What changed in this filing

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Item 1. Business

2023-10-19 compared with 2023-03-30 · 69 added, 90 removed, 257 unchanged (38% of the section changed)

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The Company distributes its physical media, entertainment products, hardware and accessories through an established multi-channel strategy.

The Company currently sells its products that it is allowed to export in more than 100 countries around the world.

The Company currently sells its products that it is allowed to export to more than 100 countries around the world.

Alliance provides state-of-the art warehousing and distribution technologies, operating systems and services that seamlessly enable entertainment product transactions to better serve customers directly or through our distribution affiliates.

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All electronic data interchange (“EDI”) and logistics are operational and ready for existing retail channels to add new products.

For the six months ended December 31, 2022, and 2021, Alliance’s consolidated revenue was $684 million and $832 million, respectively.

Consolidated net (loss) income was ($23.0 million) and $29.5 million respectively, and consolidated Adjusted EBITDA was ($21.5 million) and $44.7 million, respectively.

For the years ended June 30, 2021 and 2022, Alliance’s consolidated revenue was $1.324 billion and $1.417 billion, respectively, consolidated net income was $34.2 million and $28.5 million, respectively, and consolidated Adjusted EBITDA was $68.5 million and $60.0 million, respectively.

Alliance was founded in 1990 (previously named CD Listening Bar, Inc.).

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Management believes that Alliance’s ability to successfully integrate acquisitions is underpinned by its highly efficient operating systems and experienced leadership team.

Management believes Alliance’s existing Service, Selection, and Technology offering has well-positioned the Company to capitalize on shifts towards e-commerce and Omni-Channel strategies, especially with retailers and manufacturers vastly increased reliance on our DTC fulfillment and distribution partners.

Alliance’s goal has always been to provide all the meta-data of content and images, service, selection, and purchasing to Omni-Channel retailers to expand their selection to compete with the leading on-line retailer.

With over 1,200 employees worldwide, Alliance has over 4,000 unique customers and over 35,000 “Ship-To” locations.

Alliance believes the three pillars of its business;

Service, Selection, and Technology create a powerful competitive advantage that will protect the Company’s market leadership and propel its future growth into the evolving physical entertainment product segments.

The Business Combination

On February 10, 2023, Alliance, Adara and Merger Sub consummated the closing of the transactions contemplated by the Business Combination Agreement.

Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy Alliance and Adara was effected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly-owned subsidiary of Adara.

Following the consummation of the Merger on the closing of the Business Combination, Adara changed its name from Adara Acquisition Corp.

The Business Combination Agreement

On February 10, 2023, Adara, Alliance and Merger Sub consummated the closing of the transactions contemplated by the Business Combination Agreement.

Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy Alliance and Alliance was effected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly owned subsidiary of Alliance.

Following the consummation of the Merger on the closing of the Business Combination, Alliance changed its name from Alliance Acquisition Corp.

to Alliance Entertainment Holding Corporation.

Pursuant to the Business Combination Agreement, Adara issued (i) 47,500,000 shares of Class A common stock of Adara to holders of common stock of Legacy Alliance and (ii) 60,000,000 shares of Class E common stock of Adara to the Legacy Alliance stockholders were placed in an escrow account to be released to such Legacy Alliance stockholders and converted into Class A common stock upon the occurrence of certain triggering events.

Pursuant to the Business Combination Agreement, Alliance issued (i) 47,500,000 shares of Class A common stock of Alliance to holders of common stock of Legacy Alliance and (ii) 60,000,000 shares of Class E common stock of Alliance to the Legacy Alliance stockholders were placed in an escrow account to be released to such Legacy Alliance stockholders and converted into Class A common stock upon the occurrence of certain triggering events.

Alliance’s Business

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Alliance believes that it is a single source for all customer entertainment product needs.

As a solutions-based operation, Alliance seeks to drives sales for their suppliers with broad product selection and cost-efficient processing.

As a solutions-based operation, Alliance seeks to drive sales for their suppliers with broad product selection and cost-efficient processing.

Alliance’s distribution business is built around three areas, where our marketplace value is created:

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Alliance provides leading product and e-commerce distribution and inventory solutions.

Alliance provides a full, enterprise-level infrastructure and drop ships orders directly to consumers on behalf of its customers.

Alliance provides a full, enterprise-level infrastructure and dropships orders directly to consumers on behalf of its customers.

The entire ordering, confirmation and invoicing process is automated.

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These value-add services provide a highly technical, critical business function for our partners using traiting of locations and min/max system of supply.

Alliance consolidates and distributes a vast portfolio of entertainment products with over 425,000 SKUs in stock, while its proprietary database powers retailers’ online music and gaming offerings.

● Subsidiary Brands — We operate under the following subsidiaries which focus on the following product brand areas:

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Alliance — was a competitor to CD Listening Bar when CD Listening Bar acquired Alliance in 2013.

Alliance primarily serviced B&N and Best Buy, and hundreds independent retailers.

Alliance primarily serviced B&N and Best Buy, and hundreds of independent retailers.

This reverse merger by which CD Listening Bar merged into Alliance made Alliance the largest music and video distributor in the world.

Mill Creek Entertainment — is the home entertainment industry’s leading independent studio for Blu-ray, DVD, and digital distribution.

With direct sales pipelines to all primary retail and online partners, Mill Creek Entertainment licenses, produces,

markets, and distributes a dynamic array of film and television content to over 30,000 retail stores and thousands of websites reaching millions of customers across North America.

With direct sales pipelines to all primary retail and online partners, Mill Creek Entertainment licenses, produces, markets, and distributes a dynamic array of film and television content to over 30,000 retail stores and thousands of websites reaching millions of customers across North America.

Mill Creek Entertainment’s expansive library includes Oscar®-winning theatrical feature films, Emmy®-winning classic and contemporary TV series, original documentary productions and pop-culture favorites that enlighten, educate, and entertain.

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Alliance acquired Distribution Solutions in 2018 and has over 95 small movie studios that are exclusively distributed through Distribution Solutions.

● Product Categories — Alliance’s core media and entertainment product areas are:

Product Categories — Alliance consolidates and distributes a portfolio of entertainment products with over 375,000 SKUs in stock in core media and entertainment product areas in five primary categories:

● Gaming Products:

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Nintendo, Microsoft, Arcade1Up, and all third party video game publishers.

For the six months ended December 31, 2022, gaming represented approximately 41% of Alliance revenues on a consolidated basis.

For the year ended June 30, 2022, gaming represented approximately 39% of Alliance revenues on a consolidated basis.

● Vinyl Records:

Vinyl records have experienced a growth of 45% compounded annual growth rate, or CAGR, for each of the last eight years.

For the fiscal year ended June 30, 2023, vinyl represented 28% of all Company revenues on a consolidated basis.

For the six months ended December 31, 2022, vinyl represented approximately 24% of Alliance revenues on a consolidated basis.

For the year ended June 30, 2022, vinyl represented approximately 23% of Alliance revenues on a consolidated basis.

● Digital Video Discs and Blu-Ray:

DVD sales for the fiscal year ended June 30, 2022 have been increasing and represent 19% of Alliance’s consolidated revenue.

For the six months ended December 31, 2022, digital video discs and blu-ray represented approximately 17% of Alliance revenues on a consolidated basis.

DVD sales for the fiscal year ended June 30, 2023, represent 16% of Alliance’s consolidated revenue.

For the year ended June 30, 2022, digital video discs and blu-ray represented approximately 19% of Alliance revenues on a consolidated basis.

● Compact Discs:

CDs for the fiscal year ended June 30, 2023, represent 11% of Alliance’s consolidated revenue.

For the six months ended December 31, 2022, CDs represented approximately 10% of Alliance revenues on a consolidated basis.

For the year ended June 30, 2022, CDs represented approximately 11% of Alliance revenues on a consolidated basis.

● Consumer Products and Collectibles:

Alliance has experienced steady growth in collectible and consumer products, representing 7% of the Company consolidated revenue for the fiscal year ended June 30, 2023.

For the six months ended December 31, 2022, gaming represented approximately 7% of Alliance revenues on a consolidated basis.

For the year ended June 30, 2022, collectibles and consumer products represented approximately 4% of Alliance revenues on a consolidated basis.

Alliance’s technology platforms combine customer-friendly applications and efficient operating systems with access to the Company’s global content inventory across all current market segments.

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We continue to invest in enhancements to our automated handling equipment capable of reducing shipping times, streamlining order processing, and improving overall warehouse.

In 2021, Alliance initiated installation of a state-of-the art AutoStore Automated

Storage & Retrieval System (ASRS) for its Shepherdsville warehouse.

In December 2022, Alliance completed installation of a state-of-the art AutoStore Automated Storage & Retrieval System (ASRS) for its Shepherdsville, KY warehouse.

This system has improved Alliance’s warehouse operations, allowing the Company to achieve increased levels of speed, reliability, capacity, and precision, resulting in significant cost savings.

The Company’s platforms enable stakeholders to search and purchase personalized product selections efficiently.

Through a modern and intuitive user interface, customers access to Alliance’s global inventory as well as integrated marketing tools, conversational commerce, Fintech solutions, self-service purchasing and 24/7 support.

Through a modern and intuitive user interface, customers access Alliance’s global inventory as well as integrated marketing tools, conversational commerce, Fintech solutions, self-service purchasing and 24/7 support.

Current features of Alliance’s customer engaging technology features include seamless connectivity across desk-top, notebook and mobile devices.

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Further, Alliance’s technology offers a multi-channel marketing platform supporting retailer marketplace participants’ growth and business development with fully integrated product marketing and CRM tools.

Management believes the end result is a more comprehensive, engaging and cost-effective transaction process designed to make all stakeholders more productive and competitive.

Management believes the result is a more comprehensive, engaging and cost-effective transaction process designed to make all stakeholders more productive and competitive.

Industry Background

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Vinyl Records

The Company expects vinyl sales to increase over the next five years.

Industry wide, vinyl sales surpassed CD sales.

Revenue in the industry from vinyl grew to $1.0 billion in 2021 and accounts for 63% of physical entertainment sales dollars.

The market is expected to grow by $563.97 million from 2021 to 2025.

The expected CAGR is 8.41% during the same period.

The largest market in terms of record sales is the United States followed by the United Kingdom, France, Japan, and Germany.

The Company expects vinyl sales to increase during the next five plus years.

Industry wide, vinyl sales surpassed CD sales and revenue in the vinyl industry grew to approximately $2 billion in 2022.

The industry projects vinyl sales to reach $4.1 billion by 2030 or a CAGR of nearly 10%.

Alliance believes that the growth in vinyl is being driven by millennial consumers.

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The gaming industry shows strong growth over the next few years from 2023 to 2030.

The gaming industry was valued at $173.7 billion in 2021 and is expected to reach $314.4 billion by 2026.

The CAGR is 9.64% over the forecast period from 2021 to 2026.

The global gaming industry was valued at approximately $250 billion in 2022 and is expected to reach $665 billion by 2030.

The CAGR is 13.1% during the forecast period from 2023 to 2030.

Contributing factors include more people staying home than before and emerging technologies in gaming such as cloud, AR, VR and AI.

The global user base for AR and VR gaming is estimated to increase to 216 million users by 2025.

Consumer Products and Collectibles

The market for consumer products/collectibles shows steady growth over the next few years.

The collectibles market is expected to grow by $1.24 billion during the period of 2021 to 2025.

The CAGR is over 4% for the forecast period.

Toys and collectibles (Funko, Mattel, Hasbro, Lego, Playmobil, action figures) capitalize on the social trend of facilitating creative play while reducing screen time.

While market segmentation is expansive, the collectibles market CAGR estimates range from 4% to 6% this decade.

Toys and collectibles (Funko, Mattel, Hasbro, Lego, Playmobil, action figures) capitalize on the social trend of facilitating creative play combined with reducing screen time.

In addition, nostalgic franchises have become relatively trendy.

Compact Discs

Vinyl continues to surpass CD sales.

CD Revenues in the US in 2021 were $584 million.

Sales in the United States have dropped from 122.9 million shipments in 2015 to only 31.6 million shipments in 2021.

CD Revenues in the US in 2022 were $483 million as compared to approximately $585 million in 2021.

Sales volume have decreased from 47 million units in 2021 to 33 million in 2022.

Alliance historically over-indexes the industry compared to CD revenues in the United States due to its Amped division adding more exclusive labels to distribute.

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However, factors such as access to digital copies of films, and on-demand streaming services have caused DVD sales to decline.

Shipments are expected to decrease from 46.6 million in 2019 to 16.1 million in 2025.

Forecast for unit shipments shows an overall decline of 16.2% CAGR from 2019 – 2025.

DVD’s biggest competitor, the online streaming services market is expected to grow by $191.72 billion during 2021 – 2025 with a CAGR of 18%.

Alliance historically over-indexes the industry compared to DVD and BluRay revenues in the United States because of Distribution Solution’s division adding more exclusive studio products to distribute.

In 2022, US sales declined from approximately $2.0 billion in 2021 to $1.6 billion in 2022 or -20%.

Alliance historically over-indexes the industry compared to DVD and Blu-ray revenues in the United States because of Distribution Solution’s division adding more exclusive studio products to distribute.

Market Opportunity

The Company has identified two primary market areas where it currently conducts business and plans to grow its business:

The Company has identified three primary market areas where it currently conducts business and plans to grow its business:

Content Media

● The global content media market is expected to grow from $289.13 billion in 2021 to $308.97 billion in 2022 at a CAGR of 6.9%.

The film and music market growth are mainly due to the companies rearranging their operations and recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges.

The market is expected to reach $392.34 billion in 2025 at a CAGR of 6%.

● Despite the rise of digital distribution models, 64% of console consumers still prefer to buy their games on disc.

● The global animation collectibles market is poised to grow by $1.24 billion during 2021 – 2025, progressing at a CAGR of over 4% during the same period.

● The global e-commerce fulfillment services market size was valued at $77.57 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of 10% from 2021 to 2028 ($168.72 billion).

● Consumer electronics is expected to emerge as the fastest-growing segment registering a CAGR of over 12% from 2021 to 2028.

● As technology and social trends evolve, the film and music market studios are overhauling their business models to take advantage of changing consumer behavior and expanding media platforms.

A large opportunity for licensing and distributing products exists for companies with the technology, process, and relationships to efficiently manage supply chain logistics in bulk to major retailers and direct to consumers.

● Consumers continue to trend towards vinyl records due to the desire to own the physical product, the sound quality, and the intrinsic value of the album artwork.

● Despite the rise of digital distribution models, 66% of console consumers still prefer to buy physical versions of games.

● The global e-commerce fulfillment services market size was valued at $110 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 14% from 2023 to 2030).

● The market is anticipated to witness substantial growth during the period due to the proliferation of the e-commerce industry, especially in emerging markets leading to an unprecedented rise in the number of online buyers.

This trend implies North America will not grow as quickly as other global segments.

● It is anticipated that fulfilment in North America will continue to be funneled into established brands (for example, Amazon, Walmart, Best Buy and Target).

● The global third-party logistics market was valued at $1,022 billion in 2023 and is forecasted to reach $1,590 billion by the year 2028.

The market is anticipated to register a CAGR of 8.2% over the same period.

The market is anticipated to register a CAGR of 5.5% during the same period.

● Retailers and manufacturers are increasing their focus on core competencies to sustain the intense competition in their respective markets.

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Its existing product and service offering has positioned the Company to capitalize on shifts towards e-commerce and Omni-Channel strategies, especially with retailers and manufacturers vastly increased reliance on their DTC fulfillment and distribution partners.

We believe that our key strengths position us to deliver on our strategy to profitably grow and optimize our core physical media and entertainment product distributors fulfillment and e-commerce distribution solutions while expanding and investing in higher margin advanced technology solutions and high value services.

We believe that our key strengths position us to deliver on our strategy to grow profitably and optimize our core physical media and entertainment product distributors fulfillment and e-commerce distribution solutions while expanding and investing in higher margin advanced technology solutions and high value services.

The Company believes the following strengths are key to its ability to grow and maintain its position as a market leader:

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This M&A activity has built scale and added capabilities to the Company’s platforms.

Further, Alliance has demonstrated an ability to integrate those companies into its existing platforms to fundamentally improve the acquired businesses.

Further, Alliance has demonstrated an ability to integrate those companies into its existing platforms to improve the acquired businesses fundamentally.

Alliance management believes there remain significant consolidation opportunities to drive future growth through the acquisition of complementary businesses and competitors.

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Alliance distributes and markets over 600,000 products worldwide from approximately 400 of the industry’s premier physical media entertainment products suppliers.

Typically, it maintains over 425,000 SKUs of unique items in its on-hand inventory.

For the six months ended December 31, 2022, there were 23 suppliers in the top 80% of Alliance’s purchase expenditures and five suppliers representing approximately 48%.

For the fiscal year ended June 30, 2022, there were 26 suppliers in the top 80% of Alliance’s product purchases by expenditures.

The top five suppliers as a group represented 53 % of its purchase expenditures.

No single supplier comprised more than 15% of Alliance’s total purchases for the year ended June 30, 2022.

Typically, it maintains approximately over 375,000 SKUs of unique items in its on-hand inventory.

For the fiscal year ended June 30, 2023, five suppliers made up approximately 49% of product receipt value and 23 suppliers made up 80%.

By comparison, for the fiscal year ended June 30, 2022, five suppliers made up approximately 52% of the product receipts and 20 suppliers made up 80%.

One supplier comprised of approximately 15% of Alliance’s total receipts for the year ended June 30, 2022, and 2023.

Alliance has written supply agreements with many of its suppliers and these agreements usually provide for nonexclusive distribution rights and often include territorial restrictions that limit the countries, and in some cases certain channels, in which it may distribute the products.

Some of Alliance’s agreements with suppliers may contain limitations of liability with respect to our suppliers’ obligations and warranties.

Historically, warranty expense has not been material.

Historically, warranty expenses have not been material.

The agreements also are generally short-term, subject to annual renewal, and in some cases contain provisions permitting termination by either party without cause upon relatively short notice.

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In cases in which suppliers are not obligated to accept inventory returns upon termination, some suppliers will nevertheless elect to repurchase the inventory while other suppliers will assist with either liquidation or resale of the inventory.

Alliance has over 4,000 customers shipping to over 35,000 storefronts and service over 2,000 independent music and video retailers.

It conducts business with most of the leading retailers of entertainment products and services around the world.

Alliance conducts business with most of the leading retailers of entertainment products and services around the world.

Alliance serves a customer base that is divided into categories including retailers, direct marketers, Internet-based resellers, independent dealers, product category specialists and other distributors.

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Alliance tries to reduce our exposure to the impact of business fluctuations by maintaining a balance in the customer categories we serve.

Alliance has over 4,000 customers shipping to over 35,000 storefronts and service over 2,000 independent music and video retailers.

In most cases Alliance conducts business with our customers under our general terms and conditions, without minimum purchase requirements.

It also has resale contracts with some of its reseller customers that are terminable at will after a reasonable notice period and have no minimum purchase requirements.

Alliance typically ships products on the same day it receives and accepts customers’

purchase orders.

Alliance typically ships products on the same day it receives and accepts customers’ purchase orders.

Unless otherwise requested, substantially all of Alliance’s products are delivered by common freight carriers.

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These agreements generally may be terminated by either party without cause following reasonable notice.

None of the Company’s customer contracts exceed a one-year term, with most contracts having auto-renewal clauses.

For the year ended June 30, 2023, Alliance’s top five customers represented approximately 50% of its consolidated revenue.

Alliance’s top customer represented 23% of its consolidated net sales.

None of the Company’s customer contracts exceed a one-year term, with most contracts having auto-renewal clauses.

By comparison, for the fiscal year ended June 30, 2022, the top five customers generated approximately 55% of consolidated revenue with one customer representing almost 27%.

Our Business is Affected by Seasonality

Alliance experiences some seasonal fluctuation in demand in our business.

For instance, Alliance typically sees lower demand, particularly in Europe, in the summer months.

The Company also normally sees an increase in demand in the September-to-December period, driven primarily by pre-holiday impacts on stocking levels in the retail channel for its North American business.

Alliance experiences some seasonal fluctuation in demand in our business due to changes in consumer behavior and schedules of new releases.

In addition, the Company typically experiences an increase in demand in the September-to-December period, driven primarily by pre-holiday stocking levels in the retail channel for its North American business.

How We Manage Our Inventory

Alliance strives to maintain sufficient quantities of product inventories to achieve optimum order fill rates.

Alliance strives to maintain enough product inventories to achieve optimum order fill rates.

Alliance’s business, like that of other distributors, is subject to the risk that the value of our inventory will be impacted adversely by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the products comprising the inventory.

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Alliance’s intellectual property is an important component of its business.

The Company relies on a combination of domain names, trademarks, copyright, know-how and trade secrets, as well as contractual provisions and restrictions, to protect its intellectual property.

As of December 31, 2022, Alliance has no active patents or patent applications, but intends to pursue patent protection to the extent it believes it would be beneficial and cost effective.

As of December 31, 2022, the Company owned 32 U.S.

The Company relies on a combination of domain names, trademarks, copyright, know-how and trade secrets, as well as contractual provisions and restrictions, to protect its intellectual

As of June 30, 2023, Alliance has no active patents or patent applications, but intends to pursue patent protection to the extent it believes it would be beneficial and cost effective.

As of June 30, 2023, the Company owned 22 U.S.

registered or pending trademarks and registered or pending trademarks in two other jurisdictions.

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Alliance also requires key employees to sign invention assignment agreements with respect to inventions arising from their employment and restrict unauthorized access to the Company’s proprietary technology.

In addition, Alliance has developed proprietary, AI-driven software that is protected through a combination of copyright and trade secrets.

Notwithstanding the Company’s efforts to protect its intellectual property, there can be no assurance the measures taken will be effective or that its intellectual property will provide any competitive advantage.

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Human Capital Resources

As of December 31, 2022, Alliance had approximately 786 employees on its payroll and approximately 410 workers hired through staffing agencies throughout the U.S.

As of June 30, 2023, Alliance had approximately 761 employees on its payroll and approximately 266 workers hired through staffing agencies throughout the U.S.

and internationally.

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and internationally.

None of Alliance’s employees are subject to a collective bargaining agreement and Alliance believes it has a good relationship with its employees.

Staffing agencies are used to flex labor capacity to ensure the labor supply and demand are in balance.

None of Alliance’s employees are subject to a collective bargaining agreement and Alliance believes it has a good relationship with its employees and staffing agencies.

Employees & Demographics.

With respect to global demographics, approximately 47% of the Company’s payroll employees are female and 53% are male.

With respect to global demographics at June 30, 2023, approximately 47% of the Company’s payroll employees are female and 53% are male.

Talent & Turnover.

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Additionally, Alliance strives to promote internally when possible.

Alliance’s program resulted in an annualized turnover rate of 15% for the fiscal year ended June 30, 2022.

Alliance’s program resulted in an annualized turnover rate of about 15% for the fiscal year ended June 30, 2023.

Compensation Practice & Pay Equality.

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Health, Safety & Welfare.

Alliance acted quickly to respond to safety protocols as a result of the COVID-19 pandemic to protect the health and safety of its team members.

To support team members, Alliance provided temporary pay increases to certain employees, offered remote work where possible, purchased additional sanitation supplies and increased personal protective materials provided to staff.

Management acted quickly to respond to safety protocols as a result of the COVID-19 pandemic to protect the health and safety of its team members.

We established comprehensive protocols and guidelines in line with the recommendations of health authorities to protect the health and safety of our employees.

As we transition into the post-pandemic period, we are evaluating the effectiveness of these changes and identifying opportunities to address our policies in the event of a recurrence.

Regulatory Compliance

The Company’s overall business approach and strategy includes rigorous attention to regulatory compliance, as its operations are subject to regulations in the following principal areas, across a wide variety of jurisdictions.

Alliance’s business is subject to a wide

array of laws, regulations, and standards in each domestic and foreign jurisdiction where we operate.

Alliance’s business is subject to a wide array of laws, regulations, and standards in each domestic and foreign jurisdiction where we operate.

Alliance has a buying office in the UK and operates under the name Fulfillment Express.

Fulfillment Express sources music from the UK music suppliers that is then transferred (exported from the United Kingdom) to Kentucky where that music product is prepared to sell in the US market.

Fulfillment Express makes no sales of any kind, it only is a buying office.

Fulfillment Express makes no sales of any kind, it is a buying office.

The regulatory environment in each market is often complex, evolving and can be subject to significant change.

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We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act.

As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “ emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on

executive compensation and shareholder approval of any golden parachute payments not previously approved.

As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public

companies that are not “ emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

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

What changed 10-K

Item 1. Business