What changed in this filing

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Item 1. Financial Statements

2022-10-28 compared with 2022-07-28 · 339 added, 265 removed, 763 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

2022 December 31,

34 unchanged sentences

240,000,000 shares authorized;

150,459,784 shares issued and outstanding at June 30, 2022;

168,093,446 shares issued and outstanding at September 30, 2022;

148,895,308 shares issued and outstanding at December 31, 2021

8 unchanged sentences

(in thousands, except per share data)

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Product $ 111,152 $ 111,726 $ 305,809 $ 322,744

17 unchanged sentences

Interest expense, net ( 5,266 ) ( 2,969 ) ( 13,869 ) ( 11,836 )

Other (expense) income, net ( 10,228 ) 17,180 ( 39,028 ) ( 8,268 )

(Loss) income before income taxes ( 22,069 ) 27,084 ( 93,924 ) ( 16,787 )

Other expense, net ( 3,732 ) ( 57,702 ) ( 42,760 ) ( 65,970 )

Loss before income taxes ( 12,294 ) ( 58,679 ) ( 106,218 ) ( 75,466 )

Income tax provision ( 6,122 ) ( 752 ) ( 12,353 ) ( 5,411 )

Net (loss) income $ ( 30,180 ) $ 23,241 $ ( 100,155 ) $ ( 21,446 )

(Loss) earnings per share:

Net loss $ ( 18,416 ) $ ( 59,431 ) $ ( 118,571 ) $ ( 80,877 )

Loss per share:

Basic $ ( 0.12 ) $ ( 0.40 ) $ ( 0.78 ) $ ( 0.55 )

Diluted $ ( 0.12 ) $ ( 0.40 ) $ ( 0.78 ) $ ( 0.55 )

Weighted average shares used to compute (loss) earnings per share:

Weighted average shares used to compute loss per share:

Basic 158,921 148,184 152,795 147,204

2 unchanged sentences

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Net (loss) income $ ( 30,180 ) $ 23,241 $ ( 100,155 ) $ ( 21,446 )

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Net loss $ ( 18,416 ) $ ( 59,431 ) $ ( 118,571 ) $ ( 80,877 )

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on interest rate swap 4,053 ( 205 ) 19,522 6,464

Unrealized gain on interest rate swap 1,726 860 21,248 7,324

Foreign currency translation adjustments ( 144 ) 193 ( 1,157 ) ( 207 )

Employee retirement benefits 142 — ( 742 ) —

Other comprehensive income (loss), net of tax 2,847 ( 652 ) 17,625 6,064

Comprehensive (loss) income, net of tax $ ( 27,333 ) $ 22,589 $ ( 82,530 ) $ ( 15,382 )

Other comprehensive income, net of tax 1,724 1,053 19,349 7,117

Comprehensive loss, net of tax $ ( 16,692 ) $ ( 58,378 ) $ ( 99,222 ) $ ( 73,760 )

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except shares)

Three months ended June 30, 2022

Shares Amount Additional paid-in capital Accumulated deficit Accumulated other comprehensive income Total stockholders' equity

Balance at April 1, 2022 150,111,958 $ 15 $ 1,877,677 $ ( 1,425,636 ) $ 22,356 $ 474,412

Three months ended September 30, 2022

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit income equity

Balance at July 1, 2022 150,459,784 $ 15 $ 1,881,942 $ ( 1,455,816 ) $ 25,203 $ 451,344

Exercise of stock options 353 1 1

Vesting of restricted stock units 800,999 —

Vesting of performance-based stock units 3,433 —

Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations ( 242,434 ) ( 738 ) ( 738 )

Common stock issued in equity offering 17,071,311 2 52,065 52,067

Issuance costs related to equity offering ( 1,654 ) ( 1,654 )

Stock-based compensation expense 4,841 4,841

1 unchanged sentence

Net loss ( 18,416 ) ( 18,416 )

Balance at June 30, 2022 150,459,784 $ 15 $ 1,881,942 $ ( 1,455,816 ) $ 25,203 $ 451,344

Six months ended June 30, 2022

Shares Amount Additional paid-in capital Accumulated deficit Accumulated other comprehensive income Total stockholders' equity

Balance at September 30, 2022 168,093,446 $ 17 $ 1,936,457 $ ( 1,474,232 ) $ 26,927 $ 489,169

Nine months ended September 30, 2022

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit income equity

Balance at January 1, 2022 148,895,308 $ 15 $ 1,875,234 $ ( 1,355,661 ) $ 7,578 $ 527,166

3 unchanged sentences

Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations ( 861,202 ) ( 2,684 ) ( 2,684 )

Common stock issued in equity offering 17,071,311 2 52,065 52,067

Issuance costs related to equity offering ( 1,654 ) ( 1,654 )

Stock-based compensation expense 13,495 13,495

1 unchanged sentence

Net loss ( 118,571 ) ( 118,571 )

Balance at June 30, 2022 150,459,784 $ 15 $ 1,881,942 $ ( 1,455,816 ) $ 25,203 $ 451,344

Balance at September 30, 2022 168,093,446 $ 17 $ 1,936,457 $ ( 1,474,232 ) $ 26,927 $ 489,169

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except shares)

Three months ended June 30, 2021

Shares Amount Additional paid-in capital Accumulated deficit Accumulated other comprehensive (loss) income Total stockholders' equity

Balance at April 1, 2021 147,358,590 $ 15 $ 1,864,107 $ ( 1,223,163 ) $ 1,774 $ 642,733

Three months ended September 30, 2021

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit income equity

Balance at July 1, 2021 148,057,301 $ 15 $ 1,868,066 $ ( 1,199,922 ) $ 1,122 $ 669,281

Exercise of stock options 213 —

2 unchanged sentences

Stock-based compensation expense 4,561 4,561

Other comprehensive loss ( 652 ) ( 652 )

Net income 23,241 23,241

Balance at June 30, 2021 148,057,301 $ 15 $ 1,868,066 $ ( 1,199,922 ) $ 1,122 $ 669,281

Six months ended June 30, 2021

Shares Amount Additional paid-in capital Accumulated deficit Accumulated other comprehensive (loss) income Total stockholders' equity

Other comprehensive income 1,053 1,053

Net loss ( 59,431 ) ( 59,431 )

Balance at September 30, 2021 148,613,829 $ 15 $ 1,870,711 $ ( 1,259,353 ) $ 2,175 $ 613,548

Nine months ended September 30, 2021

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit (loss) income equity

Balance at January 1, 2021 145,425,248 $ 15 $ 1,870,256 $ ( 1,178,476 ) $ ( 4,942 ) $ 686,853

6 unchanged sentences

Net loss ( 80,877 ) ( 80,877 )

Balance at June 30, 2021 148,057,301 $ 15 $ 1,868,066 $ ( 1,199,922 ) $ 1,122 $ 669,281

Balance at September 30, 2021 148,613,829 $ 15 $ 1,870,711 $ ( 1,259,353 ) $ 2,175 $ 613,548

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six months ended

2022 June 30,

Nine months ended

September 30,

2022 September 30,

Cash flows from operating activities:

8 unchanged sentences

Decrease in fair value of investments 41,291 64,745

Foreign currency exchange (gains) losses ( 1,048 ) 2,013

Foreign currency exchange losses 830 3,235

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of property and equipment ( 9,744 ) ( 14,279 )

Purchases of software licenses ( 3,300 ) —

Proceeds from sale of business — 2,944

7 unchanged sentences

Payment of debt issuance costs ( 1,046 ) ( 789 )

Proceeds from equity offering 52,067 —

Payment of equity offering issuance costs ( 1,654 ) —

Proceeds from the exercise of stock options 1 24

Payment of tax withholding obligations related to net share settlements of restricted stock awards ( 2,684 ) ( 13,980 )

Net cash used in financing activities ( 38,362 ) ( 20,858 )

Net cash provided by (used in) financing activities 6,207 ( 28,017 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1,251 ) ( 489 )

2 unchanged sentences

Cash, cash equivalents and restricted cash, end of period $ 55,935 $ 103,755

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

Nine months ended

September 30,

2022 September 30,

Supplemental disclosure of cash flow information:

4 unchanged sentences

Capital expenditures incurred, but not yet paid $ 989 $ 1,807

Software license acquired through investment disposal $ 1,886 $ —

Supplemental disclosure of non-cash financing activities:

14 unchanged sentences

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), which was filed with the SEC on March 11, 2022.

Equity Offering

On August 12, 2022, the Company entered into a Securities Purchase Agreement with certain investors for the sale (the "Equity Offering") in a private placement by the Company of 17,071,311 shares (the "Shares") of the Company’s common stock, par value $ 0.0001 per share, at a price of $ 3.05 per share.

The aggregate gross proceeds from the Equity Offering were approximately $ 52.1 million, before deducting offering expenses paid by the Company of approximately $ 1.7 million.

The Company intends to use the net proceeds from the Equity Offering to fund general corporate purposes, including capital expenditures, working capital and repayment of debt.

The original issuance of the Shares in the Equity Offering was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).

The Company subsequently filed a registration statement on Form S-3 (the “Registration Statement”) with the SEC registering the Shares, which Registration Statement was declared effective by the SEC on September 23, 2022.

Operating Segments

7 unchanged sentences

The Company reports depreciation of property and equipment related to production activities as components of Cost of revenue.

This reclassification for the three and six months ended June 30, 2021 was as follows (in thousands):

This reclassification for the three and nine months ended September 30, 2021 was as follows

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended June 30, 2021 Six months ended June 30, 2021

(in thousands):

Three months ended September 30, 2021 Nine months ended September 30, 2021

Prior presentation Amounts reclassified Revised presentation Prior presentation Amounts reclassified Revised presentation

17 unchanged sentences

The Company's significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in the Annual Report.

There were no material changes to the significant accounting policies during the three months ended June 30, 2022.

There were no material changes to the significant accounting policies during the three months ended September 30, 2022.

Principles of Consolidation

11 unchanged sentences

The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash whose use is otherwise limited by contractual provisions.

The Company had $ 2.0 million and $ 2.6 million of restricted cash as of June 30, 2022 and December 31, 2021, respectively, representing restricted short-term bank deposits pledged to secure certain performance and financial bonds as security for the Company's obligations under tenders, contracts and to one of its main subcontractors.

The Company had $ 0.3 million and $ 2.6 million of restricted cash as of September 30, 2022 and December 31, 2021, respectively, representing restricted short-term bank deposits pledged to secure certain performance and financial bonds as security for the Company's obligations under tenders, contracts and to one of its main subcontractors.

Transfers of Financial Assets

3 unchanged sentences

The Company accounts for the factoring of its financial assets as a sale of the assets and records the factoring fees, when incurred, as a component of interest expense in the condensed consolidated statements of operations, and the proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows.

Information regarding the Company's factoring of its financial assets for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Information regarding the Company's factoring of its financial assets for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Accounts receivable sold $ 16,926 $ 24,961 $ 57,640 $ 88,608

1 unchanged sentence

Net cash proceeds $ 16,645 $ 24,792 $ 56,883 $ 88,038

Going Concern Assessment and Management Plans

Going Concern

The accompanying condensed consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Under the 2020 Credit Facility (as defined in Note 9), the Company is required to maintain compliance with certain financial covenants (see Note 9).

As of June 30, 2022, the Company was in compliance with its financial covenants.

Due to the impact of market conditions, including supply chain disruptions, higher costs, and other geopolitical instabilities and disputes, the Company projects it may not maintain compliance with its financial covenants under the 2020 Credit Facility, as amended, for the quarter ended September 30, 2022.

In the second quarter of 2022, although the Company was in compliance with its financial covenants, it projected that it may not maintain compliance with its financial covenants under the 2020 Credit Facility, as amended (as defined in Note 9), for the quarter ended September 30, 2022 due to the impact of market conditions, including supply chain disruptions, higher costs, and other geopolitical instabilities and disputes.

Failure to remain in compliance would be an event of default that would permit the Lenders (as defined in Note 9) to accelerate the maturity of the 2020 Credit Facility.

As of the date of the issuance of these condensed consolidated financial statements, the Company does not have sufficient cash on hand or available liquidity to repay the outstanding balance of $ 340.5 million as of June 30, 2022 in the event the debt was accelerated.

Management plans to avoid any potential event of default include raising additional cash that would allow the Company to pay down debt in order to remain in compliance with its financial covenants.

In addition, the Company has the ability to sell its derivative financial instrument, which had an aggregate fair market value of $ 21 million as of June 30, 2022.

Lastly, the Company would evaluate the timing of its capital spending and extension of its payment terms with vendors as needed.

The Company believes its plans are probable of being successfully implemented, which along with its available cash on hand and liquidity from the factoring of receivables, will result in adequate cash to allow the Company to pay down debt to meet its financial covenant requirements.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Under the terms of the existing credit agreement (see Note 9), the Company is allowed, subject to certain limitations, to use a portion of the capital raised in the Equity Offering in the calculation of the covenant ratios for the quarter in which the Equity Offering was completed (quarter ended September 30, 2022) and for future calculation of the covenant ratios for which the third quarter of 2022 is included in the trailing twelve month period.

As a result, the Company currently projects that it will remain in compliance with its financial covenants for at least one year from the date the condensed consolidated financial statements are issued.

Recent Accounting Pronouncements

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings ("TDRs") for creditors in ASC 310, Receivables (Topic 310) , and requires entities to provide disclosures about current period gross write-offs by year of origination.

Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326) , and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

Also, ASU 2022-02 updates the

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326) , and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

ASU 2022-02 is effective for the Company January 1, 2023, with early adoption permitted.

15 unchanged sentences

The calculations of shares used to compute diluted earnings (loss) per share were as follows (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Weighted average shares outstanding - basic 158,921 148,184 152,795 147,204

1 unchanged sentence

Weighted average shares outstanding - diluted 158,921 148,184 152,795 147,204

Options to purchase the Company's common stock and unvested restricted and performance-based stock units aggregating

Options to purchase the Company's common stock and unvested restricted and performance-based stock units aggregating 14.4 million shares have not been included in the computation of loss per share for the three and nine months ended September 30, 2022 because their effect would have been antidilutive.

Options to purchase the Company's common stock and unvested restricted and performance-based stock awards and stock units aggregating 10.9 million shares have not been included in the computation of diluted loss per share for the three and nine months ended September 30, 2021 because their effect would have been antidilutive.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

15.4 million shares have not been included in the computation of loss per share for the three and six months ended June 30, 2022 because their effect would have been antidilutive.

Options to purchase the Company's common stock aggregating 0.1 million shares have not been included in the computation of diluted earnings per share for the three months ended June 30, 2021 because their effect would have been antidilutive.

Options to purchase the Company's common stock and unvested restricted and performance-based stock awards and stock units aggregating 12.1 million shares have not been included in the computation of diluted loss per share for the six months ended June 30, 2021 because their effect would have been antidilutive.

(3) INVENTORY

Inventory at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

Inventory at September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

September 30,

2022 December 31,

5 unchanged sentences

(4) INTANGIBLE ASSETS AND GOODWILL

The Company's intangible assets at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

June 30, 2022 Weighted average amortization period

The Company's intangible assets at September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

September 30, 2022 Weighted average amortization period

(years) Cost Accumulated

5 unchanged sentences

Trade names 3.88 5,000 4,448 552

Internal use software 3.00 730 730 —

Software licenses 3.00 5,186 122 5,064

9.12 $ 618,706 $ 309,009 $ 309,697

10 unchanged sentences

* An in-process research and development intangible asset has an indefinite life until the product is generally available, at which time such asset is typically reclassified to developed technology.

Estimated future amortization expense for the Company's intangible assets at September 30, 2022 was as follows (in

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Estimated future amortization expense for the Company's intangible assets at June 30, 2022 was as follows (in thousands):

Years ending December 31,

1 unchanged sentence

Thereafter 70,223

There were no changes to the carrying value of the Company's goodwill in the six months ended June 30, 2022 and 2021.

The components of goodwill at June 30, 2022 and 2021 were as follows (in thousands):

On August 29, 2022, the Company acquired perpetual software licenses from American Virtual Cloud Technologies, Inc.

("AVCT") for $ 4.4 million (see Note 5).

There were no changes to the carrying value of the Company's goodwill in the nine months ended September 30, 2022 and 2021.

The components of goodwill at September 30, 2022 and 2021 were as follows (in thousands):

Cloud and Edge IP Optical Networks Total

Balance at June 30, 2022

Balance at September 30, 2022

Goodwill $ 392,302 $ 191,996 $ 584,298

1 unchanged sentence

$ 224,896 $ 75,996 $ 300,892

Balance at June 30, 2021

Balance at September 30, 2021

Goodwill $ 392,302 $ 191,996 $ 584,298

2 unchanged sentences

(5) INVESTMENTS AND FAIR VALUE HIERARCHY

The Company received debentures and warrants as sale consideration in connection with the sale of its Kandy Communications Business on December 1, 2020 to American Virtual Cloud Technologies, Inc.

The Company received debentures and warrants as sale consideration in connection with the sale of its Kandy Communications Business on December 1, 2020 to AVCT.

The debentures bore interest at a rate of 10 % per annum (the "Debentures"), which was added to the principal amount of the Debentures.

The Company recorded $ 1.2 million and $ 2.7 million of interest income in the three and six months ended June 30, 2021, which was added to the principal amount of the Debentures, and which is included in Interest expense, net, in the condensed consolidated statement of operations.

The Company recorded $ 0.9 million and $ 3.6 million of interest income in the three and nine months ended September 30, 2021, which was added to the principal amount of the Debentures, and which is included in Interest expense, net, in the condensed consolidated statement of operations.

On September 8, 2021 (the "Debenture Conversion Date"), the debentures were converted into 13,700,421 shares of AVCT common stock (the "Debenture Shares").

The warrants entitle the Company to purchase 4,377,800 shares of AVCT common stock at an exercise price of $ 0.01 per share, and expire on December 1, 2025 (the "Warrants").

The Company had not exercised any of the Warrants as of June 30, 2022.

The Company's investment in AVCT (the "AVCT Investment") is comprised of the debentures and Warrants for periods prior to the Debenture Conversion Date and the Debenture Shares and Warrants for periods subsequent to the Debenture Conversion Date.

The Company is recording the AVCT Investment at fair value, with changes in fair value recorded as a component of Other (expense) income, net, in the condensed consolidated statements of operations.

The fair values of the AVCT Investment, which are reported as Investments in the Company's condensed consolidated balance sheets, were $ 4.5 million and $ 43.9 million at June 30, 2022 and December 31, 2021, respectively.

The Company recorded losses of $ 12.4 million and $ 39.4 million in the three and six months ended June 30, 2022, respectively, representing the change in the fair value of the AVCT Investment.

The Company recorded a gain of $ 12.1 million and a loss of $ 11.8 million in the three and six months ended June 30, 2021, respectively, representing the change in the fair value of the AVCT Investment, which loss was partially offset by the paid-in-kind interest income described above.

The AVCT Investment is classified as a Level 1 fair value measurement at both June 30, 2022 and December 31, 2021.

The Company evaluated the nature of its investment in AVCT at June 30, 2022 and December 31, 2021, and determined that it represented an equity interest on a diluted basis of approximately 9 % and 15 %, respectively.

The Company determined

The warrants entitled the Company to purchase 4,377,800 shares of AVCT common stock at an exercise price of $ 0.01 per share, and were to expire on December 1, 2025 (the "Warrants").

The Company's investment in AVCT (the "AVCT Investment") was comprised of the Debentures and Warrants for periods prior to the Debenture Conversion Date and the Debenture Shares and Warrants for periods subsequent to the Debenture Conversion Date.

The Company recorded the AVCT Investment at fair value, with changes in fair value recorded as a component of Other (expense) income, net, in the condensed consolidated statements of operations.

On August 29, 2022, the Company and AVCT entered into a settlement agreement which provided for, amongst other things, the cancellation of the Company's investment in the Debenture Shares and the Warrants with an aggregate fair value of $ 2.6 million.

Pursuant to the settlement agreements, the Company and AVCT also entered into a Wind Down Agreement, pursuant to which a Reseller Agreement between the parties, as previously amended, was terminated, and the Company was granted a non-exclusive perpetual license to use and modify certain intellectual property owned by AVCT comprising WebRTC gateway technology that is integrated with Ribbon’s SBCs and Application Servers.

As consideration, the Company paid AVCT $ 2.5 million in cash, the Debenture Shares were redeemed and canceled, and the Warrants were terminated and canceled.

The perpetual license granted by AVCT is classified as Intangible assets, net in the Company's condensed consolidated balance sheet as of September 30, 2022 in the amount of $ 4.4 million.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

that it is not the primary beneficiary of AVCT as it does not have the power to direct the activities that most significantly impact the AVCT Investment's economic performance, and therefore concluded that it had neither significant influence nor a controlling interest arising from the AVCT Investment that would require consolidation as of June 30, 2022 or December 31, 2021.

The carrying amounts of the Company's financial instruments approximate their fair values and include cash equivalents, accounts receivable, borrowings under a revolving credit facility, accounts payable and long-term debt.

The fair value of the AVCT Investment, which was reported as an Investment in the Company's condensed consolidated balance sheet, was $ 43.9 million December 31, 2021.

The Company had no investment in AVCT as of September 30, 2022 due to the settlement agreement entered into on August 29, 2022.

The Company recorded losses of $ 1.9 million and $ 41.3 million in the three and nine months ended September 30, 2022, respectively, representing the change in the fair value of the AVCT Investment.

The Company recorded losses of $ 56.5 million and $ 68.3 million in the three and nine months ended September 30, 2021, respectively, representing the change in the fair value of the AVCT Investment, which was partially offset by the paid-in-kind interest income described above.

The AVCT Investment is classified as a Level 1 fair value measurement at December 31, 2021.

The Company evaluated the nature of the AVCT Investment at December 31, 2021, and determined that it represented an equity interest on a diluted basis of approximately 15 %.

The Company determined that it was not the primary beneficiary of AVCT as it did not have the power to direct the activities that most significantly impact the AVCT Investment's economic performance, and therefore concluded that the Company had neither significant influence nor a controlling interest arising from the AVCT Investment that would require consolidation as of December 31, 2021.

The carrying amounts of the Company's financial instruments approximate their fair values and include cash equivalents, accounts receivable, and accounts payable.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

7 unchanged sentences

(6) ACCRUED EXPENSES AND OTHER

Accrued expenses at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

Accrued expenses at September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

September 30,

2022 December 31,

3 unchanged sentences

$ 99,261 $ 100,752

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(7) WARRANTY ACCRUALS

The changes in the Company's accrual balance in the six months ended June 30, 2022 were as follows (in thousands):

The changes in the Company's accrual balance in the nine months ended September 30, 2022 were as follows (in thousands):

Balance at January 1, 2022 $ 13,120

1 unchanged sentence

Settlements ( 4,318 )

Balance at June 30, 2022 $ 12,958

Balance at September 30, 2022 $ 12,772

(8) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES

The Company recorded restructuring and related expense aggregating $ 2.9 million and $ 2.8 million in the three months ended June 30, 2022 and 2021, respectively, and $ 7.7 million and $ 8.8 million in the six months ended June 30, 2022 and 2021, respectively.

Restructuring and related expense includes restructuring expense (primarily severance and related costs), estimated future variable lease costs for vacated properties with no intent or ability of sublease, and accelerated rent

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

amortization expense.

The Company recorded restructuring and related expense aggregating $ 1.3 million and $ 1.8 million in the three months ended September 30, 2022 and 2021, respectively, and $ 9.0 million and $ 10.5 million in the nine months ended September 30, 2022 and 2021, respectively.

For restructuring events that involve lease assets and liabilities, the Company applies lease reassessment and modification guidance and evaluates the right-of-use assets for potential impairment.

2 unchanged sentences

Related variable lease expenses will continue to be expensed as incurred through the vacate date, at which time the Company will reassess the liability balance to ensure it appropriately reflects the remaining liability associated with the premises and records a liability for the estimated future variable lease costs.

Restructuring and related expense for the three and six months ended June 30, 2022 and 2021 was comprised of the following (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Restructuring and related expense for the three and nine months ended September 30, 2022 and 2021 was comprised of the following (in thousands):

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Severance and related costs $ ( 358 ) $ 481 $ 4,623 $ 3,076

9 unchanged sentences

The 2022 Restructuring Plan is expected to include, among other things, charges related to a consolidation of facilities and a workforce reduction.

Any positions eliminated in countries outside the United States are subject to local law and consultation requirements.

The Company recorded restructuring and related expense of $ 2.9 million and $ 7.1 million in the three and six months ended June 30, 2022, respectively, in connection with the 2022 Restructuring Plan.

The amount for the three months ended June 30, 2022 was comprised of $ 1.1 million for variable and other facilities-related costs, $ 1.0 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease, and $ 0.8 million for severance and related costs for approximately 10 employees.

The amount for the six months ended June 30, 2022 was comprised of $ 5.0 million for severance and related costs for approximately 60 employees, $ 1.1 million for variable and other facilities-related costs and $ 1.0 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease.

A summary of the 2022 Restructuring Plan accrual activity for the six months ended June 30, 2022 is as follows (in thousands):

Any positions eliminated in countries outside the United States are subject to local law and

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

consultation requirements.

The Company recorded restructuring and related expense of $ 1.3 million and $ 8.3 million in the three and nine months ended September 30, 2022, respectively, in connection with the 2022 Restructuring Plan.

The amount for the three months ended September 30, 2022 was comprised of $ 1.0 million for variable and other facilities-related costs, $ 0.6 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease, and $( 0.3 ) million for adjustments to severance and related costs.

The amount for the nine months ended September 30, 2022 was comprised of $ 4.7 million for severance and related costs for approximately 60 employees, $ 2.0 million for variable and other facilities-related costs and $ 1.6 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease.

A summary of the 2022 Restructuring Plan accrual activity for the nine months ended September 30, 2022 is as follows (in thousands):

2022 Initiatives

payments Net transfer to operating lease liability accounts

exchange Balance at

payments Net transfer to operating lease accounts Balance at

September 30,

Severance $ — $ 4,679 $ ( 3,324 ) $ — $ 1,355

4 unchanged sentences

The current portions of accrued restructuring are included as a component of Accrued expenses and the long-term portions of accrued restructuring are included as a component of Other long-term liabilities in the condensed consolidated balance sheets.

The long-term portions of accrued restructuring relate to facilities and totaled $ 1.7 million at June 30, 2022 and $ 1.6 million at December 31, 2021.

The long-term portions of accrued restructuring relate to facilities totaled $ 2.2 million at September 30, 2022 and $ 1.6 million at December 31, 2021.

2020 Credit Facility

7 unchanged sentences

The 2020 Credit Facility also requires periodic interest payments until maturity.

The indebtedness and other obligations under the 2020 Credit Facility are unconditionally guaranteed on a senior secured basis by the Company, Edgewater Networks, Inc., a wholly-owned subsidiary of the Company, and GENBAND Inc., a wholly-owned subsidiary of the Company (together, the "Guarantors").

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

owned subsidiary of the Company (together, the "Guarantors").

The facilities under the 2020 Credit Facility are secured by first-priority liens on substantially all of the assets of the Borrower and the Guarantors, including substantially all of the assets of the Company.

The 2020 Credit Facility requires compliance with certain financial covenants, including a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Consolidated Net Leverage Ratio (each as defined in the 2020 Credit Facility, and each tested on a quarterly basis).

The 2020 Credit Facility permits the Company to use proceeds from the sale of equity securities, subject to certain limitations, in the calculation of the minimum Consolidated Fixed Charge Coverage Ratio and maximum Consolidated Net Leverage Ratio for the quarter in which such equity sale occurs, and for future calculations of the covenant ratios where such quarter is included.

In addition, the 2020 Credit Facility contains various covenants that, among other restrictions, limit the Company’s and its subsidiaries’ ability to incur or assume indebtedness;

4 unchanged sentences

make investments;

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

engage in transactions with affiliates;

20 unchanged sentences

The Company was required to make quarterly principal payments totaling approximately $ 1 million in the first year and $ 8 million in the aggregate over the next four and a half years, with the final payment approximating $ 66 million.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The First Amendment reduced the Borrower's ability to incur new tranches of term loans, or increases in commitments under the Amended 2020 Term Loan Facility or the 2020 Revolving Credit Facility.

2 unchanged sentences

On December 1, 2020, the Borrower entered into a Second Amendment to the 2020 Credit Facility to obtain consent for an equity exchange with AVCT in connection with the Kandy Sale, as well as to amend certain other provisions of the 2020 Credit Facility.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

On March 3, 2021 (the "Third Amendment Date"), the Company, the Borrower and certain of its subsidiaries entered into a Third Amendment to Credit Agreement (the "Third Amendment"), which further amended the 2020 Credit Facility.

1 unchanged sentence

Upon the consummation of the open market purchase, the Term B Loans were assigned to the Borrower and immediately cancelled, such that the outstanding amount under the Term A Loan and incremental term loan facility were combined and held by the Lenders (the "2020 Term Loan") with the same terms as the Term A Loan.

The Company wrote off $ 2.5 million of capitalized debt issuance costs in connection with the Third Amendment, which is included in Interest expense, net, in the Company's condensed consolidated statement of operations for the six months ended June 30, 2021.

The Company was required to make quarterly principal payments on the 2020 Term Loan aggregating approximately $ 20 million per year in the first three years and $ 30 million in the fourth year, with the final payment approximating $ 300 million due on the maturity date.

8 unchanged sentences

Specifically, pursuant to the Fifth Amendment, loans incurred under the Senior Secured Credit Facilities bear interest, at the Borrower’s option, at either LIBOR plus a margin ranging from 1.50 % to 4.50 % per year, or the base rate (the highest of the Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.50 %, or the prime rate announced from time to time in The Wall Street Journal) plus a margin ranging from 0.50 % to 3.50 % per year (such margins being referred to as the “Applicable Margin”).

In addition, the Fifth Amendment allows the Company to incur junior secured or unsecured debt in an amount no less than $ 50 million, subject to certain conditions, including the requirement that 50 % of the aggregate amount of such incurred debt (net of certain costs, fees and other amounts) must be applied to prepay the Senior Secured Credit Facilities, and compliance with certain leverage ratio-based covenant exceptions.

In addition, the Fifth Amendment allows the Company to incur junior secured or unsecured debt in an amount no less than $ 50 million, subject

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

to certain conditions, including the requirement that 50 % of the aggregate amount of such incurred debt (net of certain costs, fees and other amounts) must be applied to prepay the Senior Secured Credit Facilities, and compliance with certain leverage ratio-based covenant exceptions.

In connection with the Fifth Amendment, the Company made a $ 10.0 million voluntary prepayment that was applied to the final payment due on the maturity date.

Subsequent to the Fifth Amendment, the Company is required to make quarterly principal payments on the 2020 Term Loan aggregating approximately $ 5.0 million per quarter through March 31, 2024 and $ 10.0 million in each of the three quarters thereafter, with the final payment approximating $ 275 million due on the maturity date in March 2025.

At June 30, 2022, the Company had an outstanding balance under the 2020 Term Loan of $ 340.5 million at an average interest rate of 4.4 % and $ 4.3 million of letters of credit outstanding with an interest rate of 3.5 %.

At September 30, 2022, the Company had an outstanding balance under the 2020 Term Loan of $ 335.5 million at an average interest rate of 5.4 % and $ 3.3 million of letters of credit outstanding with an interest rate of 4.5 %.

At December 31, 2021, the Company had an outstanding 2020 Term Loan balance of $ 375.5 million at an average interest rate of 3.4 % and $ 4.3 million of letters of credit outstanding with an interest rate of 2.5 %.

The Company was in compliance with all covenants of the 2020 Credit Facility at both June 30, 2022 and December 31, 2021.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company was in compliance with all covenants of the 2020 Credit Facility at both September 30, 2022 and December 31, 2021.

Letters of Credit and Performance and Bid Bonds

The Company uses letters of credit and performance and bid bonds in the course of its business.

At June 30, 2022, the Company had letters of credit, bank guarantees, and performance and bid bonds outstanding (collectively, "Guarantees") aggregating $ 25.4 million , comprised of the $ 4.3 million of letters of credit under the 2020 Credit Facility described above (the "Letters of Credit") and $ 21.1 million of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees") under various uncommitted facilities.

At September 30, 2022, the Company had letters of credit, bank guarantees, and performance and bid bonds outstanding (collectively, "Guarantees") aggregating $ 9.5 million , comprised of the $ 3.3 million of letters of credit under the 2020 Credit Facility described above (the "Letters of Credit") and $ 6.3 million of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees") under various uncommitted facilities.

At December 31, 2021, the Company had Guarantees aggregating $ 30.1 million, comprised of the $ 4.3 million of Letters of Credit noted above and $ 25.8 million of Other Guarantees.

At June 30, 2022 and December 31, 2021, the Company had cash collateral of $ 2.0 million and $ 2.6 million, respectively, supporting the Guarantees, which is reported as Restricted cash in the condensed consolidated balance sheets.

At September 30, 2022 and December 31, 2021, the Company had cash collateral of $ 0.3 million and $ 2.6 million, respectively, supporting the Guarantees, which is reported as Restricted cash in the condensed consolidated balance sheets.

(10) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

13 unchanged sentences

Cash Flow Hedge of Interest Rate Risk

The 2020 Term Loan Facility had outstanding balances of $ 340.5 million and $ 375.5 million at June 30, 2022 and December 31, 2021, respectively.

The 2020 Revolving Credit Facility was undrawn at both J une 30, 2022 and December 31, 2021.

The 2020 Term Loan Facility had outstanding balances of $ 335.5 million and $ 375.5 million at September 30, 2022 and December 31, 2021, respectively.

The 2020 Revolving Credit Facility was undrawn at both September 30, 2022 and December 31, 2021.

Borrowings under the 2020 Credit Facility have variable interest rates based on LIBOR (see Note 9).

As a result of exposure to interest rate movements, during March 2020, the Company entered into an interest rate swap arrangement, which effectively converted its $ 400 million term loan with its variable interest rate based upon one-month LIBOR to an aggregate fixed rate of 0.904 %, plus a leverage-based margin as defined in the 2020 Credit Facility.

The notional amount of this swap at June 30, 2022 was $ 400 million, and the swap matures on March 3, 2025, the same date the 2020 Credit Facility matures.

As a result of exposure to interest rate movements, during March 2020, the Company entered into an interest rate swap arrangement, which

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

effectively converted its $ 400 million term loan with its variable interest rate based upon one-month LIBOR to an aggregate fixed rate of 0.904 %, plus a leverage-based margin as defined in the 2020 Credit Facility.

On July 22, 2022, the Company sold $ 30 million of the notional amount of its interest rate swap back to its counterparty for $ 1.5 million, reducing the notional amount of this swap to $ 370 million.

On August 16, 2022 the Company sold another $ 30 million of the notional amount of its interest rate swap back to its counterparty for $ 1.6 million, reducing the notional amount to $ 340 million, which approximates the current level of our term loan debt outstanding.

The gain in accumulated other comprehensive (loss) income related to the $ 60 million notional amount sold of $ 3.1 million is being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense, the amortization of which totaled $ 0.2 million for the three and nine months ended September 30, 2022.

The notional amount of this swap at September 30, 2022 was $ 340 million, and the swap matures on March 3, 2025, the same date the 2020 Credit Facility matures.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

2 unchanged sentences

The effective portion of changes in the fair value of designated derivatives that qualify as cash flow hedges is recorded in accumulated other comprehensive income in the condensed consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings.

During the three and six months ended June 30, 2022 and 2021, such a derivative was used to hedge the variable cash flows associated with the outstanding borrowings under

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

the 2020 Credit Facility and the Company has accounted for this derivative as an effective hedge.

During the three and nine months ended September 30, 2022 and 2021, such a derivative was used to hedge the variable cash flows associated with the outstanding borrowings under the 2020 Credit Facility and the Company has accounted for this derivative as an effective hedge.

Any ineffective portion of the change in the fair value of the derivative would be recognized directly in earnings.

Amounts reported in accumulated other comprehensive income related to the Company's derivative are reclassified to interest expense as interest is accrued on the Company’s variable-rate debt.

Based upon projected forward rates, the Company estimates as of June 30, 2022 that $ 8.0 million may be reclassified as a decrease to interest expense over the next twelve months.

The impact of the Company’s derivative financial instrument on its condensed consolidated statements of comprehensive (loss) income for the three and six months ended June 30, 2022 and 2021 was as follows (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Gain (loss) recognized in other comprehensive income (loss) on derivative (effective portion) $ 3,916 $ ( 1,015 ) $ 18,629 $ 4,875

Amount reclassified from accumulated other comprehensive income (loss) to interest expense (effective portion) 137 810 893 1,589

Based upon projected forward rates, the Company estimates as of September 30, 2022 that $ 11 million may be reclassified as a decrease to interest expense over the next twelve months.

The impact of the Company’s derivative financial instrument on its condensed consolidated statements of comprehensive (loss) income for the three and nine months ended September 30, 2022 and 2021 was as follows, net of tax (in thousands):

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Gain recognized in other comprehensive income (loss) on derivative, net of tax $ 3,056 $ 30 $ 21,685 $ 4,905

Amount reclassified from accumulated other comprehensive income (loss) to interest expense ( 1,330 ) 830 ( 437 ) 2,419

$ 1,726 $ 860 $ 21,248 $ 7,324

The fair values and locations in the condensed consolidated balance sheets at June 30, 2022 and December 31, 2021 of the Company's derivative assets (liabilities) designated as a hedging instrument were as follows (in thousands):

Balance sheet location June 30,

The fair values and locations in the condensed consolidated balance sheets at September 30, 2022 and December 31, 2021 of the Company's derivative assets (liabilities) designated as a hedging instrument were as follows (in thousands):

Balance sheet location September 30,

2022 December 31,

3 unchanged sentences

$ 26,283 $ 1,811

The Company has classified the interest rate derivative aggregating $ 21.3 million and $ 1.8 million at June 30, 2022 and December 31, 2021, respectively, as Level 2 fair value measurements within the fair value hierarchy (see Note 5).

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company has classified the interest rate derivative aggregating $ 26.3 million and $ 1.8 million at September 30, 2022 and December 31, 2021, respectively, as Level 2 fair value measurements within the fair value hierarchy (see Note 5).

(11) REVENUE RECOGNITION

64 unchanged sentences

The Company disaggregates its revenue from contracts with customers based on the nature of the products and services and the geographic regions in which each customer is domiciled.

The Company's revenue for the three and six months ended June 30, 2022 and 2021 was disaggregated as follows:

The Company's revenue for the three and nine months ended September 30, 2022 and 2021 was disaggregated as follows:

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended June 30, 2022 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

Three months ended September 30, 2022 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 42,373 $ 32,980 $ 11,684 $ 87,037

3 unchanged sentences

$ 111,152 $ 71,989 $ 23,986 $ 207,127

Three months ended June 30, 2021 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

Three months ended September 30, 2021 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 47,134 $ 33,391 $ 12,764 $ 93,289

3 unchanged sentences

$ 111,726 $ 71,670 $ 27,002 $ 210,398

Six months ended June 30, 2022 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

Nine months ended September 30, 2022 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 128,056 $ 99,090 $ 33,689 $ 260,835

3 unchanged sentences

$ 305,809 $ 210,052 $ 70,260 $ 586,121

Six months ended June 30, 2021 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

Nine months ended September 30, 2021 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 140,074 $ 97,813 $ 35,516 $ 273,403

3 unchanged sentences

$ 322,744 $ 212,812 $ 78,824 $ 614,380

The Company's product revenue from indirect sales through its channel partner program and from its direct sales program for the three and six months ended June 30, 2022 and 2021 was as follows (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

The Company's product revenue from indirect sales through its channel partner program and from its direct sales program for the three and nine months ended September 30, 2022 and 2021 was as follows (in thousands):

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Indirect sales through channel partner program $ 34,382 $ 25,214 $ 86,335 $ 72,491

1 unchanged sentence

$ 111,152 $ 111,726 $ 305,809 $ 322,744

The Company's product revenue from sales to enterprise customers and from sales to service provider customers for the three and six months ended June 30, 2022 and 2021 was as follows (in thousands):

The Company's product revenue from sales to enterprise customers and from sales to service provider customers for the three and nine months ended September 30, 2022 and 2021 was as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Sales to enterprise customers $ 33,136 $ 20,034 $ 78,056 $ 67,225

1 unchanged sentence

$ 111,152 $ 111,726 $ 305,809 $ 322,744

The Company's product revenue and service revenue components by segment for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

The Company's product revenue and service revenue components by segment for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Product revenue:

19 unchanged sentences

These assets and liabilities are reported in the Company's condensed consolidated balance sheets on a contract-by-contract basis as of the end of each reporting period.

Changes in the contract asset and liability balances during the three months ended June 30, 2022 were not materially impacted by any factors other than billing and revenue recognition.

Changes in the contract asset and liability balances during the three months ended September 30, 2022 were not materially impacted by any factors other than billing and revenue recognition.

Nearly all of the Company's deferred revenue balance is related to services revenue, primarily customer support contracts.

5 unchanged sentences

Unbilled receivables that are anticipated to be invoiced in the next twelve months are included in Accounts receivable on the Company's condensed consolidated balance sheets.

The changes in the Company's accounts receivable, unbilled receivables and deferred revenue balances for the six months ended June 30, 2022 were as follows (in thousands):

The changes in the Company's accounts receivable, unbilled receivables and deferred revenue balances for the nine months ended September 30, 2022 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

3 unchanged sentences

Increase (decrease), net ( 63,441 ) 18,358 ( 18,980 ) 1,566

Balance at June 30, 2022 $ 172,978 $ 85,138 $ 106,463 $ 19,584

The Company recognized approximately $ 66 million of revenue in the six months ended June 30, 2022 that was recorded as deferred revenue at December 31, 2021 and approximately $ 60 million of revenue in the six months ended June 30, 2021 that was recorded as deferred revenue at December 31, 2020.

Of the Company's deferred revenue reported as long-term in its condensed consolidated balance sheet at June 30, 2022, the Company expects that approximately $ 8 million will be recognized as revenue in 2023, approximately $ 9 million will be recognized as revenue in 2024 and approximately $ 3 million will be recognized as revenue in 2025 and beyond.

Balance at September 30, 2022 $ 145,531 $ 92,303 $ 90,139 $ 22,185

The Company recognized approximately $ 85 million of revenue in the nine months ended September 30, 2022 that was recorded as deferred revenue at December 31, 2021 and approximately $ 81 million of revenue in the nine months ended September 30, 2021 that was recorded as deferred revenue at December 31, 2020.

Of the Company's deferred revenue reported as long-term in its condensed consolidated balance sheet at September 30, 2022, the Company expects that approximately $ 4 million will be recognized as revenue in 2023, approximately $ 10 million will be recognized as revenue in 2024 and approximately $ 8 million will be recognized as revenue in 2025 and beyond.

All freight-related customer invoicing is recorded as revenue, while the shipping and handling costs that occur after control of the promised goods or services transfer to the customer are reported as fulfillment costs, a component of Cost of revenue - product in the Company's condensed consolidated statements of operations.

3 unchanged sentences

The current and long-term portions of deferred commission expense are included as components of Other current assets and Other assets, respectively.

At both June 30, 2022 and December 31, 2021, the Company had $ 3.8 million of deferred sales commissions capitalized.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

At both September 30, 2022 and December 31, 2021, the Company had $ 3.8 million of deferred sales commissions capitalized.

(12) OPERATING SEGMENT INFORMATION

11 unchanged sentences

The Company calculates adjusted gross profit by excluding from cost of revenue:

amortization of acquired technology and stock-based compensation, and may also exclude other items in future periods that the Company believes are not part of the Company's core business.

amortization of acquired technology and stock-based

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

compensation, and may also exclude other items in future periods that the Company believes are not part of the Company's core business.

Adjusted gross profit is not a financial measure determined in accordance with U.S.

2 unchanged sentences

GAAP measure.

The tables below provide information regarding revenue, adjusted gross profit, and depreciation expense by reportable segment for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

The tables below provide information regarding revenue, adjusted gross profit, and depreciation expense by reportable segment for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Segment revenue:

2 unchanged sentences

Revenue $ 207,127 $ 210,398 $ 586,121 $ 614,380

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Segment adjusted gross profit:

5 unchanged sentences

Gross profit $ 104,318 $ 110,654 $ 286,923 $ 329,867

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Segment depreciation expense:

3 unchanged sentences

(13) MAJOR CUSTOMERS

The following customer contributed 10% or more of the Company's revenue in the three and six months ended June 30, 2022 and 2021:

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

The following customers contributed 10% or more of the Company's revenue in the three and nine months ended September 30, 2022 and 2021:

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Verizon Communications Inc.

13 % 18 % 16 % 17 %

At June 30, 2022, one customer accounted for 10% or more of the Company's accounts receivable balance, representing approximately 17 % of total accounts receivable.

AT&T 10 % * * *

* Less than 10% of total revenue.

At September 30, 2022, no customer accounted for 10% or more of the Company's accounts receivable balance.

At December 31, 2021, one customer accounted for 10% or more of the Company's accounts receivable balance, representing approximately 15 % of total accounts receivable.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable, although in some instances the Company may require letters of credit to support customer outstanding accounts receivable balances.

The Company performs ongoing credit evaluations of its customers and

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

generally does not require collateral on accounts receivable, although in some instances the Company may require letters of credit to support customer outstanding accounts receivable balances.

The Company maintains an allowance for doubtful accounts and such losses have been within management's expectations.

4 unchanged sentences

At the Company's annual meeting of stockholders held on May 25, 2022, the Company's stockholders approved an amendment to the 2019 Plan to increase the number of shares of the Company's common stock authorized for issuance under the 2019 Plan by 10.0 million shares.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Assumed Stock Plans

21 unchanged sentences

McClelland as described above.

Each year, beginning in 2019 and continuing through 2022, the Company has granted certain of its executives (the "2022 PSUs", "2021 PSUs", "2020 PSUs" and "2019 PSUs", respectively), of which 60 % of each executive's PSU grant had both performance and service conditions (the "Performance PSUs") and 40 % had both market and service conditions (the "Market PSUs").

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The 2019 PSUs earned were released on March 15, 2022;

6 unchanged sentences

The Market PSUs have one three-year performance period, beginning January 1 in the year of grant and ending on December 31, three years thereafter (the "Market Performance Period").

The number of shares subject to the Market PSUs that will vest, if any, will be dependent upon the Company's total shareholder return ("TSR") compared with the TSR of the companies included in a custom index for the applicable Market Performance Period, measured by the Compensation Committee after the Market Performance Period ends, with any shares earned vesting in the first quarter of the fiscal year

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

following the respective Market Performance Period, pending each executive's continued employment with the Company through that date.

The number of shares of common stock underlying the Market PSUs that can be earned will in no event exceed 200 % of the Market PSUs.

8 unchanged sentences

The Company is required to record expense for the PSUs with market conditions through their respective final vesting dates, regardless of the number of shares that are ultimately earned.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Stock Options

The activity related to the Company's outstanding stock options for the six months ended June 30, 2022 was as follows:

The activity related to the Company's outstanding stock options for the nine months ended September 30, 2022 was as follows:

Shares Weighted

7 unchanged sentences

Expired ( 11,609 ) $ 16.39

Outstanding at June 30, 2022 176,010 $ 13.11 2.13 $ 48

Vested or expected to vest at June 30, 2022 176,010 $ 13.11 2.13 $ 48

Exercisable at June 30, 2022 176,010 $ 13.11 2.13 $ 48

Both the total intrinsic value of options exercised and cash received in connection with those exercises was nominal in the three and six months ended June 30, 2022.

Outstanding at September 30, 2022 171,852 $ 13.09 1.90 $ 15

Vested or expected to vest at September 30, 2022 171,852 $ 13.09 1.90 $ 15

Exercisable at September 30, 2022 171,852 $ 13.09 1.90 $ 15

Both the total intrinsic value of options exercised and cash received in connection with those exercises was nominal in the three and nine months ended September 30, 2022.

Restricted Stock Units

The activity related to the Company's RSUs for the six months ended June 30, 2022 was as follows:

The activity related to the Company's RSUs for the nine months ended September 30, 2022 was as follows:

Shares Weighted

3 unchanged sentences

Forfeited ( 685,571 ) $ 5.13

Unvested balance at June 30, 2022 8,535,908 $ 4.23

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the six months ended June 30, 2022 was $ 12.5 million.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Unvested balance at September 30, 2022 7,560,971 $ 4.06

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the nine months ended September 30, 2022 was $ 16.8 million.

Performance-Based Stock Units

The activity related to the Company's PSUs for the six months ended June 30, 2022 was as follows:

The activity related to the Company's PSUs for the nine months ended September 30, 2022 was as follows:

Shares Weighted

3 unchanged sentences

Forfeited ( 383,262 ) $ 7.82

Unvested balance at June 30, 2022 6,674,668 $ 2.19

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the six months ended June 30, 2022 was $ 0.9 million.

Unvested balance at September 30, 2022 6,653,503 $ 2.52

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the nine months ended September 30, 2022 was $ 0.9 million.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Stock-Based Compensation

The condensed consolidated statements of operations include stock-based compensation for the three and six months ended June 30, 2022 and 2021 as follows (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

The condensed consolidated statements of operations include stock-based compensation for the three and nine months ended September 30, 2022 and 2021 as follows (in thousands):

Three months ended Nine months ended

September 30, 2022 September 30,

2021 September 30, 2022 September 30,

Product cost of revenue $ 133 $ 96 $ 339 $ 216

4 unchanged sentences

$ 4,841 $ 4,561 $ 13,495 $ 14,411

At June 30, 2022, there was $ 31.2 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested stock options and stock units.

At September 30, 2022, there was $ 26.7 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested stock options and stock units.

This expense is expected to be recognized over a weighted average period of approximately two years .

8 unchanged sentences

Right-of-use assets and lease liabilities are initially measured based on the present value of the future minimum fixed lease payments (i.e., fixed payments in the lease contract) over the lease term at the commencement date.

As the Company's existing leases do not have a readily determinable implicit rate, the Company uses its incremental borrowing rate based on the

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

information available at the commencement date in determining the present value of future minimum fixed lease payments.

As the Company's existing leases do not have a readily determinable implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future minimum fixed lease payments.

The Company calculates its incremental borrowing rate to reflect the interest rate that it would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term and considers its historical borrowing activities and market data from entities with comparable credit ratings in this determination.

The measurement of the right-of-use asset also includes any lease payments made prior to the commencement date (excluding any lease incentives) and initial direct costs incurred.

The Company assessed its right-of-use assets for impairment as of June 30, 2022 and December 31, 2021 and determined no impairment has occurred.

The Company assessed its right-of-use assets for impairment as of September 30, 2022 and December 31, 2021 and determined no impairment has occurred.

Lease terms may include options to extend or terminate the lease and the Company incorporates such options in the lease term when it has the unilateral right to make such an election and it is reasonably certain that the Company will exercise that option.

3 unchanged sentences

Lease contracts may contain variable lease costs, such as common area maintenance, utilities and tax reimbursements that vary over the term of the contract.

Variable lease costs are not included in minimum fixed lease payments and as a result, are excluded from the measurement of the right-of-use assets and lease liabilities.

Variable lease costs are not included in

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

minimum fixed lease payments and as a result, are excluded from the measurement of the right-of-use assets and lease liabilities.

The Company expenses all variable lease costs as incurred.

Certain leased facilities are being partially or fully vacated as part of the 2022 Restructuring Plan and for some of those facilities, the Company has no plans to enter into sublease agreements.

Accordingly, the Company accelerated the amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization expense of $ 1.0 million in the three and six months ended June 30, 2022.

The Company also recorded expense of $ 0.3 million in the three and six months ended June 30, 2022 for all estimated future variable lease costs related to those facilities.

Accordingly, the Company accelerated the amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization expense of $ 0.6 million and $ 1.6 million in the three and nine months ended September 30, 2022, respectively.

The Company also recorded expense of $ 0.7 million and $ 1.0 million in the three and nine months ended September 30, 2022, respectively, for all estimated future variable lease costs related to those facilities.

In connection with the 2020 Restructuring Plan, the Company accelerated amortization totaling $ 0.2 million and $ 0.6 million in the three and nine months ended September 30, 2021, respectively for leased facilities that were vacated in 2021 as part of the consolidation of certain sites following the ECI Acquisition.

The Company did no t record estimated future variable lease costs in the three or nine months ended September 30, 2022 related to the 2020 Restructuring Plan.

In connection with the 2019 Restructuring Plan, certain lease assets related to facilities were partially or fully vacated as the Company consolidated its facilities.

1 unchanged sentence

The Company ceased use of those facilities in the first quarter of 2021, the first and fourth quarters of 2020, and the third quarter of 2019.

Accordingly, the Company accelerated the amortization of the associated lease assets through the planned cease-use date of each facility, resulting in additional amortization expense of $ 3.4 million in the six months ended June 30, 2021.

The Company also recorded expense of $ 1.4 million in the six months ended June 30, 2021 for all estimated future variable lease costs related to those facilities.

The Company did not record expense for accelerated amortization or estimated future variable lease costs in connection with the 2019 Restructuring Plan in the three months ended June 30, 2021.

The Company did not record expense for accelerated amortization or estimated future variable lease costs in connection with the 2019 Restructuring Plan in the three or six months ended June 30, 2022.

The Company also recorded expense of $ 1.4 million in the nine months ended September 30, 2021 for all estimated future variable lease costs related to those facilities.

The Company did no t record expense for accelerated amortization or estimated future variable lease costs in connection with the 2019 Restructuring Plan in the three months ended September 30, 2021.

The Company did no t record expense for accelerated amortization or estimated future variable lease costs in connection with the 2019 Restructuring Plan in the three or nine months ended September 30, 2022.

All accelerated amortization and accrual of future variable costs are recorded as Restructuring and related expense in the Company's condensed consolidated statements of operations.

At June 30, 2022 and December 31, 2021, the Company had accruals of $ 1.7 million and $ 1.6 million, respectively, for all future anticipated variable lease costs related to these facilities.

At September 30, 2022 and December 31, 2021, the Company had accruals of $ 2.2 million and $ 1.6 million, respectively, for all future anticipated variable lease costs related to these facilities.

The Company may incur additional future expense if it is unable to sublease other locations included in the Facilities Initiative.

The Company leases its corporate offices and other facilities under operating leases, which expire at various times through 2032.

The Company's right-of-use lease assets and lease liabilities at June 30, 2022 and December 31, 2021 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Classification June 30,

The Company's right-of-use lease assets and lease liabilities at September 30, 2022 and December 31, 2021 were as follows (in thousands):

Classification September 30,

2022 December 31,

7 unchanged sentences

Total lease liabilities $ 64,917 $ 73,166

* Finance lease assets were recorded net of accumulated depreciation of $ 1.1 million and $ 1.8 million at June 30, 2022 and December 31, 2021, respectively.

The components of lease expense for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):

Three months ended Six months ended

2022 June 30,

2021 June 30,

2022 June 30,

* Finance lease assets were recorded net of accumulated depreciation of $ 1.2 million and $ 1.8 million at September 30, 2022 and December 31, 2021, respectively.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The components of lease expense for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

Three months ended Nine months ended

September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Operating lease cost* $ 5,233 $ 4,996 $ 15,401 $ 19,027

6 unchanged sentences

Net lease cost $ 9,831 $ 8,572 $ 27,952 $ 31,803

* Operating lease costs for the three and six months ended June 30, 2022 included $ 1.0 million of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

Operating lease costs for the six months ended June 30, 2021 included $ 3.4 million of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

No such accelerated amortization was recorded in the three months ended June 30, 2021.

** Variable lease costs for the three and six months ended June 30, 2022 included accruals of $ 0.3 million for all future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

Variable lease costs for the six months ended June 30, 2021 included accruals of $ 1.4 million for all future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

No such variable costs were accrued in the three months ended June 30, 2021.

Cash flow information related to the Company's leases for the six months ended June 30, 2022 and 2021 was as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Six months ended

2022 June 30,

* Operating lease costs for the three and nine months ended September 30, 2022 included $ 0.6 million and $ 1.6 million, respectively, of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

Operating lease costs for the nine months ended September 30, 2021 included $ 3.4 million of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

No such accelerated amortization was recorded in the three months ended September 30, 2021.

** Variable lease costs for the three and nine months ended September 30, 2022 included accruals of $ 0.7 million and $ 1.0 million, respectively, for future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

Variable lease costs for the nine months ended September 30, 2021 included accruals of $ 1.4 million for all future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

No such variable costs were accrued in the three months ended September 30, 2021.

Cash flow information related to the Company's leases for the nine months ended September 30, 2022 and 2021 was as follows (in thousands):

Nine months ended

September 30,

2022 September 30,

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Financing cash flows for finance leases $ 433 $ 736

Other information related to the Company's leases as of June 30, 2022 and December 31, 2021 was as follows:

Other information related to the Company's leases as of September 30, 2022 and December 31, 2021 was as follows:

September 30,

2022 December 31,

5 unchanged sentences

Finance leases 3.20 % 4.15 %

Future minimum fixed lease payments under noncancelable leases at June 30, 2022 were as follows (in thousands):

Future minimum fixed lease payments under noncancelable leases at September 30, 2022 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Operating Finance

8 unchanged sentences

(16) INCOME TAXES

The Company's income tax provisions for the six months ended June 30, 2022 and 2021 reflect the Company's estimates of the effective rates expected to be applicable for the respective full years, adjusted for any discrete events, which are recorded in the period that they occur.

The Company's income tax provisions for the nine months ended September 30, 2022 and 2021 reflect the Company's estimates of the effective rates expected to be applicable for the respective full years, adjusted for any discrete events, which are recorded in the period that they occur.

These estimates are reevaluated each quarter based on the Company's estimated tax expense for the full year.

1 unchanged sentence

The Company intends to continue to maintain a valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the respective allowances.

During the three months ended September 30, 2022, the Company recognized a tax benefit of $ 6.8 M related to the release of a valuation allowance on the capital loss deferred tax asset related to its investment in AVCT.

The Company generated a capital loss from the cancellation of the AVCT Debenture Shares and Warrants, which it concluded will be carried back to offset capital gains recognized in a prior tax year.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (the "TCJA") eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them over a minimum of five years pursuant to IRC Section 174.

1 unchanged sentence

If this provision of the TCJA is not repealed or otherwise modified, it will materially reduce the Company's operating cash flows in 2022.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(17) COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

Effective for grants approved in 2017 and subsequently, interest was calculated at the higher of LIBOR plus 1.5 % to 2.75 %.

At June 30, 2022, the Company's maximum possible future royalties commitment, including $ 4.1 million of unpaid royalties accrued, was $ 31.3 million, including interest of $ 2.0 million, based on estimates of future product sales, grants received from the IIA not yet repaid, and management's estimation of products still to be sold.

At September 30, 2022, the Company's maximum possible future royalties commitment, including $ 4.6 million of unpaid royalties accrued, was $ 31.0 million , including interest of $ 1.5 million , based on estimates of future product sales, grants received from the IIA not yet repaid, and management's estimation of products still to be sold.

Research and Development Grants

2 unchanged sentences

The Company does not anticipate receiving material grants from the IIA in the foreseeable future.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company is often a party to disputes and legal proceedings that it considers routine and incidental to its business, including those described below.

The Company believes that it has meritorious defenses to the allegations made in the pending cases and intends to vigorously defend these lawsuits;

however, the Company is unable currently to forecast the ultimate outcome of these or similar matters.

Since it is difficult to predict the outcome of legal proceedings, it is possible that the ultimate outcomes could materially and adversely affect the Company’s business, financial position, results of operations or cash flows.

Accordingly, with respect to these proceedings, the Company is currently unable to reasonably estimate the possible loss or range of possible loss.

Miller Complaint.

On November 8, 2018, Ron Miller, a purported stockholder of the Company, filed a Class Action Complaint (the "Miller Complaint") in the United States District Court for the District of Massachusetts (the "Massachusetts District Court") against the Company and three of its former officers (collectively, the "Defendants"), claiming to represent a class of purchasers of Sonus common stock during the period from January 8, 2015 through March 24, 2015 and alleging violations of the federal securities laws.

6 unchanged sentences

On August 30, 2019, the Defendants filed a motion to dismiss the Miller Complaint and, on October 4, 2019, the Lead Plaintiffs filed an opposition to the motion to dismiss.

There was an oral argument on the motion to dismiss on February 12, 2020, but to date, the court has not ruled on the motion.

In addition, the Company is often a party to disputes and legal proceedings that it considers routine and incidental to its business.

Management does not expect the results of any of these actions to have a material effect on the Company's business or condensed consolidated financial statements.

There was an oral argument on the motion to dismiss on February 12, 2020, and on October 20, 2022 the court denied the motion to dismiss.

No schedule has been set by the court for this matter.

Charter Complaint.

On September 19, 2022, Charter Communications Operating, LLC (“Charter”) filed two complaints against two of our subsidiaries (Sonus Networks, Inc.

and Ribbon Communications Operating Company, Inc.) alleging breach of contract with respect to indemnification obligations purportedly owed to Charter in connection with Charter’s legal dispute with Sprint Communications Company L.P., which was settled by Charter in March 2022.

One complaint was filed in the Supreme Court of the State of New York, New York County;

the other was filed by Charter as well as co-Plaintiffs Charter Communications Holding Company, LLC and Bright House Networks, LLC, in the Superior Court of the State of Delaware in and for New Castle County.

In both suits, Charter is seeking monetary damages.

We have not yet filed an answer to Charter’s complaints, and no schedule has been set by either court.

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. Financial Statements