What changed in this filing

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Item 1A. Risk Factors

2020-08-27 compared with 2019-08-27 · 117 added, 55 removed, 317 unchanged (35% of the section changed)

In addition to the risks described elsewhere in this Annual Report on Form 10-K and in certain of our other filings with the SEC, the following risks and uncertainties, among others, could cause our actual results to differ materially from those contemplated by us or by any forward-looking statement contained herein.

Prospective and existing investors are strongly urged to carefully consider the various cautionary statements and risks set forth in this Annual Report on Form 10-K and our other public filings.

We have many business risks including those related to our financial performance, investments in our common stock, operating our business and legal matters.

The nature of the business activities conducted by the Company subjects us to certain hazards and risks.

The following is a summary of some of the material risks relating to the Company’s business activities.

Other risks are described in “Item 1.

Business,” “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.” Prospective and existing investors are strongly urged to carefully consider the various cautionary statements and risks set forth in this Annual Report on Form 10-K and in our other public filings.

We face many business risks, including those related to our financial performance, investments in our common stock, operating our business and legal matters.

The risks and uncertainties described below are not the only ones facing us.

Additional risks and uncertainties may also impair our business operations.

Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair our business operations.

If any of these risks occur, our financial condition and results of operations could be materially and adversely affected.

In that case, the market price of the Company’s common stock could decline.

Our sales cycle may be lengthy, and the timing of sales, along with additional services such as warehousing, inventory management, installation and implementation of our products within our customers’ networks, may extend over more than one period, which can make our operating results difficult to predict.

We anticipate difficulty in accurately predicting the timing of the sale of products and amounts of revenue generated from sales of our products, primarily in developing countries.

The establishment of a business relationship with a potential customer is a lengthy process, generally taking several months and sometimes longer.

We experience difficulty in accurately predicting the timing of the sale of products and amounts of revenue generated from sales of our products, primarily in developing countries.

The establishment of a business relationship with a potential customer is a lengthy process, usually taking several months or more.

Following the establishment of the relationship, the negotiation of purchase terms can be time-consuming, and a potential customer may require an extended evaluation and testing period.

We expect that our product sales cycle, which results in our products being designed into our customers’ networks, could take 12 to 24 months.

A number of factors can contribute to the length of the sales cycle, including technical evaluations of our products, the design process required to integrate our products into our customers’ networks and warehousing and/or inventory management services that may be requested by certain large customers.

In anticipation of product orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer payments.

Specifically, should a customer require warehousing and/or inventory management services, such services may impact our operating results in any period due to the costs associated with providing such services and the fact that the timing of the revenue recognition may be delayed.

As a result, in the event that a sale is not completed or is canceled or delayed, we may have incurred substantial expenses, making it more difficult for us to become profitable or otherwise negatively impacting our financial results.

Furthermore, because of our lengthy sales cycle, our recognition of revenue from our selling efforts may be substantially delayed, our ability to forecast our future revenue may be more limited and our revenue may fluctuate significantly from quarter to quarter.

Once a purchase agreement has been executed, the timing and amount of revenue, if applicable, may remain difficult to predict.

The completion of services such as warehousing and inventory management, installation and testing of the customer’s networks and the completion of all other suppliers’ network elements are subject to the customer’s timing and efforts and other factors outside our control, each of which may prevent us from making predictions of revenue with any certainty and could cause us to experience substantial period-to-period fluctuations in our operating results.

Our typical product sales cycle, which results in our products being designed into our customers’ networks, can take 12 to 24 months.

A number of factors contribute to the length of the sales cycle, including technical evaluations of our products, the design process required to integrate our products into our customers’ networks and warehousing and inventory management services that may be requested by certain large customers.

The completion of services such as installation and testing of the customer’s networks and the completion of all other suppliers’ network elements are subject to the customer’s timing and efforts and other factors outside our control, each of which may prevent us from making predictions of revenue with any certainty and could cause us to experience substantial period-to-period fluctuations in our operating results.

Additionally, in anticipation of product orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer payments.

Specifically, warehousing and inventory management services can affect our operating results in any period due to the costs associated with providing such services and the fact that the timing of the revenue recognition may be delayed.

In the event that a sale is not completed or is canceled or delayed, we may have already incurred substantial expenses, making it more difficult for us to become profitable or otherwise negatively impacting our financial results.

Because of the challenges of our lengthy sales cycle, our recognition of revenue from our selling efforts may be substantially delayed, our ability to forecast our future revenue may be more limited and our revenue may fluctuate significantly from quarter to quarter.

Due to the volume of our international sales, we may be susceptible to a number of political, economic and geographic risks that could harm our business.

We are highly dependent on sales to customers outside the U.S.

In each of fiscal 2019, 2018 and 2017 , our sales to international customers accounted for 47% of total revenue.

In fiscal 2020, our sales to international customers accounted for 38% of total revenue.

Significant portions of our international sales are in less developed countries.

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• general economic and geopolitical conditions, including inflation and trade relationships;

• restrictions on travel to locations where we conduct business, including those imposed due to COVID-19;

• war and acts of terrorism;

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While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely affect our business, financial condition and results of operations in the future.

The ongoing global COVID-19 pandemic could adversely affect our business, financial condition and results of operations.

In March 2020, the World Health Organization characterized the current respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns.

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic.

The COVID-19 pandemic has, and is expected to continue to have, an impact on our operations, supply chains and distribution systems.

The extent to which the COVID-19 pandemic continues to affect our business, prospects and results of operations will depend on future developments, many of which are highly uncertain, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume.

Management is actively monitoring the impact of COVID-19 on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce.

Our first priority remains the health and safety of our employees and their families.

Employees whose tasks can be done off-site have been instructed to work from home.

Our sites support essential businesses and remain operational.

are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19, and our ability to perform critical functions could be harmed as a result.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the second half of fiscal 2020.

However, depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our ability to perform field services during shelter in place orders, we could/may continue to experience constraints and delays in fulfilling customer orders in future periods.

While the ultimate effects of the pandemic on our business are uncertain, the pandemic and related government actions, including restrictions on travel, temporary closure of businesses and stay at home orders have, and are likely to continue to have, an adverse impact on global economic conditions and consumer confidence and spending, which could materially affect demand for our products.

Our customers could become more conservative in response to the pandemic and economic conditions and may seek to reduce their purchases.

Our results of operations depend upon, among other things, our ability to maintain and increase sales volume with existing customers, our ability to attract new customers and the financial condition of our customers.

Decreases in demand for our products without a corresponding decrease in costs would negatively impact our operating margins and financial results.

We are monitoring, assessing and adapting to the situation and have prepared for implications to our business, supply chain and customer demand.

We expect these challenges to continue until business and economic activities return to more normal levels.

The financial results for the fiscal year reflect some of the reduced activity experienced during the period in various locations around the world and are not necessary indicative of the results for the next fiscal period or fiscal year.

To the extent the COVID-19 pandemic continues to adversely affect the global economy, and/or adversely affects our business, operations or financial performance, it may also have the effect of increasing the likelihood and/or magnitude of other risks described in the “Risk Factors” set forth in this Item 1A.

The negative effects of COVID-19 on the global economy may adversely affect our business, results of operations and financial condition.

Our business and operating results are affected by the global business environment and economic conditions, including changes in interest rates, availability of capital from credit providers, consumer confidence, rates of inflation, geopolitical issues and other macro-economic factors.

The United States and global economies continue to experience a period of economic and financial uncertainty, in part due to COVID-19 and the related public health actions taken by many governments and businesses.

The pandemic is negatively affecting, and is expected to continue to negatively affect, at least in the short term, global economic conditions, and a continued economic downturn could lead to decreased customer demand, inability to execute installs and/or service, or the inability of our customers to pay for our products, the inability of suppliers to deliver the components necessary to manufacture our products, and reduced access to capital from credit providers and through the capital markets, among other things, which could adversely affect our business, results of operations and financial condition.

Additionally, a prolonged economic downturn may exacerbate certain other risks described in the “Risk Factors” set forth in this Item 1A that affect our business, results of operations and financial condition.

Natural disasters or other catastrophic events could have an adverse effect on our business.

Natural disasters, such as hurricanes, earthquakes, fires, and floods, could adversely affect our operations and financial performance.

Such events could result in physical damage to one or more of our facilities, the temporary closure of one or more of our facilities or those of our suppliers, a temporary lack of an adequate work force in a market, a temporary or long-term disruption in the supply of products from local or overseas suppliers, a temporary disruption in the transport of goods from overseas, and delays in the delivery of goods.

Public health issues, whether occurring in the United States or abroad, could disrupt our operations, disrupt the operations of suppliers or customers, or have an adverse impact on customer demand.

As a result of any of these events, we may be required to suspend operations in some or all of our locations, which could have an adverse effect on our business, financial condition, results of operations, and cash flows.

These events could also reduce demand for our products or make it difficult or impossible to receive components from suppliers.

Although we maintain business interruption insurance and other insurance intended to cover some or all of these risks, such insurance may be inadequate, whether because of coverage amount, policy limitations, the financial viability of the insurance companies issuing such policies, or other reasons.

Tension in U.S.-China trade relations may adversely impact our supply chain operations and business.

government has taken certain actions that change U.S.

trade policies, including recently-imposed tariffs affecting certain products manufactured in China.

Some components manufactured by our Chinese suppliers are subject to tariffs if imported into the United States.

In addition, the Chinese government has taken certain reciprocal actions, including recently imposed tariffs affecting certain products manufactured in the United States.

Certain of our products manufactured in our U.S.

operations have been included in the tariffs imposed on imports into China from the United States.

Although some of the products and components we import are affected by the tariffs, at this time, we do not expect these tariffs to have a material impact on our business, financial condition or results of operations.

It is unknown whether and to what extent additional new tariffs (or other new laws or regulations) will be adopted that increase the cost of importing and/or exporting products and components from China to the United States and vice versa.

Further, the effect of any such new tariffs or retaliatory actions on our industry and customers is unknown and difficult to predict.

As additional new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or if China or other affected countries take retaliatory trade actions, such changes could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We may undertake further restructuring activities, which may adversely impact our operations, and we may not realize all of the anticipated benefits of these activities or any potential future restructurings.

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Should this occur we may determine that we must incur additional restructuring charges in the future.

Moreover, we cannot assure you that we will realize all of the anticipated benefits of our restructuring actions or that we will not further reduce or otherwise adjust our workforce or exit, or dispose

of, certain businesses and product lines.

Any decision to further limit investment, exit, or disposal of businesses or product lines may result in the recording of additional restructuring charges.

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generally accepted accounting principles (“U.S.

GAAP”), we recorded net income attributable to our stockholders of $9.7 million in fiscal 2019 , compared to net income attributable to our stockholders of $1.8 million in fiscal 2018 and net losses attributable to our stockholders of $0.8 million in fiscal 2017 .

We generated cash from operations in fiscal 2019, 2018 and 2017 .

GAAP”), we recorded net income attributable to our stockholders of $0.3 million in fiscal 2020, compared to $9.7 million in fiscal 2019 and $1.8 million in fiscal 2018.

We generated cash from operations of $17.5 million, $2.9 million and $8.2 million in fiscal 2020, 2019 and 2018, respectively.

Throughout fiscal 2020, we experienced strong price competition for new business in all regions while major customer consolidations from prior years also put pressure on revenue and gross margin.

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• failure to realize expected cost improvement throughout our supply chain;

order cancellations or postponements in product deliveries resulting in delayed revenue recognition;

• order cancellations or postponements in product deliveries, including due to the COVID-19 pandemic, resulting in delayed revenue recognition;

• restructuring and streamlining of our operations;

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• natural disasters;

• diseases or pandemics, such as the COVID-19 pandemic, and corresponding governmental actions;

• the ability of our customers to obtain financing to enable their purchase of our products;

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In May 2018, our Board of Directors approved a stock repurchase program for the repurchase of up to $7.5 million.

The repurchase program may be suspended or discontinued at any time and we are not obligated to repurchase a specified number of shares.

The repurchase program has been suspended temporarily since February 2020.

Our repurchase program even if fully implemented, may not enhance long-term stockholder value.

During fiscal 2019, we repurchased $2.3 million of our common stock in the open market.

As of June 28, 2019 , $5.2 million remained available under our stock repurchase program.

During fiscal 2020 and 2019, we repurchased $1.8 million and $2.3 million of our common stock in the open market respectively.

As of July 3, 2020, $3.4 million remained available for repurchase under our stock repurchase program.

Our success will depend on new products introduced to the marketplace in a timely manner, successfully completing product transitioning and achieving customer acceptance.

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A substantial portion of our sales are to customers in the telecommunications industry.

These customers may require their suppliers to provide extended payment terms, direct loans or other forms of financial support as a condition to obtaining commercial contracts.

These customers may require their suppliers, including the Company, to provide extended payment terms, direct loans or other forms of financial support as a condition to obtaining commercial contracts.

In addition, if local currencies cannot be hedged, we have an inherent exposure in our ability to convert monies at favorable rates from or to U.S.

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Pursuant to these contracts, we may deliver products and services representing an important portion of the contract price before receiving any significant payment from the customer.

As a result of the financing that may be provided to customers and our commercial risk exposure under long-term contracts, our business could be adversely affected if the financial condition of our customers erodes.

As a result of the financing that may be provided to customers and our commercial risk exposure under long-term contracts, our business could be adversely affected if the

financial condition of our customers erodes.

Over the past few years, certain of our customers have filed with the courts seeking protection under the bankruptcy or reorganization laws of the applicable jurisdiction or have experienced financial difficulties.

The financial healthiness may be exacerbated in many emerging markets, where our customers are being affected not only by recession, but by deteriorating local currencies and a lack of credit.

Our customers’ financial conditions face additional challenges in many emerging markets, where our customers are being affected not only by recession, but by deteriorating local currencies and a lack of credit and, more broadly, by the COVID-19 pandemic and related economic effects.

Upon the financial failure of a customer, we may experience losses on credit extended to such customer, losses relating to our commercial risk exposure and the loss of the customer’s ongoing business.

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If adequate funds are not available or are not available on acceptable terms if and when needed, our business, financial condition and results of operations could be harmed.

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders.

If we raise additional funds through the issuance of equity or convertible debt securities, the ownership of our existing stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders.

Our restructuring actions could harm our relationships with our employees and impact our ability to recruit new employees.

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Historically, competition for these key personnel has been intense.

The loss of services of any of our key personnel, the inability to retain and attract qualified personnel in the future, delays

in hiring required personnel, particularly engineering and sales personnel, or the loss of key personnel to competitors could make it difficult for us to meet key objectives, such as timely and effective product introductions and financial goals.

The loss of services of any of our key personnel, the inability to retain and attract qualified personnel in the future, delays in hiring required personnel, particularly engineering and sales personnel, or the loss of key personnel to competitors could make it difficult for us to meet key objectives, such as timely and effective product introductions and financial goals.

We face strong competition for maintaining and improving our position in the market, which can adversely affect our revenue growth and operating results.

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We can give no assurances that we will have the financial resources, technical expertise, or marketing, sales, distribution, customer service and support capabilities to compete successfully, or that regional sociopolitical and geographic circumstances will be favorable for our successful operation.

Our ability to sell our products and compete successfully is highly dependent on the quality of our customer service and support, and our failure to offer high quality service and support could have a material adverse effect on our sales and results of operations.

Once our products are delivered, our customers depend on our service and support to resolve any issues relating to our products.

Our support personnel includes employees in various geographic locations, who provide general technical support to our customers.

A high level of support is important for the successful marketing and sale of our products.

If we do not effectively help our customers quickly resolve issues or provide effective ongoing support, it could adversely affect our ability to sell our products to existing customers as well as demand for maintenance and renewal contracts and could harm our reputation with existing and potential customers.

If we fail to accurately forecast our manufacturing requirements or customer demand, we could incur additional costs, which would adversely affect our business and results of operations.

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Where price is a primary decision driver, we may not be able to effectively compete, or we may choose not to compete due to unacceptable margins.

In addition, economic conditions in certain markets could materially adversely affect our suppliers’ access to capital and liquidity with which to maintain their inventories, production levels, and/or product quality, could cause them to raise prices or lower production levels, or result in their ceasing operations.

In addition, economic conditions in certain markets could materially adversely affect our suppliers’ access to capital and liquidity with which to maintain their inventories, production levels, or product quality, could cause them to raise prices or lower production levels, or result in their ceasing operations.

Further, with respect to our credit facility discussed under “Liquidity, Capital Resources and Financial Strategies” in Item 7 of this Annual Report on Form 10-K, if continued uncertain economic conditions adversely affect Silicon Valley Bank, our ability to access the funds available under our credit facility could be materially adversely affected.

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We configure the products to our customer requirements, conduct final testing and then ship the products to our customers.

Although we currently partner with multiple major contract manufacturers, there can be no assurance that we will not encounter problems as we are dependent on contract manufacturers to provide these manufacturing services or that we will be able to replace a contract manufacturer that is not able to meet our demand.

In addition, if we fail to effectively manage our relationships with our contract manufacturers or other service providers, or if one or more of them should not fully comply with their contractual obligations or should experience delays, disruptions, component procurement problems or quality control problems, then our ability to ship products to our customers or otherwise fulfill our contractual obligations to our customers could be delayed or impaired which would adversely affect our business, financial results and customer relationships.

There can be no assurance that we will not encounter problems with our contract manufacturer related to these manufacturing services or that we will be able to replace a contract manufacturer that is not able to meet our demand.

In addition, if we fail to effectively manage our relationships with our contract manufacturers or other service providers, or if they do not fully comply with their contractual obligations or should experience delays, disruptions, component procurement problems or quality control problems, then our ability to ship products to our customers or otherwise fulfill our contractual obligations to our customers could be delayed or impaired which would adversely affect our business, financial results and customer relationships.

We depend on sole or limited sources for some key components and failure to receive timely delivery of any of these components could result in deferred or lost sales.

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Should this occur, our operating results, cash flows and financial condition could be materially adversely affected.

As a result of changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation, of any country in which we operate, the loss of a major tax dispute or a successful challenge to our operating structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries, or other factors, our effective tax rate could be highly volatile and could adversely affect our operating results.

Changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation in any country in which we operate;

the loss of a major tax dispute;

a successful challenge to our operating structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries;

or other factors could cause volatility in our effective tax rate and could adversely affect our operating results.

We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions.

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• increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairment of goodwill in connection with acquisitions;

ability to utilize net operating loss;

• our ability to utilize net operating loss;

• changes in available tax credits;

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• changes in the valuation of our deferred tax assets and liabilities;

changes in domestic or international tax laws or the interpretation of such tax laws including the impact of the Tax Cuts and Jobs Act of 2017;

the resolution of issues arising from tax audits with various tax authorities;

• changes in domestic or international tax laws, treaties, rulings, regulations or agreements or the interpretation of such tax laws, treaties, rulings, regulations or agreements, including the impact of the Tax Cuts and Jobs Act of 2017;

• the resolution of issues arising from tax audits with various tax authorities, including the loss of a major tax dispute;

• local tax authority challenging our operating structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries;

• the tax effects of purchase accounting for acquisitions and restructuring charges that may cause fluctuations between reporting periods;

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Additionally, various states have similar limitations on the use of state net operating losses (“NOL”) following an ownership change.

If we experience an ownership change, our ability to use our NOLs, any loss or deducting attributable to a “net unrealized built-in loss” and other tax attributes (collectively, the “Tax Benefits”) could be substantially limited, and the timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the Tax Benefits.

If we experience an ownership change, our ability to use our NOLs, any loss or deduction attributable to a “net unrealized built-in loss” and other tax attributes (collectively, the “Tax Benefits”) could be substantially limited, and the timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the Tax Benefits.

There is no assurance that we will be able to fully utilize the Tax Benefits and we could be required to record an additional valuation allowance related to the amount of the Tax Benefits that may not be realized, which could adversely impact our result of operations.

We believe that these Tax Benefits are a valuable asset for us.

On September 6, 2016, the Board approved a Tax Benefit Preservation Plan (the “Plan”) in an effort to protect our Tax Benefits during the effective period of the Plan.

Further, on September 6, 2016, the Board adopted certain amendments to our Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendments”), which are intended to preserve the Tax Benefits by restricting certain transfers of our common stock.

The Plan and the Charter Amendments were approved by our stockholders at our 2016 annual meeting of stockholders on November 16, 2016.

On March 3, 2020, the Board approved a Tax Benefit Preservation Plan (the “Plan”) in an effort to protect our Tax Benefits during the effective period of the Plan.

Further, on March 3, 2020, the Board adopted certain rights to the agreement which are intended to preserve the Tax Benefits by restricting certain transfers of our common stock.

The Company expects to submit the Plan to a stockholder vote at the Company’s 2020 Annual Meeting of Stockholders.

Although the Plan and the Charter Amendments are intended to reduce the likelihood of an “ownership change” that could adversely affect us, there is no assurance that the restrictions on transferability in the Plan and the Charter Amendments will prevent all transfers that could result in such an “ownership change.” There also can be no assurance that the transfer restrictions in the Charter Amendments will be enforceable against all of our stockholders absent a court determination confirming such enforceability.

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We expect a significant amount of future revenue to come from international customers in developing countries.

We do not generally expect to obtain collateral

for sales, although we require letters of credit or credit insurance as appropriate for international customers.

We do not generally expect to obtain collateral for sales, although we require letters of credit or credit insurance as appropriate for international customers.

For information regarding the percentage of revenue attributable to certain key customers, see the risks discussed in the following risk factor.

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and utility, pipeline, railroad and other industrial enterprises that operate broadband wireless networks.

During fiscal 2019, 2018 and 2017 , we had one customer in Africa, MTN Group that accounted for 11% , 13% and 14% , respectively, of our total revenue.

During fiscal 2019 and 2018, we had one customer in Africa, MTN Group, that accounted for 11% and 13% of our total revenue, respectively.

No customer accounted for more than 10% of our total revenue in fiscal 2020.

Although we have a large customer base, during any given quarter a small number of customers may account for a significant portion of our revenue.

It is possible that a significant portion of our future product sales also could become even more concentrated in a limited number of customers.

In addition, product sales to major customers have varied widely from period to period.

The loss of any existing customer, a significant reduction in the level of sales to any existing customer, or our inability to gain additional customers could result in declines in our revenue or an inability to grow revenue.

In addition, further consolidation of our potential customer base could result in purchasing decision delays as consolidating customers integrate their operations and could generally reduce our opportunities to win new customers to the extent that the number of potential customers decreases.

Furthermore, as our customers become larger, they may have more leverage to negotiate better pricing which could adversely affect our revenues and gross margins.

Consolidation within the telecommunications industry could result in a decrease in our revenue.

The telecommunications industry has experienced significant consolidation among its participants, and we expect this trend to continue.

In addition, the telecommunications industry has experienced significant consolidation among its participants, and we expect this trend to continue.

Some operators in this industry have experienced financial difficulty and have filed, or may file, for bankruptcy protection.

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This consolidation could result in purchasing decision delays and decreased opportunities for us to supply products to companies following any consolidation.

This consolidation may also result in lost opportunities for cost reduction and economies of scale.

This consolidation may also result in lost opportunities for cost reduction and economies of scale, and could generally reduce our opportunities to win new customers to the extent that the number of potential customers decreases.

Furthermore, as our customers become larger, they may have more leverage to negotiate better pricing which could adversely affect our revenues and gross margins.

It is possible that a significant portion of our future product sales could become even more concentrated in a limited number of customers due to the factors described above.

Product sales to major customers have varied widely from period to period.

The loss of any existing customer, a significant reduction in the level of sales to any existing customer, the consolidation of existing customers, or our inability to gain additional customers could result in declines in our revenue or an inability to grow revenue.

We continually evaluate strategic transaction opportunities which could involve merger, restructuring, divestiture, sale and/or acquisition activities that could disrupt our operations and harm our operating results.

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In addition, to operate in a jurisdiction, we must obtain regulatory approval for our products and each jurisdiction in which we market our products has its own regulations governing radio communications.

If we are unable to obtain sufficient allocation of radio frequency spectrum by the appropriate governmental authority or

obtain the proper regulatory approval for our products, our business, financial condition and results of operations may be harmed.

Our business is subject to changing regulation of corporate governance, public disclosure and anti-bribery measures which have resulted in increased costs and may continue to result in additional costs in the future and/or potential liabilities.

If we are unable to obtain sufficient allocation of radio frequency spectrum by the appropriate governmental authority or obtain the proper regulatory approval for our products, our business, financial condition and results of operations may be harmed.

We are subject to rules and regulations of federal and state regulatory authorities, The NASDAQ Stock Market LLC (“NASDAQ”) and financial market entities charged with the protection of investors and the oversight of companies whose securities are publicly traded, and foreign and domestic legislative bodies.

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Such litigation or claims could result in substantial costs and diversion of resources.

In the event of an adverse result in any such litigation, we could be required to pay substantial damages, cease the use and transfer of allegedly infringing

technology or the sale of allegedly infringing products and expend significant resources to develop non-infringing technology or obtain licenses for the infringing technology.

In the event of an adverse result in any such litigation, we could be required to pay substantial damages, cease the use and transfer of allegedly infringing technology or the sale of allegedly infringing products and expend significant resources to develop non-infringing technology or obtain licenses for the infringing technology.

We can give no assurances that we would be successful in developing such non-infringing technology or that any license for the infringing technology would be available to us on commercially reasonable terms, if at all.

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In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of our networks.

Due to the COVID-19 pandemic, an increased number of our employees are working from home and connecting to our networks remotely, which we believe may further increase the risk of, and our vulnerability to, a cyber-attack or breach on our network.

If an actual or perceived breach of network security occurs in our network or in the network of a customer of our security products, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of our products could be harmed.

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In addition, the economic costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software systems and security vulnerabilities could be significant and may be difficult to anticipate or measure because the damage may differ based on the identity and motive of the programmer or hacker, which are often difficult to identify.

As cyber-attacks become more sophisticated, the need to develop our infrastructure to secure our business can lead to increased cybersecurity protection costs.

Such costs may include making organizational changes, deploying additional personnel and protection technologies, training employees, and engaging third party experts and consultants.

These efforts come at the potential cost of revenues and human resources that could be utilized to continue to enhance our product offerings, and such increased costs may adversely affect our operating margins.

Additionally, certain of our suppliers have in the past and may in the future experience cybersecurity attacks that can constrain their capacity and ability to meet our product demands.

If our contract manufacturers and suppliers suffer future cyberattacks, our ability to ship products to our customers or otherwise fulfill our contractual obligations to our customers could be delayed or impaired which would adversely affect our business, financial results and customer relationships.

Anti-takeover provisions of Delaware law, the Plan, and provisions in our Amended and Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws could make a third-party acquisition of us difficult.

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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-K

Item 1A. Risk Factors