DNA X (SONM) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01To remain competitive and stimulate consumer and business demand, we must successfully manage the introduction of new products and product lines and the transition and enhancement of existing products
2. 02We participate in a competitive industry, which may become more competitive. Competitors with greater resources and significant experience in high-volume product manufacturing may be able to respond more quickly and cost-effectively than we can to new or emerging technologies and changes in customer requirements
3. 03We are dependent on the continued services and performance of a concentrated and limited group of senior management and other key personnel, the loss of any of whom could adversely impact our business
4. 04We rely on our channel partners to generate a substantial amount of our revenue. If we are unable to maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely affected
5. 05We continue to transform our business. The assumptions underlying these efforts may prove to be inaccurate, or we may fail to achieve the expected benefits from these efforts, and we may have to restructure or transform our business again in the future
6. 06We are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets, and if end customers in those markets do not purchase our solutions, our revenues will be adversely impacted, and we may not be able to expand into other markets
7. 07We have outsourced contract manufacturing, product assembly, and some of our software development operations to third parties located in Asia
8. 08We have engaged in related-party transactions and may continue to rely on related parties for key business activities, which could create conflicts of interest and adversely affect our business
9. 09If our products contain defects or errors, we could incur significant unexpected expenses, experience product returns and lost sales, experience product recalls, suffer damage to our brand and reputation, and be subject to product liability or other claims
10. 10If our business does not grow as we expect, or if we fail to manage our growth effectively, our operating results and business will suffer
11. 11We are required to undergo a lengthy customization and certification process for each wireless carrier customer, which increases our operating expenses and cost of revenue, and failure to obtain such certification would adversely impact our results of operations and financial condition
12. 12We experience lengthy sales cycles for our products and the delay of an expected large order could result in a significant unexpected revenue shortfall
13. 13If we fail to adequately forecast demand for our inventory and supply needs, we could incur additional costs or experience manufacturing delays, which could reduce our gross margin or cause us to delay or even lose sales
14. 14The markets for our mobile devices and related accessories may not develop as quickly as we expect or may not develop at all
15. 15Our dependence on third-party suppliers for key components of our products could delay shipment of our products and reduce our sales
16. 16Our future success is dependent on our ability to create independent brand awareness for our company and products with end customers, and our inability to achieve such brand awareness could limit our prospects
17. 17If we are unable to sell our solutions into new markets, our revenues may not grow
18. 18Changes in the availability of federal funding to support local public safety or other public sector efforts could impact our opportunities with public sector end customers
19. 19Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices, or to fail for any other reason, could negatively impact our business
20. 20We are exposed to risks associated with strategic transactions

Risks Related to Our Financial Condition

1. 21We may not generate sufficient liquidity to operate our business and maintain its growth
2. 22We have not been profitable in recent years and may not achieve or maintain profitability in the future
3. 23Our ability to use our net operating losses to offset future taxable income will be subject to certain limitations

Risks Related to Information Technology and Intellectual Property

1. 24A security breach or other significant disruption of our IT systems or those of our partners, suppliers, or manufacturers, caused by cyberattacks or other means, could have a negative impact on our operations, sales, and operating results
2. 25If we are unable to successfully protect our intellectual property, our competitive position may be harmed
3. 26Others may claim that we infringe on their intellectual property rights, which may result in costly and time-consuming litigation and could delay or otherwise impair the development and commercialization of our products
4. 27Our use of open-source software could subject us to possible litigation or otherwise impair the development of our products
5. 28Our inability to obtain and maintain any third-party license required to develop new products and product enhancements could seriously harm our business, financial condition, and results of operations
6. 29Increasing regulatory focus on privacy and cybersecurity issues and expanding laws could expose us to liability, subject us to lawsuits, investigations, and other liabilities and restrictions on our operations that could significantly and adversely affect our business
7. 30(3) laws regulating internet-connected devices (such as, in California, the Internet of Things Security Law)

Risks Related to Legal and Regulatory Matters

1. 31Changes in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business
2. 32Changes in U.S. trade policy, including the imposition of tariffs and restrictions and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition
3. 33The unfavorable outcome of any future litigation, arbitration, or administrative action could have a significant adverse impact on our financial condition or results of operations
4. 34We may incur substantial costs and receive adverse outcomes in litigation, regulatory investigations, and other legal matters in connection with alleged violations of securities laws and regulations
5. 35We are subject to anti-corruption, anti-bribery, anti-money laundering, economic sanctions, export control, and similar laws. Non-compliance with such laws can subject us to criminal or civil liability and harm our business, revenues, financial condition, and results of operations
6. 36We are subject to a wide range of product-, consumer-, worker- safety and environmental laws and regulations
7. 37The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business

Risks Related to Ownership of Our Common Stock

1. 38Our business and operations could be negatively affected if we become subject to stockholder activism or hostile bids, which could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price
2. 39Stockholder activism—ranging from proxy contests and hostile bids to public campaigns and litigation—has become increasingly prevalent. Declines in our stock price may heighten our vulnerability to unsolicited approaches, potentially disrupting our business strategy and operations
3. 40Our evaluation of strategic alternatives may not lead to a favorable outcome and could create business disruption and stock price volatility
4. 41We are required to meet the Nasdaq continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock
5. 42Sales of our common stock under resale registration statements or the perception of such sales in the public market or otherwise could cause the market price for our common stock to decline, even if our business is doing well
6. 43Resales of our common stock may cause the market price of our securities to drop significantly
7. 44Our quarterly results may vary significantly from period to period, which could make our future results difficult to predict and could cause our operating results to fall below investor, analyst, or our expectations
8. 45The financial and operational projections that we may provide from time to time are subject to inherent risks
9. 46Some provisions of Delaware law and our certificate of incorporation and bylaws may delay or prevent a change in control and may discourage bids for our common stock at a premium over its market price
10. 47The market price of our common stock could be subject to wide fluctuations in response to, among other things, the factors described in this “Risk Factors” section or otherwise, and other factors beyond our control, such as fluctuations in the valuations of companies perceived by investors to be comparable to us
11. 48Natural or man-made disasters and other similar events may significantly disrupt our business, and negatively impact our operating results and financial condition
12. 49Our operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect our business, results of operations, and financial condition
13. 50Economic uncertainties or downturns, or political changes, could limit the availability of funds to our customers and potential customers, which could significantly adversely impact our business
14. 51Foreign currency fluctuations may reduce our competitiveness and sales in foreign markets