Evolv Technologies Holdings (EVLV) risk factors, FY2024 10-K

Risks Related to Our Restatement and Internal Controls

1. 01We identified certain misstatements to our previously issued financial statements and have restated the financial statements described below, which has exposed us to a number of additional risks and uncertainties
2. 02We have identified material weaknesses in our internal control over financial reporting, which have led to restatements and caused us to fail to meet our periodic reporting obligations, and this could occur again the future
3. 03Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital

Risks Related to Our Business and Operations

1. 04We have a history of losses. We have not been profitable historically and may not achieve or maintain profitability in the future
2. 05Our operating results may fluctuate for a variety of reasons, including our failure to close large volume opportunity customer sales
3. 06In addition to our direct sales force, we rely on our reseller partners to sell our products. We expect to continue to focus on generating sales to new and existing customers through our reseller partners as a part of our growth strategy, who may not be successful in marketing, selling, and supporting our products
4. 07Increases in component costs, long lead times, supply shortages, and supply changes could disrupt our supply chain and have an adverse effect on our business, financial condition, and operating results
5. 08Delays in production, increases in prices charged or the loss of a limited or sole source supplier could have an adverse effect on our business, financial condition and operating results
6. 09We recognize a substantial portion of our revenue ratably over the term of our agreements with customers and, as a result, downturns or upturns in sales may not be immediately reflected in our operating results
7. 10If we are unable to compete effectively with new entrants and other potential competitors, our sales and profitability could be adversely affected
8. 11A portion of our revenue is generated by sales to government entities and such sales are subject to a number of challenges and risks
9. 12We could lose customers and revenue if there are changes in the spending policies or budget priorities for government funding of colleges, universities, K-12 schools and other education providers
10. 13If we are not able to maintain and enhance our brand or reputation as an industry leader, our business and operating results may be adversely affected
11. 14We may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or otherwise harm our operating results

Risks Related to Our Industry and Products

1. 15If our products fail or are perceived to fail to detect threats such as a firearm or other potential weapon or explosive device, or if our products contain undetected errors or defects, this could have an adverse effect on our business and results of operations
2. 16If our customers are unable to implement our products successfully, or if we fail to effectively assist our customers in installing our products and provide effective ongoing support and training, customer perceptions of our products may be impaired, or our reputation and brand may suffer
3. 17The loss of designation of our Evolv Express system as a Qualified Anti-Terrorism Technology under the Homeland Security SAFETY Act could result in adverse reputational and financial consequences
4. 18The AI-based weapons detection for security screening market is new and evolving and may not grow as expected or may develop more slowly or differently than we expect
5. 19We use AI and machine learning in our development process and in our AI-based weapon detection products
6. 20We may be unable to acquire new customers, sell additional products to our customers, or retain our existing customers
7. 21If we do not successfully anticipate market needs and enhance our existing products or develop new products that meet those needs on a timely basis, we may not be able to compete effectively and our ability to generate revenues will suffer
8. 22We incorporate technology and components from third parties into our products, and our inability to obtain or maintain rights to the technology could harm our business
9. 23Our use of “open source” software could subject our proprietary software to certain disclosure obligations, negatively affect our ability to offer our products and subject us to possible litigation
10. 24Our products collect and store personal data about individuals, including our customers, their visitors, and our employees, as well as other proprietary business and confidential information

Risks Related to Our Human Capital

1. 25If we do not effectively expand, train, and retain qualified sales and marketing personnel, we may be unable to acquire new customers or sell additional products to successfully pursue our growth strategy
2. 26We are dependent on the continued services and performance of our senior management and other key employees, as well as on our ability to successfully hire, train, manage, and retain qualified personnel, especially those in sales and marketing and research and development

Risks Related to Our Intellectual Property

1. 27Our intellectual property rights are valuable and any inability to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results
2. 28applications for additional marks in the United States and other countries. We cannot be certain that any pending or future applications will issue as registered trademarks or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights
3. 29Third parties may in the future assert claims of infringement, misappropriation, or other violations of intellectual property rights against us. There can be no assurance that we will not be found to infringe or otherwise violate any third-party intellectual property rights or to have done so in the past
4. 30Confidentiality arrangements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information

Legal and Regulatory Risks

1. 31We are subject to government regulation and other legal obligations, particularly related to privacy, data protection, information security, and product marketing and our actual or perceived failure to comply with such obligations could harm our business
2. 32Our failure, or perceived failure, to comply fully with developing interpretations of AI laws and regulations or meet evolving and varied stakeholder expectations and industry standards, could harm our business, reputation, financial condition and results of operation
3. 33Internationally, virtually every jurisdiction in which we operate, have customers or have prospective customers has established its own data security and privacy legal frameworks with which we, our reseller partners or our customers must comply
4. 34Our operating results may be harmed if we are required to collect sales and use or other related taxes for our products in jurisdictions where it has not historically done so
5. 35Failure to comply with applicable anti-corruption legislation, export controls, economic sanctions and other governmental laws and regulations could result in fines and criminal penalties and materially adversely affect our business, financial condition, and results of operations
6. 36We are and may in the future be subject to legal proceedings, claims and investigations in or outside the ordinary course of business
7. 37We are and may in the future be subject to litigation and regulatory examinations, investigations, proceedings or orders as a result of or relating to the Investigation and our failure to timely file our periodic reports with the SEC

Risks Related to Our Financial Condition and Liquidity

1. 38There are risks related to our ability to utilize net operating loss carryforwards as well as research and development tax credit carryforwards to offset future taxable income or tax liabilities
2. 39As of December 31, 2024, we had gross U.S. federal and state research and development and other tax credit carryforwards of $2.4 million and $1.5 million, respectively, which may be available to offset future tax liabilities and the majority of which begin to expire in 2033 and 2030, respectively
3. 40We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all

Risks Related to Our Common Stock and Warrants

1. 41The market price of our common stock and warrants has been highly and may continue to be highly volatile, and you may lose some or all of your investment
2. 42Certain of our warrants are accounted for as liabilities and the changes in value of such warrants could have a material effect on our financial results
3. 43Certain of our earn-out shares and founder shares are accounted for as liabilities and the changes in value of such shares could have a material effect on our financial results
4. 44Because we do not intend to pay any cash dividends for the foreseeable future, capital appreciation, if any, would be your sole source of gain
5. 45Future sales, or the perception of future sales, of common stock by our existing security holders in the public market may cause the market price of our securities to decline
6. 46Increasing attention to, and evolving expectations for, sustainability initiatives could increase our costs, harm our reputation, or otherwise adversely impact our business
7. 47Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States
8. 48If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline
9. 49Our business operations are vulnerable to disruption due to natural or other disasters, including climate-related events, strikes and other events beyond our control