Pattern Group Inc.

Current report

The use of new and evolving technologies, including AI Technologies, in our business may result in spending material resources and presents risks and challenges that can impact our business including by posing security and other risks to our confidential and/or proprietary information, including personal information, and as a result we may be exposed to reputational harm and liability.

Current report

We may continue to use and integrate AI and machine learning technologies and products (collectively, “AI Technologies”), including agentic AI, into our business processes, and this innovation presents risks and challenges that could affect its adoption, and therefore our business.

Current report

Development, use and deployment of AI Technologies could pose cybersecurity, data privacy, IT, intellectual property, regulatory, legal, operational, competitive, reputational and other risks and challenges that could affect our business. Specifically, risks related to bias, AI hallucinations, discrimination, harmful content, misinformation, fraud, scams, unauthorized agentic activity, targeted attacks such as model poisoning, data poisoning or prompt injection (including manipulation of inputs drawn from sources we do not control), surveillance, data leakage, loss of consensus reality, inequality, environmental harms and other harms may flow from our development, use or deployment of AI Technologies. Uncertainty around new and emerging AI applications such as generative AI content creation may require additional investment in the development of proprietary data sets, machine learning models and systems to test for accuracy, bias and other variables, which are often complex, development of new approaches and processes to provide attribution or remuneration to content creators and building systems that enable creatives to have greater control over the use of their work in the development of AI Technologies, which may be costly and could impact our profit margin if we are unable to monetize such assets. In addition, AI Technologies, including generative AI, may create content that appears correct but is factually inaccurate or flawed or contains copyrighted or other protected material, and if our brand partners or others use this flawed content to their detriment, we may be exposed to brand or reputational harm, competitive harm or legal liability. Developing, testing and deploying AI Technologies may also increase our costs due to the nature of the compute power costs involved in such systems.

Current report

If we enable or offer solutions that draw controversy due to perceived or actual negative societal impact, we may experience brand or reputational harm, competitive harm or legal liability. Additionally, we expect to see increasing government and supranational regulation related to AI use and ethics, which may also significantly increase the burden and cost of research, development and compliance in this area. For example, the European Union’s Artificial Intelligence Act (“AI Act”) — the world’s first comprehensive AI law — entered into force in August 2024 and its obligations apply in phases. Prohibitions on certain AI practices and obligations for general-purpose AI models have applied since 2025, and most transparency obligations, including disclosure requirements for certain AI interactions and AI-generated content, since August 2026. As amended in July 2026, the AI Act’s obligations for high-risk AI systems will begin to apply in December 2027. This legislation imposes significant obligations on providers and deployers of high-risk AI systems, and encourages providers and deployers of AI systems to account for European Union (“EU”) ethical principles in their development and use of these systems. If we develop or use AI systems that are governed by the AI Act, it may necessitate ensuring higher standards of data quality, transparency and human oversight, as well as adhering to specific and potentially burdensome and costly ethical, accountability and administrative requirements, with the possibility of significant penalties or injunctive remedies for non-compliance.

Current report

In the U.S., the AI regulatory environment is complex and uncertain. Over the past year, states have advanced, and in some cases passed, a variety of laws focusing on AI governance and regulation, including those addressing consumer-facing AI disclosures, automated decision-making, liability for AI actions and algorithmic discrimination, among others. At the federal level, the current administration has sought to limit the enforcement of state AI laws, including through a December 11, 2025, executive order on “Ensuring a National Policy Framework for Artificial Intelligence.” So far, these efforts have not been successful at curtailing state action on AI regulation, contributing to a complicated legislative patchwork, which may be litigated in state and federal courts. In addition, various federal regulators have issued guidance and focused enforcement efforts on the use of AI, including in connection with targeted advertising and regulated sectors that may impact the services we provide to our brand partners or customers. We or our customers when using our services may need to meet various standards of data quality, transparency, monitoring and human oversight, which could introduce cost and compliance risk that could adversely affect our or our customers’ or brand partners’ use of our AI-related services.

Current report

Certain capabilities within our internal processes and/or platform incorporate agentic AI (systems that autonomously execute multi-step tasks with reduced human intervention). The deployment of such agentic AI introduces risks that are distinct from those of traditional AI features, including risks of unintended or unauthorized autonomous actions, overstepping intended boundaries, or straying from business goals and objectives. These risks may be difficult to anticipate, monitor or prevent given the autonomous nature of such systems, and our ability to predict, supervise and control agentic behavior may be limited. Autonomous actions taken by such systems may be difficult or impossible to reverse and could result in financial loss, failure to meet our commitments to brand partners, or non-compliance with the requirements of third-party platforms on which our business depends.

Current report

The rapid evolution of AI will require the application of significant resources to design, develop, test, monitor and maintain our solutions to help ensure that AI is implemented in accordance with applicable law and regulation and in a socially responsible manner and to minimize any real or perceived unintended harmful impacts. With respect to agentic systems in particular, this includes establishing and enforcing appropriate scoping, permissioning, logging, persistent monitoring and human oversight controls, and there can be no assurance that such controls will be effective or will keep pace with the capabilities of the systems they govern. The use of certain AI Technologies can also give rise to intellectual property risks, including by disclosing or otherwise compromising our confidential or proprietary intellectual property, or by undermining our ability to assert or defend ownership rights in intellectual property created with the assistance of artificial intelligence tools.

Current report

Our vendors may in turn incorporate AI tools into their offerings, and the providers of these AI tools may not meet existing or rapidly evolving regulatory or industry standards, including with respect to privacy and data security. Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of confidential, sensitive, proprietary and business and personal information (collectively, “confidential information”) and intellectual property. The integration of AI systems, by us or by our vendors, may increase cybersecurity risk. To the extent agentic systems are granted access to our systems, data or credentials, or are permitted to initiate actions without contemporaneous human review, the consequences of a compromise, misconfiguration or error may be greater and may be realized more rapidly than with systems that require human execution. Unauthorized or bad actors may also use agentic AI to conduct attacks at greater speed, scale and sophistication than previously possible. Any of these effects could damage our reputation, result in the loss of valuable property and information, cause us to breach applicable laws and regulations and adversely impact our business.

Current report

Our ability to mitigate the risks associated with AI will depend on our effective maintenance, training, monitoring and enforcement of appropriate policies, procedures and controls governing the use of AI tools, the results of any such use by us and our partners, and compliance with such policies and procedures by our workforce. Any unauthorized use or misuse of AI by our employees undermines our ability to protect against the AI-related risks described above.