Vinco Ventures (BBIG) Risk Factors

Given that we produce consumer products for licensed properties, we are susceptible to intellectual property lawsuits that could cause us to incur substantial costs, pay substantial damages, or prohibit us from distributing our products. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. In addition, because patent applications can take many years to issue, there may be applications now pending of which we are unaware, which later may result in issued patents that our products may infringe. If any of our products infringe a valid patent, we could be prevented from distributing that product unless and until we can obtain a license or redesign it to avoid infringement. A license may not be available or may require us to pay substantial royalties. We also may not be successful in any attempt to redesign the product to avoid any infringement. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate, and we may not have the financial and human resources to defend ourselves against any infringement suits that may be brought against us.

Our long-term success will depend to some degree on our ability to protect the proprietary technology that we have developed or may develop or acquire in the future. Patent applications can take many years to issue, and we can provide no assurance that any such patents would be issued. If we are denied any or all of these patents, we may not be able to successfully prevent our competitors from imitating our products or using some or all of the processes that are the subject of such patent applications. Such imitation may lead to increased competition within the finite market for products such as ours. Even if our pending patents were to be issued, our intellectual property rights may not be sufficiently comprehensive to prevent our competitors from developing similar competitive products. Although we may aggressively pursue anyone whom we reasonably believe is infringing upon our intellectual property rights, initiating and maintaining suits against third parties that may infringe upon our intellectual property rights will require substantial financial resources, especially given our lack of patent registrations and applications. We may not have the financial resources to bring such suits, and if we do bring such suits, we may not prevail. Regardless of our success in any such actions, we could incur significant expenses in connection with such suits.

Competitors and other third parties may register trademarks or purchase internet search engine keywords or domain names that are similar to Lomotif’s in order to divert potential users from its platform to theirs. Preventing such unauthorized use is inherently difficult. If Lomotif is unable to prevent such unauthorized use, competitors and other third parties may continue to drive potential online customers away from Lomotif’s platform to competing, irrelevant or potentially offensive platforms, which could harm Lomotif’s reputation and cause Lomotif to lose revenues. Third parties may misappropriate Lomotif’s data through scraping its platform or by other means and may aggregate the data on their own platforms. In addition, “copycat” or piracy-based platforms or apps may misappropriate data on Lomotif’s platform and attempt to imitate Lomotif’s brand or the functionality of Lomotif’s platform. Copied and pirated content may prove to be competitive with Lomotif’s content. If Lomotif becomes aware of such platforms, it may employ technological and legal measures in an attempt to halt their operations if these efforts are commercially reasonable. Lomotif may not be able to detect all such actions in a timely manner and, even if Lomotif could, technological and legal measures when employed may be insufficient to stop their operations. In those cases, Lomotif’s available remedies may not be adequate to protect against such platforms. Regardless of whether Lomotif can successfully enforce Lomotif’s rights against these platforms, any measures that Lomotif may take could require significant financial or other resources from Lomotif or from us. Those platforms may also lure away some of Lomotif’s users or advertisers or reduce its market share, causing material and adverse effects to Lomotif’s business, financial condition, results of operations and prospects.

Lomotif relies on patented technology for mixing and editing videos. Lomotif may not be able to prevent others from developing or exploiting competing technologies, which could have a material and adverse effect on its business operations, financial condition and results of operations. Lomotif’s patents registered in the United States are generally subject to finite and non-extendable terms. Currently, Lomotif also has patent applications pending in the United States and has filed a PCT application, but we cannot assure you that Lomotif will be granted patents pursuant to pending applications. Even if Lomotif’s patent applications succeed and Lomotif is issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented or invalidated in the future. The rights granted under any issued patents may not provide Lomotif with proprietary protection or competitive advantages. Further, the claims under any patents that issue from patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to Lomotif’s technology. It is also possible that the intellectual property rights of others will bar Lomotif from licensing or from exploiting any patents that issue from Lomotif’s pending applications. Numerous U.S. and patents issued in other regions and pending patent applications owned by others exist in the fields in which Lomotif has developed and is developing technology. These patents and patent applications might have priority over Lomotif’s patent applications and could subject its patent applications to invalidation or subject it to patent infringement lawsuits in its current and in any future jurisdictions into which Lomotif expands. Finally, litigation may be necessary in the future to enforce Lomotif’s intellectual property rights and to protect its trade secrets or defend against claims of infringement by Lomotif. Such litigation could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of Lomotif’s available intellectual property or result in payment of substantial damages, penalties and fines or to the removal of relevant content from Lomotif’s website. It may also result in Lomotif’s need to seek license arrangements which may not be available on commercially reasonable terms. Further, efforts to enforce intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of Lomotif’s intellectual property rights, and if such defenses, counterclaims or countersuits are successful, Lomotif could lose valuable intellectual property rights. Lomotif’s inability to protect proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of management’s attention and resources, could delay further sales or the implementation of the Lomotif platform, impair the functionality of the platform, delay introductions of platform’s features, result in Lomotif substituting inferior or more costly technologies into platforms or damage Lomotif’s reputation.

Our success relies in part on the ability of Lomotif to drive engagement with content. Content creators generate content they upload to our service, but some creators may upload content that infringes the terms and rights of third parties or violates our terms of use. If we should fail to qualify for statutory or other legal protections that immunize us from monetary damages for intellectual property infringement, the damages could be significant and have a material impact on our business. While we have implemented measures designed to limit our exposure to claims of intellectual property infringement, intellectual property owners may allege that we failed to take appropriate measures to prevent infringing activities on our systems, that we turned a blind eye to infringement, or that we facilitated, induced or contributed to infringement. A number of entities who are members of the National Music Publishers Association, or NMPA, have threatened litigation against us where they alleged that we engaged in copyright infringement by having used certain musical compositions owned or controlled by them on our Lomotif platform without necessary licenses. We vigorously dispute and have disputed claims of infringement by such publishers but could be subject to additional claims in the future. An adverse judgment against us in any such lawsuit could require us to settle any claims for an undetermined amount which could have a material impact on our business, financial condition, or results of operations. We may also be required to enter into license agreements with various licensors, including record labels, music publishers, performing rights organizations, and collective management organizations, to obtain licenses that authorize the storage and use of content uploaded by our users. We may not be able to develop technological solutions to comply with these laws on economically reasonable terms and there is no guarantee that we will be able to enter into agreements with all relevant rights holders on terms that we deem reasonable. Compliance may therefore negatively impact our financial prospects.

Third parties may claim that one or more of AdRizer’s products or services infringe their intellectual property rights. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of AdRizer’s technology and the uncertainty of intellectual property litigation, which could divert the attention of our management and key personnel away from AdRizer’s business operations. A claim of intellectual property infringement could force AdRizer to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, or could subject AdRizer to significant damages or to an injunction against development and sale of certain of AdRizer’s products or services.

Our wholly-owned subsidiary EVNT, offers a platform for artists and content owners to distribute their intellectual property. Given the increased scrutiny of digital assets as well as cryptocurrencies for regulatory and anti-money laundering purposes, it is possible that the United States and other jurisdictions will engage in increased scrutiny and regulation of NFTs and our business. While NFTs and cryptocurrencies are similar in that both are based on blockchain technology, unlike cryptocurrency units, which are fungible, NFTs have unique identification codes and represent content on the blockchain. The record of ownership of the NFT, which establishes authenticity and may also carry other rights, cannot be duplicated. As NFTs are a relatively new and emerging type of digital asset, the regulatory, commercial, and legal framework governing NFTs (as well as cryptocurrencies) is likely to evolve both in the United States and internationally and implicates issues regarding a range of matters, including, but not limited to, intellectual property rights, privacy and cybersecurity, fraud, anti-money laundering, sanctions, and currency, commodity, and securities law implications. For example, the public sale of securities may only be effected on securities exchanges that are registered with the SEC and pursuant to offerings registered with the SEC. There is regulatory uncertainty with respect to whether certain NFTs could be considered securities. If NFTs sold on our NFT marketplace were deemed to be securities, we would be in violation of securities laws for engaging in transactions regarding unregistered securities. Such a determination could lead to an enforcement action by the SEC and result in fines and other penalties and have a negative impact on our business. As another example, NFTs raise various intellectual property law considerations, including adequacy and scope of assignment, licensing, transfer, copyright, and other right of use issues. The creator of an NFT will often have all rights to the content of the NFT and can determine what rights to assign to a buyer, such as the right to display, modify, or copy the content. To the extent we are directly or indirectly involved in a dispute between creators and buyers on our NFT platform, it could materially and adversely affect the success of our NFT platform and harm our business and reputation. NFTs, and our NFT platform, may also be an attractive target for cybersecurity attacks. For example, a perpetrator could seek to obtain the private key associated with a digital wallet holding an NFT to access and sell the NFT without valid authorization, and the owner of the NFT may have limited recourse due to the nature of blockchain transactions and of cybercrimes generally. NFT marketplaces, including our NFT platform, may also be vulnerable to attacks where an unauthorized party acquires the necessary credentials to access user accounts. The safeguards we have implemented or may implement in the future to protect against cybersecurity threats may be insufficient. If our NFT platform were to experience any cyberattacks, it could negatively impact our reputation and market acceptance of our platform. NFTs, and our NFT platform, may also be subject to regulations of the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury and the Bank Secrecy Act. Further, the Office of Foreign Assets Controls (“OFAC”) has signaled sanctions could apply to digital transactions and has pursued enforcement actions involving cryptocurrencies and digital asset accounts. The nature of many NFT transactions also involve circumstances which present higher risks for potential violations, such as anonymity, subjective valuation, use of intermediaries, lack of transparency, and decentralization associated with blockchain technology. In addition, the Commodity Futures Trading Commission has stated that cryptocurrencies, with which NFTs have some similarities, fall within the definition of “commodities.” If NFTs were deemed to be a commodity, NFT transactions could be subject to prohibitions on deceptive and manipulative trading or restrictions on manner of trading (e.g., on a registered derivatives exchange), depending on how the transaction is conducted. Moreover, if NFTs were deemed to be a “security,” it could raise federal and state securities law implications, including exemption or registration requirements for marketplaces for NFT transactions, sellers of NFTs, and the NFT transactions themselves, as well as liability issues, such as insider trading or material omissions or misstatements, among others. NFT transactions may also be subject to laws governing virtual currency or money transmission. For example, New York has legislation regarding the operation of virtual currency businesses. NFT transactions also raise issues regarding compliance with laws of foreign jurisdictions, many of which present complex compliance issues and may conflict with one another. Our launch and operation of our NFT platform expose us to the foregoing risks, among others, any of which could materially and adversely affect the success of our NFT platform and harm our business, financial condition, results of operations, reputation, and prospects. Certain U.S. jurisdictions including Washington and Puerto Rico are drafting regulations that would apply their sales tax on digital products to include NFTs and other states may act to adopt similar regulations. As the market for NFTs is relatively nascent, it is difficult to predict how the legal and regulatory framework around NFTs will develop and how such developments will impact our business and our NFT platform. Further, market acceptance of NFTs is uncertain as buyers may be unfamiliar or uncomfortable with digital assets generally, how to transact in digital assets, or how to assess the value of NFTs. The launch of our NFT platform also subjects us to risks similar to those associated with any new platform offering, including, but not limited to, our ability to accurately anticipate market demand and acceptance, our ability to successfully launch our new NFT platform offerings, creator and buyer acceptance, technical issues with the operation of our new NFT platform, and legal and regulatory risks as discussed above. We believe these risks may be heightened with respect to our NFT platform, as NFTs are still considered a relatively novel concept. If we fail to accurately anticipate or manage the risks associated with our NFT platform or with our facilitation of cryptocurrency transactions, or if we directly or indirectly become subject to disputes, liability, or other legal or regulatory issues in connection with our NFT platform or cryptocurrency transactions, our NFT platform may not be successful and our business, financial condition, results of operations, reputation, and prospects could be materially harmed.

AdRizer’s ability to successfully leverage user data and generate revenue from opportunities to serve advertisements could be impacted by restrictions imposed by third parties, including restrictions on AdRizer’s ability to use or read cookies or device identifiers, track user activity across apps and websites or use real-time bidding networks or other bidding networks. For example, if publishers or supply-side platforms decide to limit the data that AdRizer receives in order to comply (in their view) with the opt-out of sale provisions of the California Consumer Privacy Act of 2018 (the “CCPA”) or a potential federal privacy law, or with opt-out of behavioral advertising provisions under the California Privacy Rights Act (the “CPRA”), Virginia Consumer Data Protection Act (the “VCDPA”) or Colorado Privacy Act, then AdRizer’s service may prove to be less valuable to AdRizer’s customers and AdRizer may find it more difficult to generate revenue. Third parties, such as Apple and Google, on whose operating systems AdRizer and its data suppliers have historically relied for data or opportunities to serve advertisements, have recently imposed or are expected to impose in the future privacy restrictions that will require AdRizer to develop new advertising strategies which its customers may not deem successful, which could have a material adverse effect on AdRizer’s revenue. Historically, digital advertising has relied primarily on the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads. Devices are identified through unique identifiers stored in cookies, provided by device operating systems for advertising purposes, or generated based on statistical algorithms applied to information about a device, such as the IP address and device type. AdRizer uses device identifiers to record information such as when an Internet user views an ad, clicks on an ad, or visits one of AdRizer’s advertiser’s websites or applications. Historically, AdRizer has used device identifiers to help it achieve the advertisers’ campaign goals, including to limit the instances that an Internet user sees the same advertisement, report information to AdRizer’s advertisers regarding the performance of their advertising campaigns, and detect and prevent malicious behavior and invalid traffic throughout AdRizer’s network of inventory. Historically, AdRizer has also used data associated with device identifiers to help AdRizer’s customers decide whether to bid on, and how to price, an opportunity to place an advertisement in a specific location, at a given time, in front of a particular Internet user. Additionally, AdRizer’s customers historically have relied on device identifiers to add information they have collected or acquired about users into AdRizer’s platform. Without such data, AdRizer’s customers may not have sufficient insight into an Internet user’s activity, which may compromise their and AdRizer’s ability to determine which inventory to purchase for a specific campaign and may undermine the effectiveness of AdRizer’s platform or AdRizer’s ability to improve its platform and remain competitive. Historically, digital advertising, including AdRizer’s platform, has made significant use of cookies to store device identifiers for the advertising activities described above. When AdRizer uses cookies, they are generally considered third-party cookies, which are cookies owned and used by parties other than the owners of the website visited by the Internet user. The most commonly used Internet browsers, including Chrome, Firefox, Internet Explorer and Safari, allow Internet users to modify their browser settings to prevent some or all cookies from being accepted by their browsers. Internet users can delete cookies from their computers at any time. Additionally, some browsers currently, or may in the future, block or limit some third-party cookies by default or may implement user control settings that algorithmically block or limit some cookies. Today, three major web browsers, Apple’s Safari, Mozilla’s Firefox and Microsoft’s Edge, block third-party cookies by default. Google’s Chrome has introduced new controls over third-party cookies and announced plans to deprecate support for third-party cookies and user agent strings entirely by late 2023. Some Internet users also download free or paid ad-blocking software that not only prevents third-party cookies from being stored on a user’s computer, but also blocks all interaction with a third-party ad server. In addition, Google has introduced ad-blocking software in its Chrome web browser that will block certain ads based on quality standards established under a multi-stakeholder coalition. If such a feature inadvertently or mistakenly blocks ads that are not within the established blocking standards, or if such capabilities become widely adopted and the advertising technology industry does not collaboratively develop alternative technologies, AdRizer’s business could be harmed. The Interactive Advertising Bureau and Digital Advertising Alliance have also developed frameworks that allow users to opt out of the “sale” of their personal information under the CCPA in ways that stop or severely limit the ability to show targeted ads. Advertising shown on mobile applications can also be affected by blocking or restricting use of mobile device identifiers. Data regarding interactions between users and devices are tracked mostly through stable, pseudonymous advertising identifiers that are built into the device operating system with privacy controls that allow users to express a preference with respect to data collection for advertising, including to disable the identifier. These identifiers and privacy controls are defined by the developers of the platforms through which the applications are accessed and could be changed by the platforms in a way that may negatively impact AdRizer’s business. For example, Apple has shifted to require user opt-in before permitting access to Apple’s unique identifier, or IDFA. This shift from enabling user opt-out to an opt-in requirement has had, and will likely continue to have, a substantial impact on the mobile advertising ecosystem and could adversely impact AdRizer’s growth in this channel. Some consumers also download free or paid “ad blocking” software on their computers or mobile devices, not only for privacy reasons, but also to counteract the adverse effect advertisements can have on the consumer experience, including increased load times, data consumption, and screen overcrowding. Ad-blocking technologies and other privacy controls may prevent some third-party cookies, or other tracking technologies, from being stored on a consumer’s computer or mobile device. If more consumers adopt these measures, AdRizer’s business, operating results, and financial condition could be adversely affected. Ad-blocking technologies could have an adverse effect on AdRizer’s business, operating results, and financial condition if they reduce the volume or effectiveness and value of advertising. In addition, some ad blocking technologies block only ads that are targeted through use of third-party data, while allowing ads based on first-party data (i.e., data owned by the publisher). These ad blockers could place AdRizer at a disadvantage because AdRizer relies on third-party data, while some large competitors have troves of first-party data they use to direct advertising. Other technologies allow ads that are deemed “acceptable,” which could be defined in ways that place AdRizer or AdRizer’s advertisers at a disadvantage, particularly if such technologies are controlled or influenced by AdRizer’s competitors. Even if ad blockers do not ultimately have an adverse effect on AdRizer’s business, investor concerns about ad blockers could cause our stock price and ability to raise additional capital on acceptable terms or at all to be adversely impacted. In addition, in the EU, Directive 2002/58/EC (as amended by Directive 2009/136/EC), commonly referred to as the ePrivacy or Cookie Directive, directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie and other similar technologies, is allowed only if the Internet user has been informed about such access and given his or her consent. A ruling by the Court of Justice of the European Union clarified that such consent must be reflected by an affirmative act of the user, and European regulators are increasingly pressing for more robust forms of consent and bringing enforcement actions against major platforms, including Amazon, Facebook, and Google, concerning their cookie consent mechanisms. These developments may result in decreased reliance on implied consent mechanisms that have been used to meet requirements of the ePrivacy Directive in some markets. A replacement for the ePrivacy Directive is currently under discussion by EU member states to complement and bring electronic communication services in line with the General Data Protection Regulation (“GDPR”) and force a harmonized approach across EU member states. Like the GDPR, the proposed ePrivacy Regulation has extra-territorial application as it applies to businesses established outside the EU that provide publicly available electronic communications services to, or gather data from the devices of, users in the EU. Though still subject to debate, the proposed ePrivacy Regulation may further raise the bar for the use of cookies and the fines and penalties for breach may be significant. AdRizer may be required to, or otherwise may determine that it is advisable to, make significant changes in AdRizer’s business operations and product and services to obtain user opt-in for cookies and use of cookie data, or develop or obtain additional tools and technologies to compensate for a lack of cookie data. As the collection and use of data for digital advertising has received media attention over the past several years, some government regulators, such as the U.S. Federal Trade Commission (“FTC”), and privacy advocates have suggested creating a “Do Not Track” standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have their online browsing activities tracked. “Do Not Track” has seen renewed emphasis from proponents of the CCPA, and the final regulations address browser-based or similar “do not sell” signals. California’s CPRA and the Colorado Privacy Act similarly contemplate the use of technical opt outs for the sale and sharing of personal information for advertising purposes as well as to opt out of the use of sensitive information for advertising purposes and allows for rulemaking to develop these technical signals. To the extent a “Do Not Track,” “Do Not Sell,” or similar control is adopted by many Internet users or if a “Do Not Track” standard is imposed by other states or by federal or foreign legislation or is agreed upon by standard setting groups, AdRizer may have to change AdRizer’s business practices, AdRizer’s customers may reduce their use of its platform, and AdRizer’s business, financial condition, and results of operations could be adversely affected.

Much of the data that AdRizer uses is licensed from third-party data suppliers, and AdRizer is dependent upon its ability to obtain necessary data licenses on commercially reasonable terms. AdRizer could suffer material adverse consequences if AdRizer’s data suppliers were to withhold their data from AdRizer. For example, data suppliers could withhold their data from AdRizer if there is a competitive reason to do so; if AdRizer breaches its contract with a supplier; if they are acquired by one of AdRizer’s competitors; if legislation is passed restricting the use or dissemination of the data they provide; if judicial interpretations are issued restricting use of such data; or if AdRizer is unable to acquire commercially useful data from its suppliers due to privacy changes recently made by Apple and expected to be made by Google with respect to tracking user activity across apps and websites. Additionally, AdRizer could terminate relationships with AdRizer’s data suppliers if they fail to adhere to AdRizer’s data quality standards. If a substantial number of data suppliers were to withdraw or withhold their data from AdRizer, or if AdRizer severs ties with its data suppliers based on their inability to meet AdRizer’s data standards, AdRizer’s ability to provide products and services to its customers could be materially adversely impacted, which could result in decreased revenue. The reliability of AdRizer’s solutions depends upon the integrity and quality of the data in AdRizer’s database. A failure in the integrity or a reduction in the quality of AdRizer’s data could cause a loss of customer confidence in AdRizer’s solutions, resulting in harm to the AdRizer brand, loss of revenue and exposure to legal claims. AdRizer may experience an increase in risks to the integrity of its database and quality of AdRizer’s data as AdRizer moves toward real-time, non-identifiable, consumer-powered data through its products. AdRizer must continue to invest in its database to improve and maintain the quality, timeliness and coverage of the data if AdRizer is to maintain its competitive position. Failure to do so could result in a material adverse effect on AdRizer’s and our business, growth and revenue prospects.

AdRizer’s Cortex technology platform is currently hosted and managed on Amazon Web Services and takes full advantage of open standards for processing, storage, security and big data technology. Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect AdRizer’s and our business, results of operations and financial condition. AdRizer’s business is heavily dependent upon highly complex data processing capability. The ability of AdRizer’s Cortex technology platform hosts and managers to protect these data centers against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or equipment failure or other disasters is beyond AdRizer’s control and is critical to AdRizer’s ability to succeed.

AdRizer depends upon the sustained and uninterrupted performance of its Cortex technology platform to manage its advertising inventory supply; acquire advertising inventory for each campaign; collect, process and interpret data; and optimize campaign performance in real time and provide billing information to its financial systems. If AdRizer’s platform cannot scale to meet demand, if there are errors in its execution of any of these functions on its platform, or if AdRizer experiences outages, then its business may be harmed. AdRizer’s Cortex technology platform is complex and multifaceted. Operational and performance issues could arise from the platform itself or from outside factors, such as cyberattacks or other third-party attacks. Errors, failures, vulnerabilities or bugs have been found in the past, and may be found in the future. AdRizer’s Cortex technology platform also relies on third-party technology and systems to perform properly. It is often used in connection with computing environments utilizing different operating systems, system management software, equipment and networking configurations, which may cause errors in, or failures of, AdRizer’s platform or such other computing environments. Operational and performance issues with AdRizer’s platform could include the failure of its user interface, outages, errors during upgrades or patches, discrepancies in costs billed versus costs paid, unanticipated volume overwhelming its databases, server failure or catastrophic events affecting one or more server facilities. While AdRizer has built redundancies in its systems, full redundancies do not exist. Some failures will shut AdRizer’s platform down completely, others only partially. AdRizer provides service-level agreements to some of its customers, and if its platform is not available for specified amounts of time or if there are failures in the interaction between AdRizer’s platform, partner platform and third-party technologies, AdRizer may be required to provide credits or other financial compensation to its customers. As we grow AdRizer’s business, we expect to continue to invest in technology services and equipment. Without these improvements, AdRizer’s operations might suffer from unanticipated system disruptions, slow transaction processing, unreliable service levels, impaired quality or delays in reporting accurate information regarding transactions in its platform, any of which could negatively affect AdRizer’s reputation and ability to attract and retain customers. AdRizer faces intense competition in the marketplace and needs to keep up with rapidly changing technology, evolving industry standards and consumer needs, regulatory changes, and the frequent introduction of new solutions by its competitors. AdRizer’s future success will depend in part upon its ability to enhance its platform and to develop and introduce new features and solutions in a timely manner with competitive prices that also meet the evolving needs of existing and prospective customers. AdRizer may not be able to maintain its existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective manner. In addition, the expansion and improvement of AdRizer’s systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that AdRizer’s and our business will grow. If we fail to respond to technological change or to adequately maintain, expand, upgrade and develop AdRizer’s systems and infrastructure in a timely fashion, AdRizer’s and our growth prospects and results of operations could be adversely affected. Operational and performance issues with AdRizer’s Cortex technology platform could also result in negative publicity, damage to its brand and reputation, loss of or delay in market acceptance of its platform, increased costs or loss of revenue, loss of the ability to access its platform, loss of competitive position or claims by customers for losses sustained by them. Alleviating problems resulting from such issues could require significant expenditures of capital and other resources and could cause interruptions, delays or the cessation of AdRizer’s business, any of which may adversely affect our operating results and financial condition.

AdRizer operates in a highly competitive and rapidly changing industry that is subject to changing technology and customer demands and that includes many companies providing competing solutions. With the introduction of new technologies and the influx of new entrants into the market, we expect competition to persist and intensify in the future, which could harm AdRizer’s and our ability to increase revenue and profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants offer multiple new products and services aimed at capturing advertising spend. AdRizer competes with privately-held companies and with public companies such as AdMob, The Trade Desk, Inc., Perion Network Ltd., and Cardlytics, Inc., AdRizer’s current and potential competitors may have significantly more financial, technical, marketing and other resources than we have, allowing them to devote greater resources to the development, promotion, sale and support of their products and services. They may also have more extensive customer bases and broader supplier relationships than we have. As a result, these competitors may be better able to respond quickly to new technologies, develop deeper marketer relationships or offer services at lower prices. Increased competition may result in reduced pricing for AdRizer’s products and services, increased sales and marketing expense, longer sales cycles or a decrease of AdRizer’s market share, any of which could negatively affect AdRizer’s and our revenue, profitability and future operating results and ability to grow our business. These companies may also have greater brand recognition than we have, actively seek to serve AdRizer’s market, and have the power to significantly change the nature of the marketplace to their advantage. Some of AdRizer’s larger competitors may have substantially broader product and service offerings and may leverage their relationships based on other products and services or incorporate additional functionality into existing products and services to gain business in a manner that may discourage customers from using AdRizer’s products and services, including through selling at zero or negative margins or product bundling with other products and services which they provide at reduced prices. Customers may prefer to purchase advertising on their own or through another platform without using AdRizer’s buy-side products and services. Potential customers may also prefer to leverage larger sell-side platforms rather than a new platform regardless of product performance or features. These larger competitors often have broader product lines and market focus and may therefore not be as susceptible to downturns in a particular market. AdRizer may also experience negative market perception as a result of being a smaller company than its larger competitors. AdRizer may also face competition from companies that we do not yet know about or do not yet exist. If existing or new companies develop, market or resell competitive high-value marketing products or services, acquire one of AdRizer’s existing competitors or form a strategic alliance with one of AdRizer’s competitors, AdRizer’s ability to compete effectively could be significantly compromised and our results of operations could be harmed.

There are a number of companies that manufacture and distribute consumer products similar to ours. Many of our anticipated competitors are significantly larger than we are and have considerably greater financial, technical, marketing, and other resources than we do. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations.

Lomotif’s success depends on its ability to provide Lomotif users with engaging content, whether through its platform or the associated LoMoTV and LoMo Records, which in part depends on the content contributed by its users, influencers, publishers and other content creators and licensors. If its existing and target content contributors, including influencers, celebrities, artists, athletes, journalists, sports teams, media outlets and brands, publishers, and other users, are not interested in contributing, or do not continue to contribute engaging content to Lomotif, user growth, retention, and engagement may decline. That, in turn, may impair Lomotif’s ability to maintain good relationships with its advertisers and business partners or attract new advertisers and business partners, which may seriously harm its business.

The size of user base and the level of user engagement are critical to Lomotif’s success. Its expected monetization methods, including advertising, paid features, non-fungible tokens or functions, live streaming, e-commerce and online games, depend on its ability to significantly increase the size of its user base and user engagement. A majority of Lomotif’s current user base is not in the United States. While Lomotif is prioritizing the United States as a region to grow its user base, it may not be able to gain a significant number of users in the United States as quickly or cost effectively as it experienced with other jurisdictions and will likely need to change or enhance its technology platform to accommodate a user base in the United States at scale. If Lomotif fails to grow its user base in the United States or generally, either due to its failure to retain existing users or attract new users, or its users becoming less active, there may be less frequent access of users to its platform, less user engagement with any ads displayed on the platform, and less user spend with paid products or services offered by the platform. This could drive influencers and other content creators away from the Lomotif platform, discourage advertisers from purchasing advertisements on the platform, dissuade merchants from promoting products on the platform, and dissuade publishers and game developers from distributing their tv shows, music records, and games through the platform. As a result, Lomotif may not be able to generate the level of revenues expected, or suffer from decline in revenues. Lomotif may need to conduct more marketing and branding activities and incur additional selling and marketing expenses to retain existing users and attract new users, influencers, advertisers, merchants, game developers and publishers, which may reduce its profitability. Growing Lomotif’s user base and maintaining a high level of user engagement require it to adequately and timely respond to changes in user preferences, attract and retain popular influencers and offer new features and contents. A number of factors could negatively affect user retention, growth and engagement, including if: ? Lomotif fails to maintain its user base, the breadth and diversity of its contents and develop and introduce features, functions and applications that keep its users interested and engaged on its platform; ? Lomotif fails to successfully balance its efforts to provide a compelling user experience with the decisions with respect to the frequency, prominence, and size of ads and other commercial content that it displays; ? technical or other problems prevent Lomotif from delivering its services in a timely and reliable manner or otherwise adversely affect user experience; ? Lomotif fails to address changes in user sentiment about the quality or usefulness of the features, functions and applications offered on its platform and user concerns related to data privacy and safety, cyber security and other factors; ? Lomotif is unable to combat spam or inappropriate or abusive use of its platform, which may lead to negative publicity; ? Lomotif suffers from negative publicity, fails to maintain its brand image, or its reputation is damaged; ? there are adverse changes in Lomotif’s offerings that are mandated by legislation, regulatory authorities, or litigation, including settlements or consent decrees; ? users increasingly engage with competing platforms.

A limited number of AdRizer’s major customers have contributed a significant portion to its revenues in the past. AdRizer’s revenue from the top 5 largest customers accounted for approximately 90% and 91% of its total revenues in the fiscal years ended December 31, 2021 and 2020, respectively. Its revenue from its top ten largest customers accounted for approximately 96% and 96% of its total revenues in the fiscal years ended December 31, 2021 and 2020, respectively. Although AdRizer continually seeks to diversify its customer base, and we intend to integrate AdRizer with our other businesses including the Lomotif app to increase our total consolidated revenues, we cannot assure you that the proportion of our revenues contributed by these customers to AdRizer’s or our total revenues will decrease in the near future. Dependence on a limited number of customers exposes us to the risk of substantial losses resulting from the loss or financial impairment of any of those customers. Specifically, any one of the following events, among others, may cause material fluctuations or declines in AdRizer’s revenues and have a material and adverse effect on our business, financial condition, results of operations and prospects: ? an overall decline in the business of one or more of AdRizer’s significant customers; ? the decision by one or more of AdRizer’s significant customers to switch to its competitors; ? AdRizer’s agreement to reduce the prices of its products and services purchased by one or more of its significant customers; or ? the failure or inability of any of AdRizer’s significant customers to make timely payment for its products and services.

As AdRizer is in the business of providing services to publishers, advertisers and agencies, AdRizer must deliver effective digital advertising campaigns. Despite AdRizer’s efforts to implement fraud protection techniques in AdRizer’s platforms, some of its advertising and agency campaigns may experience fraudulent and other invalid impressions, clicks or conversions that advertisers may perceive as undesirable, such as non-human traffic generated by computers, known as “bots”, designed to simulate human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given digital advertising campaign and could harm AdRizer’s reputation. It may be difficult for AdRizer to detect fraudulent or malicious activity because AdRizer does not own content and relies in part on its digital media properties to control such activity. Industry self-regulatory bodies, the FTC and certain influential members of Congress have increased their scrutiny and awareness of, and have taken recent actions to address, advertising fraud and other malicious activity. If AdRizer fails to detect or prevent fraudulent or other malicious activity, the affected advertisers may experience or perceive a reduced return on their investment and AdRizer’s reputation may be harmed. High levels of fraudulent or malicious activity could lead to dissatisfaction with AdRizer’s products and services, refusals to pay, refund or future credit demands or withdrawal of future business.

The substantial majority of AdRizer’s revenue has been derived from customers that programmatically purchase or sell advertising inventory through its platform. We expect that spending on programmatic ad buying and selling will continue to be AdRizer’s primary source of revenue for the foreseeable future, and that its revenue growth will largely depend on increasing spend through its platform. The market for programmatic ad buying is an emerging market, and AdRizer’s current and potential customers may not shift quickly enough to programmatic ad buying from other buying methods, reducing its growth potential. Because this industry is relatively new, AdRizer will encounter risks and difficulties frequently encountered by early-stage companies in similarly rapidly evolving industries, including the need to: ? maintain its reputation and build trust with advertisers and digital media property owners; ? offer competitive pricing to publishers, advertisers and digital media agencies; ? maintain quality and expand quantity of its advertising inventory; ? continue to develop, launch and upgrade the technologies that enable AdRizer to provide its solutions; ? respond to evolving government regulations and industry practice relating to the internet, telecommunications, mobile, privacy, marketing and advertising aspects of its business; ? identify, attract, retain and motivate qualified personnel; and ? cost-effectively manage AdRizer’s operations. If the market for programmatic ad buying deteriorates or develops more slowly than we expect, it could reduce demand for AdRizer’s platform, and AdRizer’s and our business, growth prospects and financial condition would be adversely affected. In addition, revenue may not necessarily grow at the same rate as spend on AdRizer’s platform. Growth in spend may outpace growth in our revenue from AdRizer as the market for programmatic advertising matures due to a number of factors including quantity discounts and product, media, customer and channel mix shifts. A significant change in revenue as a percentage of spend could reflect an adverse change in AdRizer’s and our business and growth prospects. In addition, any such fluctuations, even if they reflect our strategic decisions, could cause our performance to fall below the expectations of securities analysts and investors, and adversely affect the price of our common stock.

AdRizer may be involved in disputes with agencies and their advertisers over the operation of its platform, the terms of AdRizer’s agreements or its billings for purchases made by them through AdRizer’s platform. If AdRizer is unable to collect or make adjustments to bills to customers, AdRizer could incur write-offs for bad debt, which could have a material adverse effect on its results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies and AdRizer’s bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially negative effect on AdRizer’s business, financial condition and operating results. Even if AdRizer is not paid by its customers on time or at all, AdRizer is still obligated to pay for the advertising inventory it has purchased for the advertising campaign, and as a consequence, AdRizer’s results of operations and financial condition would be adversely impacted. AdRizer and its customers set up campaigns on our platform using a number of available variables. While AdRizer’s platform includes several checks and balances, it is possible for human error to result in significant over-spending. AdRizer offers a number of protections such as daily or overall spending caps. However, despite these protections, the risk of overspend exists. For example, campaigns which last for a period of time can be set to pace evenly or as quickly as possible. If a customer with a high credit limit enters an incorrect daily cap with a campaign set to a rapid pace, it is possible for a campaign to accidently go significantly over budget. AdRizer’s potential liability for such errors may be higher when they occur in situations in which AdRizer is executing purchases on behalf of a customer rather than the customer using the self-service feature of AdRizer’s platform. While AdRizer’s customer contracts state that customers are responsible for media purchased through AdRizer’s platform, AdRizer is ultimately responsible for paying the inventory providers and it may be unable to collect when such errors occur.

AdRizer provides a platform that intermediates between publishers seeking to sell advertising space and buyers seeking to purchase that space. If AdRizer were to be perceived as favoring one side of the transaction to the detriment of the other, or presenting a competitive challenge to their own businesses, demand for AdRizer’s platform from publishers or buyers could decrease and AdRizer’s business, results of operations and financial condition would be adversely affected.

AdRizer’s future success will be greatly dependent on regularly adding new customers and increasing its customers’ usage of its platform. AdRizer’s contracts and relationships with customers generally do not include long-term or exclusive obligations requiring them to use AdRizer’s platform or maintain or increase their use of the platform. AdRizer’s agreements with its customers allow them to change the amount of spending on its platform or terminate its services with limited notice. AdRizer’s customers typically have relationships with different providers and there is limited cost to moving budgets to AdRizer’s competitors. AdRizer’s customers may also choose to decrease their overall advertising spend for any reason. Accordingly, AdRizer must continually work to win new customers and retain existing customers, increase their usage of its platform and capture a larger share of their advertising spend. AdRizer may not be successful in educating and training customers, particularly the newer customers, on how to use its platform, in order for its customers to get the most benefit from its platform and increase their usage. If these efforts are unsuccessful or customers decide not to continue to maintain or increase their usage of AdRizer’s platform for any other reason, or if AdRizer fails to attract new customers, its revenue could stagnate or decline, which would materially and adversely harm AdRizer’s and our business, results of operations, and financial condition. We cannot assure you that AdRizer’s customers will continue to use and increase their spend on AdRizer’s platform or that AdRizer will be able to attract a sufficient number of new customers to continue to grow AdRizer’s business and revenue. If customers representing a significant portion of AdRizer’s business decide to materially reduce their use of its platform or cease using the platform altogether, AdRizer’s revenue could be significantly reduced, which could have a material adverse effect on AdRizer’s and our business, operating results and financial condition. AdRizer may not be able to replace customers who decrease or cease their usage of its platform with new customers that will use its platform to the same extent.

AdRizer’s future success depends in large part on its current senior management team including its chief executive officer Kenneth Bond and its ability to attract and retain other high-quality management and operating personnel. AdRizer’s senior management team’s in-depth knowledge of and deep relationships with the participants in AdRizer’s industry are extremely valuable to AdRizer. AdRizer’s business also requires skilled technical and marketing personnel, who are in high demand and are often subject to competing offers. AdRizer’s failure to recruit and retain qualified personnel could hinder AdRizer’s ability to successfully develop and operate its business, which could have a material adverse effect on our financial position and operating results. The complexity of AdRizer’s data products, processing functionality, software systems and services require highly trained professionals to operate, maintain, improve and repair them. While AdRizer presently has a sophisticated, dedicated and experienced team who have a deep understanding of AdRizer’s business, some of whom have been with AdRizer for years, the labor market for these individuals has historically been, and is currently, very competitive due to the limited number of people available with the necessary technical skills and understanding, compensation strategies, general economic conditions and various other factors. As the business information and marketing industries continue to become more technologically advanced, AdRizer anticipates increased competition for qualified personnel. The loss of the services of highly trained personnel like AdRizer’s current team of associates, or the inability to recruit and retain additional, qualified associates, could have a material adverse effect on AdRizer’s business, financial position or operating results.

In order to be successful, Vinco must continue to attract, retain and motivate executives and other key employees across the Company. Hiring and retaining qualified executives is critical to our future. Vinco may be unable to attract and retain highly qualified management and employees, particularly if we do not offer employment terms competitive with the rest of the market. Failure to attract and retain qualified individuals, key leaders, executives and employees, or failure to develop and implement a viable succession plan, could result in inadequate depth of institutional knowledge or skill sets, which could adversely affect Vinco's business and results of operations.

We depend on a variety of consultants to provide consulting services consisting of implementation of the Company’s business plan, investor relation services, introduction of potential investors, news distribution, marketing and sales. The loss of the services of any of these consultants could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. Furthermore, if we lose or terminate the services of one or more of our consultants or if one or more of our consultants joins a competitor or otherwise competes with us, it could impair our business and our ability to successfully implement our business plan. Additionally, if we are unable to hire qualified replacements for our consultants in a timely fashion, our ability to execute our business plan would be harmed. Even if we can quickly hire qualified replacements, we would expect to experience operational disruptions and inefficiencies during any transition. We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry. Our inability to meet our staffing requirements in the future could impair our growth and harm our business.

Lomotif’s current and expected operations are dependent on: ? Electronics manufacturers and their technical standards requirements for their devices, ? Whether electronics manufacturers make Lomotif available on their platforms, ? Whether speech-based searches and functions will find or work with the Lomotif platform, ? Whether manufacturers, search engine algorithms and app stores may show users Lomotif’s platform, ? Compatibility with third-party operating systems to support Lomotif’s platform and all its features, ? The availability of complex networks and the dependability of mobile devices to connect to networks, ? Targeting and measuring tools to collect user data so that Lomotif can drive advertisement revenues, ? Third-party terms of service being reasonable or else terms with which Lomotif is able to comply, ? Third-parties maintaining their standards of service and complying with rules and regulations, ? Influencers and other content contributors, ? Advertising agencies and advertisers, ? Third-party platforms and websites integrating certain tools and functions, ? Third-parties partnering with Lomotif to drive users to its platform or otherwise working with Lomotif to create an integrated user experience between platforms, and ? Third-party online payment providers and processors. Lomotif relies on third parties to supply these services and provide revenue sources. It is important that Lomotif’s platform and related products and services work well across a range of mobile operating systems, complex networks and mobile devices that Lomotif does not control. The networks maintained and services provided by such third parties are vulnerable to damage or interruption, which could impact Lomotif’s results of operations. Any disruption or cancelation of service or partnership by Lomotif or by a third-party with Lomotif could affect user experience, drive users away and discourage advertisers and partners from working with Lomotif. Furthermore, Lomotif expects to continue to devote significant resources to creating and supporting products and services across multiple platforms and devices. Lomotif may not be successful in maintaining and developing relationships with key participants in the mobile industry or in developing services that operate effectively with these operating systems, networks, devices and standards. Failing to attract and retain a substantial number of new device manufacturers, suppliers, distributors, developers and users, or failing to develop products and technologies that work well on new devices and platforms, could harm Lomotif’s business, financial condition, and operating results and ability to capture future business opportunities. In addition, the conduct of third parties which provide infrastructure, services, content and collaboration opportunities to Lomotif may affect Lomotif’s business. We cannot be certain whether any such third party has or will infringe any other person’s legal rights or violate any regulatory requirements. While Lomotif is on watch for irregularities or non-compliance in the business practices of any parties with whom Lomotif pursues existing or future cooperation, we cannot assure you that any of these irregularities will be corrected in a prompt and proper manner or that they will not expose us or Lomotif to liability or reputational harm.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters important to our business, many of which are still evolving and being tested in courts, and could be interpreted in ways that could harm our business. These laws and regulations involve matters including privacy, data use, data protection and personal information, encryption, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, digital, electronic contracts and other communications, competition, protection of minors, consumer protection, civil rights, telecommunications, product liability, e-commerce, taxation, economic or other trade controls including sanctions, anti-corruption and political law compliance, securities law compliance, and online payment services. In particular, we are subject to federal, state, and foreign laws regarding privacy and protection of people’s data. Foreign data protection, privacy, content, competition, consumer protection, and other laws and regulations can impose different obligations, or penalties or fines for non-compliance, or be more restrictive than those in the United States. Any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, or otherwise adversely affect our business. For a further discussion of the regulatory risks faced by our various businesses, see “- Risks Related to Our Company - Our NFT platform may not be successful and may expose us to legal, regulatory, and other risks. Given the nascent and evolving nature of cryptocurrencies, NFTs, and our NFT platform, we may be unable to accurately anticipate or adequately address such risks or the potential impact of such risks. The occurrence of any such risks could materially and adversely affect our business, financial condition, results of operations, reputation, and prospects”; “ – Risks Related to Lomotif- Lomotif’s business is subject to a variety of laws, regulations, rules, policies and other obligations, which most notably include those related to data privacy and protection. Any violation of the law or regulations governing Lomotif’s operations, including those related to losses or unauthorized access to or releases of confidential information or personal data could subject Lomotif to significant reputational, financial, legal and operational consequences”; “– Risks Related to Lomotif - Lomotif faces risks and uncertainties arising from laws, regulations, rules and the political and economic climate in the jurisdictions across the globe within which it does business, including, without limitation, the United States, Brazil, India, Russia and Singapore”; “- Risks Related to AdRizer - AdRizer’s business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection”; “ – Risks Related to AdRizer - Government regulation of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by AdRizer to comply with these laws and regulations could substantially harm its business and results of operations.” Additionally, regarding the regulatory risks faced by the Cryptype businesses expected to be spun off, see relevant discussion under “Risk Factors” in the preliminary information statement filed as Exhibit 99.1 with the Amendment No. 2 to Form 10 filed with the SEC on March 18, 2022.

Failure to comply with such applicable laws, regulations and rules may subject Lomotif’s global operations to strict scrutiny by local authorities, which in turn may materially and adversely affect Lomotif’s globalized operations. As Lomotif expands operations in additional emerging markets and regions, Lomotif may have to adapt its business models or operations to the local markets due to various legal requirements and market conditions. Lomotif’s international operations and expansion efforts may result in increased costs and are subject to various risks, including difficulties in obtaining licenses, permits or other applicable governmental authorizations, content control from local authorities, uncertain enforcement of intellectual property rights, potential claims of intellectual property infringement, the complexity of compliance with laws and regulations and cultural differences. Compliance with applicable laws, regulations and rules related to matters that are central to Lomotif’s business, including those related to streaming services, content restrictions, data privacy, virtual items, anti-corruption laws, anti-money laundering and the protection of minors, increase the costs and risk exposure of doing business in multiple jurisdictions across the globe. In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country. As Lomotif’s globalized operations evolve, we cannot assure you that Lomotif will be able to fully comply with the legal requirements of each jurisdiction and successfully adapt its business models to local market conditions. Due to the complexity involved in Lomotif’s global business expansion, we cannot assure you that Lomotif is in compliance with all local laws or regulations, including license requirements, or that Lomotif’s licenses will be successfully renewed or expanded to cover all of its areas of operations.

Lomotif’s business requires it to collect, use, store and otherwise process confidential information, including, among other things, personally identifiable information, or PII, with respect to users and employees. Lomotif is subject to laws, and regulations, and additional laws and regulations as Lomotif’s global expansion evolves, relating to the collection, use, retention, security, transfer or otherwise processing of PII. In many cases, these laws and regulations not only apply to third-party transactions, but also may restrict transfers of PII from Lomotif to us or from us or Lomotif to our subsidiaries. Several jurisdictions have passed laws in this area, and other jurisdictions are considering imposing additional and possibly more stringent restrictions. These laws continue to develop and may vary from jurisdiction to jurisdiction. Complying with emerging and changing international requirements may cause Lomotif to incur substantial costs or require Lomotif to change its business practices. Non-compliance could result in significant penalties or legal liability as well as reputational harm. Data protection, privacy, and other laws and regulations, including those in Europe and the United States, may impose varying obligations. Regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning data protection. In addition, the interpretation and application of consumer and data protection laws are often uncertain. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with Lomotif’s data practices. These legislative and regulatory proposals, if adopted, and such interpretations could, in addition to the possibility of fines and reputational harm, result in an order requiring Lomotif to change it data practices, which could have an adverse effect on its business and results of operations. Complying with these various laws could cause Lomotif to incur substantial costs or require Lomotif to change its business practices in a manner adverse to the business. Although Lomotif’s operations in Europe are currently limited, recent legal developments have created compliance uncertainty regarding the processing of personal data that might nonetheless affect it. The General Data Protection Regulation, or GDPR, which came into application in the European Union, or EU, on May 25, 2018, applies to all of Lomotif’s activities conducted from an establishment in the EU or related to any products and services that Lomotif offers to EU users. The GDPR creates significant new requirements regarding the protection of personal data and significantly increases the financial penalties for noncompliance. Lomotif may be considered in violation of the GDPR and thus be required to adopt additional measures in the future. If Lomotif fails to comply with the requirements stipulated by the GDPR in a timely manner, or at all, Lomotif may be subject to significant penalties and fines, which may in turn adversely affect its business, reputation, financial condition and operating results. In addition to the new requirements imposed by the GDPR, the privacy requirements and expectations created in the EU by the GDPR are stricter than certain other regions. These requirements include rules restricting the flow of data across borders. These restrictions may cause companies to localize data and may otherwise impact the use of Lomotif’s services. Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA, which went into effect on January 1, 2020, requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase Lomotif’s compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase Lomotif’s potential liability and adversely affect its business.