What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-15 compared with 2023-10-26 · 267 added, 391 removed, 656 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

2024 December 31,

15 unchanged sentences

Current portion of term debt $ 228,168 $ 35,102

Revolving credit facility 10,000 —

Accounts payable 66,847 85,164

6 unchanged sentences

Preferred stock liability, $ 0.01 par value per share;

10,000,000 shares authorized, 55,000 shares issued and outstanding at September 30, 2023 ($ 56,650 liquidation preference);

none issued and outstanding at December 31, 2022

10,000,000 shares authorized, 55,000 shares issued and outstanding ($ 56,650 liquidation preference)

56,204 53,337

Operating lease liabilities, net of current 36,768 38,711

7 unchanged sentences

240,000,000 shares authorized;

171,417,372 shares issued and outstanding at September 30, 2023;

172,714,429 shares issued and outstanding at March 31, 2024;

172,083,667 shares issued and outstanding at December 31, 2023

8 unchanged sentences

(in thousands, except per share data)

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

2024 March 31,

Product $ 87,610 $ 93,318

15 unchanged sentences

Total operating expenses 105,441 116,591

Income (loss) from operations 856 ( 3,296 ) ( 40,955 ) ( 49,589 )

Loss from operations ( 13,486 ) ( 35,189 )

Interest expense, net ( 5,987 ) ( 6,422 )

Other expense, net ( 2,620 ) ( 3,732 ) ( 536 ) ( 42,760 )

Other (expense) income, net ( 7,513 ) 4,772

Loss before income taxes ( 26,986 ) ( 36,839 )

11 unchanged sentences

(in thousands)

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

2024 March 31,

Net loss $ ( 30,361 ) $ ( 38,305 )

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on interest rate swap, net of reclassifications and amortization into earnings ( 1,322 ) 1,726 ( 8,544 ) 21,248

Reclassification of gain to other expense, net upon sale of interest rate swap — — ( 5,099 ) —

Unrealized loss on interest rate swap, net of reclassifications and amortization into earnings ( 1,321 ) ( 5,900 )

Reclassification of gain to other income (expense), net upon sale of interest rate swap — ( 5,099 )

Foreign currency translation adjustments ( 116 ) ( 151 )

Employee retirement benefits — 142 — ( 742 )

Other comprehensive income (loss), net of tax ( 1,325 ) 1,724 ( 14,231 ) 19,349

Other comprehensive loss, net of tax ( 1,437 ) ( 11,150 )

Comprehensive loss, net of tax $ ( 31,798 ) $ ( 49,455 )

3 unchanged sentences

(in thousands, except shares)

Three months ended September 30, 2023

Three months ended March 31, 2024

Additional other Total

1 unchanged sentence

Shares Amount capital deficit (loss) income equity

Balance at July 1, 2023 170,958,400 $ 17 $ 1,950,079 $ ( 1,513,528 ) $ 17,679 $ 454,247

Balances, January 1, 2024 172,083,667 $ 17 $ 1,958,909 $ ( 1,519,950 ) $ 13,787 $ 452,763

Exercise of stock options 8,624 17 17

5 unchanged sentences

Net loss ( 30,361 ) ( 30,361 )

Balance at September 30, 2023 171,417,372 $ 17 $ 1,954,586 $ ( 1,527,029 ) $ 16,354 $ 443,928

Nine months ended September 30, 2023

Balances, March 31, 2024 172,714,429 $ 17 $ 1,962,602 $ ( 1,550,311 ) $ 12,350 $ 424,658

Three months ended March 31, 2023

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit (loss) income equity

Balance at January 1, 2023 168,324,995 $ 17 $ 1,941,569 $ ( 1,453,744 ) $ 30,585 $ 518,427

Shares Amount capital deficit income equity

Balances, January 1, 2023 168,324,995 $ 17 $ 1,941,569 $ ( 1,453,744 ) $ 30,585 $ 518,427

Exercise of stock options 573 1 1

5 unchanged sentences

Net loss ( 38,305 ) ( 38,305 )

Balance at September 30, 2023 171,417,372 $ 17 $ 1,954,586 $ ( 1,527,029 ) $ 16,354 $ 443,928

See notes to the unaudited condensed consolidated financial statements.

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except shares)

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

Other comprehensive income 1,724 1,724

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

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

Exercise of stock options 708 1 1

Vesting of restricted stock units 2,808,137 —

Vesting of performance-based stock units 179,184 —

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

Other comprehensive income 19,349 19,349

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

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

Balances, March 31, 2023 169,229,979 $ 17 $ 1,945,525 $ ( 1,492,049 ) $ 19,435 $ 472,928

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine months ended

September 30,

2023 September 30,

Three months ended

2024 March 31,

Cash flows from operating activities:

Net loss $ ( 30,361 ) $ ( 38,305 )

Adjustments to reconcile net loss to cash flows used in operating activities:

Adjustments to reconcile net loss to cash flows provided by operating activities:

Depreciation and amortization of property and equipment 3,394 3,510

4 unchanged sentences

Deferred income taxes ( 2,620 ) ( 6,048 )

Decrease in fair value of investments — 41,291

Gain on sale of swap — ( 7,301 )

2 unchanged sentences

Dividends accrued on preferred stock liability 1,355 —

Foreign currency exchange losses 1,174 830

Foreign currency exchange (gains) losses 1,144 ( 2,185 )

Changes in operating assets and liabilities:

5 unchanged sentences

Deferred revenue ( 7,986 ) 6,924

Net cash used in operating activities ( 3,052 ) ( 42,462 )

Net cash provided by operating activities 13,100 11,133

Cash flows from investing activities:

6 unchanged sentences

Principal payments of term debt ( 5,014 ) ( 80,015 )

Principal payments of finance leases — ( 433 )

Payment of debt issuance costs — ( 1,562 )

Proceeds from equity offering — 52,067

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

Proceeds from issuance of preferred stock and warrant liabilities — 53,350

Proceeds from the exercise of stock options 17 1

Payment of tax withholding related to net share settlements of restricted stock awards ( 3,912 ) ( 2,684 )

Net cash (used in) provided by financing activities ( 32,163 ) 6,207

Payment of tax obligations related to vested stock awards and units ( 846 ) ( 1,893 )

Net cash used in financing activities ( 5,843 ) ( 30,119 )

Effect of exchange rate changes on cash and cash equivalents ( 293 ) 171

Net decrease in cash and cash equivalents ( 42,761 ) ( 50,550 )

Net increase (decrease) in cash and cash equivalents 4,301 ( 21,228 )

Cash and cash equivalents, beginning of year 26,630 67,262

Cash and cash equivalents, end of period $ 30,931 $ 46,034

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

Nine months ended

September 30,

2023 September 30,

Supplemental disclosure of cash flow information:

4 unchanged sentences

Capital expenditures incurred, but not yet paid $ 1,889 $ 1,579

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

Inventory transfers to property and equipment $ 507 $ 656

Supplemental disclosure of non-cash financing activities:

Total fair value of restricted stock awards, restricted stock units and performance-based stock units on date vested $ 13,454 $ 9,092

Fair value of vested restricted and performance-based stock grants $ 2,610 $ 5,332

See notes to the unaudited condensed consolidated financial statements.

11 unchanged sentences

Interim results are not necessarily indicative of results for a full year or any future interim period.

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, 2022, as amended (the "Annual Report"), which was filed with the SEC on March 31, 2023 .

Private Placement Offering

On March 28 , 2023, the Company issued 55,000 shares of newly designated Series A Preferred Stock (the "Preferred Stock") to investors in a private placement offering at a price of $ 970 per share, along with 4.9 million warrants (the "Warrants") to purchase shares of the Company's common stock, par value $ 0.0001 per share (the "Private Placement"), at the exercise price of $ 3.77 per share.

The proceeds from the Private Placement were approximately $ 53.4 million, including approximately $ 10 million from existing related party stockholders (See Note 11).

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, 2023, as amended (the "Annual Report"), which was filed with the SEC on February 28, 2024 .

Operating Segments

4 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 nine months ended September 30, 2023, except for the addition of the accounting policy below for the Preferred Stock and Warrants issued in the Private Placement on March 28, 2023.

Preferred Stock and Warrants

The Company accounts for the Preferred Stock and Warrants as liability-classified instruments based on an assessment of their specific terms in accordance with ASC Topic 480, Distinguishing Liabilities from Equity .

The fair value option was elected for the Preferred Stock, as the Company considers fair value to best reflect the expected future economic value.

These liabilities are remeasured to fair value at each reporting date using the same valuation methodology applied upon issuance.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The value of the Preferred Stock is calculated using the Black-Derman-Toy (BDT) stochastic yield lattice model to capture the optimal timing of repayment, increasing dividend rate and other features, and the value of the Warrants is calculated using the Black-Scholes Pricing Model.

Changes in the fair value of the Preferred Stock and Warrants are reported as Other expense, net in the Company's condensed consolidated statements of operations.

There were no material changes to the significant accounting policies during the three months ended March 31, 2024.

Principles of Consolidation

2 unchanged sentences

Use of Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires Ribbon to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements include accounting for business combinations, revenue recognition for multiple element arrangements, inventory valuations, assumptions used to determine the fair value of stock-based compensation and the Preferred Stock and Warrants , intangible asset and goodwill valuations, including impairments, legal contingencies and recoverability of Ribbon's net deferred tax assets and the related valuation allowances.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements include revenue recognition for multiple element arrangements, inventory valuations, assumptions used to determine the fair value of stock-based compensation and the Preferred Stock and Warrants , intangible asset and goodwill valuations, including impairments, warranty accruals, legal contingencies and recoverability of Ribbon's net deferred tax assets and the related valuation allowances.

Ribbon regularly assesses these estimates and records changes in estimates in the period in which they become known.

Ribbon bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Ribbon bases its

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Actual results could differ from those estimates.

4 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.

Factoring of accounts receivable and associated fees for the three and nine months ended September 30, 2023 and 2022 were as follows (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Factoring of accounts receivable and associated fees for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

Three months ended

2024 March 31,

Accounts receivable sold 20,992 21,061

1 unchanged sentence

Net cash proceeds 20,601 20,606

Going Concern Assessment and Management Plans

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.

The Company's 2020 Credit Facility (as defined in Note 9) requires quarterly payments of $ 10.0 million each in the second, third and fourth quarters of 2024, with the remaining balance of $ 200.4 million due on March 3, 2025.

The Company does not have sufficient cash on hand or available liquidity to repay the $ 200.4 million due on March 3, 2025.

In response to these conditions, management's plans include refinancing the 2020 Credit Facility.

The Company has entered into a binding commitment letter to refinance the 2020 Credit Facility.

See Note 20 - Subsequent Event.

The refinance contemplated by the binding commitment letter is expected to close no later than June 30, 2024.

However, because the credit facility contemplated by the commitment letter has not yet been finalized, it cannot be deemed to be within the Company's control.

As a result, such plans cannot be deemed probable and do not alleviate the substantial doubt raised about the Company's ability to continue as a going concern.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Recent Accounting Pronouncements

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 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

In December 2023, the Financial Accounting Standards Board (the "FASB") issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which increases the disclosure requirements around rate reconciliation information and certain types of income taxes companies are required to pay.

ASU 2023-09 will be effective for the Company beginning in 2025, with early adoption permitted.

The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which improves reportable segment disclosure requirements, including enhancement of the

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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 was effective for the Company January 1, 2023.

The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which amends ASC 805, Business Combinations (Topic 805) , to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606) ("ASC 606").

Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date.

While primarily related to contract assets and contract liabilities that were accounted for by the acquiree in accordance with ASC 606, ASU 2021-08 also applies to contract assets and contract liabilities from other contracts to which the provisions of ASC 606 apply, such as contract liabilities from the sale of nonfinancial assets within the scope of ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) .

ASU 2021-08 was effective for the Company January 1, 2023.

The Company believes that the adoption of ASU 2021-08 could have a material impact on its consolidated financial statements for periods including and subsequent to significant business acquisitions.

disclosures of significant segment expenses and interim disclosure requirements, to enable investors to better understand an entity's overall performance and assess potential future cash flows.

ASU 2023-07 will be effective for the Company annually beginning in 2024 and on an interim basis beginning in 2025, with early adoption permitted.

The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC's disclosure Update and Simplification Initiative (“ASU 2023-06”), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification.

This ASU was issued in response to, and to align GAAP with, the SEC's August 2018 final rule that updates and simplifies disclosure requirements.

The effective date for the Company for each amendment will be the date on which the SEC's removal of that related disclosure requirement becomes effective, with early adoption prohibited.

The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

On February 1, 2023, the FASB staff noted that they believe that the Pillar 2 tax, established by the OECD and intended to apply for tax years beginning in 2024, would be an alternative minimum tax and therefore deferred tax assets would not need to be recognized related to this parallel taxing system.

On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax.

Under an additional transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax will not be applied by any constituent entity's jurisdiction of residence with respect to income earned by a company's ultimate parent entity in its jurisdiction of residence, if the ultimate parent entity's jurisdiction has a corporate tax rate of at least 20%.

This transition safe harbor will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026.

The Company is closely monitoring developments and evaluating the impacts these new rules will have on its tax rate, including eligibility to qualify for these safe harbor rules.

Based upon preliminary calculations for calendar year 2024, the Company anticipates that it will meet the safe harbors in most jurisdictions, and any remaining top-up tax should be immaterial.

(2) EARNINGS (LOSS) PER SHARE

2 unchanged sentences

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

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

2024 March 31,

Weighted average shares outstanding - basic 172,428 168,541

1 unchanged sentence

Weighted average shares outstanding - diluted 172,428 168,541

Options to purchase the Company's common stock and unvested restricted and performance-based stock units aggregating 14.4 million shares were excluded from the computation of diluted loss per share for the three and nine months ended September 30, 2023 and 2022, because their effect would have been antidilutive.

As of September 30, 2023, the potential number of dilutive shares from the Warrants totaled 4,858,090 shares.

However, there was no impact on weighted average shares outstanding from these Warrants for the three and nine months ended September 30, 2023 as the average share price of the Company's common stock in each period was below the exercise price of $ 3.77 per share and their effect would have been antidilutive.

Dividends payable on the Preferred Stock are not an adjustment to net income (loss) used for the calculation of diluted earnings (loss) per share as these dividends are included in the fair value adjustment of the Preferred Stock which is reflected in Other expense, net.

Options to purchase the Company's common stock and unvested restricted and performance-based stock units aggregating 12.1 million and 11.9 million shares were excluded from the computation of diluted loss per share for the three months ended March 31, 2024 and 2023, respectively, because their effect would have been antidilutive.

The proceeds from the Private Placement were approximately $ 53.4 million, including approximately $ 10 million from existing related party stockholders (See Note 11).

As of March 31, 2024, the potential number of dilutive shares from the Warrants totaled 4.9 million shares.

However, there

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

was no impact on weighted average shares outstanding from these Warrants for the three months ended March 31, 2024 as the average share price of the Company's common stock was below the exercise price of $ 3.77 per share and their effect would have been antidilutive.

For the three months ended March 31, 2023, the potential effect from the Warrants on weighted average shares outstanding for the calculation of diluted earnings (loss) per share was de minimis.

(3) INVENTORY

Inventory at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30,

Inventory at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

2024 December 31,

5 unchanged sentences

(4) INTANGIBLE ASSETS AND GOODWILL

The Company's intangible assets at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30, 2023 Weighted average amortization period

The Company's intangible assets at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024 Weighted average amortization period

(years) Cost Accumulated

15 unchanged sentences

9.51 $ 618,956 $ 380,869 $ 238,087

Estimated future amortization expense for the Company's intangible assets at September 30, 2023 was as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Estimated future amortization expense for the Company's intangible assets at March 31, 2024 was as follows (in thousands):

Years ending December 31,

1 unchanged sentence

Thereafter 28,444

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

There were no changes to the carrying value of the Company's goodwill in the nine months ended September 30, 2023 and 2022.

The components of goodwill at September 30, 2023 and 2022 were as follows (in thousands):

There were no changes to the carrying value of the Company's goodwill in the three months ended March 31, 2024 and 2023.

The components of goodwill at both March 31, 2024 and 2023 were as follows (in thousands):

Cloud and Edge IP Optical Networks Total

Balance at September 30, 2023

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

1 unchanged sentence

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

Balance at September 30, 2022

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

Accumulated impairment losses ( 167,406 ) ( 116,000 ) ( 283,406 )

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

(5) INVESTMENTS AND FAIR VALUE HIERARCHY

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

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 AVCT 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 Company's investment in AVCT (the "AVCT Investment") was comprised of the Debentures and AVCT Warrants for periods prior to the Debenture Conversion Date and the Debenture Shares and AVCT 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 AVCT 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 AVCT 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, 2023 and December 31, 2022 in the amount of $ 2.8 million and $ 3.9 million, respectively.

The Company had no investment in AVCT as of September 30, 2023 or December 31, 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 carrying amounts of the Company's financial instruments approximate their fair values and include cash equivalents, accounts receivable, accounts payable and borrowings under a revolving credit facility.

Ribbon's term debt balance as of September 30, 2023 and December 31, 2022 of $ 240.4 million and $ 330.4 million, respectively, had a fair value of approximately $ 239.5 million and $ 323.0 million, respectively.

Our Preferred Stock and Warrants liabilities had a combined fair value of $ 54.9 million as of September 30, 2023, including cumulative dividends on the Preferred Stock of $ 2.6 million.

(5) FAIR VALUE HIERARCHY

The carrying amounts of the Company's cash equivalents, accounts receivable, accounts payable and borrowings under a revolving credit facility in the condensed consolidated balance sheets approximates fair value due to the immediate or short-term nature of these financial instruments.

Ribbon's term debt balance as of March 31, 2024 and December 31, 2023 of $ 230.4 million and $ 235.4 million, respectively, had a fair value of approximately $ 231.5 million and $ 235.1 million, respectively.

Our Preferred Stock and Warrants liabilities had a combined fair value of $ 62.1 million as of March 31, 2024, including cumulative dividends on the Preferred Stock of $ 5.3 million.

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.

2 unchanged sentences

A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

value hierarchy is as follows:

The fair value hierarchy is as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

The Company had no assets or liabilities fair valued using Level 1 input at March 31, 2024 or December 31, 2023.

Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).

At December 31, 2023, the Company determined the fair value of its defined benefit plans' assets using Level 2 input.

There were no significant changes to the Company's defined benefit plans' assets during the three months ended March 31, 2024 that required the calculation of their fair value as of March 31, 2024.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

At March 31, 2024 and December 31, 2023, the fair value of the Company's Preferred Stock and Warrants were determined using Level 3 input.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(6) ACCRUED EXPENSES AND OTHER

Accrued expenses at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30,

Accrued expenses at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

2024 December 31,

5 unchanged sentences

(7) WARRANTY ACCRUALS

The changes in the Company's accrual balance in the nine months ended September 30, 2023 were as follows (in thousands):

The changes in the Company's accrual balance in the three months ended March 31, 2024 were as follows (in thousands):

Balance at January 1, 2024 $ 12,243

1 unchanged sentence

Settlements ( 1,334 )

Balance at September 30, 2023 $ 11,994

Balance at March 31, 2024 $ 12,256

(8) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES

The Company recorded restructuring and related expense aggregating $ 2.7 million and $ 1.3 million in the three months ended September 30, 2023 and 2022, respectively, and $ 13.9 million and $ 9.0 million in the nine months ended September 30, 2023 and 2022, respectively.

The Company recorded restructuring and related expense aggregating $ 3.1 million and $ 6.9 million in the three months ended March 31, 2024 and 2023, 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 amortization expense.

3 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 record a liability for the estimated future variable lease costs.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Accelerated amortization of lease assets is recognized from the date that the Company commences the plan to fully or partially vacate a facility, for which there is no intent or ability to enter into a sublease, through the final vacate date.

Accelerated amortization of lease assets that are included as a component of restructuring and related expense are excluded from the restructuring accrual activity tables below, as the liability for lease payments for these facilities is included as a component of current and noncurrent Operating lease liabilities in the Company's condensed consolidated balance sheets at September 30, 2023 and December 31, 2022 (see Note 16).

Accelerated amortization of lease assets that are included as a component of restructuring and related expense are excluded from the restructuring accrual activity tables below, as the liability for lease payments for these facilities is included as a component of current and noncurrent Operating lease liabilities in the Company's condensed consolidated balance sheets at March 31, 2024 and December 31, 2023 (see Note 16).

The Company may incur additional future expense if it is unable to sublease other locations included in the Company's facilities consolidation initiatives.

Restructuring and related expense for the three and nine months ended September 30, 2023 and 2022 was comprised of the following (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Restructuring and related expense for the three months ended March 31, 2024 and 2023 was comprised of the following (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended

2024 March 31,

Severance and related costs $ 1,616 $ 5,708

4 unchanged sentences

On February 22, 2023, the Company's Board of Directors approved a strategic restructuring program (the "2023 Restructuring Plan") to streamline the Company's operations in order to support the Company's investment in critical growth areas.

The 2023 Restructuring Plan is expected to include, among other things, charges related to a workforce reduction.

The 2023 Restructuring Plan includes, among other things, charges related to a workforce reduction.

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

The Company recorded restructuring and related expense of $ 0.9 million and $ 9.4 million in the three and nine months ended September 30, 2023, respectively, in connection with the 2023 Restructuring Plan entirely for severance related costs.

A summary of the 2023 Restructuring Plan accrual activity for the nine months ended September 30, 2023 is as follows (in thousands):

In connection with the 2023 Restructuring Plan, the Company recorded restructuring and related expense of $ 1.6 million and $ 5.7 million in the three months ended March 31, 2024 and 2023, respectively, consisting entirely of severance related costs.

A summary of the 2023 Restructuring Plan accrual activity for the three months ended March 31, 2024 is as follows (in thousands):

2024 Initiatives

payments Net transfer to operating lease accounts Balance at

September 30, 2023

March 31, 2024

Severance $ 671 $ 1,616 $ ( 1,284 ) $ — $ 1,003

3 unchanged sentences

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 $ 1.9 million and $ 4.6 million in the three and nine months ended September 30, 2023, respectively, in connection with the 2022 Restructuring Plan.

The amount for the three months ended September 30, 2023 was comprised of $ 1.7 million for facilities-related costs, and $ 0.2 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease.

The amount for the nine months ended September 30, 2023 was comprised of $ 3.8 million for facilities-related costs and $ 0.8 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, 2023 is as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company recorded restructuring and related expense of $ 1.4 million and $ 1.2 million in the three months ended March 31, 2024 and 2023, respectively, in connection with the 2022 Restructuring Plan.

The amount for the three months ended March 31, 2024 was comprised of $ 1.4 million for facilities-related costs .

The amount for the three months ended March 31, 2023 was comprised of $ 1.0 million for variable and other facilities-related costs and $ 0.2 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 three months ended March 31, 2024 is as follows (in thousands):

2024 Initiatives

payments Net transfer to operating lease accounts Balance at

September 30, 2023

Severance $ 1,164 $ — $ ( 1,010 ) $ — $ 154

payments Balance at

March 31, 2024

Variable and other facilities-related costs $ 468 1,449 ( 1,495 ) $ 422

Accelerated amortization of lease assets due to cease-use — 785 — ( 785 ) —

$ 2,054 $ 4,569 $ ( 5,158 ) $ ( 785 ) $ 680

Balance Sheet Classification

The current portions of accrued restructuring were $ 2.0 million and $ 1.3 million at September 30, 2023 and December 31, 2022, respectively, and are included as components of Accrued expenses in the condensed consolidated balance sheets.

The current portions of accrued restructuring were $ 1.4 million and $ 1.1 million at March 31, 2024 and December 31, 2023, respectively, and are included as components of Accrued expenses in the condensed consolidated balance sheets.

The long-term portions of accrued restructuring are included as components of Other long-term liabilities in the condensed consolidated balance sheets.

The long-term portions of accrued restructuring were $ 1.2 million and $ 2.0 million at September 30, 2023 and December 31, 2022, respectively.

The long-term portions of accrued restructuring were $ 1.0 million and $ 1.1 million at March 31, 2024 and December 31, 2023, respectively.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

2020 Credit Facility

3 unchanged sentences

The 2020 Credit Facility originally provided for $ 500 million of commitments from the Lenders to the Borrower, comprised of $ 400 million in term loans (the "2020 Term Loan Facility") and a $ 100 million facility available for revolving loans (the "2020 Revolving Credit Facility").

Under the 2020 Revolving Credit Facility, a $ 30 million sublimit was originally available for letters of credit and a $ 20 million sublimit is available for swingline loans.

Under the 2020 Revolving Credit Facility, a $ 30 million sublimit was originally available for letters of credit and a $ 20 million sublimit remains available for swingline loans.

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") .

5 unchanged sentences

The Applicable Margin varied depending on the Company's Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility).

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Term B Loan was scheduled to mature in March 2026 and bore interest, at the Borrower's option, at either the LIBOR rate plus a margin of 7.50 % per year, or the base rate (the highest of the Federal Funds Effective Rate (as defined in the First Amendment) plus 0.50 %, or the prime rate.

3 unchanged sentences

On March 10, 2022, the Company entered into the Fourth Amendment to the 2020 Credit Facility to increase the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility) and in conjunction the Company made a $ 15.0 million prepayment that was applied to the final payment due on the maturity date.

On June 30, 2022, the Company entered into the Fifth Amendment to the 2020 Credit Facility (the "Fifth Amendment") to increase the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility) for 2022, with the fourth quarter of 2022 increased to 4.75 :1.00, the 1st and 2nd quarters of 2023 declining to 3.25 :1.00, and in all subsequent quarters the ratio was to be fixed at 3.00 :1.00.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

On June 30, 2022, the Company entered into the Fifth Amendment to the 2020 Credit Facility (the "Fifth Amendment") to increase the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility) for 2022, with the fourth quarter of 2022 increased to 4.75 :1.00, the first and second quarters of 2023 declining to 3.25 :1.00, and in all subsequent quarters the ratio was to be fixed at 3.00 :1.00.

Also, the Fifth Amendment reduced the minimum Consolidated Fixed Charge Coverage Ratio (as defined in the 2020 Credit Facility) in 2022, with the fourth quarter of 2022 reduced to 1.10 :1.00 and in all subsequent quarters the ratio was to be fixed at 1.25 :1.00.

14 unchanged sentences

Debt issuance costs associated with the Sixth Amendment totaled $ 1.7 million and are being amortized on a straight-line basis over the remaining life of the 2020 Credit Facility to Interest expense, net.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company's interest rates under the 2020 Term Loan fo r the nine months ended September 30, 2023 and 2022 b enefited from a hedge instrument that was in place, specifically a fixed rate swap, which was sold in March 2023 (see Note 10).

The Company's interest rates under the 2020 Term Loan fo r the three months ended March 31, 2023 b enefited from a hedge instrument that was in place, specifically a fixed rate swap, which was sold in March 2023 (see Note 10).

As a result of the fixed rate swap sold in March 2023, the ongoing interest rate is based upon U.S.

dollar SOFR plus a fixed margin of 4.5 %.

The Company was in compliance with all covenants of the 2020 Credit Facility at both September 30, 2023 and December 31, 2022, including the current Consolidated Net Leverage Ratio calculation that considers the Company's debt to include Preferred Stock.

The Company had the following outstanding borrowings, unamortized debt issuance costs, letters of credit, interest rates, and remaining borrowing capacity under the 2020 Credit Facility as of September 30, 2023 and December 31, 2022:

September 30,

The Company was in compliance with all covenants of the 2020 Credit Facility at both March 31, 2024 and December 31, 2023, including the current Consolidated Net Leverage Ratio calculation that considers the Company's debt to include Preferred Stock.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

2024 December 31,

Revolving Credit Facility $ 10,000 $ —

Current portion of Term Debt $ 228,168 $ 35,102

6 unchanged sentences

Other Assets $ 439 $ 557

Current Portion of Term Debt - Contra Liability 2,213 —

Long-Term Debt - Contra Liability — 2,811

3 unchanged sentences

Average Interest Rates:

Revolving Credit Facility 9.9 % -

Term Loan 9.9 % 10.0 %

Letters of Credit 4.5 % 4.5 %

The Company's debt maturities as of September 30, 2023 were as follows:

The Company's debt maturities as of March 31, 2024 were as follows:

Years ending December 31,

2 unchanged sentences

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

At September 30, 2023, the Company had $ 6.7 million of letters of credit, bank guarantees, and performance and bid bonds outstanding (collectively, "Guarantees"), comprised of the $ 3.0 million of letters of credit under the 2020 Credit Facility described above (the "Letters of Credit") and $ 3.7 million of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees") under

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

various uncommitted facilities.

At March 31, 2024, the Company had $ 9.7 million of letters of credit, bank guarantees, and performance and bid bonds outstanding (collectively, "Guarantees"), comprised of the $ 2.7 million of letters of credit under the 2020 Credit Facility described above (the "Letters of Credit") and $ 7.0 million of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees") under various uncommitted facilities.

At December 31, 2023, the Company had Guarantees aggregating $ 7.9 million, comprised of the $ 2.7 million of Letters of Credit noted above and $ 5.2 million of Other Guarantees.

6 unchanged sentences

Ribbon does not hold or issue derivative financial instruments for trading or speculative purposes.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company records derivatives on the balance sheet at fair value.

6 unchanged sentences

Cash Flow Hedge of Interest Rate Risk

The 2020 Term Loan Facility had outstanding balances of $ 240.4 million and $ 330.4 million at September 30, 2023 and December 31, 2022, respectively.

The 2020 Revolving Credit Facility had an outstanding balance of $ 10.0 million at September 30, 2023 and was undrawn at December 31, 2022.

The 2020 Term Loan Facility had outstanding balances of $ 230.4 million and $ 235.4 million at March 31, 2024 and December 31, 2023, respectively.

The 2020 Revolving Credit Facility was undrawn at March 31, 2024 and December 31, 2023.

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

2 unchanged sentences

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 approximated the current level of our term loan debt then 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 and $ 0.7 million for the three and nine months ended September 30, 2023, respectively.

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 and $ 0.3 million for the three months ended March 31, 2024 and 2023, respectively.

On March 24 , 2023, the Company received $ 9.4 million, consisting of $ 0.4 million of interest and $ 9.0 million for the sale of $ 170 million of its $ 340 million notional amount interest rate swap back to its counterparty, reducing the notional amount to $ 170 million.

1 unchanged sentence

The portion of the gain in accumulated other comprehensive (loss) income related to the term loan debt prepaid on the date of the final sale of our swap totaled $ 7.3 million and was released into earnings immediately as Other expense, net.

The portion of the gain in accumulated other comprehensive (loss) income related to our remaining term loan debt balance was $ 12.0 million and 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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

amortization of which totaled $ 1.5 million and $ 3.1 million for the three and nine months ended September 30, 2023, respectively.

The Company’s objectives in using interest rate derivatives have been 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 nine months ended September 30, 2023 and 2022, 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 until the final portion of the swap was sold on March 27, 2023.

During the three months ended March 31, 2023, 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 until the final portion of the swap was sold on March 27, 2023.

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

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, 2023 and 2022 was as follows, net of tax (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Gain (loss) recognized in other comprehensive income (loss) on derivative, net of tax $ — $ 3,056 $ ( 2,715 ) $ 21,685

Amount reclassified from accumulated other comprehensive income (loss) to other expense, net upon sale of swap, net of tax — — ( 5,099 ) —

Amount reclassified from accumulated other comprehensive income (loss) to interest expense ( 1,322 ) ( 1,330 ) ( 5,829 ) ( 437 )

$ ( 1,322 ) $ 1,726 $ ( 13,643 ) $ 21,248

The Company had no derivative assets or liabilities at September 30, 2023.

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

Balance sheet location December 31,

Interest rate derivative - asset derivative Other current assets $ 13,212

Interest rate derivative - asset derivative Other assets 12,216

The Company classified the interest rate derivative aggregating $ 25.4 million at December 31, 2022, as Level 2 fair value measurements within the fair value hierarchy (see Note 5).

The impact of the Company’s derivative financial instrument on its condensed consolidated statements of comprehensive (loss) income for the three months ended March 31, 2024 and 2023 was as follows, net of tax (in thousands):

Three months ended

2024 March 31,

Gain (loss) recognized in other comprehensive income (loss) on swap, net of tax $ — $ ( 2,715 )

Amount reclassified from accumulated other comprehensive income to other expense, net upon sale of swap, net of tax — ( 5,099 )

Amount reclassified from accumulated other comprehensive income to interest expense ( 1,321 ) ( 3,185 )

Unrealized gain (loss) on interest rate swap, net of reclassifications and amortization $ ( 1,321 ) $ ( 10,999 )

The Company had no derivative assets or liabilities at March 31, 2024 or December 31, 2023.

(11) PREFERRED STOCK AND WARRANTS

On March 28, 2023, the Company issued 55,000 shares of Preferred Stock to investors in the Private Placement at a price of $ 970 per share, along with 4,858,090 Warrants with an exercise price of $ 3.77 per share.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The fair value option was elected for the Preferred Stock, as the Company considers fair value to best reflect the expected future economic value.

The fair value option was elected for the Preferred Stock, as the Company considers fair value to best reflect its expected future economic value.

These liabilities are remeasured to fair value at each reporting date using the same valuation methodology applied upon issuance using current input assumptions.

1 unchanged sentence

Changes in the fair value of the Preferred Stock and Warrants are reported as Other expense, net in the Company's condensed consolidated statements of operations.

The fair value of the Preferred Stock and Warrants are determined using Level 3 input and the key inputs into the models utilized were as follows as of September 30, 2023:

The Company determined the fair value of the Preferred Stock and Warrants using Level 3 input.

The key assumptions into the models utilized were as follows as of March 31, 2024:

Preferred Stock (BDT)

6 unchanged sentences

Time to maturity (in years) 1.5

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Warrants (Black-Scholes)

5 unchanged sentences

Time to expiration (years) 3.0

The changes in the Company's Preferred Stock and Warrant liabilities from issuance in March 2023 through September 30, 2023 were as follows (in thousands):

The changes in the Company's Preferred Stock and Warrant liabilities the three months ended March 31, 2024 were as follows (in thousands):

Preferred stock liability

Balance at March 31, 2023 $ 47,854

Cumulative dividends 2,573

Balance at January 1, 2024 $ 53,337

Payable in-kind dividends 1,355

Fair value change 1,512

Balance at September 30, 2023 $ 49,855

Warrant liability

Balance at March 31, 2024 $ 56,204

Warrant liability

Balance at January 1, 2024 $ 5,295

Fair value change 632

Balance at September 30, 2023 $ 5,052

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Balance at March 31, 2024 $ 5,927

The Preferred Stock is subordinate to Company indebtedness and senior to the Company’s common stock or other equity.

4 unchanged sentences

The proceeds from the Preferred Stock issuance were approximately $ 53.4 million, including $ 10.0 million from existing related party stockholders.

Offering costs paid by the Company of approximately $ 3.5 million were recorded in Other expense, net in our condensed consolidated statement of operations in the three months ended March 31, 2023.

Offering costs paid by the Company of approximately $ 3.5 million were recorded in Other expense, net in the year ended December 31, 2023.

The net proceeds from the Private Placement were used for the repayment of debt.

The Preferred Stock is redeemable on or after the first and second anniversaries of the closing date at a rate of 103 % and 102 %, respectively.

The Warrants are immediately exercisable and upon an event such as a merger, consolidation, asset sale or similar change of control, the Warrants may be exercised and the holders may vote the underlying shares of common stock.

The Warrants, which expire March 30, 2027, are immediately exercisable and upon an event such as a merger, consolidation, asset sale or similar change of control, may be exercised and the holders may vote the underlying shares of common stock.

In connection with the Private Placement, the Company provided the investors with certain registration rights relating to the Preferred Stock, the Warrants and the shares of the Company’s common stock underlying the Warrants, that required the Company to file a registration statement on Form S-3 with the SEC within 30 days following the closing date of the Private Placement.

7 unchanged sentences

Generally, contracts with customers contain multiple performance obligations, consisting of products and services.

For these contracts, the Company accounts for individual performance obligations separately if they are considered distinct.

For these contracts, the Company accounts for individual performance

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

obligations separately if they are considered distinct.

When an arrangement contains more than one performance obligation, the Company will allocate the transaction price to each performance obligation on a relative standalone selling price basis.

16 unchanged sentences

Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year .

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company's professional services include consulting, technical support, resident engineer services, design services and installation services.

9 unchanged sentences

The related revenue is typically recognized as the training services are performed.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company's typical performance obligations include the following:

19 unchanged sentences

In these instances, the Company may use information such as the size of the customer and geographic region in determining the SSP.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Deferred Revenue

4 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 nine months ended September 30, 2023 and 2022 was disaggregated as follows:

Three months ended September 30, 2023 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 40,162 $ 33,454 $ 12,440 $ 86,056

Europe, Middle East and Africa 31,969 18,268 8,120 58,357

Asia Pacific 32,070 10,016 3,043 45,129

Other 4,300 7,534 1,785 13,619

$ 108,501 $ 69,272 $ 25,388 $ 203,161

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

Europe, Middle East and Africa 42,454 20,022 7,147 69,623

Asia Pacific 19,077 11,382 3,186 33,645

Other 7,248 7,605 1,969 16,822

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

Nine months ended September 30, 2023 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

The Company's revenue for the three months ended March 31, 2024 and 2023 was disaggregated as follows:

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended March 31, 2024 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 26,607 $ 32,847 $ 11,660 $ 71,114

3 unchanged sentences

$ 87,610 $ 68,381 $ 23,673 $ 179,664

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

Three months ended March 31, 2023 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 38,067 $ 33,073 $ 10,853 $ 81,993

3 unchanged sentences

$ 93,318 $ 70,588 $ 22,253 $ 186,159

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, 2023 and 2022 was as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

The Company's product revenue from indirect sales through its channel partner program and from its direct sales program for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three months ended

2024 March 31,

Indirect sales through channel partner program $ 45,675 $ 35,914

1 unchanged sentence

$ 87,610 $ 93,318

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, 2023 and 2022 was as follows (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

The Company's product revenue from sales to enterprise customers and from sales to service provider customers for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three months ended

2024 March 31,

Sales to enterprise customers $ 37,870 $ 27,412

1 unchanged sentence

$ 87,610 $ 93,318

The Company's product revenue and service revenue components by segment for the three and nine months ended September 30, 2023 and 2022, respectively were as follows (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

The Company's product revenue and service revenue components by segment for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended

2024 March 31,

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 nine months ended September 30, 2023 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 March 31, 2024 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.

1 unchanged sentence

however, billing cannot occur until services are completed.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

In some arrangements, the Company allows customers to pay for term-based software licenses and products over the term of the software license.

2 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 nine months ended September 30, 2023 were as follows (in thousands):

The changes in the Company's accounts receivable, unbilled receivables and deferred revenue balances for the three months ended March 31, 2024 were as follows (in thousands):

Accounts receivable Unbilled accounts receivable Deferred revenue (current) Deferred revenue (long-term)

1 unchanged sentence

Increase (decrease), net ( 43,634 ) ( 12,289 ) ( 2,785 ) ( 5,199 )

Balance at September 30, 2023 $ 155,849 $ 86,334 $ 107,536 $ 17,865

The Company recognized approximately $ 92 million of revenue in the nine months ended September 30, 2023 that was recorded as deferred revenue at December 31, 2022 and approximately $ 85 million of revenue in the nine months ended September 30, 2022 that was recorded as deferred revenue at December 31, 2021.

Of the Company's deferred revenue reported as long-term in its condensed consolidated balance sheet at September 30, 2023, the Company expects that approximately $ 4 million will be recognized as revenue in 2024, approximately $ 9 million will be recognized as revenue in 2025 and approximately $ 5 million will be recognized as revenue in 2026 and beyond.

Balance at March 31, 2024 $ 143,304 $ 69,194 $ 110,596 $ 14,019

The Company recognized approximately $ 51 million of revenue in the three months ended March 31, 2024 that was recorded as deferred revenue at December 31, 2023 and approximately $ 48 million of revenue in the three months ended March 31, 2023 that was recorded as deferred revenue at December 31, 2022.

Of the Company's deferred revenue reported as long-term in its condensed consolidated balance sheet at March 31, 2024, the Company expects that approximately $ 7 million will be recognized as revenue in 2025, approximately $ 4 million will be recognized as revenue in 2026 and approximately $ 3 million will be recognized as revenue in 2027 and beyond.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

1 unchanged sentence

Sales commissions earned by the Company's employees are considered incremental and recoverable costs of obtaining a contract with a customer.

Expense related to commission payments has been deferred on our condensed consolidated balance sheet and is being amortized over the expected life of the customer contract, which averages five years .

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

The Company had capitalized deferred sales commissions of $ 3.4 million and $ 3.6 million as of September 30, 2023 and December 31, 2022, respectively.

These costs have been deferred on our condensed consolidated balance sheet and are being amortized over the expected life of the customer contract, which is generally five years .

At both March 31, 2024 and December 31, 2023, the Company had $ 3.0 million of deferred sales commissions capitalized.

(13) OPERATING SEGMENT INFORMATION

3 unchanged sentences

The Cloud and Edge products are increasingly software-centric and cloud-native for deployment on private, public or hybrid cloud infrastructures, in data centers, on enterprise premises and within service provider networks.

Ribbon's Cloud and Edge product portfolio consists primarily of its Session Border Controller ("SBC") products and its Network Transformation ("NTR") products.

Ribbon's Cloud and Edge product portfolio consists primarily of its Session Border Controller ("SBC") products and its Network Transformation products.

The IP Optical Networks segment provides high-performance, secure solutions for IP networking and optical transport, supporting wireless networks including 5G, metro and edge aggregation, core networking, data center interconnect, legacy transformation and transport solutions for wholesale carriers.

This portfolio is offered to service provider, enterprise and industry verticals with critical transport network infrastructures including utilities, government, defense, transportation, and education and research.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company has not provided segment asset information as such information is not provided to the CODM and accordingly, asset information is not used in assessing segment performance.

3 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, 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.

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

GAAP and may not be comparable to similarly titled measures used by other companies, and should not be considered a substitute for gross profit or other results reported in accordance with U.S.

GAAP, may not be comparable to similarly titled measures used by other companies, and should not be considered a substitute for gross profit or other results reported in accordance with U.S.

See below for a reconciliation of adjusted gross profit to gross profit which is the most directly comparable U.S.

GAAP measure.

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, 2023 and 2022 (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

The tables below provide revenue, adjusted gross profit and depreciation expense by reportable segment for the three months ended March 31, 2024 and 2023 (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended

2024 March 31,

Segment revenue:

2 unchanged sentences

Revenue $ 179,664 $ 186,159

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

2024 March 31,

Segment adjusted gross profit:

5 unchanged sentences

Gross profit $ 91,955 $ 81,402

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

2024 March 31,

Segment depreciation expense:

2 unchanged sentences

Depreciation expense $ 3,394 $ 3,510

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(14) MAJOR CUSTOMERS

The following customers contributed 10% or more of the Company's revenue in the three and nine months ended September 30, 2023 and 2022:

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

The following customer contributed 10% or more of the Company's revenue in the three months ended March 31, 2024 and 2023:

Three months ended

2024 March 31,

Verizon Communications Inc.

11 % 13 % 11 % 16 %

AT&T * 10 % * *

* Less than 10% of total revenue.

At September 30, 2023 and December 31, 2022, no customer accounted for 10% or more of the Company's accounts receivable balance.

At March 31, 2024 and December 31, 2023, no customer accounted for 10% or more of the Company's accounts receivable balance.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable.

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(15) STOCK-BASED COMPENSATION PLANS

The Company grants stock-based compensation to employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries under its Amended and Restated 2019 Incentive Award Plan, as amended which provides for the award of stock options, stock appreciation rights, restricted stock awards ("RSAs"), performance-based stock awards, restricted stock units ("RSUs"), performance-based stock units ("PSUs") and other stock- or cash-based awards.

The Company grants stock-based compensation to employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries under its Amended and Restated 2019 Incentive Award Plan which provides for the award of stock options, stock appreciation rights, restricted stock awards ("RSAs"), performance-based stock awards,

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

restricted stock units ("RSUs"), performance-based stock units ("PSUs") and other stock- or cash-based awards.

Executive Equity Arrangements

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In connection with his appointment as President and Chief Executive Officer of Ribbon on March 16, 2020, the Company awarded Bruce McClelland sign-on equity grants, comprised of RSUs and a PSU grant with both market and service conditions.

As of March 31, 2024, the Company estimates that the market conditions surrounding the PSUs granted will not be met by the expiration date of September 1, 2024.

Performance-Based Stock Grants

6 unchanged sentences

Shares subject to PSUs that fail to be earned will be forfeited.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Restricted Stock Units

The activity related to the Company's RSUs for the nine months ended September 30, 2023 was as follows:

The activity related to the Company's RSUs for the three months ended March 31, 2024 was as follows:

Shares Weighted

3 unchanged sentences

Forfeited ( 200,229 ) $ 3.26

Unvested balance at September 30, 2023 7,951,595 $ 3.19

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the nine months ended September 30, 2023 was $ 16.5 million.

Unvested balance at March 31, 2024 6,032,316 $ 2.90

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the three months ended March 31, 2024 was $ 4.5 million.

Performance-Based Stock Units

The activity related to the Company's PSUs for the nine months ended September 30, 2023 was as follows:

The activity related to the Company's PSUs for the three months ended March 31, 2024 was as follows:

Shares Weighted

3 unchanged sentences

Forfeited ( 280,304 ) $ 9.40

Unvested balance at September 30, 2023 6,366,501 $ 2.09

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the nine months ended September 30, 2023 was $ 2.6 million.

Unvested balance at March 31, 2024 5,986,345 $ 1.70

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the three months ended March 31, 2024 was $ 0.2 million.

Stock-Based Compensation

The condensed consolidated statements of operations include stock-based compensation for the three and nine months ended September 30, 2023 and 2022 as follows (in thousands):

Three months ended Nine months ended

September 30, 2023 September 30,

2022 September 30, 2023 September 30,

The condensed consolidated statements of operations include stock-based compensation for the three months ended March 31, 2024 and 2023 as follows (in thousands):

Three months ended

March 31, 2024 March 31,

Product cost of revenue $ 106 $ 149

4 unchanged sentences

$ 4,522 $ 5,848

At September 30, 2023, there was $ 22.7 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested RSUs and PSUs.

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

At March 31, 2024, there was $ 13.4 million , net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested RSUs and PSUs.

This expense is expected to be recognized over a weighted average period of approximately one year .

The Company has operating leases for corporate offices and research and development facilities and has historically had finance leases for certain equipment.

10 unchanged sentences

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 September 30, 2023 and December 31, 2022 and determined no impairment has occurred.

The Company assessed its right-of-use assets for impairment as of March 31, 2024 and December 31, 2023 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.

In making this determination, the Company considers its prior renewal and termination history and planned usage of the assets under lease, incorporating expected market conditions.

For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease term.

For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The expense for finance leases includes both interest and amortization expense components, with the interest component calculated based on the effective interest method and the amortization component calculated based on straight-line amortization of the right-of-use asset over the lease term.

3 unchanged sentences

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 $ 0.2 million and $ 0.8 million, respectively, in the three and nine months ended September 30, 2023 and $ 0.6 million and $ 1.6 million in the three and nine months ended September 30, 2022, respectively.

No variable lease costs were accrued in the three and nine months ended September 30, 2023 for future estimated variable expenses related to assets partially or fully vacated with no intent or ability to sublease.

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 all future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

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 September 30, 2023 and December 31, 2022, the Company had accruals of $ 1.6 million and $ 2.0 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 Consolidations Initiatives.

No such accelerated amortization was recorded in the three months ended March 31, 2024.

The Company did not record estimated future variable lease costs in the three months ended March 31, 2024 or 2023 related to the 2022 Restructuring Plan.

All incremental accelerated amortization and accruals for estimated future variable costs are included in Restructuring and related expense in the Company's condensed consolidated statements of operations.

At March 31, 2024 and December 31, 2023, the Company had accruals of $ 1.4 million and $ 1.5 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 2033.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company's right-of-use lease assets and lease liabilities at September 30, 2023 and December 31, 2022 were as follows (in thousands):

Classification September 30,

The Company's right-of-use lease assets and lease liabilities at March 31, 2024 and December 31, 2023 were as follows (in thousands):

Classification March 31,

2024 December 31,

3 unchanged sentences

Total Operating lease liabilities $ 50,981 $ 54,450

The components of lease expense for the three and nine months ended September 30, 2023 and 2022 were as follows (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

The components of lease expense for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

Three months ended

2024 March 31,

Operating lease cost* $ 4,199 $ 4,760

Finance lease cost:

Amortization of leased assets — 64 — 244

Interest on lease liabilities — 2 — 12

Short-term lease cost 3,441 3,427

2 unchanged sentences

Net lease cost $ 8,235 $ 8,559

* Operating lease costs for the three and nine months ended September 30, 2023 included $ 0.2 million and $ 0.8 million, respectively, of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

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.

** No variable lease costs were accrued in the three and nine months ended September 30, 2023 for future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

Cash flow information related to the Company's leases for the nine months ended September 30, 2023 and 2022 was as follows (in thousands):

Nine months ended

September 30,

2023 September 30,

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

Operating cash flows for operating leases $ 14,315 $ 15,662

Operating cash flows for finance leases $ — $ 12

Financing cash flows for finance leases $ — $ 433

* No accelerated amortization was recorded in the three months ended March 31, 2024.

Operating lease costs for the three months ended March 31, 2023 included $ 0.2 million of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

** No variable lease costs were accrued in the three months ended March 31, 2024 or 2023 for future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Other information related to the Company's leases as of September 30, 2023 and December 31, 2022 was as follows:

September 30,

Cash flows related to the Company's leases in both the three months ended March 31, 2024 and 2023 were included in the measurement of operating lease liabilities and classified as operating cash flows and each totaled $ 4.8 million .

Other information related to the Company's leases as of March 31, 2024 and December 31, 2023 was as follows:

2024 December 31,

3 unchanged sentences

Operating leases 7.04 % 6.34 %

Future minimum fixed lease payments under noncancelable leases at September 30, 2023 were as follows (in thousands):

Future minimum fixed lease payments under noncancelable leases at March 31, 2024 were as follows (in thousands):

Remainder of 2024 $ 13,873

3 unchanged sentences

(17) INCOME TAXES

The Company recorded income tax provisions of $ 11.5 million and $ 12.4 million in the nine months ended September 30, 2023 and 2022, respectively.

The Company recorded income tax provisions of $ 3.4 million and $ 1.5 million in the three months ended March 31, 2024 and 2023, respectively.

These amounts 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 in which they occur.

3 unchanged sentences

(18) RELATED PARTIES

The Company recognized revenue from its largest stockholder of $ 1.3 million and $ 0.6 million in the three months ended September 30, 2023 and 2022, respectively, and $ 7.1 million and $ 1.7 million in the nine months ended September 30, 2023 and 2022 , respectively.

The Company recognized revenue from its largest stockholder of $ 1.5 million and $ 0.8 million in the three months ended March 31, 2024 and 2023, respectively.

Additionally, as discussed in Note 11, certain related party stockholders participated in the Private Placement.

3 unchanged sentences

("ECI"), ECI had received research and development grants from the Office of the Innovation Authority of the Israeli Ministry of Economics (the "IIA").

The Company assumed ECI's contract with the IIA, which requires the Company to pay royalties to the IIA on proceeds from the sale of products which the Israeli government has supported by way of research and development grants.

The royalties for grants prior to 2017 were calculated at the rates of 1.3 % to 5.0 % of the aggregated proceeds from the sale of such products developed at certain of the

The Company assumed ECI's contract with the IIA, which requires the Company to pay royalties to the IIA on proceeds from the sale of products which the

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Company's R&D centers, up to an amount not exceeding 100 % of such grants plus interest at LIBOR.

Israeli government has supported by way of research and development grants.

The royalties for grants prior to 2017 were calculated at the rates of 1.3 % to 5.0 % of the aggregated proceeds from the sale of such products developed at certain of the Company's R&D centers, up to an amount not exceeding 100 % of such grants plus interest at LIBOR.

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

At September 30, 2023, the Company's maximum possible future royalties commitment, including $ 1.8 million of unpaid royalties accrued, was $ 21.6 million , including interest of $ 0.9 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 March 31, 2024, the Company's maximum possible future royalties commitment, including $ 1.8 million of unpaid royalties accrued, was $ 20.6 million , including interest of $ 1.1 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.

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

13 unchanged sentences

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.

In June 2023, the Defendants agreed to a settlement in principle with the named plaintiffs, and the settlement was preliminarily approved by the court on October 18, 2023.

The proposed settlement remains subject to final approval by the affected stockholders and the court.

The court has set April 24, 2024 as the hearing date for final approval of the proposed settlement.

If approved, the proposed settlement would provide a release of all claims asserted in the litigation to all Defendants, who continue to deny liability, and the proposed $ 4.5 million settlement amount is expected to be fully paid by the Company's Directors and Officers liability insurance.

In June 2023, the Defendants agreed to a settlement in principle with the named plaintiffs, and final approval of the settlement was provided by the court on April 24, 2024.

The settlement provided a release of all claims asserted in the litigation to all Defendants, who continue to deny liability.

The $ 4.5 million settlement amount was funded by the provider of the Company's Directors and Officers liability insurance policy.

Charter Complaint.

14 unchanged sentences

The Company filed its answer to the complaint on October 5, 2023.

Discovery is on-going and no trial date has been set at this time.

Discovery is on-going and the court has set a preliminary trial date of December 2024.

(20) SUBSEQUENT EVENT

On May 15, 2024, the Company entered into a binding commitment letter (the "Commitment Letter") with HPS Investment Partners, LLC ("HPS") and WhiteHorse Capital Management, LLC ("WhiteHorse" and, together with HPS, the "Lenders"), pursuant to which the Lenders have committed to provide the Company with a $ 385 million senior secured credit facility (the "Refinancing Facility") comprised of (i) a $ 350 million term loan and (ii) a $ 35 million revolving credit facility.

The funds from the Refinancing Facility will be used to (a) repay 100 % of the amounts outstanding under the 2020 Credit Facility (b) redeem in full the Company's outstanding Series A preferred stock and (c) pay fees and expenses related to the Refinancing Facility.

Any excess proceeds will be used by the Company for working capital.

The funding of the Refinancing Facility is subject to satisfaction of customary closing conditions.

The Company expects the Refinancing Facility to close and fund no later than June 30, 2024.

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