American Virtual Cloud Technologies (AVCTQ) Risk Analysis

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.

Third-parties, such as hackers, could circumvent or sabotage the security practices and products used in the Company's product and service offerings, and/or the security practices or products used in the Company's internal IT systems, which could result in disclosure of sensitive or personal information, unauthorized procurement, or other business interruptions that could damage the Company's reputation and disrupt its business. Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. If third-parties or the Company's employees are able to maliciously penetrate its network security or otherwise misappropriate its customers' information or employees' personal information, or other information for which its customers may be responsible and for which the Company agrees to be responsible in connection with service contracts into which it may enter, or if the Company gives third-parties or its employees improper access to certain information, the Company could be subject to liability. This liability could include claims related to unauthorized access to devices on its network; unauthorized access to its customers' networks, applications, data, devices, or software; and identity theft or other similar fraud-related claims. This liability could also include claims related to other misuses of or inappropriate access to personal information. Other liability could arise from claims alleging misrepresentation of the Company's privacy and data security practices. Any such liability for misappropriation of information could decrease the Company's profitability. In addition, federal and state agencies have been investigating various companies to determine whether they misused or inadequately secured information. The Company could incur additional expenses when new laws or regulations regarding the use of information are enacted, or if governmental agencies require the Company to substantially modify its privacy or security practices. The Company could fail to comply with applicable data privacy laws, the violation of which may result in audits, fines, penalties, litigation, or administrative enforcement actions with associated costs. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the security practices the Company uses to protect sensitive customer transaction information and employee information. A party who is able to circumvent the Company's security measures could misappropriate proprietary information or cause interruptions in the Company's operations. Further, third-parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords, or other information or otherwise compromise the security of the Company's internal networks and/or its customers' information. Since techniques used to obtain unauthorized access change frequently and the size and severity of security breaches are increasing, the Company may be unable to implement adequate preventative measures or timely identify or stop security breaches while they are occurring. The Company may be required to expend significant capital and other resources to protect against security breaches or to remediate the subsequent risks and issues caused by such breaches. The Company's security measures are designed to protect against security breaches, but its failure to prevent such security breaches could cause it to incur significant expense to investigate and respond to a security breach and correct any problems caused by any breach, subject it to liability, damage its reputation, and diminish the value of its brand. There can be no assurance that the limitations of liability in Company contracts would be enforceable or adequate or would otherwise protect the Company from any such liabilities or damages with respect to any particular claim. The Company also cannot be sure that its existing insurance coverage for errors and omissions or security breaches will continue to be available on acceptable terms or in sufficient amounts to cover one or more large claims, or that its insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against the Company that exceeds its available insurance coverage, or changes in its insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on the Company's business, financial condition, and results of operations.

As of December 31, 2021, the Company has one warehouse and a distribution facility in the U.S. If such facilities were to be seriously damaged by a natural disaster or other adverse occurrence, the Company could utilize another distribution center or third-party distributors to ship products to its customers. However, this may not be sufficient to avoid interruptions in the Company's business and may not be enough to meet the needs of all of the Company's customers and could cause increased operating costs. In addition, the Company operates two customer facing data centers which contain its Securities Operations Center and Network Operations Center. The Company also operates certain sales offices as well as leased facilities in Ottawa, North Carolina and Mexico, along with a number of rented spaces that are used as server locations, all of which may contain business-critical data and confidential customer information. A natural disaster or other adverse occurrence at any such locations could negatively impact its business, results of operations or cash flows.

To increase market awareness and sales of the Company's offerings, the Company may need to expand its marketing efforts and sales operations in the future. The Company's products and services require a sophisticated sales effort and significant technical engineering talent. For example, its sales and engineering candidates must have highly technical hardware and software knowledge to create a customized solution for its customers' business processes. Competition for qualified sales, marketing and engineering personnel fluctuates depending on market conditions, and the Company may not be able to hire or retain sufficient personnel to maintain and grow its business. Frequently, the Company's competitors require their employees to agree to non-compete and non-solicitation agreements as part of their employment. This makes it more difficult for the Company to hire, and also may increase the costs of reviewing and managing non-compete restrictions. Additionally, in some cases, the Company's relationship with a customer may be impacted by turnover in its sales or engineering team.