What changed in this filing

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Item 1A. Risk Factors

2024-10-04 compared with 2023-08-30 · 83 added, 101 removed, 428 unchanged (30% of the section changed)

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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.

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.

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Business and Operational Risk Factors

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

• We face risks related to pandemics, threatened health epidemics and other outbreaks, which could significantly disrupt our manufacturing, sales and other operations.

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

• We rely on various third-party service partners to help complement our global operations, and failure to adequately manage these relationships could adversely impact our financial results and relationships with customers.

• We continually evaluate the optimal mix and location of our manufacturing assets and our third-party contract manufacturer assets, and any movement or re-allocation of these manufacturing assets may not be successful, could disrupt our operations, cause us to incur increased costs, and adversely affect our business and our operating results.

• We must respond to rapid technological change and comply with evolving industry standards and requirements for our products to be successful.

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• Because a significant amount of our revenue may come from a limited number of customers, the termination of any of these customer relationships may adversely affect our business.

• The NEC Transaction may not be consummated on a timely basis or at all.

Failure to complete the acquisition within the expected timeframe or at all could adversely affect our stock price and our future business and financial results.

• The NEC Transaction will require management to devote significant attention and resources to integrating the acquired NEC businesses with our business.

• We continually evaluate strategic transaction opportunities which could involve merger, divestiture, sale and/or acquisition activities that could disrupt our operations and harm our operating results, and may require management to devote significant attention and resources to achieve strategic transactions.

Financial and Macroeconomic Risk Factors

• Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations.

• 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.

• There are inherent limitations on the effectiveness of our controls.

• There are inherent limitations on the effectiveness of our controls and if we fail to implement and maintain effective internal control over financial reporting, it could adversely impact our business, results of operations, investor confidence and our stock price.

• We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our stockholders.

• The effects of global financial and economic conditions in certain markets have had, and may continue to have, significant effects on our customers and suppliers, and has in the past, and may in the future have, a material adverse effect on our business, operating results, financial condition and stock price.

• The effects of global financial and economic conditions in certain markets and of certain economies and sovereign states have had, and may continue to have, significant effects on our customers and suppliers, and has in the past, and may in the future have, a material adverse effect on our business, operating results, financial condition and stock price.

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

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This litigation could be costly to defend and resolve and could prevent us from using or selling the challenged technology.

• We are subject to laws, rules, regulations and policies regarding data privacy and security.

Many of these laws and regulations are subject to change and reinterpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or other harm to our business.

• We are subject to laws, rules, regulations and policies regarding data privacy and cybersecurity.

• We are subject to complex federal, state, local and international laws and regulations related to protection of the environment that could materially and adversely affect the cost, manner or feasibility of conducting our operations, as well as those of our suppliers and contract manufacturers.

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Business and Operational Risk Factors

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

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.

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Accordingly, we cannot provide assurances that we will be able to achieve profitability in the future or that if profitability is attained, that we will be able to sustain profitability, particularly on a quarter-to-quarter basis.

We face risks related to pandemics, threatened health epidemics and other outbreaks, which could significantly disrupt our manufacturing, sales and other operations.

Our business could be adversely impacted by the effects of a widespread outbreak of contagious disease, such as COVID-19.

A pandemic such as COVID-19 or other such health crisis could impact our supply operations;

for example, if any of our suppliers cease operating, causing us to move production to an alternate supplier.

In addition, constraints on supply operations as a result of a pandemic has in the past and could in the future result in component part shortages due to global capacity constraints.

Such a constraint could and has caused lead times for our products to increase.

In an effort to halt the outbreak of a pandemic such as COVID-19, governments have in the past and may in the future place significant restrictions on travel, leading to extended business closures, including closures at our third-party manufacturers.

Our suppliers and third-party manufacturers have and could be disrupted by worker absenteeism, quarantines, office and factory closures, disruptions to ports and other shipping infrastructure, or other travel or health-related restrictions and such restrictions could spread to other locations where we outsource the manufacturing or distribution of our products if the virus and its variants continues to spread or resurge.

If our supply chain operations are affected or are curtailed by the outbreak of diseases such as COVID-19, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships.

We may need to seek alternate sources of supply which may be more expensive, unavailable or may result in delays in shipments to us from our supply chain and subsequently to our customers.

Further, if our distributors’ or end user customers’

businesses are similarly affected, they might delay or reduce purchases from us, which could adversely affect our results of operations.

In addition, freight and logistics constraints caused in part by restrictions imposed by governments to combat the COVID-19 pandemic and additionally due to container and carriage shortages, have resulted in increased costs and constrained available transport, for us and our channel partners, all at a time when global demand has increased.

We have sought and may continue to seek alternate sources of supply which may be more expensive, unavailable or may result in delays in shipments to us and from our supply chain and subsequently to our customers.

We are conducting business with certain modifications to employee travel, employee work locations, and virtualization or cancellation of certain sales and marketing events, among other modifications.

Our business is dependent on travel of our sales, operations, quality and technical support, and other managers and employees.

Limitations placed on travel globally could limit our ability to manage post-contract support and maintenance activities.

We may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interest of our employees, customers, partners, suppliers and shareholders.

Any such alterations or modifications may adversely impact our business, our customers and prospects, or our financial results.

The extent to which the COVID-19 pandemic or any other pandemic will impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of COVID-19 or other pandemics and its variants in the future, future government actions in response to the crisis, the acceptance and effectiveness of the COVID-19 vaccines and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

We cannot at this time quantify or forecast the business impact of COVID-19, and there can be no assurance that the COVID-19 pandemic or other health crisis will not have a material and adverse effect on our business, financial results and financial condition.

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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We rely upon these partners for certain installation, maintenance, logistics and support functions.

In addition, as our customers increasingly

seek to rely on vendors to perform additional services relating to the design, construction and operation of their networks, the scope of work performed by our service partners is likely to increase and may include areas where we have less experience providing or managing such services.

In addition, as our customers increasingly seek to rely on vendors to perform additional services relating to the design, construction and operation of their networks, the scope of work performed by our service partners is likely to increase and may include areas where we have less experience providing or managing such services.

We must successfully identify, assess, train and certify qualified service partners to ensure the proper installation, deployment and maintenance of our products.

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If we do not effectively manage our relationships with third-party service partners, or if they fail to perform these services in the manner or time required, our financial results and relationships with our customers could be adversely affected.

We continually evaluate the optimal mix and location of our manufacturing assets and our third-party contract manufacturer assets, and any movement or re-allocation of these manufacturing assets may not be successful, could disrupt our operations, cause us to incur increased costs, and adversely affect our business and our operating results.

Our global manufacturing strategy follows an outsourced manufacturing model using contract manufacturing partners in Asia and the United States.

We continually evaluate the optimal mix and location of our manufacturing assets and our third-party contract manufacturer assets, to optimize our manufacturing footprint with our global customer base.

Any of our decisions to move or re-allocate manufacturing assets to new locations or different third-party contract manufacturers may not be successful, could disrupt our operations, cause us to incur increased costs, and adversely affect our business and our operating results.

The movement of manufacturing assets can be capital intensive, costly and time-consuming, and may cause disruptions in our ability to fulfill customer orders in a timely manner.

If we are not successful in optimizing the mix and location of our manufacturing assets and our third-party contract manufacturer assets, our financial results and relationships with our customers could be adversely affected.

We must respond to rapid technological change and comply with evolving industry standards and requirements for our products to be successful.

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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.

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.

If customers fail to meet their obligations to us, we may experience reduced cash flows and losses in excess of reserves, which could materially adversely impact our results of operations and financial position.

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Because a significant amount of our revenue may come from a limited number of customers, the termination of any of these customer relationships may adversely affect our business.

Our historical accounts receivable balances have been concentrated in a small number of significant customers.

Our historical accounts receivable balances have been concentrated in a

small number of significant customers.

Unexpected adverse events impacting the financial condition of our customers, bank failures or other unfavorable regulatory, economic or political events in the countries in which we do business may impact collections and adversely impact our business, require increased bad debt expense or receivable write-offs and adversely impact our cash flows, financial condition and operating results, which could also result in a breach of our bank covenants.

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In addition, some of our competitors have greater name recognition, broader product lines, a larger installed base of products and longer-standing customer relationships.

Our competitors include established companies, such as Ericsson, Huawei and Nokia, as well as a number of other public and private companies, such as Ceragon and SIAE.

Our competitors include established companies, such as Ericsson, Huawei and Nokia, as well as a number of other public and private companies, such as Ceragon Networks.

Some of our competitors are OEMs or systems integrators through whom we market and sell our products, which means our business success may depend on these competitors to some extent.

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If we fail to accurately predict our manufacturing requirements or forecast customer demand, we may incur additional costs of manufacturing and our gross margins and financial results could be adversely affected.

If we overestimate our requirements, our contract manufacturers may experience an oversupply of components and assess us

charges for excess or obsolete components that could adversely affect our gross margins.

If we overestimate our requirements, our contract manufacturers may experience an oversupply of components and assess us charges for excess or obsolete components that could adversely affect our gross margins.

If we underestimate our requirements, our contract manufacturers may have inadequate inventory or components, which could interrupt manufacturing and result in higher manufacturing costs, shipment delays, damage to customer relationships and/or our payment of penalties to our customers.

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

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.

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.

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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.

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.

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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, divestiture, sale and/or acquisition activities that could disrupt our operations and harm our operating results, and may require management to devote significant attention and resources to achieve strategic transactions.

Our growth depends upon market growth, our ability to enhance our existing products and our ability to introduce new products on a timely basis.

We intend to continue to address the need to develop new products and enhance existing products through acquisitions, or “tuck-ins,” product lines, technologies, and personnel.

We intend to continue to address the need to develop new products and enhance existing products through acquisitions, product lines, technologies, and personnel.

Strategic transactions involve numerous risks, including the following:

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Failure to manage and successfully complete a strategic transaction could materially harm our business and operating results.

Even when an acquired or acquiring company has already developed and marketed products, there can be no assurance that product

enhancements will be made in a timely fashion or that pre-acquisition due diligence will have identified all possible issues that might arise with respect to such products.

The pending transaction with NEC Corporation may not be consummated on a timely basis or at all.

Failure to complete the acquisition within the expected timeframe or at all could adversely affect our stock price and our future business and financial results.

On May 9, 2023, we entered into a Master Sale of Business Agreement with NEC Corporation and certain other parties thereto in connection with the NEC Transaction (the “Purchase Agreement”).

We expect the NEC Transaction to close in the fourth quarter of calendar 2023.

The NEC Transaction is subject to closing conditions.

If these conditions are not satisfied or waived, the NEC Transaction will not be consummated.

If the closing of the NEC Transaction is substantially delayed or does not occur at all, or if the terms of the NEC Transaction are required to be modified substantially, we may not realize the anticipated benefits of the transactions fully or at all or they may take longer to realize than expected.

The closing conditions include (i) the counterparties’ representations and warranties being true (subject to certain materiality qualifiers) as of the closing, (ii) the counterparties’ performance, in all material respects, of all obligations and agreements required to be performed prior to closing, (iii) the receipt of all documents, instruments, certificates or other items required to be delivered at or as of the closing by the other parties to the Purchase Agreement, (iv) the absence of legal matters prohibiting the NEC Transaction, and (v) the absence or expiration of any required regulatory periods.

We have incurred and will continue to incur substantial transaction costs whether or not the NEC Transaction is completed.

Any failure to complete the NEC Transaction could have a material adverse effect on our stock price, our competitiveness and reputation in the marketplace, and our future business and financial results, including our ability to execute on our strategy to return capital to our stockholders.

The NEC Transaction will require management to devote significant attention and resources to integrating the acquired NEC businesses with our business.

Even when an acquired or acquiring company has already developed and marketed products, there can be no assurance that product enhancements will be made in a timely fashion or that pre-acquisition due diligence will have identified all possible issues that might arise with respect to such products.

Strategic transactions may require our management to devote significant attention and resources to integrating acquired businesses within our business.

Potential difficulties that may be encountered in the integration process include, among others:

• the inability to successfully integrate the acquired NEC business into the Aviat business in a manner that permits us to achieve the revenue we anticipated from the NEC Transaction;

• complexities associated with managing the larger, integrated business;

• potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the NEC Transaction;

• integrating personnel from the NEC companies while maintaining focus on providing consistent, high-quality products and services;

• the inability to successfully integrate the acquired business into the Aviat business in a manner that permits us to achieve the revenue and synergies we anticipated from the transaction;

• potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with strategic transactions;

• integrating personnel from acquired businesses, while maintaining focus on providing consistent, high-quality products and services;

• integrating relationships with customers, vendors and business partners;

• performance shortfalls as a result of the diversion of management’s attention caused by completing the NEC Transaction and integrating acquired NEC operations into Aviat;

• the disruption of, or loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, procedures and policies.

• performance shortfalls as a result of the diversion of management’s attention caused by completing strategic transactions and integrating acquired operations into Aviat;

• the disruption of, or loss of momentum in, the ongoing business or inconsistencies in standards, controls, procedures and policies.

Delays or difficulties in the integration process could adversely affect our business, financial results, financial condition and stock price.

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Financial and Macroeconomic Risk Factors

Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future adversely affect our liquidity.

In addition, investor concerns regarding the U.S.

or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and

liquidity sources, thereby making it more difficult for us to acquire financing on terms favorable to us, or at all.

Any decline in available funding or access to our cash and liquidity resources could, among other things, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws.

Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity, business, financial condition or results of operations.

In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our customers or suppliers, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition.

Any customer or supplier bankruptcy or insolvency, or the failure of any customer to make payments when due, or any breach or default by a customer or supplier, or the loss of any significant supplier relationships, could result in material losses to the Company and may have a material adverse impact on our business.

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

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laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions.

These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations, among others.

These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act (“FCPA”), and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations, among others.

Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results.

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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;

• restrictions on travel to locations where we conduct business;

• 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.

A portion of our sales and expenses stem from countries outside of the United States, and are in currencies other than U.S.

A material portion of our sales and expenses stem from countries outside of the United States, and are in currencies other than U.S.

dollars, and therefore subject to foreign currency fluctuation.

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From time to time, we enter into foreign currency exchange forward contracts to reduce the volatility of cash flows primarily related to forecasted foreign currency expenses.

These forward contracts reduce the impact of currency exchange rate movements on certain transactions, but do not cover all foreign-denominated transactions and therefore do not entirely eliminate the impact of fluctuations in exchange rates on our results of operations and financial condition.

There are inherent limitations on the effectiveness of our controls.

These forward contracts reduce the impact of currency exchange rate movements on certain transactions, but do not cover all

foreign-denominated transactions and therefore do not entirely eliminate the impact of fluctuations in exchange rates on our results of operations and financial condition.

There are inherent limitations on the effectiveness of our controls and if we fail to implement and maintain effective internal control over financial reporting, it could adversely impact our business, results of operations, investor confidence and our stock price.

We do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud.

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Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes, including at times of personnel turnover.

Controls can also be circumvented by individual acts of some persons, by collusion of two or more people, or by management’s override of the controls.

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If our controls become inadequate, we could fail to meet our financial reporting obligations, our reputation may be adversely affected, our business and operating results could be harmed, and the market price of our stock could decline.

We may not be successful implementing internal control procedures related to acquired businesses.

Our evaluation and remediation of assessed deficiencies over internal controls, if any, could require us to incur significant expense and adversely affect our operating results, investor confidence and our stock price.

As discussed in Note 16.

Revisions to Prior Period Consolidated Financial Statements of the Notes to the consolidated financial statements in this Annual Report on Form 10-K, subsequent to the issuance of the consolidated financial statements and related disclosures for the fiscal year ended June 30, 2023, the Company identified certain errors in its previously issued consolidated financial statements related to estimated total contract costs and progress to completion for an over-time arrangement.

The Company has identified additional errors impacting the quarterly financial statements for fiscal 2024 related to the recognition of revenue prior to performance obligations being met and related to journal entries recorded in error.

In accordance with ASC 250, Accounting Changes and Error Corrections and Staff Accounting Bulletins (“SAB”) No.

99, Materiality and No.

108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the materiality of the errors and determined that the impacts were not material, individually or in the aggregate, to the Company’s previously issued consolidated financial statements for any of the prior reporting periods in which they occurred, but that correcting the error in the current reporting period would be material to the Company’s results of operations for fiscal 2024.

As a result, the Company has restated the prior period financial statements and related disclosures for fiscal 2023 to correct the errors.

The Company will also correct previously issued quarterly financial statements and related disclosures for such immaterial errors in future filings, as applicable (see “Part II, Item 9B.

Other Information” below for additional information).

Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to evaluate and determine the effectiveness of our internal controls over financial reporting.

Ineffective internal control over financial reporting could result in errors in our financial statements, reduce investor confidence, and adversely affect our stock price.

As disclosed in Part II, Item 9A “Controls and Procedures” in this Form 10-K, we concluded that our internal control over financial reporting was not effective for the fiscal year ended June 28, 2024, due to certain material weaknesses identified related to an ineffective control environment, ineffective control activities, and ineffective monitoring activities.

We implemented certain corrective measures in the fourth quarter of fiscal 2024, including hiring a new Chief Financial Officer, Head of Internal Audit, and backfilling vacancies resulting from key finance and accounting personnel turnover.

However, due to the material weaknesses described above, there is a reasonable possibility that our existing controls would not have detected a material misstatement in a timely manner if it were to be material.

These measures are part of a process of remediating the material weaknesses that is under way and that we believe will remediate the material weaknesses.

However, if we are unable to remediate the material weaknesses in an appropriate and timely manner, or if we identify additional control deficiencies that individually or together constitute significant deficiencies or material weaknesses, our ability to accurately record, process, and report financial information and, consequently, our ability to prepare financial statements within required time periods, could be adversely affected.

Our failure to maintain effective internal control over financial reporting could result in

violations of applicable securities laws and stock exchange listing requirements;

subject us to litigation and investigations;

negatively affect investor confidence in our financial statements;

and adversely impact our stock price and ability to access capital markets.

We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our stockholders.

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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.

The effects of global or market specific financial and economic conditions have, and may continue to have, significant effects on our customers and suppliers, and have in the past, and may in the future have, a material adverse effect on our business, operating results, financial condition and stock price.

The effects of global financial and economic conditions in certain markets include, among other things, significant reductions in available capital and liquidity from credit markets, supply or demand driven inflationary pressures, and substantial fluctuations in currency values worldwide.

The effects of global or market specific financial and economic conditions in certain markets and of certain economies and sovereign states have had, and may continue to have, significant effects on our customers and suppliers, and has in the past, and may in the future have, a material adverse effect on our business, operating results, financial condition and stock price.

The effects of global financial and economic conditions in certain markets and of certain economies and sovereign states include, among other things, significant reductions in available capital and liquidity from credit markets, supply or demand driven inflationary pressures, and substantial fluctuations in currency values worldwide.

Economic conditions in certain markets have adversely affected and may continue to adversely affect our customers’ access to capital and/or willingness to spend capital on our products, and/or their levels of cash liquidity and/or their ability and/or willingness to pay for products that they will order or have already ordered from us, or result in their ceasing operations.

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Our ability to substantially offset inflationary impacts by raising prices may be limited by the competitive factors discussed above.

If global financial markets decline for long periods, or if there is a downgrade of the U.S.

government credit rating due to an actual or threatened default on government debt, or downgrades of credit ratings of other sovereign states, our ability and our customers and suppliers ability to access capital and maintain liquidity for continuing operations may be adversely affected.

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, our ability to access the funds available under our credit facility could be materially adversely affected.

The potential effects of these economic factors are difficult to forecast and mitigate.

As a consequence, our operating results for a particular period are difficult to predict and prior results are not necessarily indicative of results to be expected in future periods.

As a consequence, our operating results for a particular period are difficult to predict and prior results are not necessarily indicative of results to be expected in

future periods.

Any of the foregoing effects could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect our stock price.

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

On March 3, 2020, the Board approved The Plan (as amended and restated on August 27, 2020), in an effort to protect our Tax Benefits during the effective period of the Plan.

We submitted the Plan to a stockholder vote and our stockholders approved the plan at the 2020 Annual Meeting of Stockholders.

Although the Plan is 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 will prevent all transfers that could result in such an “ownership change.” An amendment to the Plan, approved by the Board of Directors on February 28, 2023, will be submitted to the Company’s stockholders for ratification at the Company’s 2023 annual meeting (the “Annual Meeting”), which extends the final expiration date of the Plan until March 3, 2026.

The Amended and Restated Tax Benefit Preservation Plan (the “Plan”), dated as of August 27, 2020, and amended as of February 28, 2023, is intended to protect our Tax Benefits during the effective period of the Plan.

The amended Plan was approved at the Company’s November 2023 Annual Meeting of Stockholders, which extended the final expiration date of the Plan until March 3, 2026.

The Plan could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, us or a large block of our common stock.

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We rely upon a combination of trade secrets, trademarks, copyrights, patents, contractual rights and technological measures to protect our intellectual property rights from infringement, misappropriation or other violations to maintain our brand and competitive position.

We also make business decisions about when to seek patent protection for a particular technology and when to rely upon trade secret protection, and the

approach we select may ultimately prove to be inadequate.

We also make business decisions about when to seek patent protection for a particular technology and when to rely upon trade secret protection, and the approach we select may ultimately prove to be inadequate.

With respect to patents, we cannot be certain that patents will be issued as a result of any currently pending patent application or future patent applications, or that any of our patents, once issued, will provide us with adequate protection from competing products or intellectual property owned by others.

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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.

During the past few years, these entities, including the Public Company Accounting Oversight Board, the SEC, NASDAQ and several foreign governments, have issued requirements, laws and regulations and continue to develop additional requirements, laws and regulations, most notably the Sarbanes-Oxley Act of 2002 (“SOX”), and recent laws and regulations regarding bribery and unfair competition, including the SEC’s recently-proposed rules relating to the disclosure of a range of climate-related risks.

During the past few years, these entities, including the Public Company Accounting Oversight Board, the SEC, NASDAQ and several foreign governments, have issued requirements, laws and regulations and continue to develop additional requirements, laws and regulations, most notably the Sarbanes-Oxley Act of 2002 (“SOX”), and recent laws and regulations regarding bribery and unfair competition, including the SEC’s recently-approved (though currently paused, pending litigation) rules relating to the disclosure of climate-related information.

Our efforts to comply with these requirements and regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of substantial management time and attention from revenue-generating activities to compliance activities.

14 unchanged sentences

Any litigation regarding patents or other owned or exclusively licensed intellectual property, including claims that our use of intellectual property infringes or violates the rights of others, could be costly and time-consuming and could divert our management and key personnel from our business operations.

The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks.

The complexity of the technology involved and the uncertainty of intellectual property litigation increase these

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

2 unchanged sentences

This could have a materially adverse effect on our business, results of operation, financial condition, competitive position and prospects.

We are subject to laws, rules, regulations and policies regarding data privacy and security.

We are subject to laws, rules, regulations and policies regarding data privacy and cybersecurity.

We are subject to a variety of federal, state and local laws, directives, rules, standards, regulations, policies and contractual obligations relating to data privacy and security.

6 unchanged sentences

We are subject to complex federal, state, local and international laws and regulations related to protection of the environment that could materially and adversely affect the cost, manner or feasibility of conducting our operations, as well as those of our suppliers and contract manufacturers.

Environmental, health and safety regulations govern the manufacture, assembly and testing of our products, including without limitation regulations governing the emission of pollutants and the use, remediation, and disposal of

hazardous materials (including electronic wastes).

Our failure or the failure of our suppliers or contract manufacturers to properly manage the use, transportation, emission, discharge, storage, recycling or disposal of wastes generated from our operations could subject us to increased compliance costs or liabilities such as fines and penalties.

6 unchanged sentences

Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters.

Additionally, on March 21, 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related risks.

We are currently assessing the rule, but at this time we cannot predict the costs of implementation or any potential adverse impacts resulting from the rule.

To the extent this rule is finalized as proposed, we could incur increased costs relating to the assessment and disclosure of climate-related risks.

Additionally, in March 2024, the SEC approved final rules that necessitate the disclosure of climate-related information in registration statements and periodic reports.

In April 2024, the SEC issued an Order to stay its climate rule, pausing the implementation of the final rules.

We are assessing the proposed final rules, but at this time we cannot predict the costs of implementation or any potential adverse impacts resulting from the

To the extent the final rules are upheld, we could incur increased costs relating to the assessment and disclosure of climate-related information in our periodic reports.

Increased public awareness and worldwide focus on climate change issues has led to legislative and regulatory efforts to limit greenhouse gas emissions, and may result in more international, federal or regional requirements or industry standards to reduce or mitigate risks related to climate change.

42 unchanged sentences

If our contract manufacturers and suppliers suffer future cyberattacks, our ability to ship products 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.

Unresolved Staff Comments

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