14
certain databases that make the delivery of an 9-1-1 call possible. No such requirements exist for VoIP service providers so carriers
could prevent us from continuing to provide VoIP 9-1-1 service by denying us access to the required databases.
Failure to meet our contractual obligations, including sufficiently reliable software and successful integration with
customer networks, could adversely affect our profitability and future prospects.
We design, develop and manufacture technologically advanced and innovative products and services applied by our customers
in a variety of environments. Problems and delays in development or delivery as a result of issues with respect to design, technology,
licensing and patent rights, labor, learning curve assumptions, or materials and components could prevent us from achieving
contractual obligations. In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen
problems. Examples of unforeseen problems which could negatively affect revenue and profitability include problems with quality,
delivery of subcontractor components or services, and unplanned degradation of product performance.
Our operations are subject to government regulations, and failure to comply with them will harm our business.
We operate FCC licensed teleports in Manassas, Virginia and the Republic of Kiribati subject to the Communications Act of
1934, as amended, or the FCC Act, and the rules and regulations of the FCC. We cannot guarantee that the FCC will grant renewals
when our existing licenses expire, nor are we assured that the FCC will not adopt new or modified technical requirements that will
require us to incur expenditures to modify or upgrade our equipment as a condition of retaining our licenses. We are also required to
comply with FCC regulations regarding the exposure of humans to radio frequency radiation from our teleports. These regulations, as
well as local land use regulations, restrict our freedom to choose where to locate our teleports.
The sale of our products outside the U.S. is subject to compliance with the United States Export Administration Regulations
and, in certain circumstances, with the International Traffic in Arms Regulations. The absence of comparable restrictions on
competitors in other countries may adversely affect our competitive position. In addition, in order to ship our products into and
implement our services in some countries, the products must satisfy the technical requirements of that particular country. If we were
unable to comply with such requirements with respect to a significant quantity of our products, our sales in those countries could be
restricted, which could have a material adverse effect on our business, results of operations and financial condition.
We may, in the future, be required to seek FCC or other government approval if foreign ownership of our stock exceeds certain
specified criteria. Failure to comply with these policies could result in an order to divest the offending foreign ownership, fines, denial
of license renewal and/or license revocation proceedings against the licensee by the FCC, or denial of certain contracts from other
U.S. government agencies.
If wireless carriers do not continue to provide our wireless applications to their subscribers, our business could be harmed.
Our success with applications depends on increasing the number of end users that purchase the products and services of our
wireless applications business from our wireless carrier partners. Our wireless carrier partners may change the pricing and other
terms by which they offer our wireless applications business, which could result in increased end user churn, lower revenue and
adverse effects on our business.
A portion of our revenue is derived from subscription fees that we receive from our wireless carrier partners for end users who
subscribe to our service on a standalone basis or in a bundle with other services. To date, a relatively small number of end users have
subscribed for our services in connection with their wireless plans compared to the total number of mobile phone users. The near term
success of our wireless applications business depends heavily on achieving significantly increased subscriber adoption of the products
and services of our wireless applications business either through stand alone subscriptions to our services or as part of bundles from
our existing wireless carrier partners. The success of our wireless applications business also depends on achieving widespread
deployment of the products and services of our wireless applications business by attracting and retaining additional wireless carrier
partners. The use of the products and services of our wireless applications business will depend on the pricing and quality of those
services, subscriber demand for those services, which may vary by market, as well as the level of subscriber turnover experienced by
our wireless carrier partners. If subscriber turnover increases more than we anticipate, our financial results could be adversely
affected.
Competitors offer technology that has functionality similar to ours for free, under different business models. Competition from
these free offerings may reduce our revenue and harm our business. If our wireless carrier partners can offer these location-based
services to their subscribers for free, they may elect to cease their relationships with us, alter or reduce the manner or extent to which
they market or offer our services or require us to substantially reduce our subscription fees or pursue other business strategies that may
not prove successful for us and have a material adverse effect on our business, financial position, results of operations or cash flows.
