Item 1A. Risk Factors
ITEM
1A. RISK FACTORS
Our
business, financial condition and results of operations and the market price for our common stock are subject to numerous risks, many
of which are driven by factors that we cannot control or predict. An investment in our common stock involves a high degree of risk. You
should carefully consider the following information about these risks, together with the other information contained in this Annual Report
on Form 10-K, including the information regarding “Forward-Looking Statements” earlier in this Form 10-K immediately prior
to Part I, Item 1 and “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
before investing in our common stock. If any of the events anticipated by the risks described below occur, our results of operations
and financial condition could be adversely affected, which could result in a decline in the market price of our common stock, causing
you to lose all or part of your investment. Additional risks that we do not yet know of, or that we currently think are immaterial, may
also affect our business and results of operations.
9
Risks
Related to Our Common Stock
The
market price for our common stock has been volatile, and you may not be able to sell our stock at a favorable price, or at all.
You
should consider an investment in our common stock to be risky, and you should invest in our common stock and securities convertible into
our common stock only if you can withstand a complete loss and wide fluctuations in the market value of your investment. Some factors
that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors”
section and elsewhere are:
● Sale
of our common stock by our stockholders, executives, and directors;
● Volatility
in price and level of trading volumes of our shares of common stock;
● Our
ability to obtain financings to conduct and complete research and development activities
and other business activities;
● The
timing and success of introductions of new products and services by us or our competitors
or any other change in the competitive dynamics of our industry, including consolidation
among competitors;
● Our
ability to attract and retain new customers, clients, licensees, and resellers;
● Changes
in the development status of our products and services;
● Changes
in our capital structure, future issuances of securities, and sales of large blocks of common
stock by our stockholders;
● Our
cash position;
● Announcements
and events surrounding financing efforts, including debt and equity securities;
● Our
inability to enter into new markets or develop new products and services;
● Reputational
issues;
● Announcements
of acquisitions, partnerships, collaborations, joint ventures, new products and services,
capital commitments, or other events by us or our competitors;
● Changes
in industry conditions or perceptions;
● Our
ability to attract analysts to initiate research coverage and once obtained, having such
analysts issue research reports, recommendations and any changes in recommendations, price
targets, and withdrawals of coverage;
● Departures
and additions of key personnel;
● Disputes
and litigations related to intellectual properties, proprietary rights, and contractual obligations;
● Changes
in applicable laws, rules, regulations, or accounting practices and other dynamics; and
● Other
events or factors, many of which may be out of our control.
In
addition, if the market for stock of companies in our industry or industries related to our industry, or the stock market in general,
experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business,
financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose
us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
10
Substantial
sales of our common stock, or the perception that such sales might occur, could depress the market price of our common stock.
We
cannot predict whether future issuances of our common stock, or resale of shares in the open market, will decrease the market price of
our common stock. The consequence of any such issuances or resale of our common stock on our market price may be increased as a result
of the fact that our common stock is thinly, or infrequently, traded. The exercise of any outstanding options, or the vesting of any
restricted stock, that we may grant to directors, executive officers and other employees in the future, or the issuance of common stock
in connection with acquisitions and other issuances of our common stock, may decrease the market price of our common stock.
Holders
of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.
The
exercise or conversion of stock options, warrants, preferred stock, or convertible securities will dilute the ownership percentage of
our then existing stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability
to obtain additional capital. The holders of these securities may be expected to exercise or convert their securities when we are able
to obtain additional equity capital on terms more favorable than these securities. On September 13, 2021, our stockholders approved an
equity incentive plan authorized by our Board of Directors under which we may issue equity awards that may increase the number of outstanding
shares of common stock. In the future, we may grant additional stock options, warrants, preferred stock or convertible securities.
The
anti-dilutive rights of certain warrants could result in significant dilution to our existing stockholders and/or require us to issue
a substantially greater number of shares, which may adversely affect the market price of our common stock.
The
warrants to purchase 12,011,114 shares of our common stock issued to investors in a private placement transaction that closed on April
16, 2021, contain anti-dilution rights such that if we issue, or are deemed to have issued, common stock or common stock equivalents
at a price less than the then exercise price of those warrants, the exercise price of those warrants will automatically be reduced to
such lower value, and the number of shares of common stock issuable upon exercise thereafter will be adjusted proportionately, so that
the aggregate exercise price payable upon exercise of such warrants is the same prior to and after such reduction in exercise price.
As a result, the effect of the anti-dilution right may cause significant dilution to our other stockholders. All the 12,011,114 warrants
will expire on April 16, 2026.
The
warrants to purchase 8,332,439 shares of our common stock issuable upon exercise of warrants issued to the placement agent in the private
placement include a weighted average anti-dilution right in the event we issue any shares of common stock or equivalents with a value
less than the then exercise price. As a result, the effect of the anti-dilution right may cause significant dilution to our other stockholders.
The triggering of the anti-dilution rights in the warrants issued in the private placement may result in such securities being exercisable
for a reduced exercise price.
As
of September 30, 2025, no anti-dilution triggers had occurred.
Certain
warrants issued in 2021 inhibit our access to equity capital, if we should need it, which may limit our ability to grow and maintain
our competitiveness.
The
warrants we issued in the 2021 private placement described in Part II, Item 8, Financial Statements, Note 9 , contain various provisions including, but not limited to, various price reset and anti-dilution provisions
when new equity is issued in certain transactions including stock issued for cash at a price less than the $0.36 exercise price stated
in the 2021 private placement warrants. These provisions inhibit our access to cash for the issuance of common stock which may limit
our ability to compete in a very dynamic market through new investments in research and development or selling and marketing. We cannot
predict the financial impact of the issuance of the warrants on our financial statements, specifically our balance sheet. We also cannot
predict the financial impact of the various provisions included in the warrant agreements.
11
The
purchase agreement related to our 2021 private placement includes covenants that we must comply with, or we may suffer potential monetary
and other penalties.
The
securities purchase agreement we entered into in connection with the recent private placement contains certain customary covenants. If
we do not comply with these covenants, we will be in breach of our obligations under the securities purchase agreement, which may lead
to exercise by the investors of the remedies available to them under the securities purchase agreement, which may cause a material impact
upon our financial condition.
Our
common shares are thinly traded, and in the future may continue to be thinly traded, and you may be unable to sell your shares at or
near ask prices or at all, if you need to sell your shares to raise money or otherwise desire to liquidate such shares.
We
cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors,
including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and
others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons,
they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of
our shares until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when
trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect on its share price. We cannot give you any assurance
that a broader or more active public trading market for our common stock will develop or be sustained, or that even current trading levels
will be sustained. You may be unable to sell your common stock at or above your purchase price, if at all, which may result in substantial
losses to you. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may
disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously
in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer
that could better absorb those sales without adverse impact on its share price. As a consequence of this enhanced risk, more risk-averse
investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
Future
sales and issuances of our securities could result in additional dilution of the percentage ownership of our stockholders and could cause
our share price to fall.
We
expect that we will need significant additional capital in the future to continue our planned operations, including research and development,
increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To
the extent that we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution.
We may sell common stock, convertible securities or other equity securities in one or more transactions, at prices and in a manner that
we determine from time to time, in our discretion. If we sell common stock, convertible securities or other equity securities in more
than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our
existing stockholders, and new investors could gain rights superior to our existing stockholders.
12
Our
common stock is subject to restrictions on sales by broker-dealers and penny stock rules, which may be detrimental to investors.
Our
common stock is subject to Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which impose certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers
and “accredited investors” (as defined in Rule 501(a) of the Securities Act of 1933, as amended (the “Securities Act”)).
For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and receive the
purchaser’s written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to
sell our common stock and holders of our common stock to sell their shares of our common stock.
Additionally,
our common stock is subject to SEC regulations applicable to “penny stocks.” Penny stocks include any non-Nasdaq equity security
that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that, prior to any non-exempt
buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the penny stock market must be delivered
by a broker-dealer to the purchaser of such penny stock. This disclosure must include the amount of commissions payable and the current
price quotations for our common stock. The regulations also require that monthly statements be sent to holders of a penny stock that
disclose recent price information for the penny stock and information regarding the limited market for penny stocks. These requirements
adversely affect the market liquidity of our common stock.
Because
our common stock is quoted on the OTCQB instead of a national exchange, our investors may have difficulty selling their stock or may
experience negative volatility on the market price of our common stock.
Our
common stock is quoted on the OTCQB Market, operated by the OTC Markets Group. The OTCQB is often highly illiquid, in part because it
does not have a national quotation system by which potential investors can follow the market price of shares, except through information
received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility
for securities that trade on the OTCQB, as compared to a national exchange or quotation system. This volatility may be caused by a variety
of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and
ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market
price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market
price for our securities. Accordingly, our stockholders may not be able to realize a fair price for their shares when they determine
to sell them or may have to hold them for a substantial period of time until the liquidity of the market for our common stock improves.
Our
charter allows us to issue “blank check” preferred stock and establish its terms, conditions, rights, powers and preferences
without stockholder approval.
Pursuant
to our certificate of incorporation, our Board of Directors has the authority to issue up to 10 million shares of “ blank check ”
preferred stock and to determine the price, rights, preferences, privileges, and restrictions, including voting rights, of those shares
without any additional vote or action by our stockholders. Because our Board of Directors can designate the terms, conditions,
rights, powers, and preferences of the preferred stock without the vote of a majority of our stockholders, our stockholders will have
no control over what designations and preferences our preferred stock will have. The issuance of shares of preferred stock, or the rights
associated therewith, could cause substantial dilution to our existing stockholders. Additionally, the dilutive effect of any preferred
stock that we may issue may be exacerbated given the fact that such preferred stock may have voting rights, liquidation and/or other
rights or preferences that could provide the preferred stockholders with substantial voting control over us and/or give those holders
the power to prevent or cause a change in our control. As a result, the issuance of shares of preferred stock may cause the value of
our common stock to decrease.
13
We
have never paid or declared any dividends on our common stock.
We
do not anticipate paying dividends or distributions on our common stock. Any future dividends on our common stock
will be declared at the discretion of our Board of Directors and will depend on, among other things, our earnings, our financial requirements
for future operations and growth, and other facts as we may then deem appropriate. Since we do not anticipate paying cash dividends on
our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock.
If
securities or industry analysts do not initiate research coverage on us and, if initiated, fail to publish research or reports, or publish
unfavorable research or reports, about our business, our stock price and trading volume may decline.
The
trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us,
our business, our markets, and our competitors. We do not currently have any securities or industry analysts that have initiated research
coverage on our business. When any securities or industry analysts initiate research coverage on our business, we will not control
these analysts. If securities analysts do not cover our common stock, the lack of research or other coverage may adversely affect the
market price and decrease the trading volume of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade
our stock, or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If
one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market,
and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair
our ability to expand our business and attract new clients and customers to purchase our cybersecurity products and services.
The
sale of shares of our common stock by our directors and officers may adversely affect the market price for our common stock.
Sales
of significant amounts of shares of common stock by our officers and directors, or the prospect of such sales, could adversely affect
the market price of our common stock. Our management’s stock ownership may discourage a potential acquirer from making a tender
offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing
a premium over our stock’s market price.
The
ability of our executive officers and directors to control our business may limit or eliminate other stockholders’ ability to influence
corporate affairs.
As
of September 30, 2025, our Executive Leadership Team (“ELT”) and Directors owned approximately 46.4% of the Company’s total issued and outstanding
shares. Because of this voting control through share ownership by the ELT and Directors, these individuals, acting as
a group, have significant influence over corporate actions requiring a shareholder vote, including the selection of our Directors, who
in turn approve all executive officers, authorizing change-in-control transactions, amendments to our Articles of Incorporation, and
other significant corporate matters. The interests of our ELT and Directors may differ from the interests of other stockholders
with respect to the issuance of shares, business transactions with or sales to other companies, selection of future officers and directors
and other business decisions. The minority stockholders will have no way of overriding the decisions made by our ELT and
Directors acting as a group.
Risks
Related to Our Industry
Economic
uncertainty may pressure our customers to reduce their IT and cybersecurity spending.
Worsening
economic conditions, including inflation, recession, pandemic, or other changes in economic conditions, may cause lower IT spending and
adversely affect our results of operations. If demand for computing power, PCs, servers, and other computing devices declines, or consumer
or business spending for those products declines, our results of operations could be adversely affected. Our product distribution system
relies on our partner and network. The impact of economic conditions on our partners, such as the bankruptcy of one of our partners could
adversely affect our financial condition and results of operations.
Challenging
economic conditions also may impair the ability of our customers to pay for products and services they have purchased. As a result, allowances
for doubtful accounts and write-offs of accounts receivable may increase.
14
Current
global financial conditions have been characterized by increased volatility, which could negatively impact our business, prospects, liquidity
and financial condition.
Global
financial conditions continue to be marked by significant volatility, rising interest rates, inflationary pressures, and tightening credit
markets. These factors may negatively affect customer budgets, delay technology investments, and reduce demand for our cybersecurity
products and services. Market instability could also restrict our access to capital, increase borrowing costs, and limit our liquidity
or operational flexibility. In addition, periods of financial stress often coincide with heightened cybersecurity risks, as organizations
with constrained resources may defer security upgrades or reduce cyber defense spending. Sustained volatility or an extended economic
downturn could materially and adversely impact our business operations, financial performance, and long-term growth prospects.
Inflation
and geo-political events increase the risk that we are unable to achieve and maintain profitable operations.
A
disruption or failure of our systems, operations, or supply chain because of a major earthquake, weather event, cyberattack, terrorist
attack, pandemic, or other catastrophic event could cause delays in completing sales, providing services, or performing other critical
functions. A catastrophic event that results in the destruction or disruption of any of our critical business or systems, or the infrastructure
or systems they rely on, such as power grids, could harm our ability to conduct normal business operations or adversely affect our results
of operations. Providing our customers with more services and solutions in the cloud puts a premium on the resilience of our systems
and strength of our business continuity management plans and magnifies the potential negative consequences of prolonged service outages.
Abrupt
political change, terrorist activity, and armed conflict, such as the ongoing conflict in Ukraine, pose economic and other risks, which
may negatively impact our ability to sell to and collect from customers, increase our operating costs, or otherwise disrupt our operations
in markets both directly and indirectly impacted by such events. These conditions also may add uncertainty to the timing and budget for
technology investment decisions by our customers and may cause supply chain disruptions for hardware manufacturers. Geopolitical change
may result in changing regulatory systems and requirements and market interventions that could impact our operating strategies, access
to national, regional, and global markets, hiring, and profitability. Geopolitical instability may lead to sanctions and impact our ability
to do business in some markets or with some public-sector customers. Any of these changes could adversely affect our results of operations.
Changes in geopolitical conditions also increase the security risks described elsewhere in these risk factors.
The
occurrence of regional epidemics or a global pandemic, such as COVID-19, could adversely affect our business, operations, financial condition,
and results of operations. The extent to which global pandemics impact our business going forward will depend on factors such as the
duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact
on economic activity, including the possibility of recession or financial market instability. Measures to contain a global pandemic may
intensify other risks described in these Risk Factors.
Risks
Related to Our Financial Position and Need for Capital
We have
incurred net losses and may never achieve profitability.
Our
likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered
in connection with development of a new business enterprise. Our accumulated deficit as of September 30, 2025, was $20.7 million.
We
cannot assure our current stockholders or future investors that that any of our new products and services currently under development
will be successfully commercialized, and the extent of our future losses and the timing of any possible profitability, if ever achieved,
are highly uncertain. If we are unable to achieve profitability, we may, at any time, be unable to continue our operations.
Our
ability to continue as a going concern may depend upon our ability to raise additional capital and such capital may not be available
on acceptable terms, or at all.
We
currently believe that our available cash will allow us to fund our operations through at least December 2026. Nevertheless, we may need
to raise additional capital to fund operating losses, support future expansion, develop new or enhanced products and services, hire employees,
respond to competitive pressures, acquire technologies, or respond to unanticipated events or requirements before then. Our management’s
plans include attempting to improve our profitability and our ability to generate sufficient cash flow from operations to meet our operating
needs on a timely basis, obtaining additional working capital funds through equity and debt financing arrangements, and restructuring
on-going operations to eliminate inefficiencies and reduce our expenses. However, we are not assured that these plans and arrangements
will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements. The outcome of these actions cannot
be predicted at this time. There can be no assurance that any additional financings will be available to us on satisfactory terms and
conditions, if at all. If adequate funds are not available on acceptable terms, we may be unable to develop or enhance our products and
services, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, any of which could
have a material adverse effect on our business, financial condition and operating results. If we raise additional funds through the issuance
of equity securities, or convertible debt, the percentage ownership of our stockholders will be reduced, and holders may experience dilution
in net book value per share.
15
The
amount of capital we may need depends on many factors, including the progress, timing, scope and market acceptance of our product development
programs; the time and cost required to obtain any necessary regulatory approvals; the possibility of litigation; our ability to enter
into and maintain collaborative, licensing and other commercial relationships; and our ability to secure commitment of time and resources
from third parties to the development and commercialization of our products.
The
capital markets have been unpredictable for unprofitable companies such as ours. The amount of capital that we may be able to raise depends
on variables that are beyond our control. As a result, we may not be able to secure financing on terms acceptable to us, or at all. Even
if we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds
are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued
viability will be materially adversely affected.
If
we can raise additional funding, we may be required to do so on terms that are dilutive to our stockholders.
Our
future issuances of new equity will dilute the ownership percentage of our existing stockholders. The extent of such dilution will depend
on the number of shares issued. Neither the amount of funds that may be received in such equity financing, nor the price per share of
our equity securities issued are known at this time.
We
will continue to incur increased costs as a result of being a reporting company and, given our limited capital resources, such additional
costs may have an adverse impact on our profitability.
We
are a Securities Exchange Act of 1934 (the “Exchange Act”) reporting company, meaning that we report certain required
material financial information with the Securities and Exchange Commission (“SEC”). The rules and regulations under the
Exchange Act require reporting companies to provide periodic reports with interactive data files, which require that we engage
legal, accounting and auditing professionals, and XBRL (eXtensible Business Reporting Language) and EDGAR (Electronic Data
Gathering, Analysis, and Retrieval) service providers. The engagement of such services can be costly, and we may continue to incur
additional financial losses, which may adversely affect our ability to continue as a going concern. In addition, the Sarbanes Oxley
Act of 2002, as well as a variety of new related and unrelated rules implemented by the SEC, have required changes in corporate
governance practices and generally increased the disclosure requirements of public companies. For example, as a result of being a
reporting company, we are required to file periodic and current reports and other information with the SEC, and we are adopting and
revising policies regarding disclosure controls and procedures, including internal controls over financial reporting.
The
additional costs we continue to incur in connection with being a reporting company (expected to be approximately seven to eight hundred
thousand dollars per year) will continue to further stretch our limited capital resources. Due to our limited resources, we have to allocate
resources away from other productive uses in order to continue to comply with our obligations as an SEC reporting company. Further, there
is no guarantee that we will have sufficient resources to continue to meet our reporting and filing obligations with the SEC as they
come due.
We
may apply working capital and future funding to uses that ultimately do not improve our operating results or increase the market price
of our securities.
In
general, we have complete discretion over the use of our working capital and any new investment capital we may obtain in the future that
has no dedicated use of proceeds. Because of the number and variety of factors that could determine our use of funds, our ultimate expenditure
of funds (and their uses) may vary substantially from our current intended operating plan for such funds.
We
intend to use existing working capital and future funding to support the development of our products and services, the expansion of our
marketing, or the support of operations to educate the end users of the software we sell. We will also use capital for market and network
expansion, acquisitions, and general working capital purposes. However, we do not have more specific plans for the use and expenditure
of our capital. Our management has broad discretion to use any or all of our available capital reserves. Our capital could be applied
in ways that do not improve our operating results or otherwise increase the market value of a stockholder’s shares.
Risks
Related to our Business and Results of Operations
We
depend significantly upon the continued involvement of our present management and on our ability to attract and retain talented employees.
Our
future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services
of any of our key personnel, the inability to attract or retain qualified personnel, any failure to have in place and execute an effective
succession plan for key executives or delays in hiring required personnel, particularly in engineering, sales and marketing, may seriously
harm our business, financial condition and results of operations. From time to time, we experience turnover in our management-level personnel.
None of our key employees has an employment agreement for a specific term, and any of our employees may terminate their employment at
any time. Our ability to continue to attract and retain highly skilled personnel will be critical to our future success.
Competition
for highly skilled personnel is frequently intense, especially for qualified sales, support and engineering employees in cybersecurity
software and services and especially in the locations where we have a substantial presence and need for highly skilled personnel, such
as software engineers and advanced cybersecurity engineers. We may not be successful in attracting, assimilating or retaining qualified
personnel to fulfill our current or future needs. In addition, to the extent we hire personnel from competitors, we may be subject to
allegations that they have been improperly solicited or divulged proprietary or other confidential information. Changes in immigration
laws, including changes to the rules regarding H1-B visas, may also harm our ability to attract personnel from other countries. Our inability
to hire properly qualified and effective sales, support and engineering employees could harm our growth and our ability to effectively
support growth.
We
rely on third-party software for certain essential financial and operational services. Failure, outages or disruption in services,
systems and infrastructure supplied by third parties could negatively affect our business, financial condition and financial
results.
We
currently incorporate, and will in the future incorporate, technology that we license from third parties, including software, into our
solutions. We cannot be certain that our licensors will continue to be available to us or in the market in general. Some of our agreements
with our licensors may be terminated by them for convenience or otherwise provide for a limited term. If we are unable to continue to
license technology or if we are unable to continue our license agreements with our third-party licensors or enter into new licenses on
commercially reasonable terms, our ability to develop and sell solutions and services containing or dependent on that technology would
be limited, and our business could be harmed. Additionally, if we are unable to license technology from third parties, we may be forced
to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner or at all, and may require
us to use alternative technology of lower quality or performance standards. This could limit or delay our ability to offer new or competitive
solutions and increase our costs. As a result, our margins, market share, and results of operations could be significantly harmed.
16
We
previously identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If
not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial
reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations,
each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
Maintaining
effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce
reliable financial statements. Our disclosure controls and procedures and internal controls over financial reporting are currently ineffective
and have in the past been subject to material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual
or interim financial statements will not be prevented or detected on a timely basis. A control deficiency exists when the design or operation
of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis.
We
cannot assure you that additional material weaknesses will not arise in the future. The development of new material weaknesses in our
internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to
meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading
price of our common stock, and/or result in litigation against us or our management.
If
our estimates, assumptions, or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards
or interpretations change, our results of operations could be adversely affected.
If
we do not effectively manage our growth, our business resources and systems may become strained, and we may be unable to increase revenue
growth.
If
we do not effectively manage our growth, our operations, systems, and resources may become overextended, leading to inefficiencies and
diminished performance. Rapid expansion can strain our infrastructure, challenge internal controls, and limit management’s ability
to maintain operational discipline and quality standards. Inadequate integration of new customers, employees, or technologies could disrupt
service and software delivery. Additionally, failing to scale our systems or workforce in line with growth may prevent us from meeting
demand, containing costs, or achieving strategic objectives. Such challenges could materially and adversely affect our revenue growth,
operating results, and long-term competitiveness.
Our
sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.
Increased
market awareness of our capabilities and products and increased lead generation are essential to our continued growth and our success
in all our markets, particularly the market for sales to large businesses, service providers and government organizations. While we
have increased our investments in sales and marketing, it is not clear that these investments will continue to result in increased revenue.
If our investments in additional sales personnel or our marketing programs are not successful in continuing to create market awareness
of our company and products or increasing lead generation, in growing billings for our broad product suite or if we experience turnover
and disruption in our sales and marketing teams, we may not be able to achieve sustained growth, and our business, financial condition
and results of operations may be adversely affected.
If
we do not effectively expand and train our direct sales force, we may be unable to add new customers or retain and increase sales to
our existing customers, and our business will be adversely affected.
We
depend on our direct sales force to obtain new customers or retain and increase sales
with existing customers. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting,
training and retaining enough sales personnel, particularly in international markets. There is significant
competition for sales personnel with the skills and technical knowledge that we require. New hires require significant training and
may take significant time before they achieve full productivity, and this delay is accentuated by our long sales cycles. Our recent
hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers
of qualified individuals in the markets where we do business or plan to do business. In addition, a large percentage of our sales
force is new to our company and selling our solutions, and therefore this team may be less effective than our more seasoned sales
personnel. Furthermore, hiring sales personnel in new countries, or expanding our existing presence, requires upfront and ongoing
expenditures that we may not recover if the sales personnel fail to achieve full productivity. We cannot predict whether, or to what
extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. If
we are unable to hire and train enough effective sales personnel, or the sales personnel we hire are not successful in obtaining new
customers or increasing sales to our existing customer base, our business and results of operations will be adversely
affected.
Our
future revenue and operating results will depend significantly on our ability to retain clients and customers and the ability to add
new clients and customers. Any decline in our retention rates or failure to add new clients and customers will harm our business prospects
and operating results.
Our
future revenue and operating results depend significantly on our ability to retain existing clients and attract new ones. Competitive
pressures, evolving customer expectations, pricing dynamics, and changes in technology preferences could negatively affect our retention
rates and sales performance. If we fail to maintain strong client relationships, effectively demonstrate value, or expand our customer
base, our growth opportunities and recurring revenue streams may decline. Any sustained decrease in client retention or delays in acquiring
new customers could adversely affect our business prospects, financial performance, and overall market position.
Our
growth depends in part on the success of our strategic relationships with third parties.
Our
growth depends in part on the strength and success of our strategic relationships with third parties, including technology providers,
resellers, and service partners. If these partners fail to meet performance expectations, modify their business objectives, or terminate
agreements, our ability to deliver products and expand into new markets could be hindered. Dependence on third parties also limits our
control over key aspects of service delivery, pricing, and customer experience. Any disruptions, misalignments, or loss of these relationships
could negatively affect our revenue growth, market reach, and competitive position.
17
If
we experience a decline in billing, delays and/or defaults in payments, we could be unable to recover all expenditures, and our operating
margins may decline.
We
may experience slowing growth or a decrease in billings, revenue, operating margin and free cash flow for a number of reasons, including
a slowdown in pipeline growth or for demand for our products or services generally, a shift in demand from products to services, decrease
in services revenue growth, increased competition, execution challenges including sales execution challenges and lack of optimal sales
productivity, worldwide or regional economic challenges based on inflation or possible stagflation, a regional recession or a recession
in the global economy, changing interest rates, the war in Ukraine, a decrease in the growth of our overall market or softness in demand
in certain geographies or industry verticals, such as the service provider industry, changes in our strategic opportunities, execution
risks, lower sales productivity and our failure for any reason to continue to capitalize on sales and growth opportunities due to other
risks identified in the risk factors described in this periodic report. Our expenses as a percentage of total revenue may be higher than
expected if our revenue is lower than expected. If our investments in sales and marketing and other functional areas do not result in
expected billings and revenue growth, we may experience margin declines. In addition, we may not be able to sustain our historical profitability
levels in future periods if we fail to increase billings, revenue or deferred revenue, and do not appropriately manage our cost structure,
free cash flow, or encounter unanticipated liabilities. As a result, any failure by us to maintain profitability and margins and continue
our billings, revenue and free cash flow growth could cause the price of our common stock to materially decline.
We
face intense competition, especially from larger, well-established companies, and we may lack sufficient financial or other resources
to maintain or improve our competitive position. We may lose market share to our competitors, which could adversely affect our business,
financial condition, and results of operations.
The
market for network security products is intensely competitive and dynamic, and we expect competition to continue to intensify. We face
many competitors across the different cybersecurity markets. Our competitors include companies such as Check Point, Cisco, CrowdStrike,
F5 Networks, HPE, Huawei, Illumio, Juniper, Microsoft, Netskope, Palo Alto Networks, SonicWALL, Sophos, and zScaler. Some of our existing
and potential competitors enjoy competitive advantages such as: greater name recognition and/or longer operating histories; larger sales
and marketing budgets and resources; broader distribution and established relationships with distribution partners and end-customers;
access to larger customer bases; greater customer support resources; greater expertise in certain single point solutions; greater resources
to make acquisitions; stronger U.S. government relationships; lower labor and development costs; and substantially greater financial,
technical and other resources.
In
addition, certain of our larger competitors have broader product offerings, and leverage their relationships based on other products
or incorporate functionality into existing products in a manner that discourages customers from purchasing our products. These larger
competitors often have broader product lines and market focus and are in a better position to withstand any significant reduction in
capital spending by end-customers in these markets. Therefore, these competitors will not be as susceptible to downturns in a particular
market. Also, many of our smaller competitors that specialize in providing protection from a single type of security threat are often
able to deliver these specialized security products to the market more quickly than we can.
Conditions in our markets could change rapidly and significantly because of technological advancements or continuing market consolidation.
Our competitors and potential competitors may also be able to develop products or services, and leverage new business models, that are
equal or superior to ours, achieve greater market acceptance of their products and services, disrupt our markets, and increase sales
by utilizing different distribution channels than we do. For example, certain of our competitors are focusing on delivering security
services from the cloud which include cloud-based security providers, such as CrowdStrike and Zscaler. In addition, current or potential
competitors may be acquired by third parties with greater available resources, and new competitors may arise pursuant to acquisitions
of network security companies or divisions. As a result of such acquisitions, competition in our market may continue to increase and
our current or potential competitors might be able to adapt more quickly to new technologies and customer needs, devote greater resources
to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of acquisition
or other opportunities more readily, or develop and expand their product and service offerings more quickly than we do. In addition,
our competitors may bundle products and services competitive with ours with other products and services. Customers may accept these bundled
products and services rather than separately purchasing our products and services. As our customers refresh the security products bought
in prior years, they may seek to consolidate vendors, which may result in current customers choosing to purchase products from our competitors
on an ongoing basis. Due to budget constraints or economic downturns, organizations may be more willing to incrementally add solutions
to their existing network security infrastructure from competitors than to replace it with our solutions. These competitive pressures
in our market or our failure to compete effectively may result in price reductions, fewer customer orders, reduced revenue and gross
margins and loss of market share.
18
We
have limited experience with some of our pricing models, particularly for our newer products and solutions as well as bundled sales of
our products and solutions, and we may not accurately predict the long-term rate of paying customer adoption or renewal, or the impact
these will have on our revenue or results of operations.
We
have limited experience with some of our pricing models, especially for newer or bundled offerings, and may not accurately predict their
long-term performance or customer adoption. Changes in customer usage, market expectations, or competitive dynamics could lead to revenue
fluctuations or lower-than-expected renewals. Inflexible billing systems, evolving consumption patterns, or misaligned pricing structures
may also impact our ability to forecast growth or maintain profitability. If we fail to optimize or correctly anticipate the financial
impact of our pricing strategies, our revenue stability and operating results could be materially affected.
Competitive
pricing pressure may reduce our gross profits and adversely affect our financial results.
The
cybersecurity market is highly competitive, and pricing pressure from both established and emerging competitors may reduce our gross
profit margins. Many providers are lowering prices to gain market share or appeal to budget-conscious customers, which can erode profitability
across the industry. As customers increasingly evaluate offerings based on cost and perceived value, we may be required to adjust our
pricing or offer additional incentives to remain competitive. If we cannot effectively differentiate our solutions or maintain pricing
discipline while preserving quality, our revenue, gross margins, and overall financial results could be adversely affected.
Our
largest revenue stream is providing consulting services. If we are unable to attract and retain qualified personnel, our business could
be harmed.
Our
consulting services represent a significant source of revenue, and our success depends on attracting, developing, and retaining highly
qualified professionals. The cybersecurity industry faces a well-documented shortage of skilled talent, driving intense competition for
experienced consultants. If we cannot hire or retain personnel with the necessary technical expertise or industry certifications, we
may be unable to deliver projects on time, maintain service quality, or meet client expectations. High turnover, increased labor costs,
or resource constraints could also reduce our consulting capacity and profitability. Any inability to sustain a skilled workforce may
adversely affect our growth and financial results.
If
we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological and market developments and successfully
manage product introductions and transitions to meet changing needs in the cybersecurity technology market, our competitive position,
financial results, and prospects will be harmed.
The
cybersecurity landscape evolves rapidly, driven by emerging threats, regulatory shifts, and advancements such as AI, zero trust
architectures, and post-quantum security. Our success depends on accurately anticipating these developments, aligning our solutions
with market needs, and managing timely product launches and transitions. Failure to predict or respond effectively to new
technologies or changing customer requirements could result in outdated offerings, reduced competitiveness, or missed growth
opportunities. If we do not continually innovate and adapt to these market dynamics, our competitive position, financial
performance, and long-term prospects could be materially harmed.
19
Delays
in product development or failure to introduce new and improved offerings could harm our revenues and competitive position.
Our
ability to maintain growth and competitiveness depends on timely product development and continual innovation. The cybersecurity industry
evolves rapidly, and meeting customer expectations requires ongoing enhancements in performance, features, and reliability. Delays in
product development schedules, resource constraints, or technical challenges could limit our ability to introduce new or improved offerings
on time. Additionally, if our new products or updates fail to gain market acceptance, or if we cannot keep pace with emerging technologies
and competitive advancements, our market share and profitability could decline. Ineffective management of product transitions or innovation
pipelines may also lead to reduced customer confidence and missed growth opportunities. Collectively, these factors could materially
and adversely affect our revenues, reputation, and overall financial performance.
Failures,
defects, or vulnerabilities in our complex products and services could harm our reputation, reduce sales, and expose us to legal or financial
liability.
Our
success depends on the market’s confidence in our ability to provide effective network security protection. Despite our efforts
and processes to prevent breaches of our internal networks, systems and websites, whether in our premises, cloud providers
or colocations, we are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, attempts to overload our
servers with denial-of-service, vulnerabilities in vendor hardware and software that we leverage, advanced persistent threats from sophisticated
actors and other cyber-attacks and similar disruptions from unauthorized access to our internal networks, systems or websites, whether
in our premises, cloud providers or colocations. Our security measures may also be breached due to employee error, malfeasance
or otherwise, which breaches may be more difficult to detect than outsider threats, and the existing programs and trainings we have in
place to prevent such insider threats may not be effective or sufficient. Third parties may also attempt to fraudulently induce our employees
to transfer funds or disclose information in order to gain access to our networks and confidential information. Third parties may also
send our customers or others malware or malicious emails that falsely indicate that we are the source, potentially causing lost confidence
in us and reputational harm. We cannot guarantee that the measures we have taken to protect our networks, systems and websites, whether
in our premises, cloud providers or colocations, will provide adequate security. Moreover, because we provide network security
products, we may be a more attractive target for attacks by computer hackers and any security breaches and other security incidents involving
us may result in more harm to our reputation and brand than companies that do not sell network security solutions. Hackers and malicious
parties may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products and
customers, that impersonate our update servers in an effort to access customer networks and negatively impact customers, or otherwise
exploit any security vulnerabilities of our products, or attempt to fraudulently induce our employees, customers or others to disclose
passwords or other sensitive information or unwittingly provide access to our internal networks, systems or data. Moreover, the threat
landscape continues to evolve as a result of new technologies, including AI, and malicious parties may use AI to help attack our solutions,
systems, and our customers.
20
Although
we take numerous measures and implement multiple layers of security to protect our networks, we cannot guarantee that our security products,
processes and services will secure against all threats. Further, we cannot be sure that third parties have not been, or will not in the
future be, successful in improperly accessing our systems and our customers’ systems, which could negatively impact us and our
customers. An actual breach could significantly harm us and our customers, and an actual or perceived breach, or any other actual or
perceived data security incident, threat or vulnerability, that involves our supply chains, networks, systems or websites and/or our
customers’ supply chains, networks, systems or websites could adversely affect the market perception of our products and services
and investor confidence in our company. Any breach of our networks, systems or websites could impair our ability to operate our business,
including our ability to provide Enclave and other security subscriptions and Enclave technical support services to our end-customers,
lead to interruptions or system slowdowns, cause loss of critical data or lead to the unauthorized disclosure or use of confidential,
proprietary or sensitive information. We could also be subject to liability and litigation and reputational harm, and our channel partners
and end-customers may be harmed, lose confidence in us and decrease or cease using our products and services. Any breach of our internal
networks, systems or websites could have an adverse effect on our business, operating results and stock price.
Claims,
litigation, government investigations, and other proceedings may adversely affect our business and results of operations.
We
may become subject to a variety of claims and lawsuits. These claims may arise from a wide variety of business practices and initiatives,
including new product releases, significant business transactions, warranty or product claims, employment practices, and regulation.
As we continue to expand our business and offerings, we may experience new and novel legal claims. Adverse outcomes in some or all
these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business.
Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.
An adverse impact to our financial condition and results of operations could occur for the period in which the effect of an unfavorable
outcome becomes probable and reasonably estimable.
The
success of our business depends in part on our ability to protect and enforce our intellectual property rights.
Protecting
our intellectual property rights and combating unlicensed copying and use of our software, source code, and other intellectual property
is difficult. Similarly, the absence of harmonized international patent laws makes it more difficult to ensure consistent respect for
patent rights. Changes in the law may continue to weaken our ability to prevent the use of patented technology. Our increasing engagement
with open source software will also cause us to license our intellectual property rights broadly in certain situations. If we are unable
to protect our intellectual property, our results of operations could be adversely affected.
Claims
by others that we infringe their proprietary technology or other rights, or other lawsuits asserted against us, could result in significant
costs and substantially harm our business, financial condition, results of operations and prospects.
From
time to time, others may claim we infringe their intellectual property rights,
including current copyright infringement and other claims arising from AI training and output. To resolve these claims, we may enter
into royalty-bearing data access or licensing agreements on terms that are less favorable than currently available, stop selling or
redesign affected products or services, or pay damages to satisfy indemnification commitments with our customers. Adverse outcomes
could also include monetary damages or injunctive relief that may limit or prevent importing, marketing, and selling our products or
services that have infringing technologies. We may be required to
pay significant amounts to settle claims related to the use of technology and intellectual property rights and to
procure intellectual property rights as part of our strategy to manage this risk, and may continue to do so, which could adversely
affect our results of operations.
21
We
are subject to changing laws and regulations, of which failure to comply could subject us to fines and penalties.
We
are subject to a wide range of laws, regulations, and legal requirements in the U.S. and globally, including those that may apply to
our products and online services offerings, and those that impose requirements related to user privacy, telecommunications, data storage
and protection, digital accessibility, advertising, and online safety. Laws in several jurisdictions, including EU Member State laws
under the European Electronic Communications Code, increasingly define certain of our services as regulated services. This trend may
continue with our offerings becoming subject to additional data protection, security, digital safety, law enforcement surveillance, and
other obligations. Regulators and private litigants may assert that our collection, use, and management of customer data and other information
is inconsistent with their laws and regulations, including laws that apply to the tracking of users via technology such as cookies. In
addition, laws requiring us to retrieve and produce customer data in response to compulsory legal demands from law enforcement and governmental
authorities are expanding and the requests we are experiencing are increasing in volume and complexity.
New,
existing, and evolving laws and regulations, or interpretations or applications of existing laws and regulations in a manner inconsistent
with our interpretations of such laws and regulations or our practices, may result in modification of our products and services, altered
business models and operations, increased costs, reputational damage, and civil or criminal liability.
Failure
to comply with laws and regulations applicable to government contracting, or to meet the unique requirements and constraints of government
customers, could harm our reputation and ability to secure or maintain public sector business.
Sales to U.S. and foreign federal, state and local government organizations are subject to several risks. Because of public sector
budgetary cycles and laws or regulations governing public procurements, such sales often require significant upfront time and expense
without any assurance of winning a sale. Government demand, sales and payment for our products and services may be negatively impacted
by numerous factors and requirements unique to selling to government agencies, such as: policies, laws and regulations have in the past,
and may in the future, require us to obtain and maintain certain security and other certifications in order to sell our products and
services into certain government organizations, and such certifications may be costly and time-consuming to obtain and maintain; funding
authorizations and requirements unique to government agencies, with funding or purchasing reductions or delays adversely affecting public
sector demand for our products; and geopolitical matters, including tariff and trade disputes, government shutdowns, impact of the war
in Ukraine, tensions between China and Taiwan and trade protectionism and other political dynamics that may adversely affect our ability
to sell in certain locations or obtain the requisite permits and clearances required for certain purchases by government organizations
of our products and services.
In addition, if we do not have certain certifications, this may restrict our ability to sell to certain customers until we have obtained
certain certifications, and we may not obtain the certifications in a timely manner or at all. For example, certain of our competitors
may have decided to become certified under the U.S. Federal Risk and Authorization Management Program (“FedRAMP”), and until
the time that we also certify under FedRAMP, we risk losing deals to certified competitors for deals where FedRAMP certification is a
requirement.
The rules and regulations applicable to sales to government organizations may also negatively impact sales to other organizations. For
example, government organizations may have contractual or other legal rights to terminate contracts with our distributors and resellers
for convenience or due to a default, and any such termination may adversely impact our future results of operations. If the distributor
receives a significant portion of its revenue from sales to government organizations, the financial health of the distributor could be
substantially harmed, which could negatively affect our future sales to such distributor. Governments routinely investigate, review and
audit government vendors’ administrative and other processes, and any unfavorable investigation, audit, other review or unfavorable
determination related to any government clearance or certification could result in the government’s refusing to continue buying
our products and services, a limitation and reduction of government purchases of our products and services, a reduction of revenue or
fines, or civil or criminal liability if the investigation, audit or other review uncovers improper, illegal or otherwise concerning
activities. Any such penalties could adversely impact our results of operations in a material way. Further, any refusal to grant certain
certifications or clearances by one government agency, or any decision by one government agency that our products do not meet certain
standards, may reduce business opportunities and cause reputational harm and cause concern with other government agencies, governments
and businesses and cause them to not buy our products and services and/or lead to a decrease in demand for our products generally.
22
Governmental
restrictions on the sale of our products and services in non-U.S. markets could negatively affect our business, financial condition,
and financial results.
Expanding
internationally and selling outside the United States may depend on our ability to comply with evolving export control laws and
government-imposed restrictions on the sale or use of cybersecurity products. U.S. and foreign regulations increasingly limit the
export of technology, software, and services involving advanced computing, encryption, or cybersecurity tools to certain countries
or entities. New or expanded governmental restrictions—such as U.S. export controls on cybersecurity and artificial
intelligence–related systems—could delay shipments, restrict market access, or require costly licensing and compliance
procedures. These laws are complex and may change unpredictably in response to geopolitical tensions. If we are unable to obtain
necessary licenses or adapt to new compliance requirements, we could lose revenue, face penalties, or be excluded from key
international markets, which could materially and adversely affect our business, reputation, and growth prospects.
Cyberattacks
and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive
position.
Threats
to security can take a variety of forms. Threat actors, including individual and groups of hackers and sophisticated organizations, including
nation-states, state-sponsored organizations, or cybercriminal groups, continuously undertake attacks that pose threats to our customers
and our internal infrastructure. These actors use a wide variety of methods, which include developing and deploying malicious software;
exploiting known and potential vulnerabilities or intentionally designed processes in our or third-party software, or other infrastructure
to attack our products and services or gain access to our networks; using social engineering techniques to induce our employees, users,
partners, or customers to disclose sensitive information, such as passwords, or take other actions to gain access to our data or our
users’ or customers’ data; or acting in a coordinated manner or conducting coordinated attacks.
Inadequate
account security or organizational security practices, including those of companies we have acquired or those of the third parties we
utilize, have resulted and may result in unauthorized access to our systems and data, including customer systems and data. Employees
or third parties may intentionally compromise our or our users’ security or systems or reveal confidential information, and laws
in foreign jurisdictions may compel actions by such parties against our interests and could limit our recourse. Malicious actors may
employ the supply chain to introduce malware through software updates or compromised supplier accounts or hardware.
Cyberthreats
are constantly evolving and becoming increasingly sophisticated and complex, increasing the difficulty of detecting and successfully
defending against them. Our current capabilities may not detect certain vulnerabilities or new attack methods, which may allow them to
persist in the environment over long periods of time. It may be difficult to determine the best way to investigate, mitigate, contain,
and remediate the harm caused by a cyber incident. Such efforts may not be successful, and we may make errors or fail to take necessary
actions. It is possible that threat actors may gain undetected access to other networks and systems after establishing a foothold on
an internal system. Breaches of our facilities, network, or data security can disrupt the security of our systems and business applications,
impair our ability to provide services to our customers and protect the privacy of their data, result in product development delays,
compromise confidential or technical business information, require us to allocate more resources to improve technologies or remediate
the impacts of attacks, or otherwise adversely affect our business. In addition, actions taken to remediate an incident could result
in outages, data losses, and disruptions of our services.
Cyber
incidents and attacks, individually or in the aggregate, could adversely affect our financial condition, results of operations, competitive
position, and reputation, or expose us to legal or regulatory risk.
23