What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-25 · 173 added, 221 removed, 473 unchanged (45% of the section changed)

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Our principal risks include risks associated with:

• our ability to manage our rapid growth;

• our ability to attract new clients and retain and broaden our existing clients’ use of our solutions;

• our ability to maintain, protect and enhance our brand;

• our ability to predict the long-term rate of client subscription renewals or adoption of our solutions;

• managing our rapid growth;

• attracting new clients and retaining and broadening our existing clients’ use of our solutions;

• maintaining, protecting and enhancing our brand;

• predicting the long-term rate of client subscription renewals or adoption of our solutions;

• the unpredictable and time-consuming nature of our sales cycles;

• our integration with and reliance on third-party software, content and services;

• integration with and reliance on third-party software, content and services;

• integrating our solutions with other systems used by our clients;

• satisfying our clients and meeting their digital banking needs;

• our dependence on the data centers operated by third parties and third party internet hosting providers;

• defects, errors or performance problems associated with our solutions;

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• providing client support;

• mergers and acquisitions;

• acquiring or investing in other companies or pursuing business partnerships;

• natural or man-made disasters;

• cybersecurity breaches or other compromises of our security measures or those of third parties upon which we rely;

• increased privacy concerns, laws, regulations and standards and our processing and use of the personal information of end users;

• intense competition in the markets we serve;

• our focus and reliance on the financial services industry as the source of our revenue;

• reliance on the financial services industry as the source of our revenue in the event of any downturn, consolidation or decrease in technological spend in such industry;

• evolving technological requirements and changes and additions to our solution offerings;

• regulations applicable to us, our clients and our solutions;

• security breaches or other compromises of our security measures or those of third parties upon which we rely;

• increased privacy concerns and our processing and use of the personal information of end users;

• protecting our intellectual property rights and defending ourselves against claims that we are misappropriating the intellectual property rights of others;

• open-source software in our solutions;

• the political, economic and competitive conditions in the markets and jurisdictions where we operate;

• regulations and laws applicable to us, our clients and our solutions;

• protecting our intellectual property rights and defending ourselves against claims that we are misappropriating the intellectual property rights of others;

• using open-source software in our solutions;

• complying with license or technology agreements with third parties and our ability to enter into additional license or technology agreements on reasonable terms;

• litigation or threats of litigation;

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• the way we recognize revenue, which has the effect of delaying changes in the subscriptions for our solutions from being reflected in our operating results;

• changes in financial accounting standards or practices;

• our limited operating history, our history of operating losses and our ability to use our net operating loss (“NOL”) carryforwards;

• our ability to raise sufficient capital and the resulting dilution and the terms of our credit agreements;

• stock price volatility and no intention to pay dividends;

• maintaining proper and effective internal controls;

• expenses and administrative burdens as a public company;

• our ability to raise sufficient capital and the resulting dilution and the terms of our Amended Credit Agreement (as defined below);

• our status as an emerging growth company;

• future sales of shares of our common stock, our lack of an intention to pay dividends and significant influence of our principal stockholders;

• anti-takeover provisions in our charter documents and Delaware law.

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Continued growth could strain our ability to develop and improve our operational, financial and management controls, enhance our reporting systems and procedures, recruit, train and retain highly skilled personnel and maintain client and brand satisfaction.

As we expand our business and operate as a public company, we may find it difficult to maintain our corporate culture while managing our employee growth.

As we expand our business, we may find it difficult to maintain our corporate culture while managing our employee growth.

Additionally, our productivity and the quality of our offerings may be adversely affected if we do not integrate and train our new employees quickly and effectively.

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Our failure to improve our systems, processes and controls, or their failure to operate in the intended manner, may result in our inability to manage the growth of our business and to forecast our revenues and expenses accurately.

If we are unable to attract new clients, continue to broaden our existing clients’ use of our solutions or develop and maintain resale agreements, our business, financial condition and results of operations could be materially and adversely affected.

If we are unable to attract new clients, continue to broaden our existing clients’ use of our solutions or develop and maintain resale agreements with favorable terms, our business, financial condition and results of operations could be materially and adversely affected.

To increase our revenues, we will need to continue to attract new clients and succeed in having our current clients expand the use of our solutions across their institutions.

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If we are unable to attract new clients or retain or attract new business from current clients, our business, financial condition and results of operations may be materially and adversely affected.

The growth of our business also depends on our ability to develop and maintain resale agreements for third-party solutions through our digital banking platform agreements.

If we are unable to develop and maintain resale agreements, our business, financial condition and results of operations may be materially and adversely affected.

Growth of our business will depend on a strong brand and any failure to maintain, protect and enhance our brand could hurt our ability to retain or expand our base of clients.

The growth of our business also depends on our ability to develop and maintain resale agreements with favorable terms for third-party solutions through our digital banking platform agreements.

If we are unable to develop and maintain such resale agreements, our business, financial condition and results of operations may be materially and adversely affected.

Growth of our business depends on a strong brand and any failure to maintain, protect and enhance our brand could hurt our ability to retain or expand our base of clients.

We believe that a strong brand is necessary to continue to attract and retain clients.

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If our clients do not renew their subscriptions for our solutions on similar pricing terms, our revenues may decline and it could have a material and adverse effect on our business, financial condition and results of operations.

Additionally, as the markets for our solutions continue to develop, we may be unable to attract new clients based on the same subscription

model that we have used historically.

Additionally, as the markets for our solutions continue to develop, we may be unable to attract new clients based on the same subscription model that we have used historically.

Moreover, large or influential FI clients may demand more favorable pricing or other contract terms from us.

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We leverage third-party software, content and services for use with our solutions.

Performance issues, errors and defects, or failure to successfully integrate or license necessary third-party software, content or services, could cause delays, errors or failures of our solutions, increases in our expenses and reductions in our sales, which could materially and adversely affect our business, financial condition and results of operations.

Performance issues, errors and defects, or failure to successfully integrate or license necessary third-party software, content or services on favorable terms, could cause delays, errors or failures of our solutions, increases in our expenses and reductions in our sales, which could materially and adversely affect our business, financial condition and results of operations.

We use software and content licensed from, and services provided by, a variety of third parties in connection with the operation of our solutions.

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Any performance issues, errors, bugs or defects in third-party software, content or services could result in errors or a failure of our solutions, which could materially and adversely affect our business, financial condition and results of operations.

In the future, we might need to license other software, content or services to enhance our solutions and meet evolving client demands and requirements.

In the future, we will need to renew existing licenses and license other software, content or services to enhance our solutions and meet evolving client demands and requirements, all on favorable terms.

Any limitations in our ability to use third-party software, content or services, including the App Stores, could significantly increase our expenses and otherwise result in delays, a reduction in functionality or errors or failures of our solutions until equivalent technology or content is either developed by us or, if available, identified, purchased or licensed and integrated into our solutions.

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If we are unable to effectively integrate our solutions with other systems used by our clients, or if there are performance issues with such third-party systems, our solutions will not operate effectively, and our business, financial condition and results of operations could be materially and adversely affected.

The Alkami Platform integrates with other third-party systems used by our clients, including core processing systems.

The Alkami Platform integrates with other third-party systems used by our clients, including core processing and payment systems.

We do not have formal arrangements with many of these third-party providers regarding our access to their application program interfaces to enable these client integrations.

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In addition, negative publicity resulting from issues related to our client relationships, regardless of accuracy, may adversely affect our ability to attract new clients and maintain and expand our relationships with existing clients.

If the use of our digital banking solutions increases, or if our clients demand more advanced features from our solutions, we will need to devote additional resources to improving our solutions, and we also may need to expand our technical infrastructure at a more rapid pace than we have in the past.

This would involve spending substantial amounts to increase our cloud services infrastructure, purchase or lease data center capacity

and equipment, upgrade our technology and infrastructure and introduce new or enhanced solutions.

have in the past.

This would involve spending substantial amounts to increase our cloud services infrastructure, purchase or lease data center capacity and equipment, upgrade our technology and infrastructure and introduce new or enhanced solutions.

It takes a significant amount of time to plan, develop and test changes to our infrastructure, and we may not be able to accurately forecast demand or predict the results we will realize from such improvements.

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Defects, errors or other performance problems in the Alkami Platform could harm our reputation, result in significant costs to us, impair our ability to sell our solutions and subject us to substantial liability.

The Alkami Platform is complex and may contain defects or errors when implemented or when new functionality is released, as we may modify, enhance, upgrade and implement new systems, procedures and controls to reflect changes in our business, technological advancements and changing industry trends.

The Alkami Platform is complex and may contain defects or errors when implemented or when new functionality is released, or when we modify, enhance, upgrade and implement new systems, procedures and controls to reflect changes in our business, technological advancements and changing industry trends.

From time to time, we have discovered, and may in the future discover, defects or errors in our solutions.

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Thus, if the perceived value or future value of our stock declines, our ability to attract and retain highly skilled employees may be adversely affected.

In addition, many of our existing employees may exercise vested options and then sell our stock, which may make it more difficult for us to retain key employees.

If we fail to attract and retain new employees, our business and future growth prospects could be harmed.

As the number of clients that we serve increases, we may encounter implementation challenges, and we may have to delay revenue recognition for some complex engagements, which could materially and adversely affect our business, financial condition and results of operations.

We may face unexpected challenges related to the complexity of our clients’ integration requirements.

Our expenses increase when clients have unexpected data, hardware or software technology challenges, or complex or unanticipated business requirements.

From time to time we encounter implementation challenges as a result of our clients’ integration and functionality requirements, and when this occurs we must delay revenue recognition, and in certain circumstances we may never recognize the revenue, which could materially and adversely affect our business, financial condition and results of operations.

From time to time we face unexpected challenges related to the complexity of our clients’ integration and functionality requirements.

Our expenses increase when clients have unexpected data, hardware or software technology challenges, or complex or unanticipated functionality requirements.

In addition, our clients typically require complex acceptance testing related to the implementation of our solutions.

Implementation delays may also require us to delay revenue recognition under the related client agreement longer than expected.

Further, because we do not fully control our clients’ implementation schedules, if our clients do not allocate the internal resources necessary to meet implementation timelines or if there are unanticipated implementation delays or difficulties as a result of expansions of project scope or otherwise, our revenue recognition may be delayed.

Losses of registered users or any difficulties or delays in implementation processes could cause clients to delay or forego future purchases of our solutions, which could materially and adversely affect our business, financial condition and results of operations.

Losses of registered users or any difficulties or delays in implementation processes could cause clients to delay or forego the implementation or future purchases of our solutions, which could materially and adversely affect our business, financial condition and results of operations.

Shifts over time in the number of account holders and registered users of our solutions, their use of our solutions and our clients’ implementation and client support needs could negatively affect our profit margins.

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We may acquire or invest in companies, or pursue business partnerships, which may divert our management’s attention or result in dilution to our stockholders, and we may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions, investments or partnerships.

From time to time, we may consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, solutions and other assets.

For example, in September 2021, we closed an acquisition that added employees and increased our reach into the digital account opening and loan origination space.

We have in the past considered and we may in the future consider, potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, solutions and other assets.

We also may enter into relationships with other businesses to expand our solutions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies.

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In addition, we have limited experience in acquiring other businesses.

If an acquired business fails to meet our expectations, our business, financial condition and results of operations could be materially and adversely affected.

We may not be able to find and identify desirable acquisition

targets, we may incorrectly estimate the value of an acquisition target and we may not be successful in entering into an agreement with any particular target.

If an acquired business fails to meet our

expectations, our business, financial condition and results of operations could be materially and adversely affected.

We may not be able to find and identify desirable acquisition targets, we may incorrectly estimate the value of an acquisition target and we may not be successful in entering into an agreement with any particular target.

If we are successful in acquiring an additional business, we may not achieve the anticipated benefits from the acquired business due to a number of factors, including:

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• incurrence of acquisition-related costs;

• difficulty integrating the technology, accounting systems, operations, control environments and personnel of the acquired

business and integrating the acquired business or its employees into our culture;

• difficulty integrating the technology, accounting systems, operations, control environments and personnel of the acquired business and integrating the acquired business or its employees into our culture;

• difficulties and additional expenses associated with supporting legacy solutions and infrastructure of the acquired business;

• difficulty converting the clients of the acquired business to our solutions and contract terms, including disparities in licensing

• difficulty converting the clients of the acquired business to our solutions and contract terms, including disparities in licensing terms;

• additional costs for the support of the professional services model of the acquired company;

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In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our results of operations based on this impairment assessment process, which could materially and adversely affect our business, financial condition and results of operations.

Natural or man-made disasters and other similar events, including the COVID-19 pandemic, could significantly disrupt our business, and materially and adversely affect our business, financial condition and results of operations.

Any of our operating facilities or infrastructure may be harmed or rendered inoperable by natural or man-made disasters, including hurricanes, tornadoes, wildfires, floods, earthquakes, nuclear disasters, acts of terrorism or other criminal activities, infectious disease outbreaks or pandemic events, including the COVID-19 pandemic, power outages and other infrastructure failures, which may render it difficult or impossible for us to operate our business for some period of time.

Natural or man-made disasters and other similar events, such as the COVID-19 pandemic, could significantly disrupt our business, and materially and adversely affect our business, financial condition and results of operations.

Any of our operating facilities or infrastructure may be harmed or rendered inoperable by natural or man-made disasters, including hurricanes, tornadoes, wildfires, floods, earthquakes, nuclear disasters, acts of terrorism or other criminal activities, infectious disease outbreaks or pandemic events, such as the COVID-19 pandemic, power outages and other infrastructure failures, which may render it difficult or impossible for us to operate our business for some period of time.

Our facilities would likely be costly to repair or replace, and any such efforts would likely require substantial time.

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Moreover, although we have disaster recovery plans, they may prove inadequate.

We may not carry sufficient business insurance to compensate for losses that may occur.

We may not carry sufficient business insurance to compensate for losses that may occur, and if such events become more frequent it may adversely impact the cost or availability of insurance going forward.

Any such losses or damages could have a material adverse effect on our business and results of operations.

In addition, the facilities of our third-party providers, including AWS, may be harmed or rendered inoperable by such natural or man-made disasters, which could cause disruptions, difficulties or otherwise materially and adversely affect our business, financial condition and results of operations.

We are subject to risks related to public health crises such as the global pandemic associated with COVID-19.

State, local and foreign jurisdictions have imposed “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Due to the COVID-19 pandemic and the resulting shelter-in-place orders, we transitioned our employee base to work-from-home in March 2020, creating challenges in executing sales and implementations that have resurfaced due to renewed shelter-in-place requirements and that may be exacerbated by prolonged shelter-in-place requirements.

The COVID-19 pandemic and resulting shelter-in-place orders and impacts on domestic and international economic conditions have negatively affected our clients’ and prospective clients’ operations.

The ability of our existing clients to fulfil or renew their contractual commitments, or potential new clients’ ability and willingness to purchase our products, may also be impacted by the ongoing COVID-19 pandemic.

These challenges will likely continue for the duration of the pandemic, which is uncertain, and the macro-economic effects of the pandemic will likely continue far beyond the duration of the pandemic.

The COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting from the spread of COVID-19 could materially and adversely affect our clients’ business and therefore our business, financial condition and results of operations.

The COVID-19 pandemic has also resulted in a significant increase in unemployment in the United States which may continue even after the pandemic subsides.

Additionally, to the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as our ability to achieve profitability in the future, our ability to attract new clients or continue to broaden our existing clients’ use of our solutions and the impact of any decrease in technology spend by clients and potential clients in the financial services industry where we derive all of our revenues.

Risks Relating to Our Industry

We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations.

The market for digital solutions for financial service providers is intensely competitive and characterized by rapid changes in technology and frequent new product introductions and improvements.

We anticipate continued challenges from current competitors, including point solution vendors and core processing vendors, many of whom are well-established and enjoy greater resources, as well as from new entrants into the industry, which could include well-established companies with distinct advantages, such as cloud providers, search providers, social media providers and large providers of software to businesses and consumers.

If we are unable to anticipate or react to these competitive challenges, our competitive position could weaken, and we could experience a decline in revenues that could adversely affect our business, financial condition and results of operations.

Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:

• greater name recognition and larger client bases;

• larger sales and marketing budgets and resources;

• greater client support resources;

• larger research and development budgets;

• substantially greater financial, technical and other resources.

Potential clients may also prefer to continue their relationship with their existing partner rather than change to a new partner regardless of product performance or features.

As a result, even if the features of the Alkami Platform are superior, clients may not purchase our solution.

In addition, innovative start-up companies, and larger companies that are making significant investments in research and development, may develop similar or superior products and technologies that compete with our solutions.

Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their market position.

As a result, our current or potential competitors might be able to adapt more quickly to new technologies and client customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of acquisitions or other opportunities more readily, or develop and expand their product and service offerings more quickly than we can.

Further, conditions in our industry could change rapidly and significantly as a result of technological advancements.

These competitive pressures in our market or our failure to compete effectively may result in price reductions, reduced revenues and gross margins and loss of market share.

If our clients do not renew their subscriptions for our solutions on similar or more favorable terms to us, our revenues may decline and it could have a material and adverse effect on our business, financial condition and results of operations.

We derive all of our revenues from clients in the financial services industry, and any downturn, consolidation or decrease in technology spend in the financial services industry could materially and adversely affect our business, financial condition and results of operations.

We derive all of our revenues from FIs, whose industry has experienced significant pressure in recent years due to economic uncertainty, low interest rates, liquidity concerns and increased regulation.

In the recent past, FIs have experienced consolidation, distress and failure, and very few new FIs are being created.

It is possible these conditions may continue into the future, and even if conditions improve for FIs, there can be no guarantee that these conditions will not reoccur.

If any of our clients fail or merge with, or are acquired by, other entities, such as FIs that have internally developed banking technology solutions or that are not our clients or use our solutions less, our business, financial condition and results of operations could be materially and adversely affected.

Additionally, changes in management of our clients could result in delays or cancelations of the implementation of our solutions.

It is also possible that consolidation among FIs could decrease the number of registered users by causing registered users to opt for fewer and deeper FI relationships, and larger FIs that result from business combinations could have greater leverage in negotiating price or other terms with us or could decide to replace some or all of the elements of our solutions.

Our business, financial condition and results of operations could also be materially and adversely affected by weak economic conditions in the financial services industry.

Any downturn in the financial services industry may cause our clients to reduce their spending on technology or cloud-based banking technology or to seek to terminate or renegotiate their contracts with us.

Moreover, even if the overall economy is robust, economic fluctuations caused by things such as the U.S.

Federal Reserve altering the federal funds target range may cause potential new clients and existing clients to become less profitable and therefore forego or delay purchasing our solutions or reduce the amount of spend with us, which could materially and adversely affect our business, financial condition and results of operations.

If we fail to respond to evolving technological requirements or introduce adequate enhancements and new features, our digital banking solutions could become obsolete or less competitive.

The market for our solutions is characterized by rapid technological advancements, changes in client requirements and technologies, frequent new product introductions and enhancements and changing regulatory requirements.

The life cycles of our solutions are difficult to estimate.

Rapid technological changes and the introduction of new products and enhancements by new or existing competitors or large FIs could undermine our current market position.

Other means of digital banking may be developed or adopted in the future, and our solutions may not be compatible with these new technologies.

In addition, the technological needs of and services provided by, FIs may change if they or their competitors offer new services to account holders.

Maintaining adequate research and development resources to meet the demands of the market is essential.

The process of developing new technologies and solutions is complex and expensive.

The introduction of new solutions by our competitors, the market acceptance of competitive solutions based on new or alternative technologies or the emergence of new technologies or solutions in the broader financial services industry could render our solutions obsolete or less effective.

The success of any enhanced or new solution depends on several factors, including timely completion, adequate testing and market release and acceptance of the solution.

Any new solutions that we develop or acquire may not be introduced in a timely or cost-effective manner, may contain defects or may not achieve the broad market acceptance necessary to generate significant revenues.

If we are unable to anticipate client requirements or work with our clients successfully on implementing new solutions or features in a timely manner or enhance our existing solutions to meet our clients’ requirements, our business, financial condition and results of operations could be materially and adversely affected.

If the market for digital banking solutions develops more slowly than we expect or changes in a way that we fail to anticipate, our sales would suffer and our business, financial condition and results of operations could be materially and adversely affected.

Use of, and reliance on, digital banking solutions is still at a relatively early stage, and we do not know whether FIs will continue to adopt digital banking solutions such as ours in the future or whether the market will change in ways we do not anticipate.

Many FIs have invested substantial personnel and financial resources in legacy software, and these institutions may be reluctant, unwilling or unable to convert from their existing systems to our solutions.

Furthermore, these FIs may be reluctant, unwilling or unable to use digital banking solutions due to various concerns such as the security of their data and reliability of the delivery model.

These concerns or other considerations may cause FIs to choose not to adopt our digital banking solutions or to adopt them more slowly than we anticipate, either of which would adversely affect our business, financial condition and results of operations.

Our future success also depends on our ability to sell additional applications and functionality to our current and prospective clients.

As we create new applications and enhance our existing solutions, these applications and enhancements may not be attractive to

In addition, promoting and selling new and enhanced functionality may require increasingly costly sales and marketing efforts, and if clients choose not to adopt this functionality, our business, financial condition and results of operations could be materially and adversely affected.

Our products are marketed to and used by FIs, who are subject to extensive laws and regulations regarding the business functions and activities performed on our software solutions.

Changes to any applicable statutes, regulations, rules or policies, including the interpretation or implementation of statutes, regulations, rules or policies could affect us in substantial and unpredictable ways, including limiting the types of software products we may offer and increasing the ability of third parties to offer competing services and products to FIs.

Assuring that our products adapt to changes in the compliance obligations or expectations of our customers requires significant expense and devotion of resources on our part which may adversely affect our ability to operate profitably.

Our clients and prospective clients, as FIs, are highly regulated and are generally required to comply with stringent regulations in connection with performing business functions that our solutions address.

As a provider of technology services to such FIs, we may in the future be subject to examination by various federal and state regulatory agencies, including those agencies that comprise the Federal Financial Institutions Examination Council (“FFIEC”), and we may also be required to review and perform due diligence on certain of our clients and third-party providers.

Matters subject to review and examination by the FFIEC, federal and state regulatory agencies and external auditors include, but are not limited to, our internal information technology controls in connection with our performance of data processing services, the agreements giving rise to those processing activities and the design of our solutions, as well as our systems and technical infrastructure, management and financial condition.

In addition, while we are not regulated by the National Credit Union Administration (“NCUA”), as a result of our registration as a CUSO, we are subject to disclosure, annual reporting and other requirements imposed by the NCUA.

While many of our operations are not directly subject to the same regulations applicable to FIs, we are legally and contractually obligated to our clients to provide software solutions and maintain internal systems and processes that comply with certain federal and state regulations applicable to them.

Compliance with current or future digital accessibility, privacy, data protection and information security laws to which our FI clients are subject could result in higher compliance and technology costs and could restrict our ability to fully exploit our capabilities or provide certain products and services, which could materially and adversely affect our ability to operate profitably.

Our failure to offer products and solutions that directly or indirectly comply with such laws, including as interpreted and applied by courts and regulators, could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions and damage to our reputation and our brand.

In recent years, there has been increasing enforcement activity in the areas of digital accessibility, privacy, data protection and information security in various markets in which our customers operate.

For example, as a result of obligations under some of our client contracts, we are required to comply with certain provisions of the Gramm-Leach-Bliley Act (“GLBA”) related to the privacy of consumer information and may be subject to privacy, security and digital accessibility requirements because of the solutions we provide to FIs.

We may also be subject to other laws because of the solutions we provide to FIs.

Any inability to satisfy regulatory or contractual expectations in connection with applicable regulations and guidance could adversely affect our ability to conduct our business, including attracting and maintaining clients, require significant costs to correct, harm our reputation, or lead to liability to third parties, including our customers or their consumers.

Further, if we have to make changes to our internal processes and solutions as result of applicable regulations or guidance or findings from examinations, we could be required to invest substantial additional time and funds and divert time and resources from other corporate purposes to remedy any identified deficiency or gap.

In addition, individual claimants and other third parties, including advocates for the blind or other persons with disabilities, have filed lawsuits or issued cease and desist requests to FIs, including our clients, on grounds that websites or mobile applications offered to consumers do not meet the needs of individuals with a disability within the meaning of Section 3(2) of the Americans with Disabilities Act of 1990, 42 U.S.C.

§§ 12101, 12102(2) (“ADA”) and the Title III regulations implementing the ADA contained in 28 C.F.R.

§§ 36.101, et seq.

Third-party advocates and individuals with disabilities seek changes to existing law and regulation, or advocate for novel legal rulings in court, against FIs when desktop websites or mobile applications do not meet or exceed the Web Content Accessibility Guidelines 2.1 digital accessibility standard, which was developed in part to help ensure that the content developed for banks, credit unions and other financial institutions can be accessed and used by people with or without disabilities.

The evolving, complex and often unpredictable regulatory and litigation environment in which our clients operate could result in our failure to provide compliant solutions, which could result in clients not purchasing our solutions or terminating their contracts with us or the imposition of fines or other liabilities for which we may be responsible or for which our clients may seek indemnity from us.

In addition, federal, state and/or foreign agencies may attempt to further regulate our activities in the future which could materially and adversely affect our business, financial condition and results of operations.

For example, existing laws, regulations and guidance could be amended or interpreted differently by regulators in a manner that imposes additional costs and has a negative impact on our existing operations or that limits our future growth.

In addition, new regulations could require costly changes in our processes, infrastructure or personnel.

Finally, actions by regulatory authorities could influence both the decisions our clients make concerning the purchase of our solutions and the timing and implementation of these decisions.

Substantial research and development and other corporate resources have been and will continue to be applied to adapt our solutions to this evolving, complex and often unpredictable regulatory environment.

Risks Relating to Cybersecurity or Data Privacy

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Because of our position in the financial services industry, we believe that we are likely to continue to be a target of such threats and attacks.

Additionally, geopolitical events and resulting government activity could also lead

to information security threats and attacks by affected jurisdictions and their sympathizers.

Additionally, geopolitical events and resulting government activity could also lead to information security threats and attacks by affected jurisdictions and their sympathizers.

Although we maintain policies, procedures and technological safeguards and administrative controls designed to protect our information technology system and applications, violations of such policies, procedures and safeguards have occurred in the past and, despite the security measures we have in place, there can be no assurance that our safety and security measures (and those of our third-party providers) will prevent damage to, or interruption or breach of, our information systems and operations.

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There may be, and have been in the past, unlawful attempts to disrupt or gain access to our information technology systems that may result in unauthorized access to or disclosure of client customer PI or other data and disruption of our or our clients’ operations.

We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems, react in a timely manner or implement adequate preventative measures.

We may be unable to anticipate or prevent techniques used to obtain unauthorized

access or to sabotage systems, react in a timely manner or implement adequate preventative measures.

Additionally, we and client customers integrate our solutions with certain third-party systems used by our clients which may have access to PI and other data about our clients.

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We also cannot ensure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security incident or breach, or that the insurer will not deny coverage as to any future claim.

The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation and our business,

financial condition and results of operations.

In addition, some of our clients contractually require notification of data security compromises and include representations and warranties in their contracts with us that our solutions comply with certain legal and technical standards related to data security and privacy and meet certain service levels.

In addition, our clients contractually require notification of certain data security compromises and include representations and warranties in their contracts with us that our solutions comply with certain legal and technical standards related to data security and privacy and meet certain service levels.

In our contracts, a data security compromise or operational disruption impacting us or one of our critical vendors, or system unavailability or damage due to other circumstances, may constitute a material breach and give rise to a client’s right to terminate its contract with us.

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This private right of action may increase the likelihood of, and risks associated with, data breach litigation.

Additionally, a new California ballot initiative, the California Privacy Rights Act (“CPRA”), was passed in November 2020.

Additionally, the California Privacy Rights Act (“CPRA”) was passed in November 2020.

Effective in most material respects beginning on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information.

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The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

Certain other state laws impose similar privacy obligations, and all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others.

Certain other state laws impose similar privacy obligations, and all 50 states and the District of Columbia have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others.

For example, the CCPA has prompted the enactment of several new state laws or amendments of existing state laws, such as in New York and Nevada.

The CCPA has also prompted a number of proposals for new federal and state-level privacy legislation, such as in Washington, Maryland, New York, Illinois and Nebraska.

The CCPA has also prompted a number of proposals for new federal and state-level privacy legislation, such as in Virginia, Colorado, Washington, Maryland, New York, Illinois and Nebraska.

This legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.

Internationally, many jurisdictions have established their own data privacy and security legal framework with which we or our clients may

need to comply as client customers travel outside of the United States, including, but not limited to, the European Union (“EU”).

Internationally, many jurisdictions have established their own data privacy and security legal framework with which we or our clients may need to comply as client customers travel outside of the United States, including, but not limited to, the European Union (“EU”).

The EU’s data protection landscape is currently evolving, resulting in possible significant operational costs for internal compliance and risk to our business.

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Any failure or perceived failure by us, or any third parties with which we do business, to comply with our posted privacy policies, changing consumer expectations, evolving laws, rules and regulations, industry standards, or contractual obligations to which we or such third parties are or may become subject, may result in actions or other claims against us by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities.

In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition and results of operations.

In addition, any such

action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition and results of operations.

We cannot yet fully determine the impact these or future laws, rules, regulations and industry standards may have on our business or operations.

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As we expand our client base, these requirements may vary from client to client, further increasing the cost of compliance and doing business.

Risks Relating to Our Industry

We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations.

The market for digital solutions for financial service providers is intensely competitive and characterized by rapid changes in technology and frequent new product introductions and improvements.

Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:

• greater name recognition and larger client bases;

• larger sales and marketing budgets and resources;

• greater client support resources;

• larger research and development budgets;

• substantially greater financial, technical and other resources.

Potential clients may also prefer to continue their relationship with their existing partner rather than change to a new partner regardless of product performance or features.

As a result, even if the features of the Alkami Platform are superior, clients may not purchase our solution.

Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their market position.

Further, conditions in our industry could change rapidly and significantly as a result of technological advancements.

These competitive pressures in our market or our failure to compete effectively may result in price reductions, reduced revenues and gross margins and loss of market share.

We derive all of our revenues from FIs, whose industry has experienced significant pressure in recent years due to economic and political uncertainty, liquidity concerns and increased regulation.

In the recent past, FIs have experienced consolidation, distress and failure, and very few new FIs are being created.

It is possible these conditions may continue into the future, and even if conditions improve for FIs, there can be no guarantee that these conditions will not reoccur.

Additionally, changes in management of our clients could result in delays or cancellations of the implementation of our solutions.

Our business, financial condition and results of operations could also be materially and adversely affected by weak economic conditions in the financial services industry.

Any downturn in the financial services industry may cause potential new clients and existing clients to forego or delay purchasing our solutions or reduce the amount of spend with us, which could materially and adversely affect our business, financial condition and results of operations.

If we fail to respond to evolving technological requirements or introduce adequate enhancements and new features, our digital banking solutions could become obsolete or less competitive.

The life cycles of our solutions are difficult to estimate.

Rapid technological changes and the introduction of new products and enhancements by new or existing competitors or large FIs could undermine our

current market position.

Other means of digital banking may be developed or adopted in the future, and our solutions may not be compatible with these new technologies.

In addition, the technological needs of and services provided by, FIs may change if they or their competitors offer new services to account holders.

Maintaining adequate research and development resources to meet the demands of the market is essential.

The process of developing new technologies and solutions is complex and expensive.

The success of any enhanced or new solution depends on several factors, including timely completion, adequate testing and market release and acceptance of the solution.

Furthermore, these FIs may be reluctant, unwilling or unable to use digital banking solutions due to various concerns such as the security of their data and reliability of the delivery model.

Our future success also depends on our ability to sell additional applications and functionality to our current and prospective clients.

As we create new applications and enhance our existing solutions, these applications and enhancements may not be attractive to clients.

Our products are marketed to and used by FIs, who are subject to extensive laws and regulations regarding the business functions and activities performed on our software solutions.

As a provider of technology services to such FIs, we may in the future be subject to examination by various federal and state regulatory agencies, including those agencies that comprise the Federal Financial Institutions Examination Council (“FFIEC”), and we are also required to review and perform due diligence on certain of our third-party providers.

In addition, the Dodd-Frank Act granted the CFPB authority to promulgate rules and interpret certain federal consumer financial protection laws, some of which apply to the solutions we offer to our clients.

In certain circumstances, the CFPB also has examination and supervision powers with respect to service providers who provide a material service to an FI offering consumer financial products and services.

Compliance with current or future digital accessibility, privacy, data protection and information security laws to which we or our FI clients are subject could result in higher compliance and technology costs and could restrict our ability to fully exploit our capabilities or provide certain products and services, which could materially and adversely affect our ability to operate profitably.

For example, as a result of obligations under our client contracts, we are required to comply with certain provisions of the Gramm-Leach-Bliley Act (“GLBA”) related to the privacy of consumer information and may be subject to other privacy, security and digital accessibility requirements because of the solutions we provide to FIs.

We may also be subject to other laws because of the solutions we provide to FIs.

§§ 12101, 12102(2) (“ADA”) and the Title III regulations implementing the ADA contained in 28 C.F.R.

§§ 36.101, et seq.

people with or without disabilities.

In addition, new regulations could require costly changes in our processes, infrastructure or personnel.

Finally, actions by regulatory authorities could influence both the decisions our clients make concerning the purchase of our solutions and the timing and implementation of these decisions.

Risks Relating to Our Intellectual Property, Software and Third-Party Licenses

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Our trade secrets, trademarks, copyrights, patents and other intellectual property rights are important assets for us.

We currently own four U.S.

registered patents related to automated clearing house transaction notifications and the facilitation of transaction disputes.

As of December 31, 2022 we had four U.S.

registered patents related to automated clearing house transaction notifications and the facilitation of transaction disputes and 26 issued patents, inclusive of U.S.

registered patents and international patents, as well as six patent applications pending in the United States, related to our Segmint marketing technology business.

We currently own the U.S.

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countries where we do business or may do business in the future may not recognize intellectual property rights or protect them to the same extent as do the laws of the United States.

In addition, any changes in, or unexpected

interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights.

In addition, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights.

Failure to obtain or maintain protection of our trade secrets or other proprietary information could harm our competitive position and materially and adversely affect our business, financial condition and results of operations.

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We may not be able to obtain adequate remedies for such breaches.

Additionally, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Additionally, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual

property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality.

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The outcome of any allegation is often uncertain.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential

information could be compromised by disclosure during this type of litigation.

If any of our technologies, products or services are found to infringe upon, misappropriate or violate a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue commercializing or using such technologies, products and services.

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In addition, such licenses may be non-exclusive, which could give our competitors access to the same intellectual property licensed to us.

If we are unable to enter into the necessary licenses on acceptable terms or at all, if any necessary

licenses are subsequently terminated, if our licensors fail to abide by the terms of the licenses, if our licensors fail to prevent infringement by third parties, or if the licensed intellectual property rights are found to be invalid or unenforceable, our business, financial condition, and results of operations could be materially and adversely affected.

If we are unable to enter into the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, if our licensors fail to abide by the terms of the licenses, if our licensors fail to prevent infringement by third parties, or if the licensed intellectual property rights are found to be invalid or unenforceable, our business, financial condition, and results of operations could be materially and adversely affected.

Further, third parties from whom we currently license intellectual property rights could refuse to renew our agreements upon their expiration or could impose additional terms and fees that we otherwise would not deem acceptable requiring us to obtain the intellectual property from another third party, if any is available, or to pay increased licensing fees or be subject to additional restrictions on our use of such third-party intellectual property.

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• the timing of our introduction of new solutions or updates to existing solutions;

• our ability to grow and maintain our relationships with our ecosystem of third-party partners, including integration partners and

referral partners;

• our ability to grow and maintain our relationships with our ecosystem of third-party partners, including integration partners and referral partners;

• the success of our clients’ businesses;

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• future costs related to acquisitions of content, technologies or businesses and their integration;

• natural disasters, outbreaks of disease or public health crises, such as the COVID-19 pandemic;

• natural disasters, outbreaks of disease or public health crises;

• general economic conditions.

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Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as we generally recognize subscription revenues from new clients over the applicable subscription terms.

Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.

Financial accounting standards may change or their interpretation may change.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change becomes effective.

Changes to existing rules or the re-examination of current practices could materially and adversely affect our reported financial results or the way we conduct our business.

Accounting for revenues from sales of our solutions is particularly complex, is often the subject of intense scrutiny by the SEC and will evolve as the Financial Accounting Standards Board (“FASB”) continues to consider applicable accounting standards in this area.

Our limited operating history makes it difficult to evaluate our current business and future prospects, and our recent success may not be indicative of our future results of operations.

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If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could adversely affect our business, financial condition and results of operations.

We also have incurred debt pursuant to our Credit Agreement (as defined below), and the lenders have rights senior to holders of common stock to make claims on our assets.

The terms of our Credit Agreement could restrict our operations, and we may be unable to service or repay the debt.

We also have incurred debt pursuant to our Amended Credit Agreement (as defined below), and the lenders have rights senior to holders of common stock to make claims on our assets.

The terms of our Amended Credit Agreement could restrict our operations, and we may be unable to service or repay the debt.

Furthermore, if we issue additional equity securities, stockholders may experience dilution, and the new equity securities could have rights senior to those of our common stock.

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The applicable rules generally operate by focusing on changes in ownership among stockholders considered by the rules as owning, directly or indirectly, 5% or more of the stock of a corporation, as well as changes in ownership arising from new issuances of stock by the corporation.

If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or other pre-change tax attributes if we undergo a future ownership change.

We may have experienced ownership changes in the past and could experience one or more ownership changes in the future, including in connection with this offering and as a result of future changes in our stock ownership, some of which changes may be outside our control.

Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or other pre-change tax attributes if we undergo a future ownership change.

We have experienced ownership changes in the past and could experience one or more ownership changes in the future and as a result of future changes in our stock ownership, some of which changes may be outside our control.

As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset post-change taxable income may be subject to limitations.

In addition, a portion of our NOLs generated in prior periods, if not utilized, will begin to expire in 2033 and 2024 for federal and state purposes, respectively.

The remainder of our NOL carryforwards, which do not expire and will carry forward indefinitely until utilized, are limited to offset 80% of our taxable income in such taxable year.

The remainder of our federal NOL carryforwards, which do not expire and will carry forward indefinitely until utilized, are limited to offset 80% of our taxable income in such taxable year.

The remainder of our indefinite state NOLs are subject to varying limitations determined by the respective states.

For these reasons, we may not be able to utilize a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows.

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One or more states where we do not collect taxes may successfully assert that such taxes are applicable, which could result in material tax assessments, including for past sales, as well as penalties and interest.

The terms of our Credit Agreement require us to meet certain operating and financial covenants and place restrictions on our operating and financial flexibility.

The terms of our Amended Credit Agreement require us to meet certain operating and financial covenants and place restrictions on our operating and financial flexibility.

If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

On October 16, 2020, we entered into our senior secured credit facilities credit agreement with Silicon Valley Bank and KeyBank National Association (the “Credit Agreement”).

The Credit Agreement provided us with a term loan facility of $25.0 million and a revolving credit facility of up to $25.0 million.

Our payment obligations under the Credit Agreement reduce cash available to fund working capital, capital expenditures, research and development and other corporate purposes, and limit our ability to obtain additional financing for working capital, capital expenditures, expansion plans and other investments, which may in turn limit our ability to implement our business strategy, heighten our vulnerability to downturns in our business, the industry, or in the general economy, limit our flexibility in planning for, or reacting to, changes in our business and the industry and prevent us from taking advantage of business opportunities as they arise.

In addition, indebtedness under the Credit Agreement bears interest at a variable rate, making us vulnerable to increases in market interest rates.

If market rates increase, we will have to pay additional interest

on this indebtedness, which would further reduce cash available for our other business needs.

On April 29, 2022, the Company entered into an amended and restated credit agreement with Silicon Valley Bank, Comerica Bank, and Canadian Imperial Bank of Commerce (the “Amended Credit Agreement”).

The Amended Credit Agreement amends and restates the prior credit facility provided by Silicon Valley Bank and KeyBank National Association (“the Original Credit Agreement”).

The Amended Credit Agreement matures on April 29, 2025.

The Amended Credit Agreement provided us with a term loan facility of $85.0 million and a revolving credit facility of up to $40.0 million.

Our payment obligations under the Amended Credit Agreement reduce cash available to fund working capital, capital expenditures, research and development and other corporate purposes, and limit our ability to obtain additional financing for working capital, capital expenditures, expansion plans and other investments, which may in turn limit our ability to implement our business strategy, heighten our vulnerability to downturns in our business, the industry, or in the general economy, limit our flexibility in planning for, or reacting to, changes in our business and the industry and prevent us from taking advantage of business opportunities as they arise.

In addition, indebtedness under the Amended Credit Agreement bears interest at a variable rate, making us vulnerable to increases in market interest rates.

If market rates continue to increase, we will have to pay additional interest on this indebtedness, which would further reduce cash available for our other business needs.

We cannot assure you that our business will generate sufficient cash flow from operations or that future financing will be available to us in amounts sufficient to enable us to make required and timely payments on our indebtedness, or to fund our operations.

In addition, our obligations under the Credit Agreement are secured by substantially all of our assets.

In addition, our obligations under the Amended Credit Agreement are guaranteed by our subsidiaries and secured by all or substantially all of our assets and our subsidiaries’ assets.

The security interest granted over our assets could limit our ability to obtain additional debt financing.

Our Credit Agreement also contains, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, subject to customary exceptions, including restricting our ability to:

Our Amended Credit Agreement also contains, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, subject to customary exceptions, including restricting our ability to:

• incur, assume or prepay debt or incur or assume liens;

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• enter into agreements that prohibit the incurrence of liens or the payment by our subsidiary of dividends and distributions.

In addition, the Credit Agreement includes a number of financial covenants relating to minimum recurring revenues and liquidity levels.

Our failure to comply with these restrictions and the other terms and conditions under our Credit Agreement could result in an event of default, which would allow lenders to elect to accelerate our outstanding indebtedness under our Credit Agreement and exercise other remedies as set forth therein.

In addition, the Amended Credit Agreement includes a number of financial covenants relating to minimum recurring revenues and liquidity levels.

Our failure to comply with these restrictions and the other terms and conditions under our Amended Credit Agreement could result in an event of default, which would allow lenders to elect to accelerate our outstanding indebtedness under our Amended Credit Agreement and exercise other remedies as set forth therein.

If that were to happen, we may not be able to repay all of the amounts that would become due under our indebtedness or refinance our debt, which could materially harm our business and force us to seek bankruptcy protection.

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As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We intend to utilize this extended transition period related to FASB Accounting Standards Update (“ASU”) No.

2016-02, “Leases”.

This standard amends several aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset, and a corresponding lease liability, measured at the present value of the future minimum lease payments.

The standard is effective for public companies for fiscal years beginning after December 15, 2018, and after December 15, 2021 for all other companies, with early adoption permitted.

We intend to adopt this standard in 2022 using the modified retrospective transition method and therefore will not restate comparative periods.

While we have not yet quantified the impact, resulting adjustments are expected to materially increase total assets and total liabilities relative to such amounts reported prior to adoption, but not have a material impact on the consolidated statements of comprehensive income (loss) or consolidated statements of cash flows.

We also intend to utilize this extended transition period related to FASB ASU No.

2016-13, “Financial Instruments—Credit Losses (Topic 326)”.

This standard modifies the measurement of expected credit losses of certain financial instruments with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The effective date for adoption of the new standard was delayed until calendar years beginning after December 15, 2022, with early adoption permitted.

This ASU is not expected to have a material impact on our financial statements.

For as long as we continue to be an emerging growth company, we also intend to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (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 nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

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or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

We are obligated to develop and maintain proper and effective internal control over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting on an annual basis, beginning with our second annual report on Form 10-K.

This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company,” as defined in the JOBS Act.

We will be required to disclose significant changes made in our internal control procedures on a quarterly basis.

Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts.

We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.

We cannot assure you that there will not be material weaknesses in our internal control over financial reporting in the future.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition and results of operations.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

Failure to remedy any material weakness or significant deficiency in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets and could materially and adversely affect our business, financial condition and results of operations.

Risks Related to Ownership of Our Common Stock

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We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future.

Any determination to pay dividends in the future will be at the discretion of our board of directors, is currently restricted by our Credit Agreement and may be restricted by the terms of any future indebtedness we may incur.

Any determination to pay dividends in the future will be at the discretion of our board of directors, is currently restricted by our Amended Credit Agreement and may be restricted by the terms of any future indebtedness we may incur.

Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our common stock appreciates and you sell your shares at a profit.

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Anti-takeover provisions contained in our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our amended and restated certificate of incorporation and our amended and restated bylaws will contain provisions that could delay or prevent a change in control of our company.

Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company.

These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions.

These provisions include:

• a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the

membership of a majority of our board of directors;

• a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

• the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors

or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of

• the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other

terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly

dilute the ownership of a hostile acquiror;

• the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

• the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;

• the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our

amended and restated bylaws or to repeal certain provisions of our amended and restated certificate of incorporation, including

anti-takeover provisions related to our classified board of directors, voting in the election of directors, rights to fill board

vacancies, the ability of our board of directors to alter our amended and restated bylaws without stockholder approval, the

inability of stockholders to force consideration of a proposal or to take action, including the removal of directors;

• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special

meeting of our stockholders;

• the requirement that a special meeting of stockholders may be called only by our board of directors, which may delay the ability

of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

• advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to

propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting

a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.

• the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or to repeal certain provisions of our amended and restated certificate of incorporation, including anti-takeover provisions related to our classified board of directors, voting in the election of directors, rights to fill board vacancies, the ability of our board of directors to alter our amended and restated bylaws without stockholder approval, the inability of stockholders to force consideration of a proposal or to take action, including the removal of directors;

• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

• the requirement that a special meeting of stockholders may be called only by our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

• advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.

These and other provisions in our amended and restated certificate of incorporation and our amended and restated bylaws and under Delaware law could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.

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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 1A. Risk Factors