What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-16 · 205 added, 167 removed, 146 unchanged (72% of the section changed)

13 unchanged sentences

Risk Factors.”

a comprehensive suite of cybersecurity consulting and related services that encompass all three critical pillars:

compliance, cybersecurity,

and organizational culture.

include managed security, compliance assessments, SOC support, vCISO services, incident response, digital forensics, technical assessments,

and cybersecurity training.

We’ve developed a unique offering called MCCP+ that delivers all three of these pillars through a dedicated

team of subject matter experts.

cybersecurity firms focused on specific technologies or services, we remain technology-agnostic.

Instead, we concentrate on building a

world-class team of cybersecurity and compliance experts with diverse skillsets.

Our goal is to provide our clients with truly holistic

solutions that address the chronic shortage of highly skilled cybersecurity professionals.

our services is a steadfast belief that establishing a strong culture of security is essential for organizational resilience.

closely with our clients to cultivate this security-first mindset, helping them quantify the return on their cybersecurity investments.

developed innovative software-based IP powered by machine learning, AI, and dark web threat intelligence.

These multilayered technologies

aim to enhance cyber effectiveness and drive greater resiliency for enterprises.

comprehensive portfolio of scalable IP solutions and an end-to-end team of experts, we are poised for organic growth.

By optimizing

the user experience and leveraging digital interfaces, we can expand our client base without adding strain to our services team.

This scalability will enable us to drive increased revenue and margins concurrently.

provide a comprehensive suite of cybersecurity consulting and related services built on four critical pillars:

Proprietary Software Stack,

Compliance, Cybersecurity, and Organizational Culture.

services include managed security, compliance assessments, Security Operations Center (SOC) support, virtual Chief Information Security

Officer (vCISO) services, incident response, digital forensics, technical assessments, and cybersecurity training.

We have developed

a unique offering called MCCP+, which integrates all four pillars through a dedicated team of subject matter experts.

many cybersecurity firms focused on specific technologies or services, we remain technology-agnostic.

Our approach is centered around

building a world-class team of cybersecurity and compliance experts with diverse skill sets, enabling us to provide truly holistic solutions

that address the chronic shortage of highly skilled cybersecurity professionals.

Proprietary Software Stack is foundational to our approach.

We have developed a comprehensive suite of proprietary software solutions

These multilayered technologies enhance

our cybersecurity effectiveness, improve organizational resilience, and offer real-time insights to our clients, enabling them to stay

ahead of evolving threats.

also emphasize Compliance, working with clients to ensure they meet industry regulations and standards.

Compliance assessments, audits,

and adherence to best practices are integrated into our services, helping organizations safeguard sensitive information and minimize

Cybersecurity pillar includes advanced threat detection, incident response, and ongoing risk assessments to protect client systems, networks,

and data from evolving cyber threats.

Our team applies cutting-edge tools and methodologies to proactively defend against potential breaches,

minimizing downtime and mitigating damage.

we focus on Organizational Culture, recognizing that a strong security-first mindset is essential for resilience.

By working with clients

to cultivate a culture of security, we help them make security an integral part of their operations, improving both their overall security

posture and return on cybersecurity investments.

a comprehensive portfolio of scalable intellectual property solutions, proprietary software stack, and an end-to-end team of

experts, we are well-positioned for organic growth.

By optimizing the user experience and leveraging digital interfaces, we can

expand our client base without overburdening our service team.

This scalability will enable us to drive increased revenue and profit

margins concurrently.

operating results for the year ended December 31, 2024 included the following:

revenue increased by $10.5 million to $57.1 million for the year ended December 31, 2023, as compared to the year ended December

revenue decreased by $3.2 million to $30.8 million for the year ended December 31, 2024, as compared to the year ended December 31,

gross profit increased by $1.9 million to $4.5 million for the year ended December 31, 2024, as compared to the year ended December

6 unchanged sentences

Security managed services

$ (2,550,301 )

Professional services

Cybersecurity software

Total revenue

2 unchanged sentences

Professional services

Cybersecurity software

Cost of payroll

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Impairment of goodwill

(35,933,364 )

Total operating expenses

Loss from operations

(46,446,407 )

Loss from operations

(14,589,635 )

2 unchanged sentences

Other income (expense)

Loss on issuance of convertible notes

Change in fair value of derivative liability

Interest expense, net

3 unchanged sentences

$ (64,984,498 )

$ (46,891,030 )

managed services revenue increased by $9,158,505, or 22%, for the year ended December 31, 2023, as compared to the year ended December

31, 2022, primarily due to having a full year of ownership of CUATROi and NLT Secure, and new and existing

customer revenue growth.

services revenue increased by $1,350,635, or 24%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022,

primarily due to having a full year of ownership of CUATROi and NLT Secure.

managed services cost of revenue increased by $8,240,082, or 53%, for the year ended December 31, 2023, as compared to the year ended

December 31, 2022, due primarily to having a full year of ownership of CUATROi and NLT Secure compared to only four months in 2022, which increased our revenues from hardware

and software sales and their related costs.

services cost of revenue increased by $56,295, or 7%, for the year ended December 31, 2023, as compared to the year ended December 31,

2022, due to our increase in revenue from professional services from having a full year of ownership of CUATROi and NLT Secure compared to only four months in 2022.

of payroll increased by $1,577,025, or 8%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due

to headcount costs of CUATROi and NLT Secure having a full year of ownership compared to only four months in 2022.

compensation decreased by $2,688,475, or 36%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022,

due to the timing of recognition of the reversal of expense for options forfeited by former employees, a decrease in the number of options

granted in 2023, and a decline in the fair value of new options granted resulting from the decline in our share price.

fees increased by $1,627,584, or 79%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to an

increase in accounting, legal and other professional fees incurred related to our periodic SEC filings and our efforts to raise additional

capital, offset by a reduction in accounting and audit fees.

and marketing expenses decreased by $330,097, or 41%, for the year ended December 31, 2023, as compared to December 31, 2022, due to utilizing internal resources

for advertising and marketing activities.

general, and administrative expenses increased $3,638,092, or 16%, for the year ended December 31, 2023, as compared to the year

ended December 31, 2022, due to the costs of CUATROi and NLT Secure having a full year of ownership compared to only four months in

managed services revenue decreased by $2,550,301, or 8%, for the year ended December 31, 2024, as compared to the year ended December

31, 2024, primarily due to lower hardware and software sales.

services revenue decreased by $1,080,952, or 30%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023,

primarily due to lower customer projects.

Cybersecurity

software revenue increased by $440,809, or 100%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023,

primarily due to our initial launch of our suite of internally developed cybersecurity software products.

managed services cost of revenue decreased by $654,975, or 7%, for the year ended December 31, 2024, as compared to the year ended December

31, 2023, due primarily to lower hardware and software sales.

services cost of revenue decreased by $128,296, or 22%, for the year ended December 31, 2024, as compared to the year ended December

31, 2023, due to decreased use of consultants.

Cybersecurity

software cost of revenue increased by $119,900, or 100%, for the year ended December 31, 2024, as compared to the year ended December

31, 2023, primarily due to our initial launch of our suite of internally developed cybersecurity software products.

of payroll decreased by $3,968,854, or 25%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due

to headcount reduction.

compensation decreased by $486,022, or 10%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due

to the timing of recognition of the reversal of expense for options forfeited by former employees, a decrease in the number of options

granted in 2024 and certain option grants that had fully vested.

fees decreased by $1,871,615, or 58%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to

a decrease in accounting, legal and other professional fees incurred related to our periodic SEC filings and our efforts to raise

additional capital.

and marketing expenses decreased by $449,231, or 100%, for the year ended December 31, 2024, as compared to December 31, 2023, due to

utilizing internal resources for advertising and marketing activities.

general, and administrative expenses decreased $5,156,190, or 28%, for the year ended December 31, 2024, as compared to the year ended

December 31, 2023, due to our analysis of our carrying amount of intangible assets being impaired for the year ended December 31, 2023, reductions

in head count, and lower costs for insurance and lease expenses for the year ended December 31, 2024.

compensation expenses decreased by $3,036,007, or 39%, for the year ended December 31, 2024, as compared to the year ended December 31,

2023, due to the timing of recognition of the reversal of expense for options forfeited by former employees, a decrease in the number

of options granted in 2023, and a decline in the fair value of new options granted resulting from the decline in our share price.

of goodwill increased by $45,194,717, or 100%, for the year ended December 31, 2023, as compared to the year ended December 31,

2022, due to the fair value of our reporting units falling below their carrying value in 2023, whereas in the carrying fair value of

these reporting units exceeded their carrying value in 2022.

of options granted in 2024 and certain option grants that had fully vested.

of goodwill decreased by $35,933,364, or 100%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023,

due to our analysis of our carrying amount of goodwill being impaired in 2023.

Income (Expense)

expense, net increased by $1,317,599, or 58%, during the year ended December 31, 2024, as compared to the year ended December 31,

due to an increase in our debt assumed through acquisitions during 2022 and obtaining short-term loans to fund operating capital in 2023.

2023, due to an increase in our debt assumed and the effective interest rate on such debt.

on issuance of convertible notes increased by $1,022,650, or 100%, during the year ended December 31, 2024, as compared to the year ended

December 31, 2023, due to our costs associated with issuing convertible notes exceeding the fair value of convertible notes.

in fair value of derivative liability increased by $593,083, or 100%, during the year ended December 31, 2024, as compared to the year

ended December 31, 2023, due to an increase in the share price of our common stock to $3.47 per share on December 31, 2024, providing

more value as of December 31, 2024 to the holders of the convertible note if they were converted at such time.

working capital as of December 31, 2024, as compared to our working capital as of December 31, 2023, is summarized as follows:

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$ (9,404,568 )

decrease in current assets is primarily due to a decrease in cash and cash equivalents, accounts receivable and prepaid expenses and

other current assets of $770,721, $2,176,570, and $524,379 respectively.

The increase in current liabilities is primarily due to the

increase in accounts payable and accrued expenses of $7,640,990, offset by a decrease in loans and convertible notes payable of $4,567,367

decrease in current assets is primarily due to an increase in cash and cash equivalents and prepaid cost of revenues of $750,946 and

$89,445, respectively, offset by decreases to accounts receivable and prepaid expenses and other current assets of $962,688 and $68,194

respectively.

The increase in current liabilities is primarily due to the increase in accounts payable and accrued expenses, loans payable,

line of credit, derivative liability, and convertible notes payable of $2,037,617, $817,845, $1,957,938, $2,102,927, and $5,000,002, respectively.

cash flows for the year ended December 31, 2024, as compared to our cash flows for the year ended December 31, 2023, can be summarized

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Decrease in cash

cash used in operating activities was $5,920,112 for the year ended December 31, 2023 and was primarily due to cash used to fund a net

loss of $80,231,083, adjusted for non-cash expenses in the aggregate of $64,085,528 and additional cash increases from changes in the

levels of operating assets and liabilities in the aggregate of $10,225,443, primarily as a result of an increase in accounts receivable,

accounts payable and accrued expenses, and deferred revenue.

Net cash used in operating activities was $10,681,007 for the year ended

December 31, 2022 and was primarily due to cash used to fund a net loss of $33,775,182, adjusted for non-cash expenses in the aggregate

of $20,752,668 and additional cash increases from changes in the levels of operating assets and liabilities in the aggregate of $2,341,507,

primarily as a result of an increase in accounts payable and other deferred revenue.

cash used in investing activities of $160,158 for the year ended December 31, 2023, was primarily due to cash paid to purchase

property and equipment.

Net cash used in investing activities of $6,048,944 for the year ended December 31, 2022, was primarily due

to cash paid as part of the acquisition of True Digital.

cash provided by financing activities for the year ended December 31, 2023 was $6,193,046, which was primarily due to cash received from

the sale of our common stock, and net proceeds from loans and convertible notes payable of $6,655,493 and $11,975,631, respectively,

and offset by the payment of loans and convertible notes payable of $12,929,931.

Net cash provided by financing activities for the year

ended December 31, 2022 was $15,777,909, which was primarily due to cash received from the sale of our common stock, and net proceeds

from loans and notes payable of $10,689,087 and $6,061,585, respectively, and offset by the payment of loans of $2,452,905.

accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates

realization of assets and satisfying liabilities in the normal course of business.

At December 31, 2023, we had an accumulated deficit

of $158,018,687 and working capital deficit of $15,113,288.

For the year ended December 31, 2023, we had negative cash flows from operations of $5,920,112.

Although our company is showing positive revenue and gross profit trends, we expect

to incur further losses through the end of 2024.

cash used in operating activities was $3,841,706 for the year ended December 31, 2024 and was primarily due to cash used to fund a

net loss of $24,243,919, adjusted for non-cash expenses in the aggregate of $17,013,753 and additional cash increases from changes

in the levels of operating assets and liabilities in the aggregate of $3,388,460, primarily as a result of an increase in accounts

receivable, accounts payable and accrued expenses, and deferred revenue.

Net cash used in operating activities was $5,920,112 for

the year ended December 31, 2023 and was primarily due to cash used to fund a net loss of $80,231,083, adjusted for non-cash

expenses in the aggregate of $64,085,528 and additional cash increases from changes in the levels of operating assets and

liabilities in the aggregate of $10,225,443, primarily as a result of an increase in accounts receivable, accounts payable and

accrued expenses, and deferred revenue.

cash used in investing activities of $83,095 for the year ended December 31, 2024, was primarily due to cash paid to purchase property

and equipment.

Net cash used in investing activities of $160,158 for the year ended December 31, 2023, was primarily due to cash paid

to purchase property and equipment.

cash provided by financing activities for the year ended December 31, 2024 was $3,914,162, which was primarily due to cash received

from the sale of our common stock, net proceeds from loans and lines of credit, and convertible notes payable of $154,947,

$8,919,412, and $2,065,000, respectively, and offset by the payment of loans and convertible notes payable, and lines of credit of

$6,157,484 and $1,067,713, respectively.

Net cash provided by financing activities for the year ended December 31, 2023 was

$6,193,046, which was primarily due to cash received from the sale of our common stock, and net proceeds from loans and convertible

notes payable of $6,655,493 and $11,975,631, respectively, and offset by the payment of loans and convertible notes payable of

accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which

contemplates realization of assets and satisfying liabilities in the normal course of business.

At December 31, 2024, we had an

accumulated deficit of $182,262,606 and working capital deficit of $21,474,576.

For the year ended December 31, 2024, we had

negative cash flows from operations of $3,841,706.

Although our company is showing positive operating cash flows and gross profit

trends, we expect to incur further losses through the end of 2025.

date, we have funded operations primarily through the sale of equity in public offerings, private placements, loan proceeds, and revenue

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During the year ended December 31, 2024, we received $154,947 from public and private offerings of our common

stock, $11,975,631 in net proceeds from our loans and convertible notes payable, and $491,853 from the exercise of stock options.

June 27, 2022, our Registration Statement on Form S-3 was declared effective, and we may offer and sell from time to time, in one or

more series, any of our securities, for total gross proceeds up to $300,000,000.

As of December 31, 2023, we had $291,351,048 of available

funding from our S-3 Registration Statement from which we may issue our securities to fund current and future operations.

accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction

of liabilities in the normal course of business.

However, due to losses incurred, substantial doubt about the Company’s ability

to continue as a going concern exists.

are evaluating strategies to obtain the required additional funding for future operations.

These strategies may include, obtaining equity

financing, issuing debt or entering into other financing arrangements, and restructuring of operations to grow revenues and decrease

stock and $3,759,215 in net proceeds from our loans and convertible notes payable.

On June 27, 2022, our Registration Statement on Form

S-3 was declared effective, and we may offer and sell from time to time, in one or more series, any of our securities, for total gross

proceeds up to $300,000,000.

As of December 31, 2024, we had $291,190,324 of available funding from our S-3 Registration Statement from

which we may issue our securities to fund current and future operations.

accompanying financial statements have been prepared on a going concern basis, which assumes the realization of assets and

satisfaction of liabilities in the normal course of business.

However, due to losses incurred, substantial doubt about the

Company’s ability to continue as a going concern exists.

are actively evaluating strategies to obtain the necessary additional funding for future operations.

These strategies may include,

obtaining equity financing, issuing debt or entering into other financing arrangements, and restructuring of operations to grow

revenues and decrease expenses.

However, we may be unable to access further equity or debt financing when needed.

As such, there can be no assurance that we

will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

ability for us to continue as a going concern is dependent upon our ability to successfully accomplish the plan described in the Growth

Strategy paragraph and eventually attain profitable operations.

The consolidated financial statements do not include any adjustments

to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable

to continue as a going concern.

Consequently,

there is no assurance that we will be able to obtain the necessary liquidity when needed or under acceptable terms, if at

ability to continue as a going concern depends on successfully executing the plan outlined in our Growth Strategy and

eventually achieving profitable operations.

The consolidated financial statements do not include any adjustments to the carrying

amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to

continue as a going concern.

Issued Accounting Pronouncements

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amounts of revenue and expenses during the periods.

Our significant estimates and assumptions include the recoverability and useful lives

of long-lived assets, stock-based compensation, and the valuation allowance related to our deferred tax assets.

Certain of our estimates,

including the carrying amount of intangible assets and goodwill, could be affected by external conditions, including those unique to

Our significant estimates include the allowance for credit losses, the carrying value of intangible assets and goodwill,

deferred tax asset and valuation allowance, the valuation of convertible notes, derivative liabilities, the estimated fair value of assets

acquired, liabilities assumed and stock issued in business combinations, and assumptions used in the Black-Scholes-Merton pricing model,

such as expected volatility, risk-free interest rate, share price, expected dividend rate, and the adequacy of insurance reserves, could be affected by external conditions, including those unique to

us and general economic conditions.

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in profit or loss.

assets are comprised of trademarks, customer bases, non-compete agreements and intellectual property with original estimated useful lives

with a range of 2 to 15 years.

Once placed into service, we amortize the cost of the intangible assets over their estimated useful lives

on a straight-line basis.

represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets

Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more

frequently if events or changes in circumstances indicate that the asset might be impaired.

Goodwill is tested for impairment at the

reporting level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of

the reporting unit is less than its carrying value.

If the reporting unit does not pass the qualitative assessment, then the

reporting unit’s carrying value is compared to its fair value.

The fair values of the reporting units are estimated using a

market approach.

Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.

Failure to maintain a similar market value may cause a future impairment

of goodwill at the reporting unit.

Goodwill and Indefinite-Lived Intangible Assets

and indefinite-lived intangible assets are assessed for impairment annually, or more frequently, if events occur that would indicate

a potential reduction in the fair value of a reporting unit below its carrying value.

We perform our annual impairment review of goodwill

at the reporting unit level.

If we determine the fair value of the reporting unit’s goodwill or other indefinite-lived intangible

assets is less than their carrying value as a result of an annual or interim test, an impairment loss is recognized and reflected in

operating income or loss in the consolidated statements of operations during the period incurred.

We perform our impairment assessment

based on a quantitative analysis performed for our reporting unit.

review finite-lived intangible assets for impairment whenever an event occurs or circumstances change that indicate that the carrying

amount of such assets may not be fully recoverable.

Recoverability is determined based on an estimate of undiscounted future cash flows

resulting from the use of an asset and its eventual disposition.

Should an asset not be recoverable, an impairment loss is measured by

comparing the fair value of the asset to its carrying value.

If we determine the fair value of an asset is less than the carrying value,

an impairment loss is recognized in operating income or loss in the consolidated statements of operations during the period incurred.

performed our annual impairment assessment for 2024 and concluded that no impairment of goodwill was indicated.

As of December 31,

2024, we believe such assets are recoverable, however, there can be no assurance that these assets will not be impaired in future

Any future impairment charges could adversely impact our results of operations.

Notes 3 and 7 to our financial statements for additional information regarding goodwill and indefinite-lived assets.

of Long-lived Assets

will periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review

and at least annually.

The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from

such asset is separately identifiable and is less than its carrying value.

In that event, a loss is recognized based on the amount by

which the carrying value exceeds the fair value of the long-lived asset.

Fair value is determined primarily using the anticipated cash

flows discounted at a rate commensurate with the risk involved.

Losses on long-lived assets to be disposed of are determined in a similar

manner, except that fair values are reduced for the cost to dispose.

We measure and recognize compensation

expense for equity-based awards based on the grant date fair values of the awards.

For options with service or performance-based vesting

conditions, the grant date fair value is estimated using the Black-Scholes option-pricing model, which requires management to make assumptions

and apply judgment in determining the grant date fair value.

The most significant assumptions

and judgments include estimating the expected option term, the expected stock price volatility and the risk-free interest rates.

The assumptions

used in our option pricing model represent management’s best estimates.

If factors change and different assumptions are used, our equity-based

compensation expense could be materially different in the future.

We record forfeitures when they occur, based on our lack of historical

data available to estimate an appropriate forfeiture rate.

Changes in our forfeiture rate can have a significant impact on our equity-based

compensation expense since the cumulative effect of adjusting the forfeiture rate is recognized in the period in which the estimate is

We will continue

to use judgment in evaluating the assumptions related to our equity-based awards on a prospective basis.

As we continue to accumulate

additional data related to our awards, we may refine our estimates, which could materially impact our future equity-based compensation

will periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances warrant such a

review and at least annually.

The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash

flow from such asset is separately identifiable and is less than its carrying value.

In that event, a loss is recognized based on

the amount by which the carrying value exceeds the fair value of the long-lived asset.

Fair value is determined primarily by using

the anticipated cash flows discounted at a rate commensurate with the risk involved.

Losses on long-lived assets to be disposed of

are determined in a similar manner, except that fair values are reduced for the cost to dispose.

measure and recognize compensation expense for equity-based awards based on the grant date fair values of the awards.

For options with

service or performance-based vesting conditions, the grant date fair value is estimated using the Black-Scholes option-pricing model,

which requires management to make assumptions and apply judgment in determining the grant date fair value.

most significant assumptions and judgments include estimating the expected option term, the expected stock price volatility and the risk-free

interest rates.

The assumptions used in our option pricing model represent management’s best estimates.

If factors change and different

assumptions are used, our equity-based compensation expense could be materially different in the future.

We record forfeitures when they

occur, based on our lack of historical data available to estimate an appropriate forfeiture rate.

Changes in our forfeiture rate can

have a significant impact on our equity-based compensation expense since the cumulative effect of adjusting the forfeiture rate is recognized

in the period in which the estimate is changed.

will continue to use judgment in evaluating the assumptions related to our equity-based awards on a prospective basis.

As we continue

to accumulate additional data related to our awards, we may refine our estimates, which could materially impact our future equity-based

compensation expense.

agreements with clients are primarily service contracts that range in duration from a few months to three years.

We recognize revenue

when control of these services is transferred to the client for an amount, referred to as the transaction price, which reflects the

consideration to which we are expected to be entitled in exchange for those goods or services.

when control of these services is transferred to the client for an amount, referred to as the transaction price, which reflects the consideration

to which we are expected to be entitled in exchange for those goods or services.

contract with a client exists only when:

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for additional information regarding revenue recognition and deferred revenue.

include reimbursed expenses in revenue and costs of revenue as we are primarily responsible for fulfilling the promise to provide the

include reimbursed expenses in revenue and cost of revenue as we are primarily responsible for fulfilling the promise to provide the

specified service, including the integration of the related services into a combined output to the client, which are inseparable from

2 unchanged sentences

in establishing prices.

of revenue include (i) compensation and benefits for billable employees and consultants directly involved with delivering services offerings

and engagements;

(ii) consumables used for the services;

and (iii) other expenses directly related to service contracts such as professional

services, meals and travel expenses.

Cost of revenue include the following:

and benefits for billable employees and consultants directly involved in delivering service offerings and engagements;

used in the provision of services;

Other expenses directly related

to service contracts, such as professional services, meals, and travel expenses.

in Stock-Based Compensation

We determine the expected stock

price volatility based on the historical volatilities of our peer group, blended with our historical volatility, since there is not a

sufficient trading history for our common stock.

Industry peers consist of several public companies in the technology industry similar

to us in size, stage of life cycle and financial leverage.

We intend to continue to consistently apply this process using the same or

similar public companies and continue increasing the blended proportion of our historical volatility until a sufficient trading history

of our common stock becomes available.

If circumstances change such that the identified companies are no longer similar to us, we will

revise our peer group to substitute more suitable companies in this calculation.

determine the expected stock price volatility based on the historical volatility of our common stock.

in fair value of derivative liability

automatic discounted share-settlement feature of our convertible notes issued in December 2024 is an embedded derivative requiring bifurcation

accounting as (1) the feature was not clearly and closely related to the debt host and (2) the feature met the definition of a derivative

under ASC 815 (Derivatives and Hedging).

bifurcated embedded features were initially recorded on the balance sheet at their fair value on the date of issuance.

After the initial

recognition, the fair value of the embedded derivative feature changed over time due to changes in our share price.

The change in fair

value has been included in our statement of operations.

Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis