What changed in this filing

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Item 1A. Risk Factors

2024-02-26 compared with 2023-02-27 · 92 added, 90 removed, 334 unchanged (35% of the section changed)

21 unchanged sentences

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 generate a portion of our revenues by providing tax processing services to enable businesses to file for Employee Retention Tax Credits under the CARES Act.

Such regulations were originally expected to expire in 2024 and 2025, which, following their expiration, will adversely impact our revenues and abuses of this program may require government intervention, that could adversely affect the timing of our processing services and delay or otherwise materially affect our future revenue and cash collections.

Since the introduction of the Employee Retention Tax Credits in 2021, we have received a significant portion of our tax processing revenues from the support we provide our customers as a tax processor in filing for Employee Retention Tax Credits.

Employee Retention Tax Credits were originally expected to expire during 2024 and 2025;

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

In January 2024, the United States House of Representatives passed the Tax Relief for American Families and Workers Act of 2024, which sets an expiration date of January 31, 2024, on additional claims for ERTC that can potentially apply retroactively.

The bill also includes various enforcement provisions related to ERTC, including extending the statute of limitation on assessment for the credit, and increasing certain penalties and reporting requirements for those who are considered COVID-ERTC promoters.

The Senate must also pass an identical version of the bill that must then be signed by the President before it becomes law.

On September 14, 2023, the IRS announced a moratorium on processing new ERTC claims until at least December 31, 2023, to handle the increased number of fraudulent ERTC claims filed.

While the IRS is not pausing the processing of ERTC claims filed before September 14, 2023, and eligible taxpayers retain the right to continue to file legitimate ERTC claims, the moratorium will likely adversely affect revenues earned from support provided to customers who would otherwise undergo ERTC claim processing.

Given this, investors should not expect our tax processing revenues from ERTC filings to continue beyond 2024, and any earlier expiration or revocation of the ERTC program, including the moratorium described above, will have an adverse effect on our financial condition and results of operation.

Further, we have entered into deferred payment arrangements with some customers and 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.

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

7 unchanged sentences

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.

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.

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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.

Additionally, new privacy legislation became effective throughout 2023 in various states including Virginia, Colorado, Utah and Connecticut.

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

Additional states may adopt privacy laws in the future that may 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.

7 unchanged sentences

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.

1 unchanged sentence

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.

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

Although we maintain that we are not a money service business or money transmitter at the federal level, we proactively registered with FinCEN and 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.

We are licensed or are pursuing licensure in any jurisdiction that requires a payroll processor to be licensed under state money transmission laws.

The statutes governing our money transmitter licenses subject us 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.

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

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.

To facilitate these acquisitions or investments, we may seek 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.

If we finance acquisitions by issuing equity or convertible or other debt securities or loans, or issue equity as consideration for an acquisition, our existing stockholders may be diluted, or we could face constraints related to the terms of, and repayment obligations related to, the incurrence of indebtedness.

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.

Our future success will depend on our ability to adapt and innovate.

To attract new clients and increase revenue from existing clients, we will need to enhance and improve our existing products and introduce new features.

The success of any enhancement or new feature depends on several factors, including timely completion, introduction and market acceptance.

If we are unable to enhance our existing products to meet client needs or successfully develop or acquire new features or products, or if such new features or products fail to be successful, our business, operating results and financial condition will be adversely affected.

Our products are designed to operate on a variety of network, hardware and software platforms using Internet tools and protocols, and we must continuously modify and enhance our products to keep pace with changes in Internet-related hardware, software, communication, browser and database technologies.

In addition, if new technologies emerge that are able to deliver HCM software at lower prices, more efficiently or more conveniently, we may be unable to compete with these technologies.

If we are unable to respond in a timely and cost-effective manner to these rapid technological developments, our products may become less marketable and less competitive or obsolete, and our business, operating results and financial condition 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.

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Changes in laws and regulations may require us to make significant investments in modifying and improving our products or delay or cease sales of certain products, which could result in reduced revenues or revenue growth and our incurring substantial expenses and write-offs.

Our future success relies on our capacity to attract new clients and increase revenue from existing clients, necessitating the ongoing improvement and innovation of our products.

The timely completion, introduction, and market acceptance of enhancements or new features are crucial factors for success.

Inability to meet client needs, develop/acquire successful features, or navigate market challenges could adversely affect our business, operating results, and financial condition.

Our products, designed to operate across various platforms and utilizing Internet tools and protocols, require continuous modification to align with changes in Internet-related hardware, software, communication, browser, and database technologies.

Additionally, the emergence of technologies offering HCM software at lower prices or with increased efficiency poses competition challenges.

Failing to respond promptly and cost-effectively to these technological shifts may render our products less marketable or competitive, potentially impacting our business, operating results, and financial condition negatively.

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

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The market for payroll and HCM solutions is fragmented, highly competitive and rapidly changing.

Our competitors vary for each of our solutions, and include (i) enterprise-focused software providers, such as Ultimate Software Group, Inc., MasterTax, and Ceridian Corporation, (ii) payroll service providers, such as Automatic Data Processing, Inc., Paychex, Inc., Paycom Software, Inc., Paycor, Inc.

and (iii) other regional providers, and HCM point solutions, such as Cornerstone OnDemand, Inc.

Our competitors vary, and include (i) our main competitors, such as ADP, Paychex, UKG, Paylocity, Paycor, Paycom, Ceridian, isolved, and Gusto, (ii) competitors to Asure Time & Attendance, such as UKG, Paychex, ADP and Time Simplicity and (iii) primary competitors to our tax management solutions, such as Ceridian and ADP.

Several of our competitors are larger, have greater name recognition, longer operating histories, larger marketing budgets and significantly greater resources than we do, and are able to devote greater resources to the development, promotion and sale of their products and services.

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We evaluate on a regular basis whether all or a portion of our goodwill and identifiable intangible assets may be impaired.

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.

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 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.

We may be required to incur further debt to meet future capital requirements of our business.

Should we be required to incur additional debt, the restrictions imposed by the terms of such debt could adversely affect our financial condition and our ability to respond to changes in our business.

If we incur additional debt, we may be subject to the following risks:

We may be required to incur debt to meet future capital requirements of our business.

Should we be required to incur debt, the restrictions imposed by the terms of such debt could adversely affect our financial condition and our ability to respond to changes in our business.

If we incur debt, we may be subject to the following risks:

• our vulnerability to adverse economic conditions may be heightened;

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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 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 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.

The owners of such facilities have no obligation to renew their agreements with us on commercially reasonable terms.

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.

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

Our clients access our HCM software through a standard web browser and depend on us for fast and reliable access to our products.

Our software is proprietary, and we rely on third-party data center hosting facilities and the expertise of members of our engineering and software development teams for the continued performance of our software.

We have experienced, and may in the future experience, disruptions in our computing and communications infrastructure.

Factors that may cause such disruptions include:

• human error;

• security breaches;

• telecommunications outages from third-party providers;

• computer viruses;

• 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;

• fire, earthquake, flood, the spread of major epidemics (including coronavirus) and other natural disasters;

• power loss.

Although we generally back up our client databases hourly, store our data in more than one geographically distinct location at least weekly, we do not currently offer immediate access to disaster recovery locations in the event of a disaster or major outage.

Thus, in the event of any of the factors described above, or other failures of our computing infrastructure, clients may not be able to access their data for lengthy periods of time and it is possible that client data from recent transactions may be permanently lost or otherwise compromised.

In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.

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

We intend to continue to make investments, including the acquisition of complementary businesses, to support our business growth and may seek additional funds to respond to business challenges, including the need to develop new features or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies.

Accordingly, we may need to engage in additional equity or debt financings to secure additional funds.

Accordingly, we may need to engage in equity or debt financings to secure additional funds.

If we raise additional funds through issuances of equity or debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

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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.

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.

Our future performance depends largely on our ability to continually and effectively attract, train, retain, motivate and manage highly qualified and experienced technical, sales, marketing, managerial and executive personnel.

Our future development and growth depend on the efforts of key management personnel and technical employees.

1 unchanged sentence

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.

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 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.

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.

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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.

Issues in the use of artificial intelligence (“AI”) in our HCM products and services may result in reputational harm or liability to us.

We are enhancing our products and technologies through the integration of artificial intelligence (“AI”), anticipating its increasing role in our business offerings.

Like any developing technology, AI brings inherent risks and challenges that may impact its development, adoption, and use, consequently affecting the reliability of our business and product offerings.

AI algorithms may have flaws, and datasets may be insufficient, of poor quality, or contain biased information.

While our goal is to use AI to assist customers in data collection, there is a risk that the information produced by AI applications may be perceived as deficient or inaccurate, potentially resulting in competitive harm, legal liability, and damage to our brand or reputation.

In addition, our use of AI technology may subject us to financial or regulatory risks.

Evolving rules, regulations, and industry standards governing AI may require us to expend significant resources to modify, maintain, or align our business practices or products to comply with US and non-US rules and regulations, the nature of which cannot be determined at this time.

Several jurisdictions around the globe, including the EU and certain US states, have already proposed or enacted laws governing AI.

US federal agencies are likely to release AI regulations in the near future in light of the Biden administration’s October 30, 2023 Executive Order on AI.

The regulatory environment surrounding the impact of the implementation of AI on our products and services may adversely affect our ability to produce and export products and as a result may cause harm to our reputation and financial liability.

Despite our efforts to mitigate these risks through sound business practices, the ability to generate data-driven insights for our customers using AI in our HCM technology may be constrained by existing and future regulatory requirements.

These regulations could limit our innovative use of data to support the evolving needs of our customers.

Our software and solutions may not function adequately, which could damage our reputation and give rise to claims against us, which could harm our business and operating results.

Our software and solutions are complex and operate in an environment of intricate federal, state and local regulations that pertain to human resources, taxes, payroll, benefits and other areas of the Human Capital Management marketplace.

To the extent to which our software contains defects or errors our clients might assert claims against us in the future alleging that they suffered damages due to a defect, error or other failure of our software or solutions.

While our agreements with our clients may contain provisions intended to limit our exposure to such claims, they may not be effective in limiting our exposure.

A successful claim for product or service liability brought against us could result in substantial cost to us.

We maintain insurance to cover such claims, however, it may be inadequate or may not be available in the future on acceptable terms or at all.

In addition, the cost of defending a suit, regardless of its merit, could be costly and divert management’s attention.

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 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.

The owners of such facilities have no obligation to renew their agreements with us on commercially reasonable terms.

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

Our clients access our HCM software through a standard web browser and depend on us for fast and reliable access to our products.

We have experienced, and may in the future experience, disruptions in our computing and communications infrastructure.

Factors that may cause such disruptions include:

• human error;

• security breaches;

• telecommunications outages from third-party providers;

• computer viruses;

• 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;

• fire, earthquake, flood, the spread of major epidemics and other natural disasters;

• power loss.

Although we generally back up our client databases hourly, and store our data in more than one geographically distinct location at least weekly, we do not currently offer immediate access to disaster recovery locations in the event of a disaster or major outage.

In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.

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.

Banking and capital markets have recently and may in the future 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.

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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.

Our software and solutions may not function adequately, which could damage our reputation and give rise to claims against us, which could harm our business and operating results.

While our agreements with our clients may contain provisions intended to limit our exposure to such claims, they may not be effective in limiting our exposure.

A successful claim for product or service liability brought against us could result in substantial cost to us.

We maintain insurance to cover such claims, however, it may be inadequate or may not be available in the future on acceptable terms or at all.

In addition, the cost of defending a suit, regardless of its merit, could be costly and divert management’s attention.

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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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.

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

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.

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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.

For example, in 2017 the Federal Communications Commission (the “FCC”) 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”).

In October 2023, the FCC proposed to reclassify ISPs as a Title II telecommunications service under Title II of the Communications Act and reinstate net neutrality obligations on ISPs.

The impact of these rules, if adopted, remains uncertain and further judicial review is likely.

A number of states, including California, have also taken executive action or passed legislation seeking to reestablish net neutrality, and there are efforts within Congress to pass federal legislation to codify uniform net neutrality requirements.

Changes in regulatory requirements or uncertainty associated with the regulatory environment could delay or cause us to experience discriminatory or anti-competitive behavior, which could adversely affect the sale of our products and services.

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.

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We cannot, however, assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we currently believe no such taxes are required.

If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our services, we might be liable for past taxes and the associated interest and penalty charges, in addition to taxes going forward, which will adversely affect our business, sales activity, results of operations and financial condition.

If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our services, we might be liable for past taxes and the associated interest and penalty charges, in addition to taxes going forward, which may adversely affect our business, sales activity, results of operations and financial condition.

Political, economic and social factors may materially adversely affect our business and financial results.

Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and volatility.

A slowdown in the economy or other negative changes, including in employment levels, the level of interest rates or the level of inflation, may have a negative impact on our businesses.

In addition, as our operating costs increase due to inflationary pressure or otherwise, we may not be able to offset these increases by corresponding price increases for our products and solutions.

Clients may react to worsening conditions by reducing their spending on HCM services or renegotiating their contracts with us, which may adversely affect our business and financial results.

RISKS RELATED TO OUR SECURITIES

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The market price of our common stock has in the past been and is likely to continue in the future to be, volatile.

During the fiscal year ended December 31, 2022, the Nasdaq closing price of one share of our common stock fluctuated from a low of $5.04 to a high o f $10.50.

During the fiscal year ended December 31, 2023, the Nasdaq closing price of one share of our common stock fluctuated from a low of $6.83 to a high of $16.83.

During the fiscal year ended December 31, 2022, the Nasdaq closing price of one share of our common stock fluctuated from a l ow of $5.04 to a high of $10.50.

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• 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 continuing impact of the coronavirus, the Russian invasion of Ukraine and other developments that affect the equity trading markets

• political or economic uncertainties, including rising interest rates or inflation, ongoing international conflicts and other developments that affect the equity trading markets.

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

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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 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.

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In addition, actions such as those described above could cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors