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Item 1A. Risk Factors

2021-03-11 compared with 2020-03-12 · 213 added, 183 removed, 151 unchanged (72% of the section changed)

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Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

Risks Related to Our Business and Industry

We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements.

Our management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in “Internal Control –

Integrated Framework (2013)”

issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Under auditing standards established by the U.S.

Public Company Oversight Board, a material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

During its evaluation of the effectiveness of disclosure controls and procedures as of December 31, 2019, management identified material weaknesses in internal control over financial reporting related to user access and program change-management over information technology and business process controls that are dependent on affected information technology general controls and implementing key components of the COSO framework including information and communication, control activities and monitoring.

See Part II, Item 9 –

“Controls and Procedures.”

While we are in the process of identifying and implementing remedial measures to address the control deficiencies that led to the material weaknesses, there can be no assurance that remedial measures will prevent other control deficiencies or material weaknesses.

We may identify additional material weaknesses in our internal control over financial reporting in the future.

If we are unable to remediate the material weaknesses or we identify additional material weaknesses in our internal control over financial reporting in the future, our ability to analyze, record and report financial information free of material misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC may be adversely affected.

The occurrence of, or failure to remediate, the material weaknesses and any

further material weaknesses in our internal control over financial reporting may result in material misstatements as well as negatively impact the reliability of our financial statements, our reputation, our business and the trading price of our common stock, potentially leading to the suspension of trading on or delisting of our common stock from the NASDAQ stock exchange.

We have experienced net losses in recent years, and because we have a limited operating history, our ability to fully and successfully develop our business is unknown.

We have a history of operating at losses since our inception in October 2009.

Our ability to realize consistent, meaningful revenues and profit over a sustained period has not been established and cannot be assured.

While we believe that we have made significant progress in revenue growth and managing our overhead by implementing our cloud-based technology strategy, our services must achieve broad market acceptance by consumers and we must continue to grow our geographical reach, attract more agents and brokers, and increase the volume of our residential real-estate transactions.

If we are unsuccessful in continuing to gain market acceptance, we will not be able to generate sufficient revenue to continue our business operations and could sustain on-going operating and net losses.

Despite our ongoing efforts to build revenue growth, both organically and through acquisitions, and to control the anticipated expenses associated with the continued development, marketing and provision of our services, we may not be able to generate significant net income from operations in the future.

Risks Related to Our Industry

Our profitability is tied to the strength of the residential real estate market, which is subject to a number of general business and macroeconomic conditions beyond our control.

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Macroeconomic conditions that could adversely impact the growth of the real estate market and have a material adverse effect on our business include, but are not limited to, economic slowdown or recession, increased unemployment, increased energy costs, reductions in the availability of credit or higher interest rates, increased costs of obtaining mortgages, an increase in foreclosure activity, inflation, disruptions in capital markets, declines in the stock market, adverse tax policies or changes in other regulations, lower consumer confidence, lower wage and salary levels, war or terrorist attacks, natural disasters or adverse weather events, or the public perception that any of these events may occur.

Unfavorable general economic conditions, such as a recession or economic slowdown, in the United States, Canada or other markets we enter and operate within could negatively affect the affordability of, and consumer demand for, our services which could have a material adverse effect on our business and profitability.

Unfavorable general economic conditions, such as a recession or economic slowdown, in the U.S., Canada, or other markets we enter and operate within, could negatively affect the affordability of, and consumer demand for, our services, which could have a material adverse effect on our business and profitability.

In addition, federal and state governments, agencies, and government-sponsored entities such as Fannie Mae and Freddie Mac could take actions that result in unforeseen consequences to the real estate market or that otherwise could negatively impact our business.

The real estate market is substantially reliant on the monetary policies of the federal government and its agencies and is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the U.S., which in turn impacts interest rates.

The real estate market is substantially reliant on the monetary policies of the U.S.

federal government and its agencies and is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the U.S., which in turn impacts interest rates.

Our business could be negatively impacted by any rising interest rate environment.

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Similarly, in higher interest rate environments, potential home buyers may choose to rent rather than pay higher mortgage rates.

Changes in the interest rate environment and mortgage market are beyond our control, are difficult to predict and could have a material adverse effect on our business and profitability.

Changes in the interest rate environment and mortgage market are beyond our control and are difficult to predict and, as such, could have a material adverse effect on our business and profitability.

The coronavirus (“COVID-19”) pandemic may have a material adverse effect on our businesses, financial condition, and results of operations.

Since early 2020, the COVID-19 pandemic has had a profound effect on the global economy and financial markets.

and abroad, governments continue to react to this evolving public health crisis by, among other actions, recommending or requiring the avoidance of gatherings of people or significantly or entirely curtailing activities categorized as non-essential.

This unprecedented situation has created considerable risks and uncertainties for the U.S.

real estate services industry in general and for the Company in particular, including those arising from the potential adverse effects on the economy as well as risks related to employees, independent agents, and consumers.

The extent of the impact of the pandemic on our business and financial results will depend largely on future developments, including the extent and duration of the spread of the outbreak, the extent of governmental regulation (including, but not limited to, mandated “shelter in place” or other regulations that, for example, preclude or strictly limit open houses or in-person showings of properties), the impact on capital and financial markets and the related impact on consumer confidence and spending, and the magnitude of the financial and operational consequences to our agents and brokers, all of which are highly uncertain and cannot be predicted.

Our operating results are subject to seasonality and vary significantly among quarters during each calendar year, making meaningful comparisons of successive quarters difficult.

Seasons and weather traditionally impact the real estate industry.

Continuous poor weather or natural disasters negatively impact listings and sales.

Spring and summer seasons historically reflect greater sales periods in comparison to fall and winter seasons.

We have historically experienced lower revenues during the fall and winter seasons, as well as during periods of unseasonable weather, which reduces our operating income, net income, operating margins and cash flow.

Real estate listings precede sales and a period of poor listings activity will negatively impact revenue.

Past performance in similar seasons or during similar weather events can provide no assurance of future or current performance, and macroeconomic shifts in the markets we serve can conceal the impact of poor weather or seasonality.

Home sales in successive quarters can fluctuate widely due to a wide variety of factors, including holidays, national or international emergencies, the school year calendar’s impact on timing of family relocations, interest rate changes, speculation of pending interest rate changes and the overall macroeconomic market.

Our revenue and operating margins each quarter will remain subject to seasonal fluctuations, poor weather and natural disasters and macroeconomic market changes that may make it difficult to compare or analyze our financial performance effectively across successive quarters.

Risks Related to our Business and Operations

We may be unable to maintain our agent growth rate, which would adversely affect our revenue growth and results of operations.

We have experienced rapid and accelerating growth in our real estate broker and agent base.

During the year ended December 31, 2019, our net agent and broker base grew by 63.3%, from 15,570 agents and brokers at December 31, 2018, to 25,423 agents and brokers at December 31, 2019.

Because we derive revenue from real estate transactions in which our brokers and agents receive commissions, increases in our agent and broker base correlate to increases in

revenues, and the rate of growth of our revenue correlates to the rate of growth of our agent and broker base.

The rate of growth of our agent and broker base cannot be predicted and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry generally.

We cannot assure you that we will be able to maintain our recent agent growth rate or that our agent and broker base will continue to expand in future periods.

A slowdown in our agent growth rate would have a material adverse effect on revenue growth and could adversely affect our results of operations.

During the year ended December 31, 2020, our agent and broker base grew to 41,313 agents and brokers, or by 63%, from 25,423 agents and brokers as of December 31, 2019.

Because we derive revenue from real estate transactions in which our brokers and agents receive commissions, the amount and rate of growth of our revenue typically correlate to the amount and rate of growth of our agent and broker base, respectively.

We cannot assure that we will be able to maintain our recent agent growth rate or that our agent and broker base will continue to expand in future periods.

A slowdown in our agent growth rate would have a material adverse effect on revenue growth and could adversely affect our business, results of operations, financial condition, and cash flows.

We may be unable to effectively manage rapid growth in our business.

We may not be able to scale our business quickly enough to meet the growing needs of our affiliated real estate professionals and if we are not able to grow efficiently, our operating results could be harmed.

As the Company adds new real estate professionals, we will need to devote additional financial and human resources to improving our internal systems, integrating with third-party systems, and maintaining infrastructure performance.

As the Company adds new real estate professionals, it will need to devote additional financial and human resources to improving its internal systems, integrating with third-party systems, and maintaining infrastructure performance.

In addition, we will need to appropriately scale our internal business systems and our services organization, including support of our affiliated real estate professionals as our demographics expand over time.

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We could also face inefficiencies or operational failures as a result of our efforts to scale our infrastructure, and we may not be successful in maintaining adequate financial and operating systems and controls as we expand.

Moreover, there are inherent risks associated with upgrading, improving and expanding our information technology systems.

Moreover, there are inherent risks associated with upgrading, improving, and expanding our information

technology systems.

We cannot be sure that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all.

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We may implement changes to our business model and operations to improve revenues that cause a disproportionate increase in our expenses or reduce profit margins.

For example, we may allocate resources to acquiring lower margin brokerage models, the development of a mortgage servicing division, a commercial real estate division, a title and escrow company or a continuing education division.

For example, we may allocate resources to acquiring lower margin brokerage models and have invested in the development of a mortgage servicing division, a commercial real estate division, a title and escrow company and a continuing education division.

Expanding our service offerings could involve significant up-front costs that may only be recovered after lengthy periods of time.

Any of these attempts to pursue new business opportunities could result in a disproportionate increase in our expenses and in reduced profit margins.

In addition, any of these additional activities could expose us to additional compliance obligations and regulatory risks.

Our barrier to entry in new real estate markets is low given our cloud-based operating model;

however, attempts to pursue new business opportunities could result in a disproportionate increase in our expenses and in reduced profit margins.

In addition, expansion into new markets, including internationally, could expose us to additional compliance obligations and regulatory risks.

If we fail to continue to grow in the local markets we serve or if we fail to successfully identify and pursue new business opportunities, our long-term prospects, financial condition, and results of operations may be harmed, and our stock price may decline.

Our value proposition for agents and brokers includes allowing them to participate in the revenues of our company and is not typical in the real estate industry.

If agents and brokers do not understand our value proposition, we may not be able to attract, retain, and incentivize agents.

Participation in our revenue sharing plan represents a key component of our agent and broker value proposition.

Agents and brokers may not understand or appreciate its value due to the intricacies of our programs.

In addition, agents may not appreciate other components of our value proposition, including the cloud office platform, the mobility it affords, the systems and tools that we provide to agents and brokers, and the professional development opportunities we create and deliver.

If agents and brokers do not understand the elements of our agent value proposition, or do not perceive it to be more valuable than the models used by most competitors, we may not be able to attract, retain and incentivize new and existing agents and brokers to grow our revenues.

We may be unable to attract and retain additional qualified personnel.

To execute our business strategy, we must attract and retain highly qualified personnel.

In particular, we compete with many other real estate brokerages for qualified brokers who manage our operations in each state.

We must also compete with technology companies for developers with high levels of experience in designing, developing and managing cloud-based software, as well as for skilled service and operations professionals, and we may not be successful in attracting and retaining the professionals we need.

Additionally, in order to realize the potential benefits of acquisitions, we may need to retain employees from the acquired businesses or hire additional personnel to fully capitalize on the opportunities that such acquisitions may offer, and we may not be successful in retaining or attracting such individuals following an acquisition.

From time to time in the past we have experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications.

Many of the companies with which we compete for experienced personnel have greater resources than we do.

In addition, in making employment decisions, particularly in the software industry, job candidates often consider the value of the stock options or other equity incentives they are to receive in connection with their employment.

If the price of our stock declines or continues to experience significant volatility, our ability to attract or retain key employees may be adversely affected.

If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.

We have experienced net losses in recent years, and, because we have a limited operating history, our ability to fully and successfully develop our business is unknown.

We had a history of operating at losses since our inception in October 2009 until the fourth quarter of 2019.

Our ability to realize consistent, meaningful revenues and profit over a sustained period has not been established over the long term and cannot be assured in future periods.

While we believe that we have made significant progress in revenue growth and managing our overhead by implementing our cloud-based technology strategy, our services must achieve broad market acceptance by consumers, and we must continue to grow our geographical reach, attract more agents and brokers, and increase the volume of our residential real-estate transactions.

unsuccessful in continuing to gain market acceptance, we will not be able to generate sufficient revenue to continue our business operations and could recognize future operating and net losses.

Despite our ongoing efforts to build revenue growth, both organically and through acquisitions, and to control the anticipated expenses associated with the continued development, marketing and provision of our services, we may not be able to consistently generate significant net income and cash flows from operations in the future.

We may not be able to utilize a portion of our net operating loss carryforwards, which may adversely affect our profitability.

As of December 31, 2020, we had federal and state net operating losses carryforward due to prior years’ losses.

The pre-fiscal 2018 federal and the state net operating losses will carry forward 20 years.

The federal net operating losses generated in and after fiscal 2018 can be carried forward indefinitely.

A portion of our net operating loss may expire unused and be unavailable to reduce future income tax liabilities, which may adversely affect our profitability.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes, in any taxable year, may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.

Similar rules may apply under state tax laws.

It is possible that an ownership change, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.

We could be subject to changes in tax laws and regulations that may have a material adverse effect in our business

We operate and are subject to taxes in the United States and numerous other jurisdictions throughout the world.

Changes to federal, state, local, or international tax laws on income, sales, use, indirect, or other tax laws, statutes, rules or regulations may adversely affect our effective tax rate, operating results or cash flows.

Our effective tax rate could increase due to several factors, including:

changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;

changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Tax Cuts and Jobs Act of 2017 (the “Tax Act”);

changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;

the outcome of current and future tax audits, examinations or administrative appeals;

and limitations or adverse findings regarding our ability to do business in some jurisdictions.

In particular, new income, sales and use or other tax laws or regulations could be enacted at any time, which could adversely affect our business operations and financial performance.

Further, existing tax laws, regulations could be interpreted, modified or applied adversely to us.

For example, the Tax Act enacted many significant changes to the U.S.

Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation.

For example, the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) modified certain provisions of the Tax Act.

In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, or any newly enacted federal tax legislation.

Changes in corporate tax rates, the realization of net operating losses, and other deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets and could increase our future U.S.

The utilization of a 3D cloud-based immersive office as a suitable substitute for a physical brick and mortar location is a new and unproven strategy and we cannot guarantee that we will be able to operate and grow within its confines.

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As part of our business and growth strategy, we evaluate acquisitions of, or investments in, a wide array of potential strategic opportunities, including third-party technologies and businesses, as well as other real estate brokerages.

If we are not able to integrate acquisitions, or execute on joint venture strategies, successfully, our operating results and prospects could be harmed .

If we are not able to effectively integrate acquired businesses and assets or successfully execute on joint venture strategies, our operating results and prospects could be

Since 2018, we have acquired new technology and operations and entered into joint venture arrangements.

We will continue to look for opportunities to acquire technologies or operations that we believe will contribute to our growth and development.

We will continue to look for opportunities to acquire technologies or operations that we believe will contribute to our growth and development, including our July 2020 acquisition of Showcase Web Sites, L.L.C.

and our December 2020 acquisition of Success Enterprises LLC .

The success of our future acquisition strategy will depend on our ability to identify, negotiate, complete, and integrate acquisitions.

The success of our future joint venture strategies will depend on our ability to identify, negotiate, complete, and successfully manage joint ventures with other parties.

The success of our future joint venture strategies will depend on our ability to identify, negotiate, complete, and successfully manage and grow joint ventures with other parties.

In addition, acquisitions and joint ventures could cause potentially dilutive issuances of equity securities or incurrence of debt.

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● difficulties in integrating and managing the operations and technologies of the companies we acquire, including higher than expected integration costs and longer integration periods;

diversion of our management’s attention from normal daily operations of our business;

● diversion of our management’s attention from normal daily operations of our business;

● our inability to maintain the customers, key employees, key business relationships and reputations of the businesses we acquire;

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● inability to fully realize intangible assets recognized through acquisitions or joint ventures and related non-cash impairment charges that may result if we are required to revalue such intangible assets.

Our failure to address these risks or any other challenges we encounter with our future acquisitions, joint ventures and investments could cause us to not realize all or any of the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities, and harm our business, which could negatively impact our operating results and financial condition.

We face significant risk to our brand and revenue if we fail to maintain compliance with the law and regulations of federal, state, county and foreign governmental authorities, or private associations and governing boards.

We operate in a heavily regulated industry subject to complex, federal, state, provincial and local laws and regulations within the markets in which we operate and third-party organizations’

regulations, policies and bylaws governing the real estate business.

In general, the laws, rules and regulations that apply to our business practices include, without limitation, RESPA.

the federal Fair Housing Act, the Dodd-Frank Act, and federal advertising and other laws, as well as comparable state statutes;

rules of trade organizations such as NAR, local MLSs, and state and local AORs;

licensing requirements and related obligations that could arise from our business practices relating to the provision of services other than real estate brokerage services;

privacy regulations relating to our use of personal information collected from the registered users of our websites;

laws relating to the use and publication of information through the Internet;

and state real estate brokerage licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations relating to these licenses.

Additionally, the Dodd-Frank Act contains the Mortgage Reform and Anti-Predatory Lending Act (“Mortgage Act”), which imposes a number of additional requirements on lenders and servicers of residential mortgage loans, by amending certain existing provisions and adding new sections to RESPA and other federal laws.

It also broadly prohibits unfair, deceptive or abusive acts or practices, and knowingly or recklessly providing substantial assistance to a covered person in violation of that prohibition.

The penalties for noncompliance with these laws are also significantly increased by the Mortgage Act, which could lead to an increase in lawsuits against mortgage lenders and servicers.

As we expand our business into new markets, including the United Kingdom and Australia, we are subject to additional foreign governmental regulation.

Ensuring compliance with these newly applicable laws could substantially increase our operating expenses.

In addition, entry into these new markets exposes us to increased risk and liability.

For example, the European Union’s General Data Protection Regulation (“GDPR”) confers significant privacy rights on individuals (including employees and independent agents), and materially increased penalties for violations.

A violation of any of these applicable laws could have a material adverse effect on our business.

Maintaining legal compliance is challenging and increases our costs due to resources required to continually monitor business practices for compliance with applicable laws, rules and regulations, and to monitor changes in the applicable laws themselves.

We may not become aware of all the laws, rules and regulations that govern our business, or be able to comply with all of them, given the rate of regulatory changes, ambiguities in regulations, contradictions in regulations between jurisdictions, and the difficulties in achieving both company-wide and region-specific knowledge and compliance.

If we fail, or we have alleged to have failed, to comply with any existing or future applicable laws, rules and regulations, we could be subject to lawsuits and administrative complaints and proceedings, as well as criminal proceedings.

Our noncompliance could result in significant defense costs, settlement costs, damages and penalties.

Our business licenses could be suspended or revoked, our business practices enjoined, or we could be required to modify our business practices, which could materially impair, or even prevent, our ability to conduct all or any portion of our business.

Any such events could also damage our reputation and impair our ability to attract and service home buyers, home sellers and agents, as well our ability to attract brokerages, brokers, teams of agents and agents to our company, without increasing our costs.

Further, if we lose our ability to obtain and maintain all of the regulatory approvals and licenses necessary to conduct business as we currently operate, our ability to conduct business may be harmed.

Lastly, any lobbying or related activities we undertake in response to mitigate liability of current or new regulations could substantially increase our operating expenses.

We may suffer significant financial harm and loss of reputation if we do not comply, cannot comply, or are alleged to have not complied with applicable laws, rules and regulations concerning our classification and compensation practices for the agents in our owned-and-operated brokerage.

Except for our employed state brokers and commission only employees, all real estate professionals in our brokerage operations have been retained as independent contractors, either directly or indirectly through third-party entities formed by these independent contractors for their business purposes.

With respect to these independent contractors, like most brokerage firms, we are subject to the taxing authorities’

regulations and applicable laws regarding independent contractor classification.

These regulations and guidelines are subject to judicial and agency interpretation, and it might be determined that the independent contractor classification is inapplicable to any of our affiliated real estate professionals.

Further, if legal standards for classification of real estate professionals as independent contractors change or appear to be changing, it may be necessary to modify our compensation and benefits structure for our affiliated real estate professionals in some or all of our markets, including by paying additional compensation or reimbursing expenses.

In the future we could incur substantial costs, penalties and damages, including back pay, unpaid benefits, taxes, expense reimbursement and attorneys’

fees, in defending future challenges by our affiliated real estate professionals to our employment classification or compensation practices.

Our failure to address these risks or any other challenges we encounter with our future acquisitions, joint ventures, and investments could cause us to not realize all or any of the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities, and harm our business, which could negatively impact our operating results, financial condition, and cash flows.

Our international operations are subject to risks not generally experienced by our U.S.

In addition to operating in Canada, in 2019 we expanded our business into Australia and the United Kingdom.

In addition to operating in Canada, we expanded our business into Australia and the United Kingdom in 2019, and into South Africa, Portugal, France, Mexico, and India during 2020.

Our international operations are subject to risks not generally experienced by our U.S.

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Bribery Act, or similar laws of other countries;

uncertainties and effects of the implementation of the United Kingdom’s referendum to withdraw membership from the European Union (referred to as Brexit), including financial, legal and tax implications;

● uncertainties and effects of the implementation of the United Kingdom’s agreement to withdraw its membership from the European Union (referred to as Brexit), including financial, legal and tax implications;

● government and health organization restrictions within the international locations in which we operate in response to the COVID-19 pandemic, which can be significantly different than those imposed within U.S.

jurisdictions;

● regional and country specific data protection and privacy laws including the GDPR.

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are more difficult and more expensive to monitor, and improper activities or mismanagement may be more difficult to detect.

Negligent or i mproper activities involving our agents and brokers may result in reputational damage to us and may lead to direct claims against us based on theories of vicarious liability, negligence, joint operations and joint employer liability which, if determined adversely, could increase costs, negatively impact the business prospects of our franchisees and subject us to incremental liability for their actions.

Negligent or i mproper activities involving our agents and brokers may result in reputational damage to us and may lead to direct claims against us based on theories of vicarious liability, negligence, joint operations and joint employer liability which, if determined adversely, could increase costs, and subject us to incremental liability for their actions.

Loss of our current executive officers or other key management could significantly harm our business.

We depend on the industry experience and talent of our current executives.

We believe that our future results will depend in part upon our ability to retain and attract highly skilled and qualified management.

The loss of our executive officers could have a material adverse effect on our operations because other officers may not have the experience and expertise to readily replace these individuals.

To the extent that one or more of our top executives or other key management personnel depart from the Company, our operations and business prospects may be adversely affected.

In addition, changes in executives and key personnel could be disruptive to our business.

Failure to protect intellectual property rights could adversely affect our business.

Our intellectual property rights, including existing and future trademarks, trade secrets, patents and copyrights, are important assets of the business.

We have taken measures to protect our intellectual property, but these measures may not be sufficient or effective.

We may bring lawsuits to protect against the potential infringement of our intellectual property rights and other companies, including our competitors, could make claims against us alleging our infringement of their intellectual property rights.

There can be no assurance that we would prevail in such lawsuits.

Any significant impairment of our intellectual property rights could harm our business.

We have identified material weaknesses in our internal control over financial reporting in the past and have remediated the previously identified material weaknesses in 2020.

If our remedial measures in future years are unsuccessful or inadequate, our financial statements could include material misstatements.

During its evaluation of the effectiveness of disclosure controls and procedures as of December 31, 2019, management identified material weaknesses in internal control over financial reporting.

During 2020, we identified and implemented remedial measures to address the control deficiencies that led to the material weaknesses.

However, there can be no assurance that remedial measures will prevent other control deficiencies or material weaknesses, and we may identify additional material weaknesses in our internal control over financial reporting in the future.

The occurrence of, or failure to remediate, any further material weaknesses in our internal control over financial reporting may result in material misstatements, as well as negatively impact the reliability of our financial statements, our reputation, our business, and the trading price of our common stock, potentially leading to the suspension of trading on or delisting of our common stock from the NASDAQ stock exchange.

Risks Related to our Technology

If we do not remain an innovative leader in the real estate industry, we may not be able to grow our business and leverage our costs to achieve profitability.

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The market for Internet products and services including, without limitation, 3D immersive experiences, virtual reality and augmented reality is characterized by rapid technological developments, evolving industry standards and consumer demands, and frequent new product introductions and enhancements.

The Company’s future success will depend in significant part on its ability to continually improve the performance, features and reliability of its Internet-based virtual environment, its tools and other properties in response to both evolving demands of the marketplace and competitive product offerings, and there can be no assurance that the Company will be successful in doing so.

In addition, the widespread adoption of new virtual reality and augmented reality applications through new technology developments could require fundamental changes in the Company’s services.

Our value proposition for agents and brokers includes allowing them to participate in the revenues of our company and is not typical in the real estate industry.

If agents and brokers do not understand our value proposition we may not be able to attract, retain and incentivize agents.

Participation in our gross revenue sharing plan represents a key component of our agent and broker value proposition.

Agents and brokers may not understand or appreciate its value.

In addition, agents may not appreciate other components of our value proposition including the cloud office platform, the mobility it affords, the systems and tools that we provide to agents and brokers, and the professional development opportunities we create and deliver.

We offer our independent agents the opportunity to earn a portion of their commissions through our revenue share program which pays under a multi-tiered compensation structure similar in some respects to network marketing.

Network marketing is subject to intense government scrutiny, and regulation and changes in the law, or the interpretation and enforcement of the law, might adversely affect our business.

Various laws and regulations in the United States and other countries regulate network marketing.

These laws and regulations exist at many levels of government in many different forms, including statutes, rules, regulations, judicial decisions, and administrative orders.

Network marketing regulations are inherently fact-based and often do not include "bright line" rules.

Additionally, we are subject to the risk that the regulations, or a regulator's interpretation and enforcement of the regulations, could change.

From time to time, we have received requests to supply information regarding our revenue share plan to regulatory agencies.

We could potentially in the future be required to modify our revenue sharing plan in certain jurisdictions in order to comply with the interpretation of the regulations by local authorities.

In the United States, the Federal Trade Commission (“FTC”) has entered into several highly publicized settlements with network marketing companies that required those companies to modify their compensation plans and business models.

Those settlements resulted from actions brought by the FTC involving a variety of alleged violations of consumer protection laws, including misleading earnings representations by the companies' independent distributors, as well as the legal validity of the companies' business model and distributor compensation plans.

FTC determinations such as these have created an ambiguity regarding the proper interpretation of the law and regulations applicable to network marketing companies in the U.S.

Although a consent decree between the FTC and a specific company does not represent judicial precedent, FTC officials have indicated that the network marketing industry should look to these consent decrees, and the principles contained therein, for guidance.

Additionally, following the issuance of these consent decrees, the FTC

issued non-binding guidance to the network marketing industry, suggesting it was intending to reinforce the principles contained in the consent decrees and provide other operational guidance to the network marketing industry.

While we strive to ensure that our overall business model, and revenue share plan, are regulatory compliant in each of our markets, we cannot assure you that a regulator, if it were to review our business, would agree with our assessment and would not require us to change one or more aspects of our operations.

Any action against us in the future by the FTC or another regulator could materially and adversely affect our operations.

We cannot predict the nature of any future law, regulation, or guidance, nor can we predict what effect additional governmental regulations, judicial decisions, or administrative orders, when and if promulgated, would have on our business.

Failure by us, or our independent agents, to comply with these laws, could adversely affect our business.

We may be unable to attract and retain additional qualified personnel.

To execute our business strategy, we must attract and retain highly qualified personnel.

In particular, we compete with many other real estate brokerages for qualified brokers who manage our operations in each state.

From time to time in the past we have experienced, and we expect to continue to experience in the future, difficulty in hiring and difficulty in retaining highly skilled employees with appropriate qualifications.

Many of the companies with which we compete for experienced personnel have greater resources than we do.

If the price of our stock declines, or continues to experience significant volatility, our ability to attract or retain key employees may be adversely affected.

If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.

Our operating results are subject to seasonality and vary significantly among quarters during each calendar year, making meaningful comparisons of successive quarters difficult.

Seasons and weather traditionally impact the real estate industry.

Continuous poor weather or natural disasters negatively impact listings and sales.

Spring and summer seasons historically reflect greater sales periods in comparison to fall and winter seasons.

Real estate listings precede sales and a period of poor listings activity will negatively impact revenue.

If we fail to protect the privacy of employees, independent contractors, or consumers or personal information that they share with us, our reputation and business could be significantly harmed.

Hundreds of thousands of consumers, independent contractors, and employees have shared personal information with us during the normal course of our business processing real estate transactions.

This includes, but is not limited to, social security numbers, annual income amounts and sources, consumer names, addresses, telephone and cell phone numbers, and email addresses.

The Application, disclosure and safeguarding of this information is regulated by federal and state privacy laws.

To comply with privacy laws, we invested resources and adopted a privacy policy outlining policies and procedures for the use of safeguarding personal information.

This policy includes informing consumers, independent contractors and employees that we will not share their personal information with third parties without their consent unless required by law.

Privacy policies and compliance with federal and state privacy laws presents risk and we could incur legal liability for failing to maintain compliance.

We may not become aware of all privacy laws, changes to privacy laws, or third- party privacy regulations governing the real estate business or be unable to comply with all of these regulations, given the rate of regulatory changes, ambiguities in regulations, contradictions in regulations between jurisdictions, and the difficulties in achieving both company-wide and region-specific knowledge and compliance.

Our policy and safeguards could be deemed insufficient if third parties with whom we have shared personal information fail to protect the privacy of that information.

Our legal liability could include significant defense costs, settlement costs, damages and penalties, plus, damage our reputation with consumers, which could significantly damage our ability to attract customers.

Any or all of these consequences would result in meaningful unfavorable impact on our brand, business model, revenue, expenses, income and margins.

In addition, the widespread adoption of new virtual reality and augmented reality applications through new technology developments could require fundamental changes in the Company’s services.

Our business could be adversely affected if we are unable to expand, maintain and improve the systems and technologies which we rely on to operate.

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The performance and reliability of our systems and operations are critical to our reputation and ability to attract agents, teams of agents and brokers into our company as well as our ability to service home buyers and sellers.

Our systems and operations are vulnerable to security breaches, interruption or malfunction due to certain events beyond our control, including natural disasters, such as earthquakes, fire and flood, power loss, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events.

Our systems and operations are vulnerable to security breaches, interruption or malfunction due to events beyond our control, including natural disasters, such as earthquakes, fire and flood, power loss, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events.

In addition, we rely on third party vendors to provide the cloud office platform and to provide additional systems and related support.

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Any security breach, interruption, delay or failure in our systems and operations could substantially reduce the transaction volume that can be processed with our systems, impair quality of service, increase costs, prompt litigation and other consumer claims, and damage our reputation, any of which could substantially harm our financial condition.

Loss of our current executive officers or other key management could significantly harm our business.

We depend on the industry experience and talent of our current executives.

We believe that our future results will depend in part upon our ability to retain and attract highly skilled and qualified management.

The loss of our executive officers could have a material adverse effect on our operations because other officers may not have the experience and expertise to readily replace these individuals.

To the extent that one or more of our top executives or other key management personnel depart from the Company, our operations and business prospects may be adversely affected.

In addition, changes in executives and key personnel could be disruptive to our business.

The Company does not have any key person insurance.

Failure to protect intellectual property rights could adversely affect our business.

Our intellectual property rights, including existing and future trademarks, trade secrets, patents and copyrights, are important assets of the business.

We have taken measures to protect our intellectual property, but these measures may not be sufficient or effective.

There can be no assurance that we would prevail in such lawsuits.

Any significant impairment of our intellectual property rights could harm our business.

Cybersecurity incidents could disrupt our business operations, result in the loss of critical and confidential information, adversely impact our reputation and harm our business.

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and foreign privacy and other laws, reputational damage, loss of market value, litigation with third parties (which could result in our exposure to material civil or criminal liability), diminution in the value of the services we provide to our customers, and increased cybersecurity protection and remediation costs (that may include liability for stolen assets or information), which in turn could have a material adverse effect on our competitiveness and results of operations.

Risks Related to Legal and Regulatory Matters

We offer our independent agents the opportunity to earn additional commissions through our revenue sharing plan, which pays under a multi-tiered compensation structure similar in some respects to network marketing.

Network marketing is subject to intense government scrutiny, and regulation and changes in the law, or the interpretation and enforcement of the law, might adversely affect our business.

Various laws and regulations in the United States and other countries regulate network marketing.

These laws and regulations exist at many levels of government in many different forms, including statutes, rules, regulations, judicial decisions, and administrative orders.

Network marketing regulations are inherently fact-based and often do not include "bright line"

Additionally, we are subject to the risk that the regulations, or a regulator's interpretation and enforcement of the regulations, could change.

From time to time, we have received requests to supply information regarding our revenue sharing plan to regulatory agencies.

We could potentially in the future be

required to modify our revenue sharing plan in certain jurisdictions in order to comply with the interpretation of the regulations by local authorities.

FTC determinations such as these have created an ambiguity regarding the proper interpretation of the law and regulations applicable to network marketing companies in the U.S.

Additionally, following the issuance of these consent decrees, the FTC issued non-binding guidance to the network marketing industry, suggesting it was intending to reinforce the principles contained in the consent decrees and provide other operational guidance to the network marketing industry.

While we strive to ensure that our overall business model, and revenue sharing plan, are regulatory compliant in each of our markets, we cannot assure you that a regulator, if it were to review our business, would agree with our assessment and would not require us to change one or more aspects of our operations.

Any action against us in the future by the FTC or another regulator could materially and adversely affect our operations.

Failure by us, or our independent agents, to comply with these laws, could adversely affect our business.

We operate in a heavily regulated industry subject to complex, federal, state, provincial and local laws and regulations within the markets in which we operate and third-party organizations’ regulations, policies and bylaws governing the real estate business.

In general, the laws, rules and regulations that apply to our business practices include, without limitation, RESPA, the federal Fair Housing Act, the Dodd-Frank Act, and federal advertising and other laws, as well as comparable state statutes;

rules of trade organizations such as NAR, local MLSs, and state and local AORs;

licensing requirements and related obligations that could arise from our business practices relating to the provision of services other than real estate brokerage services;

privacy regulations relating to our use of personal information collected from the registered users of our websites;

laws relating to the use and publication of information through the Internet;

and state real estate brokerage licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations relating to these licenses.

It also broadly prohibits unfair, deceptive or abusive acts or practices, and knowingly or recklessly providing substantial assistance to a covered person in violation of that prohibition.

The penalties for noncompliance with these laws are also significantly increased by the Mortgage Act, which could lead to an increase in lawsuits against mortgage lenders and servicers.

As we expand our business into new international markets, including the United Kingdom, Australia, Portugal, Mexico, South Africa, India, and France, we are subject to additional foreign governmental regulation.

Ensuring compliance with these newly applicable laws could substantially increase our operating expenses.

In addition, entry into these new markets exposes us to increased risk and liability.

A violation of any of these applicable laws could have a material adverse effect on our business.

Our noncompliance could result in significant defense costs, settlement costs, damages and penalties.

Lastly, any lobbying or related activities we undertake in response to mitigate liability of current or new regulations could substantially increase our operating expenses.

With respect to these independent contractors, like most brokerage firms, we are subject to the taxing authorities’ regulations and applicable laws regarding independent contractor classification.

In the future we could incur substantial costs, penalties and damages, including back pay, unpaid benefits, taxes, expense reimbursement and attorneys’ fees, in defending future challenges by our affiliated real estate professionals to our employment classification or compensation practices.

We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business and financial condition.

We are subject to risk of, and are from time to time involved in, or may in the future be subject to, claims, suits, government investigations, and proceedings arising from our business, including actions with respect to intellectual property, privacy, information security, data protection or law enforcement matters, tax matters, labor and employment, including claims challenging the classification of our agents and brokers as independent contractors and compliance with wage and hour regulations, and claims alleging violations of RESPA or state consumer fraud statutes, and commercial arrangements.

We are also subject to risk related to shareholder derivative actions, standard brokerage disputes like the failure to disclose hidden defects in a property such as mold, vicarious liability based upon conduct of individuals or entities outside of our control, including our agents, brokers, third-party service or product providers, and purported class action lawsuits.

We cannot predict with certainty the cost of defense, the cost of prosecution, insurance coverage or the ultimate outcome of litigation and other proceedings filed by or against us, including remedies or damage awards.

Adverse results in such litigation and other proceedings may harm our business and financial condition.

Class action lawsuits can often be particularly burdensome given the breadth of claims, large potential damages and significant costs of defense.

In the case of intellectual property litigation and proceedings, adverse outcomes could include the cancellation, invalidation or other loss of material intellectual property rights used in our business and injunctions prohibiting our use of business processes or technology that is subject to third party patents or other third party intellectual property rights.

In addition, we may be required to enter into licensing agreements (if available on acceptable terms) and be required to pay royalties.

From time to time, we may become involved in lawsuits and legal proceedings which arise in the ordinary course of business.

At present, we are not involved in any material pending legal proceeding, and there are no proceedings in which any of our directors, officers or affiliates is an adverse party or has a material interest adverse to our interest.

If we fail to protect the privacy and personal information of our customers, agents or employees, we may be subject to legal claims, government action and damage to our reputation.

To run our business, it is essential for us to store and transmit sensitive personal information about our customers, prospects, employees, and independent agents in our systems and networks.

Hundreds of thousands of consumers, independent contractors, and employees have shared personal information with us during the normal course of our business processing real estate transactions.

This includes, but is not limited to, social security numbers, annual income amounts and sources, consumer names, addresses, telephone and cell phone numbers, and email addresses.

To run our business, it is essential for us to store and transmit this sensitive information in our systems and networks.

At the same time, we are subject to numerous laws, regulations, and other requirements that require businesses like ours to protect the security of personal information, notify customers and other individuals about our privacy practices, and limit the use, disclosure, or transfer of personal data across country borders.

Regulators in the U.S.

and abroad continue to enact comprehensive new laws or legislative reforms imposing significant privacy and cybersecurity restrictions.

The result is that we are subject to

increased regulatory scrutiny, additional contractual requirements from corporate customers, and heightened compliance costs.

and abroad continue to enact comprehensive new laws or legislative reforms imposing significant

privacy and cybersecurity restrictions.

The result is that we are subject to increased regulatory scrutiny, additional contractual requirements from corporate customers, and heightened compliance costs.

These ongoing changes to privacy and cybersecurity laws also may make it more difficult for us to operate our business and may have a material adverse effect on our operations.

For example, the European Union’s GDPR conferred new and significant privacy rights on individuals (including employees and independent agents), and materially increased penalties for violations.

In the U.S., California enacted the California Consumer Privacy Act—which is expected to go into full effect in 2020—imposing new and comprehensive requirements on organizations that collect and disclose personal information about California residents.

In March 2017, the New York Department of Financial Services’

cybersecurity regulation went into effect, requiring regulated financial institutions to establish a detailed cybersecurity program.

Program requirements included corporate governance, incident planning, data management, system testing, vendor oversight, and regulator notification rules.

For example, the European Union’s GDPR conferred new and significant privacy rights on individuals (including employees and independent agents), and materially increased penalties for violations.

In the U.S., California enacted the California Consumer Privacy Act—which went into full effect in 2020—imposing new and comprehensive requirements on organizations that collect and disclose personal information about California residents.

In March 2017, the New York Department of Financial Services’ cybersecurity regulation went into effect, requiring regulated financial institutions to establish a detailed cybersecurity program.

Program requirements include corporate governance, incident planning, data management, system testing, vendor oversight, and regulator notification rules.

Now, other state regulatory agencies are expected to enact similar requirements following the adoption of the Insurance Data Security Model Law by the National Association of Insurance Commissioners that is consistent with the New York regulation.

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In addition, while we disclose our information collection and dissemination practices in a published privacy statement on our websites, which we may modify from time to time, we may be subject to legal claims, government action and damage to our reputation if we act or are perceived to be acting inconsistently with the terms of our privacy statement, customer expectations or state, national and international regulations.

The occurrence of a significant claim in excess of our insurance coverage in any given period could have a material adverse effect on our financial condition and results of operations during the period.

Our policy and safeguards could be deemed insufficient if third parties with whom we have shared personal information fail to protect the privacy of that information.

The occurrence of a significant claim in excess of our insurance coverage or which is not covered by our insurance in any given period could have a material adverse effect on our financial condition and results of operations during the period.

In the event we or the vendors with which we contract to provide services on behalf of our customers were to suffer a breach of personal information, our customers and independent agents could terminate their business with us.

Further, we may be subject to claims to the extent individual employees or independent contractors breach or fail to adhere to Company policies and practices and such actions jeopardize any personal information.

Any or all of these consequences would result in meaningful unfavorable impact on our brand, business model, revenue, expenses, income and margins.

In addition, concern among potential home buyers or sellers about our privacy practices could result in regulatory investigations, especially in the European Union as related to the GDPR.

Additionally, concern among potential home buyers or sellers could keep them from using our services or require us to incur significant expense to alter our business practices or educate them about how we use personal information.

We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business and financial condition.

Adverse results in such litigation and other proceedings may harm our business and financial condition.

Class action lawsuits can often be particularly burdensome given the breadth of claims, large potential damages and significant costs of defense.

In addition, we may be required to enter into licensing agreements (if available on acceptable terms) and be required to pay royalties.

From time to time, we may become involved in lawsuits and legal proceedings which arise in the ordinary course of business.

Risk Related to Our Stock

Glenn Sanford, our Chairman and Chief Executive Officer, together with Penny Sanford, a significant shareholder, own a significant percentage of our stock, and as a result, the trading price for our shares may be depressed and they can take actions that may be adverse to the interests of our stockholders.

Glenn Sanford beneficially owns approximately 35% of our outstanding common stock as of December 31, 2019.

Penny Sanford beneficially owns approximately 25% of our outstanding common stock as of December 31, 2019.

In December 2017 Mr.

Sanford and Ms.

Sanford filed a Schedule 13D with the Securities and Exchange Commission (“SEC”) indicating that they had entered into an agreement to vote their shares as a group with respect to the election of directors and any other matter on which our shares of common stock are entitled to vote.

This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in companies with a controlling stockholder group.

Risks Related to Our Stock

Glenn Sanford, our Chairman and Chief Executive Officer, together with Penny Sanford, a significant shareholder, Jason Gesing, a director and the Chief Executive Officer of eXp Realty, and Gene Frederick, a director, own a significant percentage of our stock and have agreed to act as a group on any matter submitted to a vote of our stockholders.

As a result, the trading price for our shares may be depressed, and they can take actions that may be adverse to the interests of our other stockholders.

On February 16, 2021, Glenn Sanford, Penny Sanford, Jason Gesing, and Gene Frederick filed an amended Schedule 13D with the Securities and Exchange Commission, which disclosed that they beneficially owned approximately 58.4% of our outstanding common stock as of February 16, 2021, and that they had agreed to vote their shares as a group with respect to the election of directors and any other matter on which our shares of common stock are entitled to vote.

This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company with a controlling stockholder group.

The group can significantly influence all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets.

In addition, due to his significant ownership stake and his service as our Principal Executive Officer and Chairman of the Board and Directors, Mr.

In addition, due to his significant ownership stake and his service as our Principal Executive Officer and Chairman of the Board of Directors, Mr.

Sanford controls the management of our business and affairs.

This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders.

Together, Messrs.

Sanford, Gesing, and Frederick hold three of our seven board seats.

This concentration of ownership and control could have the effect of delaying, deferring, or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders.

We are a “controlled company” within the meaning of NASDAQ rules, and, as a result, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

As of February 16, 2021, Glenn Sanford, Penny Sanford, Jason Gesing, and Gene Frederick beneficially owned approximately 58.4% of the total combined voting power of our outstanding common stock.

Accordingly, we qualify as a “controlled company” within the meaning of NASDAQ corporate governance standards.

Under NASDAQ rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain NASDAQ corporate governance standards, including:

● the requirement that a majority of the members of our board of directors be independent directors;

● the requirement that our nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

● the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter for addressing the committee’s purpose and responsibilities;

● the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

We intend to use these exemptions.

As a result, we will not have a majority of independent directors, our compensation and our nominating and corporate governance committees will not consist entirely of independent directors, and such committees may not be subject to annual performance evaluations.

Consequently, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance rules and requirements.

Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

Because we can issue additional shares of common stock, our stockholders may experience dilution in the future.

We are authorized to issue up to 220,000,000 shares of common stock, of which approximately 66.2 million shares were issued, and 65.2 million shares were outstanding as of December 31, 2019.

We are authorized to issue up to 220,000,000 shares of common stock, of which 146,677,786 shares were issued, and 144,143,292 shares were outstanding as of December 31, 2020.

Our Board of Directors has the authority to cause us to issue additional shares of common stock without consent of any of our stockholders.

Consequently, the stockholders may experience more dilution in their ownership of our stock in the future.

Consequently, current stockholders may experience more dilution in their ownership of our common stock in the future.

The stock price of our common stock has been and likely will continue to be volatile and may decline in value regardless of our performance.

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● our quarterly or annual earnings or those of other companies in our industry;

the public’s reaction to our press releases, other public announcements and filings with the SEC;

● the public’s reaction to our press releases, other public announcements and filings with the SEC;

● changes in recommendations or analysis of our prospects by securities analysts who track our common stock;

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● strategic actions by us or our competitors, such as acquisitions or restructurings;

actual or potential changes in laws, regulations and regulatory interpretations, including as a result of the 2017 Tax Act;

● actual or potential changes in laws, regulations and regulatory interpretations;

● changes in interest rates;

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● adverse resolution of new or pending litigation or regulatory proceedings against us;

● government and health organization restrictions within the domestic and international locations in which we operate in response to the COVID-19 pandemic;

● changes in general market, economic and political conditions in the United States and global economies.

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● establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

The foregoing factors could impede a merger, takeover or other business combination or discourage a potential investor from making a tender offer for our common stock which, under certain circumstances, could reduce the market value of our common stock and our investors’

ability to realize any potential change-in-control premium.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors