ITE M 1A.  RISK FACTORS

You should carefully consider the following risk factors, together with the other information contained in this Form 10-K and our other reports and filings made with the SEC, in evaluating our business and prospects. If any of the risks discussed in this Form 10-K occur, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected, in which case the trading price of our common stock could decline significantly. Some statements in this Form 10-K, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Statement Concerning Forward-Looking Statements.”

Risks Related to Our Spectrum Initiatives and the Use of Our Spectrum

Our regulatory initiatives aimed at increasing the usability and capacity of our spectrum may not be successful on a timely basis, or at all, and will continue to require significant time and attention from our senior management team and our expenditure of significant resources.  

While our current spectrum holdings can support narrowband and wideband wireless services, the most significant business opportunities we have identified will require greater bandwidth than allowed by the current configuration of our spectrum.  As our first priority, we are pursuing regulatory initiatives at the Federal Communications Commission (“FCC”) aimed at modernizing and realigning the 900 MHz spectrum band to increase its usability and capacity by allowing it to be utilized for deployment of broadband networks, technologies and solutions.  In March 2019, the FCC unanimously adopted a Notice of Proposed Rulemaking (“NPRM”) that proposes the creation of a broadband opportunity in the 900 MHz band for critical infrastructure and other enterprise users.  In the NPRM, the FCC has proposed three criteria for an applicant to secure a broadband license in a county: (i) the applicant must hold all 20 blocks of geographic SMR licenses in the county; (ii) the applicant must reach agreement to relocate all incumbents in the broadband segment on a 1:1 voluntary channel exchange or demonstrate that the incumbents will be protected from interference; and (iii) the applicant must agree to return to the FCC all rights to geographic and site-based spectrum in the county in exchange for the broadband license. 

In the NPRM, the FCC requested comments from incumbents and other interested parties on a number of important topics that will have a material impact on the timing and costs of obtaining a broadband license, assuming the FCC issues a Report and Order supporting broadband.  As noted above, a broadband applicant, like the Company, must hold all 20 blocks of geographic Specialized Mobile Radio (“ SMR ”) licenses in a particular county.  In certain areas, SMR spectrum is being held in inventory by the FCC.  In the NPRM, the FCC requested comments on how a broadband applicant could acquire the FCC’s inventory of geographic SMR-allocated spectrum.  Specifically, in considering whether to make its inventory available to the broadband applicant, the FCC has asked whether it should do so only if the applicant meets a threshold number of its own geographic licenses.  The FCC also questions how to mitigate a windfall that might thereby be attributed to such an applicant.   The failure of the FCC to make its SMR licenses available to the broadband applicant on a timely and cost-effective basis, could limit our ability to qualify for broadband licenses in a number of counties based on the existing criteria in the NPRM.  In addition, the FCC’s concerns about a potential windfall to the Company as a result of the FCC contributing its inventory of SMR spectrum and/or allowing the Company to convert narrowband channels to a broadband channel, could restrict our ability to obtain broadband licenses or significantly delay or increase our costs of acquiring broadband licenses from the FCC.

The NPRM also proposes a market-driven, voluntary exchange process for clearing the broadband spectrum.  An applicant seeking a broadband license for a particular county will need to demonstrate that it has entered into agreements with incumbents or that it can protect their narrowband operations from interference.  All incumbents must be accounted for before the broadband application may be filed, which could lead to holdouts.  For example, an incumbent may demand compensation in an amount that is disproportionate to the cost of relocating its system or any reasonable reflection of the value of its spectrum holdings or may elect not to negotiate an agreement at all.  In the NPRM, the FCC has requested comments on different approaches to address the holdout situation, including several different auction options.  Each of the approaches would trigger mandatory relocation rights for the prospective broadband applicant, and the Company, would be required to pay the costs associated with providing incumbents with comparable facilities and paying relocation costs.  If the FCC were to conduct either overlay or incentive auctions for the broadband license in some or all counties, parties other than the Company could obtain the broadband license(s) by outbidding the Company.

The NPRM also proposes to exempt from mandatory relocation “complex systems,” with 65 or more integrated sites, which would prevent the Company from obtaining broadband licenses in counties where these complex systems are located without the operator’s consent, which could be withheld for any reason.  Further, depending on the rules in any Report and Order issued by the FCC, the Company’s ability to address potential holdouts, and clear the 900 MHz band as required to qualify for broadband licenses, may be delayed or be uneconomical, and in some counties incumbents may be able to prevent the Company from qualifying for broadband licenses.

The Association of American Railroads (“AAR”) holds a nationwide geographic license for six non-contiguous private land mobile systems for business users (“ B/ILT ”) channels in the 900 MHz band, three of which are located within the FCC’s proposed broadband segment.  The spectrum is used by freight railroads for Advanced Train Control System (“ATCS”) operations.  We have recognized from the outset the importance of reaching agreement with the railroads about their relocation and have worked with them throughout the FCC process.  We and the AAR are in agreement about the optimal solution.  However, this proposed solution will

require an exemption from the relocation rules proposed by the FCC in the NPRM.  We are continuing to coordinate our activities at the FCC with the AAR in support of securing the required exemption from the FCC.   There is no assurance that the FCC will grant this exemption, or that we can reach a final agreement with the AAR on acceptable terms, or at all.

The NPRM also proposes “performance” or build-out requirements that the Company would be required to meet to retain each broadband license and then to renew it.  These requirements are based on deployment of a system, including a system operating pursuant to a lease arrangement with the Company, that provides reliable coverage to an area that includes a defined percentage of the population in the county.  A failure to satisfy this requirement could result in the cancellation of a broadband license.

The full text of the NPRM, and the comments and related correspondence filed in the 900 MHz proceeding, are available on the FCC’s public website. At the end of the NPRM comment period, the FCC’s next step could be the issuance of a Report and Order, a request for additional information, a decision to close the proceeding without further action, or some other action.  There is no assurance if or when the FCC will issue a Report and Order.  Further, the terms of any Report and Order may differ materially from the terms of the current NPRM.

We continue to believe in the merits of our broadband approach, and that it would be in the public interest for the FCC to realign the 900 MHz band to enable the deployment of broadband networks, technologies and solutions.  Nevertheless, obtaining a favorable result from the FCC may take a significant amount of additional time, and will continue to require the attention of our management team and our expenditure of significant resources. Moreover, there is no assurance that following the conclusion of the NPRM process, the FCC will ultimately issue a Report and Order that will allow our licensed 900 MHz spectrum to be utilized for broadband networks, technologies and solutions.  Further, even if the FCC issues a Report and Order, the terms and conditions of such Report and Order could make it difficult, time consuming and/or costly to obtain broadband licenses from the FCC.  If the FCC fails to issue a Report and Order that provides for the issuance of broadband licenses in the 900 MHz band, or if the terms and conditions in the Report and Order do not allow us to obtain broadband licenses timely and on commercially reasonable terms, we will be unable to pursue our business plans and strategies and our business, liquidity and results of operation will be harmed.  Further, if there is an extensive delay in adoption of a Report and Order, prospective customers of the Company’s spectrum may have to invest in other broadband solutions to address their operating requirements.

Even if our FCC initiatives are successful, we may not be successful in commercializing our spectrum assets.   

Our team has engaged in a research and outreach program to identify customers who would likely place value on utilizing our spectrum assets to deploy private broadband networks, technologies and solutions, assuming our FCC initiatives are successful.     Based on our market research, we have identified electrical utilities as our initial target customers.  As of the date of this filing, we have not signed our first customer contract with an electric utility or other critical infrastructure entity for the long-term lease of our spectrum asset for the deployment of broadband networks, technologies and solutions.  Further, there is no assurance, that we will be successful in our pursuit to commercialize our spectrum assets.  For example, utilities, or other critical infrastructure and enterprise customers, may not elect to license our spectrum assets on commercially reasonable terms, on a timely basis, or at all.  Similarly, there is no assurance that utilities and other critical infrastructure customers will retain us for any other value-added engineering or commercial services we offer them.  As a result, even if we are successful with our FCC initiatives, our future prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of implementing a new business plan and pursuing opportunities in new, highly competitive and rapidly developing markets.  

In addition, under our current business plan, we intend to enter into long-term leasing or other transfer arrangements for our spectrum assets with one customer, or a limited number of customers, in each geographic area.  We also expect that our customers will bear the costs of deploying and operating their private broadband networks.  As a result, many geographic areas may have only one or a limited number of potential customers, and if we are not successful with this customer or customers, our spectrum may not be utilized and we will not be able to generate revenues from owning spectrum in these geographic areas.  In addition, even if we enter into a long-term lease or transfer arrangement for a geographical area, that customer will typically require rights to all spectrum we have in that geographic area.  Because of this, we will not have additional spectrum assets to lease in such geographical area to other potential customers.  Further, other than our lease or transfer arrangements, we will not generate revenue from the operation of the broadband networks or technologies deployed by our customers. As a result, there is considerable uncertainty as to whether we can generate sufficient revenues to develop a profitable business from leasing or otherwise transferring our licensed 900 MHz spectrum. 

Further, our assessment that we should target utilities and other critical infrastructure entities as customers for our spectrum is based on our determination that these entities have regulatory and other incentives to install a significant number of new technologies, such as smart devices and sensors, that will generate an increasing amount of data that cannot be addressed well by their existing communication networks and systems. Our potential customers, however, are large organizations, and a decision to implement private broadband networks, technologies and solutions is a significant decision and will require significant capital outlays.  Any negotiation and contract process with these potential customers may take longer than we currently expect.  In addition, there is no assurance that the governmental agencies that govern these entities will allow them to pass the capital costs of implementing broadband networks, technologies and solutions utilizing our spectrum on to their ratepayers.  In addition, although there is broad availability of broadband Long Term Evolution (“ LTE ”) , there is no assurance that our targeted customers will be able to utilize existing broadband networks, technologies and solutions with our spectrum without requiring modifications to existing equipment or engaging in product and/or service development efforts, any of which could result in deployment delays, require them or us to invest in technology or other

development activities or otherwise adversely limit the potential benefits or value of our spectrum assets. If any of these risks occur, our current plans to commercialize our spectrum assets may not be as highly valued as we expect or may face significant delays, any of which would adversely affect our business, liquidity and results of operations. 

Our initiatives with the federal and state agencies and commissions that regulate electric utilities may not be successful.  

Our targeted critical infrastructure customers are highly regulated by both federal and state agencies.  Electrical utilities, for example, are regulated by federal agencies ranging from the Department of Energy, the Department of Homeland Security, the Federal Energy Regulatory Commission and the national Institute of Standards and Technologies.  We are working with each of these agencies to educate them about the potential benefits that private broadband LTE networks, technologies and solutions utilizing our spectrum assets can offer utilities.   We are also working with a number of state agencies and commissions who regulate electrical utilities, and who have a strong influence over electric utility buying decisions. Our goal with these state agencies and commissions is to gain their support for utilities being allowed to pass the capital costs of leasing our spectrum assets and deploying private broadband LTE networks, technologies and solutions to ratepayers, including at a customary rate of return for the electric utility company.  We are in the early stages of our initiatives with these federal and state agencies and commissions.  We may not be successful in gaining support from these governmental bodies on a timely basis, or at all, which could hinder or delay our commercialization efforts with electric utilities and other critical infrastructure entities.  

   Many of the third parties who have objected to our spectrum initiatives, or with whom we are competing against for spectrum opportunities, have more resources, and greater political and regulatory influence, than we do.  

Our FCC initiatives have been, and may continue to be, opposed by certain incumbents and other third parties with conflicting or competing business interests.  Many of the third parties who are not supportive of our broadband initiatives, or with whom we compete for spectrum opportunities, have more resources and greater political and regulatory influence than we do, which could prevent, delay or increase the costs of our spectrum initiatives and spectrum opportunities.  Further, we may be required to make concessions, contractual commitments, or limit the use of our spectrum assets or restrict our pursuit of business opportunities, to address the concerns expressed by opposing incumbents and other interested parties.  For example, the NPRM currently proposes to exempt from mandatory relocation “complex systems,” with 65 or more integrated sites, which would prevent us from obtaining broadband licenses in counties where these complex systems are located without the operator’s consent, which could be withheld for any reason.  This exemption and any other exemptions, concessions, limitations and restrictions could have a material adverse effect on our operations and business plan, our future prospects and opportunities and on our ability to develop a profitable business.    

Spectrum is a limited resource, and we may not be able to obtain sufficient contiguous spectrum to support our spectrum initiatives or our planned business operations and future growth.

Spectrum is a limited resource whose non-Federal use is regulated in the U.S. by the FCC.  In the NPRM, the FCC has proposed that an applicant must hold all 20 blocks of geographic SMR licenses in a particular county to qualify for a broadband license in that county.  If any Report and Order issued by the FCC has a similar requirement, we will need to acquire additional spectrum, both from the FCC and from third party incumbents, to qualify to obtain broadband licenses in a number of important geographical areas.  The amount of spectrum we will be required to purchase will vary in each county based on our existing spectrum holdings in such county.  Our ability to acquire additional spectrum on a timely and cost-effective basis will depend on the incumbents who hold the additional spectrum we need to acquire, and their operations that we may need to retune or replace.  Our time and cost to purchase additional spectrum will also depend in large part on the terms of the FCC’s Report and Order, if any, and how the FCC allows the Company as a broadband applicant to address holdouts.  To prepare for our future business opportunities, we have acquired, and may continue to acquire, additional spectrum through negotiated purchases.  We also may elect to acquire additional spectrum in government-sponsored auctions of spectrum. We cannot assure you, however, that we will be successful in acquiring the additional spectrum we will need to support our realignment efforts and to qualify to obtain broadband licenses even if the FCC issues a Report and Order in the 900 MHz proceeding.  Further, there is no assurance that the terms of any Report and Order will not significantly increase our time and cost of acquiring spectrum.  Any failure to obtain additional spectrum required to obtain broadband licenses and implement our business plans on a timely and cost-effective basis, will adversely impact our revenues and our future growth potential .      

Government regulations or actions taken by governmental bodies could adversely affect our business prospects, liquidity and results of operations .  

The licensing and sale of spectrum assets, as well as the deployment and operation of wireless networks and technologies, are regulated by the FCC and, depending on the jurisdiction, state and local regulatory agencies. In particular, the FCC imposes significant regulation on licensees of wireless spectrum with respect to how FCC licenses may be transferred or sold.  The FCC also regulates how the spectrum is used by licensees, the nature of the services that licensees may offer and how the services may be offered, including resolution of issues of interference between spectrum bands. In addition, the FCC grants wireless licenses for defined terms.  While the Company’s current licenses have ten-year license terms, the NPRM has proposed a fifteen-year license term for 900 MHz broadband licenses. There is no guarantee that our existing or future licenses will be renewed. Failure to comply with

FCC requirements applicable to a given licensee could result in revocation or non-renewal of the license, depending on the nature and severity of the non-compliance. If we, or any of the future licensees of our spectrum assets, fail to comply with applicable FCC regulations, we may be subject to sanctions or lose our FCC licenses, which would have a material adverse effect on our business. 

In addition, the FCC and other federal, state and local governmental authorities could adopt new regulations or take actions, including imposing taxes or fees on our business that could adversely affect our prospects and results of operations.  Further, the FCC or Congress may make additional spectrum available for communications services, which may result in the introduction of additional competitive entrants to the already crowded wireless communications marketplace in which we compete.  For example, the federal government created and funded the First Responder Network Authority (“FirstNet”), which the federal government authorized to help accomplish, fund and oversee the deployment of a dedicated Nationwide Public Safety Broadband Network (“NPSBN”).  The NPSBN may provide an additional source of competition to utilizing our 900 MHz spectrum assets by our targeted critical infrastructure and enterprise customers. Please see the risk factor “ Our initiatives aimed at increasing the usability and capacity of our spectrum may not be successful on a timely basis or at all, and will continue to require significant time and attention from our senior management team and our expenditure of significant resources” above regarding the impact of government regulation on our request to realign a portion of the 900 MHz band from narrowband to broadband.

The value of our spectrum assets may fluctuate significantly based on supply and demand, as well as technical and regulatory changes.  

The FCC spectrum licenses we hold are the Company’s most valuable asset.  The value of our spectrum, however, may fluctuate based on various factors, including, among others:



















Similarly, the price of any additional spectrum we desire to purchase to support our spectrum initiatives or our future business plans will also fluctuate based on similar factors.  Any decline in the value of our spectrum or increases in the cost of the spectrum we acquire could have an adverse effect on our market value and our business and operating results. 

Risks Related to Our Business



The transfer of our TeamConnect and pdvConnect businesses and our related restructuring plans may result in higher costs and lower revenues than expected and cause us not to achieve the expected long-term operational benefits.

 In December 2018, our b oard of d irectors approved the transfer of our TeamConnect and pdvConnect businesses to help reduce our operating costs and to allow our management team and company to focus on our FCC initiatives and future broadband opportunities.  Specifically, we entered into: (i) a Customer Acquisition and Resale Agreement with A BEEP LLC (“A BEEP”) on January 2, 2019 , (ii) a Customer Acquisition, Resale and Licensing Agreement with Goosetown Enterprises, Inc. (“Goosetown”) on January 2, 2019   and (iii) a memorandum of understanding (“MOU”) with the principals of Goosetown on December 31, 2018 .  Under the A BEEP and Goosetown Agreements, we agreed to: (i) transfer our TeamConnect customers located in the Atlanta, Chicago, Dallas, Houston and Phoenix metropolitan markets to A BEEP, (ii) transfer our TeamConnect customers located in the Baltimore/Washington DC, Philadelphia and New York metropolitan markets to Goosetown, (iii) provide A BEEP and Goosetown with access to our TeamConnect Metro and Campus Systems (the, “ MotoTRBO Systems ”) and (iv) grant A BEEP and Goosetown

the right to resell access to our MotoTRBO Systems pursuant to separate Mobile Virtual Network Operation arrangements for a two-year period.  We also granted Goosetown a license to sell the business applications we developed for our TeamConnect service.  

 Under these agreements, A BEEP and Goosetown agreed to provide customer care, billing and collection services for their respective acquired customers.  We continued to provide these services through April 1, 2019 to help facilitate the transitioning of the acquired customers. Additionally, we are required to maintain and pay all site lease, backhaul and utility costs required to operate the MotoTRBO Systems for a two-year period.   As part of our efforts to clear the 900 MHz spectrum for broadband use, A BEEP and Goosetown are required to migrate the acquired customers off the MotoTRBO S ystems over the two-year period.  In consideration for the customers and rights we transferred, A BEEP and Goosetown are required to pay us a certain portion of the recurring revenues they receive from the acquired customers ranging from 100% to 20% during the terms of the agreements.  Additionally, A BEEP is required to pay us a portion of recurring revenue from customers who utilize A BEEP’s push-to-talk Diga-Talk Plus application service ranging from 35% to 15% for a period of two years.  Goosetown is required to pay us 20% of recurring revenues from the TeamConnect applications we licensed for a period of two years .  

 We retained a number of significant obligations under our agreements with A BEEP and Goosetown related to the TeamConnect and pdvConnect businesses.  For example, we are obligated to continue operating the TeamConnect networks in the seven launched markets through January 2, 2021. We are also required to continue to pay the cell tower leases for the TeamConnect networks we deployed for the balance of the lease terms. We also retained customer billing and collection responsibility for the pdvConnect business.  In addition, if A BEEP, Goosetown or the principals of Goosetown do not comply with their contractual obligations or otherwise fail to adequately provide service to the transferred customers, we may recognize less revenue and incur more costs from these arrangements than anticipated, including potential litigation or damage claims from the transferred customers.  In such case, the transfer of our TeamConnect and pdvConnect businesses and our related restructuring plans may result in higher costs and lower revenues than expected and cause us not to achieve the expected long-term operational benefits.  Further, following the transfer of the pdvConnect and TeamConnect businesses, our prospects and future results are reliant on the success of our FCC initiatives and plans to commercialize our spectrum assets for the deployment of broadband networks, technologies and solutions.    

We have no operating history with our proposed business plan, which makes it difficult to evaluate our prospects and future financial results, and our business activities, strategic approaches and plans may not be successful.

Although we were incorporated in 1997, our business is now reliant on the success of our FCC initiatives and our plans to commercialize our spectrum assets to critical infrastructure and enterprise customers.  There is no assurance that following the conclusion of the NPRM process, the FCC will ultimately propose rules and issue a Report and Order that will allow our licensed 900 MHz spectrum to be utilized for broadband networks, technologies and solutions.  In addition, even if the FCC issues a Report and Order, the terms and conditions of such Report and Order could make it difficult, time consuming and costly to obtain broadband licenses from the FCC.   Further, we have not signed our first customer contract with an electric utility or other critical infrastructure entity for the long-term lease of our spectrum asset.  As a result, the ability to forecast our future operating results is limited and subject to a number of risks and uncertainties, including our ability to accurately forecast and estimate our future revenues and the expenses and time required to pursue our spectrum initiatives and business opportunities. We have encountered, and expect to continue to encounter, risks and uncertainties frequently experienced by new businesses in highly competitive, technical and rapidly changing markets. If our assumptions regarding these risks and uncertainties are incorrect or change in reaction to changes in our FCC regulatory initiatives, our commercialization plans or opportunities or general economic conditions, or if we do not manage or address these risks and uncertainties successfully, our results of operations could differ materially and adversely from our expectations.

As a new and unproven business, any future success will depend, in large part, on our ability to, among other things:













Any failure to achieve one or more of these objectives could adversely affect our business, our results of operations and our financial condition.  

We have had net losses each year since our inception and may not achieve or maintain profitability in the future.

We have incurred net losses each year since our inception, including net losses of $42.0 million, $24.6 million and $39.2 million in the fiscal years ended March 31, 2019, 2018 and 2017, respectively. We expect to continue to incur significant net losses in the future for a number of reasons, including without limitation, the continued costs to pursue our FCC initiatives, the costs to promote and commercialize our spectrum assets to our targeted critical infrastructure and enterprise customers, the costs to clear the 900 MHz band and acquire additional spectrum as required to qualify for broadband licenses, and the costs and loss of revenue resulting from the transfer of our TeamConnect and pdvConnect businesses.  Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in significant delays in our business plans, levels of revenue below our current expectations, or losses or expenses that exceed our current expectations.  If our losses or expenses exceed our expectations or our revenue assumptions are not met in future periods, we may never achieve or maintain profitability in the future.

We may not be able to correctly estimate our operating expenses of future revenues, which could lead to cash shortfalls, and require us to secure additional financing sooner than planned.

We may not correctly predict the amount or timing of our future revenues and our operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. These factors include:













In addition, our budgeted expense levels are based in part on our expectations that our restructuring actions will be effective in reducing our operating expenses, as well as on the timing of receiving regulatory approvals and obtaining the broadband licenses required to commercialize our spectrum assets.  However, we may not correctly predict the costs, amounts or timing of such future revenues or the timing or costs required to pursue our regulatory and business initiatives. We may not be able to adjust our operations in a timely manner to compensate for any shortfall in our revenues, delays in our spectrum initiatives or increases in the expenses required to implement our long-term business plan. As a result, a significant shortfall in our planned revenues, a significant delay in our spectrum initiatives or a significant increase in our planned expenses could have an immediate and material adverse effect on our business and financial condition. In such case, we may be required to issue additional equity or debt securities or enter into other commercial arrangements sooner than anticipated to secure the additional financial resources to support our future operations and the implementation of our business plans.  

We will need to secure additional financing to support our long-term business plans.  

We have used significant funds to pursue our spectrum initiatives and to prepare to commercialize our spectrum assets.  Our future capital requirements will depend on many factors, including: the costs and time required to pursue our spectrum initiatives; the costs and time to obtain additional spectrum and clear incumbents to qualify to obtain broadband licenses from the FCC, assuming our spectrum initiatives are successful; the costs to identify, market and commercialize our spectrum assets to our targeted critical infrastructure and enterprise customers; and our ability to control our operating expenses.  As a result, we will require additional funding in the future to support our operations, our efforts to obtain broadband licenses and pursue our business plans. We expect that we may be required to issue additional equity or debt securities or enter into other commercial arrangements, including relationships with corporate and other partners, to secure the additional financial resources to support our development efforts and to implement our long-term business plans. Depending upon market conditions, we may not be successful in raising sufficient additional capital on a timely basis, on favorable terms, or at all. Additionally, the issuance of additional equity securities, including securities convertible into or exercisable for our equity securities, would result in the dilution of the ownership interests of our present stockholders. If we fail to obtain sufficient additional financing, or fail or are unable to enter into relationships with others that provide additional financial resources, we may not be able to develop our network and mobile communication solutions in accordance with our long-term business plans, and we may be required to delay significantly, reduce the scope of or eliminate one or more of our business or spectrum initiatives, downsize our general and administrative infrastructure, or seek alternative measures to raise additional funds.

We may not successful compete against the Tier 1 and other wireless companies and vendors who offer technologies, solutions and services to our targeted customers.

A number of Tier 1 carriers already offer or plan to offer wireless services capable of providing services to our targeted critical infrastructure and enterprise customers.   In addition, SMR operators and other public and private companies offer services and technologies designed for our targeted critical infrastructure and enterprise customers. Further, vendors of wireless technologies and solutions may be partnered with other wireless providers or offer technologies and solutions that can operate on narrowband or wideband spectrum.  Because of their resources and, in some cases, ownership by larger companies, many of our competitors are financially stronger and have more resources than we do, which may enable them to offer services, technologies and solutions  to our targeted customers at prices and terms that make the licensing of our spectrum assets unattractive.  If we cannot compete effectively with the services offered by the Tier 1 carriers or the service, technology and solution offerings from our other competitors, our revenues and growth may be adversely affected.

Our reputation and business may be harmed, and we may be subject to legal claims if there is loss, disclosure or misappropriation of or access to our, or our customers’ information.

We make extensive use of online services and centralized data processing, including through third-party service providers. The secure maintenance and transmission of customer information is an important element of our operations. Our information technology and other systems, and those of our service providers or contract partners (including A BEEP, Goosetown and TeamConnect LLC), that maintain and transmit customer information, including location or personal information, may be compromised by a malicious third-party penetration of our network security, or that of our third-party service providers or contract partners, or impacted by unauthorized intentional or inadvertent actions or inactions by our employees, or by the employees of our third-party service providers or contract partners. Cyber-attacks, which include the use of malware, computer viruses and other means for disruption or unauthorized access, have increased in frequency, scope and potential harm in recent years. While, to date, we have not been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, have been material to our operations or financial condition, the preventive actions we and our third-party service providers and contract partners take to reduce the risk of cyber incidents and protect information technology resources and networks may be insufficient to repel a major cyber-attack in the future. As a result, our customers’ information may be lost, disclosed, accessed, used, corrupted, destroyed or taken without the customers’ consent. Any major compromise of our data or network security, failure to prevent or mitigate the loss of customer information and delays in detecting any such compromise or loss could disrupt our operations, impact our reputation and subject us to additional costs and liabilities, including litigation, which could produce material and adverse effects on our business and results of operations.  

Risks Related to Our Organization and Structure

We may change our operations, FCC initiatives and business strategies without stockholder consent.

Our executive management team, with oversight from our board of directors, establishes our operational plans, FCC initiatives and business strategies. Our board of directors and executive management team may make changes to, or approve transactions that deviate from, our current operations, initiatives and strategies without a vote of, or prior notice to, our stockholders. For example, in December 2018, our board approved a plan to transfer our TeamConnect and pdvConnect businesses, which included the elimination of approximately 20 positions, or roughly 20% of our workforce.  Further, on May 1, 2018, we and the Enterprise Wireless Alliance (“ EWA ”) augmented elements of our initial joint response in the 900 MHz proceeding based on our discussions and interactions with other interested parties. This authority to change our operations, FCC initiatives and business strategies could result in us conducting operational matters, making investments, pursuing FCC initiatives or implementing business or growth strategies in a manner different than those that we are currently pursuing. Under any of these circumstances, we may expose ourselves to different and more significant risks, decrease our revenues or increase our expenses and financial requirements, any of which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

We depend on our executive officers and key personnel.

Our success depends to a significant degree upon the contributions of our executive officers and key personnel. Although we have adopted a severance plan for our executive officers, we do not otherwise have long-term employment agreements with any of our executive officers or key personnel.  There is no guarantee that these individuals will remain employed with us.  In addition, we have not obtained and do not expect to obtain key man life insurance that would provide us with proceeds in the event of the death or disability of any of our executive officers or key personnel. If any of our executive officers or key personnel were to cease employment with us, our FCC initiatives and operating results could suffer. Further, the process of attracting and retaining suitable replacements for our executive officers and key personnel would result in transition costs and would divert the attention of other members of our senior management team from our existing operations. As a result, the loss of services from our executive officers or key personnel or a limitation in their availability could materially and adversely impact our business, prospects and results of operations. Further, such a loss could be negatively perceived in the capital markets.

If we fail to implement and maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which would materially and adversely affect our value and our ability to raise any required capital in the future.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We have discovered and may in the future discover areas of our internal control over financial reporting or our disclosure controls that need improvement or additional documentation.  For example, in connection with preparing our financial statements for the quarter ended June 30, 2018, we determined that we incorrectly interpreted the effective date of a change in the accounting treatment of our net operating losses (“NOLs”) in accordance with the new tax laws provisions in the Tax Cuts and Jobs Act of 2017, which was signed into law on December 22, 2017 (the “TCJA”).  The TCJA, among other items: (i) increased the NOL carryforward period from 20-years to an indefinite carryforward period and (ii) limited the percentage of NOLs that may be used to offset taxable income to 80%.   In preparing our financial statements for quarterly period ended December 31, 2017 and for the year ended March 31, 2018, we, in consultation with our third-party tax firm, determined that it was unlikely that Congress intended to provide this double benefit to the NOLs generated by the Company during Fiscal 2018.  As a result, we determined that an appropriate approach would be to continue to limit the carryforward period for our 2018 NOLs to 20 years, rather than apply an indefinite life to these NOLs.   However, based on our review of available accounting literature in connection with preparing our financial statements for the quarter ended June 30, 2018, we determined that we should apply the accounting changes implemented by the TCJA in accordance with the effective dates set forth in the TCJA.  Specifically, we determined that, based on the current language of the TCJA, the correct accounting treatment for the NOLs we generated during Fiscal 2018 is to apply an indefinite life to those NOLs.  Applying an indefinite life to our NOLs enables us to utilize an increased amount of NOLs to offset the deferred tax liability created by amortization of our indefinite-lived intangibles. This error, which was not detected timely by our management, was the result of an inadequate design of controls pertaining to the Company’s review and analysis of changing tax legislation.  The deficiency represented a material weakness in our internal control over financial reporting and disclosure controls.  As a result, we filed restated financial statements for the quarterly period ended December 31, 2017 and for the year ended March 31, 2018. We determined that the material weakness in our internal control over financial reporting and disclosure controls was not remediated as of March 31, 2019. As a result, we concluded that we did not maintain effective internal control over financial reporting, including effective disclosure controls and procedures as of March 31, 2019. 

In addition, in preparing this Form 10-K for the year ended March 31, 2019, our management, including our Chief Executive Officer and Chief Financial Officer, determined that we had improper segregation of duties and other design gaps caused by user access deficiencies within the design of our information technology controls that support our financial reporting processes, and that this deficiency represented a material weakness in our internal control over financial reporting as of March 31, 2019. The material weakness did result in any changes to our financial statements or results.

To remediate the material weakness in our controls related to our review and analysis of changing tax legislation, our management: (i) implemented new controls designed to evaluate the appropriateness of our income tax policies and procedures, (ii) put into place additional training programs focused on new tax legislation and (iii) implemented policies and procedures regarding the review and evaluation of tax guidelines published by the major accounting firms.  To remediate the material weakness in our controls related to user access to our information technology systems, our management: (i) promptly terminated the access granted to the individuals  with incompatible duties and (ii) implemented new policies and procedures related to security access controls over our information technology systems.

In determining that the Company had material weaknesses in its internal control over financial reporting and its disclosure controls and procedures as of March 31, 2019, our management, including our Chief Executive Officer and our Chief Financial Officer, determined that the Company had not had sufficient time to test the new policies, procedures and controls to conclude that the material weaknesses discussed above had been remediated as of March 31, 2019.  We expect that both material weaknesses will be fully remediated by the end of our first half of Fiscal 2020.  

 Nevertheless, we cannot be certain that we will be successful in maintaining effective internal controls for all financial periods.  As we grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective.  The existence of any material weakness or significant deficiency in the future may require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner.  In addition, the existence of any material weakness in our internal controls could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect our value and our ability to raise any required capital in the future.

Changes in accounting rules, assumptions and/or judgments could materially and adversely affect us.

Accounting rules and interpretations for certain aspects of our operations are highly complex and involve significant assumptions and judgments.  Our reported financial statements have been and will continue to be based on our assumptions and judgments, and any changes in these assumptions or judgments could have a material impact on our results of operations and the other information contained in our financial statements.  The complexities of these assumptions and judgments could also lead to a delay in

the preparation and dissemination of our financial statements or could subject our financial statements to restatement if our independent auditors, the SEC or we determine such assumptions or judgments must be changed. Furthermore, changes in accounting rules and interpretations could significantly impact our financial statements. In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements. Any of these circumstances could have a material adverse effect on our reported financial condition and results of operations.

We have a concentration of risk related to the pdvConnect accounts receivable from a third-party carrier and failure to fully collect outstanding balances from this carrier may adversely affect our results of operations.

We historically offered pdvConnect to customers indirectly through two domestic Tier 1 carriers. As of March 31, 2019, we had accounts receivable balances owed to us by one Tier 1 domestic carrier representing approximately 31% of our accounts receivable balances. We maintain an allowance for doubtful accounts based on the credit risk, historical trends, and other information, as well as for any specific instances we become aware of that may preclude us from reasonably assuring collection on outstanding balances. Determining the allowance for doubtful accounts is judgmental in nature and often involves the use of significant estimates. A determination that requires a change in our estimates for the accounts receivable from this carrier, or a failure by this carrier to pay a significant portion of its outstanding accounts receivable balances, could have a negative impact on our results of operations and financial condition as revenues generated by pdvConnect currently represent a significant portion of our revenues.

Risks Related to Our Common Stock

We have a limited trading history and there is no assurance that a robust market in our common stock will develop or be sustained.

Our common stock began trading on The NASDAQ Capital Market in February 2015.  Since our common stock began trading, we have had limited daily trading volume and we cannot assure you that a more active or liquid trading market for our common stock will develop, or will be sustained if it does develop, either of which could materially and adversely affect the market price of our common stock, our ability to raise capital in the future and the ability of stockholders to sell their shares at the volume, prices and times desired. In addition, the risks and uncertainties related to our FCC initiatives and our proposed business strategies makes it difficult to evaluate our business, our future prospects and the valuation of our Company, which limits the liquidity and volume of our common stock and may have a material adverse effect on the market price of our common stock.

Our common stock prices may be volatile which could cause the value of our common stock to decline.

The market price of our common stock may be highly volatile and subject to wide fluctuations. Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include :  























Concentration of ownership will limit your ability to influence corporate matters.

Based on our review of publicly available filings as of May 10, 2019, funds affiliated with Cerberus Capital Management beneficially owned approximately 23.8% and the other holders of Company common stock who have made filings with the SEC beneficially own, in the aggregate, a total of approximately 51.5% of our outstanding shares of common stock, and together with Cerberus Capital Management, approximately 75.3% of our outstanding shares of common stock.  Specifically, based on publicly available filings as of May 10, 2019: funds affiliated with Owl Creek beneficially owned roughly 17.9% of our outstanding common stock; funds affiliated with Pacific Investment Company owned roughly 9.2% of our outstanding common stock; funds affiliated with TPS Group Holdings (SBS) Advisors, Inc. owned roughly 8.8% of our outstanding common stock; funds affiliated with American Money Management Group beneficially owned roughly 7.2% of our outstanding common stock; funds affiliated with The Vanguard Group beneficially owned roughly 4.3% of our outstanding common stock; and funds affiliated with BlackRock Fund Advisors beneficially owned roughly 4.1% of our outstanding common stock. Although we are not aware of any voting arrangements between these stockholders, our significant stockholders have the ability to determine (if acting together) or significantly influence (if acting as a group of two or more): (i) the outcome of any corporate actions submitted by our board of directors for approval by our stockholders and (ii) any proposals or director nominees submitted by a stockholder.  Further, they could place significant pressure on our board of directors to pursue corporate actions, director candidates and business opportunities or initiatives they identify.  For example, these stockholders could effectively block a proposed sale of the company , even if recommended by our board of directors.  Alternatively, these stockholders could place pressure on our board of directors to pursue a sale of the company or its assets.  As a result of this concentration of ownership, our other stockholders may have no effective voice in our corporate actions or the operations of our business, which may adversely affect the market price of our common stock.  

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:









We cannot predict whether investors will find our common stock less attractive if we continue to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Nevertheless, we have elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards not later than the relevant dates on which adoption of such standards is required for other public companies.

We do not intend to pay dividends on our common stock for the foreseeable future.

We currently intend to retain our future earnings, if any, to finance the development and expansion of our business and pursuit of our strategic initiatives and, therefore, do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of d irectors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments and such other factors as our b oard of d irectors deems relevant in its discretion. Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them.

Future sales of our common stock, or preferred stock, or of other securities convertible into our common stock or preferred stock, could cause the market value of our common stock to decline and could result in dilution of your shares.

Our b oard of d irectors is authorized, without stockholder approval, to permit us to issue additional shares of common stock or to raise capital through the creation and issuance of preferred stock, other debt securities convertible into common stock or preferred stock, options, warrants and other rights, on terms and for consideration as our b oard of d irectors in its sole discretion may determine.   In April 2019 , we filed a shelf registration statement (the “Shelf Registration Statement”) on Form S-3 with the SEC that was declared effective by the SEC on April 22, 2019, which permits us to offer up to $100 million of common stock, preferred stock,

debt securities and warrants in one or more offerings and in any combination, including in units from time to time.  We have entered into a Controlled Equity Offering SM Sales Agreement and a Sales Agreement (collectively, the “Sales Agreements”) with Cantor Fitzgerald & Co. and B. Riley FBR, Inc., respectively (collectively, the “Agents”), and on May 20, 2019, registered the sale of up to an aggregate of $40,000,000 in shares of our common stock in at-the-market sales transactions pursuant to the Sales Agreements under the Shelf Registration Statement.  Our Sales Agreement is intended to provide us with additional flexibility to access the capital markets by selling registered shares under the Shelf Registration Statement. In addition, we have filed registration statements on Form S-8 to register the total number of shares of our common stock that may be issued under our 2004 Stock Plan, 2010 Stock Plan and 2014 Stock Plan, including the equity awards issued to our executive officers and directors.  As of May 10, 2019, there are outstanding options to purchase 2,079,299 shares of our common stock and restricted stock unit agreements for 461,580 shares of our common stock and 901,755 shares remaining available for issuance under our 2014 Stock Plan, all of which are registered for sale on currently effective Forms S-8.     

Sales of substantial amounts of our common stock, including sales by our officers, directors or 5% and greater stockholders, or of preferred stock could cause the market price of our common stock to decrease significantly. We cannot predict the effect, if any, of future sales of our common stock, or the availability of our common stock for future sales, on the value of our common stock. Sales of substantial amounts of our common stock by any one or more of our large stockholders, or the perception that such sales could occur, may adversely affect the market price of our common stock.

Future offerings of debt securities or preferred stock, which would rank senior to our common stock in the event of our bankruptcy or liquidation, may adversely affect the market price of our common stock.

In the future, we may attempt to increase our capital resources by making offerings of debt securities or otherwise incurring debt. In the event of our bankruptcy or liquidation, holders of our debt securities may be entitled to receive distributions of our available assets prior to the holders of our common stock. In addition, we may offer preferred stock that provides holders with a preference on liquidating distributions or a preference on dividend payments or both or that could otherwise limit our ability to pay dividends or make liquidating distributions to the holders of our common stock. Although we have no present plans to do so, our decision to issue debt securities or to issue preferred stock in any future offerings or otherwise incur debt may depend on market conditions and other factors beyond our control. As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and investors in our common stock bear the risk of our future offerings reducing the market price of our common stock and/or diluting their ownership interest in us.

Certain anti-takeover defenses and applicable law may limit the ability of a third party to acquire control of us.

Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws could discourage, delay, or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for our common stock, thereby depressing the market price of our common stock. These provisions, among other things :  











In addition, we have elected to be subject to Section 203 of the Delaware General Corporation Law (the “DGCL”) by provision of our charter.  In general, Section 203 of the DGCL prevents an “interested stockholder” (as defined in the DGCL) from engaging in a “business combination” (as defined in the DGCL) with us for three years following the date that person becomes an interested stockholder unless one or more of the following occurs:







The DGCL generally defines “interested stockholder” as any person who, together with affiliates and associates, is the owner of 15% or more of our outstanding voting stock or is our affiliate or associate and was the owner of 15% or more of our outstanding voting stock at any time within the three-year period immediately before the date of determination.  As a result, our election to be subject to Section 203 of the DGCL could limit the ability of a third party to acquire control of us.  

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that:













As a result, claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.