What changed in this filing

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Item 1A. Risk Factors

2023-10-27 compared with 2022-10-28 · 144 added, 27 removed, 415 unchanged (29% of the section changed)

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Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Risk Factor Summary

Below is a summary of the principal factors that make an investment in our common stock speculative or risky.

This summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information included in this Report.

• Our business is subject to risks arising from epidemic diseases, such as the COVID-19 illness.

• Our ability to sustain or increase revenues will depend upon our success in entering new markets, continuing to increase our customer base, and in deriving additional revenues from our existing customers.

• A decrease in, or resistance to, the acceptance of model-informed biopharmaceutical discovery and development could damage our reputation or reduce the demand for our products and services.

• Consolidation within the pharmaceutical and biotechnology industries may continue to lead to fewer potential customers for our products and services.

• We face strong competition, and increasing competition and costs within the industries and markets we operate in may negatively affect the demand for our products and services.

• Health care reform and restrictions on reimbursement may affect the customers that purchase or license our products or services, which may negatively affect our results of operations and financial condition.

• We are subject to price pressures in some of the markets we serve.

• Our operations may be interrupted by the occurrence of a natural disaster or other catastrophic event.

• Our insurance coverage may not be sufficient to avoid material impact on our financial position or results of operations resulting from claims or liabilities against us.

• Changes in government regulation or in practices relating to the industries in which we operate, including potential health care reform, could decrease the need for the services we provide.

• Any failure by us to comply with applicable regulations and related guidance could harm our reputation and operating results, and compliance with new regulations and guidance may result in additional costs.

• Our sales cycle is lengthy, and customers may delay entering into contracts or decide not to adopt our products or solutions after we have expended significant time and resources and supported evaluation by them of our technology.

• Many of our contracts are fixed price and may be delayed or terminated or reduced in scope for reasons beyond our control, or we may underprice or overrun cost estimates with these contracts, potentially resulting in financial losses.

• We could experience a breach of the confidentiality of the information we hold or of the security of our computer systems.

• Impairment of goodwill or intangible assets may adversely impact future results of operations.

• Software defects or malfunctions in our products could negatively impact our reputation and results of operations.

• Delays in the release of new or enhanced products or services or undetected errors in our products or services may result in increased cost to us, delayed market acceptance of our products, and delayed or lost revenue.

• We are subject to various risks associated with the operation of a global business, including foreign currency exchange rate risk and complex regulatory frameworks, amongst other things.

• Changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect us.

• Contract research services create a risk of liability.

• Upgrading our software could result in implementation issues and business disruptions.

• The industries in which we operate have a history of intellectual property litigation, involvement in intellectual property lawsuits is often very costly.

• We may not be able to successfully develop and market new services and products.

• Failure on our part to retain key personnel and to recruit adequate replacements could harm our business.

• Failure to successfully select and integrate the businesses and technologies we acquire could harm our business.

• Our periodic operating results fluctuate and may continue to fluctuate in the future, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

• Loss of our major customers could materially and adversely affect our business.

• A significant portion of our operating expenses is relatively fixed and planned expenditures are based in part on expectations regarding future revenues.

• If our security is breached or we fail to properly protect customer data, our business could be disrupted, our operating results could be harmed, and customers could be deterred from using our products and services.

• Changes in and/or failure to comply with other applicable laws, regulations, and interpretations of such laws and regulations could materially adversely affect our reputation, business and financial performance.

• We rely upon a single internal hosting facility and Amazon Web Services to deliver certain solutions to our customers and any disruption of or interference with our hosting systems, operations, or use of the Amazon Web Services could harm our business and results of operations.

• If we are not able to reliably meet our data storage and management requirements, or if we experience any failure or interruption in the delivery of our services over the Internet, our business could be harmed.

• Some of our software solutions and services utilize open-source software, and any failure to comply with the terms of one or more of these open-source licenses could adversely affect our business.

• We may be unable to adequately enforce or defend our ownership and use of our intellectual property rights.

• Litigation or claims made against us, which may arise in the ordinary course of our business, could be costly and time-consuming to defend.

• Our business depends on the clinical trial market, and a downturn in this market could harm our business.

• Any failure to do maintain proper and effective internal control over financial reporting in the future could impair our ability to produce timely and accurate financial statements or comply with applicable laws and regulations.

• As a public company, we may incur significant administrative workload and expenses in connection with new and changing compliance requirements.

• Cash expenditures associated with our acquisition of Immunetrics may create certain liquidity and cash flow risks.

• The business acquired through the Immunetrics acquisition may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.

• The obligations and liabilities of Immunetrics, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of the Immunetrics business to us.

• Our Board of Directors may (in its discretion) suspend the quarterly dividend that we typically pay, and, consequently, which could negatively impact your ability to achieve a return on your investment.

• If our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price of our common stock may decline.

• The price of our common stock may fluctuate significantly, and investors could lose all or part of their investment.

• If securities or industry analysts issue an adverse or misleading opinion regarding our stock, or our inclusion in the S&P 600 discontinues, our stock price and trading volume could decline.

• We may raise capital through the issuance of our common stock, convertible debt, or equity-linked securities, which could result in dilution to our stockholders or a negative impact on the price of our common stock.

• We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term shareholder value, and share repurchases could increase the volatility of the price of our common stock.

• Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.

Certain Risks Related to Our Business

Our business is subject to risks arising from epidemic diseases, such as the recent outbreak of the COVID-19 illness.

Our business is subject to risks arising from epidemic diseases, such as the outbreak of the COVID-19 illness.

The occurrence of regional epidemics or a global pandemic, such as COVID-19, may adversely affect our operations, financial condition, and results of operations.

The COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.

In the last few years, the COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.

The extent to which global pandemics impact our business going forward will depend on factors such as the duration and scope of the pandemic;

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As a result, we may incur additional costs and expend additional resources without being able to sustain or increase revenue.

A decrease in, or resistance to, the acceptance of model-informed biopharmaceutical discovery and development by regulatory authorities or academic institutions could damage our reputation or reduce the demand for our products and services.

In recent years, there has been a steady increase in the recognition by regulatory and academic institutions of the role that modeling and simulation can play in the biopharmaceutical development and approval process, as demonstrated by new regulations and guidance encouraging the use of modeling and simulation in the biopharmaceutical discovery, development, testing, clinical trial and approval process, which has positively impacted our business.

Changes in government or regulatory policy, or a stagnation or reversal in the trend toward increasing the acceptance of and reliance upon use of computer modeling and simulation in the drug approval process, could decrease the demand for our products and services or lead our customers to cease use of, or to recommend against the use of, our products and services.

This, in turn, could negatively impact our reputation and/or have a material adverse impact on our business prospects and results of operations.

Consolidation within the pharmaceutical and biotechnology industries may continue to lead to fewer potential customers for our products and services .

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Any material decrease in demand for our technologies or services may have a material adverse effect on our business, financial condition, and results of operations.

We are subject to pricing pressures in some of the markets we serve.

We are subject to price pressures in the markets we serve.

The market for modeling and simulation products for the life science industry is intensely competitive.

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Paris, France;

and Research Triangle Park, North Carolina.

Research Triangle Park, North Carolina;

and Pittsburgh, Pennsylvania.

Although we have contingency plans in effect for natural disasters or other catastrophic events, the occurrence of such events could still disrupt our operations.

For example, our Lancaster, California facility is located in a state that is particularly susceptible to earthquakes.

For example, our Lancaster, California facility is located in a state that is particularly susceptible to earthquakes and wildfires.

Any natural disaster or catastrophic event in our facilities or the areas in which they are located could have a significant negative impact on our operations.

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There can be no assurance, however, that all of these errors can be corrected.

We are subject to risks associated with the operation of a global business.

We are subject to various risks associated with the operation of a global business.

We derive a significant portion of our total revenue from our operations in international markets.

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Our global business may be affected by local economic conditions, including inflation, recession, and currency-exchange-rate fluctuations.

In addition, political and economic changes, including international conflicts and terrorist acts, throughout the world may interfere with our or our customers’ activities in particular locations and result in a material adverse effect on our business, financial condition, and operating results.

In addition, political and economic changes, including the imposition of import restrictions or tariffs, geopolitical instability, international conflicts and terrorist acts, throughout the world may interfere with our or our customers’ activities in particular locations and result in a material adverse effect on our business, financial condition, and operating results.

Potential trade restrictions, exchange controls, adverse tax consequences, and legal restrictions may affect the repatriation of funds into the U.S.

Also, we could be subject to unexpected changes in regulatory requirements, the continued global spread and impact of the COVID-19 pandemic, the difficulties of compliance with a wide variety of foreign laws and regulations, potentially negative consequences from changes in or interpretations of U.S.

Also, we could be subject to unexpected changes in regulatory requirements, the difficulties of compliance with a wide variety of foreign laws and regulations, potentially negative consequences from changes in or interpretations of U.S.

and foreign tax laws, import and export licensing requirements, and longer accounts receivable cycles in certain foreign countries.

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• Errors or omissions in reporting of study detail in preclinical studies that may lead to inaccurate reports, which may undermine the usefulness of a study or data from the study, or which may potentially advance studies absent the necessary support or inhibit studies from proceeding to the next level of testing

• Risks associated with our possible failure to properly care for our clients’ property, such as research models, records, work in progress, or other archived materials

• Risks associated with our possible failure to properly care for our clients’ property, such as data, research models, records, work in progress, or other archived materials

Contractual risk transfer indemnifications generally do not protect us against liability arising from certain of our own actions, such as negligence or misconduct.

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If we are unable to develop new services and products and/or create demand for those newly developed services and products, our future business, results of operations, financial condition, and cash flows could be adversely affected.

Ability to incur debt could adversely affect our business and growth prospects.

On March 31, 2020, the Company entered into a Credit Agreement with Wells Fargo Bank, N.A.

The Credit Agreement provided us with a credit facility of $3.5 million through April 15, 2022 (the "Termination Date"), on which date the Credit Agreement terminated in accordance with its terms.

As a result, we can no longer draw down against the line of credit.

We chose not to renew or pursue an alternative credit facility as we do not foresee a need to utilize such credit facility within the next twelve months.

As of the Termination Date, there were no amounts drawn against the line of credit.

Should circumstances require us to incur debt and a lender could not be found to provide that debt, this could have a significant adverse effect on our business, including making it more difficult for us to obtain financing on favorable terms, limiting our ability to capitalize on significant business opportunities, and making us more vulnerable to rising interest rates.

We depend on key personnel and may not be able to retain these employees or recruit additional qualified personnel, which could harm our business.

Our success depends to a significant extent on the continued services of our senior management and other members of management.

We have employment agreements with our CEO, CFO, and division presidents that range from one to three years.

We have employment agreements with our CEO, CFO, and certain of our other members of our leadership team that range from one to three years.

If our CEO, CFO, division presidents, or other members of senior management do not continue in their present positions, our business may suffer.

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If we are not successful in selecting and integrating the businesses and technologies we acquire, or in managing our current and future divestitures, our business may suffer.

Over the years, we have expanded our business through acquisitions.

Over the years, we have expanded our business through acquisitions, including our most recent acquisition of Immunetrics.

We continue to search to acquire businesses and technologies and form strategic alliances.

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We risk spending time and money investigating and negotiating with potential acquisition or alliance partners, but not completing transactions.

Even if completed, acquisitions and alliances involve numerous risks which may include:

Even if completed, acquisitions and alliances, including our most recent acquisition of Immunetrics, involve numerous risks which may include:

difficulties in achieving business and continuing financial success;

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• changes in tax laws, rules, regulations, and tax rates in the locations in which we operate

• the timing and charges associated with completed acquisitions and other events

• the timing and charges associated with completed acquisitions and other events, including our most recent acquisition of Immunetrics

• the financial performance of our investments

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Three customers accounted for 5%, 3%, and 3%, respectively, of revenues for fiscal year 2022.

Three customers accounted for 9%, 7% and 7% (a dealer account in Japan representing various customers), respectively, of revenues for fiscal year 2020.

Three customers accounted for 11%, 4% and 3%, respectively, of revenues for fiscal year 2021.

The loss of any of our major customers could have a material adverse effect on our results of operations and financial condition.

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In the three years ended August 31, 2023, 2022, and 2021, we had revenues of $7.3 million, $6.7 million, and $4.8 million, respectively, denominated in foreign currency in certain Asian and European markets.

We expanded our operations in Europe in 2020 with the addition of Lixoft in Paris, France.

As we continue to increase our international operations, our revenues and expenditures in foreign currencies are expected to become more material and subject to greater foreign currency exchange-rate fluctuations.

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Certain of our customer contracts are subject to cancellation by our customers at any time with limited notice.

Customers engaged in clinical trials may terminate or delay a clinical trial for various reasons, including the failure of the tested product to satisfy safety or efficacy requirements, unexpected or undesired clinical results, decisions to deemphasize a particular product or forgo a particular clinical trial, decisions to downsize clinical development programs, insufficient patient enrollment or investigator recruitment, and production problems resulting in shortages of required clinical supplies.

Customers engaged in clinical trials may terminate or delay a clinical trial for various reasons, including the failure of the tested product to satisfy safety or efficacy requirements, unexpected or undesired clinical results, decisions to de-emphasize a particular product or forgo a particular clinical trial, decisions to downsize clinical development programs, insufficient patient enrollment or investigator recruitment, and production problems resulting in shortages of required clinical supplies.

Any termination or delay in the clinical trials would likely result in a consequential delay or termination in those customers’ service contracts.

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In addition, any real or perceived compromise of our security or disclosure of sensitive information may result in lost revenues by deterring customers from using or purchasing our products and services in the future or prompting them to use competing service providers.

Changes in and/or failure to comply with other laws, regulations, and interpretations of such laws and regulations specific to the businesses and jurisdictions in which we operate could materially adversely affect our reputation, market position, or our business and financial performance.

The collection, use, disclosure, storage, disposal, protection and other processing of information about individuals, in particular healthcare data and sensitive personal information, is highly regulated in the United States, EU, and other jurisdictions, including but not limited to, under the U.S.

Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and other U.S.

privacy, security and breach notification and healthcare information laws;

the European Union’s General Data Protection Directive (“GDPR” and its national implementing laws);

United Kingdom’s data privacy laws (The Data Protection Act 2018 (“UK GDPR”)), data privacy laws in other countries around the world (e.g., China’s Personal Information Protection Law (“PIPL”)), as well as data privacy laws in individual states in the U.S.

(e.g., the California Consumer Privacy and Protection Act (“CCPA”) and the California Privacy Rights Act (“CPRA”)).

Although we require our customers who send their clinical data to us for analyses to provide it in de-identified form within the meaning of HIPAA, in certain parts of our business, such as in conjunction with certain services we offer customers, we may process personal information relating to persons who have been, are, and may in the future be involved in clinical trials.

The collection, retention, use, disclosure, and other processing of such personal information is governed, by the applicable data privacy and cybersecurity laws.

While we do not consider our service offerings to generally cause us to be considered a covered entity under HIPAA., HIPAA does require the use of standard contract language in contracts with our customers who are covered entities under HIPAA which define our obligations to safeguard the protected health information of patients if provided by our covered-entity customers.

We have adopted policies, practices, procedures, and training to safeguard the receipt, maintenance, processing, retention and transmission of such personal information.

In addition to the laws specifically passed to regulate the processing of personal information, the Federal Trade Commission (the “FTC”) and many state attorneys may generally interpret federal, state and local consumer protection laws to impose evolving standards for the handling and security of personal information.

Thus, such consumer protection laws may require us to publicly disclose how we process personal information about individual consumers and choices such individuals may have about the way we handle their personal information.

The interpretation and application of the consumer protection laws to personal information are still evolving and remain uncertain.

As noted above, certain states have also adopted personal data privacy laws.

For example, the CCPA and CPRA impose obligations and restrictions on businesses regarding their collection, use, and sharing of personal information of, as well as defining certain data privacy rights to, California residents.

Such data privacy rights include the right to access or have deleted their personal information that is processed by businesses and the right to opt out of certain sharing or processing of their personal information.

Most state data privacy laws also impose monetary penalties for violations of the respective law.

The interpretation and application of the new state data privacy laws are still evolving, which provides some uncertainty.

The GDPR and the UK GDPR also impose numerous requirements on companies that process personal data of residents from those respective jurisdictions, including requirements relating to processing health and other sensitive personal data, cross-border transfers, notice and consent, and contractual obligations with vendors and service providers who process personal data on behalf of a business.

Both the GDPR and UK GDPR also provide individuals who are residents with certain data privacy rights with respect to an individual’s personal data processed by a business such as, for example, the right of access, the right to rectification, the right to erasure, the right to restrict processing, and the right to data portability.

The GDPR permits data protection authorities to impose significant penalties for violations of the GDPR including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater.

The UK GDPR provides for similar penalties for violations of the UK GDPR.

The interpretation and application of these laws by the judicial systems are still evolving.

Legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EU to the United States.

Recently, the EU and the U.S.

agreed to a new Data Privacy Framework which will allow businesses to transfer data from the EU to the US in a secure and compliant way.

We also currently rely on the standard contractual clauses with our customers to transfer personal data outside the EU to the U.S., among other data transfer mechanisms pursuant to the GDPR or the UK GDPR.

While the standard contractual clauses and the new Data Privacy Framework have been determined to be adequate personal data transfer mechanism for transfer of personal information from the EU to the U.S.

by some regulatory authorities, there remains the possibility that challenges will be raised to the sufficiency of such transfer mechanisms which has created uncertainty.

In view of the trend for enactment of data privacy laws globally, we have implemented a comprehensive data privacy management program that includes physical, technological, and operational safeguards (such as policies, notices, processes, contractual provisions, and employee trainings) to help ensure that we process personal information about our employees and personal information received from our customers in a compliant manner.

We have also appointed VeraSafe, a global leader in privacy law and data protection, as our Data Protection Officer.

As data protection laws expand in number and scope with relevance to the kinds of personal information we process, we may need to modify our data privacy program and practices, and incur additional expenses, to accommodate such expansion and adjustments.

Any failure by us to properly protect customer data we possess or are deemed to possess, in connection with the conduct of clinical trials, could subject us to significant liability.

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New laws and regulations, as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act, the Dodd-Frank Act, and rules adopted by the SEC and by the Nasdaq Global Select Market, may result in increased general and administrative expenses and a diversion of management’s time and attention as we respond to new requirements.

Cash expenditures associated with the acquisition of Immunetrics may create certain liquidity and cash flow risks for us.

We incurred significant transaction costs and integration costs in connection with our acquisition of Immunetrics on June 16, 2023.

While we expected that the transactions costs would be incurred, there are many factors beyond our control that could affect the total amount of the integration expenses associated with the acquisition.

Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately.

In addition to integration-related expenses that we will incur, pursuant to the Merger Agreement we agreed to pay the equity holders of Immunetrics up to $1.8 million that was held back at closing and an aggregate of $8.0 million in earnout payments if Immunetrics achieves specified financial goals through December 31, 2024.

To the extent the integration expenses are higher than anticipated, we may experience liquidity or cash flow issues.

The Immunetrics business we acquired may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.

The Immunetrics business, which was merged into the Company through a short form merger in September 2023, may not perform as we or the market expects.

Risks associated with the Immunetrics acquisition include, without limitation:

• integrating businesses is a difficult, expensive, and time-consuming process, and the failure to successfully integrate our businesses with the business of Immunetrics in the expected time frame could adversely affect our financial condition and results of operation

• the addition of Immunetrics has increased the size of our operations, and, if we are not able to manage our expanded operations effectively, our common stock price may be adversely affected

• the extent to which we may realize the expected synergies and cost savings is uncertain at this time

• the success of the Immunetrics acquisition will also depend upon relationships with third parties and Immunetrics’ and our pre-existing customers, which relationships may be affected by customer preferences or public attitudes about the Immunetrics acquisition.

Any adverse changes in these relationships could adversely affect our business, financial condition, and results of operations.

The obligations and liabilities of Immunetrics, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of Immunetrics to us.

Immunetrics’ obligations and liabilities, some of which may not have been fully disclosed to us, may be greater than we have anticipated.

The obligations and liabilities of Immunetrics could have a material adverse effect on our business or Immunetrics’ value to us or on our business, financial condition, or results of operations.

Although we have held back $1.8 million of the merger consideration to cover any negative net working capital adjustments (if any) and Immunetrics’ indemnification obligations under the Merger Agreement, such holdback amount may not be sufficient to cover all claims brought against us or Immunetrics in the future in relation to Immunetrics’ business or operations.

In the event that we are responsible for liabilities substantially in excess of the $1.8 million holdback amount and/or any other amounts recovered through rights to indemnification or alternative remedies that might be available to us, or any applicable insurance, we could suffer consequences that would substantially reduce our earnings and cash flows or otherwise materially and adversely affect our business, financial condition, or results of operations.

Certain Risks Related to Ownership of Our Common Stock

We have been paying quarterly dividends on shares of our common stock, and although there has been a consistent track record of paying these dividends, the Board of Directors may suspend the dividend, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

Should the Board of Directors suspend the dividend and decide to use those funds to invest more into our business, you may not receive any dividends on your investment in our common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value.

We have been paying quarterly dividends on shares of our common stock, and although there has been a consistent track record of paying these dividends, our Board of Directors may suspend the dividend, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

Should our Board of Directors suspend the dividend and decide to use those funds to invest more into our business, you may not receive any dividends on your investment in our common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value.

Shares of our common stock may depreciate in value or may not appreciate in value.

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• achievement of expected software product and consulting service revenues and profitability, including the effects of seasonality on our results of operations, as well as adjustments to our revenues forecasts

• the ongoing COVID-19 pandemic, see “—Certain Risks Related to our Business—Our business is subject to risks arising from epidemic diseases, such as the recent outbreak of the COVID-19 illness”

• announcements of new products by us or our competitors

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• sales of our common stock by us, our executive officers and directors, or our stockholders in the future

• general economic and market conditions and overall fluctuations in the United States equity markets, including volatility related to the recent coronavirus outbreak and related health concerns

• general economic and market conditions and overall fluctuations in the United States equity markets, including volatility related to the coronavirus outbreak and related health concerns and/or global political instability

• the loss of any of our key scientific or management personnel

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To the extent that additional capital is raised through the sale of equity, convertible debt or other equity-linked securities, the issuance of these securities could result in dilution to our stockholders or result in downward pressure on the price of our common stock.

We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term shareholder value, and share repurchases could increase the volatility of the price of our common stock.

Pursuant to the share repurchase program authorized by our Board of Directors on December 29, 2022, we are authorized to repurchase up to an aggregate of $50 million of outstanding shares of our common stock from time to time through a combination of open market repurchases, privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions, and/or other transactions, in accordance with federal securities laws.

Such program may be suspended or discontinued at any time.

On January 11, 1023, we entered into the ASR Agreement with Morgan Stanley, pursuant to which we repurchased $20 million of shares of our common stock, amounting to an aggregate of 492,041 shares.

Repurchases under the ASR Agreement were completed in the quarter ended May 31, 2023, and we may not repurchase any additional shares thereunder.

As of August 31, 2023, we have not made any repurchases outside of the ASR Agreement.

As a result, we may repurchase up to $30 million more of our shares of common stock pursuant to our repurchase program.

However, we are not obligated to repurchase any additional shares, and the timing, manner, price, and actual amount of further share repurchases will depend on a variety of factors, including stock price, market conditions, other capital management needs and opportunities, and corporate and regulatory considerations.

The timing of additional repurchases pursuant to our share repurchase program, if any, could affect our stock price and increase its volatility.

We cannot guarantee that we will repurchase any additional shares, and there can be no assurance that any share repurchases will enhance shareholder value because the stock price of our common stock may decline below the levels at which we effected repurchases.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.

Actual events involving reduced or limited liquidity, defaults, nonperformance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems.

For example, in March 2023, Silicon Valley Bank and Signature Bank, and subsequently in May 2023 First Republic Bank, were closed and taken over by the Federal Deposit Insurance Corporation (“FDIC”) as receiver.

Although we did not have any cash or cash equivalent balances on deposit with Silicon Valley Bank, Signature Bank, First Republic Bank, or any other regional banks, investor concerns regarding the U.S.

or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all.

Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations.

Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

ITEM 1B – UNRESOLVED STAFF COMMENTS

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