What changed in this filing

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Item 1A. Risk Factors

2021-05-07 compared with 2021-02-05 · 42 added, 43 removed, 740 unchanged (10% of the section changed)

80 unchanged sentences

Any distributor may also cease doing business with us at any time with little or no notice.

termination of a relationship with a major distributor, either by us or by the distributor, could result in a temporary or permanent loss of revenues, slower or impaired collection on accounts receivable and costly and time-consuming litigation or arbitration.

The termination of a relationship with a major distributor, either by us or by the distributor, could result in a temporary or permanent loss of revenues, slower or impaired collection on accounts receivable and costly and time-consuming litigation or arbitration.

We may not be successful in finding other suitable distributors on satisfactory terms, or at all, and this could adversely affect our ability to sell in certain geographic markets or to certain network operators and service providers.

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Our ability to keep pace in these markets depends upon our ability to enhance our current products, and continue to develop and introduce new products rapidly and at competitive prices.

The success of new product introductions or updates on existing products depends on a number of factors including, but not limited to, timely and successful product development, market acceptance, our ability to manage the risks associated with new product production ramp-up, the effective management of our inventory and manufacturing schedule and the risk that new products may have defects or other deficiencies in the early stages of introduction.

The success of new product introductions or updates on existing products depends on a

number of factors including, but not limited to, timely and successful product development, market acceptance, our ability to manage the risks associated with new product production ramp-up, the effective management of our inventory and manufacturing schedule and the risk that new products may have defects or other deficiencies in the early stages of introduction.

The development of our products is complex and costly, and we typically have several products in development at the same time.

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Potential customers may prefer to purchase from their existing suppliers or well-known brands rather than a new supplier, regardless of product performance or features.

We expect increased competition from other established and emerging companies if our

market continues to develop and expand.

We expect increased competition from other established and emerging companies if our market continues to develop and expand.

As we enter new markets, we expect to face competition from incumbent and new market participants and there is no assurance that our entry into new markets will be successful.

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We have experienced cyber-attacks in the past, and may experience cyber-attacks in the future.

As a result, unauthorized parties have obtained, and may in the future obtain, access to our systems and data and may have obtained, and may in the future obtain, our users’ or customers’ data.

Our security measures may also be breached due to employee error, malfeasance, or otherwise.

Third parties may also attempt to induce employees, users, or customers to disclose sensitive information in order to gain access to our data or our users’ or customers’ data.

As a result, unauthorized parties have obtained, and may in the future obtain, access to our systems and data and may have obtained, and may in the future obtain, our users’ or customers’ dat a.

Our security measures have in the past, and may in the future, be breached due to employee error, malfeasance, or otherwise.

T hird parties may also attempt to induce employees, users, or customers to disclose sensitive information in order to gain access to our data or our users’ or customers’ data.

Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our products and services.

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The fraud resulted in transfers of funds aggregating $46.7 million held by a Company subsidiary incorporated in Hong Kong to other overseas accounts held by third parties.

To date, the Company has recovered $16.7 million.

To date, the Company has recove red $18.6 million.

The Company recovered $8.1 million in fiscal 2015, resulting in a charge of $39.1 million in the fourth quarter of fiscal 2015, including additional expenses consisting of professional service fees associated with the fraud loss.

In fiscal 2016, the Company recorded a net recovery of an additional $8.3 million, comprised of an $8.6 million recovery less $0.3 million of professional service fees associated with the recovery.

No additional recoveries were made since fiscal year ended 2016.

In March 2021, the Company recorded a recovery of an additional $1.9 million.

No additional recoveries were made since March 31, 2021.

The Company is continuing to pursue the recovery of the remaining $28.1 million and is cooperating with numerous overseas law enforcement authorities who are actively pursuing a multi-agency criminal investigation.

However, any additional recoveries are likely remote and therefore cannot be assured.

The Company may not be successful in obtaining any insurance coverage for this loss.

While we do not expect the fraud to have a material impact on our business, we have borne, and will continue to bear additional expenses in connection with the remediation and investigation of the fraud.

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In the event that we receive shipments of products that fail to comply with our technical specifications or that fail to conform to our quality control standards, and we are not able to obtain replacement products in a timely manner, we risk revenue losses from the inability to sell those products, increased administrative and shipping costs, and lower profitability.

Additionally, if defects are not

discovered until after distributors and/or end users purchase our products, they could lose confidence in the technical attributes of our products and our business and results of operations could be harmed.

Additionally, if defects are not discovered until after distributors and/or end users purchase our products, they could lose confidence in the technical attributes of our products and our business and results of operations could be harmed.

We do not control our contract manufacturers or suppliers, including their labor, environmental or other practices.

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Public health problems may also result in quarantines, business closures, unavailability of key personnel, domestic and international transportation restrictions, import and export complications, and otherwise cause shortages in the supply of components or cause other disruptions within our supply chain.

Public health problems currently cause and may continue

to cause disruptions, delays, shortages, and increased costs within our supply chain, and distribution channels.

Public health problems currently cause and may continue to cause disruptions, delays, shortages, and increased costs within our supply chain, and distribution channels.

In addition, public health problems may require us to take precautionary measures to minimize the risk to our employees, including requiring our employees to work remotely and suspending non-essential travel, which could negatively affect our business.

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The continuation of these remote working measures also introduces additional operational risk, including increased cybersecurity risk.

These cybersecurity risks include greater phishing, social engineering, malware, and other cybersecurity attacks, greater risk of a security breach resulting in the unauthorized release, destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations, which could materially and adversely affect our business, financial condition or results of operations.

results of operations.

Public health problems may expose us to unanticipated liability or require us to change our business practices in a manner materially adverse to our business, results of operations and financial condition.

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Additionally, as a result of the COVID-19 pandemic, certain of our distributors have been forced to temporarily suspend or otherwise reduce operations, which may adversely impact sales of our products.

Further, our distributors build inventory in anticipation of future sales, and if such sales do not occur as rapidly as they anticipate, our distributors will decrease the size of their future product orders.

distributors build inventory in anticipation of future sales, and if such sales do not occur as rapidly as they anticipate, our distributors will decrease the size of their future product orders.

We are also subject to the risks of our distributors encountering financial difficulties, which could impede their effectiveness and also expose us to financial risk if they are unable to pay for the products they purchase from us.

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We invested in developing our own manufacturing capacity to support our product development and prototyping.

To the extent that we may invest in and expand or relocate these manufacturing capabilities, and increasingly rely upon such activities, we will face increased risks associated with:

To the extent that we may invest in and expand or relocate these manufacturing capabilities, and increasingly rely upon such activities, we will face

increased risks associated with:

• bearing the fixed costs of these activities;

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Our contract manufacturers operate primarily in China, where the prosecution of intellectual property infringement and trade secret theft is more difficult than in the United States.

In the past, our contract manufacturers, their affiliates, their other customers or their suppliers have attempted to participate in efforts to misappropriate our intellectual property and trade secrets to manufacture our products for themselves or others without our knowledge.

In the past, our contract manufacturers, their affiliates, their other customers or their

suppliers have attempted to participate in efforts to misappropriate our intellectual property and trade secrets to manufacture our products for themselves or others without our knowledge.

Even if the agreements with our contract manufacturers, and applicable laws, prohibit them from misusing our intellectual property and trade secrets, we may be unsuccessful in monitoring and enforcing our intellectual property rights against them.

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• require us to cease offering certain of our products or services.

Some of our competitors may have substantially greater resources than we do and may be able to sustain the costs of complex

intellectual property litigation to a greater degree and for longer periods of time than we could.

Some of our competitors may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could.

In addition, patent holding companies and other third-party non-practicing entities that focus on extracting royalties and settlements by enforcing patent rights may target our component suppliers, manufacturers, us, our distributors, members of our sales channels, our network operators and service providers, or other purchasers of our products.

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Our debt levels could adversely affect our ability to raise additional capital to pay dividends, repurchase our shares of common stock and fund our operations or limit our ability to react to changes in our industry or the economy.

As of December 31, 2020, our balance outstanding under the Credit Agreement for our Term Facility and Revolving Facility, was $462.5 million and $145.0 million, respectively.

As of March 31, 2021, our balance outstanding under the Third Amended and Restated Credit Agreement for our Term Facility and Revolving Facility, was $500.0 million and $75.0 million, respectively.

In the future we may need to raise additional capital to finance our payment of dividends or repurchase shares of our common stock and fund our growth and operational goals.

If additional financing is not available when required or on acceptable terms, we may not be able to pay dividends, repurchase shares of common stock, expand our

business, develop or enhance our products, take advantage of business opportunities or respond to competitive pressures, which could result in lower revenues and reduce the competitiveness of our products.

If additional financing is not available when required or on acceptable terms, we may not be able to pay dividends, repurchase shares of common stock, expand our business, develop or enhance our products, take advantage of business opportunities or respond to competitive pressures, which could result in lower revenues and reduce the competitiveness of our products.

In addition, any potential debt level increases could have important consequences, including:

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• limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;

• limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to competitors who are less highly leveraged or have access to more capital.

• limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to

competitors who are less highly leveraged or have access to more capital.

If we are unable to integrate future acquisitions successfully, our business, results of operations and prospects could be harmed.

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We may be adversely affected by changes in LIBOR reporting practices or the index used to replace LIBOR.

Our Term Facility and Revolving Facility primarily use the London Interbank Offered Rate (“LIBOR”) to calculate interest due to our lenders.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

It is unclear whether replacement for LIBOR will be established such that it continues to exist after 2021.

As a result, it is possible that LIBOR will be discontinued as a reference rate after 2021.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

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Treasury securities, called the Secured Overnight Financing Rate (“SOFR”).

The first publication of SOFR was released by the Federal Reserve Bank of New York in April 2018.

Whether SOFR will become a widely accepted benchmark in place of LIBOR, however, remains in question.

As such, the future of LIBOR and potential alternatives thereto

are uncertain at this time.

If LIBOR is discontinued, the terms of our Credit Agreement provide for the use of an alternative rate.

Such an event would not affect our ability to borrow or maintain already outstanding borrowings, but the alternative rate could be higher and more volatile than LIBOR prior to its discontinuance.

As such, the future of LIBOR and potential alternative reference rates are uncertain at this time.

If LIBOR is discontinued, the terms of our Third Amended and Restated Credit Agreement provide for the use of an alternative rate.

Such an event would not affect our ability to borrow or maintain already outstanding borrowings, but the alternative rate could be higher and more volatile than LIBOR prior to its discontinuance and may result in interest obligations which are higher or lower or that do not otherwise correlate over time with the interest payments that would have been made on such debt if LIBOR remained in its current form.

Accordingly, the potential effects of the foregoing on our cost of capital cannot yet be determined.

Further, the same costs and risks that may lead to the unavailability of LIBOR may make one or more of the alternative rate methods impossible or impracticable to determine.

Any of these proposals or consequences could materially and adversely affect our financing costs, and as a result, our financial condition, operating results and cash flows.

Risks Related to Our Common Stock

Our Chief Executive Officer owns a majority of our common stock.

Pera, our founder, Chairman, and Chief Executive Officer, is able to exercise voting rights with respect to a majority of the voting power of our outstanding stock and therefore has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets.

Pera, our founder, Chairman, and Chief Executive Officer, is able to exercise voting rights with respect to a majority of the

voting power of our outstanding stock and therefore has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets.

This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support.

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Pera is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally.

As of February 5, 2021, Mr.

As of May 7, 2021, Mr.

Pera beneficially owned 56,278,181 shares of our common stock.

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Factors that could cause our results of operation and stock price to fluctuate include:

• varying demand for our products due to the financial and operating condition of our distributors and their customers,

distributor inventory management practices and general economic conditions;

• varying demand for our products due to the financial and operating condition of our distributors and their customers, distributor inventory management practices and general economic conditions;

• shifts in our fulfillment practices including increasing inventory levels as part of efforts to decrease our delivery lead times;

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As these regulations and standards evolve, and if new regulations or standards are implemented, we will be required to modify our products or develop and support new versions of our products, and our compliance with these regulations and standards may become more burdensome.

The failure of our products to comply, or delays in compliance, with the various existing and evolving industry

regulations and standards could prevent or delay introduction of our products, which could harm our business.

The failure of our products to comply, or delays in compliance, with the various existing and evolving industry regulations and standards could prevent or delay introduction of our products, which could harm our business.

End customer uncertainty regarding future policies may also affect demand for communications products, including our products.

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Further, the enforcement of laws and regulations may force us to withdraw one or more of our products from sale in certain jurisdictions or to recall one or more of our products in certain jurisdictions.

We may incur costs and expenses relating to a withdrawal from a particular market or a recall of one or more of our products.

incur costs and expenses relating to a withdrawal from a particular market or a recall of one or more of our products.

The process of identifying products that have been widely distributed for withdrawals and recalls may be lengthy and require significant resources and we may incur significant replacement costs, damage claims and harm to our reputation.

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The handling of such information is increasingly subject to regulations in numerous jurisdictions around the world.

These regulations are typically intended to protect the privacy and security of personal

information that is collected, stored and transmitted in or from the governing jurisdiction.

These regulations are typically intended to protect the privacy and security of personal information that is collected, stored and transmitted in or from the governing jurisdiction.

In addition, because various foreign jurisdictions have different regulations concerning the storage and transmission of personal information, we may face unknown requirements that pose compliance challenges in new geographic markets that we seek to enter.

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The vast majority of our products rely on the availability of specific unlicensed radio frequency spectrum.

The vast majority of our products operate in unlicensed radio frequency (“RF”) spectrum, which is used by a wide range of devices such as cordless phones, baby monitors, and microwave ovens, and is becoming increasingly crowded.

The vast majority of our products operate in unlicensed radio frequency (“RF”) spectrum, which is used by a wide range of devices

such as cordless phones, baby monitors, and microwave ovens, and is becoming increasingly crowded.

If such spectrum usage continues to increase through the proliferation of consumer electronics and products competitive with ours, and others, the resultant higher levels of clutter and interference in the frequency bands used by our products could decrease the usage of our products.

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Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations, and prevent us from producing accurate and timely financial statements to manage our business.

included in our Annual Report on Form 10-K in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.

If we fail to do so, our business could be negatively affected and our independent registered public accounting firm may be unable to attest to the fair presentation of our Consolidated Financial Statements included in our Annual Report on Form 10-K in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.

If we cannot provide reliable financial reports and effectively prevent fraud, our reputation and results of operations could be harmed.

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To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

Additionally, as the COVID-19 pandemic continues to develop, many of our estimates could require increased judgement and carry a higher degree of variability and volatility.

Additionally, as the COVID-19 pandemic continues to develop, many of our estimates could require increased judgement and carry a higher degree of variability and

As events continue to evolve our estimates may change materially in future periods.

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

What changed 10-Q

Item 1A. Risk Factors