What changed in this filing

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Item 1A. Risk Factors

2025-08-07 compared with 2025-05-09 · 67 added, 73 removed, 941 unchanged (13% of the section changed)

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• The collection, storage, use, disclosure, and other processing of personal information is an area of increasing complexity and scrutiny.

• Our business has in the past been subject to the regulatory framework applicable to registered investment advisers, including regulation by the Securities and Exchange Commission (the “SEC”).

• Our business has in the past been subject to the regulatory framework applicable to registered investment advisers, including regulation by the SEC.

• Our bank partnership products may lead to regulatory risk and may increase our regulatory burden.

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If our relationship with Pathward terminates, or if Pathward were to suspend, limit, or cease its operations or loan origination activities for any reason, and we are unable to engage another originating bank partner on a timely basis or at all, our business, results of operations and financial condition would be materially and adversely affected.*

As of March 31, 2025, we relied on Pathward, N.A., or Pathward, to originate a substantial portion of our loan originations, with the remaining loans being originated directly by us under our lending and servicing licenses across 3 states in the United States.

In the three months ended March 31, 2025 and 2024, Pathward originated approximately 97% and 71% of aggregate personal loan originations, respectively.

Pathward retains a proportion of the loans they originate on their own balance sheet, and sells the remainder of the loans to us, which we in turn sell to institutional investors, sell to our warehouse trust special purpose entities, or retain on our balance sheet.

Our Pathward program agreement has an initial term of five years, which is scheduled to expire in August 2025.

As of June 30, 2025, we relied on Pathward, N.A., or Pathward, to originate a substantial portion of our loan originations, with the remaining loans being originated directly by us under our lending and servicing licenses across 3 states in the United States.

In the three months ended June 30, 2025 and 2024, Pathward originated approximately 97% and 98% of aggregate personal loan originations, respectively.

Our previous Pathward program agreement had an initial term of five years, which was scheduled to expire in August 2025.

The agreement would have automatically renewed for an additional two years following the initial five-year term, unless either party provided notice.

In February 2025, we notified Pathward of our desire to continue the relationship pursuant to certain revised terms.

As a result, we are currently in discussions with Pathward with respect to the terms of such new agreement that will replace the existing agreement upon its expiration in August 2025.

In February 2025, we notified Pathward of our desire to continue the relationship pursuant to certain revised terms and in August 2025, we entered into an amended and restated program agreement with Pathward, which replaced the prior agreement in its entirety and governs the ongoing terms of our relationship.

The amended and restated program agreement has an initial term of four years and will automatically renew for successive two-year periods following the initial four-year term, unless either party provides notice of its intent to not renew.

Under the current arrangement, Pathward retains a proportion of the loans they originate on their own balance sheet, and sells the remainder of the loans to us, which we in turn sell to institutional investors, sell to our warehouse trust special purpose entities, or retain on our balance sheet.

The amended and restated program agreement includes a post-closing provision requiring the parties to negotiate in good faith to determine whether Pathward will continue retaining loans they originate and to agree on the handling, transition, or disposition of Pathward's existing retained loan portfolio.

If the parties do not reach agreement within six months following the effective date of the amended and restated program agreement, Pathward will cease retaining new loans under the program as of that date.

There can be no assurance that the parties will reach agreement on a long-

term retention structure or that the transition of Pathward’s retention rights, if required, will not result in adverse operational, financial, or business-related impacts.

In addition, even during the term of our arrangement and for specified circumstances, Pathward could reduce the volume of loans that it chooses to originate and/or retain on its balance sheet.

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If our bank partnership arrangement with Pathward were to be suspended or limited, or if Pathward ceased their operations or otherwise terminated their relationship with us, our business, financial condition and results of operations would be adversely affected.

If we need to enter into alternative arrangements with a different bank to replace our existing arrangement, we may not be able to negotiate a comparable alternative arrangement in a timely manner or at all and transitioning loan

originations to a new bank may result in delays in the issuance of new loans.

In addition, if we are unable to enter into an alternative arrangement with a different bank to fully replace or supplement our relationship with Pathward, we would potentially need to obtain additional state licenses to enable us to originate loans directly in the states where Pathward originates loans, as well as comply with other state and federal laws, which would be costly and time consuming, and there can be no assurances that any such licenses could be obtained in a timely manner or at all.

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In particular, it is important that we continue to ensure that our members with loans remain loyal to us and we continue to extend loans to members who have successfully repaid their previous loans.

As of March 31, 2025 and 2024, members with repeat loans comprised 78% and 83%, respectively, of our Owned Principal Balance at End of Period.

As of June 30, 2025 and 2024, members with repeat loans comprised 77% and 82%, respectively, of our Owned Principal Balance at End of Period.

If our repeat loan rates decline, we may not realize consistent or improved operating results from our existing member base.

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We use estimates and assumptions in determining the fair value of our loans receivable held for investment and asset-backed notes.

Our Loans Receivable at Fair Value represented 86% of our total assets and our asset-backed notes represented 75% of our total liabilities as of March 31, 2025.

Our Loans Receivable at Fair Value represented 86% of our total assets and our asset-backed notes represented 79% of our total liabilities as of June 30, 2025.

The fair value of our loans receivable held for investment are determined using Level 3 inputs and the fair value of our asset-backed notes are determined using Level 2 inputs.

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Financial institutions and other funding sources provide us with the capital to fund a substantial portion of the principal amount of our loans to members and charge us interest on funds that we borrow.

In the event that the spread between the interest rate at which we lend to our members and the rate at which we borrow from our lenders decreases, our Net Revenue will decrease.

In the event that the spread between the interest rate at which we lend to our members and the rate at which we borrow from our lenders

decreases, our Net Revenue will decrease.

We have capped the APR for newly originated loans at 36% since August 2020.

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Market interest rate changes have had, and may continue to have, an adverse effect on our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as the imposition of tariffs and non-tariff trade barriers, inflation, recession, the state of the credit markets, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies.

Factors outside our control, including interest rate changes and widening credit spreads, have required, and may continue to require us to

make adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, which may in turn adversely affect our results of operations or lead to volatility in our Net Revenue.

Factors outside our control, including interest rate changes and widening credit spreads, have required, and may continue to require us to make adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, which may in turn adversely affect our results of operations or lead to volatility in our Net Revenue.

For example, elevated interest rates decrease the fair value of our loans receivable held for investment, which decreases Net Revenue, but also decreases the fair value of our asset-backed notes, which increases Net Revenue.

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Decreases in consumer demand for automobiles and declining values of vehicles securing outstanding secured personal loans would weaken collateral coverage for secured personal loans and increase the amount of loss in the event of default.

Significant increases in the inventory of used vehicles may also depress the prices at which repossessed vehicles may be sold or delay the timing of these sales.

Significant increases in the inventory of used

vehicles may also depress the prices at which repossessed vehicles may be sold or delay the timing of these sales.

Consequently, if a vehicle securing a secured personal loan is repossessed while the used car auction market is depressed, the sale proceeds for such vehicle may be lower than expected, resulting in higher than expected losses.

Our risk management efforts may not be effective, which may expose us to market risks that harm our results of operations.

We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, monitor, manage and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related risks, as well as regulatory and

operational risks related to our business, assets, and liabilities.

Our risk management policies, procedures and models may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified, or identify additional risks that arise in the future.

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Additionally, the use of A.I.

is relatively new and the regulatory framework is evolving and remains uncertain.

is relatively new and the regulatory

framework is evolving and remains uncertain.

Any negative regulatory or public scrutiny based upon this could adversely affect our business and reputation.

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In addition, our investment of resources to develop products and services may either be insufficient, result in expenses that are excessive considering revenue originated from these products and services, or may not be able to attract new members or retain existing members.

Failure to accurately predict demand or growth with respect to our products and services

could adversely impact our business, and these products and services may not become profitable, and even if they are profitable, operating margins of some new products may not be as high as the margins we have experienced historically or we may not be able to achieve target margins.

Failure to accurately predict demand or growth with respect to our products and services could adversely impact our business, and these products and services may not become profitable, and even if they are profitable, operating margins of some new products may not be as high as the margins we have experienced historically or we may not be able to achieve target margins.

We have previously invested resources to develop, launch and sustain our products and services and subsequently decided to discontinue certain of these products and services in order to strategically realign our resources.

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If there are changes in the laws affecting any of our products, or our marketing and servicing, or if we become subject to such investigations, enforcement actions and lawsuits, our financial condition and results of operations would be adversely affected.

Entry into new products, as well as into the banking business or new origination channels, such as bank partnerships, and other partnerships, could lead to negative publicity or draw additional scrutiny.

into new products, as well as into the banking business or new origination channels, such as bank partnerships, and other partnerships, could lead to negative publicity or draw additional scrutiny.

Harm to our reputation can also arise from many other sources, including employee or former employee misconduct, misconduct by outsourced service providers or other counterparties, failure by us or our partners to meet minimum standards of service and quality, and inadequate protection of member information and compliance failures and claims.

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For example, our employees are accessing our servers remotely through home or other networks to perform their job responsibilities and such security systems may be less secure than those used in our offices, which may subject us to increased security risks, including cybersecurity-related events, and expose us to risks of data or financial loss and associated disruptions to our business operations.

Techniques used in cybersecurity attacks to obtain unauthorized access, disable or sabotage information technology systems change frequently, as data breaches and other cybersecurity events have become increasingly commonplace, including as a result of the intensification of state-sponsored cybersecurity attacks during periods of geopolitical conflict, such as the ongoing conflicts in Ukraine and the Middle East.

Techniques used in cybersecurity attacks to obtain unauthorized access, disable or sabotage information technology systems change frequently, as

data breaches and other cybersecurity events have become increasingly commonplace, including as a result of the intensification of state-sponsored cybersecurity attacks during periods of geopolitical conflict, such as the ongoing conflicts in Ukraine and the Middle East.

We have seen, and will continue to see, industry-wide vulnerabilities, which could affect our or other parties’ systems.

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Our ability to deliver products and services, and otherwise operate our business and comply with applicable laws, depends on the efficient and uninterrupted operation of our computer systems and third-party data centers, as well as third-party providers.

Our computer systems, including those provided by third-party providers and partners, may encounter service interruptions at any time due to system or software failure, natural disasters,

severe weather conditions, health epidemics or pandemics, terrorist attacks, cyber-attacks, computer viruses, ransomware or other malware, physical or electronic break-ins, technical errors, insider threats, power outages or other events.

Our computer systems, including those provided by third-party providers and partners, may encounter service interruptions at any time due to system or software failure, natural disasters, severe weather conditions, health epidemics or pandemics, terrorist attacks, cyber-attacks, computer viruses, ransomware or other malware, physical or electronic break-ins, technical errors, insider threats, power outages or other events.

Any of these occurrences may interrupt the availability, or reduce or adversely affect the functionality of our websites, applications, products or services, including our ability to service our loans, process loan applications, and provide digital financial services to our members.

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Further, the concentration of our outstanding receivables in one or more states would have a disproportionate effect on us if governmental authorities in any of those states take action against us or take action affecting how we conduct our business.

As of March 31, 2025, 39.0%, 26.4%, 10.4%, 5.7% and 4.1% of our Owned Principal Balance at End of Period related to members from California, Texas, Florida, Illinois and New Jersey, respectively.

As of June 30, 2025, 37.1%, 25.9%, 10.8%, 5.8% and 4.1% of our Owned Principal Balance at End of Period related to members from California, Texas, Florida, Illinois and New Jersey, respectively.

If any of the events noted in these risk factors were to occur in or have a disproportionate impact in regions where we operate or plan to commence operations, it may negatively affect our business in many ways, including increased delinquencies and loan losses or a decrease in future originations.

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If we are unable to access certain third-party data used in our credit risk models, or our access to such data is limited through new regulation or otherwise, our ability to accurately evaluate potential members will be compromised, and we may be unable to effectively predict probable credit losses inherent in our loan portfolio, which would negatively impact our results of operations.

Third-party data sources, including credit bureau data and other alternative data sources, are aggregated by our risk engine to be used in our credit risk models to score applicants, make credit decisions, and in our verification processes to confirm member-reported information.

Third-party data sources, including credit bureau data and other alternative data sources, are

aggregated by our risk engine to be used in our credit risk models to score applicants, make credit decisions, and in our verification processes to confirm member-reported information.

If the information that we receive from third parties about a member is inaccurate or does not accurately reflect the member’s creditworthiness, this may cause us to provide loans to higher risk members than we intended through our underwriting process and/or inaccurately price the loans we make.

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For example, in some cases, information from third parties has a lag, such as credit reports that do not reflect delinquencies until the end of the month during which a borrower becomes 30 days delinquent, or where a customer may have lost his or her job in the course of applying or shortly after receiving a loan.

In the case of many buy-now-pay-later products available on the market, such products are often not reported to or by the credit

In the case of many buy-now-pay-later products available on the market, such products are often not reported to or by the credit bureaus.

Further, regulators may require banks and other lenders to not report certain negative performance data, such as medical debt, to the credit bureaus.

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For a further discussion of the risks applicable to our partnership with Pathward, see “Risk Factors—We currently rely on Pathward to originate a substantial portion of our loans.

If our relationship with Pathward terminates, or if Pathward were to suspend, limit, or cease its operations or loan origination activities for any reason, and

we are unable to engage another originating bank partner on a timely basis or at all, our business, results of operations and financial condition would be materially and adversely affected.”

Our mission to provide inclusive, affordable financial services that empower our members to build a better future may conflict with the short-term interests of our stockholders or may not provide the long-term benefits that we expect and may adversely impact our business operations, results of operations, and financial condition.

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Our international operations involve inherent risks which could result in harm to our business.

As of March 31, 2025, we had 1,515 employees in Mexico, including employees related to our two contact centers.

As of June 30, 2025, we had 1,494 employees in Mexico, including employees related to our two contact centers.

These employees provide certain English/Spanish bilingual support related to member-facing contact center activities, administrative and technology support of the contact centers and back-office support services.

In addition, we have a technology development center in India, where we had 203 employees as of March 31, 2025.

In addition, we have a technology development center in India, where we had 204 employees as of June 30, 2025.

We have also previously engaged vendors that utilized employees or contractors based outside of the U.S.

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If collections were insufficient to repay the amounts due under our securitizations and our revolving debt facilities, the applicable lenders, trustees and noteholders could seek remedies, including against the collateral pledged under such facilities.

Any of these events would negatively impact our liquidity, including our ability to

originate new loans, and require us to rely on alternative funding sources.

Any of these events would negatively impact our liquidity, including our ability to originate new loans, and require us to rely on alternative funding sources.

If we were unable to arrange new or alternative methods of financing on favorable terms, we might have to curtail the origination of loans, and we may be replaced by our back-up servicer or another successor servicer.

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Potential loan purchasers might reduce the premiums they are willing to pay, or even require a discount to principal balance, for the loans that they purchase during periods of economic slowdown or recession to compensate for any increased risks.

A reduction in the sale price of the loans we sell under any future whole loan sale program would likely result in a reduction in the fair value of our Loans Receivable at Fair Value, which would negatively impact our results of operations.

A reduction in the sale price of the loans we sell under any future whole loan

sale program would likely result in a reduction in the fair value of our Loans Receivable at Fair Value, which would negatively impact our results of operations.

Any sustained decline in demand for our loans or increase in delinquencies, defaults or foreclosures may reduce the price we receive on future loan sales below our loan origination cost.

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In addition, although in some cases a third party may have agreed to indemnify us for such costs, such indemnifying party may refuse or be unable to uphold its contractual obligations.

In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.

In other cases, our

insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.

Our credit risk models, A.I.

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It could also result in a default or early amortization event under certain of our debt facilities and reduce or terminate availability of debt financing to us to fund originations.

To the extent it is determined that any loan we make was not originated

in accordance with all applicable laws as we are required to represent under our securitization and other debt facilities and in loan sales to investors, we could be obligated to repurchase for cash or swap for qualifying assets, any such loan determined not to have been originated in compliance with legal requirements.

To the extent it is determined that any loan we make was not originated in accordance with all applicable laws as we are required to represent under our securitization and other debt facilities and in loan sales to investors, we could be obligated to repurchase for cash or swap for qualifying assets, any such loan determined not to have been originated in compliance with legal requirements.

We may not have adequate liquidity and resources to make such cash repurchases or swap for qualifying assets.

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If the CFPB decides to subject us to its supervisory process, it could significantly increase the level of regulatory scrutiny of our business practices.

Further, in June 2024, the CFPB finalized a rule requiring a nonbank entity to register with the CFPB if it receives a final public written order or judgment (including a consent order or stipulated order) from a federal, state or local government agency for violation of consumer protection laws, and in January 2023, the CFPB announced a proposed rule requiring a supervised nonbank to register if it uses certain contract terms and conditions that claim to waive or limit consumer rights and protections (including arbitration clauses).

Each of these registries has the potential to increase the operational costs and regulatory scrutiny of our business practices.

In addition, the Biden Administration previously announced a government-wide effort to eliminate “junk fees” which could subject our business practices to even further scrutiny.

The CFPB’s action on junk fees initially focused on fees associated with deposit products, such as “surprise” overdraft fees and not-sufficient-funds fees, but has since expanded.

Furthermore, what constitutes a “junk fee” remains unclear and both the CFPB and Federal Trade Commission have taken steps to increase scrutiny of fees.

The CFPB has called out other fees, such as pay-to-pay fees charged by debt collectors, and is actively soliciting consumer input on fee practices associated with other consumer financial products or services, signaling that the “junk fee” initiative is likely to continue to broaden in scope.

In December 2024, the CFPB issued an advance notice of proposed rulemaking ("ANPR") to request public comment on potential amendments to Regulation V, which implements the Fair Credit Reporting Act.

As described by the CFPB, the ANPR would address concerns regarding coerced debt, where individuals are manipulated into incurring debt without their consent, often within the context of abusive relationships, which can damage their credit scores and impact financial independence .

It is unclear whether or the extent to which the CFPB's positions on any of the proposed or recently finalized rules discussed above will change under the Trump administration and the extent to which the government’s focus on enforcement of federal consumer protection laws will change.

It is unclear whether or the extent to which the CFPB's position will change under the Trump administration and the extent to which the government’s focus on enforcement of federal consumer protection laws will change.

It is possible that the CFPB could promulgate rules and bring enforcement actions that materially impact our business.

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We use internet-based loan processes to obtain application information, distribute certain legally required notices to applicants and borrowers, and to obtain electronically signed loan documents in lieu of paper documents with wet borrower signatures obtained in person.

These processes may

entail greater risks than would paper-based loan origination processes, including risks regarding the sufficiency of notice for compliance with consumer protection laws, risks that borrowers may challenge the authenticity of their signature or of the loan documents, risks that a court of law may not enforce electronically signed loan documents and risks that, despite controls, unauthorized changes are made to the electronic loan documents.

These processes may entail greater risks than would paper-based loan origination processes, including risks regarding the sufficiency of notice for compliance with consumer protection laws, risks that borrowers may challenge the authenticity of their signature or of the loan documents, risks that a court of law may not enforce electronically signed loan documents and risks that, despite controls, unauthorized changes are made to the electronic loan documents.

If any of those factors were to cause any loans, or any of the terms of the loans, to be unenforceable against the borrowers, or impair our ability to service our loans, the value of our loan assets would decrease significantly to us and to our whole loan purchasers, securitization investors and warehouse lenders.

In addition to increased default rates and losses on our loans, this could lead to the loss of whole loan purchasers and securitization investors and trigger terminations and amortizations under our debt warehouse facilities, each of which would materially adversely impact our business.

In addition to increased default rates and losses on our loans, this could lead to the loss of whole loan purchasers and

securitization investors and trigger terminations and amortizations under our debt warehouse facilities, each of which would materially adversely impact our business.

The CFPB has broad authority to regulate consumer financial services, creating uncertainty as to how the agency’s actions or the actions of any other new agency could impact our business.*

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While historically, we have not been subject to CFPB supervisory authority, it is possible that we may become subject to additional regulatory scrutiny and compliance costs going forward through supervision by the CFPB.

In recent publications, the CFPB has indicated that the agency is significantly increasing its oversight and scrutiny over consumer finance and on April 25, 2022, the CFPB announced that it was invoking a previously unused legal provision to examine nonbank financial companies that it believes pose risk to consumers.

The CFPB may also request, through examination or investigation, reports concerning our organization, business conduct, markets and activities and if the CFPB were to determine that we were engaging in activities that pose risks to consumers, may conduct on-site examinations of our business on a periodic basis.

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The CFPB also may issue requests for public input in certain areas of concern that may lead to increased regulatory scrutiny on us, our products and consumer finance industry and impose restrictions on fees and charges, thereby impacting results of our business.

For example, in March 2022, it requested public input on fees for financial products and has indicated that it plans to ramp up enforcement actions against lenders that illegally charge credit card late-payment fees and may rewrite its rules that set thresholds for such fees.

Hello Digit, Inc.

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In connection with such consent order, Digit agreed to implement a redress and compliance plan to pay at least $68,145 in consumer redress to consumers who may have been harmed and paid a $2.7 million civil penalty to the CFPB in the third quarter of 2022.

Other federal or state regulators could launch similar investigations or join the CFPB in its investigation.

In addition, actions by the CFPB could result in requirements to alter or cease offering affected financial products and services, making them less attractive and restricting our ability to offer them.

The CFPB could also implement rules that restrict our effectiveness in servicing our financial products and services.

Future actions by the CFPB (or other regulators) against us or our competitors that discourage the use of our or their services or restrict our business activities could result in reputational harm and adversely affect our business.

If the CFPB changes regulations that were adopted in the past by other regulators and transferred to the CFPB by the Dodd-Frank Act, or modifies through supervision or enforcement past regulatory guidance or interprets existing regulations in a different or stricter manner than they have been interpreted in the past by us, the industry or other regulators, our compliance costs and litigation exposure could increase materially.

In addition, actions by regulatory bodies, including the CFPB, could result in requirements to alter or cease offering affected financial products and services, making them less attractive and restricting our ability to offer them.

Regulatory bodies could also implement rules that restrict our effectiveness in servicing our financial products and services.

Future regulatory actions against us or our competitors that discourage the use of our or their services or restrict our business activities could result in reputational harm and adversely affect our business.

If the CFPB changes regulations that were adopted in the past by other regulators and transferred to the CFPB by the Dodd-Frank Act, or modifies through supervision or enforcement past regulatory guidance, or if the CFPB (or other regulators) interpret existing regulations in a different or stricter manner than they have been interpreted in the past by us, the industry or other regulators, our compliance costs and litigation exposure could increase materially.

It is also possible that regulators could promulgate rules and bring enforcement actions that materially impact our business and the business of our lending partners.

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The FTC, for example, released its updated Standards for Safeguarding Customer Information (Safeguards Rule), effective June 9, 2023, which raises the bar for covered financial institutions’ information security programs through proscriptive requirements for things like accountability and oversight, performing risk assessments, encryption, and enabling multi-factor authentication to protect all forms of customer information.

to consumers in a standardized electronic format through a consumer interface and limits collecting and maintaining data only as necessary to carry out transactions a consumer requests, prohibiting use of any information for targeted or behavioral advertising.

Further, on October 22, 2024, the CFPB finalized the Section 1033 Rule on Personal Financial Data Rights, which requires certain financial institutions, and any party who controls or possesses information concerning a covered financial product or service, to provide financial data to consumers in a standardized electronic format through a consumer interface and limits collecting and maintaining data only as necessary to carry out transactions a consumer requests, prohibiting use of any information for targeted or behavioral advertising.

The final rule has been challenged in the Eastern District Court of Kentucky.

On July 29, 2025, the Eastern District of Kentucky issued an Order granting the stay of litigation requested by the CFPB while it works to promulgate a new rule implementing Section 1033 of Dodd-Frank.

At this time the substance of the new rule is unknown and it is possible it could adversely affect our business.

federal government also is contemplating federal privacy legislation.

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For example, we’ve seen an increase in third-party arrangements, including, for example, with lead aggregators, bank partners, Lending as a Service partners and affiliate relationships.

Our failure, or any failure by third parties with whom we do business, to comply with applicable laws or regulations or contractual obligations required by our business partners relating to privacy, data protection, or cybersecurity, and even a perceived failure, could damage our reputation, harm our ability to obtain market adoption, discourage existing and prospective members from using our products and services, require us to change our business practices, business partners or operational structure, or result in investigations, claims, or fines by governmental agencies and private plaintiffs, and other liabilities.

Our failure, or any failure by

third parties with whom we do business, to comply with applicable laws or regulations or contractual obligations required by our business partners relating to privacy, data protection, or cybersecurity, and even a perceived failure, could damage our reputation, harm our ability to obtain market adoption, discourage existing and prospective members from using our products and services, require us to change our business practices, business partners or operational structure, or result in investigations, claims, or fines by governmental agencies and private plaintiffs, and other liabilities.

Even in the absence of a challenge to our practices, we may incur substantial costs to implement new systems to comply with regulatory requirements, such as consumer requests concerning the processing of their personal information and to honor any choices that may be available to them by law.

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and foreign regulations governing the export and import of goods, software and technology.

If we fail to comply with these laws and regulations, we and certain of our employees could be subject to significant sanctions, fines, penalties and reputational harm.

If we fail to comply with these laws and regulations, we and certain of our employees could be subject to significant sanctions, fines,

penalties and reputational harm.

Further, any change in applicable export, import or economic sanctions regulations or related legislation, shift in approach to the enforcement or scope of existing regulations or change in the countries, persons or technologies targeted by these regulations could adversely affect our business.

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The issuance of shares of our Common Stock upon exercise of our outstanding warrants issued in connection with our Corporate Financing, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

As of March 31, 2025, the warrants to purchase 9,046,459 shares of our Common Stock issued in connection with our Corporate Financing, were outstanding and exercisable.

As of June 30, 2025, warrants to purchase 2,682,788 shares of our Common Stock issued in connection with our Corporate Financing, remain outstanding and exercisable.

The exercise price of these warrants is $0.01 per share.

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federal, state and local and non-U.S.

tax laws could increase our liability and adversely affect our after-tax profitability.

For example, in August 2022, the United States enacted the Inflation Reduction Act of 2022, which implemented, among other changes, a 15% alternative minimum tax on adjusted financial statement income for certain large companies and a 1% excise tax on certain stock buybacks.

In addition, many countries and the Organisation for Economic Co-operation and Development have reached an agreement to implement a 15% global minimum tax.

tax laws, including recently enacted U.S.

federal tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBB Act”), could increase our liability and adversely affect our after-tax profitability.

We are currently evaluating the full impact of the OBBB Act on us.

In addition, many countries and the Organisation for Economic Co-operation and Development have reached an agreement to implement a 15% global minimum tax (“Pillar Two”).

Such proposed changes, as well as regulations and legal decisions interpreting and applying these changes, may have significant impacts on our effective tax rate, cash tax expenses and net deferred taxes in the future.

As the legislation becomes effective in countries in which we do business, our taxes could increase and negatively impact our provision for income taxes.

Further, the U.S.

has withdrawn support for the initiative and has indicated that it may take action against countries with tax laws that disproportionately impact U.S.

businesses, which may result in retaliatory taxes or other retaliatory actions against U.S.

However, on June 28, 2025, the G7 released a joint statement that it had reached an understanding with the United States for a side-by-side system based on certain accepted principles, including that U.S.-parented groups, such as ours, would be exempt from certain provisions of Pillar Two.

We will continue to monitor legislative and regulatory developments to assess the potential impacts that Pillar Two and any retaliatory taxes or actions may have on our business, operating results and financial condition.

Additionally, U.S.

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As of December 31, 2024, the Company had federal and California research and development tax credit carryforwards of $21.9 million and $10.4 million, respectively.

The federal research and development tax credit expires beginning in 2041, and the California research and development tax credits are not subject to expiration.

The federal research and development tax credit carryforwards expire beginning in 2041, and the California research and development tax credit carryforwards are not subject to expiration.

Realization of these net operating loss and research and development tax credit carryforwards depends on future income, and there is a risk that some of our existing carryforwards could expire unused or may be unavailable to fully offset future income tax liabilities, which could adversely affect our results of operations.

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As a result of this legislation or other unforeseen reasons, we may not be able to utilize some or all of our net operating loss carryforwards and tax credits, even if we attain profitability.

In addition, under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in ownership by “5 percent shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development credits, to offset its post-change income or taxes may be limited.

In addition, under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in ownership by “5 percent shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development credit carryforwards, to offset its post-change income or taxes may be limited.

We may experience ownership changes in the future as a result of shifts in our stock ownership.

As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S.

As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other pre-change attributes to offset U.S.

federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

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They may also have interests that differ from yours, and they may vote in a way with which you disagree or which may be adverse to your interests.

This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our

stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified Board members.

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These provisions include the following:

• a classified Board with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board;

• our Board has the right to elect directors to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill Board vacancies;

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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