Financial Performance and Position - The company had approximately $117 million in cash on its balance sheet as of December 31, 2024, but may require additional financing for operations and growth [55]. - The company’s financial performance could be negatively impacted if its products and services are perceived as non-competitive [99]. - The company may incur significant legal, accounting, and other expenses related to compliance with public company reporting and acquisition activities, making sustained profitability challenging [49]. - The company may face significant environmental compliance costs related to its real estate operations [112]. - The company has incurred approximately $3.5 million in transaction costs related to its Business Combination as of December 31, 2024 [123]. Revenue Generation and Business Operations - The company generates revenue from its Spectrum Access System (SAS) platform in the Citizens Broadband Radio Service (CBRS) market, which is approved for commercial deployment by the FCC [20]. - The company acquired TVWS spectrum databases in the U.S. and U.K. in 2020, enhancing its position as a TVWS database service provider, generating revenue from cloud-based subscriptions [22]. - The company relies on EchoStar for all revenues from its real estate operations, making it vulnerable to EchoStar's financial performance [46]. - For the year ended December 31, 2024, one customer represented more than 10% of the company's total revenue, indicating a significant customer concentration risk [85]. Competition and Market Risks - The company faces competition in both its Technology & Telecommunications and Infrastructure & Real Estate lines of business from established firms and private equity groups [37]. - The company faces significant competition from established entities with greater resources, including EchoStar and DISH, which could impact demand and pricing for its products and services [52]. - Macroeconomic uncertainties, such as inflation and recession, could adversely affect demand for the company's products and services [65]. - The company may face risks related to potential future acquisitions, which could change its current business plan and affect the value of its securities [60]. Regulatory and Compliance Issues - The company is subject to various regulatory requirements that may increase legal and financial compliance costs, diverting management's attention from core business operations [70]. - Changes in laws or regulations, or failure to comply with them, may adversely affect the company's ability to negotiate and complete future transactions [66]. - The company’s services are subject to government regulation, which could affect operational costs and business prospects [90]. Acquisitions and Operational Challenges - Future acquisitions may lead to operational difficulties, dilution, and other consequences that could adversely impact the company's financial condition [62]. - The operation of RED Technologies is expected to be costly and time-consuming, requiring significant management resources that may detract from other operations [83]. - The company may face challenges in retaining key personnel from RED Technologies, which is critical for the successful operation of the acquired business [89]. - The company anticipates growing through further acquisition opportunities, including disruptive technologies and infrastructure assets [59]. Risks and Liabilities - The company may incur additional cash payment obligations of up to $5.30 million related to the acquisition of RED Technologies, contingent on achieving certain technology development milestones [80]. - The company faces risks associated with cyber incidents, which could lead to information theft, operational disruption, and financial loss due to insufficient data security measures [69]. - The company does not carry sufficient business interruption insurance, which could lead to significant losses from system failures [68]. - The company has identified material weaknesses in internal control over financial reporting as of December 31, 2024, related to accounting for complex financial instruments and insufficient qualified personnel [71]. Stock and Securities - The controlling stockholder, nXgen, beneficially owns approximately 99.3% of the Class A Common Stock, potentially limiting other stockholders' influence on corporate matters [53]. - The company's securities were delisted from Nasdaq, limiting market transactions and liquidity for investors [115]. - The outstanding warrants to purchase an aggregate of 30,083,285 shares of Class A Common Stock became exercisable on May 31, 2024, at a price of $11.50 per share, which may result in dilution for existing stockholders [124]. - As of December 31, 2024, the closing price of Class A Common Stock was $1.46, indicating that warrant holders are unlikely to exercise their warrants if the price remains below $11.50 [126]. - The company may redeem outstanding Public Warrants at a price of $0.01 per warrant if the closing price of Class A Common Stock equals or exceeds $18.00 for any 20 trading days within a 30 trading-day period [128]. - The company can also redeem Public Warrants at $0.10 per warrant if the closing price equals or exceeds $10.00 for the same trading conditions [129]. - Holders of Public Warrants may be required to exercise their warrants on a cashless basis, potentially resulting in fewer shares received upon exercise [131]. - The number of shares issued in a cashless exercise is capped at 0.361 shares of Class A Common Stock per Public Warrant, which may adversely affect the value of the common stock [131]. - The company may amend the terms of the Warrants with the approval of at least 50% of the holders, which could be disadvantageous to existing warrant holders [127]. - Non-U.S. holders may be subject to U.S. federal income tax on gains realized from the sale of Class A Common Stock and Warrants if the company qualifies as a U.S. real property holding corporation [132]. - The company's securities are currently subject to state "blue sky" laws due to its delisting from Nasdaq, which may restrict resale and trading in certain states [130]. Real Estate Operations - The company has a triple-net lease agreement for its commercial real estate property in Littleton, Colorado, with an initial monthly base rent of $228,500, escalating at 2% annually [28]. - The lease agreement includes two five-year renewal options, with base rent adjusted to fair market value upon renewal [28]. - The property comprises approximately 206,992 square feet of net rentable area and is fully occupied, providing a predictable revenue stream [31]. - The company has limited experience in operating commercial real estate, which could adversely affect its financial success [114]. - The company is exposed to risks from international operations, including varying privacy and cyber-related laws [103].
CONX (CONX) - 2024 Q4 - Annual Report