What changed in this filing

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Item 1. Legal Proceedings

2021-11-02 compared with 2021-08-03 · 78 added, 75 removed, 815 unchanged (16% of the section changed)

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of the impact from the coronavirus outbreak on our business depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees.

If our employees are required to work from home for many months, it could ultimately negatively impact new gear and improvements and potentially result in delays or releasing significant updates.

If a substantial number of our employees continue to work from home, it could negatively impact new gear and improvements and potentially result in delays or releasing significant updates.

If we do not execute on these factors successfully, demand for our current gear may decline and any new gear that we may introduce may not gain widespread acceptance.

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dollar could result in significant increases in our expenses that may seriously harm our business.

Total unit shipments of our gear tend to be higher during the third and fourth quarters of the year.

As a result, our sales are subject to seasonal fluctuations, which may seriously harm our business.

We have experienced and expect to continue to experience seasonal fluctuations in sales due to the spending patterns of gamers who purchase our gear.

Total unit shipments of our gear have historically been higher during the third and fourth quarters of the year.

As a result, our sales may be subject to seasonal fluctuations, which may seriously harm our business.

Notwithstanding the results of operations of the third quarter for 2021 which were adversely impacted by the COVID-19 pandemic, historically, we have experienced and expect to continue to experience seasonal fluctuations in sales due to the spending patterns of gamers who purchase our gear.

Our total unit shipments have generally been lowest in the first and second calendar quarters due to lower sales following the fourth quarter holiday season and because of the decline in sales that typically occurs in anticipation of the introduction of new or enhanced GPUs, CPUs and other computer hardware products, which usually takes place in the second calendar quarter, and which tends to drive sales in the following two quarters.

As a consequence of seasonality, our total unit shipments for the second calendar quarter are generally the lowest of the year, followed by total unit shipments for the first calendar quarter.

We expect these seasonality trends to continue.

As a result, our total unit shipments are subject to seasonal fluctuations, which may seriously harm our business.

Historical seasonal patterns may not continue in the future and have been impacted, and may be further impacted in the future, by increasing supply constraints, GPUs shortages, shifts in customer behavior and the evolving impacts of the COVID-19 pandemic .

Our results of operations are subject to substantial quarterly and annual fluctuations, which may adversely affect the market price of our common stock.

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In a cloud computing environment a user’s computer may be a so-called “dumb terminal” with minimal processing power and limited need for high-performance components.

Through cloud computing, gamers will be able to access and play graphically sophisticated games that they may not be able to otherwise play on a PC that is not fully equipped with the necessary, and often expensive, hardware.

If cloud computing is widely accepted, the demand for high-performance computer gaming hardware

products such as the PC high-performance memory, prebuilt and custom gaming PCs and laptops, and other PC gaming components we sell, could diminish significantly.

Through cloud computing, gamers will be able to access and play graphically sophisticated games that they may not be able to otherwise play on a PC that is not fully equipped with the necessary,

and often expensive, hardware.

If cloud computing is widely accepted, the demand for high-performance computer gaming hardware products such as the PC high-performance memory, prebuilt and custom gaming PCs and laptops, and other PC gaming components we sell, could diminish significantly.

As a result, if cloud computing gaming were to become widely adopted, such adoption could seriously harm our business.

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In addition, declines in the market price of ICs enable our competitors to lower prices and we will likely be forced to lower our product prices in order to compete effectively which could have an adverse effect on our net revenue.

Further, because we carry inventory of DRAM ICs and DRAM modules at our facility in Taiwan, fluctuations in the market price of these ICs can have an effect on our gross margin.

example, declines in the prices of these ICs and their related products have tended to have a negative short-term impact on gross margin of our DRAM modules.

Further, because we carry inventory of DRAM ICs and

DRAM modules at our facility in Taiwan, fluctuations in the market price of these ICs can have an effect on our gross margin.

For example, declines in the prices of these ICs and their related products have tended to have a negative short-term impact on gross margin of our DRAM modules.

In addition, selling prices of our DRAM modules, on the one hand, and market prices of DRAM ICs, on the other hand, may rise or fall at different rates, which may also affect our gross margin.

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significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity, including our ability to repay the indebtedness outstanding from our credit facilities.

The extent to which the COVID-19 outbreak, including the spread of more contagious and deadly variants, ultimately impacts our business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

Since early 2020, we have experienced some business disruptions due to COVID-19, including the stoppage in our factories in early 2020, disruption in our supply chain and increased distribution costs such as the elevated ocean freight costs we incurred in the third quarter of 2021, which led to increases in operating costs.

As a result of the COVID-19 pandemic, we are continuing to experience logistics challenges globally.

These negative financial impacts have been offset by strong revenue growth year-over-year partly due to an increase in demand for our gear as more people in more countries are under shelter-in-place restrictions, which we believe have limited people’s access to alternative forms of entertainment and social interaction, and thus have increased the demand for home entertainment and connecting with others through content creation.

In contrast, as the COVID-19 pandemic subsides, it has, and could continue to result in shelter-in-place and other similar restrictions being eased.

Such easing of restrictions likely has, and will continue to result in consumers returning to other alternative forms of entertainment and interaction.

This in turn has, and could continue to, result in a decline in demand for our products.

The extent to which the COVID-19 outbreak, including the spread of more contagious and deadly variants, ultimately impacts our business, results of operations, cash flows and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the

virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

While the extent and duration of the COVID-19 outbreak remains uncertain, the approval and distribution of vaccines could result in the pandemic subsiding in the near term.

If and when the pandemic subsides and shelter-in-place and other restrictions are lifted, consumers may start to enjoy activities outside of the home again.

If this occurs, demand for our products could decrease.

Such a drop in demand could result in a decrease in revenue that would seriously harm our business.

A significant portion of our net revenue is generated by sales of DRAM modules and any significant decrease in the average selling prices of our DRAM modules would seriously harm our business.

A significant percentage of our net revenue is generated by sales of DRAM modules.

In particular, net revenue generated by sales of DRAM modules accounted for a total of 27.30% and 38.21% of our net revenue for the six months ended June 30, 2021 and 2020, respectively.

In particular, net revenue generated by sales of DRAM modules accounted for a total of 27.2% and 34.2% of our net revenue for the nine months ended September 30, 2021 and 2020, respectively.

As a result, any significant decrease in average selling prices of our DRAM modules, whether as a result of declining market prices of DRAM ICs or for any other reason, would seriously harm our business.

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Sales to a limited number of customers represent a significant portion of our net revenue, and the loss of one or more of our key customers may seriously harm our business.

For the six months ended June 30, 2021 and 2020, sales to Amazon accounted for 24.6% and 26.8% of our net revenue, respectively.

Sales to our ten largest customers accounted for 50.0% and 52.4% of our net revenue for the six months ended June 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021 and 2020, sales to Amazon accounted for 26.4% and 25.1% of our net revenue, respectively.

Sales to our ten largest customers accounted for 50.5% and 51.0% of our net revenue for the nine months ended September 30, 2021 and 2020, respectively.

Our customers typically do not enter into long-term agreements to purchase our gear but instead enter into purchase orders with us from time to time.

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We have limited manufacturing facilities that only assemble our DRAM modules, custom built PCs, custom cooling and controllers, we have no guaranteed sources of supply of products or components and we depend upon a small number of manufacturers, some of which are exclusive or single-source suppliers, to supply our gear, each of which may result in product or component shortages, delayed deliveries and quality control problems.

We maintain limited manufacturing facilities that only produce DRAM modules, custom built PCs, custom cooling and performance controllers, and as a result, we depend entirely upon third parties to manufacture and supply the gear we sell and the components used in our gear such as gaming peripherals and gaming components.

We maintain limited manufacturing facilities that only assemble DRAM modules, custom built PCs, custom cooling and performance controllers, and as a result, we depend entirely upon third parties to manufacture and supply the gear we sell and the components used in our gear such as gaming peripherals and gaming components.

Our gear that is manufactured by outsourced parties is generally produced by a limited number of manufacturers and in some instances is purchased on a purchase order basis.

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Furthermore, the supply of products from manufacturers and suppliers to us could be interrupted or delayed, and we may be unable to obtain sufficient quantities of our products because of factors outside of our control.

For example, our manufacturers and suppliers may experience financial difficulties, be affected by natural disasters or pandemics, have limited production facilities or manufacturing capacity, may experience labor shortages or may be adversely affected by regional unrest or military actions.

military actions.

In addition, we may be slower than our competitors in introducing new products or reacting to changes in our markets due to production or delivery delays by our third-party manufacturers or suppliers.

Likewise, lead times for the delivery of products being manufactured for us can vary significantly and depend on many factors outside of our control, such as demand for manufacturing capacity and availability of components.

terms we consider acceptable and, in any event, there would likely be significant delays before we were able to transition production to a new manufacturer and potentially significant costs associated with that transition.

In addition, if one of our exclusive or single-source manufacturers were to stop production, or experience product quality or shortage issues, we may be unable to locate or engage a suitable replacement on terms we consider acceptable and, in any event, there would likely be significant delays before we were able to transition production to a new manufacturer and potentially significant costs associated with that transition.

Risks relating to product quality .

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The laws governing customs and tariffs in many countries are complex, subject to many interpretations and often include substantial penalties for non-compliance.

Our effective tax rate may increase in the future, including as a result of the Reorganization and recent U.S.

tax legislation.

Our effective tax rate may increase in the future, including as a result of the Reorganization and changes in tax legislation, which may have a material adverse effect on our business, financial condition and results of operations.

Our effective tax rate may be impacted by changes in or interpretations of tax laws in any given jurisdiction, utilization of or limitations on our ability to utilize any tax credit carry-forwards, changes in geographical allocation of revenue and expense and changes in management’s assessment of matters such as our ability to realize the value of deferred tax assets.

In the past, we have experienced fluctuations in our effective income tax rate which reflects a variety of factors that may or may not be present in any given year.

In particular, the U.S.

government may enact significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income, significant changes to the taxation of income derived from international operations, and an addition of further limitations on the deductibility of business interest.

While certain draft legislation has been publicly released and is under development in Congress at this time, the likelihood of these changes being enacted or implemented is unclear.

As a result of the Reorganization, we acquired a number of non-U.S.

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affiliates in a manner that may adversely impact our effective tax rate.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or Tax Act, was enacted, which has significantly changed the U.S.

federal income taxation of U.S.

corporations, including by reducing the U.S.

corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements of a partially territorial tax system, revising the rules governing net operating losses and the rules governing foreign tax credits, and introducing new anti-base erosion provisions.

The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service, or the IRS, any of which could lessen or increase certain adverse impacts of the legislation.

In addition, it is unclear how these U.S.

federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security, or CARES, Act was enacted, which provides temporary relief from certain aspects of the Tax Act that had imposed limitations on the utilization of certain losses, interest expense deductions, and minimum tax credits.

We have recorded additional income tax benefits of $0.6 million during the year ended December 31, 2020 resulting from the enactment of the CARES Act.

Our effective tax rate could also increase due to several factors, including:

changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;

changes in tax rates, tax treaties, and regulations or the interpretation of them, including the Tax Act and the CARES Act;

changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;

the outcome of current and future tax audits, examinations, or administrative appeals;

the effects of acquisitions.

In the past, we have experienced fluctuations in our effective income tax rate which reflects a variety of factors that may or may not be present in any given year.

In light of these factors, there can be no assurance that our effective income tax rate will not change in future periods.

Accordingly, if this were to occur, and if our effective tax rate were to increase, our business may be seriously harmed.

Accordingly, if our effective tax rate were to increase, it may have a material adverse effect on our business, financial condition and results of operations.

Our ability to utilize our net operating losses, or NOLs, carryforwards and certain other tax attributes may be limited.

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As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset U.S.

federal taxable income may be subject to limitations under Section 382, which could

potentially result in increased future tax liability to us.

federal taxable income may be subject to limitations under Section 382, which could potentially result in increased future tax liability to us.

In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

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As a result, we may need to invest significant resources in research and development to maintain our market position, keep pace with technological changes and compete effectively.

Our product development expenses were $30.7 million and $23.4 million for the six months ended June 30, 2021 and 2020, respectively, representing 3.1% and 3.4% of our net revenue for these periods, respectively.

Our product development expenses were $45.2 million and $36.3 million for the nine months ended September 30, 2021 and 2020, respectively, representing 3.2% of our net revenue for each of these periods.

Our failure to improve our gear, create new and relevant categories of gear and adapt to changing business models in a timely manner may seriously harm our business.

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In that regard, rights to return products vary by customer and range from the right to return defective products to limited stock rotation rights allowing the exchange of a limited percentage of the customer’s inventory for new product purchases.

If the estimated

market values of products held in our finished goods and work in process inventories at the end of any fiscal quarter are below our cost of these products, we will recognize charges to write down the carrying value of our inventories to market value.

If the estimated market values of products held in our finished goods and work in process inventories at the end of any fiscal quarter are below our cost of these products, we will recognize charges to write down the carrying value of our inventories to market value.

In addition, we provide a variety of rebates to both customers and gamers, including instant rebates, volume incentive rebates, back end rebates and mail-in rebates.

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The aggregate amount of charges incurred as a result of all of these rebates and other financial incentives is offset from our gross revenue.

For the six months ended June 30, 2021 and 2020, our gross revenue was reduced approximately by 7.3% and 6.4%, respectively, as a result of these rebates.

For the nine months ended September 30, 2021 and 2020, our gross revenue was reduced approximately by 7.9% and 6.8%, respectively, as a result of these rebates.

In the future, we also may be required to write down inventory or receivables due to product obsolescence or because of declines in market prices of our gear.

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For example, we will likely not be able to travel to conduct in-person meetings and due diligence sessions with potential target companies.

If we are successful in making any acquisition or strategic transaction, we may be unable to integrate the acquired business effectively or may incur unanticipated expenditures, which could seriously harm our business.

If we are successful in making any acquisition or strategic transaction, we may be unable to integrate the acquired business

effectively or may incur unanticipated expenditures, which could seriously harm our business.

The COVID-19 pandemic may make integration of these businesses even more difficult.

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However, notwithstanding the foregoing, there are instances when we are required to pay for gear in advance of it being manufactured and delivered to us.

We also utilize borrowings under our revolving credit facility to provide working capital, and access to external debt financing has historically been and will likely continue to be very important to us.

We may also utilize borrowings under our revolving credit facility to provide working capital, and access to external debt financing has historically been and will likely continue to be very important to us.

As a result of any downturn in general economic conditions or conditions in the credit markets or other factors, manufacturers and suppliers may be reluctant to provide us with the same credit that they have in the past, which would require that we increase the level of borrowing under our revolving credit facility or obtain other external financing to provide for our substantial working capital needs.

Additional financing may not be available on terms acceptable to us or at all.

In particular, our access to debt financing may be limited by a covenant in our credit facilities, which requires our Consolidated Total Net Leverage Ratio (as defined in our credit facilities) to be no greater than 8.0 to 1.0 if our revolving credit facility is more than 35% drawn.

As a result, the restriction imposed by our debt covenants could limit, perhaps substantially, the amount we are permitted to borrow under our credit facilities or under other debt arrangements.

In particular, our access to other debt financing is limited by the negative covenant in our credit agreement restricting our ability to incur other indebtedness, as well as the financial covenants therein prohibiting our Consolidated Total Net Leverage Ratio from exceeding 3.0 to 1.0 or our Consolidated Interest Coverage Ratio being less than 3.0 to 1.0 (both tested quarterly on a trailing four fiscal quarter basis).

As a result, such restrictions could limit, perhaps substantially, the amount of indebtedness we are permitted to borrow under other debt arrangements.

To the extent we are required to use additional borrowings under our revolving credit facility or from other sources (if available and if permitted by the credit facility) to provide working capital, it could increase our interest expense and expose us to other risks of leverage.

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Indebtedness and the terms of our credit facilities may impair our ability to respond to changing business and economic conditions and may seriously harm our business.

We had $270.0 million of indebtedness as of June 30, 2021.

We had $248.8 million of indebtedness as of September 30, 2021.

We have incurred significant indebtedness under our credit facilities to fund working capital and other cash needs and we expect to incur additional indebtedness in the future, particularly if we use borrowings or other debt financing to finance all or a portion of any future acquisitions.

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Upon an event of default under our credit facilities, the lender may require the immediate repayment of all outstanding loans and accrued interest.

In addition, during the continuance of certain events of default under our credit facilities (subject to a cure period for some events of default), interest may accrue at a rate

that is 200 basis points above the otherwise applicable rate.

In addition, during the continuance of certain events of default under our credit facilities (subject to a cure period for some events of default), interest may accrue at a rate that is 200 basis points above the otherwise applicable rate.

As a result, any breach or failure to comply with covenants contained in our debt instruments could seriously harm our business.

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Restrictions under our credit facilities .

We must comply with covenants under our current credit facilities, one of which requires our Consolidated Total Net Leverage Ratio (as defined in our credit facilities) to be no greater than 8.0 to 1.0 if the revolving credit facility is more than 35% drawn.

Our Consolidated Total Net Leverage Ratio as of June 30, 2021 was 0.5 to 1.0.

While we were in compliance with this covenant as of June 30, 2021, there can be no assurance that we will not breach these covenants in our credit facilities in the future or other covenants in our future credit facilities.

Our credit facilities also include covenants that limit or restrict our ability to, among other things, incur liens on our properties, make acquisitions and other investments and sell assets, subject to specified exceptions.

In addition to the covenants described in the preceding sentence, we are also prohibited from incurring indebtedness other than debt owed to the lender under our credit facilities, debt associated with certain liens permitted by our credit facilities or subordinated debt.

We must comply with covenants under our current credit facilities, which require the maintenance of a maximum Consolidated Total Net Leverage Ratio of 3.0 to 1.0 and a Minimum Consolidated Interest Coverage Ratio of 3.0 to 1.0 (as defined in our credit facilities).

Our Consolidated Total Net Leverage Ratio and Consolidated Interest Coverage Ratio were 0.8 to 1.0 and 10.4 to 1.0 as of September 30, 2021, respectively.

While we were in compliance with all applicable financial covenants under our credit facilities as of September 30, 2021, there can be no assurance that we will not breach these financial covenants in our credit facilities in the future or other covenants in our future credit facilities.

In addition to the covenants described in the preceding sentence, we are also prohibited from incurring indebtedness other than debt owed to the lenders under our credit facilities, debt associated with certain liens permitted by our credit facilities, certain subordinated debt and other specified exceptions.

Our credit facilities also contain restrictions on our ability to pay dividends or make distributions in respect of our common stock or redemptions or repurchases of our common stock.

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We conduct our operations and sell our gear internationally and the effect of business, legal and political risks associated with international operations may seriously harm our business.

Sales to customers outside the United States accounted for 64.3% and 63.7% of our net revenue for the six months ended June 30, 2021 and 2020, respectively.

Sales to customers outside the United States accounted for 62.7% and 62.4% of our net revenue for the nine months ended September 30, 2021 and 2020, respectively.

In addition, substantially all of the gear that we sell is manufactured at facilities in Asia.

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To defend against security threats, both to our internal systems and those of our customers, we must continuously engineer more secure products and enhance security and reliability features, which may result in increased expenses.

Actual or perceived breaches of our security measures, those of third-parties or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us, our partners, our customers or third parties have exposed, and may in the future could expose us and the parties affected to a risk of loss or misuse of this information, resulting in litigation and potential liability, paying damages, regulatory inquiries or actions, damage to our brand and reputation or other serious harm to our business.

other serious harm to our business.

Our efforts to prevent and overcome these challenges could increase our expenses and may not be successful.

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Many of these laws and regulations are subject to change and uncertain interpretation.

federal and state governments and agencies may in the future

enact new legislation and promulgate new regulations governing collection, use, disclosure, storage, processing, transmission and destruction of personal data and other information.

federal and state governments and agencies may in the future enact new legislation and promulgate new regulations governing collection, use, disclosure, storage, processing, transmission and destruction of personal data and other information.

New privacy laws add additional complexity, requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs, and could impact trading strategies and availability of previously useful data.

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federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters.

For example, the European Union General Data Protection Regulation, or GDPR, which came into effect on May 25, 2018, has led to more stringent operational requirements for processors and controllers of personal data, including, for example, requiring expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements, and higher standards for data controllers to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities.

that they have obtained valid consent or have another legal basis in place to justify their data processing activities.

The GDPR provides that EU member states may make their own additional laws and regulations in relation to certain data processing activities, which could limit our ability to use and share personal data or could require localized changes to our operating model.

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Any compromise or perceived compromise of the security of our systems could damage our reputation, result in disruption or interruption to our business operations, reduce demand for our products and subject us to significant liability and expense as well as regulatory action and lawsuits, which would harm our business, operating results and financial condition.

In addition, any failure or perceived failure by us to comply with privacy or security laws, policies, legal obligations or industry standards, or any security incident that results in the actual or alleged unauthorized release or transfer of personal data, may result in governmental enforcement actions and investigations, including fines and penalties, enforcement orders requiring us to cease processing or operating in a certain way, litigation and/or adverse publicity, including by consumer advocacy groups, and could cause our customers to lose trust in us, which could have material impacts on our revenue and operations and could seriously harm our business.

our customers to lose trust in us, which could have material impacts on our revenue and operations and could seriously harm our business.

We may be adversely affected by the financial condition of retailers and distributors to whom we sell our gear and may also be adversely affected by the financial condition of our competitors.

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Likewise, our competitors may from time to time experience similar financial difficulties or may elect to terminate their sales of certain products.

If one of our competitors experiences financial distress or bankruptcy and is forced to liquidate inventory or exits a

product line and disposes of inventory at reduced prices, this may also result in over-supply of and reduced demand for our gear and could have a short-term adverse effect on our results of operations and financial condition.

If one of our competitors experiences financial distress or bankruptcy and is forced to liquidate inventory or exits a product line and disposes of inventory at reduced prices, this may also result in over-supply of and reduced demand for our gear and could have a short-term adverse effect on our results of operations and financial condition.

Our online operations are subject to numerous risks that may seriously harm our business.

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We are required to test goodwill, intangible assets and other long-lived assets for recoverability and may be required to record charges if there are indicators of impairment, and we have in the past recognized impairment charges.

As of June 30, 2021, we had approximately $314.2 million of goodwill, $243.7 million of intangible assets and $73.9 million of other long-lived assets.

As of September 30, 2021, we had approximately $313.8 million of goodwill, $234.1 million of intangible assets and $70.5 million of other long-lived assets.

One of our strategies is to grow through acquisitions of other businesses or technologies and, if we are successful in doing so, these acquisitions may result in goodwill and other long-lived assets.

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In order to avoid these restrictions, we may have to seek a license for the technology.

Any such license may

not be available on reasonable terms or at all, could require us to pay significant royalties and may significantly increase our operating expenses or otherwise seriously harm our business or operating results.

Any such license may not be available on reasonable terms or at all, could require us to pay significant royalties and may significantly increase our operating expenses or otherwise seriously harm our business or operating results.

As a result, we may be required to develop alternative non-infringing technologies, which could require significant effort and expense and might not be successful or, if alternative non-infringing technologies already exist, we may be required to license those technologies from third parties, which may be expensive or impossible.

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We are controlled by EagleTree, whose interests in our business may be different than yours.

As of June 30, 2021, EagleTree beneficially owned approximately 57.8% of our common stock and is able to control our affairs in all cases.

As of September 30, 2021, EagleTree beneficially owned approximately 57.5% of our common stock and is able to control our affairs in all cases.

Further, pursuant to the terms of an Investor Rights Agreement between us and EagleTree, EagleTree has the right, among other things, to designate the chairman of our board of directors, as well as the right to nominate up to five out of eight directors to our board of directors as long as affiliates of EagleTree beneficially own at least 50% of our common stock, four directors as long as affiliates of EagleTree beneficially own at least 40% and less than 50% of our common stock, three directors as long as affiliates of EagleTree beneficially own at least 30% and less than 40% of our common stock, two directors as long as affiliates of EagleTree beneficially own at least 20% and less than 30% of our common stock and one director as long as affiliates of EagleTree beneficially own at least 10% and less than 20% of our common stock.

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In addition, EagleTree is in the business of making investments in companies and may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are our significant existing or potential suppliers or customers.

EagleTree may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.

EagleTree may

acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.

We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

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If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public, the trading price of our common stock could decline.

Based upon the number of shares outstanding as of June 30, 2021, we had outstanding a total of 93.8 million shares of common stock.

Based upon the number of shares outstanding as of September 30, 2021, we had outstanding a total of 94.2 million shares of common stock.

Of these shares, all of the shares of our common stock sold in the initial public offering and in the secondary in January 2021, are freely tradable, without restriction, in the public market.

As of June 30, 2021 , the holders of approximately 54.2 million shares of our common stock, or approximately 57.8 % of our total outstanding common stock based upon the number of shares outstanding as of June 30, 2021 , will be entitled to rights with respect to the registration of their shares under the Securities Act.

As of September 30, 2021, the holders of approximately 54.2 million shares of our common stock, or approximately 57.5% of our total outstanding common stock based upon the number of shares outstanding as of September 30, 2021, will be entitled to rights with respect to the registration of their shares under the Securities Act.

Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates.

Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stoc k.

Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

If we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may decline.

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The market price of our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business.

If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could

lose visibility in the financial markets, which in turn could cause the market price or trading volume of our common stock to decline.

If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume of our common stock to decline.

Moreover, if one or more of the analysts who cover our company downgrade our common stock or if our operating results or prospects do not meet their expectations, the market price of our common stock could decline.

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For instance, a director of our company who also serves as a director, officer or employee of EagleTree, or any of its respective portfolio companies, funds or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us.

As of June 30, 2021, this provision of our amended and restated certificate of incorporation relates only to the EagleTree director designees.

These potential conflicts of interest could seriously harm our business if attractive corporate opportunities are allocated by EagleTree to itself or its respective portfolio companies, funds or other affiliates instead of to us.

As of September 30, 2021, this provision of our amended and restated certificate of incorporation relates only to the EagleTree director designees.

These potential conflicts of interest could seriously harm our business if

attractive corporate opportunities are allocated by EagleTree to itself or its respective portfolio companies, funds or other affiliates instead of to us.

General Risk Factors

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We are subject to the reporting requirements of the U.S.

Exchange Act of 1934, as amended, or the Exchange Act, which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial

In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and the stock exchange on which our securities are listed to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

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If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot deliver a report attesting to the effectiveness of our internal controls over financial reporting, or if we identify or fail to remediate material weaknesses in our internal controls such as those described more fully above, we could be subject to regulatory scrutiny and a loss of public confidence, which could seriously harm our reputation and the market price of our common stock.

In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and may seriously harm our business.

In addition, if we do not maintain

adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and may seriously harm our business.

Unregistered Sales of Equity Securities and Use of Proceeds.

4 unchanged sentences

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

What changed 10-Q

Item 1. Legal Proceedings