Financial Performance and Risks - The company experienced a net loss from continuing operations of approximately $31.6 million for the year ended December 31, 2019, with cash and cash equivalents of about $1.0 million[30]. - Current assets were reported at $35.2 million, while current liabilities stood at $99.6 million as of December 31, 2019, resulting in significant liquidity concerns[37]. - The company anticipates that revenue for 2020 may be negatively impacted by the COVID-19 pandemic by as much as 50% or more compared to 2019[27]. - The company is in default of loan agreements with Partners For Growth, which could lead to significant asset loss and restrict operational capabilities[36]. - The company’s ability to continue as a going concern is dependent on meeting financial requirements and securing additional funding, which is uncertain[31]. - The company may face significant risks related to anti-corruption and anti-bribery laws in multiple jurisdictions, which could adversely affect its business and reputation[106]. - The company may be involved in future litigation that could result in substantial monetary damages, impacting its financial condition[124]. - The company may not be able to accurately report its results of operations if it fails to maintain effective internal control over financial reporting, adversely impacting investor confidence[126]. - As of December 31, 2019, the company identified a material weakness in internal control over financial reporting due to insufficient financial reporting personnel with appropriate knowledge and experience in U.S. GAAP and SEC reporting requirements[127]. Customer Dependency and Revenue Concentration - The company's top five customers accounted for 87.2% of net revenues in 2019, indicating a high dependency on a small number of major clients[42]. - In 2019, 63.9% of the company's revenues were concentrated with one customer in India, indicating a high dependency on a single client[94]. - The company derived approximately 70% of its revenues from customers located in India in the year ended December 31, 2019, which may be impacted by geopolitical tensions[146]. Operational Challenges and Workforce Management - Due to stringent cash flow conditions, the company has postponed further investment into the acquisition target of KADI and ceased additional payments for ownership of Colmei and Crave, both of which are insolvent[28]. - The company has reduced its workforce by approximately 20% in India and 40% in China in response to the pandemic's impact on sales[27]. - The company must continuously seek new engagements, as its customer contracts are typically project-based and can be terminated at any time[80]. - The company is negotiating with PFG for settlement and restructuring of loans due to defaults, with penalties and interests accrued totaling approximately $2.9 million as of December 31, 2019[36]. Market and Competitive Landscape - The company faces intense competition in the wireless communications market, with numerous MVNOs posing challenges to its market position[61]. - The company is vulnerable to competition from open source software, which may pressure pricing and reduce demand for its Android+ software and service platform solutions[82]. - The company is one of the top MVNOs in China by registered subscribers and intends to expand market share through organic growth and acquisitions[61]. - The company faces risks from technology infrastructure failures, which could lead to service interruptions and harm its reputation and financial condition[85]. Regulatory and Compliance Issues - The company is in the process of implementing policies to comply with evolving privacy regulations, which could impact its business operations[84]. - The company is classified as an "emerging growth company," allowing it to take advantage of reduced regulatory and reporting requirements, which may affect the attractiveness of its ordinary shares to investors[139]. - The company may remain an "emerging growth company" for up to five years unless certain revenue or market value thresholds are exceeded[140]. - The PRC legal system presents uncertainties that could impact the company's compliance and operational effectiveness in China[148][149]. - The company is subject to PRC regulations that may limit its ability to inject capital into its PRC subsidiaries and could result in penalties for non-compliance[172]. Acquisition and Investment Risks - The acquisition of KADI is subject to changes or rescission, with certain commercial registrations not yet completed, which may affect the company's ability to capture the KADI business[222]. - There is no assurance that KADI can meet customer delivery standards or that the company can provide necessary funds for KADI's manufacturing setup, which could jeopardize the acquisition[223]. - The integration of KADI's management with the company's management team is uncertain, which may hinder the realization of intended benefits from the acquisition[224]. - Changes in the electric vehicle industry, including increases in component pricing, may necessitate amendments to the acquisition agreement with KADI[222]. Economic and Geopolitical Factors - The company faces risks related to doing business in China, including economic, political, and legal developments that could adversely affect its operations and financial condition[141][142]. - Recent U.S. trade policy initiatives against the PRC may adversely affect the company's business operations and market conditions[151]. - The evolving trade dispute may adversely affect various industries, with no assurance of immunity for specific customers or products[155]. - Approximately 50% of the company's revenues and costs are denominated in RMB, making it sensitive to RMB fluctuations against the U.S. dollar, which could materially affect cash flows and earnings[171]. Technology and Innovation - The company must continuously invest in research and development to keep up with technological advancements and changing customer demands to maintain competitiveness[53]. - The company’s business model is heavily dependent on the Android platform, and any cessation of development by Google could materially harm its operations[70]. - The company is facing increased labor costs due to the enforcement of the Labor Contract Law, which mandates unlimited-term contracts after ten years of employment and requires severance payments upon contract termination[190]. - The company faces risks from significant developments in alternative technologies, which could adversely affect its business and competitiveness in the electric vehicle market[210].
Borqs(BRQS) - 2019 Q4 - Annual Report