Allot Ltd.

 

Conflict Minerals Report

For the reporting period from January 1 to December 31, 2023

 

INTRODUCTION

This Conflict Minerals Report (the “Report”) of Allot Ltd. ( “Allot,” “Company,” “we” or “us”) has been prepared pursuant to Rule 13p-1 and Form SD (collectively, the “Rule”) promulgated under the Securities Exchange Act of 1934, as amended, for the reporting period between January 1 and December 31, 2023 (the “2023 calendar year”). The Rule requires disclosure of certain information when a company manufactures or contracts to manufacture products (“Covered Products”) and the minerals specified in the Rule are necessary to the functionality or production of those products. The specified minerals (“Conflict Minerals”) are gold, columbite-tantalite (coltan), cassiterite and wolframite, including their derivatives, which are limited to tantalum, tin and tungsten, or any other mineral or its derivatives determined by the U.S. Secretary of State to be financing conflict in the Democratic Republic of the Congo (“DRC”) or an adjoining country (collectively with the DRC, the “Covered Countries”).

REASONABLE COUNTRY OF ORIGIN INQUIRY

 

Pursuant to the Rule, the Company conducted a good faith reasonable country of origin inquiry (“RCOI”) regarding the Conflict Minerals, which was reasonably designed to determine whether any of the Conflict Minerals originated in the Covered Countries or whether any of the Conflict Minerals may be from recycled or scrap sources. Following this inquiry, the Company had reason to believe that during the calendar year 2023:

 

 

 

Therefore, the Company performed due diligence on the source and chain of custody of the Conflict Minerals. There is significant overlap between the Company’s RCOI efforts and its due diligence measures performed.  The due diligence measures performed by the Company are discussed below.

 

Allot is filing this Report with its Form SD as required under the Rule.  This Report has not been subject to an independent private sector audit.

 

PART I.  DESCRIPTION OF THE COMPANY’S PRODUCTS COVERED BY THIS REPORT 

 

During the 2023 calendar year, the Covered Products included the following:

 

PART II.  THE COMPANY’S DUE DILIGENCE PROCESS

 

The Company’s due diligence measures have been designed to conform to the five-step framework laid out by the Organization for Economic Co-operation and Development in its OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: Third Edition (2016) including the related supplements on gold, tin, tantalum and tungsten (collectively, the “OECD Guidance”).

OECD Guidance Step 1: Establish strong company management systems for Conflict Minerals supply chain due diligence and reporting compliance.

Adopt and commit to a supply chain policy for minerals originating from conflict-affected and high-risk areas.

The Company has adopted a policy statement relating to the Conflict Minerals (the “Policy”), which incorporates the standards set forth in the OECD Guidance. Specifically, the Policy states that the Company supports the actions of governments and organizations to increase supply chain transparency and enable companies to source conflict-free minerals. Further, the Company has initiated a comprehensive process to meet its regulatory obligations related to the sourcing of Conflict Minerals, taking steps to expand its supply chain due diligence measures and internal controls for the Conflict Minerals.

The Policy is available on the Company’s website at https://www.allot.com/corporate/about/quality-management/.

Structure internal management systems to support supply chain due diligence.

The Company’s compliance with the Policy and the Rule is overseen by the head of the Company’s engineering department. A team of subject matter experts from relevant departments within the Company, including the engineering, quality assurance and legal departments, is collectively responsible for implementing the Company’s Conflict Minerals strategy and compliance processes and for training employees outside of the team on their roles and responsibilities in connection with the compliance program. Additionally, this team meets regularly to assess the progress of the Company’s compliance program and reports to management from time to time. As in past years, the team reported progress and results of its due diligence efforts to management at review sessions held at various times throughout the 2023 calendar year.

Establish a system of controls and transparency over the Conflict Mineral supply chain.

The Company has established a system of controls to promote transparency over its Conflict Minerals supply chain by utilizing the Conflict Minerals Reporting Template (as further described below), which is designed to facilitate the transfer of information through the supply chain regarding each mineral’s country of origin and the smelters and refiners being utilized for the mineral. 

To educate its senior management regarding sourcing practices, the Company has from time to time participated in various focus groups and forums relating to responsible sourcing of Conflict Minerals, including several presentations given by the Institute of Printed Circuits, ILTAM – The Israeli Users’ Association of Advanced Technologies in Hi-Tech Integrated Systems.

Consistent with the Company’s commitment to sourcing products from suppliers that share its values with regard to human rights, ethics and social and environmental responsibility, as outlined in the Policy, and in compliance with the Rule, the Company has undertaken a multi-stage diligence inquiry to verify the possible sources of the Conflict Minerals contained in the products manufactured or contracted to be manufactured by the Company. The team overseeing the Company’s Conflict Minerals strategy and compliance program led this inquiry, with each focus group listed below tasked with specific responsibilities relating to the due diligence efforts:

 

Strengthen the Company’s engagement with suppliers.

The Company informs its in-scope manufacturers and suppliers of its materials disclosure requirements, including its compliance with the OECD Guidance and the Rule, and of specification updates that the Company communicates and tracks electronically. Moreover, under the terms and conditions of the Company’s purchase orders and contracts, manufacturers and suppliers are expressly required to procure the Conflict Minerals from sources that have been verified as conflict-free and to support the supply chain due diligence process employed by the Company.

Establish a Company-level grievance mechanism.

The Company maintains an open reporting system through which employees and third parties may report concerns about potential or actual violations of the Policy. Concerns may be reported anonymously or for attribution through several channels, including through an employee’s immediate manager or the Company’s legal department. 

OECD Guidance Step 2: Identify and assess risks in the Company’s supply chain.

Identify risks in the supply chain.

The Company does not purchase Conflict Minerals directly from mines, smelters or refiners. The Company’s supply chain with respect to the Covered Products is complex, with multiple intermediaries and third parties in the supply chain between the Company’s manufacture of the Covered Products and the original sources of Conflict Minerals. As a result, the Company designed its due diligence process to conform to the requirements of the Rule and the OECD Guidance, as applicable for downstream companies. The Company relied and continues to rely on its suppliers to provide information regarding the origin of Conflict Minerals included in the Covered Products. Because the Company believes that the smelters and refiners of the Conflict Minerals are best situated to identify the sources of Conflict Minerals, the Company relied on communications with suppliers to identify the applicable smelters and refiners of Conflict Minerals in the Company’s supply chain.

 

The first step in the Company’s due diligence process was to determine which products manufactured or contracted to be manufactured by the Company during the 2023 calendar year may fall within the scope of the Rule and which first-tier suppliers and manufacturers the Company ought to engage in its due diligence efforts.

Once the final first-tier manufacturer and supplier list was confirmed, all manufacturers and suppliers identified in connection with the Covered Products were then contacted by GreenSoft Technology, Inc. and provided with a supply chain survey in the form of the Conflict Minerals Reporting Template (the “Template”) of the Responsible Business Alliance (the “RBA”). The RBA oversees the Responsible Minerals Initiative (formerly the Conflict-Free Sourcing Initiative, or the “CFSI”) (the “RMI”). The Company modeled its survey after version 6.22 of the Template. In its cover letter enclosing the survey, GreenSoft Technology, Inc. (i) reiterated the requirements of the Rule and its applicability to the Company, (ii) expressed the Company's goal to become a “conflict-free” company and its expectation that its suppliers take similar measures with their suppliers, and (iii) requested that each recipient manufacturer or supplier complete the survey for all products supplied to the Company during the 2023 calendar year.

As set forth in the Template and the OECD Guidance, manufacturers and suppliers which completed the survey, made representations or provided information regarding the following:

Assess risk in the supply chain.

The information in the surveys received from manufacturers and suppliers was compared against the RMAP’s “conformant” and “active” smelters list. The Company adopted the following multi-step process to evaluate the surveys:

-	If correctly completed, each survey identified the smelters and refiners within the solicited supplier’s or manufacturer’s supply chain. Thus, the Company compared each completed survey against the RMAP’s “conformant” and “active” smelters list to determine whether the smelters or refiners associated with the surveyed supplier or manufacturer qualified as “conformant” or “active.” The RMAP is a program in which the RMI uses independent third-party auditors to audit the source, including origin of mines and chain of custody, of the Conflict Minerals processed by smelters and refiners which agree to undergo an audit or to take part in a cross-recognition program.
	•	The smelter or refiner is considered RMAP “conformant” if the audited smelter or refiner has successfully completed an RMAP audit and maintains good standing in the program, through a continual validation process. These smelters or refiners have the systems and processes in place to support responsible sourcing of raw materials and can provide evidence to support their sourcing activities.
	•	Smelters and refiners labeled as RMAP “active” by the RMI represent smelters and refiners that have committed to undergo an RMAP assessment, completed the relevant documents, and scheduled the on-site assessment. These may be in the pre-assessment, assessment or corrective-action phases of the assessment. The RMI notes on the active smelters list the names of any smelters or refiners that have left the “active” or “conformant” list and intend to re-enter the program.
	•	Downstream smelters or refiners may not take part in the RMAP. However, they may participate in the RMI’s Downstream Audit Program, an independent validation of companies’ sourcing practices outside of the RMAP audit process.

-	The Company worked with individual manufacturers and suppliers that had questions or concerns regarding the survey modeled after the Template or regarding the Rule.
-	Manufacturers and suppliers that returned surveys that appeared to be incomplete or incorrect were contacted again with a follow-up request to provide the missing information or to correct the inaccuracies.
-	Manufacturers and suppliers that failed to respond to the follow-up request were issued an official notification by the Company’s senior officers informing them that continued refusal could result in cancelation of all contractual engagements, following which notification such manufacturers and suppliers provided the requested information to the Company.

All completed surveys received from suppliers were stored electronically in a central location accessible to authorized employees of the Company involved in the due diligence process and will be retained in accordance with the Company’s document retention guidelines.

Following the process outlined above, as of December 31, 2023, the Company received completed survey responses from approximately 100% of manufacturers and suppliers on the list responsible for manufactured parts used in the Covered Products included in the supply chain survey. The Company relied on the completed surveys it received from its manufacturers and suppliers as the main source of documentation supporting the representations made by such parties regarding the source and chain of custody of relevant Conflict Minerals.

 

OECD Guidance Step 3: Design and implement a strategy to respond to identified risks.

Report findings to designated senior management.

The team overseeing the Company’s Conflict Minerals strategy and compliance program reported its due diligence findings to senior management overseeing the supply chain and engineering departments, including the Quality Assurance Manager and the Vice President for Operations. All completed surveys from manufacturers and suppliers were stored electronically in a central location accessible to authorized employees in the Company’s engineering and legal departments. The Company’s quality assurance department was involved in the design and was responsible for the internal audit of the due diligence process.

Devise, adopt and implement a risk management plan.

In light of the complexity of the Company’s and its suppliers’ supply chains, the Company is currently unable to assess adequately all of the risks in its supply chain. However, the Company has taken and continues to take steps to manage risks, including:

Monitor risk mitigation efforts and report back to designated senior management.

 

To monitor and track performance of risk management efforts, the Company relies on supplier survey updates and supplier RMAP updates. The status of such efforts is communicated in meetings of the internal team charged with executing the Company’s Conflict Minerals strategy and compliance processes.

The Company employs an escalation process whereby it promptly engages directly with suppliers or manufacturers upon obtaining any information that may indicate that such suppliers or manufacturers may be sourcing Conflict Minerals from any of the Covered Countries. Various steps taken by the Company in such instances may include requiring a contracted supplier or manufacturer to find an alternative source for the Covered Minerals for use in products or components supplied to the Company, or, if appropriate in light of all relevant factors, suspending or terminating a contractual relationship with the supplier or manufacturer. The Company’s risk management plan is ultimately to discontinue doing business with any supplier found to be purchasing the Conflict Minerals, the trading of which directly or indirectly finance or benefit armed groups in the Covered Countries, after attempts at corrective actions are not successful.

Undertake additional fact and risk assessments for risks requiring mitigation or after a change in circumstances.

To undertake additional fact and risk assessments for risks requiring mitigation or after a change of circumstances, the Company relies on a supplier re-approval process as set forth in its Policy.

OECD Guidance Step 4: Carry out independent third-party audit of smelter/refiner’s due diligence practices.

 

Due to the Company’s position in the supply chain, the Company does not have a direct relationship with smelters and refiners, nor does it perform direct audits of the smelters and refiners that provide its supply chain with the Conflict Minerals contained in the Company’s Covered Products. The Company relies upon industry efforts to influence smelters and refiners to undergo audits and become certified through the RMAP.

OECD Guidance Step 5: Report annually on supply chain due diligence.

The Company has filed with the Securities and Exchange Commission its specialized disclosure report on Form SD, which includes this Conflict Minerals Report as Exhibit 1.01, for the reporting period from January 1 to December 31, 2023. In accordance with OECD Guidance and the Rule, the Company has also made these disclosures available on its website at https://investors.allot.com/financial-information/sec-filings.

PART III.  THE COMPANY’S DUE DILIGENCE FINDINGS AND CONCLUSIONS

 

Inherent Limitations on Due Diligence Measures

 

As a downstream purchaser of products which contain Conflict Minerals, our due diligence measures can provide only reasonable, not absolute, assurance regarding the source and chain of custody of the necessary Conflict Minerals. Our due diligence processes are based on the necessity of seeking data from our direct suppliers and those suppliers seeking similar information within their supply chains to identify the original sources of the necessary Conflict Minerals. We also rely, to a large extent, on information collected and provided by responsible mineral sourcing validation programs. Such sources of information may yield inaccurate or incomplete information and may be subject to fraud.

 

Another complicating factor is the unavailability of country of origin and chain of custody information from our suppliers on a continuous, real-time basis. The supply chain of commodities such as Conflict Minerals is a multi-step process operating more or less on a daily basis, with ores being delivered to smelters and refiners, with smelters and refiners smelting or refining ores into metal containing derivatives such as ingots, with the derivatives being shipped, sold and stored in numerous market locations around the world and with distributors and purchasers holding varying amounts of the derivatives in inventory for use. Since we do not have direct contractual relationships with smelters and refiners, we rely on our direct suppliers and the entire supply chain to determine the mine or location of origin of Conflict Minerals and to gather and provide specific information about the date when the ore is smelted into a derivative and later shipped, stored, sold and first entered the stream of commerce. We directly seek sourcing data on a periodic basis from our direct suppliers as well as certain smelters and refiners. We ask that the data cover the entire reporting year, and we seek to use contract provisions requiring the suppliers to promptly update us in the event that the sourcing data changes.

Country of Origin of the Conflict Minerals in the Covered Products

 

Based on the information obtained by the Company during the due diligence process, the Company does not have sufficient information, with respect to the Covered Products, to determine the country of origin of all of the Conflict Minerals contained in the Covered Products or to determine whether the Covered Products directly or indirectly finance or benefit armed groups in the Covered Countries. However, based on the information that has been obtained, to the extent reasonably determinable by the Company, with respect to the smelters and refineries identified by the Company, such countries of origin are believed to include, to the extent known, the following countries: India, United Arab Emirates, United States of America, Republic of Korea, Uganda, Lithuania, Italy, Chile, Germany, Australia, Russian Federation, Malaysia, Zambia, South Africa, Austria, Andorra, France, Kazakhstan, Brazil, Belgium, Netherlands, Sudan, China (Mainland), Taiwan, Zimbabwe, Poland, Thailand, Czech Republic, New Zealand, Japan, Switzerland, Spain, Canada, Indonesia, Uzbekistan, Turkey, Mexico, Singapore, Saudi Arabia, Kyrgyzstan, Sweden, Philippines, Macedonia, Myanmar, Vietnam, Bolivia, Peru and Estonia.

Facilities Used to Process the Conflict Minerals in the Covered Products

Following the process outlined above, the Company received responses from approximately 100% of the surveyed suppliers. Therefore, the Company was unable to conclusively determine the origin of all the Conflict Minerals contained in the Covered Products.

 

However, based on the information that was provided by the Company’s suppliers and otherwise obtained through the due diligence process, the Company believes that, to the extent reasonably determinable by the Company, the facilities that were used to process the Conflict Minerals contained in the Covered Products during the covered period included the smelters and refineries listed on Appendix A to this Report. The smelters and refiners that the Company has been able to determine as RMAP “conformant” are identified by an asterisk in Appendix A. The smelters and refiners which are in “active” RMAP status are identified by two asterisks.  The smelters and refiners identified in Appendix A to this Report were identified by our suppliers and the Company cannot be certain that these smelters and refiners were in fact in the Company’s supply chain during the period covered by this Report.

 

PART IV. IMPLEMENTATION OF STRATEGIES TO RESPOND TO IDENTIFIED RISKS AND FUTURE STEPS

 

We have taken, and intend to continue to take, steps to improve our due diligence processes and to minimize the risk that our necessary Conflict Minerals benefit armed groups. Going forward, the Company plans to continue to engage with its manufacturers and suppliers to obtain current, accurate and complete information about its supply chains and will continue to improve its due diligence efforts to ensure responsible sourcing in compliance with the Policy. The Company further intends to collaborate with key stakeholders to identify relevant risks and improve systems of raising grievances related to conditions in and around mining. The Company also intends to continue its engagement with industry programs, stakeholders and groups to encourage the further development, adoption, improvement and reliability of relevant programs, tools and standards. The Company intends to continue monitoring the performance and efficiency of its due diligence efforts and to maintain its risk management plan, which includes due diligence reviews of suppliers, smelters and refiners sourcing from the Covered Countries and procedures designed to account for any new risks in the risk management plan.  The Company also plans to continue to encourage its suppliers to adopt best practices for the responsible sourcing of materials and use conflict-free or otherwise RMAP “conformant” smelters and refiners as capacity becomes available. As it has done in the past, the Company may also elect to contact or follow up with smelter and refinery facilities that have not received a “conflict-free” or otherwise RMAP “conformant” designation from an independent third-party audit program, such as the RMAP, to encourage their participation in such a program, request country of origin and chain of custody information, and encourage their participation in an independent third-party audit program.