Risk, Opportunity, Mitigation, Probability of Occurrence

Supplier Delivery chip set, display, key pad, secondary display, camera, GPS, Wi-Fi,

blue tooth chip

I. Potential Failure Mode

a. Suppliers may from time to time extend lead times, limit supplies or increase price due to capacity constraints or other factors.

b. Geographic areas may be generally affected by adverse conditions that disrupt production and/or deliveries from any of our suppliers

c. Component suppliers may fail to meet our supplier requirements

II. Potential Failure Effects

a. affect our ability to deliver our products and solutions successfully and on a timely basis, which may materially adversely affect our sales and profitability

b. which could lead to an increase in the cost, or limit the availability, of components

c. our reputation and brand value may be affected due to real or merely alleged failures in our products and solutions.

Supplier Delivery chip set, display, key pad, secondary display, camera, GPS, Wi-Fi,

blue tooth chip

III. Potential Causesa. component supplier may experience delays or disruption in its manufacturing processes or financial difficulties. b. suppliers are geographically concentratedc. possible consolidation among our suppliers results in a stronger bargaining power and limits the choice of alternative suppliers. Larger suppliersd. we depend on a limited number of suppliers

IV. Mitigatea. Obtaining adequate supplies of fully functional components on a timely basis.

V. Opportunitya. Produce more product in house

VI. Probability of Occurrencea. Low: MS has network of trusted suppliers

Joint Ventures Satellite Radio (Sirius or X/M) & GPS (NAVASTAR)

I. Potential Failure Modea. Service not available

II. Potential Failure Effectsa. Our reputation, brand value, and sales may be affectedb. Consumers will not receive the service that was promised, which will lose the loyally of present customers and prevent new customers.

III. Potential Causesa. Problems with Satellite or Satellite station b. Blockage or inferences of signal

IV. Mitigatea. Continue to obtain contracts with all available providers (Sirius, XM, NAVSTAR).

Joint Ventures Satellite Radio (Sirius or X/M) & GPS (NAVASTAR)

V. Opportunity

a. SATLITE : Add a 9 hour recording feature to the device for consumers to record satellite radio. Now they can utilize the device if there are any signal blockage

b. GPS: Allow the consumer the ability to utilize their cellular network (tower) to obtain GPS information when they can not utilize the satellite because there is a blockage in the Satellite signal

VI. Probability of Occurrence

a. Moderate, occasional failure, depending on signal output

Manufacturing (internal / external)

(case, pc board) I. Potential Failure Mode

a. May experience difficulties in adapting our supply to meet the demand of our products, ramping up or down production at facilities as needed, maintaining an optimal inventory level, finding the most timely way to develop the best technical solutions for new products, managing the increasingly complex manufacturing process for our high-end products, particularly the software for these high-end products, or achieving manufacturing efficiency and flexibility, whether we manufacture our products and solutions ourselves or outsource to third parties.

II. Potential Failure Effectsa. Effect on our sales and results of operations , among other things, delays in adjusting or upgrading production at our facility production capacity, failure in our manufacturing and logistics processes, failures in the activities we have outsourced, and interruptions in the data communication systems that run our operationsb. Effect in manufacturing and delivery processes, resulting in our products and solutions not meeting our and our customers’ quality, safety, security and other requirements, or being delivered late compare to our own estimates or customer requirements, which could have a material adverse effect on our sales, our results or operations and reputation, and the value of the Millennium Systems (MS) brand.

Manufacturing (internal / external) Logistics (case, pc board)

III. Potential Causesa. We fail to efficiently manage our manufacturing and logistics without interruption, or fail to ensure that our products and solutions meet our and our customers’ quality, safety, security and other requirements and are delivered on time.

IV. Mitigatea. Manage manufacturing, and each stage of our product creation.

V. OpportunityHave more that one manufacture or manufacture in house.

VI. Probability of OccurrenceModerate, occasional failures: building on current technology, phones are similar in design to current phones, full productions 200k units/week

New Technology/ Acquired Technology

I. Potential Failure Modea. The technologies, functionalities and features on which we choose to focus may not achieve as broad or timely customer acceptance as we expect. Accepted by high end market but not by mid level.b. We do not have authorization to utilize third parties hardware and softwarec. Components such as batteries or software applications may not be compatible with our products and solutions and may not meet our and our customer’s quality, safety, security or other standards. d. Certain components or layers that may be used with our products that may enable our products and solutions to be used for objectionable purposes, such as to transfer content that might be hateful or derogatory. e. Failure in the internal circuitry design (connecting ports), which affect the ability to modify module (mode).

New Technology/ Acquired Technology

II. Potential Failure Effectsa. Our network business’s sales and operating results may be adversely affected if these technologies or subsequent new technologies on which we focus do not achieve as broad acceptance among customers as we expect, or if we fail to adapt to different technology platforms that emerge over time.b. Technology is not available at such times as we may seek to use them c. Increased licensing costs, restriction on our ability to use certain technologies, time-consuming litigation

III. Potential Causesa. Did not develop or acquire complex, evolving technologies with full rights needed to use in our businessb. Lack of available more attractive alternativesc. Insufficient compatibility between the memory unit and each Module (skin) and with other existing technologies, products and solutions.e. Limited money for R&D on mid-range area. All funds on advanced technology for high end market-segment

New Technology/ Acquired Technology

IV. Mitigatea. Acquire MS patents and licenses to utilize technology from third partiesb. The use of our products and solutions with incompatible or otherwise substandard hardware or software components, or for purposes that are inappropriate, is largely outside of our control and could harm the MM brand.

V. OpportunityInnovation

VI. Potential RiskLow: technology was utilized in high-end market

Design RiskI. Potential Failure Mode

a. Design not appealing to consumer or not unique b. Design not reliablec. Design not completed on time

III. Potential Failure Effectsa. No new customers and departure of existing customersb. Affect our profit, sales and brand namec. Push back in schedule, possible re-tooling for mistakes

IV. Potential Causesa. Design is similar to all phones on the market. b. Features are not useful to the consumerc. Rush to market, limit amount of funds for research and development, sharing employees and resources between other projects with in the company.

Design Risk

IV. Mitigation

a. Change investment strategy from high-level market segment to mid-level market segment

b. Do more consumer surveys and conceptual design to determine the perfect Model design

V. Opportunity

Traditional Design

VI. Risk

Moderate, quick to market

Market SegmentI. Potential Failure Mode

a. If segments we target grow less than expected (Our past performance to our established market segments does not guarantee our success in these new market segments. )

II. Potential Failure Effectsa. May not receive a return on our investment as we expect. b. May also forgo growth opportunities in new market segment of the mobile communication industry on which we do not focus. Or market segments we target may be less profitable that we currently foresee. May incur short-term operating losses uncertain of these new market segments if we are not able to generate sufficient revenue to cover the early stage investments required to pursue these new business opportunities.

III. Potential Causesa. market segment is in early stages of development and can’t accurately predict which new market segment are the most advantageous for us to focus on (dedicated GPS, 3.2 Camera, Satellite Radio,)b. did not research the business opportunity or market segments enough.

Market SegmentIII. Potential Causes

a. Market segment is in early stages of development and can’t accurately predict which new market segment are the most advantageous for us to focus on (PDA, Sport, Flip)b. Did not research the business opportunity or market segments enough.

IV. Mitigatea. Research technology or business opportunities before we invest. Research other cellular phone companiesb. Research electronic components, mechanical components and software utilized in our phones.

V. OpportunityAllow mid-price phone to acquire portion of the low-price phone market segment. Loyal customers do not now the reliability of our low price phones because they are branded under many other names. Change technology to the new emerging market segment

VII. Potential RiskModerate: rapid production, market growth is available in mid-level

Target Market / CustomerI. Potential Failure Mode

a. Fail to analyze correctly and respond timely and appropriately to customer feedback and other data. b. Did not meet the needs of the customer, which include mobile network operators, distributors, independent retailers, corporate customers and end users.

II. Potential Failure Effectsa. impact market share, business and results of operation (lower revenue and profits)

III. Potential Causesa. did not understand different markets we operate.b. did not achieve and maintain a competitive portfolio

Target Market / CustomerIV. Mitigate

a. Identify key market trends and user segments and address our customers’ needs proactively and in a timely manner. b. Establishing an maintain good relationships with our customers, including both our mobile device customers and our network infrastructure customers, and understanding trends and needs in their markets require us to constantly obtain and evaluate a complex array of feedback and other data. c. Communicate about our product and services effectively through consistent and focused marketing messages to our target audienced. Analyze correctly and reasonably timely and appropriately to customer feedback and other data e. Launch our products at optimal times to meet customer requirements and preferences while taking into account the availability of competitor’s products. f. Create a product portfolio with a broad and balanced offering of commercially appealing mobile devices with attractive features, functionality and design for all major consumer segments and price points supported by the MS brand, quality and competitive cost structure.

Target Market / Customer

V. OPPRUTINTY

A. Customization

1. customization is an important element in increasing operator customer satisfaction, work together with operators on product

planning, as well as acceleration product hardware and software customization programs.

2. Customization result in new challenges, such as the need for us to produce mobile devices in smaller lot sizes, which can

impede our economies of scale, or the potential for the erosion of the Millennium Systems brand, which is a key

competitive advantage

VI. Potential Risk

Low: 200th worldwide mid-tier market

Consumer Demand

I. Potential Failure Mode

a. Existing model subscribers do not upgrade or replace their existing mobile (Sugar) device

b. No new subscribers

c. Less usage of cellular phone

d. No demand for new technology

II. Potential Failure Effects

a. Decreased sales and profitability

Consumer DemandIII. Potential Causes

a. Not marketing correctly or not satisfying the wants and needs of customer (price concession and higher tiered capabilities)b. In adequate data from market researchc. Operator (wholesale customer) did not successfully introduce the new service to encourage the customer to upgrade or replace current device with new SPIRIT phone.

IV. Mitigationa. Gather accurate data of customer needs and wants

b. Train operators (wholesale customer) how to increase subscriber numbers, stimulate increased usage and drive replacement sales.

V. Potential Riska. Low, quick to market

Wholesale Customers

I. Potential Failure Modea. Fail to reach market expectation of selling 6 million units

II. Potential Failure Effectsa. Loss of profit and business

III. Potential Causesa. Location or business closers of communication services (telephone, DSL, cable television, FAX, etc.) that offered phonesb. Displays in store are not visible or appealing to attract customerc. Operator (wholesale customer) did not successfully introduce the new service to customer

Wholesale Customers

III. Mitigatea. by the third year we will have 3 million memory unit, 2 million flip, 1 million PDA and 50,000 sport phone models ready to take to market. Cut back productions if we are not selling product b. Train wholesale customers on how to market phone/

IV. Opportunity

V. Riska. Moderate: wholesaler are selling more of competitor product

International Sales

I. Potential Failure Modea. Regulations against imports to countriesb. Economic or political turmoil in these countries couldc. Exchange rate fluctuations, Foreign exchange risk (transaction and translation)

II. Potential Failure Effectsa. Sales from these countries represent a significant portion of our total sales and these countries represent a significant portion of the expected industry growth, economic or political turmoil in these countries could adversely affect our sales and results or operations

International SalesIII. Potential Causes

a. We have generated sales from and have invested in various emerging market countries. b. Unfavorable taxation treatment, exchange controls, challenges in protecting our intellectual property rights, nationalization, inflation, currency fluctuations, or the absence of, or unexpected changes in, regulation as well as other unforeseeable operational risks.

IV. Mitigatea. Determine the risk and uncertainties before we invest in emerging market countries. b. Monitor and hedge exchange rate exposurec. Manage operations to mitigate but not to eliminate, the impact of exchange rate fluctuations

V. OpportunitySell more mid-price phone, than low-price phones

VI. Possible RiskModerate: competitors have government subsidies, investments and tax abatements

Competition (internal / external)I. Potential Failure Mode

a. Competitors have used and we expect will continue to use, more aggressive pricing strategies, different design approaches and alternative technologies.b. Consolidation among the industry participants could potentially result in stronger competitors that are better able to compete as end-to-end suppliers as well as competitor who are more specialized in particular areas.c. Mobile network operators are increasingly offering mobile device under their own brand.e. Emergence of offshore manufacturesf. MS does not accept our proposal (project)

II. Potential Failure Effectsa. Impact business and results of operationsb. Our cost advantages may be eroded, which could materially adversely affect our competitive position and our results of operations, particularly our profitability.c. Face increasing competition from non-branded mobile device manufacturesd. Customers are starting to sell more of our competitors products.e. Can’t competed in all three major market segments (hi, medium, low)f. Competing against two other teams, loss of contract

Competition (internal / external)III. Potential Causes

a. our failure to maintain or improve our market position and respond successfully to change in the competitive landscape may impact on our business and results of operationsb. traditional competitors in the mobile communications industry as well as a number of new competitors, particularly from countries where production costs tend to be lower. c. competition tensed. failure to position the product in the market against the competitione. Offshore manufactures enjoy the subsidies, investments, and tax abatements to enhance their worldwide competitive position. f. MS has limited resources and will sponsor only one mid-tier phone. Other cell phone team was extremely aggressive (cut-throat). product is to innovative (MS is cautious about market entry with new products). Other competition better proposal.

IV. Mitigatea. Respond successfully to competitive developmentb. Maintain or increase our market share and scale compared to our competitors

V. Possible RiskModerate: heavy competition

Cost (price erosion is a characteristic of the mobile communication industry)

I. Potential Failure Modea. Natural price erosion over time

II. Potential Failure Effectsa. Materially adverse effect on our business and results of operations, particularly our profitability.

III. Potential Causesa. Did not successfully manage price erosion or manage costs related to our products and operations

IV. Mitigatea. Lower costs at the same rate or faster than price erosion b. Introduce new cost-efficient products with higher prices in a timely manner, as well as generally manage cost related to our products and operations

V. Possible RiskModerate, customer pressing MS for price concessions