(a) Contingencies The Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit. The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If either or both of the criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses, that the amount is not material, or that an estimate of the loss cannot be made. The Company expenses its legal fees as incurred. On January 23, 2020, William Schulze filed a complaint, and subsequently filed an amended complaint on April 3, 2020 (collectively the Schulze Complaint) as lead plaintiff on behalf of purchasers of Zoom modems in a putative class action lawsuit against Zoom in the U.S. District Court for the District of Massachusetts. The Schulze Complaint alleged that Zoom modems were sold as new despite containing refurbished parts. On July 28, 2020, the lead plaintiff filed a Stipulation of Dismissal that dismissed the Schulze Complaint with prejudice. The Company does not have any other pending or outstanding material legal proceedings. (b) Commitments In May 2015, Zoom entered into a License Agreement with Motorola Mobility LLC (the Networking Product License Agreement). The Networking Product License Agreement provides Zoom with an exclusive license to use certain trademarks owned by Motorola Trademark Holdings, LLC for the manufacture, sale, and marketing of consumer cable modem products in the United States and Canada through certain authorized sales channels. In August 2016, Zoom entered into an amendment to the Networking Product License Agreement (the First Agreement) with Motorola Mobility LLC. The First Amendment expands Zooms exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, and expands the license from cable modems and gateways to also include consumer routers, WiFi range extenders, home powerline network adapters, and access points. In August 2017, Zoom entered into an amendment to the Networking Product License Agreement (the Second Amendment) with Motorola Mobility LLC. The Second Amendment expands Zooms exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, and expands the license from cable modems, gateways, consumer routers, WiFi range extenders, home powerline network adapters, and access points to also include MoCa adapters, and cellular sensors. The Networking Product License Agreement, as amended, had a five-year term beginning January 1, 2016 through December 31, 2020. In March 2020, Zoom entered into an amendment to the Networking Product License Agreement (the Third Amendment) with Motorola Mobility LLC. The Third Amendment expands Zooms exclusive license to use the Motorola trademark to a wide range of authorized channels worldwide, including Service Provider Channels. The Networking Product License Agreement, as amended, has a ten-year term beginning January 1, 2016 through December 31, 2025 and modified the minimum annual royalty payments starting for the year ending December 31, 2021 as outlined below. In connection with the Networking Product License Agreement, as amended, the Company has committed to reserve a certain percentage of wholesale prices for use in advertising, merchandising and promotion of the related products. Additionally, the Company is required to make quarterly royalty payments equal to a certain percentage of the preceding quarters net sales with minimum annual royalty payments as follows: Year ending December 31, 2020 (remaining): $ 1,275,000 2021: $ 4,300,000 2022: $ 4,300,000 2023: $ 4,300,000 2024: $ 4,300,000 2025: $ 4,300,000 Royalty expense under the Networking Product License Agreement was $1,275,000 for the third quarter of 2020 and $1,125,000 for the third quarter of 2019. Royalty expense for the nine-months ended September 30, 2020 was $3,825,000 compared to $3,375,000 in the nine-months ended September 30, 2019. Royalty expense is included in selling expense on the accompanying condensed consolidated statements of operations. Additionally in March 2020, Zoom entered into a new, separate License Agreement (the 2020 License Agreement) with Motorola Mobility LLC to provide Zoom with an exclusive global license to use certain trademarks owned by Motorola Trademark Holdings, LLC for the manufacture, sale, and marketing of consumer-grade home security, monitoring and energy management products and services globally. The 2020 License Agreement is effective January 1, 2021 and extends through December 31, 2025. In connection with the 2020 License Agreement, the Company has committed to reserve a certain percentage of wholesale prices for use in advertising, merchandising and promotion of the related products. Additionally, the Company is required to make quarterly royalty payments equal to a certain percentage of the preceding quarters net sales with minimum annual royalty payments as follows: Year Ending December 31, 2021 $ 2,050,000 2022 $ 2,300,000 2023 $ 2,550,000 2024 $ 2,800,000 2025 $ 2,800,000