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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-11 · 93 added, 95 removed, 447 unchanged (30% of the section changed)

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Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors in its entirety in addition to other information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the Securities and Exchange Commission (“SEC”).

These are factors which, individually or in the aggregate, we think could cause our actual results to differ significantly from anticipated or historical results.

In addition to understanding the key risks described below, investors should understand that it is not possible to predict or identify all risk factors, and consequently, the following is not a complete discussion of all potential risks or uncertainties.

Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

Additionally, investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.

Risk Factors Summary

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• Our quarterly revenue and operating results are unpredictable and may fluctuate significantly quarter to quarter.

• The continuing COVID-19 pandemic may have a material adverse impact on our business, financial position and results of operations.

• Failure to compete successfully could impair our ability to increase revenues and/or remain profitable.

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• Worldwide efforts to contain capital spending and global economic conditions and uncertainties may have a material adverse impact on our business.

• Growing tensions between Russia and Ukraine could materially impact our sales to customers in that region.

• The military conflict between Russia and Ukraine could materially impact our sales to customers in that region.

• Conditions in Israel may materially and adversely affect our business.

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• The terms of our credit agreement could adversely affect our operating flexibility and pose risks of default, which would negatively impact our liquidity and operations.

• The value of the securities received in connection with the sale of our Kandy Communications Business is volatile and can significantly impact our financial results.

• Impairment of our goodwill or intangible assets may require us to record a significant charge to earnings.

• Failure to maintain appropriate internal controls in the future may adversely affect our stock price and our business.

Risks Related to Ownership of our Common Stock

• The choice of forum provision in our Certificate of Incorporation could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or agents.

• Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our common stock.

General Risk Factors

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Any such revenue shortfall would, therefore, have a significant effect on our operating results for that quarter.

The continuing COVID-19 pandemic and resulting effects on global economic conditions may have a material adverse impact on our business, financial position and results of operations.

In 2020, a novel strain of the coronavirus (COVID-19) was declared by the World Health Organization to be a global pandemic.

The COVID-19 pandemic has had a negative effect on the global economy, disrupting the various manufacturing, commodity and financial markets and increasing volatility, and has impeded global supply chains.

Continuing economic uncertainties as a result of the COVID-19 pandemic may cause our customers to restrict spending or delay purchases for an indeterminate period of time.

Travel restrictions imposed as a result of the pandemic have also made it more difficult to meet with existing and potential customers.

In addition, our ability to deliver our solutions as agreed with our customers depends on the ability of our global contract manufacturers, vendors, licensors, and other business partners to deliver products or perform services we have procured from them.

When the COVID-19 pandemic impairs the ability of our business partners to support us on a timely basis, or negatively impacts the demand for our customers’ other products and services, our ability to perform our customer contracts as well as the demand for our solutions may suffer.

In addition, disruptions from the COVID-19 pandemic has included the temporary closures of some of our facilities, as well as those of our contract manufacturers, vendors and suppliers.

This workforce disruption has caused, in some cases, the inability to obtain key components of our products, the disruption of logistics necessary to import, export and deliver our solutions.

Future waves and new variants of COVID-19, for which current vaccines may not be as effective or effective at all, could materially impact our business, financial position and results of operations, the degree to which will depend on future developments beyond our control.

This includes the continued effect of COVID-19 on economic conditions, as well as workforce disruptions due to illness or compliance with local health and safety measures.

If we fail to compete successfully against telecommunications equipment and networking companies, our ability to increase our revenue and remain profitable will be impaired.

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The market is shifting from an ecosystem dominated by a few large incumbent telecommunications equipment companies, such as Ericsson LM Telephone Company, Huawei Technologies Co.

and Nokia Corporation, to a market with competitors that are characterized by network virtualization, migration to the cloud, and open interfaces.

Ltd., Nokia Corporation, Ciena Corporation and Cisco Systems, Inc., to a market with competitors that are characterized by network virtualization, migration to the cloud, and open interfaces.

We believe this shift creates opportunities for us, as well as our direct competitors in telecommunications and networking.

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We rely on certain key customers, and our future success will depend on our ability to generate recurring business from our existing customers and to attract additional customers beyond our current customer base.

One customer, Verizon Communications Inc., contributed approximately 16% of our revenue in the year ended December 31, 2021.

One customer, Verizon, contributed approximately 15% of our revenue in the year ended December 31, 2022.

Our top five customers contributed approximately 34 % of our revenue in 2022.

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Consolidation in the telecommunications industry could harm our business.

The telecommunications industry, including many of our customers, has experienced consolidation, including, in the carrier space, the merger between T-Mobile US, Inc.

and Sprint Corporation (April 2020) and the acquisition of Blue Face Ltd.

by Comcast Corporation (January 2020).

Further, consolidation has also occurred in the telecommunications supplier and vendor space, including the proposed combination of ADTRAN, Inc.

and ADVA (expected to be completed in 2022), the acquisition of Acacia Communications, Inc.

The telecommunications industry, including many of our customers, has experienced consolidation, including, in the carrier space, the pending merger between Rogers Communications Inc.

and Shaw Communications Inc.

(announced in March 2021), the acquisition of certain Lumen Technologies assets by Brightspeed (2022), the merger between T-Mobile US, Inc.

and Sprint Corporation (2020) and the acquisition of Blue Face Ltd.

by Comcast Corporation (2020).

Further, consolidation has also occurred in the telecommunications supplier and vendor space, including the combination of ADTRAN, Inc.

and ADVA (2022), the acquisition of Acacia Communications, Inc.

by Cisco Systems, Inc.

(March 2021) and the closing of a strategic partnership between RingCentral, Inc.

(2021) and the closing of a strategic partnership between RingCentral, Inc.

and Avaya Holdings Corp.

(October 2019).

We expect this trend to continue.

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Restructuring activities could adversely affect our ability to execute our business strategy.

We recorded net restructuring expense of $11.7 million and $16.2 million in 2021 and 2020, respectively, including severance and related costs, facilities restructuring and accelerated amortization of lease assets.

We recorded restructuring expense of $10.8 million and $11.7 million in 2022 and 2021, respectively, including severance and related costs, facilities restructuring and accelerated amortization of lease assets.

In 2023, we expect to record additional restructuring expense of approximately $18 million as we look to further streamline operations and consolidate our global footprint to reflect, among other things, a greater percentage of our workforce working from home on a go-forward basis.

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Due to our reliance on significant customers, we are dependent on the continued financial strength of our customers.

If one or more of our significant customers experience financial difficulties, it could result in uncollectable accounts receivable and our loss of significant customers and anticipated revenue.

If one or more of our significant customers experience financial difficulties, it could result in uncollectible accounts receivable and our loss of significant customers and anticipated revenue.

Most of our sales are on an open credit basis, with typical payment terms of 30 to 90 days.

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We continue to enhance our sales strategy, which we expect will include more partner sales engagements to resell our products and services through authorized distributors, value-added resellers ("VARs"), system integrators and other channel partners.

Our future success is dependent upon establishing and maintaining successful relationships with a variety of distributors, VARs, system integrators and other channel partners.

Our future success is dependent upon establishing and maintaining successful relationships with a variety of distributors, VARs,

system integrators and other channel partners.

We may also need to pursue strategic partnerships with vendors that have broader technology or product offerings in order to compete with end-to-end solution providers.

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If our strategic plan, including our research and development of innovative new products and the improvement of existing products, is not aligned with our customers’ investments in the evolution of their networks, or if our products and services do not meet customers’ demands, customers may not buy our products or use our services.

We spend a significant amount of time, money and resources both developing new technology, products and solutions and acquiring new businesses or business assets to help keep up with rapid technology and market changes.

Our strategic plan

includes a continued shift in our investments from mature technologies that previously generated significant revenue for us toward certain next-generation technologies.

We spend a significant amount of time, money and resources developing new technology, products and solutions to help keep up with rapid technology and market changes.

Our strategic plan includes a continued shift in our investments from mature technologies that previously generated significant revenue for us toward certain networking technologies.

Our choices of specific technologies to pursue, and those to de-emphasize, may prove to be inconsistent with our customers' investment spending.

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If our products do not interoperate with those of our customers' networks, installations could be delayed or orders for our products could be canceled, which would seriously harm our gross margins and result in loss of revenue or customers.

We believe the telecommunications industry is in the early stages of a major architectural shift to the virtualization of networks.

We believe the telecommunications industry is in a major architectural shift to the virtualization of networks.

If the architectural shift does not occur, if it does not occur at the pace we predict, or if the products and services we have developed are not attractive to our customers after such shift takes place, our revenue could decline.

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These longer decision cycles and reduced expenditures may negatively impact our revenue or make it difficult for us to accurately predict our revenue, either of which could materially adversely affect our results of operations and cause our stock price to decline.

Virtualization of our product portfolio, particularly in our Cloud and Edge segment, to increasingly focus on software-based products could also adversely impact our revenue growth.

As we virtualize our product portfolio, we expect our margins to improve due to decreased costs tied to production and sales of our appliance products, however, our revenue may decline as a result of the decreases in sales of appliance products, many of which have generated higher revenue on a per-unit basis than certain of our software products.

Virtualization of our product portfolio, particularly in our Cloud and Edge segment, to increasingly focus on more software-based products could also adversely impact our revenue growth.

As we virtualize our product portfolio, we expect our margins

to improve due to decreased costs tied to production and sales of our appliance products, however, our revenue may decline as a result of the decreases in sales of appliance products, many of which have generated higher revenue on a per-unit basis than certain of our software products.

The market for some of our products depends on the availability and demand for other vendors' products.

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We rely on these strategic partners in the timely and successful deployment of our solutions to our customers.

If the products provided by these partners have defects or do not operate as expected, if the services provided by these partners are not completed in a timely manner, if our partners have organizational or supply issues, or if we do not effectively integrate and support products supplied by these strategic partners,

then we may have difficulty with the deployment of our solutions that may result in loss of, or delay in, revenue;

increased service, support and warranty costs and a diversion of development resources;

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If our contract manufacturers fail to perform, or if we change or consolidate manufacturers, we may fail to meet the demands of our customers and damage our customer relationships, which could materially adversely affect our business.

We currently rely on a number of large global contract manufacturers to assemble our products according to our specifications and to fulfill orders on a timely basis.

We currently rely on a small number of large global contract manufacturers to assemble our products according to our specifications and to fulfill orders on a timely basis.

Reliance on a third-party manufacturer involves a number of risks, including a lack of control over the manufacturing process, inventory management and the potential absence or unavailability of adequate capacity.

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If we or our contract manufacturers underestimate our requirements, we may not have an adequate supply, which could interrupt manufacturing of our products and result in delays in shipments and revenue.

If any of our sole or limited source suppliers experiences capacity constraints, work stoppages or other reductions or disruptions in output, it may not be able to meet, or may choose not to meet, our delivery schedules.

If any of our sole or limited source suppliers experience capacity constraints, work stoppages or other reductions or disruptions in output, it may not be able to meet, or may choose not to meet, our delivery schedules.

Moreover, we have agreed to compensate our contract manufacturers in the event of termination or cancellation of orders, discontinuance of product or excess material.

We currently do not have long-term supply contracts with our component suppliers and they are not required to supply us with components for any specified periods, in any specified quantities or at any set price, except as may be specified in a particular purchase order.

We generally do not have long-term supply contracts with our component suppliers and they are not required to supply us with components for any specified periods, in any specified quantities or at any set price, except as may be specified in a particular

purchase order.

In the event of a disruption or delay in supply or our inability to obtain components, we may not be able to develop an alternate source in a timely manner or at favorable prices, or at all.

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Additionally, any unforeseen increases in the prices of components could reduce our profitability or force us to increase our prices, which could result in a loss of customers or harm our ability to attract new customers and could have a material adverse effect on our results of operations.

For example, in the fourth quarter of 2021, we estimate that higher component costs, expedite and production fees and logistics expenses resulting from the global supply chain disruption reduced our gross margin by approximately 220 basis points.

Our customer contracts also generally allow customers to reschedule delivery dates or cancel orders within certain time frames before shipment without penalty and outside those times frames with a penalty.

Because of these and other factors, there are risks of excess or inadequate inventory that could negatively affect our expenses and results of operations.

If we are unable to correctly estimate future requirements for hardware products that we purchase from our third-party vendors that have reached the end of their life cycles, it could harm our operating results or business.

Some of the hardware products that we purchase from our third-party vendors have reached the end of their life cycles.

It may be difficult for us to maintain appropriate levels of the discontinued appliances to adequately ensure that we do not have a

shortage or surplus of inventory of these products.

If we do not correctly forecast the demand for such appliances, we could have excess inventory and may need to write off the costs related to such purchases and such write-offs could materially adversely affect our operating results.

If we are unable to correctly estimate future requirements for products and components that we purchase from our third-party vendors that have reached the end of their life cycles, it could harm our operating results or business.

Some of the products and components that we purchase from our third-party vendors have reached the end of their life cycles.

It may be difficult for us to maintain appropriate levels of the discontinued products or components to adequately ensure that we do not have a shortage or surplus of inventory of these products.

If we do not correctly forecast the demand for such products that utilize third-party components, we could have excess inventory and may need to write off the costs related to such purchases and such write-offs could materially adversely affect our operating results.

However, if we underestimate our forecast and our customers place orders to purchase more products than are available, we may not have sufficient inventory to support their needs.

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For example, the U.S.

Department of Defense ("DOD") has issued specific requirements for IP networking products for features and interoperability.

Department of Defense ("DOD") has issued specific requirements for IP networking

products for features and interoperability.

In order for our products to be used to connect to the DOD network, that product must pass a series of significant tests and be certified by the Joint Interoperability Test Command (“JITC”).

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Additional unanticipated costs may be incurred in the ECI Acquisition and the integration of the two companies’ businesses, or in future acquisitions.

While we expect that the elimination of duplicative

operating costs as well as the realization of other efficiencies related to the integration of the businesses should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term or at all.

While we expect that the elimination of duplicative operating costs as well as the realization of other efficiencies related to the integration of the businesses should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term or at all.

As part of the integration process, we may also attempt to divest certain assets of the combined company, which may not be possible on favorable terms, or at all, or if successful, may change the profile of the combined company.

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Any failure to hire, assimilate in a timely manner and retain key qualified personnel, particularly engineering and sales personnel, could impair our growth and make it difficult to meet key objectives, such as timely and effective product introductions.

In addition, our ability to attract and retain key employees could be adversely impacted if we do not have a sufficient number of shares available under the Amended and Restated 2019 Stock Incentive Plan to issue to our employees.

We may not be able to locate suitable employees for any key employee who leaves or offer employment to potential replacements on reasonable terms.

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None of our officers or key employees is bound by an employment agreement for any specific term.

The loss of the services of any of our executive officers or key employees could delay the development and introduction of, and negatively impact our ability to sell, our products and achieve our business objectives.

The loss of the services of any of our executive officers or key employees could

delay the development and introduction of, and negatively impact our ability to sell, our products and achieve our business objectives.

Man-made problems, such as terrorism, and natural catastrophic events may disrupt our operations and harm our operating results.

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A factor that significantly affects our operating results is the impact of economic conditions on the willingness of our current and potential customers to make capital investments.

Given the general uncertainty regarding global economic conditions and other factors, we believe that customers have tried to maintain or improve profitability through cost control and constrained capital spending, which places additional pressure on IT departments to demonstrate acceptable return on investment.

Given the general uncertainty regarding global economic conditions and other factors, such as inflation, rising interest rates and foreign exchange rate fluctuations, we believe that customers have tried to maintain or improve profitability through cost control and constrained capital spending, which places additional pressure on IT departments to demonstrate acceptable return on investment.

Some of our customers have canceled or delayed, and current and prospective customers may continue to cancel and delay, spending on the development or roll-out of capital and technology projects with us due to economic uncertainty and, consequently, our results of operations have been, and may continue to be, adversely affected.

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Our revenue is likely to decline in such circumstances, which may result in erosion of our profit margins and significant losses.

Moreover, economic conditions worldwide may contribute to slowdowns in the communications and networking industries, as well as to specific segments and markets in which we operate, particularly the wireline sector, resulting in, among other things, reduced demand for our products and services as a result of our customers choosing to refrain from building capital intensive networks;

Moreover, economic conditions worldwide may contribute to slowdowns in the communications and networking industries, as well as to specific segments and markets in which we operate, particularly the telecom sector, resulting in, among other things, reduced demand for our products and services as a result of our customers choosing to refrain from building capital intensive networks;

increased price competition for our products, not only from our competitors, but also as a consequence of customers disposing of unutilized products;

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The military action between Russia and Ukraine, and the sanctions imposed as a result, could materially impact our sales to customers in that region.

For 2021, approximately 6% of our sales was to customers in Russia, Ukraine and surrounding countries.

In February 2022, Russia commenced military action in Ukraine, and the uncertainty resulting from this military action and the threat for expansion of the conflict has resulted in some of our customers delaying purchases from us and is expected to result in additional delays or reductions in sales to customers in the impacted region.

In 2022, approximately 7 % of our sales were to customers in Eastern European countries, including the Ukraine, Russia, and surrounding countries.

Further, the U.S.

and other European countries have imposed sanctions against Russia in connection with the conflict.

While these sanctions are in place, we believe they will severely limit, if not prohibit, our ability to sell our products and services to customers in Russia and, if expanded, could impact our ability to collect on outstanding accounts receivable from such customers.

If the military action continues and the sanctions remain in place for an extended period, it could have a material impact on our financial results.

These sanctions currently prohibit our ability to sell certain products and services.

The sanctions continue to evolve and further changes in the current sanctions could further limit our ability to sell products and services to customers in Russia and our ability to collect on outstanding accounts receivable from such customers.

We attempt to mitigate some of the risk in this region by requiring a portion of the purchase orders to be paid in advance.

Since the start of the conflict, our customers have

continued to meet their obligations to pay us.

If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.

Conditions in Israel may materially and adversely affect the Company’s business.

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As a result, political, economic and military conditions in Israel may directly affect the Company’s business.

In recent years, there have been hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities.

In early 2023 there have been a number of changes proposed to the political system in Israel by the current government which, if implemented as planned, could lead to large-scale protests and additional uncertainty, negatively impacting the operating environment in Israel.

In addition, there continue to be hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities.

Popular uprisings in various countries in the Middle East and North Africa over the last few years has also affected the political stability of those countries and have led to a decline in the regional security situation.

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Our operations could also be disrupted by the absence for significant periods of one or more key employees or a significant number of other employees because of military service.

Some of our employees in Israel are obliged to perform military reserve duty, which generally accumulates over a period of three years from several days to up to a maximum of 84 days (and

up to 108 days, in special circumstances specified under applicable law) and, in certain emergency circumstances, employees may be called to immediate and unlimited active duty.

Some of our employees in Israel are obliged to perform military reserve duty, which generally accumulates over a period of three years from several days to up to a maximum of 84 days (and up to 108 days, in special circumstances specified under applicable law) and, in certain emergency circumstances, employees may be called to immediate and unlimited active duty.

In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists and it is possible that there will be similar large-scale military reserve duty call-ups in the future.

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An increase in the value of the U.S.

dollar could increase the real cost to

our customers of our products in those markets outside the United States where we often sell in dollars, and a weakened U.S.

dollar could increase the real cost to our customers of our products in those markets outside the United States where we often sell in dollars, and a weakened U.S.

dollar could increase the cost of local operating expenses and procurement of raw materials from sources outside the United States.

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Such cyberattacks and other cyber incidents are occurring more frequently, are constantly evolving, are becoming more sophisticated and can take many forms.

For example, we are aware of a third party gaining unauthorized access to a portion of our network in the first quarter of 2021, although we do not believe they were able to obtain any material internal or customer data or otherwise disrupt our information

systems before the intrusion was detected and remediated.

While we believe that we leverage appropriate detection and prevention systems and services and that we focus on continuous improvement based upon the latest attack vectors in the industry, we cannot guarantee that there will never be any information technology system failures, including future breaches of our or our third-party providers' data security measures through a cyberattack, other cyber incident or otherwise, or the theft or loss of laptops, other mobile devices or electronic records used to back up our systems or our third-party providers' systems, which could result in a disclosure of customer, employee, or our information or otherwise disrupt our ability to function in the normal course of business by potentially causing, among other things, delays in the fulfillment or cancellation of customer orders or disruptions in the manufacture or shipment of products or delivery of services, any of which could have a material adverse effect on our operating results.

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It also requires data controllers to be transparent and disclose to data subjects how their personal information is to be used;

imposes limitations on retention of personal data;

imposes limitations

on retention of personal data;

introduces mandatory data breach notification requirements;

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Under the FCPA and the UKBA, U.S.

companies, their subsidiaries, employees, senior officers and/or directors may be held liable for actions taken by strategic or

local partners or representatives.

companies, their subsidiaries, employees, senior officers and/or directors may be held liable for actions taken by strategic or local partners or representatives.

In addition, the U.S.

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The telecommunications industry is highly regulated and our business and financial condition could be adversely affected by changes in the regulations relating to the telecommunications industry.

Currently, there are few laws or regulations that apply directly to access to or delivery of voice services on IP networks.

Currently, there are few laws or regulations that apply

directly to access to or delivery of voice services on IP networks.

We could be adversely affected by regulation of IP networks and commerce in any country where we operate, including the United States.

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In addition, we may not be able to refinance our debt or obtain additional financing on favorable terms, or at all.

In addition, we are required to meet certain financial covenants customer for financings of this type, including a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Consolidated Net Leverage Ratio (each as defined in the 2020 Credit Agreement) which are tested on a quarterly basis.

In addition, we are required to meet certain financial covenants for financings of this type, including a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Consolidated Net Leverage Ratio (each as defined in the 2020 Credit Agreement) which are tested on a quarterly basis.

The maximum Consolidated Net Leverage Ratio covenant uses our EBITDA (calculated in accordance with the 2020 Credit Agreement) for the last 12 months (as of the testing date) to determine compliance.

While we remain in compliance with this covenant, sequential decreases in our EBITDA over the 12-month period compared to previous 12-month periods used for the calculation, as we experienced in the second half of 2021 and that may continue into the first quarter of 2022, could impact our ability to continue to satisfy this requirement in future periods if we are unable to obtain a waiver or further amendment to the terms of the covenant, or otherwise reduce our debt.

Our failure to comply with these covenants may result in the declaration of an event of default, which could cause us to be unable to borrow

under the credit facility or result in the acceleration of the maturity of indebtedness outstanding under the 2020 Credit Facility at such time.

While we were in compliance with the covenants at December 31, 2022, the maximum Consolidated Net Leverage Ratio and the minimum Consolidated Fixed Charge Coverage Ratio we are required to maintain under the 2020 Credit Agreement will decrease and increase, respectively, in future quarters.

As a result, it could impact our ability to continue to satisfy these requirements in future periods.

Our failure to comply with these covenants may result in the declaration of an event of default, which could cause us to be unable to borrow under the credit facility or result in the acceleration of the maturity of indebtedness outstanding under the 2020 Credit Facility at such time.

If we are prevented from borrowing or if we are unable to extend, renew or replace the credit facilities under the 2020 Credit Facility by the maturity dates, on favorable terms, or at all, this could have a material adverse effect on our liquidity and cause our business, operations and financial condition to suffer.

In addition, we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the indebtedness on terms acceptable to us, or at all.

The United Kingdom's Financial Conduct Authority, which regulates the London Inter-bank Offered Rate ("LIBOR"), has announced that it intends to stop encouraging or requiring banks to submit LIBOR rates after 2023, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve.

We have the option under the 2020 Credit Facility to determine our interest rate that includes either the LIBOR rate or the base rate.

While we also have the ability under our current credit facility to switch to a new or alternative benchmark rate, if LIBOR ceases to exist or the methods of calculating LIBOR change from their current form, we may no longer have the ability to elect the LIBOR rate option under the 2020 Credit Facility, and our current or future indebtedness may be adversely affected.

This could impact our interest costs and our ability to borrow additional funds under the 2020 Credit Facility.

We cannot be sure that our current cash and available borrowings under our 2020 Credit Facility will be sufficient to meet our future needs.

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We may not be able to refinance our debt or obtain additional financing on favorable terms or at all.

The value of the securities received in connection with the sale of our cloud-based enterprise communications service is based on the ongoing operations of the acquiring company and is volatile.

Quarterly fluctuations in price can significantly impact our financial results.

In connection with our sale of the Kandy Communications Business to AVCT, we received 43,778 units of AVCT securities (the "AVCT Units"), with each AVCT Unit consisting of (1) $1,000 in principal amount of AVCT's Series A-1 convertible debentures (the "Debentures");

and (ii) one warrant to purchase 100 shares of AVCT common stock, $0.0001 par value (the "Warrants.

In the third quarter of 2021, the Debentures were converted, pursuant to their terms, into shares of AVCT common stock (the "AVCT Shares").

Since AVCT's common stock is publicly traded on NASDAQ, under U.S.

GAAP ("GAAP"), we elected the fair value option to record our investment in AVCT, under which we value the AVCT Shares on our balance sheet based on the trading price of the AVCT common stock.

Such trading price is also used to value the Warrants on an if-converted basis.

We are also required under GAAP to revalue and mark to market the value of the AVCT Shares and Warrants on a quarterly basis, with any changes in value reflected in our statements of operations and, therefore, impacting our earnings.

AVCT's stock price on NASDAQ has been volatile, with the closing price ranging from $0.85 to $9.26 during the year ended December 31, 2021.

As a result, our financial statements may reflect significant swings in the value of the AVCT Shares and Warrants held on our balance sheet, which could have a material impact on our financial results, even though such changes in value would not reflect our current operating business.

We continue to rely on AVCT for the provision of products and services to a number of customers we jointly share.

AVCT reported that as of September 30, 2021 (the last period for which AVCT has reported financial results as of the date of this Annual Report on Form 10-K), AVCT's current liabilities exceeded its current assets by $26.6 million.

AVCT has announced a number of initiatives designed to increase its liquidity, including a proposed sale of its Computex business, and AVCT believes that cash from continuing operations, taken together with these initiatives, will be sufficient to continue to fund its operations.

However, if such activities are not successful, AVCT may be required to take other actions that could materially negatively affect the value of our investment in AVCT.

Disruptions in AVCT's operations could also result in claims by our customers for failure to satisfy contractual service requirements and/or require us to find alternative solutions in order to satisfy our customer obligations.

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

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Goodwill is tested annually for impairment and, along with our intangible assets, is also reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Based on the results of our recently completed impairment test, we determined that the carrying value of our IP Optical Networks segment exceeded its fair value and accordingly, we recorded a goodwill impairment charge of $116.0 million, which had a material impact on both our net loss and loss per share for the year ended December 31, 2021.

Based on the results of impairment testing for 2021, we determined that the carrying value of our IP Optical Networks segment exceeded its fair value and accordingly, we recorded a goodwill impairment charge of $116.0 million, which had a material impact on both our net loss and loss per share for the year ended December 31, 2021.

Based on the results of our 2019 annual impairment test, we determined that our carrying value for goodwill exceeded our fair value and accordingly, we recorded a goodwill impairment charge of $164.3 million, which had a material impact on both our net loss and loss per share for the year ended December 31, 2019.

may be considered a change in circumstances indicating that the carrying value of our goodwill or intangible assets may not be recoverable include significant underperformance relative to plan or long-term projections, strategic changes in business strategy, significant negative industry or economic trends, significant change in circumstances relative to a large customer, significant decline in our stock price for a sustained period and decline in our market capitalization to below net book value.

Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or intangible assets may not be recoverable include significant underperformance relative to plan or long-term projections, strategic changes in business strategy, significant negative industry or economic trends, significant change in circumstances relative to a large customer, significant decline in our stock price for a sustained period and decline in our market capitalization to below net book value.

Any additional material impairment of goodwill or intangible assets could adversely affect our results of operations.

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Any such consequence or other negative effect of our inability to meet our reporting requirements or comply with legal and regulatory requirements, as well as any disclosure of an accounting, reporting or control issue, could adversely affect the trading price of our common stock and our business.

Risks Related to the Ownership of our Common Stock

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our common stock.

Provisions of the Company’s Certificate of Incorporation and By-laws may have the effect of delaying or preventing a change of control or changes in our management, including, generally, provisions that:

• do not provide cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

• allow only the Board to fill a vacancy on the Board, however occurring, including a vacancy resulting from an enlargement of the Board;

• require advance notice for stockholder proposals to be brought before a meeting of stockholders, including proposed nominations of persons for election to the board of directors;

• only allow stockholder action to be taken at an annual or special meeting;

• require a vote of holders of at least 66 2/3% of the voting power of our outstanding voting stock entitled to vote thereon to amend or repeal certain provisions of the Company’s Certificate of Incorporation or its By-laws;

• limit the ability of stockholders to call a special meeting;

• authorize blank check preferred stock.

These provisions may make it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

In addition, pursuant to our Certificate of Incorporation, we have expressly elected not to be governed by Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with a stockholder owning 15% or more of our outstanding voting stock, unless the stockholder has held the stock for a period of at least three years.

Instead, the Certificate of Incorporation provides that, notwithstanding any other provisions of the DGCL or Certificate of Incorporation, and subject to limited exceptions, we shall not engage in any business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder unless:

(i) the Board has approved, before the acquisition time, either the business combination or the transaction that resulted in the person becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owns at least 85% of the corporation’s voting stock at the time the transaction commenced (excluding for such purposes any shares owned by directors who are officers and shares owned by employee stock plans in which participants do not have the right to determine confidentially whether shares will be tendered in a tender or exchange offer) or (iii) at or after the person or entity becomes an interested stockholder, the business combination is approved by two-thirds of the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships, and by a majority of the independent directors (as defined in the Stockholders Agreement (as defined below)).

This could delay or prevent a change of control transaction or discourage a potential acquirer from pursuing such a transaction, which transaction might have otherwise been of benefit to the other stockholders.

The choice of forum provision in our Certificate of Incorporation could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or agents.

Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the “Court of Chancery”) is, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Company to the Company or the Company's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim arising pursuant to any provision of the Company’s Certificate of Incorporation or the Company’s By-laws or governed by the internal affairs doctrine.

The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or agents, which may discourage such lawsuits against us and our directors, officers and agents.

Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

General Risk Factors

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We have also been named as a defendant in securities class action and stockholder derivative lawsuits and have also been subject to investigations by the government.

We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these lawsuits.

For more information on currently pending litigation, please see "Part I, Item 3.

Legal Proceedings." We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these lawsuits.

Defending against litigation or government investigation may require significant attention and resources of management.

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The Stockholders Agreement sets forth certain arrangements and contains various provisions relating to board size, board representation, standstill restrictions and transfer restrictions as further described therein, including the right of the JPM Stockholders and Swarth to each designate up to three directors for nomination to our nine-member board of directors, subject to the JPM Stockholders and Swarth maintaining certain levels of beneficial ownership of our common stock.

Therefore, the JPM Stockholders and Swarth will be able to exert significant influence over matters requiring board approval, and our stockholders other than the JPM Stockholders and Swarth will have limited or no ability to influence the outcome of certain key transactions.

Therefore, the JPM Stockholders and Swarth will be able to exert significant influence over

matters requiring board approval, and our stockholders other than the JPM Stockholders and Swarth will have limited or no ability to influence the outcome of certain key transactions.

The interests of the parties to the Stockholders Agreement may differ from those of other holders of our common stock.

Additionally, the Company entered into a First Amended and Restated Registration Rights Agreement with the JPM Stockholders and Swarth.

Additionally, the Company is party to a Second Amended and Restated Registration Rights Agreement, dated as of August 12, 2022, with the JPM Stockholders, Swarth and certain other stockholders (the "Registration Rights Agreement").

The JPM Stockholders and Swarth collectively own approximately 47% of our common stock as of December 31, 2022, and may decide to sell their shares in bulk or from time to time, except as provided under the Stockholders Agreement, which timing we cannot control.

The sale of shares by the JPM Stockholders and/or Swarth may increase the volatility of our stock price, and our stock price could decline as a result.

The sale of shares by these stockholders may increase the volatility of our stock price, and our stock price could decline as a result.

Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover, even if such a transaction would be beneficial to our stockholders.

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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