Risk Factors - AAMC

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$AAMC Risk Factor changes from 00/03/27/23/2023 to 00/03/29/24/2024

Item 1A. Risk Factors.” ii(table of contents)Part IItem 1.”ii(table of contents)Part I Item 1. BusinessOur BusinessAltisource Asset Management Corporation (“we,” “our,” “us,” “AAMC,” or the “Company”) was incorporated in the U. S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”) and commenced operations as an asset manager on December 21, 2012. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”), and commenced operations as an asset manager on December 21, 2012. As disclosed in our public filings, the Company's asset management business operations ceased in 2021. As disclosed in our public filings, the Company's prior business operations ceased in the first week of 2021. During 2022 and 2023, the Company generated alternative private credit loans through Direct to Borrower Lending, Wholesale Originations and Correspondent Loan Acquisitions and funded the originated or acquired alternative loans from a combination of Company equity and lines of credit. Those loans were then sold through forward commitments and repurchase contracts.Following a full year of ALG’s operations, our Board of Directors mandated a comprehensive review of the Company’s mortgage platform to improve the performance of the business. The review involved assessments of operational efficiency and capacity issues, opportunities for cost reductions, strategies for improving liquidity, among other initiatives, all with a view toward enhancing financial performance. The Company made significant progress in reducing costs and streamlining operations. This included an across-the-board employee right-sizing, reducing expenditures for third-party professional services, reducing reliance on lines of credit and significantly reducing our investment in loans held for sale and investment. While the Company will retain the ability to originate and purchase loans in the future, it does not anticipate doing so other than on a very selective basis. The Company’s principal line of business going forward is the development and licensing of a control system which increases the efficiency of electric vehicles. On October 6, 2023, the Company signed a Non-Exclusive Patent and Technology Licensing Agreement (“PTL Agreement”) with System73 Limited (“System73”), an entity incorporated under the laws of Malta and controlled and managed by the 49.5% owners of the Company’s common stock. Under the PTL Agreement, the Company acquired a non-exclusive license for a set of patents for a control system which seeks to optimize the efficiency of electric vehicles (“Alpha Controls”). Electric motors have very narrow ranges of torque and speed where they are highly efficient. Outside of that range, efficiency generally rapidly deteriorates. By employing multiple motors with differing peak efficiency ranges in an electric vehicle, the overall efficiency can be improved. The patent covers algorithms which optimize the utilization of multiple motors not only at a point in time but over the entire trip. At the time of acquisition, the technology had been under development for five years. The mathematical algorithms had been developed, patents awarded and the technology had been successfully bench tested at the University of Bath by our third party strategic partners/vendors Seabird Technologies Limited (“Seabird”) and Purple Sector Limited (“Purple Sector”). These studies resulted in an 8 – 12% increase in efficiency.There are two primary value propositions which the Company is pursuing:•Consumer - automotive and light truck to extend range and performance•Commercial and industrial both delivery and construction/mining equipment – minimize downtime for both expensive personnel and equipment during rechargingCommencing January 1, 2024, these two strategic partners were engaged to develop and commercialize the multi-motor control system embodied in the patents, including specifically to facilitate the creation of one or more prototype electric vehicles over the next 18 months. Seabird and Purple Sector have extensive relationships with auto and equipment manufacturers and suppliers and are incentivized to sign licensing agreements over the 18-month development of the prototype and for the subsequent 24-month period:•10% ownership in the Company when revenue attributable to Partners’ efforts exceeds $500 million per annum. •Exclusive worldwide distributor for two years following development: ◦10% of revenue from net sales directly attributable to Partners’ efforts up to $250 million per annum. ◦20% of revenue from net sales directly attributable to Partners’ efforts over $250 million per annum. As consideration for the patent rights grant provided in the PTL Agreement, the Company agreed to pay 6.2 million pounds sterling (approximately $8.0 million USD) in budgeted increments as they are incurred by System73 under the strategic arrangements with Seabird and Purple Sector, plus any future third-party expenses reasonably incurred in connection with the filing, prosecution and maintenance of the patents. 1(table of contents)In addition, the PTL Agreement contemplates certain equity incentives for System73 based on performance. The PTL Agreement sets out “AAMC Common Stock Milestones”, defined as each instance where the average closing price of the Company’s common stock for the preceding twenty (20) day period reaches an amount equal to or in excess of a multiple of $100 (i.e., $100, $200, $300, etc.). Upon the occurrence of each such AAMC Common Stock Milestone, System 73 would be awarded the number of shares of AAMC Common Stock equal to ten percent of the AAMC fully diluted Shares. Consistent with New York Stock Exchange rules, any equity award under the PTL Agreement will be subject to stockholder approval.Environmental, Social and Governance The Company’s principal line of business going forward is the development and licensing of a control system which increases the efficiency of electric vehicles.Human Capital ResourcesAs of December 31, 2023, AAMC employed 13 full-time employees. At this time, our employees are primarily based in the United States Virgin Islands and Florida. The retention of our employees and the ability to attract new employees are core to the sustainability and long-term success of AAMC, and we will invest in programs that attract, retain, develop, and care for our people. Cultural priorities and values are closely intertwined with our overarching business strategy, and we believe these priorities support AAMC’s ability to fulfill our mission and contribute to our ongoing focus on having a strong, healthy culture and a capable and satisfied workforce.Diversity, Equity, Inclusion, and BelongingThe Company believes in developing an atmosphere that fosters diversity, equity, inclusion, and belonging.Diversity, Equity, Inclusion, and Belonging1(table of contents)The Company believes in developing an atmosphere that fosters diversity, equity, inclusion, and belonging (“DEIB”). This mandate starts from the top with the independent members of our Board of Directors. This mandate starts from the top with the independent members of our Board of Directors all being persons of color. As of December 31, 2023, 50% of the Board of Directors and 84.6% of the workforce are female and/or racially diverse employees at all levels within the organization including two of the three highest paid employees.CompetitionLoan Assets and OperationsWe are subject to intense competition in acquiring, originating, and selling loans, the potential for initiating securitization transactions, and in other aspects of our business. CompetitionWe are subject to intense competition in acquiring, originating, and selling loans, the potential for initiating securitization transactions, and in other aspects of our business. Dependent upon the loan product niche, our potential competitors may include in varying degrees, commercial banks, mortgage REITs, regional and community banks, other specialty finance companies, financial institutions, as well as investment funds and other investors in real estate-related assets. Dependent upon the loan product niche as we expand, our potential competitors may include in varying degrees, commercial banks, mortgage REITs, regional and community banks, other specialty finance companies, financial institutions, as well as investment funds and other investors in real estate-related assets. In addition, other companies may be formed that will compete with us. In addition, other companies may be formed that will compete with us. Some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more favorable relationships than we can. Some of our competitors have greater resources than us, and we may not be able to compete successfully with them. Electric Vehicle Assets and OperationsThe EV market is rapidly evolving and highly competitive. With the introduction of new technologies, increased focus and competition in the market, and the potential entry of new competitors into the market, we expect competition to increase in the future, which could harm demand for products that would utilize our intellectual property rights, and, in turn harm our business, results of operations or financial condition.Our current and prospective competitors include major manufacturers currently supplying the industry, automotive OEMs and potential new entrants to the industry. Because of the importance of electrification, many automotive OEMs are researching and investing in battery development and production and other means and technologies intended to enhance electric vehicle efficiencies and performance. A number of development-stage companies are also seeking to develop and improve batteries or to develop new technologies for enhancing the performance of electric vehicles. Some of these companies have established relationships with automotive OEMs and are in varying stages of development.We believe our ability to compete, position and market our electric vehicle technologies successfully with other companies seeking to develop solid-state batteries or develop new technologies for enhancing the performance of electric vehicles will depend on a number of factors including range enhancement, charge rate, price, safety and reliability and on non-technical factors such as brand, established customer relationships and financial resources.2(table of contents)Many of the incumbents have, and future entrants may have, greater resources than we have and may also be able to devote greater resources to the development of their current and future technologies. They may also have greater access to larger potential customer bases and have and may continue to establish cooperative or strategic relationships amongst themselves or with third parties (including automotive OEMs) that may further enhance their resources and offeringsFederal and State Regulatory and Legislative DevelopmentsOur existing loan business could be affected by conditions in the housing, business-purpose, multifamily, and real estate markets and the broader financial markets, as well as by the financial condition and resources of other participants in these markets. These markets and many of the participants in these markets are subject to, or regulated under, various federal and state laws and regulations. In some cases, the government or government-sponsored entities, such as Fannie Mae and Freddie Mac, directly participate in these markets. In particular, because issues relating to residential real estate and housing finance can be areas of political focus, federal, state and local governments may be more likely to take actions that affect residential real estate, the markets for financing residential real estate, and the participants in residential real estate-related industries than they would with respect to other industries. As a result of the government’s statutory and regulatory oversight of the markets we participate in and the government’s direct and indirect participation in these markets, federal and state governmental actions, policies, and directives can have an adverse effect on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future, which effects may be material. For additional discussion regarding federal and state legislative and regulatory developments, see the risk factor below under the heading “Federal and state legislative and regulatory developments and the actions of governmental authorities and entities may adversely affect our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future" in Item 1A.

Risk Factors of this Annual Report on Form 10-K.The Company itself does not manufacture, develop, produce or sell electric vehicles, systems or components used in electric vehicles. Instead, the Company owns certain intellectual property rights related to electric vehicles under the PTL Agreement that it hopes to sell or license to manufactures (or other third parties). As such, the Company is not directly subject to the governmental regulations and industry standards applicable to manufacturers or sellers of electric vehicles. However, such regulations and standards apply to third parties who manufacture and sell electric vehicles that may utilize our intellectual property assets, and therefore the Company and its partners need to stay abreast of the regulatory landscape and industry standards in this space to ensure that the Company’s intellectual property rights and assets may be desirable to manufacturers in the electric vehicle industry. As a result, governmental regulations and industry standards applicable to electric vehicle manufacturers and sellers may impact the Company and the electric vehicle component of its business plan. Electric vehicles are designed to comply with required government regulations and industry standards. The operations and products of electronic vehicle manufacturers are subject to stringent and comprehensive federal, state and local laws and regulations, including, but not limited to, governing matters related to environmental protection, occupational health and safety, and the release or discharge of materials into the environment, including air emissions and wastewater discharges. In particular, because issues relating to residential housing and real estate finance can be areas of political focus, federal, state and local governments may be more likely to take actions that affect residential housing, the markets for financing residential housing, and the participants in residential housing-related industries than they would with respect to other industries. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of investigatory and remedial obligations and the issuance of orders enjoining some or all of our operations in affected areas. Government regulations regarding the manufacture, sale and implementation of products and systems used in, and a part of, electric vehicles are subject to future change. We cannot predict what impact, if any, such changes may have on our intellectual property assets, or our business and prospects.

Available InformationAnnual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, are available free of charge on or through our website, www.altisourceamc.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC"). The SEC’s website, http://www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Our website and the information on it or connected to it is not incorporated by reference and should not be considered a part of this Annual Report on Form 10-K or any other filings with the SEC.3(table of contents)Item 1A.”ii(table of contents)Part I Item 1.

Risk FactorsThe following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. These risk factors are not exhaustive. Many of these risks relate to our new businesses and will be increasingly critical as we invest additional funds in these businesses. Many of these risks relate to our new businesses and will be increasingly critical as we invest additional funds in these businesses and acquire additional mortgage loans. If any of the following risks actually occur, our business, operating results and financial condition could be materially adversely affected. The Company may face additional risks and uncertainties that are not presently known to it, or that AAMC currently deems immaterial, which may also impair the Company’s business or financial condition.We face a variety of risks that are substantial and inherent in our businesses. The following is a summary of some of the more important factors that could affect our businesses:Operational Electric Vehicle Intellectual Property Assets•There is no guarantee that we will be able to further develop or monetize our intellectual property rights related to components and technology used, or useful, in electric vehicles, or, if we are able to further advance and develop those rights that we will ultimately realize the revenues and other benefits we expect.•The value of our intellectual property assets, and our future growth, is largely dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.•If we, or our partners, are unable to design, develop, and market products and technologies that utilize our intellectual property assets in the electric vehicle space, or other product offerings that address other market opportunities, our business, prospects and operating results will suffer.•If we, or our partners, are unable to keep up with advances in electric vehicle technology, we may suffer an inability to obtain a competitive position in the market or suffer a decline in our competitive position.•The demand for electric vehicles depends, in part, on the continuation of current trends resulting from historical dependence on fossil fuels. Extended periods of low petroleum-based fuel prices could adversely affect demand for vehicles that would utilize our technology and intellectual property rights, which could adversely affect our business, prospects, financial condition and operating results.•Developments in alternative technologies or improvements in the internal combustion engine may materially adversely affect the demand for electric vehicles and components that would utilize our intellectual property assets.•The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.•Our business success will depend in part on the success of our, and our partners, strategic relationships with third parties. We may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.•If electric vehicles and components that utilize our technology fail to perform as expected, our ability to further develop, market and license our technology and intellectual property rights could be harmed.•Our intellectual property and electric vehicle focused business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources. Any such disruption could damage our reputation, result in lost customers, lost revenue and market value declines, lead to legal proceedings against us by affected third parties resulting in penalties or fines and require us to incur significant costs to remediate or otherwise resolve these issues. •Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology.General Operational•Information technology failures or data security breaches could harm our business and result in substantial costs.Information technology failures or data security breaches could harm our business and result in substantial costs. •If we fail to develop, enhance and implement strategies to adapt to changing conditions in the real estate and capital markets, our business, results of operations and financial condition may be materially and adversely affected.4(table of contents)Alternative Private Credit Loan Operations and Assets•The nature of the assets we hold and the investments we make expose us to credit risk that could negatively impact the value of those assets and investments, our earnings, dividends, cash flows, and access to liquidity, or otherwise negatively affect our business.•We may have concentrated credit risk in certain geographical regions and may be disproportionately affected by an economic or housing downturn, natural disaster, terrorist event, climate change, or any other adverse event specific to those regions.•The timing of credit losses can harm our economic returns.•Our efforts to manage credit risks may fail.•Multifamily and business purpose mortgage loan borrowers that have been negatively impacted by the pandemic may not make payments of principal and interest relating to their mortgage loans on a timely basis, or at all, which could negatively impact our business.•The performance of the assets we own will vary and may not meet our earnings or cash flow expectations. In addition, the cash flows and earnings from, and market values of loans, we own may be volatile.•Our results could be adversely affected by counterparty credit risk.•General economic developments and trends and the performance of the housing, real estate, mortgage finance, and broader financial markets may adversely affect our existing mortgage business and the value of, and returns on, real estate-related and other assets we own or may acquire and could also negatively impact our business and financial results.RISKS RELATED TO OUR MARKET GENERALLY General economic developments and trends and the performance of the housing, real estate, mortgage finance, and broader financial markets may adversely affect our business and the value of, and returns on, real estate-related and other assets we own or may acquire and could also negatively impact our business and financial results. •Federal and state legislative and regulatory developments and the actions of governmental authorities and entities may adversely affect our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future.Internal•We are subject to the risks of securities laws liability and related civil litigation.We are subject to the risks of securities laws liability and related civil litigation. •Failure to retain the tax benefits provided by the USVI would adversely affect our financial performance.•Our USVI operations may become subject to United States federal income taxation.•Our cash balances are held at a number of financial institutions that expose us to their credit risk.•Our failure to meet the continued listing requirements of the New York Stock Exchange (“NYSE”) could result in a delisting or a halt in the trading of our common stock.•Our failure to meet the continued listing requirements of the NYSE American could result in a delisting or a halt in the trading of our common stock. •The market price and trading volume of our common stock may be volatile and may be affected by market conditions beyond our control.RISKS RELATED TO OUR ELECTRIC VEHICLES INTELLECTUAL PROPERTY OPERATIONSThere is no guarantee that we will be able to further develop or monetize our intellectual property rights related to components and technology used, or useful, in electric vehicles, or, if we are able to further advance and develop those rights that we will ultimately realize the revenues and other benefits we expect.Our intellectual property rights relate primarily to technology and components that are intended to be integrated into electric vehicles and used by electric vehicle manufacturers. Our intellectual property assets are not yet in a commercial state and are not generating any revenue for the Company. We believe our technology will be an important component to improve and maximize utility and value from electric vehicles. However, if we, or our partners, are unable to successfully develop, promote, market and eventually monetize our intellectual property rights, or, if third party manufacturers customers do not consider it valuable or do not use it as intended, we may not achieve the benefits we expect from our intellectual property assets, and our revenues may never materialize or may be lower than expected, all of which could adversely affect our business, prospects, financial condition, results of operations and cash flows.The value of our intellectual property assets, and our future growth, is largely dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.Our future growth is largely dependent on the demand for, and upon consumers’ willingness to adopt electric vehicles, and even if electric vehicles become more mainstream, consumers choosing electric vehicles that incorporate and utilize our intellectual property rights and assets. Demand for electric vehicles may be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect our business, prospects, financial condition and operating results.5(table of contents)In addition, the demand for vehicles that utilize our technology and intellectual property rights will depend upon the adoption by consumers of new energy vehicles in general and electric vehicles in particular. The market for new energy vehicles is still rapidly evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards, and changing consumer demands and behaviors.Other factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:•perceptions about electric vehicle quality, safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles, whether or not such vehicles are produced by us or other manufacturers;•range anxiety;•the availability of new energy vehicles, including plug-in hybrid electric vehicles;•the environmental consciousness of consumers, and their adoption of electric vehicles;•changes in the cost of oil and gasoline;•government regulations and economic incentives, including a change in the administrations and legislations of federal and state governments, promoting fuel efficiency and alternate forms of energy;•perceptions about and the actual cost of alternative fuel; and•macroeconomic factors.Any of the factors described above may cause current or potential customers not to purchase electric vehicles in general. If the market for electric vehicles does not develop as we hope or develops more slowly than we anticipate, our business, prospects, financial condition and operating results will likely be affected.If we, or our partners, are unable to design, develop, and market products and technologies that utilize our intellectual property assets in the electric vehicle space, or other product offerings that address other market opportunities, our business, prospects and operating results will suffer.We, and our partners, may not be able to successfully develop products or otherwise advance or utilize our intellectual property assets. We will need to develop and market our technology such that it is deemed attractive and useful in the electric vehicle marketplace. Successfully developing technologies for, or useful in, the electric vehicle market requires delivering a technology or product that is deemed superior (whether due to price, characteristics, or otherwise) or otherwise competitive with other similar technologies. Because the electric vehicle market is relatively new and is developing, acceptance of our technologies and products utilizing our technologies, it is difficult to project demand and market acceptance and our ability to monetize our intellectual property assets in a volume or manner we currently intend. Our failure to address existing or additional market opportunities would harm our business, financial condition, operating results and prospects.If we, or our partners, are unable to keep up with advances in electric vehicle technology, we may suffer an inability to obtain a competitive position in the market or suffer a decline in our competitive position.There are companies in the electric vehicle industry that have developed or are developing technologies that compete, or will compete, with our technology and vehicles that may utilize and incorporate technologies and vehicles manufactured, in part, using our intellectual property assets. These competitors could be able to provide products and services similar to those that would utilize our technologies more efficiently or at greater scale. We may be unable to keep up with changes in the electric vehicle technology sector and, as a result, may suffer a decline in our current or prospective competitive position. Any failure to keep up with advances in electric vehicle technology would result in a decline in our competitive position, which would materially and adversely affect our business, prospects, operating results and financial condition. Our, and our partners’, research and development efforts may not be sufficient to adapt to changes in electric vehicle technology. As technologies change, we anticipate that our intellectual property assets and rights can be applied to upgraded or adopted vehicle models, or new vehicle models in order to continue to provide vehicles with the latest technology. However, components and vehicles utilizing our intellectual property assets may not compete effectively with alternatives if we, or our partners, are unable to modify, and integrate the latest technology into products utilizing our intellectual property assets. The demand for electric vehicles depends, in part, on the continuation of current trends resulting from historical dependence on fossil fuels. Extended periods of low petroleum-based fuel prices could adversely affect demand for vehicles that would utilize our technology and intellectual property rights, which could adversely affect our business, prospects, financial condition and operating results.We believe that much of the present and projected demand for electric vehicles results from concerns about volatility in the cost of petroleum-based fuel, the dependency of the United States on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency and alternative forms of energy, as well as the belief that poor air quality 6(table of contents)and climate change results in part from the burning of fossil fuels. If the cost of petroleum-based fuel decreased significantly, or the long-term supply of oil in the United States improved, the government may eliminate or modify its regulations or economic incentives related to fuel efficiency and alternative forms of energy. If there is a change in the perception that the burning of fossil fuels does not negatively impact the environment, the demand for commercial zero-emission electric vehicles could be reduced, and our business and revenue may be harmed. Diesel and other petroleum- based fuel prices have been extremely volatile, and we believe this continuing volatility will persist. Lower diesel or other petroleum-based fuel prices over extended periods of time may lower the current perception in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If diesel or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for electric vehicles may decrease, which could have an adverse effect on our business, prospects, financial condition and operating results.Developments in alternative technologies or improvements in the internal combustion engine may materially adversely affect the demand for electric vehicles and components that would utilize our intellectual property assets.Significant developments in alternative technologies, such as advanced diesel, ethanol and other renewable fuels, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. For example, compressed natural gas or propane, which are abundant and relatively inexpensive in North America, may emerge as consumers’ preference. Any failure by us to develop or acquire new or enhanced intellectual property rights, technologies or processes, or an inability to react to changes in existing technologies, could materially decrease demand for our intellectual property assets or delay our ability to monetize our intellectual property assets, which would likely decrease the value of our intellectual property assets and adversely affect our financial performance and results of operations. The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle or for other reasons, may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally and, in turn, demand for our intellectual property rights and assets. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results. or state tax law could be enacted in the future that could have a material adverse effect on our business, results of operations, and financial condition. While certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the future, our financial position could be harmed.Our business success will depend in part on the success of our, and our partners, strategic relationships with third parties. We may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.Our business success will depend in part on our ability to successfully manage and enter into productive strategic relationships with third parties. We do not expect to directly manufacture control systems to be utilized in electric vehicles. Instead, we expect to attempt to license or sell our intellectual property assets to third party manufacturers. Therefore, we will depend on various third parties to manufacture, market and sell products that utilize our intellectual property assets. We have not yet entered into any formal relationships with third parties, or manufacturers of components or vehicles that would utilize and integrate our technology. Identifying, entering, maintaining and expanding strategic relationships with third parties is critical to our success. Further, relationships we enter with third parties may ultimately be non-exclusive and in such a case would not prohibit the other party from working with our competitors. These relationships also may not result in additional customers or enable us to generate significant revenue. Identifying suitable business partners and negotiating and documenting relationships with them require significant time and resources. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to successfully monetize our intellectual property assets, compete in the marketplace or to establish and grow our revenue could be impaired and our operating results would suffer.If electric vehicles and components that utilize our technology fail to perform as expected, our ability to further develop, market and license our technology and intellectual property rights could be harmed.Vehicles or components that utilize our technology and intellectual property rights may not perform in a manner that is consistent with our customers’ expectations for a variety of reasons. If electric vehicles that utilize or integrate our technologies were to contain defects in design and manufacture that cause them not to perform as expected or that require repair, or experience any other failure to perform as expected, it could harm our reputation and result in delivery delays, product recalls, product liability claims, significant warranty and other expenses, which could, in part, be blamed on or attributed to our Company and, in turn, have a material adverse impact on our ability to develop, market and license our technology to electric vehicle manufacturers. While we expect that we, or our partners, will perform extensive internal testing, there currently is no frame of reference by which to evaluate the long-term performance of vehicles that will utilize or integrate our technologies. 7(table of contents)There can be no assurance that we will be able to detect and fix any defects in our technology prior to their integration into vehicles that are ultimately sold to customers. Further, the performance of our electronic vehicles may be negatively impacted by other factors, such as limitations inherent in existing battery technology and extreme weather conditions.Any vehicle product defects or any other failure of our technology and products / vehicles utilizing our technology to perform as expected could harm our reputation and result in development delays, product recalls, product liability claims, significant warranty and other expenses, customer losses and lost revenue, any of which could have a material adverse impact on our business, financial condition, operating results and prospects.Our intellectual property and electric vehicle focused business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources. Any such disruption could damage our reputation, result in lost customers, lost revenue and market value declines, lead to legal proceedings against us by affected third parties resulting in penalties or fines and require us to incur significant costs to remediate or otherwise resolve these issues. Investors should be aware of the difficulties normally encountered when an enterprise enters into a new business line or industry, many of which are beyond our control, including substantial risks and expenses while establishing or entering new markets, setting up operations and undertaking marketing activities. When we entered into the PTL Agreement with System73 in October 2023, we essentially began to operate and focus on an entirely new line of business as it relates to the Company. The likelihood of our success in monetizing our intellectual property rights and assets must be considered in light of these risks, expenses, complications, delays and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our new business model will prove successful, and we may not be able to generate significant revenue (or any revenue), raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure, and may encounter unforeseen expenses, difficulties or delays in connection with implementing our new business plan. In addition, we can be expected to continue to sustain substantial operating expenses without generating sufficient (or any) revenues to cover expenditure. Any investment in our company is therefore highly speculative and could result in the loss of your entire investment.Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology.Our success and ability to compete depend in part upon our intellectual property. We primarily rely on intellectual property laws, including trade secret, copyright, trademark and patent laws in the United States and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property. However, the steps we take to protect our intellectual property rights may be inadequate, or we may be unable to secure intellectual property protection for all of our products and services.If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products, services or products and services similar to ours and our ability to compete effectively would be impaired. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. The enforcement of our intellectual property rights depends on our legal actions against these infringers being successful, but these actions may not be successful, even when our rights have been infringed. In addition, we might be required to spend significant resources to monitor and protect our intellectual property rights, and our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management, whether or not it is resolved in our favor, and could ultimately result in the impairment or loss of portions of our intellectual property. Any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties.Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective protection of our intellectual property may not be available to us in every country in which our products and services are available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.RISKS RELATED TO OUR GENERAL OPERATIONS Information technology failures or data security breaches could harm our business and result in substantial costs.We use information technology and other computer resources to carry out important operational activities and to maintain our business records. Our computer systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches (through cyber-attacks from computer hackers and sophisticated organizations), catastrophic events such as fires, tornadoes and hurricanes, usage errors by our 8(table of contents)employees, or cyber-attacks or errors by third party vendors who have access to our confidential data or that of our customers. Our computer systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches (through cyber-attacks from computer hackers and sophisticated organizations), catastrophic events such as fires, tornadoes and hurricanes, usage errors by our employees, or cyber-attacks or errors by third party vendors who have access to our confidential data or that of our customers. While to our knowledge we have not experienced a significant cyber-attack, we are continuously working to improve our information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to enhance our levels of protection, to the extent possible, against cyber risks and security breaches, and monitor to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have an impact on our business, there is no assurance that advances in computer capabilities, new technologies, methods or other developments will detect or prevent security breaches and safeguard access to proprietary or confidential information.The frequency and sophistication of cyber-attacks on companies has increased in recent years, including significant ransomware attacks and foreign attacks on prominent companies and computer software programs.6(table of contents)The frequency and sophistication of cyber-attacks on companies has increased in recent years, including significant ransomware attacks and foreign attacks on prominent companies and computer software programs. If our computer systems and our back-up systems are damaged, breached, or cease to function properly, or if there are intrusions or failures of critical infrastructure such as the power grid or communications systems, we could suffer extended interruptions in our operations. Any such disruption could damage our reputation, result in lost customers, lost revenue and market value declines, lead to legal proceedings against us by affected third parties resulting in penalties or fines and require us to incur significant costs to remediate or otherwise resolve these issues. In addition, the costs of maintaining adequate protection and insurance against such threats, as they develop in the future (or as legal requirements related to data security increase) could be material.Breaches of our computer or data systems, including those operated by third parties on our behalf, could result in the unintended public disclosure or the misappropriation of our proprietary information or personal and confidential information, about our employees, customers and business partners, requiring us to incur significant expense to address and resolve. The misappropriation and/or release of confidential information may also lead to legal or regulatory proceedings against us by affected individuals and the outcome of such proceedings could include penalties or fines and require us to incur significant costs to remediate or otherwise resolve. Depending on its nature, a particular breach or series of breaches of our systems may result in the unauthorized use, appropriation or loss of confidential or proprietary information on a one-time or continuing basis, which may not be detected for a period of time.If we fail to develop, enhance and implement strategies to adapt to changing conditions in the real estate and capital markets, our business, results of operations and financial condition may be materially and adversely affected.The manner in which we compete and the loans for which we compete are affected by changing conditions, which can take the form of trends or sudden changes in our industry, regulatory environment, changes in the role of government-sponsored entities, changes in the role of credit rating agencies or their rating criteria or process or the United States economy more generally. If we do not effectively respond to these changes, or if our strategies to respond to these changes are not successful, our business, results of operations and financial condition may be materially and adversely affected.RISKS RELATED TO OUR ALTERNATIVE PRIVATE CREDIT LOAN OPERATIONS AND ASSETS STRATEGYThe nature of the assets we hold and the investments we make expose us to credit risk that could negatively impact the value of those assets and investments, our earnings, dividends, cash flows, and access to liquidity, or otherwise negatively affect our business.We assume credit risk primarily through the ownership of business purpose and multifamily real estate loans. Credit losses on these types of real estate loans can occur for many reasons, including: fraud; poor underwriting; poor servicing practices; weak economic conditions; increases in payments required to be made by borrowers; declines in the value of real estate; declining rents and/or elevated delinquencies associated with single- and multifamily rental housing; the outbreak of highly infectious or contagious diseases; natural disasters, the effects of climate change (including flooding, drought, wildfires, and severe weather) and other natural events; uninsured property loss; over-leveraging of the borrower; costs of remediation of environmental conditions, such as indoor mold; changes in zoning or building codes and the related costs of compliance; acts of war or terrorism; changes in legal protections for lenders and other changes in law or regulation; and personal events affecting borrowers, such as reduction in income, job loss, divorce, or health problems. Credit losses on these types of real estate loans can occur for many reasons, including: fraud; poor underwriting; poor servicing practices; weak economic conditions; increases in payments required to be made by borrowers; declines in the value of real estate; declining rents and/or elevated delinquencies associated with single- and multifamily rental housing; the outbreak of highly infectious or 7(table of contents)contagious diseases; natural disasters, the effects of climate change (including flooding, drought, wildfires, and severe weather) and other natural events; uninsured property loss; over-leveraging of the borrower; costs of remediation of environmental conditions, such as indoor mold; changes in zoning or building codes and the related costs of compliance; acts of war or terrorism; changes in legal protections for lenders and other changes in law or regulation; and personal events affecting borrowers, such as reduction in income, job loss, divorce, or health problems. In addition, the amount and timing of credit losses could be affected by loan modifications, delays in the liquidation process, documentation errors, and other actions by servicers. Weakness in the U.S. economy or the housing market could cause our credit losses to increase beyond levels that we currently anticipate.Credit losses on business purpose and multifamily real estate loans can occur for many of the reasons noted above. Moreover, these types of real estate loans may not be fully amortizing, and therefore, the borrower’s ability to repay the principal when due may depend upon the ability of the borrower to refinance or sell the property at maturity. Business purpose and multifamily real estate loans and real estate loans collateralizing business purpose and multifamily securities are particularly sensitive to conditions in the rental housing market and to demand for residential rental properties.9(table of contents)For loans we own directly, we will most likely be in a position to incur credit losses - should they occur - only after losses are borne by the owner of the property (e.For loans we own directly, we will most likely be in a position to incur credit losses - should they occur - only after losses are borne by the owner of the property (e. g., by a reduction in the owner’s equity stake in the property). We may take actions available to us in an attempt to protect our position and mitigate the amount of credit losses, but these actions may not prove to be successful and could result in our increasing the amount of credit losses we ultimately incur on a loan.Additionally, loans to small, privately owned businesses such as borrowers from our business purpose loan origination platforms involve a high degree of business and financial risk. Often, there is little or no publicly available information about these businesses. Accordingly, we must rely on our own due diligence to obtain information in connection with our investment decisions. A borrower’s ability to repay its loan may be adversely impacted by numerous factors, including a downturn in its industry or other negative local or more general economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in the collateral for the loan. These factors may have an impact on loans involving such businesses, and can result in substantial losses, which in turn could have a material and adverse effect on our business, results of operations and financial condition.We may have concentrated credit risk in certain geographical regions and may be disproportionately affected by an economic or housing downturn, natural disaster, terrorist event, climate change, or any other adverse event specific to those regions.A decline in the economy or difficulties in certain real estate markets, such as a high level of foreclosures in a particular area, are likely to cause a decline in the value of multifamily properties in that market. This, in turn, will increase the risk of delinquency, default, and foreclosure on real estate loans we may hold with properties in those regions. This may then adversely affect our credit loss experience and other aspects of our business, including our ability to securitize (or otherwise sell) real estate loans and securities.The occurrence of a natural disaster (such as an earthquake, tornado, hurricane, flood, landslide, or wildfire), or the effects of climate change (including flooding, drought, and severe weather), may cause decreases in the value of real estate (including sudden or abrupt changes) and would likely reduce the value of the properties collateralizing real estate loans we own. For example, in recent years, hurricanes have caused widespread flooding in Florida and Texas and wildfires and mudslides in northern and southern California have destroyed or damaged thousands of homes. Since certain natural disasters may not typically be covered by the standard hazard insurance policies maintained by borrowers, the borrowers may have to pay for repairs due to the disasters. Borrowers may not repair their property or may stop paying their mortgage loans under those circumstances, especially if the property is damaged. This would likely cause foreclosures to increase and lead to higher credit losses on our loans.The timing of credit losses can harm our economic returns.The timing of credit losses can be a material factor in our economic returns from real estate loans, investments, and securities. If unanticipated losses occur within the first few years after a loan is originated, those losses could have a greater negative impact on our investment returns than unanticipated losses on more seasoned loans. The timing of credit losses could be affected by the creditworthiness of the borrower, the borrower’s willingness and ability to continue to make payments, and new legislation, legal actions, or programs that allow for the modification of loans or rental obligations, or ability for borrowers or tenants to get relief through forbearance, bankruptcy or other avenues.Our efforts to manage credit risks may fail.We will attempt to manage risks of credit losses by continually evaluating our investments for impairment indicators and establishing reserves under GAAP for credit and other risks based upon our assessment of these risks.8(table of contents)We will attempt to manage risks of credit losses by continually evaluating our investments for impairment indicators and establishing reserves under GAAP for credit and other risks based upon our assessment of these risks. We cannot establish credit reserves for tax accounting purposes. The amount of reserves that we establish may prove to be insufficient, which would negatively impact our financial results and would result in decreased earnings. In addition, cash and other capital we hold to help us manage credit and other risks and liquidity issues may prove to be insufficient. If these increased credit losses are greater than we anticipated, and we need to increase our credit reserves, our GAAP earnings might be reduced. Increased credit losses may also adversely affect our cash flows, ability to invest, asset fair values, access to short-term borrowings, and ability to finance assets.Changes in consumer behavior, bankruptcy laws, tax laws, regulation of the mortgage industry, and other laws may exacerbate loan or investment losses. In most cases, the value of the underlying property will be the sole effective source of funds for any recoveries. Other changes or actions by judges or legislators regarding mortgage loans and contracts, including the voiding of certain portions of these agreements, may reduce our earnings, impair our ability to mitigate losses, or increase the probability 10(table of contents)and severity of losses. Any expansion of our loss mitigation efforts could increase our operating costs and the expanded loss mitigation efforts may not reduce our future credit losses.Multifamily and business purpose mortgage loan borrowers that have been negatively impacted by the pandemic, macro-economic conditions, or by other events may not make payments of principal and interest relating to their mortgage loans on a timely basis, or at all, which could negatively impact our business.Multifamily and business purpose mortgage loan borrowers that have been negatively impacted by the pandemic may not make payments of principal and interest relating to their mortgage loans on a timely basis, or at all, which could negatively impact our business. Multifamily and business purpose loans could be subject to similar risks as those described above and could likely be impaired, potentially materially to the extent multifamily and business purpose loan borrowers have been negatively impacted by the pandemic, economic events or other conditions affecting their liquidity and do not timely remit payments of principal and interest relating to their mortgage loans.Multifamily and business purpose loans we are to own could be subject to similar risks as those described above and could likely be impaired, potentially materially to the extent multifamily and business purpose loan borrowers have been negatively impacted by the pandemic and do not timely remit payments of principal and interest relating to their mortgage loans. In addition, if tenants who rent their residence from a multifamily or business purpose loan borrower are unable to make rental payments, are unwilling to make rental payments, or a waiver of the requirement to make rental payments on a timely basis, or at all, is available under the terms of any applicable forbearance or waiver agreement or program (which rental payment forbearance or waiver program may be available as a result of a government-sponsored or -imposed program or under any such agreement or program a landlord may otherwise offer to tenants), then the value of multifamily and business purpose loans we own will likely be impaired, potentially materially. Moreover, to the extent the economic impact of any such pandemic impacts local, regional or national economic conditions, the value of multifamily and residential real estate that secures multifamily and business purpose loans is likely to decline, which would also likely negatively impact the value of mortgage loans we own, potentially materially.Additionally, a significant amount of the business purpose loans that we own are short-term bridge loans that are secured by residential properties that are undergoing rehabilitation or construction and not occupied by tenants. Because these properties are generally not income producing (e.g., from rental revenue), in order to fund principal and interest payments, these borrowers may seek to renegotiate the terms of their mortgage loan, including by seeking payment forbearance, waivers, or maturity extensions as a result of being negatively impacted by the pandemic. Moreover, planned construction or rehabilitation of these properties may not be able to proceed on a timely basis or at all due to operating disruptions or government mandated moratoriums on construction, development or redevelopment. All of the foregoing factors would also likely negatively impact the value of mortgage loans we own, potentially materially.The performance of the assets we own will vary and may not meet our earnings or cash flow expectations. In addition, the cash flows and earnings from, and market values of loans, we own may be volatile.We seek to manage certain of the risks associated with acquiring, originating, holding, selling, and managing real estate loans. No amount of risk management or mitigation; however, can change the variable nature of the cash flows of, fair values of, and financial results generated by these loans. No amount of risk management or mitigation, however, can change the variable nature of the cash flows of, fair values of, and financial results generated by these loans. Changes in the credit performance of, or the prepayments on, these real estate loans, and changes in interest rates impact the cash flows on these loans, and the impact could be significant for our loans with concentrated risks. Changes in cash flows lead to changes in our return on investment and also to potential variability in and level of reported income. The revenue recognized on some of our assets is based on an estimate of the yield over the remaining life of the asset. Thus, changes in our estimates of expected cash flow from an asset will result in changes in our reported earnings on that asset in the current reporting period. We may be forced to recognize adverse changes in expected future cash flows as a current expense, further adding to earnings volatility.Our results could be adversely affected by counterparty credit risk.We have credit risks that are generally related to the counterparties with which we do business. There is a risk that counterparties will fail to perform under their contractual arrangements with us, and this risk is usually more pronounced during an economic downturn. The economic impact of the pandemic and the associated volatility in the financial markets has at times triggered, and is likely to trigger additional periods of economic slowdown or recession, and such conditions could jeopardize the solvency of counterparties with which we do business. Those risks of non-performance may differ materially from the risks entailed in exchange-traded transactions, which generally are backed by clearing organization guarantees, daily mark-to-market and settlement of positions, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered into directly between parties generally do not benefit from those protections, and expose the parties to the risk of counterparty default. Furthermore, there may be practical and timing problems associated with enforcing our rights to assets in the case of an insolvency of a counterparty.In the event a counterparty to our borrowings becomes insolvent, we may fail to recover the full value of our pledged collateral, thus reducing our earnings and liquidity. In addition, the insolvency of one or more of our financing counterparties could reduce the amount of financing available to us, which would make it more difficult for us to leverage the value of our assets and obtain substitute financing on attractive terms or at all. In addition, the insolvency of one or more of our financing counterparties could reduce the amount of financing available to us, which would make it more difficult for us to leverage the value of our assets and obtain 11(table of contents)substitute financing on attractive terms or at all. A material reduction in our financing sources or an adverse change in the terms of our financings could have a material adverse effect on our financial condition and results of operations. In the event a 11(table of contents)counterparty to our interest rate agreements or other derivatives becomes insolvent or interprets our agreements with it in a manner unfavorable to us, our ability to realize benefits from the hedge transaction may be diminished, any cash or collateral we pledged to the counterparty may be unrecoverable, and we may be forced to unwind these agreements at a loss. In the event a counterparty to our interest rate agreements or other derivatives becomes insolvent or interprets our agreements with it in a manner unfavorable to us, our ability to realize benefits from the hedge transaction may be diminished, any cash or collateral we pledged to the counterparty may be unrecoverable, and we may be forced to unwind these agreements at a loss. In the event a counterparty that sells us mortgage loans becomes insolvent or is acquired by a third party, we may be unable to enforce our loan repurchase rights in connection with a breach of loan representations and warranties and we may suffer losses if we must repurchase delinquent loans. In the event that one of our sub-servicers becomes insolvent or fails to perform, loan delinquencies and credit losses may increase, and we may not receive the funds to which we are entitled. We will attempt to diversify our counterparty exposure, although we may not always be able to do so. Our counterparty risk management strategy may prove ineffective and, accordingly, our earnings and cash flows could be adversely affected.General economic developments and trends and the performance of the housing, real estate, mortgage finance, and broader financial markets may adversely affect our existing mortgage business and the value of, and returns on, real estate-related and other assets we own or may acquire and could also negatively impact our business and financial results.RISKS RELATED TO OUR MARKET GENERALLY General economic developments and trends and the performance of the housing, real estate, mortgage finance, and broader financial markets may adversely affect our business and the value of, and returns on, real estate-related and other assets we own or may acquire and could also negatively impact our business and financial results. Our level of business activity and the profitability of our business, as well as the values of, and the cash flows from, the assets we own, are affected by developments in the U.4(table of contents)Our level of business activity and the profitability of our business, as well as the values of, and the cash flows from, the assets we own, are affected by developments in the U. S. economy and the broader global economy. As a result, negative economic developments are likely to negatively impact our business and financial results. There are a number of factors that could contribute to negative economic developments, including, but not limited to, U.S. fiscal and monetary policy changes, including Federal Reserve policy shifts and changes in benchmark interest rates, changing U.S. consumer spending patterns, negative developments in the housing, single-family rental (“SFR”), multifamily, and real estate markets, rising unemployment, rising government debt levels, changing expectations for, or the occurrence of, inflation and deflation, or adverse global political and economic events, such as the outbreak of pandemic, epidemic disease, or warfare. consumer spending patterns, negative developments in the housing, single-family rental (“SFR”), multifamily, and real estate markets, rising unemployment, rising government debt levels, changing expectations for, or the occurrence of, inflation and deflation, or adverse global political and economic events, such as the outbreak of pandemic, epidemic disease, or warfare (including the recent outbreak of hostilities between Russia and Ukraine). Rising inflation and elevated U.S. budget deficits and overall debt levels, including as a result of federal pandemic relief and stimulus legislation and/or economic or market and supply chain conditions, can put upward pressure on interest rates and could be among the factors that could lead to higher interest rates in the future. Higher interest rates could adversely affect our overall business, income, including by reducing the fair value of many of our assets. This may affect our earnings results, reduce our ability to securitize, re-securitize, or sell our assets, or reduce our liquidity. Higher interest rates could also reduce the ability of borrowers to make interest payments or to refinance their loans. Real estate values, and the ability to generate returns by owning or taking credit risk on loans secured by real estate, are important to our business. Federal and state legislative and regulatory developments and the actions of governmental authorities and entities may adversely affect our existing mortgage business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future. Federal and state legislative and regulatory developments and the actions of governmental authorities and entities may adversely affect our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future. As noted above, our existing mortgage business is affected by conditions in the housing, business purpose, multifamily, and real estate markets and the broader financial markets, as well as by the financial condition and resources of other participants in these markets.As noted above, our business is affected by conditions in the housing, business purpose, multifamily, and real estate markets and the broader financial markets, as well as by the financial condition and resources of other participants in these markets. These markets and many of the participants in these markets are subject to, or regulated under, various federal and state laws and regulations. In some cases, the government or government-sponsored entities, such as Fannie Mae and Freddie Mac, directly participate in these markets. In particular, because issues relating to residential housing and real estate finance can be areas of political focus, federal, state and local governments may be more likely to take actions that affect residential housing, the markets for financing residential housing, and the participants in residential housing-related industries than they would with respect to other industries. As a result of the government’s statutory and regulatory oversight of the markets we participate in and the government’s direct and indirect participation in these markets, federal and state governmental actions, policies, and directives can have an adverse effect on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future, which effects may be material.Ultimately, we cannot assure you of the impact that governmental actions may have on our business or the financial markets and, in fact, they may adversely affect us, possibly materially. We cannot predict whether or when such actions may occur or what unintended or unanticipated impacts, if any, such actions could have on our business and financial results. Even after governmental actions have been taken and we believe we understand the impacts of those actions, prevailing interpretations 12(table of contents)may shift, or we may not be able to effectively respond to them so as to avoid a negative impact on our business or financial results. Even after governmental actions have been taken and we believe we understand the impacts of those actions, prevailing interpretations may shift, or we may not be able to effectively respond to them so as to avoid a negative impact on our business or financial results. SPECIFIC RISKS RELATING TO USWe are subject to the risks of securities laws liability and related civil litigation.We may be subject to risk of securities litigation and derivative actions from time to time as a result of being publicly traded, including the actions set forth in Note 6 - Commitments and Contingencies. There can be no assurance that any settlement or liabilities in any future lawsuits or claims against us would be covered or partially covered by our insurance policies, which could have a material adverse effect on our earnings in one or more periods. The range of possible resolutions for any potential legal actions could include determinations and judgments against us or settlements that could require substantial payments by us, including the costs of defending such suits, which could have a material adverse effect on our financial condition, results of operations and cash flows.Failure to retain the tax benefits provided by the USVI would adversely affect our financial performance.We are incorporated under the laws of the USVI and are headquartered in the USVI. The USVI has an Economic Development Commission (the “EDC”) that provides benefits (“EDC Benefits”) to certain qualified businesses in the USVI that enable us to avail ourselves of significant tax benefits for a 30-year period. We received our certificate to operate as a company that qualifies for EDC Benefits as of February 1, 2013, which provides us with a 90% tax credit on USVI-source income so long as we comply with the requirements of the EDC and our certificate of benefits. It is possible that we may not be able to retain our qualifications for the EDC Benefits or that changes in U.S. federal, state, local or USVI taxation statutes or applicable regulations may cause a reduction in or an elimination of the EDC Benefits, all of which could result in a significant increase to our tax expense and, therefore, adversely affect our financial condition and results of operations.Our USVI operations may become subject to United States federal income taxation.Our parent company is incorporated under the laws of the USVI and intends to operate in a manner that will cause us to be treated as not engaging in a trade or business within the United States, which will cause us to be exempt from current United States federal income taxation on our net income. However, because there are no definitive standards provided by the U.S. Internal Revenue Code, regulations or court decisions as to the specific activities that constitute being engaged in the conduct of a trade or business within the United States, and as any such determination is essentially factual in nature, we cannot assure you that the Internal Revenue Service (“IRS”) will not successfully assert that we are engaged in a trade or business within the United States.If the IRS were to successfully assert that we have been engaged in a trade or business within the United States in any taxable year, various adverse tax consequences could result, including the following:•We may become subject to current United States federal income taxation on our net income from sources within the United States;•We may be subject to United States federal income tax on a portion of our net investment income, regardless of its source;•We may not be entitled to deduct certain expenses that would otherwise be deductible from the income subject to United States taxation; and•We may be subject to United States branch profits tax on profits deemed to have been distributed out of the United States.Our cash balances are held at a number of financial institutions that expose us to their credit riskWe maintain our cash and cash equivalents at financial or other intermediary institutions. The combined account balances at each institution typically exceed FDIC insurance coverage of $250,000 per depositor, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. At December 31, 2023, substantially all of our cash and cash equivalent balances held at financial institutions exceeded FDIC insured limits. On March 10, 2023, the FDIC took control and was appointed receiver of Silicon Valley Bank (“SVB”), and on March 12, 2023, the FDIC took control and was appointed receiver of Signature Bank, and on March 16, 2023, First Republic Bank received a commitment for a $30 billion deposit infusion, each case due primarily to liquidity concerns. As of March 13, 2023, the Company did not have any direct exposure to SVB, Signature Bank, or First Republic. However, if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our 13(table of contents)ability, and the ability of our customers, clients and vendors, to access existing cash, cash equivalents and investments, or to access existing or enter into new banking arrangements or facilities, may be threatened and could have a material adverse effect on our business and financial condition. However, if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability, and the ability of our customers, clients and vendors, to access existing cash, cash equivalents and investments, or to access existing or enter into new banking arrangements or facilities, may be threatened and could have a material adverse effect on our business and financial condition. Our failure to meet the continued listing requirements of the NYSE could result in a delisting or a halt in the trading of our common stock. Our failure to meet the continued listing requirements of the NYSE American could result in a delisting or a halt in the trading of our common stock. We must continue to satisfy the NYSE’s continued listing requirements.We must continue to satisfy the NYSE American’s continued listing requirements. If we fail to satisfy the continued listing requirements of the NYSE, the NYSE may take steps to delist our common stock or halt the trading of our common stock. If we fail to satisfy the continued listing requirements of the NYSE American, the NYSE American may take steps to delist our common stock or halt the trading of our common stock. Such a delisting or trading halt would likely have a negative effect on the price of our common stock and would impair a shareholder's ability to sell or purchase our common stock when they wish to do so. We cannot assure the shareholders that we will continue to meet the existing listing requirements of the NYSE because some of the requirements, like the number of shareholders and the trading price of our common stock, are outside of our control. We cannot assure the shareholders that we will continue to meet the existing listing requirements of the NYSE American because some of the requirements, like the number of shareholders and the trading price of our common stock, are outside of our control. On November 30, 2021, the NYSE halted trading in our common stock.On November 30, 2021, the NYSE American halted trading in our common stock. Although the NYSE allowed trading to resume on March 21, 2022, shareholders were unable to trade our common stock while the trading halt was in place. Although the NYSE American allowed trading to resume on March 21, 2022, shareholders were unable to trade our common stock while the trading halt was in place. Any further trading halt would prevent shareholders from selling the stock until the trading halt is lifted and the trading price may be adversely affected if trading in the stock begins again.On November 30, 2023, the Company received a written notice (the “Notice”) from the NYSE that the NYSE would delist the Company’s shares of common stock (the “Securities”) from the Exchange. NYSE Regulation staff had determined that the Company was no longer qualified for listing pursuant to Section 1009(a) of the NYSE American Company Guide, citing non-compliance with the Stockholders’ Equity requirements provided in Sections 1003(a)(i), (ii) and (iii) thereof.As a result of the transactions provided in the Settlement Agreement (see Note 11 - Subsequent Events), including the surrender of the Preferred Shares, which transactions have the effect of increasing the Company’s Stockholders’ Equity, the NYSE informed the Company on January 192, 2024 that it had rescinded the Notice and that the Company’s Securities would not be delisted from the Exchange pursuant to such Notice. A similar issue could occur in the future. The market price and trading volume of our common stock may be volatile and may be affected by market conditions beyond our control.The market price and trading volume of our common stock may be volatile and may be affected by market conditions beyond our control. The price at which our common stock trades has fluctuated, and may continue to fluctuate, significantly. The market price of our common stock may fluctuate in response to many things, including but not limited to, the following:•Variations in actual or anticipated results of our operations, liquidity or financial condition;•Changes in, or the failure to meet, our financial estimates or those of by securities analysts;•Actions or announcements by our competitors;•Potential conflicts of interest, or the discontinuance of our strategic relationships;•Actual or anticipated accounting problems;•Regulatory actions;•Lack of liquidity;•An inability to develop or obtain new businesses or client relationships, respectively;•Changes in the market outlook for the real estate, mortgage or housing markets;•Technology changes in our business;•Changes in interest rates that lead purchasers of our common stock to demand a higher yield;•Actions by our stockholders;•Speculation in the press or investment community;•General market, economic and political conditions, including an economic slowdown or dislocation in the global credit markets;•Failure to maintain the listing of our common stock on the NYSE;•Changes in accounting principles;•Passage of legislation or other regulatory developments that adversely affect us or our industry; and•Departure of our key personnel.The market prices of securities of alternative lenders have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies.15(table of contents)The market prices of securities of alternative lenders have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. These market fluctuations could result in extreme volatility in the market price of our common stock.14(table of contents)Furthermore, our small size and different investment characteristics may not continue to appeal to our current investor base that may seek to dispose of large amounts of our common stock.Furthermore, our small size and different investment characteristics may not continue to appeal to our current investor base that may seek to dispose of large amounts of our common stock. There is no assurance that there will be sufficient buying interest to offset those sales, and, accordingly, the market price of our common stock could be depressed and/or experience periods of high volatility.RISKS RELATED TO OUR MANAGEMENT AND OUR RELATIONSHIPS Our Directors have the right to engage or invest in the same or similar businesses as ours.Our Directors may have other investments and business activities in addition to their interest in, and responsibilities to, us. Under the provisions of our Charter and our bylaws (the “Bylaws”), our Directors have no duty to abstain from exercising the right to engage or invest in the same or similar businesses as ours or employ or otherwise engage any of the other Directors. If any of our Directors who are also directors, officers or employees of any company acquires knowledge of a corporate opportunity or is offered a corporate opportunity outside of his capacity as one of our Directors, then our Bylaws provide that such Director will be permitted to pursue that corporate opportunity independently of us, so long as the Director has acted in good faith. Our Bylaws provide that, to the fullest extent permitted by law, such a Director will be deemed to have satisfied his fiduciary duties to us and will not be liable to us for pursuing such a corporate opportunity independently of us. This may create conflicts of interest between us and certain of our Directors and result in less than favorable treatment of us and our stockholders. As of this date, none of our Directors is directly involved as a director, officer or employee of a business that competes with us, but there can be no assurance that will remain unchanged in the future.Item 1B. Unresolved Staff CommentsNone.Item 1C.Item 1A. CybersecurityWhile we take cybersecurity seriously, we mitigate the common cybersecurity risks that many companies face by greatly limiting the accessibility of and web-based activities. Of our 13 employees, only one employee plus one third-party information-technology consultant (our “IT Consultant”) that we contract with have access to our cyber system. No vendors or customers have access to our system, which greatly minimizes the risk of unauthorized access. No part of our business entails third-party members of the public accessing our accounts, making purchases, or ordering products or services, which greatly reduces our risks of cyber-attack and minimizes the potential consequences if such an attack were to occur. In addition, although we do have a website, it is maintained offsite. Despite our relatively low risk cybersecurity profile and the minimal threat of cybersecurity incidents that we face, we contract with one IT Consultant to assist us in identifying any potential cybersecurity risks and in implementing and maintaining effective measures to reduce our cybersecurity risks. Our IT Consultant helps ensure that our system is updated with the latest cybersecurity patches and configurations and monitors our system and accounts for suspicious activity.Additionally, we invest in firewall protection through Symantec Corporation, which is a provider of Internet-security technology and business-management solutions. Our Symantec firewall protection is designed to monitor and secure our computers from malicious inbound and outbound traffic and to provide an additional layer of protection to our network and data, which helps mitigate the risks of unauthorized access and cybersecurity threats. In the event our IT Consultant becomes aware of any suspicious activity in our accounts or system, our IT Consultant would contact our Chief Executive Officer. Our Chief Executive Officer would consult with our IT Consultant to assess and determine the materiality of the risk presented by the suspicious activity and to determine what steps should be taken to protect the limited data we maintain online. Depending on the materiality of the risk, our IT Consultant and Chief Executive Officer would consult with our Board of Directors to determine an appropriate notification and risk-management plan.Despite the low accessibility of our server and system and the resultant low cybersecurity risks that we face, we recognize that no system is completely protected from cyber threats, that cybersecurity risks are increasingly difficult to detect, and that the increasingly digitalized landscape that businesses operate in increase the pervasiveness and severity of cyber-attack risks. While we do not believe our business strategy, results of operations, or financial condition have been materially adversely affected by any cybersecurity threats or incidents, there is no assurance that we will not be materially affected by such threats or incidents in the future. We will continue to monitor cybersecurity risks with our IT Consultant and stay apprised of changes in the cyber environment.15(table of contents).”ii(table of contents)Part I Item 1.