ITEM 1A. RISK FACTORS
You should carefully consider the risks described below together with
the other information set forth in this report, which could materially affect our business, financial condition and future results. The
risks described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we currently
deem to be immaterial also may materially adversely affect our business, financial condition and operating results.
Risk Factors Related to Our Business and Industry
We have a history of operating losses and
expect to incur significant losses in the future.
We have had substantial losses since our inception. We cannot assure you
that we will ever become or remain profitable.
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As of June 30, 2021, we had an accumulated deficit of $607.4 million.
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We had an accumulated deficit of $586.2 million from inception through 2020, and a net loss of $21.2 million
during the six months ended June 30, 2021.
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The likelihood of our success must be considered in light of the expenses,
difficulties and delays frequently encountered by companies formed to develop and commercialize new technologies. In particular, our operations
to date have focused primarily on research and development of our LBS technology system and development of demonstration units. We are
unable to accurately estimate future revenues and operating expenses based upon historical performance.
We cannot be certain that we will succeed in obtaining additional development
revenue or commercializing our technology or products. In light of these factors, we expect to continue to incur significant losses and
negative cash flow at least through 2021 and likely thereafter. There is significant risk that we will not achieve positive cash flow
at any time in the future.
We were unable to secure a customer to launch one of our module products
in 2020, as planned. As a result, we focused our immediate attention on strategic alternatives, including a potential sale or merger of
the Company, sale of part of the Company, strategic minority investment, licensing agreement or other transaction. We also focused on
developing our lidar sensor for the automotive market. There is substantial risk that these efforts will be unsuccessful. We currently
have no agreements or commitments to engage in any specific strategic transactions, and our exploration of various strategic alternatives
may not result in any specific action or transaction. We may be unable to identify, successfully negotiate with and consummate a suitable
transaction with a buyer or other strategic partner on favorable terms. If we determine to engage in a strategic transaction, we cannot
predict the impact that such a transaction might have on our operations or stock price, and we cannot predict the impact on our stock
price or operations if we fail to enter into such a transaction.
COVID-19 has had an adverse effect on our business,
and the future COVID-19 effects on our financial position and business prospects are uncertain.
On March 11, 2020, the World Health Organization declared the outbreak
of COVID-19 as a pandemic, which continues to be spread throughout the United States and the world. The impact from the COVID-19 outbreak
is uncertain and may impact our business and results of operations and could impact our financial condition in the future. We are unable
to accurately predict the full impact that COVID-19 may have due to numerous uncertainties, including the severity, duration and spread
of the outbreak, and actions that may be taken by governmental authorities.
The adverse impacts of the pandemic on our business and future financial
performance could include, but are not limited to:
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our ability to raise additional capital,
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our ability to enter into sales, licensing, strategic transactions, or other agreements,
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our technology development plans and timelines,
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significant declines in revenue or delays in revenue due to supply chain disruptions,
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our ability to add manufacturing capabilities in other countries due to travel restrictions,
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our operating effectiveness resulting from employees working remotely or being ill and unable to work,
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and our ability to complete a sale or merger of the Company.
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We may require additional capital to fund our operations and to implement
our business plan. Raising additional capital may dilute the value of current shareholders' shares.
Based on our current operating plan, we anticipate that we have sufficient
cash and cash equivalents to fund our operations for at least the next 12 months. We may require additional capital to fund our operating
plan past that time. We may seek to obtain additional capital through the issuance of equity or debt securities, product sales and/or
licensing activities. There can be no assurance that any such efforts to obtain additional capital would be successful.
While we continue to pursue strategic alternatives, we are focused on
developing our automotive lidar module. This involves introducing new technology into an emerging market
which creates significant uncertainty about our ability to accurately project revenue, costs and cash flows. Our capital requirements
will depend on many factors, including, but not limited to, the commercial success of our LBS modules, the rate at which OEMs and ODMs
introduce products incorporating our LBS technology and the market acceptance and competitive position of such products. If revenues are
less than we anticipate, if the mix of revenues and the associated margins vary from anticipated amounts or if expenses exceed the amounts
budgeted, we may require additional capital earlier than expected to fund our operations. In addition, our operating plan provides for
the development of strategic relationships with suppliers of components, products and systems, and equipment manufacturers that may require
additional investments by us.
Additional capital may not be available to us or, if available, may not
be available on terms acceptable to us or on a timely basis. Raising additional capital may involve issuing securities with rights and
preferences that are senior to our common stock and may dilute the value of our current shareholders' shares. If adequate capital resources
are not available on a timely basis, we may consider limiting our operations substantially and we may be unable to continue as a going
concern. This limitation of operations could include reducing investments in our research and development projects, staff, operating costs,
and capital expenditures which could jeopardize our ability to achieve our business goals or satisfy our customer requirements.
Qualifying a contract manufacturer or foundry for our products could
cause us to experience delays that result in lost revenues and damaged customer relationships.
We rely on single or limited-source suppliers to manufacture our products.
Establishing a relationship with a contract manufacturer or foundry is a time-consuming process, as our unique technology may require
significant manufacturing process adaptation to achieve full manufacturing capacity. Accordingly, we may be unable to establish a relationship
with a contract manufacturer at prices or on other terms that are acceptable to us.
Changes in our supply chain may result in increased cost and delay and
may subject us to risks and uncertainties regarding, but not limited to, product warranty, product liability and quality control standards.
The loss of any single or limited-source supplier, the failure of any of these suppliers to perform as expected or the disruption in the
supply chain of components from these suppliers could cause significant delays in product deliveries, which may result in lost revenues
and damaged customer relationships. To the extent that we are not able to establish a relationship with a contract manufacturer or foundry
in a timely manner, we may be unable to meet contract or production milestones, which could have a material adverse effect on our financial
condition, results of operations and cash flows.
Our success will depend, in part, on our ability to secure and retain
significant third-party manufacturing resources.
Our success will depend, in part, on our ability to provide our components
and future products in commercial quantities at competitive prices and on schedule. Accordingly, we will be required to obtain and retain
access, through business partners or contract manufacturers, to manufacturing capacity and processes for the commercial production of
our expected future products.
Our foreign contract manufacturers could experience severe financial difficulties
or other disruptions in their business, and such continued supply could be significantly reduced or terminated. In addition, we cannot
be certain that we will successfully obtain and retain access to needed manufacturing resources concurrent with a significant increase
in our planned production levels. Future manufacturing limitations of our suppliers could constrain the number of products that we are
able to develop and produce.
We are dependent on third parties in order to develop, manufacture,
sell and market products incorporating our LBS technology, scanning modules, and the scanning module components.
Our business strategy for commercializing our technology in products incorporating
LBS technology includes entering into development, manufacturing, licensing, sales and marketing arrangements with OEMs, ODMs and other
third parties. These arrangements reduce our level of control over production and distribution and may subject us to risks and uncertainties
regarding, but not limited to, product warranty, product liability and quality control standards.
We cannot be certain that we will be able to negotiate arrangements on
acceptable terms, if at all, or that these arrangements will be successful in yielding commercially viable products. If we cannot establish
these arrangements, we would require additional capital to undertake such activities on our own and would require extensive manufacturing,
sales and marketing expertise that we do not currently possess and that may be difficult to obtain.
In addition, we could encounter significant delays in introducing our LBS
technology or find that the development, manufacture or sale of products incorporating our technology would not be feasible. To the extent
that we enter into development, manufacturing, licensing, sales and marketing or other arrangements, our revenues will depend upon the
performance of third parties. We cannot be certain that any such arrangements will be successful.
We cannot be certain that our technology system or products incorporating
our LBS technology will achieve market acceptance. If our technology system or products incorporating our technology do not achieve market
acceptance, our revenues may not grow.
Our success will depend in part on customer acceptance of our LBS technology.
Our technology may not be accepted by manufacturers who use lidar sensing and display technologies in their products, by systems integrators,
OEMs, and ODMs who incorporate the scanning module components into their products or by end users of these products. To be accepted, our
LBS technology must meet the expectations of our current and potential customers in the consumer electronics, automotive, and other markets.
If our technology system or products incorporating our LBS technology do not achieve market acceptance, we may not be able to continue
to develop our technology.
Future products incorporating our LBS technology and scanning modules
are dependent on advances in technology by other companies.
Our LBS technology will continue to rely on technologies, such as laser
diode light sources and other components that are developed and produced by other companies. The commercial success of certain future
products incorporating our LBS technology will depend, in part, on advances in these and other technologies by other companies. We may,
from time to time, contract with and support companies developing key technologies in order to accelerate the development of them for
our or our customers' specific uses. There are no guarantees that such activities will result in useful technologies or products that
will be profitable.
Our revenue is generated from one customer. Our quarterly performance
may vary substantially and this variance, as well as general market conditions, may cause our stock price to fluctuate greatly and potentially
expose us to litigation.
For the six months ended June 30, 2021, one customer accounted for $1.2
million in revenue, representing 100% of our total revenue. For the six months ended June 30, 2020, the same customer accounted for $2.1
million in revenue, representing 100% of our total revenue. Generally, our customers take time to obtain, and the loss of a significant
customer, in particular our current sole customer, could negatively affect our revenue. Our quarterly operating results may vary significantly
based upon:
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Market acceptance of products incorporating our LBS technology;
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Changes in evaluations and recommendations by any securities analysts following our stock or our industry
generally;
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Announcements by other companies in our industry;
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Changes in business or regulatory conditions;
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Announcements or implementation by our competitors of technological innovations or new products;
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The status of particular development programs and the timing of performance under specific development
agreements;
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Economic and stock market conditions; or
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Other factors unrelated to our company or industry.
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In one or more future quarters, our results of operations may fall below
the expectations of securities analysts and investors and the trading price of our common stock may decline as a consequence. In addition,
following periods of volatility in the market price of a company's securities, shareholders often have instituted securities class action
litigation against that company.
If we become involved in a class action suit, it could divert the attention
of management and, if adversely determined, could require us to pay substantial damages.
We or our customers may fail to perform under open orders or agreements,
which could adversely affect our operating results and cash flows.
We or our customers may be unable to meet the performance requirements
and obligations under open orders or agreements, including performance specifications, milestones or delivery dates, required by such
purchase orders or agreements. Furthermore, our customers may be unable or unwilling to perform their obligations thereunder on a timely
basis, or at all if, among other reasons, our products and technologies do not achieve market acceptance, our customers' products and
technologies do not achieve market acceptance or our customers otherwise fail to achieve their operating goals. To the extent we are unable
to perform under such purchase orders or agreements or to the extent customers are unable or unwilling to perform, our operating results
and cash flows could be adversely affected.
We have identified a material weakness in our internal controls.
As described in Part I, Item 4, Controls and Procedures, we have identified
a material weakness in the controls that support our determination of the grant date of equity awards. If not remediated, or if we identify
further material weaknesses in our internal controls, our failure to establish and maintain effective disclosure controls and procedures
and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet
our reporting obligations. Any such failure could cause investors to lose confidence in the accuracy of our financial reports, harm our
reputation and adversely affect the market price of our common stock.
Our stock price has fluctuated in the past, has recently been volatile
and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.
Our stock price has fluctuated in the past, has recently been
volatile and may be volatile in the future. During the 12 months prior to the date of this report, our common stock has traded at a
low of $1.25 and a high of $28.00. From the beginning of 2021 through August 4, 2021, our common stock has traded at a low of
$4.86 and a high of $28.00. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are
unrelated to our operating performance or prospects. For the fiscal year ended December 31, 2020, we incurred a loss per share of
$(0.10).
As a result of this volatility, investors may experience losses on their
investment in our common stock. The market price for our common stock may be influenced by many factors, including the following:
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investor reaction to our business strategy;
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the success of competitive products or technologies;
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any developments with respect to our pursuit of strategic alternatives, including a potential sale
or merger of the Company, sale of part of the Company, strategic minority investment, licensing agreement or other
transaction;
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the timing and results of our development efforts with respect to our first generation LRL module;
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changes in regulatory or industry standards applicable to our technologies;
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variations in our financial and operating results or those of companies that are perceived to be similar
to us;
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developments concerning our collaborations or partners;
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developments or disputes with any third parties that supply, manufacture, sell or market any of our
products;
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developments or disputes concerning patents or other proprietary rights, including patents, litigation
matters and our ability to obtain patent protection for our products;
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actual or perceived defects in any of our products, if commercialized, and any related product liability
claims;
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our ability or inability to raise additional capital and the terms on which we raise it;
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declines in the market prices of stocks generally;
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trading volume of our common stock;
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sales of our common stock by us or our stockholders;
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general economic, industry and market conditions; and
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other events or factors, including those resulting from such events, or the prospect of such events,
including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the
recent outbreak of COVID-19, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate
conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers
or result in political or economic instability.
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Since the stock price of our common stock has fluctuated in the past, has
been recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following
periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation,
if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially
and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our
stock price will remain at current levels or that future sales of our common stock will not be at prices lower than those sold to investors.
Additionally, securities of certain companies have recently experienced
significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short squeeze.”
These short squeezes have caused extreme volatility in both the stock prices of those companies and in the market, and have led to the
price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company.
Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their
original investment, as in many cases the price per share has declined steadily as interest in those stocks have abated. There can be
no assurance that our shares will not be subject to a short squeeze in the future, and investors may lose a significant portion or all
of their investment if they purchase our shares at a rate that is significantly disconnected from our underlying value.
If we are unable to maintain our listing on The Nasdaq Global Market,
it could become more difficult to sell our stock in the public market.
Our common stock is listed on The Nasdaq Global Market. To maintain our
listing on this market, we must meet Nasdaq's listing maintenance standards. From the initial receipt of notice in the fourth quarter
of 2019 through our regaining compliance in the second quarter of 2020, our stock was at risk of being delisted due to noncompliance with
the minimum required market value and closing price requirements of Nasdaq’s continued listing standards. If we are unable to continue
to meet Nasdaq's listing maintenance standards for any reason, our common stock could be delisted from The Nasdaq Global Market. If our
common stock were delisted, we may seek to list our common stock on The Nasdaq Capital Market, the NYSE American or on a regional stock
exchange or, if one or more broker-dealer market makers comply with applicable requirements, the over-the-counter (OTC) market. Listing
on such other market or exchange could reduce the liquidity of our common stock. If our common stock were to trade in the OTC market,
an investor would find it more difficult to dispose of, or to obtain accurate quotations for the price of, the common stock.
A delisting from The Nasdaq Global Market and failure to obtain listing
on another market or exchange would subject our common stock to so-called penny stock rules that impose additional sales practice and
market-making requirements on broker-dealers who sell or make a market in such securities. Consequently, removal from The Nasdaq Global
Market and failure to obtain listing on another market or exchange could affect the ability or willingness of broker-dealers to sell or
make a market in our common stock and the ability of purchasers of our common stock to sell their securities in the secondary market.
On August 4, 2021, the closing price of our common stock was
$12.22 per share.
Our lack of financial and technical resources relative to our competitors
may limit our revenues, potential profits, overall market share or value.
Our products and potential products incorporating our LBS technology will
compete with established manufacturers of existing products and companies developing new technologies. Many of our competitors have substantially
greater financial, technical and other resources than we have. Because of their greater resources, our competitors may develop products
or technologies that may be superior to our own. The introduction of superior competing products or technologies could result in reduced
revenues, lower margins or loss of market share, any of which could reduce the value of our business. Additionally, for a variety of reasons,
customers may choose to purchase from suppliers that have substantially greater financial, technical or other resources than we have.
We may not be able to keep up with rapid technological change and our
financial results may suffer.
The automotive lidar and consumer display industries have been
characterized by rapidly changing technology, accelerated product obsolescence and continuously evolving industry standards. Our
success will depend upon our ability to further develop our LBS technology system and to cost effectively introduce new products and
features in a timely manner to meet evolving customer requirements and compete with competitors' product advances. We may not
succeed in these efforts due to:
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Delays in product development;
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Lack of market acceptance for our technology or products incorporating our LBS technology; or
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Lack of funds to invest in product research, development and marketing.
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The occurrence of any of the above factors could result in decreased revenues,
market share and value of our business.
We could face lawsuits related to our use of LBS technology or other
technologies. Defending these suits would be costly and time-consuming. An adverse outcome, in any such matter, could limit our ability
to commercialize our technology or products incorporating our LBS technology, reduce our revenues and increase our operating expenses.
We are aware of several patents held by third parties that relate to certain
aspects of light scanning displays and 3D sensing products. These patents could be used as a basis to challenge the validity, limit the
scope or limit our ability to obtain additional or broader patent rights of our patents. A successful challenge to the validity of our
patents could limit our ability to commercialize our technology or products incorporating our LBS technology and, consequently, materially
reduce our revenues. Moreover, we cannot be certain that patent holders or other third parties will not claim infringement by us with
respect to current and future technology. Because U.S. patent applications are held and examined in secrecy, it is also possible that
presently pending U.S. applications will eventually be issued with claims that will be infringed by our products or our technology.
The defense and prosecution of a patent suit would be costly and time-consuming,
even if the outcome were ultimately favorable to us. An adverse outcome in the defense of a patent suit could subject us to significant
costs, require others and us to cease selling products incorporating our technology, require us to cease licensing our technology or require
disputed rights to be licensed from third parties. Such licenses, if available, would increase our operating expenses. Moreover, if claims
of infringement are asserted against our future co-development partners or customers, those partners or customers may seek indemnification
from us for any damages or expenses they incur.
If we fail to manage expansion effectively, our revenue and expenses
could be adversely affected.
Our ability to successfully offer products incorporating LBS technology
and implement our business plan in a rapidly evolving market requires an effective planning and management process. The growth in business
and relationships with customers and other third parties has placed, and will continue to place, a significant strain on our management
systems and resources. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and
will need to continue to train and manage our work force. Following our substantial reduction in headcount in February 2020, the risks
associated with strained resources are heightened.
If we fail to adequately reduce and control our manufacturing, supply
chain and operating costs, our business, financial condition, and operating results could be adversely affected.
We incur significant costs related to procuring components and increasing
our production capabilities to manufacture our products. We may experience delays, cost overruns or other unexpected costs associated
with an increase in production. If we are unsuccessful in our efforts to reduce and control our manufacturing, supply chain and operating
costs and keep costs aligned with the levels of revenues we generate, our business and financial condition could suffer.
Our technology and products incorporating our LBS technology may be
subject to future environmental, health and safety regulations that could increase our development and production costs.
Our technology and products incorporating our LBS technology could become
subject to future environmental, health and safety regulations or amendments that could negatively impact our ability to commercialize
our technology and products incorporating our LBS technology. Compliance with any such new regulations would likely increase the cost
to develop and produce products incorporating our LBS technology, and violations may result in fines, penalties or suspension of production.
If we become subject to any environmental, health, or safety laws or regulations that require us to cease or significantly change our
operations to comply, our business, financial condition and operating results could be adversely affected.
Our operating results may be adversely impacted by worldwide political
and economic uncertainties and specific conditions in the markets we address.
In the recent past, general worldwide economic conditions have experienced
a downturn due to slower economic activity, concerns about inflation, increased energy costs, decreased consumer confidence, reduced corporate
profits and capital spending, and adverse business conditions. Any continuation or worsening of the current global economic and financial
conditions could materially adversely affect: (i) our ability to raise, or the cost of, needed capital, (ii) demand for our current and
future products, and (iii) our ability to commercialize products. Additionally, infectious diseases including COVID-19 may cause an unexpected
downturn in economic conditions. We cannot predict the timing, strength, or duration of any economic slowdown or subsequent economic recovery,
worldwide, regionally or in the display industry.
Because we plan to continue using foreign suppliers, our operating results
could be harmed by economic, political, regulatory and other factors in foreign countries.
We currently use foreign suppliers and plan to continue to use foreign
suppliers to manufacture current and future components and products, where appropriate. These international operations are subject to
inherent risks, which may adversely affect us, including, but not limited to:
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Political and economic instability;
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High levels of inflation, historically the case in a number of countries in Asia;
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Burdens and costs of compliance with a variety of foreign laws, regulations and sanctions;
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Foreign taxes and duties;
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Changes in tariff rates or other trade, tax or monetary policies; and
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Changes or volatility in currency exchange rates and interest rates.
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Our suppliers' facilities could be damaged or disrupted by a natural
disaster or labor strike, either of which would materially affect our financial position, results of operations and cash flows.
A major catastrophe, such as an earthquake, monsoon, flood, infectious
disease including the COVID-19 virus, or other natural disaster, labor strike, or work stoppage at our suppliers' facilities or our customers,
could result in a prolonged interruption of our business. A disruption resulting from any one of these events could cause significant
delays in product shipments and the loss of sales and customers, which could have a material adverse effect on our financial condition,
results of operations, and cash flows.
If we are unable to obtain effective intellectual property protection
for our products, processes and technology, we may be unable to compete with other companies.
Intellectual property protection for our products, processes and technology
is important and uncertain. If we do not obtain effective intellectual property protection for our products, processes and technology,
we may be subject to increased competition. Our commercial success will depend, in part, on our ability, to maintain the proprietary nature
of our LBS technology and other key technologies by securing valid and enforceable patents and effectively maintaining unpatented technology
as trade secrets.
We protect our proprietary LBS technology by seeking to obtain United States
and foreign patents in our name, or licenses to third party patents, related to proprietary technology, inventions, and improvements that
may be important to the development of our business. However, our patent position involves complex legal and factual questions. The standards
that the United States Patent and Trademark Office and its foreign counterparts use to grant patents are not always applied predictably
or uniformly and can change.
Additionally, the scope of patents is subject to interpretation by courts
and their validity can be subject to challenges and defenses, including challenges and defenses based on the existence of prior art. Consequently,
we cannot be certain as to the extent to which we will be able to obtain patents for our new products and technology or the extent to
which the patents that we already own, protect our products and technology. Reduction in scope of protection or invalidation of our licensed
or owned patents, or our inability to obtain new patents, may enable other companies to develop products that compete directly with ours
on the basis of the same or similar technology.
We also rely on the law of trade secrets to protect unpatented know-how
and technology to maintain our competitive position. We try to protect this know-how and technology by limiting access to the trade secrets
to those of our employees, contractors and partners, with a need-to-know such information and by entering into confidentiality agreements
with parties that have access to it, such as our employees, consultants and business partners. Any of these parties could breach the agreements
and disclose our trade secrets or confidential information, or our competitors might learn of the information in some other way. If any
trade secret not protected by a patent were to be disclosed to or independently developed by a competitor, our competitive position could
be negatively affected.
We could be subject to significant product liability claims that could
be time-consuming and costly, divert management attention and adversely affect our ability to obtain and maintain insurance coverage.
We could be subject to product liability claims if any of the product applications
are alleged to be defective or cause harmful effects. For example, because some of the scanning modules incorporating our LBS technology
could scan a low power beam of colored light into the user's eye, the testing, manufacture, marketing and sale of these products involve
an inherent risk that product liability claims will be asserted against us.
Additionally, any misuse of our technology or products incorporating our
LBS technology by end users or third parties that obtain access to our technology, could result in negative publicity and could harm our
brand and reputation. Product liability claims or other claims related to our products or our technology, regardless of their outcome,
could require us to spend significant time and money in litigation, divert management time and attention, require us to pay significant
damages, harm our reputation or hinder acceptance of our products. Any successful product liability claim may prevent us from obtaining
adequate product liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance
coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization
of our products and our LBS technology.
Our contracts and collaborative research and development agreements
have long sales cycles, which makes it difficult to plan our expenses and forecast our revenues.
Our contracts and collaborative research and development agreements have
long sales cycles that involve numerous steps including determining the product application, exploring the technical feasibility of a
proposed product, evaluating the costs of manufacturing a product or qualifying a contract manufacturer for production. Typically, these
contracts and agreements involve several face-to-face meetings before they conclude. Infectious diseases including COVID-19 may delay
face-to-face meetings and closing contracts and agreements. Our long sales cycle, which can last several years, makes it difficult to
predict the quarter in which revenue recognition will occur. Delays in entering into contracts and collaborative research and development
agreements could cause significant variability in our revenues and operating results for any particular period.
Our contracts and collaborative research and development agreements
may not lead to any product or any products that will be profitable.
Our contracts and collaborative research and development agreements, including
without limitation, those discussed in this document, are exploratory in nature and are intended to develop new types of products for
new applications. Our efforts may prove unsuccessful and these relationships may not result in the development of any product or any products
that will be profitable.
Our operations could be adversely impacted by information technology
system failures, network disruptions, or cyber security breaches.
We rely on information technology systems to process, transmit, store,
and protect electronic data between our employees, our customers and our suppliers. Our systems are vulnerable to damage or interruptions
due to events beyond our control, including, but are not limited to, natural disasters, power loss, telecommunications failures, computer
viruses, hacking, or other cyber security issues. Our system redundancy may be inadequate and our disaster recovery planning may be ineffective
or insufficient to account for all eventualities. Additionally, we maintain insurance coverage to address certain aspects of cyber risks.
Such insurance coverage may be insufficient to cover all losses or all claims that may arise, should such an event occur.
Loss of any of our key personnel could have a negative effect on the
operation of our business.
Our success depends on our executive officers and
other key personnel and on the ability to attract and retain qualified new personnel. Achievement of our business objectives will require
substantial additional expertise in the areas of sales and marketing, research and product development and manufacturing. Competition
for qualified personnel in these fields is intense, and the inability to attract and retain additional highly skilled personnel, or the
loss of key personnel, could hinder our ability to compete effectively in the LBS markets and adversely affect our business strategy execution
and results of operations.