What changed in this filing

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Item 1A. Risk Factors

2024-03-08 compared with 2023-03-07 · 59 added, 84 removed, 350 unchanged (29% of the section changed)

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You should carefully consider the risks and uncertainties described below and the other information in this Annual Report before making an investment in our common stock.

Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment.

Our business, financial condition, results of

operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment.

This Annual Report also contains forward-looking statements that involve risks and uncertainties.

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Risks Related to AerSale’s Business and Industry

The ongoing COVID-19 pandemic, including associated variants, has had a material adverse impact, and could in the future have a material adverse impact, on our business, operating results, financial condition, and liquidity.

The COVID-19 pandemic, including associated variants, continues to negatively affect the commercial aviation industry, including our business and operations.

The COVID-19 pandemic and the measures instituted by governments, and businesses to mitigate its spread, including travel restrictions, quarantines, shelter in place directives, and shutting down of non-essential businesses led to significant declines in demand for air travel in 2020 and 2021, and, therefore, resulted in lower demand from civil aviation customers for our products.

Although there have been signs of ongoing recovery in the overall demand for commercial air travel, some commercial aviation segments have recovered less quickly than others, and it remains uncertain when commercial flight activity will return to and/or exceed pre-pandemic levels.

Moreover, a resurgence of the COVID-19 pandemic (including through any new variant strains of the underlying virus), a new health epidemic or similar outbreak or other negative developments associated with the pandemic or outbreak could hinder or reverse the commercial flight activity recovery and lead to decreased worldwide commercial activity, which could eventually adversely affect the demand for airline cargo services.

Reduced flight activity negatively impacts the demand for many of our products and services, and any prolonged reduction could materially and adversely affect our business, operating results, financial condition, and access to sources of liquidity.

While COVID-19 has had a significant impact on our business and the businesses of our customers and suppliers, as well as our results of operations and financial condition, the extent to which COVID-19 or any other pandemics, epidemics and similar outbreaks, especially of infectious diseases, may impact our business, results of operations and financial condition depends on future developments, including (i) the duration, spread, severity, or any recurrence of the COVID-19 pandemic (including COVID-19 variants);

(ii) the effectiveness, availability, and usage of vaccines;

(iii) the impact of government mandates, directives, orders, regulations, and other governmental actions;

(iv) the extent of the impact of the COVID-19 pandemic or similar outbreak on overall demand for air travel and our related business plans and decisions;

(v) the impact of the COVID-19 pandemic or similar outbreak on the our ability to retain key employees;

and (vi) the impact of the COVID-19 pandemic or similar outbreak on our access to capital, all of which cannot be predicted with certainty.

Moreover, prolonged pandemics, epidemics and similar outbreaks, or the threat thereof, could result in worker absences, lower productivity, voluntary closure of our offices and facilities, travel restrictions for our employees and other disruptions to our business.

Any of these could have a material adverse effect on our business, financial condition or results of operations.

We cannot predict the impact that COVID-19 or any other pandemics, epidemics and similar outbreaks, especially of infectious diseases, will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions;

however, any material effect on these parties could adversely impact us, and may also exacerbate other risks discussed in this “Risk Factors” section, any of which could have a material effect on us.

Supply chain disruptions could have adverse effects on our ability to provide certain services.

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As a provider of products and services to the commercial aviation industry, we are generally affected by overall economic conditions of that industry.

The commercial aviation industry is historically cyclical and has been negatively affected in the past by geopolitical events, such as terrorism, high fuel and oil prices, labor issues, lack of capital, and weak economic conditions.

As a result of these and other events, from time to time certain of our customers have filed for

bankruptcy protection or ceased operation.

The commercial aviation industry is historically cyclical and has been negatively affected in the past by geopolitical events, such as ongoing conflicts (including between Russia and Ukraine and between Israel and Hamas), terrorism, high fuel and oil prices, labor issues, lack of capital, and weak economic conditions.

As a result of these and other events, from time to time certain of our customers have filed for bankruptcy protection or ceased operation.

The impact of instability in the global financial markets has led, and may in the future lead, airlines to reduce domestic or international capacity.

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As a result of the foregoing and other factors, the availability of Flight Equipment for lease or sale periodically experiences cycles of oversupply and undersupply of given engine or aircraft models.

The incidence of an oversupply of Flight Equipment may produce substantial decreases in lease rates and the appraised or resale value of aviation equipment and may increase the time spent and costs incurred to lease or sell Flight Equipment.

The incidence of an oversupply of Flight Equipment may produce substantial decreases in lease rates and appraised or resale values of aviation equipment and may increase the time spent and costs incurred to lease or sell Flight Equipment.

We anticipate that fluctuations from period to period will continue in the future.

As a result, we

believe that comparisons to results for preceding periods may not be meaningful, and that results of prior periods should not be relied upon as an indication of our future performance.

As a result, we believe that comparisons to results for preceding periods may not be meaningful, and that results of prior periods should not be relied upon as an indication of our future performance.

Market values for our aviation products fluctuate, and we may be unable to recover our costs incurred with respect to engines, rotable components and other aircraft parts.

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Reductions in demand for these assets or declining market values, as well as differences between actual results and the assumptions we utilize in determining the recoverability of our Flight Equipment, could result in impairment charges in future periods, which may have a material adverse effect on our business, financial condition, liquidity and results of operations.

The value of any given aircraft model, or any engine model applicable thereto, can vary significantly based on supply in the market place.

The value of any given aircraft model, or any engine model applicable thereto, can vary significantly based on supply in the marketplace.

Certain types of Flight Equipment may be used in significant numbers by commercial aircraft operators that experience financial difficulties from time to time.

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When a lessee defaults on its obligations under a lease and does not cure such default in a timely manner, we typically seek to terminate the applicable lease and repossess the leased Flight Equipment.

If a defaulting lessee contests the termination and repossession or is under court protection, enforcement of our rights under the lease may be difficult, expensive and time-consuming.

If a defaulting lessee contests the termination and repossession or is under court protection, enforcement of our rights under the lease may be difficult,

expensive and time-consuming.

In the event the Flight Equipment is located outside of the United States, we may need to obtain governmental consents to export the Flight Equipment back to the United States.

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In addition, certain airlines operate new fleet types and/or newer generation aircraft and we may not have contractual arrangements to service these aircraft, nor technicians trained and certified to perform the required airframe maintenance, repair, and overhaul activities on such aircraft.

If either the number of aircraft operating or the level of outsourcing of maintenance activities for the aircraft models for which we are authorized to

service declines, we may not be able to execute our operational and financial plans at our MRO facilities, which may adversely impact our financial condition or results of operations.

If either the number of aircraft operating or the level of outsourcing of maintenance activities for the aircraft models for which we are authorized to service declines, we may not be able to execute our operational and financial plans at our MRO facilities, which may adversely impact our financial condition or results of operations.

Our operations would be adversely affected by a shortage of skilled personnel or work stoppages.

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Our inability to fill our supply needs could jeopardize our ability to fulfill obligations under customer contracts, which could result in reduced revenues and profits, contract penalties or terminations, and damage to customer relationships.

Further, increased costs of such raw materials or components could reduce our profits if we were unable to pass along such price increases on to our customers.

Further, increased costs of such raw materials or components could reduce our profits if we are unable to pass such price increases onto our customers.

We operate in highly competitive markets, and competitive pressures may adversely affect us.

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Certain of our competitors may have substantially greater financial and other resources than we have, and others may price their products and services below our selling prices.

These competitive markets also create pressure on our ability to hire and retain qualified technicians and other skilled labor needs.

These competitive markets also create pressure on our ability to hire and retain qualified technicians and fill other skilled labor needs.

We believe that our ability to compete depends on superior customer service and support, on-time delivery, sufficient inventory availability, competitive pricing, and effective quality assurance programs.

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● compliance with the U.S.

Foreign Corrupt Practices Act, the United Kingdom Bribery Act of 2010, and other anti-bribery and anticorruption laws;

Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the United Kingdom Bribery Act of 2010, and other anti-bribery and anticorruption laws;

● the burden and cost of compliance with foreign laws, treaties, and technical standards and changes in those regulations;

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● changes in United States policies on trade relations and trade policy, including implementation of or changes in trade sanctions (such as those imposed on Russia), tariffs, and embargoes.

Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the European Union and ratified a trade and cooperation agreement governing its future relationship with the European Union.

The agreement, which is being applied provisionally from January 1, 2021 and entered into force on May 1, 2021, addresses trade, economic arrangements, law enforcement, judicial cooperation and a governance framework including procedures for dispute resolution, among other things.

Because the agreement merely sets forth a framework in many respects and will require complex additional bilateral negotiations between the United Kingdom and the European Union as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal.

These developments, or the perception that any related developments could occur, have had and may continue to have a material adverse effect on global economic conditions and financial markets, and could significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets, increase restrictions on imports and exports between the United Kingdom and other countries and increase regulatory complexities.

Asset valuations, currency exchange rates and credit ratings have been and may continue to be subject to increased market volatility.

Lack of clarity about future United Kingdom laws and regulations as the United Kingdom determines which European Union laws to replace or replicate, including with respect to trade relations could depress economic activity and restrict our access to capital.

Measures that we have or will adopt to reduce the potential impact of losses resulting from the risks of doing business internationally may not be adequate, and the regions in which we operate might not continue to be stable enough to allow us to operate profitably or at all.

The war in the Ukraine is creating an adverse climate for our business.

Global conflicts, including the war in the Ukraine and conflict in the Middle East are creating an adverse climate for our business.

government has imposed enhanced export restrictions and controls on certain products and technology, as well as sanctions on certain industry sectors and parties in Russia, Belarus and parts of the Ukraine.

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These sanctions and restrictions may also jeopardize and adversely impact the availability and cost of insurance which covers any assets or operations that may be subject to these restrictions and enhanced sanctions.

In October 2023, a military conflict commenced between Israel and Hamas.

The intensity and duration of Israel’s current war against Hamas is difficult to predict, as are such war’s global economic impact;

which could include further sanctions, embargoes, regional instability, energy shortages, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets, and the impact on the Company’s business and operations and on the businesses and operations of the Company’s suppliers, customers and other third parties with which the Company conducts business.

Of note, the Company’s enterprise resource planning vendor and the supplier of most of the components of our EFVS offering designated as AerAware™ are both based in Israel.

Business acquisitions expose us to risks, including the risk that we may be unable to effectively integrate acquired businesses.

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Cybersecurity threats are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to our sensitive information, business e-mail compromises, ransomware attacks, and other electronic security breaches, including at our customers, suppliers, subcontractors, and joint venture partners, that could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data.

As a result of the ongoing COVID-19 pandemic, certain functional areas of our workforce may continue to function in a remote work environment, which could heighten the risk of these potential vulnerabilities.

Certain functional areas of our workforce continue to function in a remote work environment, which could heighten the risk of these potential vulnerabilities.

The procedures and controls we utilize to monitor and mitigate these threats may not be sufficient to prevent security threats from materializing.

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In the event that we believe that a third party is infringing upon our proprietary rights, we may bring an action to enforce such rights.

In addition, third parties may claim infringement by us with respect to their proprietary rights and may initiate legal proceedings against us in the future.

In addition, we are from time to time involved in legal proceedings by third parties claiming infringement by us with respect to their proprietary rights.

The expense and time of bringing an action to enforce such rights or defending against infringement claims can be significant, which may adversely affect our results of operations and financial condition.

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Accordingly, the market price of our common stock may decline.

Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could have a material adverse effect of our business, financial condition and results of operation.

Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could have a material adverse effect on our business, financial condition and results of operation.

Our operations depend on our facilities, which are subject to physical and other risks that could disrupt production.

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We have implemented policies, procedures, training and other compliance controls, and have negotiated terms designed to prevent misconduct by employees, agents or others working on our behalf or with us that would violate the applicable laws of the jurisdictions in which we operate, including laws governing improper payments to government officials, the protection of export controlled products and services, cost accounting and billing, competition and data privacy.

However, we cannot ensure that it will prevent all such misconduct committed by our employees, agents, subcontractors, suppliers, business partners or others working on our behalf or with us, and this risk of improper conduct may increase as we expand globally.

However, we cannot ensure that such controls will prevent all such misconduct committed by our employees, agents, subcontractors, suppliers, business partners or others working on our behalf or with us, and this risk of improper conduct may increase as we expand globally.

In the future, we may form and/or become a member of joint ventures.

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Improper actions by those with whom or through whom we do business (including our employees, agents, subcontractors, suppliers, business partners and joint ventures) could subject us to administrative, civil or criminal investigations and monetary and non-monetary penalties, including suspension and debarment, which may adversely affect our results of operations and financial condition.

We are subject to certain limitations on employee compensation, payment of dividends and stock buy backs pursuant to the CARES Act.

In connection with the financial assistance we received through the Payroll Support Program, and loan program under the CARES Act pursuant to the CARES Act, we are subject to certain limitations on the payment of certain employee compensation through April 1, 2023.

We believe that our future success will depend in large part on our ability to retain or attract highly qualified management, technical and other personnel.

Limitations on compensation may adversely impact our ability to attract and retain senior management, or attract other key employees during the duration of these restrictions.

Our business might suffer if we were to lose the services of certain key employees.

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A termination for default could expose us to liability and adversely affect our financial performance and our ability to win new contract awards.

Future outbreaks and infectious diseases could have a material adverse impact, on our business, operating results, financial condition, and liquidity.

While the overall demand for commercial air travel has significantly recovered from the effects of the COVID-19 pandemic, future outbreaks and infectious diseases could pose a threat to the commercial aviation industry, including our business and operations.

Moreover, a resurgence of the COVID-19 pandemic (including through any new variant strains of the underlying virus), a new health epidemic or similar outbreak or other negative developments associated with the pandemic or outbreak could hinder or reverse the commercial flight activity recovery and lead to decreased worldwide commercial activity, which could lead to a reduced demand for airline passenger and cargo services.

Any of these could have a material adverse effect on our business, financial condition or results of operations.

We cannot predict the impact that any pandemics, epidemics and similar outbreaks, especially of infectious diseases, will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions;

Strategic and Financial Risks

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Our ability to manage our business and to execute our business strategy is dependent, in part, on the continued availability of debt and equity capital.

Our Amended and Restated Credit Agreement (as defined below) matures on March 12, 2024.

Our Amended and Restated Credit Agreement (as amended, the “Revolving Credit Agreement”) matures on July 24, 2028.

Access to the debt and equity capital markets may be limited by various factors, including the condition of overall credit markets, general economic factors, state of the aviation industry, our financial performance, and credit ratings.

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Our failure to comply with these covenants may adversely affect our results of operations and financial condition.

In addition, our receipt of funds under the CARES Act requires us to comply with certain covenants.

If we do not comply with these covenants, the government may require us to repay the support given to us.

Restrictive covenants in the documents governing our existing and any future indebtedness may limit our current and future operations, particularly our ability to respond to changes in our business or to pursue our business strategies.

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We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes and foreign currency exchange rate fluctuations.

Some of our indebtedness bears interest at variable rates, generally linked to market benchmarks such as LIBOR.

Some of our indebtedness bears interest at variable rates, generally linked to market benchmarks such as the Secured Overnight Financing Rate (“SOFR”).

Any increase in interest rates would increase our finance expenses relating to our variable rate indebtedness and increase the costs of refinancing our existing indebtedness and issuing new debt.

In addition, in July 2017, the U.K.’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced its intent to phase out LIBOR by the end of 2021.

On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative:

(a) immediately after December 31, 2021, in the case of the one-week and two-month U.S.

dollar settings;

and (b) immediately after June 30, 2023, in the case of the remaining U.S.

dollar settings.

The United States Federal Reserve has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate.

The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.

Although SOFR has been endorsed by the Alternative Reference Rates Committee as its preferred replacement for the London Interbank Offered Rate (“LIBOR”), it remains uncertain how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is imminent.

The consequences of these developments cannot be entirely predicted, but could cause potential increases in interest rates on our floating debt rate.

Previously, our Revolving Credit Agreement bore interest at London Interbank Overnight (“LIBOR”) rates.

The U.K.’s Financial Conduct Authority, which regulated LIBOR, ended publication of the one-week and two-month USD LIBOR tenors on December 31, 2021, and ended publication of the remaining USD LIBOR tenors on June 30, 2023.

Effective March 9, 2023, we amended our Revolving Credit Agreement to replace the benchmark rate from LIBOR to SOFR.

Although SOFR has been endorsed by the Alternative Reference Rates Committee, a committee convened by the United States Federal Reserve that includes major market participants, has identified the SOFR, an index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR, it remains uncertain how markets will respond to SOFR or other alternative reference rates following the transition away from the LIBOR benchmarks.

The consequences of these developments cannot be entirely predicted and could cause potential increases in interest rates on our floating debt rate.

These uncertainties or their resolution also could negatively impact our funding costs, loan and other asset values, asset-liability management strategies and other aspects of our business and financial results.

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Prior to being placed into service the products and services that we provide for aircraft, engines and their components are required to meet certain standards of airworthiness established by the FAA or the equivalent regulatory agencies in certain other countries.

We also operate repair stations that are licensed by the FAA and the equivalent regulatory agencies in certain other countries.

We also operate repair stations that are licensed by the FAA and equivalent regulatory agencies in certain other countries.

Specific regulations vary from country to country;

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The Occupational Safety and Health Act of 1970 mandates general requirements for safe workplaces for all employees, and established the Occupational Safety and Health Administration (“OSHA”) in the Department of Labor.

In particular, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances.

In particular,

OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances.

In addition, specific safety standards have been promulgated for workplaces engaged in the treatment, disposal or storage of hazardous waste.

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We believe that our operations are in material compliance with OSHA’s health and safety requirements.

We are subject to the U.S.

Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.

We are subject to the U.S.

Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.

Our operations are subject to anti-corruption laws including the U.S.

Foreign Corrupt Practices Act of 1977, as amended the (“FCPA”), the U.S.

We are subject to the FCPA and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.

Our operations are subject to anti-corruption laws including the FCPA, the U.S.

domestic bribery statute contained in 18 U.S.C.

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If we are not in compliance with the FCPA and other anticorruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws or Trade Control laws by the United States or other authorities could

also have an adverse impact on our reputation, our business, financial condition and results of operations.

Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws or Trade Control laws by the United States or other authorities could also have an adverse impact on our reputation, our business, financial condition and results of operations.

Efforts to ensure that our business arrangements with third parties will comply with applicable aviation and aerospace laws and regulations will involve substantial costs.

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Some historical and current legal proceedings and future legal proceedings may purport to be brought as class actions on behalf of similarly situated parties including with respect to employment-related matters.

We discuss legal proceedings in Note R – Commitments and Contingencies within our consolidated financial statements included elsewhere in this Annual Report (the “Consolidated Financial Statements”).

Some or all of our expenditures to defend, settle or litigate these matters may not be covered by insurance or could impact our cost and ability to obtain insurance in the future.

We discuss legal proceedings in Note R – Commitments and Contingencies within our consolidated financial statements and related notes included elsewhere in this Annual Report (the “Consolidated Financial Statements”).

Some or all of our expenditures to defend, settle or litigate these matters may

not be covered by insurance or could impact our cost and ability to obtain insurance in the future.

Litigation can be expensive, lengthy and disruptive to normal business operations, including to our management due to the increased time and resources required to respond to and address the litigation.

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If an aircraft is security for the owner’s obligations to a third-party, the security interest in the aircraft may supersede our rights as owner of the engine.

This legal principle could limit our ability to repossess a leased engine in the event of a lessee’s bankruptcy

or lease default while the aircraft with the engine installed remains in such a jurisdiction.

This legal principle could limit our ability to repossess a leased engine in the event of a lessee’s bankruptcy or lease default while the aircraft with the engine installed remains in such a jurisdiction.

We may suffer a loss if we are not able to repossess engines leased to lessees in these jurisdictions.

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Certain of our facilities, including facilities acquired and operated by us or one of our subsidiaries, have at one time or another been under active investigation for environmental contamination by federal or state agencies.

Under specific environmental laws and regulations, we could be held responsible for all of the costs relating to any contamination at our past or present facilities and at third party waste disposal sites.

Under specific environmental laws and regulations, we could be held responsible for all of the costs relating to any contamination at our past or present facilities

and at third party waste disposal sites.

If we fail to comply with applicable environmental laws and regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.

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In October 2016, ICAO passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”), which is a global, market-based emissions offset program to encourage carbon-neutral growth beyond 2020.

CORSIA is scheduled to be implemented through multiple phases beginning in 2021.

continues to develop details regarding implementation, but we believe compliance with CORSIA will increase operating costs for us and our customers.

CORSIA is scheduled to be implemented through multiple phases beginning with a pilot which began in 2021 and continued through 2023, followed by a first phase of the program beginning in 2024 and a second phase beginning in 2027.

ICAO continues to develop details regarding implementation, but we believe compliance with CORSIA could significantly increase operating costs for us and our customers.

Risk Factors Related to our Common Stock

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The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business.

If our analysts do not continue to cover us, or if no additional analysts commence coverage of us, the trading price of our stock could be negatively affected.

If our analysts do not continue to cover us, or if no additional analysts commence

coverage of us, the trading price of our stock could be negatively affected.

Even with analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our common stock could decline.

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We intend to retain any future earnings to fund operations, to service debt and other obligations, and to use for other corporate needs.

Further, our credit facility and the CARES Act limit our ability to pay cash dividends.

Further, our Revolving Credit Agreement limits our ability to pay cash dividends.

As an “emerging growth company,” we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors.

For as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), 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.

For as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 (“Section 404”) of the Sarbanes-Oxley Act of 2002 (“SOX”), 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.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, which we have elected to do.

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General Risk Factors

As a public company in the United States, we are subject to the Sarbanes-Oxley Act.

As a public company in the United States, we are subject to SOX.

We have determined our disclosure controls and procedures and our internal control over financial reporting are effective.

We can provide no assurance that we will, at all times, in the future be able to report that our internal controls over financial reporting are effective.

Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”).

Companies that file reports with the SEC, including us, are subject to the requirements of Section 404.

Section 404 requires management to establish and maintain a system of internal control over financial reporting.

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Our results of operations could be materially negatively affected by economic conditions generally, both in the United States and elsewhere around the world.

Concerns over inflation, rising interest rates, energy costs, geopolitical

issues, including the conflict between Russia and Ukraine, and tensions in Western countries, the availability and cost of credit, and the U.S.

Concerns over inflation, rising interest rates, energy costs, geopolitical issues, including the conflict between Russia and Ukraine, Israel and Hamas, and tensions in the Middle East and in Western countries, the availability and cost of credit, and the U.S.

financial markets have in the past contributed to, and may continue in the future contribute to, increased volatility and diminished expectations for the economy and the markets.

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In the event of a market downturn, our results of operations could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may decline.

ITEM 1B UNRESOLVED STAFF COMMENTS

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