What changed in this filing

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Item 1A. Risk Factors

2023-09-12 compared with 2022-08-29 · 396 added, 291 removed, 418 unchanged (62% of the section changed)

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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 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;

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 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.

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 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

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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.

we continue to experience long lead times and 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

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

Depending on a limited number of suppliers exposes us to risks, including limited control over pricing, availability, quality

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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 outsource substantially all of our manufacturing to contract manufacturers

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

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lack of guaranteed production capacity or product supply;

effects of terrorist attacks or geopolitical conflicts abroad;

reliance on these manufacturers to maintain competitive manufacturing technologies;

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

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.

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

From time to time, we may transition the manufacturing of certain products

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unexpected issues.

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 pandemic or another pandemic or similar outbreak has 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.

In addition, the COVID-19 pandemic resulted in industry events, trade shows and business travel

being suspended, cancelled and/or significantly curtailed.

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 other possible

pandemics and similar outbreaks, our sales may continue to be negatively impacted in the future.

In addition, the impact of the COVID-19 pandemic or other possible pandemics

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;

adverse impacts on our ability to distribute or deliver our products or services, as well as temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers;

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 or another 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.

The adverse impact of the COVID-19 pandemic or another pandemic or similar outbreak on our business, results of operations

and financial condition have been and could continue to be material.

Certain of our products are sold into mature markets, which could

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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.

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

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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.

address the specific needs of businesses.

We may face challenges and delays in the development of this product line as the marketplace

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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.

a profit from this new product line.

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.

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

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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

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 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:

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.

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

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

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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

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.

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.

We depend upon a relatively small number of

distributor and end-user customers for a large portion of our revenue, and a decline in sales to these major customers would materially

adversely affect our business, financial condition, and results of operations.

Historically, we have relied upon a small number of distributors and end-user

customers for a significant portion of our net revenue.

Additionally, we expect an increased customer concentration from end-users in

the near future based on existing customer supply agreements and order backlog.

Our customer concentration could fluctuate, depending

on future customer requirements, which will depend on market conditions in the industry segments in which our customers participate.

loss of one or more significant customers or a decline in sales to our significant customers could result in a material loss of sales

and possible increase in excess inventories which would adversely affect our business, financial condition, and results of operations.

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.

In addition, sales through our top five distributors accounted for approximately 35%

of our net revenue in fiscal 2023.

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.

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

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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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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.

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

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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

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.

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

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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 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, the Transition Networks and Net2Edge businesses of CSI, and Uplogix in 2019, 2020, 2021 and 2022 respectively.

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 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.

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

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.

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.

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cash flows and the market price of our common stock.

Relying on third-party logistics providers could increase the risk

of the following:

Relying on third-party logistics providers could increase the risk of the

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

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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.

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

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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.

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.

In connection with certain implementations of our management software platform,

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

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 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

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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.

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.

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 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 customers.

Any errors discovered after

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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.

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, including the effects of climate change.

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 maintain cash deposits in excess of federally insured limits.

Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.

We regularly maintain domestic cash deposits in the Federal Deposit Insurance

Corporation (“FDIC”) insured banks, which exceed the FDIC insurance limits.

Bank failures, events involving limited liquidity,

defaults, non-performance or other adverse developments that affect financial institutions, or concerns or rumors about such events, may

lead to widespread demands for customer withdrawals and liquidity constraints that may result in market-wide liquidity problems.

on March 10, 2023, SVB failed and was taken into receivership by the FDIC.

At that time, we maintained deposits amounting to approximately

85% of our total cash at SVB.

On March 12, 2023, federal regulators announced that the FDIC would complete its resolution of SVB in a

manner that fully protects all depositors, and on March 26, 2023, the assets, deposits and loans of SVB were acquired by First Citizens

While we were able to regain full access to our deposits with SVB and have taken steps to diversify our banking relationships since

then, our Loan Agreement with SVB currently requires us to hold 50% of our company-wide cash balances at SVB, and consequently any future

failure of that bank could simultaneously prevent access to both a substantial portion of our cash holdings and to our credit line for

funds needed to meet our working capital requirements and other financial commitments.

Our cash balances are concentrated at a small number

of financial institutions.

In addition, current macroeconomic conditions have continued to cause turmoil in the banking sector since the

failure of SVB.

For example, on March 12, 2023, Signature Bank Corp.

and Silvergate Capital Corp.

were each swept into receivership,

and on May 1, 2023, the FDIC took control of First Republic Bank and brokered its sale to JPMorgan Chase.

Further bank failures, or other

adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, including disruptions

that may cause delays in our ability to transfer funds, make payments, or withdraw funds whether held with SVB or other banks, could adversely

impact our liquidity and financial performance.

A failure to timely access our cash on deposit with SVB or other banks could require the

scaling back of our operations and production, negatively affect our credit, and prevent us from fulfilling contractual obligations.

there can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S.

or any applicable foreign government in the future or that any bank or financial institution with which we do business will be able to

obtain needed liquidity from other banks, government institutions or by acquisition in the event of a future failure or liquidity crisis,

and such uninsured deposits may ultimately be lost.

In addition, if any of the parties with whom we conduct business are unable to access

funds due to the status of their financial institution, such parties’ ability to pay their obligations to us or to enter into new

commercial arrangements requiring additional payments to us could be adversely affected.

We have a history of losses.

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.

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.

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

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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

to acquire additional businesses

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.

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all of our assets to our senior lender, SVB.

In addition, the Loan Agreement with SVB currently requires us to hold 50% of our company-wide

cash balances at SVB, which may limit our ability to manage our cash holdings effectively and could put a substantial portion of those

holdings at risk in the event of a bank failure.

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

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

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 the

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

government’s institution

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

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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 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

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

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Foreign currency exchange rates may adversely affect our results.

We are exposed to market risk primarily related to foreign currencies

and interest rates.

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.

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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 affected.

currency rates could adversely affect our revenues and operating results.

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 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

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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

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.

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revenues and profitability.

Increasing attention on environmental, social and governance matters

may have a negative impact on our business, impose additional costs on us, and expose us to additional risks.

Increasingly regulators (including the SEC),

customers, investors, employees and other stakeholders are focusing on environmental, social and governance (“ESG”) matters.

While we have, or are developing, certain ESG initiatives, there can be no assurance that regulators, customers, investors, and employees

will determine that these programs are sufficiently robust.

Actual or perceived shortcomings with respect to our ESG initiatives and reporting

can impact our ability to hire and retain employees, increase our customer base, or attract and retain certain types of investors.

addition, these parties are increasingly focused on specific disclosures and frameworks related to ESG matters.

Collecting, measuring,

and reporting ESG information and metrics can be costly, difficult and time consuming, is subject to evolving reporting standards, and

can present numerous operational, reputational, financial, legal and other risks, any of which could have a material impact on us, including

on our reputation and stock price.

Inadequate processes to collect and review this information prior to disclosure could subject us to

potential liability related to such information.

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.

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.

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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

Rising interest rates may negatively impact our results of operations

and financing costs.

Interest rates are highly sensitive to many factors that are beyond our

control, including general economic conditions and policies of various governmental and regulatory agencies.

In an effort to combat inflation,

a number of central banks around the world, including the U.S., have raised interest rates and are expected to keep increasing interest

Increased interest rates may hinder the economic growth in markets where we do business, and has and may continue to have negative

impacts on the global economy.

Rising interest rates may lead customers to decrease or delay spending on products and projects, including

on products that we sell, which may have a material adverse effect on our business, financial condition and results of operations.

addition, higher interest rates impact the amount of interest we pay for our debt obligations and leases and continue and sustained increases

in interest rates could negatively impact our financing costs or cash flow.

Risks generally associated with a company-wide implementation of

an enterprise resource planning (ERP) system may adversely affect our business and results of operations or the effectiveness of our internal

controls over financial reporting.

In October 2022 we implemented a company-wide ERP system to

upgrade certain existing business, operational, and financial processes, and continue to refine the system on an ongoing basis.

ERP implementation is a complex and time-consuming project.

This project has required and may continue to require investment of

capital and human resources, the re-engineering of processes of our business, and the attention of many employees who would

otherwise be focused on other aspects of our business.

Any deficiencies in the design and implementation of the new ERP

system could result in higher costs than we had anticipated and could adversely affect our ability to develop and launch

solutions, provide services, fulfill contractual obligations, file reports with the SEC in a timely manner, operate our business or

otherwise affect our controls environment.

Any of these consequences could have an adverse effect on our results of operations and

financial condition.

In addition, because the ERP is a new system that we have limited prior experience with, there is an increased

risk that one or more of our financial controls may fail.

Any failure to maintain internal control over financial reporting could

severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.

If we determine that

we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and

completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or

investigations by the Nasdaq Stock Market, the SEC, or other regulatory authorities.

Failure to remedy any material weakness in our

internal control over financial reporting, or to implement or maintain other effective control systems required of public companies,

could also restrict our future access to the capital markets.

We identified a material weakness in our internal

control related to ineffective information technology general controls which, if not remediated appropriately or timely, could result

in loss of investor confidence and adversely impact our stock price.

Internal controls related to the operation of technology

systems are critical to maintaining adequate internal control over financial reporting.

As disclosed in Part II, Item 9A, during the fourth

quarter of fiscal 2023, management identified a material weakness related to the design and implementation of information technology general

controls related to the Company’s information systems that are relevant to the preparation of consolidated financial statements.

Specifically, we did not design and maintain user access controls to adequately restrict user access to the financial application and

data to appropriate Company personnel.

As a result, management concluded that our internal control over financial reporting was not effective

as of June 30, 2023.

We are implementing remedial measures and, while there can be no assurance that our efforts will be successful, we

plan to remediate the material weakness prior to the end of fiscal 2024.

These measures will result in additional technology and other

If we are unable to remediate the material weakness, or are otherwise unable to maintain effective internal control over financial

reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare

financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations

requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements

and adversely impact our stock price.

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.

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

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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 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.

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:

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,

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

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announcements of technological innovations;

our announcement of significant acquisitions, strategic partnerships,

joint ventures or capital commitments;

our announcement of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

conditions or trends in the industry;

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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