What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-27 compared with 2022-03-14 · 145 added, 155 removed, 279 unchanged (52% of the section changed)

5 unchanged sentences

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 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 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.

The conditions caused by the COVID-19 pandemic have affected and may continue to affect the rate of IT spending and our customers' ability or willingness to attend our events or to purchase our offerings, our prospective customers' purchasing decisions, our ability to provide on-site consulting services to our customers and the provisioning of our offerings, and may lengthen payment terms, reduce the value or duration of our contracts, or affect attrition rates, all of which has and may continue to adversely affect our future sales, operating results and overall financial information.

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 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.

Finally, as a result of changes in the tax code such as the recent deferral of certain payroll tax obligations and the implementation of certain tax credits, we have had to devote more resources internally both to monitor the impact of these changes on our clients and ensure that our clients remain compliant with the federal, state and local tax jurisdictions.

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, 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.

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

We have incurred losses since our inception.

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.

We expect to continue to incur operating losses as a result of expenses associated with the continued development and expansion of our business.

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 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.

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.

HCM software is often targeted in cyber-attacks, including computer viruses, worms, phishing attacks, malicious software programs and other information security breaches, which could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our clients’ sensitive data or otherwise disrupt our clients’ or other third parties’ business operations.

If cybercriminals are able to circumvent our security measures, or if we are unable to detect an intrusion into our systems and contain such intrusion in a reasonable amount of time, our clients’ sensitive data may be compromised.

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, or if personal information of our clients or their employees is accessed or obtained, our services and HCM solution 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.

Our solution involves the collection, storage and transmission of clients’ and their employees’ confidential and proprietary information, including personal identifying information such as social security numbers and HIPAA data with respect to our consumer health care administration services, as well as financial and payroll data.

This type of data is highly sensitive and is regulated by laws in all jurisdictions governing the security and privacy of personal information.

HCM software is often targeted in cyber-attacks, including computer viruses, worms, phishing attacks, malicious software programs and other information security breaches due to the sensitive nature of the data, which could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our clients’ sensitive data or otherwise disrupt our clients’ or other third parties’ business operations.

In addition to malicious acts by third parties, unauthorized access to or breach of our systems could occur through employee error or employee malfeasance.

Certain of our employees have access to sensitive information about our clients’ employees.

2 unchanged sentences

Because the techniques used to obtain unauthorized access or to sabotage systems change frequently, we may not be able to anticipate these techniques and implement adequate preventative or protective measures.

While we currently maintain a cyber liability insurance policy, cyber liability insurance may be inadequate or may not be available in the future on acceptable terms, or at all.

In addition, our customers may not have adequate security measures in place to protect their data that is stored on our services.

Because we do not control our customers or third-party technology providers, or the processing of such data by third-party technology providers, we cannot ensure the integrity or security of such transmissions or processing.

While we currently maintain a cyber liability insurance policy, the coverage limits of our cyber liability insurance may be inadequate or coverage under our cyber liability insurance policy may not be available in the future on acceptable terms, or at all.

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 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.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

generally accepted accounting principles.

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.

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.

Furthermore, if we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed and investors could lose confidence in our reported financial information.

Moreover, if a high profile security breach occurs with respect to another SaaS provider in our market, our clients and potential clients may lose trust in the security of the SaaS business model generally, which could adversely impact our ability to retain clients or attract new ones.

Any actual or perceived breach of our security could damage our reputation, cause existing clients and resellers to terminate our services, prevent future clients from doing business with us and result in regulatory liability and third-party liability, any of which could adversely affect our business and results of operations.

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

We have historically incurred losses since our inception.

We experienced a net loss from continuing operations of $(14.5) million in the fiscal year ended December 31, 2022.

At December 31, 2022, our accumulated deficit was $281.2 million and total stockholders’ equity was $145.1 million .

We expect to continue to incur operating losses as a result of expenses associated with the continued development and expansion of our business.

Such exp enses 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.

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

We generate revenues by providing services to enable businesses to file for Employee Retention Tax Credits under the CARES Act and such regulations will eventually expire, which, following their expiration, will adversely impact our revenues.

Since the introduction of the Employee Retention Tax Credits in 2021, we have received a signification portion of our tax processing revenues from the support we provide our customers in filing for Employee Retention Tax Credits and we expect revenues from these services to continue to be a significant portion of our tax processing revenues while the Employee Retention Tax Credits are available.

Employee Retention Tax Credits are expected, at this time, to expire in 2025;

however it is possible that the government could revoke the program prior to its scheduled expiration.

Given this, investors should not expect our tax processing revenues from ERTC filings to continue beyond 2025, and any earlier expiration or revocation of the ERTC program will have an adverse effect on our financial condition and results of operation.

Further, we have entered into deferred payment arrangements with some referral partners whereby collections from the customer are expected to be received upon the customer’s future receipt of their tax credit.

Given the deferred nature of such receipts there is risk pertaining to our ability to collect such amounts in the future.

In certain situations, the tax authorities could have the ability to challenge the validity of a business’ filing or could challenge our calculations or find other deficiencies in our filings that could expose us to uncertain penalties or damages.

Our current outlook envisions continued revenues from ERTC.

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

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 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, The Virginia Consumer Data Protection Act became effective January 2023.

Colorado legislation becomes effective mid to late 2023.

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.

In addition to governmental regulation, self-regulatory standards may place additional burdens on us.

Many of our customers expect us to meet voluntary certification or other standards established by third parties as well as other audited measures and controls.

If we are unable to maintain these certifications or meet these standards, it could adversely affect our ability to provide our solutions to certain customers and could harm our business.

Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services, and could limit adoption of our cloud-based solutions.

Furthermore, certain of our products use client data to provide value to our solutions, aid in efficiency and reduce human error.

Evolving privacy requirements and privacy concerns could restrict our ability to store and process data, which may impact our ability to offer our services thereby reducing demand.

Enforcement actions and investigations could also impact us through increased costs, regulatory penalties, or restrictions o n our business.

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.

If we are unable to generate sufficient cash flow, we may be required to pursue one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or dilutive.

Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.

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 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.

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.

4 unchanged sentences

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.

Asure HCM involves the collection, transmission, processing and storing of the personal information of our direct and indirect clients and their employees, including personally identifying information including social security numbers, banking information and payroll data.

This type of data is highly sensitive and is regulated by laws in all jurisdictions governing the security and privacy of personal information.

HCM software is a target in cyber attacks due to the sensitive nature of data being stored, accordingly, we could be subjected to viruses, phishing, worms or other malicious software programs and other information security breaches.

In the event that such attacks were able to circumvent our own security processes, or if we did not detect an intrusion in time to stop such attack, such breach could result in loss, destruction, theft, or misuse of this information.

In addition to malicious acts by third parties, unauthorized access to or breach of our systems could occur through employee error or employee malfeasance.

Although we have security measures in place to prevent the possibility of breach or data loss, we may not be able to adequately anticipate and operationalize all preventative and protective measures necessary.

While we maintain a cyber liability insurance policy, such policy may not be adequate to cover all losses and the cost of defending a lawsuit.

Further, should states or jurisdictions where we are not licensed or pursuing licenses 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.

We have acquired and plan to continue to acquire from time to time our Reseller Partners' businesses that have licensed our proprietary software either through stock acquisition or through an asset purchase of their client service agreements and related assets.

50 unchanged sentences

In addition, if we cannot accurately predict subscription renewals or upgrade rates, we may not meet our revenue targets, which may adversely affect the market price of our common stock.

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.

The widespread adoption of our products depends not only on strong demand for HCM products and services generally, but also for products and services delivered via a SaaS business model in particular.

A significant number of organizations do not use HCM products, and it is unclear whether such organizations will ever use these products and, if they do, whether they will choose to use a SaaS software service or our HCM products in particular.

As a result, we cannot assure you that our SaaS HCM software products will achieve and sustain the high level of market acceptance that is critical for the success of our business.

Client funds that we hold in trust are subject to market, interest rate, credit and liquidity risk.

3 unchanged sentences

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.

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

41 unchanged sentences

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.

Our services are subject to various laws and regulations including COBRA, HIPAA, laws and regulations promulgated by state wage and hour authorities and anti-money laundering regulations.

Failure to comply with the multiple laws and regulations that impact us may result in civil liability from our clients for noncompliance, regulatory fines, and loss of reputation in the event of a public regulatory investigation or consent order or civil lawsuit.

Moreover, many of our solutions are designed to assist our clients with their compliance with myriad government regulations and laws that continually change.

For example, regulatory changes in 2020 in response to the COVID-19 pandemic necessitated multiple product modifications to accommodate changes relevant to the collection and remittance of payroll tax, including payroll tax deferments.

The introduction of new regulatory requirements or changes in interpretation of existing laws or regulations could increase our cost of doing business.

As with the development changes necessitated with new regulations in response to COVID-19, changing regulatory requirements may require the introduction of new applications or enhancements, or may make new modifications or new applications more expensive or could prevent the introduction of new applications.

Changes in laws could also impact applications under development, rendering them in applicable or obsolete mid development which could result in wasted time and development money.

Any failure to anticipate and respond to these legal regulations and changes and provide tools and applications to solve for these changes in a timely fashion could adversely affect our reputation and affect 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 products are subject to various complex laws and regulations on the federal, state and local levels, including those governing data security and privacy.

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

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.

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.

Evolving privacy requirements could also reduce demand for our services or restrict our ability to store and process data or, in some cases, impact our ability to offer our services in certain locations.

In addition to governmental regulation, self-regulatory standards may place additional burdens on us.

Many of our customers expect us to meet voluntary certification or other standards established by third parties as well as other audited measures and controls.

If we are unable to maintain these certifications or meet these standards, it could adversely affect our ability to provide our solutions to certain customers and could harm our business.

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.

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.

Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

In addition, our customers may authorize third-party technology providers to access their customer data, and some of our customers may not have adequate security measures in place to protect their data that is stored on our services.

Malicious third parties may also conduct attacks designed to temporarily deny customers access to our services.

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

Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.

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.

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.

13 unchanged sentences

We cannot assure you that our leverage and such restrictions will not materially and adversely affect our ability to finance our future operations or capital needs or to engage in other business activities.

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 are sometimes the subject of claims, lawsuits, governmental investigations and other legal and regulatory proceedings in the ordinary course of business, including those involving, among others, breach of contract, tortious conduct and employment law matters.

The results of any such claims, lawsuits, or other legal or regulatory proceedings cannot be predicted with certainty.

Any claims against us, whether meritorious or not, could be time-consuming, result in costly litigation, be harmful to our reputation, impact licenses that are necessary or required to operate our business, require significant management attention and divert significant resources.

It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that could adversely affect our business, financial condition and results of operations.

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

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 (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.

Our management and other personnel devote a substantial amount of time to ensure that we comply with all of these requirements.

Moreover, new reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly.

Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.

To the extent that our pre-tax income or loss becomes relatively modest, our ability to conclude that a control deficiency is not a material weakness or that an accounting error does not require a restatement could be adversely affected.

Under the Sarbanes-Oxley Act of 2002, our management is required to assess the impact of control deficiencies based upon both quantitative and qualitative factors, and depending upon that analysis, we classify such identified deficiencies as either a control deficiency, significant deficiency or a material weakness.

One element of our analysis of the significance of any control deficiency is its actual or potential financial impact.

This assessment will vary depending on our level of pre-tax income or loss.

For example, a smaller pre-tax income or loss will increase the likelihood of a quantitative assessment of a control deficiency as a significant deficiency or material weakness.

To the extent that our pre-tax income or loss is relatively small, if management or our independent registered public accountants identify an error in our interim or annual financial statements, it is more likely that such an error may be determined to be a material weakness or be considered a material error that could, depending upon the complete quantitative and qualitative analysis, result in our having to restate previously issued financial statements.

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

21 unchanged sentences

Moreover, some of our agreements include performance guarantees and service level standards that obligate us to provide credits, refunds or termination rights in the event of a significant disruption in our SaaS hosting network infrastructure or other technical problems that relate to the functionality or design of our software.

We may be adversely affected by failure of third parties in providing their services.

We rely on multiple third-party service providers to provide services to our clients as part of our service offerings.

Service providers include for example our banking and ACH transaction partners, mail services, outsourced consumer health care administration service providers, and Amazon Web Services hosting services.

Failure of these providers to deliver their services in a compliant, timely manner could result in material disruption to our business, result in reputational damage, expose us to greater liability from our clients than we can recover from the third parties, any of which may adversely affect our results of operations.

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

9 unchanged sentences

We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the notes or future indebtedness.

Volatility and weakness in bank and capital markets may adversely affect credit availability and related financing costs for us.

Banking and capital markets can experience periods of volatility and disruption.

If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be adversely affected.

Although we currently can access the bank and capital markets, there is no assurance that such markets will continue to be a reliable source of financing for us.

These factors, including the tightening of credit markets, could adversely affect our ability to obtain cost effective financing.

Increased volatility and disruptions in the financial markets also could make it more difficult and more expensive for us to refinance outstanding indebtedness and to obtain financing.

In addition, the adoption of new statutes and regulations, the implementation of recently enacted laws, or new interpretations or the enforcement of older laws and regulations applicable to the financial markets or the financial services industry could result in a reduction in the amount of available credit or an increase in the cost of credit.

Disruptions in the financial markets can also adversely affect our lenders, insurers, customers, and other counterparties.

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

6 unchanged sentences

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, 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 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.

If we are unable to retain and successfully integrate the current employees serving in these roles, it could have a material impact on our business and financial results.

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.

Our services depend on the ability of our registered users to access the Internet.

Currently, this access is provided by companies that have significant market power in the broadband and Internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies and government-owned service providers.

Laws or regulations that adversely affect the growth, popularity or use of the Internet, including changes to laws or regulations impacting Internet neutrality, could decrease the demand for our products, increase our operating costs, require us to alter the manner in which we conduct our business and/or otherwise adversely affect our business.

For example, the Federal Communications Commission (the “FCC”) recently adopted an order repealing rules that prohibit Internet service providers (“ISPs”) from blocking or throttling Internet traffic, and from engaging in practices that prioritize particular Internet content in exchange for payment (also known as “paid prioritization”).

The order is not yet effective and has been challenged in court, which could result in further changes to the governing law.

There is also uncertainty regarding how the FCC’s new framework, if upheld, and new oversight by the Federal Trade Commission (“FTC”) will be applied.

Depending on ongoing appellate proceedings and future action by the FCC and FTC, we could experience discriminatory or anti-competitive practices that could cause us to incur additional expense or otherwise adversely affect our business, operating results and financial condition.

In particular, the repeal of restrictions on paid prioritization could enable ISPs to impose higher fees and otherwise adversely affect our business.

In addition, the rapid and continual growth of traffic on the Internet has resulted at times in slow connection and download speeds of Internet users.

Our business may be harmed if the Internet infrastructure cannot handle our clients’ demands or if hosting capacity becomes insufficient.

If our clients become frustrated with the speed at which they can utilize our products over the Internet, our clients may discontinue the use of our software and choose not to renew their contracts with us.

Further, the performance of the Internet has also been adversely affected by viruses, worms, hacking, phishing attacks, denial of service attacks and other similar malicious programs, as well as other forms of damage to portions of its infrastructure, which have resulted in a variety of Internet outages, interruptions and other delays.

These service interruptions could diminish the overall attractiveness of our products to existing and potential users and could cause demand for our products to suffer.

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.

9 unchanged sentences

If we fail to secure, protect and enforce our intellectual property rights, we may lose valuable assets, generate reduced revenue and incur costly litigation to protect our rights, which could adversely affect our business, operating results and financial condition.

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

The use of open-source software in our products may expose us to additional risks and harm our intellectual property rights.

There have been claims in the past challenging the ownership of open-source software against companies that incorporate such software into their products or applications.

As a result we could be subject to intellectual property related claims around ownership rights to what we believe to be open-source software.

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.

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.

We use certain third-party software in our applications that we obtain from other companies and will continue to rely on such third party software.

If we were required to find alternatives to such software for whatever reason, it may be expensive to replace, and could require significant investment of time and resources to find alternatives and integrate with our software.

Additionally, error or issues in that software could adversely affect our own software and errors or defects may not be readily apparent to use, resulting in a failure of our applications.

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

16 unchanged sentences

In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a significant impact on our ability to fulfill orders for our products.