Item 1A. Risk Factors
ITEM
1A. RISK FACTORS
Risks
Related to Our Business
We
could be adversely affected by information security breaches or cyber security attacks.
Our
web and cloud services involve the storage and transmission of our customers’ and employees’ proprietary information. Our
business relies on our digital technologies, computer and email systems, software and networks to conduct our operations. Our technologies,
systems and networks may become the target of criminal cyber-attacks or information security breaches that could result in the unauthorized
release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of us or third parties
with whom we deal, or otherwise disrupt our or our customers’ or other third parties’ business operations. It is critical
to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure. Although
we believe we employ appropriate security technologies, we cannot guarantee that the security technologies (including data encryption
processes, intrusion detection systems) we employ, the comprehensive risk assessments we conduct, or our other internal control procedures
will ensure the security of our customers’ data. If our security measures are breached due to third-party action, employee error
or otherwise, and as a result, our customers’ data becomes available to unauthorized parties, we could incur liability and our
reputation would be damaged, which could lead to the loss of current and potential customers.
5
Furthermore, we maintain a work-from-home policy
for our employees. Remote work and remote access increase our vulnerability to cybersecurity attacks. We may see an increase in cyberattack
volume, frequency and sophistication driven by the global enablement of remote workforces. We seek to detect and investigate unauthorized
attempts and attacks against our network, products and services and to prevent their recurrence where practicable through changes to our
internal processes and tools and changes or updates to our products and services; however, we remain potentially vulnerable to additional
known or unknown threats. In some instances, we and our customers can be unaware of an incident or its magnitude and effects. Additionally,
the rapid evolution and increasing prevalence of AI technologies has increased our cybersecurity risks. Moreover, globally there has been
an increase in cybersecurity attacks, particularly as a result of international conflicts. The risk of state-supported and geopolitical-related
cyber-attacks may increase in connection with the war, including the conflicts in Ukraine, Iran and the Middle East, and any related political
or economic responses and counter-responses. We may not discover all such incidents or activity or be able to respond or otherwise address
them promptly, in sufficient respects or at all.
In
addition, we have in the past and may in the future be required to expend significant capital and other resources to detect, remedy,
protect against or alleviate breaches of our network and security, and we may not be able to remedy these problems in a timely manner,
or at all. Because techniques used by outsiders to obtain unauthorized network access or to sabotage systems change frequently and generally
are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative
measures.
Further,
any breaches to our security measures in the future as a result of third-party action, employee error or otherwise could increase the
cost of cybersecurity insurance, which, in turn, could adversely affect our financial condition and results of operations. Our existing
general liability insurance coverage and the coverage we carry for cyber-related liabilities may not continue to be available on acceptable
terms or be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage as to any future
claim. The successful assertion of one or more large claims against us that are not covered or exceed available insurance coverage, or
the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance
requirements, could harm our business.
We
rely on third-party license agreements with the owners of the Data Centers to operate our secure private cloud which, if terminated,
could have an adverse material effect on our business.
We
operate a secure private cloud from private suites in completely isolated areas that are leased within two Tier 3 data center facilities
located in Phoenix, Arizona, and Edison, New Jersey. We are party to license agreements with Aligned Data Centers (Phoenix) PropCo, LLC
and Iron Mountain Data Centers LLC with respect to the Data Centers located in Phoenix, Arizona, and Edison, New Jersey, respectively,
through which we offer our secure private cloud hosting services. The Data Centers host our critical infrastructure and are designed
to conform to the global standards for such centers. Although the terms of the license agreements for the Data Centers located in Arizona
and New Jersey currently extend through 2032 and 2026, respectively, such license agreements may not continue to be available on commercially
reasonable terms, or at all. Additionally, termination of such license agreements would require us to identify replacement facilities
for our secure private cloud hosting services, which may not be available at all. Any delay or interruption in our ability to meet demand
for our secure private cloud hosting services and other IT-related services will result in the loss of potential revenues and could have
a material adverse effect on our business, results of operations, and financial condition.
We
operate in a highly competitive industry in which technological change can be rapid.
The
information technology industry involves a broad range of rapidly changing technologies, including AI. Our equipment and the technologies
on which it is based may not remain competitive over time, and others may develop superior technologies that render our products non-competitive,
without significant additional capital expenditures. Some of our competitors are significantly larger and have substantially greater
market presence, as well as greater financial, technical, operational, marketing and other resources and experience than we do. In the
event that such a competitor expends significant sales and marketing resources in one or several markets in which we operate, we may
not be able to compete successfully in such market(s). We believe that competition will continue to increase, placing downward pressure
on prices. Such pressure could adversely affect our gross margins if we are not able to reduce our costs commensurate with such price
reductions.
6
We
rely on a limited number of customers for a material portion of our revenues and income.
A substantial portion of our revenue is derived
from a limited number of customers. For instance, Newtek is currently the largest customer of the Company, accounting for 32.5% of our
revenue for the fiscal year ended December 31, 2025. The loss of, or a reduction in orders from, any one of our significant customers,
adverse changes in their procurement strategies, or their decision to terminate or not renew contracts—many of which are terminable
on short notice—could materially and adversely affect our business, financial condition, and results of operations.
Our
technology solutions business depends on the efficient and uninterrupted operation of our Data Centers and computer and communications
hardware systems and infrastructure.
Despite
precautions we implement against possible failure of our systems, interruptions could result from natural disasters, power loss, the
inability to acquire fuel for our backup generators, telecommunications failure, terrorist attacks and similar events. We also lease
telecommunications lines from local, regional and national carriers whose service may be interrupted. Our business, financial condition
and results of operations could be harmed by any damage or failure that interrupts or delays our operations. Our insurance may not cover
all of the losses or compensate us for the possible loss of clients occurring during any period that we are unable to provide service.
Additionally,
since the Data Centers through which we operate rely on third parties to provide power sufficient to meet operational needs, the Data
Centers could have a limited or inadequate amount of electrical resources necessary to meet our customer requirements. The operators
for the Data Centers attempt to limit exposure to system downtime due to power outages by using backup generators and power supplies.
However, these protections may not limit our exposure to power shortages or outages entirely. Any system downtime resulting from insufficient
power resources or power outages could cause physical damage to equipment, increase our susceptibility to security breaches, damage our
reputation and lead us to lose current and potential customers, which would harm our business, financial condition and results of operations.
Failure
to have reliable Internet, telecommunications and fiber optic network connectivity and capacity from third-party providers may adversely
affect our results of operations.
Our
success depends in part upon the capacity, reliability and performance of our network infrastructure, including our Internet, telecommunications
and fiber optic network connectivity providers. We depend on these companies to provide uninterrupted and error-free service through
their telecommunications networks. Some of these providers are also our competitors. We exercise little control over these providers,
which increases our vulnerability to problems with the services they provide. We have experienced, and expect to continue to experience,
interruptions or delays in network service. Any failure on our part or the part of our third-party suppliers to achieve or maintain high
data transmission capacity, reliability or performance could significantly reduce customer demand for our services and have a material
and adverse effect on our business, financial condition and results of operations.
As
our customers’ usage of telecommunications capacity increases, we will be required to make additional investments in our capacity
to maintain adequate data transmission speeds, the availability of which may be limited or the cost of which may be on terms unacceptable
to us. If adequate capacity is not available to us as our customers’ usage increases, our network may be unable to achieve or maintain
sufficiently high data transmission capacity, reliability or performance. In addition, our business and results of operations would suffer
if our network suppliers increased the prices for their services and we were unable to successfully pass along the increased costs to
our customers.
Real
or perceived errors, failures or bugs in our customer solutions, software or technology could adversely affect our business, financial
condition and results of operations.
Undetected
real or perceived errors, failures, bugs or defects may be present or occur in the future in our customer solutions, software or technology
or the technology or software we license from third parties, including open source software. Despite testing by us, real or perceived
errors, failures, bugs or defects may not be found until our customers use our services. Real or perceived errors, failures, bugs or
defects in our customer solutions could result in negative publicity, loss of or delay in market acceptance of our services and harm
to our brand, weakening of our competitive position, claims by customers for losses sustained by them or failure to meet the stated service
level commitments in our customer agreements. In such an event, we may be required, or may choose, for customer relations or other reasons,
to expend significant additional resources to help correct the problem. Any real or perceived errors, failures, bugs or defects in our
customer solutions could also impair our ability to attract new customers, retain existing customers or expand their use of our services,
which could adversely affect our business, financial condition and results of operations.
7
If
we are unable to attract new customers, retain existing customers and sell additional services at comparable gross margins to customers,
our revenue and results of operations could be adversely affected.
Our
ability to maintain or increase our revenues and make a profit may be impacted by a number of factors, including our ability to attract
new customers, retain existing customers and sell additional services at comparable gross margins to our customers. In addition, as we
seek to grow our customer base, we expect to incur higher customer acquisition costs and, to the extent we are unable to retain and sell
additional services to existing customers, our revenue and results of operations may decrease.
Growth
in the demand for our services may be inhibited, and we may be unable to profitably maintain or grow our customer base for a number of
reasons, such as:
●
our inability to provide
compelling services or effectively market them to new and existing customers;
●
customer migration to platforms
that we do not have expertise in managing;
●
the inability of customers
to differentiate our services from those of our competitors or our inability to effectively communicate such distinctions;
●
the decision of customers
to host internally, in third-party cloud infrastructure, or in third-party colocation facilities as an alternative to the use of
our services;
●
the decision of customers
to use internal or other third-party resources to manage their platforms and applications;
●
reductions in IT spending
by customers or potential customers;
●
a reduction in the demand
for our services due to macroeconomic factors in the markets in which we operate;
●
our inability to strengthen
awareness of our brand;
●
past or future cybersecurity-related
incidents; and
●
reliability, quality or
compatibility problems with our services.
Moreover,
we may face difficulty retaining existing customers over the long term. Certain customer contracts, frequently have initial terms (typically
from 24 to 36 months) and, unless terminated, may be renewed or automatically extended for shorter, rolling periods after the initial
term. Our customers have no obligation to renew their services after their initial contract periods expire and any termination fees associated
with an early termination may not be sufficient to recover our costs associated with such contracts. In addition, most of our services
can be canceled at any time without penalty. As a result, we may face high rates of customer churn if we are unable to meet our customer
needs, requirements and preferences.
Our
costs associated with generating revenue from existing customers are generally lower than costs associated with generating revenue from
new customers, and depending on the customer and the service offering, there may be substantial variation in the gross margins associated
with existing and new customers. Any failure by us in continuing to attract new customers or grow our revenue from existing customers
could have a material and adverse effect on our business, financial condition and results of operations.
Our
business depends on Microsoft Corporation and others for the licenses to use software and other intellectual property in the managed
technology solutions business.
Our
managed technology business is built on technological platforms that rely on the Microsoft Windows products and other intellectual property
that we currently license. As a result, if we are unable to continue to have the benefit of those licensing arrangements, or if the products
upon which our platform is built become obsolete, our business could be materially and adversely affected.
8
If
we fail to hire and retain qualified employees and management personnel, our strategies and our business could be harmed.
Our
ability to be successful and to execute on our strategies depends on our ability to identify, hire, train and retain qualified executives,
IT professionals, technical engineers, software developers, operations employees and sales and senior management personnel who maintain
relationships with our customers and who can provide the technical, strategic and marketing skills required for our company to grow.
Our ability to execute on our sales strategy is also dependent on our ability to identify, hire, train and retain a sufficient number
of qualified sales personnel. There is a shortage of qualified personnel in these fields, and like many other companies, we have encountered
additional challenges in hiring and retaining qualified personnel. We compete with other companies for this limited pool of potential
employees. Furthermore, the implementation of our strategies may result in changes throughout our business, which may create uncertainty
for our employees. Such uncertainties may impair our ability to attract, retain and motivate key personnel and could cause customers,
suppliers and others who deal with us to seek to change existing business relationships. In addition, the industry in which we operate
is generally characterized by significant competition for skilled personnel, and as our industry becomes more competitive, it could become
especially difficult to retain personnel with unique in-demand skills and knowledge, whom we would expect to become recruiting targets
for our competitors. We may not be able to recruit or retain qualified personnel or successfully transition knowledge from departing
employees, and any failure to do so could cause a dilution of our service-oriented culture and weaken our ability to develop and deliver
existing or new operations and services, either of which could cause our business to be negatively impacted.
Our
future success is dependent, in part, on the performance and continued service of our executive officers. Without their continued service,
we may be forced to interrupt or eventually cease our operations.
We
are dependent to a great extent upon the experience, abilities and continued service of Jason Katz, our Chief Executive Officer and Chairman
of the Board of Directors (the “Board”), Kara B. Jenny, our Chief Financial Officer and director, Jared Mills, our President,
and Adam Zalko, our Chief Operating Officer. The loss of the services of these individuals would substantially affect our business or
operations and could have a material adverse effect on our business, results of operations or financial condition.
Because
we recognize revenue from subscriptions over the term of the subscription, the full impact of downturns or upturns in subscription sales
may not be immediately reflected in our results of operations or financial condition.
Based on the variability of contract and service
type offered with our managed IT security services, professional services and secure private cloud hosting, we report deferred revenue
for any unearned portion of revenue from contracts we entered into during previous periods. In addition, we recognize subscription revenue
from ManyCam customers monthly over the term of the subscription, which are offered in twelve- and twenty-four-month terms. As a result,
much of the subscription revenue we report in each period is deferred revenue from subscription agreements or other contracts entered
into during previous periods. Consequently, a decline in certain new or renewed agreements in any one quarter will negatively affect our
revenue in future quarters. In addition, we might not be able to immediately adjust our costs and expenses to reflect these reduced revenues.
Accordingly, the effect of significant downturns in user demand for our products and services may not be fully reflected in our results
of operations until future periods. Our subscription model for ManyCam also makes it difficult for us to quickly increase revenue generated
from ManyCam through additional sales in any period, as revenue from new subscribers must be recognized over the term of the subscription.
As a result, you should not rely on the amount of subscription revenue generated in prior quarters as an indication of future results.
Our
business is affected by general economic conditions, including inflation, and uncertainties affecting markets in which we operate, and
economic volatility could adversely impact our business.
Our
overall performance depends in part on worldwide economic and geopolitical conditions. The United States has experienced cyclical downturns
from time to time in which economic activity was impacted by rising inflation, falling demand for a variety of goods and services, restricted
credit, poor liquidity, reduced corporate profitability, volatility in credit and fluctuating interest rates, equity and foreign exchange
markets, bankruptcies and overall uncertainty with respect to the economy. These economic conditions can arise suddenly, and the full
impact of such conditions can remain uncertain. In addition, geopolitical developments, such as existing and potential wars, trade wars
or other conflicts, changes in foreign policy and other events are beyond our control. Any form of civil unrest or other conflict can
increase levels of political and economic unpredictability regionally or globally and has the potential to increase the volatility of
global financial markets. Any of these effects could have a material and adverse impact on our business, financial condition and results
of operations. Sustained levels of high inflation could cause the U.S. Federal Reserve and other central banks to increase interest rates,
which could have the effects of raising the cost of capital and depressing economic growth, either of which, or the combination thereof,
could hurt the financial and operating results of our business and impact our ability to raise capital.
9
We
may need additional capital to execute our business plan. If we are not able to obtain additional financing, it could have a material
adverse effect on our business, results of operations or financial condition.
We
might need to raise additional capital or financing through debt or equity offerings to support our expansion, marketing efforts and
application development programs in the future. For instance, we might require additional capital or financing to:
●
hire and retain talented
employees, including technical employees, executives, and marketing experts;
●
effectuate our long-term
growth strategy and expand our application development programs; and
●
market and advertise our
products and solutions to acquire additional customers.
We
may be unable to obtain future capital or financing on favorable terms or at all. If we cannot obtain additional capital or financing,
we may need to reduce, defer or cancel planned initiatives, marketing or advertising expenses or costs and expenses. The failure to obtain
necessary additional capital or financing on favorable terms, if at all, could have a material adverse effect on our business, results
of operations or financial condition.
We
may make or attempt to make acquisitions in the future, which could require significant management attention, disrupt our business, dilute
our stockholders and significantly harm our business.
As
part of our business strategy, we have made in the past, and intend to make in the future, acquisitions to add specialized employees
and complementary companies, products and technologies. In the future, we may not be able to find suitable acquisition candidates, and
we may not be able to complete acquisitions on favorable terms, if at all. Our previous and future acquisitions may not achieve our goals,
and any future acquisitions we complete could be viewed negatively by customers, advertisers or investors. In addition, if we fail to
successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions
into our company, our business could be seriously harmed. Any integration process may require significant time and resources, and we
may not be able to manage the process successfully. We may not successfully evaluate or use the acquired products, technology and personnel,
or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may also incur unanticipated
liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay
for any acquisition, any of which could negatively impact our business and financial condition. Issuing equity to finance any such acquisitions
would also dilute our existing stockholders. Incurring debt would increase our fixed obligations and could also include covenants or
other restrictions that would impede our ability to manage our operations.
IPM
currently benefits from Newtek’s referral network, and we expect to rely on Newtek’s referral network in the future .
In
connection with the Acquisition, we entered into a referral arrangement with Newtek pursuant to which Newtek will continue to refer potential
clients to us at the same level it provided NTS for a fee. Our referral arrangement with Newtek is terminable by either us or Newtek
at any time. If Newtek does not provide customer referrals to us at the same level it provided NTS, or if Newtek terminates our referral
arrangement, our ability to gain new customers would be materially adversely affected. We paid Newtek and its affiliates $0.3 million for
the year ended December 31, 2025 in connection with the referral arrangement.
Legal
and Regulatory Risks
Customers
could potentially expose us to lawsuits for their lost profits or damages, which could impair our results of operations.
Because
our services are critical to many of our customers’ businesses, any significant disruption in our services could result in lost
profits or other indirect or consequential damages to our customers. Although we generally require our customers to sign agreements that
contain provisions attempting to limit our liability for service outages, a court may not enforce any contractual limitations on our
liability in the event that one of our customers brings a lawsuit against us as the result of a service interruption or other Internet
site or application problems that they may ascribe to us. The outcome of any such lawsuit would depend on the specific facts of the case
and any legal and policy considerations that we may not be able to mitigate. In such cases, we could be liable for substantial damage
awards that may exceed our insurance coverage by unknown but significant amounts, which could materially and adversely impair our business,
financial condition and results of operations.
10
As
a technology service provider to U.S. financial institutions, we are subject to regulation, supervision, and enforcement authority of
numerous governmental and regulatory bodies in the jurisdictions in which we operate, which includes banking regulators.
Because
we are a technology service provider to U.S. financial institutions and host, secure and manage banking software, we are subject to regular
oversight and examination by the FFIEC, which is an inter-agency body of federal banking regulators. The FFIEC has broad discretion in
the implementation, interpretation and enforcement of banking and consumer protection laws. Our failure to comply with these laws, or
our failure to meet the supervisory expectations of the banking regulators, could result in adverse action against us. The regulators
have the power to, among other things, enjoin “unsafe or unsound” practices, require affirmative actions to correct any violation
or practice, issue administrative orders that can be judicially enforced, direct the sale of subsidiaries or other assets, and assess
civil money penalties. Our failure to comply with these laws, or our failure to meet the supervisory expectations of the banking regulators,
could result in adverse action against us, which could have a material adverse impact on our business and results of operations.
Government
regulation is continuously evolving and, depending on its evolution, may adversely affect our business, financial condition and results
of operations.
We are subject to varying degrees of regulation
in each of the jurisdictions in which we provide services. Local laws and regulations, and their interpretation and enforcement, differ
significantly among those jurisdictions. These regulations and laws may cover taxation, privacy, data protection, pricing, content, intellectual
property and proprietary rights, distribution of content, mobile communications, electronic device certification, electronic waste, electronic
contracts and other communications, consumer protection, web services, the provision of online payment services, unencumbered Internet
access to our services, the design and operation of websites and the characteristics and quality of services. These laws can be costly
to comply with, can be a significant diversion to management’s time and effort and can subject us to claims or other remedies, as
well as negative publicity. Many of these laws were adopted prior to the advent of the Internet and related technologies and, as a result,
do not contemplate or address the unique issues that the Internet and related technologies currently produce. Some of the laws that do
reference the Internet and related technologies have been and continue to be interpreted by the courts, but their applicability and scope
remain largely uncertain.
Additionally,
the increasing focus on the risks and strategic importance of AI technologies has already resulted in regulatory restrictions that target
products and services capable of enabling or facilitating AI and may in the future result in additional restrictions impacting some or
all of our product and service offerings. Concerns regarding third-party use of AI for purposes contrary to local governmental interests,
including concerns relating to the misuse of AI applications, models, and solutions, could result in unilateral or multilateral restrictions
on products that can be used for training, refining, and deploying large language models. Such restrictions could limit the ability of
downstream customers and users worldwide to acquire, deploy, and use systems that include our products, software, and services, and negatively
impact our business and financial results.
Risks
Related to Our Intellectual Property
If
we are unable to protect our intellectual property rights, we may be unable to compete with competitors developing similar technologies.
Historically,
our defense of our intellectual property rights has been a significant aspect of our business and has meaningfully contributed to our
results of operations. We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements
and invention assignment agreements with all our employees, consultants, advisors and any third parties who access or contribute to our
proprietary know-how, information, or technology. We also rely on trademark, copyright, patent, trade secret, and domain-name-protection
laws to protect our proprietary rights. We have filed various applications to protect aspects of our intellectual property, and we currently
hold eight patents. In the future we may acquire additional patents or patent portfolios, which could require significant cash expenditures.
However, third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held
by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection
may not be available in every country in which we operate or intend to operate our business.
11
In
any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights. Although
we have taken measures to protect our proprietary rights, others may offer products or concepts that are substantially similar to ours
and compete with our business. If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third
parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic
our service and methods of operations. Any of these events could seriously harm our business.
Intellectual
property infringement claims against us could cause us to incur significant expenses, pay substantial damages or royalties and prevent
us from offering our products and solutions.
Third parties have in the past, and may in the
future, claim that our products and solutions infringe or violate their intellectual property rights. For instance, on March 7, 2025,
Cisco Systems, Inc. and Cisco Technology, Inc. filed a complaint against the Company in the U.S. District Court for the District of Delaware,
alleging that the Company’s ManyCam software has infringed certain patents and seeking damages and injunctive relief and, as of
December 31, 2025, the Company had incurred approximately $0.7 million in expense for the year ended December 31, 2025 in defense of these
claims. Such claims, and any future claims of infringement, could cause us to incur significant expenses and, if successfully asserted
against us, could require that we pay substantial damages and prevent us from using licensed technology that may be fundamental to our
products and solutions. Even if we were to prevail, any litigation regarding intellectual property could be costly and time-consuming
and divert the attention of our management and key personnel from our business operations. We maintain insurance to protect against intellectual
property infringement claims and resulting litigation, but such insurance may not cover or may not be sufficient to cover all potential
claims, liability or expenses. We may also be obligated to indemnify our business partners in any such litigation, which could further
exhaust our resources. Furthermore, as a result of an intellectual property challenge, we may be prevented from offering our products
and solutions unless we enter into royalty, license or other agreements. We may not be able to obtain such agreements at all or on terms
acceptable to us, and as a result, we may be precluded from offering our products and solutions.
Risks
Related to Ownership of Our Common Stock
Our
common stock is historically thinly traded, stockholders may be unable to sell at or near ask prices or at all and the price of our common
stock may be volatile.
Historically,
shares of our common stock have been thinly traded The Nasdaq Capital Market (“Nasdaq”), meaning that the number of persons
interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation
is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts,
stockbrokers, institutional investors and others in the investment community that generate or influence sales volume. As a consequence,
there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned
issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect
on stock price.
However,
during certain periods, we have received, and may continue to receive, a high degree of media coverage that is published or otherwise
disseminated by third parties, including blogs, articles, message boards and social and other media. This may include coverage that is
not attributable to statements made by the Company or our Board. Information provided by third parties may not be reliable or accurate
and could materially impact the trading price of our common stock, which could cause stockholders to lose their investments.
The
market prices and trading volume of our common stock have in the past experienced, and may continue to experience in the future, extreme
volatility, which could cause purchasers of our common stock to incur substantial losses. We believe that the historical volatility and
our historical market prices during such periods reflected market and trading dynamics unrelated to our underlying business, or macro
or industry fundamentals, and we do not know if these dynamics will continue in the future.
Although
our common stock is listed for trading on Nasdaq, a broader or more active public trading market for our common stock may not develop
or be sustained, and the current trading level of our common stock may not be sustained. Due to these conditions, stockholders may be
unable to sell their common stock at or near ask prices or at all if they desire to sell shares of common stock.
The stock markets in general have experienced
substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations
may also adversely affect the trading price of our common stock, especially in light of the macro-economic factors including rising inflation
rates, increased interest rates, bank-specific and broader financial institution liquidity challenges, the Russia-Ukraine conflict, the Israel-Hamas conflict and the ongoing conflict in Iran and the Middle East. In the past, following periods of volatility in the market
price of a company’s securities, stockholders have often instituted class action securities litigation against those companies.
Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly
harm our profitability and reputation.
12
Because
of the limited trading market for our common stock, and because of the possible price volatility, stockholders may not be able to sell
their shares of common stock when you desire to do so. The inability to sell shares in a rapidly declining market may substantially increase
the risk of loss because of such illiquidity and because the price for our common stock may suffer greater declines because of its price
volatility.
The
ownership of our common stock is significantly concentrated in a small number of investors, some of whom are affiliated with our Board
and management, which could prevent stockholders from having input on the course of our operations or otherwise lead to actual or potential
conflicts of interest.
As of March 13, 2026, Jason Katz, our Chairman
of the Board, and our Chief Executive Officer, and our largest stockholder, The J. Crew Delaware Trust B, beneficially owned an aggregate
of approximately 26.5% of our outstanding common stock. The J. Crew Delaware Trust B is a trust formed by Mr. Katz for the benefit of
certain of his family members. Mr. Katz is not a beneficiary of the trust and does not hold voting or dispositive power over the shares
held by the trust.
Mr.
Katz, The J. Crew Delaware Trust B and others that have significant beneficial ownership of our common stock have substantial influence
regarding matters submitted for stockholder approval, including proposals regarding:
●
any merger, consolidation
or sale of all or substantially all of our assets;
●
the election of members
of our Board; and
●
any amendment to our Certificate
of Incorporation, as amended (the “Certificate of Incorporation”).
The
current or increased ownership position of any of these stockholders and/or their respective affiliates could delay, deter or prevent
a change of control or adversely affect the price that investors might be willing to pay in the future for our common stock. In addition,
the interests of these stockholders and/or their respective affiliates may significantly differ from the interests of our other stockholders
and they may vote the common stock they beneficially own in ways with which our other stockholders disagree.
Our
results of operations are volatile and difficult to predict, and our stock price may decline if we fail to meet the expectations of stockholders.
Our
revenue and results of operations could vary significantly from period-to-period and year-to-year and may fail to match our past performance
because of a variety of factors, many of which are outside of our control. Any of these events could cause the market price of our common
stock to fluctuate. Factors that may contribute to the variability of our results of operations include:
●
changes in expectations
as to our future financial performance;
●
announcements by us or
our competitors of significant contracts, acquisitions, strategic partnerships or capital commitments;
●
market acceptance of our
new products and solutions;
●
the amount of advertising
and marketing that is available and spent on customer campaigns;
●
disruptions in the availability
of our applications on third party platforms;
●
actual or perceived violations
of privacy obligations and compromises of customer data;
●
the entrance of new competitors
in our market whether by established companies or the entrance of new companies;
13
●
additions or departures
of key personnel and the cost of attracting and retaining application developers and other software engineers;
●
general market conditions,
including market volatility and the impact of inflation; and
●
developments in connection
with our current patent litigation or future patent litigation.
Given
the rapidly evolving industry in which we operate, our historical results of operations may not be useful in predicting our future results
of operations. In addition, metrics available from third parties regarding our industry and the performance of our products and solutions
may not be indicative of our future financial performance.
Investor
relations activities, nominal “float” and supply and demand factors may affect the price of our common stock.
We
have engaged an investor relations firm to create investor awareness for our Company. These campaigns may include non-deal road shows
and personal, video and telephone conferences with investors and prospective investors in which our business and business practices are
described. We provide compensation to our investor relations firm and may in the future provide compensation to additional investor relations
firms or financial advisory firms, for these services, and pay for newsletters, websites, mailings and email campaigns that are produced
by third parties based upon publicly available information concerning us. We do not intend to review or approve of the content of such
analyst reports or other writings and communications that are based upon analysts’ own research or methods. Investor relations
firms are generally required to disclose when they are compensated for their efforts and the source of such compensation, but whether
such disclosure is made or in compliance with applicable laws is not under our control. In addition, our investors may, from time to
time, take steps to encourage investor awareness through similar activities that may be undertaken at the expense of such investors.
Investor awareness activities may also be suspended or discontinued, which may impact the trading market of our common stock.
The
SEC and the Financial Industry Regulatory Authority enforce various statutes and regulations intended to prevent manipulative or deceptive
devices in connection with the purchase or sale of any security and carefully scrutinize trading patterns and company news and other
communications for false or misleading information, particularly in cases where the hallmarks of “pump and dump” activities
may exist, such as rapid share price increases or decreases. We and our stockholders may be subjected to enhanced regulatory scrutiny
due to the fact that our affiliates hold a majority of our outstanding common stock and we have a limited number of shares of common
stock that are publicly available for resale.
The
Supreme Court of the United States has stated that manipulative action is a term of art connoting intentional or willful conduct designed
to deceive or defraud investors by controlling or artificially affecting the price of securities. Often times, manipulation is associated
by regulators with forces that upset the supply and demand factors that would normally determine trading prices. Securities regulators
have often cited thinly-traded markets, small numbers of holders and awareness campaigns as components of their claims of price manipulation
and other violations of law when combined with manipulative trading, such as wash sales, matched orders or other manipulative trading
timed to coincide with false or touting press releases. Our activities or the activities of third parties, or the small number of potential
sellers or small percentage of stock in our public float, or determinations by purchasers or holders as to when or under what circumstances
or at what prices they may be willing to buy or sell stock, could artificially impact (or could be claimed by regulators to have affected)
the normal supply and demand factors that determine the price of our common stock.
If
we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our securities.
Our
common stock began trading on Nasdaq on August 3, 2021. However, our common stock may not continue to be listed on Nasdaq in the future.
In order to maintain our listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards,
including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share
price, and certain corporate governance requirements. We may not be able to comply with the applicable listing standards, and Nasdaq
could delist our common stock as a result.
If
our common stock is delisted from Nasdaq, we may be unable to list our common stock on another national securities exchange. If our common
stock is delisted by Nasdaq, our common stock would likely trade on the OTCQB where an investor may find it more difficult to sell our
shares or obtain accurate quotations as to the market value of our common stock.
14
Shares
issuable upon conversion of the Series A Preferred Stock, could depress our stock price.
As partial consideration for the Acquisition,
we issued Newtek 4,000,000 shares of our Series A Non-Voting Common Equivalent Stock, par value $0.001 per share (the “Series A
Preferred Stock”). As of March 13, 2026, Newtek owned approximately 30.6% of our issued and outstanding common stock or common-equivalent
equity (on an as-converted and fully-diluted basis), calculated based on the number of shares of our common stock outstanding as of March
13, 2026. As a holder of our Series A Preferred Stock, Newtek does not have voting rights, except with respect to certain protective matters,
such as amendments to the Company’s Certificate of Incorporation or the Series A Preferred Stock Certificate of Designations (the
“Certificate of Designations”) that significantly and adversely affect the preferences, rights, privileges or powers of the
Series A Preferred Stock.
The
Series A Preferred Stock is convertible into common stock only upon certain qualifying transfers to third parties. In addition, we entered
into a Registration Rights Agreement with Newtek at the closing of the Acquisition (the “Registration Rights Agreement”),
pursuant to which, among other things, we are obligated to use our reasonable best efforts to prepare and file a registration statement
registering the resale the shares of our common stock issuable upon conversion of the Series A Preferred Stock. Once registered, the
shares of common stock issuable upon conversion of the Series A Preferred Stock held by Newtek generally will not require further registration
under the Securities Act, provided , however, that to the extent that Newtek is deemed to be our affiliate for purposes of the
Securities Act, its sales of common stock issuable upon conversion of the Series A Preferred Stock will be subject to the resale restrictions
of Rule 144 under the Securities Act.
Any
sale by Newtek of its shares of Series A Preferred Stock (or the perception that any such a sale may occur), coupled with the increase
in the outstanding number of shares of our common stock following the conversion of the Series A Preferred Stock upon transfer, could
have a dilutive effect to our existing stockholders and may affect the market for, and the market price of, shares of common stock in
an adverse manner.