Item
1. Business
Overview
Weyland
Tech, Inc., a Delaware corporation that incorporated in 2004, enables small-to-medium-sized businesses (“SMBs”) to create
a mobile application (“app”) for their business without the need of technical knowledge, high investment, or background
in information technology (“IT”) by utilizing the Company’s core platform, “CreateApp”, which is
a platform that is offered as a Platform as a Service (“PaaS”) to the Company’s clients and customers. Weyland
Tech is headquartered in New York, with offices in New York City, and its common stock is quoted on the OTCQX Market under the
symbol, “WEYL.”
We
provide our PaaS to SMBs in a wide variety of industry sectors. We believe that SMBs can increase their sales, reach more customers,
and promote their products and services using our PaaS, which we believe is a simple, easy to build mobile app at an affordable
price and in a cost-effective manner. We recognize revenue on a pay to use subscription basis when our customers use our platform
in order to create mobile apps for their business.
On
April 23, 2018, the Company participated in the incorporation of a company in Indonesia, PT Weyland Indonesia Perkasa (“WIP’),
an Indonesian limited liability company of which the Company held a 49% equity interest, spun off to shareholders as of December
2018, with the option to purchase an additional 31% equity interest at a later date.
The
Company holds a 31% unexercised option in WIP as at December 31, 2019.
On December 18, 2019, the Company, and
its wholly-owned subsidiary, Origin8, Inc., a Nevada corporation (“Origin8), entered into an Asset Purchase Agreement (the
“Purchase Agreement”) whereby Origin8 would acquire substantially all of the assets of Push Holdings, Inc. (“Push”),
a wholly-owned subsidiary of ConversionPoint Technologies, Inc. (“ConversionPoint,” and together with Push, the “Sellers”),
in exchange for a total of up 35,714,285 shares of restricted common stock (the “Sellers’ Shares”) of the Company
(the “Transaction”).
On January 8, 2020, the Company, via its
wholly-owned subsidiary, completed the acquisition of substantially all of the assets of Push pursuant to the terms of the Purchase
Agreement.
Under the terms of the Purchase Agreement,
at closing the Company issued 28,571,428 of the Sellers’ Shares to ConversionPoint, and the remaining 7,142,857 of such Sellers’
Shares were issued and placed in an independent third-party escrow where such shares will be released to ConversionPoint once the
Sellers achieve certain milestone requirements, subject to offset for indemnification purposes.
Products
General
Since
2017, we have been focused on enabling mobile commerce via our enhanced platform offered on a PaaS
basis, and the Company’s e-wallet initiative. Product launches with our strategic partners DPEX (Indonesia), BGT (Thailand),
and Augicom/Orange (France) are representative of the PaaS platform strategy and product offering.
As
of the filing date of this annual report, we currently offer the following products: (i) CreateApp, (ii) AtozPay, and (iii) AtozGo.
CreateApp
CreateApp,
the Company’s core product and PaaS, allows SMBs to create mobile apps for their business without the need of technical
knowledge, high investment, or background in IT.
CreateApp
has evolved over the course of 2017, 2018 and 2019 to capitalize on the immediate opportunity for developing a larger network
of valuable users and merchants by developing services that will enable the adoption of mobile commerce across Greater South East
Asia and the United States. The platform enhancements have taken the Company’s technology from a standalone DIY app builder,
to an enhanced platform built to enable mobile commerce by empowering users to create their own e & M-commerce ecosystem.
In
2019, Weyland focused on scaling this business model by continuing to develop and expand strategic partnerships that would increase
the number of users and merchants available to users of the Company’s products on a PaaS basis. These efforts expanded on
the success of recent product launches representative of the PaaS platform strategy and product offerings with our strategic partners,
and after extensive discussions with our partners, management believes that supporting these initiatives through deeper engagement,
interaction, and co-marketing/sales substantially benefited the Company in 2018 and 2019.
AtozPay
AtozPay,
beta testing originally launched in late 2017 as the Company’s e-wallet initiative, is a ‘consumer facing’ product
offering that supports the PaaS strategy developed by the enhancements to the CreateApp platform that provides payment capabilities
to users of our platform. However, AtozPay is designed to be a robust, universal payment platform, therefore, its growth is not
limited to the Company’s PaaS customers alone.
Since
its launch, AtozPay has surpassed the Company’s expectations as it has achieved stronger than anticipated customer traction
with limited marketing expense. In 2019, AtozPay’s total gross mobile transaction volume totaled $16 million.
AtozGo
AtozGo
is our PaaS platform that provides mobile payment capabilities for the local food delivery service industry.
We launched AtozGo
in the fall of 2019 in Jakarta, Indonesia, and as of the filing date of this annual report, AtozGo has reached a registered customer
base of 102,000 mobile users. About 16% of the userbase has been generating more than 16,000 deliveries per day.
The
Company plans to continue to reinvest in AtozGo in order to increase user growth and regional expansion with its unique pedestrian-powered
approach to urban food delivery.
Product
Development
Development
of our software is focused on expanding product lines, designing enhancements to our core technologies, and integrating existing
and new products into our principal software architecture and platform technologies. We intend to continue to offer regular updates
to our products and to continue to look for opportunities to expand our existing suite of products and services.
To date, we have developed
products internally, sometimes also licensing or acquiring products, or portions of products, from third parties. These arrangements
sometimes require that we pay royalties to third parties. We intend to continue to license or otherwise acquire technology or products
from third parties when it makes business sense to do so.
Our
Strategy
Although
Weyland Tech’s CreateApp platform originally focused on the Pan-Asia markets—the platform is provided in fourteen, predominantly
Asian, languages—we have partners that work with us to develop other markets.
The
CreateApp platform enables SMBs to create a mobile app without the need of technical knowledge, high
investment or background in IT.
We
believe that through our app, SMBs can increase sales, reach more customers and promote their products and services via a simple
easy to build mobile app at an affordable price and in a cost-effective manner.
Weyland
Tech currently offers the CreateApp platform directly, as a Platform as a Service (PaaS).
Weyland
Tech also offers a DIY App builder through a ‘white label’ platform, also under a PaaS model, with the apps developed generating
revenue in the following markets, primarily via cooperation agreements that were structured in late 2015, 2016 and 2017.
For
the territories licensed to our distributors and on a white label basis, we derive royalty income from the end user use of our
platform.
Plan
of Operations
During
2019 Weyland plans to continue to develop and expand strategic partnerships that would increase the number of users and merchants
available to users of the Company’s products on a PaaS basis.
This includes the continued
roll-out of the PaaS platform with our strategic partners in various regions as well as introducing additional logistics solutions
with PT Royal Express Indonesia.
Furthermore, the company
expects to expand the AtoZPay e-wallet services as our QR Code payment technology trials to continue and are now poised to launch
a robust marketing effort. The company’s partnership with Finnet is expected to accelerate adoption to over 200,000 merchant
outlets using AtoZPay QR technology after our launch in early 2019.
Finnet
http://www.finnet-indonesia.com/home/en, founded in 2005, is 60% owned by PT. Telekomunikasi Indonesia, the largest provider of
telecom services in Indonesia, is currently the largest ‘fixed-line’ provider with over 10 million households and
businesses as their clients.
Further, the Company
plans to expand the AtoPay e-wallet solution to other Greater South East Asia countries.
Finally,
the company also plans to begin cross-selling efforts of the PaaS platform to customers in the Indonesian market that initially
adopted the AtoZPay e-wallet solution. At the same, the company plans to expand marketing efforts to specific affinity groups
and everyday product merchants currently underserved in Indonesia.
Sales
and Marketing
Our
sales and marketing efforts are focused on promoting sales, producing expert content and brand awareness.
Sales
Service
revenues were $34,648,621 and $22,667,325 for the twelve months ended December 31, 2019 and 2018, respectively. The increase is
due to a push for market share for the CreateApp platform during 2019 in highly competitive emerging markets as well as new subscriptions
sold to existing customers and subscriptions sold directly to new customers.
Marketing
Sales
and Marketing expense were $389,610 for the twelve months ended December 31, 2019, (2018: $0). This represents the marketing,
market awareness and positioning expenses in June 2019 in connection with the Reg. S fund raising efforts assisted by a
consulting company.
Research
and Development
Research
and Development expense were $6,412,998 and $4,773,349 for the twelve months ended December 31, 2019 and 2018, respectively. The
increase reflects a reclassification from cost of service, spending on website, e-commerce platform and mobile app development
(powered by CreateApp & Magento), completion of the DPEX Enable dashboard as well as integrating various functionality including
the AtoZ Pay payment facility into the PaaS 3.0 platform. Additionally, the company continued development of the company’s
system support knowledge base and other internal systems. The increase was funded primarily from operating income and capital
raising efforts.
Additional
functionality added and enhanced during 2019 includes but is not limited to:
Infrastructure
Improvements
Enhancements
|
●
|
Improve
Publishing & Build Preparations
|
|
●
|
Improve
Email notification templates
|
|
●
|
Admin
Panel - Manage Merchant Enhancements
|
|
●
|
Admin
Panel - Manage Resellers Enhancements
|
|
●
|
Admin
Panel - Manage Application Enhancements
|
|
●
|
Admin
Panel - Menu Updates
|
|
●
|
Contact
Us & Map Routing Enhancements
|
|
●
|
Implement
Event Sorting Functionality
|
|
●
|
Rupiah
Currency Enhancement
|
|
●
|
Publishing
Email Notification Enhancement
|
|
●
|
Publishing
Page Enhancement
|
|
●
|
Gallery
Module Enhancement
|
|
●
|
Image
Loading Enhancement
|
|
●
|
Transactional
Email Distributions Enhancement
|
New
Features
|
●
|
Implement
Advertisement Module
|
|
○
|
Google
Admob Integration
|
|
●
|
Bank
Transfer payment method Implementation
|
|
●
|
64-bit
Android Capabilities Implementation
|
|
●
|
Android
X compatibility Implementation
|
|
●
|
Implement
Android Go Devices compatibility
|
|
●
|
Upgrade
Android API Level to version 28 (Pie) and 29 (Android 10)
|
|
●
|
QR
Code Implementation at Invoice
|
|
●
|
iOS
12 & 13 compatibility Implementation
|
|
●
|
iPhone
X and above compatibility implementation
|
|
●
|
Platform
& Preview Kit Versioning System
|
Need
for Additional Capital
To
become profitable and competitive, and execute strategic transactions, we may have to raise additional capital. If we are unable
to raise additional equity capital to develop our business and continue earning revenues, we might have to suspend or cease operations
and our investors may lose their investment.
We
have no assurance that future financings will be available to us on acceptable terms. If financing is not available on satisfactory
terms, we may be unable to continue, develop, or expand our operations. Equity financing could result in additional dilution to
existing shareholders.
SMBs
The
Company believes that these agreements will create a large enough addressable market opportunity to generate sales and profits
in a scalable manner, grow the Company’s business and enhance shareholder value. Given the nature of DIY mobile apps (“apps”),
and the primary target market of SMBs, a typical go-to-market strategy would have a direct sales force or resellers approach SMBs
directly to drive our revenue.
Over
the past two years, the Company has evolved our Platform as a service model with three distinct market paths to drive recurring
revenue business model:
A) Cooperation agreements in countries/regions where our partners are responsible for targeting SMBs either
through an installed base of customers or groups of Direct Sellers with a sales force encompassing SMBs as end customers.
B)
Enterprise Solutions where large retailers (hypermarket chains, mall owners, brand owners with company-owned and franchise stores)
adopt a ‘Master App’ on a white-label basis, hosted at a 3rd party regional Hosting or Data Center facility.
C)
Digital Wallet or e-Wallet: a digital financial services business, a distinguishing characteristic of Greater South East Asia
(“GSEA”) compared to the United States, is the substantially lower percentage of the population in GSEA with bank
accounts, credit cards, or debit cards. This creates the need for alternative payment methods, specifically e-wallets. GSEA is
poised for its own payments transformation in much the same way that China has shifted to online payments, according to IDC. Online
payments in GSEA is divided into four broad payment modes: e-wallets, such as our AtoZPay platform, credit cards, debit cards
and online banking. Of these, the e-wallet mode is expected to grow the fastest over the next five years, according to IDC. Drivers
for GSEA’s e-wallet industry include the mismatch between internet penetration and banking penetration, which creates a
structural opportunity for e-wallets; the increasing integration of e-wallets with use cases such as online games and e-commerce;
and the opportunity to offer broader digital financial services using e-wallets as a foundation.
With
the above strategy, we believe that the Company has been able to maintain a lower capital expenditure base due to the ‘level-two’
customer support vs. ‘level-one’ customer support, smaller sales and marketing teams, and the need to provide hosting services.
The
Company’s CreateApp Platform operates as a Platform as a Service (“PaaS”) allowing users to develop their own
applications supplying the infrastructure and IT services, which users can access anywhere via a web or desktop browser.
The Company recognizes revenue on a pay to use subscription basis when our customers use our platform.
We
do not compensate resellers and distributors, instead the end user pays the reseller/distributor directly as well as paying for
our services, for which we or our reseller/distributor in licensed territories bill the end user separately.
Growth
of the Mobile Apps Industry
We
believe that there are a number of factors that are contributing to the continued growth of the mobile apps industry: (i) smartphone
adoption continues to increase globally; (ii) lower purchase prices of smartphones for consumers; (iii) smartphone users are becoming
increasingly comfortable with the process of searching for and conducting business on their phones; (iv) SMBs are placing more
emphasis on implementing a mobile app versus a mobile website to enable customers to gain a higher level of interaction and functionality;
and (v) internet users in emerging markets use smartphones as their primary internet access device, having bypassed the desktop
PC entirely. We believe that the Company will be able to participate in the growth of the mobile apps industry by offering an
affordable, easy to build and use platform.
Recent
Developments
Acquisition
of Assets of Push Holdings, Inc.
On
December 18, 2019, the Company and its wholly-owned subsidiary, Origin8, Inc., a Nevada corporation (“Origin8”),
entered into an Asset Purchase Agreement (the “Purchase Agreement”) whereby Origin8 would purchase substantially
all of the assets of Push Holdings, Inc. (“Push”), a wholly-owned subsidiary of ConversionPoint Technologies,
Inc. (“ConversionPoint”), in exchange for a total of up to 35,714,285 shares of restricted common stock (the
“Shares”) of the Company (the “Transaction”).
On
January 8, 2020, the Company completed the Transaction. Under the terms of the Purchase Agreement, at closing, the Company
issued 28,571,428 Shares to ConversionPoint and 7,142,857 Shares were issued and placed in an independent third-party escrow
where such Shares will be released to ConversionPoint if ConversionPoint and Push achieve certain performance milestone
requirements, subject to offset for indemnification purposes.
Approval
of Reverse Split Ratio Range; Effectuating Reverse Split
On
November 15, 2019, we held a Special Meeting of Stockholders (the “Special Meeting”) pursuant to notice duly given.
At the Special Meeting, our stockholders were asked to consider and vote on the proposal to grant the Company’s Board of
Directors (the “Board”) discretionary authority to amend the Company’s Certificate of Incorporation to effectuate
a reverse stock split of the Company’s common stock, $0.0001 par value (“Common Stock”), by a ratio of no less
than 1-for-5 and no more than 1-for-20, with such ratio to be determined by the Board in its sole discretion (the “Reverse
Split”), and with such Reverse Split to be effective at such time and date, if at all, as determined by the Board in its
sole discretion, it being understood that the purpose of the Reverse Split is to attempt to obtain a listing of the Company’s
Common stock on The Nasdaq Capital Market (the “Proposed Action”).
On
November 15, 2019, our stockholders approved the Proposed Action.
On
February 25, 2020, the Board filed a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State
of the State of Delaware to effectuate the Reverse Split of the Company’s Common Stock, at a ratio of 1-for-13.
The
Reverse Split became effective on February 27, 2020 (the “Effective Date”), and was approved by the Financial Industry
Regulatory Authority (“FINRA”).
On
the Effective Date, the total number of shares of the Company’s Common Stock held by each stockholder was converted
automatically into the number of whole shares of Common Stock equal to (i) the number of issued and outstanding shares of Common
Stock held by such stockholder immediately prior to the Reverse Split, divided by (ii) 13.
The
Reverse Split did not change the current authorized number of shares of capital stock of the Company. Thus, the Company shall
continue to be authorized to issue up to 250,000,000 shares of Common Stock.
Competition
Our business is rapidly
evolving and highly competitive. Our current and potential competitors include, eCommerce and eWallet platforms.
Each
of the above listed industries in GSEA is highly fragmented. We face competition in each of our lines of business in each market
where we operate. Some of our competitors, particularly those based outside of GSEA, may have greater access to capital markets,
more financial and other resources, and a longer operating history than we do.
E-commerce
We
face competition principally from regional players that operate across several markets in the region. We also face competition
from single-market players in the region. We compete to attract, engage and retain buyers based on the variety and value of products
and services listed on our marketplaces, overall user experience and convenience, online communication tools, integration with
mobile and networking applications and tools, quality of mobile applications, and availability of payment settlement and logistics
services. We also compete to attract and retain sellers based on the number and engagement of buyers, the effectiveness and value
of the marketing services we offer, commission rates and the usefulness of the services we provide including data and analytics
for potential buyer targeting, cloud computing services and the availability of support services including payment settlement
and logistics services.
E-wallet Platforms
AtoZPay
competes primarily with credit card and debit card service providers, banks with payment processing offerings, other offline payment
options and other electronic payment system operators. AtoZPay competes with these companies primarily on the basis of transaction
processing speed, convenience, network size, accessibility, reliability and price. We believe the combination of AtoZPay’s
numerous physical service counters and the AtoZPay App is a significant competitive advantage because of the strong demand in
GSEA for convenient forms of payment processing.
Our
business is rapidly evolving and highly competitive. Our current and potential competitors include: (1) Advertising companies,
Web design firms and more recently, mobile app makers; (2) other DIY mobile app companies; (3) a number of indirect competitors,
including media companies, web portals, comparison shopping websites, and web search engines, either directly or in collaboration
with SMBs; (4) companies that provide e-commerce services, including website/app development.; (5) companies that provide infrastructure
web and mobile services. We believe that the principal competitive factors in our mobile apps business include ease of use, affordability
and broad range of functionality. Many of our current and potential competitors have greater resources, slightly longer histories,
more customers, and greater brand recognition. They may adopt more aggressive pricing and devote more resources to technology,
functionality and ease of use and marketing. Other companies also may enter into business combinations or alliances that strengthen
their competitive positions.
Intellectual
Property
The Company has, under
a software purchase agreement (“SPA”), the eWallet platform currently operating under the brand names AtozPay and AtozGo
in Indonesia, and the global rights to market and operate in other countries, worldwide.
Item
1A. Risk Factors
Investing
in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other
information in this Annual Report, including our financial statements and the related notes, and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. In
addition to other information in this Annual Report and in other filings we make with the Securities and Exchange Commission,
the following risk factors should be carefully considered in evaluating our business as they may have a significant impact on
our business, operating results and financial condition. If any of the following risks actually occurs, our business, financial
condition, results of operations and future prospects could be materially and adversely affected. In such an event, the market
price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial also may impair our business operations. Because of the following factors,
as well as other variables affecting our operating results, past financial performance should not be considered as a reliable
indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
RISKS
RELATED TO OUR BUSINESS
We
are subject to risks associated with changing technologies in the mobile apps industry, which could place us at a competitive
disadvantage.
The
successful implementation of our business strategy requires us to continuously evolve our existing solutions and introduce new
solutions to meet customers’ needs. We believe that our customers rigorously evaluate our solution and service offerings
on the basis of a number of factors, including, but not limited to: quality; price competitiveness; technical expertise and
development capability; innovation; reliability and timeliness of delivery; operational flexibility; customer service; and overall
management.
Our
success depends on our ability to continue to meet our customers’ changing requirements and specifications with respect
to these and other criteria. There can be no assurance that we will be able to address technological advances or introduce new
offerings that may be necessary to remain competitive within the mobile apps industry.
Systems
failures could cause interruptions in our services or decreases in the responsiveness of our services which could harm our business.
If
our systems fail to perform for any reason, we could experience disruptions in operations, slower response times, or decreased
customer satisfaction. Our ability to host mobile apps successfully and provide high quality customer service depends on the efficient
and uninterrupted operation of our hosting company’s computer and communications hardware and software systems. Although unlikely,
our hosting company’s systems are vulnerable to damage or interruption from human error, natural disasters, power loss, telecommunication
failures, break-ins, sabotage, computer viruses, intentional acts of vandalism, and similar events. Any systems failure that causes
an interruption in our services or decreases the responsiveness of our services could impair our reputation, damage our brand
name, and materially adversely affect our business, financial condition and results of operations and cash flows.
If
our security is breached, our business could be disrupted, our operating results could be harmed, and customers could be deterred
from using our products and services.
Our
business relies on the secure electronic transmission, storage, and hosting of sensitive information, including financial information,
and other sensitive information relating to our customers, company, and workforce. As a result, we face some risk of a deliberate
or unintentional incident involving unauthorized access to our computer systems (including, among other methods, cyber- attacks
or social engineering) that could result in misappropriation or loss of assets or sensitive information, data corruption, or other
disruption of business operations. In light of this risk, we have devoted significant resources to protecting and maintaining
the confidentiality of our information, including implementing security and privacy programs and controls, training our workforce,
and implementing new technology. We have no guarantee that these programs and controls will be adequate to prevent all possible
security threats. We believe that any compromise of our electronic systems, including the unauthorized access, use,
or disclosure of sensitive information or a significant disruption of our computing assets and networks, would adversely affect
our reputation and our ability to fulfill contractual obligations, and would require us to devote significant financial and other
resources to mitigate such problems, and could increase our future cyber security costs. Moreover, unauthorized access, use, or
disclosure of such sensitive information could result in contractual or other liability. In addition, any real or perceived compromise
of our security or disclosure of sensitive information may result in lost revenues by deterring customers from using or purchasing
our products and services in the future or prompting them to use competing service providers.
Delays
in the release of new or enhanced products or services or undetected errors in our products or services may result in increased
cost to us, delayed market acceptance of our products, and delayed or lost revenue.
To
achieve market acceptance, new or enhanced products or services can require long development and testing periods, which may result
in delays in scheduled introduction. Any delays in the release schedule for new or enhanced products or services may delay market
acceptance of these products or services and may result in delays in new or existing customers from using these new or enhanced
products or services or the loss of new or existing customers. In addition, new or enhanced products or services may contain a
number of undetected errors or “bugs” when they are first released. Although we extensively test each new or enhanced
product or service before it is released to the market, there can be no assurance that significant errors will not be found in
existing or future releases. As a result, in the months following the introduction of certain releases, we may need to devote
significant resources to correct these errors. There can be no assurance, however, that all of these errors can be corrected.
Defects
or errors in our applications could harm our reputation, result in significant cost to us and impair our ability to market our
products and services.
Our
applications may contain defects or errors, some of which may be material. Errors may result from our own technology or from the
interface of our cloud-based solutions with legacy systems and data, which we did not develop. The risk of errors is particularly
significant when a new product is first introduced or when new versions or enhancements of existing products are released. The
likelihood of errors is increased when we do more frequent releases of new products and enhancements of existing products. We
have, from time to time, found defects in our applications. Although these past defects have not resulted in any litigation against
us to date, we have invested significant capital, technical, managerial, and other resources to investigate and correct these
past defects and we have needed to divert these resources from other development efforts. In addition, material performance
problems or defects in our applications may arise in the future. Material defects in our cloud-based solutions could result in
a reduction in sales, delay in market acceptance of our applications, or credits or refunds to our customers. In addition, such
defects may lead to the loss of existing customers and difficulty in attracting new customers, diversion of development resources,
or harm to our reputation. Correction of defects or errors could prove to be impossible or impractical. The costs incurred in
correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect
our operating results.
If
we are not able to reliably meet our data storage and management requirements, or if we experience any failure or interruption
in the delivery of our services over the Internet, customer satisfaction and our reputation could be harmed and customer contracts
may be terminated.
As
part of our current business model, we deliver our applications over the Internet and store and manage hundreds of terabytes of
data for our customers, resulting in substantial information technology infrastructure and ongoing technological challenges, which
we expect to continue to increase over time. If we do not reliably meet these data storage and management requirements, or if
we experience any failure or interruption in the delivery of our services over the Internet, customer satisfaction and our reputation
could be harmed, leading to reduced revenues and increased expenses. Our hosting services are subject to service-level agreements
and, in the event that we fail to meet guaranteed service or performance levels, we could be subject to customer credits or termination
of these customer contracts. If the cost of meeting these data storage and management requirements increases, our results of operations
could be harmed.
Upgrading
our products and services could result in implementation issues and business disruptions.
We
update our products and services on a periodic basis. In doing so, we face the possibility that existing customers will find the
updated product and/or service unacceptable, or new customers may not be as interested as they have been in the past versions.
Furthermore, translation errors might introduce new software and/or technical bugs that will not be caught.
New
entrants and the introduction of other platforms in our markets may harm our competitive position.
The
markets for development, distribution, and sale of offering SMBs a platform to create mobile apps for their business are rapidly
evolving. New entrants seeking to gain market share by introducing new technology, new products, and new platforms may make it
more difficult for us to sell our products which could create increased pricing pressure, reduced profit margins, increased sales
and marketing expenses, or the loss of market share or expected market share, any of which may significantly harm our business,
operating results and financial condition.
Our
future success depends on our ability to develop and successfully introduce new and enhanced products that meet the needs of our
customers.
Our
sales depend on our ability to anticipate our existing and prospective customers’ needs and develop products that address
those needs. Our future success will depend on our ability to design new products, anticipate technological improvements and enhancements,
and to develop products that are competitive in the rapidly changing mobile apps industry. Introduction of new products and product
enhancements will require coordination of our efforts with our customers to develop products that offer performance features desired
by our customers and performance and functionality superior or more cost effective than solutions offered by our competitors.
If we fail to coordinate these efforts, develop product enhancements or introduce new products that meet the needs of our customers
as scheduled, our operating results will be materially and adversely affected, and our business and prospects will be harmed.
We cannot assure that product introductions will meet our anticipated release schedules or that our products will be competitive
in the market. Furthermore, given the rapidly changing nature of the mobile apps market, there can be no assurance our products
and technology will not be rendered obsolete by alternative or competing technologies.
Our
cost structure is partially fixed. If our revenues decline and we are unable to reduce our costs, our profitability will be adversely
affected.
Our
cost structure is partially fixed, and if our revenues decrease, these fixed costs will not be reduced. We base our cost structure
on historical and expected levels of demand for our services, as well as our fixed operating infrastructure, such as computer
hardware, software, and staffing levels. If demand for our services declines, and as a result, our revenues decline, we may not
be able to adjust our cost structure on a timely basis and our profitability may be materially adversely affected.
Attrition
of customers and failure to attract new customers could have a material adverse effect on our business, financial condition and
results of operations, and cash flows.
Although
we offer mobile apps designed to support and retain our customers, our efforts to attract new customers or prevent attrition of
our existing customers may not be successful. If we are unable to retain our existing customers or acquire new customers in a
cost-effective manner, our business, financial condition and results of operations, and cash flows would likely be adversely affected.
Although we have spent significant resources on business development and related expenses and plan to continue to do so, these
efforts may not be cost-effective at attracting new customers.
Our
ability to sustain or increase revenues will depend upon our success in entering new markets, continuing to increase our customer
base, and in deriving additional revenues from our existing customers.
One
component of our overall business strategy is to derive more revenues from our existing customers by expanding their use of our
products and services. Such strategy would have our customers utilize our PaaS platforms and our tools and components to leverage
vast amounts of information stored in both corporate databases and public data sources in order to make informed business decisions
during the research and development process. In addition, we seek to expand into new markets, and new areas within our existing
markets, by potentially acquiring businesses in these markets, attracting and retaining personnel knowledgeable in these markets,
identifying the needs of these markets, and developing marketing programs to address these needs. If successfully implemented,
these strategies could increase the usage of our PaaS platforms from SMBs operating within our existing customer base, as well
as by new customers in other industries. However, if our strategies are not successfully implemented, our products and services
may not achieve market acceptance or penetration in targeted new departments within our existing customers or in new industries.
As a result, we may incur additional costs and expend additional resources without being able to sustain or increase revenue.
A pandemic, epidemic or outbreak
of an infectious disease in the United States or elsewhere may adversely affect our business.
If a pandemic, epidemic
or outbreak of an infectious disease occurs in the United States or elsewhere, our business may be adversely affected. In December
2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus continues to spread globally and, as
of March 2020, has spread to over 100 countries, including the United States and Indonesia. The spread of COVID-19 from China to
other countries has resulted in the World Health Organization declaring the outbreak of COVID-19 as a “pandemic,” or
a worldwide spread of a new disease, on March 11, 2020. Many countries around the world, including the United States, have imposed
quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. In response to this, many employers
throughout the United States and elsewhere (including us) are preparing and increasing as much as possible the capacity and arrangement
for employees to work remotely. However, we are still assessing the effect on our business, from the spread of COVID-19 and the
actions implemented by the governments of the United States and elsewhere across the globe.
The spread of an infectious
disease, including COVID-19, may result in the inability of our vendors or contractors to provide services on a timely basis.
In addition, announcements from health professionals or governmental agencies may have the effect of reducing our in-person staffing
or postpone meetings with vendors and customers in response to the spread of an infectious disease. Such events may result in
a period of business disruption, and in reduced operations, any of which could materially affect our business, financial condition
and results of operations. The extent to which COVID-19 impacts our business will depend on future developments, which are highly
uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions
to contain COVID-19 or treat its impact, among others.
If
we are not successful in selecting and integrating the businesses and technologies we acquire, or in managing our current and
future divestitures, our business may suffer.
Over
the years, we have expanded our business through acquisitions. We continue to search to acquire businesses and technologies and
form strategic alliances. However, businesses and technologies may not be available on terms and conditions we find acceptable.
We risk spending time and money investigating and negotiating with potential acquisition or alliance partners, but not completing
transactions. Even if completed, acquisitions and alliances involve numerous risks which may include: difficulties in achieving
business and continuing financial success; difficulties and expenses incurred in assimilating and integrating operations, services,
products, technologies, or pre-existing relationships with our customers, distributors, and suppliers; challenges with developing
and operating new businesses, including those which are materially different from our existing businesses and which may require
the development or acquisition of new internal capabilities and expertise; challenges of maintaining staffing at the acquired
entities, including loss of key employees; potential losses resulting from undiscovered liabilities of acquired companies that
are not covered by the indemnification we may obtain from the seller(s); the presence or absence of adequate internal controls
and/or significant fraud in the financial systems of acquired companies; diversion of management’s attention from other business
concerns; acquisitions could be dilutive to earnings, or in the event of acquisitions made through the issuance of our common
stock to the shareholders of the acquired company, dilutive to the percentage of ownership of our existing shareholders; new technologies
and products may be developed which cause businesses or assets we acquire to become less valuable; and risks that disagreements
or disputes with prior owners of an acquired business, technology, service, or product may result in litigation expenses and distribution
of our management’s attention. In the event that an acquired business or technology or an alliance does not meet our expectations,
our results of operations may be adversely affected.
Some
of the same risks exist when we decide to sell a business, site, product line, or division. In addition, divestitures could involve
additional risks, including the following: difficulties in the separation of operations, services, products, and personnel; and
the need to agree to retain or assume certain current or future liabilities in order to complete the divestiture. We evaluate
the performance and strategic fit of our businesses. These and any divestitures may result in significant write-offs, including
those related to goodwill and other intangible assets, which could have an adverse effect on our results of operations and financial
condition. In addition, we may encounter difficulty in finding buyers or alternative exit strategies at acceptable prices and
terms and in a timely manner. We may not be successful in managing these or any other significant risks that we encounter in divesting
a business, site, product line, or division, and as a result, we may not achieve some or all of the expected benefits of the divestitures.
If
we are unable to manage our growth and expand our operations successfully, our business and operating results will be harmed and
our reputation may be damaged.
We
have expanded our operations significantly since inception and anticipate that further significant expansion will be required
to achieve our business objectives. The growth and expansion of our business and product offerings places a continuous and significant
strain on our management, operational, and financial resources. Any such future growth would also add complexity to and require
effective coordination throughout our organization. To manage any future growth effectively, we must continue to improve and expand
our information technology and financial infrastructure, our operating and administrative systems and controls, and our ability
to manage headcount, capital and processes in an efficient manner. We may not be able to successfully implement improvements to
these systems and processes in a timely or efficient manner, which could result in additional operating inefficiencies and could
cause our costs to increase more than planned. If we do increase our operating expenses in anticipation of the growth of our business
and this growth does not meet our expectations, our operating results may be negatively impacted. If we are unable to manage future
expansion, our ability to provide high quality products and services could be harmed, which could damage our reputation and brand
and may have a material adverse effect on our business, operating results, and financial condition.
We
may be unable to respond to customers’ demands for new mobile app solutions and service offerings, and our business, financial
condition and results of operations, and cash flows may be materially adversely affected.
Our
customers may demand new mobile app solutions and service offerings. If we fail to identify these demands from customers or update
our offerings accordingly, new offerings provided by our competitors may render our existing solutions and services less competitive.
Our future success will depend, in part, on our ability to respond to customers’ demands for new offerings on a timely and cost-effective
basis and to adapt to address the increasingly sophisticated requirements and varied needs of our customers and prospective customers.
We may not be successful in developing, introducing or marketing new offerings. In addition, our new offerings may not achieve
market acceptance. Any failure on our part to anticipate or respond adequately to customer requirements, or any significant delays
in the development, introduction or availability of new offerings or enhancements of our current offerings could have a material
adverse effect on our business, financial condition and results of operations and cash flows.
Increasing
competition and increasing costs within our customers’ industries may affect the demand for our products and services, which
may affect our results of operations and financial condition.
Our
customers’ demand for our products is impacted by continued demand for their products and by our customers’ research and development
costs, budget costs, and capital expenditures. Demand for our customers’ products could decline, and prices charged by our customers
for their products may decline, as a result of increasing competition that our customers face in their respective industries.
In addition, our customers’ expenses could continue to increase as a result of increasing costs of complying with government regulations
and other factors. A decrease in demand for our customers’ products, pricing pressures associated with the sales of these products,
and additional costs associated with product development could cause our customers to reduce their research and development costs,
budget costs, and capital expenditures. Although we believe our products can help our customers increase productivity, generate
additional sales, and reduce costs in many areas, because our products and services depend on such research and development, budget,
and capital expenditures, our revenues may be significantly reduced.
We
are subject to pricing pressures in some of the markets we serve.
The
market for PaaS for the SMB industry is intensely competitive. In response to increased competition and general adverse economic
conditions in this market, we may be required to modify our pricing practices. Changes in our pricing model could adversely affect
our revenue and earnings.
We
may be unable to respond to the evolving industry practices and technology solutions, and our business, financial condition and
results of operations and cash flows may be materially adversely affected.
To
remain competitive as a mobile app provider, we must continue to invest in research and development of new technology solutions
in order to keep up with the ever-evolving industry practices and enhancements to our existing solutions. The process of developing
new technologies, products and services is complex and expensive. The introduction of new solutions by our competitors, the market
acceptance of competitive solutions based on new or alternative technologies or the emergence of new industry practices could
render our solutions less competitive.
We
derive a significant percentage of our revenues from a concentrated group of customers and the loss of more than one of our major
customers could materially and adversely affect our business, results of operations or financial condition.
Three
(3) customers accounted for 13.05%, 9.23% and 7.99% of net sales for fiscal year 2019. Three (3) customers accounted for
16.43%, 6.15% and 5.38% of net sales for fiscal year 2018. Three (3) customers accounted for 14.78%, 7.18% and 5.34% of net
sales for fiscal year 2017. The loss of any of our major customers could have a material adverse effect on our results of
operations and financial condition. We may not be able to maintain our customer relationships, and our customers may delay
payment under, or fail to renew, their agreements with us, which could adversely affect our business, results of operations,
or financial condition. Any reduction in the amount of revenues that we derive from these customers, without an offsetting
increase in new sales to other customers, could have a material adverse effect on our operating results. A significant change
in the liquidity or financial position of our customers could also have a material adverse effect on the collectability of
our accounts receivable, our liquidity, and our future operating results.
Our
insurance coverage may not be sufficient to avoid material impact on our financial position or results of operations resulting
from claims or liabilities against us, and we may not be able to obtain insurance coverage in the future.
We
maintain insurance coverage for protection against many risks of liability. The extent of our insurance coverage is under continuous
review and is modified as we deem it necessary. Despite this insurance, it is possible that claims or liabilities against us may
have a material adverse impact on our financial position or results of operations. In addition, we may not be able to obtain any
insurance coverage, or adequate insurance coverage, when our existing insurance coverage expires.
We
depend on key personnel and may not be able to retain these employees or recruit additional qualified personnel, which could harm
our business.
Our
success depends to a significant extent on the continued services of our senior management and other members of management. We
have contractual agreements with our CEO, CFO, and COO.
If
our CEO, CFO, COO, or other members of senior management do not continue in their present positions, our business may suffer.
Because of the nature of our business, we are highly dependent upon attracting and retaining qualified personnel. While we have
a strong record of employee retention, there is still significant competition for qualified personnel in our industry. Therefore,
we may not be able to attract and retain the qualified personnel necessary for the development of our business. The loss of the
services of existing personnel, as well as the failure to recruit additional key technical, UX, and managerial personnel in a
timely manner, could harm our business.
We
are subject to risks associated with the operation of a global business.
We
derive a significant portion of our total revenue from our operations in international markets. During the years ended December
31, 2019, 2018, and 2017, 100%, of our total revenue was derived from our international operations. Our global business may be
affected by local economic conditions, including inflation, recession, and currency exchange rate fluctuations. In addition, political
and economic changes, including international conflicts, including terrorist acts, throughout the world may interfere with our
or our customers’ activities in particular locations and result in a material adverse effect on our business, financial condition,
and operating results. Potential trade restrictions, exchange controls, adverse tax consequences, and legal restrictions may affect
the repatriation of funds into the U.S. Also, we could be subject to unexpected changes in regulatory requirements, the difficulties
of compliance with a wide variety of foreign laws and regulations, potentially negative consequences from changes in or interpretations
of U.S. and foreign tax laws, import and export licensing requirements, and longer accounts receivable cycles in certain foreign
countries. These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial
condition.
Potential
changes in U.S. and international tax law.
Tax
proposals to reform corporate tax law are constantly being considered. Proposals include both increasing and reducing the corporate
statutory tax rate, broadening the corporate tax base through the elimination or reduction of deductions, exclusions, and credits,
implementing a territorial regime of taxation, limiting the ability of U.S. corporations to deduct interest expense associated
with offshore earnings, modifying the foreign tax credit rules, and reducing the ability to defer U.S. tax on offshore earnings.
These or other changes in the U.S. tax laws could increase our effective tax rate, which would affect our profitability.
Changes
in government regulation or in practices relating to mobile apps and e-wallet industries could decrease the need for the products
and services we provide.
Governmental
agencies throughout the world, including but not limited to the U.S., regulate mobile apps, e-wallets, and the products and services
we offer to our customers. Changes in regulations, such as a relaxation in regulatory requirements, or an increase in regulatory
requirements that we have difficulty satisfying or that make our products and services less competitive, could eliminate or substantially
reduce the demand for our products and services.
Any
negative commentaries made by any regulatory agencies or any failure by us to comply with applicable regulations and related guidance
could harm our reputation and operating results, and compliance with new regulations and guidance may result in additional costs.
Any
negative commentaries made by any regulatory agencies or any failure on our part to comply with applicable regulations could result
in the termination of customers using our products and services. This could harm our reputation, our prospects for generating
future revenue, and our operating results. If our operations are found to violate any applicable law or other governmental regulations,
we might be subject to civil and criminal penalties, damages, and fines. Any action against us for violation of these laws, even
if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from
the operation of our business, and damage our reputation.
Current
and future litigation against us, which may arise in the ordinary course of our business, could be costly and time consuming to
defend.
We
are subject to claims that arise in the ordinary course of business, such as claims brought by our customers in connection with
commercial disputes and employment claims made by our current or former employees. Third parties may in the future assert intellectual
property rights to technologies that are important to our business and demand back royalties or demand that we license their technology.
Litigation may result in substantial costs and may divert management’s attention and resources, which may seriously harm
our business, overall financial condition, and operating results. Insurance may not cover such claims, may not be sufficient for
one or more such claims, and may not continue to be available on terms acceptable to us. A claim brought against us that is uninsured
or underinsured could result in unanticipated costs, negatively affecting our business, results of operations, and financial condition.
We
could incur substantial costs resulting from product liability claims relating to our products or services or our customers’
use of our products or services.
Any
failure or errors caused by our products or services could result in a claim for substantial damages against us by our customers,
regardless of our responsibility for the failure. Although we are generally entitled to indemnification under our customer contracts
against claims brought against us by third parties arising out of our customers’ use of our products, we might find ourselves
entangled in lawsuits against us that, even if unsuccessful, may divert our resources and energy and adversely affect our business.
Further, in the event we seek indemnification from a customer, a court may not enforce our indemnification right if the customer
challenges it or the customer may not be able to fund any amounts for indemnification owed to us. In addition, our existing insurance
coverage may not continue to be available on reasonable terms or may not be available in amounts sufficient to cover one or more
large claims, or the insurer may disclaim coverage as to any future claim.
As
a public company, we may incur significant administrative workload and expenses in connection with new and changing compliance
requirements.
As
a public company with common stock quoted on OTCQX Market, we must comply with various laws, regulations and requirements.
New laws and regulations, as well as changes to existing laws and regulations affecting public companies, including the provisions
of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and rules adopted by
the SEC, may result in increased general and administrative expenses and a diversion of management’s time
and attention as we respond to new requirements.
RISKS
RELATED TO OUR COMMON STOCK
Our
quarterly and annual operating results fluctuate and may continue to fluctuate in the future, and if we fail to meet the expectations
of analysts or investors, our stock price and the value of your investment could decline substantially.
We
believe that operating results for any particular quarter are not necessarily a meaningful indication of future results. Nonetheless,
fluctuations in our quarterly operating results could negatively affect the market price of our common stock. Our results of operations
in any quarter or annual period have varied in the past, and may vary from quarter to quarter or year to year and are influenced
by such factors as:
|
●
|
changes
in the general global economy;
|
|
●
|
changes
in customer budget cycles;
|
|
●
|
the
number and scope of ongoing customer engagements;
|
|
●
|
changes
in the mix of our products and services;
|
|
●
|
competitive
pricing pressures;
|
|
●
|
the
extent of cost overruns;
|
|
●
|
buying
patterns of our customers;
|
|
●
|
the
timing of new product releases by us or our competitors;
|
|
●
|
general
economic factors, including factors relating to disruptions in the world credit and equity
markets and the related impact on our customers’ access to capital;
|
|
●
|
our
earnings releases, actual or anticipated changes in our earnings, fluctuations in our
operating results or our failure to meet the expectations of financial market analysts
and investors;
|
|
●
|
changes
in financial estimates by us or by any securities analysts who might cover our stock;
|
|
●
|
speculation
about our business in the press or the investment community;
|
|
●
|
significant
developments relating to our relationships with our customers or suppliers;
|
|
●
|
stock
market price and volume fluctuations of other publicly traded companies and, in particular,
those that are in our industry;
|
|
●
|
customer
demand for our business solutions;
|
|
●
|
investor
perceptions of our industry in general and our Company in particular;
|
|
●
|
the
operating and stock performance of comparable companies;
|
|
●
|
announcements
by us or our competitors of new products, significant acquisitions, strategic partnerships
or divestitures;
|
|
●
|
the
timing and charges associated with completed acquisitions, divestitures, and other events;
|
|
●
|
changes
in accounting standards, policies, guidance, interpretation or principles;
|
|
●
|
changes
in tax laws, rules, regulations, and tax rates in the locations in which we operate;
|
|
●
|
exchange
rate fluctuations;
|
|
●
|
loss
of external funding sources;
|
|
●
|
sales
of our common stock, including sales by our directors, officers or significant stockholders;
and
|
|
●
|
addition
or departure of key personnel.
|
Securities
class action litigation is often instituted against companies following periods of volatility in their stock price. Should this
type of litigation be instituted against us, it could result in substantial costs to us and divert our management’s attention
and resources.
Moreover,
securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating
performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests
in our Company at a time when you may want to sell your interest in our common stock.
If
securities or industry analysts issue an adverse opinion regarding our stock or do not publish research or reports about our company,
our stock price and trading volume could decline.
The
trading market for our common stock will depend in part on the research and reports that equity research analysts publish about
us and our business. We anticipate having limited analyst coverage and we may continue to have inadequate analyst coverage in
the future. Even if we obtain adequate analyst coverage, we would have no control over such analysts or the content and opinions
in their reports. Securities analysts may elect not to provide research coverage of our company and such lack of research coverage
may adversely affect the market price of our common stock. The price of our common stock could also decline if one or more equity
research analysts downgrade our common stock or if those analysts issue other unfavorable commentary or cease publishing reports
about us or our business. If one or more equity research analysts cease coverage of our company, we could lose visibility in the
market, which in turn could cause our stock price to decline.
Substantial
future sales of shares of our common stock could cause the market price of our common stock to decline.
The market price of
shares of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors,
executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the
perception in the market that holders of a large number of shares intend to sell their shares. As of March 26, 2020, we have 160,597,190
(pre-reverse split) shares of our common stock outstanding.
Moreover,
we may enter into agreements with certain holders of our common stock which could give such holders certain rights, subject to
some conditions, to require us to file registration statements covering their shares or to include their shares in registration
statements that we may file for ourselves or our stockholders.
Anti-takeover
provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders,
more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price
of our common stock.
Provisions
in our certificate of incorporation and bylaws, as may be amended from time to time, may have the effect of delaying or preventing
a change of control or changes in our management. Some of these provisions:
|
●
|
authorize
our board of directors to issue up to 250,000,000 shares of authorized common stock;
|
|
●
|
specify
that special meetings of our stockholders can be called only by the Chairman of our board
of directors, President, or Vice President; and
|
|
●
|
provide
that stockholders will not be allowed to vote cumulatively in the election of directors;
|
In
addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability
of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us, unless such transaction satisfies
certain conditions.
These
anti-takeover provisions and other provisions in our certificate of incorporation and bylaws, as may be amended from time to time,
make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions
that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest
involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders
to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change
of control transaction or changes in our board of directors could cause the market price of our common stock to decline.
Our
inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize new
solutions and technologies and expand our operations.
If
our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements,
due to lower demand for our products as a result of other risks described in this “Risk Factors” section, we may seek
to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements. We may also consider
raising additional capital in the future to expand our business, pursue strategic investments, take advantage of financing opportunities,
develop and exploit existing and new products, expand into new markets, or other reasons.
Additional
funding may not be available to us on acceptable terms, or at all. If we raise funds by issuing equity securities, dilution to
our stockholders could result. Any equity securities issued also may provide for rights, preferences or privileges senior to those
of holders of our common stock. The terms of debt securities issued or borrowings could impose significant restrictions on our
operations. The incurrence of indebtedness or the issuance of certain equity securities could result in increased fixed payment
obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue
additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions
that could adversely affect our ability to conduct our business. In addition, the issuance of additional equity securities by
us, or the possibility of such issuance, may cause the market price of our common stock to decline. If we do not have, or are
not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third
parties the rights to commercialize products or technologies that we would otherwise seek to commercialize. If we raise additional
funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our
technologies or our products, or to grant licenses on terms that are not favorable to us. If we are unable to raise adequate funds,
we may have to liquidate some or all of our assets, or delay, reduce the scope of or eliminate some or all of our development
programs. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations.
Any of these actions could harm our business, operating results, and financial condition.
We
do not intend to pay dividends for the foreseeable future.
For
the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not
anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common
stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not
purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors
and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable
law and other factors our board deems relevant.
RISKS
RELATED TO INTELLECTUAL PROPERTY
We
may be unable to adequately enforce or defend our ownership and use of our intellectual property and other proprietary rights.
Part
of our success is dependent upon our intellectual property and other proprietary rights. We rely upon a combination of trademark,
trade secret, copyright, unpatented know-how, and unfair competition laws, as well as license and access agreements and other
contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to protect
our intellectual property and proprietary information by requiring certain of our employees and consultants to enter into confidentiality,
non-competition, and assignment-of-inventions agreements. The steps we take to protect these rights may not be adequate to prevent
misappropriation of our technology by third parties, or may not be adequate under the laws of some foreign countries, which may
not protect our intellectual property rights to the same extent as do the laws of the United States. Our attempts to protect our
intellectual property may be challenged by others or invalidated through administrative process or litigation, and agreement terms
that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any particular case.
In addition, there remains the possibility that others will “reverse engineer” our products in order to introduce
competing products, or that others will develop competing technology independently. If we resort to legal proceedings to enforce
our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights
of others, the proceedings could be burdensome and expensive, even if we were to prevail. The failure to adequately protect our
intellectual property and other proprietary rights may have a material adverse effect on our business, results of operations or
financial condition.
Claims
by others that we infringe their intellectual property or trade secret rights could harm our business.
Our
industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in protracted
and expensive litigation for many companies. Third parties may in the future assert claims of infringement of intellectual property
rights against us or against our customers or channel partners for which we may be liable. As the number of products and competitors
in our market increases and overlaps occur, infringement claims may increase.
Intellectual
property or trade secret claims against us, and any resulting lawsuits, may result in our incurring significant expenses and could
subject us to significant liability for damages and invalidate what we currently believe are our proprietary rights. Our involvement
in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material
adverse effect on our business. Adverse determinations in any litigation could subject us to significant liabilities to third
parties, require us to seek licenses from third parties and prevent us from developing and selling our products. Any of these
situations could have a material adverse effect on our business. These claims, regardless of their merits or outcome, would likely
be time consuming and expensive to resolve and could divert management’s time and attention.
Some
of our products and services utilize open source software, and any failure to comply with the terms of one or more of these open
source licenses could adversely affect our business.
Some
of our products utilize software covered by open source licenses. Open source software is typically freely accessible, usable
and modifiable, and is used by our development team in an effort to reduce development costs and speed up the development process.
Certain open source software licenses require a user who intends to distribute the open source software as a component of the
user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open source software
licenses require the user of such software to make any derivative works of the open source code available to others on unfavorable
terms or at no cost. This can subject previously proprietary software to open source license terms. While we monitor the use of
all open source software in our products, processes and technology and try to ensure that no open source software is used in such
a way as to require us to disclose or make available the source code to the related product, such use could inadvertently occur.
This could harm our intellectual property position and have a material adverse effect on our business.
RISKS
RELATED TO OUR INTERNATIONAL OPERATIONS
Our
international sales and operations subject us to additional risks that can adversely affect our operating results and financial
condition.
Our
international operations subject us to a variety of risks and challenges, including: exposure to fluctuations in foreign currency
exchange rates, increased management, travel, infrastructure and legal compliance costs associated with having international operations;
reliance on channel partners; increased financial accounting and reporting burdens and complexities; compliance with foreign laws
and regulations; compliance with U.S. laws and regulations for foreign operations; and reduced protection for intellectual property
rights in some countries and practical difficulties of enforcing rights abroad. Any of these risks could adversely affect our
international operations, reduce our international sales or increase our operating costs, adversely affecting our business, operating
results and financial condition and growth prospects.
We
may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt
Practices Act could have a material adverse effect on our business.
We
are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments
to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the
purpose of obtaining or retaining business. We have operations, agreements with third parties and make sales in Asia, which may
experience corruption. Our activities in Asia create the risk of unauthorized payments or offers of payments by one of the employees,
consultants or agents of our company, because these parties are not always subject to our control. It is our policy to implement
safeguards to discourage these practices by our employees. Also, our existing safeguards and any future improvements may prove
to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for
which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject
to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the
government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest
or that we acquire.