UTStarcom(UTSI) - 2024 Q4 - Annual Report

Financial Performance - The company reported a net loss of $4.4 million,$3.9 million, and $5.0 million for the years ended December 31, 2024, 2023, and 2022, respectively[37]. - The company has a history of operating losses and may not have enough liquidity to execute its business plan without obtaining additional funding or selling additional securities[35]. - The company recorded a net loss of$0.7 million in 2022, a net gain of $1.9 million in 2023, and a net gain of$0.5 million in 2024[81]. - The company anticipates that future product sales will be unpredictable, leading to potential fluctuations in quarterly and annual operating results[58]. - The company may require additional capital in the future, and selling additional equity could lead to shareholder dilution[160]. Liquidity and Cash Management - As of December 31, 2024, the company had $43.9 million in cash or cash equivalents, indicating a need for liquidity management[37]. - The company may need to obtain additional financing, but there is uncertainty regarding the ability to secure funding under commercially reasonable terms[39]. - The company faces risks related to its reliance on a Japanese customer and an Indian customer for a significant portion of its net sales, which could adversely affect its financial condition[30]. Customer Relationships and Sales - The company relies significantly on two major customers: SoftBank Corp. and Bharat Sanchar Nigam Limited (BSNL), accounting for approximately 30$3.4 million (INR 0.3 billion), with payment collection taking longer than anticipated[50]. - The company collected $11 million,$21 million, $35 million,$23 million, and $10 million from BSNL in the years 2019 to 2023, indicating fluctuating payment patterns[54]. - In 2024, net sales totaled$10.878 million, with India contributing 45%, Japan 36%, and China 19%[208]. Competition and Market Risks - The company faces intense competition from both domestic and international firms, which may lead to reduced prices, revenues, and market share[64]. - Average selling prices of the company's products may decrease, potentially reducing revenues and gross profit margins[67]. - The company has a rapidly evolving business model, with new product offerings that may not attract or retain customers, posing risks to growth and operating results[56]. Regulatory and Legal Risks - The company is subject to various legal and operational risks associated with its operations in China, which could negatively impact its business[25]. - Changes in the regulatory environment in India may restrict the company's ability to participate in future biddings, negatively impacting operations in the region[63]. - The company is subject to evolving data privacy laws that may impose onerous compliance requirements, potentially affecting its operations and user data collection[96]. - The company must comply with the new PRC Company Law effective July 1, 2024, which requires shareholders to fully pay in their subscribed registered capital within five years of establishment[111]. Management and Operational Challenges - The company has faced significant management changes, including the appointment of new executives in key positions, which may create uncertainty in business operations[45]. - The company has identified a material weakness in its internal control over financial reporting as of December 31, 2024, indicating that its internal controls were not effective[106]. - The company is committed to improving its internal control processes to ensure compliance with regulatory requirements, although uncertainties remain regarding future material weaknesses[106]. Intellectual Property and Compliance - The company may incur substantial costs related to intellectual property infringement claims, which could harm its financial condition[88]. - The company faces risks related to the loss or misappropriation of intellectual property, which could harm its competitive position[87]. - The company has not received any claims of patent infringement in 2024, but past claims have diverted management's attention and resources[88]. Future Growth and Product Development - The company anticipates continued increases in labor costs, including wages and employee benefits, which may adversely affect its financial condition if not controlled or passed on[155]. - The company is actively exploring the Chinese market for new customers and opportunities related to the rollout of 5G networks[212]. - The company is evaluating acquisition prospects to complement existing product offerings and enhance market coverage, but faces risks related to assimilation and realization of anticipated synergies[86].