What changed in this filing

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Item 1A. Risk Factors

2020-07-21 compared with 2020-04-30 · 76 added, 69 removed, 615 unchanged (19% of the section changed)

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Our business and results of operations may be negatively affected by the COVID-19 pandemic that has severely impacted the global economy.

In late 2019 a novel strain of coronavirus, or COVID-19, was reported in Wuhan, China.

COVID-19 has since been declared a global pandemic by the World Health Organization and has severely impacted the global economy, disrupting financial markets, supply chains, customer spending and purchasing patterns and general business operations.

In response, governments have implemented measures to attempt to contain and mitigate the transmission of COVID-19, including shelter in place orders, travel restrictions, mandatory quarantines and shutdown of certain non-essential business activities, all of which have resulted in global business disruptions.

In late 2019 a novel strain of coronavirus, identified as COVID-19, was reported in Wuhan, China.

We cannot predict the continued impact of the pandemic and the degree to which our business and results of operations may be affected.

There are no assurances that the global economy will recover quickly or at all, or that impacted areas will be able to fully contain COVID-19 to avoid a new wave of infections.

There are no assurances that the global economy will recover quickly or at all, or that impacted areas will be able to fully contain COVID-19 to avoid new waves of infections.

The COVID-19 pandemic has also presented financial challenges to numerous businesses, which may result in liquidity issues leading to heightened difficulties with collections.

In consideration of the health and safety of our employees, we instituted office closures, implemented shelter-in-place orders and restrictions, and instituted a mandatory work from home policy for substantially all of our employees.

While these measures help to contain and mitigate the transmission of COVID-19, such measures are disruptive, require transition to new business processes and detract our employees from normal business activities.

In consideration of the health and safety of our employees, we instituted office closures, travel restrictions and a mandatory work from home policy for substantially all of our employees.

In consideration of the well-being of our employees and customers, we replaced in-person meetings and conferences with virtual meetings and events and we are leveraging technology to host ConneXions, our annual user conference, virtually this fall.

Furthermore, we have transitioned our workforce to a work-from-anywhere model, and are reorganizing our physical office requirements and embracing a virtual culture.

While these measures help to contain and mitigate the transmission of COVID-19 and the impact on productivity, such measures are disruptive, require transition to new business processes and detract our employees from normal business activities.

The spread of COVID-19 has impacted our supply chain operations through restrictions and shutdown of business activities, suppliers from whom we rely on for sourcing components and materials and third-party partners from whom we rely on for manufacturing, warehousing and logistics services.

Specifically, the manufacture of our products requires optical-electronic components and materials sourced from suppliers in China.

Although we have limited dependencies on suppliers in Wuhan, the containment measures that began in Wuhan have been expanded to other parts of China and have included factory shutdowns at some of our suppliers.

Shortages of fiber optics and other materials due to the decreased productivity in Wuhan may delay planned fiber network buildouts by CSPs, which in turn could delay or lower demand for our products.

If these containment measures continue for a prolonged period, we may experience a global shortage of components and materials, which may negatively impact our ability to supply products to meet customer requirements and could materially adversely affect our business and results of operations.

Specifically, the manufacture of our products requires optical-electronic components, chipsets and materials with critical dependencies on manufacturing located in China.

Business disruptions due to factory shutdowns and other containment measures have decreased productivity from these suppliers, resulting in competing demand and longer lead times for components and materials needed for the manufacture of our products.

In addition, shortages of fiber optics and other materials may delay planned fiber network buildouts by CSPs, which in turn could delay or lower demand for our products.

If these containment measures continue for a prolonged period, we may experience a sustained shortage of components and materials, which may have a material negative impact our ability to supply products to meet customer requirements and could materially adversely affect our business and results of operations.

Similarly, our customers’ purchasing decisions may be impacted by the pandemic, which could in turn impact our sales and results of operations.

For example, CSPs may choose not to invest at this time in our new platforms, or delay infrastructure improvements due to the uncertainty in the global economy.

The COVID-19 pandemic has depressed global markets, leading to significant unemployment rates and increasing uncertainty over fears of a global recession.

The COVID-19 pandemic has disrupted global markets, leading to significant unemployment rates and increasing uncertainty over fears of a global recession.

Adverse global economic conditions, geopolitical issues and other conditions that impact our increasingly global operations, including uncertainty around global trade policies and outbreaks of pandemic diseases, could have a negative effect on our business, results of operations and financial condition and liquidity.

As a global company, our performance is affected by global economic conditions as well as geopolitical issues and other conditions with global reach.

In recent years concerns about the global economic outlook have adversely affected market and

business conditions in general.

In recent years concerns about the global economic outlook have adversely affected market and business conditions in general.

Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses.

Geopolitical issues, such as tariffs and trade policy changes imposed by both the United States and China beginning in late 2018, other international trade policy changes and the withdrawal of the United Kingdom from the European Union have resulted in increasing global tensions and create uncertainty for global commerce.

In particular, the United States has referenced the potential imposition of tariffs on imports from other countries where we produce some of our products, such as the recent imposition of tariffs on steel imported from Vietnam.

We have incurred substantial costs and diversion of resources as a result of these tariff and trade policy changes.

More recently, the uncertainty over COVID-19 in China, which has resulted in government-imposed travel restrictions across a number of countries and closures of numerous business operations in China, has disrupted and delayed our and our suppliers’ operations in China.

Geopolitical issues, such as ongoing conflicts between the United States and China related to tariffs, trade policy changes, other international trade policy changes and the withdrawal of the United Kingdom from the European Union, as well as political positioning by each country, have resulted in increasing global tensions and create uncertainty for global commerce.

In particular, we incurred substantial costs and diversion of resources in realigning our supply chain operations to move substantially all of our product manufacturing to locations outside of China as a result of these tariff and trade policy changes.

More recently, the uncertainty over the global COVID-19 pandemic, which has resulted in government-imposed travel restrictions across a number of countries and closures of numerous business operations globally, has disrupted and delayed our and our global supply chain operations.

Sustained uncertainty about, or worsening of, global economic conditions, geopolitical issues and other conditions with global impact may increase our cost of doing business or disrupt our supply chain operations and may cause our customers to reduce or delay spending and could intensify pricing pressures.

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We incurred net losses of $17.7 million in 2019, $19.3 million in 2018 and $83.0 million in 2017.

For the first three months of 2020, we incurred a net loss of $6.9 million .

As of March 28, 2020 , we had an accumulated deficit of $709.5 million .

For the first six months of 2020, we incurred a net loss of $11.2 million.

As of June 27, 2020, we had an accumulated deficit of $713.7 million.

We expect to continue to incur significant expenses and cash outlays for research and development associated with our platforms and systems, including our cloud and services operations, investments in innovative technologies, expansion of our product portfolio, sales and marketing, customer support and general and administrative functions as we expand our business and operations and target new customer opportunities, including larger CSPs and cable MSOs as well as additional types of regional and local providers.

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• the impact of global economic conditions, including the impact of the COVID-19 pandemic;

our ability to effectively manage our global supply chain operations to mitigate the impact of the COVID-19 pandemic or of the U.S.

• our ability to effectively manage our global supply chain operations to mitigate the impact of the COVID-19 pandemic and U.S.

tariffs and other trade policies;

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Historically, a large portion of our sales has been to a limited number of customers.

For example, one customer accounted for 15% of total revenue in 2019, 18% of total revenue in 2018 and 31% of total revenue in 2017.

For example, CenturyLink, Inc.

accounted for 15% of total revenue in 2019, 18% of total revenue in 2018 and 31% of total revenue in 2017.

However, we cannot anticipate the same level of purchases in the future by these or other customers who have historically comprised a larger percentage of our revenue.

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They also may face obstacles in manufacturing, deployment and competitive response.

Adoption of our new products, such as our smart home and business systems, is dependent on the success of our customers in investing, deploying and selling advanced services to their subscribers.

Our products support a variety of advanced broadband services, such as high-speed Internet, managed Wi-Fi, connected home,

IPTV, mobile broadband, high-definition video and online gaming.

If we are unable to ramp sales of our new products, or if subscriber demand for our services does not grow as expected or declines, or our customers are unable or unwilling to invest in our platforms to deploy and market these services, demand for our products may decrease or fail to grow at rates we anticipate.

Adoption of our new products, such as our smart home and business systems, is dependent on the success of our customers in investing, deploying and selling advanced services to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.

Our products support a variety of advanced broadband services, such as high-speed Internet, managed Wi-Fi, connected home, IPTV, mobile broadband, high-definition video and online gaming.

If we are unable to ramp sales of our new products, or if subscriber demand for our services does not grow as expected or declines, or our customers are unable or unwilling to invest in our platforms to deploy and market these services, particularly in light of the COVID-19 pandemic, demand for our products may decrease or fail to grow at rates we anticipate.

If we fail to manage our supply chain effectively, or if the federal government increases the imposition of tariffs to goods imported from countries where we do business, our ability to conduct our business will be materially impaired, which would adversely impact our gross margins and results of operations.

Until recently, substantially all of our products were manufactured in China.

We recently completed activities to realign our supply chain operations to move substantially all of our product manufacturing to locations outside of China.

Up until 2018, substantially all of our products were manufactured in China.

In the first half of 2019, we completed activities to realign our supply chain operations to move substantially all of our product manufacturing to locations outside of China.

The transition of global supply chain operations is complex, requires significant resources and unanticipated costs, involves significant third-party dependencies and carries numerous risks of disruptions to the manufacture and supply of our products, including exacerbation of the risks associated with our reliance upon third-party manufacturing and supply partners.

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Any of the sole-source, single-source and limited-source suppliers upon whom we or our business partners rely could stop producing our components, be subject to tariffs, epidemics or other conditions that disrupt their operations, cease operations or enter into exclusive arrangements with our competitors.

For example, we have encountered disruptions in our supply of certain components sourced from China as a result of the COVID-19 pandemic and the continued uncertainty around trade and tariff policies between the U.S.

For example, we have encountered disruptions in our supply of certain components sourced from China as a result of the COVID-19 pandemic, which have resulted in production delays for our products due to longer lead times for such components, and from continued uncertainty around trade and tariff policies between the U.S.

Disruptions of manufacturing activities in China business activities, particularly if prolonged, may adversely affect our ability to obtain components and materials needed to manufacture our products at acceptable prices or at all, which would in turn harm our business and results of operations.

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Any such interruption or delay may force us and our business partners to seek similar components from alternative sources, which may not be available, or result in higher than anticipated prices for such components.

Switching suppliers could also require that we redesign our products to accommodate new components and could require us to re-qualify our products with our customers, which would be costly and time consuming.

Switching suppliers could also require that we redesign our products to accommodate new components and could require us to re-qualify our products with our customers, which would be

costly and time consuming.

Any interruption in the supply of sole-source, single-source or limited-source components for our products would adversely affect our ability to meet scheduled product deliveries to our customers, could result in lost revenue or higher expenses and would harm our business.

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We do not have internal manufacturing capabilities and rely upon a small number of third-party manufacturing partners such as CMs and ODMs to supply our products to meet customer needs.

Our reliance on a small number of manufacturing partners

makes us vulnerable to possible supply and capacity constraints and reduced control over component availability, delivery schedules, quality, manufacturing yields and costs.

Our reliance on a small number of manufacturing partners makes us vulnerable to possible supply and capacity constraints and reduced control over component availability, delivery schedules, quality, manufacturing yields and costs.

Our business operations and ability to supply our products are highly dependent upon our manufacturing partners.

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We bear inventory risk under our third-party manufacturing arrangements.

Lead times for the materials and components that we order through our manufacturers vary significantly and depend on numerous factors, including the specific supplier and market demand for a component at a given time.

Lead times for certain key materials and components incorporated into our products are currently lengthy, requiring our manufacturers to order materials and components several months in advance of manufacture, which impacts the lead time for our products.

Lead times for the materials and components that we order through our manufacturers vary significantly and depend on numerous factors, including the specific supplier and market

demand for a component at a given time.

Lead times for certain key materials and components incorporated into our products are currently lengthy and further exacerbated by the COVID-19 pandemic, requiring our manufacturers to order materials and components several months in advance of manufacture, which impacts the lead time for our products.

If we overestimate our production requirements, our manufacturers may purchase excess components and build excess inventory, and we could be required to pay for these excess parts or products and their storage costs.

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If we incur payments to our manufacturers associated with excess or obsolete inventory, this may have an adverse effect on our gross margins, financial condition and results of operations.

We have experienced unanticipated increases in demand from customers, which resulted in delayed shipments and variable shipping patterns.

We have experienced unanticipated increases in demand from customers, including from higher consumer demand for internet services due to COVID-19, which in turn has resulted in delayed shipments and variable shipping patterns.

If we underestimate our product requirements, our manufacturers may have inadequate component inventory, which could interrupt manufacturing of our products, increase our cost of product revenue associated with expedite fees and air freight and/or result in delays or cancellation of sales.

If we are unable to deliver products in a timely fashion to our customers, we may lose customer goodwill or our customers may choose to purchase from other vendors, all of which may have a material negative impact on our revenue and operating results.

Furthermore, while we have largely transitioned our global supply chain operations to mitigate the impact of U.S.

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For example, we have invested and continue to invest resources and funds in our cloud and software platforms.

In addition, on an ongoing basis we expect to reposition our product and service offerings and introduce new products and services as we encounter rapidly changing CSP requirements and increasing competitive pressures.

In addition, on an ongoing basis we expect to reposition our product and service offerings and introduce

new products and services as we encounter rapidly changing CSP requirements and increasing competitive pressures.

If we cannot increase sales of our new products and services, keep pace with rapid technological developments to meet our customers’ needs and compete with evolving industry standards or if the technologies we choose to invest in fail to meet customer needs or are not adopted by customers in the timeframes that we expect, it would be difficult to forecast our future revenue and plan our operating expenses.

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These government-supported loan programs and grants generally include conditions such as deployment criteria, domestic preference provisions and other requirements that apply to the project and selected equipment as conditions for funding.

Changes to the terms or

administration of these programs, including uncertainty from government and administrative change, potential funding limitations that impact our ability to meet program requirements or funding delays due to U.S.

Changes to the terms or administration of these programs, including uncertainty from government and administrative change, potential funding limitations that impact our ability to meet program requirements or funding delays due to U.S.

federal government shutdowns could reduce the ability of IOCs to access capital or secure funding under government-funded programs to purchase our products and services and thus reduce our revenue opportunities.

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Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier, regardless of product performance or features, because the products that we and our competitors offer require a substantial investment of time and funds to qualify and install.

Moreover, the recent demand on network capacity as a result of

shelter-in-place restrictions and shift towards remote workforces may attract new market entrants with competitive or substitutive products, which may lead to increased sales cycles, cause pricing pressure and impact CSP adoption of our platforms due to the availability of broader product offerings in the home networking market.

Some of our competitors may offer substantial discounts or rebates to win new customers or to retain existing customers.

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We intend to continue to invest in developing new products and enhancing the functionality of our platforms, including to reach a broader set of customers.

Developing our products is expensive and complex and involves

uncertainties, including pricing risks from sourcing sufficient quantities of custom components from limited suppliers on terms which may not be commercially acceptable for us.

Developing our products is expensive and complex and involves uncertainties, including pricing risks from sourcing sufficient quantities of custom components from limited suppliers on terms which may not be commercially acceptable for us.

We may not have sufficient resources to successfully manage lengthy product development cycles.

Our research and development expenses were $20.7 million , or 20% of our revenue, for the first three months of 2020, $81.2 million, or 19% of total revenue, in 2019, $90.0 million, or 20% of total revenue, in 2018 and $127.5 million, or 25% of total revenue, in 2017.

Our research and development expenses were $41.6 million, or 19% of our revenue, for the first six months of 2020, $81.2 million, or 19% of total revenue, in 2019, $90.0 million, or 20% of total revenue, in 2018 and $127.5 million, or 25% of total revenue, in 2017.

We believe that we must continue to dedicate a significant amount of resources to our research and development efforts, including increased reliance on third-party partners to maintain our competitive position.

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Such delays may result in fluctuations in our quarterly revenue.

If sales expected from a specific customer for a particular quarter are not realized in that quarter or at all, we may not achieve our revenue forecasts and our financial results would be adversely affected.

If sales expected

from a specific customer for a particular quarter are not realized in that quarter or at all, we may not achieve our revenue forecasts and our financial results would be adversely affected.

Our focus on CSPs with relatively small networks limits our revenue from sales to any one customer and makes our future operating results difficult to predict.

A large portion of our sales efforts continue to be focused on CSPs with relatively small networks, cable MSOs and selected international CSPs.

Our current and potential customers generally operate small networks with limited capital expenditure budgets.

A portion of our current and potential customers generally operate small networks with limited capital expenditure budgets.

Accordingly, we believe the potential revenue from the sale of our products to any one of these customers is limited.

As a result, we must identify and sell products to new customers each quarter to continue to increase our sales.

In addition, the spending patterns of many of our customers are characterized by small and sporadic purchases.

As a consequence, we have limited backlog and will likely continue to have limited visibility into future operating results.

In addition, the spending patterns of many of these customers are generally less formal and often characterized by small and sporadic purchases, which may make our future operating results difficult to predict.

We do not have long-term, committed-volume purchase contracts with our customers, and therefore have no guarantee of future revenue from any customer.

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In addition, our customers may attempt to renegotiate terms of sale, including price and quantity.

our key customers stop purchasing our access platforms, systems and software for any reason, our business and results of operations would be harmed.

If any of our key customers stop purchasing our access platforms, systems and software for any reason, our business and results of operations would be harmed.

Our efforts to increase our sales to CSPs globally, including cable MSOs, may be unsuccessful.

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Concerns about or regulatory actions involving our practices with regard to the collection, storage, processing, use or disclosure of customer information or other privacy related matters, even if unfounded, could damage our reputation and adversely affect operating results.

While we strive to provide transparency about our collection, use, disclosure and security over any personal data and to comply with all applicable data protection laws and regulations, the failure or perceived failure to comply may result in inquiries and other proceedings or actions against us by government entities or others, or could cause us to lose customers, which could potentially have an adverse effect on our business.

in inquiries and other proceedings or actions against us by government entities or others, or could cause us to lose customers, which could potentially have an adverse effect on our business.

Security breaches and data loss may expose us to liability, harm our reputation and adversely affect our business.

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In particular, there has been a spike in cybersecurity attacks as shelter in place orders and work from home requirements have led businesses to increase reliance on virtual environments and communications systems, which have been subjected to increasing third-party vulnerabilities and security risks.

Although we monitor our networks and continue to enhance our security protections, hackers are increasingly more sophisticated and aggressive, and our efforts may be inadequate to prevent all incidents of data breach or theft.

Although we monitor our networks and continue to enhance our security protections, particularly as we transition to a work-from-anywhere workforce, hackers are increasingly more sophisticated and aggressive, and our efforts may be inadequate to prevent all incidents of data breach or theft.

The theft, loss, or misuse of personal data collected, stored or processed by us or our service providers to run our business could result in significantly increased security and remediation costs or costs related to defending legal claims.

If we or our service providers do not allocate and effectively implement and manage the resources necessary to maintain adequate security measures, we could be subjected to data loss, unauthorized data disclosure or a compromise or breach of our systems or those of our third-party data centers.

As we continue to grow our cloud and software portfolio, risks arising from or related to security breaches or data loss are likely to increase.

As we transition to a work-from-anywhere workforce and continue to grow our cloud and software portfolio, risks arising from or related to security breaches or data loss are likely to increase.

Any loss of data or compromise of our systems or data centers could result in a loss of confidence in the security of our offerings, damage our reputation, cause the loss of current or potential customers or partners, lead to legal and regulatory liability and adversely affect our business, financial condition, operating results and cash flows.

If we experience protracted disruption in functionality or processing capabilities of our newly migrated enterprise resource planning system, or ERP system, we may not be able to effectively transact our business or produce our financial statements on a timely basis and without incurrence of additional costs, which would adversely affect our business, results of operations and cash flows.

We recently migrated our Oracle ERP system to Oracle’s cloud platform.

In January 2020, we migrated our Oracle ERP system to Oracle’s cloud platform.

This migration involved significant complexity, requiring us to move and reconfigure all of our current system processes, transactions, data and controls to a new Oracle platform.

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However, our evaluation of the creditworthiness of customers may not be accurate if they do not provide us with timely and accurate financial information, or if their situations change after we evaluate their credit.

Furthermore, some of our international customers operate in countries with developing economies, which from time to time, experience financial crises and become unable to make payments in U.S.

Furthermore, some of our international customers operate in countries with developing

economies, which from time to time, experience financial crises and become unable to make payments in U.S.

The COVID-19 pandemic has also presented financial challenges to numerous businesses, which may result in liquidity issues leading to heightened difficulties with collections.

While we attempt to monitor these situations carefully, adjust our allowances

for doubtful accounts as appropriate and take measures to collect accounts receivable balances, we have written down accounts receivable and written off doubtful accounts in prior periods and may be unable to avoid additional write-downs or write-offs of doubtful accounts in the future.

While we attempt to monitor these situations carefully, adjust our allowances for doubtful accounts as appropriate and take measures to collect accounts receivable balances, we have written down accounts receivable and written off doubtful accounts in prior periods and may be unable to avoid additional write-downs or write-offs of doubtful accounts in the future.

Such write-downs or write-offs could negatively affect our operating results for the period in which they occur and could harm our cash flow or our financial condition.

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As a result, our failure to maintain high quality support and services could result in the loss of customers, which would harm our business.

An increase in revenue mix towards deployment services may adversely affect our gross margin.

In response to greater customer demand for certain professional and support services for our products, we continue to invest and grow our services business while de-prioritizing lower gross margin deployment services.

Our services include deployment services, product warranty and support services, customer success services, customer enablement services, managed services to help our customers manage and optimize their networks and education and certification services.

Deployment services typically have a lower gross margin than product purchases or other service offerings.

We also rely upon third-party subcontractors to assist with some of our professional and support services projects, which generally result in higher costs and increased risk of cost overruns, which can negatively impact our gross margin.

An increase in revenue mix towards services may adversely affect our gross margin.

In response to greater customer demand for certain services for our products, we continue to invest and grow our services business while de-prioritizing lower gross margin deployment services.

Our services include product warranty and support services, customer success services, customer enablement services, managed services to help our customers manage and optimize their networks, education and certification services and, to a lesser extent, deployment services.

Services typically have a lower gross margin than our products, particularly as we invest in growing our service organization.

Certain services, such as deployment services, may tend to involve higher costs and increased risk of cost overruns, which can negatively impact our gross margin.

Moreover, if we are unable to achieve desired efficiencies and scale as we ramp and develop our services business, we may incur higher than expected costs, which can further adversely impact our gross margin.

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Some defects in our products may only be discovered after a product has been installed and used by customers and may in some cases only be detected under certain circumstances or after extended use.

Any errors, bugs, defects or security vulnerabilities discovered in our products after commercial release could result in loss of revenue or delay in revenue recognition, loss of customers and increased service and warranty and retrofit costs, any of which could adversely affect our business, operating results and financial condition.

In addition, we could face claims for security and data breach, product

liability, tort or breach of warranty.

Any errors, bugs, defects or security vulnerabilities discovered in our products after commercial release could result in loss of revenue or delay in revenue

recognition, loss of customers and increased service and warranty and retrofit costs, any of which could adversely affect our business, operating results and financial condition.

In addition, we could face claims for security and data breach, product liability, tort or breach of warranty.

Our contracts with customers contain provisions relating to warranty disclaimers and liability limitations, which may not be upheld.

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Demand can be affected not only by customer- or market-specific issues, but also by broader economic and/or geopolitical factors.

We may, from time to time, adjust inventory valuations downward in response to our assessment of demand from our customers for specific products or product lines.

We may, from time to time, adjust inventory valuations downward or end of life certain of our products in response to our assessment of our business strategy as well as consideration of demand from our customers for specific products or product lines.

The related excess inventory charges may have an adverse effect on our gross margin, financial condition and results of operations.

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In some cases, we are compelled to obtain certifications or authorizations before our products can be introduced, marketed or sold in new markets or to customers that we have not historically served.

For example, our ability to maintain Operations System Modification for Intelligent Network Elements certification for our products will affect our ongoing ability to continue to sell our products to Tier 1 CSPs.

In addition, our ability to expand our international operations and create international market demand for our products may be limited by regulations or standards adopted by other countries that may require us to redesign our existing products or develop new products suitable for sale in those countries.

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Further, any failure by us to adequately protect our proprietary rights could result in our competitors offering similar products, resulting in the loss of our competitive advantage and decreased sales.

It may become more difficult to adequately protect our intellectual property as we expand our reliance on third parties for the design, development and/or manufacture of our products.

It may become more difficult to adequately protect our intellectual property as we expand our reliance on third parties for the design, development and/or manufacture of our products and as we transition to a work-from-anywhere workforce.

While our contracts with such third parties contain provisions relating to intellectual property rights, indemnification and liability, they may not be adequately enforced.

Our third-party providers may also be subject to unauthorized third-party copying or use of our proprietary rights.

In addition, as we transition to a work-from-anywhere workforce and implement different technologies for a distributed workforce, we may become subject to increased risks arising from or related to security breaches or data loss.

Despite our efforts to protect our proprietary rights, attempts may be made to copy or reverse engineer aspects of our products or to obtain and use information that we regard as proprietary.

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Although we closely monitor our use of open source software, the terms of many open source software licenses have not been interpreted by the courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to sell our products.

In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could adversely affect our revenue and operating expenses.

the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could adversely affect our revenue and operating expenses.

If we are unable to obtain necessary third-party technology licenses, our ability to develop new products or product enhancements may be impaired.

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Our ability to incur debt and the use of our funds could be limited by borrowing base restrictions and restrictive covenants in our loan and security agreement for our revolving credit facility.

In January 2020 we entered into a Loan and Security Agreement with Bank of America, N.A., or the BofA Loan Agreement, which provides for a revolving credit facility up to a principal amount of $35.0 million, with the availability of borrowings subject to certain conditions and requirements, including the maintenance of Availability (as defined in the BofA Loan Agreement) of at least $5.0 million.

We are dependent on our existing cash, cash equivalents and borrowings available under our BofA Loan Agreement to provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next twelve months.

In January 2020, we entered into the BofA Loan Agreement, which provides for a revolving credit facility up to a principal amount of $35.0 million, with the availability of borrowings subject to certain conditions and requirements, including the maintenance of Availability (as defined in the BofA Loan Agreement) of at least $5.0 million.

We are dependent on our existing cash, cash equivalents and borrowings available under the BofA Loan Agreement to provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next twelve months.

If our financial position deteriorates, our borrowing capacity under the credit facility may be reduced, which would adversely impact our business and growth.

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As emissions of greenhouse gases continue to alter the composition of the atmosphere, affecting large-scale weather patterns and the global climate, any new regulation of greenhouse gas emissions may result in additional costs to our customers and our manufacturers.

In addition, the physical impacts of climate change and other natural events, including changes in weather patterns, drought, rising ocean and temperature levels, earthquakes and tsunamis may impact our customers, suppliers and manufacturers, and our operations.

manufacturers, and our operations.

These potential physical effects may adversely affect our revenue, costs, production and delivery schedules, and cause harm to our results of operations and financial condition.

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• fluctuation in currency exchange rates and tax risks associated with international operations;

development efforts that do not meet our requirements because of language, cultural or other differences associated with international operations, resulting in errors or delays;

• development efforts that do not meet our requirements because of differences associated with international operations, resulting in errors or delays;

• uncertainty with respect to tariffs imposed by the federal government on products imported from China and future actions the federal government may take with respect to international trade agreements and U.S.

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For example, the COVID-19 outbreak first reported in Wuhan, China in December 2019 impacted our research and development operations in Nanjing, and may continue to impact our operations, including our ability to meet our desired development timelines.

Government-imposed travel restrictions and closures of certain business operations in China in response to COVID-19 have disrupted and delayed the supply of component parts sourced from China and our supply chain and our suppliers’ operations in and outside of China, which may continue for the foreseeable future if the pandemic is not contained.

Government-imposed travel restrictions and closures of certain business operations in China in response to COVID-19 have disrupted and delayed the supply of component parts sourced from China and our supply chain and our suppliers’ operations in and outside of China, which may reoccur in the foreseeable future if the pandemic is not contained.

Our customers are subject to government regulation, and changes in current or future laws or regulations that negatively impact our customers could harm our business.

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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-Q

Item 1A. Risk Factors