Item 1A. Risk Factors
Investing in our common stock involves a high
degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information
in this Annual Report, before deciding to invest in our common stock. The risks and uncertainties described below may not be the only
ones we face. If any of the risks actually occur, our business, results of operations, financial condition and prospects could be harmed.
In that event, the trading price of our common stock could decline, and you could lose part or all of your investment. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Summary Risk Factors
Our business is subject to
numerous risks and uncertainties that you should consider before investing in our company. You should carefully consider all of the risks
described more fully in the section titled “Risk Factors” in this Annual Report on page
24, before deciding to invest in our common stock. If any of these risks actually occurs, our business, financial condition
and results of operations would likely be materially adversely affected. These key risks, include, but are not limited to, the following:
Risks Related to Our Business
24
● We may be ineffective in our sales and marketing efforts.
● Demand for our products and solutions may not grow or may decline.
● Our gross margins may not increase or may deteriorate.
● We depend on key information systems and third-party service providers.
25
Risks Related to Protecting Our Technology
and Intellectual Property
● Our patents and proprietary technology may be challenged or disputed.
Risks Related to Managing Our Business
Operations in Israel
Risks Related to our Common Stock
26
RISK FACTORS
Investing in our common
stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of
the other information in this Annual Report, before deciding to invest in our common stock. The risks and uncertainties described below
may not be the only ones we face. If any of the risks actually occur, our business, results of operations, financial condition and prospects
could be harmed. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Risks Related to Our Business
We have a history of net losses, may incur
substantial net losses in the future, and may not achieve or sustain profitability or growth in future periods. If we cannot achieve and
sustain profitability, our business, financial condition, and operating results will be adversely affected.
We have incurred net losses in recent years, and we may not achieve
or maintain profitability in the future. We experienced a net loss of $8.3 million and $4.4 million in the years ended December 31,
2025 and 2024, respectively. As a result, we had an accumulated deficit of $52 million as of December 31, 2025. We cannot predict when
or whether we will reach or maintain profitability.
We may also increase our
operating expenses in the future as we continue to invest for our future growth, including expanding our research and development function
to drive further development of our platform, expanding our sales and marketing activities, developing the functionality to expand into
adjacent markets, and reaching customers in new geographic locations, which will negatively affect our operating results if our total
revenues do not increase. In addition to the anticipated costs to grow our business, we also expect to incur significant additional legal,
accounting, and other expenses as a newly public company. These efforts and additional expenses may be more costly than we expect, and
we cannot guarantee that we will be able to increase our revenues to offset our operating expenses. Any failure to increase our revenues
or to manage our costs as we invest in our business would prevent us from achieving or maintaining profitability.
There is no guaranty that we will be able
to generate the revenue necessary to support our cost structure or obtain the level of financing necessary for our operations.
We have incurred significant losses and negative cash flows from operations
and incurred losses of $8.3 million and $4.4 million for the years ended December 31, 2025 and 2024, respectively. During the years
ended December 31, 2025 and 2024, we had negative cash flows from operations of $7.7 million and $6.5 million, respectively. As of
December 31, 2025, our accumulated deficit was $52 million. We have funded our operations to date through equity and debt financing and
have cash on hand (including short term bank deposits and restricted cash equivalents) of $4.4 million and long-term restricted bank deposits
of $30 thousand and long term deposit of $91 thousand as of December 31, 2025. We monitor our cash flow projections on a current
basis and take active measures to obtain the funding it requires to continue our operations. However, these cash flow projections are
subject to various uncertainties concerning their fulfilment such as the ability to increase revenues by attracting and expanding its
customer base or reducing cost structure. If we will not succeed in generating sufficient cash flow or completing additional financing,
then it will need to execute a cost reduction plan that has been prepared. Our transition to profitable operations is dependent on generating
a level of revenue adequate to support our cost structure. We expect to fund operations using cash on hand, through operational cash flows
and raising additional proceeds. There are no assurances, however, we will be able to generate the revenue necessary to support our cost
structure or that we will be successful in obtaining the level of financing necessary for its operations.
Furthermore, we may continue
to incur negative cash flow from operating and investing activities for the foreseeable future as we expect to incur research and development,
sales and marketing, and general and administrative expenses and make capital expenditures in our efforts to increase our sales. Our business
also will at times require significant amounts of working capital to support our growth of additional platforms. An inability to generate
positive cash flow from operating activities for the near term may adversely affect our ability to raise needed capital for our business
on reasonable terms, or at all, diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects
that may decrease our long-term viability. There can be no assurance that we will achieve positive cash flow in the near future or at
all.
Our financial condition raises substantial
doubt as to our ability to continue as a going concern
Our consolidated financial statements have been prepared assuming that
we will continue to operate as a going concern. These events and conditions, along with other matters, indicate that a material uncertainty
exists that may cast significant doubt on our ability to continue as a going concern. This going concern determination could materially
limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise. Further financial statements
includes an explanatory paragraph with respect to our ability to continue as a going concern. There can be no assurance that we will succeed
in generating sufficient revenues from our product sales to continue our operations as a going concern. If funds are not available to
us, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with
respect to our products. This raises substantial doubts about our ability to continue as a going concern.
27
Our shares of common stock could be delisted
from the Nasdaq Capital Market if we fail to regain compliance with the Nasdaq’s stockholders’ equity continued listing standards.
Our ability to publicly or privately sell equity securities and the liquidity of our shares of common stock could be adversely affected
if we are delisted from the Nasdaq Capital Market.
On August 25, 2023, we received
a notification letter from the Listing Qualifications Staff (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”)
indicating that we are not in compliance with Nasdaq Listing Rule 5550(b)(1) due to our failure to comply with the Minimum Shareholders’
Equity Requirement or any alternatives to such requirement. In order to maintain our listing on the Nasdaq Capital Market, we submitted
a plan of compliance addressing how we intended to regain compliance. On March 27, 2024, we received a delist determination letter from
Nasdaq advising us that the Staff had determined to delist our securities from Nasdaq due to non-compliance with the Minimum Shareholders’
Equity Requirement, unless we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”). We timely requested
a hearing before the Panel.
On August 27, 2024, we received
formal written notice from Nasdaq confirming that we have evidenced compliance with all applicable criteria for continued listing on Nasdaq
as set forth in Nasdaq Listing Rule 5550, including the Minimum Shareholders’ Equity Requirement. In accordance with Nasdaq Listing
Rule 5815(d)(4)(B), we remained subject to a panel monitor for equity compliance through August 27, 2025.
On May 12, 2025, Nasdaq notified
us (the “Notification Letter”) that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), which requires our Common
Stock to maintain a minimum bid price of $1.00 per share (the “Bid Price Rule”). The Notification Letter had no immediate
effect on the listing or trading of our Common Stock on Nasdaq and, at this time, the Common Stock will continue to trade on Nasdaq under
the symbol “ASNS”. The Notification Letter provided that we have 180 calendar days, or until November 10, 2025, to regain
compliance with the Bid Price Rule.
On August 19, 2025, we received
written notice from Nasdaq stating that, due to the Company’s non-compliance with the Minimum Shareholders’ Equity Requirement
as of June 30, 2025, and because, pursuant to Listing Rule 5815(d)(4)(B), the Company remained subject to a mandatory hearing panel monitor
through August 27, 2025, the Company’s securities were subject to delisting from Nasdaq unless the Company timely requests a hearing
before the Panel. The Company has its hearing with the Panel on September 30, 2025.
At the hearing, the Company
presented its plan to evidence compliance with the Equity Rule and all other applicable criteria for continued listing on The Nasdaq Capital
Market, and requested to remain listed subject to its plan to regain compliance.
On October 28, 2025, we received
a listing decision from Nasdaq notifying us that the Panel determined that the Company evidenced compliance with the Shareholders’
Equity Requirement.
The Panel also granted the
Company’s request for continued listing on The Nasdaq Capital Market, pursuant to an exception through December 5, 2025, to regain
compliance with the bid price requirement set forth in Nasdaq Listing Rule 5550(a)(1). In order to evidence compliance with the bid price
requirement, the Company must evidence a closing bid price of at least $1.00 per share for a minimum of 10, but generally not more than
20, consecutive business days. On November 7, 2025, we held a special meeting of shareholders where our shareholders approved, among other
things, the Reverse Split. The Reverse Split was effected on November 18, 2025.
On December 3, 2025, the Company
received formal notice from Nasdaq that the Company has regained compliance with the Bid Price Rule and evidenced compliance with all
other applicable criteria for continued listing on Nasdaq. Accordingly, the previously disclosed listing matter has been closed.
The Company will remain subject
to a one-year “Panel Monitor”, as contemplated by Nasdaq Listing Rule 5815(d)(4)(A), through December 5, 2026. If during that
period the Company fails to satisfy any of the criteria for continued listing on Nasdaq, the Staff may not grant the Company additional
time to regain compliance. Rather, Nasdaq will issue a delist determination, which the Company may address by requesting a new hearing
before the Nasdaq Hearings Panel.
28
On February 4, 2026, we received
a written notice Nasdaq indicating that the Staff has determined to delist the Company’s securities from The Nasdaq Capital Market.
As disclosed in the Notice,
the Staff determined that the Company’s common stock failed to maintain compliance with the Bid Price Rule. While companies are
typically afforded a 180-calendar-day compliance period to comply with the Bid Price Rule, the Staff concluded that the Company is not
eligible for the compliance period pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv) due to the fact that the Company effected a reverse
stock split within the prior one-year period, specifically a 1-for-10 reverse stock split on November 18, 2025, and therefore is subject
to immediate delisting.
As further disclosed in the Notice, the Company had the right to request
a hearing and that a hearing request would result in a stay of any suspension or delisting action pending the conclusion of the hearings
process. Accordingly, on February 11, 2026, the Company requested a hearing before the Panel, which served to stay any further suspension
or delisting action through the hearing or any extension the Panel provides following the hearing.
At the hearing, the Company
intends to take all reasonable measures available and is going to present a plan to regain compliance with the Bid Price Rule and
remain listed on Nasdaq to the Panel. However, there can be no assurance that the Company will be able to regain compliance with the Bid
Price Rule or maintain compliance with all other Nasdaq continued listing requirements.
In connection with the Company’s
entry into the Common Stock Purchase Agreement with White Lion as described below, if the Company fails to be listed on the Nasdaq Capital
Market, the Commitment Fee Amount (as defined below) will increase subject to the terms of the Delisting Penalty Provision in the Common
Stock Purchase Agreement. See “Item 1-Business-Recent Developments-Equity Line of Credit Agreement” for additional information.
On January 26, 2026, Nasdaq
filed a rule proposal with the SEC that would permit the immediate suspension and delisting of a company listed on the Nasdaq Capital
Market if its market value of listed securities remains below $5 million for 30 consecutive business days. As of the date of this Annual
Report, our market value of listed securities is below $5 million and if this rule were to go into effect and we are unable to increase
our market value of listed securities above $5 million, we would become subject to immediate suspension and delisting.
We have in the past, and may
in the future, be unable to comply with certain of the listing standards that we are required to meet to maintain the listing of our shares
of common stock on Nasdaq. If we fail to satisfy the continued listing requirements of Nasdaq, such as minimum stockholders’ equity
requirements or minimum bid price requirements, Nasdaq may take steps to delist our shares of common stock. Such a delisting would have
a negative effect on the price of our shares of common stock, impair the ability to sell or purchase our shares of common stock when persons
wish to do so, and any delisting materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing
or other transactions on acceptable terms, or at all. Delisting from Nasdaq could also have other negative results, including the potential
loss of institutional investor interest and fewer business development opportunities, as well as a limited amount of news and analyst
coverage of us. Delisting could also result in a determination that our shares of common stock are a “penny stock,” which
would require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of
trading activity in the secondary market for our shares of common stock. In the event of a delisting, we would attempt to take actions
to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would
allow our shares of common stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent
our shares of common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s
listing requirements.
29
Unfavorable global economic or political
conditions could adversely affect our business, financial condition or results of operations.
Our business is susceptible
to general conditions in the global economy and in the global financial markets. A global financial crisis or a global or regional political
disruption has caused, and could in the future cause, extreme volatility in the capital and credit markets. A severe or prolonged economic
downturn, including a recession, the currently prolonged inflationary economic environment, continued rising interest rates, debt and
equity market fluctuations, diminished liquidity and credit availability, increased unemployment rates, decreased investor and consumer
confidence, supply chain challenges, natural catastrophes, the effects of climate change, regional and global conflicts and terrorist
attacks or political disruption or turmoil could result in a variety of risks to our business, including weakened demand for our product
candidates or any future product candidates, if approved, and our ability to raise additional capital when needed on acceptable terms,
if at all. A weak or declining economy or political disruption could also strain our manufacturers or suppliers, possibly resulting in
supply disruption, or cause our customers to delay making payments for our potential products. Any of the foregoing could materially and
adversely affect our business, financial condition, results of operations and prospects, and we cannot anticipate all of the ways in which
the political or economic climate and financial market conditions could adversely impact our business.
Prolonged inflation rates could negatively
impact our revenues and profitability if increases in the prices of our products or a decrease in customer spending results in lower sales
which would adversely affect our business, results of operations and financial condition.
Inflation rates, particularly
in the United States, have increased in 2022 through 2025 at levels not seen in years in many countries where our customers
reside. Continued and increased inflation may result in decreased demand for our products and services, increased operating costs (including
our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital. In addition,
the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Increases
in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of
further increasing economic uncertainty and heightening these risks. In an inflationary environment, we may be unable to raise the sales
prices of our products at or above the rate at which our costs increase, which could have a material and adverse effect on our business,
results of operations and financial condition. Accordingly, the U.S. dollar has strengthened against foreign currencies as a result
of the United States Federal Reserve’s actions to lower inflation, which is affecting our business partners, where they sell
local currency to the end-user of our products and services.
We may need to raise additional capital
to meet our business requirements in the future, and such capital raising may be costly or difficult to obtain and could dilute our stockholders’
ownership interests.
In order for us to pursue
our business objectives, we may need to raise additional capital, which additional capital may not be available on reasonable terms or
at all. Any additional capital raised through the sale of equity or equity-backed securities may dilute our shareholders’ ownership
percentages and could also result in a decrease in the market value of our equity securities. The terms of any securities issued by us
in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance
of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then outstanding.
In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting
fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash
expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial
condition.
Our indebtedness could adversely affect
our ability to raise additional capital to fund operations, limit our ability to react to changes in the economy or our industry and prevent
us from meeting our financial obligations.
In February 2024, we entered into a new credit line facility from an
Israeli bank of up to $1.5 million (the “Credit Line”). The Credit Line is secured by customer invoices and will incur interest
at a Federal SOFR rate plus 5.5%. The Credit Line has been extended until February 1, 2026. The current balance outstanding is approximately
$36,000. As of the date hereof, the Company has not further extended the credit facility; however, it may do so in the future.
We may raise additional debt
in the future in order to extend the financing we need in ways that are less or non-dilutive vs. equity fund raising. Such debt funding
may increase the burden on our cash flow, make us subject to interest accruing overtime which will affect our profitability as well as
our ability to fund our operations.
30
To support our business growth, in the past years
we increased our focus on serving certain IoT verticals, while continuing to serve our existing Telco customers. This change in our strategy
may make it more difficult to evaluate our business growth and future prospects, and may increase the risk that we will not be successful
in our plans.
Since our inception, our
business was focused on serving Telcos for enterprises and residential customers. Our products and solutions have been deployed with more
than 100 telecommunication service providers worldwide, in enterprise, residential and mobile base station connectivity applications.
In recent years, as we have further developed our technology and rolled out additional products, we turned our focus on serving the
IoT markets. Our operations are focused on our fast-growing IoT business, while maintaining our commitment to our existing Telco customers.
A portion of our revenue continues to be derived from our existing Telco customers. For the years ended December 31, 2025 and
December 31, 2024, our Telco customers in the aggregate decreased by 1% from approximately 28% of our revenues in the year ended
December 31, 2024, to 27% in the year ended December 31, 2025.
Our change in strategy and
our efforts to serve the IoT verticals that we have focused on may prove more expensive than we currently anticipate, or may require longer
development and deployment times, and we may not succeed in fully penetrating such IoT verticals, or at all.
We may have ineffective sales and marketing
efforts.
Our sales and marketing efforts
to drive growth may be ineffective as we try to win new deals either directly with end-user customers, or indirectly through business
partners, distributors, system integrators or value-add resellers. These ineffective efforts may cause us to miss our planned growth and
harm our financial results.
We outsource our product manufacturing and
are dependent on our key manufacturers, and on our component and OEM suppliers. We are susceptible to problems, and have encountered problems
in the past, in connection with procurement, decreasing quality, reliability, and protectability.
Our devices are assembled
by using fully manufactured parts, the manufacturing of which has been fully outsourced, and we have no direct control over the manufacturing
processes of our products. We outsource procurement and manufacturing activities to certain key manufacturers and certain component and
OEM suppliers.
We also purchase unique components
and products from suppliers who are exclusively able to fulfill such supply. We may lose some or all of these relationships, or have a
material weakness in negotiating favorable terms, or such unique components have or may be declared end-of-life which may require product
design changes. Such circumstances have hurt our profitability in the past, and may hurt our profitability in the future, and negatively
affect our ability to deliver our product on time to customers.
Our lack of control in our
manufacturing process due to the fact that we outsource our product manufacturing may increase quality or reliability risks and could
limit our ability to quickly increase or decrease production rates. If necessary, switching production to other or additional subcontractors
will entail a material cost and a temporary decrease in our productivity. Our manufacturing process has been disrupted in the past, and
may be disrupted in the future, by various factors, including but not limited to shipping delays, bottlenecks resulting from raw materials
specific shortages, quality problems or a decrease in quality, manpower shortages by the manufacturers or political unease that would
trigger the closure of a facility or financial insolvency.
Furthermore, a supplier may
discontinue production of a particular part for any number of reasons, which may require us to purchase a large inventory of such discontinued
parts in order to ensure that a continuous supply of such parts remains available to our customers. Such “end-of-life” parts
purchases could result in significant expenditures by us in a particular period, and ultimately any unused parts may result in a significant
inventory write-off, either of which could have an adverse impact on our financial condition and results of operations for the applicable
periods. Additionally, in case any part embedded in our products is no longer available, we may be required to redesign such product in
order to enable usage of alternative parts, or be forced to announce end-of-life of such product. Refer to “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” for additional information on supply constraints related to the
COVID-19 pandemic.
31
Demand for our products and solutions may
not grow or may decline.
We may experience a reduction
in customer demand as a result of either of competition from other companies, technological changes required by our target markets, or
disruptions of existing and new customer relationships. Such demand reduction will prevent us from realizing our planned growth.
Our gross margins may not increase or may
deteriorate.
If our gross margins do not
increase as planned or deteriorate, it will be harder for us to achieve profitability, which could substantially impact our business and
ability to carry on operations if other financing sources are not secured on satisfactory terms. Our gross margins may deteriorate as
a result of either reductions of customers price points, increases in product component and manufacturing costs, or unfavorable changes
in the mix between more and less profitable customers and/or products.
Changes in the price and availability of
our raw materials and shipping could be detrimental to our profitability.
Chipsets, electronic and
mechanical components are significant components of our products. Over the past few years, the prices and availability of electronic and
mechanical components have been fluctuating and may continue to evolve unpredictably in the future.
Furthermore, our products
are assembled with various contract manufacturers located in Israel and in Taiwan. We have experienced instances of limited supply of
certain raw materials and shipping delays, which resulted in extended lead times, increased shipping costs and higher-than-usual backlogs.
Economic and political circumstances may negatively affect the price and availability of raw materials, shipping and availability of assembly
capacity of contract manufacturers.
We may have previously agreed
to set prices with our customers and any changes in supply costs may decrease our margin and directly affect profitability. If prices
increase, supply interruptions, shipping delays, or shortages of materials continue to occur, it could have a negative effect on revenues
and earnings.
Expanding our operations and marketing efforts
to meet expected growth may impact profitability if actual growth is less than expected.
To meet expected growth,
we plan to expand operations, including additional hiring, advertising, and promotion. If actual growth is less than expected, it would
negatively impact our ability to become profitable, which would require we raise additional capital if required, which may not be available
on favorable terms, or at all, which would impact our ability to carry on operations.
If our internal company cyber-security measures
are breached or fail and unauthorized access is obtained to our IT environment, we may incur significant losses of data, which we may
not be able to recover and may experience a delay in our ability to conduct our day-to-day business.
As cybersecurity attacks
continue to evolve and increase, our cyber-security measures and our IT environment could be penetrated or compromised by internal and
external parties’ intent on extracting confidential information, disrupting business processes, corrupting information, or looking
to force the Company to pay a ransom. These risks could arise from external parties or from acts or omissions of internal or service provider
personnel. Such unauthorized access could disrupt our business and could result in the loss of assets, litigation, remediation costs,
damage to our reputation and failure to retain or attract customers following such an event, which could adversely affect our business.
Cyber attackers update their
methods frequently. Sometimes cyberattacks are unrecognizable at the time of their occurrence and even long after. In addition, cyber
incidents can occur as a result of non-technological failures, like human error or malicious acts. In some cases, information security
incidents at our customers or suppliers can also lead to information security incidents in our information systems. For these reasons,
we cannot guarantee that the safeguards taken by us and the safeguards we will take in the future will completely prevent information
security incidents or damages that may result from them as detailed above.
32
We provide cyber security features as part
of our products that may not completely prevent information security breaches, and our products are installed in live customer environments
and may be compromised by cyber-attacks and damage customer assets.
Our products include cyber-security
features such as data-traffic encryption that are engineered to protect our customers’ data and environment. Cyber-attacks become
more sophisticated and evolve quickly, and these features may fail to protect our customers as intended and fail at preventing information
security breaches. We plan to offer new cyber security products and features which we will either develop internally, obtain from partnerships
with third-parties, or through acquisitions in the future. These planned new cyber-security products and features may fail to protect
our customers as intended and not prevent information security breaches.
Our products are installed
in live customer network environments, and may be subject to cyber-attacks seeking access to our customers networks through our products.
Those cyber-attack attempts may take advantage of vulnerabilities of our products within the networks, vulnerabilities that may be known
or unknown to us.
Our products and services
include information systems and digital data of various types, including data kept by our employees, suppliers, and customers (and their
own customers). In recent years there has been an increase in the frequency and severity of cyber incidents (including cybercrime).
This trend is expected to continue in the future and even worsen, despite all the defense mechanisms employed against it. Cyber events
can lead to unauthorized access, unauthorized disclosure, misuse, disruption, deletion, or modification of the Company and its customer
assets, data, and processing, as well as disrupting day-to-day operations, computing services, and significantly slowing them down
and even disabling information systems.
In the event of damage caused
by such cyber-attacks, we may suffer negative consequences, such as disruption of the Company’s and/or our customers’ activities,
disruption of or disabling information systems, theft of our and/or our customers’ data, or damage to its reputation thus affecting
clients’ trust in the Company, and potentially exposing it to lawsuits. In such cases, our business results may be severely harmed.
We depend on key information systems and
third-party service providers.
We depend on key information
systems to transact our business accurately and efficiently. These systems and services are vulnerable to interruptions or other failures
resulting from, among other things, natural disasters, terrorist attacks, software, equipment or digital failures, processing errors,
computer viruses, other security issues or supplier defaults. Security, backup, and disaster recovery measures may not be adequate or
implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services could cause substantial
errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other
business disruptions, all of which could negatively affect our business and financial performance.
We depend on our management team and other
key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely
affect our business.
Our future success depends,
in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services of any of our key personnel,
the inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly in engineering and sales,
may seriously and adversely affect our business, financial condition and results of operations. Although we have entered into employment
or consulting agreements with our personnel, their employment is generally for no specific duration.
Our future performance also
depends on the continued services and continuing contributions of our senior management team, which includes Tuvia Barlev, our Chief Executive
Officer, to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of
our senior management team, particularly our Chief Executive Officer, could significantly delay or prevent the achievement of our development
and strategic objectives, which could adversely affect our business, financial condition and results of operations.
33
We may face the effects of increased competition
and rapid technological changes.
The industry in which we
are engaged is subject to rapid and significant technological change. There can be no assurance that our systems can be upgraded to meet
future innovations which will be required to meet our customer’s requirements, or that new technologies will be adopted successfully
by us, or existing technologies will not be improved, which would render the offerings obsolete or non-competitive. Companies we compete
with enjoy significant competitive advantages, including greater name recognition; greater financial, technical, and service resources;
established networks; additional product offerings; and greater resources for product development and sales and marketing.
There can be no assurance
that other established networking technology companies, any of which would likely have greater resources than us, will not enter the market.
In addition, new competitors may enter the marketplace and/or begin offering networking technology products and solutions and in channels
similar to or competing with ours. Such competition may reduce demand for our products and impact the growth prospects and ability to
achieve profitability, which may require us to raise new capital, which may not be available on favorable terms, or at all, and that would
impair our ability to carry on operations.
We cannot assure you that
we will be able to compete successfully against any of these competitors. Our failure to compete successfully with our competitors could
harm our business.
We are dependent on skilled human capital.
Our ability to innovate and
execute its business plans is dependent on the ability to hire, replace, and train skilled personnel. The employment market suffers from
shortages of candidates, and such shortages may continue in future years, causing delays and preventing us from executing our plans.
Our results of operations are likely to
fluctuate from quarter to quarter and year to year, which could adversely affect the trading price of our common stock.
Our results of operations,
including our revenue, cost of revenue, gross margin, operating expenses, cash flow, and deferred revenue, have fluctuated from quarter
to quarter and year to year in the past and may continue to vary significantly in the future so that period-to-period comparisons of our
results of operations may not be meaningful. Accordingly, our financial results in any one quarter should not be relied upon as indicative
of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of
our control, may be difficult to predict, and may not fully reflect the underlying performance of our business. Factors that may cause
fluctuations in our quarterly financial results include:
● the loss of existing customers;
● mix of our revenue;
● our ability to gain new partners and retain existing partners;
● fluctuations in share-based compensation expense;
● changes in the spending patterns of our customers;
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● network outages;
● general economic, industry, and market conditions;
● the impact of political uncertainty or unrest;
● changes in our pricing policies or those of our competitors;
● fluctuations in the growth rate of the markets that our offerings address;
● the business strengths or weakness of our customers;
● our ability to collect timely on invoices or receivables;
● the cost and potential outcomes of future litigation or other disputes;
● future accounting pronouncements or changes in our accounting policies;
● fluctuations in foreign currency exchange rates; and
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The impact of one or more
of the foregoing or other factors may cause our results of operations to vary significantly. Such fluctuations make forecasting more difficult
and could cause us to fail to meet the expectations of investors and securities analysts, which could cause the trading price of our common
stock to fall substantially, resulting in the loss of all or part of your investment, and subject us to costly lawsuits, including securities
class action suits.
The loss of one or more of our significant
customers, or any other reduction in the amount of revenue we derive from any such customer, would adversely affect our business, financial
condition, results of operations and growth prospects.
Our future success is dependent
on our ability to establish and maintain successful relationships with a diverse set of customers.
We currently derive a significant
portion of our revenue from a limited number of our customers. For the years ended December 31, 2025 and December 31, 2024,
our top ten customers in the aggregate accounted for approximately 62% and 74% of our revenues.
We expect to continue to
derive a significant portion of our revenue from a limited number of customers in the future and, in some cases, the portion of our revenue
attributable to individual customers may increase. The loss of one or more significant customers or a reduction in the amount of revenue
we derive from any such customer could significantly and adversely affect our business, financial condition and results of operations.
Customers may choose not to renew their contracts or may otherwise reduce the breadth of the offerings which they purchase for any number
of reasons. We are also subject to the risk that any such customer will experience financial difficulties that prevent them from making
payments to us on a timely basis or at all.
Our business, operating results and growth
rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect
to financial institutions and associated liquidity risk.
Our business depends on the
economic health of the global economies. If the conditions in the global economies remain uncertain or continue to be volatile, or if
they deteriorate, including as a result of the impact of military conflict, such as the security situation in the Middle East, Russia
and Ukraine, terrorism or other geopolitical events, our business, operating results and financial condition may be materially adversely
affected. Economic weakness, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained
capital spending have at times in the past resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption
of new technologies and increased price competition, and could negatively affect our ability to forecast future periods, which could result
in an inability to satisfy demand for our products and a loss of market share.
Our operations would be particularly
vulnerable to potential interruptions in the supply of certain critical materials and metals, such as neon gas and palladium, which are
used in semiconductor manufacturing. Any interruption to semiconductor chip supply could significantly impact our ability to receive the
components and timely roll-out of our operations. Furthermore, any potential increase in geopolitical tensions in Asia, particularly in
the Taiwan Strait, could also significantly disrupt existing semiconductor chip manufacturing and increase the prospect of an interruption
to the semiconductor chip supply across the world. A significant portion of the world’s semiconductor manufacturing is in Taiwan,
and similar geopolitical tensions there could create further supply chain disruptions, which could result in further delays for our products’
components.
The world’s largest
semiconductor chip manufacturer is located in Taiwan and a large part of equipment and materials, is manufactured in, and imported from,
Taiwan. A setback to the current state of relative peace and stability in the region could compromise existing semiconductor chip production
and have downstream implications for our company. We are continuing to monitor the situation in Ukraine, the Middle East and globally,
and assessing its potential impact on our business.
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In addition, increases in
inflation raise our costs for commodities, labor, materials and services and other costs required to grow and operate our business, and
failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in inflation, geopolitical
developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty
about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure
to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.
There can be no assurance
that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general
business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued
unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or if adverse developments are experienced
by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult,
more costly, more onerous with respect to financial and operating covenants and more dilutive. Failure to secure any necessary financing
in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock
price and could require us to alter our operating plans. In addition, there is a risk that one or more of our service providers, financial
institutions, manufacturers, suppliers and other partners may be adversely affected by the foregoing risks, which could directly affect
our ability to attain our operating goals on schedule and on budget.
The effects of health pandemics, such as
the global COVID-19 pandemic could have an adverse impact on our business, financial condition and results of operations.
In December 2019, a
novel coronavirus disease, or COVID-19, was first reported and on March 11, 2020, the World Health Organization characterized COVID-19
as a pandemic. The widespread health crisis is adversely affecting the broader economies, financial markets and overall demand environment
for many of our products.
Our operations and the operations
of our suppliers, channel partners and customers were disrupted to varying degrees by a range of external factors related to the COVID-19
pandemic, some of which are not within our control. Many governments imposed, and may yet impose, a wide range of restrictions on the
physical movement of people in order to limit the spread of COVID-19. The COVID-19 pandemic has had, and likely will continue to have,
an impact on the attendance and productivity of our employees, and those of our channel partners or customers, resulting in negative impacts
to our results of operations and overall financial performance. We suffered delays in realization of certain new orders from our customers,
delay in testing of some of our new technologies in customer premises and difficulty conducting business development activities in an
effective way (face-to-face). Additionally, COVID-19 has resulted in delays in non-residential construction, non-crisis-related IT purchases
and project completion schedules in general, all of which can negatively impact our results in both current and future periods.
The duration and extent of
any future epidemic or pandemic such as the COVID 19 pandemic depends on future developments that cannot be accurately predicted at this
time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the effects of measures
enacted by policy makers and central banks around the globe, and the impact of these and other factors on our employees, customers, channel
partners and suppliers. If we are not able to respond to and manage the impact of such events effectively, our business will be affected.
Our performance is affected by general economic
and political conditions and taxation policies.
The success of our activities
may be affected by general economic and market conditions, like interest rates, currency exchange rate fluctuations, availability of credit,
inflation rates, economic uncertainty, changes in laws, and United States and international political circumstances. Unexpected volatility
or illiquidity could impair profitability or result in losses.
We may be adversely affected by the political
and economic situation in the U.S., Europe and a number of countries in Asia.
The U.S. communications
market is directly affected by economic developments in the U.S. economy. The European and Asian communications market is similarly
reliant on political and economic stability in those regions. Changing trends in these markets may lead to a decrease in investments and
a delay in projects, which could harm our business. To reduce our sensitivity to market changes, we operate in a large number of different
vertical markets and territories.
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Our business could be adversely impacted
by changes in laws, regulations and tariffs related to government contracts.
Federal or state government
bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial
medium. Legislators, regulators, or government bodies or agencies may also make legal or regulatory changes or interpret or apply existing
laws or regulations that relate to government contracts. Changes in these laws, regulations or interpretations could require us to modify
our platform in order to comply with these changes, to incur substantial additional costs or divert resources that could otherwise be
deployed to grow our business, or expose us to unanticipated civil or criminal liability, among other things.
We are subject to laws and regulations worldwide,
changes to which could increase our costs and individually or in the aggregate adversely affect our business.
We are subject to laws and
regulations affecting our domestic and international operations in a number of areas. These U.S. and foreign laws and regulations
affect our activities including, but not limited to, in areas of labor, health and safety, tax, import and export requirements, foreign
exchange controls and cash repatriation restrictions, data privacy requirements, anti-competition, and environmental.
Compliance with these laws,
regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further
increasing the cost of compliance and doing business. Any such costs, which may rise in the future as a result of changes in these laws
and regulations or in their interpretation, could individually or in the aggregate make our products and services less attractive to our
customers, delay the introduction of new products in one or more regions, or cause us to change or limit our business practices. We have
implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance
that our employees, contractors, or agents will not violate such laws and regulations or our policies and procedures.
Scrutiny of sustainability and environmental,
social, and governance (“ESG”) initiatives could increase our costs or otherwise adversely impact our business.
Public companies have recently
faced scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy groups, other
market participants and other stakeholder groups. Such scrutiny may result in increased costs, enhanced compliance or disclosure obligations,
or other adverse impacts on our business, financial condition or results of operations. If our ESG practices and reporting do not meet
investor or other stakeholder expectations, we may be subject to investor or regulator engagement regarding such matters. Our failure
to comply with any applicable ESG rules or regulations could lead to penalties and adversely impact our reputation, access to capital
and employee retention. Such ESG matters may also impact our third-party contract manufacturers and other third parties on which we rely,
which may augment or cause additional impacts on our business, financial condition, or results of operations.
Risks Related to Protecting Our Technology
and Intellectual Property
Claims by others that we infringe their
intellectual property could force us to incur significant costs or revise the way we conduct our business.
Our competitors protect their
proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property. We have not conducted an
independent review of patents and other intellectual property issued to third parties, who may have patents or patent applications relating
to our proprietary technology. We may receive letters from third parties alleging, or inquiring about, possible infringement, misappropriation,
or violation of their intellectual property rights. Any party asserting that we infringe, misappropriate, or violate proprietary rights
may force us to defend ourselves, and potentially our customers, against the alleged claim. These claims and any resulting lawsuit, if
successful, could subject us to significant liability for damages or interruption or cessation of our operations. Any such claims or lawsuit
could:
● be time-consuming and expensive to defend, whether meritorious or not;
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● divert the attention of our technical and managerial resources;
● require us to indemnify our customers.
Furthermore, during the course
of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests,
depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could
materially adversely affect our business. Some of our competitors may be able to sustain the costs of intellectual property litigation
more effectively than we can because they have substantially greater resources. In addition, any litigation could significantly harm our
relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect
on our business, operating results and financial condition.
Our patents and proprietary technology may
be challenged or disputed.
We hold certain patent and
trade secret rights relating to various aspects of our technologies, which are of material importance to the Company and its future prospects.
Any patents we have obtained or do obtain may be challenged by re-examination or otherwise invalidated or eventually found unenforceable.
Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may attempt
to challenge or invalidate our patents or may be able to design alternative techniques or devices that avoid infringement of our patents
or develop products with functionalities that are comparable to ours. In the event a competitor infringes upon our patent or other intellectual
property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful,
could be expensive and time consuming and could require significant time and attention from our management. We do not have sufficient
resources to enforce our intellectual property rights or to defend our patents against challenges from others.
Any failure to protect our intellectual
property rights could impair our ability to protect our proprietary technology and our brand.
Our success and ability to
compete depend largely upon our intellectual property. To date, we have 16 registered patents in the United States; 3 registered patents
in Europe, 1 registered patent in Mexico, 1 registered patent in Indonesia, one pending application in the United States and one pending
application in Europe, all of which in the general area of high-speed carrier class Ethernet service and transport over bonded VDSL2,
G.SHDSL as well as Fiber covering various aspects of our technology. We take reasonable steps to protect our intellectual property, especially
when working with third parties. However, the steps we take to protect our intellectual property rights may be inadequate. For example,
other parties, including our competitors, may independently develop similar technology, duplicate our services, or design around our intellectual
property and, in such cases, we may not be able to assert our intellectual property rights against such parties. Further, our contractual
arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized
disclosure of our confidential information, and we may be unable to detect the unauthorized use of, or take appropriate steps to enforce,
our intellectual property rights.
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We make business decisions
about when to seek patent protection for a particular technology and when to rely upon trade secret protection, and the approach we select
may ultimately prove to be inadequate. Even in cases where we seek patent protection, there is no assurance that the resulting patents
will effectively protect every significant feature of our technology or provide us with any competitive advantages. Moreover, we cannot
guarantee that any of our pending patent application will issue or be approved. The United States Patent and Trademark Office and
various foreign governmental patent agencies also require compliance with a number of procedurals, documentary, fee payment, and other
similar provisions during the patent application process and after a patent has issued. There are situations in which noncompliance can
result in abandonment or lapse of the patent, or patent application, resulting in partial or complete loss of patent rights in the relevant