent

third parties from infringing upon or misappropriating our intellectual property, which may harm our business, financial condition

and results of operations.

The impact of natural disasters and other business interruptions

could negatively impact our supply chain and customers resulting in an adverse impact to our revenues and profitability.

Certain of our components and other materials used in producing

our products are from regions susceptible to natural disasters.

A natural disaster could damage equipment and inventory at our

suppliers’

facilities, adversely affecting our supply chain.

If we are unable to obtain these materials, we could experience

a disruption to our supply chain that would hinder our ability to produce our products in a timely manner, or cause us to seek

other sources of supply, which may be more costly or which we may not be able to procure on a timely basis.

In addition, our customers

may not follow their normal purchasing patterns or temporarily cease purchasing from us due to impacts to their businesses in the

region, creating unexpected fluctuations or decreases in our revenues and profitability.

Natural disasters in other parts of the

world on which our operations are reliant also could have material adverse impacts on our business.

In addition, our operations

and those of our suppliers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, cybersecurity

breaches, Information Technology (“IT”) systems failure, terrorist attacks and other events beyond our control.

A substantial

portion of our facilities, including our corporate headquarters and other critical business operations, are located near major

earthquake faults and, therefore, may be more susceptible to damage if an earthquake occurs.

We do not carry earthquake insurance

for direct earthquake-related losses.

If a business interruption occurs, whether due to a natural disaster or otherwise, our business

could be materially and adversely affected.

If our products become subject to cybersecurity breaches,

or if public perception is that they are vulnerable to cyberattacks, our reputation and business could suffer.

We could be subject to liability or our reputation could be

harmed if technologies integrated into our products fail to prevent cyberattacks, or if our partners or customers fail to safeguard

the systems with security policies that conform to industry best practices.

In addition, any cyberattack or security breach that

affects a competitor’s products could lead to the negative perception that our solutions are or could be subject to similar

attacks or breaches.

Cybersecurity breaches and other disruptions could compromise

our information and expose us to liability, which could cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store

sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and

business partners, and personally identifiable information of our employees, on our networks and third-party cloud software providers.

The secure processing, maintenance and transmission of this information is critical to our operations.

Although we have taken steps

to protect the security of our information systems, we have, from time to time, experienced threats to our data and systems, including

malware and computer virus attacks and it is possible that in the future our safety and security measures will not prevent the

systems’

improper functioning or damage, or the improper access or disclosure of personally identifiable information such

as in the event of cyber-attacks.

In addition, due to the fast pace and unpredictability of cyber threats, long-term implementation

plans designed to address cybersecurity risks become obsolete quickly and, in some cases, it may be difficult to anticipate or

immediately detect such incidents and the damage they cause.

Any unauthorized access, disclosure or other loss of information could

result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our products

and services, which could adversely affect our business.

Some of our new software offerings may be subject to various

cybersecurity risks, which are particularly acute in the cloud-based technologies operated by us and other third parties that form

a part of our solutions.

In connection with certain implementations of our management

software platform, application, and SaaS offering, ConsoleFlow, we expect to store, convey and potentially process data produced

This data may include confidential or proprietary information, intellectual property or personally identifiable information

of our customers or other third parties with whom they do business.

It is important for us to maintain solutions and related infrastructure

that are perceived by our customers and other parties with whom we do business to provide a reasonable level of reliability and

Despite available security measures and other precautions, the infrastructure and transmission methods used by our products

and services may be vulnerable to interception, attack or other disruptive problems.

If a cyberattack or other security incident were to allow unauthorized

access to or modification of our customers’

data or our own data, whether due to a failure with our systems or related systems

operated by third parties, we could suffer damage to our brand and reputation.

The costs we would incur to address and fix these

incidents could significantly increase our expenses.

These types of security incidents could also lead to lawsuits, regulatory

investigations and increased legal liability, including in some cases contractual costs related to customer notification and fraud

Further, as regulatory focus on privacy and data security issues continues to increase and worldwide laws and regulations

concerning the protection of information become more complex, the potential risks and costs of compliance to our business will

Acquisitions, strategic

partnerships, joint ventures or investments may impair our capital and equity resources, divert our management’s attention

or otherwise negatively impact our operating results.

We may pursue acquisitions,

strategic partnerships and joint ventures that we believe would allow us to complement our growth strategy, increase market share

in our current markets and expand into adjacent markets, broaden our technology and intellectual property and strengthen our relationships

with distributors, OEMs and ODMs.

Any future acquisition, partnership, joint venture or investment may require that we pay significant

cash, issue equity or incur substantial debt.

Acquisitions, partnerships or joint ventures may also result in the loss of key personnel

and the dilution of existing stockholders to the extent we are required to issue equity securities.

In addition, acquisitions,

partnerships or joint ventures require significant managerial attention, which may be diverted from our other operations.

capital, equity and managerial commitments may impair the operation of our business.

Furthermore, acquired businesses may not be

effectively integrated, may be unable to maintain key pre-acquisition business relationships, may not result in an increase in

revenues or earnings or the delivery of new products, may contribute to increased fixed costs, and may expose us to unanticipated

If any of these occur, we may fail to meet our business objectives and our business, financial condition and operating

results could be materially and adversely affected.

If we are unable

to attract, retain or motivate key senior management and technical personnel, it could seriously harm our business.

Our financial performance

depends substantially on the performance of our executive officers and of key engineers, marketing and sales employees.

particularly dependent upon our technical personnel, due to the specialized technical nature of our business.

If we were to lose

the services of our executive officers or any of our key personnel and were not able to find replacements in a timely manner, our

business could be disrupted, other key personnel might decide to leave, and we might incur increased operating expenses associated

with finding and compensating replacements.

We may experience

difficulties associated with utilizing third-party logistics providers.

A majority of our physical

inventory management process, as well as the shipping and receiving of our inventory, is performed by third-party logistics providers

in Los Angeles, California and Hong Kong.

There is a possibility that these third-party logistics providers will not perform as

expected and we could experience delays in our ability to ship, receive, and process the related data in a timely manner.

could adversely affect our financial position, results of operations, cash flows and the market price of our common stock.

Relying on third-party

logistics providers could increase the risk of the following:

failing to receive accurate and timely inventory data, theft or poor

physical security of our inventory, inventory damage, ineffective internal controls over inventory processes or other similar business

risks out of our immediate control.

We may need additional capital and it may not be available

on acceptable terms, or at all.

To remain competitive,

we must continue to make significant investments to operate our business and develop our products.

Our future capital requirements

will depend on many factors, including the timing and amount of our net revenue, research and development expenditures, expenses

associated with any strategic partnerships or acquisitions and infrastructure investments, and expenses related to litigation,

each of which could negatively affect our ability to generate additional cash from operations.

If cash generated from operations

is insufficient to satisfy our working capital requirements, we may need to raise additional capital.

ahead at long-term needs, we may need to raise additional funds for a number of purposes, including:

to fund working capital requirements;

to update, enhance or expand the range of products we offer;

to increase our sales and marketing activities;

to respond to competitive pressures or perceived opportunities, such as investment, acquisition and international expansion activities.

We may seek additional capital from public or private offerings

of our capital stock, borrowings under our existing or future credit lines or other sources.

If we issue equity or debt securities

to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights,

preferences and privileges senior to those of our existing stockholders.

In addition, if we raise additional funds through collaborations,

licensing, joint ventures, or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future

products or proprietary technologies, or grant licenses on terms that are not favorable to us.

There can be no assurance that we

will be able to raise any needed capital on terms acceptable to us, if at all.

If we are unable to secure additional financing

in sufficient amounts or on favorable terms, we may not be able to develop or enhance our products, take advantage of future opportunities,

respond to competition or continue to operate our business.

The terms of our amended credit facility may restrict

our financial and operational flexibility and, in certain cases, our ability to operate.

The terms of our amended credit facility restrict, among other

things, our ability to incur additional indebtedness;

pay dividends or make certain other restricted payments;

consummate certain

enter into certain transactions with affiliates;

merge or consolidate with other persons;

or sell, assign, transfer,

lease, convey or otherwise dispose of all or substantially all of our assets.

Further, we are currently and may in the future be

required to maintain specified financial ratios, including pursuant to a Minimum Tangible Net Worth covenant, and satisfy certain

financial conditions.

Our ability to meet those financial ratios and tests can be affected by events beyond our control, and there

can be no assurance that we will meet those tests.

Pursuant to our amended credit agreement and the related loan and security agreement,

we have pledged substantially all of our assets to our lender, Silicon Valley Bank.

General Risk Factors

If we are unable to attract,

retain or motivate key senior management and technical personnel, it could seriously harm our business.

Our financial performance depends

substantially on the performance of our executive officers and of key engineers, marketing and sales employees.

We are particularly dependent

upon our technical personnel, due to the specialized technical nature of our business.

If we were to lose the services of our executive

officers or any of our key personnel and were not able to find replacements in a timely manner, our business could be disrupted, other

key personnel might decide to leave, and we might incur increased operating expenses associated with finding and compensating replacements.

Our quarterly operating

results may fluctuate, which could cause the market price of our common stock to decline.

We have experienced, and

expect to continue to experience, significant fluctuations in net revenue, expenses and operating results from quarter to quarter.

We therefore believe that quarter to quarter comparisons of our operating results are not a good indication of our future performance,

and you should not rely on them to predict our future operating or financial performance or the future performance of the market

price of our common stock.

A high percentage of our operating expenses are relatively fixed and are based on our forecast of future

If we were to experience an unexpected reduction in net revenue in a quarter, we would likely be unable to adjust our

short-term expenditures significantly.

We have experienced, and expect

to continue to experience, significant fluctuations in net revenue, expenses and operating results from quarter to quarter.

believe that quarter to quarter comparisons of our operating results are not a good indication of our future performance, and you should

not rely on them to predict our future operating or financial performance or the future performance of the market price of our common

A high percentage of our operating expenses are relatively fixed and are based on our forecast of future revenue.

If we were to

experience an unexpected reduction in net revenue in a quarter, we would likely be unable to adjust our short-term expenditures significantly.

If this were to occur, our operating results for that fiscal quarter would be harmed.

addition, if our operating results in future fiscal quarters were to fall below the expectations of equity analysts and investors,

the market price of our common stock would likely fall.

The market price of our common stock may be volatile based

on a number of factors, many of which are not under our control.

The market price of our common stock

has been highly volatile.

The market price of our common stock could be subject to wide fluctuations in response to a variety of

factors, many of which are out of our control, including:

In addition, if our operating results in future

fiscal quarters were to fall below the expectations of equity analysts and investors, the market price of our common stock would likely

The market price of our common stock may be volatile based on

a number of factors, many of which are not under our control.

The market price of our common stock has been

highly volatile.

The market price of our common stock could be subject to wide fluctuations in response to a variety of factors, many

of which are out of our control, including:

adverse changes in domestic or global economic, market and other conditions;

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sales of common stock by our stockholders or us or repurchases of common stock by us.

In addition, the Nasdaq Capital Market often experiences price

and volume fluctuations.

These fluctuations often have been unrelated or disproportionate to the operating performance of companies

listed on the Nasdaq Capital Market.

In addition, the Nasdaq Capital Market often experiences price and

volume fluctuations.

These fluctuations often have been unrelated or disproportionate to the operating performance of companies listed

on the Nasdaq Capital Market.

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