What changed in this filing

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Item 1A. Risk Factors

2023-03-03 compared with 2022-03-01 · 146 added, 86 removed, 672 unchanged (26% of the section changed)

15 unchanged sentences

• If we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be harmed.

• The mobile hotspot business is subject to a number of challenges that are difficult to overcome.

• Our future capital needs are uncertain, and we may need to raise additional funds in the future.

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• Our debt service requirements are significant, and we may not have sufficient cash flow from our business to pay our substantial debt.

• Uncertainties relating to recent changes in our management team may adversely affect our operations.

Risks Related to Corporate Development Activities

• If we do not properly manage the development of our business, we may experience significant strains on our management and operations and disruptions in our business.

• We may, as part of our growth strategy, acquire companies and businesses, and/or divest assets or businesses.

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• Following acquisitions and/or divestitures, our reorganized business may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.

• If our goodwill and acquired intangible assets become impaired, we may be required to record a significant charge to earnings.

Risks Related to Competition

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• Our inability to adapt to rapid technological change in our markets could impair our ability to remain competitive and adversely affect our results of operations.

• If we fail to develop and maintain strategic relationships, we may not be able to penetrate new markets.

• We depend upon Verizon Wireless and T-Mobile for a substantial portion of our revenues, and our business would be negatively affected by an adverse change in our dealings with either of these customers.

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• The marketability of our products may suffer if wireless telecommunications operators do not deliver acceptable wireless services.

• Changes in practices of insurance companies in the markets in which we provide our solutions could materially and adversely affect demand for products and services.

• Reduction in regulation in certain markets may adversely impact demand for certain of our solutions by reducing the necessity for, or desirability of, our solutions.

Risks Related to Developing, Manufacturing and Delivering Our Solutions

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The availability and sale of those services would be harmed if any of these suppliers is not able to meet our demand and alternative suitable products are not available on acceptable terms, or at all.

• Natural disasters, public health crises, political crises and other catastrophic events or other events outside of our control could damage our facilities or the facilities of third parties on which we depend, and could impact consumer spending.

• The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events on our business, operating results and cash flows are uncertain.

• If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase.

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• If we do not effectively manage our sales channel inventory and product mix, we may incur costs associated with excess inventory or lose sales from having too few products.

• Product liability, product replacement or recall costs could adversely affect our business and financial performance.

• Our solutions integrate with third-party technologies and if our solutions become incompatible with these technologies, our solutions would lose functionality and our customer acquisition and retention could be adversely affected.

• Our software may contain undetected errors, defects or other software problems, and if we fail to correct any defect or other software problems, we could lose customers or incur significant costs, which could result in damage to our reputation or harm to our operating results.

• Our “over-the-air” transmission of firmware updates could permit a third party to disable our customers’ in-vehicle devices or introduce malware into our customers’ in-vehicle devices, which could expose us to widespread loss of service and customer claims.

• Any significant disruption in service on our websites or in our computer systems could damage our reputation and result in a loss of customers, which would harm our business and operating results.

• We provide minimum service level commitments to certain of our customers, and our failure to meet them could require us to issue credits for future subscriptions or pay penalties, which could harm our results of operations.

• Failure to maintain the security of our information and technology networks, including information relating to our customers and employees, could adversely affect us.

Furthermore, if security breaches in connection with the delivery of our services allow unauthorized third parties to obtain control or access of our asset management, fleet management and telemetry solutions, our reputation, business, results of operations and financial condition could be harmed.

• Failure to maintain the security of our information and technology networks, including information relating to our customers and employees and access to our asset and fleet management and telemetry solutions, could adversely affect us.

• Our business may be adversely affected by unfavorable macroeconomic conditions

Risks Related to International Operations

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• Weakness or deterioration in global economic or political conditions in jurisdictions where we have significant foreign operations could have a material adverse effect on our results of operations and financial condition.

• Fluctuations in foreign currency exchange rates could adversely affect our results of operations.

Risks Related to Regulations, Taxation and Accounting Matters

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• Future settlements of any conversion obligations with respect to the 2025 Notes may result in dilution to existing stockholders, lower prevailing market prices for our common stock or require a significant cash outlay.

• Future issuances of our common stock to holders of warrants may materially and adversely affect the price of our common stock and cause dilution to our existing stockholders.

• Ownership of our common stock is concentrated, and as a result, certain stockholders may exercise significant influence over us.

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• service outages or security breaches and any related occurrences which could impact our reputation;

• the impact of worldwide economic, industry, and market conditions, including disruptions in financial markets and the deterioration of the underlying economic conditions in some countries, and those conditions specific to Internet usage and online businesses;

• the impact of worldwide economic, industry, and market conditions, including disruptions in financial markets and the deterioration of the underlying economic conditions in some countries, rises in inflation and interest rates, and those conditions specific to Internet usage and online businesses;

• the emergence of global public health emergencies, such as the outbreak of COVID-19, which could extend lead times in our supply chain and lengthen sales cycles with our customers;

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• changes in laws and regulations affecting our business;

• provision of fleet management solutions or asset management solutions from cellular carrier-controlled or OEM-controlled channels from which Inseego may be excluded.

• the provision of fleet management solutions or asset management solutions from cellular carrier-controlled or OEM-controlled channels from which Inseego may be excluded.

We believe that our quarterly revenue and operating results may vary significantly in the future and that period-to-period comparisons of our operating results may not be meaningful.

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We have an accumulated deficit and may not be able to achieve or sustain profitability, which may negatively impact our ability to achieve our business objectives.

We have reported net losses in each of the last five fiscal years, and we cannot predict when we will become profitable or if such profitability can be sustained.

We have reported net losses in each of the last six fiscal years, and we cannot predict when we will become profitable or if such profitability can be sustained.

We expect to continue making significant expenditures to develop and expand our business.

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The 5G market may take longer to materialize than we expect or, if it does materialize rapidly, we may not be able to meet the development schedule and other customer demands.

Growth of the 5G market and its emerging standards, including the newly defined 5G NR standard, is accelerating and we believe that we are at the forefront of this newly emerging standard.

However, this market may take longer to materialize than we expect which could delay important commercial network launches.

Growth of the 5G market and its emerging standards, including the newly defined 5G NR standard, is accelerating and we believe that we are at the forefront of this newly emerging standard and already have a solid footing in this growing market.

However, this market may not see as much growth as we expect or this growth may take longer to materialize than we expect which could delay important commercial network launches.

Even if the market does materialize at the rapid pace that we are expecting, we may have difficulties meeting aggressive timing expectations of our current customers and getting our target products to market on time to meet the demands of our target customers.

The 5G market requires us to design routers and antennas that meet certain technical specifications.

We may have difficulties meeting the market and technical specifications and timelines.

While we launched our fourth generation mobile hotspot in 2022, we may have difficulties meeting the market and any further technical specifications and timelines.

Additionally, our target customers have no guarantee that the configurations of their respective target products will be successful or that they can reach the appropriate target client base to provide a positive return on the research and development investments we are making in the 5G market.

We are pursuing 5G opportunities in the United States and abroad.

While we believe that 5G technology will provide expanded use cases and opportunities and that we are strategically placed to realize these opportunities, the development of our products and our portfolio may not prove to be as successful as we expect.

Furthermore, we are pursuing 5G opportunities in the United States and abroad.

5G markets outside of the United States will develop at different rates and we will encounter these challenges to varying degrees in different countries.

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An assertion by a third party that we are infringing its intellectual property could subject us to costly and time-consuming litigation or expensive licenses and our business could be harmed.

The technology industries involving mobile data communications, IoT devices, software and services are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on

allegations of infringement or other violations of intellectual property rights.

Much of this litigation involves patent holding companies or other adverse patent owners who have no relevant product revenues of their own, and against whom our own patent portfolio may provide little or no deterrence.

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The principal amount of 2025 Notes outstanding at December 31, 2022 is $161.9 million.

Further, on August 5, 2022, we entered into a Loan and Security Agreement (the “Credit Agreement”) by and among Siena Lending Group LLC, as lender, the borrower parties thereto and the Company, as guarantor, which established a $50 million revolving credit facility (the “Credit Facility”).

As of December 31, 2022, the Credit Facility had outstanding borrowings of $7.9 million, gross borrowing base of $15.7 million and availability of $7.8 million.

Our ability to make scheduled payments on, or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.

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Any default under such indebtedness could have a material adverse effect on our business, results of operations and financial condition.

We are required to comply with certain financial and other covenants under our Credit Agreement and, if we fail to meet those covenants or otherwise suffer a default thereunder, our lender may accelerate the payment of such obligations.

The Credit Agreement contains various covenants, restrictions and events of default.

Among other things, these provisions require us to maintain a certain level of consolidated liquidity and impose certain limits on our ability to engage in certain activities.

The restrictions in the Credit Agreement impose operating and financial restrictions on us and may limit our ability to compete effectively, take advantage of new business opportunities or take other actions that may be in our, or our shareholders’, best interests.

Further, various risks and uncertainties may impact our ability to comply with our obligations under the Credit Agreement.

Our obligations under the Credit Agreement are secured by a continuing security interest in all property (other than certain excluded collateral) of the Company and each of the borrower parties.

Our inability to comply with any of the provisions of the Credit Agreement could result in a default under it.

If such a default occurs, the lender may elect to (a) terminate all or any portion of its commitments without prior notice, (b) demand payment in full of all or any portion of our obligations under the Credit Facility, along with an early payment/termination premium and (c) demand that the letters of credit be cash collateralized.

The occurrence of any of these events could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Uncertainties relating to recent changes in our management team may adversely affect our operations.

Over the last three years, we have experienced significant turnover and additions to our senior management.

While we expect to engage in an orderly transition process as we integrate newly appointed officers and managers, we face a variety of risks and uncertainties relating to the lack of management continuity, including diversion of management attention from business concerns, failure to retain other key personnel or inability to hire new key personnel.

While we are currently engaged in an orderly transition process as we integrate newly appointed officers and managers, we face a variety of risks and uncertainties relating to the lack of management continuity, including diversion of management attention from business concerns, failure to retain other key personnel or inability to hire new key personnel.

These risks and uncertainties could result in operational and administrative inefficiencies and added costs, which could adversely impact our results of operations, stock price and customer relationships.

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We may also experience development, certification or production delays as we seek to meet demand for our products or unanticipated product requirements.

Our failure to properly manage the developments that we or our industry might experience could

negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations and our reputation with our current or potential customers.

Our failure to properly manage the developments that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations and our reputation with our current or potential customers.

We may, as part of our growth strategy, acquire companies and businesses, and/or divest assets or businesses.

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Many of our competitors or potential competitors have significantly greater financial, technical, operational and marketing resources than we do.

These competitors, for example, may be able to respond more rapidly or more effectively than we can to new or emerging technologies, changes in customer requirements, supplier-related developments, or a shift in the business landscape.

These competitors, for example, may be able to respond more rapidly or more effectively than we can to new or emerging technologies, changes in customer

requirements, supplier-related developments, or a shift in the business landscape.

They also may devote greater or more effective resources than we do to the development, manufacture, promotion, sale, and post-sale support of their respective products and services.

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Our current competitors include:

• fleet management SaaS and services providers, such as Fleetmatics, Masternaut, Telogis, MiX Telematics and Cartrack;

• mobile hotspot providers, such as NETGEAR, Franklin Wireless, WNC, Sierra Wireless, Nokia, TCL, ZTE and Huawei;

• fleet management SaaS and services providers, such as Verizon Connect, Masternaut, MiX Telematics and Cartrack;

• mobile hotspot providers, such as NETGEAR, Franklin Wireless, Sierra Wireless, Nokia, TCL, ZTE and Huawei;

• IoT solution providers, such as Cradlepoint and Sierra Wireless;

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The 5G fixed wireless access gateway business is subject to a number of challenges that will be difficult to overcome.

The developing market for 5G fixed wireless access devices is very competitive.

The developing market for FWA devices is very competitive.

In addition to other challenges, our fixed wireless access gateway products compete against similar products offered by mature companies, including Samsung, Ericsson, Nokia and Wistron NeWeb Corporation.

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We believe that our success in penetrating new markets for our products will depend, in part, on our ability to develop and maintain these relationships and to cultivate additional or alternative relationships.

There can be no assurance, however, that we will be able to develop additional strategic relationships, that existing relationships will survive and

successfully achieve their purposes or that the companies with whom we have strategic relationships will not form competing arrangements with others or determine to compete with us.

There can be no assurance, however, that we will be able to develop additional strategic relationships, that existing relationships will survive and successfully achieve their purposes or that the companies with whom we have strategic relationships will not form competing arrangements with others or determine to compete with us.

We depend upon Verizon Wireless and T-Mobile for a substantial portion of our revenues, and our business would be negatively affected by an adverse change in our dealings with either of these customers.

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A part of our growth strategy is to sell additional new features and solutions to our existing customers.

Our ability to sell new features to customers will depend in significant part on our ability to anticipate industry evolution, practices and standards and to continue to enhance existing solutions or introduce or acquire new solutions on a timely basis to keep pace with technological developments both within our industry and in related industries, and to remain compliant with any regulations mandated by federal agencies or state-mandated or foreign government regulations as they pertain to our customers.

mandated by federal agencies or state-mandated or foreign government regulations as they pertain to our customers.

However, we may prove unsuccessful either in developing new features or in expanding the third-party software and products with which our solutions integrate.

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Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments.

We are unable to predict the likely duration and severity of adverse economic conditions in the United

States and other countries, but the longer the duration, the greater risks we face in operating our business.

We are unable to predict the likely duration and severity of adverse economic conditions in the United States and other countries, but the longer the duration, the greater risks we face in operating our business.

We cannot assure you that current economic conditions, worsening economic conditions or prolonged poor economic conditions will not have a significant adverse impact on the demand for our solutions, and consequently on our results of operations and prospects.

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Regulatory compliance and reporting is driven by legislation and requirements, which are often subject to change, from regulatory authorities in nearly every jurisdiction globally.

For example, in the United States, fleet operators can face numerous complex regulatory requirements, including mandatory Compliance, Safety and Accountability driver safety scoring, hours of service, compliance and fuel tax reporting.

For example, in the United States, fleet operators can face numerous complex regulatory requirements, including mandatory Compliance, Safety and Accountability driver safety scoring, hours of

service, compliance and fuel tax reporting.

The reduction in regulation in certain markets may adversely impact demand for certain of our solutions, which could materially and adversely affect our business, financial condition and results of operations.

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Further, if we are unable to manage successfully our relationship with a manufacturer, the quality and availability of products used in our services and solutions may be harmed.

None of our third-party manufacturers is obligated to supply us with a specific quantity of products, except as may be provided in a particular purchase order that we have submitted to, and that has been accepted by, such third-party manufacturer.

None of our third-party manufacturers are obligated to supply us with a specific quantity of products, except as may be provided in a particular purchase order that we have submitted to, and that has been accepted by, such third-party manufacturer.

Our third-party manufacturers could, under some circumstances, decline to accept new purchase orders from us or otherwise reduce their business with us.

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From time to time, certain components used in our products or solutions have been in short supply or their anticipated commercial introduction has been delayed or their availability has been interrupted for reasons outside our control.

If there is a shortage or interruption in the availability to us of any such components or products and we cannot timely obtain a commercially and technologically suitable substitute or make sufficient and timely design or other modifications to permit the use of such a substitute component or product, we may not be able to timely deliver sufficient quantities of our products or solutions to satisfy our contractual obligations and may not be able to meet particular revenue expectations.

to meet particular revenue expectations.

Moreover, even if we timely locate a substitute part or product, but its price materially exceeds the original cost of the component or product, then our results of operations could be adversely affected.

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Moreover, these types of events could negatively impact consumer spending in the impacted regions or, depending upon the severity, globally, which could adversely impact our operating results.

The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events on our business, operating results and cash flows are uncertain.

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

Government in March 2020 and has negatively impacted the U.S.

and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S.

government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted.

While the COVID-19 pandemic has led to an increase in demand for our products, particularly our MiFi and mobile wireless devices, relative to historic trends, this increased demand, as well as the revenues, net income and other financial and operating data associated therewith, may not be indicative of results for future periods.

Temporary precautionary measures intended to help minimize the risk of the pandemic to our employees and to comply with government mandated closures and “shelter-in-place” orders have been put in place, including temporarily requiring most employees to work remotely, suspending all non-essential travel worldwide for our employees, and suspending employee attendance at industry events and in-person work-related meetings.

These efforts could negatively affect our business.

While most of our global operations have continued to operate, facility closures or work slowdowns or temporary stoppages could occur.

Logistics has emerged as a new challenge, as globally the transportation industry restricted the frequency of departures and increased logistics costs.

We have experienced increased costs in freight as well as direct labor costs as we continue to work in serving our customers.

We expect this trend to continue for the duration of the COVID-19 pandemic.

In addition, we rely on contract manufacturers and other companies to provide materials, components and products that we sell to our customers.

The continued spread of COVID-19 could negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products and could impact our ability to meet customer demand.

If we are not able to implement alternatives or other mitigations with respect to suppliers that may have potential delivery impacts due to COVID-19, our sales and financial results could be adversely impacted.

The effects of COVID-19 have increased competition for qualified personnel in the industries in which we operate.

Our business may be adversely affected by unfavorable macroeconomic conditions

Our business, our results of operations and our financial condition could be adversely affected by various macroeconomic factors and the current and future conditions in the global financial markets.

The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, rising interest rates, inflation, increases in unemployment rates and uncertainty about economic stability.

The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism or other geopolitical events.

Sanctions imposed by the U.S.

and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability.

There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.

Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions.

If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.

Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price.

In addition, these macroeconomic factors could affect the ability of our current or potential future third-party manufacturers or sole source suppliers to remain in business, or otherwise maintain our manufacturing or supply demands, which could result in potential supply chain disruptions.

This, along with any of the foregoing factors, could impact our financial conditions, results of operations and cash flows.

We cannot anticipate all of the ways in which the current and future economic climate and financial market conditions could adversely impact our business.

Our business is subject to risks arising from epidemic diseases, such as the recent COVID-19 pandemic.

The COVID-19 pandemic continues to impact worldwide economic activity.

A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, manufacturers, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.

The COVID-19 pandemic and mitigation measures have also had an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition.

The extent to which the COVID-19 pandemic, or any other outbreak of an epidemic disease, impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

Prolonged impacts of COVID-19 could result in delays in payment by customers, the speed of regulatory approvals such as Federal Communications Commission (FCC) and other licenses that are needed for releases of new products, and delays in new 5G network rollouts.

Accordingly, recent growth in our business particularly during the onset of the COVID-19 pandemic, may not continue into the future, and you should not rely on our revenue or key business metrics for any previous quarterly or annual period as an indication of our revenue, revenue growth, key business metrics, or key business metrics growth in future periods.

Supply chain disruptions due to factory shutdowns and logistics congestion have improved considerably over the past year.

Lead times for raw material have also improved from their peak during the pandemic.

While freight costs have declined considerably from their peak during the pandemic, they still remain elevated compared to pre-pandemic levels.

Direct labor costs have increased as a result of inflation over the past year, and we do not expect to see a decline from current levels.

As restrictions in China have been relaxed, we are experiencing more predictability in the flow of raw material from suppliers there.

Should COVID-19 re-emerge in China or other geographies where raw material is sourced and restrictions reimposed, this could result in delays or disruptions in the supply of our products and could impact our ability to meet customer demand.

we are not able to implement alternatives or other mitigations with respect to suppliers that may have potential delivery impacts due to COVID-19, our sales and financial results could be adversely impacted.

The continuing effects of COVID-19 have increased competition for qualified personnel in the industries in which we operate.

Additionally, changes we make to our current and future work environments may not meet the needs or expectations of our employees or may be perceived as less favorable compared to other companies’ policies, which could negatively impact our ability to hire and retain qualified personnel.

The COVID-19 outbreak is a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect longer-term demand for our products and likely impact our operating results.

The impact of COVID-19 could worsen if there is an extended duration of any COVID-19 outbreak or a resurgence of COVID-19 infection in affected regions after they have begun to experience improvement.

Prolonged impacts of COVID-19 could result in delays in payment by customers, the speed of regulatory approvals such as FCC and other licenses that are needed for releases of new products, and delays in new 5G network rollouts.

Current limitations on travel to customer locations could impact international orders.

Accordingly, recent growth in our business may not continue into the future, and you should not rely on our revenue or key business metrics for any previous quarterly or annual period as any indication of our revenue, revenue growth, key business metrics, or key business metrics growth in future periods.

Further, to the extent the COVID-19 pandemic or any other outbreak of an epidemic disease adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section.

If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase.

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For example, our business depends on the continued supply of semiconductor chips, which are integral components for our 5G and 4G products.

A global semiconductor supply shortage is having wide-ranging

effects across the technology industry and may negatively impact the supply of semiconductors needed for our testing and production timeline.

A global semiconductor supply shortage is having wide-ranging effects across the technology industry and may negatively impact the supply of semiconductors needed for our testing and production timeline.

Any reduced availability of these raw materials or substantial increases in the prices for such materials may increase the cost of our components and consequently, the cost of our products.

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We determine production levels based on our forecasts of demand for our products.

Actual demand for our products depends on many factors, which makes it difficult to forecast.

Actual demand for our products

depends on many factors, which makes it difficult to forecast.

We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future.

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Any event that significantly disrupts our service or exposes our data to misuse could damage our reputation and harm our business and operating results, including reducing our revenue, causing us to issue credits to customers, subjecting us to potential liability, harming our churn rates, or increasing our cost of acquiring new customers.

We host our solutions and serve our customers from network servers hosted by third parties, which are located at data

center facilities in the United States, Europe and Australia.

We host our solutions and serve our customers from network servers hosted by third parties, which are located at data center facilities in the United States, Europe and Australia.

If these data centers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business.

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• acts of terrorism and other security concerns;

• the escalation or continuation of armed conflict, hostilities or economic sanctions between countries or regions, including the current conflict between Russia and Ukraine;

• government embargoes or foreign trade restrictions such as tariffs, duties, taxes or other controls;

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Any failure on our part to comply with encryption or other applicable export control requirements could result in financial penalties or other sanctions under the U.S.

or foreign export regulations, including restrictions on future export activities, which could harm our business and operating results.

or foreign export regulations, including restrictions on future export activities, which could harm our business and

operating results.

Regulatory restrictions could impair our access to technologies needed to improve our solutions and may also limit or reduce the demand for our solutions outside of the United States.

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The current European Union legislation related to data protection is the GDPR, which came into effect on May 25, 2018.

We have updated and will continue to evaluate our group data protection and security policies, charters, and

procedures to assist in maintaining data privacy and data security in line with international practices.

We have updated and will continue to evaluate our group data protection and security policies, charters, and procedures to assist in maintaining data privacy and data security in line with international practices.

We may also be subject to costly notification and remediation requirements if we, or a third party, determines that we have been the subject of a data breach involving personal data of individuals.

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government were to remove or reduce such trade restrictions, it could cause such carriers to reduce their business with us and we may be unable to recoup or attain a return on such investments.

On October 28, 2021, the House Rules Committee, under the Biden Administration released new proposed tax legislation under the “Build Back Better Act” (“BBBA”) which contains potential reversals and revisions of key provisions of the 2017 Tax Cuts and Jobs Act.

As the BBBA, which was passed by the U.S.

House of Representatives in November 2021, is proposed legislation that has not yet been enacted into law, we have not yet determined the impact on our effective tax rate, though we continue to monitor the Biden Administration’s proposals.

We are currently unable to predict whether any future changes will occur or the impact of such changes if the legislation is passed into law, including on the U.S.

federal income tax considerations relating to the purchase, ownership, and disposition of our common stock.

In August 2022, the Inflation Reduction Act of 2022 was signed into law which includes provisions that will impact the U.S.

federal income taxation of corporations.

Among other items, this legislation includes provisions that will impose a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock.

It is unclear how this legislation will be implemented by the U.S.

Department of the Treasury and we cannot predict how this legislation or any future changes in tax laws might affect us or purchasers of our securities.

The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.

There has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on a variety of environmental, social and other sustainability matters.

We may experience pressure to make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability.

If we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation and financial results may suffer.

In addition, we may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have an adverse impact on our business and financial condition.

In addition, this emphasis on environmental, social and other sustainability matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements.

If we fail to comply with new laws, regulations or reporting requirements, our reputation and business could be adversely impacted.

RISKS RELATED TO OWNING OUR SECURITIES

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comments by securities analysts;

announcements by us or others regarding, among other things,

operating results, additions or departures of key personnel, and acquisitions or divestitures;

announcements by us or others regarding, among other things, operating results, additions or departures of key personnel, and acquisitions or divestitures;

additional equity or debt financing;

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If litigation were instituted on this basis, it could result in substantial costs and a diversion of management’s attention and resources.

Failure to meet the continued listing requirements of The NASDAQ Global Select Market, could result in delisting of our common stock, which in turn would negatively affect the price of our common stock and limit investors’ ability to trade in our common stock.

Our common stock trades on The NASDAQ Global Select Market.

The standards for continued listing on The NASDAQ Global Select Market include, among other things, that the minimum closing bid price for the listed securities not fall below $1.00 for a period in excess of thirty consecutive business days.

During the months of December 2022, January 2023 and February 2023, our common stock periodically traded at levels below $1.00 per share, but never for thirty consecutive days.

At February 24, 2023, the closing bid price of our common stock was $0.88.

If the closing bid price of our common stock were to fail to meet the minimum closing bid price requirement, or if we otherwise fail to meet any other applicable requirements of The NASDAQ Global Select Market and we are unable to regain compliance, there may be a determination to delist our common stock.

Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

If our common stock is delisted from The NASDAQ Global Select Market, we could face significant material adverse consequences, including:

• limited availability of market quotations for our common stock;

• reduced liquidity with respect to our common stock;

• a determination that our shares of common stock are a “penny stock” which would require broker-dealers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;

• a limited amount of news and analyst coverage for our company;

• a limited ability to issue additional securities or obtain additional financing in the future.

In the event of a delisting notification, we anticipate that we would take actions to restore our compliance with the requirements for continued listing on The NASDAQ Global Select Market, such as stabilize our market price, improve the liquidity of our common stock, prevent our common stock from dropping below such exchange’s minimum bid price requirement, or prevent future non-compliance with such exchange’s listing requirements, but there is no guarantee that our actions would be successful.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

At December 31, 2022, the Company had U.S.

federal net operating loss carryforwards (“NOLs”) related to tax years 2020 and prior of approximately $417.2 million.

Approximately $110.0 million of these NOLs have no expiration date.

The remainder began to expire in 2023, unless previously utilized.

Some of these NOLs may be limited by either past or future changes in control events.

The Company had California NOLs at December 31, 2022 of approximately $62.0 million, which begin to expire in 2028, unless previously utilized, and foreign NOLs for its active foreign subsidiaries of approximately $22.7 million, which generally have no expiration date.

At December 31, 2022, the Company had federal research and development tax credit carryforwards of approximately $15.9 million, which begin to expire in 2026, unless previously utilized, and California research and development tax credit carryforwards of approximately $17.4 million, which have no expiration date.

It is possible that we will not generate taxable income in time to use these NOLs before their expiration and additional NOLs will expire unused.

Under legislative changes made in December 2017, as modified by federal tax law changes enacted in March 2020, U.S.

federal net operating losses incurred in tax years beginning after December 31, 2017 and in future years may be carried forward indefinitely, but, for tax years beginning after December 31, 2020, the deductibility of such net operating losses is limited.

In addition, the federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, or the Code, respectively, and similar provisions of state law.

Under those sections of the Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited.

In general, an "ownership change" will occur if there is a cumulative change in our ownership by "5-percent shareholders" that exceeds 50 percentage points over a rolling three-year period.

Similar rules may apply under state tax laws.

We have completed a Section 382 review and have determined that none of the operating losses will expire solely due to Section 382 limitation(s).

However, we may experience ownership changes in the future as a result of future shifts in our stock ownership, some of which may be outside of our control.

If an ownership change occurs and our ability to use our net operating loss carryforwards and tax credits is materially limited, it would harm our business by effectively increasing our future tax obligations.

The price of our stock may be vulnerable to manipulation, including through short sales.

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For example, if a takeover would constitute a fundamental change (as defined in the Indenture), holders of the 2025 Notes will have the right to require us to repurchase their notes in cash.

In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their 2025 Notes in connection with such takeover.

In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their 2025 Notes in connection

with such takeover.

In either case, and in other cases, our obligations under the 2025 Notes and the related Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us .

Future issuances of our common stock to holders of warrants may materially and adversely affect the price of our common stock and cause dilution to our existing stockholders.

As of December 31, 2021, we had outstanding warrants to purchase 2,500,000 shares of our common stock.

These warrants are generally only exercisable on a cash basis but may be exercised on a cashless basis if and only if a registration statement relating to the issuance of the shares underlying the warrants is not then effective or an exemption from registration is not available for the resale of such shares.

Any such net exercise will dilute the ownership interests of existing stockholders without any corresponding benefit to the Company of a cash payment for the exercise price of such warrant.

Ownership of our common stock is concentrated, and as a result, certain stockholders may exercise significant influence over us.

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The Series E Preferred Stock is senior to our shares of common stock in right of payment of dividends and other distributions.

In the event of a liquidation, dissolution or winding up of the Company, the holders of the Series E Preferred Stock will be entitled to receive, after satisfaction of liabilities to creditors and subject to the rights of holders of any senior securities, but before any distribution of assets is made to holders of common stock or any other junior securities, the Series E Base Amount (as defined below) plus (without duplication) any accrued and unpaid dividends.

Preferred Stock and Common Stock in the Notes to the Consolidated Financial Statements) plus (without duplication) any accrued and unpaid dividends.

In the future, we may offer additional shares of Series E Preferred Stock or other equity, equity-linked or debt securities, which may have rights, preferences or privileges senior to our common stock.

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Thus, holders of our common stock bear the risk that our future issuances of debt or equity securities or our incurrence of other borrowings may negatively affect the market price of our common stock.

We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation, if any, in the price of our common stock.

We have never declared or paid any cash dividend on our common stock.

We currently anticipate that we will retain any future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.

In addition, the terms of our debt agreements and any future debt agreements may preclude us from paying dividends.

Any return to stockholders will therefore be limited to the appreciation of their stock.

There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

Our restated certificate of incorporation and restated bylaws and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our restated certificate of incorporation and restated bylaws contain provisions that could delay or prevent a change in control of us.

These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions.

These provisions include:

providing for a classified board of directors with staggered, three-year terms;

authorizing the board of directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;

providing that vacancies on our board of directors be filled by appointment by the board of directors;

prohibiting stockholder action by written consent;

requiring that certain litigation must be brought in Delaware;

limiting the persons who may call special meetings of stockholders;

and requiring advance notification of stockholder nominations and proposals.

In addition, we are subject to Section 203 of the Delaware General Corporation Law which may prohibit large stockholders, in particular those owning fifteen percent or more of our outstanding voting stock, from merging or combining with us for a certain period of time without the consent of our board of directors.

These and other provisions in our restated certificate of incorporation and our restated bylaws and under the Delaware General Corporation Law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.

GENERAL RISK FACTORS

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A change in our accounting systems or new accounting system implementations could cause trial balances to be out of balance or hinder the reconciliation of items which are time consuming to diagnose, impacting our ability to provide timely audited and unaudited financial results.

Any such change could have a significant impact on the effectiveness of our system of internal controls and could cause a delay in compliance with our reporting obligations, which could adversely affect our business and the trading price of our common stock.

Any such change could have a significant impact on the effectiveness of our system of

internal controls and could cause a delay in compliance with our reporting obligations, which could adversely affect our business and the trading price of our common stock.

Any changes to existing accounting pronouncements or taxation rules or practices may cause adverse fluctuations in our reported results of operations or affect how we conduct our business.

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We may be exposed to risks related to litigation and administrative proceedings that could materially and adversely affect our business, results of operations and financial condition.

disputes and criminal prosecution, among other matters, that could materially and adversely affect our business, results of operations, and financial condition.

In addition to intellectual property and other claims mentioned above, our business may expose us to litigation and administrative proceedings relating to labor, regulatory, tax proceedings, governmental investigations, tort claims, contractual disputes and criminal prosecution, among other matters, that could materially and adversely affect our business, results of operations, and financial condition.

In the context of these proceedings, we may not only be required to pay fines or monetary damages but also be subject to sanctions or injunctions affecting our ability to continue our operations.

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

What changed 10-K

Item 1A. Risk Factors