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Our future success depends in part on our ability to further penetrate into new markets, such as defense electronics and homeland security, and we may be unable to do so. Our operating results may fluctuate significantly based on seasonal factors in the telecommunication network market. Because of the shortages of some components and our dependence on single source suppliers and custom components, we may be unable to obtain an adequate supply of components of sufficient quality in a timely fashion, or we may be required to pay higher prices or to purchase components of lesser quality. Our cash requirements will be impacted by our need to increase inventories. We rely heavily on a Thailand facility of HANA Microelectronics Co., Ltd., a contract manufacturer, to produce our RF modules. If HANA is unable to produce these modules in sufficient quantities or with adequate quality, or it chooses to terminate our manufacturing arrangement, we will be forced to find an alternative manufacturer and may not be able to fulfill our production commitments to our customers, which could cause sales to be delayed or lost and could harm our reputation. We rely on Velocium and other third-party semiconductor foundries to manufacture the semiconductors contained in our products. The loss of our relationship with any of these foundries, particularly Velocium, without adequate notice would adversely impact our ability to fill customer orders and could damage our customer relationships. Implementing our acquisition strategy could result in dilution to our stockholders and operating difficulties leading to a decline in revenues and operating profit. Our products may contain component, manufacturing or design defects or may not meet our customers performance criteria, which could cause us to incur significant repair expenses, harm our customer relationships and industry reputation, and reduce our revenues and profitability. We depend on our key personnel. Skilled personnel in our industry can be in short supply. If we are unable to retain our current personnel or hire additional qualified personnel, our ability to develop and successfully market our products would be harmed. Competitive conditions may require us to reduce prices in the future and, as a result, we may need to reduce our costs in order to be profitable. The length of our sales cycle requires us to invest substantial financial and technical resources in a potential sale before we know whether the sale will occur. There is no guarantee that the sale will ever occur and if we are unsuccessful in designing a high-frequency RF module for a particular generation of a customer s products, we may need to wait until the next generation of that product to sell our products to that particular customer. We may not be able to design our products as quickly as our customers require, which could cause us to lose sales and may harm our reputation. We may not be able to manufacture and deliver our products as quickly as our customers require, which could cause us to lose sales and would harm our reputation. Because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could have negative effects on our inventory levels, revenues and results of operations. Some of our customer contracts require us to manufacture products designed by our customers. While we intend to convert many of these products to products of our own design, such transitions may be difficult and/or expensive to implement and delays or difficulties in doing so could harm our operating results. Any failure to protect our intellectual property appropriately could reduce or eliminate any competitive advantage we have. Risks Relating to Our Industry Our acquisition of JCA Technology and our own marketing and sales efforts have increased the volume of our products used by the United States government. Our revenues in this market largely depend upon the funding and implementation decisions of Congress and United States government agencies. These decisions could change abruptly and without notice, unexpectedly reducing our current or future revenues in this market. Our failure to compete effectively could reduce our revenues and margins. Our failure to comply with any applicable environmental regulations could result in a range of consequences, including fines, suspension of production, excess inventory, sales limitations and criminal and civil liabilities. Government regulation of the communications industry could limit the growth of the markets that we serve or could require costly alterations of our current or future products. Risks Relating to Ownership of Our Stock The assets of Wood River Capital Management, LLC and certain of its affiliates, the holders of 36.7% of our outstanding common stock as of December 31, 2005, have been placed into receivership by the Securities and Exchange Commission, and the receiver may dispose of such shares of our common stock. Such disposition may adversely affect the trading price of our common stock. The market price of our common stock has historically fluctuated and is likely to fluctuate in the future. Wood River and the receiver of the Wood River assets control a large percentage of our common stock and are able to affect significantly the outcome of matters requiring stockholder approval. Our certificate of incorporation, bylaws and arrangements with executive officers contain provisions that could delay or prevent a change in control.

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