What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-04 · 1082 added, 2588 removed, 165 unchanged (96% of the section changed)

Risk Factors.

nature of our operations and services we provide, and as described in more detail below, a wide range of factors could materially

affect our operations and profitability.

The risks and uncertainties described below are not the only risks and uncertainties facing

Additional risks and uncertainties not presently known or that are currently considered to be immaterial may also materially

and adversely affect our business operations or stock price.

Given the nature of our operations and services we provide, and as described in more detail below, a wide range of factors could materially affect our operations and profitability.

The risks and uncertainties described below are not the only risks and uncertainties facing us.

Additional risks and uncertainties not presently known or that are currently considered to be immaterial may also materially and adversely affect our business operations or stock price.

Summary Risk Factors

Some of the factors

that could materially and adversely affect our business, financial condition, results of operations and cash flows include, but

are not limited to, the following:

● Our revenues and results of operations are volatile and difficult to predict.

● Conditions in the financial markets and general economic conditions, including the ongoing COVID-19

pandemic, have impacted and may continue to impact our ability to generate business and revenues, which may cause significant fluctuations

in our stock price.

● Our exposure to legal liability is significant and could lead to substantial damages.

● Financial services firms have been subject to increased scrutiny over the last several years, increasing

the risk of financial liability and reputational harm resulting from adverse regulatory actions.

● Our failure to maintain effective internal control over financial reporting in accordance with

Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our financial condition, results of operations and

business and the price of our common stock and other securities.

● We may enter into new lines of business, make strategic investments or acquisitions or enter into

joint ventures, each of which may result in additional risks and uncertainties for our business.

● Our corporate finance and strategic advisory engagements are singular in nature and do not generally provide for subsequent

● We have made and may make Principal Investments in relatively high-risk, illiquid assets that often have significantly leveraged

capital structures, and we may fail to realize any profits from these activities for a considerable period of time or lose some

or all of the principal amount we invest in these activities.

● We are exposed to credit risk from a variety of our activities, including loans, lines of credit, guarantees and backstop commitments,

Some of the factors that could materially and adversely affect our business, financial condition, results of operations and cash flows include, but are not limited to, the following:

revenues and results of operations are volatile and difficult to predict.

in the financial markets and general economic conditions, including the ongoing COVID-19 pandemic, have impacted and may continue

to impact our ability to generate business and revenues, which may cause significant fluctuations in our stock price.

change could have a material negative impact on us and our customers and counterparties.

exposure to legal liability is significant and could lead to substantial damages.

services firms have been subject to increased scrutiny over the last several years, increasing the risk of financial liability and

reputational harm resulting from adverse regulatory actions.

failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act

could have a material adverse effect on our financial condition, results of operations and business and the price of our common stock

and other securities.

may enter into new lines of business, make strategic investments or acquisitions or enter into joint ventures, each of which may

result in additional risks and uncertainties for our business.

corporate finance and strategic advisory engagements are singular in nature and do not generally provide for subsequent engagements.

have made and may make principal investments in relatively high-risk, illiquid assets that often have significantly leveraged capital

structures, and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of

the principal amount we invest in these activities.

are exposed to credit risk from a variety of our activities, including loans, lines of credit, guarantees and backstop commitments,

and we may not be able to fully realize the value of the collateral securing certain of our loans.

● We may incur losses as a result of “guarantee” based engagements that we enter into in connection with our Auction

and Liquidation solutions business.

We may incur losses as a result of “guarantee” based engagements that we enter into in connection with our auction and liquidation solutions business.

We depend on financial institutions as primary clients for our financial consulting business.

Consequently,

the loss of any financial institutions as clients may have an adverse impact on our business.

Consequently, the loss of any financial institutions as clients may have an adverse impact on our business.

The asset management business is intensely competitive.

● Poor investment performance may decrease assets under management and reduce revenues from and the profitability of our asset

management business.

● UOL competes against large companies, many of whom have significantly more financial and marketing resources, and our business

will suffer if we are unable to compete successfully.

Poor investment performance may decrease assets under management and reduce revenues from and the profitability of our asset management business.

Our communications businesses compete against large companies, many of whom have significantly more financial and marketing resources, and our business will suffer if we are unable to compete successfully.

Dial-up and DSL pay accounts may decline faster than expected and adversely impact our business.

● magicJack may face difficulty in attracting new customers, and if we fail to attract new customers, our business and results

of operations may suffer.

● magicJack’s products must comply with various domestic and international regulations and standards and failure to do

so could have an adverse effect on our business, operating results and financial condition.

● magicJack’s emergency and E911 calling services are different from those offered by traditional wireline telephone companies

and may expose us to significant liability.

● The failure of our licensees to sell products that generate royalties to us, to pay us royalties pursuant to their license

agreements with us, or to renew these agreements could negatively affect our results of operations and financial condition.

The failure of our licensees to sell products that generate royalties to us, to pay us royalties pursuant to their license agreements with us, or to renew these agreements could negatively affect our results of operations and financial condition.

We operate in highly competitive industries.

Some of our competitors may have certain competitive advantages, which may cause

us to be unable to effectively compete with or gain market share from our competitors.

● Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our

business and reputation to suffer.

● Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control and could

also limit the market price of our stock.

● Because of their significant stock ownership, some of our existing stockholders will be able to exert control over us and our

significant corporate decisions.

Some of our competitors may have certain competitive advantages, which may cause us to be unable to effectively compete with or gain market share from our competitors.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control and could also limit the market price of our stock.

Because of their significant stock ownership, some of our existing stockholders will be able to exert control over us and our significant corporate decisions.

Our common stock price may fluctuate substantially, and your investment could suffer a decline in value.

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Our level of indebtedness, and restrictions under such indebtedness, could adversely affect our operations and liquidity.

Risks Related to Global and Economic

Our revenues and results of operations

are volatile and difficult to predict.

Our revenues and results

of operations fluctuate significantly from quarter to quarter, due to a number of factors.

These factors include, but are not limited

to, the following:

Risks Related to Global and Economic Conditions

Our revenues and results of operations are volatile and difficult to predict.

Our revenues and results of operations fluctuate significantly from quarter to quarter, due to a number of factors.

These factors include, but are not limited to, the following:

Our ability to attract new clients and obtain additional business from our existing client base;

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Changes in general economic and market conditions, including the effects of the ongoing COVID-19 pandemic, or an outbreak of another highly infectious or contagious disease.

We have limited or no

control over some of the factors set forth above and, as a result, may be unable to forecast our revenues accurately.

our investment banking revenues are typically earned upon the successful completion of a transaction, the timing of which is uncertain

and beyond our control.

A client’s acquisition transaction may be delayed or terminated because of a failure to agree upon

final terms with the counterparty, failure to obtain necessary regulatory consents or board or stockholder approvals, failure to

secure necessary financing, adverse market conditions or unexpected financial or other problems in the business of a client or

a counterparty.

If the parties fail to complete a transaction on which we are advising or an offering in which we are participating,

we will earn little or no revenue from the contemplated transaction.

We rely on projections

of revenues in developing our operating plans for the future and will base our expectations regarding expenses on these projections

If we inaccurately forecast revenues and/or earnings, or fail to accurately project expenses, we may be unable to adjust

our spending in a timely manner to compensate for these inaccuracies and, as a result, may suffer operating losses and such losses

could have a negative impact on our financial condition and results of operations.

If, for any reason, we fail to meet company,

investor or analyst projections of revenue, growth or earnings, the market price of the common stock could decline and you may

lose all or part of your investment.

Conditions in

the financial markets and general economic conditions, including the ongoing COVID-19 pandemic, have impacted and may continue

to impact our ability to generate business and revenues, which may cause significant fluctuations in our stock price.

We have limited or no control over some of the factors set forth above and, as a result, may be unable to forecast our revenues accurately.

For example, our investment banking revenues are typically earned upon the successful completion of a transaction, the timing of which is uncertain and beyond our control.

A client’s acquisition transaction may be delayed or terminated because of a failure to agree upon final terms with the counterparty, failure to obtain necessary regulatory consents or board or stockholder approvals, failure to secure necessary financing, adverse market conditions or unexpected financial or other problems in the business of a client or a counterparty.

If the parties fail to complete a transaction on which we are advising or an offering in which we are participating, we will earn little or no revenue from the contemplated transaction.

We rely on projections of revenues in developing our operating plans for the future and will base our expectations regarding expenses on these projections and plans.

If we inaccurately forecast revenues and/or earnings, or fail to accurately project expenses, we may be unable to adjust our spending in a timely manner to compensate for these inaccuracies and, as a result, may suffer operating losses and such losses could have a negative impact on our financial condition and results of operations.

If, for any reason, we fail to meet company, investor or analyst projections of revenue, growth or earnings, the market price of the common stock could decline and you may lose all or part of your investment.

Conditions in the financial markets and general economic conditions, including the ongoing COVID-19 pandemic, have impacted and may continue to impact our ability to generate business and revenues, which may cause significant fluctuations in our stock price.

Our opportunity to act as underwriter or placement agent could be adversely affected by a reduction in the number and size of capital raising transactions or by competing sources of equity.

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Government intervention may not succeed in improving the financial and credit markets and may have negative consequences for our business.

It is difficult to predict

how long the current financial market and economic conditions related to the ongoing COVID-19 pandemic will continue, whether they

will further deteriorate and if they do, which of our business lines will be adversely affected.

We are currently being impacted

by the ongoing COVID-19 pandemic, including with respect to the above-described risks.

While we are continuing to monitor the spread

of COVID-19 and related risks, the rapid development and fluidity of situation precludes any prediction as to its ultimate impact

However, if the spread continues, such impact could grow and our business, financial condition, results of operations and

cash flows could be materially adversely affected.

Global economic

and political uncertainty, in particular due to the ongoing COVID-19 pandemic, could adversely affect our revenue and results of

It is difficult to predict how long the current financial market and economic conditions related to the ongoing COVID-19 pandemic will continue, whether they will further deteriorate and if they do, which of our business lines will be adversely affected.

We are currently being impacted by the ongoing COVID-19 pandemic, including with respect to the above-described risks.

While we are continuing to monitor the spread of COVID-19 and related risks, the rapid development and fluidity of situation precludes any prediction as to its ultimate impact on us.

However, if the spread continues, such impact could grow and our business, financial condition, results of operations and cash flows could be materially adversely affected.

Global economic and

political uncertainty, including as a result of COVID-19 pandemic, could adversely affect our revenue and results of operations.

As a result of the international

nature of our business, we are subject to the risks arising from adverse changes in global economic and political conditions.

about the effects of current and future economic and political conditions on us, our customers, suppliers and partners makes it

difficult for us to forecast operating results and to make decisions about future investments.

Deterioration in economic conditions

in any of the countries in which we do business could result in reductions in sales of our products and services and could cause

slower or impaired collections on accounts receivable, which may adversely impact our liquidity and financial condition.

The ongoing COVID-19

pandemic has caused severe disruptions in the U.S.

and global economy, which has impacted the business, activities, and operations

of our customers, as well as our business and operations.

In March 2020, the Federal Reserve lowered the target range for the federal

funds rate to a range from 0 to 0.25 percent, citing concerns about the impact of COVID-19 on markets and stress in the energy

Many states and localities have imposed limitations on commercial activity and public gatherings and events, as well as

moratoria on evictions.

Concern about the spread of COVID-19 has caused and is likely to continue to cause quarantines, business

shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions, increased unemployment

and overall economic and financial market instability, all of which may result a decrease in our business.

Such conditions are

likely to exacerbate many of the risks described elsewhere in these Risk Factors.

Unfavorable economic conditions may also make

it more difficult for us to access the capital markets, use the capital markets for our clients or otherwise obtain additional

The continued spread

of COVID-19, or a significant outbreak of another contagious disease, could negatively impact the availability of key personnel

necessary to conduct our business, and the business and operations of our third-party service providers who perform critical services

for our business.

If COVID-19, or a future highly infectious or contagious disease, is not successfully contained, we could experience

a material adverse effect on our business, financial condition, results of operations and cash flow.

about the effects of current and future economic and political conditions, including acts of war, aggression or terrorism, on us, our

customers, suppliers and partners makes it difficult for us to forecast operating results and to make decisions about future investments.

Deterioration in economic conditions in any of the countries in which we do business could result in reductions in sales of our products

and services and could cause slower or impaired collections on accounts receivable, which may adversely impact our liquidity and financial

The ongoing COVID-19 pandemic

has caused severe disruptions in the U.S.

and global economies, which has impacted the business, activities, and operations of our customers,

as well as our business and operations.

Through 2021, the U.S.

and other economies have been impacted by supply chain disruptions, labor

shortages and high inflation, and in late 2021 the Federal Reserve signaled that it will likely begin increasing the target range for

the federal funds rate in response to the increasing inflation.

While many of the restrictions on commercial activity and public gatherings

and events that characterized the earlier stages of the pandemic have been lifted or are winding down, there can be no assurances that

there will not be additional quarantines, business shutdowns, and reduction in business activity and financial transactions as a result

of a resurgence in the virus or new variants.

The return of unfavorable economic conditions may also make it more difficult for us to

access the capital markets, use the capital markets for our clients or otherwise obtain additional financing.

The continuation of the COVID-19

pandemic, or a significant outbreak of another contagious disease or other severe public health crisis, could negatively impact the availability

of key personnel necessary to conduct our business, and the business and operations of our third-party service providers who perform critical

services for our business.

Pandemics, epidemics, future highly infectious or contagious diseases, or other severe public health crisis

could cause a material adverse effect on our business, financial condition, results of operations and cash flow.

Among the factors outside

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● the pandemic’s course and severity;

the direct and indirect results of the pandemic, such as recessionary economic trends, including with respect to employment, wages and benefits and commercial activity;

political, legal and regulatory actions and policies in response to the pandemic, including the effects of restrictions on commerce or other public activities, moratoria and other suspensions of evictions or rent and related obligations;

the timing, magnitude and effect of public spending, directly or through subsidies, its direct and indirect effects on commercial activity and incentives of employers and individuals to resume or increase employment, wages and benefits and commercial activity;

the timing and availability of direct and indirect governmental support for various financial assets, and possible related distortions in market values and liquidity for such assets whose markets have or are assumed to have government support versus possibly similar assets that do not;

potential longer-term effects of increased government spending on the interest rate environment and borrowing costs for non-governmental parties;

the ability of our employees and our third-party vendors to work effectively during the course of the pandemic;

● the direct and indirect results of the pandemic, such as recessionary economic trends, including with

respect to employment, wages and benefits and commercial activity;

● political, legal and regulatory actions and policies in response to the pandemic, including the effects

of restrictions on commerce or other public activities, moratoria and other suspensions of evictions or rent and related obligations;

● the timing, magnitude and effect of any continued or additional public

spending, directly or through subsidies, or the winding-down of the same, and the resultant direct and indirect effects on commercial

activity and incentives of employers and individuals to resume or increase employment, wages and benefits and commercial activity;

● the timing and availability of direct and indirect governmental support for various financial assets,

and possible related distortions in market values and liquidity for such assets whose markets have or are assumed to have government support

versus possibly similar assets that do not;

● the likely longer-term effects of increased government spending on

inflation and the interest rate environment and borrowing costs for non-governmental parties;

● the ability of our employees and our third-party vendors to work effectively during the course of the

● potential longer-term shifts toward telecommuting and telecommerce;

geographic variation in the severity and duration of the COVID-19 pandemic, including in states such as New York and California where high percentages of our clients, customers and personnel are located.

We focus principally

on certain sectors of the economy in our investment banking operations, and deterioration in the business environment in these

sectors or a decline in the market for securities of companies within these sectors could harm our business.

Volatility in the business

environment in the industries in which our clients operate or in the market for securities of companies within these industries

could adversely affect our financial results and the market value of our common stock.

The business environment for companies in

some of these industries has been subject to high levels of volatility in recent years, and our financial results have consequently

been subject to significant variations from year to year.

For example, the consumer goods and services sectors are subject to consumer

spending trends, which have been volatile, to mall traffic trends, which have been down, to the availability of credit, and to

broader trends such as the rise of Internet retailers.

Most recently, the consumer goods and services sector has been severely

impacted by the ongoing COVID-19 pandemic, which has resulted in mandatory store closures of uncertain duration due to social distancing

measures, stay-at-home work restrictions and the closing of non-essential businesses imposed to control the pandemic.

markets have driven the growth of certain consumer companies but emerging market economies are fragile, subject to wide swings

in GDP, and subject to changes in foreign currencies.

The technology industry has been volatile, driven by evolving technology

trends, by technological obsolescence, by enterprise spending, and by changes in the capital spending trends of major corporations

and government agencies around the world.

Our investment banking

operations focus on various sectors of the economy, and we also depend significantly on private company transactions for sources

of revenues and potential business opportunities.

Most of these private company clients are initially funded and controlled by

private equity firms.

To the extent that the pace of these private company transactions slows or the average transaction size declines

due to a decrease in private equity financings, difficult market conditions, such as those due to the ongoing COVID-19 pandemic,

in our target industries or other factors, our business and results of operations may be harmed.

Underwriting and other

corporate finance transactions, strategic advisory engagements and related sales and trading activities in our target industries

represent a significant portion of our investment banking business.

This concentration of activity in our target industries exposes

us to the risk of declines in revenues in the event of downturns in these industries, such as those due to the ongoing COVID-19

Our businesses

may be adversely affected by the disruptions in the credit markets, such as those due to the ongoing COVID-19 pandemic, including

reduced access to credit and liquidity and higher costs of obtaining credit.

In the event existing

internal and external financial resources do not satisfy our needs, we would have to seek additional outside financing.

The availability

of outside financing will depend on a variety of factors, such as our financial condition and results of operations, the availability

of acceptable collateral, market conditions, the general availability of credit, the volume of trading activities, and the overall

availability of credit to the financial services industry, all of which may be negatively impacted due to the ongoing COVID-19

Widening credit spreads,

as well as significant declines in the availability of credit, could adversely affect our ability to borrow on an unsecured basis.

● geographic variation in the severity and duration of the COVID-19 pandemic, including in states such as

New York and California where high percentages of our clients, customers and personnel are located.

We focus principally on certain sectors of the economy in our investment banking operations, and deterioration in the business environment in these sectors or a decline in the market for securities of companies within these sectors could harm our business.

Volatility in the business environment in the industries in which our clients operate or in the market for securities of companies within these industries could adversely affect our financial results and the market value of our common stock.

The business environment for companies in some of these industries has been subject to high levels of volatility in recent years, and our financial results have consequently been subject to significant variations from year to year.

For example, the consumer goods and services sectors are subject to consumer spending trends, which have been volatile, to mall traffic trends, which have been down, to the availability of credit, and to broader trends such as the rise of Internet retailers.

The consumer goods and services sector was severely impacted by the ongoing COVID-19 pandemic, which has resulted in mandatory store closures of uncertain duration due to social distancing measures, stay-at-home work restrictions and the closing of non-essential businesses imposed to control the pandemic.

Emerging markets have driven the growth of certain consumer companies but emerging market economies are fragile, subject to wide swings in GDP, and subject to changes in foreign currencies.

The technology industry has been volatile, driven by evolving technology trends, by technological obsolescence, by enterprise spending, and by changes in the capital spending trends of major corporations and government agencies around the world.

Our investment banking operations focus on various sectors of the economy, and we also depend significantly on private company transactions for sources of revenues and potential business opportunities.

Most of these private company clients are initially funded and controlled by private equity firms.

To the extent that the pace of these private company transactions slows or the average transaction size declines due to a decrease in private equity financings, difficult market conditions in our target industries or other factors, our business and results of operations may be harmed.

Underwriting and other corporate finance transactions, strategic advisory engagements and related sales and trading activities in our target industries represent a significant portion of our investment banking business.

This concentration of activity in our target industries exposes us to the risk of declines in revenues in the event of downturns in these industries, such as those due to rising inflation and interest rates.

Our businesses may be adversely affected by the disruptions in the credit markets, such as those due to the COVID-19 pandemic and its effects, including reduced access to credit and liquidity and higher costs of obtaining credit.

In the event existing internal and external financial resources do not satisfy our needs, we would have to seek additional outside financing.

The availability of outside financing will depend on a variety of factors, such as our financial condition and results of operations, the availability of acceptable collateral, market conditions, the general availability of credit, the volume of trading activities, and the overall availability of credit to the financial services industry, all of which may be negatively impacted due to the effects of the COVID-19 pandemic, which may include increased inflation and rising interest rates.

Widening credit spreads, as well as significant declines in the availability of credit, could adversely affect our ability to borrow on an unsecured basis.

Disruptions in the credit markets could make it more difficult and more expensive to obtain funding for our businesses.

available funding is limited or we are forced to fund our operations at a higher cost, these conditions may require us to curtail

our business activities and increase our cost of funding, both of which could reduce our profitability, particularly in our businesses

that involve investing and taking principal positions.

Liquidity, or ready

access to funds, is essential to financial services firms, including ours.

Failures of financial institutions have often been attributable

in large part to insufficient liquidity.

Liquidity is of particular importance to our sales and trading business, and perceived

liquidity issues may affect the willingness of our clients and counterparties to engage in sales and trading transactions with

Our liquidity could be impaired due to circumstances that we may be unable to control, such as a general market disruption,

including disruptions due to the ongoing COVID-19 pandemic, or an operational problem that affects our sales and trading clients,

third parties or us.

Further, our ability to sell assets may be impaired if other market participants are seeking to sell similar

assets at the same time.

Our clients engaging

us with respect to mergers and acquisitions often rely on access to the secured and unsecured credit markets to finance their transactions.

The lack of available credit and the increased cost of credit could adversely affect the size, volume and timing of our clients’

merger and acquisition transactions-particularly large transactions-and adversely affect our investment banking business and revenues.

Risks Related to Legal Liability,

Risk Management, Finance and Accounting

Our exposure to

legal liability is significant, and could lead to substantial damages.

We face significant

legal risks in our businesses.

These risks include potential liability under securities laws and regulations in connection with

our Capital Markets, asset management and other businesses.

The volume and amount of damages claimed in litigation, arbitrations,

regulatory enforcement actions and other adversarial proceedings against financial services firms have increased in recent years.

We also are subject to claims from disputes with our employees and our former employees under various circumstances.

Risks associated

with legal liability often are difficult to assess or quantify and their existence and magnitude can remain unknown for significant

periods of time, making the amount of legal reserves related to these legal liabilities difficult to determine and subject to future

Legal or regulatory matters involving our directors, officers or employees in their individual capacities also may create

exposure for us because we may be obligated or may choose to indemnify the affected individuals against liabilities and expenses

they incur in connection with such matters to the extent permitted under applicable law.

In addition, like other financial services

companies, we may face the possibility of employee fraud or misconduct.

The precautions we take to prevent and detect this activity

may not be effective in all cases and there can be no assurance that we will be able to deter or prevent fraud or misconduct.

from and expenses incurred related to any of the foregoing actions or proceedings could have a negative impact on our results of

operations and financial condition.

In addition, future results of operations could be adversely affected if reserves relating

to these legal liabilities are required to be increased or legal proceedings are resolved in excess of established reserves.

We may incur losses

as a result of ineffective risk management processes and strategies.

We seek to monitor and

control our risk exposure through operational and compliance reporting systems, internal controls, management review processes

and other mechanisms.

Our investing and trading processes seek to balance our ability to profit from investment and trading positions

with our exposure to potential losses.

While we employ limits and other risk mitigation techniques, those techniques and the judgments

that accompany their application cannot anticipate economic and financial outcomes or the specifics and timing of such outcomes.

If our available funding is limited or we are forced to fund our operations at a higher cost, these conditions may require us to curtail our business activities and increase our cost of funding, both of which could reduce our profitability, particularly in our businesses that involve investing and taking principal positions.

Liquidity, or ready access to funds, is essential to financial services firms, including ours.

Failures of financial institutions have often been attributable in large part to insufficient liquidity.

Liquidity is of particular importance to our sales and trading business, and perceived liquidity issues may affect the willingness of our clients and counterparties to engage in sales and trading transactions with us.

Our liquidity could be impaired due to circumstances that we may be unable to control, such as a general market disruption or an operational problem that affects our sales and trading clients, third parties, or us.

Further, our ability to sell assets may be impaired if other market participants are seeking to sell similar assets at the same time.

Our clients engaging us with respect to mergers and acquisitions often rely on access to the secured and unsecured credit markets to finance their transactions.

The lack of available credit and the increased cost of credit could adversely affect the size, volume and timing of our clients’ merger and acquisition transactions-particularly large transactions-and adversely affect our investment banking business and revenues.

Climate change could

have a material negative impact on us and our customers and counterparties, and our efforts to address concerns relating to climate change

could result in damage to our reputation.

Our business, as well as

the operations and activities of our customers and counterparties, could be negatively impacted by climate change.

Climate change presents

both immediate and long-term risks to us and our customers and these risks are expected to increase over time.

Climate change may cause

extreme weather events that disrupt operations at one or more of our primary locations, which may negatively affect our ability to service

and interact with our clients, adversely affect the value of our investments, and reduce the availability of insurance.

Climate change

and the transition to a less carbon-dependent economy may also have a negative impact on the operations or financial condition of our

clients and counterparties, which may decrease revenues from those clients and counterparties and increase the credit risk associated

with loans and other credit exposures to those clients and counterparties.

In addition, climate change may impact the broader economy,

including through disruptions to supply chains.

Climate change also exposes

us to transition risks associated with the transition to a less carbon-dependent economy.

Transition risks may result from changes in

laws and regulations;

technologies;

and/or market preferences to address climate change.

Such changes could materially, negatively

impact our business, results of operations, financial condition and/or our reputation, in addition to having a similar impact on our customers

and counterparties.

For example, our reputation

and client relationships may be damaged as a result of our involvement, or our clients’ involvement, in certain industries or projects

associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities

in response to considerations relating to climate change.

New regulations or guidance

relating to climate change, as well as the perspectives of regulators, stockholders, employees and other stakeholders regarding climate

change, may affect whether and on what terms and conditions we engage in certain activities or offer certain products.

The risks associated

with, and the perspective of regulators, shareholders, employees and other stakeholders regarding, climate change are continuing to evolve

rapidly, which can make it difficult to assess the ultimate impact on us of climate change-related risks and uncertainties, and we expect

that climate change-related risks will increase over time.

Risks Related to Legal Liability, Risk Management, Finance and Accounting

Our exposure to legal liability is significant, and could lead to substantial damages.

We face significant legal

risks in our businesses.

These risks include potential liability under securities laws and regulations in connection with our capital

markets, asset management and other businesses.

The volume and amount of damages claimed in litigation, arbitrations, regulatory enforcement

actions and other adversarial proceedings against financial services firms have increased in recent years.

We also are subject to claims

from disputes with our employees and our former employees under various circumstances.

Risks associated with legal liability often are

difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time, making the amount

of legal reserves related to these legal liabilities difficult to determine and subject to future revision.

Legal or regulatory matters

involving our directors, officers or employees in their individual capacities also may create exposure for us because we may be obligated

or may choose to indemnify the affected individuals against liabilities and expenses they incur in connection with such matters to the

extent permitted under applicable law.

In addition, like other financial services companies, we may face the possibility of employee fraud

or misconduct.

The precautions we take to prevent and detect this activity may not be effective in all cases and there can be no assurance

that we will be able to deter or prevent fraud or misconduct.

Exposures from and expenses incurred related to any of the foregoing actions

or proceedings could have a negative impact on our results of operations and financial condition.

In addition, future results of operations

could be adversely affected if reserves relating to these legal liabilities are required to be increased or legal proceedings are resolved

in excess of established reserves.

We may incur losses as a result of ineffective risk management processes and strategies.

We seek to monitor and control our risk exposure through operational and compliance reporting systems, internal controls, management review processes and other mechanisms.

Our investing and trading processes seek to balance our ability to profit from investment and trading positions with our exposure to potential losses.

While we employ limits, hedging transactions, and other risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate economic and financial outcomes or the specifics and timing of such outcomes.

Thus, we may, in the course of our investment and trading activities, incur losses, which may be significant.

In addition, we are

investing our own capital in our funds and funds of funds as well as principal investing activities, and limitations on our ability

to withdraw some or all of our investments in these funds or liquidate our investment positions, whether for legal, reputational,

illiquidity or other reasons, may make it more difficult for us to control the risk exposures relating to these investments.

Our risk management

policies and procedures may leave us exposed to unidentified or unanticipated risks.

Our risk management

strategies and techniques may not be fully effective in mitigating our risk exposure in all market environments or against all

types of risk.

We seek to manage, monitor and control our operational, legal and regulatory risk through operational and compliance

reporting systems, internal controls, management review processes and other mechanisms;

however, there can be no assurance that

our procedures will be fully effective.

Further, our risk management methods may not effectively predict future risk exposures,

which could be significantly greater than the historical measures indicate.

In addition, some of our risk management methods are

based on an evaluation of information regarding markets, clients and other matters that are based on assumptions that may no longer

A failure to adequately manage our growth, or to effectively manage our risk, could materially and adversely affect

our business and financial condition.

We are exposed to the

risk that third parties that owe us money, securities or other assets will not perform their obligations.

These parties may default

on their obligations to us due to bankruptcy, lack of liquidity, operational failure, and breach of contract or other reasons.

In addition, we are investing our own capital in our funds and funds of funds as well as principal investing activities, and limitations on our ability to withdraw some or all of our investments in these funds or liquidate our investment positions, whether for legal, reputational, illiquidity or other reasons, may make it more difficult for us to control the risk exposures relating to these investments.

Our risk management policies and procedures may leave us exposed to unidentified or unanticipated risks.

Our risk management strategies and techniques may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk.

We seek to manage, monitor and control our operational, legal and regulatory risk through operational and compliance reporting systems, internal controls, management review processes and other mechanisms;

however, there can be no assurance that our procedures will be fully effective.

Further, our risk management methods may not effectively predict future risk exposures, which could be significantly greater than the historical measures indicate.

In addition, some of our risk management methods are based on an evaluation of information regarding markets, clients and other matters that are based on assumptions that may no longer be accurate.

A failure to adequately manage our growth, or to effectively manage our risk, could materially and adversely affect our business and financial condition.

We are exposed to the risk that third parties that owe us money, securities or other assets will not perform their obligations.

These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure, and breach of contract or other reasons.

We are also subject to the risk that our rights against third parties may not be enforceable in all circumstances.

As an introducing

broker, we could be held responsible for the defaults or misconduct of our customers.

These may present credit concerns, and default

risks may arise from events or circumstances that are difficult to detect, foresee or reasonably guard against.

In addition, concerns

about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions,

which in turn could adversely affect us.

If any of the variety of instruments, processes and strategies we utilize to manage our

exposure to various types of risk are not effective, we may incur losses.

Our failure to

deal appropriately with conflicts of interest could damage our reputation and adversely affect our business.

As we have expanded

the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our and our funds’

and clients’ investment and other activities.

Certain of our funds have overlapping investment objectives, including funds

which have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate

investment opportunities among ourselves and those funds.

For example, a decision to acquire material non-public information about

a company while pursuing an investment opportunity for a particular fund gives rise to a potential conflict of interest when it

results in our having to restrict the ability of the Company or other funds to take any action.

In addition, there may

be conflicts of interest regarding investment decisions for funds in which our officers, directors and employees, who have made

and may continue to make significant personal investments in a variety of funds, are personally invested.

Similarly, conflicts

of interest may exist or develop regarding decisions about the allocation of specific investment opportunities between the Company

and the funds.

We also have potential

conflicts of interest with our investment banking and institutional clients including situations where our services to a particular

client or our own proprietary or fund investments or interests conflict or are perceived to conflict with a client.

It is possible

that potential or perceived conflicts could give rise to investor or client dissatisfaction or litigation or regulatory enforcement

Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail,

or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest.

Regulatory scrutiny of, or

litigation in connection with, conflicts of interest would have a material adverse effect on our reputation, which would materially

adversely affect our business in a number of ways, including as a result of redemptions by our investors from our hedge funds,

an inability to raise additional funds and a reluctance of counterparties to do business with us.

Financial services

firms have been subject to increased scrutiny over the last several years, increasing the risk of financial liability and reputational

harm resulting from adverse regulatory actions.

Firms in the financial

services industry have been operating in a difficult regulatory environment which we expect will become even more stringent in

light of recent well-publicized failures of regulators to detect and prevent fraud.

The industry has experienced increased scrutiny

from a variety of regulators, including the SEC, the NYSE, FINRA and state attorneys general.

Penalties and fines sought by regulatory

authorities have increased substantially over the last several years.

This regulatory and enforcement environment has created uncertainty

with respect to a number of transactions that had historically been entered into by financial services firms and that were generally

believed to be permissible and appropriate.

We may be adversely affected by changes in the interpretation or enforcement of existing

laws and rules by these governmental authorities and self-regulatory organizations.

Each of the regulatory bodies with jurisdiction

over us has regulatory powers dealing with many aspects of financial services, including, but not limited to, the authority to

fine us and to grant, cancel, restrict or otherwise impose conditions on the right to carry on particular businesses.

a failure to comply with the obligations imposed by the Exchange Act on broker-dealers and the Investment Advisers Act of 1940

on investment advisers, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions

on fraudulent activities, or by the Investment Company Act of 1940, could result in investigations, sanctions and reputational

As an introducing broker, we could be held responsible for the defaults or misconduct of our customers.

These may present credit concerns, and default risks may arise from events or circumstances that are difficult to detect, foresee or reasonably guard against.

In addition, concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions, which in turn could adversely affect us.

If any of the variety of instruments, processes and strategies we utilize to manage our exposure to various types of risk are not effective, we may incur losses.

Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our business.

As we have expanded the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our and our funds’ and clients’ investment and other activities.

Certain of our funds have overlapping investment objectives, including funds which have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among ourselves and those funds.

For example, a decision to acquire material non-public information about a company while pursuing an investment opportunity for a particular fund gives rise to a potential conflict of interest when it results in our having to restrict the ability of the Company or other funds to take any action.

In addition, there may be conflicts of interest regarding investment decisions for funds in which our officers, directors and employees, who have made and may continue to make significant personal investments in a variety of funds, are personally invested.

Similarly, conflicts of interest may exist or develop regarding decisions about the allocation of specific investment opportunities between the Company and the funds.

We also have potential conflicts of interest with our investment banking and institutional clients including situations where our services to a particular client or our own proprietary or fund investments or interests conflict or are perceived to conflict with a client.

It is possible that potential or perceived conflicts could give rise to investor or client dissatisfaction or litigation or regulatory enforcement actions.

Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest.

Regulatory scrutiny of, or litigation in connection with, conflicts of interest would have a material adverse effect on our reputation, which would materially adversely affect our business in a number of ways, including as a result of redemptions by our investors from our hedge funds, an inability to raise additional funds and a reluctance of counterparties to do business with us.

Financial services firms have been subject to increased scrutiny over the last several years, increasing the risk of financial liability and reputational harm resulting from adverse regulatory actions.

Firms in the financial services industry have been operating in a difficult regulatory environment which we expect will become even more stringent in light of recent well-publicized failures of regulators to detect and prevent fraud.

The industry has experienced increased scrutiny from a variety of regulators, including the SEC, the NYSE, FINRA and state attorneys general.

Penalties and fines sought by regulatory authorities have increased substantially over the last several years.

This regulatory and enforcement environment has created uncertainty with respect to a number of transactions that had historically been entered into by financial services firms and that were generally believed to be permissible and appropriate.

We may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations.

Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services, including, but not limited to, the authority to fine us and to grant, cancel, restrict or otherwise impose conditions on the right to carry on particular businesses.

For example, a failure to comply with the obligations imposed by the Exchange Act on broker-dealers and the Investment Advisers Act of 1940 on investment advisers, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, or by the Investment Company Act of 1940, could result in investigations, sanctions and reputational damage.

We also may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S.

or foreign governmental regulatory authorities or FINRA or other self-regulatory organizations that supervise the financial markets.

Substantial legal liability or significant regulatory action against us could have adverse financial effects on us or cause reputational

harm to us, which could harm our business prospects.

In addition, financial

services firms are subject to numerous conflicts of interests or perceived conflicts.

The SEC and other federal and state regulators

have increased their scrutiny of potential conflicts of interest.

We have adopted various policies, controls and procedures to

address or limit actual or perceived conflicts and regularly review and update our policies, controls and procedures.

appropriately addressing conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear

to fail, to appropriately address conflicts of interest.

Our policies and procedures to address or limit actual or perceived conflicts

may also result in increased costs and additional operational personnel.

Failure to adhere to these policies and procedures may

result in regulatory sanctions or litigation against us.

For example, the research operations of investment banks have been and

remain the subject of heightened regulatory scrutiny which has led to increased restrictions on the interaction between equity

research analysts and investment banking professionals at securities firms.

Substantial legal liability or significant regulatory action against us could have adverse financial effects on us or cause reputational harm to us, which could harm our business prospects.

In addition, financial services firms are subject to numerous conflicts of interests or perceived conflicts.

The SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest.

We have adopted various policies, controls and procedures to address or limit actual or perceived conflicts and regularly review and update our policies, controls and procedures.

However, appropriately addressing conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to appropriately address conflicts of interest.

Our policies and procedures to address or limit actual or perceived conflicts may also result in increased costs and additional operational personnel.

Failure to adhere to these policies and procedures may result in regulatory sanctions or litigation against us.

For example, the research operations of investment banks have been and remain the subject of heightened regulatory scrutiny which has led to increased restrictions on the interaction between equity research analysts and investment banking professionals at securities firms.

Several securities firms in the U.S.

reached a global

settlement in 2003 and 2004 with certain federal and state securities regulators and self-regulatory organizations to resolve investigations

into the alleged conflicts of interest of research analysts, which resulted in rules that have imposed additional costs and limitations

on the conduct of our business.

Asset management businesses

have experienced a number of highly publicized regulatory inquiries which have resulted in increased scrutiny within the industry

and new rules and regulations for mutual funds, investment advisors and broker-dealers.

reached a global settlement in 2003 and 2004 with certain federal and state securities regulators and self-regulatory organizations to resolve investigations into the alleged conflicts of interest of research analysts, which resulted in rules that have imposed additional costs and limitations on the conduct of our business.

Asset management businesses have experienced a number of highly publicized regulatory inquiries which have resulted in increased scrutiny within the industry and new rules and regulations for mutual funds, investment advisors and broker-dealers.

Our subsidiary, B.

Riley Capital Management,

LLC, is registered as an investment advisor with the SEC and regulatory scrutiny and rulemaking initiatives may result in an increase

in operational and compliance costs or the assessment of significant fines or penalties against our asset management business,

and may otherwise limit our ability to engage in certain activities.

In addition, the SEC staff has conducted studies with respect

to soft dollar practices in the brokerage and asset management industries and proposed interpretive guidance regarding the scope

of permitted brokerage and research services in connection with soft dollar practices.

The SEC staff has indicated that it is considering

additional rulemaking in this and other areas, and we cannot predict the effect that additional rulemaking may have on our asset

management or brokerage business or whether it will be adverse to us.

In addition, Congress is currently considering imposing new

requirements on entities that securitize assets, which could affect our credit activities.

It is impossible to determine the extent

of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law.

Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we

conduct business.

Financial reforms

and related regulations may negatively affect our business activities, financial position and profitability.

The Dodd-Frank Wall

Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) instituted a wide range of reforms that have impacted

and will continue to impact financial services firms and continues to require significant rule-making.

In addition, the legislation

mandates multiple studies, which could result in additional legislative or regulatory action.

The legislation and regulation of

financial institutions, both domestically and internationally, include calls to increase capital and liquidity requirements;

the size and types of the activities permitted;

Riley Capital Management, LLC, is registered as an investment advisor with the SEC and regulatory scrutiny and rulemaking initiatives may result in an increase in operational and compliance costs or the assessment of significant fines or penalties against our asset management business, and may otherwise limit our ability to engage in certain activities.

In addition, the SEC staff has conducted studies with respect to soft dollar practices in the brokerage and asset management industries and proposed interpretive guidance regarding the scope of permitted brokerage and research services in connection with soft dollar practices.

The SEC staff has indicated that it is considering additional rulemaking in this and other areas, and we cannot predict the effect that additional rulemaking may have on our asset management or brokerage business or whether it will be adverse to us.

In addition, Congress is currently considering imposing new requirements on entities that securitize assets, which could affect our credit activities.

It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law.

Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.

Financial reforms and related regulations may negatively affect our business activities, financial position and profitability.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) instituted a wide range of reforms that have impacted and will continue to impact financial services firms and continues to require significant rule-making.

In addition, the legislation mandates multiple studies, which could result in additional legislative or regulatory action.

The legislation and regulation of financial institutions, both domestically and internationally, include calls to increase capital and liquidity requirements;

limit the size and types of the activities permitted;

and increase taxes on some institutions.

FINRA’s oversight over broker-dealers

and investment advisors may be expanded, and new regulations on having investment banking and securities analyst functions in the

same firm may be created.

Certain of the provisions of the Dodd-Frank Act remain subject to further rule making procedures and

As a result, we cannot assess the full impact of all of these legislative and regulatory changes on our business at the

present time.

However, these legislative and regulatory changes could affect our revenue, limit our ability to pursue business

opportunities, impact the value of assets that we hold, require us to change certain of our business practices, impose additional

costs on us, or otherwise adversely affect our businesses.

If we do not comply with current or future legislation and regulations

that apply to our operations, we may be subject to fines, penalties or material restrictions on our businesses in the jurisdiction

where the violation occurred.

Accordingly, such legislation or regulation could have an adverse effect on our business, results

of operations, cash flows or financial condition.

If we cannot meet

our future capital requirements, we may be unable to develop and enhance our services, take advantage of business opportunities

and respond to competitive pressures.

We may need to raise

additional funds in the future to grow our business internally, invest in new businesses, expand through acquisitions, enhance

our current services or respond to changes in our target markets.

If we raise additional capital through the sale of equity or

equity derivative securities, the issuance of these securities could result in dilution to our existing stockholders.

If additional

funds are raised through the issuance of debt securities, the terms of that debt could impose additional restrictions on our operations

or harm our financial condition.

FINRA’s oversight over broker-dealers and investment advisors may be expanded, and new regulations on having investment banking and securities analyst functions in the same firm may be created.

Certain of the provisions of the Dodd-Frank Act remain subject to further rule making procedures and studies.

As a result, we cannot assess the full impact of all of these legislative and regulatory changes on our business at the present time.

However, these legislative and regulatory changes could affect our revenue, limit our ability to pursue business opportunities, impact the value of assets that we hold, require us to change certain of our business practices, impose additional costs on us, or otherwise adversely affect our businesses.

If we do not comply with current or future legislation and regulations that apply to our operations, we may be subject to fines, penalties or material restrictions on our businesses in the jurisdiction where the violation occurred.

Accordingly, such legislation or regulation could have an adverse effect on our business, results of operations, cash flows or financial condition.

If we cannot meet our future capital requirements, we may be unable to develop and enhance our services, take advantage of business opportunities and respond to competitive pressures.

We may need to raise additional funds in the future to grow our business internally, invest in new businesses, expand through acquisitions, enhance our current services or respond to changes in our target markets.

If we raise additional capital through the sale of equity or equity derivative securities, the issuance of these securities could result in dilution to our existing stockholders.

If additional funds are raised through the issuance of debt securities, the terms of that debt could impose additional restrictions on our operations or harm our financial condition.

Additional financing may be unavailable on acceptable terms.

Our ability to use net loss carryovers

to reduce our taxable income may be limited.

As a result of the common

stock offering that was completed on June 5, 2014, the Company had a more than 50% ownership shift in accordance with Section 382

of the Internal Revenue Code of 1986, as amended (the “Code”).

Accordingly, the Company may be limited to the amount

of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income.

result of the acquisition of UOL on July 1, 2016, the historical net operating losses of UOL are limited to offset income we generate

post acquisition.

As of December 31, 2019, the Company believes that the net operating loss that existed as of the more than 50%

ownership shift will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that

future taxable earnings will be sufficient to realize its deferred tax assets and has not provided an allowance.

However, to the

extent that the Company is unable to utilize such net operating loss, it may have a material adverse effect on our financial condition

and results of operations.

The tax benefits,

grants and other incentives available to us require us to continue to meet various conditions and may be terminated, repaid or

reduced in the future, which could increase our costs and taxes.

The Israeli government

currently provides major tax and capital investment incentives to domestic companies, as well as grant and loan programs relating

to research and development and marketing and export activities.

In recent years, the Israeli Government has reduced the benefits

available under these programs and the Israeli Governmental authorities have indicated that the government may in the future further

reduce, seek repayment or eliminate the benefits of those programs.

Our ability to use net loss carryovers to reduce our taxable income may be limited.

As a result of the common stock offering that was completed on June 5, 2014, the Company had a more than 50% ownership shift in accordance with Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

Accordingly, the Company may be limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income.

As a result of the acquisition of UOL on July 1, 2016, the historical net operating losses of UOL are limited to offset income we generate post acquisition.

As of December 31, 2019, the Company believes that the net operating loss that existed as of the more than 50% ownership shift will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided an allowance.

However, to the extent that the Company is unable to utilize such net operating loss, it may have a material adverse effect on our financial condition and results of operations.

The tax benefits, grants and other incentives available to us require us to continue to meet various conditions and may be terminated, repaid or reduced in the future, which could increase our costs and taxes.

The Israeli government currently provides major tax and capital investment incentives to domestic companies, as well as grant and loan programs relating to research and development and marketing and export activities.

In recent years, the Israeli Government has reduced the benefits available under these programs and the Israeli Governmental authorities have indicated that the government may in the future further reduce, seek repayment or eliminate the benefits of those programs.

magicJack currently takes advantage of these programs.

is no assurance that we will continue to meet the conditions of such benefits and programs or that such benefits and programs would

continue to be available to us in the future.

If we fail to meet the conditions of such benefits and programs or if they are terminated

or further reduced, it could have an adverse effect on our business, operating results and financial condition.

Changes in tax

laws or regulations, or to interpretations of existing tax laws or regulations, to which we are subject could adversely affect

our financial condition and cash flows.

We are subject to taxation

in the United States and in some foreign jurisdictions.

Our financial condition and cash flows are impacted by tax policy implemented

at each of the federal, state, local and international levels.

We cannot predict whether any changes to tax laws or regulations,

or to interpretations of existing tax laws or regulations, will be implemented in the future or whether any such changes would

have a material adverse effect on our financial condition and cash flows.

However, future changes to tax laws or regulations, or

to interpretations of existing tax laws or regulations, could increase our tax burden or otherwise adversely affect our financial

condition and cash flows.

Our failure to

maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have

a material adverse effect on our financial condition, results of operations and business and the price of our common stock and

other securities.

The Sarbanes-Oxley Act

and the related rules require our management to conduct an annual assessment of the effectiveness of our internal control over

financial reporting and require a report by our independent registered public accounting firm addressing our internal control over

financial reporting.

To comply with Section 404 of the Sarbanes-Oxley Act, we are required to document formal policies, processes

and practices related to financial reporting that are necessary to comply with Section 404.

Such policies, processes and practices

are important to ensure the identification of key financial reporting risks, assessment of their potential impact and linkage of

those risks to specific areas and activities within our organization.

If we fail for any reason

to comply with the requirements of Section 404 in a timely manner, our independent registered public accounting firm may, at that

time, issue an adverse report regarding the effectiveness of our internal control over financial reporting.

Matters impacting our

internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse

regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules.

There could also

be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial

Any such event could adversely affect our financial condition, results of operations and business, and result in a

decline in the price of our common stock and other securities.

We may suffer losses if our reputation

Our ability to attract

and retain customers and employees may be diminished to the extent our reputation is damaged.

If we fail, or are perceived to fail,

to address various issues that may give rise to reputational risk, we could harm our business prospects.

These issues include,

but are not limited to, appropriately dealing with market dynamics, potential conflicts of interest, legal and regulatory requirements,

ethical issues, customer privacy, record-keeping, sales and trading practices, and the proper identification of the legal, reputational,

credit, liquidity and market risks inherent in our products and services.

Failure to appropriately address these issues could give

rise to loss of existing or future business, financial loss, and legal or regulatory liability, including complaints, claims and

enforcement proceedings against us, which could, in turn, subject us to fines, judgments and other penalties.

In addition, our

Capital Markets operations depend to a large extent on our relationships with our clients and reputation for integrity and high-caliber

professional services to attract and retain clients.

As a result, if a client is not satisfied with our services, it may be more

damaging in our business than in other businesses.

Misconduct by

our employees or by the employees of our business partners could harm us and is difficult to detect and prevent.

There have been a number

of highly publicized cases involving fraud or other misconduct by employees in the financial services industry in recent years,

and we run the risk that employee misconduct could occur at our firm.

For example, misconduct could involve the improper use or

disclosure of confidential information, which could result in regulatory sanctions and serious reputational or financial harm.

It is not always possible to deter misconduct and the precautions we take to detect and prevent this activity may not be effective

in all cases.

There is no assurance that we will continue to meet the conditions of such benefits and programs or that such benefits and programs would continue to be available to us in the future.

If we fail to meet the conditions of such benefits and programs or if they are terminated or further reduced, it could have an adverse effect on our business, operating results and financial condition.

Changes in tax laws or regulations, or to interpretations of existing tax laws or regulations, to which we are subject could adversely affect our financial condition and cash flows.

We are subject to taxation in the United States and in some foreign jurisdictions.

Our financial condition and cash flows are impacted by tax policy implemented at each of the federal, state, local and international levels.

We cannot predict whether any changes to tax laws or regulations, or to interpretations of existing tax laws or regulations, will be implemented in the future or whether any such changes would have a material adverse effect on our financial condition and cash flows.

However, future changes to tax laws or regulations, or to interpretations of existing tax laws or regulations, could increase our tax burden or otherwise adversely affect our financial condition and cash flows.

Our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our financial condition, results of operations and business and the price of our common stock and other securities.

The Sarbanes-Oxley Act and the related rules require our management to conduct an annual assessment of the effectiveness of our internal control over financial reporting and require a report by our independent registered public accounting firm addressing our internal control over financial reporting.

To comply with Section 404 of the Sarbanes-Oxley Act, we are required to document formal policies, processes and practices related to financial reporting that are necessary to comply with Section 404.

Such policies, processes and practices are important to ensure the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within our organization.

If we fail for any reason to comply with the requirements of Section 404 in a timely manner, our independent registered public accounting firm may, at that time, issue an adverse report regarding the effectiveness of our internal control over financial reporting.

Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules.

There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

Any such event could adversely affect our financial condition, results of operations and business, and result in a decline in the price of our common stock and other securities.

We may suffer losses if our reputation is harmed.

Our ability to attract and retain customers and employees may be diminished to the extent our reputation is damaged.

If we fail, or are perceived to fail, to address various issues that may give rise to reputational risk, we could harm our business prospects.

These issues include, but are not limited to, appropriately dealing with market dynamics, potential conflicts of interest, legal and regulatory requirements, ethical issues, customer privacy, record-keeping, sales and trading practices, and the proper identification of the legal, reputational, credit, liquidity and market risks inherent in our products and services.

Failure to appropriately address these issues could give rise to loss of existing or future business, financial loss, and legal or regulatory liability, including complaints, claims and enforcement proceedings against us, which could, in turn, subject us to fines, judgments and other penalties.

In addition, our Capital Markets operations depend to a large extent on our relationships with our clients and reputation for integrity and high-caliber professional services to attract and retain clients.

As a result, if a client is not satisfied with our services, it may be more damaging in our business than in other businesses.

Misconduct by our employees or by the employees of our business partners could harm us and is difficult to detect and prevent.

There have been a number of highly publicized cases involving fraud or other misconduct by employees in the financial services industry in recent years, and we run the risk that employee misconduct could occur at our firm.

For example, misconduct could involve the improper use or disclosure of confidential information, which could result in regulatory sanctions and serious reputational or financial harm.

It is not always possible to deter misconduct and the precautions we take to detect and prevent this activity may not be effective in all cases.

Our ability to detect and prevent misconduct by entities with which we do business may be even more limited.

suffer reputational harm for any misconduct by our employees or those entities with which we do business.

We may enter into

new lines of business, make strategic investments or acquisitions or enter into joint ventures, each of which may result in additional

risks and uncertainties for our business.

We may enter into new

lines of business, make future strategic investments or acquisitions and enter into joint ventures.

As we have in the past, and

subject to market conditions, we may grow our business by increasing assets under management in existing investment strategies,

pursue new investment strategies, which may be similar or complementary to our existing strategies or be wholly new initiatives,

or enter into strategic relationships, or joint ventures.

In addition, opportunities may arise to acquire or invest in other businesses

that are related or unrelated to our current businesses.

To the extent we make

strategic investments or acquisitions, enter into strategic relationships or joint ventures or enter into new lines of business,

we will face numerous risks and uncertainties, including risks associated with the required investment of capital and other resources

and with combining or integrating operational and management systems and controls and managing potential conflicts.

certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently

exempt, and may lead to increased litigation and regulatory risk.

If a new business generates insufficient revenues, or produces

investment losses, or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely

affected, and our reputation and business may be harmed.

In the case of joint ventures, we are subject to additional risks and

uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls

and personnel that are not under our control.

Risks Related to Our Capital Markets

Our corporate

finance and strategic advisory engagements are singular in nature and do not generally provide for subsequent engagements.

Our investment banking

clients generally retain us on a short-term, engagement-by-engagement basis in connection with specific corporate finance, merger

and acquisition transactions (often as an advisor in company sale transactions) and other strategic advisory services, rather than

on a recurring basis under long-term contracts.

As these transactions are typically singular in nature and our engagements with

these clients may not recur, we must seek new engagements when our current engagements are successfully completed or are terminated.

As a result, high activity levels in any period are not necessarily indicative of continued high levels of activity in any subsequent

If we are unable to generate a substantial number of new engagements that generate fees from new or existing clients, our

business, results of operations and financial condition could be adversely affected.

Our Capital Markets

operations are highly dependent on communications, information and other systems and third parties, and any systems failures could

significantly disrupt our Capital Markets business.

Our data and transaction

processing, custody, financial, accounting and other technology and operating systems are essential to our Capital Markets operations.

A system malfunction (due to hardware failure, capacity overload, security incident, data corruption, etc.) or mistake made relating

to the processing of transactions could result in financial loss, liability to clients, regulatory intervention, reputational damage

and constraints on our ability to grow.

We outsource a substantial portion of our critical data processing activities, including

trade processing and back office data processing.

We may suffer reputational harm for any misconduct by our employees or those entities with which we do business.

We may enter into new lines of business, make strategic investments or acquisitions or enter into joint ventures, each of which may result in additional risks and uncertainties for our business.

We may enter into new lines of business, make future strategic investments or acquisitions and enter into joint ventures.

As we have in the past, and subject to market conditions, we may grow our business by increasing assets under management in existing investment strategies, pursue new investment strategies, which may be similar or complementary to our existing strategies or be wholly new initiatives, or enter into strategic relationships, or joint ventures.

In addition, opportunities may arise to acquire or invest in other businesses that are related or unrelated to our current businesses.

To the extent we make strategic investments or acquisitions, enter into strategic relationships or joint ventures or enter into new lines of business, we will face numerous risks and uncertainties, including risks associated with the required investment of capital and other resources and with combining or integrating operational and management systems and controls and managing potential conflicts.

Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk.

If a new business generates insufficient revenues, or produces investment losses, or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected, and our reputation and business may be harmed.

In the case of joint ventures, we are subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control.

Risks Related to Our Capital Markets Activities

Our corporate finance and strategic advisory engagements are singular in nature and do not generally provide for subsequent engagements.

Our investment banking clients generally retain us on a short-term, engagement-by-engagement basis in connection with specific corporate finance, merger and acquisition transactions (often as an advisor in company sale transactions) and other strategic advisory services, rather than on a recurring basis under long-term contracts.

As these transactions are typically singular in nature and our engagements with these clients may not recur, we must seek new engagements when our current engagements are successfully completed or are terminated.

As a result, high activity levels in any period are not necessarily indicative of continued high levels of activity in any subsequent period.

If we are unable to generate a substantial number of new engagements that generate fees from new or existing clients, our business, results of operations and financial condition could be adversely affected.

Our Capital Markets operations are highly dependent on communications, information and other systems and third parties, and any systems failures could significantly disrupt our capital markets business.

Our data and transaction processing, custody, financial, accounting and other technology and operating systems are essential to our capital markets operations.

A system malfunction (due to hardware failure, capacity overload, security incident, data corruption, etc.) or mistake made relating to the processing of transactions could result in financial loss, liability to clients, regulatory intervention, reputational damage and constraints on our ability to grow.

We outsource a substantial portion of our critical data processing activities, including trade processing and back office data processing.

We also contract with third parties for market data and other services.

event that any of these service providers fails to adequately perform such services or the relationship between that service provider

and us is terminated, we may experience a significant disruption in our operations, including our ability to timely and accurately

process transactions or maintain complete and accurate records of those transactions.

Adapting or developing

our technology systems to meet new regulatory requirements, client needs, expansion and industry demands also is critical for our

In the event that any of these service providers fails to adequately perform such services or the relationship between that service provider and us is terminated, we may experience a significant disruption in our operations, including our ability to timely and accurately process transactions or maintain complete and accurate records of those transactions.

Adapting or developing our technology systems to meet new regulatory requirements, client needs, expansion and industry demands also is critical for our business.

Introduction of new technologies present new challenges on a regular basis.

We have an ongoing need to upgrade and improve

our various technology systems, including our data and transaction processing, financial, accounting, risk management and trading

We have an ongoing need to upgrade and improve our various technology systems, including our data and transaction processing, financial, accounting, risk management and trading systems.

This need could present operational issues or require significant capital spending.

It also may require us to make additional

investments in technology systems and may require us to reevaluate the current value and/or expected useful lives of our technology

systems, which could negatively impact our results of operations.

Secure processing, storage

and transmission of confidential and other information in our internal and outsourced computer systems and networks also is critically

important to our business.

It also may require us to make additional investments in technology systems and may require us to reevaluate the current value and/or expected useful lives of our technology systems, which could negatively impact our results of operations.

Secure processing, storage and transmission of confidential and other information in our internal and outsourced computer systems and networks also is critically important to our business.

We take protective measures and endeavor to modify them as circumstances warrant.

However, our computer

systems and software are subject to unauthorized access, computer viruses or other malicious code, inadvertent, erroneous or intercepted

transmission of information (including by e-mail), and other events that have had an information security impact.

If one or more

of such events occur, this potentially could jeopardize our or our clients’ or counterparties’ confidential and other

information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions

or malfunctions in our, our clients’, our counterparties’ or third parties’ operations.

We may be required to

expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other

exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through

any insurance maintained by us.

A disruption in the

infrastructure that supports our business due to fire, natural disaster, health emergency (for example, the ongoing COVID-19 pandemic),

power or communication failure, act of terrorism or war may affect our ability to service and interact with our clients.

are not able to implement contingency plans effectively, any such disruption could harm our results of operations.

Due to the ongoing

COVID-19 pandemic, many businesses, including ours, have shifted largely to telecommuting.

While we continue to evaluate the situation

and invest in our technological infrastructure, the duration and effects of this shift are uncertain, but could make our operations

more vulnerable.

The growth of

electronic trading and the introduction of new technology in the markets in which our market-making business operates may adversely

affect this business and may increase competition.

The continued growth

of electronic trading and the introduction of new technologies is changing our market-making business and presenting new challenges.

However, our computer systems and software are subject to unauthorized access, computer viruses or other malicious code, inadvertent, erroneous or intercepted transmission of information (including by e-mail), and other events that have had an information security impact.

If one or more of such events occur, this potentially could jeopardize our or our clients’ or counterparties’ confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our clients’, our counterparties’ or third parties’ operations.

We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.

A disruption in the infrastructure that supports our business due to fire, natural disaster, health emergency (for example, the ongoing COVID-19 pandemic), power or communication failure, act of terrorism or war may affect our ability to service and interact with our clients.

If we are not able to implement contingency plans effectively, any such disruption could harm our results of operations.

Due to the ongoing COVID-19 pandemic, many businesses, including ours, have shifted largely to telecommuting.

While we continue to evaluate the situation and invest in our technological infrastructure, the duration and effects of this shift are uncertain, but could make our operations more vulnerable.

The growth of electronic trading and the introduction of new technology in the markets in which our market-making business operates may adversely affect this business and may increase competition.

The continued growth of electronic trading and the introduction of new technologies is changing our market-making business and presenting new challenges.

Securities, futures and options transactions are increasingly occurring electronically, through alternative trading systems.

expect that the trend toward alternative trading systems will continue to accelerate.

This acceleration could further increase

program trading, increase the speed of transactions and decrease our ability to participate in transactions as principal, which

would reduce the profitability of our market-making business.

Some of these alternative trading systems compete with our market-making

business and with our algorithmic trading platform, and we may experience continued competitive pressures in these and other areas.

Significant resources have been invested in the development of our electronic trading systems, which includes our at-the-market

business, but there is no assurance that the revenues generated by these systems will yield an adequate return on the investment,

particularly given the increased program trading and increased percentage of stocks trading off of the historically manual trading

Pricing and other competitive pressures

may impair the revenues of our sales and trading business.

We derive a significant

portion of our revenues for our investment banking operations from our sales and trading business.

There has been intense price

competition and trading volume reduction in this business in recent years.

In particular, the ability to execute trades electronically

and through alternative trading systems has increased the downward pressure on per share trading commissions and spreads.

these trends toward alternative trading systems and downward pricing pressure in the business to continue.

We experience competitive

pressures in these and other areas in the future as some of our competitors seek to obtain market share by competing on the basis

of price or by using their own capital to facilitate client trading activities.

In addition, we face pressure from our larger competitors,

many of whom are better able to offer a broader range of complementary products and services to clients in order to win their trading

These larger competitors may also be better able to respond to changes in the research, brokerage and investment banking

industries, to compete for skilled professionals, to finance acquisitions, to fund internal growth and to compete for market share

As we are committed to maintaining and improving our comprehensive research coverage in our target sectors to support

our sales and trading business, we may be required to make substantial investments in our research capabilities to remain competitive.

If we are unable to compete effectively in these areas, the revenues of our sales and trading business may decline, and our business,

results of operations and financial condition may be harmed.

Some of our large institutional

sales and trading clients in terms of brokerage revenues have entered into arrangements with us and other investment banking firms

under which they separate payments for research products or services from trading commissions for sales and trading services, and

pay for research directly in cash, instead of compensating the research providers through trading commissions (referred to as “soft

dollar” practices).

In addition, we have entered into certain commission sharing arrangements in which institutional clients

execute trades with a limited number of brokers and instruct those brokers to allocate a portion of the commission directly to

us or other broker-dealers for research or to an independent research provider.

If more of such arrangements are reached between

our clients and us, or if similar practices are adopted by more firms in the investment banking industry, we expect that would

increase the competitive pressures on trading commissions and spreads and reduce the value our clients place on high quality research.

Conversely, if we are unable to make similar arrangements with other investment managers that insist on separating trading commissions

from research products, volumes and trading commissions in our sales and trading business also would likely decrease.

Larger and more

frequent capital commitments in our trading and underwriting businesses increase the potential for significant losses.

Certain financial services

firms make larger and more frequent commitments of capital in many of their activities.

For example, in order to win business,

some investment banks increasingly commit to purchase large blocks of stock from publicly traded issuers or significant stockholders,

instead of the more traditional marketed underwriting process in which marketing is typically completed before an investment bank

commits to purchase securities for resale.

We have participated in this activity and expect to continue to do so and, as a result,

we are subject to increased risk.

Conversely, if we do not have sufficient regulatory capital to so participate, our business may

Furthermore, we may suffer losses as a result of the positions taken in these transactions even when economic and market

conditions are generally favorable for others in the industry.

We may increasingly

commit our own capital as part of our trading business to facilitate client sales and trading activities.

The number and size of

these transactions may adversely affect our results of operations in a given period.

We may also incur significant losses from

our sales and trading activities due to market fluctuations and volatility in our results of operations.

To the extent that we

own assets, i.e., have long positions, in any of those markets, a downturn in the value of those assets or in those markets could

result in losses.

Conversely, to the extent that we have sold assets we do not own, i.e., have short positions, in any of those

markets, an upturn in those markets could expose us to potentially large losses as we attempt to cover our short positions by acquiring

assets in a rising market.

Our underwriting

and market making activities may place our capital at risk.

We may incur losses

and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities we purchased as an underwriter

at the anticipated price levels.

As an underwriter, we also are subject to heightened standards regarding liability for material

misstatements or omissions in prospectuses and other offering documents relating to offerings we underwrite.

Further, even though

underwriting agreements with issuing companies typically include a right to indemnification in favor of the underwriter for these

offerings to cover potential liability from any material misstatements or omissions, indemnification may be unavailable or insufficient

in certain circumstances, for example if the issuing company has become insolvent.

As a market maker, we may own large positions

in specific securities, and these undiversified holdings concentrate the risk of market fluctuations and may result in greater

losses than would be the case if our holdings were more diversified.

We are subject

to net capital and other regulatory capital requirements;

We expect that the trend toward alternative trading systems will continue to accelerate.

This acceleration could further increase program trading, increase the speed of transactions and decrease our ability to participate in transactions as principal, which would reduce the profitability of our market-making business.

Some of these alternative trading systems compete with our market-making business and with our algorithmic trading platform, and we may experience continued competitive pressures in these and other areas.

Significant resources have been invested in the development of our electronic trading systems, which includes our at-the-market business, but there is no assurance that the revenues generated by these systems will yield an adequate return on the investment, particularly given the increased program trading and increased percentage of stocks trading off of the historically manual trading markets.

Pricing and other competitive pressures may impair the revenues of our sales and trading business.

We derive a significant portion of our revenues for our investment banking operations from our sales and trading business.

There has been intense price competition and trading volume reduction in this business in recent years.

In particular, the ability to execute trades electronically and through alternative trading systems has increased the downward pressure on per share trading commissions and spreads.

We expect these trends toward alternative trading systems and downward pricing pressure in the business to continue.

We experience competitive pressures in these and other areas in the future as some of our competitors seek to obtain market share by competing on the basis of price or by using their own capital to facilitate client trading activities.

In addition, we face pressure from our larger competitors, many of whom are better able to offer a broader range of complementary products and services to clients in order to win their trading business.

These larger competitors may also be better able to respond to changes in the research, brokerage and investment banking industries, to compete for skilled professionals, to finance acquisitions, to fund internal growth and to compete for market share generally.

As we are committed to maintaining and improving our comprehensive research coverage in our target sectors to support our sales and trading business, we may be required to make substantial investments in our research capabilities to remain competitive.

If we are unable to compete effectively in these areas, the revenues of our sales and trading business may decline, and our business, results of operations and financial condition may be harmed.

Some of our large institutional sales and trading clients in terms of brokerage revenues have entered into arrangements with us and other investment banking firms under which they separate payments for research products or services from trading commissions for sales and trading services, and pay for research directly in cash, instead of compensating the research providers through trading commissions (referred to as “soft dollar” practices).

In addition, we have entered into certain commission sharing arrangements in which institutional clients execute trades with a limited number of brokers and instruct those brokers to allocate a portion of the commission directly to us or other broker-dealers for research or to an independent research provider.

If more of such arrangements are reached between our clients and us, or if similar practices are adopted by more firms in the investment banking industry, we expect that would increase the competitive pressures on trading commissions and spreads and reduce the value our clients place on high quality research.

Conversely, if we are unable to make similar arrangements with other investment managers that insist on separating trading commissions from research products, volumes and trading commissions in our sales and trading business also would likely decrease.

Larger and more frequent capital commitments in our trading and underwriting businesses increase the potential for significant losses.

Certain financial services firms make larger and more frequent commitments of capital in many of their activities.

For example, in order to win business, some investment banks increasingly commit to purchase large blocks of stock from publicly traded issuers or significant stockholders, instead of the more traditional marketed underwriting process in which marketing is typically completed before an investment bank commits to purchase securities for resale.

We have participated in this activity and expect to continue to do so and, as a result, we are subject to increased risk.

Conversely, if we do not have sufficient regulatory capital to so participate, our business may suffer.

Furthermore, we may suffer losses as a result of the positions taken in these transactions even when economic and market conditions are generally favorable for others in the industry.

We may increasingly commit our own capital as part of our trading business to facilitate client sales and trading activities.

The number and size of these transactions may adversely affect our results of operations in a given period.

We may also incur significant losses from our sales and trading activities due to market fluctuations and volatility in our results of operations.

To the extent that we own assets, i.e., have long positions, in any of those markets, a downturn in the value of those assets or in those markets could result in losses.

Conversely, to the extent that we have sold assets we do not own, i.e., have short positions, in any of those markets, an upturn in those markets could expose us to potentially large losses as we attempt to cover our short positions by acquiring assets in a rising market.

Our underwriting and market making activities may place our capital at risk.

We may incur losses and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities we purchased as an underwriter at the anticipated price levels.

As an underwriter, we also are subject to heightened standards regarding liability for material misstatements or omissions in prospectuses and other offering documents relating to offerings we underwrite.

Further, even though underwriting agreements with issuing companies typically include a right to indemnification in favor of the underwriter for these offerings to cover potential liability from any material misstatements or omissions, indemnification may be unavailable or insufficient in certain circumstances, for example if the issuing company has become insolvent.

As a market maker, we may own large positions in specific securities, and these undiversified holdings concentrate the risk of market fluctuations and may result in greater losses than would be the case if our holdings were more diversified.

We are subject to net capital and other regulatory capital requirements;

failure to comply with these rules would significantly harm our business.

Our broker-dealer subsidiaries, are subject to the net capital requirements of the SEC, FINRA, and various self-regulatory organizations

of which they are members.

These requirements typically specify the minimum level of net capital a broker-dealer must maintain and

also mandate that a significant part of its assets be kept in relatively liquid form.

Failure to maintain the required net capital

may subject a firm to limitation of its activities, including suspension or revocation of its registration by the SEC and suspension

or expulsion by FINRA and other regulatory bodies, and ultimately may require its liquidation.

Failure to comply with the net capital

rules could have material and adverse consequences, such as:

Our broker-dealer subsidiaries are subject to the net capital requirements of the SEC, FINRA, and various self-regulatory organizations of which they are members.

These requirements typically specify the minimum level of net capital a broker-dealer must maintain and also mandate that a significant part of its assets be kept in relatively liquid form.

Failure to maintain the required net capital may subject a firm to limitation of its activities, including suspension or revocation of its registration by the SEC and suspension or expulsion by FINRA and other regulatory bodies, and ultimately may require its liquidation.

Failure to comply with the net capital rules could have material and adverse consequences, such as:

limiting our operations that require intensive use of capital, such as underwriting or trading activities;

1 unchanged sentence

This, in turn, could limit our ability to implement our business and growth strategies, pay interest on and repay the principal of our debt and/or repurchase our shares.

In addition, a change

in the net capital rules or the imposition of new rules affecting the scope, coverage, calculation, or amount of net capital requirements,

or a significant operating loss or any large charge against net capital, could have similar adverse effects.

In addition, a change in the net capital rules or the imposition of new rules affecting the scope, coverage, calculation, or amount of net capital requirements, or a significant operating loss or any large charge against net capital, could have similar adverse effects.

Furthermore, our broker-dealer subsidiaries are subject to laws that authorize regulatory bodies to block or reduce the flow of funds from it to B.

Riley Financial,

Riley Financial, Inc.

As a holding company, B.

Riley Financial, Inc.

depends on dividends, distributions and other payments from its subsidiaries

to fund dividend payments, if any, and to fund all payments on its obligations, including debt obligations.

As a result, regulatory

actions could impede access to funds that B.

depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments, if any, and to fund all payments on its obligations, including debt obligations.

As a result, regulatory actions could impede access to funds that B.

Riley Financial, Inc.

needs to make payments on obligations, including debt obligations,

or dividend payments.

needs to make payments on obligations, including debt obligations, or dividend payments.

In addition, because B.

Riley Financial, Inc.

holds equity interests in the firm’s subsidiaries, its

rights as an equity holder to the assets of these subsidiaries may not materialize, if at all, until the claims of the creditors

of these subsidiaries are first satisfied.

Risks Related to our Principal Investments

We have made and

may make Principal Investments in relatively high-risk, illiquid assets that often have significantly leveraged capital structures,

and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal

amount we invest in these activities.

From time to time, we

use our capital, including on a leveraged basis, in proprietary investments in both private company and public company securities

that may be illiquid and volatile.

The equity securities of a privately-held entity in which we make a proprietary investment are

likely to be restricted as to resale and are otherwise typically highly illiquid.

In the case of fund or similar investments, our

investments may be illiquid until such investment vehicles are liquidated.

We expect that there will be restrictions on our ability

to resell the securities that we acquire for a period of up to one year after we acquire those securities.

Thereafter, a public

market sale may be subject to volume limitations or dependent upon securing a registration statement for an initial and potentially

secondary public offering of the securities.

We may make Principal Investments that are significant relative to the overall capitalization

of the investee company and resales of significant amounts of these securities might be subject to significant limitations and

adversely affect the market and the sales price for the securities in which we invest.

In addition, our Principal Investments may

involve entities or businesses with capital structures that have significant leverage.

The large amount of borrowing in the leveraged

capital structure increases the risk of losses due to factors such as rising interest rates, downturns in the economy or deteriorations

in the condition of the investment or its industry.

In the event of defaults under borrowings, the assets being financed would

be at risk of foreclosure, and we could lose our entire investment.

Even if we make an appropriate

investment decision based on the intrinsic value of an enterprise, we cannot assure you that general market conditions will not

cause the market value of our investments to decline.

For example, an increase in interest rates, a general decline in the stock

markets, such as the recent declines in the stock markets due to the ongoing COVID-19 pandemic, or other market and industry conditions

adverse to companies of the type in which we invest and intend to invest could result in a decline in the value of our investments

or a total loss of our investment.

In addition, some of

these investments are, or may in the future be, in industries or sectors which are unstable, in distress or undergoing some uncertainty.

Further, the companies in which we invest may rely on new or developing technologies or novel business models, or concentrate on

markets which are or may be disproportionately impacted by pressures in the financial services and/or mortgage and real estate

sectors, have not yet developed and which may never develop sufficiently to support successful operations, or their existing business

operations may deteriorate or may not expand or perform as projected.

Such investments may be subject to rapid changes in value

caused by sudden company-specific or industry-wide developments.

Contributing capital to these investments is risky, and we may

lose some or all of the principal amount of our investments.

There are no regularly quoted market prices for a number of the investments

that we make.

The value of our investments is determined using fair value methodologies described in valuation policies, which

may consider, among other things, the nature of the investment, the expected cash flows from the investment, bid or ask prices

provided by third parties for the investment and the trading price of recent sales of securities (in the case of publicly-traded

securities), restrictions on transfer and other recognized valuation methodologies.

The methodologies we use in valuing individual

investments are based on estimates and assumptions specific to the particular investments.

Therefore, the value of our investments

does not necessarily reflect the prices that would actually be obtained by us when such investments are sold.

Realizations, if

any, at values significantly lower than the values at which investments have been reflected on our balance sheet would result in

loses of potential incentive income and Principal Investments.

are exposed to credit risk from a variety of our activities, including loans, lines of credit, guarantees and backstop commitments,

and we may not be able to fully realize the value of the collateral securing certain of our loans.

We are generally exposed

to the risk that third parties that owe us money, securities or other assets will fail to meet their obligations to us due to numerous

causes, including bankruptcy, lack of liquidity, or operational failure, among others.

Additionally, when we guarantee or backstop

the obligations of third parties, we are exposed to the risk that our guarantee or backstop may be called by the holder following

a default by the primary obligor, which could cause us to incur significant losses, and, when our obligations are secured, expose

us to the risk that the holder may seek to foreclose on collateral pledged by us.

We incur credit risk

through loans, lines of credit, guarantees and backstop commitments issued to or on behalf of businesses and individuals, and other

loans collateralized by a variety of assets, including securities.

Our credit risk and credit losses can increase if our loans

or investments are concentrated among borrowers or issuers engaged in the same or similar activities, industries, or geographies,

or to borrowers or issuers who as a group may be uniquely or disproportionately affected by economic or market conditions.

deterioration of an individually large exposure, for example due to natural disasters, health emergencies or pandemics (like the

ongoing COVID-19 pandemic), acts of terrorism, severe weather events or other adverse economic events, could lead to additional

loan loss provisions and/or charges-offs, or credit impairment of our investments, and subsequently have a material impact on our

net income and regulatory capital.

amount and duration of our credit exposures have been increasing over the past year, as have the breadth and size of the entities

to which we have credit exposures.

We permit our clients

to purchase securities on margin.

During periods of steep declines in securities prices, the value of the collateral securing client

margin loans may fall below the amount of the purchaser’s indebtedness.

If clients are unable to provide additional collateral

for these margin loans, we may incur losses on those margin transactions.

This may cause us to incur additional expenses defending

or pursuing claims or litigation related to counterparty or client defaults.

Although a substantial

amount of our loans to counterparties are protected by holding security interests in the assets or equity interests of the borrower,

we may not be able to fully realize the value of the collateral securing our loans due to one or more of the following factors:

holds equity interests in the firm’s subsidiaries, its rights as an equity holder to the assets of these subsidiaries may not materialize, if at all, until the claims of the creditors of these subsidiaries are first satisfied.

Risks Related to our Principal Investments Activities

We have made and may make principal investments in relatively high-risk, illiquid assets that often have significantly leveraged capital structures, and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amount we invest in these activities.

From time to time, we use our capital, including on a leveraged basis, in proprietary investments in both private company and public company securities that may be illiquid and volatile.

The equity securities of a privately-held entity in which we make a proprietary investment are likely to be restricted as to resale and are otherwise typically highly illiquid.

In the case of fund or similar investments, our investments may be illiquid until such investment vehicles are liquidated.

We expect that there will be restrictions on our ability to resell the securities that we acquire for a period of up to one year after we acquire those securities.

Thereafter, a public market sale may be subject to volume limitations or dependent upon securing a registration statement for an initial and potentially secondary public offering of the securities.

We may make principal investments that are significant relative to the overall capitalization of the investee company and resales of significant amounts of these securities might be subject to significant limitations and adversely affect the market and the sales price for the securities in which we invest.

In addition, our Principal Investments may involve entities or businesses with capital structures that have significant leverage.

The large amount of borrowing in the leveraged capital structure increases the risk of losses due to factors such as rising inflation, interest rates, downturns in the economy or deteriorations in the condition of the investment or its industry.

In the event of defaults under borrowings, the assets being financed would be at risk of foreclosure, and we could lose our entire investment.

Even if we make an appropriate investment decision based on the intrinsic value of an enterprise, we cannot assure you that general market conditions will not cause the market value of our investments to decline.

For example, a further increase in inflation, interest rates, a general decline in the stock markets, such as the recent declines in the stock markets due to the anticipated rising interest rate environment, or other market and industry conditions adverse to companies of the type in which we invest and intend to invest could result in a decline in the value of our investments or a total loss of our investment.

In addition, some of these investments are, or may in the future be, in industries or sectors which are unstable, in distress or undergoing some uncertainty.

Further, the companies in which we invest may rely on new or developing technologies or novel business models, or concentrate on markets which are or may be disproportionately impacted by pressures in the financial services and/or mortgage and real estate sectors, have not yet developed and which may never develop sufficiently to support successful operations, or their existing business operations may deteriorate or may not expand or perform as projected.

Such investments may be subject to rapid changes in value caused by sudden company-specific or industry-wide developments.

Contributing capital to these investments is risky, and we may lose some or all of the principal amount of our investments.

There are no regularly quoted market prices for a number of the investments that we make.

The value of our investments is determined using fair value methodologies described in valuation policies, which may consider, among other things, the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment and the trading price of recent sales of securities (in the case of publicly-traded securities), restrictions on transfer and other recognized valuation methodologies.

The methodologies we use in valuing individual investments are based on estimates and assumptions specific to the particular investments.

Therefore, the value of our investments does not necessarily reflect the prices that would actually be obtained by us when such investments are sold.

Realizations, if any, at values significantly lower than the values at which investments have been reflected on our balance sheet would result in loses of potential incentive income and Principal Investments.

We are exposed to credit risk from a variety of our activities, including loans, lines of credit, guarantees and backstop commitments, and we may not be able to fully realize the value of the collateral securing certain of our loans.

We are generally exposed to the risk that third parties that owe us money, securities or other assets will fail to meet their obligations to us due to numerous causes, including bankruptcy, lack of liquidity, or operational failure, among others.

Additionally, when we guarantee or backstop the obligations of third parties, we are exposed to the risk that our guarantee or backstop may be called by the holder following a default by the primary obligor, which could cause us to incur significant losses, and, when our obligations are secured, expose us to the risk that the holder may seek to foreclose on collateral pledged by us.

incur credit risk through loans, lines of credit, guarantees and backstop commitments issued to or on behalf of businesses and

individuals, and other loans collateralized by a variety of assets, including securities.

Our credit risk and credit losses can

increase if our loans or investments are concentrated among borrowers or issuers engaged in the same or similar activities,

industries, or geographies, or to borrowers or issuers who as a group may be uniquely or disproportionately affected by economic or

market conditions.

The deterioration of an individually large exposure, for example due to natural disasters, health emergencies or

pandemics (like the ongoing COVID-19 pandemic), acts of terrorism or war, severe weather events or other adverse economic events,

could lead to additional loan loss provisions and/or charges-offs, or credit impairment of our investments, and subsequently have a

material impact on our net income and regulatory capital.

The amount and duration of our credit exposures have been increasing over the past year, as have the breadth and size of the entities to which we have credit exposures.

We permit our clients to purchase securities on margin.

During periods of steep declines in securities prices, the value of the collateral securing client margin loans may fall below the amount of the purchaser’s indebtedness.

If clients are unable to provide additional collateral for these margin loans, we may incur losses on those margin transactions.

This may cause us to incur additional expenses defending or pursuing claims or litigation related to counterparty or client defaults.

Although a substantial amount of our loans to counterparties are protected by holding security interests in the assets or equity interests of the borrower, we may not be able to fully realize the value of the collateral securing our loans due to one or more of the following factors:

Our loans may be unsecured, therefore our liens on the collateral, if any, are subordinated to those of the senior secured debt of the borrower, if any.

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The liquidity and value of the collateral could be impaired as a result of changing economic conditions, competition, and other factors, including the availability of suitable buyers.

We may experience

write downs of our investments and other losses related to the valuation of our investments and volatile and illiquid market conditions.

In our proprietary investment

activities, our concentrated holdings, illiquidity and market volatility may make it difficult to value certain of our investment

Subsequent valuations, in light of factors then prevailing, may result in significant changes in the values of these

securities in future periods.

In addition, at the time of any sales and settlements of these securities, the price we ultimately

realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair

Any of these factors could require us to take write downs in the value of our investment and securities portfolio, which

may have an adverse effect on our results of operations in future periods.

Risks Related to our Auction and

Liquidation Activities

We may experience write downs of our investments and other losses related to the valuation of our investments and volatile and illiquid market conditions.

In our proprietary investment activities, our concentrated holdings, illiquidity and market volatility may make it difficult to value certain of our investment securities.

Subsequent valuations, in light of factors then prevailing, may result in significant changes in the values of these securities in future periods.

In addition, at the time of any sales and settlements of these securities, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value.

Any of these factors could require us to take write downs in the value of our investment and securities portfolio, which may have an adverse effect on our results of operations in future periods.

Risks Related to our Auction and Liquidation Activities

We may incur losses

as a result of “guarantee” based engagements that we enter into in connection with our auction and liquidation solutions

In many instances, in

order to secure an engagement, we are required to bid for that engagement by guaranteeing to the client a minimum amount that such

client will receive from the sale of inventory or assets.

In many instances, in order to secure an engagement, we are required to bid for that engagement by guaranteeing to the client a minimum amount that such client will receive from the sale of inventory or assets.

Our bid is based on a variety of factors, including:

our experience,

expertise, perceived value added by engagement, valuation of the inventory or assets and the prices we believe potential buyers

would be willing to pay for such inventory or assets.

An inaccurate estimate of any of the above or inaccurate valuation of the

assets or inventory could result in us submitting a bid that exceeds the realizable proceeds from any engagement.

If the liquidation

proceeds, net of direct operating expenses, are less than the amount we guaranteed in our bid, we will incur a loss.

in the event that the proceeds, net of direct operating expenses, from an engagement are less than the bid, the value of the assets

or inventory decline in value prior to the disposition or liquidation, or the assets are overvalued for any reason, we may suffer

a loss and our financial condition and results of operations could be adversely affected.

Losses due to

any auction or liquidation engagement may cause us to become unable to make payments due to our creditors and may cause us to default

on our debt obligations.

our experience, expertise, perceived value added by engagement, valuation of the inventory or assets and the prices we believe potential buyers would be willing to pay for such inventory or assets.

An inaccurate estimate of any of the above or inaccurate valuation of the assets or inventory could result in us submitting a bid that exceeds the realizable proceeds from any engagement.

If the liquidation proceeds, net of direct operating expenses, are less than the amount we guaranteed in our bid, we will incur a loss.

Therefore, in the event that the proceeds, net of direct operating expenses, from an engagement are less than the bid, the value of the assets or inventory decline in value prior to the disposition or liquidation, or the assets are overvalued for any reason, we may suffer a loss and our financial condition and results of operations could be adversely affected.

Losses due to any auction or liquidation engagement may cause us to become unable to make payments due to our creditors and may cause us to default on our debt obligations.

We have three engagement

structures for our auction and liquidation services:

(i) a “fee” based structure under which we are compensated for

our role in an engagement on a commission basis, (ii) purchase on an outright basis (and take title to) the assets or inventory

of the client, and (iii) “guarantee” to the client that a certain amount will be realized by the client upon the sale

of the assets or inventory based on contractually defined terms in the auction or liquidation contract.

We bear the risk of loss

under the purchase and guarantee structures of Auction and Liquidation contracts.

If the amount realized from the sale or disposition

of assets, net of direct operating expenses, does not equal or exceed the purchase price (in purchase transaction), we will recognize

a loss on the engagement, or should the amount realized, net of direct operating expenses, not equal or exceed the “guarantee,”

we are still required to pay the guaranteed amount to the client.

The ongoing COVID-19

pandemic has temporarily limited our Auction and Liquidation businesses.

While we expect that our Auction and Liquidation

services business will experience increased demand in the medium to long term as a result of business disruptions due to the ongoing

COVID-19 pandemic, restrictions limiting travel, public gatherings and requiring store closures due to social

distancing measures imposed to control the pandemic has temporarily limited our ability to conduct auctions and liquidations.

cannot predict when these restrictions will be relaxed or lifted or the extent to which such restrictions will materially and negatively

affect our auction and liquidation businesses.

We could incur

losses in connection with outright purchase transactions in which we engage as part of our Auction and Liquidation solutions business.

When we conduct an asset

disposition or liquidation on an outright purchase basis, we purchase from the client the assets or inventory to be sold or liquidated

and therefore, we hold title to any assets or inventory that we are not able to sell.

In other situations, we may acquire assets

from our clients if we believe that we can identify a potential buyer and sell the assets at a premium to the price paid.

these unsold or acquired assets and inventory until they can be sold or, alternatively, transported to the site of a liquidation

of comparable assets or inventory that we are conducting.

If we are forced to sell these assets for less than we paid, or are required

to transport and store assets multiple times, the related expenses could have a material adverse effect on our results of operations.

We could be forced

to mark down the value of certain assets acquired in connection with outright purchase transactions.

In most instances, inventory

is reported on the balance sheet at its historical cost;

(i) a “fee” based structure under which we are compensated for our role

in an engagement on a commission basis, (ii) purchase on an outright basis (and take title to) the assets or inventory of the client,

and (iii) “guarantee” to the client that a certain amount will be realized by the client upon the sale of the assets or inventory

based on contractually defined terms in the auction or liquidation contract.

We bear the risk of loss under the purchase and guarantee

structures of auction and liquidation contracts.

If the amount realized from the sale or disposition of assets, net of direct operating

expenses, does not equal or exceed the purchase price (in purchase transaction), we will recognize a loss on the engagement, or should

the amount realized, net of direct operating expenses, not equal or exceed the “guarantee,” we are still required to pay the

guaranteed amount to the client.

We could incur losses

in connection with outright purchase transactions in which we engage as part of our auction and liquidation solutions business.

When we conduct an asset disposition or liquidation on an outright purchase basis, we purchase from the client the assets or inventory to be sold or liquidated and therefore, we hold title to any assets or inventory that we are not able to sell.

In other situations, we may acquire assets from our clients if we believe that we can identify a potential buyer and sell the assets at a premium to the price paid.

We store these unsold or acquired assets and inventory until they can be sold or, alternatively, transported to the site of a liquidation of comparable assets or inventory that we are conducting.

If we are forced to sell these assets for less than we paid, or are required to transport and store assets multiple times, the related expenses could have a material adverse effect on our results of operations.

We could be forced to mark down the value of certain assets acquired in connection with outright purchase transactions.

In most instances, inventory is reported on the balance sheet at its historical cost;

however, according to U.S.

Generally Accepted Accounting Principles, inventory

whose historical cost exceeds its market value should be valued conservatively, which dictates a lower value should apply.

should the replacement cost (due to technological obsolescence or otherwise), or the net realizable value of any inventory we hold

be less than the cost paid to acquire such inventory (purchase price), we will be required to “mark down” the value

of such inventory held.

If the value of any inventory held on our balance sheet is required to be written down, such write down

could have a material adverse effect on our financial position and results of operations.

We frequently

use borrowings under credit facilities in connection with our guaranty engagements, in which we guarantee a minimum recovery to

the client, and outright purchase transactions.

In engagements where

we operate on a guaranty or purchase basis, we are typically required to make an upfront payment to the client.

If the upfront

payment is less than 100% of the guarantee or the purchase price in a “purchase” transaction, we may be required to

make successive cash payments until the guarantee is met or we may issue a letter of credit in favor of the client.

the size and structure of the engagement, we may borrow under our credit facilities and may be required to issue a letter of credit

in favor of the client for these additional amounts.

If we lose any availability under our credit facilities, are unable to borrow

under credit facilities and/or issue letters of credit in favor of clients, or borrow under credit facilities and/or issue letters

of credit on commercially reasonable terms, we may be unable to pursue large liquidation and disposition engagements, engage in

multiple concurrent engagements, pursue new engagements or expand our operations.

We are required to obtain approval from the lenders

under our existing credit facilities prior to making any borrowings thereunder in connection with a particular engagement.

inability to borrow under our credit facilities, or enter into one or more other credit facilities on commercially reasonable terms

may have a material adverse effect on our financial condition, results of operations and growth.

Defaults under

our credit agreements could have an adverse impact on our ability to finance potential engagements.

The terms of our credit

agreements contain a number of events of default.

Should we default under any of our credit agreements in the future, lenders may

take any or all remedial actions set forth in such credit agreement, including, but not limited to, accelerating payment and/or

charging us a default rate of interest on all outstanding amounts, refusing to make any further advances or issue letters of credit,

or terminating the line of credit.

As a result of our reliance on lines of credit and letters of credit, any default under a credit

agreement, or remedial actions pursued by lenders following any default under a credit agreement, may require us to immediately

repay all outstanding amounts, which may preclude us from pursuing new liquidation and disposition engagements and may increase

our cost of capital, each of which may have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Financial Consulting

We depend on financial

institutions as primary clients for our Financial Consulting business.

Consequently, the loss of any financial institutions as

clients may have an adverse impact on our business.

A majority of the revenue

from our Financial Consulting business is derived from engagements by financial institutions.

As a result, any loss of financial

institutions as clients of our valuation and advisory services, whether due to changing preferences in service providers, failures

of financial institutions or mergers and consolidations within the finance industry, could significantly reduce the number of existing,

repeat and potential clients, thereby adversely affecting our revenues.

In addition, any larger financial institutions that result

from mergers or consolidations in the financial services industry could have greater leverage in negotiating terms of engagements

with us, or could decide to internally perform some or all of the Financial Consulting services which we currently provide to one

of the constituent institutions involved in the merger or consolidation or which we could provide in the future.

Generally Accepted Accounting Principles, inventory whose historical cost exceeds its market value should be valued conservatively, which dictates a lower value should apply.

Accordingly, should the replacement cost (due to technological obsolescence or otherwise), or the net realizable value of any inventory we hold be less than the cost paid to acquire such inventory (purchase price), we will be required to “mark down” the value of such inventory held.

If the value of any inventory held on our balance sheet is required to be written down, such write down could have a material adverse effect on our financial position and results of operations.

We frequently use borrowings under credit facilities in connection with our guaranty engagements, in which we guarantee a minimum recovery to the client, and outright purchase transactions.

In engagements where we operate on a guaranty or purchase basis, we are typically required to make an upfront payment to the client.

If the upfront payment is less than 100% of the guarantee or the purchase price in a “purchase” transaction, we may be required to make successive cash payments until the guarantee is met or we may issue a letter of credit in favor of the client.

Depending on the size and structure of the engagement, we may borrow under our credit facilities and may be required to issue a letter of credit in favor of the client for these additional amounts.

If we lose any availability under our credit facilities, are unable to borrow under credit facilities and/or issue letters of credit in favor of clients, or borrow under credit facilities and/or issue letters of credit on commercially reasonable terms, we may be unable to pursue large liquidation and disposition engagements, engage in multiple concurrent engagements, pursue new engagements or expand our operations.

We are required to obtain approval from the lenders under our existing credit facilities prior to making any borrowings thereunder in connection with a particular engagement.

Any inability to borrow under our credit facilities, or enter into one or more other credit facilities on commercially reasonable terms may have a material adverse effect on our financial condition, results of operations and growth.

Defaults under our credit agreements could have an adverse impact on our ability to finance potential engagements.

The terms of our credit agreements contain a number of events of default.

Should we default under any of our credit agreements in the future, lenders may take any or all remedial actions set forth in such credit agreement, including, but not limited to, accelerating payment and/or charging us a default rate of interest on all outstanding amounts, refusing to make any further advances or issue letters of credit, or terminating the line of credit.

As a result of our reliance on lines of credit and letters of credit, any default under a credit agreement, or remedial actions pursued by lenders following any default under a credit agreement, may require us to immediately repay all outstanding amounts, which may preclude us from pursuing new liquidation and disposition engagements and may increase our cost of capital, each of which may have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Financial Consulting Activities

depend on financial institutions as primary clients for our financial consulting business.

Consequently, the loss of any financial institutions

as clients may have an adverse impact on our business.

majority of the revenue from our financial consulting business is derived from engagements by financial institutions.

As a result, any

loss of financial institutions as clients of our valuation and advisory services, whether due to changing preferences in service providers,

failures of financial institutions or mergers and consolidations within the finance industry, could significantly reduce the number of

existing, repeat and potential clients, thereby adversely affecting our revenues.

In addition, any larger financial institutions that

result from mergers or consolidations in the financial services industry could have greater leverage in negotiating terms of engagements

with us, or could decide to internally perform some or all of the financial consulting services which we currently provide to one of

the constituent institutions involved in the merger or consolidation or which we could provide in the future.

Any of these developments

could have a material adverse effect on our financial consulting business.

We may face liability

or harm to our reputation as a result of a claim that we provided an inaccurate appraisal or valuation and our insurance coverage

may not be sufficient to cover the liability.

We could face liability

in connection with a claim by a client that we provided an inaccurate appraisal or valuation on which the client relied.

of this type, whether with or without merit, could result in costly litigation, which could divert management’s attention

and company resources and harm our reputation.

We may face liability or harm to our reputation as a result of a claim that we provided an inaccurate appraisal or valuation and our insurance coverage may not be sufficient to cover the liability.

We could face liability in connection with a claim by a client that we provided an inaccurate appraisal or valuation on which the client relied.

Any claim of this type, whether with or without merit, could result in costly litigation, which could divert management’s attention and company resources and harm our reputation.

Furthermore, if we are found to be liable, we may be required to pay damages.

our appraisals and valuations are typically provided only for the benefit of our clients, if a third party relies on an appraisal

or valuation and suffers harm as a result, we may become subject to a legal claim, even if the claim is without merit.

insurance for liability resulting from errors or omissions in connection with our appraisals and valuations;

however, the coverage

may not be sufficient if we are found to be liable in connection with a claim by a client or third party.

While our appraisals and valuations are typically provided only for the benefit of our clients, if a third party relies on an appraisal or valuation and suffers harm as a result, we may become subject to a legal claim, even if the claim is without merit.

We carry insurance for liability resulting from errors or omissions in connection with our appraisals and valuations;

however, the coverage may not be sufficient if we are found to be liable in connection with a claim by a client or third party.

Risks Related to our Asset Management Business

The asset management business is intensely

Over the past several

years, the size and number of asset management funds, including hedge funds and mutual funds, has continued to increase.

trend continues, it is possible that it will become increasingly difficult for our funds to raise capital.

More significantly,

the allocation of increasing amounts of capital to alternative investment strategies by institutional and individual investors

leads to a reduction in the size and duration of pricing inefficiencies.

Many alternative investment strategies seek to exploit

these inefficiencies and, in certain industries, this drives prices for investments higher, in either case increasing the difficulty

of achieving targeted returns.

In addition, if interest rates were to rise or there were to be a prolonged bull market in equities,

the attractiveness of our funds relative to investments in other investment products could decrease.

Competition is based on a

variety of factors, including:

The asset management business is intensely competitive.

the past several years, the size and number of asset management funds, including hedge funds and mutual funds, has continued to

If this trend continues, it is possible that it will become increasingly difficult for our funds to raise capital.

significantly, the allocation of increasing amounts of capital to alternative investment strategies by institutional and individual

investors leads to a reduction in the size and duration of pricing inefficiencies.

Many alternative investment strategies seek to

exploit these inefficiencies and, in certain industries, this drives prices for investments higher, in either case increasing the

difficulty of achieving targeted returns.

In addition, when inflation or interest rates rise or there is a prolonged bear market in

equities, the attractiveness of our funds relative to investments in other investment products could decrease.

Competition is based

on a variety of factors, including:

investment performance;

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level of fees and expenses charged for services.

We compete in the asset

management business with a large number of investment management firms, private equity fund sponsors, hedge fund sponsors and other

financial institutions.

We compete in the asset management business with a large number of investment management firms, private equity fund sponsors, hedge fund sponsors and other financial institutions.

A number of factors serve to increase our competitive risks, as follows:

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other industry participants in the asset management business continuously seek to recruit our best and brightest investment professionals away from us.

These and other factors

could reduce our earnings and revenues and adversely affect our business.

In addition, if we are forced to compete with other alternative

asset managers on the basis of price, we may not be able to maintain our current base management and incentive fee structures.

We have historically competed primarily on the performance of our funds, and not on the level of our fees relative to those of

our competitors.

However, there is a risk that fees in the alternative investment management industry will decline, without regard

to the historical performance of a manager, including our managers.

Fee reductions on our existing or future funds, without corresponding

decreases in our cost structure, would adversely affect our revenues and distributable earnings.

Poor investment

performance may decrease assets under management and reduce revenues from and the profitability of our asset management business.

Revenues from our asset

management business are primarily derived from asset management fees.

Asset management fees are generally comprised of management

and incentive fees.

Management fees are typically based on assets under management, and incentive fees are earned on a quarterly

or annual basis only if the return on our managed accounts exceeds a certain threshold return, or “highwater mark,”

for each investor.

We will not earn incentive fee income during a particular period, even when a fund had positive returns in that

period, if we do not generate cumulative performance that surpasses a highwater mark.

If a fund experiences losses, we will not

earn incentive fees with regard to investors in that fund until its returns exceed the relevant highwater mark.

In addition, investment

performance is one of the most important factors in retaining existing investors and competing for new asset management business.

Investment performance may be poor as a result of the current or future difficult market or economic conditions, including changes

in interest rates or inflation, terrorism, widespread outbreaks of disease, such as the ongoing COVID-19 pandemic, or political

uncertainty, our investment style, the particular investments that we make, and other factors.

Poor investment performance may

result in a decline in our revenues and income by causing (i) the net asset value of the assets under our management to decrease,

which would result in lower management fees to us, (ii) lower investment returns, resulting in a reduction of incentive fee income

to us, and (iii) investor redemptions, which would result in lower fees to us because we would have fewer assets under management.

To the extent our future

investment performance is perceived to be poor in either relative or absolute terms, the revenues and profitability of our asset

management business will likely be reduced and our ability to grow existing funds and raise new funds in the future will likely

The historical returns of our funds

may not be indicative of the future results of our funds.

The historical returns

of our funds should not be considered indicative of the future results that should be expected from such funds or from any future

funds we may raise.

Our rates of returns reflect unrealized gains, as of the applicable measurement date, which may never be realized

due to changes in market and other conditions not in our control that may adversely affect the ultimate value realized from the

investments in a fund.

The returns of our funds may have also benefited from investment opportunities and general market conditions

that may not repeat themselves, and there can be no assurance that our current or future funds will be able to avail themselves

of profitable investment opportunities.

Furthermore, the historical and potential future returns of the funds we manage also may

not necessarily bear any relationship to potential returns on our common stock.

These and other factors could reduce our earnings and revenues and adversely affect our business.

In addition, if we are forced to compete with other alternative asset managers on the basis of price, we may not be able to maintain our current base management and incentive fee structures.

We have historically competed primarily on the performance of our funds, and not on the level of our fees relative to those of our competitors.

However, there is a risk that fees in the alternative investment management industry will decline, without regard to the historical performance of a manager, including our managers.

Fee reductions on our existing or future funds, without corresponding decreases in our cost structure, would adversely affect our revenues and distributable earnings.

Poor investment performance may decrease assets under management and reduce revenues from and the profitability of our asset management business.

Revenues from our asset management business are primarily derived from asset management fees.

Asset management fees are generally comprised of management and incentive fees.

Management fees are typically based on assets under management, and incentive fees are earned on a quarterly or annual basis only if the return on our managed accounts exceeds a certain threshold return, or “highwater mark,” for each investor.

We will not earn incentive fee income during a particular period, even when a fund had positive returns in that period, if we do not generate cumulative performance that surpasses a highwater mark.

If a fund experiences losses, we will not earn incentive fees with regard to investors in that fund until its returns exceed the relevant highwater mark.

addition, investment performance is one of the most important factors in retaining existing investors and competing for new asset management

Investment performance may be poor as a result of the current or future difficult market or economic conditions, including

changes in interest rates, with increases anticipated in 2022, or inflation, which has been an ongoing concern during 2021 and into 2022,

acts of war, aggression or terrorism, widespread outbreaks of disease, such as the ongoing COVID-19 pandemic, or political uncertainty,

our investment style, the particular investments that we make, and other factors.

Poor investment performance may result in a decline

in our revenues and income by causing (i) the net asset value of the assets under our management to decrease, which would result in lower

management fees to us, (ii) lower investment returns, resulting in a reduction of incentive fee income to us, and (iii) investor redemptions,

which would result in lower fees to us because we would have fewer assets under management.

To the extent our future investment performance is perceived to be poor in either relative or absolute terms, the revenues and profitability of our asset management business will likely be reduced and our ability to grow existing funds and raise new funds in the future will likely be impaired.

The historical returns of our funds may not be indicative of the future results of our funds.

The historical returns of our funds should not be considered indicative of the future results that should be expected from such funds or from any future funds we may raise.

Our rates of returns reflect unrealized gains, as of the applicable measurement date, which may never be realized due to changes in market and other conditions not in our control that may adversely affect the ultimate value realized from the investments in a fund.

The returns of our funds may have also benefited from investment opportunities and general market conditions that may not repeat themselves, and there can be no assurance that our current or future funds will be able to avail themselves of profitable investment opportunities.

Furthermore, the historical and potential future returns of the funds we manage also may not necessarily bear any relationship to potential returns on our common stock.

We are subject to risks in using custodians.

Our asset management

subsidiary and its managed funds depend on the services of custodians to settle and report securities transactions.

of the insolvency of a custodian, our funds might not be able to recover equivalent assets in whole or in part as they will rank

among the custodian’s unsecured creditors in relation to assets which the custodian borrows, lends or otherwise uses.

addition, cash held by our funds with the custodian will not be segregated from the custodian’s own cash, and the funds will

therefore rank as unsecured creditors in relation thereto.

We manage debt

investments that involve significant risks and potential additional liabilities.

Our asset management subsidiary and its managed funds depend on the services of custodians to settle and report securities transactions.

In the event of the insolvency of a custodian, our funds might not be able to recover equivalent assets in whole or in part as they will rank among the custodian’s unsecured creditors in relation to assets which the custodian borrows, lends or otherwise uses.

In addition, cash held by our funds with the custodian will not be segregated from the custodian’s own cash, and the funds will therefore rank as unsecured creditors in relation thereto.

We manage debt investments that involve significant risks and potential additional liabilities.

GACP I., L.P.

II, L.P., both direct lending funds of which our wholly owned subsidiary GACP is the general partner, and which are managed by

WhiteHawk Capital Partners, L.P.

pursuant to an investment advisory services agreement are may invest in secured debt issued by

companies that have or may incur additional debt that is senior to the secured debt owned by the fund.

In the event of insolvency,

liquidation, dissolution, reorganization or bankruptcy of any such company, the owners of senior secured debt (i.e., the owners

of first priority liens) generally will be entitled to receive proceeds from any realization of the secured collateral until they

have been reimbursed.

At such time, the owners of junior secured debt (including, in certain circumstances, the fund) will be entitled

to receive proceeds from the realization of the collateral securing such debt.

There can be no assurances that the proceeds, if

any, from the sale of such collateral would be sufficient to satisfy the loan obligations secured by subordinate debt instruments.

To the extent that the fund owns secured debt that is junior to other secured debt, the fund may lose the value of its entire investment

in such secured debt.

In addition, the fund

may invest in loans that are secured by a second lien on assets.

Second lien loans have been a developed market for a relatively

short period of time, and there is limited historical data on the performance of second lien loans in adverse economic circumstances.

In addition, second lien loan products are subject to intercreditor arrangements with the holders of first lien indebtedness, pursuant

to which the second lien holders have waived many of the rights of a secured creditor, and some rights of unsecured creditors,

including rights in bankruptcy, which can materially affect recoveries.

While there is broad market acceptance of some second lien

intercreditor terms, no clear market standard has developed for certain other material intercreditor terms for second lien loan

This variation in key intercreditor terms may result in dissimilar recoveries across otherwise similarly situated second

lien loans in insolvency or distressed situations.

While uncertainty of recovery in an insolvency or distressed situation is inherent

in all debt instruments, second lien loan products carry more risks than certain other debt products.

Risks Related to Our United Online

and magicJack Businesses

UOL competes against

large companies, many of whom have significantly more financial and marketing resources, and our business will suffer if we are

unable to compete successfully.

UOL competes with numerous

providers of broadband, mobile broadband and DSL services, as well as other dial-up Internet access providers, many of whom are

large and have significantly more financial and marketing resources.

The principal competitors for UOL’s mobile broadband

and DSL services include, among others, local exchange carriers, wireless and satellite service providers, and cable service providers.

and GACP II, L.P., both direct lending funds of which our wholly owned subsidiary GACP is the general partner, and which are managed by WhiteHawk Capital Partners, L.P.

pursuant to an investment advisory services agreement, may invest in secured debt issued by companies that have or may incur additional debt that is senior to the secured debt owned by the fund.

In the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of any such company, the owners of senior secured debt (i.e., the owners of first priority liens) generally will be entitled to receive proceeds from any realization of the secured collateral until they have been reimbursed.

At such time, the owners of junior secured debt (including, in certain circumstances, the fund) will be entitled to receive proceeds from the realization of the collateral securing such debt.

There can be no assurances that the proceeds, if any, from the sale of such collateral would be sufficient to satisfy the loan obligations secured by subordinate debt instruments.

To the extent that the fund owns secured debt that is junior to other secured debt, the fund may lose the value of its entire investment in such secured debt.

In addition, the fund may invest in loans that are secured by a second lien on assets.

Second lien loans have been a developed market for a relatively short period of time, and there is limited historical data on the performance of second lien loans in adverse economic circumstances.

In addition, second lien loan products are subject to intercreditor arrangements with the holders of first lien indebtedness, pursuant to which the second lien holders have waived many of the rights of a secured creditor, and some rights of unsecured creditors, including rights in bankruptcy, which can materially affect recoveries.

While there is broad market acceptance of some second lien intercreditor terms, no clear market standard has developed for certain other material intercreditor terms for second lien loan products.

This variation in key intercreditor terms may result in dissimilar recoveries across otherwise similarly situated second lien loans in insolvency or distressed situations.

While uncertainty of recovery in an insolvency or distressed situation is inherent in all debt instruments, second lien loan products carry more risks than certain other debt products.

Risks Related to Our Communications Businesses

We compete against large companies, many of whom have significantly more financial and marketing resources, and our business will suffer if we are unable to compete successfully.

We compete with numerous providers of broadband, mobile broadband and DSL services, as well as other dial-up Internet access providers, many of whom are large and have significantly more financial and marketing resources.

Our principal competitors include, among others, local exchange carriers, wireless and satellite service providers, and cable service providers.

These competitors include established providers such as AT&T, Verizon, Sprint, and T-Mobile.

UOL’s principal dial-up

Internet access competitors include established online service and content providers, such as AOL and MSN, and independent national

Internet service providers, such as EarthLink and its PeoplePC subsidiary.

Dial-up Internet access services do not compete favorably

with broadband services with respect to connection speed and do not have a significant, if any, price advantage over certain broadband

In addition, there are a number of mobile virtual network operators, some of which focus on pricing as their main selling

UOL’s principal dial-up Internet access competitors include established online service and content providers, such as AOL and MSN, and independent national Internet service providers, such as EarthLink and its PeoplePC subsidiary.

Dial-up Internet access services do not compete favorably with broadband services with respect to connection speed and do not have a significant, if any, price advantage over certain broadband services.

In addition, there are a number of mobile virtual network operators, some of which focus on pricing as their main selling point.

Certain portions of the U.S., primarily rural areas, currently have limited or no access to broadband services.

However, the U.S.

government has indicated its intention to facilitate the provision of broadband services to such areas.

Such expansion

of the availability of broadband services will increase the competition for Internet access subscribers in such areas and will

likely adversely affect the UOL business.

In addition to competition from broadband, mobile broadband, and DSL providers, competition

among dial-up Internet access service providers is intense and neither UOL’s pricing nor the features of UOL’s services

provides us with a significant competitive advantage, if any, over certain of UOL’s dial-up Internet access competitors.

We expect that competition, particularly with respect to price, for broadband, mobile broadband, and DSL services, as well as dial-up

Internet access services, will continue and may materially and adversely impact our business, financial condition, results of operations,

and cash flows.

Dial-up and DSL

pay accounts may decline faster than expected and adversely impact our business.

A significant portion

of UOL’s revenues and profits come from dial-up Internet and DSL access services and related services and advertising revenues.

UOL’s dial-up and DSL Internet access pay accounts and revenues have been declining and are expected to continue to decline

due to the continued maturation of the market for dial-up and DSL Internet access, competitive pressures in the industry and limited

sales efforts.

Consumers continue to migrate to broadband access, primarily due to the faster connection and download speeds provided

by broadband access.

Advanced applications such as online gaming, music downloads and videos require greater bandwidth for optimal

performance, which adds to the demand for broadband access.

The pricing for basic broadband services has been declining as well,

making it a more viable option for consumers.

In addition, the popularity of accessing the Internet through tablets and mobile

devices has been growing and may accelerate the migration of consumers away from dial-up Internet access.

The number of dial-up

Internet access pay accounts has been adversely impacted by both a decrease in the number of new pay accounts signing up for UOL’s

services, as well as the impact of subscribers canceling their accounts, which we refer to as “churn.” Churn has increased

from time to time and may increase in the future.

If we experience a higher than expected level of churn, it will make it more

difficult for us to increase or maintain the number of pay accounts, which could adversely affect our business, financial condition,

results of operations, and cash flows.

We expect UOL’s

dial-up and DSL Internet access pay accounts to continue to decline.

As a result, related services revenues and the profitability

of this segment may decline.

Such expansion of the availability of broadband services will increase the competition for Internet access subscribers in such areas and will likely adversely affect the UOL business.

In addition to competition from broadband, mobile broadband, and DSL providers, competition among dial-up Internet access service providers is intense and neither UOL’s pricing nor the features of UOL’s services provide us with a significant competitive advantage, if any, over certain of UOL’s dial-up Internet access competitors.

We expect that competition, particularly with respect to price, for broadband, mobile broadband, and DSL services, as well as dial-up Internet access services, will continue and may materially and adversely impact our business, financial condition, results of operations, and cash flows.

Dial-up and DSL pay accounts may decline faster than expected and adversely impact our business.

A significant portion of UOL’s revenues and profits come from dial-up Internet and DSL access services and related services and advertising revenues.

UOL’s dial-up and DSL Internet access pay accounts and revenues have been declining and are expected to continue to decline due to the continued maturation of the market for dial-up and DSL Internet access, competitive pressures in the industry and limited sales efforts.

Consumers continue to migrate to broadband access, primarily due to the faster connection and download speeds provided by broadband access.

Advanced applications such as online gaming, music downloads and videos require greater bandwidth for optimal performance, which adds to the demand for broadband access.

The pricing for basic broadband services has been declining as well, making it a more viable option for consumers.

In addition, the popularity of accessing the Internet through tablets and mobile devices has been growing and may accelerate the migration of consumers away from dial-up Internet access.

The number of dial-up Internet access pay accounts has been adversely impacted by both a decrease in the number of new pay accounts signing up for UOL’s services, as well as the impact of subscribers canceling their accounts, which we refer to as “churn.” Churn has increased from time to time and may increase in the future.

If we experience a higher than expected level of churn, it will make it more difficult for us to increase or maintain the number of pay accounts, which could adversely affect our business, financial condition, results of operations, and cash flows.

We expect UOL’s dial-up and DSL Internet access pay accounts to continue to decline.

As a result, related services revenues and the profitability of this segment may decline.

The rate of decline in these revenues may continue to accelerate.

We may not be able to

consistently make a high level of expense reductions in the future.

Continued declines in revenues relating to the UOL business,

particularly if such declines accelerate, will materially and adversely impact the profitability of this business.

Failure to maintain

or grow advertising revenues from UOL, including as a result of failing to increase or maintain the number of subscribers for UOL’s

services, could have a negative impact on advertising profitability.

Advertising revenues

are a key component of revenues and profitability from UOL.

UOL’s services currently generate advertising revenues from search

placements, display advertisements and online market research associated with Internet access and email services.

have caused, or may cause in the future, UOL’s advertising revenues to fluctuate include, without limitation, changes in

the number of visitors to UOL’s websites, active accounts or consumers purchasing our services and products, the effect of,

changes to, or terminations of key advertising relationships, changes to UOL’s websites and advertising inventory, changes

in applicable laws, regulations or business practices, including those related to behavioral or targeted advertising, user privacy,

and taxation, changes in business models, changes in the online advertising market, changes in the economy, advertisers’

budgeting and buying patterns, competition, and changes in usage of UOL’s services.

Decreases in UOL’s advertising

revenues are likely to adversely impact our profitability.

Further, our successful operation and management of UOL, including the

ability to generate advertising revenues for UOL’s services, will depend in part upon our ability to increase or maintain

the number of subscribers for UOL’s services.

A decline in the number of subscribers using UOL’s services could result

in decreased advertising revenues, and decreases in advertising revenues would adversely impact our profitability.

to increase or maintain the number of subscribers for UOL’s services could have a material adverse effect on advertising

revenues and our profitability.

Interruption or

failure of the network, information systems or other technologies essential to the UOL business could impair our ability to provide

services relating to the UOL business, which could damage our reputation and harm our operating results.

Our successful operation

of the UOL business depends on our ability to provide reliable service.

Many of UOL’s products are supported by data centers.

UOL’s network, data centers, central offices and those of UOL’s third-party service providers are vulnerable to damage

or interruption from fires, earthquakes, hurricanes, tornados, floods and other natural disasters, terrorist attacks, power loss,

capacity limitations, telecommunications failures, software and hardware defects or malfunctions, break ins, sabotage and vandalism,

human error and other disruptions that are beyond our control.

Some of the systems serving the UOL business are not fully redundant,

and our disaster recovery or business continuity planning may not be adequate.

The UOL business could also experience interruptions

due to cable damage, theft of equipment, power outages, inclement weather and service failures of third-party service providers.

The occurrence of any disruption or system failure or other significant disruption to business continuity may result in a loss

of business, increase expenses, damage to reputation for providing reliable service, subject us to additional regulatory scrutiny

or expose us to litigation and possible financial losses, any of which could adversely affect our business, results of operations

and cash flows.

We may be accused

of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to

use certain technologies in the future.

From time to time third

parties have alleged that UOL infringes on their intellectual property rights, including patent rights.

We may be unaware of filed

patent applications and of issued patents that could be related to the products and services we acquired in the UOL acquisition.

These claims are often made by patent holding companies that are not operating companies.

The alleging parties generally seek royalty

payments for prior use as well as future royalty streams.

Defending against disputes, litigation or other legal proceedings, whether

or not meritorious, may involve significant expense and diversion of management’s attention and resources from other matters.

Due to the inherent uncertainties of litigation, we may not prevail in these actions.

Both the costs of defending lawsuits and

any settlements or judgments against us could adversely affect our results of operations and cash flows.

If there are events

or circumstances affecting the reliability or security of the Internet, access to the websites related to the UOL business and/or

the ability to safeguard confidential information could be impaired causing a negative effect on the financial results of our business

Our website infrastructure

and the website infrastructure of UOL may be vulnerable to computer viruses, hacking or similar disruptive problems caused by customers,

other Internet users, other connected Internet sites, and the interconnecting telecommunications networks.

Such problems caused

by third-parties could lead to interruptions, delays or cessation of service to the customers of the UOL products and services.

Inappropriate use of the Internet by third-parties could also potentially jeopardize the security of confidential information stored

in our computer system, which may deter individuals from becoming customers.

There can be no assurance that any such measures would

not be circumvented in future.

Dealing with problems caused by computer viruses or other inappropriate uses or security breaches

may require interruptions, delays or cessation of service to customers, which could have a material adverse effect on our business,

financial condition and results of operations.

The ongoing COVID-19 pandemic has put increased strain on the internet due to, among

other things, an increase in remote work and the effects on our business are difficult to estimate.

The UOL business

processes, stores and uses personal information and other data, which subjects us to governmental regulation and other legal obligations

related to privacy, and our actual or perceived failure to comply with such obligations could harm our business.

The UOL business receives,

stores and processes personal information and other customer data, and UOL enables customers to share their personal information

with each other and with third parties.

There are numerous federal, state and local laws around the world regarding privacy and

the storing, sharing, use, processing, disclosure and protection of personal information and other customer data, the scope of

which are changing, subject to differing interpretations, and may be inconsistent between countries or conflict with other rules.

We will generally comply with industry standards and are and will be subject to the terms of privacy policies and privacy-related

obligations to third parties.

We will strive to comply with all applicable laws, policies, legal obligations and industry codes

of conduct relating to privacy and data protection, to the extent possible.

However, it is possible that these obligations may

be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules

or UOL’s practices.

Any failure or perceived failure to comply with UOL’s privacy policies, privacy-related obligations

to customers or other third parties, or privacy-related legal obligations, or any compromise of security that results in the unauthorized

release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions,

litigation or public statements against us by consumer advocacy groups or others and could cause customers to lose trust in us,

which could have an adverse effect on our business.

Additionally, if third parties we work with, such as customers, vendors or

developers, violate applicable laws or policies, such violations may also put our customers’ information at risk and could

in turn have an adverse effect on our business.

Our marketing

efforts for UOL’s business may not be successful or may become more expensive, either of which could increase our costs and

adversely impact our business, financial condition, results of operations, and cash flows.

We rely on relationships

for our UOL business with a wide variety of third parties, including Internet search providers such as Google, social networking

platforms such as Facebook, Internet advertising networks, co-registration partners, retailers, distributors, television advertising

agencies, and direct marketers, to source new members and to promote or distribute our services and products.

In addition, in connection

with the launch of new services or products for our UOL business, we may spend a significant amount of resources on marketing.

With any of our brands, services, and products, if our marketing activities are inefficient or unsuccessful, if important third-party

relationships or marketing strategies, such as Internet search engine marketing and search engine optimization, become more expensive

or unavailable, or are suspended, modified, or terminated, for any reason, if there is an increase in the proportion of consumers

visiting our websites or purchasing our services and products by way of marketing channels with higher marketing costs as compared

to channels that have lower or no associated marketing costs, or if our marketing efforts do not result in our services and products

being prominently ranked in Internet search listings, our business, financial condition, results of operations, and cash flows

could be materially and adversely impacted.

Our UOL business

is dependent on the availability of telecommunications services and compatibility with third-party systems and products.

Our UOL business substantially

depends on the availability, capacity, affordability, reliability, and security of our telecommunications networks.

Only a limited

number of telecommunications providers offer the network and data services we currently require for our UOL business, and we purchase

most of our telecommunications services from a few providers.

Some of our telecommunications services are provided pursuant to

short-term agreements that the providers can terminate or elect not to renew.

In addition, some telecommunications providers may

cease to offer network services for certain less populated areas, which would reduce the number of providers from which we may

purchase services and may entirely eliminate our ability to purchase services for certain areas.

Currently, our mobile broadband

service of our UOL business is entirely dependent upon services acquired from one service provider, and the devices required by

the provider can be used for only such provider’s service.

If we are unable to maintain, renew or obtain a new agreement

with the telecommunications provider on acceptable terms, or the provider discontinues its services, our business, financial condition,

results of operations, and cash flows could be materially and adversely affected.

Sprint, which owns Clearwire, ceased using WiMAX

technology on the Clearwire network.

This affected our mobile broadband subscribers for our UOL business that utilized the Clearwire

Our dial-up Internet

access services of our UOL business also rely on their compatibility with other third-party systems, products and features, including

operating systems.

Incompatibility with third-party systems and products could adversely affect our ability to deliver our services

or a user’s ability to access our services and could also adversely impact the distribution channels for our services.

dial-up Internet access services are dependent on dial-up modems and an increasing number of computer manufacturers, including

certain manufacturers with whom we have distribution relationships, do not pre-load their new computers with dial-up modems, requiring

the user to separately acquire a modem to access our services.

We cannot assure you that, as the dial-up Internet access market

declines and new technologies emerge, we will be able to continue to effectively distribute and deliver our services.

Government regulations

could adversely affect our business or force us to change our business practices.

The services that are

provided by UOL are subject to varying degrees of international, federal, state and local laws and regulation, including, without

limitation, those relating to taxation, bulk email or “spam,” advertising (including, without limitation, targeted

or behavioral advertising), user privacy and data protection, consumer protection, antitrust, export, and unclaimed property.

with such laws and regulations, which in many instances are unclear or unsettled, is complex.

New laws and regulations, such as

those being considered or recently enacted by certain states, the federal government, or international authorities related to automatic-renewal

practices, spam, user privacy, targeted or behavioral advertising, and taxation, could impact our revenues or certain of our business

practices or those of our advertisers.

UOL resells broadband

Internet access services offered by other parties pursuant to wholesale agreements with those providers.

In an order released in

March 2015, the Federal Communications Commission (the “FCC”) classified retail broadband Internet access services

as telecommunications services subject to regulation under Title II of the Communications Act.

That ruling is subject to a pending

The classification of retail broadband Internet access services as telecommunications services means that providers of

these services are subject to the general requirement that their charges, practices and classifications for telecommunications

services be “just and reasonable,” and that they refrain from engaging in any “unjust or unreasonable discrimination”

with respect to their charges, practices or classifications.

However, the FCC has not determined what, if any, regulations will

apply to wholesale broadband Internet access services, and it is uncertain whether it will adopt requirements that will be favorable

or unfavorable to us.

It is also possible that the classification of retail broadband Internet access services will be overturned

on appeal, that Congress will adopt legislation reversing that decision, or that a future FCC will reverse that decision.

Broadband Internet access

is also currently classified as an “information service.” While current policy exempts broadband Internet access services

(but not all broadband services) from contributing to the Universal Service Fund (“USF”), Congress and the FCC may

consider expanding the USF contribution base to include broadband Internet access services.

If broadband Internet access providers

become subject to USF contribution obligations, they would likely impose a USF surcharge on end users.

Such a surcharge will raise

the effective cost of our broadband services to UOL’s customers, which could adversely affect customer satisfaction and have

an adverse impact on our revenues and profitability.

Failure to make proper

payments for federal USF contributions, FCC regulatory fees or other amounts mandated by federal and state regulations;

to maintain proper state tariffs and certifications;

We may not be able to consistently make a high level of expense reductions in the future.

Continued declines in revenues relating to the UOL business, particularly if such declines accelerate, will materially and adversely impact the profitability of this business.

Failure to maintain advertising revenues from UOL, including as a result of failing to increase or maintain the number of subscribers for UOL’s services, could have a negative impact on advertising profitability.

Advertising revenues are a key component of revenues and profitability from UOL.

UOL’s services currently generate advertising revenues from search placements, display advertisements and online market research associated with Internet access and email services.

Factors that have caused, or may cause in the future, UOL’s advertising revenues to fluctuate include, without limitation, changes in the number of visitors to UOL’s websites, active accounts or consumers purchasing our services and products, the effect of, changes to, or terminations of key advertising relationships, changes to UOL’s websites and advertising inventory, changes in applicable laws, regulations or business practices, including those related to behavioral or targeted advertising, user privacy, and taxation, changes in business models, changes in the online advertising market, changes in the economy, advertisers’ budgeting and buying patterns, competition, and changes in usage of UOL’s services.

Decreases in UOL’s advertising revenues are likely to adversely impact our profitability.

Further, our successful operation and management of UOL, including the ability to generate advertising revenues for UOL’s services, will depend in part upon our ability to increase or maintain the number of subscribers for UOL’s services.

A decline in the number of subscribers using UOL’s services could result in decreased advertising revenues, and decreases in advertising revenues would adversely impact our profitability.

The failure to increase or maintain the number of subscribers for UOL’s services could have a material adverse effect on advertising revenues and our profitability.

Interruption or failure of the network, information systems or other technologies essential to our communications businesses could impair our ability to serve our customers, which could damage our reputation and harm our operating results.

Our successful operation of our communications businesses depends on our ability to provide reliable service.

Many of our products are services are supported by data centers, central offices and network infrastructure maintained and operated by third-party service providers which are vulnerable to damage or interruption from fires, earthquakes, hurricanes, tornados, floods and other natural disasters, terrorist attacks, power loss, capacity limitations, telecommunications failures, software and hardware defects or malfunctions, break ins, sabotage and vandalism, human error and other disruptions that are beyond our control.

Some of the systems serving our communications businesses are not fully redundant, and our disaster recovery or business continuity planning may not be adequate.

Our communications businesses could also experience interruptions due to cable damage, theft of equipment, power outages, inclement weather and service failures of third-party service providers.

The occurrence of any disruption or system failure or other significant disruption to business continuity may result in a loss of business, increase expenses, damage to reputation for providing reliable service, subject us to additional regulatory scrutiny or expose us to litigation and possible financial losses, any of which could adversely affect our business, results of operations and cash flows.

If there are events or circumstances affecting the reliability or security of the Internet, access to the websites related to the communications businesses and/or the ability to safeguard confidential information could be impaired causing a negative effect on the financial results of our business operations.

Our website infrastructure may be vulnerable to computer viruses, hacking or similar disruptive problems caused by customers, other Internet users, other connected Internet sites, and the interconnecting telecommunications networks.

Such problems caused by third-parties could lead to interruptions, delays or cessation of service to our customers.

Inappropriate use of the Internet by third-parties could also potentially jeopardize the security of confidential information stored in our computer system, which may deter individuals from becoming customers.

There can be no assurance that any such measures would not be circumvented in future.

Dealing with problems caused by computer viruses or other inappropriate uses or security breaches may require interruptions, delays or cessation of service to customers, which could have a material adverse effect on our business, financial condition and results of operations.

Our marketing efforts for our communications businesses may not be successful or may become more expensive, either of which could increase our costs and adversely impact our business, financial condition, results of operations, and cash flows.

We rely on relationships with a wide variety of third parties, including Internet search providers such as Google, social networking platforms such as Facebook, Internet advertising networks, co-registration partners, retailers, distributors, television advertising agencies, and direct marketers, to source new customers and to promote or distribute our services and products.

In addition, in connection with the launch of new services or products for our communications businesses, we may spend a significant amount of resources on marketing.

With any of our brands, services, and products, if our marketing activities are inefficient or unsuccessful, if important third-party relationships or marketing strategies, such as Internet search engine marketing and search engine optimization, become more expensive or unavailable, or are suspended, modified, or terminated, for any reason, if there is an increase in the proportion of consumers visiting our websites or purchasing our services and products by way of marketing channels with higher marketing costs as compared to channels that have lower or no associated marketing costs, or if our marketing efforts do not result in our services and products being prominently ranked in Internet search listings, our business, financial condition, results of operations, and cash flows could be materially and adversely impacted.

Our communications businesses are dependent on the availability of telecommunications services and compatibility with third-party systems and products.

Our communications businesses substantially depend on the availability, capacity, affordability, reliability, and security of telecommunications networks operated by third parties.

Only a limited number of telecommunications providers offer the network and data services we currently require for our services, and we purchase most of our telecommunications services from a few providers.

Some of our telecommunications services are provided pursuant to short-term agreements that the providers can terminate or elect not to renew.

In addition, some telecommunications providers may cease to offer network services for certain less populated areas, which would reduce the number of providers from which we may purchase services and may entirely eliminate our ability to purchase services for certain areas.

Currently, our mobile broadband service of our UOL business is entirely dependent upon services acquired from one service provider, and the devices required by the provider can be used for only such provider’s service.

If we are unable to maintain, renew or obtain a new agreement with the telecommunications provider on acceptable terms, or the provider discontinues its services, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

Our dial-up Internet access services of our UOL business also rely on their compatibility with other third-party systems, products and features, including operating systems.

Incompatibility with third-party systems and products could adversely affect our ability to deliver our services or a user’s ability to access our services and could also adversely impact the distribution channels for our services.

Our dial-up Internet access services are dependent on dial-up modems and an increasing number of computer manufacturers, including certain manufacturers with whom we have distribution relationships, do not pre-load their new computers with dial-up modems, requiring the user to separately acquire a modem to access our services.

We cannot assure you that, as the dial-up Internet access market declines and new technologies emerge, we will be able to continue to effectively distribute and deliver our services.

Government regulations could adversely affect our business or force us to change our business practices.

The services we provide are subject to varying degrees of international, federal, state and local laws and regulation, including, without limitation, those relating to taxation, bulk email or “spam,” advertising (including, without limitation, targeted or behavioral advertising), user privacy and data protection, consumer protection, antitrust, export, and unclaimed property.

Compliance with such laws and regulations, which in many instances are unclear or unsettled, is complex.

New laws and regulations, such as those being considered or recently enacted by certain states, the federal government, or international authorities related to automatic-renewal practices, spam, user privacy, targeted or behavioral advertising, and taxation, could impact our revenues or certain of our business practices or those of our advertisers.

Moreover, distribution partners or customers may require us, or we may otherwise deem it necessary or advisable, to alter our products to address actual or anticipated changes in the regulatory environment.

Our inability to alter our products to address these requirements and any regulatory changes could have a material adverse effect on our business, financial condition, and operating results.

The current regulatory environment for broadband telephone services is developing and therefore uncertain.

The United States and other countries have begun to assert regulatory authority over broadband telephone service and are continuing to evaluate how broadband telephone service will be regulated in the future.

Both the application of existing rules to us and our competitors and the effects of future regulatory developments are uncertain.

Future legislative, judicial or other regulatory actions could have a negative effect on our business, which may involve significant compliance costs and require that we restructure our service offerings, exit certain markets, or increase our prices to recover our regulatory costs, any of which could cause our services to be less attractive to customers.

Regulatory and governmental agencies may determine that we should be subject to rules applicable to certain broadband telephone service providers or seek to impose new or increased fees, taxes, and administrative burdens on broadband telephone service providers.

We also may change our product and service offerings in a manner that subjects us to greater regulation and taxation.

We are faced, and may continue to face, difficulty collecting such charges from our customers and/or carriers, and collecting such charges may cause us to incur legal fees.

We may be unsuccessful in collecting all of the regulatory fees owed to us.

The imposition of any such additional regulatory fees, charges, taxes and regulations on VoIP communications services could materially increase our costs and may limit or eliminate our competitive pricing advantages.

We offer our magicJack products and services in other countries, and therefore could also be subject to regulatory risks in each such foreign jurisdiction, including the risk that regulations in some jurisdictions will prohibit us from providing our services cost-effectively or at all, which could limit our growth.

Currently, there are several countries where regulations prohibit us from offering service.

In addition, because customers can use our services almost anywhere that a broadband Internet connection is available, including countries where providing broadband telephone service is illegal, the governments of those countries may attempt to assert jurisdiction over us.

Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business.

Any such violations could include prohibitions on our ability to offer our products and services in one or more countries, could delay or prevent potential acquisitions, expose us to significant liability and regulation and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.

Our success depends, in part, on our ability to anticipate these risks and manage these difficulties.

Broadband Internet access is currently classified by the FCC as an “information service.” While this classification means that broadband Internet access services are not subject to Universal Service Fund (“USF”) contributions, Congress or the FCC may expand the USF contribution obligations to include broadband Internet access services.

If broadband Internet access providers become subject to USF contribution obligations, it would likely raise the effective cost of our services to customers, which could adversely affect customer satisfaction and have an adverse impact on our revenues and profitability.

We are faced, and may continue to face, difficulty collecting regulatory charges from our customers and/or carriers and collecting such charges may cause us to incur legal fees.

We may be unsuccessful in collecting all the regulatory fees owed to us.

The imposition of any such additional regulatory fees, charges, taxes and regulations on our services could materially increase our costs and may limit or eliminate our competitive pricing advantages.

Failure to remit regulatory fees, charges and taxes mandated by federal and state regulations;

failure to maintain proper state tariffs and certifications;

failure to comply with federal, state or local laws and regulations;

to obtain and maintain required licenses, franchises and permits;

imposition of burdensome license, franchise or permit requirements

for us to operate in public rights-of-way;

and imposition of new burdensome or adverse regulatory requirements could limit the

types of services we provide or the terms on which we provide these services.

We cannot predict the

outcome of any ongoing legislative initiatives or administrative or judicial proceedings or their potential impact upon the communications

and information technology industries generally or upon the UOL business specifically.

Any changes in the laws and regulations

applicable to UOL, the enactment of any additional laws or regulations, or the failure to comply with, or increased enforcement

activity by regulators of, such laws and regulations, could significantly impact our services and products, our costs, or the manner

in which we or our advertisers conduct business, all of which could adversely impact our business, financial condition, results

of operations, and cash flows and cause our business to suffer.

The FCC and some states

require us to obtain prior approval of certain major merger and acquisition transactions, such as the acquisition of control of

another telecommunications carrier.

Delays in obtaining such approvals could affect our ability to close proposed transactions

in a timely manner and could increase our costs and increase the risk of non-consummation of some transactions.

The market in

which magicJack participates is highly competitive and if we do not compete effectively, our operating results may be harmed by

loss of market share and revenues.

The telecommunications

industry is highly competitive.

We face intense competition from traditional telephone companies, wireless companies, cable companies

and alternative voice communication providers and manufacturers of communication devices.

The principal competitors

for our products and services include the traditional telephone service providers, such as AT&T, Inc., CenturyLink, Inc.

Verizon Communications Inc., which provide telephone service using the public switched telephone network.

Certain of these traditional

providers have also added, or are planning to add, broadband telephone services to their existing telephone and broadband offerings.

We also face, or expect to face, competition from cable companies, such as Cablevision Systems Corp., Charter Communications, Inc.,

Comcast Corporation, Cox Communications, Inc.

and Time Warner Cable (a division of Time Warner Inc.), which offer broadband telephone

services to their existing cable television and broadband offerings.

Further, wireless providers, including AT&T Mobility,

Inc., Sprint Corporation, T-Mobile USA Inc., and Verizon Wireless, Inc.

offer services that some customers may prefer over wireline-based

In the future, as wireless companies offer more minutes at lower prices, their services may become more attractive to

customers as a replacement for broadband or wireline-based phone service.

We face competition

on magicJack device sales from Apple, Samsung, Motorola and other manufacturers of smart phones, tablets and other handheld wireless

Also, we compete against established alternative voice communication providers, such as Vonage, Google Voice, Ooma, and

Skype, which is another non-interconnected voice provider, and may face competition from other large, well-capitalized Internet

failure to obtain and maintain required licenses, franchises and permits;

imposition of burdensome license, franchise or permit requirements for us to operate in public rights-of-way;

and imposition of new burdensome or adverse regulatory requirements could limit the types of services we provide or the terms on which we provide these services.

We cannot predict the outcome of any ongoing legislative initiatives or administrative or judicial proceedings or their potential impact upon the communications and information technology industries generally or upon our communications businesses specifically.

Any changes in the laws and regulations applicable to our communications businesses, the enactment of any additional laws or regulations, or the failure to comply with, or increased enforcement activity by regulators of, such laws and regulations, could significantly impact our services and products, our costs, or the manner in which we or our advertisers conduct business, all of which could adversely impact our business, financial condition, results of operations, and cash flows and cause our business to suffer.

The FCC and some states require us to obtain prior approval of certain major merger and acquisition transactions, such as the acquisition of control of another telecommunications carrier.

Delays in obtaining such approvals could affect our ability to close proposed transactions in a timely manner and could increase our costs and increase the risk of non-consummation of some transactions.

The market in which our communications businesses participate is highly competitive and if we do not compete effectively, our operating results may be harmed by loss of market share and revenues.

The communications industry is highly competitive.

We face intense competition from traditional telephone companies, wireless companies, cable companies and alternative voice communication providers and manufacturers of communication devices.

Competitors for our products and services include telecommunications carriers, such as AT&T, Inc., Lumen and Verizon, which provide telephone service using the public switched telephone network, as well as broadband telephone services.

We also face competition from cable companies, such as Cablevision, Charter, Comcast, and Cox Communications, which offer broadband telephone services to their existing cable television and broadband customers.

Further, wireless providers, including AT&T, T-Mobile, and Verizon Wireless offer services that some customers may prefer over wireline-based broadband voice service.

We face competition on magicJack device sales from Apple, Samsung and other manufacturers of smart phones, tablets and other handheld wireless devices.

Also, we compete against established alternative voice communication providers, such as Vonage, Google Voice, Ooma, and Skype, some of which are part of established, well-capitalized technology companies.

In addition, we compete with independent broadband telephone service providers.

Increased competition

may result in our competitors using aggressive business tactics, including providing financial incentives to customers, selling

their products or services at a discount or loss, offering products or services similar to our products and services on a bundled

basis at a discounted rate or no charge, announcing competing products or services combined with aggressive marketing efforts,

and asserting intellectual property rights or claims, irrespective of their validity.

We believe that some

of our existing competitors may choose to consolidate or may be acquired in the future.

Additionally, some of our competitors may

enter into alliances or joint ventures with each other or establish or strengthen relationships with other third parties.

consolidation, acquisition, alliance, joint venture or other relationship could adversely affect our ability to compete effectively,

lead to pricing pressure, our loss of market share and could harm our business, results of operations and financial condition.

magicJack may

face difficulty in attracting new customers, and if we fail to attract new customers, our business and results of operations may

Most traditional wireline

and wireless telephone service providers and cable companies are substantially larger and better capitalized than us and have the

advantage of a large existing customer base.

Because most of our customers are purchasing communications services from one or more

of these providers, our success is dependent upon our ability to attract customers away from their existing providers.

these competitors could focus their substantial financial resources to develop competing technology that may be more attractive

to potential customers than what we offer.

Our competitors’ financial resources may allow them to offer services at prices

below cost or even for free in order to maintain and gain market share or otherwise improve their competitive positions.

magicJack’s competitors

also could use their greater financial resources to offer broadband telephone service with more attractive service packages that

include on-site installation and more robust customer service.

In addition, because of the other services that our competitors

provide, they may choose to offer broadband telephone service as part of a bundle that includes other products, such as video,

high speed Internet access and wireless telephone service, which we do not offer at the present time.

This bundle may enable our

competitors to offer broadband telephone service at prices with which we may not be able to compete or to offer functionality that

integrates broadband telephone service with their other offerings, both of which may be more desirable to consumers.

competitive factors could make it more difficult for us to attract and retain customers to our products, and cause us to lower

our prices in order to compete and reduce our market share and revenues.

magicJack may

be unable to obtain enough phone numbers in desirable area codes to meet demand, which may adversely affect our ability to attract

new customers and our results of operations.

magicJack’s operations

are subject to varying degrees of federal and state regulation.

It currently allows customers to select the area code for their

desired phone number from a list of available area codes in cities throughout much of the United States.

This selection may become

limited if we are unable to obtain phone numbers, or a sufficient quantity of phone numbers, including certain area codes, due

to exhaustion and consequent shortages of numbers in those area codes, restrictions imposed by federal or state regulatory agencies,

or a lack of telephone numbers made available to us by third parties.

If we are unable to provide our customers with a nationwide

selection of phone numbers, or any phone numbers at all, in all geographical areas and is unable to obtain telephone numbers from

another alternative source, or is required to incur significant new costs in connection with obtaining such phone numbers, our

relationships with current and future customers may be damaged, causing a shortfall in expected revenue, increased customer attrition,

and an inability to attract new customers.

As a result, our business, results of operations and financial condition could be materially

and adversely affected.

If magicJack’s

services are not commercially accepted by customers, our prospects for growth will suffer.

Our success in deriving

a substantial amount of revenues from magicJack’s broadband telephone service offering sold to consumers and businesses relies

on the commercial acceptance of our offering from consumers and business.

Although we currently sell our services to a number of

customers, it cannot be certain that future customers will find our services attractive.

If customer demand for our services does

not develop or develops more slowly than anticipated, it would have a material adverse effect on our business, results of operations

and financial condition.

Our success relies on the commercial acceptance of our offering from these advertisers and retailers.

magicJack is not currently selling its advertising and retailing services and it cannot be certain future online advertisers and

retailers will find its services attractive.

If demand for these services does not develop or develops more slowly than anticipated,

it would have a material adverse effect on our business, results of operations and financial condition.

If magicJack is

unable to retain its existing customers, our revenue and results of operations would be adversely affected.

We offer magicJack services

pursuant to a subscriber agreement that ranges generally from one month to five years in duration and allows our customers to gain

access to our servers for telephone calls.

Our customers do not have an obligation to renew their subscriber agreement after their

initial term period expires, and these agreements may not be renewed on the same or on more profitable terms.

As a result, our

ability to grow depends in part on retaining customers for renewals.

We may not be able to accurately predict future trends in

customer renewals, and our customers’ renewal rates may decline or fluctuate because of several factors, including their

satisfaction or dissatisfaction with our services, the prices of our services, the fees imposed by government entities, the prices

of comparable services offered by our competitors or reductions in our customers’ spending levels.

If our customers do not

renew their services, renew on less favorable terms, or do not purchase additional functionality, our revenue may grow more slowly

than expected or decline, and our profitability and gross margins may be harmed.

The market for

magicJack’s services and products is characterized by rapidly changing technology and our success will depend on our ability

to enhance our existing service and product offerings and to introduce new services and products on a timely and cost effective

The market for magicJack’s

services and products is characterized by rapidly changing enabling technology, frequent enhancements and evolving industry standards.

Our continued success depends on our ability to accurately anticipate the evolution of new products and technologies and to enhance

our existing products and services.

Historically, several factors have deterred consumers and businesses from using voice over

broadband service, including security concerns, inconsistent quality of service, increasing broadband traffic and incompatible

software products.

If we are unable to continue to address those concerns and foster greater consumer demand for our products and

services, our business and results of operations will be adversely affected.

Our success also depends

on our ability to develop and introduce innovative new magicJack services and products that gain market acceptance.

be successful in selecting, developing, manufacturing and marketing new products and services or enhancing existing products and

services on a timely basis.

We may experience difficulties with software development, industry standards, design or marketing that

could delay or prevent our development, introduction or implementation of new products, services and enhancements.

The introduction

of new products or services by competitors, the emergence of new industry standards or the development of entirely new technologies

to replace existing service offerings could render our existing or future services obsolete.

If our services become obsolete due

to wide-spread adoption of alternative connectivity technologies, our ability to generate revenue may be impaired.

any new markets into which we attempt to sell our services, including new countries or regions, may not be receptive.

unable to successfully develop or acquire new products or services, enhance our existing products or services to anticipate and

meet customer preferences or sell magicJack products and services into new markets, our revenue and results of operations would

be adversely affected.

We may be unsuccessful

in protecting our proprietary rights or may have to defend ourselves against claims of infringement, which could impair or significantly

affect our business.

Our means of protecting

our proprietary rights may not be adequate and our competitors may independently develop technology that is similar ours.

protections afford only limited protection for our technology.

The laws of many countries do not protect our proprietary rights

to as great an extent as do the laws of the United States.

Despite our efforts to protect our proprietary rights, unauthorized

parties have in the past attempted, and may in the future attempt, to copy aspects of our products or to obtain and use information

that it regards as proprietary.

Third parties may also design around our proprietary rights, which may render our protected products

less valuable, if the design around is favorably received in the marketplace.

In addition, if any our products or the technology

underlying our products is covered by third-party patents or other intellectual property rights, we could be subject to various

legal actions.

We cannot assure you

that our products do not infringe intellectual property rights held by others or that they will not in the future.

Third parties

may assert infringement, misappropriation, or breach of license claims against us from time to time.

Such claims could cause us

to incur substantial liabilities and to suspend or permanently cease the use of critical technologies or processes or the production

or sale of major products.

Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets,

to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity,

misappropriation, or other claims.

Any such litigation could result in substantial costs and diversion of our resources, which

in turn could materially adversely affect our business and financial condition.

Moreover, any settlement of or adverse judgment

resulting from such litigation could require us to obtain a license to continue to use the technology that is the subject of the

claim, or otherwise restrict or prohibit our use of the technology.

Any required licenses may not be available to us on acceptable

terms, if at all.

If we attempt to design around the technology at issue or to find another provider of suitable alternative technology

to permit it to continue offering applicable software or product solutions, our continued supply of software or product solutions

could be disrupted or our introduction of new or enhanced software or products could be significantly delayed.

products must comply with various domestic and international regulations and standards and failure to do so could have an adverse

effect on our business, operating results and financial condition.

magicJack’s products

must comply with various domestic and international regulations and standards defined by regulatory agencies.

If it does not comply

with existing or evolving industry standards and other regulatory requirements or if we fail to obtain in a timely manner any required

domestic or foreign regulatory approvals or certificates, we will not be able to sell our products where these standards or regulations

apply, which may harm our business.

Moreover, distribution partners or customers may require us, or we may otherwise deem it necessary

or advisable, to alter our products to address actual or anticipated changes in the regulatory environment.

Our inability to alter

our products to address these requirements and any regulatory changes could have a material adverse effect on our business, financial

condition, and operating results.

emergency and E911 calling services are different from those offered by traditional wireline telephone companies and may expose

us to significant liability.

While we do not believe

that we are currently subject to regulatory requirements to provide such capability, we provide our customers with emergency calling

services/E911 calling services (“E911”) that significantly differ from the emergency calling services offered by traditional

wireline telephone companies.

Those differences may cause significant delays, or even failures, in callers’ receipt of the

emergency assistance they need.

Traditional wireline telephone companies route emergency calls from a fixed location over a dedicated

infrastructure directly to an emergency services dispatcher at the public safety answering point (“ PSAP ”) in

the caller’s area.

Generally, the dispatcher automatically receives the caller’s phone number and actual location information.

Because the magicJack devices are portable or nomadic, the only way we can determine to which PSAP to route an emergency call,

and the only location information that our E911 service can transmit to a dispatcher at a PSAP is the information that our customers

have registered with us.

A customer’s registered location may be different from the customer’s actual location at the

time of the call because customers can use their magicJack devices to make calls almost anywhere a broadband connection is available.

Significant delays may occur in a customer updating its registered location information, and in applicable databases being updated

and new routing implemented once a customer has provided new information.

If our customers encounter delays when making emergency

services calls and any inability to route emergency calls properly, or of the answering point to automatically recognize the caller’s

location or telephone number, such delays can have devastating consequences.

Customers may, in the future, attempt to hold us responsible

for any loss, damage, personal injury or death suffered as a result.

Traditional phone companies

also may be unable to provide the precise location or the caller’s telephone number when their customers place emergency

However, traditional phone companies are covered by federal legislation exempting them from liability for failures of emergency

calling services, and magicJack is not afforded such protection.

In addition, magicJack has lost, and may in the future lose, existing

and prospective customers because of the limitations inherent in our emergency calling services.

Additionally, service interruptions

from our third-party providers could cause failures in our customers’ access to E911 services.

Any of these factors could

cause us to lose revenues, incur greater expenses or cause our reputation or financial results to suffer.

State and local

governments may seek to impose E911 fees.

Many state and local

governments have sought to impose fees on customers of VoIP providers, or to collect fees from VoIP providers, to support implementation

of E911 services in their area.

The application of such fees with respect to magicJack users and use is not clear because various

statutes and regulations may not cover our services, we do not bill our customers monthly, nor do we bill customers at all for

telecommunication services.

We may also not know the end user’s location because the magicJack devices and services are nomadic.

Should a regulatory authority require payment of money from us for such support, we may be required to develop a mechanism to collect

fees from our customers, which may or may not be satisfactory to the entity requesting us to be a billing agent.

We cannot predict

whether the collection of such additional fees or limitations on where our services are available would impact customers’

interest in purchasing our products.

In settlement of litigation,

magicJack agreed that it would, at least once a year, issue bills for 911 emergency calling services to each user who has access

to 911 services through their magicJack services, and who has provided a valid address in a U.S.

jurisdiction that provides access

to 911 services and which is legally empowered to impose 911 charges on such users in accordance with applicable state and/or local

Certain E911 regulatory

authorities have asserted or may assert in the future that we are liable for damages, including end user assessed E911 taxes, surcharges

and/or fees, for not having billed and collected E911 fees from our customers in the past or in the future.

If a jurisdiction were

to prevail in such claims, the decision could have a material adverse effect on our financial condition and results of operations.

Increases in credit

card processing fees and high chargeback costs would increase our operating expenses and adversely affect our results of operations,

and an adverse change in, or the termination of, magicJack’s relationship with any major credit card company would have a

severe, negative impact on our business.

A significant number

of magicJack’s customers purchase its products through magicJack’s website and pay for its products and services using

credit or debit cards.

The major credit card companies or the issuing banks may increase the fees that they charge for transactions

using their cards.

An increase in those fees would require us to either increase the prices we charge for our products, or suffer

a negative impact on our profitability, either of which could adversely affect our business, financial condition and results of

We have potential liability

for chargebacks associated with the transactions we process, or that are processed on our behalf by merchants selling our products.

If a customer returns his or her magicJack products at any time, or claims that magicJack’s product was purchased fraudulently,

the returned product is “charged back” to magicJack or its bank, as applicable.

If magicJack or its sponsoring banks

are unable to collect the chargeback from the merchant’s account, or, if the merchant refuses or is financially unable, due

to bankruptcy or other reasons, to reimburse the merchant’s bank for the chargeback, we bear the loss for the amount of the

We are vulnerable to

credit card fraud, as we sell magicJack products directly to customers through our website.

Card fraud occurs when a customer uses

a stolen card (or a stolen card number in a card-not-present-transaction) to purchase merchandise or services.

In a traditional

card-present transaction, if the merchant swipes the card, receives authorization for the transaction from the card issuing bank

and verifies the signature on the back of the card against the paper receipt signed by the customer, the card issuing bank remains

liable for any loss.

In a fraudulent card-not-present transaction, even if the merchant or magicJack receive authorization for

the transaction, magicJack or the merchant are liable for any loss arising from the transaction.

Because sales made directly from

magicJack’s website are card-not-present transactions, we are more vulnerable to customer fraud.

We are also subject to acts

of consumer fraud by customers that purchase magicJack products and services and subsequently claim that such purchases were not

In addition, as a result

of high chargeback rates or other reasons beyond our control, the credit card companies or issuing bank may terminate their relationship

with magicJack, and there are no assurances that it will be able to enter into a new credit card processing agreement on similar

terms, if at all.

Upon a termination, if magicJack’s credit card processor does not assist it in transitioning its business

to another credit card processor, or if magicJack were not able to obtain a new credit card processor, the negative impact on our

liquidity likely would be significant.

The credit card processor may also prohibit magicJack from billing discounts annually or

for any other reason.

Any increases in the magicJack’s credit card fees could adversely affect our results of operations,

particularly if we elect not to raise our service rates to offset the increase.

The termination of magicJack’s ability to

process payments on any major credit or debit card, due to high chargebacks or otherwise, would significantly impair our ability

to operate our business.

Flaws in magicJack’s

technology and systems could cause delays or interruptions of service, damage our reputation, cause us to lose customers and limit

Our service could be

disrupted by problems with magicJack technology and systems, such as malfunctions in our software or other facilities and overloading

of our servers.

Increased competition may result in our competitors using aggressive business tactics, including providing financial incentives to customers, selling their products or services at a discount or loss, offering products or services similar to our products and services on a bundled basis at a discounted rate or no charge, announcing competing products or services combined with aggressive marketing efforts, and asserting intellectual property rights or claims, irrespective of their validity.

We may be unsuccessful in protecting our proprietary rights or may have to defend ourselves against claims of infringement, which could impair or significantly affect our business.

Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop technology that is similar ours.

Legal protections afford only limited protection for our technology.

The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States.

Despite our efforts to protect our proprietary rights, unauthorized parties have in the past attempted, and may in the future attempt, to copy aspects of our products or to obtain and use information that it regards as proprietary.

Third parties may also design around our proprietary rights, which may render our protected products less valuable if the design around is favorably received in the marketplace.

In addition, if any our products or the technology underlying our products is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions.

We cannot assure you that our products do not infringe intellectual property rights held by others or that they will not in the future.

Third parties may assert infringement, misappropriation, or breach of license claims against us from time to time.

Such claims could cause us to incur substantial liabilities and to suspend or permanently cease the use of critical technologies or processes or the production or sale of major products.

Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity, misappropriation, or other claims.

Any such litigation could result in substantial costs and diversion of our resources, which in turn could materially adversely affect our business and financial condition.

Moreover, any settlement of or adverse judgment resulting from such litigation could require us to obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology.

Any required licenses may not be available to us on acceptable terms, if at all.

If we attempt to design around the technology at issue or to find another provider of suitable alternative technology to permit it to continue offering applicable software or product solutions, our continued supply of software or product solutions could be disrupted or our introduction of new or enhanced software or products could be significantly delayed.

Increases in credit card processing fees and high chargeback costs would increase our operating expenses and adversely affect our results of operations, and an adverse change in, or the termination of, our relationship with any major credit card company would have a severe, negative impact on our business.

A significant number of our communications customers purchase its products through our websites and pay for our communications products and services using credit or debit cards.

The major credit card companies or the issuing banks may increase the fees that they charge for transactions using their cards.

An increase in those fees would require us to either increase the prices we charge for our products, or suffer a negative impact on our profitability, either of which could adversely affect our business, financial condition and results of operations.

We have potential liability for chargebacks associated with the transactions we process, or that are processed on our behalf by merchants selling our products.

If a customer returns his or her products at any time, or claims that our product was purchased fraudulently, the returned product is “charged back” to magicJack or its bank, as applicable.

If we or our sponsoring banks are unable to collect the chargeback from the merchant’s account, or, if the merchant refuses or is financially unable, due to bankruptcy or other reasons, to reimburse the merchant’s bank for the chargeback, we bear the loss for the amount of the refund paid.

We are vulnerable to credit card fraud, as we sell communications products and services directly to customers through our website.

Card fraud occurs when a customer uses a stolen card (or a stolen card number in a card-not-present-transaction) to purchase merchandise or services.

In a traditional card-present transaction, if the merchant swipes the card, receives authorization for the transaction from the card issuing bank and verifies the signature on the back of the card against the paper receipt signed by the customer, the card issuing bank remains liable for any loss.

In a fraudulent card-not-present transaction, even if the merchant or we receive authorization for the transaction, we or the merchant are liable for any loss arising from the transaction.

Because sales made directly from our websites are card-not-present transactions, we are more vulnerable to customer fraud.

We are also subject to acts of consumer fraud by customers that purchase our products and services and subsequently claim that such purchases were not made.

In addition, as a result of high chargeback rates or other reasons beyond our control, the credit card companies or issuing bank may terminate their relationship with us, and there are no assurances that it will be able to enter into a new credit card processing agreement on similar terms, if at all.

Upon a termination, if our credit card processor does not assist it in transitioning its business to another credit card processor, or if we were not able to obtain a new credit card processor, the negative impact on the liquidity of our communications businesses likely would be significant.

The credit card processor may also prohibit us from billing discounts annually or for any other reason.

Any increases in the credit card fees paid by our communications businesses could adversely affect our results of operations, particularly if we elect not to raise our service rates to offset the increase.

The termination of our ability to process payments on any major credit or debit card, due to high chargebacks or otherwise, would significantly impair our ability to operate our business.

Flaws in our technology and systems could cause delays or interruptions of service, damage our reputation, cause us to lose customers and limit our growth.

Our communications services could be disrupted by problems with our technology and systems, such as malfunctions in our software or other facilities and overloading of our servers.

Our customers could experience interruptions in the future as a result of these types of problems.

Interruptions

could in the future cause us to lose customers, which could adversely affect our revenue and profitability.

In addition, because

magicJack’s systems and our customers’ ability to use our services are Internet-dependent, our services may be subject

to “hacker attacks” from the Internet, which could have a significant impact on our systems and services.

interruptions adversely affect the perceived reliability of our service, it may have difficulty attracting and retaining customers

and our brand reputation and growth may suffer.

We depend on overseas

manufacturers, and for certain magicJack products, third-party suppliers, and our reputation and results of operations would be

harmed if these manufacturers or suppliers fail to meet magicJack’s requirements.

The manufacture of the

magicJack devices is conducted by a manufacturing company in China, and certain parts are produced in Taiwan and Hong Kong.

manufacturers supply substantially all of the raw materials and provide all facilities and labor required to manufacture our products.

If these companies were to terminate their arrangements with us or fail to provide the required capacity and quality on a timely

basis, either due to actions of the manufacturers;

Interruptions could in the future cause us to lose customers, which could adversely affect our revenue and profitability.

In addition, because our systems and our customers’ ability to use our services are Internet-dependent, our services may be subject to “hacker attacks” from the Internet, which could have a significant impact on our systems and services.

If service interruptions adversely affect the perceived reliability of our service, it may have difficulty attracting and retaining customers and our brand reputation and growth may suffer.

We depend on overseas manufacturers, and for certain magicJack products, third-party suppliers, and our reputation and results of operations would be harmed if these manufacturers or suppliers fail to meet magicJack’s requirements.

The manufacture of the magicJack devices is conducted by a manufacturing company in China, and certain parts are produced in Taiwan and Hong Kong.

These manufacturers supply substantially all of the raw materials and provide all facilities and labor required to manufacture our products.

If these companies were to terminate their arrangements with us or fail to provide the required capacity and quality on a timely basis, either due to actions of the manufacturers;

earthquakes, typhoons, tsunamis, fires, floods, or other natural disasters;

or the actions of their respective governments, we would be unable to manufacture our products until replacement contract manufacturing

services could be obtained.

To qualify a new contract manufacturer, familiarize it with the magicJack products, quality standards

and other requirements, and commence volume production is a costly and time-consuming process.

We cannot assure you that we would

be able to establish alternative manufacturing relationships on acceptable terms or in a timely manner that would not cause disruptions

in our supply.

Any interruption in the manufacture of our products would be likely to result in delays in shipment, lost sales

and revenue and damage to our reputation in the market, all of which would harm our business and results of operations.

while the magicJack contract obligations with its contract manufacturer in China is denominated in U.S.

dollars, changes in currency

exchange rates could impact our suppliers and increase our prices.

We rely on independent

retailers to sell the magicJack devices, and disruption to these channels would harm our business.

Because we sell a significant

amount of the magicJack devices, other devices and certain services to independent retailers, we are subject to many risks, including

risks related to their inventory levels and support for magicJack’s products.

In particular, magicJack’s retailers

maintain significant levels of our products in their inventories.

If retailers attempt to reduce their levels of inventory or if

they do not maintain sufficient levels to meet customer demand, our sales could be negatively impacted.

The retailers who sell

magicJack products also sell products offered by its competitors.

If these competitors offer the retailers more favorable terms,

those retailers may de-emphasize or decline to carry magicJack’s products.

In the future, we may not be able to retain or

attract a sufficient number of qualified retailers.

If we are unable to maintain successful relationships with retailers or to

expand our distribution channels, our business will suffer.

To continue this method

of sales, we will have to allocate resources to train vendors, systems integrators and business partners as to the use of our products,

resulting in additional costs and additional time until sales by such vendors, systems integrators and business partners are made

or the actions of their respective governments, we would be unable to manufacture our products until replacement contract manufacturing services could be obtained.

To qualify a new contract manufacturer, familiarize it with the magicJack products, quality standards and other requirements, and commence volume production is a costly and time-consuming process.

We cannot assure you that we would be able to establish alternative manufacturing relationships on acceptable terms or in a timely manner that would not cause disruptions in our supply.

Any interruption in the manufacture of our products would be likely to result in delays in shipment, lost sales and revenue and damage to our reputation in the market, all of which would harm our business and results of operations.

In addition, while the magicJack contract obligations with its contract manufacturer in China is denominated in U.S.

dollars, changes in currency exchange rates could impact our suppliers and increase our prices.

We rely on independent retailers to sell the magicJack devices, and disruption to these channels would harm our business.

Because we sell a significant amount of the magicJack devices, other devices and certain services to independent retailers, we are subject to many risks, including risks related to their inventory levels and support for magicJack’s products.

In particular, magicJack’s retailers maintain significant levels of our products in their inventories.

If retailers attempt to reduce their levels of inventory or if they do not maintain sufficient levels to meet customer demand, our sales could be negatively impacted.

The retailers who sell magicJack products also sell products offered by its competitors.

If these competitors offer the retailers more favorable terms, those retailers may de-emphasize or decline to carry magicJack’s products.

In the future, we may not be able to retain or attract a sufficient number of qualified retailers.

If we are unable to maintain successful relationships with retailers or to expand our distribution channels, our business will suffer.

To continue this method of sales, we will have to allocate resources to train vendors, systems integrators and business partners as to the use of our products, resulting in additional costs and additional time until sales by such vendors, systems integrators and business partners are made feasible.

Our business depends to a certain extent upon the success of such channels and the broad market acceptance of our products.

To the extent that our channels are unsuccessful in selling our products, our revenues and operating results will be adversely

Many factors out of

our control could interfere with our ability to market, license, implement or support magicJack products with any of our channels,

which in turn could harm our business.

These factors include, but are not limited to, a change in the business strategy of magicJack’s

channels, the introduction of competitive product offerings by other companies that are sold through one or more of its channels,

potential contract defaults by one or more of its channels, bankruptcy of one or more distribution channel, or changes in ownership

or management of one or more of its channels.

For example, in February 2015, RadioShack Corporation, one of magicJack’s retail

customers, filed a voluntary petition in bankruptcy court.

magicJack was owed $1.3 million by RadioShack which it did not collect

and sales to RadioShack were ceased to limit exposure.

magicJack made limited sales to the RadioShack entity that emerged from

the bankruptcy proceedings and terminated its relationship with that entity effective as of October 27, 2016.

Some of magicJack’s

competitors may have stronger relationships with its channels than magicJack does or offer more favorable terms with respect to

their products, and magicJack has limited control, if any, as to whether those channels implement its products rather than its

competitors’ products or whether they devote resources to market and support its competitors’ products rather than

its offerings.

If magicJack fails to maintain relationships with these channels, fails to develop new channels, fails to effectively

manage, train, or provide incentives to existing channels or if these channels are not successful in their sales efforts, sales

of magicJack’s products may decrease and our operating results would suffer.

The independent retailers we rely on may be

impacted by the ongoing COVID-19 pandemic, which has resulted in mandatory store closures of uncertain duration due to social distancing

measures imposed to control the pandemic and they may be limited in their ability to sell magicJack devices to customers.

We may not be

able to maintain adequate customer care during periods of growth or in connection with our addition of new and complex devices

or features, which could adversely affect our ability to grow and cause our financial results to be negatively impacted.

We consider our offshore

customer care to be critically important to acquiring and retaining customers.

A portion of our customer care for magicJack products

is provided by third parties located in Costa Rica and the Philippines.

This approach exposes us to the risk that we may not maintain

service quality, control or effective management within these business operations.

The increased elements of risk that arise from

conducting certain operating processes in some jurisdictions could lead to an increase in reputational risk.

Interruptions in our

customer care caused by disruptions at our third-party facilities may cause us to lose customers, which could adversely affect

our revenue and profitability.

If our customer base expands rapidly in the U.S.

or abroad, we may not be able to expand our outsourced

customer care operations quickly enough to meet the needs of our customer base, and the quality of our customer care will suffer

and our access right renewal rate may decrease.

As we broaden our magicJack offerings and its customers build increasingly complex

home networking environments, we will face additional challenges in training our customer care staff.

We could face a high turnover

rate among our customer service providers.

We intend to have our customer care provider hire and train customer care representatives

in order to meet the needs of our customer base.

If they are unable to hire, train and retain sufficient personnel to provide adequate

customer care, we may experience slower growth, increased costs and higher levels of customer attrition, which would adversely

affect our business and results of operations.

If we are unable

to maintain an effective process for local number portability provisioning, our growth may be negatively impacted.

We comply with requests

for local number portability from our customers.

Local number portability means that our customers can retain their existing telephone

numbers when subscribing to magicJack’s services, and would in turn allow former customers to retain their telephone numbers

should they subscribe to another carrier.

If we are unable to maintain the technology to expedite porting our customers’

numbers, demand for our services may be reduced, and this will adversely affect our revenue and profitability.

If we cannot continue

to obtain key switching elements from magicJack’s primary competitors on acceptable terms, we may not be able to offer our

local voice and data services on a profitable basis, if at all.

We will not be able

to provide our local voice and data services on a profitable basis, if at all, unless we are able to obtain key switching elements

from some of magicJack’s primary competitors on acceptable terms.

To offer local voice and data services in a market, we

must connect our servers with other carriers in a specific market.

This relationship is governed by an interconnection agreement

or carrier service agreement between us and that carrier.

magicJack has such agreements with Verizon, AT&T, XO Communications

Services and CenturyLink in a majority of its markets.

If we are unable to continue these relationships, enter into new interconnection

agreements or carrier service agreements with additional carriers in other markets or if these providers liquidate or file for

bankruptcy, our business and profitability may suffer.

Regulatory initiatives

may continue to reduce the maximum rates we are permitted to charge long distance service providers for completing calls by our

customers to customers served by our servers.

The rates that we charge

and is charged by service providers for terminating calls by their customers to customers served by its servers, and for transferring

calls by its customers onto other carriers, cannot exceed rates determined by regulatory authorities.

In 2011, the FCC adopted

an order fundamentally overhauling its existing intercarrier compensation (“ ICC ”) rules, which govern payments

between carriers for exchange traffic.

This order established a new ICC regime that will result in the elimination of virtually

all terminating switched access charges and reciprocal compensation payments over a transition period that will end in 2020.

reductions resulting from these new ICC rules have affected and will continue to affect our revenues and results of operations.

Regulation of

broadband telephone services are developing and therefore uncertain;

and future legislative, regulatory or judicial actions could

adversely impact our business and expose us to liability.

The current regulatory

environment for broadband telephone services is developing and therefore uncertain.

The United States and other countries have

begun to assert regulatory authority over broadband telephone service and are continuing to evaluate how broadband telephone service

will be regulated in the future.

Both the application of existing rules to us and our competitors and the effects of future regulatory

developments are uncertain.

Future legislative, judicial or other regulatory actions could have a negative effect on our business.

If its VoIP telephony service or our other magicJack products and services become subject to the rules and regulations applicable

to telecommunications providers, if current broadband telephone service rules are expanded and applied to us, or if additional

rules and regulations applicable specifically to broadband telephone services are adopted, we may incur significant compliance

costs, and we may have to restructure our service offerings, exit certain markets or start charging for our services at least to

the extent of regulatory costs or requirements, any of which could cause our services to be less attractive to customers.

faced, and may continue to face, difficulty collecting such charges from our customers and/or carriers, and collecting such charges

may cause us to incur legal fees.

We may be unsuccessful in collecting all of the regulatory fees owed to us.

The imposition of

any such additional regulatory fees, charges, taxes and regulations on VoIP communications services could materially increase our

costs and may limit or eliminate our competitive pricing advantages.

Regulatory and governmental

agencies may determine that we should be subject to rules applicable to certain broadband telephone service providers or seek to

impose new or increased fees, taxes, and administrative burdens on broadband telephone service providers.

We also may change our

product and service offerings in a manner that subjects us to greater regulation and taxation.

Such obligations could include requirements

that we contribute directly to federal or state Universal Service Funds.

We may also be required to meet various disability access

requirements, number portability obligations, and interception or wiretapping requirements, such as the Communications Assistance

for Law Enforcement Act.

The imposition of such regulatory obligations or the imposition of additional federal, state or local

taxes on our services could increase our cost of doing business and limit our growth.

We offer our magicJack

products and services in other countries, and therefore could also be subject to regulatory risks in each such foreign jurisdiction,

including the risk that regulations in some jurisdictions will prohibit us from providing our services cost-effectively or at all,

which could limit our growth.

Currently, there are several countries where regulations prohibit us from offering service.

because customers can use our services almost anywhere that a broadband Internet connection is available, including countries where

providing broadband telephone service is illegal, the governments of those countries may attempt to assert jurisdiction over us.

Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and

prohibitions on the conduct of our business.

Any such violations could include prohibitions on our ability to offer our products

and services in one or more countries, could delay or prevent potential acquisitions, expose us to significant liability and regulation

and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain

employees, our business and our operating results.

Our success depends, in part, on our ability to anticipate these risks and manage

these difficulties.

The success of

our business relies on customers’ continued and unimpeded access to broadband service.

Providers of broadband services may

be able to block our services or charge their customers more for also using our services, which could adversely affect our revenue

Our customers must have

broadband access to the Internet in order to use our service.

Providers of broadband access, some of whom are also competing providers

of voice services, may take measures that affect their customers’ ability to use our service, such as degrading the quality

of the data packets they transmit over their lines, giving those packets low priority, giving other packets higher priority than

ours, blocking our packets entirely or attempting to charge their customers more for also using our services.

In 2015, the FCC adopted

net neutrality rules that prohibited broadband providers from:

1) blocking legal content, applications, services, or non-harmful

2) impairing or degrading lawful Internet traffic on the basis of content, applications, services, or non-harmful devices;

3) engaging in paid prioritization by favoring some lawful Internet traffic over other lawful traffic in exchange for consideration

of any kind or by prioritizing content and services of their affiliates;

and 4) unreasonably interfering with or unreasonably disadvantaging

the ability of consumers to select, access, and use the lawful content, applications, services, or devices of their choosing;

of edge providers to make lawful content, applications, services, or devices available to consumers.

In doing so, the FCC reclassified

broadband Internet access - the retail broadband service mass-market customers buy from cable, phone, and wireless providers -

as a telecommunications service regulated under Title II of the Communications Act of 1934, although the FCC agreed to forbear

from many requirements of Title II.

Significantly, these rules applied equally to fixed and mobile broadband networks.

After the FCC’s

new net neutrality rules went into effect in June 2015, various broadband providers and their trade associations challenged the

FCC’s decision before the U.S.

Court of Appeals for the D.C.

In June 2016, the D.C.

Circuit issued its decision

upholding the FCC’s rules.

Circuit also denied various petitions seeking rehearing en banc of the court’s

Various parties have sought review by the United States Supreme Court of the D.C.

Circuit’s decision, which remains

We cannot predict the outcome of these proceedings.

In December 2017, the

FCC adopted its “Restoring Internet Freedom Order,” which:

1) restored the classification of broadband Internet access

services as unregulated information services, ending Title II regulation of these services;

2) eliminated the FCC’s three

“bright-line” net neutrality rules;

3) eliminated the FCC’s “general conduct” rule;

and 4) adopted

a new transparency rule.

Multiple parties filed

petitions seeking judicial review of the “Restoring Internet Freedom Order,” which were consolidated and heard by the

United States Court of Appeals for the D.C.

To the extent that our channels are unsuccessful in selling our products, our revenues and operating results will be adversely affected.

If magicJack fails to maintain relationships with these channels, fails to develop new channels, fails to effectively manage, train, or provide incentives to existing channels or if these channels are not successful in their sales efforts, sales of magicJack’s products may decrease and our operating results would suffer.

The independent retailers we rely on were impacted by the acute phase of the COVID-19 pandemic, which resulted in mandatory store closures due to social distancing measures imposed to control the pandemic and they may be limited in their ability to sell magicJack devices to customers should such measures return during additional waves of the pandemic.

The success of our business relies on customers’ continued and unimpeded access to broadband service.

Providers of broadband services may be able to block our services or charge their customers more for also using our services, which could adversely affect our revenue and growth.

Our customers must have broadband access to the Internet in order to use our service.

Providers of broadband access, some of whom are also competing providers of broadband voice services, may take measures that affect their customers’ ability to use our service, such as degrading the quality of the data packets they transmit over their lines, giving those packets low priority, giving other packets higher priority than ours, blocking our packets entirely or attempting to charge their customers more for also using our services.

In December 2017, the FCC rescinded rules that, among other things, prohibited broadband Internet access providers from blocking, throttling, or otherwise degrading the quality of data packets, or attempting to extract additional fees from edge service providers.

In October 2019, the D.C.

Circuit largely upheld the FCC decision to eliminate

legal prohibitions against broadband providers blocking, throttling, or otherwise degrading the quality of our data packets or

attempting to extract additional fees from us or our customers, which could adversely impact our business.

We may be bound

by certain FCC regulations relating to the provision of E911 service, and if we fail to comply with FCC regulations requiring us

to provide E911 emergency calling services, we may be subject to fines or penalties.

In 2005, the FCC issued

regulations requiring interconnected voice-over broadband providers to provide E911 services and to notify customers of any differences

between the broadband telephone service emergency calling services and those available through traditional telephone providers

and obtain affirmative acknowledgments from customers of those notifications.

In 2019, the FCC adopted rules broadening the scope

of its E911 requirements, including imposing 911 obligations on outbound VoIP providers – obligations that will take effect

in two years.

Limitations on our ability

to provide E911 service or comply with the FCC’s new mandates could materially limit our growth and have a material adverse

effect on our profitability.

We could be subjected to various fines and forfeitures.

FCC rulings could also subject us to greater

regulation in some states.

Regulatory rulings

and/or carrier disputes could affect the manner in which we interconnect and exchange traffic with other providers and the costs

and revenues associated with doing so.

We exchange calls with

other providers pursuant to applicable law and interconnection agreements and other carrier contracts that define the rates, terms,

and conditions applicable to such traffic exchange.

The calls we exchange originate from and terminate to a customer that uses

a broadband Internet connection to access our services and are routed using telephone numbers of the customer’s choosing.

There is uncertainty, however, with respect to intercarrier compensation for such traffic while rules continue to be challenged

in various courts.

The FCC Report and Order issued in November 2011 has asserted its jurisdiction over such traffic.

Various state

commissions have also issued rulings with respect to the exchange of different categories of traffic under interconnection agreements.

To the extent that another provider were to assert that the traffic we exchanges with them is subject to higher levels of compensation

than we, or the third parties terminating our traffic to the PSTN, pay today (if any), or if other providers from whom we currently

collect compensation for the exchange of such traffic refuse to pay it going forward, we may need to seek regulatory relief to

resolve such a dispute.

Given the recent changes to the intercarrier compensation regime, we cannot guarantee that the outcome

of any proceeding would be favorable, and an unfavorable ruling could adversely affect the amounts we collect and/or pay to other

providers in connection with the exchange of our traffic.

The FCC clarified in January 2015 that its VoIP symmetry rule does not

require a CLEC or its VoIP provider partner to provide the physical last-mile facility to the VoIP provider’s end user customers

in order to provide the functional equivalent of end office switching, and thus for the CLEC to be eligible to assess access charges

for this service.

The ruling confirms that the VoIP symmetry rule is technology and facilities neutral and applies regardless of

whether a CLEC’s VoIP partner is a facilities-based or over-the-top VoIP provider.

However, in November 2016, the U.S.

of Appeals for the D.C.

Circuit vacated the FCC’s ruling.

In December 2019, the Federal Communications Commission (FCC) issued

an order on remand revisiting its interpretation of the VoIP symmetry rule, concluding that LECs may assesses end office switched

access charges only if the LEC or its VoIP partner provides a physical connection to the last-mile facilities used to serve an

If neither the LEC nor its VoIP partner provides such physical connection, it is not providing the functional equivalent

of end office switched access and the LEC may not assess end office switched access charges.

The FCC also decided to give its order

retroactive effect to “prevent an undue hardship being worked upon those parties who properly interpreted the VoIP Symmetry

Rule and have been in disputes ever since.” We are still assessing the impact of this recent FCC order that will affect the

amounts we collect and/or pay to other providers in connection with the exchange of our traffic.

Server failures

or system breaches could cause delays or adversely affect our service quality, which may cause us to lose customers and revenue.

In operating our servers,

we may be unable to connect and manage a large number of customers or a large quantity of traffic at high speeds.

Any failure or

perceived failure to achieve or maintain high-speed data transmission could significantly reduce demand for our magicJack services

and adversely affect our operating results.

In addition, computer viruses, break-ins, human error, natural disasters and other

problems may disrupt our servers.

The system security and stability measures we implement may be circumvented in the future or

otherwise fail to prevent the disruption of our services.

The costs and resources required to eliminate computer viruses and other

security problems may result in interruptions, delays or cessation of services to our customers, which could decrease demand, decrease

our revenue and slow our planned expansion.

Hardware and software

failures, delays in the operation of magicJack’s computer and communications systems or the failure to implement system enhancements

may harm our business.

Our success depends

on the efficient and uninterrupted operation of magicJack’s software and communications systems.

A failure of our servers

could impede the delivery of services, customer orders and day-to-day management of our business and could result in the corruption

or loss of data.

Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures,

computer viruses, break-ins and similar events at our various facilities could result in interruptions in the flow of data to our

servers and from our servers to our customers.

In addition, any failure by our computer environment to provide our required telephone

communications capacity could result in interruptions in our service.

Additionally, significant delays in the planned delivery

of system enhancements and improvements, or inadequate performance of the systems once they are completed, could damage our reputation

and harm our business.

Finally, long-term disruptions in infrastructure caused by events such as natural disasters, the outbreak

of war, the escalation of hostilities, and acts of terrorism (particularly involving cities in which it has offices) could adversely

affect our business.

Although we maintain general liability insurance, including coverage for errors and omissions, this coverage

may be inadequate, or may not be available in the future on reasonable terms, or at all.

We cannot assure you that this policy

will cover any claim against us for loss of data or other indirect or consequential damages and defending a lawsuit, regardless

of its merit, could be costly and divert management’s attention.

In addition to potential liability, if we experience interruptions

in our ability to supply our services, our reputation could be harmed and we could lose customers.

Our magicJack

service requires an operative broadband connection, and if the adoption of broadband does not progress as expected, the market

for our services will not grow and we may not be able to grow our business and increase our revenue.

Use of magicJack’s

service requires that the user be a subscriber to an existing broadband Internet service, most typically provided through a cable

or digital subscriber line, or DSL, connection.

Although the number of broadband subscribers in the U.S.

and worldwide has grown

significantly over the last five years, this service has not yet been adopted by all consumers and is not available in every part

of the United States and Canada, particularly rural locations.

If the adoption of broadband services does not continue to grow,

the market for our services may not grow.

Our magicJack

business is subject to privacy and online security risks, including security breaches, and we could be liable for such breaches

If we are unable to protect the privacy of our customers making calls using our service, or information obtained from

our customers in connection with their use or payment of our services, in violation of privacy or security laws or expectations,

we could be subject to significant liability and damage to our reputation.

Although we have developed

systems and processes that are designed to protect customer information and prevent fraudulent transactions, data loss and other

security breaches, such systems and processes may not be sufficient to prevent fraudulent transactions, data loss and other security

Circuit largely upheld the FCC decision.

Although some states, most notably California, have adopted prohibitions similar to those rescinded by the FCC, if broadband providers block, throttle or otherwise degrade the quality of our data packets or attempt to extract additional fees from us or our customers, it could adversely impact our business.

Server failures or system breaches could cause delays or adversely affect our service quality, which may cause us to lose customers and revenue.

In operating our servers, we may be unable to connect and manage a large number of customers or a large quantity of traffic at high speeds.

Any failure or perceived failure to achieve or maintain high-speed data transmission could significantly reduce demand for our magicJack services and adversely affect our operating results.

In addition, computer viruses, break-ins, human error, natural disasters and other problems may disrupt our servers.

The system security and stability measures we implement may be circumvented in the future or otherwise fail to prevent the disruption of our services.

The costs and resources required to eliminate computer viruses and other security problems may result in interruptions, delays or cessation of services to our customers, which could decrease demand, decrease our revenue and slow our planned expansion.

Hardware and software failures, delays in the operation of our computer and communications systems or the failure to implement system enhancements may harm our business.

Our success depends on the efficient and uninterrupted operation of our software and communications systems.

A failure of our servers could impede the delivery of services, customer orders and day-to-day management of our business and could result in the corruption or loss of data.

Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at our various facilities could result in interruptions in the flow of data to our servers and from our servers to our customers.

In addition, any failure by our computer environment to provide our required telephone communications capacity could result in interruptions in our service.

Additionally, significant delays in the planned delivery of system enhancements and improvements, or inadequate performance of the systems once they are completed, could damage our reputation and harm our business.

Finally, long-term disruptions in infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, and acts of terrorism (particularly involving cities in which it has offices) could adversely affect our business.

Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may be inadequate, or may not be available in the future on reasonable terms, or at all.

We cannot assure you that this policy will cover any claim against us for loss of data or other indirect or consequential damages and defending a lawsuit, regardless of its merit, could be costly and divert management’s attention.

In addition to potential liability, if we experience interruptions in our ability to supply our services, our reputation could be harmed and we could lose customers.

Our communications businesses are subject to privacy and online security risks, including security breaches, and we could be liable for such breaches of security.

If we are unable to protect the privacy of our customers using our services, or information obtained from our customers in connection with their use or payment of our services, in violation of privacy or security laws or expectations, we could be subject to significant liability and damage to our reputation.

Our systems and processes that are designed to protect customer information and prevent fraudulent transactions, data loss and other security breaches, may not be sufficient to prevent fraudulent transactions, data loss and other security breaches.

Failure to prevent or mitigate such breaches may adversely affect our operating results.

Customers may believe

that using our services to make and receive telephone calls using their broadband connection could result in a reduction of their

privacy, as compared to traditional wireline carriers.

Additionally, our website, www.magicJack.com, serves as an online sales

The websites of our communications businesses serve as online sales portals.

We currently obtain and retain personal information about our website users in connection with such purchases.

addition, we obtain personal information about our customers as part of their registration to use our products and services.

state and foreign governments have enacted or may enact laws or regulations regarding the collection and use of personal information.

Our business involves

the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk of loss or

misuse of this information, litigation, and potential liability.

An increasing number of websites, including several other Internet

companies, have recently disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks

on portions of their sites.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage

systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques

or to implement adequate preventative measures.

If an actual or perceived breach of our security occurs, the market perception

of the effectiveness of our security measures could be harmed and we could lose users.

A party that is able to circumvent our security

measures could misappropriate magicJack’s or its users’ proprietary information, cause interruption in our operations,

damage our computers or those of our users, or otherwise damage our reputation and business.

Any compromise of our security could

result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation,

and a loss of confidence in our security measures, which could harm our business.

Currently, a significant

number of our users authorize it to bill their credit card accounts directly for all transaction fees charged by us.

encryption and authentication technology licensed from third parties to provide the security and authentication to effectively

secure transmission of confidential information, including customer credit card numbers.

Advances in computer capabilities, new

discoveries in the field of cryptography or other developments may result in the technology used by us to protect transaction data

being breached or compromised.

In addition, we obtain personal information about our customers as part of their registration to use our products and services.

Federal, state and foreign governments have enacted or may enact laws or regulations regarding the collection and use of personal information.

Additionally, magicJack customers may believe that using our services to make and receive telephone calls using their broadband connection could result in a reduction of their privacy, as compared to traditional wireline carriers.

Our business involves the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk of loss or misuse of this information, litigation, and potential liability.

An increasing number of websites, including several other communications companies, have recently disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their sites.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose users.

A party that is able to circumvent our security measures could misappropriate our or our users’ proprietary information, cause interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business.

Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

Currently, a significant number of our users authorize it to bill their credit card accounts directly for all transaction fees charged by us.

We rely on encryption and authentication technology licensed from third parties to provide the security and authentication to effectively secure transmission of confidential information, including customer credit card numbers.

Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by us to protect transaction data being breached or compromised.

Non-technical means, for example, actions by a suborned employee, can also result in a data breach.

Possession and use of

personal information in conducting our business subjects it to legislative and regulatory burdens that could require notification

of data breach, restrict our use of personal information and hinder our ability to acquire new customers or market to existing

We may incur expenses to comply with privacy and security standards and protocols imposed by law, regulation, industry

standards or contractual obligations.

Under payment card rules

and magicJack’s contracts with its card processors, if there is a breach of payment card information that we store, we could

be liable to the payment card issuing banks for their cost of issuing new cards and related expenses.

In addition, if we fail to

follow payment card industry security standards, even if there is no compromise of customer information, we could incur significant

fines or lose our ability to give customers the option of using payment cards to fund their payments or pay their fees.

unable to accept payment cards, our business would be seriously damaged.

Our servers are also

vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions.

We may need to expend significant resources

to protect against security breaches or to address problems caused by breaches.

These issues are likely to become more difficult

as we expand the number of places where we operate.

Security breaches, including any breach by us or by parties with which we have

commercial relationships that result in the unauthorized release of magicJack’s users’ personal information, could

damage our reputation and expose us to a risk of loss or litigation and liability.

Our insurance policies carry coverage limits

that may not be adequate to reimburse it for losses caused by security breaches.

magicJack’s users,

as well as those of other prominent Internet companies, have been and will continue to be targeted by parties using fraudulent

“spoof” and “phishing” emails to misappropriate passwords, credit card numbers, or other personal information

or to introduce viruses or other malware through “trojan horse” programs to magicJack’s users’ computers.

These emails appear to be legitimate emails sent by magicJack, but direct recipients to fake websites operated by the sender of

the email or request that the recipient send a password or other confidential information via email or download a program.

our efforts to mitigate “spoof” and “phishing” emails through product improvements and user education,

“spoof” and “phishing” remain a serious problem that may damage our brands, discourage use of our websites,

and increase our costs.

We have a stringent

privacy policy covering the information we collect from our customers and have established security features to protect this information.

However, our security measures may not prevent security breaches.

We may need to expend resources to protect against security breaches

or to address problems caused by breaches.

If unauthorized third parties were able to penetrate our security and gain access to,

or otherwise misappropriate, our customers’ personal information or be able to access their telephone calls, it could harm

our reputation and, therefore, our business and magicJack could be subject to liability.

Such liability could include claims for

misuse of personal information or unauthorized use of credit cards.

These claims could result in litigation, our involvement in

which, regardless of the outcome, could require us to expend significant financial resources.

Internet privacy is a rapidly changing

area and we may be subject to future requirements and legislation that are costly to implement and negatively impact our results.

magicJack has

operations located in Israel, and therefore our results may be adversely affected by political, economic and military conditions

magicJack’s business

and operations may be directly influenced by the political, economic and military conditions affecting Israel at any given time.

A change in the security and political situation in Israel could have a material adverse effect on our business, operating results

and financial condition.

Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between

Israel and its Arab neighbors, including Hezbollah in Lebanon and Hamas in the Gaza Strip.

In the last few years, these conflicts

involved missile strikes against civilian targets in various parts of Israel and negatively affected business conditions in Israel.

In addition, political uprisings and conflicts in various countries in the Middle East, including Syria and Iraq, and including

terrorist organizations gaining control and political power in the region such as the Islamic State of Iraq and Syria, or ISIS,

are affecting the political stability of those countries.

It is not clear how this instability will develop and how it will affect

the political and security situation in the Middle East.

Our commercial insurance

does not cover losses that may occur as a result of events associated with the security situation in the Middle East.

the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts

of war, we cannot assure you that this government coverage will be maintained.

Any losses or damages incurred by us could have

a material adverse effect on our business, operating results and financial condition.

Furthermore, several

countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries

may impose restrictions on doing business with Israel and Israeli companies if hostilities in the region continue or intensify.

Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could

have a material adverse effect on our business, operating results and financial condition.

Possession and use of personal information in conducting our business subjects it to legislative and regulatory burdens that could require notification of data breach, restrict our use of personal information and hinder our ability to acquire new customers or market to existing customers.

We may incur expenses to comply with privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations.

Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the payment card issuing banks for their cost of issuing new cards and related expenses.

In addition, if we fail to follow payment card industry security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give customers the option of using payment cards to fund their payments or pay their fees.

If we were unable to accept payment cards, our business would be seriously damaged.

Our servers are also vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions.

We may need to expend significant resources to protect against security breaches or to address problems caused by breaches.

These issues are likely to become more difficult as we expand the number of places where we operate.

Security breaches, including any breach by us or by parties with which we have commercial relationships that result in the unauthorized release of our users’ personal information, could damage our reputation and expose us to a risk of loss or litigation and liability.

Our insurance policies carry coverage limits that may not be adequate to reimburse it for losses caused by security breaches.

Our users, as well as those of other prominent communications companies, have been and will continue to be targeted by parties using fraudulent “spoof” and “phishing” emails to misappropriate passwords, credit card numbers, or other personal information or to introduce viruses or other malware through “trojan horse” programs to our users’ computers.

These emails appear to be legitimate emails sent by our communications businesses, but direct recipients to fake websites operated by the sender of the email or request that the recipient send a password or other confidential information via email or download a program.

Despite our efforts to mitigate “spoof” and “phishing” emails through product improvements and user education, “spoof” and “phishing” remain a serious problem that may damage our brands, discourage use of our websites, and increase our costs.

Our security measures may not prevent security breaches.

We may need to expend resources to protect against security breaches or to address problems caused by breaches.

If unauthorized third parties were able to penetrate our security and gain access to, or otherwise misappropriate, our customers’ personal information or be able to access their telephone calls, it could harm our reputation and, therefore, our business and we could be subject to liability.

Such liability could include claims for misuse of personal information or unauthorized use of credit cards.

These claims could result in litigation, our involvement in which, regardless of the outcome, could require us to expend significant financial resources.

Internet privacy is a rapidly changing area and we may be subject to future requirements and legislation that are costly to implement and negatively impact our results.

Risks Related to Our Brand Portfolio

The failure of

our licensees to sell products that generate royalties to us, to pay us royalties pursuant to their license agreements with us,

or to renew these agreements could negatively affect our results of operations and financial condition.

Our revenues are dependent

on royalty payments made to us under our license agreements.

Although some of our license agreements guarantee a minimum royalty

payment to us each year, the failure of our licensees to satisfy these or the other obligations under their agreements with us,

their decision to not renew their agreements with us or their inability to grow or maintain their sales of products bearing our

brands or their businesses generally could cause our revenues to decline.

These events or circumstances could occur for a variety

of reasons, many of which are outside our control, including business and operational risks that impact our licensees’ ability

to make payments and sell products generally, such as obtaining and maintaining desirable store locations and consumer acceptance

and presence;

retaining key personnel, including the specific individuals who work on sales and marketing for products bearing

Our revenues are dependent on royalty payments made to us under our license agreements.

Although some of our license agreements guarantee a minimum royalty payment to us each year, the failure of our licensees to satisfy these or the other obligations under their agreements with us, their decision to not renew their agreements with us or their inability to grow or maintain their sales of products bearing our brands or their businesses generally could cause our revenues to decline.

These events or circumstances could occur for a variety of reasons, many of which are outside our control, including business and operational risks that impact our licensees’ ability to make payments and sell products generally, such as obtaining and maintaining desirable store locations and consumer acceptance and presence;

retaining key personnel, including the specific individuals who work on sales and marketing for products bearing our brands;

and liquidity and capital resources risks.

The consumer goods and services sector

has been severely impacted by the ongoing COVID-19 pandemic, which has resulted in mandatory store closures of uncertain duration

due to social distancing measures imposed to control the pandemic and our licensees may have difficulty selling their merchandise

and meeting their financial obligations to us.

The failure by any of

our key licensees or the concurrent failure by several licensees to meet their financial obligations to us or to renew their respective

license agreements with us could materially and adversely impact our results of operations and our financial condition.

Our brand investment

portfolio is subject to intense competition.

hold a majority interest in a brand investment portfolio that is focused on generating revenue through the licensing of trademarks.

Therefore, our degree of success is dependent on the strength of our brands, consumer acceptance of our brands and our licensees’

ability to design, manufacture and sell products bearing our brands, all of which is dependent on the ability of us and our licensees

responding to ever-changing consumer demands.

We cannot control the level of consumer acceptance of our brands and changing preferences

and trends may lead customers to purchase other products.

Further, we cannot control the level of resources that our licensees

commit to supporting our brands, and our licensees may choose to support products bearing other brands to the detriment of our

brands because our agreements generally do not prevent them from licensing or selling other products, including products bearing

competing brands.

addition, we compete with companies that own other brands and trademarks, as these companies could enter into similar licensing

arrangements with retailers and wholesalers in the United States and internationally.

These arrangements could be with our existing

retail and wholesale partners, thereby competing with us for consumer attention and limited floor or rack space in the same stores

in which our branded products are sold, and vying with us for the time and resources of the retailers and wholesale licensees that

manufacture and distribute our products.

These companies may be able to respond more quickly to changes in retailer, wholesaler

and consumer preferences and devote greater resources to brand acquisition, development and marketing.

We may not be able to compete

effectively against these companies.

we or our brands are unable to compete successfully against current and future competitors, we may be unable to sustain or increase

demand for products bearing our brands, which could have a material adverse effect on our reputation, prospects, performance and

financial condition.

The consumer goods and services sector was severely impacted by the ongoing COVID-19 pandemic, which resulted in mandatory store closures of uncertain duration due to social distancing measures imposed to control the pandemic and our licensees may continue to have difficulty selling their merchandise and meeting their financial obligations to us as the sector evolves following the acute phase of the pandemic.

The failure by any of our key licensees or the concurrent failure by several licensees to meet their financial obligations to us or to renew their respective license agreements with us could materially and adversely impact our results of operations and our financial condition.

Our brand investment portfolio is subject to intense competition.

We hold a majority interest in a brand investment portfolio that is focused on generating revenue through the licensing of trademarks.

Therefore, our degree of success is dependent on the strength of our brands, consumer acceptance of our brands and our licensees’ ability to design, manufacture and sell products bearing our brands, all of which is dependent on the ability of us and our licensees responding to ever-changing consumer demands.

We cannot control the level of consumer acceptance of our brands and changing preferences and trends may lead customers to purchase other products.

Further, we cannot control the level of resources that our licensees commit to supporting our brands, and our licensees may choose to support products bearing other brands to the detriment of our brands because our agreements generally do not prevent them from licensing or selling other products, including products bearing competing brands.

In addition, we compete with companies that own other brands and trademarks, as these companies could enter into similar licensing arrangements with retailers and wholesalers in the United States and internationally.

These arrangements could be with our existing retail and wholesale partners, thereby competing with us for consumer attention and limited floor or rack space in the same stores in which our branded products are sold, and vying with us for the time and resources of the retailers and wholesale licensees that manufacture and distribute our products.

These companies may be able to respond more quickly to changes in retailer, wholesaler and consumer preferences and devote greater resources to brand acquisition, development and marketing.

We may not be able to compete effectively against these companies.

If we or our brands are unable to compete successfully against current and future competitors, we may be unable to sustain or increase demand for products bearing our brands, which could have a material adverse effect on our reputation, prospects, performance and financial condition.

Risks Related to Competition

We operate in

highly competitive industries.

Some of our competitors may have certain competitive advantages, which may cause us to be unable

to effectively compete with or gain market share from our competitors.

We face competition

with respect to all of our service areas.

The level of competition depends on the particular service area and, in the case of our

asset and liquidation services, the category of assets being liquidated or appraised.

We compete with other companies and investment

banks to help clients with their corporate finance and capital needs.

In addition, we compete with companies and online services

in the bidding for assets and inventory to be liquidated.

The demand for online solutions continues to grow and our online competitors

include other e-commerce providers, auction websites such as eBay, as well as government agencies and traditional liquidators and

auctioneers that have created websites to further enhance their product offerings and more efficiently liquidate assets.

the market to become even more competitive as the demand for such services continues to increase and traditional and online liquidators

and auctioneers continue to develop online and offline services for disposition, redeployment and remarketing of wholesale surplus

and salvage assets.

In addition, manufacturers, retailers and government agencies may decide to create their own websites to sell

their own surplus assets and inventory and those of third parties.

We also compete with

other providers of valuation and advisory services.

Competitive pressures within the Financial Consulting and other Advisory Services

and real estate services markets, including a decrease in the number of engagements and/or a decrease in the fees which can be

charged for these services, could affect revenues from our Financial Consulting and other Advisory Services and real estate services

as well as our ability to engage new or repeat clients.

We believe that given the relatively low barriers to entry in the Financial

Consulting and other Advisory Services and real estate services markets, these markets may become more competitive as the demand

for such services increases.

Some of our competitors

may be able to devote greater financial resources to marketing and promotional campaigns, secure merchandise from sellers on more

favorable terms, adopt more aggressive pricing or inventory availability policies and devote more resources to website and systems

development than we are able to do.

Any inability on our part to effectively compete could have a material adverse effect on our

financial condition, growth potential and results of operations.

We compete with specialized

investment banks to provide financial and investment banking services to small and middle-market companies.

Middle-market investment

banks provide access to capital and strategic advice to small and middle-market companies in our target industries.

with those investment banks on the basis of a number of factors, including client relationships, reputation, the abilities of our

professionals, transaction execution, innovation, price, market focus and the relative quality of our products and services.

have experienced intense competition over obtaining advisory mandates in recent years, and we may experience pricing pressures

in our investment banking business in the future as some of our competitors seek to obtain increased market share by reducing fees.

Competition in the middle-market may further intensify if larger Wall Street investment banks expand their focus to this sector

of the market.

Increased competition could reduce our market share from investment banking services and our ability to generate

fees at historical levels.

We also face increased

competition due to a trend toward consolidation.

In recent years, there has been substantial consolidation and convergence among

companies in the financial services industry.

This trend was amplified in connection with the unprecedented disruption and volatility

in the financial markets during the past several years, and, as a result, a number of financial services companies have merged,

been acquired or have fundamentally changed their respective business models.

Many of these firms may have the ability to support

investment banking, including financial advisory services, with commercial banking, insurance and other financial services in an

effort to gain market share, which could result in pricing pressure in our businesses.

UOL competes with numerous

providers of broadband, mobile broadband and DSL services, as well as other dial-up Internet access providers, many of whom are

large and have significantly more financial and marketing resources.

The principal competitors for UOL’s mobile broadband

and DSL services include, among others, local exchange carriers, wireless and satellite service providers, and cable service providers.

magicJack competes with

the traditional telephone service providers, which provide telephone service using the public switched telephone network.

of these traditional providers have also added, or are planning to add, broadband telephone services to their existing telephone

and broadband offerings.

We also face, or expect to face, competition from cable companies, which offer broadband telephone services

to their existing cable television and broadband offerings.

Further, wireless providers offer services that some customers may

prefer over wireline-based service.

In the future, as wireless companies offer more minutes at lower prices, their services may

become more attractive to customers as a replacement for broadband or wireline-based phone service.

We face competition on magicJack

device sales from manufacturers of smart phones, tablets and other handheld wireless devices.

Also, we compete against established

alternative voice communication providers, and may face competition from other large, well-capitalized Internet companies.

we compete with independent broadband telephone service providers.

Our brand investment

portfolio competes with companies that own other brands and trademarks, as these companies could enter into similar licensing arrangements

with retailers and wholesalers in the United States and internationally.

These arrangements could be with our existing retail and

wholesale partners, thereby competing with us for consumer attention and limited floor or rack space in the same stores in which

our branded products are sold, and vying with us for the time and resources of the retailers and wholesale licensees that manufacture

and distribute our products.

These companies may be able to respond more quickly to changes in retailer, wholesaler and consumer

preferences and devote greater resources to brand acquisition, development and marketing.

If we are unable

to attract and retain qualified personnel, we may not be able to compete successfully in our industry.

Our future success depends

to a significant degree upon the continued contributions of senior management and the ability to attract and retain other highly

qualified management personnel.

We operate in highly competitive industries.

Some of our competitors may have certain competitive advantages, which may cause us to be unable to effectively compete with or gain market share from our competitors.

We face competition with respect to all of our service areas.

The level of competition depends on the particular service area and, in the case of our asset and liquidation services, the category of assets being liquidated or appraised.

We compete with other companies and investment banks to help clients with their corporate finance and capital needs.

In addition, we compete with companies and online services in the bidding for assets and inventory to be liquidated.

The demand for online solutions continues to grow and our online competitors include other e-commerce providers, auction websites such as eBay, as well as government agencies and traditional liquidators and auctioneers that have created websites to further enhance their product offerings and more efficiently liquidate assets.

We expect the market to become even more competitive as the demand for such services continues to increase and traditional and online liquidators and auctioneers continue to develop online and offline services for disposition, redeployment and remarketing of wholesale surplus and salvage assets.

In addition, manufacturers, retailers and government agencies may decide to create their own websites to sell their own surplus assets and inventory and those of third parties.

We also compete with other providers of valuation and advisory services.

Competitive pressures within the Financial Consulting and other Advisory Services and real estate services markets, including a decrease in the number of engagements and/or a decrease in the fees which can be charged for these services, could affect revenues from our Financial Consulting and other Advisory Services and real estate services as well as our ability to engage new or repeat clients.

We believe that given the relatively low barriers to entry in the Financial Consulting and other Advisory Services and real estate services markets, these markets may become more competitive as the demand for such services increases.

Some of our competitors may be able to devote greater financial resources to marketing and promotional campaigns, secure merchandise from sellers on more favorable terms, adopt more aggressive pricing or inventory availability policies and devote more resources to website and systems development than we are able to do.

Any inability on our part to effectively compete could have a material adverse effect on our financial condition, growth potential and results of operations.

We compete with specialized investment banks to provide financial and investment banking services to small and middle-market companies.

Middle-market investment banks provide access to capital and strategic advice to small and middle-market companies in our target industries.

We compete with those investment banks on the basis of a number of factors, including client relationships, reputation, the abilities of our professionals, transaction execution, innovation, price, market focus and the relative quality of our products and services.

We have experienced intense competition over obtaining advisory mandates in recent years, and we may experience pricing pressures in our investment banking business in the future as some of our competitors seek to obtain increased market share by reducing fees.

Competition in the middle-market may further intensify if larger Wall Street investment banks expand their focus to this sector of the market.

Increased competition could reduce our market share from investment banking services and our ability to generate fees at historical levels.

We also face increased competition due to a trend toward consolidation.

In recent years, there has been substantial consolidation and convergence among companies in the financial services industry.

This trend was amplified in connection with the unprecedented disruption and volatility in the financial markets during the past several years, and, as a result, a number of financial services companies have merged, been acquired or have fundamentally changed their respective business models.

Many of these firms may have the ability to support investment banking, including financial advisory services, with commercial banking, insurance and other financial services in an effort to gain market share, which could result in pricing pressure in our businesses.

UOL competes with numerous providers of broadband, mobile broadband and DSL services, as well as other dial-up Internet access providers, many of whom are large and have significantly more financial and marketing resources.

The principal competitors for UOL’s mobile broadband and DSL services include, among others, local exchange carriers, wireless and satellite service providers, and cable service providers.

magicJack competes with the traditional telephone service providers, which provide telephone service using the public switched telephone network.

Certain of these traditional providers have also added, or are planning to add, broadband telephone services to their existing telephone and broadband offerings.

We also face, or expect to face, competition from cable companies, which offer broadband telephone services to their existing cable television and broadband offerings.

Further, wireless providers offer services that some customers may prefer over wireline-based service.

In the future, as wireless companies offer more minutes at lower prices, their services may become more attractive to customers as a replacement for broadband or wireline-based phone service.

We face competition on magicJack device sales from manufacturers of smart phones, tablets and other handheld wireless devices.

Also, we compete against established alternative voice communication providers, and may face competition from other large, well-capitalized Internet companies.

In addition, we compete with independent broadband telephone service providers.

Our brand investment portfolio competes with companies that own other brands and trademarks, as these companies could enter into similar licensing arrangements with retailers and wholesalers in the United States and internationally.

These companies may be able to respond more quickly to changes in retailer, wholesaler and consumer preferences and devote greater resources to brand acquisition, development and marketing.

If we are unable to attract and retain qualified personnel, we may not be able to compete successfully in our industry.

Our future success depends to a significant degree upon the continued contributions of senior management and the ability to attract and retain other highly qualified management personnel.

We face competition for management from other companies and organizations;

therefore, we may not

be able to retain our existing personnel or fill new positions or vacancies created by expansion or turnover at existing compensation

Although we have entered into employment agreements with key members of the senior management team, there can be no assurances

such key individuals will remain with us.

The loss of any of our executive officers or other key management personnel would disrupt

our operations and divert the time and attention of our remaining officers and management personnel which could have an adverse

effect on our results of operations and potential for growth.

We also face competition

for highly skilled employees with experience in our industry, which requires a unique knowledge base.

We may be unable to recruit

or retain other existing technical, sales and client support personnel that are critical to our ability to execute our business

therefore, we may not be able to retain our existing personnel or fill new positions or vacancies created by expansion or turnover at existing compensation levels.

Although we have entered into employment agreements with key members of the senior management team, there can be no assurances such key individuals will remain with us.

The loss of any of our executive officers or other key management personnel would disrupt our operations and divert the time and attention of our remaining officers and management personnel which could have an adverse effect on our results of operations and potential for growth.

also face competition for highly skilled employees with experience in the industries in which we operate, and some of which requires

a unique knowledge base.

We may be unable to recruit or retain existing technical, sales and client support personnel that are critical

to our ability to execute our business plan, with such difficulties exacerbated by the labor shortages that arose during the COVID-19

pandemic and persist throughout the economy.

Additionally, the ongoing COVID-19 pandemic could affect the availability of our key personnel.

Risks Related to Data Security

Security breaches

and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation

In the ordinary course

of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and

that of our customers, clients and business partners, and personally identifiable information of our employees, in our servers

and on our networks.

The secure processing, maintenance and transmission of this information is critical to our operations and

business strategy.

Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by

hackers or breached due to employee error, malfeasance or other disruptions.

Any such breach could compromise our networks and

the information stored there could be accessed, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of

information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information,

and regulatory penalties.

In addition, such a breach could disrupt our operations and the services we provide to our clients, damage

our reputation, and cause a loss of confidence in our services, which could adversely affect our business and our financial condition.

Significant disruptions

of information technology systems, breaches of data security, or unauthorized disclosures of sensitive data or personally identifiable

information could adversely affect our business, and could subject us to liability or reputational damage.

Our business is increasingly

dependent on critical, complex, and interdependent information technology (“IT”) systems, including Internet-based

systems, some of which are managed or hosted by third parties, to support business processes as well as internal and external communications.

The size and complexity of our IT systems make us vulnerable to, and we have experienced, IT system breakdowns, malicious intrusion,

and computer viruses, which may result in the impairment of our ability to operate our business effectively.

In addition, our systems

and the systems of our third-party providers and collaborators are potentially vulnerable to data security breaches which may expose

sensitive data to unauthorized persons or to the public.

Such data security breaches could lead to the loss of confidential information,

trade secrets or other intellectual property, or could lead to the public exposure of personal information (including personally

identifiable information) of our employees, customers, business partners, and others.

In addition, the increased use of social

media by our employees and contractors could result in inadvertent disclosure of sensitive data or personal information, including

but not limited to, confidential information, trade secrets and other intellectual property.

Any such disruption

or security breach, as well as any action by us or our employees or contractors that might be inconsistent with the rapidly evolving

data privacy and security laws and regulations applicable within the United States and elsewhere where we conduct business, could

result in enforcement actions by U.S.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information

and that of our customers, clients and business partners, and personally identifiable information of our employees, in our servers and

on our networks.

The secure processing, maintenance and transmission of this information is critical to our operations and business strategy.

Despite our security measures, our information technology and infrastructure is vulnerable to attacks by hackers or breach due to employee

error, malfeasance or other disruptions.

Any such breach could compromise our networks and the information stored there could be accessed,

publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings,

liability under laws that protect the privacy of personal information, and regulatory penalties.

In addition, such a breach could disrupt

our operations and the services we provide to our clients, damage our reputation, and cause a loss of confidence in our services, which

could adversely affect our business and our financial condition.

Significant disruptions of information technology systems, breaches of data security, or unauthorized disclosures of sensitive data or personally identifiable information could adversely affect our business, and could subject us to liability or reputational damage.

Our business is increasingly dependent on critical, complex, and interdependent information technology (“IT”) systems, including Internet-based systems, some of which are managed or hosted by third parties, to support business processes as well as internal and external communications.

The size and complexity of our IT systems make us vulnerable to, and we have experienced, IT system breakdowns, malicious intrusion, and computer viruses, which may result in the impairment of our ability to operate our business effectively.

In addition, our systems and the systems of our third-party providers and collaborators are potentially vulnerable to data security breaches which may expose sensitive data to unauthorized persons or to the public.

Such data security breaches could lead to the loss of confidential information, trade secrets or other intellectual property, or could lead to the public exposure of personal information (including personally identifiable information) of our employees, customers, business partners, and others.

In addition, the increased use of social media by our employees and contractors could result in inadvertent disclosure of sensitive data or personal information, including but not limited to, confidential information, trade secrets and other intellectual property.

Any such disruption or security breach, as well as any action by us or our employees or contractors that might be inconsistent with the rapidly evolving data privacy and security laws and regulations applicable within the United States and elsewhere where we conduct business, could result in enforcement actions by U.S.

states, the U.S.

Federal government or foreign governments, liability or sanctions under

data privacy laws that protect personally identifiable information, regulatory penalties, other legal proceedings such as but not

limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business

operations and collaborations, diversion of management efforts and damage to our reputation, which could harm our business and

Because of the rapidly moving nature of technology and the increasing sophistication of cybersecurity threats, our

measures to prevent, respond to and minimize such risks may be unsuccessful.

In addition, the European

Parliament and the Council of the European Union adopted a comprehensive general data privacy regulation (“GDPR”) in

2016 that took effect in May 2018 and governs the collection and use of personal data in the European Union.

The GDPR, which is

wide-ranging in scope, will impose several requirements relating to the consent of the individuals to whom the personal data relates,

the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and

the use of third party processors in connection with the processing of the personal data.

The GDPR also imposes strict rules on

the transfer of personal data out of the European Union to the United States, enhances enforcement authority and imposes large

penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of

the infringer, whichever is greater.

In addition, the California Consumer Privacy Act effective on January 1, 2020 and applies

to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.

The CCPA will

give consumers the right to request disclosure of information collected about them, and whether that information has been sold

or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt

out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these

In October 2019, the California Attorney General adopted regulations to implement the CCPA.

In addition, similar laws have

and may be adopted by other states where the Company does business.

The impact of the CCPA and other state privacy laws on the

Company’s business is yet to be determined.

Due to the ongoing COVID-19

pandemic, most of our personnel have shifted to working remotely and we cannot predict the duration of this shift.

While we have

made substantial investments on our information security infrastructure, this shift has could put stress on our information security

infrastructure and increase the risk of a data breach.

Related to our Securities and Ownership

Anti-takeover

provisions under our charter documents and Delaware law could delay or prevent a change of control and could also limit the market

price of our stock.

Our amended and restated

certificate of incorporation and our bylaws, as amended, contain provisions that could delay or prevent a change of control of

our company or changes in our board of directors that our stockholders might consider favorable.

Our amended and restated certificate

of incorporation provides that our board of directors will be authorized to issue from time to time, without further stockholder

approval, up to 1,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights

and any qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates,

conversion rights, voting rights, rights of redemption, including sinking fund provisions, redemption price or prices, liquidation

preferences and the number of shares constituting any series or designations of any series.

Such shares of preferred stock could

have preferences over our common stock with respect to dividends and liquidation rights.

We may issue additional preferred stock

in ways which may delay, defer or prevent a change of control of our company without further action by our stockholders.

of preferred stock may be issued with voting rights that may adversely affect the voting power of the holders of our common stock

by increasing the number of outstanding shares having voting rights, and by the creation of class or series voting rights.

We are also governed

by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders

owning 15% or more of our outstanding voting stock.

The foregoing and other provisions in our amended and restated certificate

of incorporation, our bylaws, as amended, and Delaware law could make it more difficult for stockholders or potential acquirers

to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including

delaying or impeding a merger, tender offer, or proxy contest or other change of control transaction involving our company.

delay or prevention of a change of control transaction or changes in our board of directors could prevent the consummation of a

transaction in which our stockholders could receive a substantial premium over the then current market price for their shares.

Because of their

significant stock ownership, some of our existing stockholders will be able to exert control over us and our significant corporate

Our executive officers,

directors and their affiliates own or control, in the aggregate, approximately 27.5% of our outstanding common stock as of December

Federal government or foreign governments, liability or sanctions under data privacy laws that protect personally identifiable information, regulatory penalties, other legal proceedings such as but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business operations and collaborations, diversion of management efforts and damage to our reputation, which could harm our business and operations.

Because of the rapidly moving nature of technology and the increasing sophistication of cybersecurity threats, our measures to prevent, respond to and minimize such risks may be unsuccessful.

addition, the European Parliament and the Council of the European Union adopted a comprehensive general data privacy regulation (“GDPR”)

in 2016 that took effect in May 2018 and governs the collection and use of personal data in the European Union.

The GDPR, which is wide-ranging

in scope, will impose several requirements relating to the consent of the individuals to whom the personal data relates, the information

provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third party

processors in connection with the processing of the personal data.

The GDPR also imposes strict rules on the transfer of personal data

out of the European Union to the United States, enhances enforcement authority and imposes large penalties for noncompliance, including

the potential for fines of up to €20 million or 4% of the annual global revenues of the infringer, whichever is greater.

the California Consumer Privacy Act effective since January 1, 2020 applies to for-profit businesses that conduct business in California

and meet certain revenue or data collection thresholds.

The CCPA established new requirements regarding handling of person data to entities

serving or employing California residents, and gave consumers the right to request disclosure of information collected about them, and

whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain

exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against

for exercising these rights.

Such rights will be expanded under the California Privacy Rights Act (“CPRA”) once it goes into

effect on January 1, 2023.

In addition, similar laws have and may be adopted by other states where the Company does business.

of the CCPA and other state privacy laws on the Company’s business is yet to be determined.

During the initial phase of the COVID-19 pandemic, most of our personnel shifted to working remotely and many personnel continue to work remotely.

Additional waves of the pandemic have, and may continue to, cause us to require periods of remote work for certain personnel or locations.

We cannot predict the duration of these disruptions or the durability of the more general trend toward remote work.

While we have made substantial investments on our information security infrastructure, this shift has could put stress on our information security infrastructure and increase the risk of a data breach and could require us to make further investments in our cybersecurity program.

Risks Related to our Securities and Ownership

Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control and could also limit the market price of our stock.

Our amended and restated certificate of incorporation and our bylaws, as amended, contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable.

Our amended and restated certificate of incorporation provides that our board of directors will be authorized to issue from time to time, without further stockholder approval, up to 1,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, rights of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of any series.

Such shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights.

We may issue additional preferred stock in ways which may delay, defer or prevent a change of control of our company without further action by our stockholders.

Such shares of preferred stock may be issued with voting rights that may adversely affect the voting power of the holders of our common stock by increasing the number of outstanding shares having voting rights, and by the creation of class or series voting rights.

We are also governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock.

The foregoing and other provisions in our amended and restated certificate of incorporation, our bylaws, as amended, and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including delaying or impeding a merger, tender offer, or proxy contest or other change of control transaction involving our company.

Any delay or prevention of a change of control transaction or changes in our board of directors could prevent the consummation of a transaction in which our stockholders could receive a substantial premium over the then current market price for their shares.

Because of their significant stock ownership, some of our existing stockholders will be able to exert control over us and our significant corporate decisions.

Our executive officers, directors and their affiliates own or control, in the aggregate, approximately 27.1% of our outstanding common stock as of December 31, 2021.

In particular, our Chairman and Co-Chief Executive Officer, Bryant R.

Riley, owns or controls, in the aggregate, 5,383,368

shares of our common stock or 20.9% of our outstanding common stock as of December 31, 2020.

These stockholders are able to exercise

influence over matters requiring stockholder approval, such as the election of directors and the approval of significant corporate

transactions, including transactions involving an actual or potential change of control of the company or other transactions that

non-controlling stockholders may not deem to be in their best interests.

This concentration of ownership may harm the market price

of our common stock by, among other things:

Riley, owns or controls, in the aggregate, 5,627,388 shares of our common stock or 20.4% of our outstanding common stock as of December 31, 2021.

These stockholders are able to exercise influence over matters requiring stockholder approval, such as the election of directors and the approval of significant corporate transactions, including transactions involving an actual or potential change of control of the company or other transactions that non-controlling stockholders may not deem to be in their best interests.

This concentration of ownership may harm the market price of our common stock by, among other things:

delaying, deferring, or preventing a change in control of our company;

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discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.

Our common stock

price may fluctuate substantially, and your investment could suffer a decline in value.

The market price of

our common stock may be volatile and could fluctuate substantially due to many factors, including, among other things:

Our common stock price may fluctuate substantially, and your investment could suffer a decline in value.

The market price of our common stock may be volatile and could fluctuate substantially due to many factors, including, among other things:

actual or anticipated fluctuations in our results of operations;

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general economic conditions

In addition, the stock

market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the

operating performance of those companies.

These broad market factors may materially harm the market price of our common stock,

regardless of our operating performance.

The trading price

of our common shares is subject to volatility.

On November 16, 2016,

we began trading our shares on the NASDAQ Global Market.

Trading of our common stock has in the past been highly volatile and the

market price of shares of our common stock could continue to fluctuate substantially.

Additionally, if we are not able to maintain

our listing on NASDAQ, then our common stock will again be quoted for trading on an over-the-counter quotation system and may be

subject to more significant fluctuations in stock price and trading volume and large bid and ask price spreads.

We may not pay

dividends regularly or at all in the future.

From time to time,

we may decide to pay dividends which will be dependent upon our financial condition and results of operations.

Our Board of Directors

may reduce or discontinue dividends at any time for any reason it deems relevant and there can be no assurances that we will continue

to generate sufficient cash to pay dividends, or that we will continue to pay dividends with the cash that we do generate.

determination regarding the payment of dividends is subject to the discretion of our Board of Directors, and there can be no assurances

that we will continue to generate sufficient cash to pay dividends, or that we will pay dividends in future periods.

Our level of indebtedness,

and restrictions under such indebtedness, could adversely affect our operations and liquidity.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.

These broad market factors may materially harm the market price of our common stock, regardless of our operating performance.

The trading price of our common shares is subject to volatility.

of our common stock has in the past been highly volatile and the market price of shares of our common stock could continue to fluctuate

substantially.

Additionally, if we are not able to maintain our listing on NASDAQ, then our common stock will be quoted for trading on

an over-the-counter quotation system and may be subject to more significant fluctuations in stock price and trading volume and large

bid and ask price spreads.

We may not pay dividends regularly or at all in the future.

we currently pay dividends quarterly, our Board of Directors may reduce or discontinue dividends at any time for any reason it deems

relevant and there can be no assurances that we will continue to generate sufficient cash to pay dividends, or that we will continue

to pay dividends with the cash that we do generate.

The determination regarding the payment of dividends is subject to the discretion

of our Board of Directors, and there can be no assurances that we will continue to generate sufficient cash to pay dividends, or that

we will pay dividends in future periods.

Our level of indebtedness, and restrictions under such indebtedness, could adversely affect our operations and liquidity.

Our senior notes include:

(a) the 6.75% 2024 Notes with an aggregate principal amount of approximately $111.2 million;

(b) the 7.375% 2023 Notes with an

aggregate principal amount of approximately $137.5 million, (c) the 7.25% 2027 Notes with an aggregate principal amount of $122.8

(d) the 7.50% 2027 Notes with an aggregate principal amount of $128.2 million;

(e) the 6.75% 2024 Notes with an aggregate

(b) the 6.50% 2026 Notes with an aggregate

principal amount of approximately $178.8 million;

(d) the 6.00% 2028 Notes with an aggregate principal amount of approximately $259.3 million;

(e) the 5.50% 2026 Notes with an

aggregate principal amount of approximately $214.2 million;

(f) the 5.25% 2028 Notes with an aggregate principal amount of approximately

$397.3 million;

(g) the 6.375% 2025 Notes with an aggregate principal amount of approximately $130.9 million and (h) the 6.00%

2028 Notes with an aggregate principal amount of approximately $230.0 million.

The Company periodically enters into At Market Issuance

Sales Agreements with B.

and (g) the 5.00% 2026 Notes with an aggregate principal amount of approximately $322.7 million.

The Company periodically

enters into At Market Issuance Sales Agreements with B.

Riley Securities.

Most recently, the Company entered into the February 2020 Sales Agreement on February

The most recent sales agreement prospectus was filed by us with the SEC on January 28, 2021 (the “January 2021

Sales Agreement Prospectus”).

Pursuant to the February 2020 Sales Agreement, the Company may sell from time to time, at the

Company’s option, up to the aggregate principal amount of $150,000,000 of the 7.50% 2027 Notes, 7.25% 2027 Notes, 7.375%

2023 Notes, 6.875% 2023 Notes, 6.75% 2024 Notes, 6.50% 2026 Notes, 6.375% 2025 Notes and Depositary Shares.

At December 31, 2020,

the Company had $132,697 million available for offer and sale pursuant to the February 2020 Sales Agreement.

On December 19, 2018,

BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, a Delaware corporation

(collectively, the “Borrowers”), indirect wholly owned subsidiaries of ours, in the capacity of borrowers, entered

into a credit agreement with the Banc of California, N.A.

in the capacity as agent and lender and with the other lenders party

thereto (the “BRPAC Credit Agreement”).

The most recent sales agreement prospectus was filed by us with

the SEC on January 5, 2022 (the “January 2022 Sales Agreement Prospectus”) superseding the prospectus filed with the SEC on

August 11, 2021, the prospectus filed with the SEC on April 6, 2021, and the prospectus filed with the SEC on January 28, 2021.

to the January 2022 Sales Agreement, the Company may sell from time to time, at the Company’s option, up to an aggregate principal

amount of $250.0 million, 6.75% 2024 Notes, 6.50% 2026 Notes, 6.375% 2025 Notes, 6.00% 2028 Notes, 5.50% 2026 Notes, 5.25% 2028 Notes,

5.00% 2026 Notes and Depositary Shares.

As of December 31, 2021, the Company had $111.9 million available for offer and sale pursuant

to the January 2022 Sales Agreement.

On June 23, 2021, we and our

wholly owned subsidiaries, BR Financial Holdings, LLC, a Delaware limited liability company (the “Primary Guarantor”),

and BR Advisory & Investments, LLC, a Delaware limited liability company (the “Borrower”), entered into a credit

agreement (the “Credit Agreement”) by and among us, Primary Guarantor, the Borrower, the lenders party thereto, Nomura

Corporate Funding Americas, LLC, as administrative agent and Wells Fargo Bank, N.A., as collateral agent, providing for a four-year $200.0

million secured term loan credit facility (the “Term Loan Facility”) and a four-year $80.0 million secured revolving

loan credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit

Facilities”).

The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment.

On the closing date, the

Borrower borrowed the full $200.0 million under the Term Loan Facility.

The Revolving Credit Facility is available for borrowing from

time to time prior to the final maturity of the Revolving Credit Facility.

On December 19, 2018, BRPI

Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, a Delaware corporation (collectively,

the “Borrowers”), indirect wholly owned subsidiaries of ours, in the capacity of borrowers, entered into a credit agreement

with Banc of California, N.A.

in its capacity as agent and lender and with the other lenders party thereto (the “BRPAC Credit Agreement”).

Under the BRPAC Credit Agreement, we borrowed $80.0 million due December 19, 2023.

Pursuant to the terms of the BRPAC Credit Agreement, we may request additional optional term loans in an aggregate principal

amount of up to $10.0 million at any time prior to the first anniversary of the agreement date.

On February 1, 2019, the Borrowers

entered into the First Amendment to Credit Agreement and Joinder with City National Bank as a new lender in which the new lender

extended to Borrowers the additional $10.0 million as further discussed in Note 9 to the accompanying financial statements.

December 31, 2020, the Borrowers entered into the Second Amendment to Credit Agreement pursuant to which, among other things, we

borrowed an additional $75.0 million term loan, the proceeds of which the Borrowers’ will use to repay the outstanding principal

amount of the existing term loans and optional loans and for other general corporate purposes.

In April 2017, we amended our Credit

Agreement with Wells Fargo Bank (the “Wells Fargo Credit Agreement”) to increase our retail liquidation line of credit

from $100 million to $200 million.

The terms of such indebtedness

contain various restrictions and covenants regarding the operation of our business, including, but not limited to, restrictions

on our ability to merge or consolidate with or into any other entity.

We may also secure additional debt financing in the future

in addition to our current debt.

Our level of indebtedness generally could adversely affect our operations and liquidity, by, among

other things:

(i) making it more difficult for us to pay or refinance our debts as they become due during adverse economic and

industry conditions because we may not have sufficient cash flows to make our scheduled debt payments;

(ii) causing us to use a

larger portion of our cash flows to fund interest and principal payments, thereby reducing the availability of cash to fund working

capital, capital expenditures and other business activities;

(iii) making it more difficult for us to take advantage of significant

business opportunities, such as acquisition opportunities or other strategic transactions, and to react to changes in market or

industry conditions;

and (iv) limiting our ability to borrow additional monies in the future to fund working capital, capital expenditures,

acquisitions and other general corporate purposes as and when needed, which could force us to suspend, delay or curtail business

prospects, strategies or operations.

We may not be able to

generate sufficient cash flow to pay the interest on our debt, and future working capital, borrowings or equity financing may not

be available to pay or refinance such debt.

If we are unable to generate sufficient cash flow to pay the interest on our debt,

we may have to delay or curtail our operations.

If we are unable to service our indebtedness, we will be forced to adopt an alternative

strategy that may include actions such as reducing capital expenditures, selling assets, restructuring or refinancing our indebtedness

or seeking additional equity capital.

These alternative strategies may not be affected on satisfactory terms, if at all, and they

may not yield sufficient funds to make required payments on our indebtedness.

If, for any reason, we are unable to meet our debt

service and repayment obligations, we would be in default under the terms of the agreements governing our debt, which could allow

our creditors at that time to declare certain outstanding indebtedness to be due and payable or exercise other available remedies,

which may in turn trigger cross acceleration or cross default rights in other agreements.

If that should occur, we may not be able

to pay all such debt or to borrow sufficient funds to refinance it.

Even if new financing were then available, it may not be on

terms that are acceptable to us.

Our senior notes

are unsecured and therefore are effectively subordinated to any secured indebtedness that we currently have or that we may incur

in the future.

Our senior notes are

not secured by any of our assets or any of the assets of our subsidiaries.

As a result, our senior notes are effectively subordinated

to any secured indebtedness that we or our subsidiaries have currently outstanding or may incur in the future (or any indebtedness

that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness.

The indenture governing our senior notes does not prohibit us or our subsidiaries from incurring additional secured (or unsecured)

indebtedness in the future.

In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our

existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged

to secure that indebtedness and may consequently receive payment from these assets before they may be used to pay other creditors,

including the holders of our senior notes.

Our senior notes

are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

Our senior notes are

obligations exclusively of the Company and not of any of our subsidiaries.

None of our subsidiaries is a guarantor of our senior

notes, and our senior notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.

in any bankruptcy, liquidation or similar proceeding, all claims of creditors (including trade creditors) of our subsidiaries will

have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of our

senior notes) with respect to the assets of such subsidiaries.

Even if we are recognized as a creditor of one or more of our subsidiaries,

our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness

or other liabilities of any such subsidiary senior to our claims.

Consequently, our senior notes will be structurally subordinated

to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may

in the future acquire or establish as financing vehicles or otherwise.

The indenture governing our senior notes does not prohibit

us or our subsidiaries from incurring additional indebtedness in the future.

In addition, future debt and security agreements entered

into by our subsidiaries may contain various restrictions, including restrictions on payments by our subsidiaries to us and the

transfer by our subsidiaries of assets pledged as collateral.

The indenture

under which our senior notes were issued contains limited protection for holders of our senior notes.

The indenture under

which our senior notes were issued offers limited protection to holders of our senior notes.

The terms of the indenture and our

senior notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety

of corporate transactions, circumstances or events that could have an adverse impact on the holders of our senior notes.

In particular,

the terms of the indenture and our senior notes do not place any restrictions on our or our subsidiaries’ ability to:

Pursuant to the terms of the BRPAC Credit Agreement,

we may request additional optional term loans in an aggregate principal amount of up to $10.0 million at any time prior to the first anniversary

of the agreement date.

On February 1, 2019, the Borrowers entered into the First Amendment to Credit Agreement and Joinder with City National

Bank as a new lender in which the new lender extended to Borrowers the additional $10.0 million as further discussed in Note 11 to the

accompanying financial statements.

On December 31, 2020, the Borrowers entered into the Second Amendment to Credit Agreement pursuant

to which, among other things, we borrowed an additional $75.0 million term loan, the proceeds of which the Borrowers’ will use to

repay the outstanding principal amount of the existing term loans and optional loans and for other general corporate purposes.

2017, we amended our Credit Agreement with Wells Fargo Bank (the “Wells Fargo Credit Agreement”) to increase our retail liquidation

line of credit from $100 million to $200 million.

The terms of such indebtedness contain various restrictions and covenants regarding the operation of our business, including, but not limited to, restrictions on our ability to merge or consolidate with or into any other entity.

We may also secure additional debt financing in the future in addition to our current debt.

Our level of indebtedness generally could adversely affect our operations and liquidity, by, among other things:

(i) making it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions because we may not have sufficient cash flows to make our scheduled debt payments;

(ii) causing us to use a larger portion of our cash flows to fund interest and principal payments, thereby reducing the availability of cash to fund working capital, capital expenditures and other business activities;

(iii) making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities or other strategic transactions, and to react to changes in market or industry conditions;

and (iv) limiting our ability to borrow additional monies in the future to fund working capital, capital expenditures, acquisitions and other general corporate purposes as and when needed, which could force us to suspend, delay or curtail business prospects, strategies or operations.

We may not be able to generate sufficient cash flow to pay the interest on our debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt.

If we are unable to generate sufficient cash flow to pay the interest on our debt, we may have to delay or curtail our operations.

If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital.

These alternative strategies may not be affected on satisfactory terms, if at all, and they may not yield sufficient funds to make required payments on our indebtedness.

If, for any reason, we are unable to meet our debt service and repayment obligations, we would be in default under the terms of the agreements governing our debt, which could allow our creditors at that time to declare certain outstanding indebtedness to be due and payable or exercise other available remedies, which may in turn trigger cross acceleration or cross default rights in other agreements.

If that should occur, we may not be able to pay all such debt or to borrow sufficient funds to refinance it.

Even if new financing were then available, it may not be on terms that are acceptable to us.

Our senior notes are unsecured and therefore are effectively subordinated to any secured indebtedness that we currently have or that we may incur in the future.

Our senior notes are not secured by any of our assets or any of the assets of our subsidiaries.

As a result, our senior notes are effectively subordinated to any secured indebtedness that we or our subsidiaries have currently outstanding or may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness.

The indenture governing our senior notes does not prohibit us or our subsidiaries from incurring additional secured (or unsecured) indebtedness in the future.

In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness and may consequently receive payment from these assets before they may be used to pay other creditors, including the holders of our senior notes.

Our senior notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

Our senior notes are obligations exclusively of the Company and not of any of our subsidiaries.

None of our subsidiaries is a guarantor of our senior notes, and our senior notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.

Therefore, in any bankruptcy, liquidation or similar proceeding, all claims of creditors (including trade creditors) of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of our senior notes) with respect to the assets of such subsidiaries.

Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims.

Consequently, our senior notes will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise.

The indenture governing our senior notes does not prohibit us or our subsidiaries from incurring additional indebtedness in the future.

In addition, future debt and security agreements entered into by our subsidiaries may contain various restrictions, including restrictions on payments by our subsidiaries to us and the transfer by our subsidiaries of assets pledged as collateral.

The indenture under which our senior notes were issued contains limited protection for holders of our senior notes.

The indenture under which our senior notes were issued offers limited protection to holders of our senior notes.

The terms of the indenture and our senior notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on the holders of our senior notes.

In particular, the terms of the indenture and our senior notes do not place any restrictions on our or our subsidiaries’ ability to:

issue debt securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to our senior notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to our senior notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to our senior notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to our senior notes with respect to the assets of our subsidiaries;

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create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

In addition, the indenture

does not include any protection against certain events, such as a change of control, a leveraged recapitalization or “going

private” transaction (which may result in a significant increase of our indebtedness levels), restructuring or similar transactions.

Furthermore, the terms of the indenture and our senior notes do not protect holders of our senior notes in the event that we experience

changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do

not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income,

cash flow, or liquidity.

Also, an event of default or acceleration under our other indebtedness would not necessarily result in

an event of default under our senior notes.

Our ability to recapitalize,

incur additional debt and take a number of other actions that are not limited by the terms of our senior notes may have important

consequences for the holders of our senior notes, including making it more difficult for us to satisfy our obligations with respect

to our senior notes or negatively affecting the trading value of our senior notes.

Other debt we issue

or incur in the future could contain more protections for its holders than the indenture and our senior notes, including additional

covenants and events of default.

The issuance or incurrence of any such debt with incremental protections could affect the market

for and trading levels and prices of our senior notes.

An increase in

market interest rates could result in a decrease in the value of our senior notes.

In general, as market

interest rates rise, notes bearing interest at a fixed rate decline in value.

Consequently, if the market interest rates increase

after our senior notes were purchased, the market value of our senior notes may decline.

We cannot predict the future level of

market interest rates.

An active trading

market for our senior notes may not develop, which could limit the market price of our senior notes or the ability of our senior

note holders to sell them.

The 7.25% 2027 Notes

are quoted on Nasdaq under the symbol “RILYG,” the 7.50% 2027 Notes are quoted on Nasdaq under the symbol “RILYZ,”

the 7.375% 2023 Notes are quoted on Nasdaq under the symbol “RILYH,” the 6.875% 2023 Notes are quoted on Nasdaq under

the symbol “RILYI,” the 6.75% 2024 Notes are quoted on Nasdaq under the symbol “RILYO,” the 6.50% 2026

Notes are quoted on Nasdaq under the symbol “RILYN,” the 6.375% 2025 Notes are quoted on Nasdaq under the symbol “RILYM”

and the 6.00% 2028 Notes are quoted on Nasdaq under the symbol “RILYT”.

We cannot provide any assurances that an active

trading market will develop for our senior notes or that our senior note holders will be able to sell their senior notes.

senior notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending

on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial

condition, performance and prospects and other factors.

Accordingly, we cannot assure our senior note holders that a liquid trading

market will develop for our senior notes, that our senior note holders will be able to sell our senior notes at a particular time

or that the price our senior note holders receive when they sell will be favorable.

To the extent an active trading market does

not develop, the liquidity and trading price for our senior notes may be harmed.

Accordingly, our senior note holders may be required

to bear the financial risk of an investment in our senior notes for an indefinite period of time.

We may issue additional

Under the terms of the

indenture governing our senior notes, we may from time to time without notice to, or the consent of, the holders of our senior

notes, create and issue additional notes which will be equal in rank to our senior notes.

We will not issue any such additional

notes unless such issuance would constitute a “qualified reopening” for U.S.

In addition, the indenture does not include any protection against certain events, such as a change of control, a leveraged recapitalization or “going private” transaction (which may result in a significant increase of our indebtedness levels), restructuring or similar transactions.

Furthermore, the terms of the indenture and our senior notes do not protect holders of our senior notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.

Also, an event of default or acceleration under our other indebtedness would not necessarily result in an event of default under our senior notes.

Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of our senior notes may have important consequences for the holders of our senior notes, including making it more difficult for us to satisfy our obligations with respect to our senior notes or negatively affecting the trading value of our senior notes.

Other debt we issue or incur in the future could contain more protections for its holders than the indenture and our senior notes, including additional covenants and events of default.

The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of our senior notes.

An increase in market interest rates could result in a decrease in the value of our senior notes.

In general, as market interest rates rise, notes bearing interest at a fixed rate decline in value.

Consequently, if the market interest rates increase after our senior notes were purchased, the market value of our senior notes may decline.

We cannot predict the future level of market interest rates.

An active trading market for our senior notes may not develop, which could limit the market price of our senior notes or the ability of our senior note holders to sell them.

The 5.00% 2026 Notes are

quoted on NASDAQ under the symbol “RILYG,” the 5.25% 2028 Notes are quoted on NASDAQ under the symbol “RILYZ,”

the 6.75% 2024 Notes are quoted on NASDAQ under the symbol “RILYO,” the 6.50% 2026 Notes are quoted on NASDAQ under the symbol

“RILYN,” the 6.375% 2025 Notes are quoted on NASDAQ under the symbol “RILYM,” the 5.50% 2026 Notes are quoted

on the NASDAQ under the symbol “RILYK” and the 6.00% 2028 Notes are quoted on NASDAQ under the symbol “RILYT”.

We cannot provide any assurances that an active trading market will develop for our senior notes or that our senior note holders will

be able to sell their senior notes.

If the senior notes are traded after their initial issuance, they may trade at a discount from their

initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic

conditions, our financial condition, performance and prospects and other factors.

Accordingly, we cannot assure our senior note holders

that a liquid trading market will develop for our senior notes, that our senior note holders will be able to sell our senior notes at

a particular time or that the price our senior note holders receive when they sell will be favorable.

To the extent an active trading

market does not develop, the liquidity and trading price for our senior notes may be harmed.

Accordingly, our senior note holders may

be required to bear the financial risk of an investment in our senior notes for an indefinite period of time.

We may issue additional notes.

Under the terms of the indenture governing our senior notes, we may from time to time without notice to, or the consent of, the holders of our senior notes, create and issue additional notes which will be equal in rank to our senior notes.

We will not issue any such additional notes unless such issuance would constitute a “qualified reopening” for U.S.

federal income tax purposes.

The rating for

the 7.25% 2027 Notes, 7.375% 2023 Notes, 6.875% 2023 Notes, 6.75% 2024 Notes, 6.50% 2026 Notes, 6.375% 2025 Notes or 6.00% 2028

Notes could at any time be revised downward or withdrawn entirely at the discretion of the issuing rating agency.

We have obtained a rating

for the 7.25% 2027 Notes, 7.375% 2023 Notes, 6.875% 2023 Notes, 2024 Notes, 2026 Notes, 2025 Notes and 2028 Notes (collectively,

the “Rated Notes”).

Ratings only reflect the views of the issuing rating agency or agencies and such ratings could

at any time be revised downward or withdrawn entirely at the discretion of the issuing rating agency.

A rating is not a recommendation

to purchase, sell or hold any of the Rated Notes.

Ratings do not reflect market prices or suitability of a security for a particular

investor and the rating of the Rated Notes may not reflect all risks related to us and our business, or the structure or market

value of the Rated Notes.

The rating for the 5.00% 2026 Notes, 5.25% 2028 Notes, 6.75% 2024 Notes, 6.50% 2026 Notes, 6.375% 2025 Notes, 5.50% 2026 Notes, or 6.00% 2028 Notes could at any time be revised downward or withdrawn entirely at the discretion of the issuing rating agency.

We have obtained a rating for the 5.00% 2026 Notes, 5.25% 2028 Notes, 6.75% 2024 Notes, 6.50% 2026 Notes, 6.375% 2025 Notes, 5.50% 2026 Notes, and 6.00% 2028 Notes (collectively, the “Rated Notes”).

Ratings only reflect the views of the issuing rating agency or agencies and such ratings could at any time be revised downward or withdrawn entirely at the discretion of the issuing rating agency.

A rating is not a recommendation to purchase, sell or hold any of the Rated Notes.

Ratings do not reflect market prices or suitability of a security for a particular investor and the rating of the Rated Notes may not reflect all risks related to us and our business, or the structure or market value of the Rated Notes.

We may elect to issue other securities for which we may seek to obtain a rating in the future.

issue other securities with a rating, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn,

could adversely affect the market for or the market value of the Rated Notes.

There is no established

market for the Depositary Shares and the market value of the Depositary Shares could be substantially affected by various factors.

The Depositary Shares

are a new issue of securities with no established trading market.

Although the shares recently began trading on the Nasdaq Global

Market, an active trading market on the Nasdaq Global Market for the Depositary Shares may not develop or last, in which case the

trading price of the Depositary Shares could be adversely affected.

If an active trading market does develop on the Nasdaq Global

Market, the Depositary Shares may trade at prices higher or lower than their initial offering price.

The trading price of the Depositary

Shares also depends on many factors, including, but not limited to:

If we issue other securities with a rating, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn, could adversely affect the market for or the market value of the Rated Notes.

There is no established market for the Depositary Shares and the market value of the Depositary Shares could be substantially affected by various factors.

The Depositary Shares are

an issue of securities with no established trading market.

Although the shares are trading on the NASDAQ Global Market, an active trading

market on the NASDAQ Global Market for the Depositary Shares may not develop or last, in which case the trading price of the Depositary

Shares could be adversely affected.

If an active trading market does develop on the NASDAQ Global Market, the Depositary Shares may trade

at prices higher or lower than their initial offering price.

The trading price of the Depositary Shares also depends on many factors,

including, but not limited to:

prevailing interest rates;

2 unchanged sentences

the Company’s financial condition, results of operations and prospects.

The Company has been

advised by some of the underwriters that they intend to make a market in the Depositary Shares, but they are not obligated to do

so and may discontinue market-making at any time without notice.

The Existing Preferred

Stock and the Depositary Shares rank junior to all of the Company’s indebtedness and other liabilities and are effectively

junior to all indebtedness and other liabilities of the Company’s subsidiaries.

In the event of a bankruptcy,

liquidation, dissolution or winding-up of the affairs of the Company, the Company’s assets will be available to pay obligations

on the 6.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”)

and the 7.375% Series B Cumulative Perpetual Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”

and, together with the Series A Preferred Stock, the “Existing Preferred Stock”), which ranks in parity with the Series

A Preferred Stock, only after all of the Company’s indebtedness and other liabilities have been paid.

The rights of holders

of the Existing Preferred Stock to participate in the distribution of the Company’s assets will rank junior to the prior

claims of the Company’s current and future creditors and any future series or class of preferred stock the Company may issue

that ranks senior to the Existing Preferred Stock.

In addition, the Existing Preferred Stock effectively ranks junior to all existing

and future indebtedness and other liabilities of (as well as any preferred equity interests held by others in) the Company’s

existing subsidiaries and any future subsidiaries.

The Company’s existing subsidiaries are, and any future subsidiaries would

be, separate legal entities and have no legal obligation to pay any amounts to the Company in respect of dividends due on the Existing

Preferred Stock.

If the Company is forced to liquidate its assets to pay its creditors, the Company may not have sufficient assets

to pay amounts due on any or all of the Existing Preferred Stock then outstanding.

The Company and its subsidiaries have incurred

and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Existing Preferred Stock.

The Company may incur additional indebtedness and become more highly leveraged in the future, which could harm the Company’s

financial position and potentially limit cash available to pay dividends.

As a result, the Company may not have sufficient funds

remaining to satisfy its dividend obligations relating to the Existing Preferred Stock if the Company incurs additional indebtedness.

Future offerings of

debt or senior equity securities may adversely affect the market price of the Depositary Shares.

If the Company decides to issue

debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other

instrument containing covenants restricting the Company’s operating flexibility.

Additionally, any convertible or exchangeable

securities that the Company issues in the future may have rights, preferences and privileges more favorable than those of the Existing

Preferred Stock and may result in dilution to owners of the Depositary Shares.

The Company and, indirectly, the Company’s

shareholders, will bear the cost of issuing and servicing such securities.

Because the Company’s decision to issue debt or

equity securities in any future offering will depend on market conditions and other factors beyond the Company’s control,

the Company cannot predict or estimate the amount, timing or nature of the Company’s future offerings.

Thus, holders of the

Depositary Shares will bear the risk of the Company’s future offerings reducing the market price of the Depositary Shares

and diluting the value of their holdings in the Company.

The Company may

issue additional shares of the Existing Preferred Stock and additional series of preferred stock that rank on a parity with the

Existing Preferred Stock as to dividend rights, rights upon liquidation or voting rights.

The Company is allowed

to issue additional shares of Existing Preferred Stock and additional series of preferred stock that would rank on a parity with

the Existing Preferred Stock as to dividend payments and rights upon the Company’s liquidation, dissolution or winding up

of the Company’s affairs pursuant to the Company’s articles of incorporation and the certificate of designation for

The Company has been advised by some of the underwriters that they intend to make a market in the Depositary Shares, but they are not obligated to do so and may discontinue market-making at any time without notice.

The Existing Preferred Stock and the Depositary Shares rank junior to all of the Company’s indebtedness and other liabilities and are effectively junior to all indebtedness and other liabilities of the Company’s subsidiaries.

In the event of a bankruptcy, liquidation, dissolution or winding-up of the affairs of the Company, the Company’s assets will be available to pay obligations on the 6.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) and the 7.375% Series B Cumulative Perpetual Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Existing Preferred Stock”), which ranks in parity with the Series A Preferred Stock, only after all of the Company’s indebtedness and other liabilities have been paid.

The rights of holders of the Existing Preferred Stock to participate in the distribution of the Company’s assets will rank junior to the prior claims of the Company’s current and future creditors and any future series or class of preferred stock the Company may issue that ranks senior to the Existing Preferred Stock.

In addition, the Existing Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of (as well as any preferred equity interests held by others in) the Company’s existing subsidiaries and any future subsidiaries.

The Company’s existing subsidiaries are, and any future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to the Company in respect of dividends due on the Existing Preferred Stock.

If the Company is forced to liquidate its assets to pay its creditors, the Company may not have sufficient assets to pay amounts due on any or all of the Existing Preferred Stock then outstanding.

The Company and its subsidiaries have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Existing Preferred Stock.

The Company may incur additional indebtedness and become more highly leveraged in the future, which could harm the Company’s financial position and potentially limit cash available to pay dividends.

As a result, the Company may not have sufficient funds remaining to satisfy its dividend obligations relating to the Existing Preferred Stock if the Company incurs additional indebtedness.

Future offerings of debt or senior equity securities may adversely affect the market price of the Depositary Shares.

If the Company decides to issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instrument containing covenants restricting the Company’s operating flexibility.

Additionally, any convertible or exchangeable securities that the Company issues in the future may have rights, preferences and privileges more favorable than those of the Existing Preferred Stock and may result in dilution to owners of the Depositary Shares.

The Company and, indirectly, the Company’s shareholders, will bear the cost of issuing and servicing such securities.

Because the Company’s decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond the Company’s control, the Company cannot predict or estimate the amount, timing or nature of the Company’s future offerings.

Thus, holders of the Depositary Shares will bear the risk of the Company’s future offerings reducing the market price of the Depositary Shares and diluting the value of their holdings in the Company.

The Company may issue additional shares of the Existing Preferred Stock and additional series of preferred stock that rank on a parity with the Existing Preferred Stock as to dividend rights, rights upon liquidation or voting rights.

Company is allowed to issue additional shares of Existing Preferred Stock and additional series of preferred stock that would rank on

a parity with the Existing Preferred Stock as to dividend payments and rights upon the Company’s liquidation, dissolution or winding

up of the Company’s affairs pursuant to the Company’s certificate of incorporation and the certificate of designation for

the Existing Preferred Stock without any vote of the holders of the Existing Preferred Stock.

The Company’s articles of incorporation

authorize the Company to issue up to 1,000,000 shares of preferred stock in one or more series on terms determined by the Company’s

The Company’s certificate of incorporation

authorizes the Company to issue up to 1,000,000 shares of preferred stock in one or more series on terms determined by the Company’s

Board of Directors.

Prior to the issuance of Series A Preferred Stock, the Company had no outstanding series of preferred stock.

However, the use of depositary shares enables the Company to issue significant amounts of preferred stock, notwithstanding the

number of shares authorized by the Company’s articles of incorporation.

However, the use of depositary shares enables the Company to issue significant amounts of preferred stock, notwithstanding

the number of shares authorized by the Company’s certificate of incorporation.

The issuance of additional shares of Existing Preferred

1 unchanged sentence

stockholders upon the Company’s liquidation or dissolution or the winding up of the Company’s affairs.

reduce dividend payments on the Existing Preferred Stock issued and outstanding if the Company does not have sufficient funds to

pay dividends on all Existing Preferred Stock outstanding and other classes of stock with equal priority with respect to dividends.

In addition, although

holders of the Depositary Shares are entitled to limited voting rights (discussed further below), the holders of the Depositary

Shares will vote separately as a class along with all other outstanding series of the Company’s preferred stock that the

Company may issue upon which like voting rights have been conferred and are exercisable.

As a result, the voting rights of holders

of the Depositary Shares may be significantly diluted, and the holders of such other series of preferred stock that the Company

may issue may be able to control or significantly influence the outcome of any vote.

Future issuances and

sales of parity preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices

for the Depositary Shares and the Company’s common stock to decline and may adversely affect the Company’s ability

to raise additional capital in the financial markets at times and prices favorable to the Company.

Such issuances may also reduce

or eliminate the Company’s ability to pay dividends on the Company’s common stock.

Holders of Depositary

Shares will have extremely limited voting rights.

The voting rights of

holders of Depositary Shares will be limited.

The Company’s common stock is the only class of the Company’s securities

that carries full voting rights.

Voting rights for holders of Depositary Shares will exist primarily with respect to the ability

It also may reduce

dividend payments on the Existing Preferred Stock issued and outstanding if the Company does not have sufficient funds to pay dividends

on all Existing Preferred Stock outstanding and other classes of stock with equal priority with respect to dividends.

In addition, although holders of the Depositary Shares are entitled to limited voting rights (discussed further below), the holders of the Depositary Shares will vote separately as a class along with all other outstanding series of the Company’s preferred stock that the Company may issue upon which like voting rights have been conferred and are exercisable.

As a result, the voting rights of holders of the Depositary Shares may be significantly diluted, and the holders of such other series of preferred stock that the Company may issue may be able to control or significantly influence the outcome of any vote.

Future issuances and sales of parity preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Depositary Shares and the Company’s common stock to decline and may adversely affect the Company’s ability to raise additional capital in the financial markets at times and prices favorable to the Company.

Such issuances may also reduce or eliminate the Company’s ability to pay dividends on the Company’s common stock.

Holders of Depositary Shares have extremely limited voting rights.

voting rights of holders of Depositary Shares are limited.

The Company’s common stock is the only class of the Company’s

securities that carries full voting rights.

Voting rights for holders of Depositary Shares exist primarily with respect to the ability

to elect (together with the holders of other outstanding series of the Company’s preferred stock, or Depositary Shares representing

interests in the Company’s preferred stock, or additional series of preferred stock the Company may issue in the future and

upon which similar voting rights have been or are in the future conferred and are exercisable) two additional directors to the

Company’s Board of Directors in the event that six quarterly dividends (whether or not declared or consecutive) payable on

the Existing Preferred Stock are in arrears, and with respect to voting on amendments to the Company’s articles of incorporation

or certificate of designation (in some cases voting together with the holders of other outstanding series of the Company’s

preferred stock as a single class) that materially and adversely affect the rights of the holders of Depositary Shares (and other

series of preferred stock, as applicable) or create additional classes or series of the Company’s stock that are senior to

the Existing Preferred Stock, provided that in any event adequate provision for redemption has not been made.

Other than the limited

circumstances described in this prospectus supplement, holders of Depositary Shares will not have any voting rights.

The Depositary

Shares have not been rated.

The Existing Preferred

Stock and the Depositary Shares have not been rated and may never be rated.

It is possible, however, that one or more rating agencies

might independently decide to assign a rating to the Depositary Shares or that the Company may elect to obtain a rating of the

Depositary Shares in the future.

Furthermore, the Company may elect to issue other securities for which the Company may seek to

obtain a rating.

If any ratings are assigned to the Depositary Shares in the future or if the Company issues other securities with

a rating, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn, could adversely affect

the market for, or the market value of, the Depositary Shares.

Ratings reflect the

views of the issuing rating agency or agencies, and such ratings could at any time be revised downward, placed on negative outlook

or withdrawn entirely at the discretion of the issuing rating agency or agencies.

Furthermore, a rating is not a recommendation

to purchase, sell or hold any particular security, including the Depositary Shares.

Ratings do not reflect market prices or the

suitability of a security for a particular investor, and any future rating of the Depositary Shares may not reflect all risks related

to the Company and its business, or the structure or market value of the Depositary Shares.

The conversion

feature may not adequately compensate the holders, and the conversion and redemption features of the Existing Preferred Stock and

the Depositary Shares may make it more difficult for a party to take over the Company and may discourage a party from taking over

Upon the occurrence

of a Delisting Event or Change of Control (each as defined in the certificate of designation for each series of the Existing Preferred

Stock, respectively), holders of the Depositary Shares will have the right (unless, prior to the Delisting Event Conversion Date

or Change of Control Conversion Date (each as defined in the certificate of designation for each series of the Existing Preferred

Stock, respectively), as applicable, the Company has provided or provide notice of the Company’s election to redeem such

series of Existing Preferred Stock) to direct the depositary to convert some or all of such series of Existing Preferred Stock

underlying their Depositary Shares into the Company’s common stock (or equivalent value of alternative consideration), and

under these circumstances the Company will also have a special optional redemption right to redeem such series of Existing Preferred

Upon such a conversion, the holders will be limited to a maximum number of shares of the Company’s common stock equal

to the Share Cap (as defined in the certificate of designation for each series of the Existing Preferred Stock, respectively) multiplied

by the number of shares of such series of Existing Preferred Stock converted.

If the Common Stock Price is less than $11.49 in

the case of the Series A Preferred Stock (which is approximately 50% of the closing sale price per share of the Company’s

common stock on October 1, 2019) or $13.39 in the case of the Series B Preferred Stock (which is approximately 50% of the closing

sale price per share of the Company’s common stock on August 31, 2020), subject to adjustment, the holders will receive a

maximum number of shares of the Company’s common stock per depositary share, which may result in a holder receiving value

that is less than the liquidation preference of the Depositary Shares.

In addition, those features of the Existing Preferred Stock

and Depositary Shares may have the effect of inhibiting a third party from making an acquisition proposal for the Company or of

delaying, deferring or preventing a change of control of the Company under circumstances that otherwise could provide the holders

of the Company’s common stock and Depositary Shares with the opportunity to realize a premium over the then-current market

price or that shareholders may otherwise believe is in their best interests.

The market price

of the Depositary Shares could be substantially affected by various factors.

The market price of

the Depositary Shares will depend on many factors, which may change from time to time, including:

interests in the Company’s preferred stock, or additional series of preferred stock the Company may issue in the future and upon

which similar voting rights have been or are in the future conferred and are exercisable) two additional directors to the Company’s

Board of Directors in the event that six quarterly dividends (whether or not declared or consecutive) payable on the Existing Preferred

Stock are in arrears, and with respect to voting on amendments to the Company’s certificate of incorporation or certificate of

designation (in some cases voting together with the holders of other outstanding series of the Company’s preferred stock as a single

class) that materially and adversely affect the rights of the holders of Depositary Shares (and other series of preferred stock, as applicable)

or create additional classes or series of the Company’s stock that are senior to the Existing Preferred Stock, provided that in

any event adequate provision for redemption has not been made.

Other than the limited circumstances described in this prospectus supplement,

holders of Depositary Shares will not have any voting rights.

The Depositary Shares have not been rated.

The Existing Preferred Stock and the Depositary Shares have not been rated and may never be rated.

It is possible, however, that one or more rating agencies might independently decide to assign a rating to the Depositary Shares or that the Company may elect to obtain a rating of the Depositary Shares in the future.

Furthermore, the Company may elect to issue other securities for which the Company may seek to obtain a rating.

If any ratings are assigned to the Depositary Shares in the future or if the Company issues other securities with a rating, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn, could adversely affect the market for, or the market value of, the Depositary Shares.

Ratings reflect the views of the issuing rating agency or agencies, and such ratings could at any time be revised downward, placed on negative outlook or withdrawn entirely at the discretion of the issuing rating agency or agencies.

Furthermore, a rating is not a recommendation to purchase, sell or hold any particular security, including the Depositary Shares.

Ratings do not reflect market prices or the suitability of a security for a particular investor, and any future rating of the Depositary Shares may not reflect all risks related to the Company and its business, or the structure or market value of the Depositary Shares.

The conversion feature may not adequately compensate the holders, and the conversion and redemption features of the Existing Preferred Stock and the Depositary Shares may make it more difficult for a party to take over the Company and may discourage a party from taking over the Company.

the occurrence of a Delisting Event or Change of Control (each as defined in the certificate of designation for each series of the Existing

Preferred Stock, respectively), holders of the Depositary Shares will have the right (unless, prior to the Delisting Event Conversion

Date or Change of Control Conversion Date (each as defined in the certificate of designation for each series of the Existing Preferred

Stock, respectively), as applicable, the Company has provided or provide notice of the Company’s election to redeem such series

of Existing Preferred Stock) to direct the depositary to convert some or all of such series of Existing Preferred Stock underlying their

Depositary Shares into the Company’s common stock (or equivalent value of alternative consideration), and under these circumstances

the Company will also have a special optional redemption right to redeem such series of Existing Preferred Stock.

Upon such a conversion,

the holders will be limited to a maximum number of shares of the Company’s common stock equal to the Share Cap (as defined in the

certificate of designation for each series of the Existing Preferred Stock, respectively) multiplied by the number of shares of such

series of Existing Preferred Stock converted.

If the common stock price is less than $11.49 in the case of the Series A Preferred Stock

(which is approximately 50% of the closing sale price per share of the Company’s common stock on October 1, 2019) or $13.39 in

the case of the Series B Preferred Stock (which is approximately 50% of the closing sale price per share of the Company’s common

stock on August 31, 2020), subject to adjustment, the holders will receive a maximum number of shares of the Company’s common stock

per depositary share, which may result in a holder receiving value that is less than the liquidation preference of the Depositary Shares.

In addition, those features of the Existing Preferred Stock and Depositary Shares may have the effect of inhibiting a third party from

making an acquisition proposal for the Company or of delaying, deferring or preventing a change of control of the Company under circumstances

that otherwise could provide the holders of the Company’s common stock and Depositary Shares with the opportunity to realize a

premium over the then-current market price or that shareholders may otherwise believe is in their best interests.

The market price of the Depositary Shares could be substantially affected by various factors.

The market price of the Depositary Shares will depend on many factors, which may change from time to time, including:

prevailing interest rates, increases in which may have an adverse effect on the market price of the Depositary Shares;

6 unchanged sentences

actual or anticipated variations in quarterly operating results of the Company and its competitors.

As a result of these and other factors, investors

who purchase the Depositary Shares may experience a decrease, which could be substantial and rapid, in the market price of the

Depositary Shares, including decreases unrelated to the Company’s operating performance or prospects.

As a result of these and other factors, investors who purchase the Depositary Shares may experience a decrease, which could be substantial and rapid, in the market price of the Depositary Shares, including decreases unrelated to the Company’s operating performance or prospects.

UNRESOLVED STAFF COMMENTS

Our headquarters are

located in Los Angeles, California in a leased facility.

We believe that our existing facilities are suitable and adequate for

the business conducted therein, appropriately used and have sufficient capacity for their intended purpose.

Our headquarters are located

in Los Angeles, California in a leased facility.

We believe that this facility and our other existing facilities are suitable and adequate

for the business conducted therein, appropriately used and have sufficient capacity for their intended purpose.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors