What changed in this filing

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Item 1A. Risk Factors

2024-03-12 compared with 2023-03-01 · 190 added, 91 removed, 856 unchanged (25% of the section changed)

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We face vigorous competition from companies throughout the world, including large multinational consumer products companies that have many beauty health brands under ownership and standalone beauty and skincare brands, including those that may target the latest trends or specific distribution channels.

Competition in the beauty and skincare industry is based on the introduction of new products, pricing of products, quality of products and packaging, brand awareness, perceived value and quality, innovation, in-store presence and visibility, promotional activities, advertising, editorials, e-commerce and mobile-

commerce initiatives and other activities.

We must compete with a high volume of new product introductions as well as existing products by diverse companies across several different distribution channels.

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If we are unable to continue to compete effectively, it could have a material adverse effect on our business, financial condition and results of operations.

Our business is dependent on the commercial success of selling our Delivery Systems, particularly Syndeo 3.0 devices.

If we are unable to continue to successfully commercialize Syndeo 3.0, our results or operations and financial condition will be materially harmed.

Our business and our ability to generate revenue largely depends on our ability to successfully commercialize and sell our Delivery Systems, particularly Syndeo 3.0 devices.

Our ability to generate revenue depends on our ability to manufacture and sell high quality, reliable Delivery Systems and execute on our commercialization plans, and the size of the market for, and the level of market acceptance of, our Delivery Systems, particularly the Syndeo 3.0.

If our Delivery Systems are not accepted and adopted by our customers, if our customers experience significant performance interruptions or if our Syndeo 3.0 devices do not meet our performance standards, or if we experience an RMA rate for Syndeo 3.0 devices significantly above historical averages, our revenue and results of operations will be materially and adversely affected.

Our new product introductions may not be as successful as we anticipate.

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Delivery Systems and Consumables can be bought together or separately, although the Delivery System is intended to be used solely with our solutions and serums.

Notwithstanding this fact, we are aware of incidents where providers, who initially purchased authentic bottles of solutions and serums from us to be used with our Delivery System, have then subsequently refilled such bottles once they became depleted with unauthentic, and often times, less expensive solutions and serums from other companies.

This practice not only results in lower net sales of our solutions and serums to us, but could also damage our image, reputation and/or the value of our brands, where the Hydrafacial treatment is diminished as a result of the use of these unauthentic products, and the provider’s client has been misled to believe such products are our authentic products.

There could be further risk to our reputation if the solutions and serums passed off as Hydrafacial solutions and serums cause a negative reaction in such provider’s client.

There could be further risk to our reputation if the solutions and serums passed off as Hydrafacial solutions and serums cause a negative or adverse reaction in such provider’s client.

Demand for our products may not increase as rapidly as we anticipate due to a variety of factors including a weakness in general economic conditions and resistance to non-traditional treatment methods.

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economy and certain international economies or an uncertain economic outlook could adversely affect consumer spending habits which may, among other things, result in reduced patient traffic in dermatology or internal medicine offices and in medical spa facilities and spa facilities, a reduction in consumer spending on elective, non-urgent or higher value treatments, such as those offered by our providers, or a reduction in the demand for aesthetic services generally, each of which could have a material adverse effect on our sales and operating results.

Weakness in the global economy results in a challenging environment for selling aesthetic technologies and doctors or aestheticians may postpone investments in capital equipment, such as our delivery systems.

Weakness in the global economy results in a challenging environment for selling aesthetic technologies and doctors or estheticians may postpone investments in capital equipment, such as our delivery systems.

Increased market acceptance of all of our products and treatments will depend in part upon the recommendations of medical and aesthetics professionals, as well as other factors including effectiveness, safety, ease of use, reliability, aesthetics and price compared to competing products and treatment methods.

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or if our geographic, channel, or product mix shifts to lower priced products or to products that have a higher percentage of deferred revenue.

Additionally, in response to the COVID-19 pandemic or any resurgence of COVID-19, as a result of a new variant or otherwise, we may find the need to discount the prices of our products to facilitate sales in uncertain times.

Additionally, in response to a pandemic or any resurgence of such pandemic, as a result of a new variant or otherwise, we may find the need to discount the prices of our products to facilitate sales in uncertain times.

Were any of the foregoing to occur, our net revenues, gross profit, gross margin and net income may be reduced.

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• drive demand in the brand;

• invest in digital capabilities;

• invest in our providers and digital capabilities;

• improve productivity in our retailers, U.S.

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We may fail to realize all of the anticipated benefits of any entities that we acquire, such benefits may take longer to realize than expected or we may encounter significant difficulties integrating acquired businesses into our operations.

acquisitions do not achieve their intended benefits, or do not achieve their intended benefits on our projected timelines, our business, financial condition, and results of operations could be materially and adversely affected.

If our acquisitions do not achieve their intended benefits, or do not achieve their intended benefits on our projected timelines, our business, financial condition, and results of operations could be materially and adversely affected.

We believe that businesses we acquire will provide certain benefits to us, including certain cost synergies and operational efficiencies;

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Growing our business may make it difficult for us to adequately predict the expenditures we will need to make in the future.

If we do not make the necessary overhead expenditures to accommodate our future growth, we may be unsuccessful in executing our growth strategy and our results of operations could suffer.

If we do not make the necessary overhead

expenditures to accommodate our future growth, we may be unsuccessful in executing our growth strategy and our results of operations could suffer.

Acquisitions or investments could disrupt our business and harm our financial condition.

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• implementation or remediation of controls, procedures and policies at the acquired company;

• differences between legal and regulatory requirements between different geographical territories;

• differences in legal and regulatory requirements among different geographical territories;

• diversion of management time and focus from operation of our then-existing business to acquisition integration challenges;

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To the extent that we pay the consideration for any acquisitions or investments in cash, it would reduce the amount of cash available to us for other purposes.

Acquisitions or investments could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, increased interest expenses or impairment charges against goodwill on our consolidated balance sheet, any of which could have a material adverse effect on our business, financial condition and results of operations.

Acquisitions or investments could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, increased interest expenses or impairment charges against goodwill on our Consolidated Balance Sheets, any of which could have a material adverse effect on our business, financial condition and results of operations.

There can be no assurance that any contemplated or future acquisition will occur.

Our operating results have fluctuated in the past and we expect our future quarterly and annual operating results to fluctuate for a variety of reasons, particularly as we focus on increasing provider and consumer demand for our products.

Volatility in the financial markets could also have a material adverse effect on our business.

Our operating results have fluctuated in the past and we expect our future quarterly and annual operating results to fluctuate for a variety of reasons.

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Most of our expenses, such as employee compensation and lease payment obligations, are relatively fixed in the short term.

expense levels are based, in part, on our expectations regarding future revenue levels.

Moreover, expense levels are based, in part, on our expectations regarding future revenue levels.

As a result, if our net revenues for a particular period fall below expectations, we may be unable to adjust spending quickly enough to offset any shortfall in net revenues.

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We have yet to establish any history of profitable operations.

We reported a loss from operations of $24.3 million during the fiscal year ended December 31, 2022.

We reported a loss from operations of $130.9 million during the year ended December 31, 2023.

We expect to incur additional operating losses for the foreseeable future.

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A disruption in our operations could materially and adversely affect our business.

As a company engaged in distribution on a global scale, our operations, including those of our third-party suppliers, brokers and delivery service providers, are subject to the risks inherent in such activities, including industrial accidents, supply chain disruptions, macroeconomic issues, environmental events, strikes and other labor disputes, disruptions in information systems, product quality control, safety, licensing requirements and other regulatory issues, changes in laws and regulatory requirements, as well as natural disasters, pandemics (such as the COVID-19 pandemic), border disputes, acts of terrorism and other external factors over which we and our third-party suppliers, brokers and delivery service providers may have no control.

As a company engaged in distribution on a global scale, our operations, including those of our third-party suppliers, brokers and delivery service providers, are subject to the risks inherent in such activities, including industrial accidents, supply chain disruptions, macroeconomic issues, environmental events, strikes and other labor disputes, disruptions in information systems, product quality control, safety, licensing requirements and other regulatory issues, changes in laws and regulatory requirements, as well as natural disasters, pandemics (such as the COVID-19 pandemic), border disputes, political crises, such as acts of terrorism, war and other political instability, including the current conflicts between Russia and Ukraine and between Israel and Hamas, and other external factors over which we and our third-party suppliers, brokers and delivery service providers may have no control.

Our ability to meet the needs of our consumers depends on the proper operation of our distribution facilities, where most of our inventory that is not in transit is housed.

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Our insurance coverage may not be sufficient to cover the full extent of any loss or damage to our manufacturing facilities or distribution centers, and any loss, damage of or disruption to those facilities, or loss or damage of the inventory stored there, could materially and adversely affect our business, financial condition and results of operations.

The COVID-19 global pandemic and related government, private sector and individual consumer responsive actions have adversely affected, and other pandemics and responses to them may also adversely affect our business, financial condition and results of operations.

Since early 2020, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) and its variants.

Related government and private sector responsive actions, as well as changes in consumer spending behaviors, have adversely affected and may continue to adversely affect our business, financial condition and results of operations.

It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, including any resurgence of the COVID-19 virus as a result of a new variant or otherwise.

While our suppliers and distribution centers currently remain open, there is a risk that any of these facilities (i) may become less productive or encounter disruptions due to employees at the facilities becoming infected with the COVID-19 virus and/or (ii) are no longer allowed to operate based on directives from public health officials or government authorities.

Additionally, there is a risk of decreased, or further decreased, demand if our provider facilities are no longer allowed to operate based on directives from public health officials or government authorities.

In addition to the COVID-19 pandemic, other pandemics may result from other pathogens in the future, resulting in adverse impacts that are similar to the above or worse on our business plans or operations.

Emergence of pandemics may require us to have many of our personnel work remotely, and it is possible that this could have a negative impact on the execution of our business plans and operations.

If a natural disaster, power outage, connectivity issue, or other event occurs that impacts our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.

The increase in remote working may also result in consumer privacy, information technology (“IT”) security and fraud concerns as well as increase our exposure to potential wage and hour issues.

The extent to which the COVID-19 pandemic or other future pandemics impact our and our vendors’ operations and results will depend on future developments, which are highly uncertain and cannot be predicted.

Our success depends, in part, on our retention of key members of our senior management team, whose continued service is not guaranteed, ability to manage the transition of our Chief Executive Officer, and ability to attract and retain qualified personnel.

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The loss of any of these key personnel could result in the loss of these and other benefits and could also materially and adversely affect our results of operations.

Andrew Stanleick was appointed as our Chief Executive Officer and a member of our board of directors, effective as of February 7, 2022.

Stanleick has held a number of senior management positions and has extensive multi-channel marketing, branding, and deep digital experience, he had not served as the chief executive officer of a U.S.

publicly traded company before joining the Company in that role.

Our future performance will depend, in part, on the successful performance of Mr.

Stanleick as our chief executive officer.

Andrew Stanleick, our former Chief Executive Officer, was terminated from his position as Chief Executive Officer of the Company without cause, and as a member of our Board of Directors, effective as of November 19, 2023.

Stanleick agreed to remain available to assist our Company as an advisor through December 31, 2023.

Marla Beck was appointed as our Interim Chief Executive Officer, effective as of November 20, 2023, for a 6-month term.

Beck has held a number of senior management positions and directorships and has extensive multi-channel marketing, branding, and deep digital experience, she had not served as the chief executive officer of a U.S.

publicly traded company before joining our Company in that role.

Our future performance will depend, in part, on the successful performance of Ms.

Beck as our Interim Chief Executive Officer and our ability to identify, attract, and hire a suitable replacement for our Chief Executive Officer in a timely fashion.

Furthermore, if we do not successfully manage our chief executive officer transition, it could be viewed negatively by our customers, employees or investors and could have an adverse impact on our business.

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The loss of key personnel or the failure to attract and retain qualified personnel may have a material adverse effect on our business, financial condition and results of operations.

Our workforce reductions may cause undesirable consequences and our results of operations may be harmed.

The reduction in workforce, which was part of our business transformation program (the “Transformation Program”) that we announced in September 2023 may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, employee attrition beyond what we had intended in implementing the Transformation Program, a reduction in morale among our remaining employees, greater-than-anticipated costs incurred in connection with implementing the Transformation Program, and the risk that we may not achieve the benefits from the Transformation Program to the extent or as quickly as we anticipate, all of which may have a material adverse effect on our business, results of operations or financial condition.

The initiatives of our Transformation Program could place substantial demands on our management and employees, which could lead to the diversion of our management’s and employees’ attention from other business priorities.

In addition, we may discover that the workforce reduction and other Transformation Program efforts will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.

We rely on a number of third-party suppliers, distributors and other vendors, and they may fail to produce products or to provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand reputation, cause consumer dissatisfaction or require us to find alternative suppliers of our products or services.

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In addition, we earn an increasingly larger portion of our total revenues from international sales.

International sales carry higher

shipping costs which could negatively impact our gross margin and results of operations.

International sales carry higher shipping costs which could negatively impact our gross margin and results of operations.

If freight costs materially increase and we are unable to pass that increase along to our customers for any reason or otherwise offset such increases in costs, our gross margin and financial results could be adversely affected.

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however, there is no assurance our campaigns will achieve the returns on advertising spend desired or successfully increase brand or product awareness sufficiently to sustain or increase our growth goals, which could have an adverse effect on our gross margin and business overall.

We manufacture and assemble the majority of our delivery systems at one site in California and if that site were to become compromised or damaged, our ability to continue to manufacture and assemble our products would be negatively affected.

One of our sites in California manufactures and assembles the vast majority of our delivery systems.

We manufacture and assemble our delivery systems in both California and China, and if these sites were to become compromised or damaged, our ability to continue to manufacture and assemble our products would be negatively affected.

One of our sites in California manufactures and assembles our delivery systems.

Another site in California fills the majority of our consumable products and these items are kitted at the first site.

If either of these sites were shut down or damaged by natural disaster, fire, social unrest, government regulation or other causes, our operations would be negatively impacted.

Our contract manufacturing partner in China manufactures and assembles our delivery systems as well.

If any of these sites were shut down or damaged by natural disaster, fire, social unrest, government regulation or other causes, our operations would be negatively impacted.

In that situation, our ability to manufacture our products would be impaired and our ability to distribute to and service our customers would be impaired, which could materially and adversely affect our business, financial condition and results of operations and possibly our reputation.

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• the effect of consolidation or weakness in the retail industry or at certain providers, including store and spa closures and the resulting uncertainty;

• changes in federal, state, local, or foreign regulations that affect the scope of practice of our providers.

Risks related to our financial condition

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If in the future we raise additional capital through debt financing, the terms of any new debt arrangements could further restrict our ability to operate our business by imposing significant restrictions on our operations, including restrictive covenants such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to pay dividends, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions.

We maintain our cash at financial institutions, often in balances that exceed federally insured limits.

Our cash is held in accounts at U.S.

banking institutions that we believe are of high quality.

Cash held in deposit accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.

If such banking institutions fail, we could lose all or a portion of those amounts held in excess of such insurance limitations.

While the FDIC took control of two such banking institutions, Silicon Valley Bank (“SVB”) on March 10, 2023 and Signature Bank (“Signature Bank”) on March 12, 2023, we did not have any accounts with SVB or Signature Bank, and therefore, did not experience any direct risk of loss.

Any material loss, individually or in the aggregate, from a similarly failed banking relationship above FDIC insurance limits that we may experience in the future could have an adverse effect on our ability to pay our operational expenses or make other payments and may require us to move our accounts to other banks, which could cause a temporary delay in making payments to our vendors and employees and cause other operational inconveniences.

Our ability to use any net operating loss carryforwards and certain other tax attributes may be limited.

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Exchange rate fluctuations may affect the costs we incur in our operations.

The main currencies to which we are exposed are the British pound, the Canadian dollar and the EU euro.

The main currencies to which we are exposed are the British pound, the EU euro, and the Chinese Renminbi.

The exchange rates between these currencies and the U.S.

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Our failure to successfully respond to these risks in a timely manner could reduce e-commerce sales and damage our brand’s reputation.

Cyber threats are constantly evolving, are becoming more sophisticated and are being made by groups and individuals with a wide range of expertise and motives, and this increases the difficulty of detecting and successfully defending against them.

We must successfully maintain and upgrade our information technology systems, and our failure to do so could have a material adverse effect on our business, financial condition and results of operations.

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In addition, difficulties with implementing new technology systems, delays in our timeline for planned improvements, significant system failures, or our inability to successfully modify our information systems to respond to changes in our business needs may cause disruptions in our business operations and have a material adverse effect on our business, financial condition and results of operations.

We are subject to risks associated with product failure and/or technology flaws.

Components used in our products are complex in design, and our products may contain undetected errors or result in failures when first introduced or when new versions are released.

Despite product testing efforts and testing by current and potential customers, it is possible that errors will be found in a new product or enhancement after commercial shipments have commenced.

The occurrence of product defects and/or technological flaws could result in negative publicity, delays in product introduction, the diversion of resources to remedy defects, loss of or delay in industry acceptance and adoption or claims by customers against us, and could cause us to incur warranty obligations and additional costs, any one of which could adversely affect our business.

Furthermore, the failure of our products to perform as promised could result in increased costs, lower margins, liquidated damage payment obligations, and harm to our reputation and brand.

If we fail to adopt new technologies or adapt our e-commerce websites and systems to changing consumer demands or emerging industry standards, our business may be materially and adversely affected.

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, ransomware), unauthorized access or other cybersecurity attacks, natural disasters (including hurricanes and earthquakes), terrorism, war, fire, and telecommunication or electrical failures.

service attacks, attempting to gain access to our systems, information or monetary funds through phishing or social engineering campaigns, installing viruses or malicious software on our e-commerce websites or devices used by our employees or contractors, or carrying out other activity intended to disrupt our systems or gain access to confidential or sensitive information in our or our service providers’ systems.

We and our service providers may not be able to prevent third parties, including criminals, competitors or others, from breaking into or altering our systems, disrupting our business operations or communications infrastructure through denial-of-service attacks, attempting to gain access to our systems, information or monetary funds through phishing or social engineering campaigns, installing viruses or malicious software on our e-commerce websites or devices used by our employees or contractors, or carrying out other activity intended to disrupt our systems or gain access to confidential or sensitive information in our or our service providers’ systems.

Attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and these attacks are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

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Third parties may attempt to fraudulently induce our or our service providers’ employees or consultants to misdirect funds or to disclose information in order to gain access to personal data about our consumers or website users that we maintain.

In addition, we have limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which some of our consumers may elect to make payment for purchases at our e-commerce websites.

In addition, we have limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which some of our

consumers may elect to make payment for purchases at our e-commerce websites.

We must have a designated employee to oversee cybersecurity operations and maintain a data security/information security program with specific measures, employee training, comprehensive risk assessments, vendor contract requirements, and timely data disposal.

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Accordingly, if our cybersecurity measures, and those of our service providers, fail to protect against unauthorized access, attacks (which may include sophisticated cyber-attacks) and the mishandling of data by our employees and third-party service providers, then our reputation, business, results of operations and financial condition could be adversely affected.

We may also be subject to new laws governing the privacy of consumer health data, including information concerning individual health conditions and treatment.

For example, Washington’s My Health My Data Act (“MHMD”) broadly defines consumer health data, places restrictions on processing consumer health data (including imposing stringent requirements for obtaining consumer consent), provides consumers certain rights with respect to their health data, and creates a private right of action to allow individuals to sue for violations of the law.

Other states, including California, are considering and may adopt similar laws.

Payment methods used on our e-commerce websites subject us to third-party payment processing-related risks.

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Transactions on our e-commerce websites are card-not-present transactions, so they present a greater risk of fraud.

Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and

bank account information.

Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and bank account information.

Requirements relating to consumer authentication and fraud detection with respect to online sales are complex.

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• local political and economic instability;

• increased expense of developing, testing and making localized versions of Hydrafacial’s products;

• increased expense of developing, testing and making localized versions of our products;

• difficulties in hiring and retaining employees;

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• pandemics, such as the COVID-19 pandemic, and natural disasters;

• difficulties in managing international operations, including any travel restrictions imposed on Hydrafacial or Hydrafacial’s customers, such as those imposed in response to the COVID-19 pandemic;

• difficulties in managing international operations, including any travel restrictions imposed on us or our customers, such as those imposed in response to the COVID-19 pandemic;

• fluctuations in currency exchange rates;

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• difficulties in controlling production volume and quality of the manufacturing process;

• acts of terrorism and acts of war;

• acts of terrorism and acts of war, including the current conflicts between Russia and Ukraine and between Israel and Hamas;

• general geopolitical instability and the responses to it, such as the possibility of economic sanctions, trade restrictions and changes in tariffs, such as the recent economic sanctions implemented by the United States against China and Russia and tariffs imposed by the United States and China;

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• product or material transportation delays or disruption, including as a result of customs clearance, violence, protests, police and military actions, or natural disasters;

• risks of non-compliance by Hydrafacial’s employees, contractors, or partners or agents with, and burdens of complying with, a wide variety of extraterritorial, regional and local laws, including competition laws and anti-bribery laws such as the U.S.

Foreign Corrupt Practices Act (“FCPA”) and the UK Bribery Act 2010 (the “UKBA”), in spite of Hydrafacial’s policies and procedures designed to promote compliance with these laws;

• risks of non-compliance by our employees, contractors, or partners or agents with, and burdens of complying with, a wide variety of extraterritorial, regional and local laws, including competition laws and anti-bribery laws such as the U.S.

Foreign Corrupt Practices Act (“FCPA”) and the UK Bribery Act 2010 (the “UKBA”), in spite of our policies and procedures designed to promote compliance with these laws;

• the impact of government-led initiatives to encourage the purchase or support of domestic vendors, which can affect the willingness of customers to purchase products from, or collaborate to promote interoperability of products with, companies whose headquarters or primary operations are not domestic;

• an inability to obtain or maintain adequate intellectual property protection for Hydrafacial’s brand and products;

• an inability to obtain or maintain adequate intellectual property protection for our brand and products;

• longer payment cycles and greater difficulty in accounts receivable collection;

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A decrease in consumer spending or in consumer confidence and demand for our products could have a significant negative impact on our net sales and profitability, including our operating margins and return on invested capital.

In addition, rising interest rates due to the U.S.

Federal Reserve’s tightening of monetary policy in order to combat inflation could increase our costs.

These economic conditions could cause some of our providers or suppliers to experience cash flow or credit problems and impair their financial condition, which could disrupt our business and adversely affect product orders, payment patterns and default rates and increase our bad debt expense.

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Further, since the United Kingdom is no longer part of the EU, its data protection regulatory regime will be independent of the EU.

From January 1, 2021, companies have had to comply with the GDPR and also the United Kingdom GDPR (“UK GDPR”), which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in UK national law.

From January 1, 2021, companies have had to comply with the GDPR and also the UK GDPR, which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, i.e.

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We currently source components in China and do not have substantial alternatives to those suppliers.

We also utilize warehouse services provided by our third-party distributors.

We also use manufacturers located in China to help manufacture, package, and label our Delivery Systems and Consumables and utilize warehouse services provided by our third-party distributors in China.

With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future.

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If this trend continues, we may find it necessary to alter some of the ways we have traditionally manufactured and marketed our products in order to stay in compliance with a changing regulatory landscape, and this could add to the costs of our operations and have an adverse impact on our business.

To the extent federal, state, local or foreign regulatory changes regarding licensing, distribution, consumer protection, or the ingredients, claims or safety of our products occurs in the future, they could require us to obtain additional licenses and registrations, reformulate or discontinue certain of our products, revise the product packaging or labeling, or adjust operations and systems, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on our business, financial condition and results of operations.

Noncompliance with applicable regulations, including those for medical devices, could result in enforcement action by the FDA or other regulatory authorities within or outside the United States, including state and local regulatory authorities, with actions including but not limited to product seizures, injunctions, product recalls and criminal or civil monetary penalties, all of which could have a material adverse effect on our business, reputation, financial condition and results of operations.

To the extent federal, state, local or foreign regulatory changes regarding the scope of practice of estheticians, licensing, distribution, consumer protection, or the ingredients, claims or safety of our products occurs in the future, they could require us to obtain additional licenses and registrations, reformulate or discontinue certain of our products, revise the product packaging or labeling, adjust operations and systems, or affect our ability to sell our products to certain customer groups in particular states and/or territories, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on our business, financial condition and results of operations.

injunctions or civil penalties;

suspension or withdrawal of approvals or clearances;

seizures or recalls of product;

total or partial suspension of production or distribution;

administrative or judicially imposed sanctions;

the FDA’s refusal to grant pending or future clearances or approvals for products;

clinical holds;

refusal to permit the import or export of products;

and criminal prosecution, all of which could have a material adverse effect on our business, reputation, financial condition and results of operations.

For example, Congress enacted MoCRA on December 29, 2022, which directed FDA to implement a set of new regulatory requirements that previously were not applicable to cosmetic products.

Pursuant to MoCRA, FDA will subject the manufacturers and cosmetic products to requirements such as facility registration and product listing requirements, compliance with certain GMP requirements, adverse event reporting requirements, and other labeling requirements.

Many of the requirements will become applicable on December 29, 2023, although some of the requirements, such as those relating to labeling, will become applicable in 2024 and 2025.

Some of the requirements became applicable on December 29, 2023, although many of the requirements, such as those relating to labeling, will become applicable in 2024 and 2025.

Moreover, depending on how we market the products, they could also be regulated as both drugs and cosmetics simultaneously, as the categories are not mutually exclusive.

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In recent years, the FDA has issued warning letters to several cosmetic companies alleging improper claims regarding their cosmetic products.

If the FDA determines that we have disseminated inappropriate drug claims for our products intended to be sold as cosmetics, we could receive a warning or untitled letter, be required to modify our product claims or take other actions to satisfy the FDA, including product recalls.

If the FDA determines that we have disseminated inappropriate drug claims for our products intended to be sold as cosmetics, we could receive a warning or untitled letter or other FDA enforcement action, be required to modify our product claims, or take other actions to satisfy the FDA, which may include product recalls.

In addition, plaintiffs’ lawyers have filed class action lawsuits against cosmetic companies after receipt of these types of FDA warning letters.

There can be no assurance that we will not be subject to state and federal government actions or class action lawsuits, which could harm our business, financial condition, and results of operations.

The EU does not currently require pre-market approval for cosmetic products, but all products to be marketed in the EU must be registered in the cosmetic products notification portal (“CPNP”) before being placed on the market.

The EU does not currently require pre-market approval for cosmetic products, but all products to be marketed in the EU must be registered in the CPNP before being placed on the market.

In addition, there is a ban on animal testing for cosmetic purposes and finished cosmetic products or ingredients which were tested on animals may not be marketed in the EU.

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Similar requirements may exist in foreign jurisdictions.

New laws, regulations, enforcement trends, or changes in existing regulations could affect the ability of our esthetician providers in certain states to provide our treatments to consumers, any of which could have a material adverse effect on our business, financial condition, and results of operation.

Currently, licensed estheticians are allowed to provide Hydrafacial treatments to customers whether or not they are supervised by a physician.

Changes in regulations or enforcement trends regarding the scope of practice of estheticians could limit the ability of estheticians to provide Hydrafacial treatments or require estheticians to obtain additional training and certifications to provide Hydrafacial treatments.

Any such regulatory changes could affect our ability to sell our products to certain customer groups in particular states and/or territories, which could result in decreased sales, and therefore could have a material adverse effect on our business, financial condition, and results of operation.

Our business is subject to extensive and continuing regulatory compliance obligations.

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Our products are subject to extensive regulation by the applicable regulatory authorities where our products are or will be sold prior to their marketing for commercial use.

In the United States, medical device products are subject to extensive regulation by the FDA for developing, testing, manufacturing, labeling, sale, marketing, advertising, promotion, distribution, import, export, shipping, establishment registration and device listing, inspections and audits, record keeping, recalls and field safety corrective actions and post-market surveillance, including reporting of certain events.

The Hydrafacial Delivery System is subject to regulation by the FDA and comparable foreign regulatory authorities as a medical device, while our boosters and serums are marketed as cosmetics.

Before a new medical device, or a new use of, or claim for, an existing medical device product can be marketed in the United States, it must first receive marketing authorization from the FDA unless it is exempt.

The FDA marketing authorizations for medical devices include a clearance of a premarket notification under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (the “FDCA”) (or a 510(k) clearance) or premarket approval of a Premarket Approval application.

Some devices may be exempt from 510(k) clearance, receive enforcement discretion from the FDA or may receive marketing authorization through the de novo classification pathway.

In the United States, medical device products are subject to extensive regulation by the FDA and include requirements related to developing, testing, establishment registration and device listing, manufacturing, labeling, sale, marketing, advertising, promotion, distribution, import, export, shipping, inspections and audits, record keeping, recalls and field safety corrective actions and post-market surveillance, including reporting of certain events.

Delivery Systems are subject to regulation by the FDA and comparable foreign regulatory authorities as a medical device, while our boosters and serums are marketed as cosmetics.

The FDA marketing authorizations for medical devices include a clearance of a premarket notification under Section 510(k) of the FDCA (or a 510(k) clearance), or premarket approval of a Premarket Approval application.

Alternatively, some devices may be exempt from 510(k) clearance, receive enforcement discretion from the FDA or may receive marketing authorization through the De Novo classification pathway.

Authorization processes can be expensive and lengthy.

The FDA’s 510(k) clearance process usually takes from three to 12 months, but it can last longer.

The FDA’s 510(k) clearance process usually takes from three to 12 months, but it can take longer.

The process of obtaining premarket approval is much more costly and uncertain than the 510(k) clearance process and it generally takes from one to three years, or even longer, from the time the application is submitted to the FDA.

The De Novo classification pathway, when available, has a 150 day timeline for review.

Our future products and enhancements or changes to products may require new 510(k) clearance, premarket approval, authorization from the FDA or listing with the FDA, as well as state licenses as may be applicable to the manufacturing or distribution of medical devices.

The currently marketed medical devices are marketed pursuant to 510(k) clearances we have obtained or are exempt from the requirement to obtain such clearance or other form of marketing authorization.

Medical devices may be marketed only for the indications for which they are approved or cleared, or for which they are classified as exempt from such clearance.

Medical devices may be marketed only for the indications for which they are approved or cleared, or for which they are classified as exempt from such premarket requirements.

If the FDA disagrees with us concerning the scope or applicability of a clearance or exemption with respect to a device or its marketing, we may be required to change its promotional and/or labeling materials and/or stop marketing that device and may need to pursue additional authorizations or conduct product recalls, corrections, or removals.

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Such policy or regulatory changes could impose additional requirements that could delay our ability to obtain new clearances, increase the costs of compliance or restrict our ability to maintain our current clearances.

Additionally regulatory clearances, approvals or certifications to market a product can contain limitations on the indicated uses for such product.

Additionally, regulatory clearances, approvals, or certifications to market a product can contain limitations on the indications for use of such product.

Product clearances, approvals and certifications can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial clearance, approval, or certification.

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We and our manufacturers may be inspected or audited by the FDA or other regulatory bodies and notified bodies from time to time to determine whether we or our manufacturers are in compliance with applicable laws.

A determination that we are in violation of FDA or other applicable foreign laws and regulations or any of our product clearances, approvals or certifications could lead to imposition of civil penalties, including fines, product recalls or product seizures and, in certain cases, criminal sanctions.

A determination that we are in violation of FDA or other applicable foreign laws and regulations or any of our product clearances, approvals or certifications could lead to warning letters or untitled letters;

fines, injunctions, or civil penalties;

suspension or withdrawal of approvals or clearances;

seizures or recalls of products;

total or partial suspension of production or distribution;

administrative or judicially imposed sanctions;

the FDA’s refusal to grant pending or future clearances or approvals for products;

clinical holds;

refusal to permit the import or export of products;

and criminal prosecution.

Our facilities are subject to regulation under the FDCA and FDA implementing regulations governing the manufacture of our products.

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Our facilities are subject to regulation under the FDCA and FDA implementing regulations.

With respect to our medical device products, we are required to demonstrate and maintain compliance with the FDA’s current Good Manufacturing Practices, referred to as the Quality System Regulation (“QSR”).

The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage, and shipping of medical device products.

The FDA enforces the QSR through periodic announced or unannounced inspections.

We are subject to such inspections.

Because we are subject to the QSR, we are subject to such inspections.

Any failure by us to take satisfactory corrective action in response to an adverse inspection could result in enforcement actions against us, including warning letters or untitled letters;

fines, injunctions or civil penalties;

fines, injunctions

or civil penalties;

suspension or withdrawal of approvals or clearances;

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We may only use labeling, including promotional materials, that are consistent with the specific indication(s) for use included in the FDA exemption regulation, 510(k) clearance or certification, or in the case of our cosmetic products, that are consistent with the kinds of claims that are permitted to be used for cosmetics under the FDCA, and as applicable to the specific product.

If the FDA or other authorities determine that our promotional or training materials constitute the unlawful promotion of an off-label use, they could request that we modify our training or promotional materials and/or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, civil money penalties, seizure, injunction or criminal fines and penalties.

In addition, there may be increased risk of injury if we or our sales force markets or physicians, a/estheticians, or others attempt to use our products off-label.

fines, injunctions or civil penalties;

suspension or withdrawal of approvals or clearances;

seizures or recalls of products;

total or partial suspension of production or distribution;

administrative or judicially imposed sanctions;

the FDA’s refusal to grant pending or future clearances or approvals for products;

clinical holds;

refusal to permit the import or export of products;

and criminal prosecution.

In addition, there may be increased risk of regulatory enforcement if we or our sales force markets our products for off-label use, or physicians, estheticians, or others attempt to use our products off-label.

The FDA and other foreign authorities do not restrict or regulate a physician’s or other licensed professional’s use of a medical product within the scope of practice of medicine or other licensed activity, and we cannot prevent the use of our products off-label.

The use of our products for indications other than those for which our products have been cleared by the FDA or certified by a notified body, or that are permitted under the scope of any regulation establishing an exemption from 510(k) clearance, may not have the intended effect, which could harm our reputation in the marketplace.

Physicians, a/estheticians, and others may also misuse our products or use improper techniques if they are not adequately trained in the particular use, potentially leading to injury and an increased risk of product liability.

Product liability claims are expensive to defend and could divert management’s attention from the primary business and result in substantial damage awards against us.

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The timing of the obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event.

We may fail to report adverse events of which we become aware within the prescribed timeframe.

We may fail to report within the prescribed timeframe adverse events of which we become aware.

We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product.

If we fail to comply with our reporting obligations, the FDA or foreign regulatory authorities could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of device clearance, seizure of products or delay in clearance of future products.

If we fail to comply with our reporting obligations, the FDA or foreign regulatory authorities could take action, including warning letters or untitled letters;

fines, injunctions or civil penalties;

suspension or withdrawal of approvals or clearances;

seizures or recalls of products;

total or partial suspension of production or distribution;

administrative or judicially imposed sanctions;

the FDA’s refusal to grant pending or future clearances or approvals for products;

clinical holds;

refusal to permit the import or export of products;

and criminal prosecution.

The FDA and foreign regulatory authorities have the authority to require the recall or recommend the market withdrawal, as applicable, of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.

Companies may also choose to voluntarily recall a product if any material deficiency is found.

Companies may also choose to voluntarily recall a product if any material deficiency or regulatory violation is discovered.

A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies or failures to comply with applicable regulations.

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Seeking such approvals, clearances or certifications may delay our ability to replace the recalled products in a timely manner.

Moreover, if we do not adequately address problems associated with our products, we may face additional regulatory enforcement action, including FDA or foreign regulatory authorities warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Moreover, if we do not adequately address problems associated with our products, we may face additional regulatory enforcement action, including warning letters or untitled letters;

fines, injunctions or civil penalties;

suspension or withdrawal of approvals or clearances;

seizures or recalls of products;

total or partial suspension of production or distribution;

administrative or judicially imposed sanctions;

the FDA’s refusal to grant pending or future clearances or approvals for products;

clinical holds;

refusal to permit the import or export of products;

and criminal prosecution.

Companies are required to maintain certain records of recalls and corrective actions, even if they are not reportable to the FDA or foreign regulatory authorities.

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In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA, other agencies and notified bodies may also slow the time necessary for new

medical devices or modifications to be cleared or approved or certified medical devices to be reviewed and/or cleared, approved or certified by necessary government agencies or notified bodies, which would adversely affect our business.

For example, over the last several years, the United States government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Disruptions at the FDA, other agencies and notified bodies may also slow the time necessary for new medical devices or modifications to be cleared or approved or certified medical devices to be reviewed and/or cleared, approved or certified by necessary government agencies or notified bodies, which would adversely affect our business.

For example, over the past decade, the United States government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical and non-critical activities.

Separately, in response to the COVID-19 pandemic, the FDA had significantly curtailed and limited its inspection of both foreign and domestic facilities.

Furthermore, regulatory authorities outside the United States adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if new or existing global health concerns continue to hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

In addition, in the EU, notified bodies must be officially designated to certify products and services in accordance with the Medical Devices Regulation (EU) No 2017/745 (the “EU Medical Devices Regulation”).

If a prolonged government shutdown occurs, or if new or

existing global health concerns hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

In addition, in the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

While several notified bodies have been designated the COVID-19 pandemic has significantly slowed down their designation process and the current designated notified bodies are facing a large amount of requests with the new regulation as a consequence of which review times have lengthened.

This situation could impact our ability to grow our business in the EU and EEA.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our shares of Class A Common Stock.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports.

As a “large accelerated filer”, we are responsible for establishing and maintaining internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404.

Although our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 and our management is required to report on our internal controls over financial reporting under Section 404, any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.

In addition, any testing by us, as and when required, conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our shares of Class A Common Stock.

Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.

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Similar laws have passed in Virginia, Colorado, Connecticut and Utah, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging and may impose significant costs that are likely to increase over time.

The FTC and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.

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The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

In Europe, the GDPR went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area (“EEA”).

In Europe, the GDPR went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area.

Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.

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On March 21, 2022, new versions of the UK SCCs came into force for transfer of data outside the United Kingdom, with a two-year grace period for transfer arrangements signed up until September 21, 2022, which can still rely on existing EU SCCs for data transfers to third countries until March 21, 2024.

As supervisory authorities issue further

guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

In addition, the EU’s institutions are debating the ePrivacy Regulation, which would repeal and replace the current ePrivacy Directive that regulates electronic marketing and use of cookies and tracking technologies.

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In addition, significant changes to the regulatory requirements for cosmetic products are scheduled in the next several years.

On December 29, 2022, Congress enacted the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”) that adds significant new regulatory requirements to cosmetic products, with many of the regulatory requirements becoming effective on December 29, 2023.

On December 29, 2022, Congress enacted MoCRA that adds significant new regulatory requirements to cosmetic products.

Some of the requirements became applicable on December 29, 2023, although many of the requirements, such as those relating to labeling, will become applicable in 2024 and 2025.

For example, cosmetic manufacturing and processing facilities will need to be registered with FDA, and products will need to be listed with FDA.

Adulterated or misbranded cosmetic products will be subject to recalls that are mandated by FDA, similar to medical devices.

In addition, a responsible person will be required to report any serious adverse events that result from the use of a cosmetic product manufactured, packaged, or distributed by the person, and the records relating to each adverse event report will be required to be kept for six years.

In addition, a responsible person will be required to report any serious adverse events that result from the use of a cosmetic product manufactured, packaged, or distributed by the associated entity, and the records relating to each adverse event report will be required to be kept for six years.

Notably, MoCRA requires FDA to promulgate proposed rules for Good Manufacturing Practices for cosmetic products by December 29, 2024, and final rules by December 29, 2025.

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There can be no assurances that our practices have complied, comply or will comply fully with all such laws and regulations.

Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in

damage to our reputation, a loss in business or proceedings or actions against us by governmental entities or others.

Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business or proceedings or actions against us by governmental entities or others.

Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract management, increase costs of doing business, decrease the use of our sites by consumers and suppliers and may result in the imposition of monetary liability.

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In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time-consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations.

These potential claims include, but are not limited to, personal injury claims, class action lawsuits, intellectual property claims, employment litigation and regulatory investigations and causes of action relating to the advertising and promotional claims about our products.

These potential claims include, but are not limited to, personal injury claims, class action lawsuits, intellectual property claims, employment litigation, securities litigation, and regulatory investigations and causes of action relating to our financial reporting, claims about our business and operations, and/or the advertising and promotional claims about our products.

Any adverse determination against us in these proceedings, or even the allegations contained in these claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.

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Any product liability claim or series of claims brought against us could harm our business significantly, particularly if a claim were to result in adverse publicity or damage awards outside or in excess of our insurance policy limits.

Anti-takeover provisions of Delaware law and our Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws could delay and discourage takeover attempts that stockholders may consider to be favorable.

Certain provisions of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and applicable provisions of the Delaware General Corporation Law may make it more difficult or impossible for a third-party to acquire control of us or effect a change in our Board of Directors and management.

These provisions include:

• the classification of our Board of Directors into three classes, with one class elected each year to serve for a term of three

• prohibiting cumulative voting in the election of directors;

• the ability of our Board of Directors to issue preferred stock without stockholder approval;

• the ability to remove a director only for cause and only with the vote of the holders of a majority of our voting stock;

• a special meeting of stockholders may only be called by our chairman of our Board of Directors, Chief Executive Officer,

or upon a resolution adopted by an affirmative vote of a majority of the Board of Directors, and not by our stockholders;

• prohibiting stockholder action by written consent;

• our stockholders must comply with advance notice procedures in order to nominate candidates for election to our board of

directors or to place stockholder proposals on the agenda for consideration at any meeting of our stockholders.

We may incur substantial costs and receive adverse outcomes in litigation, regulatory investigations, and other legal matters in connection with alleged violations of securities laws and regulations.

Our business, financial condition, and results of operations could be materially adversely affected by unfavorable results in pending or future litigations, regulatory investigations, and other legal matters related to violations or perceived violations of applicable securities laws and regulations by the Company or its affiliates.

We may become subject to SEC investigations or legal proceedings in the future.

The ultimate resolution of such investigations and lawsuits cannot be predicted, and the claims raised in these lawsuits may result in further legal matters or actions against us, including, but not limited to, government enforcement actions or additional private litigation.

We cannot predict the outcome of any particular proceeding, or whether any SEC investigation will be resolved favorably or ultimately result in charges or material damages, fines or other penalties, enforcement actions, or civil or criminal proceedings against us or members of our senior management.

Litigation matters and regulatory investigations, regardless of their merits or their ultimate outcomes, are costly, divert management’s attention, and may materially adversely affect our reputation and demand for our products.

We cannot predict with certainty the eventual outcome of pending or future legal matters.

An adverse outcome of litigation or legal matters could result in us being responsible for significant damages.

Any of these negative effects resulting from litigation, regulatory investigations, and other legal matters could materially adversely affect our business, financial condition, and results of operations.

Risks related to intellectual property

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We also rely on social networking messaging services to send communications and to encourage consumers to send communications.

Changes to the terms of these social

networking services to limit promotional communications, any restrictions that would limit our ability or our consumers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by consumers could materially and adversely affect our business, financial condition and results of operations.

Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our consumers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by consumers could materially and adversely affect our business, financial condition and results of operations.

Our business could be negatively impacted by corporate citizenship and sustainability matters.

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In addition to potential dilution associated with future offerings of debt or equity securities, we currently have significant numbers of securities outstanding that may be exercisable for shares of our Class A Common Stock, which may result in significant dilution to current stockholders and downward pressure on our stock price.

As of February 24, 2023, there were 132,500,049 shares of our Class A Common Stock outstanding.

As of March 9, 2024, there were 123,427,416 shares of our Class A Common Stock outstanding.

In addition, the potential conversion of the Notes into shares of our Class A Common Stock represents the issuance of approximately 21,252,983 shares of our Class A Common Stock.

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Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants for each reporting period that our warrants remain outstanding and that the amount of such gains or losses on our warrants could be material.

Unresolved Staff Comments.

We may be subject to securities litigation, which is expensive to defend and could divert management’s attention.

In the past, following periods of market volatility in the price of a company’s securities or the reporting of unfavorable news, security holders have often instituted class action litigation.

If the market value of our securities experience adverse fluctuations and we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management’s attention could be diverted from the operation of our business, causing our business to suffer.

Any adverse determination in litigation could also subject us to significant liabilities.

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

What changed 10-K

Item 1A. Risk Factors