What changed in this filing

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Item 1A. Risk Factors

2026-08-24 compared with 2025-08-25 · 50 added, 42 removed, 282 unchanged (25% of the section changed)

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Risks Related to Our Business

Our business could be materially adversely affected as a result of general economic and market conditions.

Our business could be materially adversely affected because of general economic and market conditions.

We are subject to the effects of general economic and market conditions.

In the event that any of these conditions deteriorate, our revenue, profit and cash-flow levels could be materially adversely affected in future periods.

If any of these conditions deteriorate, our revenue, profit and cash-flow levels could be materially adversely affected in future periods.

In the event of such deterioration, many of our current or potential future customers may experience serious cash flow problems and as a result may modify, delay or cancel purchases of our products.

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We have historically invested approximately 6% to 7% of annual revenues on R&D to mitigate this risk.

However, many of our competitors have dedicated more resources and capabilities to R&D, including committing more engineers and capital expenditures, to develop and design new product that may enter the markets sooner or with more penetration.

However, many of our competitors have dedicated more resources and capabilities to R&D, including committing more engineers and capital expenditures, to develop and design new products that may enter the market sooner or with more penetration.

Future success will depend, in part, on our ability to continue to develop and market products and product enhancements cost-effectively.

The Company’s research and development expenditures are principally targeted at enhancing existing products, and to a lesser extent at

developing new ones.

The Company’s research and development expenditures are principally targeted at enhancing existing products, and to a lesser extent at developing new ones.

Further, there can be no assurance that the Company will not experience additional price competition, and that such competition may not adversely affect the Company’s revenues and results of operations

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As a result, period-to-period comparisons of our results of operations may be volatile, and you should not rely on them as an indication of our future performance.

Increased demand for semiconductors and electronic components driven by artificial intelligence ("AI") infrastructure and data center expansion could adversely affect our supply chain and operating results.

The rapid growth of AI applications and the expansion of large-scale data centers have significantly increased global demand for semiconductors, processors, memory devices, power management components and other electronic parts.

As a result, component manufacturers may prioritize production capacity for higher-volume or higher-margin customers serving AI, cloud computing and hyperscale data center markets.

We rely on a variety of third-party suppliers for critical electronic components used in our products.

Increased competition for available semiconductor capacity could result in extended lead times, reduced allocations, higher prices, supply shortages and less favorable purchasing terms.

In addition, shortages affecting a single component may delay the production and shipment of finished products, even when other materials remain available.

While we maintain inventory strategies, supplier relationships and alternative sourcing initiatives designed to mitigate supply disruptions, there can be no assurance that these efforts will be sufficient.

Any significant interruption in the supply of critical components, inability to obtain required quantities at commercially reasonable prices, or failure of suppliers to meet our requirements could increase our costs, delay customer deliveries, reduce revenue, adversely affect margins and harm our reputation with customers.

The impact of these risks may be amplified by geopolitical tensions, trade restrictions, manufacturing concentration in certain regions, transportation disruptions or continued growth in AI-related demand for advanced and legacy semiconductor products.

If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase.

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Certain of our expenses are fixed or semi-variable, including our costs for operating our manufacturing facilities.

While expense levels relative to current sales levels result in positive net income and cash flows, if sales levels decrease significantly and we are unable to reduce expenses proportionately, our business may be adversely affected.

While expense levels relating to current sales levels result in positive net income and cash flows, if sales levels decrease significantly and we are unable to reduce expenses proportionately, our business may be adversely affected.

The amount of our operating expenses are subject to variables and factors that may not be within our control, including but are not limited to, unexpected expenses relating to the manufacturing of products;

increased compensation requirement for our employees and cost of raw materials.

increased compensation requirements for our employees and cost of raw materials.

A significant portion of our expense is labor cost, including costs for workers who are operating our facility in the Dominican Republic.

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Some of these distributors and wholesalers, particularly smaller firms with limited working capital and resources, may not be able to withstand adverse changes in business conditions or mitigate the negative impact of a prolonged economic downturn or recession, including the impact of the COVID-19 pandemic.

The failure of our distributors to maintain financial heath and success will impact our ability to generate revenues.

Furthermore, our relationship with distributors may change or terminate due to other factors beyond

our control, including but are not limited to, acquisition of distributors by third parties may not be willing to continue the relationship with us;

The failure of our distributors to maintain financial health and success will impact our ability to generate revenues.

Furthermore, our relationship with distributors may change or terminate due to other factors beyond our control, including but are not limited to, acquisition of distributors by third parties may not be willing to continue the relationship with us;

internal restructuring or refocus of business strategies;

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We rely on introduction of new products and services to penetrate new markets and identify additional sources of revenues order to grow our business.

However, many of our distributors and customers may not be willing to change or switch to new products and equipment, or may require an extended period time to assess, test and evaluate functionalities and performance of our new products.

However, many of our distributors and customers may not be willing to change or switch to new products and

equipment, or may require an extended period time to assess, test and evaluate functionalities and performance of our new products.

Any delays in establishing widespread acceptance of our new products may adversely affect our financial performance and growth.

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The facility requires us to incur certain fixed operating costs that do not fluctuate with changes in production levels or utilization of our manufacturing capacity.

If production levels decline due to lower demand or reduced customer orders, our fixed

costs are spread over reduced levels, which may contribute to decreasing margins and reduced profitability.

If production levels decline due to lower demand or reduced customer orders, our fixed costs are spread over reduced levels, which may contribute to decreasing margins and reduced profitability.

Operation of a manufacturing facility also subjects us to certain additional risks, including but not limited to the following:

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dollars weakens and the currency exchange rate is less favorable, it may be more costly for us to pay expenses for our factory in the Dominican Republic, which may adversely affect our financial conditions and results of operations.

Future changes to U.S.

income tax or trade policies impacting multi-national companies, including tariffs, could materially affect our financial condition and results of operations.

On April 2, 2025, the U.S.

announced a new universal baseline tariff of 10%, (which includes imports from the Dominican Republic where we manufacture most of our products) plus significant additional country-specific tariffs for select trading partners, on all U.S.

The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S.

presents significant challenges to our operations and supply chain and could impact future result.

We cannot predict what additional actions might be considered or implemented by the U.S.

or its trade partners, particularly in the current geopolitical environment.

We anticipate that the imposition of the baseline 10% tariff will increase the cost of our products and could impact product margins.

The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs.

We are closely monitoring the evolving tariff landscape and attempting to mitigate these impacts, including using pricing adjustments, sourcing strategies and other cost-mitigation measures.

However, there can be no assurance that we will be able to fully mitigate the impacts of such tariffs or that the imposition of tariffs, and the resulting economic impact on the U.S.

market and consumer, will not be material to our financial results.

We primarily source our manufacturing materials from Asia, including Taiwan, India and China, with additional sourcing from other producers throughout the world.

There have been significant enacted and proposed reciprocal tariffs on certain of these countries.

At this time, the overall impact on our business related to tariffs remains uncertain and depends on multiple factors, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, reciprocal measures by impacted trade partners, inflationary effects, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.

Changes in U.S.

policies, including tariffs may adversely affect our business, financial condition, and results of operations.

Tariff decisions in the current environment has become difficult to predict.

We source certain raw materials, components, and finished goods from international suppliers and are therefore exposed to changes in U.S.

trade policy.

In recent years, the United States has imposed, modified, suspended, or terminated tariffs under various statutory authorities, including IEEPA, Section 122, and Section 301.

These actions have been subject to significant legal, political, and regulatory uncertainty, including court challenges and subsequent replacement tariffs.

Recent developments have included judicial rulings concerning the legality of certain IEEPA-based tariffs and the implementation of alternative tariff programs under Section 122 and Section 301 authorities.

Future tariff actions, retaliatory trade measures, changes in tariff rates, expansion of tariff coverage, or modifications to applicable exemptions could increase our costs of goods sold, reduce profit margins, disrupt our supply chain, and negatively impact demand for our products.

Although certain tariffs imposed under IEEPA have been invalidated by courts and may be subject to refund claims, replacement tariffs imposed under Section 122, Section 301, or other trade authorities may continue, expand, or be modified.

The ultimate scope, duration, and economic impact of these measures remain uncertain and could adversely affect our sourcing costs, supply chain stability, and operating results.

In addition, uncertainty regarding future trade policy may adversely affect purchasing decisions by customers, availability of suppliers, ocean freight capacity, and inventory planning.

While we may seek to mitigate the impact of tariffs through pricing actions, sourcing alternatives, contractual arrangements, or supply chain adjustments, there can be no assurance that such measures will fully offset increased costs or disruptions.

Furthermore, ongoing litigation, administrative actions, and governmental policy changes relating to tariffs may create uncertainty regarding the amount, timing, and recoverability of any tariff-related costs or refunds.

As a result, changes in the tariff environment could have a material adverse effect on our business, financial condition, cash flows, and results of operations.

Our business could be materially adversely affected by adverse tax consequences of offshore operations.

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As a result of the COVID-19 pandemic and the related economic downturn, we experienced a decline in the demand for our products, as our distributors and customers reduced orders and adjusted their inventory channel in response to slowdown in spending and demand for security products.

While the economic recovery from this pandemic has resulted in increased demand for our products beginning in the fiscal year ended June 30, 2021, re-institution of a prolonged stay-at-home order, or any other continued decrease in economic activity as a result of COVID-19 pandemic, could have a negative adverse impact on our customers and their financial condition, which could impact their ability to meet their financial obligations and could result in elevated levels of delinquencies and bad debt losses.

negative adverse impact on our customers and their financial condition, which could impact their ability to meet their financial obligations and could result in elevated levels of delinquencies and bad debt losses.

In addition, we rely upon our third-party vendors to provide parts and materials for us to produce our products.

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Our information technology systems, along with those of the third parties whom we rely on, are potentially vulnerable to a variety of evolving cybersecurity threats that may expose our data to unauthorized persons or otherwise compromise its integrity.

In addition, cyber-attacks from computer hackers and cyber criminals and other malicious Internet-based activity continue to increase generally, and perpetrators of cyber-attacks may be able to develop and deploy viruses, worms, ransomware, malware, DNS attacks, wireless network attacks, attacks on our cloud networks, phishing attempts, social engineering attempts, distributed denial of service attacks and other advanced persistent threats or malicious software programs that attack our products and services, our networks and network endpoints or otherwise exploit any security vulnerabilities of our products, services and networks.

software programs that attack our products and services, our networks and network endpoints or otherwise exploit any security vulnerabilities of our products, services and networks.

Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target.

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The success of the Company is largely dependent on the effort and service of our senior management members, including Mr.

Richard Soloway, the founder, Chief Executive Officer, Chairman of our board of directors, and Mr.

Kevin Buchel, President and Chief Operating Officer.

Richard Soloway, the Founder and Executive Chairman, and Mr.

Kevin Buchel, Chief Executive Officer and President.

We depend on them for various aspects of our business operation, including their experience and knowledge in the industry, extensive relationships with distributors and customers, and their leadership to develop and implement business strategies.

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Soloway and Mr.

Buchel could have a

material adverse effect on the Company’s business and prospects.

Buchel could have a material adverse effect on the Company’s business and prospects.

Messrs Soloway and Buchel are 80 and 73 years old, respectively.

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If we issue additional equity or equity-linked securities, our stockholders may experience significant dilution of their ownership interests and the market price of our common stock could decline.

If we engage in additional debt financing, the holders of such debt would have priority over the holders of our common stock, and we may be required to accept terms that further restrict our operations or our ability to incur additional indebtedness or to take other actions that would otherwise be in the interests of the debt holders.

If we engage in additional debt financing, the holders of such debt would have priority over the holders

of our common stock, and we may be required to accept terms that further restrict our operations or our ability to incur additional indebtedness or to take other actions that would otherwise be in the interests of the debt holders.

Any of the above could harm our business, results of operations, and financial condition.

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Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Recent and proposed changes to SEC reporting and filer-status requirements may affect the Company's future compliance obligations under Section 404 of the Sarbanes-Oxley Act and other disclosure rules.

Regardless of any reduction in external attestation requirements, management remains responsible for maintaining effective internal control over financial reporting.

Failure to maintain effective controls, successfully implement regulatory changes, or address evolving disclosure requirements could result in increased compliance costs, regulatory scrutiny, litigation exposure, reputational harm, or loss of investor confidence.

Cost of operating as a public company, and compliance with SEC regulations.

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We may not be successful in implementing these requirements and implementing them could materially and adversely affect our business, results of operations and financial condition.

In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our operating results on a timely and accurate basis could be impaired.

In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our operating results on a timely and

accurate basis could be impaired.

If we do not implement such requirements in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC and the NASDAQ.

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We also expect the regulations under Section 404 of the SOX Act to increase our legal and financial compliance costs, making it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on our audit committee, and make some activities more difficult, time-consuming, and costly.

For the year ended June 30, 2024, management identified a control deficiency related to inventory costing, as a result of ineffective review of information used in the inventory costing process that was considered a material weakness.

Although we remediated this material weakness as of June 30, 2025, there is no assurance that additional material weaknesses will not occur or that we will be able to remediate any additional material weaknesses in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the SOX Act.

If we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the SOX Act in a timely manner, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be materially adversely affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.

Risks Related to Ownership of Our Common Stock

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We are unable to predict the effect that sales, particularly sales by our directors, executive officers, and significant stockholders, may have on the prevailing market price of our common stock.

Additionally, the shares of common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under

our equity incentive plans, as well as shares issuable upon vesting of restricted stock awards, will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.

Additionally, the shares of common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans, as well as shares issuable upon vesting of restricted stock awards, will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.

Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation, or impact our stock price.

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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