CISO Global, Inc. 10-K

ITEM 1A. RISK FACTORS An investment in our common stock involves a number of very significant risks. Readers of this Annual Report on Form 10-K should carefully consider the following risks and uncertainties in addition to other information in this Annual Report on Form 10-K in evaluating our company and its business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. An investor in our common stock could lose all or part of their investment due to any, or a combination of these risks. Risk Factor Summary Risks Related to Our Business and Industry ● We will need to raise capital to realize our business plan and growth strategy, the failure of which could adversely impact our operations. - 13 - ● We incurred significant operating losses during the years ended December 31, 2024 and December 31, 2023, and we have limited cash flow. Unless we increase revenue and cash flow or raise additional capital, we may be unable to take advantage of any acquisition opportunities that arise or expand our business, all of which could adversely impact us. ● We will need to improve the size and capabilities of our organization, and we may experience difficulties in managing this growth. ● We depend on key personnel who would be difficult to replace, and our business plans will likely be harmed if we lose their services or cannot hire additional qualified personnel. ● We operate in an industry that is experiencing a shortage of qualified compliance and cybersecurity professionals. If we are unable to recruit and retain key management and technical and sales personnel, our business would be negatively affected. ● We depend on independent contractors to provide certain services for which we do not have the expertise internally. Any compromise in the service quality may delay our business processes and cause economic loss. ● We have recently acquired multiple businesses. Our growth strategy is driven by successful acquisitions and integration of additional businesses that provide comparable or complementary services. ● Our business strategy may impose limitations in our ability to accurately forecast future revenue and operating results. ● Our sales cycles can be long and unpredictable, and our sale efforts require considerable time and expense. ● Because we recognize revenue from subscriptions to our solutions over the term of the subscription, downturns or upturns in new business will not be immediately reflected in our operating results. ● We provide service level commitments under some of our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide partial refunds, or our customers could be entitled to terminate their contracts and our business would suffer. ● We provide service level commitments under some of our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide partial refunds, or our customers could be entitled to terminate their contracts and our business would suffer. ● Our future results may be affected by various legal and regulatory proceedings and legal compliance risks, including those involving intellectual property, governmental regulations, the U.S. Foreign Corrupt Practices Act, and other anti-bribery, anti-corruption, or other matters. ● We may be subject to risks from operating internationally. ● Our operations in certain emerging markets expose us to political, economic and regulatory risks. ● Adverse economic conditions in the United States may adversely impact our business and operating results. ● Breaches of network or information technology security could have an adverse effect on our business. ● If we fail to meet our service level obligations under our service level agreements, we may be subject to certain penalties and could lose clients. ● The nature of our business involves significant risks and uncertainties that may not be covered by insurance or indemnification. ● We indemnify our officers and directors against liability to us and our security holders, and such indemnification could increase our operating costs. ● Our industry is highly competitive, and there is no assurance that we will compete successfully. ● Our success depends on our ability to protect our intellectual property and our proprietary technologies. ● Increasingly complex cybersecurity regulations and standards may have significant impact on our business, and it may require us to substantially invest in our development capabilities to meet compliance requirements and may negatively impact our ability to offer certain services and remain profitable. ● We may become subject to disputes, including litigation, that could negatively impact our business, profitability, and financial condition. ● If we incur additional debt, we will be subject to restrictive covenants and debt service obligations that could negatively impact our operations. ● The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and Nasdaq, may strain our resources, increase our costs and divert management’s attention, and we may be unable to comply with these requirements in a timely or cost-effective manner. ● The preparation of our financial statements involves use of estimates, judgments, and assumptions, and our financial statements may be materially affected if our estimates prove to be inaccurate. ● The auditor’s opinion on our audited consolidated financial statements for the year ended December 31, 2024, included in this annual report on Form 10-K, contain an explanatory paragraph relating to our ability to continue as a going concern. Risks Related to Our Common Stock ● The market price of our common stock is volatile and may fluctuate in a way that is disproportionate to our operating performance. ● Future sales of shares of our common stock by existing stockholders could depress the market price of our common stock. - 14 - ● Provisions in our certificate of incorporation, our by-laws and Delaware law might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock. ● FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock. ● If we issue additional shares in the future, it will result in a dilution of our existing stockholders. ● We are eligible to be treated as an “emerging growth company,” as defined in the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. ● Our directors, a former director and executive officers beneficially own a substantial majority of our outstanding capital stock and will have the ability to control our affairs. ● Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. ● Following a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve. ● We do not intend to pay dividends on our common stock. ● Our business could be negatively impacted by stockholder activism. ● Our share price may be volatile, and you may be unable to sell your shares. Risks Related to Our Business and Industry We will need to raise capital to realize our business plan and growth strategy, the failure of which could adversely impact our operations. Our growth strategy focuses on expanding our client base and increasing consolidated revenue through strategic acquisitions and seamless integration of businesses offering complementary cybersecurity services. As of December 31, 2024, our business has not yet achieved profitability. To reach profitability and sustain long-term growth, we require adequate funding, significant revenue growth, and continued successful integration of our acquisitions. As of March 24, 2025, we maintained cash resources of approximately $250,000. We plan to fund operations through a combination of available net operating cash flows and future capital raises, which may include issuing equity or other securities. This approach may result in dilution for existing stockholders. Any newly issued securities may carry rights, preferences, or privileges that differ from those of our existing common stock. We incurred significant operating losses during the years ended December 31, 2024 and December 31, 2023, and we have limited cash flow. Unless we increase revenue and cash flow or raise additional capital, we may be unable to take advantage of any acquisition opportunities that arise or expand our business, all of which could adversely impact us. We are unable to predict if and when we will be able to generate significant positive cash flow or achieve profitability. Our plan regarding these matters is to strengthen our revenue and continue improving operational efficiencies across the business. There can be no assurances that we will be successful in increasing revenue, improving operational efficiencies or that financing will be available or, if available, that such financing will be available under favorable terms. In the event that we are unable to generate adequate revenue to cover expenses and cannot obtain additional financing, we may need to cut back or curtail our expansion plans. We will need to improve the size and capabilities of our organization, and we may experience difficulties in managing this growth. As we shift our growth strategy from acquisition-driven expansion to a focus on organic growth, we recognize the importance of effectively integrating and scaling our operations. This transition requires the careful alignment of managerial, operational, sales, marketing, financial, and other key functions across the organization. Successfully managing these dynamics is critical to sustaining our growth trajectory and enhancing long-term stockholder value. Our ability to achieve future growth will depend on the following factors: ● Attracting, integrating, developing, and retaining skilled personnel across all functions, with a particular focus on building a strong, high-performing salesforce and expanding our cybersecurity expertise. ● Executing efficient post-acquisition integration processes where applicable, while maintaining cost discipline and optimizing operational performance. ● Strengthening our operational, financial, and management systems to support scalability, ensure transparency, and improve overall business performance. - 15 - We anticipate that these growth initiatives will place increasing demands on our management team, including the need to balance day-to-day operational responsibilities with the strategic oversight required to guide expansion. As our leadership team continues to evolve, limited long-term experience working together may present challenges to operational cohesion. We depend on key personnel who would be difficult to replace, and our business plans will likely be harmed if we lose their services or cannot hire additional qualified personnel. Our business is significantly dependent on the continued efforts and abilities of our senior management and executive officers. The loss of services of one or more of these key individuals, or our inability to attract, train, and retain key personnel, could materially disrupt our operations, delay strategic initiatives, and hinder our ability to execute our business plan. At present, we do not maintain key man insurance for any members of our senior management or key personnel. The competition for qualified management and personnel, particularly those with specialized expertise in the cybersecurity industry, is intense. If we were to lose the services of any of our key executives, or if we are unable to successfully recruit, retain, and develop personnel with the necessary skills and industry knowledge, our ability to continue executing on our acquisition strategy and service program development could be adversely impacted. Furthermore, such a loss could have a significant effect on our ability to maintain and grow client relationships, which may negatively impact our financial performance and long-term prospects. We recognize the critical importance of having a strong and capable leadership team to execute our business strategy. As such, we continue to explore options for mitigating these risks, including potential investments in succession planning and talent development. However, there can be no assurance that we will be successful in securing or retaining the right talent, and any failure to do so may materially affect our ability to achieve our objectives. We operate in an industry that is experiencing a shortage of qualified compliance and cybersecurity professionals. If we are unable to recruit and retain key management and technical and sales personnel, our business would be negatively affected. To execute our growth strategy, attracting and retaining highly skilled compliance and cybersecurity experts remains critical. The demand for these professionals is intense, particularly given the global shortage of talent with the technical and strategic expertise required to deliver exceptional services to our clients. Our competitors, many with greater resources, also seek to recruit skilled professionals, and compensation packages—particularly stock options and other equity incentives—often play a significant role in attracting candidates. We are mindful of the importance of offering competitive compensation, but recognize that fluctuations in stock value can impact this dynamic. We continually evaluate our compensation strategies to ensure they align with market trends and support our long-term growth objectives. We depend on independent contractors to provide certain services for which we do not have the expertise internally. Any compromise in the service quality may delay our business processes and cause economic loss. We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors, and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors, and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, some of our business activities may be delayed or terminated, and we may not be able to mitigate negative impacts or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further expand and, accordingly, may not achieve our business goals. - 16 - We have recently acquired multiple businesses. Our growth strategy is driven by successful acquisitions and integration of additional businesses that provide comparable or complementary services. We have completed the acquisition and integration of several complementary businesses, and we intend to consider opportune additional potential strategic transactions that enhance stockholder value, which could involve acquisitions of businesses or assets, joint ventures, or investments in businesses or technologies that expand, complement, or otherwise relate to our business. We may also consider, from time to time, opportunities to engage in joint ventures or other business collaborations with third parties. Should our relationships fail to materialize into significant agreements, or should we fail to work efficiently with these companies, we may lose sales and marketing opportunities and our business, results of operations, and financial condition could be adversely affected. Any business acquisition creates risks such as, among others: (i) the need to integrate and manage the businesses acquired with our own business; (ii) additional demands on our resources, systems, procedures, and controls; (iii) disruption of our ongoing business; and (iv) diversion of management’s attention from other business concerns. Moreover, these transactions could involve: (a) substantial investment of funds or financings by issuance of debt or equity securities; (b) substantial investment with respect to technology transfers and operational integration; and (c) the acquisition or disposition of lines of businesses. Also, such activities could result in one-time charges and expenses and have the potential to either dilute the interests of our existing stockholders or result in the issuance of, or assumption of debt. Such acquisitions, investments, joint ventures, or other business collaborations may involve significant commitments of financial and other resources. Any such activities may not be successful in generating revenue, income, or other returns, and any resources we committed to such activities will not be available to us for other purposes. Moreover, if we are unable to access the capital markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a less than optimal capital structure. Our inability to take advantage of growth opportunities or address risks associated with acquisitions or investments in businesses may negatively affect our operating results. Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially reduce our earnings. Future acquisitions or joint ventures may not result in their anticipated benefits and we may not be able to properly integrate acquired technologies or businesses with our existing operations or successfully combine personnel and cultures. Failure to do so could deprive us of the intended benefits of those acquisitions. Our business strategy may impose limitations on our ability to accurately forecast future revenue and operating results. Our operating results are subject to a variety of factors that could cause our financial performance to fluctuate significantly. These factors include, but are not limited to, fluctuations in client demand, competitive pricing pressures, debt servicing obligations, and general economic conditions. Our ability to achieve consistent revenue growth is highly dependent on several key elements, including: ● Client Demand and Sales Targets: We may experience variability in our sales performance, which could affect our ability to meet financial targets. This is especially true if new service offerings receive a poor response from clients or if client acquisition costs rise due to increased competition in the market. ● Competition and Market Positioning: Intense competition within the cybersecurity and managed IT services sector can lead to downward pressure on pricing, potentially affecting our profitability. If we are unable to maintain or grow our market share through innovation or service differentiation, our financial performance could be negatively impacted. ● Organic Growth Strategy: Our growth is largely dependent on our ability to expand our client base and increase revenue from existing clients through organic growth. We face risks associated with the execution of this strategy, including the challenge of effectively scaling our operations to meet increasing demand and the potential for higher-than-expected client acquisition costs. ● Economic Trends: General economic conditions, including changes in client spending patterns or economic downturns, may adversely impact demand for our services, which could result in lower revenue growth or even a decline in revenue. ● Operational and Execution Risks: We may encounter unexpected operational or execution challenges, such as the inability to hire and retain top talent or issues related to service delivery, which could disrupt our growth trajectory. Additionally, changes in regulatory requirements or industry standards could affect our operations and increase compliance costs. ● Debt Servicing: As we grow, we may incur additional debt to fund our operations or invest in new capabilities. This could result in increased interest expenses and the need to meet debt covenants, which may limit our financial flexibility and affect our ability to pursue growth initiatives. While we have a robust strategy in place to manage and mitigate these risks, there can be no assurance that we will successfully navigate the challenges associated with organic growth. We cannot guarantee that our efforts will result in sustainable revenue growth, improved profitability, or the achievement of long-term financial objectives. - 17 - Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense. Our sales cycles are often long and unpredictable, and our sales efforts require significant time, resources, and investment. These factors introduce considerable uncertainty into our ability to forecast revenue and operating results. Specifically: ● Length and Unpredictability of the Sales Cycle: The sales cycle for our solutions, particularly with large enterprises and government entities, can be extended due to the complex nature of the solutions we provide. These customers typically require a significant amount of time to evaluate, test, and qualify our solutions before committing to a purchase or expansion of the relationship. In light of current macroeconomic conditions, we have observed an increase in the length of the sales cycle, primarily driven by heightened cost-consciousness around IT budgets. As a result, prospective customers may delay or prolong their decision-making process, making it challenging to predict when, or if, a sale will be finalized. ● Challenges in Securing Sales: Our sales efforts, which are carried out by both our direct sales team and channel partners, involve substantial time and expense. We invest considerable resources in developing relationships with customers, coordinating account penetration, and driving overall market development. However, there is no guarantee that these efforts will result in a sale. The purchasing decisions for security solutions are often subject to budget constraints, multiple levels of approval, and unanticipated delays in administrative and processing steps, all of which contribute to the difficulty in predicting the timing of sales. ● Impact on Financial Performance: Given the length and unpredictability of our sales cycles, we may face challenges in accurately forecasting revenue, particularly for large and government accounts. The failure to close sales after investing significant resources in a lengthy sales process could have a material adverse effect on our business, operating results, and financial condition. Considering these factors, we cannot guarantee that we will successfully close sales in the anticipated timeframes, and the uncertainty surrounding our sales cycle may affect our ability to achieve our revenue and financial objectives. Because we recognize revenue from subscriptions to our solutions over the term of the subscription, downturns or upturns in new business will not be immediately reflected in our operating results. We recognize revenue from customer subscriptions ratably over the term of their agreement, which generally spans one to three years. As a result, a significant portion of the revenue we report in any given period is derived from the recognition of deferred revenue related to agreements entered into in prior periods. This model presents the following risks: ● Delayed Impact of Sales Fluctuations: Any increase or decrease in new sales or renewals in a given period will not be immediately reflected in our revenue for that period. Instead, the financial impact of these changes will be realized in future periods as the associated deferred revenue is recognized. Consequently, fluctuations in sales or renewals, particularly during periods of economic uncertainty, may not be fully captured in our reported revenue until later, making it more difficult to assess our immediate financial performance. ● Renewal Rates and Sales Cycles: Our revenue is also influenced by the rate of renewals, which can be unpredictable. A decline in renewals or a decrease in new sales would not immediately impact our reported revenue but could affect future revenue recognition. Conversely, an increase in sales or renewals will positively impact our future revenue but may not be reflected immediately in the current period’s results. ● Operational Adjustments and Cost Structure: The delayed recognition of revenue can also affect our ability to quickly adjust our cost structure. In the event of a significant downturn in sales or renewals, we may be unable to immediately reduce costs in line with revenue reductions, which could negatively affect our profitability and financial condition. As a result of these factors, our ability to manage and adjust our operations in response to changes in sales or renewals may be hindered, potentially leading to variability in our financial results from period to period. We may also face challenges in maintaining profitability if revenue trends do not align with our cost structure adjustments. We provide service level commitments under some of our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide partial refunds, or our customers could be entitled to terminate their contracts and our business would suffer. Certain of our customer agreements include service level commitments, which specify the availability and performance of our solutions and support services. Failure to meet these commitments could have a material adverse effect on our business. The following outlines key risks associated with our service level commitments: ● Failure to Meet Service Level Commitments: Our infrastructure, or that of our third-party hosting service providers, could experience disruptions, impacting the performance and availability of our solutions. If we fail to meet the agreed-upon service levels, we may be required to provide affected customers with credits, partial refunds, or even allow them to terminate their contracts. Although we have not experienced any material failures to meet our service level commitments to date, any significant downtime or poor performance beyond agreed-upon service levels could negatively impact our reputation, customer retention, and financial results. ● Adverse Business Impact: Any failure to meet service levels could result in substantial operational challenges, including loss of customer trust, which would adversely affect our business, operating results, and financial condition. We may also face increased costs related to crediting or refunding customers or managing customer contract terminations. - 18 - Our business is subject to the risks of warranty claims from real or perceived defects in our solutions or their misused by our customers or third parties and provisions in certain agreements potentially expose us to substantial liability and other losses. Our solutions are subject to warranty claims arising from real or perceived defects or misuse by our customers or third parties. The following risks are associated with potential liability claims: ● Product Liability and Warranty Claims: We are subject to risks of liability for errors, defects, or failures in our solutions. While we generally have limitations of liability provisions in our contracts, they may not fully shield us from claims under federal, state, or local laws, or unfavorable judicial decisions. We may also be exposed to product liability claims, especially if our solutions are found to be defective or cause harm to customers. ● Indemnification and Legal Risks: We provide indemnification to customers, partners, and other third parties for losses arising from third-party intellectual property claims related to our solutions. We also offer unlimited liability for certain breaches of confidentiality and limited liability for breaches of our master subscription agreements. While we have not incurred any material costs due to such indemnification claims to date, as we continue to expand, the frequency and cost of indemnity claims may increase, leading to significant legal expenses, damages, or licensing fees. We may also be required to stop using technology found to infringe upon third-party rights, which could disrupt our business operations. ● Intellectual Property Infringement: If we are found to be infringing on a third party’s intellectual property rights, we could face substantial damages and legal costs. Additionally, we may need to obtain licenses for certain technologies, which may not be available on favorable terms or at all. The inability to secure necessary licenses could limit our ability to deliver solutions or features to our customers and harm our competitive position. ● Unauthorized Use of Solutions: Our solutions may be misused by customers or third parties for purposes other than what they were intended for, which could expose us to liability claims. Although we maintain insurance to mitigate certain risks, our coverage may not fully protect us from the claims asserted against us. Even unsuccessful claims could result in significant litigation costs, diversion of management resources, and reputational harm. ● Impact of Warranty and Insurance Coverage: We offer limited warranties to some customers, which are subject to certain conditions. If our insurance providers fail to fulfill their obligations, or if we cease offering warranties, we may face significant expenses or lose customer trust. This could negatively impact our ability to attract and retain customers, and harm our business, operating results, and financial condition. We continue to monitor and manage these risks, but there can be no assurance that our efforts will prevent material adverse impacts on our business. Additionally, our solutions may be used by our customers and other third parties who obtain access to our solutions for purposes other than for which our solutions was intended. We maintain insurance to protect against certain claims associated with the use of our solutions, but our insurance coverage may not adequately cover the claims asserted against us. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert management’s time and other resources, and harm our business and reputation. We have offered some of our customers a limited warranty, subject to certain conditions. Any failure or refusal of our insurance providers to provide the expected insurance benefits to us after we have remediated warranty claims would cause us to incur significant expense or cause us to cease offering warranties which could damage our reputation, cause us to lose customers, expose us to liability claims by our customers, negatively impact our sales and marketing efforts, and have an adverse effect on our business, operating results, and financial condition. Further, although the terms of the warranty do not allow those customers to use warranty claim payments to fund payments to persons on the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), list of Specially Designated Nationals and Blocked Persons or who are otherwise subject to U.S. sanctions, we cannot assure you that all of our customers will comply with our warranty terms or refrain from taking actions, in violation of our warranty and applicable law. - 19 - Our future results may be affected by various legal and regulatory proceedings and legal compliance risks, including those involving intellectual property, governmental regulations, the U.S. Foreign Corrupt Practices Act, and other anti-bribery, anti-corruption, or other matters. Our business is subject to various legal and regulatory proceedings, and we face compliance risks in multiple areas, including intellectual property, governmental regulations, and international anti-bribery and anti-corruption laws. These risks may adversely impact our business and financial results. Specifically: ● Legal and Compliance Risks: We may be involved in legal or regulatory proceedings related to intellectual property disputes, compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery, anti-corruption laws, and other regulatory matters. Due to the inherently unpredictable nature of litigation and regulatory actions, the outcomes of these proceedings may differ from our expectations. Developments such as significant rulings, settlements, or changes in laws may lead us to revise our estimates of liabilities and insurance requirements. An adverse ruling or unfavorable regulatory development could result in significant charges that would materially impact our results of operations and cash flows. ● Regulatory Uncertainty: As regulations evolve, particularly in relation to intellectual property and international compliance standards, we could face additional legal challenges or expenses related to these matters. The resolution of any significant legal dispute or regulatory matter could have a substantial impact on our financial position and operations. We may be subject to risks from operating internationally. We may seek to expand our operations in international markets, which may expose us to a variety of risks. Our international business growth is subject to numerous challenges, including: ● Compliance with Foreign Regulations: Operating in foreign markets requires compliance with a complex and constantly changing landscape of tax, legal, accounting, and regulatory requirements. These challenges could result in increased costs and operational difficulties as we navigate diverse legal systems and business practices across multiple jurisdictions. ● Geopolitical and Economic Risks: International operations expose us to political, social, and economic instability, including risks arising from war, terrorism, or conflicts such as the ongoing military tensions between Russia and Ukraine, and in the Middle East. These geopolitical risks could disrupt our operations, harm our ability to conduct business, and negatively impact market conditions for our services. ● Changes in Trade Policies: Modifications in trade policies, tariffs, and taxes in the United States or other national governments could disrupt market access and increase the cost of doing business in certain regions. We must continuously monitor and adapt to these regulatory shifts to maintain our competitiveness in foreign markets. ● Market Acceptance and Expansion: Expanding into foreign markets requires the development of superior products and services that meet local demand. We must gain market acceptance while also expanding our offerings efficiently. Failures in product adaptation or local market penetration could impede our international growth. ● Non-Compliance with International Laws: Operating in multiple countries exposes us to the risk of non-compliance with a broad range of laws, including anti-corruption, export control, and anti-boycott regulations. Non-compliance could lead to significant legal penalties and reputational damage. ● Sovereign Risk: We face increased sovereign risk, particularly in emerging markets where there is a greater risk of government defaults, economic deterioration, or downgrades in credit ratings. These factors could destabilize markets in which we operate, affecting our operations and financial performance. ● Logistical and Communication Challenges: Operating internationally involves logistical complexities, such as managing supply chains, communication across time zones, and coordinating activities in diverse business environments. These challenges can disrupt our operations and delay service delivery. ● Contractual and Currency Risks: International contracts are subject to interpretation under foreign laws, which can create risks in the event of a dispute. Additionally, fluctuations in currency exchange rates, devaluations, or conversion restrictions could impact the value of our revenues and costs, potentially resulting in financial losses. Any of these factors could have a material adverse effect on our reputation, financial condition, results of operations, and stock price. The risks associated with operating internationally are inherent and may increase as we expand into new markets. - 20 - Our operations in certain emerging markets expose us to political, economic, and regulatory risks. Our growth strategy includes expanding operations in emerging markets, particularly in regions such as South America and Europe. While these markets present significant growth opportunities, they also introduce a variety of risks that could adversely affect our business and financial results. The key risks associated with our expansion in emerging markets include: ● Political and Economic Volatility: Emerging markets often experience greater political and economic instability compared to more established markets. This volatility can lead to unpredictable changes in market conditions, regulatory environments, and business operations. Political upheaval, economic downturns, or social unrest could disrupt our ability to operate efficiently in these regions, adversely impacting sales, revenues, and overall business performance. ● Currency Fluctuations and Infrastructure Risks: Emerging markets may be more susceptible to currency fluctuations and devaluations, which could affect the value of our revenue and expenses in these regions. Additionally, these markets often have less developed infrastructure, increasing the risk of operational disruptions, such as supply chain delays or labor shortages, which could negatively affect our ability to deliver services effectively. ● Compliance with Anti-Corruption Laws: In many emerging markets, business practices that may not be permissible in more established markets, such as improper payments or bribes to government officials, can be more prevalent. We are subject to stringent anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and local anti-bribery laws in the countries where we operate. These laws prohibit improper payments to government officials, including in relation to obtaining permits or conducting other business activities. Non-compliance with these laws could result in severe civil and criminal penalties, which could damage our reputation and adversely impact our financial condition, operating results, and stock price. ● Legal and Regulatory Risks: The legal and regulatory environments in emerging markets can be unpredictable and subject to rapid changes. Non-compliance with local laws or failure to navigate these complex legal systems effectively could lead to regulatory fines, penalties, or reputational harm. These risks are heightened in countries with weak rule of law or inconsistent enforcement of regulations. Failure to manage political, economic, and regulatory risks in emerging markets could have a material adverse impact on our ability to achieve sales targets, grow our business, and maintain profitability in these regions. The risks associated with expanding into emerging markets may result in unanticipated costs, operational disruptions, or financial losses, which could negatively affect our financial condition, results of operations, cash flows, and stock price. Adverse economic conditions in the United States may adversely impact our business and operating results. Our operations, demand for services, and overall business performance are subject to general macroeconomic conditions, which can fluctuate and present significant risks to our financial performance. Key macroeconomic factors such as higher interest rates, inflation, recessions, or economic slowdowns—whether in the United States or globally—could adversely affect our business operations, customer demand, and financial results. The key risks include the following: ● Inflationary Pressures: The United States and global markets have experienced volatility due to rising interest rates and inflationary pressures. Inflation rates in the United States have remained above the Federal Reserve’s inflation target since the second half of 2021, contributing to increased costs for goods, services, and labor. While our business has not yet been materially impacted by these inflationary pressures, we cannot predict the future impact on our operations. If inflation continues or worsens, it may lead to higher operational costs, which could reduce our profitability and adversely affect our business. ● Geopolitical Instability: The escalation of geopolitical tensions, including the conflicts between Russia and Ukraine and in the Middle East, has created ongoing instability in global markets. These factors may disrupt supply chains, elevate costs, and reduce consumer and business confidence, which could negatively affect demand for our products and services. ● Economic Slowdowns and Recession: A slowdown in economic activity or a recession, whether domestic or global, could lead to reduced spending by businesses and consumers. If our customers face decreased consumer demand, higher operational costs, or increased regulatory burdens, they may choose to reduce or postpone their spending on our products and services. Certain discretionary services may be deprioritized, leading to a decline in sales and potentially adversely affecting our operating results. ● Credit Availability: Adverse economic conditions may impact the availability of credit for our customers. If customers experience difficulty accessing credit, they may be unable or unwilling to invest in our products and services, potentially leading to delayed or lost sales opportunities. This could affect our revenue and growth prospects. ● Impact on Business Relationships: Economic downturns could also affect the third parties with whom we have business relationships, including suppliers, service providers, and partners. If these third parties experience financial difficulties or operational disruptions, it could impede our ability to execute on business opportunities and growth initiatives, adversely affecting our operations and long-term strategic goals. The unpredictability of macroeconomic conditions makes it difficult to accurately forecast and plan for future business activities. Adverse economic conditions may lead to changes in customer behavior, demand patterns, and spending priorities, all of which could have a negative effect on our ability to achieve growth and maintain profitability. In the event of future economic slowdowns or disruptions, we may face challenges in sustaining growth or expanding our business in the manner anticipated. - 21 - Breaches of network or information technology security could have an adverse effect on our business. Cybersecurity threats, including cyber-attacks or breaches of our network or IT security, could have a material adverse effect on our operations, financial condition, and reputation. The nature of our business exposes us to various risks related to network security breaches, which could disrupt both our own operations and the operations of our clients. Key risks include the following: ● Cybersecurity Threats and Liabilities: Cyber-attacks or other breaches of network or IT security could result in significant disruptions to our systems, causing equipment failures, service interruptions, or damage to systems and data. If our security measures are compromised, it could lead to misappropriation of proprietary information or sensitive customer and employee data. Such incidents could expose us to substantial liabilities, potentially exceeding the coverage provided by our insurance policies, and cause financial losses or operational setbacks. ● Damage to Reputation and Market Share Loss: A security breach could also damage our brand and reputation, particularly given the nature of our industry, where security is a critical competitive factor. Even short periods of operational downtime could result in a loss of market share to competitors, as clients may lose confidence in our ability to protect their data and systems. ● Indirect Effects on Clients: Our IT infrastructure’s security threats could also affect our clients indirectly. A compromise of our systems may impact their operations or lead to the unauthorized access to their proprietary or personal information. This could damage our clients’ trust in our services, which could have a cascading effect on our relationships and business performance. ● Ongoing Security Challenges: As cybersecurity threats evolve rapidly, new methods of breach may emerge that we are not able to anticipate or defend against immediately, especially now with state and foreign governments that are adversaries and employ hackers or bad actors. We may be unable to implement timely security measures to mitigate these risks, and in some cases, we may not be able to fully determine the extent to which new threats can bypass our defenses. This presents a significant challenge in maintaining the integrity of our security systems. ● Legal and Regulatory Risks: If we fail to adequately protect sensitive information, we could face legal consequences, including lawsuits, regulatory penalties, or damage claims, particularly if our clients or relevant authorities question the effectiveness of our threat detection and mitigation measures. These legal proceedings could expose us to significant financial and reputational risks. ● Potential Lawsuits and Liability: Our services are designed to protect clients from cyber-attacks and other security breaches. However, if our clients experience losses from cyber-attacks, including lost profits or other indirect damages, they may seek to hold us liable through lawsuits. While our service agreements typically include liability limitations, these provisions may not be enforceable in all cases. In the event of litigation, we could face substantial damage awards, which may exceed our insurance coverage and significantly impact our financial position. A security breach, failure to protect sensitive information, or liability arising from a breach could have a material adverse effect on our business, operating results, financial condition, and prospects. We may incur significant legal, remediation, and security costs, and any reputational damage could undermine our business relationships and market position. If we fail to meet our service level obligations under our service level agreements, we may be subject to certain penalties and could lose clients. We have entered into service level agreements (“SLAs”) with many of our managed services clients, under which we guarantee specified levels of service availability. These arrangements require us to estimate and meet service delivery standards, including uptime and system performance, to ensure client satisfaction. The following risks are associated with these SLAs: ● Penalties and Cost Overruns: If we fail to meet our service level obligations, we may be subject to financial penalties, which could result in higher-than-expected costs. These penalties, along with any potential requirements for remediation, may negatively affect our profitability and operating margins. ● Client Loss and Revenue Impact: Failure to meet SLAs could result in client dissatisfaction, potentially leading to the termination of contracts or a reduction in client spending. The loss of clients due to unmet service expectations could significantly reduce our revenue and impact the stability of our future cash flows. ● Reputational Damage: Our ability to deliver on service level commitments is central to maintaining strong relationships with our clients. If we fail to meet our SLAs, our reputation may suffer, potentially leading to a loss of future business, difficulty attracting new clients, and challenges in retaining existing ones. ● Operational and Financial Risks: The financial and operational consequences of failing to meet service level commitments could lead to a deterioration in our gross and operating margins. Additionally, the resources required to address service failures and mitigate customer dissatisfaction could divert attention from other key business priorities, further impacting our overall performance. If we fail to fulfill our SLAs, it could result in material financial costs, including penalties, client churn, and reputational damage, which would adversely affect our business, operating results, financial condition, and prospects. The nature of our business involves significant risks and uncertainties that may not be covered by insurance or indemnification. We provide services in circumstances where insurance or indemnification may not be available or may be insufficient to cover operational risks and other uncertainties that we face. Our existing insurance coverages may not fully protect us against the risks associated with the delivery of our services, and additional insurance may not be available on favorable terms, or at all. The following risks are associated with our insurance coverage: ● Liabilities in Excess of Coverage: Liabilities or claims arising from our services in excess of available indemnity or insurance coverage could materially harm our financial condition, cash flows, and operating results. If we are unable to obtain sufficient coverage for potential claims, the financial impact could be significant. ● Reputational Damage: Even if a claim is fully covered or insured, it could still harm our reputation in the marketplace. A negative perception resulting from claims, regardless of the outcome, could undermine client confidence and make it more difficult for us to compete effectively. ● Cost and Management Distraction: The defense of claims, even if ultimately unsuccessful, can be costly and time-consuming. It could divert management’s attention away from key business operations and strategic initiatives, which could affect our ability to execute on our business plan and impact overall operational performance. The occurrence of claims or liabilities for which we do not have adequate insurance or indemnification could have a material adverse effect on our business, operating results, financial condition, and prospects. Furthermore, the associated reputational risks and management distraction could hinder our ability to maintain growth and profitability. - 22 - We indemnify our officers and directors against liability to us and our security holders, and such indemnification could increase our operating costs. Our certificate of incorporation and bylaws allow us to indemnify our officers and directors against claims associated with carrying out the duties of their offices. Our bylaws also allow us to reimburse them for the costs of certain legal defenses. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our officers, directors, or control persons, the SEC has advised that such indemnification is against public policy and is therefore unenforceable. Our industry is highly competitive, and there is no assurance that we will compete successfully. Our business operates in a highly competitive landscape, and our current and potential competitors vary significantly by size, service offerings, and geographic location. Our competitors include technology companies, consulting firms, telecommunication companies, technology resellers, hardware and software providers, and other entities. Many of these competitors have established relationships within specific industries or have developed a reputation for expertise in particular sectors of the cybersecurity market, including services, software, and hardware. Primary factors influencing competition in our market include security, reliability, and functionality; customer service and technical expertise; reputation and brand recognition; financial strength; the breadth of products and services offered; price; and scalability. However, many of our competitors possess substantial advantages in these areas, including the following: ● Financial and Operational Resources: Many of our competitors have greater financial, technical, and marketing resources. They may be able to deploy more significant resources in research and development, marketing, and sales, which could allow them to adapt more rapidly to emerging technologies or shifts in customer demands. ● Market Positioning: Competitors may have entrenched relationships within specific industries or have gained extensive reputation and brand recognition, positioning them as leaders in the market. ● Pricing and Product Bundling: Some of our competitors may be able to offer more favorable pricing or bundle products and services in ways that provide them with a competitive price advantage. Additionally, they may be able to maintain a lower cost structure, making it difficult for us to compete on price. ● Mergers, Acquisitions, and Alliances: Competitors may also benefit from strategic acquisitions, partnerships, or other alliances, allowing them to offer complementary products and services or achieve greater operational efficiencies. Some of our competitors are better positioned to: ● Rapidly develop and deploy new products and services. ● Offer lower prices or more attractive pricing packages. ● Devote greater resources to sales and marketing efforts, including providing more incentives to channel partners. As a result, competition in our industry could lead to several adverse outcomes for our business, including a loss of customers, reduced revenue, increased expenses, or pressure on our margins. These factors could adversely affect our business, financial condition, operating results, and long-term growth prospects. Our success depends on our ability to protect our intellectual property and our proprietary technologies. We rely on trade secrets to protect our intellectual property, proprietary technology, and processes, which we have developed or may develop in the future. However, there can be no assurance that confidentiality obligations will always be honored or that others will not independently develop similar or superior technology. The protection of intellectual property and proprietary technology through trade secret claims has become increasingly contentious, with more companies pursuing litigation to protect their rights or for competitive reasons, even when the claims may be unsubstantiated. The prosecution or defense of intellectual property claims can be costly and unpredictable, particularly given the evolving legal landscape. We may also face claims from other parties alleging infringement on their intellectual property or technology, which could adversely affect our business. - 23 - Increasingly complex cybersecurity regulations and standards may have significant impact on our business, and it may require us to substantially invest in our development capabilities to meet compliance requirements and may negatively impact our ability to offer certain services and remain profitable. Cybersecurity legislation at the federal and state levels continues to evolve as lawmakers respond to the growing threat landscape. Multiple bills and resolutions are currently being considered, which may lead to new regulations, including cybersecurity standards and compliance requirements. Our expansion strategy, which includes acquisitions of other cybersecurity service providers, may be impacted by these regulations. We may be required to dedicate significant resources to ensure our services comply with diverse state-level requirements, potentially delaying service launches or limiting the scope of certain offerings. Non-compliance with these regulations could result in legal actions, increased costs, and operational disruptions, which would negatively impact our financial results. We may become subject to disputes, including litigation, that could negatively impact our business, profitability, and financial condition. We may become involved in disputes with third parties, which could result in litigation. Whether or not a dispute leads to litigation, significant resources—both management time and financial—may be required to resolve the issue. This could detract from our ability to focus on business operations. Any resolution could involve the payment of damages or other significant costs, and may involve restrictive terms that limit our operational flexibility. Prolonged or unfavorable legal disputes could materially harm our financial condition, profitability, and overall business performance. If we incur additional debt, we will be subject to restrictive covenants and debt service obligations that could negatively impact our operations. If we incur additional debt to fund operations or acquisitions, we will be subject to debt service obligations, including interest and principal payments. Debt agreements often contain restrictive covenants that may limit our operational flexibility and impose financial constraints. A default under any debt agreement could accelerate repayment and result in a judgment against us, potentially leading to the foreclosure of assets, which would materially adversely affect our business, financial condition, or results of operations. The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and Nasdaq, may strain our resources, increase our costs, and divert management’s attention, and we may be unable to comply with these requirements in a timely or cost-effective manner. As a public company, we are subject to the reporting requirements of the Exchange Act, and the corporate governance standards of the Sarbanes-Oxley Act and Nasdaq. We have a limited operating history as a public company, and these requirements may place a strain on our management, systems, and resources. In addition, we have incurred, and expect to continue to incur, significant legal, accounting, insurance, and other expenses. The Exchange Act requires us to file annual, quarterly, and current reports with respect to our business and financial condition within specified time periods and to prepare a proxy statement with respect to our annual meeting of stockholders. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. Nasdaq requires that we comply with various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting and comply with the Exchange Act and Nasdaq requirements, significant resources and management oversight are required. This may divert management’s attention from other business concerns and lead to significant costs associated with compliance, which could have a material adverse effect on us and the market price of our common stock. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors or its committees or as our executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of these costs. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory action, and potentially civil litigation. - 24 - The preparation of our financial statements involves the use of estimates, judgments, and assumptions, and our financial statements may be materially affected if our estimates prove to be inaccurate. Financial statements prepared in accordance with accounting principles generally accepted in the United States require the use of estimates, judgments, and assumptions that affect the reported amounts. Different estimates, judgments, and assumptions reasonably could be used that would have a material effect on the financial statements, and changes in these estimates, judgments, and assumptions are likely to occur from period to period in the future. These estimates, judgments, and assumptions are inherently uncertain, and, if they prove to be wrong, then we face the risk that charges to income will be required. The auditor’s opinion on our audited consolidated financial statements for the year ended December 31, 2024, included in this annual report on Form 10-K, contain an explanatory paragraph relating to our ability to continue as a going concern. The auditor’s opinion on our audited consolidated financial statements for the year ended December 31, 2024 includes an explanatory paragraph stating that our losses and negative cash flows from operations and uncertainty in generating sufficient cash to meet our operating obligations raise substantial doubt about our ability to continue as a going concern. While we are pursuing a variety of funding sources and transactions that could raise capital, there can be no assurances that we will be successful in these efforts or will be able to resolve our liquidity issues or eliminate our operating losses. If we are unable to obtain sufficient funding, we would need to significantly reduce our operating plans and curtail some or all of our strategic plans. Accordingly, our business, prospects, financial condition, and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited consolidated financial statements, and it is likely that investors will lose all or a part of their investment. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all. Risks Related to our Common Stock The market price of our common stock is volatile and may fluctuate in a way that is disproportionate to our operating performance. The market price of our common stock may experience significant volatility due to a variety of factors, including, but not limited to: ● sales or potential sales of substantial amounts of our common stock; ● announcements about us or about our competitors or new product introductions; ● the loss or unanticipated underperformance of our global distribution channels; ● litigation and other developments relating to our patents or other proprietary rights or those of our competitors; ● conditions in the cybersecurity and IT services industries; ● governmental regulation and legislation; ● variations in our anticipated or actual operating results; ● changes in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations; ● foreign currency values and fluctuations; and ● overall political and economic conditions, including internation developments. Many of these factors are beyond our control. In addition to recent events, the stock markets have historically experienced substantial price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market price of our common stock, regardless of our actual operating performance. - 25 - Future sales of shares of our common stock by existing stockholders could depress the market price of our common stock. We had an aggregate of 11,821,866 issued and outstanding shares of common stock as of December 31, 2024. Approximately 4,838,618 shares were in street name. The remainder of the outstanding shares may be sold, subject to certain volume limitations, pursuant to Rule 144 or other available exemptions. Also, in the future, we may issue additional securities in connection with financings and acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding stock. Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Provisions in our certificate of incorporation, our by-laws, and Delaware law might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock. Provisions of our amended and restated certificate of incorporation, our amended and restated by-laws, and Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include the ability of our Board of Directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our Board of Directors. The existence of the forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that an investor in our company could receive a premium for their common stock in an acquisition. Our Board of Directors is expressly authorized to make, alter, or repeal our by-laws by majority vote, while such action by stockholders would require a super majority vote. These anti-takeover provisions and other provisions under Delaware law could discourage, delay, or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions they desire. FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock. The Financial Industry Regulatory Authority, Inc. (“FINRA”) has adopted rules that require that, in recommending an investment to a client, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for certain customers. FINRA requirements will likely make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in the shares, resulting in fewer broker-dealers may be willing to make a market in our shares, potentially reducing a stockholder’s ability to resell shares of our common stock. - 26 - If we issue additional shares in the future, it will result in a dilution of our existing stockholders. Our amended and restated certificate of incorporation authorizes the issuance of up to 300,000,000 shares of our common stock and up to 50,000,000 shares of preferred stock. Our Board of Directors may choose to issue some or all of such shares to acquire one or more companies and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current stockholders. Further, such issuance may result in a change of control of our company. We are eligible to be treated as an “emerging growth company,” as defined in the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to take advantage of the extended transition period for complying with the revised accounting standards. As a result, our financial statements may not be comparable to companies that comply with effective dates generally applicable to public companies. Investors may find our common stock less attractive because we may rely on these exemptions, reduced reporting requirements, and extended transition periods. If investors find our common stock less attractive as a result of any of the foregoing, there may be a less active trading market for our common stock and our stock price may be more volatile or may decrease. Our directors, a former director and executive officers beneficially own a substantial majority of our outstanding capital stock and will have the ability to control our affairs. Our current directors and executive officers, and a former director beneficially own approximately 31.55% of our outstanding capital stock. By virtue of these holdings, they effectively control the election of the members of our Board of Directors, our management, and our affairs and may prevent us from consummating corporate transactions such as mergers, consolidations, or the sale of all or substantially all of our assets that may be favorable from our standpoint or that of our other stockholders. Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. On March 29, 2023, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price for our common stock had closed below $1.00 per share for the previous 30 consecutive business days and our common stock no longer met the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we had an initial period of 180 calendar days to regain compliance. To regain compliance, the closing bid price of our common stock had to be $1.00 per share or more for a minimum of 10 consecutive business days at any time before the expiration of the initial compliance period. We were unable to regain compliance with Rule 5550(a)(2) during the initial compliance period, but pursuant to Nasdaq rules we were eligible for an additional 180 calendar day compliance period. To qualify, we needed to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and we were required to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. Subsequently, on December 28, 2023, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price for our common stock had closed below $0.10 per share for the previous 10 consecutive trading days and our common stock no longer met the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2). Accordingly we were subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii), and as a result, Nasdaq determined to delist our securities. We were granted an appeal with Nasdaq’s Hearings Panel on March 28, 2024. On March 8, 2024, our 1-for-15 reverse split became effective, increasing the bid price for our common stock above $1.00 per share. On March 22, 2024, we received notification from Nasdaq that we had regained compliance with the bid price requirements as set forth under Nasdaq Listing Rule 550(a)(2). As a result of regaining compliance, our appeal with Nasdaq’s Hearing Panel was cancelled. We must continue to maintain a minimum closing bid price over $1.00 per share pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If our closing bid price falls below $1.00 per share for more than 30 consecutive trading days, we may again be deemed noncompliant with Nasdaq’s continued listing requirements. The liquidity of the shares of our common stock may be affected adversely by the reverse stock split undertaken to address such compliance failure, given the reduced number of shares that are outstanding following a reverse stock split. In addition, reverse stock splits may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales. On January 10, 2025, we received a notification letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, since we have not yet held an annual meeting of stockholders within twelve months of the end of its December 31, 2023 fiscal year, we are out of compliance with the Nasdaq rules for continued listing (Listing Rules 5620(a) and 5810(c)(2)(G)). The notification letter has no immediate effect on the listing of our securities on the Nasdaq Capital Market. Under the applicable Nasdaq rules, we had 45 calendar days to submit a plan to regain compliance. If Nasdaq accepted our plan, Nasdaq can grant an exception of up to 180 calendar days from our most recent fiscal year end, or until June 30, 2025, to regain compliance. We filed a definitive proxy statement on March 5, 2025 for an annual meeting to be held on April 25, 2025 to regain compliance with the applicable Nasdaq Listing Rules. - 27 - In the event that we again become non-compliant with Rule 5550(a)(2) and cannot re-establish compliance within the required timeframe, our common stock could be delisted from Nasdaq, which could have a material adverse effect on our financial condition, and which would cause the value of our common stock to decline. If our common stock is not eligible for listing or quotation on another market or exchange, trading of our common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it would become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely be a reduction in our coverage by security analysts and the news media, which could cause the price of our common stock to decline further. In addition, it may be difficult for us to raise additional capital if we are not listed on a national securities exchange. Following a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve. Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that our reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve. We do not intend to pay dividends on our common stock. We have never paid any cash dividends, and currently do not intend to pay any dividends for the foreseeable future. We intend to retain any future earnings to the extent necessary to develop and expand our business. Payment of cash dividends, if any, will depend, among other factors, on our earnings, capital requirements, and the general operating and financial condition, and will be subject to legal limitations on the payment of dividends out of paid-in capital. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock price. This may never happen, and investors may lose all of their investment. Our business could be negatively impacted by stockholder activism. In recent years, stockholder activists have become involved in numerous public companies. Stockholder activists frequently propose to involve themselves in the governance, strategic direction, and operations of companies. Stockholder activists have also become increasingly concerned with companies’ efforts with respect to environmental, sustainability and governance standards. Responding to actions by activist stockholder, such as requests for special meetings, potential nominations of candidates for election to our Board of Directors, requests to pursue a strategic combination or other transaction, or other special requests may disrupt our business and divert the attention of management and employees. In addition, any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners, all of which could negatively impact our business. Stockholder activism could result in substantial costs. In addition, actions of activist stockholder may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals of our business. - 28 - Our share price may be volatile, and you may be unable to sell your shares. The trading price of our common stock is likely to be highly volatile and these fluctuations could cause you to lose all or part of your investment in our common stock. Since shares of our common stock were sold in our initial public offering (IPO) in January 2022 at a price of $75.00 per share, the reported high and low sales prices of our common stock ranged from $0.26 to $138.15 per share through March 24, 2025. Factors that may cause the market price of our common stock to fluctuate include: ● price and volume fluctuations in the overall stock market from time to time; ● significant volatility in the market price and trading volume of technology companies in general, and of companies in our industry; ● actual or anticipated changes in our results of operations or fluctuations in our operating results; ● whether our operating results meet the expectations of securities analysts or investors; ● failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company, or our failure to meet the estimates or the expectations of investors; ● announcements of new products or technologies, commercial relationships, acquisitions, or other events by us or our competitors; ● actual or anticipated developments in our competitors’ businesses or the competitive landscape generally; ● actual or perceived privacy or data security incidents; ● litigation involving us, our industry or both; ● regulatory developments in the United States, foreign countries, or both; ● general economic conditions and trends; ● the commencement or termination of any share repurchase program; ● new laws or regulations or new interpretations of existing laws or regulations applicable to our business; ● the availability of our services, security breaches or perceived security breaches, and vulnerabilities; ● changes in accounting standards, policies, guidelines, interpretations, or principles; ● actions instituted by activist stockholder or others; ● major catastrophic events, including those resulting from war, incidents of terrorism, outbreaks of pandemic diseases, such as COVID-19, or responses to these events; ● sales of large blocks of our stock; or ● departures of key personnel. In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The trading price of our common stock might also decline in reaction to events affecting other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation, which could result in substantial costs and a diversion of management’s attention and resources.