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We cannot guarantee that our estimated contract backlog will result in actual revenue.
As of December 31, 2013, our estimated contract backlog totaled approximately $1.0 billion, of which $288.1 million was
funded. There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract
included in backlog will be profitable. There is a higher degree of risk in this regard with respect to unfunded backlog. The actual
receipt and timing of any revenue is subject to various contingencies, many of which are beyond our control. The actual receipt of
revenue on contracts included in backlog may never occur or may change because a program schedule could change, the program
could be canceled, a contract could be reduced, modified or terminated early, or an option that we had assumed would be exercised
not being exercised. Approximately 20% of our funded contract backlog consisted of Government Segment orders and the fluctuations
in political and fiscal policy priorities and processes materially influence the funding of our backlog and our ability to convert backlog
into revenue. Our estimates are based on our experience under such contracts and similar contracts. However, there can be no
assurances that all, or any, of such estimated contract value will be recognized as revenue.
We are subject to procurement and other related laws and regulations which carry significant penalties for non-compliance.
As a supplier to the U.S. government, we must comply with numerous regulations, including those governing security and
contracting practices. In addition, prime contracts with various agencies of the U.S. government and subcontracts with other prime
contractors are subject to numerous laws and regulations.
Failure to comply with these procurement regulations and practices could result in fines being imposed against us or our
suspension for a period of time from eligibility for bidding on, or for award of, new government contracts. If we are disqualified as a
supplier to government agencies, we would lose most, if not all, of our U.S. government customers and revenues from sales of our
products would decline significantly. Among the potential causes for disqualification are violations of various statutes, including those
related to procurement integrity, export control, U.S. government security regulations, employment practices, protection of the
environment, accuracy of records in the recording of costs, and foreign corruption. The government could investigate and make
inquiries of our business practices and conduct audits of contract performance and cost accounting. Based on the results of such audits,
the U.S. government could adjust our contract-related costs and fees. Depending on the results of these audits and investigations, the
government could make claims against us, and if it were to prevail, certain incurred costs would not be recoverable by us.
Technological and regulatory change to wireless and next-generation 9-1-1 could affect our future performance.
The Federal Communication Commission, or FCC, requires that certain location information be provided to network operators
for public safety answering points when a subscriber makes a 9-1-1 call. Technical failures, greater regulation by federal, state or
foreign governments or regulatory authorities, time delays or the significant costs associated with developing or installing improved
location technology could slow down or stop the deployment of our mobile location products. If deployment of improved location
technology is delayed, stopped or never occurs, market acceptance of our products and services may be adversely affected. Because
we will rely on some third-party location technology instead of developing all of the technology ourselves, we have little or no
influence over its improvement.
The technology employed with next-generation 9-1-1 services generally anticipates a migration to internet-protocol (or IP)
based communication. Since many companies are proficient in IP-based communication protocols, the barriers to entry to providing
next-generation 9-1-1 products and services are lower than exist for the traditional switch-based protocols. If we are unable to develop
unique and proprietary solutions that are superior to and more cost effective than other market offers, our 9-1-1 business could get
replaced by new market entrants, resulting in material adverse impacts on our overall business, financial position, results of operations
or cash flows.
Our 9-1-1 business is dependent on state and local governments and the regulatory environment for Voice over Internet
Protocol (VoIP) services is developing.
Under the FCC’s mandate, wireless carriers are required to provide 9-1-1 services only if state and local governments request
the service. As part of a state or local government’s decision to request 9-1-1, they have the authority to develop cost recovery
mechanisms. However, cost recovery is no longer a condition to wireless carriers’ obligation to deploy the service. If state and local
governments do not widely request that 9-1-1 services be provided or we become subject to significant pressures from wireless
carriers with respect to pricing of 9-1-1 services, our 9-1-1 business would be harmed and future growth of our business would be
reduced.
The FCC has determined that VoIP services are not subject to the same regulatory scheme as traditional wireline and wireless
telephone services. If the regulatory environment for VoIP services evolves in a manner other than the way we anticipate, our 9-1-1
business would be significantly harmed and future growth of our business would be significantly reduced. For example, the regulatory
scheme for wireless and wireline service providers requires those carriers to allow service providers such as us to have access to
