What changed in this filing

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Item 1. Legal Proceedings

2024-08-09 compared with 2024-05-10 · 44 added, 6 removed, 49 unchanged (51% of the section changed)

4 unchanged sentences

See Note 18 of the Notes to Condensed Consolidated Financial Statements included in Part 1 of this report for a description of our material legal proceedings, which is incorporated herein by reference.

At this time, we are unable to predict the outcome of or estimate the possible loss or range of loss, if any, associated with these Legal Matters.

Although the ultimate disposition of asserted claims cannot be predicted with certainty, it is our belief that the outcome of any such claims, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial position.

RI SK FACTORS

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Risks related to our financial results and Company success

We are obligated to comply with covenants related to our Wells Fargo Credit Agreement that restrict our operating activities, and the failure to comply with such covenants could result in defaults that accelerate our debt.

The Wells Fargo Credit Agreement governing our indebtedness contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest.

Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all its debt.

Our Wells Fargo Credit Agreement along with the amendments thereto, contain various restrictive covenants which include, among others, provisions restricting our ability to:

• pay dividends or make other distributions or repurchase capital stock;

• incur or guarantee additional debt;

• make certain distributions, investments and other restricted payments;

• engage in transactions with affiliates;

• engage in mergers or consolidations;

• grant or incur liens on assets;

• dispose of assets;

• make loans and investments;

• modify our organization documents;

• enter into certain restrictive agreements.

In addition, the Wells Fargo Credit Agreement contains customary events of default, such as misrepresentation and a default in the performance or observance of any covenant (subject to customary cure periods and materiality thresholds).

In addition, certain covenants in the Wells Fargo Credit Agreement, including covenants set forth in the amendments thereto, require us, among other things, to:

• maintain certain leverage ratios;

• maintain certain fixed charge coverage ratios;

• maintain minimum amounts of cash and cash equivalents.

As a result of these restrictions, we have been and may continue to be:

• limited in how we conduct our business;

• limited in how much additional funding we can draw on our line of credit;

• unable to raise additional debt or equity financing to operate during general economic or business downturns;

• unable to compete effectively or to take advantage of new business opportunities.

Our failure to comply with the restrictive covenants set forth in the Credit Agreement could result in defaults that accelerate the payment under such debt which would likely have a material adverse impact on our financial condition and results of operations.

In addition, an event of default under the Credit Agreement would permit the lenders to terminate all commitments to extend further credit under the applicable facility.

Furthermore, if we were unable to repay the amounts due and payable under the Credit Agreement, the lenders could proceed against the collateral granted them to secure that indebtedness.

In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

In addition, these defaults could impair our ability to access debt and equity markets.

For additional information on our debt covenants, see "Liquidity & Capital Resources" in Part I, Item 2 of this report on Form 10-Q.

Managing our inventory is complex and has included and may continue to include write downs of excess or obsolete inventory.

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During the year ended December 31, 2023, we recognized write-downs of inventory of $24.3 million due to a discontinuation of certain product lines within our Network Solutions segment in connection with our business efficiency program.

Additionally, during the three months ended March 31, 2024, we recognized write-downs of inventory and other charges of $8.8 million as a result of a strategy shift which included discontinuance of certain items in connection with the Business Efficiency Program, of which, $4.0 million relates to inventory write-downs and $4.8 million relates to other charges.

Additionally, during the six months ended June 30, 2024, we recognized write-downs of inventory and other charges of $8.9 million as a result of a strategy shift which included discontinuance of certain items in connection with the Business Efficiency Program, of which, $4.1 million relates to inventory write-downs and $4.8 million relates to other charges.

Significant and unanticipated changes in our business could require additional charges for inventory write downs in a future period.

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The quantitative impairment analysis indicated there was no impairment of the Services & Support goodwill.

Subsequent to March 31, 2024, the Company has experienced volatility in its stock price which reduced the market value of the Company’s common stock as of this filing.

The Company will continue to monitor its stock price, operating results and other macroeconomic factors to determine if there is further indication of a sustained decline in fair value requiring an event driven assessment of the recoverability of its remaining goodwill.

Any future charges relating to such impairments could have a material adverse effect our business, financial condition and results of operations in the periods recognized.

Any future charges relating to such impairments could have a material adverse effect on our business, financial condition and results of operations in the periods recognized.

Risks related to our control environment

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These incremental costs may exceed the savings we expect to achieve from the realization of efficiencies related to the combination of the businesses, particularly in the near term and in the event there are material unanticipated costs.

Risks related to the telecommunications industry

We depend on a third-party cloud platform provider to host our Mosaic One SaaS network and other operating platforms, and if we were to experience a material disruption or interference in service, our business and reputation could suffer.

Our quality of customer service and our continued growth depends in part on the ability of our existing and potential customers to use and access our Mosaic One SaaS network operating platform.

We use third-party service providers that we do not control for key components of our infrastructure, particularly with respect to delivery of our SaaS products.

The use of these service providers gives us greater flexibility in efficiently delivering a more tailored, scalable customer experience, but also exposes us to additional risks and vulnerabilities.

Third-party service providers operate their own platforms that we access, and we are, therefore, vulnerable to their service interruptions.

In the future, we may experience interruptions, delays and outages in service and availability from time to time as a result of our third-party service providers’ infrastructure.

Lack of availability of this infrastructure could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks that we cannot predict or prevent.

Such outages could adversely impact our business, reputation, financial condition and results of operations.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended March 31, 2024, we did not repurchase any shares of our common stock.

As of March 31, 2024, there is no current authorization to repurchase common stock.

During the six months ended June 30, 2024, we did not repurchase any shares of our common stock.

As of June 30, 2024, there is no current authorization to repurchase common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings