Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [ X ]

 

PART I.
Item 1:	Description of Business
Item 1A:	Risk Factors
Item 2:	Description of Properties
Item 3:	Legal Proceedings
Item 4:	Submission of Matters to a Vote of Security Holders
PART II.
Item 5:	Market for Common Equity and Related Stockholder Matters
Item 6:	Management’s Discussion and Analysis or Plan of Operations
Item 7:	Financial Statements
Item 8:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 8A:	Controls and Procedures
Item 8B:	Other Information
PART III.
Item 9:	Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act
Item 10:	Executive Compensation
Item 11:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 12:	Certain Relationships and Related Transactions, and Director Independence
Item 13:	Exhibits
Item 14:	Principal Accountant Fees and Services

 

Our anticipated sales cycle in our target markets is subject to long cycles which include potential buyers requiring an evaluation process. As a result, we may be required to subsidize our operations during the period of obtaining sales contracts and the subsequent payment of invoices.  Since our technology is new, prospective customers may require a longer evaluation process prior to purchasing or making a decision to include our product in their vehicles or containers.  Some prospective customers may require a test installation of a customized system before making a purchase decision, which could be costly and time consuming for us.  Each industry that we serve may have entirely different requirements, which can diminish our ability to fine tune a marketing approach.

The Company entered into a fixed-price contract with a Singapore entity on April 10, 2007 to design, development and manufacture, approximately $93.5 million of our Telematics products (the “Contract”). Deliveries began in January 2008 and we anticipated beginning the five major shipments in the later part of 2008. The Contract includes a provision for substantial liquidated damages for unexcused delays in product deliveries and/or failure to satisfy certain customer-specified acceptance criteria. The Company’s proprietary Telematics system is undergoing significant customization/modification in order to achieve the functionality required by the customer.  During the current fiscal year ending February 29, 2008, we have completed the design phase and currently are near the completion of the development phase of the Contract.  The design and development phase is where we have designed the functionality of the system to meet the customer needs and then developed the functionalities into a working environment for testing and acceptance to move into production.  Throughout the last ten months, we have accomplished all requirements under the Contract with no liquidation damages incurred. Upon completion of the development phase, we will move into the production phase which includes the units for delivery over approximately fifteen months to the customer.   We expect to progress through the production phase with minimal to no liquidation damages through the completion of this Contract.

In June 2007, the Singapore Civil Defense Force (“SCDF”) awarded a $2.2 million contract for the Company's new Intelligent Immobilization System technology (the “Immobilizer”).  The Immobilizer is an add-on module to the Company’s Telematics System, which SCDF has been using since 2005 to track, monitor and now immobilize vehicles transporting hazardous materials, as well as to alert SCDF if these vehicles deviate from their prescribed routes.  The Company will complete this contract in June 2008.

In May 2008, Geneva-based Cotecna Group SA, one of the world’s leading trade inspection, security and certification companies, has awarded Astrata a contract to produce a transit monitoring system for the government of Senegal’s customs operations.  The contract, the first for Astrata in the West African country, is to provide Remotely Deployed Units (“RDU’s”) and fixed tracking units as part of Cotecna’s Transit Monitoring & Traceability solution, which is designed to remotely monitor the movement of vehicles transporting goods.

Management is projecting growth in Telematics sales during fiscal 2008 and 2009, and has announced sales orders in this sector valued at a total of approximately $110 million (which includes $93.5 million for the Contract) for the next two years. Other sales contracts are under negotiation, but at this time there can be no assurance regarding the ultimate success of these negotiations.

Competition

The markets for navigation, communications, and information products are highly competitive.  We believe the principal competitive factors impacting the market for our products are design, functionality, quality and reliability, customer service, price, time-to-market, and availability.  

 

We believe our products and services offer superior features and provide us with the ability to meet customer needs in a competitive international market.  A number of our competitors offer products that provide some of the functionality of our products.

We believe that our principal competitors for our Telematics products are @ Road Inc (acquired by Trimble in February 2006),, Xata Corporation, Trimble, Minor Planet Systems plc, Navman NZ Limited, Digicore Holdings Ltd, Seimens VDO Automotive (the automotive component arm of Siemens AG), CET and SES Systems Pte Ltd (subsidiaries of Singapore Technologies Electronics Limited), and Cybit Positioning Solutions.

Government regulations and environmental laws

Our products and services require compliance with many telecommunication laws and regulations, consumer safety laws and regulations, as well as compliance with governmental laws and regulations applicable to small public companies and their capital formation efforts.  For example, CE certification for radiated emissions is required for most GPS receiver and data communications products sold in the European Union.  An inability to obtain such certifications in a timely manner could have an adverse effect on our operating results.  Also, some of our products that use integrated radio communication technology require an end user to obtain licensing from the FCC for frequency-band usage.  These are secondary licenses that are subject to certain restrictions.  An inability or delay in obtaining such certifications or changes in the FCC regulations could adversely affect our ability to bring our products to market which could harm our customer relationships and have a material adverse effect on our business.  Although we will make every effort to comply with applicable laws and regulations, there is no certainty of our ability to do so, nor can we predict the effect of those regulations on our proposed business activities.

 

 

In addition, regulations applicable to businesses in general, may also subject us to direct regulation by governmental agencies.  These regulations may impose licensing requirements, privacy safeguards relating to certain subscriber information, or safety standards, for example with respect to human exposure to electromagnetic radiation and signal leakage.  A number of legislative and regulatory proposals under consideration by governmental organizations may lead to laws or regulations concerning various aspects of the Internet, wireless communications and GPS technology, including on-line content, user privacy, taxation, access charges and liability for third-party activities.  Additional, it is uncertain how existing laws governing issues such as taxation on the use of wireless networks, intellectual property, libel, user privacy and property ownership will be applied to our solutions.  The adoption of new laws or the application of existing laws may expose us to significant liabilities and additional operational requirements, which could decrease the demand for our solutions and increase our cost of doing business.  Wireless communications providers who supply us with airtime are subject to regulations that also increase our costs or limit the provision of our solutions.  To date, these governmental regulations have not impacted our abilities to provide products and services in the markets we serve.  We also believe we are in compliance with all governmental and environmental laws and regulations.

Employees

We currently employ 55 persons directly and eight as full-time consultants.  Our employees are not represented by labor unions or collective bargaining agreements.  We believe that our labor relations are good.

Research and Development Costs (“R & D”)

Research and development costs relating to GPS positioning hardware and software systems (including the Astrata “Geo-Location Platform”) to be sold or otherwise marketed that are incurred before technological feasibility of the products has been established and after general release of the product to customers are expensed as incurred. Management believes that technological feasibility is not established until a beta version of the software product exists. Historically, costs incurred during the period from when a beta version is available until general release to the public have not been material. Accordingly, the Company has not capitalized any software development costs.  Our R & D expenditures during the year ended February 29, 2008 amounted to approximately $37,000.  We have no third party R & D arrangements and no R & D costs are borne by our customers.  During the fiscal year ended February 29, 2008, our R & D team was primarily focused on modifications related the Contract.  These costs of approximately $892,000 were reported as direct costs to the project and are included in cost of goods sold in our consolidated financial statements.

Available Information

 

We file annual reports on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The public may read and copy these materials at the SEC’s Public Reference Room at 100 F Street, NE Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other corporate information regarding our Company.

Item 1A:    Risk Factors

Investing in our common stock involves a high degree of risk.  You should carefully review and consider the risk factors listed below, as well as the other information contained in this Annual Report, including our consolidated financial statements and related notes, before deciding to invest in shares of our common stock or to maintain or increase your investment in shares of our common stock.  You should also review our quarterly reports on Form 10-QSB and previous and subsequent current reports on Form 8-K.  The risks and uncertainties described below are not the only ones we may face.  Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also adversely affect our business, financial condition, and/or operating results.  If any of the following risks, or any other risks not described below actually occur; it is likely that our business, financial condition, and operating results could be seriously harmed.  As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

 

 

Risks Related to Our Business and Our Marketplace

We may not be able to secure the additional funding necessary to meet our liquidity and future funding requirements

The consolidated financial statements included elsewhere herein have been prepared assuming we will continue in our present form, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.  For the year ended February 29, 2008, we had a net loss of approximately $9.5 million and negative cash flow from operating activities of approximately $2.5 million.  In addition, we had a working capital deficit of approximately $10 million and an accumulated deficit of approximately $46.5 million as of February 29, 2008.

In order for us to fund our operations and continue our business plan, substantial additional funding will be required from external sources.  Management currently intends to fund operations through a combination of equity, lines of credit, and debt facilities.  There can be no assurance that we will be able to secure financing on acceptable terms.  In February 2007 management further revised our business plan which included the exit of African operations to focus on the more developed markets in Europe, South East Asia and North America.

Our current financial condition has raised substantial doubt regarding the Company’s ability to continue as a going concern

The independent registered public accounting firm’s report on our fiscal 2008 consolidated financial statements included elsewhere herein contains an explanation that our consolidated financial statements have been prepared assuming that we will continue as a going concern.  Factors such as those described in the preceding risk factor raise substantial doubt about our ability to continue as a going concern.  Notwithstanding management’s undertakings to continue to reduce costs and raise debt and/or equity funds in future transactions, we cannot assure you that management’s efforts will lead us to profitability; nor can we provide any assurance that we can continue raising funds on acceptable terms.  The consolidated financial statements included elsewhere herein do not include any adjustments that might result from the outcome of these uncertainties.  The ability of the Company to continue operating as a going concern will depend on our ability to raise working capital, further streamline our operations, and increase revenues.  Failure in any of these efforts may materially and adversely affect our ability to continue as a going concern.

Our strategic acquisitions, investments, strategic partnerships or other ventures may not be successful

We intend to evaluate acquisition opportunities and opportunities to make investments in complementary businesses, technologies, services, or products or to enter into strategic partnerships with parties who can provide access to those assets, additional product or services offerings, or additional industry expertise.  We may not be able to identify suitable acquisition, investment, or strategic partnership candidates, or if we do identify suitable candidates in the future, we may not be able to complete those transactions on commercially favorable terms, or at all.

Acquisitions of companies, divisions of companies, or products entail numerous risks and uncertainties, which in our past experience include, and which we anticipate will include:

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the difficulty of assimilating geographically dispersed operations and personnel of the acquired companies;

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potential inability to successfully integrate acquired operations and/or products or to realize cost savings or other anticipated benefits from integration;

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loss of key employees of acquired operations;

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the potential disruption of our ongoing business;

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unanticipated expenses related to such integration;

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the impairment of relationships with employees and customers of either an acquired company and/or our own business;

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the potential unknown  liabilities  associated with acquired business;

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inability to recover strategic investments in development stage entities;

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amortization and/or impairment of substantial amounts of intangible assets;

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the diversion of management’s attention from ongoing development of our business and/or other business concerns;

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the use of substantial amounts of our available cash or financial resources to consummate the acquisition; and

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unanticipated expenses related to discontinuance of operations.

We are subject to significant risks inherent in the development of new products and markets

Our strategy includes developing new applications and entering new markets.  The development of new and/or enhanced software products and services is a complex and uncertain process.  We may experience design, development, testing, and other difficulties that could delay or prevent the introduction of new products or product enhancements and could increase research and development costs.

 

 

The market for certain of our products and services is new and the markets for all of our products and services are likely to change rapidly.  Our future success will depend on, among other things, our ability to anticipate changing customer requirements effectively and in a timely manner and to offer products and services that meet these demands.  If we are unable to anticipate changes in existing and planned markets, we may not be able to expand our business or successfully compete with other companies.

We have limited marketing experience and have conducted only limited marketing activities in the international market.  We are in the early stages of development of our marketing, distribution and sales structure, organization, alliances, contracts and partnerships.  Our expertise does not guarantee success or sales and there is a risk that we could be less capable in these areas of business development than in the area of product development.  Further, we may experience delays in market acceptance of new products or product enhancements as we engage in marketing and education of our user base regarding the advantages and system requirements for the new products and services and as customers evaluate the advantages and disadvantages of upgrading to our new products or services.

We are subject to significant risks associated with international business

We have been subject to specific risks associated with doing business internationally and we anticipate that our future results will or could be affected by a variety of international factors, which principally include:

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changes in a specific country’s or region’s political risk and/or economic conditions (generally described as “geo-political risks”), particularly in emerging markets;

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changes in government, governmental policy and/or legislative action;

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war and/or significant acts of terrorism in the foreign countries in which the Company, our major customers and suppliers, and/or the end users of our products and services operate;

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trade protection measures and import or export licensing requirements;

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changes in foreign currency exchange rates;

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potentially negative consequences from changes in tax laws;

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difficulty in managing widespread sales and manufacturing operations;

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less effective protection of intellectual property;

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longer sales cycles in international markets;

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tariffs, export controls and other trade barriers;

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difficulties in collecting accounts receivable in foreign countries;

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the burdens of complying with a wide variety of foreign laws; and

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the need to develop internationalized versions of our products and foreign language marketing and sales materials.

Our products are dependent on the continual availability of the Global Positioning System

GPS products depend upon satellites maintained by the United States Department of Defense.  If a significant number of these satellites become inoperable, unavailable, not replaced, if the policies of the United States government for the free use of the GPS are changed, or if there is interference with GPS signals, our business will suffer.

The GPS is a satellite-based navigation and positioning system consisting of a constellation of orbiting satellites.  The satellites and their ground control and monitoring stations are maintained and operated by the United States Department of Defence.  The Department of Defence does not currently charge users for access to the satellite signals.  These satellites and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible sabotage.  The satellites were originally designed to have lives of 7.5 years and are subject to damage by the hostile space environment in which they operate.  However, some of the current satellites have been operating for more than thirteen years.

If a significant number of satellites were to become inoperable, unavailable, or are not replaced, it would impair the current utility of our GPS products and the growth of current and additional market opportunities.  In addition, there can be no assurance that the U.S. government will remain committed to the operation and maintenance of GPS satellites over a long period, or that the policies of the U.S. government that provide for the use of the GPS without charge and without accuracy degradation will remain unchanged.

Because of the increasing commercial applications of the GPS, other U.S. government agencies may become involved in the administration or the regulation of the use of GPS signals.  European governments have expressed interest in building an independent satellite navigation system known as Galileo.  Depending on the as yet undetermined design and operation of this system, it is possible that it could cause interference with GPS signals.  Any of the foregoing factors could affect the willingness of buyers of our products to select GPS-based products instead of products that use competing technologies.

 

 

Any reallocation of radio frequency spectrum could cause interference with the reception of GPS signals and this interference could harm our business.  GPS technology is dependent on the use of the Standard Positioning Service or “SPS” provided by the U.S. Government’s GPS satellites.  The GPS operates in radio frequency bands that are globally allocated for radio navigation satellite services.  The assignment of spectrum is controlled by an international organization known as the International Telecommunications Union or “ITU”.

The Federal Communications Commission or the “FCC” is responsible for the assignment of spectrum for non-government use in the United States in accordance with ITU regulations.  Any ITU or FCC reallocation of radio frequency spectrum, including frequency band segmentation or sharing of spectrum, could cause interference with the reception of GPS signals and may materially and adversely affect the utility and reliability of our products, which would, in turn, have a material adverse effect on our operating results.  In addition, emissions from mobile satellite service and other equipment operating in adjacent frequency bands or in-band may materially and adversely affect the utility and reliability of our products, which could result in a material adverse effect on our operating results.

Our products are subject to rapid technological advances and may become obsolete

Since many of our products are based upon both GPS and cellular telephone technologies, both of which experience rapid technological advances, we must continue our research and development efforts or risk technological obsolescence.  Our future revenue stream depends to a large degree on our ability to bring new products to market on a timely basis.  We must continue to make significant investments in order to develop new products, enhance existing products and achieve market acceptance of such products.  We may incur problems in the future in innovating and introducing new products.  Our products in development may not be successfully completed or, if developed, may not achieve significant customer acceptance.  If we are unable to successfully define, develop and introduce competitive new products, and enhance existing products, our future results of operations would be adversely affected.  Development and manufacturing schedules for technology products are difficult to predict, and we might not achieve timely initial customer shipments of new products.  The timely availability of these products in volume and their acceptance by customers are important to our future success.

A delay in new product introductions could have a significant adverse impact on our results of operations.  Products and services as sophisticated as ours could contain undetected errors or defects, especially when first introduced or when new models or versions are released.  In general, our products may not be free from errors or defects after commercial shipments have begun, which could result in damage to our reputation, lost revenues, diverted development resources, increased customer service and support costs and warranty claims and litigation which would harm our business, results of operations, and financial condition.

Although we have completed many technological aspects of upcoming products, there is no certainty that, even upon widespread commercial use, any of these products or services will satisfactorily perform the functions for which they have been designed.  Our technology is not inherently new; many competitors use similar hardware, and we anticipate it will be well received by the marketplace.  Product development, commercialization, and continued system refinement and enhancement efforts remain subject to all of the risks inherent in development of new products based on innovative technologies, including unanticipated delays, expenses, technical problems, as well as the possible insufficiency of funds to implement development efforts, which could result in abandonment or substantial change in product commercialization.

Our success will also be largely dependent upon our products meeting performance objectives and the timely introduction of those products into the marketplace, among other things.  There is no certainty that our products will satisfy current price or performance objectives.

Our success depends on our ability to protect the proprietary and confidential aspects of our technology

Our success will be dependent to a significant extent on our ability to protect the proprietary and confidential aspects of our products’ technology and its method of utilization.  We have no patents or patent applications pending for our products.  We have used non-disclosure agreements and other contractual provisions and technical measures to establish and protect our proprietary rights in our products.  It is our belief that the pace of product development is so fast that long-term patent protection would be of little benefit to us.  Furthermore, there is no guarantee that a patent, if granted, will protect our products against infringement, or that we will have the financial resources to prosecute an infringement claim.

Legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in software are uncertain and still evolving, and the future viability or value of any of our intellectual property rights is uncertain.  Effective patent, trademark, copyright and trade secret protection may not be available in every country in which our products are distributed or made available.  For example, patent protection within the World Trade Organization appears to permit substantial discretion to member countries.

 

 

In addition, patent protection does not prevent independent third-party development of competitive products or services.  There can be no certainty, however, that third parties will not assert infringement claims against us in the future or that any such assertion will not require us to enter into a license agreement or royalty arrangement with the party asserting such a claim.  Responding to and defending any such claims may require significant management and financial resources and otherwise have a material adverse effect on our results of operations, financial condition, or business.

In addition, if, in the future, litigation is necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others, such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results and/or financial condition.  As a result, ultimately, we may be unable, for financial or other reasons, to enforce our rights under the various intellectual property laws described above.

If we are subject to third-party infringement claims, we could be required to pay a substantial damage award

In recent years, there has been significant litigation in the United States involving patents, trademarks, copyrights and other intellectual property rights, particularly in the software industry.  We could become subject to intellectual property infringement claims as the number of our competitors grows and our products and services increasingly overlap with competitive offerings.  In addition, as part of our product licenses, we agree to indemnify our customers against claims that our products infringe upon the intellectual property rights of others.  These claims, even if not meritorious, could be expensive and divert management’s attention from operating our business.  We could incur substantial costs in defending ourselves and our customers against infringement claims.  If we become liable to third parties for infringement of their intellectual property rights, we could be required to pay a substantial damage award and to develop non-infringing technology, obtain one or more licenses for us and our customers from third parties or cease selling the products that contain the infringing intellectual property.  We may be unable to develop non-infringing technology or obtain a license at a reasonable cost, or at all.  We believe that our products and other proprietary rights do not infringe upon the proprietary rights of third parties.

We are dependent upon a limited number of key personnel

Because of the technical nature of our solutions and the markets in which we compete, our success depends on the continued services of our current executive officers and our ability to attract and retain qualified personnel with expertise in wireless communications and GPS.  The loss of any of them or our inability to attract additional, experienced management personnel could have a substantial adverse affect on us.  We have not obtained “key man” insurance policies on any of our management personnel and do not expect to obtain it on any of our future management personnel, as employed.  Our ability to implement our strategies depends upon our ability to attract highly talented managerial personnel.  There can be no assurance that we will attract and retain such employees in the future.  The inability to hire and/or loss of key management or technical personnel could materially and adversely affect our business, results of operations and financial condition.

We are in very competitive markets with much larger, more established competitors

Our markets are highly competitive and we expect that both direct and indirect competition will increase in the future.  Our overall competitive position depends on a number of factors including the price, quality, and performance of our products, the level of customer service, the development of new technology and our ability to participate in emerging markets.  Within each of our markets, we encounter direct competition from other GPS, optical and laser suppliers and competition may intensify from various larger foreign and domestic competitors and new market entrants, some of which may be our current customers.  The competition in the future may, in some cases, result in price reductions, reduced margins and/or loss of market share, any of which could materially and adversely affect our business, operating results and financial condition.  We believe that our ability to compete successfully in the future with existing and additional competitors will depend largely on our ability to execute our strategy to provide systems and products with significantly differentiated features compared to currently available products.  We may not be able to implement this strategy successfully, and our products may not be competitive with other technologies or products that may be developed by our competitors, many of whom have significantly greater financial, technical, manufacturing, marketing, sales, and other resources than we do.

While we believe our products and services offer superior features, there is no certainty that we will establish our self in the international market.  A number of companies offer products that provide some of the functionality of our products.  While we do not believe that any one company has a dominant position in our market as a whole, we may not be able to maintain our competitive position against current or potential competitors, especially those with significantly greater financial, marketing, service, and support, technical, and other resources.  Competitors with greater resources may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to potential employees, distributors, resellers or other strategic partners.  We expect additional competition from other established and emerging companies as the market for our software continues to develop.  We may not be able to compete successfully with current and future competitors.

 

 

Our business is subject to long sales cycles, causing high working capital requirements

Because the anticipated sales cycle in the target markets is subject to long cycles which include potential buyers requiring an evaluation process, we may be required to subsidize our operations between obtaining sales contracts and the subsequent payment of invoices, increasing the need for adequate working capital.

Since our technology is new, prospective customers may require a longer evaluation process prior to purchasing or making a decision to include our product in their vehicles or containers.  Some prospective customers may require a test installation of a customized system before making a purchase decision, which could be costly and time consuming for us.  Each industry that we serve may have entirely different requirements, which can diminish our ability to fine tune a marketing approach.  Consequently, a backlog of orders could place a significant strain on our financial and other resources.  At the same time, the failure by us to build a backlog of orders in the future would have a material adverse effect on our financial condition.

Any system failure or inadequacy could materially and adversely affect our business

Any system failure could harm our reputation, cause a loss or delay in market acceptance of our products or services and could have a material adverse effect on our business, financial condition, and results of operations.  There is no certainty that server failures or interruptions will not occur.

Contract provisions for liquidation damages for non-performance could adversely affect our business

Our contracts, including the Contract, may include a provision for substantial liquidated damages for unexcused delays in product deliveries and/or failure to satisfy certain customer-specified acceptance criteria.  There is no certainty that liquidation damages will occur.

Our failure to comply with government regulations could materially and adversely affect our business

Our products and services require compliance with many telecommunication laws and regulations, consumer safety laws and regulations, as well as compliance with governmental laws and regulations applicable to small public companies and their capital formation efforts.  For example, CE certification for radiated emissions is required for most GPS receiver and data communications products sold in the European Union.  An inability to obtain such certifications in a timely manner could have an adverse effect on our operating results.  Also, some of our products that use integrated radio communication technology require an end user to obtain licensing from the FCC for frequency-band usage.  These are secondary licenses that are subject to certain restrictions.  An inability or delay in obtaining such certifications or changes in the FCC regulations could adversely affect our ability to bring our products to market which could harm our customer relationships and have a material adverse effect on our business.  Although we will make every effort to comply with applicable laws and regulations, there is no certainty of our ability to do so, nor can we predict the effect of those regulations on our proposed business activities.

Government regulations and standards could subject us to increased regulation

In addition to regulations applicable to businesses in general, we may also be subject to direct regulation by governmental agencies.  These regulations may impose licensing requirements, privacy safeguards relating to certain subscriber information, or safety standards, for example with respect to human exposure to electromagnetic radiation and signal leakage.  A number of legislative and regulatory proposals under consideration by governmental organizations may lead to laws or regulations concerning various aspects of the Internet, wireless communications and GPS technology, including on-line content, user privacy, taxation, access charges and liability for third-party activities.  Additional, it is uncertain how existing laws governing issues such as taxation on the use of wireless networks, intellectual property, libel, user privacy and property ownership will be applied to our solutions.  The adoption of new laws or the application of existing laws may expose us to significant liabilities and additional operational requirements, which could decrease the demand for our solutions and increase our cost of doing business.  Wireless communications providers who supply us with airtime are subject to regulations that also increase our costs or limit the provision of our solutions.

We are subject to significant foreign currency exchange rate fluctuations

We have customers, suppliers and manufacturers that are located outside the United States.  Some transactions relating to supply and development agreements may be conducted in currencies other than the U.S. Dollar, and fluctuations in the value of foreign currencies relative to the U.S. Dollar could cause us to incur currency exchange costs.  We cannot predict the effect of exchange rate fluctuations on our future operating results.  Should there be a sustained increase in average exchange rates for the local currencies in these countries, our suppliers and manufacturers may request a price increase at the end of the contract period.

 

 

Throughout fiscal 2008, the U.S. Dollar continued to weaken against several major currencies in which we do business, adversely impacting our financial results.  The weaker U.S. Dollar negatively impacts our operating income due to significant manufacturing, distribution, research and development, and selling expenses incurred outside of the United States.

We operate in a single market segment

During the quarter ended May 31, 2006, the Company elected to exit the Geomatics segment which was limited by distribution agreements to distribution in Sub-Saharan Africa.  The Company now focuses exclusively on the Telematics segment which affords global opportunities.  As noted elsewhere, this segment is dependent on access to GPS signals and cellular wireless providers.

Risks Related to Owning Our Securities

Since first trading on December 16, 2004, our common stock has traded only in limited volumes and is expected to experience significant price and volume volatility in the future which substantially increases the risk of loss to persons owning our common stock

There was no public market for our common stock prior to December 16, 2004.  At best, only a limited market has developed and is expected to continue in the foreseeable future for our common stock.  Because of the limited trading market for our common stock, and the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so.  The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity and/or because the price for our common stock may suffer greater declines because of its price volatility.

We cannot predict the extent to which investor interest in our stock will create or sustain an active and orderly trading market.  If such a market were to develop, the market price of our common stock may continue to be highly volatile.  The sale of a large block of shares could depress the price of our common stock to a greater degree than a company that typically has a higher volume of trading in its securities.  In our experience, the following factors may have the most significant impact with upon the market price of our common stock and to the value of your investment:

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Disappointing results from our development efforts;

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Failure to meet our revenue or profit goals or operating budget;

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Decline in demand for our common stock;