SEZL US Equity☆

szl-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

(Mark One)

For the fiscal year ended December 31, 2021

OR

For the transition period from to

SEZZLE INC.

(Exact name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: +1651504 5402

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.00001 per share(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the

past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth

company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒

Smaller reporting company ☒ Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2021, was $582,910,693 based on the closing price of A$8.81 per share of Common Stock as reported on the Australian Securities Exchange.

The total number of shares of common stock, par value $0.00001 per share, outstanding at February 28, 2022 was 204,409,961.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents

SEZZLE INC.

TABLE OF CONTENTS

PART I

Item 1 Business 6

Item 1A Risk Factors 20

Item 1B Unresolved Staff Comments 50

Item 2 Properties 50

Item 3 Legal Proceedings 50

Item 4 Mine Safety Disclosures 50

PART II

Item 6 [Reserved] 53

Item 7A Quantitative and Qualitative Disclosures About Market Risk 71

Item 8 Financial Statements and Supplementary Data 72

Item 9A Controls and Procedures 101

Item 9B Other Information 103

Item 9C Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 103

PART III

Item 10 Directors, Executive Officers and Corporate Governance 104

Item 11 Executive Compensation 109

Item 14 Principal Accountant Fees and Services 121

PART IV

Item 15 Exhibits and Financial Statement Schedules 123

2

Table of Contents

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.

3

Table of Contents

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.

4

Table of Contents

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.

5

Table of Contents

PART I

ITEM 1. BUSINESS

Unless otherwise noted, references in this Form 10-K to “we,” “us,” “our,” “Company,” or “Sezzle” refer to Sezzle Inc.

Our Company

We are a purpose-driven payments company that is on a mission to financially empower the next generation. Launched in 2017, we have built a digital payments platform that allows merchants to offer their consumers a flexible alternative to traditional credit. As of December 31, 2021, our platform has supported the business growth of over 47 thousand Active Merchants while serving approximately 3.4 million Active Consumers. Through our payments products we aim to enable consumers to take control over their spending, be more responsible, and gain access to financial freedom. Our vision is to create a digital ecosystem benefiting all of our stakeholders - merchant partners, consumers, employees, communities and investors - while continuing to drive ethical growth.

We launched Sezzle amid a backdrop in which digitally-enabled shopping began to claim a larger share of the retail sector and younger generations (i.e., Gen Z and Millennials) started to demonstrate a need for credit. Gen Z and Millennial consumers, which we define as individuals currently between ages 18-25 and 26-44 respectively, use credit cards less frequently relative to other generations and in many cases lack access to traditional credit. These same consumers are tech-savvy, gravitating towards modern, streamlined commerce solutions whether online or in person. We believe that our platform addresses the shortcomings in legacy payment offerings faced by consumers by providing a flexible, secure, omnichannel alternative, with the structural benefit of “creditizing” traditional debit products. The technology solutions we have designed specifically align with our ethos of helping the next generation pave their way forward financially. It is therefore no surprise that, as of December 31, 2021, 80% of our consumer base who have placed an order with us is comprised of Gen Z (18-25) and Millennials (26-44).

The Sezzle Platform connects consumers with merchants via our core proprietary, digital payments platform that instantly extends credit at the point-of-sale. Our core product is differentiated from traditional lenders through our credit-and-capital-light approach, and we believe that it is mutually beneficial for our merchants and consumers given the network effects inherent in our platform. We enable consumers to acquire merchandise upfront and spread payments over four equal, interest-free installments over six weeks. We realize high repeat usage rates by many of our consumers, with the top 10% of our consumers measured by UMS transacting an average of 49 times per year based on the transaction activity during the year ended December 31, 2021, although historical transaction activity is not an indication of future results.

Our core product offering is completely free for consumers who pay on time; instead, we generate a substantial majority of our revenues by charging our merchants fees in the form of a Merchant Discount Rate. For the year ended December 31, 2021, the fees generated through the Merchant Discount Rate comprised 96.1% of our “Sezzle Income”, which is the sum of total merchant fees and rescheduled payment fees, less note origination costs. Sezzle Income represented 85.5% of “Total Income,” which is the sum of Sezzle Income and account reactivation fees for the year ended December 31, 2021.

In the fourth quarter of 2020, we launched Sezzle Up, an upgraded version of the core Sezzle experience which provides a credit-building solution for new-to-credit consumers, helping consumers adopt credit responsibly and build their credit history. In the second quarter of 2021, we expanded our product suite to provide consumers of participating merchants with access to a long-term installment lending option pursuant to a partnerships with third-party financial institutions. Through these partnerships, we offer consumers at participating merchants access to an interest-bearing, monthly fixed-rate installment loan product to finance larger-ticket items, generally for up to 60 months, with our lending partners providing the capital and assuming the credit risk to support the product. We receive a fee from our lending partners on a monthly basis based on the total originated loan volume for that month. We believe Sezzle Up and our long-term financing option are among a number of recent initiatives that set us apart from our competitors.

Further, we believe our multi-stakeholder approach gives us a competitive advantage and positions our company for success because our consumers and merchant partners want to be affiliated with a purpose-driven partner. We reclassified as a public benefit corporation in June 2020, and in March 2021, we also became certified as a B Corporation. Our status as a B Corporation aligns with our mission to achieve growth, profitability, and returns for our investors while continuing to do right by our surrounding communities and our full set of stakeholders. See “Biennial Public Benefit Corporation Statement” below.

6

Table of Contents

We offer a unique and user-friendly platform to our merchants. Our easy integration and seamless onboarding capabilities allow most merchants to go live on our platform within 24 hours of activation so they quickly realize the benefits of partnering with Sezzle. Our merchant categories include small-to-medium sized businesses (“SMBs”), medium-sized brands and large retailers, many of which recognize the benefits of the Sezzle Platform, including an average increase in average order value (“AOV”) of approximately 22% during 2021 based on a review of merchants with a minimum of $80,000 UMS, and an average reduction of approximately 38% in full return orders compared to pre-installation during 2021 based on the review of over 7,500 merchants on the Shopify platform with a minimum of $1,000 in UMS. This all occurs without any credit risk being transferred to the merchant.

The continued expansion of our platform should continue to enhance the benefits for our merchants. Our integration into scaled e-commerce platforms, such as Shopify, WooCommerce, BigCommerce and Wix.com, is expected to give more merchants the opportunity to seamlessly offer Sezzle as a payment option at checkout. We expect our long-term installment loan product will facilitate a broader range of purchases, including larger ticket items by our consumers at participating merchants.

A critical component of our business model is the ability to effectively manage the repayment risk inherent in allowing consumers to pay over time. To that end, a team of Sezzle engineers and risk specialists oversee our proprietary systems, identify transactions with elevated risk of fraud, assess the credit risk of the consumer and assign spending limits, and manage the ultimate receipt of funds. We believe these systems have allowed us to maintain an approximately 81% order approval rate in our core product as of December 2021. Further, we believe repayment risk is more limited relative to other traditional forms of unsecured consumer credit because consumers primarily settle 25% of the purchase value upfront. Additionally, ongoing user interactions allow us to continuously refine and enhance the effectiveness of these platform tools through machine learning.

Our success would not be possible without our dedicated people, who are our company’s greatest asset. Bringing together a team of highly-skilled and innovative engineering, product, marketing and business development professionals and creating an inclusive, team-centric culture in which doing the right thing is celebrated are imperative to execute our strategy.

We have ambitious plans to continue to grow both our consumer base and our merchant partner base, as well as to deepen our level of penetration within each group. We are expanding into new merchant categories to best capture the latest spending trends. In parallel, we are increasing Sezzle’s consumer brand awareness to reach new consumer audiences, while driving higher repeat usage levels by Active Consumers and continuing to develop new ways for these consumers to leverage the Sezzle Platform, including in-store through the Sezzle Virtual Card. We plan to continue partnering with larger merchants through incentive-based arrangements.

We primarily operate in the United States and have operations in Canada, India, Brazil and certain countries in Europe. We are currently evaluating our business opportunities in international markets and may determine to exit markets outside of North America.

Our growth has continued to accelerate during the year. Sezzle Income, the total of merchant fees and rescheduled payment fees less note origination costs, increased to $114.8 million for the year ended December 31, 2021—an increase of 95% from the prior year period. Additionally, we recorded $1.8 billion of Underlying Merchant Sales (UMS, as defined below) for the year ended December 31, 2021, an increase of 111% from the prior year period. As of December 31, 2021, Active Consumer repeat usage increased for the 36th month in a row, reaching 92.8%. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Operating Metrics.”

7

Table of Contents

Technology Solutions

Sezzle Platform

At its core, the Sezzle Platform is a payments solution that instantly extends credit at point-of-sale, allowing consumers to purchase and receive the ordered merchandise at the time of sale and effectively split the payment for the purchase over four equal, interest-free payments over six weeks.

Merchants and consumers have indicated that the Sezzle Platform is easy to use. Our platform is integrated into merchants’ websites via our direct Application Programming Interface and we provide technical support and onboarding services as part of the integration process. We are able to rapidly onboard merchants through an increasingly automated “merchant underwriting process”, and once integrated, merchants can immediately promote Sezzle to their shoppers on product and cart pages to start improving sales conversion. The Sezzle Platform is presented alongside other payment options on the merchant’s “Checkout” page. Consumers then select Sezzle as their payment option and create an account if they are a first-time user with Sezzle in a streamlined process that keeps consumers engaged throughout checkout.

The Sezzle Platform reviews the transaction and consumer profile in real-time and, if approved, quickly confirms the transaction for the merchant and consumer. Once approved, consumers are granted an initial spending limit. Further, our approval engine has a “counteroffer” function, which analyzes above-limit purchase attempts and provides alternative terms so that the consumer is not denied outright. Upon approval, the merchant ships the item(s) and receives payment, just as if the consumer had paid in cash or used a traditional credit or debit card, and the merchant pays us in the form of a Merchant Discount Rate, which is subtracted from the sales price when we pay the merchant.

The Sezzle Platform is completely free to consumers who pay on time. In order to complete their installment payments, consumers will receive a notification via email, SMS, or the Sezzle iOS or Android app two days prior to the date the installment payment is automatically debited by the Sezzle Platform. The consumer is also able to review and manage their Sezzle account via the Sezzle Platform’s online dashboard. From the dashboard, consumers are able to reschedule a payment without charge the first time, and can subsequently reschedule a payment up to three times for a small fee. Consumers who fail to pay for their purchases on time may incur an account reactivation fee, which requires the settlement of an outstanding balance (including the reactivation fee) before they may use our platform again in the future. We typically do not report delinquent core Sezzle accounts to any credit bureaus or collection agencies, unless the consumer has elected to participate in Sezzle Up (as further discussed below). As a result, consumer behavior on the core Sezzle Platform has no impact to a consumer’s credit score.

Our consumer-centric model has enabled us to consistently add Active Consumers each quarter. We added 1.2 million Active Consumers during the year ended December 31, 2021, reaching a total of 3.4 million Active Consumers on the platform at the end of 2021.

Sezzle Up

In partnership with TransUnion, we engineered Sezzle Up, an upgraded version of the core Sezzle experience that supports consumers in building their credit scores by permitting us to report their payment histories to credit bureaus. As these consumers pay on time, their credit scores and spending limits on the Sezzle Platform can increase. Qualifying for Sezzle Up is simple: existing Sezzle users who elect to participate just need to connect a bank account and pay off one order on time. As a condition to joining Sezzle Up, users commit to complete installment payments over the Automated Clearing House (“ACH”) network instead of over a card network. Users’ initial down payment is still completed over a card network. Using the ACH network benefits us by typically reducing processing fees and, in turn, lowering our transaction costs.

We were an early if not the first mover among digital payments platforms that offer a credit-building solution to consumers, and we supplement Sezzle Up’s credit development capabilities with Sezzle U, a free curated series of lessons on personal finance to further help our consumers develop their financial literacy.

8

Table of Contents

Sezzle Virtual Card

Other parts of our product suite and proprietary merchant interface are specifically designed to streamline the merchant experience. Our Sezzle Virtual Card bolsters our omnichannel offering and provides a rapid-installation, point-of-sale option for brick-and-mortar retailers through its compatibility with Apple Pay and Google Pay. With the Sezzle Virtual Card, consumers can enjoy in-store shopping with the convenience of immediately tapping into the Sezzle Platform with the “swipe” of their virtual card at the

point-of-sale.

Long-Term Installments

We look to provide access to a long-term installment financing option to our merchants and consumers while limiting our own capital needs and credit risk. To provide this option to our merchants and consumers, in 2021 we began engaging third-party financial institutions. Through these partnerships, we offer our consumers at participating merchants access to interest-bearing monthly fixed-rate installment-loan products for larger-ticket items, which extend up to 60 months while we earn a fee from our lending partners. We believe providing consumers access to long-term options has the potential to enhance our relationship with both merchants and consumers while generating an attractive fee stream with no capital requirements or credit risk for us and complementing our existing short-term, interest-free offering.

Our Merchants

We believe our merchant partners benefit from our platform’s network effects. By equipping our consumers with a flexible payment product, we help our merchants expand their reach and access a deep and growing pool of consumers who would not otherwise be able to finance a transaction with our merchants. Additionally, we believe that merchants benefit from associating with an innovative payments company with B Corporation status which shares their consumers’ values across environmental, social, and economic causes. Our merchant partnerships span numerous merchant categories, with apparel and accessories; outdoors, sporting goods, and activities; and beauty and cosmetics representing the top three categories by UMS as of December 31, 2021.

We also provide our merchants with a toolkit to grow their businesses that we believe is unmatched among digital payments platforms. Our merchants gain access to our marketing efforts that begin with a launch campaign to introduce new brands to Sezzle consumers, and then follow these efforts with bi-weekly promotional support, quarterly “mega campaigns” that promote participating merchants with added incentives, and initiatives that enable consumers to “shop their values”. In addition, we provide select merchants with incentives to grow their sales and introduce Sezzle into new merchant categories, as well as guaranteed incentives, in order to aid them in recognizing the value proposition. We plan to enter into additional incentive-based arrangements with our larger merchant partners in the near-term and beyond.

We offer a powerful value proposition to our merchant partners, and over 90% of our merchant additions are derived from inbound inquiries. Our platform developed by serving merchants in the SMB category, has continued with our mid-size direct-to-consumer (“DTC”) retailers, and now has accelerated through the establishment of an increasing number of partnerships with large retailers.

SMBs

SMBs, which we define as merchants with UMS of less than $10 million per year, have historically comprised the largest segment of our merchant base. Our fast, easy application process makes onboarding simple, and our user-friendly merchant interface streamlines the integration process. Through Sezzle, these merchants are able to offer their consumers an optimized, effortless checkout process that enables them to complete sales.

Mid-Size Retailers

We are increasing our focus on “mid-size” retailers which tend to be DTC brands, which we define as merchants with UMS of between $10 million and $50 million per year. A diverse array of growing DTC brands that are online-first and seek to connect with consumers without the use of secondary retailers naturally fit within our core offering. As we build out a larger consumer base, we believe we also enhance our value proposition to these brands by driving increased visits to their sites. For example, we drive traffic toward DTC brands that may not otherwise gain exposure through traditional retail channels by creating marketing campaigns designed to increase consumer exposure to their brands.

9

Table of Contents

Large Retailers

An ongoing major initiative is greater engagement with large retailers, which we define as merchants with over $50 million in UMS per year. The core Sezzle product helps these merchants to facilitate a sale by providing access to credit for a consumer who has limited-to-no credit history. Without our payments platform, the consumer that lacks credit history may be rejected after applying for the store’s private label or co-brand credit card, which could tarnish the consumer’s view of that retailer’s brand. Importantly, we are not competing with a large retailer’s card offering. Instead, we work collaboratively with these retailers to drive sales, and over time, serve as a lead generator to consumers who are ready to graduate to the retailer’s card program. Our value proposition and engagement strategy have resonated with large retailers, including Target, Sportsman’s Guide, Lamps Plus, Bass Pro Shops, Barstool Sports, and Market America.

Our Consumers

Sezzle focuses on a young consumer base that is tech-savvy and socially-minded and that expects brands to possess ethical and social principles. As of December 31, 2021, 80% of Sezzle’s consumer base is comprised of members of the Gen Z (18-25) and Millennial (26-44) generations which are generally early in their credit journey. For many of these consumers, we believe Sezzle has provided a way to improve financial responsibility, not only through enhanced budgeting and payments capabilities, but also through an opportunity to build credit history and develop a sense of financial empowerment with the Sezzle Up platform.

Source: Internal data as of December 31, 2021 (Gen Z (18-25), Millennials (26-44), Gen X (45-56), Baby Boomers (57-75), and Silent (76 and greater)).

Gen Z and Millennial consumers use credit cards less frequently relative to other generations and in many cases lack access to traditional credit. As a result, they tend to have fewer viable options for budgeting, achieving financial flexibility, and building credit history. Consumers in these generations also tend to transact frequently across e-commerce and brick-and-mortar retail, but spend less on average per transaction than older generations. In doing so, these consumers prefer to avoid loans that are not transparent or require payments that are not affordable. Sezzle’s core product provides these younger generations, who are newer to credit and are likely to move up the FICO score spectrum as they grow older and transact more often, with a unique solution to these payment challenges.

In addition, consumers benefit from our platform’s network effects. As our platform grows and we establish more merchant partnerships, our consumers enjoy a wider variety of shopping options.

10

Table of Contents

Our Business Model

We believe that we have built a sustainable, transparent business model in which our success is aligned with the financial success of our merchants and consumers.

Core product revenue

We earn fees from our merchants predominately based on a percentage of UMS plus a fixed fee per transaction, collectively referred to as merchant fees. We pay our merchants for the transaction value upfront net of the merchant fees owed to Sezzle and assume all costs associated with the consumer payment processing, fraud and payment default. Merchant-related fees comprised approximately 82% of our Total Income for the year ended December 31, 2021.

Long-term product revenue

For our long-term financing product where we take no balance sheet or credit risk, we charge a platform fee to our financial partners, which is a fixed percentage of UMS on a monthly basis. We also share a negotiated percentage of the merchant discount revenue with our financial partners. This amount may vary based on our partner and the volume of UMS. Our financial partners earns interest from consumers through this product, but we do not earn any interest or take any credit risk.

Consumer-based revenue

We do not charge our consumers any interest, finance charges or initiation fees and are not incentivized to profit from our consumers’ errors or financial adversity. Any consumer-based revenue that we earn is derived from fees that we charge to reactivate an account following a failed payment and when consumers elect to reschedule a payment. We permit consumers to reschedule a payment without charging a fee once per order, and reactivation fees are waived if the consumer corrects a failed payment within 48 hours. Additionally, we have a hardship and fee forgiveness program which allows consumers to have fees waived. Consumer-related revenue comprised approximately 19% of our Total Income for the year ended December 31, 2021.

Capital-light strategy

We have created an efficient funding strategy which has allowed us to scale our business and drive rapid growth. We have existing access to revolving credit facilities. Additionally, we also pay merchants a low interest rate if they elect not to receive transaction proceeds upfront and instead leave cash with us.

Our products are entirely funded through our $250 million warehouse facility and merchant account payables. The high-velocity with which we are able to recycle capital due to the short-term nature of our products has a multiplier effect on our committed capital. We do not require equity to directly fund product growth.

History and Public Benefit Corporation Structure

Our founders created the Sezzle Platform in 2016 after observing an increasing trend in the United States of a lack of availability of credit for consumers (particularly younger consumers). Since we launched the Sezzle Platform in August 2017, our activities have principally involved raising money to develop our software, products and services (including the Sezzle Platform), as well as signing merchants to the Sezzle Platform and expanding our service offerings to an increasing base of consumers.

Sezzle is incorporated in Delaware as a public benefit corporation. Public benefit corporations are for-profit corporations intended to produce a public benefit and operate in a responsible and sustainable manner. Under Delaware law, public benefit corporations must identify in their certificate of incorporation the public benefit or benefits they will promote, and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct and the specific public benefit or public benefits identified in the public benefit corporation’s certificate of incorporation. Our statement of the public benefits we will promote is included under “Biennial Public Benefit Corporation Statement” below.

11

Table of Contents

Being a public benefit corporation offers advantages, including:

•public benefit corporation status is a clear differentiator in an increasingly growing, and sometimes crowded, industry;

•we are more likely to become an employer of choice as the younger workforce increasingly seek employment from companies which align with their ethical values;

•further opportunities to conduct business with brands that also care about sustainability;

•the potential to expand our consumer base due to conscious consumers;

•added credibility to our mission statement and potential to grow capital through impact investing; and

•further opportunities for positive public relations and marketing.

On March 22, 2021, Sezzle became certified as a B Corporation by B Lab, an independent non-profit organization, and thereby joined a movement of innovative socially-conscious brands. In order to be designated as a Certified B Corporation, we were required to undertake a comprehensive and objective assessment of our environmental and social standards for transparency, accountability and commitment to improved performance. Our actions are part of a movement of innovative brands around the world intent on advancing environmental, social, and economic causes. To maintain our status as a certified B Corporation, we must satisfy re-certification requirements every three years.

Competition

We operate in a highly competitive and dynamic industry. Our product offerings face competition from a variety of players, including those who enable transactions and commerce via digital payments. The point-of-sale financing market in which we operate includes several types of products. For example, consumers may make purchases with credit cards that have revolving balances and some of these products offer promotional terms, such as an introductory rate or deferred interest. In addition to traditional credit card products, some revolving balance products do not issue plastic credit cards to consumers (e.g., PayPal Credit). BNPL products, such as the Sezzle Platform, facilitate consumer purchases from retail merchants on installment plans. Credit card providers also offer products that allow consumers to pay for purchases made with their credit cards in installments rather than as a revolving balance (e.g., American Express and J.P. Morgan Chase). Visa and Mastercard, the major payments networks, have also introduced technology that facilitate this functionality.

We consider our main competitors to be other BNPL service providers. In the U.S. market, this includes Affirm, Afterpay, Klarna, PayPal’s Pay in 4, and Zip (formerly QuadPay). In addition, PayBright by Affirm and Afterpay operate in the Canadian market. In July 2021, Apple announced its intention to provide a BNPL platform to its consumers called “Apple Pay Later.” We aim to differentiate our business to consumers by providing a product that is more simple to understand and consumer friendly than our competitors. This includes allowing the consumer to shift their repayment schedule once per order for free, and waiving Account Reactivation Fees where the consumer corrects a failed payment within 48 hours. See “Item 1A. Risk Factors – Risks Related to Our Industry - We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our business, results of operations, financial condition, and prospects.”

We face intense competitive pressure on the fees we charge our merchants, particularly our larger merchants. To stay competitive, we may need to adjust our pricing or offer incentives to our clients to increase payments volume, enter new market segments, adapt to regulatory changes, and expand their use and acceptance of the Sezzle Platform. These include up-front cash payments, fee discounts, rebates, credits, performance-based incentives, marketing, and other support payments that impact our revenues and profitability. Market pressures on pricing, incentives, fee discounts, and rebates could moderate our growth. We have entered into merchant agreements that require us to make marketing, incentive or other payments to the merchant over the term of the agreement. In addition, if we are unable to fulfill our obligations under these merchant agreements, including any payments we have agreed to make with merchants, the merchant may terminate such agreement or determine not to renew and remain on our platform.

12

Table of Contents

Intellectual Property

Our business depends on our ability to commercially exploit our technology and intellectual property rights, including our technological systems and data processing algorithms. We rely on laws in the United States, Canada and other countries relating to trade secrets, copyright, and trademarks to assist in protecting our proprietary rights. Our core intellectual property asset is the Sezzle Platform and the accumulation of transaction data, rules and consumer insights generated from consumers using the Sezzle Platform, including the proprietary fraud and risk detection systems.

We developed our proprietary fraud and risk detection systems by creating valuable intellectual property that enables us to improve our products. The Sezzle Fraud Detection System was developed by the Company’s data sciences team, which utilizes numerous data points from a transaction to identify the likelihood of a fraudulent attempt. Consumer interactions with the Sezzle Platform are recorded and analyzed along with data points on the consumer and order itself. This data passes through the Sezzle Fraud Detection System, which scores the likelihood of the transaction being fraudulent. The Sezzle Underwriting Engine then assigns a score to each new consumer that passes through the Sezzle Fraud Detection System. Based on data obtained from traditional and non-traditional sources, along with the order data and retailer data, we give some shoppers a higher initial limit than others. As consumers use the Sezzle Platform, Sezzle’s system learns from the behavior of the individual consumers and adapts the consumer’s limit to the appropriate level based on the consumer’s success level within the Sezzle Platform.

We do not currently have any issued patents, but continue to consider the most effective methods of protecting our intellectual property. We currently hold registered trademarks in the United States, the UK, the European Union, and India, and we have pending trademark applications in Canada and Brazil. However, continued operations within our existing markets and expansion into new markets risks conflicts with unrelated companies who may own registered trademarks for and/or otherwise use a similar name. See “Item 1A. Risk Factors — Other Risks Related to Our Business – Our efforts to protect our intellectual property rights may not be sufficient.”

Government Regulation

Overview

Various aspects of our business and services are subject to U.S. federal, state, and local regulation, as well as regulation outside the United States including Canada. Certain of our services also are subject to rules promulgated by various card networks and other authorities, as more fully described below. These descriptions are not exhaustive, and these laws, regulations and rules frequently change and are increasing in number.

BNPL and Consumer Protection Regulation

The BNPL segment of the point-of-sale financing market in which we operate is a developing field. There has recently been an increased focus and scrutiny by regulators in various jurisdictions, including the United States and Canada, with respect to BNPL arrangements. We may become subject to additional legal or regulatory requirements if laws or regulations or the interpretation of such laws and regulations change in the future or industry standards for BNPL arrangements change in the future.

United States

In the United States, we are required to comply with the applicable provisions of the Truth-in-Lending Act and Regulation Z promulgated thereunder, which require certain disclosures to consumers regarding the terms and conditions of their loans and credit transactions and impose requirements on credit accessed through credit cards, Section 5 of the FTCA, which prohibits unfair and deceptive acts or practices (“UDAP”) in or affecting commerce and analogous provisions in each state; the Consumer Financial Protections Act, which prohibits unfair, deceptive or abusive acts or practices (“UDAAP”) in connection with consumer financial products and services; the Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program, or the fact that the applicant has in good faith exercised any right under the Federal Consumer Credit Protection Act or applicable state law; the Fair Credit Reporting Act (“FCRA”), which promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies; the Fair Debt Collection Practices Act (the “FDCPA”), which provides guidelines and limitations concerning the conduct of third-party debt collectors in connection with the collection of consumer debts; and the and the Telephone Consumer Protection Act (the “TCPA”), which regulates the use of telephone and texting technology to contact customers.

13

Table of Contents

We are also subject to the Holder in Due Course Rule of the Federal Trade Commission (“FTC”), and equivalent state laws, which requires any holder of a consumer credit contract to include a required notice and become subject to all claims and defenses that a borrower could assert against the seller of goods or services; the Electronic Fund Transfer Act, which provides disclosure requirements, guidelines, and restrictions on the electronic transfer of funds from consumers’ bank accounts; the Electronic Signatures in Global and National Commerce Act and similar state laws, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures; the Military Lending Act and similar state laws, which provide obligations and prohibitions relating to loans made to servicemembers and their dependents; and the Servicemembers Civil Relief Act, which allows active duty military members to suspend or postpone certain civil obligations. In addition, we are subject to the requirements under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act relating to collection and credit reporting, though many of the implementing regulations under the CARES Act have not yet been issued.

We possess certain state lending licenses and we are currently in the process of applying for others, which subject us to supervisory oversight from these state license authorities and periodic examinations. We currently hold licenses in six U.S. states (California, North Dakota, South Dakota, Idaho, Montana and Missouri) to operate our business in those states, in particular to originate loans to consumers residing in those jurisdictions. The loans we may originate on our platform pursuant to these state licenses are subject to state licensing and interest rate fee restrictions, as well as numerous state requirements regarding consumer protection, interest rate, disclosure, prohibitions on certain activities, and loan term lengths. Our business may become subject to licensing requirements in states in which we currently do not hold licenses. For instance, in certain states we are currently not required to obtain a lending license because our extension of credit in those states is structured as retail installment transactions. We continue to monitor state licensing regulations and how they may apply to our business, and may be required in the future to apply for additional state licenses, including states in which our loans are structured as retail installment transactions.

Canada

In Canada, we are required to comply with the Canada Anti-Spam Law, which regulates the transmittal of commercial email messages, the Canadian Personal Information Protection and Electronic Documents Act and equivalent provincial privacy laws in the provinces of Alberta, British Columbia and Quebec, each of which includes requirements surrounding the use, disclosure, and other processing of certain personal information about Canadian residents. In addition, we are required to comply with the Canada federal and provincial human rights legislation which prohibits discriminatory practices to deny, deny access to, or to differentiate adversely in relation to any individual in respect of the provision of services customarily available to the general public on the basis of a certain prohibited grounds of discrimination. The Canadian provincial consumer protection and cost of credit disclosure laws prohibit late fees, impose limits on default charges, prohibit unfair practices, and include consumer contract disclosure and related process requirements, among other compliance requirements. We are also subject to Canadian provincial and territorial e-commerce laws.

We believe that we are appropriately licensed as a lender and/or have structured our business activities to avoid a licensing requirement in each of the Canadian provinces that require such licenses. In connection with our business activities, we are also generally subject to consumer protection legislation and other laws and, on that basis, our business is also generally subject to regulatory oversight and supervision from federal and/or provincial regulators in respect of those activities, regardless of whether we have a license. These regulators and enforcement agencies generally act on a complaints-basis and may receive consumer complaints about us. Investigations or enforcement actions may be costly and time consuming. Enforcement actions by such regulators and enforcement agencies could lead to fines, penalties, consumer restitution, the cessation of our business activities in whole or in part, or the assertion of private claims and lawsuits against us.

14

Table of Contents

Payment Regulations

We are subject to the rules, codes of conduct and standards of Visa, Mastercard and other payment networks and their participants. In order to provide our payment processing services, we must be registered either indirectly or directly as service providers with the payment networks that we use. As such, we are subject to applicable card association and payment network rules, standards and regulations, which impose various requirements and could subject us to a variety of fines or penalties that may be levied by such associations or networks for certain acts or omissions. Card associations and payment networks and their member financial institutions regularly update and generally expand security expectations and requirements related to the security of consumer data and environments. Failure to comply with the networks’ requirements, or to pay the fees or fines they may impose, could result in the suspension or termination of our registration with the relevant payment networks and therefore require us to limit, suspend or cease providing the relevant payment processing services. We are also subject to the Payment Card Industry Data Security Standard (“PCI DSS”) with respect to the acceptance of payment cards, which provides for security standards relating to the processing of cardholder data and the systems that process such data. The failure of our products to comply with PCI DSS requirements may result in the loss of our status as a PCI DSS certified Service Provider and thereby impact our relationship with our merchant partners and their own ability to comply with PCI DSS.

In Canada, we are required to comply with the Payments Canada Rule H1- Pre-Authorized Debit Rules in respect of the acceptance of payments from Canadian bank accounts and the Quebec Charter of French Language laws which regulates the language of communication in commerce and business and applies to entities carrying on business in Quebec.

Data Privacy and Data Security Laws

We are subject to a variety of laws, rules, directives, and regulations, as well as contractual obligations, relating to the processing of personal information, including personally identifiable information. The regulatory framework for privacy and data protection worldwide is rapidly evolving and, as a result, implementation standards and enforcement practices are likely to continue to evolve for the foreseeable future. We publicly post policies and documentation regarding our practices concerning the processing of personal information. This publication of our privacy policy and other documentation that provide information about our privacy and security practices is required by applicable law and can subject us to proceedings and actions brought by data protection authorities, government entities, consumers (either individually or in a class action), or others if our policies are alleged to be deceptive, unfair, or misrepresentative of our actual practices.

We are subject to the Gramm-Leach-Bliley Act (the “GLBA”) and implementing regulations and guidance thereunder, in addition to applicable privacy and data protection laws in the other jurisdictions in which we carry on business activities or process personal information. Among other requirements, the GLBA imposes certain limitations on the ability to share consumers’ nonpublic personal information with nonaffiliated third parties and requires certain disclosures to consumers about information collection, sharing, and security practices and their right to “opt out” of the institution’s disclosure of their nonpublic personal information to nonaffiliated third parties. Privacy requirements, including notice and opt out requirements, under the GLBA and the FCRA are enforced by the FTC and by the Consumer Financial Protection Bureau (“CFPB”) through UDAAP claims, and are a standard component of CFPB examinations. State entities also may initiate actions for alleged violations of privacy or security compliance under state UDAAP claims, financial privacy, security and other laws.

15

Table of Contents

Furthermore, an increasing number of state, federal, and international jurisdictions have enacted, or are considering enacting, privacy and data security laws, such as the California Consumer Privacy Act (“CCPA”) which was based on the General Data Protection Regulation (“GDPR”), which regulates the collection, processing and use of personal information of data subjects in the European Union and the European Economic Area (“EEA”), and the Canadian Personal Information Protection and Electronics Document Act. The CCPA gives residents of California expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used, and also provides for civil penalties for violations and private rights of action for data breaches. Meanwhile, the GDPR provides data subjects with greater control over the processing of their personal information (such as the “right to be forgotten”) and has specific requirements relating to cross-border transfers of personal information to certain jurisdictions outside the EEA, including to the United States, with fines for noncompliance of up to the greater of 20 million euros or up to 4% of the annual global revenue of the noncompliant company. From January 1, 2021, we may also have to comply in respect of certain of our activities with the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. In addition, on November 3, 2020, California voters approved a new privacy law, the California Privacy Rights Act (“CPRA”), which significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts. Many of the CPRA’s provisions will become effective on January 1, 2023. Additionally, on March 2, 2021, the Virginia Consumer Data Protection Act (“CDPA”) was signed into law and multiple other states are considering enacting similar legislation. The Virginia CDPA becomes effective beginning January 1, 2023, and contains similar provisions to the CCPA and CPRA. Other states have recently or may soon pass similar laws and promulgate related regulations, including the Colorado Privacy Act (CoPA) (signed into law in July 2021 with rulemaking currently in progress) and the Utah Consumer Privacy Act (UCPA) (signed into law March 24, 2022). Most states also have in place data security laws requiring companies to maintain certain safeguards with respect to the processing of personal information, and all states require companies to notify individuals or government regulators in the event of a data breach impacting such information. In addition, most industrialized countries have or are in the process of adopting similar privacy or data security laws enforced through data protection authorities.

Other Applicable Regulations

We are subject to regulations relating to our corporate conduct and the conduct of our business, including securities laws, trade regulations and anti-money laundering (“AML”) laws and anti-corruption legislation. The United States and certain foreign jurisdictions have taken aggressive stances with respect to such matters and have implemented new initiatives and reforms.

We are required to comply with the U.S. Foreign Corrupt Practices Act, the Foreign Public Officials Act (Canada), the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions, which prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals.

AML laws and related KYC requirements generally require certain companies to conduct necessary due diligence to prevent and protect against money laundering. AML enforcement activity could result in criminal and civil proceedings brought against companies and individuals, which could have a material adverse effect on our business. Regulators and enforcement agencies may receive consumer complaints about us. In the United States, these regulators and agencies include the Financial Crimes Enforcement Network (“FinCEN”), which could subject us to burdensome rules and regulations that could increase costs and use of our resources in order to satisfy our compliance obligations. We are also subject to certain economic and trade sanctions programs including Canadian sanctions laws and the sanctions programs administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), which prohibit or restrict transactions or dealings with specified countries, individuals, and entities.

16

Table of Contents

Human Capital

As of December 31, 2021, we had approximately 540 employees across the operations, sales and marketing, and platform development teams. No employees are subject to any collective bargaining agreements at this time. We consider our relationships with our employees to be good and have not experienced any interruptions of operations due to labor disagreements.

Our success to date would not be possible without our dedicated people, who we believe are our greatest asset. Bringing together a team of highly-skilled engineering, product, marketing and business development professionals is imperative to executing on our strategy. We do this by creating an inclusive, team-centric culture in which doing the right thing is celebrated.

In light of our commitment to our employees, we upgraded our Human Resources Information Systems during 2021 to ensure state-of-the-art management, operation and oversight of our workforce. Our goals in this upgrade were to:

•ensure that People Operations is equipped with the tools, training and motivation to operate in the most efficient and effective manner;

•continue to promote and recruit the best-qualified people while embracing the value of diversity in the workplace;

•allow for more accurate measurement and accountability on the diversity front;

•provide a competitive salary and benefits package and develop the full potential of our workforce by providing training and development for career enhancement; and

•secure accurate and timely information relating to employee turnover, mobility, retention and the percentage of positions filled internally.

We also updated our Diversity Policy and Ethics Policy to renew and refine our commitment to derive strength from a diverse workforce. We have an active Diversity, Equity and Inclusion group to further ensure communication throughout the organization on issues impacting minorities. Employees are encouraged to participate in company and community activities to secure an improved quality of life for ourselves, our co-workers and the community.

We embrace change and the opportunity it brings. On March 10, 2022 we announced a workforce reduction aimed at positioning the business for long-term growth while establishing a path toward profitability and free cash flow. Combined with normal attrition since the beginning of 2022, the reduction impacts approximately 20% of our North American workforce. We continue to be focused on acting openly, equitably and consistently in our pursuit of uncompromising quality. To meet this goal, we remain committed to recruiting, developing, rewarding and retaining our global workforce.

Environmental, Social, and Governance (ESG)

We are focused on the environmental, social and governance concerns that are important to our consumers, merchant partners, employees and other stakeholders. We are committed to integrating consideration of these concerns into the decisions made across our business with a view to enhancing sustainability, promoting employee equity and wellness, and supporting the communities in which we operate.

Carbon Footprint and Land Regeneration

On July 15, 2021, through a combination of reduction efforts and carbon offsets, we officially became 100% carbon neutral. As a Climate Neutral Certified company, we reduce our carbon emissions by choosing to do business in a way that aids environmental conservation. By taking responsibility for decreasing climate-changing greenhouse gas emissions, we are taking action to affect climate change. During 2020, we also partnered with Trees for the Future, helping the organization by planting one tree per new Sezzle user, contributing to their mission to end hunger and poverty by training farmers to regenerate their land.

17

Table of Contents

Community Engagement

Sezzle Inc. is proud to make a positive difference in the communities that it serves.

In 2020, we launched Sezzle Up, an upgraded version of the core Sezzle experience which provides a credit-building solution for new-to-credit consumers, helping consumers adopt credit responsibly and build their credit history. We have also collaborated with the University of Minnesota to provide “full-ride” scholarships to underrepresented students pursuing degrees in technology. We also partner with nonprofits on initiatives such as Blacks in Technology, a global platform establishing standards for technical excellence and serving members through community, media and mentorship, to provide financial support, mentoring and free legal advice to their entrepreneurs.

Biennial Public Benefit Corporation Statement

Under Delaware law, a public benefit corporation is required to no less than biennially provide its stockholders with a statement as to the corporation’s promotion of the public benefit or public benefits identified in the certificate of incorporation and of the best interests of those materially affected by the corporation’s conduct. The following is intended to serve as the required statement to stockholders.

As a Delaware public benefit corporation, we have committed to pursuing opportunities for positive change in the community and the planet. Our management team and board of directors strongly believe that our long-standing commitment to financial education and helping young adults with their approach to personal finances, as well as creating alternative means for consumers to purchase items they need without incurring high-interest finance charges, benefit the community and serve as a public good.

When considering Environmental, Social and Governance (ESG) and Corporate Social Responsibility (CSR), Sezzle focuses on five primary areas: governance, impact on workers (human capital), environment, customers and the community (“Factors”). These Factors align with the targeted focus of the B Lab, BCorp Impact Assessment.

Each section focuses on a different area and opportunity to maximize value for ESG and CSR initiatives. The governance portion gauges the overall mission, ethics/transparency, and social/environmental impact; including Sezzle’s ability to protect the mission and stakeholder considerations through corporate structure and/or governing documents.

The workers/human capital portion assesses Sezzle’s contributions to its employees through various areas including financial security, health, safety, wellness, career development, engagement and satisfaction.

The community portion analyzes Sezzle’s relationship with and impact on the community. Focus here includes diversity, equity and inclusion (DEI), impact on the economy, community engagement, charity, and supply chain management.

The environment portion evaluates Sezzle’s management practices as they relate to air, climate, water, land, and biodiversity. This evaluation includes the direct impact of a company’s operations and, when applicable, its supply chain channels.

The customer portion evaluates Sezzle’s commitment to its customers through the quality of its services, ethical marketing, data privacy/security, and other customer/consumer factors. This initiative recognizes services that improve the social impact of the community.

Sezzle maintains annual Key Performance Indicators (KPIs) to measure its successful progress in achieving and promoting sustainable and meaningful commitment to ESG/CSR. The annual reporting occurs in June of each year. The KPIs are based on the identified Factors derived from the B Lab Impact Assessment which offer the largest opportunity of improvement for Sezzle. The Board of Directors receives annual updates on progress made against such KPIs. Additionally, the Board ensures that social responsibility remains a factor in its decision making process.

Upon initial certification, Sezzle had a B Lab rating of 80.7. To date, Sezzle’s metrics indicate an improvement of at least 8%. While figures may change over time due to new strategic initiatives, changes in operations and external factors, current metrics show a consistent improvement in Sezzle’s commitment to ESG/CSR. We believe that the improvements in our B Lab rating during 2021, in conjunction with the activities described above under “Environmental, Social, and Governance (ESG)”, support the conclusion that the Company has been successful in promoting our stated public benefits.

18

Table of Contents

Available Information

Our website address is www.sezzle.com. Information found on, or accessible through, our website is not a part of, and is not

incorporated into, this Form 10-K. Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on

Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of

1934, as amended (the “Exchange Act”), are available, free of charge, on our website as soon as reasonably practicable after we file

such material electronically with, or furnish it to, the Securities and Exchange Commission (the “SEC”). The SEC also maintains a

website that contains our SEC filings. The address of the site is www.sec.gov.

19

Table of Contents

ITEM 1A. RISK FACTORS

Risks Related to the Proposed Merger with Zip Co Limited

Certain conditions under the Zip Merger Agreement to our consummation of the merger with a wholly-owned subsidiary of Zip are beyond our control may not be satisfied (or waived) at all or in the anticipated timeframe.

Under the terms of the Zip Merger Agreement, the consummation of our merger with a wholly-owned subsidiary of Zip is subject to certain conditions. Satisfaction of certain of the conditions is not within our control, and difficulties in otherwise satisfying the conditions may prevent, delay or otherwise materially adversely affect the consummation of the transaction. It also is possible that a change, event, development, circumstance or occurrence since the date of the Zip Merger Agreement may have or reasonably be expected to have a material adverse effect on us, the non-occurrence of which is a condition to the consummation of the merger. We cannot predict with certainty whether and when any of the required conditions will be satisfied (including approvals relating to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain Australian approvals). If the merger does not receive, or timely receive, the required regulatory and shareholder approvals and clearances, or if another event occurs delaying or preventing the transaction, such delay or failure to complete the merger may create uncertainty or otherwise have negative consequences that may materially and adversely affect our income, financial condition and results of operations. Our share price may also fluctuate significantly based on announcements made by Zip and other third parties or us regarding the transaction with Zip or based on market perceptions of the likelihood of the satisfaction of the various conditions to closing. Such announcements may lead to perceptions in the market that the transaction may not be completed, which could cause our share price to fluctuate or decline. If we do not consummate the transaction with Zip, the price of our shares may decline (potentially significantly) from the current market price, which may reflect a market assumption that the transaction would be consummated. Any of these events could have a material adverse effect on our business, operating results and financial condition and could cause a decline in the price of our shares.

If the merger is not completed by November 28, 2022 (subject to a mutual right to extend the termination date until February 28, 2023 under certain circumstances), either we or Zip have the right to terminate the Zip Merger Agreement. We or Zip may also elect to terminate the Zip Merger Agreement in certain other circumstances. If the proposed acquisition is not completed, we would remain liable for significant transaction costs, including the potential payment of a termination fee to Zip under certain circumstances.

The merger consideration payable to holders of our shares will not be adjusted for change in our business, assets, liabilities, prospects, outlook, financial condition or results of operations. In addition, certain factors could affect the value of Zip’s common stock, which would affect the value realized by our stockholders in connection with the proposed merger.

The consideration payable to our shareholders in connection with the transaction with Zip will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial conditions or results of operations. Pursuant to the Zip Merger Agreement, upon the consummation of the proposed merger, our stockholders will be entitled to receive 0.98 Zip ordinary shares for each share of our common stock they hold. A variety of factors, including factors outside of our control, could affect the value of Zip’s ordinary shares either before or after the consummation of the proposed merger. Additionally, if we experienced an improvement in our business, assets, liabilities, prospects, outlook, financial conditions or results of operations prior to the consummation of the transaction, there will be no adjustment to the amount of the consideration.

While the proposed merger is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business.

Whether or not the proposed merger is consummated, the proposed merger may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. The pendency of the merger may also divert management’s attention and our resources from ongoing business and operations and our employees and other key personnel may have uncertainties about the effect of the pending merger, and the uncertainties may impact our ability to retain, recruit and hire key personnel while the merger is pending or if it fails to close. We may incur unexpected costs, charges or expenses resulting from the merger. Furthermore, we cannot predict how our business partners and merchants will view or react to the merger upon consummation. If we are unable to reassure our partners and merchants to continue their relationships with us, our business, financial condition and results of operations may be adversely affected.

20

Table of Contents

The preparations for integration between us and Zip have placed, and we expect will continue to place, a significant burden on many of our key employees and on our internal resources. If, despite our efforts, key employees depart because of these uncertainties and burdens, or because they do not wish to remain with the combined company, our business and results of operations may be adversely affected. In addition, whether or not the merger is consummated, while it is pending we will continue to incur costs, fees, expenses and charges related to the proposed merger, which may materially and adversely affect our financial condition and results of operations.

In addition, the Zip Merger Agreement generally requires us to operate our business in the ordinary course of business consistent with past practice pending consummation of the merger and also restricts us from taking certain actions without the consent of Zip. Such restrictions will be in place until either the merger is consummated or the Zip Merger Agreement is terminated. A breach of these covenants could result in termination of the Zip Merger Agreement. For these and other reasons, the pendency of the merger could adversely affect our business and results of operations.

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 and our future business and results of operations may be negatively affected.

The conditions to the consummation of the proposed merger may not be satisfied as noted above. If the merger is not consummated, we generally would remain liable for significant transaction costs, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the proposed merger. For these and other reasons, not consummating the merger could adversely affect our business and results of operations. Furthermore, if we do not consummate the merger, the price of shares of our common stock may decline (potentially significantly) from the current market price. Certain costs associated with the merger have already been incurred or may be payable even if the merger is not consummated. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. Finally, any disruptions to our business resulting from the announcement and pendency of the merger, including any adverse changes in our relationships with our customers, partners, vendors and merchants or recruiting and retention efforts, could continue or accelerate in the event of a failed merger.

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.

The Zip Merger Agreement contains restrictions on our ability to obtain a third-party proposal for an acquisition of us. These provisions include our agreement not to solicit or engage in discussions with third parties regarding, enter into any agreement with respect to, or provide any confidential information in respect of, any Acquisition Proposal (as defined in the Zip Merger Agreement) or an IPO (as defined in the Merger Agreement), as well as restrictions on our ability to respond to such proposals, subject to certain expectations with respect to the fiduciary duties of our board of directors, among other conditions set forth in the Zip Merger Agreement. The Zip Merger Agreement also provides that under specified circumstances, including if the Merger Agreement is terminated by Zip because our board of directors changes its recommendation for approval of the merger, we may be required to pay to Zip a termination fee of A$7,800,000. These provisions might discourage an otherwise-interested third-party from considering or proposing an acquisition of us, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the transaction. These provisions also might result in a potential third party acquirer proposing to pay a lower price to our shareholder than it might otherwise have proposed to pay due to the added expense of the A$7,800,000 termination fee than may become payable in certain circumstances. If the agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the transaction with Zip.

Shareholder litigation could prevent or delay the closing of the proposed acquisition by Zip or otherwise negatively impact our business, operating results and financial condition.

We may incur costs in connection with the defense or settlement of any future shareholder litigation in connection with the proposed transaction with Zip. Future shareholder litigation may adversely affect our ability to complete the proposed transaction with Zip. We could incur significant costs in connection with any such litigation lawsuits, including costs associated with the indemnification of obligations to our directors. Furthermore, one of the conditions to the closing of the transaction is the absence of any governmental order or law preventing the transaction or making the consummation of the transaction illegal. Consequently, if a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to complete the proposed transaction, then such injunctive or other relief may prevent the proposed transaction from becoming effective within the expected time frame or at all.

21

Table of Contents

Risks Related to Our Industry

The BNPL industry may become subject to increased regulatory scrutiny, and our failure to manage our business to comply with new regulations would materially and adversely affect our business, results of operations and financial condition.

There has recently been an increased focus and scrutiny by regulators in various jurisdictions with respect to BNPL arrangements, including in those jurisdictions in which we operate. There is potential that we may become subject to additional legal or regulatory requirements if laws or regulations change in the future, the interpretation of laws and regulations changes in the future, industry standards for BNPL arrangements change in the future, or regulators more heavily scrutinize BNPL arrangements. This increased risk may relate to state lending licensing or other state licensing or registration requirements, regulatory requirements concerning BNPL arrangements, consumer protection or consumer finance matters, or similar limitations on the conduct of our business. There is a risk that additional or changed legal, regulatory and industry compliance standards may make it economically unfeasible for us to continue to operate, or to expand in accordance with our strategy. This would likely have a material adverse effect on our business, results of operations and financial condition, including by preventing our business from reaching sufficient scale.

We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our business, results of operations, financial condition, and prospects.

We operate in a highly competitive and dynamic industry with a low barrier to entry, which makes increased competition more likely. Our technology platform faces competition from a variety of existing businesses and new market entrants, including competitors with BNPL products and those who enable transactions and commerce via digital payments.

Despite any competitive advantage we may have, there is always a risk of new entrants in the market, which may disrupt our business and decrease our market share. We expect competition to intensify in the future, both as emerging technologies continue to enter the marketplace and as large financial incumbents increasingly seek to innovate the services that they offer to compete with our products. Technological advances and the continued growth of e-commerce activities have increased consumers’ accessibility to products and services and led to the expansion of competition in digital payment options such as pay-over-time solutions. We face competition in areas such as: flexibility on payment options; duration, simplicity, and transparency of payment terms; reliability and speed in processing applications; underwriting effectiveness; compliance and security; promotional offerings; fees; approval rates; ease-of-use; marketing expertise; service levels; products and services; technological capabilities and integration; customer service; brand and reputation; and consumer and merchant satisfaction. In addition, it may be become more difficult to distinguish our platform, and products and services, from those of our competitors.

Some of our competitors are substantially larger than we are, which gives those competitors advantages we do not have, such as a more diversified product, a broader consumer and merchant base, the ability to reach more consumers, the ability to cross sell their products, operational efficiencies, the ability to cross-subsidize their offerings through their other business lines, more versatile technology platforms, the ability to acquire competitors, broad-based local distribution capabilities, and lower-cost funding. Our competitors may also have longer operating histories, more extensive and broader consumer and merchant relationships, and greater brand recognition and brand loyalty than we have. For example, more established companies that possess large, existing consumer and merchant bases, substantial financial resources, and established distribution channels could enter the market. Further, consumers’ increased usage of BNPL platforms in recent years may encourage more of such competitors that may be in a better position, due to financial and other resources, to attract merchants and customers to their platforms.

Increased competition, particularly for large, well-known merchants, has in the past resulted and will result in the need for us to alter the pricing we offer to merchants. If we are unable to successfully compete, the demand for our platform and products could stagnate or substantially decline, and we could fail to retain or grow the number of consumers or merchants using our platform, which would reduce the attractiveness of our platform to other consumers and merchants, and which would materially and adversely affect our business, results of operations, financial condition, and prospects.

22

Table of Contents

Economic conditions may adversely impact consumer demand for the merchandise and products on our platform, which could adversely impact our business, results of operations and financial condition.

Our business depends on consumers transacting with merchants, which in turn can be affected by changes in general economic conditions. For example, the retail sector is affected by economic conditions such as unemployment, consumer confidence, economic recessions, consumer debt, the availability of consumer credit, inflation and deflation, currency exchange rates, taxation, fuel and energy prices and interest rates, downturns or extended periods of uncertainty or volatility, all of which may influence consumer spending. In weaker economic environments, consumers may have less disposable income to spend and so may be less likely to purchase merchandise by utilizing our services. Alternatively, consumers may purchase merchandise but become unable to repay loans, which would result in an increase of loans that will not be paid on time or at all. Furthermore, the COVID-19 pandemic has had, and continues to have, a significant impact on the U.S. and global economy and the communities in which we operate. While the COVID-19 pandemic’s effect on the macroeconomic environment has yet to be fully determined and could continue for months or years, any prolonged economic downturn with sustained high unemployment rates would lead to decreased retail consumption and may materially decrease our transaction volume or increase defaults and delinquencies.

Some of our merchants have experienced a decrease in sales, supply chain disruptions, inventory shortages, and other adverse effects as a result of the COVID-19 pandemic, and the future impact of the COVID-19 pandemic remains uncertain. Such effects, if they continue for a prolonged period, may continue to have an adverse effect on our merchants, and would have a material adverse effect on our business, results of operations, financial condition, and prospects. In the short term, however, we have seen increased Sezzle Income since the outbreak of the COVID-19 pandemic. These results may not be indicative of results for future periods. Some of the increased demand could be due to consumers being required or encouraged to stay at home, school closures and employers requiring employees to work remotely, which increase their propensity to purchase goods over the internet. Our increased Sezzle Income during the COVID-19 pandemic could also be attributable to the timing of tax refunds in the United States and COVID-related stimulus payments. Much is unknown, including the duration and severity of the COVID-19 outbreak, the amount of time it will take for normal economic activity to resume if at all, and future government actions that may be taken, and accordingly the situation remains dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our merchants and partners, which ultimately could result in material adverse effects on our business, results of operations and financial condition.

Negative publicity about us or our industry could adversely affect our business, results of operations, financial condition, and prospects.

Negative publicity about us or our industry, including the transparency, fairness, user experience, quality, and reliability of our platform or point-of-sale lending platforms in general, the effectiveness of our risk model, the setting and charging of merchant and consumer fees, our ability to effectively manage and resolve complaints, our privacy and security practices, litigation, regulatory activity, misconduct by our employees, funding sources, originating bank partners, service providers, or others in our industry, the experience of consumers and investors with our platform or services or point-of-sale lending platforms in general, or use of loan proceeds by consumers that have obtained loans facilitated through our platform or other point-of-sale lending platforms for illegal purposes, even if inaccurate, could adversely affect our reputation and the confidence in, and the use of, our platform. Any such reputational harm could further affect the behavior of consumers, including their willingness to obtain loans facilitated through our platform or to make payments on their loans. As a result, our business, results of operations, financial condition, and prospects would be materially and adversely affected.

23

Table of Contents

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, and we may not achieve profitability in the future.

We are an early stage financial technology company with a limited operating history. Since launching the Sezzle Platform in August 2017, our activities have principally involved raising money to develop our software, products and services (including the Sezzle Platform), as well as adding merchants to the Sezzle Platform and expanding our service offerings to an increasing base of consumers. Similar to many early stage companies, we have incurred losses since our inception. We anticipate that our operating expenses will increase in the foreseeable future as we seek to continue to grow our business, attract new consumers, merchants, funding sources, and additional originating bank partners, and further enhance and develop our products and platform. As we expand our offerings to additional markets, our offerings in these markets may be less profitable than the markets in which we currently operate. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing Sezzle Income sufficiently to offset these higher expenses. We expect to incur additional net losses in the future and may not achieve profitability on a quarterly or annual basis.

Our business depends on our ability to retain and increase our merchant base, our base of consumers and UMS, and any failure to do so may have a material adverse effect on our business and results of operations.

We generate Sezzle Income when consumers pay with Sezzle at checkout in e-commerce transactions with our merchants. If we are not able to continue to retain and grow our merchant network, our base of consumers or volume of transactions, which we measure as UMS, we will not be able to sustain our business. Our continued success is dependent on our ability to expand our merchant base and to grow our merchants’ revenue, or UMS, on our platform. We derive Sezzle Income primarily from merchant fees earned from our merchant partners in the form of Merchant Discount Rate, which is generally charged as a percentage of the transaction volume on our platform. If we are not able to continue to retain and grow our consumer base, we will not be able to increase transaction volumes.

Our ability to retain and grow our consumer relationships depends on the willingness of consumers to use our platform and products. The attractiveness of our platform to consumers depends upon, among other things, the number and variety of merchants and the mix of products available through our platform, our brand and reputation, consumer experience and satisfaction, consumer trust and perception of our solutions, technological innovation, and the type and quality of services and products offered by us and by our competitors.

We will not be able to continue to attract new consumers or grow our business unless we are able to attract additional merchants and to expand revenue and volume of transactions from existing merchants. The attractiveness of our platform to merchants depends upon, among other things: the size of our consumer base; our brand and reputation; the amount of merchant fees that we charge; the promotional marketing incentives we may offer; our ability to sustain our value proposition to merchants for consumer acquisition by demonstrating higher conversion at checkout and increased AOV; the attractiveness to merchants of our technology and data-driven platform; services and products offered by competitors; our availability and prominence as a payment method on e-commerce platforms such as Shopify, WooCommerce, BigCommerce and Wix.com; and our ability to perform under our merchant agreements.

If we fail to maintain our relationships with existing consumers and merchant partners, or if we do not attract a diverse mix of merchant partners or new consumers to our platform, then our business, results of operations, financial condition, and prospects likely would be materially and adversely affected.

If we fail to retain existing merchants or acquire new merchants in a cost-effective manner, our business, financial condition, and results of operations could be adversely affected.

We believe that growth of our business is dependent on our ability to continue to cost-effectively grow our platform by retaining our existing merchants and attracting new merchants. In particular, our partnerships with larger merchants and merchants with a high degree of brand recognition are a key component of our strategy to provide a wide and attractive selection for consumers. If we fail to retain our existing merchants, especially our most popular and larger merchants, or acquire new larger merchants, the value of our platform would be negatively impacted.

24

Table of Contents

We face intense competitive pressure on the fees we charge our merchants, particularly our larger merchants. In order to stay competitive, we may need to adjust our pricing or offer incentives to our clients to increase payments volume, enter new market segments, adapt to regulatory changes, and expand their use and acceptance of the Sezzle Platform. These include up-front cash payments, fee discounts, rebates, credits, performance-based incentives, marketing, and other support payments that impact our revenues and profitability. Market pressures on pricing, incentives, fee discounts, and rebates could moderate our growth. We expect to continue to incur substantial expenses to acquire additional merchants, particularly larger merchants that we believe will make our platform more attractive to consumers. These merchant partnership cost structures may not be cost-effective for us and we cannot assure you that the revenue we generate from the merchants we acquire will ultimately exceed the cost of adding them to our platform. We have entered into merchant agreements that require us to make marketing, incentive or other payments to the merchant over the terms of the agreement, which are typically one to three years. Certain agreements also contain provisions that may require payments by us and are contingent on us and/or the merchant meeting specified criteria, such as achieving volume targets and implementation benchmarks. If we are not able to implement cost savings and productivity initiatives in other areas of our business or increase our volumes in other ways to offset or absorb the financial impact of these incentives, fee discounts, and rebates, we may be prevented from reaching profitability.

In addition if we are unable to fulfill our obligations under these merchant agreements, including any payments we have agreed to make with merchants, the merchant may terminate such agreement or determine not to renew and remain on our platform, which could have a negative impact on our business, results of operations and financial condition.

We may not be able to sustain Sezzle Income growth rate, or our growth rate of related key operating metrics, in the future, and failure to effectively manage growth may adversely affect our financial results.

Although we have experienced a period of strong growth in Sezzle Income, UMS, employee numbers and consumers, there can be no assurances that such growth will continue at our current rate or at all. Many factors may contribute to a decline in Sezzle Income growth rate, including increased competition, slowing demand for our products from existing and new consumers, changes in transaction volumes and mix (particularly with our significant merchant partners), lower sales by our merchants (particularly those with whom we have significant relationships), general economic conditions, a failure by us to continue capitalizing on growth opportunities, changes in the regulatory environment and the maturation of our business, among others. You should not rely on the Sezzle Income or key operating metrics for any prior quarterly or annual period as an indication of our future performance. If Sezzle Income growth rate declines, our results of operations and financial condition could be materially and adversely affected.

In addition, a continuation of this growth in the future could place additional pressures on current management, as well as corporate, operational and finance other resources within our business, and on the infrastructure supporting the Sezzle Platform. Failure to appropriately manage growth could result in failure to retain existing consumers and attract new consumers, as well as contract with new merchants, which could adversely affect our operating results and financial condition.

If we fail to promote, protect, and maintain our brand in a cost-effective manner, we may lose market share and our results of operations and financial condition may be negatively impacted.

We believe that developing, protecting, and maintaining awareness of our brand in a cost-effective manner is critical to attracting new and retaining existing merchants and consumers to our platform. As competition intensifies, we believe that positive consumer recognition is an important factor in our financial performance. We cannot guarantee that our brand development strategies will accelerate the recognition of our brand or increase Sezzle Income. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and incentives and the experience of merchants and consumers. Our brand promotion activities may not result in increased Sezzle Income and, even if they do, any increases may not offset the expenses incurred. Additionally, the successful protection and maintenance of our brand will depend on our ability to obtain, maintain, protect, and enforce trademark and other intellectual property protection for our brand. If we fail to successfully promote, protect, and maintain our brand or if we incur substantial expenses in an unsuccessful attempt to promote, protect, and maintain our brand, we may lose our existing merchants and consumers to our competitors or be unable to attract new merchants and consumers. Any such loss of existing merchants or consumers, or inability to attract new merchants or consumers, would have a material adverse effect on our business and results of operations.

25

Table of Contents

In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites, and other forms of internet-based communications that allow individuals access to a broad audience of consumers and other persons. The rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination and given users the ability to more effectively organize collective actions such as boycotts and other brand-damaging behaviors. The dissemination of information via social media could harm our brand or our business, regardless of the information’s accuracy. This could include negative publicity related to our products or services or negative publicity related to actions taken (or not taken) by us or our executives, team members, employees, partner merchants, or other individuals or entities that may be perceived as being associated with us. Such negative publicity may relate to actions taken (or not taken) with respect to social, environmental, and community outreach issues and initiatives, including in connection with our status as a public benefit corporation and our certification as a B Corporation. Our inability or failure to recognize, respond to, and effectively manage the accelerated impact of social media could adversely impact our business. In addition, we use social media and other internet-based communications methods to communicate with our end-users, customers, partners and the public in general. Failure to use social media or other internet-based communication methods effectively could lead to a decline in our reputation. Further, laws and regulations, including associated enforcement priorities, rapidly evolve to govern social media platforms and other internet-based communications. Any failure by us or third parties acting at our direction to abide by applicable laws and regulations in the use of social media or internet-based communications could adversely impact our reputation or financial performance or subject us to fines or other penalties. Other risks associated with the use of social media and internet based-communication include improper disclosure of proprietary information, negative comments about our brand, products, or services, exposure of personally identifiable information, fraud, hoaxes, or malicious dissemination of false information.

Moreover, because our brand is directly associated with the brands of so many other companies by virtue of our business model and the integration of our platform with those of our partner merchants, there is a risk that we could be adversely affected by negative publicity that our partner merchants experience and that is beyond our control. The negative publicity could involve any manner of conduct and relate to any number of subjects, and even the mere perception of our involvement could dilute or tarnish or otherwise adversely affect our reputation, and could contribute to diminished financial performance.

There are a number of risks associated with our international operations that could materially and adversely affect our business.

We primarily operate in the United States and have operations in Canada, India, Brazil, and certain countries in Europe. We are currently evaluating our future plans in international markets and may determine to exit markets outside of North America. Our international markets could be adversely affected by a number of factors in the future, including:

•the ongoing impact of corporate and government response to the COVID-19 pandemic;

•currency controls, new currency adoptions and repatriation issues;

•changes in political and economic conditions and potential instability in certain regions, including in particular the recent civil unrest, terrorism, political turmoil and economic uncertainty in Africa, the Middle East, Eastern Europe and other regions;

•possible fraud or theft losses, and lack of compliance by international representatives in foreign legal jurisdictions where collection and legal enforcement may be difficult or costly;

•reduced or no protection of our intellectual property rights;

•unfavorable tax rules or trade barriers;

•inability to secure, train or monitor international agents;

•conformity of our platform with applicable business customs, including translation into foreign languages and associated expenses;

•potential changes to our established business model;

•the need to support and integrate with local vendors and service providers;

•protection of our platform from cybersecurity threats and data privacy breaches;

•competition with vendors and service providers that have greater experience in the local markets than we do or that have pre-existing relationships with potential consumers, merchants and investors in those markets; and

•difficulties in staffing and managing foreign operations in an environment of diverse culture, laws, and consumers and merchants, and the increased travel, infrastructure, and legal and compliance costs associated with international operations.

26

Table of Contents

In addition, international operations may continue to expose us to numerous regulatory risks. We are subject to regulations relating to our corporate conduct and the conduct of our business, including securities laws, consumer protection laws, trade regulations, advertising regulations, privacy and cybersecurity laws, wage and hour regulations, anti-money laundering (“AML”) laws and anti-corruption legislation. Certain jurisdictions have taken aggressive stances with respect to such matters and have implemented new initiatives and reforms, including more stringent regulations, disclosure and compliance requirements. Any violations of these regulations and requirements would likely have a material and adverse impact on our business and results of operations.

We may require additional capital.

We may require additional funding to support the provision of installments plans to consumers and working capital. There can be no assurance that such goals can be met without further financing and whether such financing, if necessary, can be obtained on favorable terms or at all.

If we require additional capital to grow our business, we may rely on a combination of funding options including equity and our existing and new revolving credit facilities. An inability to raise capital through the issuance of equity securities or secure funding through new credit facilities, or any increase in the cost of such funding, may adversely impact our ability to grow our business. Failure by us to meet financial covenants under the credit agreement governing our existing revolving credit facility, or the occurrence of other specified events, may lead to an event of default. If an event of default were to occur, we may be required to make repayments under the credit facility in advance of the relevant maturity dates and/or termination of the credit facility, which would likely have an adverse impact on our business, results of operations and financial condition.

Our existing revolving credit facility is secured by our consumer notes receivable we choose to pledge and is subject to covenants. Fifty percent of the total available funding facility ($125,000,000) is committed while the remaining fifty percent is available to us for expanding our funding capacity. Thus, a significant portion of our funding capacity is in part dependent on our accounts receivable, which can be volatile and, at times, at levels low enough to result in our inability to draw down on this part of the credit facility. Any material decrease in our accounts receivable could negatively impact our liquidity, which would have an adverse effect on our business, results of operations, and financial condition. In addition, it is possible that our transaction volume will outpace our ability to finance transactions if we do not have sufficient borrowing capacity under our credit facility, which in turn could result in a material adverse effect on our results of operations and financial condition.

We may not realize any or all of our estimated costs savings or benefits from our recently announced workforce reduction plan.

On March 10, 2022, we announced a reduction of our workforce that, when considered with normal attrition during the beginning of 2022, impacted approximately 20% of our North American workforce. We may not realize all or any of the anticipated costs savings and benefits from the workforce reduction. In addition, any cost savings that we realize may be offset by reductions in revenues or through increases in other expenses. If we are unable to achieve the expected efficiency and cost savings from the workforce reduction, or if we need to consider further reductions in workforce, our business and results of operations may be adversely affected.

Risks Related to Our Financing Program

Consumers may not view or treat their BNPL product loans as having the same significance as other obligations, and the loans facilitated through our platform are not secured, guaranteed, or insured and involve a high degree of financial risk.

Consumers may not view the BNPL product loans facilitated through our platform as having the same significance as a loan or other credit obligation arising under more traditional circumstances. If a consumer neglects his or her payment obligations on a BNPL product loan facilitated through our platform or chooses not to repay his or her loan entirely, it will have an adverse effect on our business, results of operations, financial condition, prospects, and cash flows.

Personal loans facilitated through our platform are not secured by any collateral, not guaranteed or insured by any third-party, and not backed by any governmental authority in any way. Therefore, we are limited in our ability to collect on these loans if a consumer is unwilling or unable to repay them. A consumer’s ability to repay their loans can be negatively impacted by increases in their payment obligations to other lenders under mortgage, credit card, and other debt obligations resulting from increases in base lending rates or structured increases in payment obligations. If a consumer defaults on a loan, we may be unsuccessful in our efforts to collect the amount of the loan. We may also be required to pay credit card processing costs for transactions that we fail to collect loans on from our consumers. Our originating bank partners could decide to originate fewer BNPL product loans through our platform. An increase in defaults precipitated by these risks and uncertainties could have a material adverse effect on our business, results of operations, financial condition, and prospects.

27

Table of Contents

If our merchants fail to fulfill their obligations to consumers or comply with applicable law, we may incur costs.

Although our merchants are obligated to fulfill their contractual commitments to consumers and to comply with applicable law from time to time, they might not, or a consumer might allege that they did not. This, in turn, can result in claims or defenses against us or any subsequent holder of our installment agreements. One such claim or defense could be pursuant to a term included in our installment agreement, which we refer to as our user agreement, that is pursuant to the Federal Trade Commission’s Holder in Due Course Rule. The term provides that the holder of the consumer credit contract, in our case the user agreement, is subject to all claims and defenses which the debtor could assert against the seller of goods or services that were obtained with the proceeds of the consumer credit contract. If merchants fail to fulfill their contractual or legal obligations to consumers, it may also negatively affect our reputation with consumers thereby negatively affecting our business. Federal and state regulatory authorities may also bring claims against us, including unfair and deceptive acts or practices (“UDAP”) or unfair, deceptive or abusive acts or practices (“UDAAP”) claims, if we fail to provide consumer protections relating to potential merchants actions or disputes.

Internet-based loan origination processes may give rise to greater risks than paper-based processes.

We use the internet to obtain application information and distribute certain legally required notices to applicants for loans, and to obtain electronically signed loan documents in lieu of paper documents with tangible consumer signatures. These processes entail additional risks relative to paper-based loan underwriting processes and procedures, including risks regarding the sufficiency of notice for compliance with consumer protection laws, risks that consumers may challenge the authenticity of loan documents or the validity of electronic signatures and records, and risks that, despite internal controls, unauthorized changes are made to the electronic loan documents.

Exposure to consumer bad debts and insolvency of merchants may adversely impact our financial success.

Our ability to generate profits depends on our ability to put in place and optimize our systems and processes to make predominantly accurate, real-time decisions in connection with the consumer transaction approval process. We do not ordinarily perform credit checks on consumers in connection with the application process, unless consumers join our “Sezzle Up” platform to build their credit and boost their spending power. Consumer non-payment is a major component of our expenses at present, and we are exposed to consumer bad debts as a normal part of our operations because we absorb the costs of all uncollectible notes receivables from our consumers. We calculate our provision for uncollectible accounts on notes receivable on an expected loss basis. Any amounts delinquent after 90 days are charged-off with an offsetting reversal of the allowance for doubtful accounts through the provision for uncollectible accounts. Our ability to collect on loans is dependent on the consumer’s continuing financial stability, and consequently, collections can be adversely affected by a number of factors, including job loss, divorce, death, illness, or personal bankruptcy. It is possible that a higher percentage of consumers will seek protection under bankruptcy or debtor relief laws as a result of financial and economic disruptions related to the COVID-19 pandemic than is reflected in our historical experience. Excessive exposure to bad debts as a result of consumers failing to repay outstanding amounts owed to us may materially and adversely impact our results of operations and financial position.

We also have exposure to the potential insolvency of merchants to which we have advanced funds. Exposure occurs in the period of time between the advance of funds to a merchant for a consumer’s purchase of goods, and the retail merchant shipping the goods to the consumer (at which point we are entitled to payment from the consumer). While this period of risk is typically only a short period of time, it is still a period that we are exposed to the risk that merchants will be unable to repay the funds we have advanced to them. As the merchants on our platform continue to grow, so does the amount of funds that may be advanced by us. The failure by merchants to repay these funds may result in a material adverse effect to our results of operations and financial position.

28

Table of Contents

If we fail to comply with the applicable requirements of Visa or other payment processors, those payment processors could seek to fine us, suspend us or terminate our registrations, which could have a material adverse effect on our business, results of operations, financial condition, and prospects.

We partially rely on card issuers or payment processors, and must pay a fee for this service. From time to time, payment processors such as Visa may increase the interchange fees that they charge for each transaction using one of their cards. The payment processors routinely update and modify their requirements. Changes in the requirements, including changes to risk management and collateral requirements, may impact our ongoing cost of doing business and we may not, in every circumstance, be able to pass through such costs to our merchants or associated participants. Furthermore, if we do not comply with the payment processors’ requirements (e.g., their rules, bylaws, and charter documentation), the payment processors could seek to fine us, suspend us or terminate our registrations that allow us to process transactions on their networks. Some payment processors may also choose not to support BNPL solutions and the credit cards they issue therefore cannot be linked to pay for purchases made through BNPL entities, including Sezzle. The termination of our registration due to failure to comply with the applicable requirements of Visa or other payment processors, or any changes in the payment processors’ rules that would impair our registration, could require us to stop providing payment services to Visa or other payment processors, which could have a material adverse effect on our business, results of operations, financial condition, and prospects. We are also subject to the Payment Card Industry Data Security Standard (“PCI DSS”) with respect to the acceptance of payment cards. PCI DSS sets forth security standards relating to the processing of cardholder data and the systems that process such data, and a failure to adhere to these standards can result in fines, limitations on our ability to process payment cards, and impact to our relationship with our merchant partners and their own ability to comply with PCI DSS.

Risks Related to Our Technology and the Sezzle Platform

Our results depend on integration, support, and prominent presentation of our platform by our merchants.

We use and rely on integration with third-party systems and platforms, particularly websites and other systems of our merchants. The success of our services, and our ability to attract additional consumers and merchants, depends on the ability of our technology and systems to integrate into, and operate with, these various third-party systems and platforms. In addition, as these systems and platform are regularly updated, it is possible that when such updates occur it could cause our services to operate inefficiently. This will likely require us to change the way we operate our systems and platform, which may take time and expense to remedy.

We also depend on our merchants, which generally accept most major credit cards and other forms of payment, to present our platform as a payment option, such as by prominently featuring our platform on their websites or in their stores and not just as an option at website checkout. We do not have any recourse against merchants when they do not prominently present our platform as a payment option. The failure by our merchants to effectively integrate, support, and present our platform would likely have a material adverse effect on our business, results of operations and financial condition.

Unanticipated surges or increases in transaction volumes may adversely impact our financial performance.

Continued increases in transaction volumes may require us to expand and adapt our network infrastructure to avoid interruptions to our systems and technology. Any unanticipated surges or increases in transaction volumes may cause interruptions to our systems and technology, reduce the number of completed transactions, increase expenses, and reduce the level of customer service, and these factors could adversely impact our reputation and, thus, diminish consumer confidence in our systems, which may result in a material adverse effect on our business, results of operations and financial condition.

29

Table of Contents

Data security breaches, cyberattacks, employee or other internal misconduct, malware, phishing or ransomware, physical security breaches, natural disasters, or similar disruptions could occur and would materially adversely impact our business or ability to protect the confidential information in our possession or control.

Through the ordinary course of business, we collect, store, process, transfer, and use (collectively, “process”) a wide range of confidential information, including personally identifiable information, for various purposes, including to follow government regulations and to provide services to our users and merchants. The information we collect may be sensitive in nature and subject to a variety of privacy, data protection, cybersecurity, and other laws and regulations. Due to the sensitivity and nature of the information we process, we and our third-party service providers are the target of, defend against and must regularly respond to cyberattacks, including from malware, phishing or ransomware, physical security breaches, or similar attacks or disruptions. Cyberattacks and similar disruptions may compromise or breach the Sezzle Platform and the protections we use to try to protect confidential information in our possession or control. Breaches of the Sezzle Platform or other Sezzle systems could result in the criminal or unauthorized use of confidential information and could negatively affect our users and merchants and, because the techniques for conducting cyberattacks are constantly evolving and may be supported by significant financial and technological resources (e.g., state-sponsored actors), we may be unable to anticipate these techniques, react in a timely manner, or implement adequate preventative or remedial measures. These risks also reside with third party service providers and partners with whom we conduct business. Our business could be materially and adversely impacted by security breaches of the data and information of merchants’ and consumers’ data and information, either by unauthorized access, theft, destruction, loss of information or misappropriation or release of confidential data.

These events may cause significant disruption to our business and operations or expose us to reputational damage, loss of consumer confidence, legal claims, civil and criminal liability, constraints on our ability to continue operation, reduced demand for our products and services, termination of our contracts with merchants or third party service providers, and regulatory scrutiny and fines, any of which could materially adversely impact our financial performance and prospects. Any security or data issues experienced by other software companies or third party service providers with whom we conduct business could diminish our customers’ trust in providing us access to their personal data generally. Merchants and consumers that lose confidence in our security measures may be less willing to make payments on their loans or participate in the Sezzle Platform.

In addition, our partners include credit bureaus, collection agencies and banking parties, each of whom operate in a highly regulated environment, and many laws and regulations that apply directly to them may apply directly or indirectly to us through our contractual arrangements with these partners. Federal, state and international laws or regulators, as well as our contractual partners, may require notice in event of a security breach that involves personally identifiable information, and these disclosures may result in negative publicity, loss of confidence in our security measures, regulatory or other investigations, the triggering of indemnification and other contractual obligations, and other adverse effects to our partner ecosystem and operations. We may also incur significant costs and loss of operational resources in connection with remediating, investigating, mitigating, or eliminating the causes of security breaches, cyberattacks, or similar disruptions after they have occurred, and particularly given the evolving nature of these risks, our incident response, disaster recovery, and business continuity planning may not sufficiently address all of these eventualities. The retention and coverage limits in our insurance policies may not be sufficient to reimburse the full cost of responding to and remediating the effects of a security breach, cyberattack, or similar disruption, and we may not be able to collect fully, if at all, under these insurance policies or to ensure that the insurer will not deny coverage as to any future claim.

Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and prospects.

Our platform and our internal systems rely on software that is highly technical and complex. In addition, our platform and our internal systems depend on the ability of such software to store, retrieve, process, and manage immense amounts of data. As a result, undetected vulnerabilities, errors, failures, bugs, or defects may be present in such software or occur in the future in such software, including open source software and other software we license in from third parties, especially when updates or new products or services are released.

Any real or perceived vulnerabilities, errors, failures, bugs, or defects in the software may not be found until our consumers use our platform and could result in outages or degraded quality of service on our platform that could adversely impact our business (including through causing us not to meet contractually required service levels), as well as negative publicity, loss of or delay in market acceptance of our products and services, and harm to our brand or weakening of our competitive position. In such an event, we may be required, or may choose, to expend significant additional resources in order to correct the problem. Any real or perceived errors, failures, bugs, or defects in the software we rely on could also subject us to liability claims, impair our ability to attract new consumers, retain existing consumers, or expand their use of our products and services, which would adversely affect our business, results of operations, financial condition, and prospects.

30

Table of Contents

We also rely on online payment gateways, banking and financial institutions for the validation of bank cards, settlement and collection of payments. There is a risk that these systems may fail to perform as expected or be adversely impacted by a number of factors, some of which may be outside our control, including damage, equipment faults, power failure, fire, natural disasters, computer viruses and external malicious interventions such as hacking, cyber-attacks or denial-of-service attacks.

Any significant disruption in, or errors in, service on our platform or relating to vendors could prevent us from processing transactions on our platform or posting payments.

We use vendors, such as our cloud computing web services provider, virtual card processing companies, and third-party software providers, in the operation of our platform. The satisfactory performance, reliability, and availability of our technology and our underlying network and infrastructure are critical to our operations and reputation and the ability of our platform to attract new and retain existing merchants and consumers. We rely on these vendors to protect their systems and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm these systems, criminal acts, and similar events. If our arrangement with a vendor is terminated or if there is a lapse of service or damage to its systems or facilities, we could experience interruptions in our ability to operate our platform. We also may experience increased costs and difficulties in replacing that vendor and replacement services may not be available on commercially reasonable terms, on a timely basis, or at all. Any interruptions or delays in our platform availability, whether as a result of a failure to perform on the part of a vendor, any damage to one of our vendor’s systems or facilities, the termination of any of our third-party vendor agreement, software failures, our or our vendor’s error, natural disasters, terrorism, other man-made problems, security breaches, whether accidental or willful, or other factors, could harm our relationships with our merchants and consumers and also harm our reputation.

In addition, we source certain information from third parties. In the event that any third-party from which we source information experiences a service disruption, whether as a result of maintenance, natural disasters, terrorism, or security breaches, whether accidental or willful, or other factors, the ability to score and decision loan applications through our platform may be adversely impacted. Additionally, there may be errors contained in the information provided by third parties. This may result in the inability to approve otherwise qualified applicants through our platform, which may adversely impact our business by negatively impacting our reputation and reducing our transaction volume.

To the extent we use or are dependent on any particular third-party data, technology, or software, we may also be harmed if such data, technology, or software becomes non-compliant with existing regulations or industry standards, becomes subject to third-party claims of intellectual property infringement misappropriation, or other violation, or malfunctions or functions in a way we did not anticipate. Any loss of the right to use any of this data, technology, or software could result in delays in the provisioning of our products and services until equivalent or replacement data, technology, or software is either developed by us, or, if available, is identified, obtained, and integrated, and there is no guarantee that we would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software, which could result in the loss or limiting of our products, services, or features available in our products or services.

These factors could prevent us from processing transactions or posting payments on our platform, damage our brand and reputation, divert the attention of our employees, reduce Sezzle Income, subject us to liability, and cause consumers or merchants to abandon our platform, any of which could have a material and adverse effect on our business, results of operations, financial condition, and prospects.

Fraudulent activities may result in us suffering losses, causing a materially adverse impact to our reputation and results of operations.

We are exposed to risks imposed by fraudulent conduct, including the risks associated with consumers attempting to circumvent our system and repayment capability assessments. There is a risk that we may be unsuccessful in defeating fraud attempts, resulting in a higher than budgeted costs of fraud and consumer non-payment.

31

Table of Contents

We guarantee payment to merchants and accept the responsibility associated with minimizing fraudulent activity and bear all costs associated with such fraudulent activity. Fraudulent activity is likely to result in us suffering losses, which may have a material adverse impact on our reputation and cause us to bear increased costs to rectify and safeguard business operations and our systems against such fraudulent activity. Significant amounts of fraudulent cancellations or chargebacks could adversely affect our business, results of operations or financial condition. High profile or significant increases in fraudulent activity could also lead to regulatory intervention, negative publicity, and the erosion of trust from our consumers and merchants, which could result in a material adverse effect on our business, results of operations and financial condition.

Other Risks Related to Our Business

Our vendor relationships subject us to a variety of risks, and the failure of third parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business, results of operations and financial condition.

We have significant vendors that, among other things, provide us with financial, technology, and other services to support our products and other activities, including, for example, cloud-based data storage and other IT solutions, and payment processing, and we could be adversely impacted to the extent our vendors fail to comply with the legal requirements applicable to the particular products or services being offered. For example, the Consumer Financial Protection Bureau (“CFPB”) has issued guidance stating that institutions under its supervision may be held responsible for the actions of the companies with which they contract.

In some cases, we may be reliant on one or a limited number of vendors for critical services. Most of our vendor agreements are terminable by the vendor on little or no notice, and if our current vendors were to terminate their agreements with us or otherwise stop providing services to us on acceptable terms, we may be unable to procure alternatives from other vendors in a timely and efficient manner and on acceptable terms or at all. If any vendor fails to provide the services we require, fails to meet contractual requirements (including compliance with applicable laws and regulations), fails to maintain adequate data privacy controls and electronic security systems, or suffers a cyber-attack or other security breach, we could be subject to regulatory enforcement actions, claims from third parties, including our consumers, suffer operational outages, and suffer economic and reputational harm that could have an adverse effect on our business. Further, we may incur significant costs to resolve any such disruptions in service, which could adversely affect our business.

The loss of key partners and merchant relationships would adversely affect our business.

We depend on continued relationships with our current significant merchants and partners that assist in obtaining and maintaining our relationships with merchants. There can be no guarantee that these relationships will continue or, if they do continue, that these relationships will continue to be successful. Our contracts with merchants can be terminated for convenience on relatively short notice by either party, and so we do not have long-term contracted income. There is a risk that we may lose merchants for a variety of reasons, including a failure to meet key contractual or commercial requirements, or merchants shifting to in-house solutions (including providing a service competitive to us), competitor service providers. Similarly, there is a risk that e-commerce platforms with which we partner (such as Shopify, WooCommerce, BigCommerce and Wix.com) may limit or prevent Sezzle from being offered as a payment option at checkout. We also face the risk that our key partners could become competitors of our business after our key partners determine how we have implemented our model to provide our services.

Although no one merchant accounted for more than 10% of Sezzle Income for the year ended December 31, 2021, our business is still in a relatively early stage and merchant income is not as diversified as it might be for a more mature business. The loss of even a small number of our key merchants may have a material adverse effect on our results of operations and financial condition, and may be further exacerbated by an increase in marketing expenses to sign up new merchants to replace those lost, including incentive arrangements spent on lost merchants and new incentive commitments. There is also a risk that key terms with new merchants may be less favorable to us, including terms of pricing, due to unanticipated changes in our market. In addition, the loss of a key merchant may also have a negative impact on our reputation with other merchants and with consumers.

32

Table of Contents

We rely on the accuracy of third-party data, and inaccuracies in such data will lead to reduced Sezzle Income.

We purchase data from third parties that is critical to our assessment of the creditworthiness of consumers before they are either approved or denied funding for their purchase from a merchant. We are reliant on these third parties to ensure that the data they provide is accurate. Inaccurate data could cause us to not approve transactions that otherwise would have been approved, or instead, we may either lose Sezzle Income, or earn Sezzle Income that may lead to a higher incidence of bad debts. Our inability to collect on certain amounts from consumers due to poor creditworthiness or otherwise would likely have a material adverse effect on our results of operations and financial condition.

Changes in market interest rates and the replacement of LIBOR could have an adverse effect on our business.

We offer our merchants an interest bearing program whereby merchants may defer payment from us in exchange for interest. Deferred payments retained in the program bear interest at the LIBOR daily (3 month) rate plus three percent (3.0%) on an annual basis, compounding daily. The weighted average annual percentage yield for the year ended December 31, 2021 was 3.22%. Interest expense associated with the program totaled approximately $2.3 million and $1.5 million for the years ended December 31, 2021 and 2020, respectively. In addition, the interest paid on borrowings under our receivable facility were tied to the LIBOR rate during the years ended December 31, 2021 and 2020. The facility carried an interest rate of LIBOR plus 3.375% and LIBOR plus 10.689% (depending on the lender making the borrowings under the facility). Increased interest rates may adversely impact the amounts we may be required to pay under the merchant interest bearing program and our receivables facility, which as a result could negatively impact our results of operations and financial condition.

In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that, after 2021, it will stop compelling banks to submit rates for the calculation of LIBOR. Effective January 1, 2022, we amended our receivables facility agreement to replace references to LIBOR with the U.S. Federal Reserve’s Secured Overnight Financing Rate (“SOFR”). We believe the change in the reference rate to SOFR from LIBOR will not have a material impact on our consolidated financial statements. We are still contemplating a mechanism for replacing LIBOR with a new benchmark rate for outstanding debt under our interest bearing program. We cannot reasonably predict the potential effect of the discontinuation or replacement of LIBOR on our interest bearing program, other reforms or the establishment of alternative reference rates on our business. The discontinuation, reform, or replacement of LIBOR on our interest bearing program could result in interest rate increases on the funding arrangement, which could adversely affect our operating results and financial condition.

We are exposed to exchange rate fluctuations in the international markets in which we operate.

There are instances in which our costs and revenues related to international operations are not able to be exactly matched with respect to currency denomination. Currency fluctuations cause the U.S. dollar value of our international results of operations and net assets to vary with exchange rate fluctuations. A decrease in the value of any of these currencies relative to the U.S. dollar could have a negative impact on our business, results of operations and financial condition. We may experience economic loss and a negative impact on earnings or net assets solely as a result of foreign currency exchange rate fluctuations. In the future, we may utilize derivative instruments to manage the risk of fluctuations in foreign currency exchange rates that could potentially impact our future earnings and forecasted cash flows. However, the markets in which we operate could restrict the removal or conversion of the local or foreign currency, resulting in our inability to hedge against some or all of these risks and/or increase our cost of conversion of local currency to U.S. dollar.

Our ability to use certain net operating loss carryforwards and certain other tax attributes may be limited.

Under U.S. federal income tax principles set forth in Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in ownership of the relevant corporation by “5% shareholders” (as defined under U.S. income tax laws), which includes Charles Youakim (our Chief Executive Officer), that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. Our ability to utilize a portion of our net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be subject to certain limitations under Section 382 of the Code. Such limitations on the ability to use net operating loss carryforwards and other tax assets could adversely impact our business, financial condition, results of operations, and cash flows.

33

Table of Contents

Our efforts to protect our intellectual property rights may not be sufficient.

Our business depends on our ability to commercially exploit our technology and intellectual property rights, including our technological systems and data processing algorithms. We rely on laws relating to trade secrets, copyright, and trademarks to assist in protecting our proprietary rights. However, there is a risk that unauthorized use or copying of our software, data, specialized technology, trademarks or platforms will occur. In addition, there is a risk that the validity, ownership, registration or authorized use of intellectual property rights relevant to our business may be successfully challenged by third parties. This could involve significant expense and potentially the inability to use the intellectual property rights in question. If an alternative cost-effective solution were not available, there may be a material adverse impact on our financial position and performance. Such disputes may also temporarily adversely impact our performance or ability to integrate new systems, which may adversely impact our income and financial position.

There is a risk that we will be unable to register or otherwise protect new intellectual property rights we develop in the future, or which are developed on our behalf by contractors. In addition, competitors may be able to work around any of our intellectual property rights, or independently develop technologies, or competing payment products or services that are not protected by our intellectual property rights. Our competitors may then be able to offer identical or very similar services or services that are otherwise competitive against those we provide, which could adversely affect our business. We also face risks in connection with our international expansion, including in countries that may have less protection for our intellectual property rights than the United States. We currently hold registered trademarks in the United States, the United Kingdom (“UK”), the European Union and India, and we have pending trademark applications in Canada and Brazil. There is a risk that our trademarks and other intellectual property rights may not be adequate to protect our brand or proprietary technology or may conflict with the registered trademarks or other intellectual property rights of other companies, both domestically and abroad, which may require us to rebrand our product and service offerings, obtain costly licenses, defend against third-party claims, or substantially change our product or service offerings. Should such risks manifest, we may be required to expend considerable resources and divert the attention of our management, which could have an adverse effect on our business and results of operations.

Our ability to protect our trademarks and other intellectual property may be adversely affected by the COVID-19 pandemic. As a result of the COVID-19 pandemic, certain domestic and foreign intellectual property offices have amended their filing requirements and other procedures, including, but not limited to, extending deadlines and waiving fees. These accommodations have not been applied uniformly across all intellectual property offices globally, and the effectiveness and duration of existing action is unclear. Further, the ongoing COVID-19 pandemic has created uncertainty with respect to the uninterrupted operation of domestic and foreign intellectual property offices, which, amongst other things, may cause delayed processing of renewal and application filings. Our inability to establish and maintain current and future trademarks or other intellectual property rights may have an adverse effect on the growth and reputation of our business. Further, the constantly evolving nature of the COVID-19 pandemic may change its effect on our brand and our other intellectual property rights over time in ways that cannot be reasonably anticipated or mitigated. This could have an adverse effect on our business, results of operations, and financial condition.

We may be sued by third parties for alleged infringement, misappropriation, or other violation of their intellectual property or other proprietary rights.