What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2020-11-06 compared with 2020-09-11 · 163 added, 125 removed, 749 unchanged (28% of the section changed)

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Investing in our Series 1 common stock involves substantial risks.

You should carefully consider the following risk factors, as well as all of the other information contained in Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes.

You should carefully consider the following risk factors, as well as all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes.

Additional risks and uncertainties that we are unaware of may also become important factors that adversely affect our business.

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We have not yet achieved profitability.

We incurred net losses of $42.6 million and $12.5 million for the year ended December 31, 2019 and the six months ended June 30, 2020, respectively, as compared to $38.9 million and $17.5 million for the year ended December 31, 2018 and the six months ended June 30, 2019, respectively.

As of June 30, 2020, we had an accumulated deficit of $291.1 million.

We incurred net losses of $42.6 million and $23.4 million for the year ended December 31, 2019 and the nine months ended September 30, 2020, respectively, as compared to $38.9 million and $32.3 million for the year ended December 31, 2018 and the nine months ended September 30, 2019, respectively.

As of September 30, 2020, we had an accumulated deficit of $299.2 million .

While we have experienced significant revenue growth over recent periods, we may not be able to sustain or increase our growth or achieve profitability in the future.

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You should not rely on our revenue for any prior periods as any indication of our future revenue or revenue growth.

Our future revenue and operating results will be harmed if we are unable to acquire new customers, retain existing customers, expand sales to our existing customers, or develop new functional ity for our platform that achieves market acceptance.

Our future revenue and operating results will be harmed if we are unable to acquire new customers, retain existing customers, expand s ales to our existing customers, or develop new functionality for our platform that achieves market acceptance, or the increase in ecommerce during the COVID-19 pandemic fails to continue after the pandemic ends .

To continue to grow our business, it is important that we continue to acquire new customers to purchase and use our platform.

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The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales, and other expenses we will have incurred in connection with the new functionality and services.

As reported by the U.S.

Department of Commerce, U.S.

ecommerce grew more than 30% between the first and second quarters of 2020 as a result of changes in consumer behavior due to the COVID-19 pandemic.

We were a beneficiary of this trend but there are no assurances this trend will continue.

In response to the COVID-19 pandemic, governments have instituted lockdown, social distancing, and similar measures to slow infection rates.

These restrictions have prompted shifts from physical commerce to ecommerce, which has increased usage of our services.

After the COVID-19 pandemic has abated, our customers’ stores may experience decreases or decreased growth rates in transactions, which would negatively affect our business, financial condition, and operating results.

We may experience decreases or decreased growth rates in sales of new store subscriptions to customers, which would negatively affect our business, financial condition and operating results.

We face intense competition, especially from well-established companies offering solutions and related applications.

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Some of our larger competitors also have substantially broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market.

Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors, or continuing market consolidation.

Conditions in our market could change rapidly and significantly as a result of

technological advancements, partnering by our competitors, or continuing market consolidation.

New start-up companies that innovate, and large companies that are making significant investments in research and development, may invent similar or superior products and technologies that compete with our platform.

In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with agency partners, technology and application providers in complementary categories, or other parties.

Furthermore, ecommerce on large marketplaces, such as Amazon, could increase as a percentage of all ecommerce activity, thereby reducing customer traffic to individual merchant websites.

In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationship s with agency partners, technology and application providers in complementary categories, or other parties.

Furthermore, ecommerce on large marketplaces, such as Amazon, could increase as a percentage of all ecommerce activity, thereby reducing customer tr affic to individual merchant websites.

Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure, a loss of market share, or a smaller addressable share of the market.

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Furthermore, potential customers may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existing infrastructure with our platform.

These competitive pressures in our market, or our failure to compete effectively, may result in price reductions, fewer orders, reduced revenue and gross margins, increased net losses, and loss of ma rket share.

Any failure to meet and address these factors could harm our business, results of operations, and financial condition.

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Suspending travel and doing business in-person on a long-term basis could negatively impact our marketing efforts, our ability to enter into customer contracts in a timely manner, our international expansion efforts and our ability to recruit employees across the organization.

These changes could negatively impact our sales and marketing in particular, which could have longer-term effects on our sales pipeline, or create operational or other challenges as our workforce remains predominantly remote, any of which could harm our business.

Any of these impacts could harm our business.

In addition, our management team has spent, and will likely continue to spend, significant time, attention, and resources monitoring the COVID-19 pandemic and associated global economic uncertainty and seeking to manage its effects on our business and workforce.

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These developments include but are not limited to the duration, extent, and severity of the COVID-19 pandemic, actions taken to contain the COVID-19 pandemic, the impact of the COVID-19 pandemic and related restrictions on economic activity and domestic and international trade, and the extent of the impact of these and other factors on our employees, suppliers, partners, and customers.

The COVID-19 pandemic and related restrictions could limit our customers’ ability to continue to operate (limiting their abilities to obtain inventory, generate sales, or make timely payments to us).

The COVID-19 pandemic and related restrictions could limit our customers’ ability to continue to operate (to obtain inventory, generate sales, or make timely payments to us).

It could disrupt or delay the ability of employees to work because they become sick or are required to care for those who become sick, or for dependents for whom external care is not available.

It could cause delays or disruptions in services provided by key suppliers and vendors, increase vulnerability of us and our partners and service providers to security breaches, denial of service attacks or other hacking or phishing attacks, or cause other unpredictable effects.

It could cause delays or disruptions in services provided by key suppliers and vendors, make us, our partners and our service providers more vulnerable to security breaches, denial of service attacks or other hacking or phishing attacks, or cause other unpredictable effects.

The COVID-19 pandemic also has caused heightened uncertainty in the global economy.

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Since the impact of COVID-19 is ongoing, the effect of the COVID-19 pandemic and the related impact on the global economy may not be fully reflected in our results of operations until future periods.

Volatility in the capital markets has been heightened during recent months and such volatility may continue, which may cause declines in the price of our Series 1 common stock.

Further, to the extent there is a sustained general economic downturn and our software is perceived by customers and potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in general information technology spending.

Volatility in the

capital markets has been heightened during recent months and such volatility may continue, which may cause declines in the price of our Series 1 common stock.

To the extent there is a sustained general economic downturn and our software is perceived by customers and potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected.

Our revenue may also be disproportionately affected by delays or reductions in general information technology spending.

Competitors, many of whom are larger and more established than we are, may respond to market conditions by lowering prices and attempting to lure away our customers.

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We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry.

economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operati ons, and financial condition could be materially and adversely affected.

If the economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operations, and financial condition could be materially and adversely affected.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, and changing customer needs or preferences, our platform may become less competitive.

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Any failure of our platform to operate effectively with business applications could reduce the demand for our platform, resulting in customer dissatisfaction and harm to our business.

If we are unable to respond to these changes or failures in a cost-effective manner, our platform may become less marketable, less competitive, or obsolete, and our results of operations may be negatively impacted.

If we are unable

to respond to these changes or failures in a cost-effective manner, our platform may become less marketable, less competitive, or obsolete, and our results of operations may be negatively impacted.

We have strategic technology partnerships with third parties that pay us a revenue share on their gross sales to our joint customers and/or collaborate to co-sell and co-market BigCommerce to new customers.

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If our relationships with our strategic technology partners are disrupted, we may receive less revenue and incur costs to form other revenue-generating strategic technology partnerships.

If our strategic technology partners were to be acquired by a competitor or were to acquire a competitor, it could compromise these

relationships.

If our strategic technology partners were to be acquired by a competitor or were to acquire a competitor, it could compromise these relationships.

This could harm our relationship with our customers, our reputation and brand, and our business and results of operations.

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We may continue to experience rapid growth and organizational change, which may continue to place significant demands on our management and our operational and financial resources.

We have also experienced growth in the number of customers, the amount of transactions we process, and the amount of data that our hosting infrastructure supports.

Our success will depend in part on our ability to manage this growth effectively.

We will require significant capital expenditures and valuable management resources to grow without undermining our culture of innovation, teamwork, and attention to customer success, which has been central to our growth so far.

We have also experienced growth in the number of customers, the

amount of transactions we process, and the amount of data that our hosting infrastructure supports.

Our success will depend i n part on our ability to manage this growth effectively.

If we fail to manage our anticipated growth and change in a manner that preserves our corporate culture, it could negatively affect our reputation and ability to retain and attract customers and employees.

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If we are unable to manage our growth successfully, our business and results of operations could suffer.

It is important that we maintain a high level of customer service and satisfaction as we expan d our business.

It is important that we maintain a high level of customer service and satisfaction as we expand our business.

As our customer base continues to grow, we will need to expand our account management, customer service, and other personnel.

Failure to manage growth could result in difficulty or delays in launching our platform, declines in quality or cu stomer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties.

Failure to manage growth could result in difficulty or delays in launching our platform, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties.

Any of these could adversely impact our business performance and results of operations.

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If we are not able to achieve prominence through advertising or otherwise, we may not achieve significant traffic to our website through these new platforms and our business and operating results could be adversely affected.

To the extent our security measures are compromised, our platform may be perceived as not being secure.

To the extent our security measures are actually or believed to have been compromised, our platform may be perceived as not being secure.

This may result in customers curtailing or ceasing their use of our platform, our reputation being harmed, our incurring significant liabilities, and adverse effects on our results of operations and growth prospects.

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Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of services are expected to continue to be targeted.

Threats include traditional computer “hackers,” malicious code (such as viruses and worms), employee theft or misuse and denial-of-service attacks.

Threats include traditional computer “hackers,” malicious code (such as viruses, worms and ransomware), employee theft or misuse, action or inaction by our employees or contractors, and denial-of-service attacks.

Sophisticated nation-states and nation-state supported actors now engage in such attacks, including advanced persistent threat intrusions.

Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks.

If our security measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials, or otherwise, our reputation could be damaged, our business may be harmed, and we could incur significant liability.

If our security measures are actually or perceived to be compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials, or otherwise, our reputation could be damaged, our business may be harmed, and we could incur significant liability.

We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to compromise our systems because they change frequently and are generally not detected until after an incident has occurred.

As we rely on third-party and public-cloud infrastructure, we will depend in part on third-party security measures to protect against unauthorized access, cyberattacks, and the mishandling of customer data.

A cybersecurity event could have significant costs, including regulatory enforcement actions, litigation, litigation indemnity obligations, remediation costs, network downtime, increases in insurance premiums, and reputational damage.

Many companies that provide cloud-based services have reported a significant increase in cyberattack activity since the beginning of the COVID-19 pandemic.

A cybersecurity event could have significant costs, including regulatory enforcement actions, litigation, litigation indemnity obligations, remediation costs, network downtime, increases in insurance

premiums, and reputational damage.

Many companies that provide cloud-ba sed services have reported a significant increase in cyberattack activity since the beginning of the COVID-19 pandemic.

We depend on third-party data hosting and transmission services.

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Our platform is deployed to multiple data centers within these geographies, with additional geographies available for disaster recovery.

Our operations depend, in part, on our third-party providers’ protection of

these facilities from natural disasters, power or telecommunications failures, criminal acts, or similar events (such as the COVID-19 pandemic).

If any third-party facility’s arrangement is termin ated, or its service lapses, we could experience interruptions in our platform, latency, as well as delays and additional expenses in arranging new facilities and services.

Our operations depend, in part, on our third-party providers’ protection of these facilities from natural disasters, power or telecommunications failures, criminal acts, or similar events (such as the COVID-19 pandemic).

If any third-party facility’s arrangement is terminated, or its service lapses, we could experience interruptions in our platform, latency, as well as delays and additional expenses in arranging new facilities and services.

A significant portion of our operating cost is from our third-party data hosting and transmission services.

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We may have difficulty managing improvements to our systems, processes and controls or in connection with third-party software.

This could impair our ability to provide our platform to our customers, causing us to lose customers, limiting our platform to

less significant updates, or increasing our technical support costs.

This could impair our ability to provide our platform to our customers, causing us to lose customers, limiting our platform to less significant updates, or increasing our technical support costs.

If we are unable to manage this complexity, our business, operations, operating results and financial condition may suffer.

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As a result, we may be required or choose to reduce our prices or otherwise change our pricing model, which could adversely affect our business, operating results, and financial condition.

Our sales cycle with mid-market and large enterprise customers can be long and unpredictable, and our sales efforts require considerable time and expense.

Our sales cycle with mid-market and large enterprise customers can be long and unpredictable, and our sales efforts require considerable time and expen se.

The timing of our sales with our mid-market and large enterprise customers and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for these customers.

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This may cause a delay between increasing operating expenses for such sales efforts and, upon successful sales, the generation of corresponding revenue.

We are often required to spend significant time and

resources to better educate our potential mid-market and large enterprise customers and familiarize them with the platform.

We are often required to spend significant time and resources to better educate our potential mid-market and large enterprise customers and familiarize them with the platform.

The length of our sales cycle for these customers, from initial evaluation to contract execution, is generally three to six months but can vary substantially.

On occasion, some customers will negotiate their contracts to include a trial period, delayed payment or a number of months on a promoti onal basis.

On occasion, some customers will negotiate their contracts to include a trial period, delayed payment or a number of months on a promotional basis.

As the purchase and launch of our platform can be dependent upon customer initiatives, infrequently, our sales cycle can extend to up to twelve months.

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The importance of high-quality support will increase as we expand our business and pursue new customers, particularly mid-market and large enterprise customers.

If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to sell new software to existing and new customers could suffer and our reputation with existing or potential customers could be harmed.

help our customers quickly resolv e issues and provide effective ongoing support, our ability to sell new software to existing and new customers could suffer and our reputation with existing or potential customers could be harmed.

We store personal information of our customers and their shoppers.

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Third-party applications available on our platform and mobile applications may also store personal information, credit card information, and other confidential information.

We do not proactively monitor the content that our customers

upload or the information provided to us through the applications integrated with our ecommerce platform;

therefo re, we do not control the substance of the content on our servers, which may include personal information.

We cannot and do not proactively monitor the content that our customers upload or the information provided to us through the applications integrated with our ecommerce platform;

therefore, we do not control the substance of the content on our servers, which may include personal information.

We use third-party service providers and subprocessors to help us deliver services to customers and their shoppers.

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In addition, failures to meet our customers’ or shoppers’ expectations with respect to security and confidentiality of their data and information could damage our reputation and affect our ability to retain customers, attract new customers, and grow our business.

Our failure to comply with legal or contractual requirements around the security of personal information could lead to significant fines and penalties, as well as claims by our customers, their shoppers, or other stakeholders.

Our failure to comply with legal, contractual, or standards-based requirements around the security of personal information could lead to significant fines and penalties, as well as claims by our customers, their shoppers, or other stakeholders.

These proceedings or violations could force us to spend money in defense or settlement of these proceedings, result in the imposition of monetary liability or injunctive relief, divert management’s time and attention, increase our costs of doing business, and materially adversely affect our reputation and the demand for our platform.

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The limitations of liability in our contracts may not be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim.

Our insurance coverage, including coverage for errors and omissions, may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims.

Our insurance coverage, including coverage for errors and omissions and cyber liability, may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims.

Our insurers could deny coverage as to any future claim.

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If we fail to observe these requirements, our business, operating results, and financial condition could be adversely affected.

Evolving global internet laws, regulations and standards, privacy regulations, cross-border data transfer restrictions, and data localization requirements may limit the use and adoption of our services, expose us to liability, or otherwise adversely affect our business.

Evolving global laws, regulations and standards, privacy regulations, cross-border data transfer restrictions, and data localization requirements may limit the use and adoption of our services, expose us to liability, or otherwise adversely affect our business.

Federal, state, or foreign governmental bodies or agencies have in the past adopted, and may in the future adopt, laws and regulations affecting the use of the internet as a commercial medium.

These laws and regulations could impact taxation, internet neutrality, tariffs, content, copyrights, distribution, electronic contracts and other communications, consumer protection, and the characteristics and quality of services.

Legislators and regulators may make legal and regulatory changes, or apply existing laws, in ways that require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices.

These laws and regulations and resulting increased costs could materially harm our business, results of operations, and financial condition.

These laws and regulations could impact taxation, internet neutrality, tariffs, content, copyrights, distribution, electronic contracts and other communications, consumer protection, and the

characteristics and quality of services.

Legislators and regulators may make legal and regulatory changes, or apply existing law s, in ways that require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices.

These laws and regulations and resulting increased costs could materially harm our business, result s of operations, and financial condition.

Laws and regulations governing data privacy are constantly evolving.

Many of these laws and regulations, including the European Union’s GDPR and the California Consumer Protection Act (the “CCPA”), contain detailed requirements regarding collecting and processing personal information, restrict the use and storage of such information, and govern the effectiveness of consumer consent.

They could restrict our ability to store and process personal data (in particular, our ability to use certain data for

purposes such as risk or fraud avoidance, marketing or advertising), to control our costs by using certain vendors or service providers, and to offer certain services in certain jurisdictions.

Further, the CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow for a ne w cause of action for data breaches.

Many of these laws and regulations, including the European Union’s GDPR and the California Consumer Privacy Act (the “CCPA”), contain detailed requirements regarding collecting and processing personal information, restrict the use and storage of such information, and govern the effectiveness of consumer consent.

They could restrict our ability to store and process personal data (in particular, our ability to use certain data for purposes such as risk or fraud avoidance, marketing or advertising), to control our costs by using certain vendors or service providers, and to offer certain services in certain jurisdictions.

Such laws could restrict our customers’ ability to run their businesses;

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For example, the European Court of Justice recently invalidated the U.S.-EU Privacy Shield as a basis for transfers of personal data from the EU to the U.S.

while upholding standard contractual clauses as a mechanism for transfers.

and introduced requirements to carry out risk assessments in relation to use of other data transfer mechanisms.

This may increase regulatory and compliance burdens and may lead to uncertainty about or interruptions of personal data transfers from Europe to the United States (and beyond).

Use of other data transfer mechanisms now involves additional compliance steps and in the event any court blocks personal data transfers to or from a particular jurisdiction on the basis that certain or all such transfer mechanisms are not legally adequate, this could give rise to operational interruption in the performance of services for customers and internal processing of employee information, greater costs to implement alternative data transfer mechanisms that are still permitted, regulatory liabilities, or reputational harm.

Our response to these requirements globally may not meet the expectations of individual customers, their shoppers, or other stakeholders, which could reduce the demand for our services.

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We rely on a globally distributed infrastructure in order to be able to provide our services efficiently, and consequently may not be able to meet the expectations of customers who are located in or otherwise subject to such localization requirements, which may reduce the demand for our services.

In addition, the United Kingdom enacted legislation in May 2018 that substantially implements the GDPR, but the United Kingdom’s exit from the EU (which formally occurred on January 31, 2020), commonly referred to as “Brexit”, has created uncertainty with regard to the regulation of data protection in the United Kingdom.

Our failure to comply with these and additional laws or regulations could expose us to significant fines and penalties imposed by regulators, as well as legal claims by our customers, or their shoppers, or other relevant stakeholders.

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Any liability attributed to us could adversely affect our brand, reputation, ability to expand our subscriber base, and financial results.

Unfavorable conditions in our industry or the global economy, or reductions in IT spending, could limit our ability to g row our business and negatively affect our results of operations.

Unfavorable conditions in our industry or the global economy, or reductions in IT spending, could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers.

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We rely heavily on our network infrastructure and IT systems for our business operations.

An online attack, earthquake, fire, terrorist attack, power loss, global pandemics (such as the COVID-19 pandemic), telecommunications failure, or other similar catastrophic event could cause system interruptions, delays in accessing our service, reputational harm, and loss of critical data.

An online attack, damage as a result of civil unrest, earthquake, fire, terrorist attack, power loss, global pandemics (such as the COVID-19 pandemic), telecommunications failure, or other similar catastrophic event could cause system interruptions, delays in accessing our service, reputational harm, and loss of critical data.

Such events could prevent us from providing our platform to our customers.

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However, the steps we take to protect our intellectual property may be inadequate.

While we have been issued a patent in the United States and have an additional patent application pending, we may be unable to obtain patent protection for the technology covered in our patent application.

We make business decisions about when to seek patent protection for a particular technology and when to rely upon trade secret protection.

The approach we select may ultimately prove to be inadequate.

Our patent or patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties.

Our patents or patents issued to us in the future may not provide us with competitive advantages, or may be successfully challenged by third parties.

Any of our patents, trademarks, or other intellectual property rights may be challenged or circumvented by others or invalidated through administrative process or litigation.

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Moreover, effective trademark, copyright, patent, and trade secret protection may not be available or commercially feasible in every country in which we conduct business.

Further, intellectual property law, including

statutory and case law, particularly in the United States, is constantly developing.

Further, intellectual property law, including statutory and case law, particularly in the United States, is constantly developing.

Changes in the law could make it harder for us to enforce our rights.

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Many software companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them.

Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue and against which our patent may therefore provide little or no deterrence.

Any litigation may also involve patent holding companies or other

adverse patent owners that have no relevant product revenue and against whic h our patent s may therefore provide little or no deterrence.

We have and may in the future need to enter into settlement agreements that require us to pay settlement fees and that encumber a portion of our intellectual property.

Any claims or litigation could cause us to incur significant expenses and, whether or not successfully asserted against us, could require that we pay substantial damages, ongoing royalty or license payments, require us to re-engineer all or a portion of our platform, or require that we comply with other unfavorable terms.

If a third party is able to obtain an injunction preventing us from accessing third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software or cease business activities covered by such intellectual property.

Any claims or litigation co uld cause us to incur significant expenses and, whether or not successfully asserted against us, could require that we pay substantial damages, ongoing royalty or license payments, require us to re-engineer all or a portion of our platform, or require that we comply with other unfavorable terms.

If a third party is able to obtain an injunction preventing us from accessing third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we wou ld be forced to limit or stop sales of our software or cease business activities covered by such intellectual property.

It could prevent us from competing effectively.

We may be contractually obligated to indemnify our customers for infringement of a third party’s intellectual property rights.

We are contractually obligated to indemnify certain of our customers for infringement of a third party’s intellectual property rights.

From time to time, we have received indemnification requests with respect to alleged infringement of third party intellectual property rights.

Responding to such claims regardless of their merit, can be time-consuming, costly to defend in litigation, and damage our reputation and brand.

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Requiring us to change one or more aspects of the way we deliver our platform may harm our business.

Although we carry general liability insurance and other insurance, our insurance may not cover potential cl aims of this type.

Although we carry general liability insurance and other insurance, our insurance may not cover potential claims of this type.

Our insurance may not be adequate to cover us for all liability that may be imposed.

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therefore, the potential impact of these terms on our business is unknown and may result in unanticipated obligations regarding our technologies.

If a distributor of open source software were to allege that we had not complied with its license, we could be required to incur significant legal expenses.

If a distributor of open source

software were to allege that we had not complied with its license, we could be required to incur s ignificant legal expenses.

If we combine our proprietary software with open source software or utilize open source software in a certain manner, under some open source licenses, we could be in breach of the license if we did not release the source code of our proprietary software.

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We have found defects in our platform and may discover additional defects in the future that could result in data unavailability, unauthorized access to, loss, corruption, or other harm to our customers’ data.

We may not be able to detect and correct defects or

errors before release.

Consequently, we or our customers may discover defects or errors after our platf orm has been employed.

We may not be able to detect and correct defects or errors before release.

Consequently, we or our customers may discover defects or errors after our platform has been employed.

We implement bug fixes and upgrades as part of our regularly scheduled system maintenance.

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The federal and state NOL carryforwards each will begin to expire in 2036.

Certain of the federal losses have no expiration.

Certain of the federal

losses have no expiration.

As of December 31, 2019, we also had total foreign NOL carryforwards of $6.9 million, which do not expire under local law.

In general, under Section 382 of the United States Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income.

In ge neral, under Section 382 of the United States Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income .

Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code.

Furthermore, our ability to utilize NOLs of companies that we have acquired or may acquire in the future may be subject to limitations.

Furthermore, our ability to utilize NOLs of companies that we have acquired or may acquire in the future m ay be subject to limitations.

Furthermore, our losses in Australia are subject to the change of ownership test rules in that jurisdiction that when applied may limit our ability to fully utilize our Australian NOLs.

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We have reviewed our current NOLs and determined that we are not able to carryback any NOLs into prior periods.

In addition, under the TCJA, as modified by the CARES Act, the amount of NOLs that we are permitted to deduct in any taxable year beginning after December 31, 2020, is limited to 80% of our taxable income in such year,

where taxable income is determined without regard to the NOL deduction itself.

It is uncertain if and to what extent various states will conform to the TCJA or the CARES Act.

The changes i n the carryforward/carryback periods as well as the limitation on use of NOLs in the taxable years beginning after December 31, 2020 may affect our ability to fully utilize our available NOLs.

The changes in the carryforward/carryback periods as well as the limitation on use of NOLs in the taxable years beginning after December 31, 2020 may affect our ability to fully utilize our available NOLs.

We may be subject to additional obligations to collect and remit sales tax and other taxes.

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A component of our growth strategy involves the further expansion of our operations and customer base internationally .

Historically, approximately 20 percent of our revenue has been generated from customers outside the United States.

In the case of the two most recent fiscal years, approximately 20 percent of our revenue has been generated from customers outside the United States.

We currently have locations in the United States, Australia, the United Kingdom (“UK”), Singapore, and Ukraine.

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In addition, the COVID-19 pandemic and related stay-at-home, business closure, and other restrictive orders and travel restrictions, may pose additional challenges for international expansion and may impact our ability to launch new locations and further expand geographically.

We have a significant number of full-time and private entrepreneurs located outside of the United States.

We expect that our international activities will continue to grow over the foreseeable future as we continue to pursue opportunities in existing and new international markets.

This will require significant management attention and financial resources.

We have a significant number of full-time employees and private entrepreneurs outside of the United States.

We expect that our international activities will continue to grow over the foreseeable future as we continue to pursue opportunities in existing and new

international markets.

This will require signific ant management attention and financial resources.

We may face difficulties, including:

(1) costs associated with developing software and providing support in many languages, (2) varying seasonality patterns, (3) potential adverse movement of currency exchange rates, (4) longer payment cycles and difficulties in collecting accounts receivable, (5) tariffs and trade barriers, (6) a variety of regulatory or contractual limitations on our ability to operate, (7) adverse tax events, (8) reduced protection of intellectual property rights, (9) a geographically and culturally diverse workforce and customer base, and (10) travel restrictions associated with the COVID-19 pandemic.

Failure to overcome any of these difficulties could negatively affect our results of operations.

(1) costs associated with developing software and providing support in many languages, (2) varying seasonality patterns, (3) potential adverse movement of currency excha nge rates, (4) longer payment cycles and difficulties in collecting accounts receivable, (5) tariffs and trade barriers, (6) a variety of regulatory or contractual limitations on our ability to operate, (7) adverse tax events, (8) reduced protection of int ellectual property rights, (9) a geographically and culturally diverse workforce and customer base, and (10) travel restrictions associated with the COVID-19 pandemic.

Failure to overcome any of these difficulties could negatively affect our results of ope rations.

Our current international operations and future initiatives involve a variety of risks, including:

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We continue to await guidance from the tax authorities on some of the changes that will affect us.

Such future guidance could result in significant one-time

charges in the c urrent or future taxable years and could increase our future U.S.

Such future guidance could result in significant one-time charges in the current or future taxable years and could increase our future U.S.

The impact of this tax reform on holders of our Series 1 common stock is uncertain and could be adverse.

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These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations, including by license, a license exception or other appropriate government authorizations.

Furthermore, our activities are subject to the U.S.

Furthermore, our activities are subject to U.S.

economic sanctions laws and regulations that prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S.

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however, no assurance can be given that our partners will comply with such requirements.

Various countries regulate the import and export of certain encryption and other technology, including import and export licensing requirements.

Some countries have enacted laws that could limit our ability to distribute our platform or could limit our customers’ ability to implement our platform in those countries.

Changes in our platform or future changes in export and import regulations may create delays in the introduction of our platform in international markets, prevent our customers with international operations from launching our platform globally or, in some cases, prevent the export or import of our platform to certain countries, governments, or persons altogether.

Various governmental agencies have proposed additional regulation of encryption technology, including the escrow and government recovery of private encryption keys.

Various countries regula te the import and export of certain encryption and other technology, including import and export licensing requirements.

Some countries have enacted laws that could limit our ability to distribute our platform or could limit our customers’ ability to imple ment our platform in those countries.

Changes in our platform or future changes in export and import regulations may create delays in the introduction of our platform in international markets, prevent our customers with international operations from launch ing our platform globally or, in some cases, prevent the export or import of our platform to certain countries, governments, or persons altogether.

Various governmental agencies have proposed additional regulation of encryption technology, including the es crow and government recovery of private encryption keys.

Any change in export or import regulations, economic sanctions, or related legislation, or change in the countries, governments, persons, or technologies targeted by such regulations, could limit our ability to export or sell our platform to existing or potential customers with international operations.

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In addition, an increasing portion of our operating expenses is incurred and an increasing portion of our assets is held outside the United States.

These operating expenses and assets are denominated in foreign currencies and are subject to fluctuations due to changes in foreign

currency exchange rates.

These operating expenses and assets are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates.

If we are not able to successfully hedge against the risks associated with currency fluctuations, our operating results could be adversely affected.

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These matters are complex and involve subjective assumptions, estimates, and judgments by our management.

Changes in GAAP, these accounting pronouncements or their interpretation or changes in underlying assumptions, estimates, or judgments by our management, the Financial Accounting Standards Board (“FASB”), the Securities and Exchange Commission (the “SEC”), and others could significantly change our reported or expected financial performance, which could impact the market price for our Series 1 common stock.

significantly change our reported or expected financial performance, which could impact the market price for our Series 1 common stock.

The terms of the agreements governing our indebtedness restrict, and any future indebtedness would likely restrict, our operations.

Our Amended and Restated Credit Facility (our “Credit Facility”) with Silicon Valley Bank (“SVB”) contains, and any future indebtedness would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to take actions that may be in our best interests.

Our Credit Facility requires us to satisfy specified financial covenants.

Our ability to meet those financial covenants can be affected by events beyond our control, and we may not be able to continue to meet those covenants.

A breach of any of these covenants or the occurrence of other events specified in the Credit Facility.

Upon the occurrence of an event of default, SVB could elect to declare all amounts outstanding under the Credit Facility to be immediately due and payable and terminate all commitments to extend further credit.

If we were unable to repay those amounts, SVB could proceed against the collateral granted to them to secure such indebtedness.

We have pledged substantially all of our assets, including our intellectual property, as collateral under the Credit Facility.

Our Second Amended and Restated Loan and Security Agreement (our “Credit Facility”), which we amended and restated in February 2020 and further amended in September 2020 (our “A&R Credit Facility”), with Silicon Valley Bank (“SVB”) contains, and any future indebtedness would likely contain, a number of covenants, including financial covenants, that impose operating and financial restrictions on us, including restrictions on our ability to take actions that may be in our best interests.

Our ability to remain in compliance with these covenants can be affected by events beyond our control, and we may not be able to continue to remain in compliance as a result.

A breach of any of these covenants or the occurrence of other events specified in the Credit Facility or in the agreements governing any future indebtedness could result in an event of default, leading to the acceleration of any outstanding amounts and terminating all commitments to extend further credit.

If that occurs, we would be forced to repay our outstanding indebtedness, reducing our cash on hand.

Any future debt arrangements with other creditors will include covenants that may be more restrictive than those contained in the A&R Credit Facility.

If SVB accelerates the repayment of borrowings, if any, we may not have sufficient funds to repay our existing debt.

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We may not be able to extend the term or obtain other debt financing on terms that are favorable to us, if at all.

If we are unable to obtain adequate financing

or financ ing on satisfactory terms when required, our ability to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.

If we are unable to obtain adequate financing or financing on satisfactory terms when required, our ability to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.

We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders.

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The market price of shares of our Series 1 common stock may be volatile, which could cause the value of your investment to decline.

The market price of our Series 1 common stock may be highly volatile and could be subject to wide fluctuations.

The market price of our Series 1 common stock has been highly volatile and could be subject to wide fluctuations.

Securities markets worldwide experience significant price and volume fluctuations.

The securities markets have experienced significant volatility as a result of the COVID-19 pandemic.

Market volatility, as well as general economic, market, or political conditions, could reduce the market price of shares of our Series 1 common stock regardless of our operating performance.

Market volatility, as well as general economic, market, or political conditions, including the U.S.

presidential election in 2020, could reduce the market price of shares of our Series 1 common stock regardless of our operating performance.

Our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including:

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In response, the market price of shares of our Series 1 common stock could decrease significantly.

You may be unable to resell your shares of Series 1 common stock at or above the initial public offering price.

Following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies.

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In addition, these stockholders will be able to exercise influence over all matters requiring stockholder approval, including the election of directors and approval of corporate transactions, such as a merger or other sale of our company or its assets.

This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change in control would benefit our other stockholders.

business combination involving us, or discouraging a potential acquirer from making a tender offer or o therwise attempting to obtain control, even if that change in control would benefit our other stockholders.

We have no current plans to pay cash dividends on our Series 1 common stock;

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Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty, such as the current global economic uncertainty being experienced as a result of the COVID-19 pandemic.

If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our Series 1

common stock may decline as well.

Even if we do issue public guidance, there can be no assurance that we will continue to do so in the futu re.

We incur increased costs and are subject to additional regulations and requirements as a result of becoming a public company.

This could lower our profits or make it more difficult to run our business.

As a public company, we incur significant legal, accounting, and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements.

We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), and related rules implemented by the SEC and Nasdaq.

The expenses generally incurred by public companies for reporting and corporate governance purposes have been increasing.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly.

We are currently unable to estimate these costs with any certainty.

These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance.

We may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees, or as our executive officers.

If we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Series 1 common stock, fines, sanctions, and other regulatory action and potentially civil litigation.

Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act, the requirements of the Sarbanes-Oxley Act and the requirements of Nasdaq, may strain our resources, increase our costs and distract manag ement, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we are subject to laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act, related regulations of the SEC and the requirements of Nasdaq, which we were not required to comply as a private company.

As a newly public company, complying with these statutes, regulations and requirements occupies a significant amount of time of our board of directors and management and significantly increases our costs and expenses.

For example, we have had to institute a more comprehensive compliance function, comply with rules promulgated by Nasdaq, prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws, establish new internal policies, such as those relating to insider trading.

We have also had to retain and rely on outside counsel and accountants to a greater degree in these activities.

In addition, being subject to these rules and regulations has made it more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors, or as executive officers.

We are an “emerging growth company.” The reduced public company reporting requirements applicable to emerging growth companies may make our Series 1 common stock less attractive to investors.

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These provisions include:

(1) presenting only two years of audited financial statements, (2) presenting only two years of related selected financial data and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure, (3) an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404 of Sarbanes-Oxley, (4) not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, (5) reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, registration statements, and proxy statements, and (6) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

any golden parachute payments not previously approved.

As a result, the information we provide will be different than the information that is available with respect to other public companies that are not emerging growth companies.

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We will remain an emerging growth company until the earliest of:

(1) the end of fiscal 2025, (2) the first fiscal year after our annual gross revenue exceed $1.07 billion, (3) the date on which we have, during the immediately preceding three-year period, issued more than $1.0 billion in non-convertible debt securities, and (4) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year.

(1) December 31, 2025, (2) the first fiscal year after our annual gross revenue exceed $1.07 billion, (3) the date on which we have, during the immediately preceding three-year period, issued more than $1.0 billion in non-convertible debt securities, and (4) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Series 1 common stock may decline.

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

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial

condition or results of operations.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a materi al weakness or significant deficiency in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Series 1 common stock could decline.

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

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Series 1 common stock could decline.

We could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

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Any Series 1 common stock that we issue, including under our 2013 Plan and 2020 Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchased Series 1 common stock in our initial public offering.

If we or the pre-IPO investors sell additional shares of our Series 1 common stock, the market price of our Series 1 common stock could decline.

If we, our officers, directors, or the pre-IPO investors sell additional shares of our Series 1 common stock, the market price of our Series 1 common stock could decline.

The sale of substantial amounts of shares of our Series 1 common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Series 1 common stock.

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

As of September 7, 2020, we had a total of 62,563,651 shares of our Series 1 common stock outstanding and an additional 360,009 shares of our Series 1 common stock issuable upon the full exercise of our outstanding warrants.

As of September 30, 2020, we had a total of 62,756,186 shares of our Series 1 common stock outstanding.

Of the outstanding 62,756,186 shares of Series 1 common stock, the 10,372,500 shares sold in our initial public offering are freely tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described in “Shares Eligible for Future Sale.”

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We, our officers, directors, and certain pre-IPO investors that collectively will own substantially all of such shares of Series 1 common stock (including shares issuable on exchange of Series 2 common stock) following this offering have signed lock-up agreements with the underwriters or are subject to comparable lock-up restrictions.

Subject to certain customary exceptions, these agreements restrict the sale of the shares of our Series 1 common stock held for 180 days following the date of our Prospectus.

These agreements restrict the sale of the shares of our Series 1 common stock for a period of time following our initial public offering.

Morgan Stanley & Co.

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Upon the expiration of the lock-up agreements, all of such shares of Series 1 common stock will be eligible for resale in a public market, subject, in the case of shares held by our affiliates, to volume, manner of sale, and other limitations under Rule 144.

Commencing 180 days following our initial public offering, certain pre-IPO investors will have the right, subject to certain exceptions and conditions, to require us to register their shares of Series 1 common stock under the Securities Act, and they will have the right to participate in future registrations of securities by us.

Commencing on February 1, 2021, certain pre-IPO investors will have the right, subject to certain exceptions and conditions, to require us to register their shares of Series 1 common stock under the Securities Act, and they will have the right to participate in future registrations of securities by us.

Registration of any of these outstanding shares of Series 1 common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement.

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the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our governing body.

These provisions of our amended and restated cert ificate of incorporation and amended and restated bylaws could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our Series 1 common stock in the future, which could reduce the market price of our Series 1 common stock.

These provisions of our amended and restated certificate of incorporation and amended and restated bylaws could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our Series 1 common stock in the future, which could reduce the market price of our Series 1 common stock.

For more information, see “Description of Capital Stock.”

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If so, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

U nregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Equity Securities

During the quarter ended September 30, 2020, we issued an aggregate of 415,000 shares of our common stock upon the exercise of stock options under our 2020 Plan at exercise prices ranging from $0.39 to $3.87 per share, for aggregate proceeds of $534,000.

During the quarter ended September 30, 2020, we granted an aggregate of 147,000 restricted stock units to officers and employees under our 2020 plan, for aggregate proceeds of $0.

During the quarter ended September 30, 2020, we issued 5,249,534 shares in connection with exercises of conversion and purchase rights under the 2017 Convertible Term Loan and the 2020 Convertible Term Loan.

On August 4, 2020, SVB exercised its conversion and purchase rights under the 2017 Convertible Term Loan to convert $10 million of the unpaid and repaid principal under the 2017 Convertible Term Loan into 1,089,680 shares of Series 1 common stock.

The conversion and purchase price was $9.177 per share after taking into account our one-for-three reverse stock split.

On August 4, 2020, SVB also exercised its conversion right under the 2020 Convertible Term Loan to convert $17.5 million of the unpaid principal under the 2020 Convertible Term Loan into 1,535,087 of Series 1 common stock.

The conversion and purchase price was $11.40 per share after taking into account our one-for-three reverse stock split.

On August 4, West River Mezzanine Loans – Loan Pool V, LLC exercised its conversion and purchase rights under the 2017 Convertible Term Loan to convert $10 million of the unpaid and repaid principal under the 2017 Convertible Term Loan into 1,089,680 shares of Series 1 common stock.

The conversion and purchase price was $9.177 per share after taking into account our one-for-three reverse stock split.

On August 4, 2020, WestRiver Innovation Lending Fund VIII, LP also exercised its conversion right under the 2020 Convertible Term Loan to convert $17.5 million of the unpaid principal under the 2020 Convertible Term Loan into 1,535,087 of Series 1 common stock.

The conversion and purchase price was $11.40 per share after taking into account our one-for-three reverse stock split.

During the quarter ended September 30, 2020, we issued 285,737 shares upon the cashless exercise of warrants that were originally issued on dates ranging from July 2013 through October 2014.

On August 7, 2020, SVB exercised its right under certain warrants to purchase 136,082 shares of our Series 1 common stock at prices ranging from $1.65 to $5.55 per share.

As a result of the cashless exercise, we issued 130,208 shares of our Series 1 common stock and withheld issuing 5,874 shares of our Series 1 common stock in satisfaction of the exercise price under the warrants.

On August 22, 2020, West River Innovation Lending Fund VIII, LP exercised its right under certain warrants to purchase 49,782 shares of our Series 1 common stock at $9.21 per share.

As a result of the cashless exercise, we issued 43,693 shares of our Series 1 common stock and withheld issuing 6,089 shares of our Series 1 common stock in satisfaction of the exercise price under the warrants.

On August 22, 2020, West River Mezzanine Loans – Loan Pool V, LLC exercised its right under certain warrants to purchase 118,749 shares of our Series 1 common stock at prices ranging from $2.55 to $5.55 per share.

As a result of the cashless exercise, we issued 111,836 shares of our Series 1 common stock and withheld issuing 6,913 shares of our Series 1 common stock in satisfaction of the exercise price under the warrants.

We did not receive any proceeds from the exercise of the warrants.

The issuances of the securities described above were deemed to be exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering, Regulation S of the Securities Act or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions pursuant to compensation benefits plans and contracts relating to compensation.

Use of Proceeds

On August 4, 2020, we completed our initial public offering (IPO), in which we issued and sold 7,877,500 shares of our Series 1 common stock, including 1,027,500 shares of Series 1 common stock that were sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares of Series 1 common stock at $24.00 per share.

The IPO resulted in net proceeds of $171.1 million after deducting underwriting discounts, commissions and other offering costs.

Existing stockholders sold an additional 2,495,000 shares of Series 1 common stock, including 325,435 shares of Series 1 common stock that were sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares of Series 1 common stock at $24.00 per share.

We did not receive any proceeds from the sale of shares by the selling stockholders in the IPO.

There have been no material changes in the planned use of proceeds from our IPO fr om that described in the P rospectus except as set forth in the following sentence.

The Series F Dividend was finally calculated to be $12.8 million and was paid on or about August 12, 2020 .

Defaults Upon Senior Securities

Mine Safety Disclosures

Not applicable.

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-Q

Item 1A. Risk Factors