Beneficient (BENF) risk factors, FY2025 10-K

Risks Related to Our Liquidity Products Business

1. 01We have experienced net losses, and we may not be able to achieve or maintain profitability in the future
2. 02We may not be able to grow, effectively manage our growth, or achieve profitability
3. 03Difficult market conditions can cause investors to reduce or suspend their investments in alternative assets or their desire to liquidate alternative assets they hold, which could adversely affect our business
4. 04The due diligence process that we undertake in connection with any liquidity transaction may or may not reveal all facts that may be relevant in connection with such liquidity transaction
5. 05We depend on the accuracy and completeness of information from and about our Customers
6. 06Our fair value estimates of illiquid alternative assets may not accurately estimate prices obtained at the time we enter into a liquidity transaction, and we cannot provide assurance that the values of the alternative assets underlying such liquidity transactions that we report from time to time will be realized
7. 07We depend on the use of data and modeling in our decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future
8. 08Restrictions on our ability to collect and analyze data regarding our customers’ alternative assets could adversely affect our business
9. 09We may be required to omit alternative asset limited partnership agreement information from our underwriting process
10. 10Our liquidity, profitability and business may be adversely affected by concentrations of assets comprising the Collateral
11. 11Usage of our Class A common stock or securities convertible into Class A common stock as consideration for investments in alternative asset funds may create significant volatility in our investment income and the price of our Class A common stock
12. 12Allocations of write downs in the value of our intangible assets and goodwill due to impairment will result in a decrease in the capital account balance of the BCH Class A Units indirectly held by the Company
13. 13third, pro rata among all outstanding units of BCH, except the BCH Preferred A-0 Unit Accounts, BCH Preferred A-1 Unit Accounts and the BCH FLP Unit Accounts
14. 14Our business may face substantial competition from a variety of financial solution companies and other liquidity providers
15. 15Poor performance of our collateral would cause a decline in our revenue, income and cash flow and could adversely affect our ability to raise capital for future liquidity transactions
16. 16Transfer restrictions applicable to alternative assets may prevent us from being able to attract a sufficient number of Customers to achieve our business goals
17. 17We are subject to repayment risk in connection with our liquidity transactions
18. 18We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business
19. 19Furthermore, periodically, we have sought to extend the maturity date of our secured loans with HCLP and have paid fees in connection with this extension. We have also been required to amend the HH-BDH loan and have paid fees in connections with these amendments
20. 20We face risks related to the total return interest aspect of our business model
21. 21Certain of our ordinary course liquidity transactions utilizing the issuance of shares of Class A common stock are subject to Nasdaq listing rules and require stockholder approval under certain circumstances
22. 22The custody trusts may require additional liquidity to fund capital contributions. If adequate capital is not available, our business, operating results and financial condition may be negatively affected
23. 23We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses
24. 24Our results of operations may fluctuate from period to period
25. 25A decline in the pace or size of our liquidity transactions would result in Ben Liquidity and Ben Custody receiving less revenue from interest income and fees
26. 26Decisions made by a trustee could materially affect our custody business and the assets held in certain of our trusts
27. 27We will experience costs associated with the Customer ExAlt Trust payments to certain charities that are the ultimate beneficiaries of the Customer ExAlt Trusts
28. 28We may be required to seed a new fund for Hatteras Investment Partners, LP (“Hatteras”)
29. 29We may not be able to sustain our growth, and the continuation of growth may strain our resources
30. 30Our organizational documents do not limit our ability to enter into new lines of business, and we may expand into new liquidity product strategies, transaction structures, geographic markets and businesses, each of which may result in additional risks and uncertainties
31. 31Our transfer agency solutions may be adversely affected if we do not comply with applicable legal and regulatory requirements
32. 32We have an evolving business model
33. 33We may incur significant losses as a result of ineffective risk management processes and strategies
34. 34We may be able to offer only a limited number of products and solutions

Risks Related to Our Broker-Dealer Business

1. 35We have limited experience in operating a broker-dealer to place securities of our Company, and our entry into and operating in this market may not be successful
2. 36Our broker-dealer business is subject to extensive and evolving regulations and our failure to be fully compliant with applicable regulations could have a material adverse effect on our future business, financial condition, results of operations and prospects
3. 37Our broker-dealer business is subject to various risks associated with the securities industry
4. 38We are subject to certain limitations that could prevent AltAccess Securities from entering new businesses
5. 39Several of our broker-dealer segment’s product lines rely on favorable tax treatment and changes in federal tax law could impact the attractiveness of these products to our customers
6. 40The actions of a third-party broker-dealer or financial intermediary may cause a material adverse effect
7. 41AltAccess Securities is subject to various conflicts of interest, incentives and risks given its affiliation with the Company, including that decisions related to the Company’s offerings may be influenced by such affiliation
8. 42The Company is subject to the risk of possibly becoming an investment advisor under the Investment Advisers Act

Risks Related to Our Proposed Ben Insurance Business

1. 43We have no experience in operating an insurance business, and our entry into the insurance market may not be successful
2. 44Our failure to obtain or maintain approval of insurance regulators and other regulatory authorities as required for the operations of our planned insurance subsidiary may have a material adverse effect on our future business, financial condition, results of operations and prospects
3. 45If we seek authority to operate our proposed international insurance business, for which we have no prior experience, we may be subject to additional costs and economic, political, currency and other risks that could adversely affect our revenues or financial position

Risks Related to Our Limited Operating History

1. 46We do not have significant operating history or an established customer base
2. 47We may be unable to operate our business successfully, which would negatively impact the results of operations and our ability to generate distributable cash flow
3. 48While BFF has received an unconditional Kansas TEFFI charter, we may continue to encounter delays in effecting certain parts of our current business plan related to BFF’s operating Kansas TEFFI charter, which could hinder our ability to successfully pursue our current business plan
4. 49regulate the entirety of Beneficient. Such regulations could prove to be burdensome on our business and could adversely impact our financial condition and results of operations
5. 50Additional legislation passed by the Kansas legislature or any repeal or amendment to the TEFFI Act could materially and adversely affect our ability to successfully pursue our business plan and our financial performance and prospects

Risks Related to the Company’s Organizational Structure

1. 51The Company may engage in transactions that represent a conflict of interest, with the review of such transactions subject to the Nevada statutory business judgment rule
2. 52A determination that we are an unregistered investment company would have serious adverse consequences
3. 53Shares of our Class A common stock, Series A preferred stock, Series B preferred stock, and any additional series of preferred stock we issue are and will be structurally subordinated to interests in BCH
4. 54The Class A Units the Company indirectly owns in BCH are junior to certain existing classes of limited partner interests in BCH
5. 55Stockholders will experience dilution of their ownership interests upon the issuance of additional shares of the Company’s common stock or securities convertible into shares of Company common stock
6. 56The protective provisions contained in the Stockholders Agreement may have unintended negative effects
7. 57We have, and may continue to, offer certain investors the opportunity to acquire participation interests in ExAlt Loans
8. 58Our ability to receive payment on the ExAlt Loans and fee income from the Customer ExAlt Trusts is limited by the distributions the Customer ExAlt Trusts receive

Risks Related to Our Relationship with GWG

1. 59The transfer of GWG’s assets to the GWG Wind Down Trust and the Litigation Trust pursuant to the Second Amended Plan has and could continue to create significant uncertainties and risks for our continued operations and materially and adversely impact our financial operating results
2. 60We may face risks related to allegations in the Chapter 11 Cases, which has, and could further, damage our reputation and otherwise be disruptive to our business
3. 61A regulatory investigation involving GWG has diverted and may continue to divert time and attention of our management

Risks Related to Litigation and Government Investigations

1. 62The Company has been involved in a now-terminated SEC investigation and may be subject to other regulatory investigations and proceedings
2. 63The Company is currently involved in legal proceedings and may be a party to additional claims and litigation in the future
3. 64Court entered an order dismissing count I of PCA’s complaint in accordance with its memorandum opinion and count II in light of the parties’ agreement that it should also be dismissed

Risks Related to Reliance on Technology, Third Parties and Our Employees

1. 65We rely on other companies to provide key components of our business infrastructure
2. 66A failure in our operational systems could impair our liquidity, disrupt our business, result in the disclosure of confidential information, damage our reputation, and cause losses
3. 67If we are not able to innovate and develop enhancements to our products and services, keep pace with technological developments or respond to future disruptive technologies, our business could be adversely affected
4. 68Our success depends on certain key personnel and the ability to attract, retain, and develop new professionals
5. 69Our employees may take excessive risks, which could negatively affect our financial condition and business
6. 70Misconduct by our employees, advisors or third-party service providers could harm us by impairing our ability to attract and retain Customers and subjecting us to significant legal liability and reputational harm
7. 71Any cybersecurity attack or other security breach of our technology systems, or those of third-party vendors we rely on, could subject us to significant liability and harm our business operations and reputation

Risks Related to Our Intellectual Property

1. 72If we are unable to protect our intellectual property rights, our business could be negatively affected
2. 73We may be sued by third parties for alleged infringement of their proprietary rights

Risks Related to Accounting Policies

1. 74Changes in accounting standards issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies may adversely affect our financial statements
2. 75Our financial results depend on management’s selection of accounting methods and certain assumptions and estimates
3. 76The accuracy of the Company’s financial statements and related disclosures could be adversely affected if the judgments, assumptions or estimates used in the Company’s critical accounting policies are inaccurate
4. 77The implementation of the Current Expected Credit Loss accounting standard required us to increase our allowance for loan losses and may continue to have a material adverse effect on our financial condition and results of operations, including the allocation of income (loss) to the Company’s and BCH’s equity holders
5. 78A “material weakness” is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis

Risks Related to Our Growth Strategy

1. 79Our failure to correctly identify mergers, acquisitions, divestitures or other strategic transactions could have a material adverse effect on our business, financial condition and results of operations
2. 80Economic Environment, Capital Markets-Related and General Risks
3. 81Our liquidity, profitability and business may be adversely affected by an inability to access, or ability to access only on unfavorable terms, the capital markets, and we may never obtain the maximum anticipated proceeds contemplated under current capital raising agreements such as the SEPA
4. 82If we are unable to raise additional capital through the methods above, then we may have difficulty entering into liquidity transactions, which would lead to a decrease in income earned by us
5. 83Our operations, products and services may be negatively impacted by changes in economic and market conditions
6. 84Fluctuations in interest rates and foreign exchange rates may negatively impact our business
7. 85We are dependent on the continued success of the alternative asset industry
8. 86Business disruptions and interruptions due to natural disasters, pandemics and other external events beyond our control can adversely affect our business, financial condition and results of operations
9. 87Our indebtedness could adversely affect our financial condition and may otherwise adversely impact our business operations. We and our subsidiaries may incur additional indebtedness, including secured indebtedness
10. 88Credit Agreement is collateralized by pledges of substantially all of the assets of Beneficient Financing, BCH’s equity interests in Beneficient Financing, certain equity interests in the Custody Trust and certain deposit accounts
11. 89We are dependent on future near-term capital to fund our business plan

Regulatory and Legal Risks

1. 90We operate in a highly regulated environment, which could restrain our growth and profitability
2. 91As our business grows, we expect to become subject to additional regulatory agencies’ regulation
3. 92We are or will become subject to comprehensive governmental regulation and supervision
4. 93We face a risk of noncompliance and enforcement action with the Bank Secrecy Act, other anti-money laundering statutes and regulations and sanctions regulations
5. 94New activities and expansion require regulatory approvals, and failure to obtain them may restrict our growth
6. 95The failure of our trust subsidiaries to maintain certain minimum amounts of capital may result in regulatory sanctions or restrictions, limitations on their respective activities and operations, or require them to raise additional capital
7. 96We will be subject to certain limitations with respect our investments and liquidity as a result of the minimum capital requirements applicable to our trust subsidiaries, which could adversely impact our results of operations
8. 97As a result of BFF’s receipt of an operating TEFFI charter in Kansas, the OSBC has the authority to increase the minimum amount of capital required to be maintained by our trust subsidiaries under certain circumstances, which may result in lower returns on equity
9. 98We may incur fines, penalties and other negative consequences from regulatory violations
10. 99We may be impacted adversely by claims or litigation, including claims or litigation relating to our fiduciary responsibilities
11. 100We may face risks from regulatory investigations and proceedings and from private actions
12. 101The Company has incurred significant legal, accounting and other expenses as a public company that it would not incur as a private company, and these expenses may increase even more after the Company is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act
13. 102Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect the Company’s business, investments and results of operations
14. 103We may engage in permissible political activities with the intent of furthering our business interests or otherwise, but such activities may not be successful or may be perceived unfavorably by investors

Risks Related to the Ownership of Class A Common Stock and Warrants

1. 104We have been notified by Nasdaq of our failure to comply with certain continued listing requirements and, if we are unable to regain compliance with all applicable continued listing requirements and standards of Nasdaq, our Class A common stock could be delisted from Nasdaq
2. 105The Company’s hearing before the Panel occurred on August 26, 2025
3. 106Substantial future sales of shares of Class A common stock could cause the market price of our shares of Class A common stock to decline
4. 107The market price for Class A common stock has been, and may continue to be, subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volumes, prices and times desired
5. 108In order for our liquidity products to be attractive, there must be an active trading market for our common stock, and our stock price must remain stable
6. 109Certain provisions in the Charter, the Bylaws, the Stockholders Agreement and of Nevada law may prevent or delay attempts to acquire a controlling interest in the Company, which could decrease the trading price of Class A common stock
7. 110The Company’s operating results and other operating metrics may fluctuate significantly from period to period, which could lead to a decline in the trading price of Class A common stock
8. 111We engage in related party transactions, which may result in conflicts of interest involving our senior management
9. 112Beneficient’s board of directors and management have significant control over Beneficient’s business
10. 113officer on the board may have influence over his or her personal compensation and may obtain benefits levels that may not be commensurate with our financial performance
11. 114Brad K. Heppner, our founder and former CEO, has financial interests that conflict with the interests of Beneficient and its stockholders
12. 115Our business could be impacted by a potential proxy contest for the election of directors at our next annual meeting of stockholders
13. 116If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our shares, the price of our shares could decline
14. 117The Company may be materially adversely affected by negative publicity
15. 118Because there are no current plans to pay cash dividends on Class A common stock for the foreseeable future, you may not receive any return on investment unless you sell Class A common stock for a price greater than that which you paid for it
16. 119An active trading market for Class A common stock may not develop or persist, and you may not be able to resell your Class A common stock at or above the price you paid for it
17. 120Beneficient’s issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans, raising additional capital or otherwise would dilute all other stockholders
18. 121Provisions in the Charter and Nevada law may have the effect of discouraging lawsuits against its directors and officers
19. 122Beneficient’s board of directors may issue blank check preferred stock, which may discourage or impede acquisition efforts or other transactions
20. 123The Company may redeem unexpired Warrants prior to their exercise at a time that is disadvantageous to the holder, thereby making the Warrants worthless
21. 124We have the ability to require holders of the Public Warrants to exercise such warrants on a cashless basis, which will cause holders to receive fewer Class A common stock upon their exercise of the Public Warrants than they would have received had they been able to exercise their Public Warrants for cash