System1 (SST) risk factors, FY2025 10-K

Risks Related to Our Business Strategy and Industry Generally

1. 01We have a limited operating history, which makes it difficult to evaluate our business and prospects and may increase the risks associated with your investment22% rewritten
2. 02Our revenue is tied to the effectiveness and ability to acquire traffic in a cost-effective mannerNew
3. 03A meaningful portion of our revenue is attributable to our agreements with Google, and therefore is subject to its practices
4. 04We collect, process, store, share, disclose and use consumer information and other data, and our actual or perceived failure to protect such information and data or respect users’ privacy could damage our reputation and brand and harm our business and operating results
5. 05We rely on our Marketing and Network Partners for a significant portion of our consumer Internet traffic35% rewritten
6. 06Efforts designed to drive visitors to our various brands and businesses or those of our advertisers may not be successful or cost-effective
7. 07Our marketing efforts may not be successful
8. 08We have entered into, and may in the future enter into, credit facilities which contain operating and financial covenants that restrict our business and financing activities
9. 09We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs, which may in turn impair our growth
10. 10We have $255.1 million of outstanding indebtedness under our Term Loan that is scheduled to mature in July 2027. This maturity means that these long-term obligations will be reclassified as current liabilities on our balance sheet during fiscal 2026, which will significantly increase our short-term obligationsNew
11. 11There is substantial doubt about our ability to continue as a going concern, which may adversely affect our business, financial condition and results of operationsNew
12. 12The transfer of assets in connection with our business restructuring is subject to legal challenge by certain creditors, including claims of fraudulent transfer or conveyance, which could result in significant liabilitiesNew
13. 13Operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems, may adversely affect our business, financial condition and operating results
14. 14We allow our clients to utilize application programming interfaces, or APIs, with MapQuest and for reporting or distribution of services for our other businesses, which could result in outages or security breaches and negatively impact our business, financial condition and operating results
15. 15We compete for advertising spend from our advertisers, and if we are unable to maintain or increase our share of the advertising spend of our advertisers, our business could be harmed
16. 16Our results of operations may fluctuate significantly, which could prevent us from meeting our own expectations or security analysts or investor expectations
17. 17As our costs increase, we may not be able to generate sufficient revenue to sustain profitability
18. 18Our advertising business is dependent on advertisers buying mobile, display and video advertising. A decrease in the use of these advertising channels would harm our business, growth prospects, financial condition and results of operations
19. 19Our business and prospects would be harmed if changes to the technologies used across our websites or other products and services or new versions or upgrades of operating systems and Internet browsers adversely impact users
20. 20Unfavorable global economic conditions, including as a result of political or social conflict or unrest or health and safety concerns related to a public health crisis, could adversely affect our business, financial condition or results of operations84% rewritten
21. 21If material weaknesses are identified, we may not be able to report our financial results accurately, prevent or detect material misstatements due to fraud or error, or file our periodic reports as a public company in a timely mannerNew
22. 22A significant portion of our assets consists of goodwill and other intangible assets, the value of which may be reduced if we determine that those assets are impaired62% rewritten
23. 23If future operating performance were to fall below current projections or if there are material changes to management’s assumptions, we could be required to recognize additional non-cash charges to operating earnings for goodwill and other intangible asset impairment, which could be significant
24. 24If we fail to build and maintain our brands, our ability to expand the use of our websites and software products by advertisers and consumers, respectively, may be adversely affected
25. 25International expansion subjects us to additional costs and risks that can adversely affect our business, financial condition and operating results
26. 26Future acquisitions, strategic investments or alliances could disrupt our business and harm our business, financial condition and operating results
27. 27Our future success depends on the continuing efforts of our key employees, and our ability to attract, hire, retain and motivate highly skilled employees in the future
28. 28We may need to change our pricing models to compete successfully
29. 29We depend on search engines, display advertising, social media, email, content-based online advertising and other online sources to attract consumers to our websites and convert them into sales for our advertisers. If we are unable to drive traffic cost-effectively, our business and financial results may be harmed
30. 30We depend on third-party website publishers for a significant portion of our visitors, and any decline in the supply of media available through these websites or increase in the price of this media could cause our revenue to decline or our cost to reach visitors to increase
31. 31Our failure to meet content and inventory standards and provide services that our advertisers and inventory suppliers trust could harm our brand and reputation and negatively impact our business, financial condition and operating results
32. 32If the non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to, or do not perform as we expect, our business, financial condition and operating results could be harmed
33. 33Our management team has limited experience managing a public company

Legal and Compliance Risks

1. 34Our business could be affected by the enactment of new governmental regulations regarding the Internet
2. 35To date, government regulations have not materially restricted the use of the Internet in most parts of the world. The legal and regulatory environment pertaining to the Internet, however, is uncertain and may change
3. 36We assess customer needs, and sometimes collect customer contact information to provide other product offerings, which results in us receiving personally identifiable information
4. 37Litigation could distract management, increase our expenses or subject us to material monetary damages and other remedies
5. 38We are subject to anti-bribery, anti-corruption and similar laws and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation
6. 39Privacy and data protection laws to which we are subject may cause us to incur additional or unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change offerings or our business model, which may have a material adverse effect on our business
7. 40We typically collect and store IP addresses, other device identifiers (such as unique mobile application identifiers) and email addresses, which are or may be considered personal data or personal information in some jurisdictions or otherwise may be the subject of regulation31% rewritten
8. 41or third parties acting at our direction to abide by applicable laws and regulations could adversely impact our business, financial condition and results of operations or subject us to fines or other penaltiesNew
9. 42Failure to comply with current or future laws and regulations relating to AI could adversely affect our business, operations, and financial condition
10. 43Today, digital advertising, including our offering, makes significant use of first-party cookies to store device identifiers for the advertising activities described above69% rewritten
11. 44derived from our users or subscribers, including certain user-profile elements such as IP address, device or browser type, operating system or search query information, our business, financial condition and results of operations could be adversely affectedNew
12. 45Concerns regarding data privacy and security relating to our industry’s technology and practices, and perceived failure to comply with laws and industry self-regulation, could damage our reputation and deter current and potential clients from using our products and services

Risks Related to Intellectual Property

1. 46Our use of "open source" software could adversely affect our ability to protect our proprietary software and subject us to possible litigation
2. 47Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantages and harming our business
3. 48Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information
4. 49We may not be able to adequately protect our intellectual property rights
5. 50We may be sued by third parties for alleged infringement of their trademarks or other intellectual property rights, which would result in additional expense and potential damages
6. 51We face potential liability and harm to our business based on the nature of our business and the content on our technology platform
7. 52We may face risks associated with our use of certain AI Tools90% rewritten
8. 53technologies will always enhance our products or services or be beneficial to our business, including our efficiency or profitabilityNew

Risks Related to Our Common Stock and Warrants

1. 54Our issuance of additional shares of common stock, Warrants or other convertible securities may dilute your ownership interest in us and could adversely affect our stock price
2. 55We are a "smaller reporting company" and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock and Warrants less attractive to investors69% rewritten
3. 56The market price of our common stock and Warrants may be volatile or may change significantly regardless of our operating performance. You may lose some or all of your investment as a result
4. 57Our failure to satisfy the NYSE continued listing standards could result in the delisting of our common stock, which could adversely affect the market for our common stock and our ability to access capitalNew
5. 58The obligations associated with being a public company involve significant expenses and require significant resources and management attention, which may divert from our business operations
6. 59You may only be able to exercise the Warrants (as defined below) on a "cashless basis" under certain circumstances, and if you do so, you will receive fewer shares of common stock from such exercise than if you were to exercise such Warrants for cash
7. 60We may redeem your unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Warrants worth less than what you paid for them