What changed in this filing

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Item 1A. Risk Factors

2024-11-12 compared with 2024-05-09 · 106 added, 82 removed, 379 unchanged (33% of the section changed)

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Because we recognize revenue when we have satisfied performance obligations to customers in connection with our sales contracts, most of our revenue each quarter results from recognition of deferred revenue related to agreements entered into during previous quarters.

Consequently, declines in new or renewed subscription agreements and maintenance agreements that occur in one quarter will largely be felt in future quarters, both because we may be unable to generate sufficient new revenue to offset the decline and because we may be unable to adjust our operating costs and capital expenditures to align

with the changes in revenue.

Consequently, declines in new or renewed subscription agreements and maintenance agreements

that occur in one quarter will largely be felt in future quarters, both because we may be unable to generate sufficient new revenue to offset the decline and because we may be unable to adjust our operating costs and capital expenditures to align with the changes in revenue.

In addition, our subscription model makes it more difficult for us to increase our revenue rapidly in any period, because revenue from new customers must be recognized over the applicable subscription term.

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Any of these developments may adversely affect our revenue, operating results and financial condition.

Furthermore, we maintain an allowance for doubtful accounts for estimated credit losses resulting from the inability of our customers to make required payments.

Furthermore, we maintain a provision for credit losses resulting from the inability of our customers to make required payments.

In such cases, we may be required to defer revenue recognition on sales to affected customers.

In the future, we may have to record additional reserves or write-offs, or defer revenue on sales transactions, which could negatively impact our financial results.

Our SaaS only business model is subject to certain risks.

Our SaaS business model is subject to certain risks.

Our business is highly dependent on our ability to continue to expand our SaaS business and cloud operations, including keeping pace with the market transition to SaaS solutions.

While we continue to drive new SaaS sales, at the same time we are working to migrate our remaining perpetual license clients to SaaS.

The expansion of our SaaS business and operations increases our reliance on our channel partners to grow our business.

If our channel partners choose to place greater emphasis on products of their own or those offered by our competitors, do not effectively market and sell our solutions, or fail to meet the needs of our customers, then our ability to grow our SaaS business and sell our SaaS solutions may be adversely affected.

Our SaaS transition and the terms, and timing of transactions in a given period can have a significant impact on our financial results in that period.

As our SaaS revenue continues to grow, we expect a greater amount of our revenue to be recognized over longer periods, in some cases several years, as compared to the way revenue is recognized for perpetual licenses.

This change in the pattern of recognition also means that increases or decreases in SaaS subscription activity impact the amount of revenue recognized in both current and future periods.

The duration of the term of new or renewal SaaS contracts can have a significant impact on our results in a given period.

As our SaaS transition continues and accelerates, our subscription renewal rates have and will become more important to our financial results.

If customers choose not to renew, or reduce, their subscriptions, our operating results and financial results will suffer.

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In addition, our business is subject to seasonal factors that may also cause our results to fluctuate from quarter to quarter.

If we are unable to properly manage our SaaS transition, or if the transition does not progress as expected, our business may suffer.

If we are unable to properly manage our SaaS transition, our business may suffer.

We cannot accurately predict subscription renewal rates and the impact these rates may have on our future revenue and operating results.

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Our lengthy sales cycles and the difficulty in predicting timing of sales or delays may impair our operating results.

The long sales cycle for our products may cause license and subscription revenue and operating results to vary significantly from period to period.

The long sales cycle for our products may cause license and SaaS revenue and operating results to vary significantly from period to period.

The sales cycle for our products can be six months or more and varies substantially from customer to customer.

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While software internally developed by enterprises represents indirect competition, we also compete directly with packaged application software vendors, including Genesys Telecommunications Laboratories, Inc., LivePerson, Inc., NICE Ltd., and Verint Systems Inc.

In addition, we face actual or potential competition from larger software companies such as Microsoft Corporation, Oracle Corporation, salesforce.com Inc., and ServiceNow, Inc., and similar companies that may attempt to sell customer engagement software to their installed base.

In addition, we face actual or potential competition from larger software companies such as Microsoft Corporation, Oracle Corporation, salesforce.com, Inc., ServiceNow, Inc., and similar companies that may attempt to sell customer engagement software to their installed base.

We believe that competition will continue to be fierce as current competitors increase the sophistication of their offerings and as new participants enter the market.

Many of our current and potential competitors have longer operating histories, larger customer bases, broader brand recognition, and significantly greater financial, marketing and other resources.

Many of our current and potential competitors have longer operating histories,

larger customer bases, broader brand recognition, and significantly greater financial, marketing and other resources.

With more established and better-financed competitors, these companies may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies, and make more attractive offers to businesses to induce them to use their products or services.

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We believe that our future success depends in part upon our ability to develop, maintain and expand strategic, long-term and profitable partnerships and reseller relationships.

If we are unable to do so for any reason, including as a result of any change in the leadership of our distribution partners, or if any existing or future distribution partners fail to successfully market, resell, implement or support our products for their customers, or if distribution partners represent multiple providers and devote

greater resources to market, resell, implement and support competing products and services, our future revenue growth could be impeded.

We sometimes rely on distribution partners to recommend our products to their customers.

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We generally recognize revenue upon the transfer of control of promised services to our customers in the amount that is commensurate with the consideration that we expect to receive in exchange for those services.

If an arrangement requires significant customization or implementation services from us, recognition of the associated license or subscription and service revenue could be delayed.

The timing of the commencement and completion of these services is subject to factors that may be beyond our control, as this process may require access to the customer’s facilities and coordination with the customer’s personnel after delivery of the software.

If an arrangement requires significant customization or implementation services from us, recognition of the associated subscription and service revenue could be delayed.

In addition, customers could cancel or delay product implementations.

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These risks in turn could cause our operating results and financial condition to suffer.

We derived 22% and 21% of our revenue from EMEA sales during the three and nine months ended March 31, 2024 respectively, which is consistent with the three and nine months ended March 31, 2023.

We derived 25% and 21% of our revenue from EMEA sales during the three months ended September 30, 2024 and 2023.

In addition to those discussed elsewhere in this section, our EMEA sales operations are subject to a number of specific risks, such as:

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● various trade restrictions and tax consequences;

● hostilities in various parts of the world, including the war in Ukraine and the conflict in the Middle East;

● hostilities in various parts of the world, such as the conflict between Russia and Ukraine and the evolving events in Israel and Gaza;

● reduced intellectual property protections in some countries.

Any of the above risks could adversely affect our international operations, reduce our revenue from customers outside of the United States or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects.

As of March 31, 2024, approximately 46% of our workforce was employed in India.

Of our employees in India, approximately 50% are allocated to research and development.

Although the movement of certain operations internationally was principally motivated by cost cutting, the continued management of these remote operations requires significant management attention and financial resources that could adversely affect our operating performance.

As of September 30, 2024, approximately 46% of our workforce was employed in India.

Of our employees in India, 51% are allocated to research and development.

Although the movement of certain operations internationally was principally motivated by cost cutting, the continued management of these remote operations requires significant management attention

and financial resources that could adversely affect our operating performance.

In addition, with the significant increase in the numbers of foreign businesses that have established operations in India, the competition to attract and retain employees there has increased significantly.

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Any damage to, or failure of, our systems, or those of our third-party data centers, could result in impairment of, or interruptions in, our service.

Impairment or interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rate and our ability to attract new customers.

Impairment or interruptions in our service may reduce our revenue, cause us to issue credits, pay penalties, or cause customers to terminate their subscriptions and adversely affect our renewal rate and our ability to attract new customers.

Our business will also be harmed if our customers and potential customers believe our cloud operations are unreliable.

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If a customer opts not to pay for premium disaster recovery, we will only assure that their data is available within 72 hours.

This delay could cause severe disruptions to our customers’

customers and may result in customer termination of our solutions.

This delay could cause severe disruptions to our customers’ customers and may result in customer termination of our solutions.

Our premium disaster recovery service provides for an alternative data center and a return to operations within one business day.

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If we were required to provide any of these in a material way, our results of operations would suffer.

If we are unable to increase the profitability of subscription revenue, if we experience significant customer attrition, or if we are required to delay recognition of revenue, our operating results could be adversely affected.

If we are unable to increase the profitability of SaaS revenue, if we experience significant customer attrition, or if we are required to delay recognition of revenue, our operating results could be adversely affected.

We have invested, and expect to continue to invest, substantial resources to expand, market, implement, and refine our cloud offerings.

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Our business model assumes that both customers and companies will increasingly elect to communicate through multiple channels, as well as demand integration of the online channels into the traditional telephone-based call center.

If any of these assumptions is incorrect or if customers and companies do not adopt digital technology in a timely manner, our business will be seriously harmed and our stock price will decline.

If any of these assumptions is incorrect

or if customers and companies do not adopt digital technology in a timely manner, our business will be seriously harmed and our stock price will decline.

We may be unable to respond to the rapid technological change and changing customer preferences in the online sales, marketing, customer service, and/or online consumer services industries and this may cause our business to suffer.

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We anticipate that we will continue to rely on such third-party software in the future.

Although we believe that there are commercially reasonable alternatives

to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace such software.

Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace such software.

In addition, integration of the software used in our platform with new third-party software may require significant work and require substantial investment of our time and resources.

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Third-party licenses may expose us to increased risks, including risks associated with the integration of new technology, the diversion of resources from the development of our own proprietary technology, and our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs.

In the event that we are not able to maintain our licenses to third-party software, or cannot obtain licenses to new software as needed, or in the event third-party software used in conjunction with our platform contains errors or defects, our business, operating results, and financial condition may be adversely affected.

In the event that we are not able to maintain our licenses to third-party software, or cannot obtain licenses to new software as needed, or in the event third-

party software used in conjunction with our platform contains errors or defects, our business, operating results, and financial condition may be adversely affected.

Our offshore product development, support and professional services may prove difficult to manage or may not allow us to realize our cost reduction goals, produce effective new solutions and provide professional services to drive growth.

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If we are not able to raise additional funds on terms acceptable to us, if and when needed, our ability to fund our operations, take advantage of opportunities, and develop or expand our business could be significantly limited.

Our reserves may be insufficient to cover receivables we are unable to collect.

Our provision may be insufficient to cover accounts receivable we are unable to collect.

We assume a certain level of credit risk with our customers in order to do business.

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In the past, we have experienced collection delays from certain customers, and we cannot predict whether we will continue to experience similar or more severe delays in the future.

Although we have established reserves to cover losses due to delays or inability to pay, there can be no assurance that such reserves will be sufficient to cover our losses.

Although we have established provision to cover losses due to delays or inability to pay, there can be no assurance that such reserves will be sufficient to cover our losses.

If losses due to delays or inability to pay are greater than our reserves, it could harm our business, operating results and financial condition.

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Our technology platforms enable representatives of our customers as well as individual service providers to communicate with consumers and other persons seeking information or advice on the Internet.

The law relating to the liability of online platform providers such as us for the activities of users of their online platforms is often challenged in the U.S.

The law relating to the liability of online

platform providers such as us for the activities of users of their online platforms is often challenged in the U.S.

and internationally.

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If our cybersecurity systems or the systems of our vendors, partners and suppliers are breached and unauthorized access is obtained to a customer’s data or our data or IT systems, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.

Security incidents have become more prevalent across industries and may occur on our systems.

Security incidents have become more prevalent across industries and the methods and techniques used by threat actors continue to evolve at a rapid pace.

These cyberattacks may occur on our systems and we may be unable to identify current attacks, anticipate these attacks or implement adequate security measures.

Our service involves the storage and transmission of customers’ proprietary information, and security incidents could expose us to a risk of loss of this information, loss of access, litigation and possible liability.

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While we have security measures in place that are designed to protect customer information and prevent data loss and other security breaches, these security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers (which may involve nation states and individuals sponsored by them), employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information, or our IT systems.

Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers’ data or our data or IT systems.

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

Employees or contractors have introduced vulnerabilities in, and enabled the exploitation of, our IT environments in the past and may do so in the future.

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Further, if unauthorized access or sabotage remains undetected for an extended period of time, the effects of such breach could be exacerbated.

In addition, our ability to defend against and mitigate cyberattacks depends in part on prioritization decisions that we and third parties upon whom we rely make to address vulnerabilities and security defects.

While we endeavor to address all identified vulnerabilities in our products, we must make determinations as to how we prioritize developing and deploying the respective fixes, and we may be unable to do so prior to an attack.

In addition, our customers may authorize third party access to their customer data located in our cloud environment.

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Any successful denial of service attack could result in a loss of customer confidence in the security of our platform and damage to our brand.

Our platform involves the storage and transmission of our customers’ information, which may include their business and financial data.

Our platform involves the storage and transmission of our customers’ information, which may including their business and financial data.

As a result, unauthorized access to customer data or security breaches could result in the loss, or unauthorized dissemination, of such data, which could seriously harm our or our customers’ businesses and reputations.

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Data Protection Commissioner) regarding the adequacy of the U.S.-EU Safe Harbor Framework, and the July 16, 2020 ECJ judgment in Case C-311/18 (Data Protection Commissioner v Facebook Ireland Limited and Maximillian Schrems) regarding the adequacy of the Privacy Shield Framework, both frameworks are no longer deemed to constitute a valid method of compliance with restrictions set forth in European law regarding the transfer of data outside of the EEA.

We are therefore required to rely on alternative mechanisms permitted under European law, such as consent and approved standard contractual clauses.

The standard contractual clauses approved by the European Commission for these purposes have recently been replaced and a significant repapering exercise is therefore required.

The UK is also currently consulting on its own updated version of the standard contractual clauses and the result of this may be that different standard contractual clauses are needed depending on the origin of the PII.

While we have sought to implement appropriate transfer mechanisms following the invalidation of the Safe Harbor and Privacy Shield frameworks, owing to the significant changes that are ongoing in this area, we may be unsuccessful in establishing legitimate means of transferring data from the EEA or UK to the U.S.

Moreover, further challenges may be raised against the transfer mechanisms that we have adopted which may require future adaptation.

The EJC also noted that standard contractual clauses (approved by the European Commission as an adequate personal data transfer mechanism) may not necessarily be relied upon in all circumstances.

In addition to other mechanisms, in limited circumstances we may rely on Privacy Shield certifications of third parties (for example, vendors and partners).

The European Commission and the United Kingdom’s Information Commissioner’s Office have published new standard contractual clauses that are required to be implemented.

Following issuance of a U.S.

Executive Order, a new framework, the EU-U.S.

Data Privacy Framework (“EU-U.S.

DPF”) was created as a successor to the Privacy Shield.

Following an adequacy decision issued by the European Commission on July 10, 2023, the DPF, along with a UK extension to the EU-U.S.

DPF that allows the transfer of personal data from the UK to the U.S.

(the “UK DPF Extension”), is available for companies as a lawful transfer mechanism for personal data transfers to the U.S.

from the EEA and UK.

The Swiss-U.S.

Data Privacy Framework (“Swiss-U.S.

DPF”) also has been established, but has not yet been granted an adequacy decision by the Swiss Federal Data Protection and Information Commissioner.

We have self-certified to the EU-U.S.

DPF, the UK DPF Extension, and the Swiss-U.S.

DPF already has been the subject of legal challenge, however, and more generally, these frameworks may be subject to legal challenges from privacy advocacy groups or others.

Additionally, the European Commission's adequacy decision regarding the DPF provides that the DPF will be subject to future reviews and may be subject to suspension,

amendment, repeal, or limitations in scope by the European Commission.

These developments regarding cross-border data transfers have created uncertainty and increased the risk around our international operations and may require us to review and amend the legal mechanisms by which we make or receive personal data transfers to the U.S.

and other jurisdictions.

We may, among other things, be required to implement additional contractual and technical safeguards for any personal data transferred out of the EEA, Switzerland, the United Kingdom or other regions which may increase compliance costs, lead to increased regulatory scrutiny or liability, may require additional contractual negotiations, and may adversely impact our business, financial condition and operating results.

We may also experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use our services due to the potential risk exposure to such customers as a result of the international legal developments.

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Our publication of our privacy policy and other public statements that provide promises and assurances about privacy and security can subject us to potential governmental action if they are found to be deceptive or misrepresentative of our practices.

Further, the costs of compliance with, and other burdens imposed by, such laws, regulations and policies that are applicable to us may limit the use and adoption of our products and solutions and could have a material adverse impact on our results of operations.

Further, t he costs of compliance with, and other burdens imposed by, such laws, regulations and policies that are applicable to us may limit the use and adoption of our products and solutions and could have a material adverse impact on our results of operations.

Privacy concerns and laws, evolving regulation of cloud computing and other domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business.

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

Although we have implemented contracts, diligence programs, policies and procedures designed to address compliance with applicable laws and regulations, there can be no assurance that our employees, contractors, partners, suppliers, data providers or agents will not violate such laws and regulations or our contracts, policies and procedures.

Additionally, public perception and standards related to the privacy of personal information can shift rapidly, in ways that may affect our reputation or influence regulators to enact regulations and laws that may limit our ability to provide certain products and services.

For example, numerous jurisdictions, including the EU, are considering laws and regulations that would impose additional data privacy and other compliance requirements on the use of AI and could require us to adjust or limit our product offerings in such jurisdictions.

In the U.S., California enacted the California Consumer Privacy Act (CCPA) on June 28, 2018, which went into effect on January 1, 2020.

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On November 3, 2020, California passed the California Privacy Rights Act (CPRA), which became effective on January 1, 2023 and amends and expands the CCPA, including the introduction of sensitive personal information as a new regulated dataset in California that is subject to new disclosure and purpose limitation requirements.

Additionally, the Virginia Consumer Data Protection Act (VCDPA) became effective on January 1, 2023, the Colorado Privacy Act and the Connecticut Data Privacy Act both become effective on July 1, 2023, and the Utah Consumer Privacy Act will become effective on December 31, 2023.

Additionally, by July 2024, additional states had enacted numerous comprehensive state data privacy laws, requiring businesses to evaluate each law individually for specific compliance requirements and consumer rights, including the following:

● The Virginia Consumer Data Protection Act (VCDPA) became effective on January 1, 2023;

● The Colorado Privacy Act and the Connecticut Data Privacy Act both become effective on July 1, 2023;

● The Utah Consumer Privacy Act became effective on December 31, 2023;

● Florida's Digital Bill of Rights, Oregon's Consumer Privacy Act, and Texas' Data Privacy and Security Act went into effect on July 1, 2024;

● Montana's Consumer Data Privacy Act will come into effect on October 1, 2024;

● Delaware’s Personal Data Privacy Act, Iowa’s Consumer Data Protection Act, Nebraska’s Online Data Privacy Act and New Hampshire’s Privacy Act will come into effect on January 1, 2025;

● New Jersey’s Privacy Act will come into effect on January 15, 2025;

● Tennessee’s Information Protection Act will come into effect on July 1, 2025;

● Minnesota’s Consumer Privacy Act will come into effect on July 31, 2025;

● Maryland’s Online Data Privacy Act will come into effect on October 1, 2025;

● Indiana’s Consumer Data Protection Act and Kentucky’s Consumer Data Protection Act will come into effect on January 1, 2026.

Furthermore, New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), which became effective March 2020 and requires companies with data relating to New Yorkers to adopt comprehensive cybersecurity programs.

Aspects of the CCPA, CPRA and other laws remain unclear and we may be required to modify our practices further in an effort to comply with them.

Aspects of the CCPA, CPRA and other states’ privacy laws remain unclear and we may be required to modify our practices further in an effort to comply with them.

These statutes may increase our compliance costs and potential liability.

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Moreover, as our customers face increased scrutiny for data privacy breaches, they may elect to transfer the risk to us through contractual provisions which may subject us to increasing levels of contractual liability for data privacy breaches.

Issues in the development and use of AI may result in reputational or competitive harm or liability.

We are integrating AI into several of our offerings, developed either by us or in collaboration with our strategic partner, OpenAI.

We anticipate significant growth in this area.

However, like many innovations, AI comes with risks and challenges that could impact its adoption and our business.

Potential issues include flawed algorithms or training methods, inadequate or biased datasets, and harmful or illegal content generated by AI systems.

Poor AI development or deployment practices could lead to incidents that hinder AI acceptance, cause harm, or result in our products not functioning as intended.

Human oversight may be necessary for certain outputs.

These challenges, along with other issues related to innovative technologies, could expose us to competitive harm, regulatory actions, legal liabilities (including under new AI regulations in the EU), and reputational damage.

Some AI applications raise ethical concerns or have broad societal impacts.

If our AI solutions lead to unintended consequences, misuse, or controversy due to their effects on human rights, privacy, employment, or other social, economic, or political issues, we may face reputational harm, negatively affecting our business and financial performance.

Anti-corruption, anti-bribery, and similar laws, and failure to comply with these laws, could subject us to criminal penalties or significant fines and harm our business and reputation.

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Any failure or perceived failure by us to comply with such requirements could have an adverse impact on our business.

We face risks related to pandemic and public health emergencies which could have a material adverse effect on our business, financial condition and results of operations.

Pandemics, such as the COVID-19 pandemic, and other public health emergencies, and preventative measures taken to contain or mitigate such crises have caused, and may in the future cause, business slowdown or shutdown in affected areas and significant disruption in the financial markets, both globally and in the United States.

These events have led to and could again lead to adverse impacts to our business, results of operations, financial conditions, and cash flows.

We cannot predict whether, and to what degree, our sales, operations and financial results could in the future be affected by the pandemic and preventative measures.

● Risks presented by pandemics and other public health emergencies include, but are not limited to:

the rate of information technology spending and the ability of our customers to purchase our offerings could be adversely impacted.

Further, the impact of a pandemic or public health emergency could delay prospective customers’ purchasing decisions and cause them to become less inclined to trade-up from existing solutions, impact customers’ pricing expectations for our offerings, lengthen payment terms, reduce the value or duration of their subscription contracts, or adversely impact renewal rates;

● increased cyber incidents during a pandemic or public health emergency and our increased reliance on a remote workforce could increase our exposure to potential cybersecurity breaches and attacks;

● our results of operations are subject to fluctuations in foreign currency exchange rates, which risks may be heightened due to increased volatility of foreign currency exchange rates as a result of a pandemic or public health emergency.

Further, our forecasted revenue, operating results and cash flows could vary materially from those we provide as guidance or from those anticipated by investors and analysts if the assumptions on which we base our financial projections are inaccurate as a result of the unpredictability of the impact that a pandemic or public health emergency will have on our businesses, our customers’ and partners’ businesses and the global markets and economy or we make changes to our licensing programs or payment terms in connection with a pandemic or public health emergency.

We cannot reasonably predict the ultimate impact of any pandemic or public health emergency, including the extent of any adverse impact on our business, results of operations and financial condition, which will depend on, among other things, the duration and spread of the pandemic or public health emergency, the impact of governmental regulations that have been, and may continue to be, imposed in response, the effectiveness of actions taken to contain or mitigate the outbreak, the availability, safety and efficacy of vaccines, including against emerging variants of the infectious disease, and global economic conditions.

Additionally, disruptions have in the past made it more challenging to compare our performance, including our revenue growth and overall profitability, across quarters and fiscal years, and could have this effect in the future.

To the extent a pandemic or public health emergency adversely affects our business, results of operations, financial conditions, and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section.

Changes to current accounting policies could have a significant effect on our reported financial results or the way in which we conduct our business.

Generally accepted accounting principles and the related accounting pronouncements, implementation guidelines and interpretations for some of our significant accounting policies are highly complex and require subjective judgments and assumptions.

Some of our more significant accounting policies that could be affected by changes in the accounting rules and the related implementation guidelines and interpretations include:

● recognition of revenue;

● contingencies and litigation;

● accounting for income taxes.

Changes in these or other rules, or scrutiny of our current accounting practices, or a determination that our judgments or assumptions in the application of these accounting principles were incorrect, could have a significant adverse effect on our reported operating results or the way in which we conduct our business.

Risks Related to Intellectual Property

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These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement.

The AI technology and features incorporated into our solution include new and evolving technologies that may present both legal and business risks.

Concerns relating to the responsible use of generative AI in our products and services may result in reputational and financial harm and liability and may cause us to incur costs to resolve such issues.

AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving legal and regulatory landscape.

The incorporation of AI-powered features into our products and services may subject us to new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications.

Intellectual property ownership and license rights, including copyright, surrounding AI technologies has not been fully addressed by federal or state laws or by U.S.

courts, and the manner in which we configure and use AI technologies may expose us to claims of copyright infringement or other intellectual property misappropriation.

It is possible that new laws and regulations will be adopted in the United States and in other countries, or that existing laws and regulations will be interpreted in ways that would affect the operation of our products and services and the way in which we use AI.

Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could harm our business, reputation, financial condition, and results of operations.

If we enable or offer solutions that draw controversy due to their perceived or actual impact on society, such as AI solutions that have unintended consequences or are controversial because of their impact on human rights, privacy, employment, or other social, economic, or political issues, or if we are unable to develop effective internal policies and frameworks relating to the responsible development and use of AI models and systems offered through our sales channels, we may experience brand or reputational harm, competitive harm or legal liability.

Compliance with government regulation in the area of AI ethics may also increase the cost of related research and development, and changes in AI-related regulation could disproportionately impact and disadvantage us and require us to change our business practices, which may negatively impact our financial results.

Our failure to address concerns relating to the responsible use of AI by us or others could undermine public confidence in AI and slow adoption of AI in our products and services or cause reputational harm.

Uncertainty around new and emerging AI applications such as generative AI content creation may require additional investment in the development of proprietary datasets, machine learning models and systems to test for accuracy, bias and other variables, which are often complex, may be costly and could impact our profit margin if we decide to expand generative AI into our product offerings.

We face risks related to pandemic and public health emergencies which could have a material adverse effect on our business, financial condition and results of operations .

These events have led to and could again lead to adverse impacts to our business, results of operations, financial conditions, and cash flows.

We cannot predict whether, and to what degree, our sales, operations and financial results could in the future be affected by the pandemic and preventative measures.

● Risks presented by pandemics and other public health emergencies include, but are not limited to:

the rate of information technology spending and the ability of our customers to purchase our offerings could be adversely impacted.

health emergency will have on our businesses, our customers’ and partners’ businesses and the global markets and economy or we make changes to our licensing programs or payment terms in connection with a pandemic or public health emergency.

General Risk Factors

Changes to current accounting policies could have a significant effect on our reported financial results or the way in which we conduct our business.

Some of our more significant accounting policies that could be affected by changes in the accounting rules and the related implementation guidelines and interpretations include:

● recognition of revenue;

● contingencies and litigation;

● accounting for income taxes.

Our stock price has demonstrated volatility and continued market conditions may cause declines or fluctuations.

The price at which our common stock trades has been and will likely continue to be highly volatile and show wide fluctuations due to factors such as the following:

● transition to a subscription revenue model;

● concerns related to liquidity of our stock;

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Our insiders who are significant stockholders have the ability to exercise significant control over matters requiring stockholder approval, including the election of our board of directors, and may have interests that conflict with those of other stockholders.

Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 33% of our outstanding capital stock as of March 31, 2024, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 29% as of such date.

Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 35% of our outstanding capital stock as of September 30, 2024, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 32% as of such date.

As a result of these concentrated holdings, Mr.

1 unchanged sentence

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