What changed in this filing

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Item 1A. Risk Factors

2022-03-14 compared with 2021-03-11 · 44 added, 116 removed, 390 unchanged (29% of the section changed)

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Refer to the cautionary note regarding forward-looking statements at the beginning of Part 1 of this Form 10-K.

Risk Factor Summary

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary.

These risks include, among others, the following:

• The COVID-19 pandemic has materially affected and will continue to materially affect how we and our clients operate our businesses;

• We have a history of losses, and we cannot be certain that we will achieve or sustain profitability;

• If our security measures, or those of our third-party data center hosting facilities, cloud computing platform providers or third-party service partners are compromised or breached, our services may be perceived as not being secure, our brand could be damaged, our services may be disrupted, and customers may curtail or stop using our services, all of which could reduce our revenue and earnings, increase our expenses, and expose us to legal claims and regulatory actions;

• We identified a material weakness in our internal control over financial reporting as of December 31, 2019 and may identify additional material weaknesses in the future.

If we fail to remedy our material weaknesses, or if we fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected;

• The adoption of new or interpretation of existing money service business statutes and money transmitter statutes at the federal and state level could subject us to additional regulation and related expense and necessitate changes to our business model;

• Acquisitions and potential acquisitions of Reseller Partners' businesses could prove difficult to integrate, result in unknown or unforeseen liabilities, disrupt our business, dilute stockholder value and ownership and adversely affect our operating results and financial condition;

• If we are not able to develop enhancements and new features to our products, keep pace with technological developments or respond to future technologies, our business, operating results and financial results will be adversely affected;

• If we are unable to release timely updates to reflect changes in wage and hour laws, tax, privacy, benefit and other laws and regulations that our products help our clients address, the market acceptance of our products may be adversely affected and our revenues could decline;

• Our business depends substantially on clients renewing their agreements with us, purchasing additional products from us or adding additional users;

• Even if demand for HCM products and services increases generally, there is no guarantee that demand for SaaS products generally or our products in particular will increase to a corresponding degree, or at all;

• Client funds that we hold in trust are subject to market, interest rate, credit and liquidity risks and loss of these funds could have a material adverse effect on our business, financial condition and results of operations;

• The markets in which we participate are highly competitive, and if we do not compete effectively, our operating results could be adversely affected;

• Our clients could have insufficient funds to cover payments we have made on their behalf or credit that we have extended to them in connection with the services that we have provided, resulting in financial loss to us;

• The impairment of a significant portion of our goodwill and intangible assets would adversely affect our business, operating results and financial condition;

• If the Small Business Administration does not grant forgiveness of our loan under the Paycheck Protection Program, our business operations and cash flow likely will be adversely affected;

• Our failure to comply with existing laws and regulations or failure to comply with changing laws and regulations through modifications, developments, and enhancements to our products and services could have a material adverse effect on our business and results of operations;

• Privacy concerns and laws and other regulations may limit the effectiveness of our applications and adversely affect our business;

• Our ability to make scheduled payments on or to refinance our existing indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors that may be beyond our control;

• Our ability to incur debt and the use of our funds could be limited by the restrictive covenants in our loan agreement for our term loan and revolving credit facility or any restrictive covenants imposed by incurring additional debt;

• We may be subject to claims, lawsuits, governmental investigations and other proceedings that could adversely affect our business, financial condition and results of operations;

• We incur significant costs and liabilities as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives;

• We depend on data centers and computing infrastructure operated by third parties and any disruption in these operations could adversely affect our business;

• We may require additional capital to support business growth, and this capital may not be available on acceptable terms, or at all;

• If we lose key personnel, or are unable to attract and retain additional personnel as needed in the future, it could disrupt the operation of our business, delay our product development and harm our growth efforts;

• Evolving regulation of the Internet, changes in the infrastructure underlying the Internet or interruptions in Internet access may adversely affect our business, operating results and financial condition by increasing our expenditures and causing client dissatisfaction.

• If we fail to effectively manage such growth and change, our business, operating results and financial condition could be adversely affected;

• If we fail to adequately protect our proprietary rights, our competitive advantage and brand could be impaired and we may lose valuable assets, generate reduced revenue and incur costly litigation to protect our rights;

• The use of open source software in our applications may expose us to risks and harm our intellectual property rights;

• We may be sued by third parties for infringement of their proprietary rights;

• Some of our key components are procured from a single or limited number of suppliers and we are at risk of shortage, price increases, tariffs, changes, delay, or discontinuation of key components;

• Our common stock has traded in low volumes and we cannot predict whether an active trading market for our common stock will ever develop;

• Our stock price has been, and likely will continue to be, volatile;

• Sales, or the potential for sales, of a substantial number of shares of our common stock in the public market by us or our existing stockholders could cause our stock price to fall;

• We do not intend to pay dividends for the foreseeable future, and you must rely on increases in the market price of our common stock for returns on equity investment;

• Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited;

• Provisions in our charter documents and under Delaware law, and our stockholder rights plan could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of our management and board of directors;

• Our business could be negatively affected as a result of actions of activist stockholders, and such activism could impact the trading value of our securities.

RISKS RELATED TO OUR BUSINESS

The effects of the COVID-19 pandemic have materially affected and will continue to materially affect how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

The effects of the COVID-19 pandemic have materially affected and will continue to materially affect how we and our customers are operating our respective businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

As a result of the COVID-19 pandemic, we temporarily closed our office locations, introduced remote working for many of our employees that remains in effect, and implemented certain travel restrictions, all of which has caused disruptions to how we operate our business.

Many of our customers are non-essential businesses within the meaning of applicable regulations that have been forced, in some jurisdictions, to temporarily suspend or greatly reduce operations resulting in a lay off or termination of workers, which has a direct impact on our revenue, as this results in a decrease in overall payroll spend by our customers.

Many of our customers are non-essential businesses within the meaning of applicable regulations that have been forced and may in the future be forced, in some jurisdictions, to temporarily suspend or greatly reduce operations resulting in a lay off or termination of workers, which has a direct impact on our revenue, as this results in a decrease in overall payroll spend by our customers.

Similarly, many of our customers have experienced and may continue to experience difficulty in attracting and retaining new employees and are therefore continuing to operate below their full capacity.

Additionally, we have shifted certain of our customer events to virtual-only experiences and we may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future.

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Our operations have been negatively affected by a range of external factors related to the COVID-19 pandemic that are not within our control.

For example, many cities, counties, states, and even countries have imposed or may impose a wide range of restrictions on our employees', partners' and customers' physical movement to limit the spread of COVID-19.

For example, many cities, counties, states, and even countries have imposed or may continue to impose a wide range of restrictions on our employees', partners' and customers' physical movement to limit the spread of COVID-19 and its variants.

To the extent the COVID-19 pandemic has a substantial impact on our employees', partners' or customers' attendance or productivity, our results of operations and overall financial performance will likely be harmed.

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In addition, there can be no assurance that additional tax changes will not require us to incur more expense.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and vendors.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, new variants and their transmission and severity, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and vendors.

We currently expect our business will continue to be adversely impacted by the COVID-19 pandemic.

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We have incurred losses since our inception.

We experienced net losses from continuing operations of $16.3 million and $42.3 million in the fiscal years ended December 31, 2020, and 2019, respectively.

We experienced net income from continuing operations of $3.2 million in the fiscal year ended December 31, 2021 and a net loss of $16.3 million in the fiscal year ended December 31, 2020.

At December 31, 2021, our accumulated deficit was $266.8 million and total stockholders’ equity was $158.2 million.

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Such expenses include among others, transaction costs associated with acquisitions, sales and marketing, research and development, consulting and support services and other costs relating to the development, marketing and sale and service of our products that may not generate revenue until later periods, if at all.

Any failure to increase revenue or manage our cost structure as we implement initiatives to grow our business could prevent us from achieving or sustaining

profitability.

In addition, our ability to achieve profitability is subject to a number of the risks and uncertainties discussed below, many of which are beyond our control, including the impact of the current environment, the spread of major epidemics (including coronavirus) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains and extended shut-down of businesses.

Any failure to increase revenue or manage our cost structure as we implement initiatives to grow our business could prevent us from achieving or sustaining profitability.

In addition, our ability to achieve profitability is subject to a number of the risks and uncertainties discussed below, many of which are beyond our control, including the impact of the current environment, the spread of major epidemics (including COVID-19) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains and extended shut-down of businesses.

We cannot be certain that we will be able to achieve or sustain profitability on a quarterly or annual basis.

If our security measures are breached, or unauthorized access to our clients' or their employees' sensitive data is otherwise obtained, our solution may not be perceived as being secure, clients may reduce the use of or stop using our solution, our ability to attract new clients may be harmed and we may incur significant liabilities.

If our security measures are breached, or unauthorized access to our clients' or their employees' sensitive data is otherwise obtained, our solution may not be perceived as being secure.

This may lead clients to reduce the use of or stop using our solutions, thereby hindering our ability to attract new clients while also incurring significant liabilities.

Our solution involves the collection, storage and transmission of clients’ and their employees’ confidential and proprietary information, including personal identifying information, as well as financial and payroll data.

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In addition, our cyber liability insurance policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention from our business and operations.

We identified a material weakness in our internal control over financial reporting as of December 31, 2019 and may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our consolidated financial statements.

We may identify material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our Consolidated Financial Statements.

If we are unable to remedy any material weaknesses identified in the future, or if we fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected and we may be adversely affected.

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generally accepted accounting principles.

In connection with the preparation of our consolidated financial statements as of and for the year ended December 31, 2019, we identified a material weakness in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Management has since implemented measures to remediate this material weakness, including:

(i) review and changes to system access, (ii) organization re-alignment to improve and ensure segregation of duties and (iii) implementation of additional manual and IT controls.

The actions we have taken are subject to continued review, supported by confirmation and testing by management as well as audit committee oversight.

While we believe the measures that we have implemented have remediated the material weakness, we cannot assure you that such measures will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or to avoid potential future material weaknesses.

If we identify any additional material weaknesses, the accuracy and timeliness of our financial reporting may be adversely affected and we may be adversely affected.

If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations

as a public company.

If we identify any material weaknesses, the accuracy and timeliness of our financial reporting may be adversely affected and we may be adversely affected.

If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations as a public company.

Failure to comply with the Sarbanes-Oxley Act, when and as applicable, could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.

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The adoption of new money transmitter or money service business statutes in new jurisdictions, changes in regulators’ interpretations of existing statutes, or disagreement by regulators of our interpretation of such statutes or regulations could require additional registrations or licensing, limit certain of our business activities until we are properly licensed and expose us to financial penalties.

These occurrences could also require change to the manner in which we conduct some aspects of our money movement business or client funds investment strategy.

These occurrences could also require change to the manner in which we conduct some aspects of our money movement business, client funds investment strategy or our overall business strategy.

Although we maintain that we are not a money service business or money transmitter, we have proactively registered in some jurisdictions due to regulatory changes and have adopted an Anti-Money Laundering Policy and compliance program designed to mitigate the risk of our services and application being utilized for illegal purposes including money laundering and to assist in detecting fraud.

Should other states or jurisdictions determine that that we are a money service business or money transmitter, we could be subject to civil and criminal fines, penalties, registration fees, cost of surety bonds or other security, reputational damage and other negative consequences that may have an adverse effect on our financial condition.

Under the statutes governing our money transmitter licenses, we are subject to routine examinations from the regulatory agencies overseeing these licenses.

If these examinations reveal violations of the money transmitter license and those violations cannot be remediated, we may be subject to civil and criminal fines and penalties and we could lose our license to provide our services in those jurisdictions, all of which could have a material adverse effect on our business.

Further, should other states or jurisdictions determine that that we are a money service business or money transmitter, we could be subject to civil and criminal fines, penalties, registration fees, cost of surety bonds or other security, reputational damage and other negative consequences that may have an adverse effect on our financial condition.

If our security measures are breached or if personal information of our direct or indirect clients or their employees is accessed or obtained, our HCM solution may not be perceived as being secure and we may suffer reputational damage, clients and resellers may not select or continue with our services or products and we may incur significant liabilities.

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• diversion of financial and managerial resources from existing operations;

• the potential entry into new markets in which we have little or no experience or where competitors may have stronger market positions;

• the potential entry into new markets in which we have little or no experience or where competitors may have stronger

• market positions;

• potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers;

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Any of these risks could have an adverse effect on our business, operating results and financial condition.

In addition, our Third Amended and Restated Credit Agreement ("Third Restated Credit Agreement") restricts our ability to consummate acquisitions without the consent of our lender.

To facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us, or at all, which may affect our ability to complete acquisitions or investments.

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Our future success also depends in part on our ability to sell additional features and services, more subscriptions or enhanced editions of our services to our current customers.

This may also require increasingly sophisticated and costly sales efforts that are targeted at senior management.

This may also require increasingly sophisticated and costly sales efforts.

Similarly, the rate at which our customers purchase new or enhanced services depends on a number of factors, including general economic conditions and that our customers do not react negatively to any price changes related to these additional features and services.

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These risks may be exacerbated during periods of unusual financial market volatility.

Any loss or inability to access client funds could have an adverse impact on our cash position and could require us to obtain

additional sources of liquidity, and could have a material adverse effect on our business, financial condition and results of operations.

Any loss or inability to access client funds could have an adverse impact on our cash position and could require us to obtain additional sources of liquidity, and could have a material adverse effect on our business, financial condition and results of operations.

The markets in which we participate are highly competitive, and if we do not compete effectively, our operating results could be adversely affected.

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Under current accounting rules, any determination that impairment has occurred would require us to write off the impaired portion of goodwill and such intangible assets, resulting in a charge to our earnings.

In 2019, we recorded an impairment of goodwill amounting to $35,060, which was reflected as an operating expense in our consolidated statements of comprehensive income (loss).

In addition, any future impairment of a significant portion of goodwill or intangible assets could have a material adverse effect on our business, operating results and financial condition.

If the Small Business Administration does not grant forgiveness of our loan under the Paycheck Protection Program, our business operations and cash flow likely will be adversely affected, and we may be limited in our ability to grow our operations until the unforgiven portion of this loan is repaid.

On April 15, 2020, we received a loan in the aggregate principal amount of $8,856 (the “PPP Loan”) from Pinnacle Bank pursuant to the Paycheck Protection Program under Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

The PPP Loan bears interest at a fixed rate of 1.00% per annum and matures on April 15, 2022.

Under the terms of the Paycheck Protection Program, the principal balance and interest due under the promissory note will be forgiven if we meet certain conditions related to the use of the loan proceeds.

While we expect that this loan will be forgiven, we cannot be certain that the Small Business Administration (“SBA”) will grant forgiveness of our entire loan.

If we do not receive forgiveness of our entire loan, we will be obligated to start making payments on the portion of the principal and interest that is not forgiven so that it will be fully repaid no later than April 15, 2022, unless we are able to negotiate new payment terms with Pinnacle Bank.

Amendments to the terms of our PPP Loan are subject to the consent of our senior lender.

We filed our initial forgiveness application in December 2020 and completed our application in early February 2021.

We do not expect to have a decision from the SBA regarding the forgiveness of the PPP Loan until sometime in the second quarter of 2021.

If the portion of the PPP Loan that is not forgiven (the “Unforgiven Debt”) exceeds $3,250 or requires monthly payments of principal and interest in excess of $185, it is likely we will be in default under our Third Restated Credit Agreement unless we obtain a waiver from our senior lender or are otherwise able to negotiate acceptable terms with our senior lender and Pinnacle Bank.

In the event our senior lender requires us to make a prepayment on the Unforgiven Debt or on any outstanding loans with our senior lender, our cash flow and business likely will be adversely affected.

Finally, in addition to the potential effects of the Unforgiven Debt on compliance with the terms of our third amended and restated credit agreement, the monthly principal and interest payments on the Unforgiven Debt may negatively affect our ability to grow our operations, service other indebtedness, including the indebtedness under our credit facility with our senior lender or owed to sellers in connection with prior acquisitions, or integrate complementary acquisitions.

The Unforgiven Debt, if any, could cause the price of our common stock to decline and otherwise have a negative impact on our operations.

Any future impairment of a significant portion of goodwill or intangible assets could have a material adverse effect on our business, operating results and financial condition.

Our failure to comply with existing laws and regulations may result in adverse effects on our business, service and financial condition and failure to comply with changing laws and regulations through modifications, developments, and enhancements to our products and services could have a material adverse effect on our business and results of operations.

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Our products are subject to various complex laws and regulations on the federal, state and local levels, including those governing data security and privacy.

The regulatory framework for privacy issues is rapidly evolving and will remain uncertain as more jurisdiction adopt laws and regulations regarding the collection, processing, storage and disposal of personal information.

In the United States, the laws include regulations promulgated by the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, state data breach notification laws, and state security and privacy laws such as the California Consumer Privacy Act (CCPA) and the Illinois Biometric Information Privacy Act (IBIPA) governing biometric data.

The regulatory framework for privacy issues is rapidly evolving and will remain uncertain as more jurisdictions adopt laws and regulations regarding the collection, processing, storage and disposal of personal information.

In the United States, the laws include regulations promulgated by the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, state data breach notification laws, and state security and privacy laws such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act, (the “CCPA”) and the Illinois Biometric Information Privacy Act (“IBIPA”) governing biometric data.

Some of these laws, such as the CCPA and IBIPA, grant consumers private right of actions for data breaches or violations as applicable.

Additionally, because some of our Reseller clients have clients in the European Union utilizing Asure’s Time and Attendance product, the GDPR may impact our processing of certain client and client employee information.

Additionally, Virginia and Colorado enacted data privacy laws in 2021 that will come into effect in January 2023 and July 2023, respectively.

These laws track significant portions of existing laws, but include differences that may or may not increase our compliance burden.

Further, because some of our Reseller clients have clients in the European Union utilizing Asure’s Time and Attendance product, the GDPR may impact our processing of certain client and client employee information.

Failure to comply with laws, including security and privacy laws, could subject us to liability, fines, lawsuits and could require us to change our applications in order to comply.

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Our services involve the collection, transmission, processing and storing of our Reseller Partner’s clients and our direct clients proprietary and other sensitive data, including personally identifiable information about employees, financial information, banking information, HIPAA data with respect to our consumer health care administration services, and other personal information.

While we have security measures in place, they may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our information technology systems, our customers’ data or our data,

including our intellectual property and other confidential business information.

In addition, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data, their customers’ data, our data or our information technology systems.

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Any security breach could result in a loss of confidence in the security of our services, damage our reputation, negatively impact our future sales, disrupt our business and lead to legal liability.

Our ability to make scheduled payments on or to refinance our existing indebtedness (including the indebtedness under our Third Restated Credit Agreement and subordinated promissory notes) depends on our future performance, which is subject to economic, financial, competitive and other factors that may be beyond our control.

Our ability to make scheduled payments on or to refinance our existing indebtedness (including the indebtedness under our Senior Credit Facility with Structural Capital Investments III LP and our subordinated promissory notes) depends on our future performance, which is subject to economic, financial, competitive and other factors that may be beyond our control.

Our business may not generate cash flow from operations in the future sufficient to service our debt and support our growth strategies.

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We may not be able to engage in any of these activities or on desirable terms, which could result in a default on our debt obligations, including under our current debt obligations.

In addition, if for any reason we are unable to meet our debt service and repayment obligations, we would be in default under the terms of our Third Restated Credit Agreement, which would allow our creditors at that time to declare all outstanding indebtedness to be due and payable.

In addition, if for any reason we are unable to meet our debt service and repayment obligations, we would be in default under the terms of our Senior Credit Facility with Structural Capital Investments III LP, which would allow our creditors at that time to declare all outstanding indebtedness to be due and payable.

Under these circumstances, our lenders could compel us to apply all of our available cash to repay our indebtedness.

Our ability to incur debt and the use of our funds could be limited by the restrictive covenants in our loan agreement for our term loan and revolving credit facility.

Our Third Restated Credit Agreement with Wells Fargo Bank, N.A.

provides for a term loan and revolving credit facility that contains restrictive covenants, including restrictions on our ability to pay dividends to stockholders, as well as requirements to comply with certain leverage ratios and other financial maintenance tests and stringent requirements around regulatory compliance.

These restrictive covenants and requirements limit the amount of borrowings that are available to us.

The Third Restated Credit Agreement covenants may also affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions.

Our ability to incur debt and the use of our funds could be limited by the restrictive covenants in our loan agreement for our term loan.

Our agreement with Structural Capital Investments III LP provides for a credit facility that contains restrictive covenants, including restrictions on our ability to pay dividends to stockholders, as well as requirements to comply with certain financial maintenance and liquidity tests.

The agreement covenants may affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions.

These covenants could place us at a disadvantage compared to some of our competitors, who may have fewer restrictive covenants and may not be required to operate under these restrictions.

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We may fail to comply with the rules that apply to public companies, which could result in sanctions or other penalties that would harm our business.

We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and regulations regarding corporate governance practices.

We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and regulations regarding corporate governance practices.

The listing requirements of The Nasdaq Capital Market require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct.

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We depend on data centers and computing infrastructure operated by third parties and any disruption in these operations could adversely affect our business.

We rely on hosted infrastructure partners, such as Amazon Web Services ("AWS") and to a lesser extent, Data Center providers, to provide third-party hosted environments for our applications.

We rely on hosted infrastructure partners, such as Amazon Web Services and to a lesser extent, data center providers, to provide third-party hosted environments for our applications.

While we control and have access to our servers and all the components of the networks that are located in our hosted environments, we do not control the operations of these facilities.

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If we are not able to renew these contracts on commercially reasonable terms, we may be required to transfer our servers and other infrastructure to new data facilities, and we may incur significant costs and possible service interruption in doing so.

We may not have adequately distributed our systems within our hosted

infrastructure partner's environment to prevent in any regional disruption or interference at our hosted infrastructure partners from adversely impacting our operations and our business.

We may not have adequately distributed our systems within our hosted infrastructure partner's environment to prevent in any regional disruption or interference at our hosted infrastructure partners from adversely impacting our operations and our business.

Our SaaS hosting network infrastructure is a critical part of our business operations.

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• computer viruses;

• acts of terrorism, sabotage or other intentional acts of vandalism, including cyber attacks;

• acts of terrorism, war, sabotage or other intentional acts of vandalism, including cyber attacks;

• unforeseen interruption or damages experienced in moving hardware to a new location, including government-imposed travel restrictions;

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

Further, the interest rate on debt we have incurred under our Third Restated Credit Agreement is calculated with reference to LIBOR.

LIBOR is an interest rate used in lending transactions between banks on the London interbank market.

On July 27, 2017, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

The maturity date of our indebtedness under our Third Restated Credit Agreement is after December 31, 2021.

Our Third Restated Credit Agreement allows for an adjustment of the interest rate on such loans as a result of the phase out of LIBOR;

however, we cannot guarantee that any replacement rate will be as favorable to us as the LIBOR rate and this may affect our ability to meet our debt service and repayment obligations or have an adverse effect on our operations.

If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel as needed in the future, it could disrupt the operation of our business, delay our product development and harm our growth efforts.

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The loss of one or more of our key management or technical personnel could have a material and adverse effect on our business, operating results and financial condition.

In the last twelve months, we have experienced turnover within our finance team.

We continue to experience turnover within our finance team.

If we are unable to retain and successfully integrate their replacements in our business, it could have a material adverse effect on our business and the reliability of our financial statements.

Our future performance depends largely on our ability to continually and effectively attract, train, retain, motivate and manage highly qualified and experienced individuals, specifically in our finance function.

In the last year, we had significant turnover in our finance and accounting team, including the executive, tax, SEC reporting, treasury and audit functions and we also had a new chief financial officer and corporate controller, thereby resulting in a lack of institutional knowledge as to our financial operations.

In the last year, we had significant turnover in our finance and accounting team, including the executive, tax, SEC reporting, treasury and audit functions, thereby resulting in a lack of institutional knowledge as to our financial operations.

While none of these former employees left us due to any disagreement with management over the financial statements, the loss of these individuals impacts the continuity of our financial reporting and related internal controls.

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In addition, if we were to combine our applications with open source software in a certain manner, we could, under certain of the open-source licenses, be required to release the source code of our applications.

If we inappropriately use open-source software, we

may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition.

If we inappropriately use open-source software, we may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition.

Inability to maintain the third-party licensed software we use in our applications at the current costs could result in increased costs or reduced service levels, which could adversely affect our business.

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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2020, we had federal net operating loss carryforwards of approximately $48,435 and research and development credit carryforwards of approximately $3,579, which begin expiring in 2021.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited.

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Similar rules apply under state tax laws.

In the event that it is determined that we have in the

past experienced ownership changes, or if we experience one or more ownership changes as a result of future transactions in our stock, then we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn.

In the event that it is determined that we have in the past experienced ownership changes, or if we experience one or more ownership changes as a result of future transactions in our stock, then we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn.

Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, operating results, and financial condition.

19 unchanged sentences

• actual or anticipated fluctuations in our quarterly financial and operating results and degree of trading liquidity in our common stock;

• political or economic uncertainties, including the impact of the coronavirus and other developments on equity trading markets.

• political or economic uncertainties, including the continuing impact of the coronavirus, the Russian invasion of Ukraine and other developments that affect the equity trading markets

In addition, stock markets generally have experienced significant price and volume volatility.

3 unchanged sentences

These sales, or the possibility that these sales may occur, also might make it more difficult for us to raise capital through the sale of equity securities in the future at a time and at a price that we deem appropriate.

As of March 8, 2021, we had 19,016,972 shares of common stock outstanding.

We do not intend to pay dividends for the foreseeable future, and you must rely on increases in the market price of our common stock for returns on equity investment.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock.

In addition, our Third Restated Credit Agreement contains limitations on our ability to pay dividends and make other distributions.

In addition, our Senior Credit Agreement with Structural Capital Investments III LP contains limitations on our ability to pay dividends and make other distributions.

Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur.

18 unchanged sentences

The Rights have certain anti-takeover effects, including potentially discouraging a takeover that stockholders may consider favorable.

The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms

not approved by the board of directors.

The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by the board of directors.

On the other hand, the Rights should not interfere with any merger or other business combination approved by the board of directors since the Rights may be redeemed by us at the Redemption Price prior to the date ten days after the public announcement that a person or group has become the beneficial owner of 4.9% or more of the common stock, and any securities which a person or any of such person’s affiliates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between us and such person may be excluded from the calculation of their beneficial ownership if such agreement has been approved by the board of directors prior to them becoming an Acquiring Person.

19 unchanged sentences

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