FORWARD-LOOKING STATEMENTS
The information in this Annual Report on Form 10-K (“Form 10-K”) includes “forward-looking statements” under Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical fact included in this Form 10-K, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Form 10-K, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in this Form 10-K. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. There is a risk that such predictions, estimates, projections, and other forward-looking statements will not be achieved. Nevertheless, and despite the fact that management’s expectations and estimates are based on assumptions management believes to be reasonable and data management believes to be reliable, our actual results, performance or achievements are subject to future risks and uncertainties, any of which could materially affect our actual performance. Risks and uncertainties that could affect such performance include, but are not limited to:
•Our ability to complete the merger and other transactions contemplated by the Agreement and Plan of Merger (“Zip Merger Agreement”) dated February 28, 2022, by and among Sezzle Inc., Zip Co Limited (“Zip”) and Zip’s wholly owned subsidiary Miyagi Merger Sub, Inc. (“Merger Sub”), including due to the failure to satisfy the conditions for the completion of the merger;
•risks related to disruption of management’s attention from business operations due to the proposed merger;
•the effect of the proposed merger on our results of operations and business generally; including our ability to retain and hire key personnel and maintain our relationships with customers and partners;
•the risk that the proposed merger will not be completed in a timely manner, increasing the expected costs of the proposed merger;
•the occurrence of any event, change or circumstance that could give rise to the termination of the Zip Merger Agreement;
•impact of the “buy-now, pay-later” (“BNPL”) industry becoming subject to increased regulatory scrutiny;
•impact of operating in a highly competitive industry;
•impact of macro-economic conditions on consumer spending;
•our ability to increase our merchant network, our base of consumers and UMS;
•our ability to effectively manage growth, sustain our growth rate and maintain our market share;
•our ability to meet additional capital requirements;
•impact of exposure to consumer bad debts and insolvency of merchants;
•impact of the integration, support and prominent presentation of our platform by our merchants;
•impact of any data security breaches, cyberattacks, employee or other internal misconduct, malware, phishing or ransomware, physical security breaches, natural disasters, or similar disruptions;
•impact of key vendors or merchants failing to comply with legal or regulatory requirements or to provide various services that are important to our operations;
•impact of the loss of key partners and merchant relationships;
•impact of exchange rate fluctuations in the international markets in which we operate;
•our ability to protect our intellectual property rights;
•our ability to retain employees and recruit additional employees;
•impact of the costs of complying with various laws and regulations applicable to the BNPL industry in the United States and the international markets in which we operate; and
•our ability to achieve our public benefit purpose and maintain our B Corporation certification.
We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, the risks described under “Risk Factors” in this Form 10-K. Should one or more of the risks or uncertainties described in this Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
All forward-looking statements, expressed or implied, included in this Form 10-K are expressly qualified in their entirety by these cautionary statements. These cautionary statements should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the cautionary statements in this section, to reflect events or circumstances after the date of this Form 10-K.
SUMMARY OF RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those highlighted in “Risk Factors”. If any of these risks actually occur, our business, financial condition, or results of operations would likely be materially and adversely affected. In such case, the trading price of our shares of common stock would likely decline, and you may lose all or part of your investment. These risks include, but are not limited to, the following:
Risks Related to the Proposed Merger with Zip Co Limited
•Certain of the conditions under the Zip Merger Agreement to our consummation of the merger with a wholly-owned subsidiary of Zip are beyond our control and may not be satisfied (or waived) at all or in the anticipated timeframe.
•The merger consideration payable to holders of shares of our common stock will not be adjusted for change in our or Zip’s business, assets, liabilities, prospects, outlook, financial condition or results of operations. In addition, certain factors could affect the value of Zip ordinary shares, which would affect the value realized by our stockholders in connection with the proposed merger.
•While the proposed merger is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business.
•In the event that the proposed merger with a wholly-owned subsidiary of Zip is not consummated, the trading price of shares of our common stock represented by CDIs and our future business and results of operations may be negatively affected.
•The Zip Merger Agreement contains provisions that could make it difficult for a third party to acquire us prior to the completion of the proposed merger.
•Shareholder litigation could prevent or delay the closing of the proposed merger with Zip or otherwise negatively impact our business, operating results and financial condition.
Risks Related to Our Industry
•The BNPL industry may become subject to increased regulatory scrutiny.
•We operate in a highly competitive industry.
•Our success is subject to macro-economic conditions that have an impact on consumer spending.
•Our industry may be subject to negative publicity.
Risks Related to Our Strategy and Growth
•We are an early-stage financial technology company with a limited operating history and a history of operating losses.
•Our business depends on our ability to increase our merchant network, our base of consumers and UMS.
•Our ability to effectively manage growth.
•Our ability to maintain market share.
•We may not be able to sustain our growth rate.
•Our ability to comply with business and regulatory risks associated with international expansion of our operations.
•We may require additional capital.
•We may not realize any or all of our estimated costs savings or benefits from our recently announced workforce reduction plan.
Risks Related to Our Financing Program
•Consumers may not treat their BNPL product loans with the same significance as other financial obligations.
•Merchants may fail to fulfill their obligations to consumers or comply with applicable law.
•Internet-based loan origination processes may give rise to greater risks than paper-based processes.
•Exposure to consumer bad debts and insolvency of merchants may adversely impact our financial success.
•Our ability to comply with the applicable requirements of payment processors.
Risks Related to Our Technology and the Sezzle Platform
•The integration, support and prominent presentation of our platform by our merchants.
•Unanticipated surges or increases in transaction volumes.
•The occurrence of data security breaches, cyberattacks, employee or other internal misconduct, malware, phishing or ransomware, physical security breaches, natural disasters, or similar disruptions.
•Real or perceived software failures or outages.
•Disruption in service on our platform that prevents us from processing transactions.
•Fraudulent activities occurring on our platform.
Other Risks Related to Our Business
•The failure of key vendors or merchants to comply with legal or regulatory requirements or to provide various services that are important to our operations.
•The loss of key partners and merchant relationships.
•Changes in market interest rate and the replacement of LIBOR.
•Exchange rate fluctuations in the international markets in which we operate.
•Our ability to protect our intellectual property rights.
•The loss of licenses or any quality issues with third-party technology that support our business operations or are integrated with our products or services.
•Our inability to retain employees or recruit additional employees.
Risks Related to Our Regulatory Environment
•The costs of complying with various laws and regulations applicable to the BNPL industry in the United States and Canada.
•We are subject to various laws in the United States and Canada concerning lending programs, consumer finance and consumer protection and in other jurisdictions into which we are expanding.
•Litigation, regulatory actions, and compliance issues could subject us to increased costs.
•Stringent and changing laws and regulations relating to privacy and data protection could result in claims, harm our results of operations, financial condition, and prospects, or otherwise harm our business.
•Failure to operate without obtaining necessary licenses.
•Violating applicable state lending or other laws.
Risks Related to Our Corporate Structure
•Our existing major stockholders own a large percentage of our stock and can exert significant influence over us.
•Failure to maintain effective internal control over financial reporting or disclosure controls may adversely affect our ability to report our financial results in a timely and accurate basis.
•We are an “emerging growth company,” and the reduced U.S. public company reporting requirements applicable to emerging growth companies may make our shares of common stock less attractive to investors.
•We have and will continue to incur significant costs and are subject to additional regulations and requirements as a public company in both Australia and the United States.
•As a public benefit corporation, we cannot provide any assurance that we will achieve our public benefit purpose or that producing a positive effect for society will benefit us.
•As a public benefit corporation, our focus on a public benefit purpose may negatively impact our financial condition.
•Our directors have a fiduciary duty to consider not only our stockholders’ interests, but also our specific public purpose and the interests of other stakeholders affected by our actions.
•Increased derivative litigation concerning our duty to balance stockholder and public benefit interest.
•If our ability to maintain our certification as a B Corporation or our publicly reported B Corporation score declines, our reputation could be harmed and our business could be adversely affected.