What changed in this filing

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Item 1A. Risk Factors

2022-08-29 compared with 2021-08-27 · 461 added, 479 removed, 248 unchanged (79% of the section changed)

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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:

The ongoing COVID-19 pandemic, and the periodic measures intended to

reduce its spread imposed by governments and other authorities around the world, including restrictions on freedom of movement and business

operations such as travel bans, border closings, business limitations and closures, quarantines and shelter-in-place orders, have had,

and may continue to have, an adverse impact on the economy generally, our business and the businesses of our suppliers, and our results

of operations and financial condition.

Most of our employees transitioned to remote working arrangements commencing in March 2020, and

many continue to primarily work remotely as of the date hereof, which may ultimately result in lower work efficiency and productivity,

and in turn 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 has negatively affected our sales since the beginning of the outbreak.

While most 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 ongoing 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;

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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;

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 has limited and could further 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.

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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

time, including new information which may emerge concerning the long-term effects 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.

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

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

We have experienced and may in the future 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.

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.

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:

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.

our products use components that have been in the past and may in the future be subject to market shortages and substantial price fluctuations,

whether due to the COVID-19 pandemic, the war between Ukraine and Russia, recent tensions between China and Taiwan or otherwise.

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

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.

Future operating results depend upon our ability to timely obtain

components in sufficient quantities and on acceptable terms.

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

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 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.

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

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;

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

effects of terrorist attacks abroad;

effects of terrorist attacks or geopolitical conflicts abroad;

greater difficulty in staffing and managing foreign operations;

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.

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:

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 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.

Our 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.

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 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.

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.

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.

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.

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.

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 forecast our manufacturing and inventory

requirements.

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;

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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.

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

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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 distributors for a majority of our sales and to

complete order fulfillment.

We depend on the resale of products through distributor accounts for

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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.

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

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and operating results could be materially and adversely affected.

Changes to the average

selling prices of our products could affect our net revenue and gross margins and adversely affect results of operations.

In the past, we have experienced

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

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.

Changes to the average selling prices of our products could affect

our net revenue and gross margins and adversely affect results of operations.

In the past, we have experienced 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

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

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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.

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.

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 operations.

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 liabilities.

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

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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

ranging from one to five years on each of our products.

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 products.

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.

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 ranging from one to five years on each

of our products.

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 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.

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.

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 customers.

Any errors discovered after

commercial release could result in financial losses and claims against us.

Significant product warranty claims against us could harm our

business, reputation and financial results and cause the market price of our common stock to decline.

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:

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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.

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.

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

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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.

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.

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 have historically incurred net losses.

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

In the event that we fail to achieve profitability in future periods, the value of our common stock may decline.

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 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, but not

to fund working capital requirements;

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

to refinance existing indebtedness;

to increase our sales and marketing activities;

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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.

The terms of our Senior Credit Facilities may restrict our financial

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

The terms of our Senior Credit Facilities restrict, among other things,

our ability to incur liens, incur indebtedness, dispose of assets, make investments, make certain restricted payments, merge or consolidate

and 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 leverage ratio, a minimum fixed charge coverage ratio or a minimum liquidity test.

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, SVB.

Risks Related to International Operations

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, Brexit in Europe, and the current war between Ukraine and Russia.

This uncertainty includes

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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

Foreign currency exchange

rates may adversely affect our results.

goods, the potential for increased trade barriers between the U.K.

and the European Union, and export controls or other retaliatory

actions against, or restrictions on doing business with Russia, as well as any resulting disruption, instability or volatility in the

global markets and industries resulting from such conflict.

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

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.

Foreign currency exchange rates may adversely affect our results.

We are exposed to market risk primarily related to foreign currencies

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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.

If the value of European currencies, including the Euro,

deteriorates, thus reducing the purchasing power of European customers, our sales could be adversely affected.

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 U.S.

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

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.

Certain states and countries

have passed regulations relating to chemical substances in electronic products and requiring electronic products to use environmentally

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.

are expected to adopt further environmental compliance programs.

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.

Responding to any infringement

claim, regardless of its validity, could:

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 have passed regulations relating to chemical

substances in electronic products and requiring electronic products to use environmentally 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.

expected to adopt further environmental compliance programs.

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 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.

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 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.

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

Responding to any infringement claim, regardless of its validity, could:

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

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require us to satisfy indemnification obligations to our customers.

If any of these occur,

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

If any of these occur, our business, financial condition

or results of operations could be adversely affected

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.

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.

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

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 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.

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 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:

The market price of our common stock has been highly volatile.

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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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