QUEST PATENT RESEARCH CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and acting chief financial officer, who is the same person and our sole full-time employee. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and acting chief financial officer concluded that, due to our limited internal audit function and our very limited staff, our disclosure controls were not effective as of December 31, 2024, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the chief executive officer and acting chief financial officer, as appropriate to allow timely decisions regarding disclosure. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2024, management identified material weaknesses related to (i) our internal audit functions (ii) inadequate levels of review of the financial statements and (iii) a lack of segregation of duties within accounting functions. Therefore, our internal controls over financial reporting were not effective as of December 31, 2024. Management has determined that our internal controls contain material weaknesses due to the absence of segregation of duties, as well as lack of qualified accounting personnel and excessive reliance on third-party consultants for accounting, financial reporting and related activities. The material weaknesses were a root cause of our need to restate our financial statements for the year ended December 31, 2023. The lack of any separation of duties, with the same person, who is our only full time employee, serving as both chief executive officer and acting chief financial officer, and who does not have an accounting background, makes it unlikely that we will be able to implement effective internal controls over financial reporting in the near future. 30 Due to our size and nature, segregation of all conflicting duties is not possible. However, to the extent possible, we plan to implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals if and when we have sufficient income to enable us to hire such individuals, and we cannot give any assurance that we will be able to hire such personnel. Since we became engaged in the intellectual property management business in 2008, we have not had the financial resources to develop or implement systems that would provide us with the necessary information on a timely basis so as to be able to implement financial controls. Our financial condition makes it difficult for us to implement a system of internal controls over financial reporting. Unless we generate significantly greater revenues on an ongoing basis and employ accounting personnel, it is doubtful that we will be able implement any system which provides us with any degree of internal controls over financial reporting. A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Changes in Internal Control over Financial Reporting During the period ended December 31, 2024, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. 31 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table presents information with respect to our officers and directors: Name Age Position(s) Jon C. Scahill 48 Chief executive officer, president, acting chief financial officer, secretary and director Timothy J. Scahill 57 Chief technology officer and director Dr. William Ryall Carroll 49 Director Ryan T. Logue 44 Director Our board of directors has three classes of directors – Class I directors, Class II directors and Class III directors. On July 27, 2022, the Company held its 2022 annual meeting of stockholders. At the meeting, the stockholders voted on the election of two Class I directors, one Class II director and one Class III director. Jon C. Scahill, a Class I director, has been president and chief executive officer since January 2014 and a director since 2007. He was appointed secretary in April 2014. He also served as president and chief operating officer from May 2007 to December 2013. From December 2006 to May 2007, Mr. Scahill was founder and managing director of the Urban-Rigney Group, LLC, a private consultancy specializing in new business/new venture development, operations optimization, and strategic analysis. Prior to launching his consultancy business, Mr. Scahill held numerous positions in sales and marketing, technical management, and product development in the consumer products/flexible packaging arena. Mr. Scahill holds a B.S. in chemical engineering from the University of Rochester, an MBA in finance, strategy and operations from Rochester’s Simon Graduate School of Business and a JD from Pace Law School. Mr. Scahill is admitted to practice in New York, Florida and the District of Columbia, and he is a registered patent attorney admitted to practice before the United States Patent and Trademark Office. Timothy J. Scahill, a Class II director, has a director since October 2014 and our chief technology officer since 2007. As chief technology officer, Mr. Scahill is responsible for our cybersecurity protection. Mr. Scahill is also currently a managing partner of Managed Services Team LLC, an IT services provider. Prior to Managed Services Team, he was president of Layer 8 Group, Inc. from August 2005 to December 2012, at which time Layer 8 merged with Structured Technologies Inc. to form Managed Services Team LLC. In his roles he has taken the responsibility for business strategy, acquisition, execution, as well as financial management. His entrepreneurial acumen and proven record of successful management with sole discretionary responsibility, demonstrate the scope of his capability and his value to delivering results. He serves on the boards of the Upstate New York Technology Council, is an investor in Greater Rochester Enterprise, Pariemus Rochester and also serves on the Corporate Advisory Board for Habitat for Humanity. He is a member of Greater Rochester Enterprise and CEO Roundtable Chair. Dr. William Ryall Carroll, a Class III director, has been a director since October 2014. Dr. Carroll has been associate professor and chairman of the marketing department at St. John’s University College of Business since July 2014. From September 2008 until June 2014, Dr. Carroll was an assistant professor in the marketing department of St. John’s University College of Business. Dr. Carroll is founder, chief executive officer and owner of Raiserve Inc., a web-based platform for monetizing non-profit programmatic work in the area of service formed in October 2014. Dr. Carroll’s research focuses on consumer behavior and behavioral decision theory. Dr. Carroll’s work has been published in top academic journals including the Journal of Advertising, Marketing Letters, as well in books such as Psycholinguistic Phenomena in Marketing Communications. In addition to his research Dr. Carroll has taught Marketing at the executive, graduate and undergraduate level across in the United States, Europe and Asia. Prior to pursuing his academic career, Dr. Carroll held various marketing positions at NOP Worldwide Marketing Research Company and Ralston Purina Company. Dr. Carroll earned his BA in Economics from the University of Rochester, his MS in Marketing Research from the University of Texas in Arlington, and his PhD from City University of New York – Baruch College. 32 Ryan T. Logue, a Class I director, is an investment advisory representative Lincoln Investment, a position he has held since 2019. Prior to joining Lincoln Investment, he spent 16 years with Morgan Stanley in the private wealth management department. Mr. Logue has spent the majority of his career focused on investing in both public and private opportunities department. Mr. Logue graduated with a BA from Colgate University and an MBA from Columbia University and has previously served on the board of the Columbia Alumni Association of Fairfield County. Timothy J. Scahill and Jon C. Scahill are first cousins. Director Independence Dr. Carroll and Mr. Logue are “independent” directors based on the definition of independence in the listing standards of the NYSE. Code of Ethics We have not yet adopted a code of ethics that applies to our principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions, since we have been focusing our efforts on developing our business. We expect to adopt a code as we develop our business. Committees of the Board of Directors We do not have any committees of our board of directors. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires executive officers and directors of issuers whose securities are registered pursuant to the Securities Exchange Act and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of the our common stock and other equity securities, on Form 3, 4 and 5 respectively. Because our common stock is not registered pursuant to the Securities Exchange Act, our officers, directors and 10% stockholders are not required to make such filings. ITEM 11. EXECUTIVE COMPENSATION The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during the years ended December 31, 2024 and 2023, earned by or paid to our executive officers. Name & Principal Position Year Salary Bonus Awards Stock Awards Options/ Warrant Awards Non-Equity Plan Compensation Nonqualified Deferred Earnings All Other Compensation (1) Total Jon C. Scahill, CEO and President 2024 $ 600,000 $ — $ — $ — $ — $ — $ 69,000 $ 669,000 2023 $ 600,000 $ — $ — $ — $ — $ — $ 66,000 $ 666,000 Timothy J. Scahill 2024 $ 60,000 $ — $ — $ — $ — $ — $ 6,900 $ 66,900 Chief Technology Officer 2023 $ 60,000 $ — $ — $ — $ — $ — $ 6,600 $ 66,600 (1) Represents the payments made by the Company under the SEP IRA. 33 Employment Agreements Pursuant to the restated employment agreement, dated November 30, 2014, we agreed to employ Jon C. Scahill as president and chief executive officer for a term of three years, commencing January 1, 2014, and continuing on a year-to-year basis unless terminated by either party on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension. The agreement provides for an annual salary of $252,000, which may be increased, but not decreased, by the board or the compensation committee. In March 2023, the board of directors increased Mr. Scahill’s annual salary to $600,000, effective January 1, 2023. Mr. Scahill is entitled to a bonus if we meet or exceed performance criteria established by the compensation committee, or by the board in the absence of a compensation committee. In August 2016, the board of directors approved annual bonus compensation to Mr. Scahill equal to 30% of the amount by which our consolidated income before income taxes exceeds $500,000, but, if we are subject to the limitation on deductibility of executive compensation pursuant to Section 162(m) of the Internal Revenue Code, the bonus cannot exceed the amount which would be deductible pursuant to Section 162(m). Mr. Scahill is also eligible to participate in any executive incentive plans which we may adopt. Pursuant to the agreement, we issued to Mr. Scahill warrants to purchase 600,000 shares, representing the warrants that had been previously covered in his prior employment agreement, but which had never been issued, and we issued to Mr. Scahill a restricted stock grant for 300,000 shares which vested on January 15, 2015. In the event that we terminate Mr. Scahill’s employment other than for cause or as a result of his death or disability, we will pay him severance equal to his salary for the balance of the term and, if he received a bonus for the previous year, an amount equal to that bonus, as well as continuation of his insurance benefits. Mr. Scahill also waived accrued compensation of $1,167,705, representing his accrued salary for periods prior to January 1, 2014. The restated employment agreement also includes mutual general releases between Mr. Scahill and us. In March 2020, the Company adopted a SEP IRA plan for its employees. Mr. Scahill is our only employee covered by the plan. Pension Benefits In March 2020, we adopted a SEP IRA plan for our employees pursuant to which we deposit into a SEP IRA account of each of our participating employees a percentage of the employee’s compensation, subject to statutory limitations on the amount of the contribution all as set forth in the IRS Form 5305-SEP presented to and reviewed by the directors of this Corporation. For the year ending December 31, 2024 the percentage was set at 12%. Our Chief Executive Officer and Chief Technology Officer, who are our only employees, are covered by the plan. 2017 Equity Incentive Plan On November 10, 2017, the board of directors adopted the 2017 Equity Incentive Plan (the “Plan”) pursuant to which 1,500,000 shares of common stock may be issued. In February 2021, the board amended the Plan to increase the number of shares subject to the plan to 5,000,000. The plan provides for the grant of non-qualified options, stock grants and other equity-based incentives to employees, including officers, directors and consultants. This summary of the Plan is qualified in its entirety by reference to the plan, a copy of which is filed as an exhibit to this annual report. The Company’s chairman of the board holds outstanding options to purchase 600,000 shares which options expire February 22, 2031. An option to purchase 200,000 shares of common stock at an exercise price of $1.00 per share is currently exercisable. An options to purchase 200,000 shares of common stock at $3.00 per share becomes exercisable on the first day on which we file with the SEC a Form 10-K or Form 10-Q which reports stockholders’ equity of at least $5,000,000, and an options to purchase 200,000 shares of common stock at an exercise price of $5.00 per share becomes exercisable on the date on which our common stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange. We did not recognize an option expense with respect to these options during the year ended December 31, 2024 or 2023. 34 Pursuant to consulting agreements, we granted options to purchase a total of 900,000 shares of common stock which expire on February 21, 2031. Option to purchase 300,000 shares of common stock at $1.00 per share, 100,000 shares at $3.00 per share and 100,000 shares at $5.00 per share are currently exercisable. Option to purchase 200,000 shares at an exercise price of $3.00 per share, become exercisable on the first day on which we file with the SEC a Form 10-K or Form 10-Q which reports stockholders’ equity of at least $5,000,000 and options to purchase 200,000 shares at an exercise price of $5.00 per share become exercisable on the date on which the common stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange. The Company recognized option expense of approximately $6,000 and $49,000 for the years ended December 31, 2024 and 2023, respectively, with respect to these options. Outstanding Equity Awards at Fiscal Year-End The following table sets forth information as to the outstanding equity awards granted to and held by the officers named in the Summary Compensation Table as of December 31, 2024. Option awards Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Equity incentive plan awards: Number pf securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Jon Scahill 200,000 - - $ 1.00 2/22/2031 200,000 (1) 3.00 2/22/2031 200,000 (2) 5.00 2/22/2031 (1) This option becomes exercisable on the first day on which we file a Form 10-K or Form 10-Q which reflects stockholders’ equity of at least $5,000,000. (2) This option becomes exercisable on the date on which the common stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange. Directors’ Compensation We do not have any agreements or formal plan for compensating our directors for their service in their capacity as directors, although our board has, and may in the future, award stock grants or options to purchase shares of common stock to our directors. None of our directors received compensation during 2024. 35 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table provides information as to shares of common stock beneficially owned as of March 15, 2025 by: ● Each director; ● Each current officer named in the summary compensation table; ● Each person owning of record or known by us, based on information provided to us by the persons named below, at least 5% of our common stock; and ● All directors and officers as a group. For purposes of the following table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or sole or shared investment power with respect to a security, or any combination thereof, and the right to acquire such power (for example, through the exercise of warrants granted by us) within 60 days of March 15, 2025. Name and Address (1) of Beneficial Owner Amount and Nature of Beneficial Ownership % of Class Jon C. Scahill (2) 1,600,000 28.9 % Andrew C. Fitton (3) 1,174,074 22.0 % Intelligent Partners, LLC (4) 500,000 8.6 % Michael R. Carper (5) 788,889 14.8 % Dr. William Ryall Carroll 154,846 2.9 % Timothy J. Scahill 151,050 2.8 % Ryan T. Logue 54,976 1.0 % All officers and directors as a group (four individuals) 1,960,873 35.4 % (1) The address of Jon C. Scahill, Dr. Carroll, Timothy J. Scahill and Ryan T. Logue is c/o Quest Patent Research Corporation, 411 Theodore Fremd Ave., Suite 206S, Rye, New York 10580-1411. (2) Represents (a) 1,400,000 shares owned by Mr. Scahill and (b) 200,000 shares issuable upon exercise of options held by Mr. Scahill. (3) Represents (a) 674,074 shares owned by Mr. Fitton and (b) 500,000 shares issuable upon exercise of an option held by Intelligent Partners. The address for Mr. Fitton and Intelligent Partners is 300 Bowie St., Apt. 2803 Austin, TX 78703. (4) Represents 500,000 shares of common stock issuable upon exercise of options held by Intelligent Partners. Andrew C. Fitton and Michael R. Carper, as the members of Intelligent Partners, have the joint right to vote and dispose of the shares owned by Intelligent Partners. The address for Mr. Carper is 13218 Tamayo Drive Austin, TX 78729. (5) Represents (a) 288,889 shares of common stock owned by Mr. Carper and (b) 500,000 shares of common stock issuable upon exercise of an option held by Intelligent Partners. 36 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Related Transactions Reference is made to the discussion of our agreements with Intelligent Partners, Mr. Fitton and Mr. Carper under “Item 1. Business – Agreements with Intelligent Partners.” During 2023, we contracted with a law firm more than 10 percent owned by the chief executive officer. The firm is engaged as counsel in connection with general corporate matters, diligence and maintenance of our patent portfolio. In connection with the engagement, we recorded sales, general and administrative expenses of approximately $131,000 and $50,000 for the years ended December 31, 2024 and 2023, respectively. During 2024 and 2023, we contracted with a law firm more than 10% owned, but not controlled, by the father-in-law of the chief executive officer. The firm is engaged on a contingent fee basis and serves as escrow agent in connection with monetization of our patents in matters where the firm is serving as counsel to us. In connection with the engagement, we recorded litigation and licensing expenses of approximately $1,163,000 and $5,316,000 for the years ended December 31, 2024 and 2023, respectively. Since the services are on a contingent fee basis, no fees are incurred unless there is a recovery. In prior periods, we engaged a firm at which the father-in-law of the chief executive was formerly a partner. Because his interest in the prior firm was less than 10%, the prior firm was not considered a related party in prior periods. Director Independence Dr. Carroll and Mr. Logue are “independent” directors based on the definition of independence in the listing standards of the NYSE. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table sets forth the fees billed by our independent accountants, Rosenberg Rich Baker Berman P.A. (“RRBB”) for 2024 and 2023 for the categories of services indicated. Fiscal Year Ended December 31, 2024 2023 Audit fees – RRBB $ 100,000 $ 100,000 Audit – related fees — — Tax fees — — Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements and the review of our quarterly financial statements. Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Since we do not have an audit committee, the pre-approval is made by the board of directors. Our board approved all services that our independent accountants provided to us in the past two fiscal years. 38 ITEM 15. EXHIBITS Exhibit No. Description 3.1 Amended and Restated Articles of Incorporation of the Company.(5) 3.2 Bylaws of the Company. (3) 10.1 Restated Employment Agreement dated as of November 30, 2014 between the Company and Jon C. Scahill. (1) 10.2 Restricted Stock Grant dated October 30, 2014 between the Company and Jon C. Scahill. (1) 10.3 Form of warrant issued to former officers and directors. (1) 10.4 Form of warrant issued to Mr. Jon C. Scahill. (1) 10.5 Indemnification agreement, dated December 8, 2014 between the Company and Jon C. Scahill. (4) 10.6 Indemnification agreement, dated December 8, 2014 between the Company and Timothy J. Scahill. (4) 10.7 Indemnification agreement, dated December 8, 2014 between the Company and Dr. William Ryall Carroll. (4) 10.8 Indemnification agreement, dated February 19, 2021 between the Company and Ryan T. Logue (10) 10.9 Patent Sale Agreement, effective July 8, 2015 between Intellectual Ventures Assets 16 LLC and the Company.(2) 10.10 2017 Equity Incentive Plan(6) 10.11 Purchase Agreement dated February 19, 2021 among the Company and QPRC Finance LLC (7) † 10.12 Ex. A to Purchase Agreement – Security Agreement dated February 19, 2021 among the Company and QPRC Finance LLC. (7)† 10.13 Ex. B to Purchase Agreement – Subsidiary Continuing Guaranty Agreement dated February 19, 2021 among Quest Licensing Corporation, Mariner IC Inc., Semcon IP Inc., IC Kinetics Inc., Quest NetTech Corporation, CXT Systems, Inc., M-Red Inc., Audio Messaging Inc. and QPRC Finance LLC. (7) 10.14 Ex. C to Purchase Agreement – Subsidiary Patent Proceeds Security Agreement dated February 19, 2021 among the Company, Quest Licensing Corporation, Mariner IC Inc., Semcon IP Inc., IC Kinetics Inc., Quest NetTech Corporation, CXT Systems, Inc., M-Red Inc., Audio Messaging Inc. and QPRC Finance LLC. (7) 10.15 Ex. D to Purchase Agreement – Warrant Issuance Agreement dated February 19, 2021 among the Company and QPRC Finance LLC. (7) 10.16 Ex. E to Purchase Agreement – Board Observation Rights Agreement dated February 19, 2021 among the Company and QPRC Finance LLC. (7) 10.17 Registration Rights Agreement – dated February 19, 2021 among the Company and QPRC Finance LLC. (7) 10.18 Form of Warrant – dated February 19, 2021 among the Company and QPRC Finance LLC (7) 10.19 Restructure Agreement dated February 19, 2021 among the Company, Quest Licensing Corporation, Mariner IC Inc., Semcon IP Inc., IC Kinetics Inc., Quest NetTech Corporation, CXT Systems, Inc., M-Red Inc., Audio Messaging Inc. Intelligent Partners LLC, Andrew Fitton and Michael Carper. (7) 10.20 Ex. A to Restructure Agreement - Stock Purchase Agreement dated February 19, 2021 among the Company, Intelligent Partners LLC, Andrew Fitton and Michael Carper. (7) 10.21 Ex. B to Restructure Agreement - Option Grant dated February 19, 2021 among the Company and Intelligent Partners LLC. (7) 10.22 Ex. C to Restructure Agreement - Amended and Restated Pledge Agreement dated February 19, 2021 among the Company and Intelligent Partners LLC. (7) 10.23 Ex. D to Restructure Agreement - Amended and Restated Registration Rights Agreement dated February 19, 2021 among the Company, Intelligent Partners LLC, Andrew Fitton and Michael Carper. (7) 10.24 Ex. E to Restructure Agreement - Board Observation Agreement dated February 19, 2021 among the Company and Intelligent Partners LLC. (7) 10.25 Ex. F to Restructure Agreement - Amended and Restated MPA-CP dated February 19, 2021 among the Company, Quest Licensing Corporation, Mariner IC Inc., Semcon IP Inc., IC Kinetics Inc., Quest NetTech Corporation and Intelligent Partners LLC. (7) 10.26 Ex. G to Restructure Agreement - Amended and Restated MPA-CXT dated February 19, 2021 among CXT Systems, Inc. and Intelligent Partners LLC. (7) 39 10.27 Ex. H to Restructure Agreement - Monetization Proceeds Agreement dated February 19, 2021 among M-RED Inc. and Intelligent Partners LLC. (7) 10.28 Ex. I to Restructure Agreement - Monetization Proceeds Agreement dated February 19, 2021 among Audio Messaging Inc. and Intelligent Partners LLC. (7) 10.29 Ex. J to Restructure Agreement - Amended and Restated 2015 Patent Proceeds Security Agreement dated February 19, 2021 among the Company, Quest Licensing Corporation, Mariner IC Inc., Semcon IP Inc., IC Kinetics Inc., Quest NetTech Corporation, CXT Systems, Inc., M-Red Inc., Audio Messaging Inc. and Intelligent Partners LLC. (7) 10.30 Ex. K to Restructure Agreement - MPA-NA dated February 19, 2021 among the Company and Intelligent Partners LLC. (7) 10.31 Ex. L to Restructure Agreement - MPA-NA Security Interest Agreement dated February 19, 2021 among the Company and Intelligent Partners LLC. (7) 10.32 Form of Consulting Agreement (8) 10.33 Form of Restricted Stock Agreement (8) 10.34 Form of Option Agreement (8) 10.35 Purchase Agreement dated March 12, 2023 among the Company and QPRC Finance III LLC (9) † 10.36 Amended and Restated Prepaid Forward Purchase Agreement among the Company, certain subsidiaries and QPRC Finance LLC (11) 31.1 Certification of Chief Executive Officer and Acting Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(11). 32.1 Section 1350 Certification of the Chief Executive Officer and Acting Chief Financial Officer.(11). 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (1) Incorporated by reference to the Form 10-K for the year ended December 31, 2012, which was filed by the Company on December 15, 2014. (2) Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on October 28, 2015 and incorporated herein by reference. (3) Filed as an exhibit to the Company’s Form 10-K, for the year ended December 31, 2013, which was filed with the SEC on April 10, 2015. (4) Filed as exhibit to Amendment No. 1 to the Company’s registration statement on Form S-1, which was filed with the SEC on February 3, 2016, and incorporated herein by reference. (5) Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on January 26, 2016 and incorporated herein by reference. (6) Incorporated by reference to the Form 10-K for the year ended December 31, 2017, which was filed by the Company on April 2, 2018. (7) Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on February 24, 2021 and incorporated herein by reference. (8) Incorporated by reference to the Form 10-K for the year ended December 31, 2020, which was filed by the Company on April 15, 2021. (9) Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on March 16, 2023 and incorporated herein by reference. (10) Incorporated by reference to the Form 10-K for the year ended December 31, 2022 which was filed on March 31, 2023. (11) Filed herewith. † Certain confidential information has been deleted from this Exhibit. ITEM 16. FORM 10-K SUMMARY Not applicable. 40 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: March 26, 2025 QUEST PATENT RESEARCH CORPORATION By: /s/ Jon C. Scahill Jon C. Scahill Chief Executive Officer and Acting Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes Jon C. Scahill as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Signature Title Date /s/ Jon C. Scahill Director, Chief Executive Officer, March 26, 2025 Jon C. Scahill Acting Chief Financial Officer, and President (Principal Executive, Financial and Accounting Officer) /s/ Timothy J. Scahill Director March 26, 2025 Timothy J. Scahill /s/ Dr. William Ryall Carroll Director March 26, 2025 Dr. William Ryall Carroll /s/ Ryan T. Logue Director March 26, 2025 Ryan T. Logue 41 QUEST PATENT RESEARCH CORPORATION DECEMBER 31, 2024 Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm ( Rosenberg Rich Baker Berman P.A . - PCAOB ID: 89 ) F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-3 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 F-4 Consolidated Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2024 and 2023 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 F-6 Notes to Consolidated Financial Statements F-7 F- 1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Quest Patent Research Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Quest Patent Research Corporation and its subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income, consolidated statement of changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We determined that there were no critical audit matters. /s/ Rosenberg Rich Baker Berman, P.A. We have served as the Company’s auditor since 2021. Somerset, New Jersey March 26, 2025 F- 2 QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2024 2023 ASSETS Current assets Cash and cash equivalents $ 482,023 $ 563,484 Accounts receivable, net of allowance for credit losses of $ 0 and $ 0 , respectively 8,251 3,015,295 Other current assets 12,011 28,121 Total current assets 502,285 3,606,900 Patents, net of accumulated amortization of $ 3,048,750 and $ 2,412,397 , respectively 3,038,250 3,674,603 Total assets $ 3,540,535 $ 7,281,503 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts payable and accrued liabilities ($ 11,041 and $ 1,378,154 due to related parties, respectively) 156,033 1,674,690 Loans payable 138,000 138,000 Funding liability 7,634,381 7,325,502 Loan payable - related party 2,796,500 2,796,500 Warrant liability 117,130 281,809 Accrued interest 1,196,317 1,096,985 Total current liabilities 12,038,361 13,313,486 Non-current liabilities Loan payable – SBA 150,000 150,000 Purchase price of patents 53,665 53,665 Total liabilities 12,242,026 13,517,151 Commitments and contingencies (Note 11) Stockholders’ deficit: Preferred stock, par value $ 0.00003 per share - authorized 10,000,000 shares - no shares issued and outstanding — — Common stock, par value $ 0.00003 per share; authorized 30,000,000 at December 31, 2024 and 2023; 5,331,973 shares issued and outstanding at December 31, 2024 and 2023 160 160 Additional paid-in capital 17,680,793 17,674,985 Accumulated deficit ( 26,382,672 ) ( 23,911,021 ) Total Quest Patent Research Corporation stockholders’ deficit ( 8,701,719 ) ( 6,235,876 ) Non-controlling interest in subsidiary 228 228 Total stockholders’ deficit ( 8,701,491 ) ( 6,235,648 ) Total liabilities and stockholders’ deficit $ 3,540,535 $ 7,281,503 See the accompanying notes to the consolidated financial statements. F- 3 QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2024 2023 Revenues Patent licensing fees $ 2,795,000 $ 13,152,500 Cost of revenue Litigation and licensing expenses 1,844,089 6,905,705 Gross margin 950,911 6,246,795 Operating expenses Selling, general and administrative expenses 2,797,380 2,740,554 Total operating expenses 2,797,380 2,740,554 (Loss) income from operations ( 1,846,469 ) 3,506,241 Other income (expense) Change in fair market value of warrant liability 164,679 ( 136,381 ) Interest expense ( 689,861 ) ( 1,061,387 ) Total other income (expense) ( 525,182 ) ( 1,197,768 ) (Loss) income before income tax ( 2,371,651 ) 2,308,473 Income tax expense ( 100,000 ) ( 30,000 ) Net (loss) income $ ( 2,471,651 ) $ 2,278,473 (Loss) income per share - basic and diluted $ ( 0.46 ) $ 0.43 Weighted average shares outstanding - basic and diluted 5,331,973 5,331,973 See the accompanying notes to the consolidated financial statements. F- 4 QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT Additional Non- controlling Total Common Stock Paid-In Accumulated Interest in Stockholders’ Shares Amount Capital Deficit Subsidiaries Deficit Balances as of December 31, 2022 5,331,973 $ 160 $ 17,626,279 $ ( 26,189,494 ) $ 228 $ ( 8,562,827 ) Stock-based compensation — — 48,706 — — 48,706 Net income — — — 2,278,473 — 2,278,473 Balances as of December 31, 2023 5,331,973 160 17,674,985 ( 23,911,021 ) 228 ( 6,235,648 ) Stock-based compensation — — 5,808 — — 5,808 Net loss — — — ( 2,471,651 ) — ( 2,471,651 ) Balances as of December 31, 2024 5,331,973 $ 160 $ 17,680,793 $ ( 26,382,672 ) $ 228 $ ( 8,701,491 ) See the accompanying notes to the consolidated financial statements. F- 5 QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2024 2023 Cash flows from operating activities: Net (loss) income $ ( 2,471,651 ) $ 2,278,473 Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: Change in fair market value of warrant liability ( 164,679 ) 136,381 Stock-based compensation 5,808 48,706 Amortization of intangible assets 636,353 786,552 Change in operating assets and liabilities: Accounts receivable 3,007,044 ( 3,015,295 ) Accrued interest 99,337 192,415 Other current assets 16,110 ( 22,800 ) Accounts payable and accrued liabilities ( 1,518,662 ) 1,526,153 Net cash (used in) provided by operating activities ( 390,340 ) 1,930,585 Cash flows from investing activities: Purchase of intangible assets — ( 3,330,000 ) Net cash used in investing activities — ( 3,330,000 ) Cash flows from financing activities: Proceeds from funding liability 1,834,381 6,000,000 Payment of funding liability ( 1,525,502 ) ( 4,127,702 ) Net cash provided by financing activities 308,879 1,872,298 Net (decrease) increase in cash and cash equivalents ( 81,461 ) 472,883 Cash and cash equivalents at beginning of year 563,484 90,601 Cash and cash equivalents at end of year $ 482,023 $ 563,484 Non-cash investing and financing activities: Interest added to principal $ 5,640 $ 5,625 Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes $ 100,000 $ 30,000 Interest $ 486,320 $ 969,930 F- 6 QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS The Company is a Delaware corporation, incorporated on July 17, 1987 and has been engaged in the intellectual property monetization business since 2008. As used herein, “we”, “us”, “our”, the “Company” refer to Quest Patent Research Corporation and its wholly and majority-owned and controlled operating subsidiaries unless the context indicates otherwise. All intellectual property acquisition, development, licensing and enforcement activities are conducted by the Company’s wholly and majority-owned and controlled operating subsidiaries. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Financial Statement Presentation The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries, a number of which are inactive, as of December 31, 2024 and 2023. The consolidated financial statements include the accounts and operations of: Quest Patent Research Corporation (“The Company”) Digital IP Advisors Inc. (“DIPA”) (wholly owned) (formerly Quest Licensing Corporation (NY)) (inactive) Quest Licensing Corporation (DE) (“QLC”) (wholly owned) (inactive) Quest Packaging Solutions Corporation ( 90 % owned) (inactive) Quest Nettech Corporation (“NetTech”) ( 65 % owned) (inactive) Semcon IP, Inc. (“Semcon”) (wholly owned) (inactive) Mariner IC, Inc. (“Mariner”) (wholly owned) (inactive) IC Kinetics, Inc. (“IC”) (wholly owned) (inactive) CXT Systems, Inc. (“CXT”) (wholly owned) (inactive) Photonic Imaging Solutions Inc. (“PIS”) (wholly owned) (inactive) M-Red Inc. (“M-Red”) (wholly owned) (inactive) Audio Messaging Inc. (“AMI”) (wholly owned) (inactive) Peregrin Licensing LLC (“PLL”) (wholly owned) (inactive) Taasera Licensing LLC (“TLL”) (wholly owned) Soundstreak Texas LLC (“STX”) (wholly owned) (inactive) Multimodal Media LLC (“MML”) (wholly owned) LS Cloud Storage Technologies, LLC (“LSC”) (wholly owned) (inactive) Tyche Licensing LLC (“Tyche”) (wholly owned) (inactive) Deepwell IP LLC (“DIP”) (wholly owned) (inactive) EDI Licensing LLC (“EDI”) (wholly owned) Koyo Licensing LLC (“Koyo”) (wholly owned) Harbor Island Dynamic LLC (“HID”) (wholly owned) Flash Uplink LLC (“FUL”) (wholly owned) MR Licensing LLC (“MRL”) (wholly owned) Significant intercompany transactions and balances have been eliminated in consolidation. The non-controlling interests are presented in the audited consolidated balance sheets, separately from equity attributable to the shareholders of the Company. During the years ended December 31, 2024 and 2023, none of the Company’s net income or loss was attributable to non-controlling interests. F- 7 Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturity dates of three months or less when purchased, to be cash equivalents. The Company had no cash equivalents as of December 31, 2024 and 2023. Accounts Receivable Accounts receivable, which generally relate to licensed sales, are presented on the balance sheet net of estimated uncollectible amounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful. The Company did not record an allowance for credit losses at December 31, 2024 and 2023. Intangible Assets Intangible assets consist of patents which are amortized using the straight-line method over their estimated useful lives or statutory lives whichever is shorter and are reviewed for impairment upon any triggering event that may give rise to the assets ultimate recoverability as prescribed under the guidance related to impairment of long-lived assets. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. Patents include the cost of patents or patent rights (collectively “patents”) acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are allocated equally across the patents in force at the time of acquisition. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years . Certain patent application and prosecution costs incurred to secure additional patent claims that, based on management’s estimates, are deemed to be recoverable, are capitalized and amortized over the remaining estimated economic useful life of the related patent portfolio. Impairment of Long-Lived Assets Long-lived assets, including intangible assets with a finite life, are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. In the event that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is recorded. There were no impairments of long-lived assets for the year ended December 31, 2024 and 2023. Warrant Liability The Company reflects a warrant liability with respect to warrants for which the number of shares underlying the warrants is not fixed until the date of the initial exercise. The amount of the liability is determined at the end of each fiscal period and the period-to-period change in the amount of warrant liability is reflected as a gain or loss in warrant liability and is included under other income (expense) in the accompanying consolidated statements of operations. F- 8 Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is used which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 5 for information about our warrant liability. The fair value hierarchy based on the three levels of inputs that may be used to measure fair value are as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The carrying value reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and short-term borrowings approximate fair value due to the short-term nature of these items. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. The fair value of warrant liabilities are classified as Level 3 in the fair value hierarchy. Commitments and Contingencies In connection with the investment in certain patents and patent rights, certain of the Company’s operating subsidiaries may execute related agreements which grant to the inventors and/or former owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios. The Company’s operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with its licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded. The Company’s operating subsidiaries may engage with funding sources that provide financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby the litigation finance firms are paid from any settlement in accordance with a payment schedule set forth in the agreement for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities. F- 9 The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries and are included in cost of revenues as litigation and licensing expenses. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors. Revenue Recognition Patent Licensing Fees The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers”. Revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Under Topic 606, revenue is recognized when there is a contract which has commercial substance which is approved by both parties and identifies the rights of the parties and the payment terms. For the periods presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company’s operating subsidiaries as part of the settlement of litigation commenced by the Company’s subsidiaries. Intellectual property rights granted included the following, as applicable: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted were perpetual in nature, extending until the legal expiration date of the related patents. The individual intellectual property rights are not accounted for as separate performance obligations, as (a) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised intellectual property rights are inputs and (b) the Company’s promise to transfer each individual intellectual property right described above to the customer is not separately identifiable from other promises to transfer intellectual property rights in the contract. Since the acquired intellectual property rights are not individually distinct, the Company combined each individual IP right in the contract into a bundle of IP rights that is distinct, and accounted for all of the intellectual property rights promised in the contract as a single performance obligation. The intellectual property rights granted were “functional IP rights” that have significant standalone functionality. The Company’s subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. The Company’s subsidiaries have no further obligation with respect to the grant of intellectual property rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for the grant (i.e., transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the intellectual property rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts within 30 to 90 days of execution of the contract. Contractual payments made by licensees are generally non-refundable. The Company does not have any significant payment terms, as payment is received shortly after goods are delivered or services are provided, therefore there is no significant financing component or consideration payable to the customer in these transactions. The Company’s revenue for the years ended December 31, 2024 and 2023 was generated from licenses pursuant to the settlement of patent infringement lawsuits.. Cost of Revenues Cost of revenues mainly includes expenses incurred in connection with our patent enforcement activities, such as legal fees, consulting costs, patent maintenance, royalty fees for acquired patents and other related expenses. Cost of revenue does not include expenses related to product development, patent amortization, integration or support, as these are included in general and administrative expenses. F- 10 Inventor Royalties, Litigation Funding Fees and Contingent Legal Expenses. In connection with the investment in or acquisition of certain patents and patent rights, certain of the Company’s operating subsidiaries may grant the inventors and/or former owners of the respective patents or patent rights the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios. The Company’s operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded. The Company’s operating subsidiaries may engage with funding sources that specialize in providing financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities. The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors. Income Taxes Deferred income tax assets and liabilities are recognized for the expected future income tax consequences of events that have been included in the consolidated financial statements or income tax returns. Deferred income tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities using tax rates in effect for the years in which the differences are expected to reverse. In evaluating the ultimate realization of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. Management establishes a valuation allowance if it is more likely than not that all or a portion of the deferred income tax assets will not be utilized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income, which must occur prior to the expiration of the net operating loss carryforwards. The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of December 31, 2024 and 2023. F- 11 Stock-Based Compensation We account for stock-based compensation for employees and non-employees pursuant to ASC 718, “Compensation — Stock Compensation,” which prescribes accounting and reporting standards for all stock-based payment transactions. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments. Stock-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values estimated using a Black-Scholes option pricing model. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Concentration of Credit Risk The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any such losses in these accounts. Net (Loss) Income Per Share The Company calculates net (loss) income per share by dividing income or losses allocated to the Company’s stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted weighted average shares is computed using basic weighted average shares plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive. Because the Company incurred losses for the year ended December 31, 2024, potentially dilutive securities would be anti-dilutive, and therefore, the diluted net loss per share is the same as the basic net loss per share.. Potentially dilutive securities are out of the money and therefore excluded from the computation of diluted earnings per share for the year ended December 31, 2023. The Company’s potentially dilutive securities include 962,463 potential shares of common stock issuable upon exercise of warrants granted to QPRC Finance LLC (“QFL”) in connection with the Purchase Agreement, described in Note 4, 500,000 shares of common stock issuable upon exercise of stock options granted to Intelligent Partners, LLC (“Intelligent Partners”) in connection with the Restructure Agreement described in Note 4 and 700,000 shares of common stock issuable upon exercise of stock options granted to officers and consultants. See Notes 4, 5 and 6. Recently Adopted Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures. The Company adopted ASU 2023-07 effective December 31, 2024, on a retrospective basis. The adoption of 2023-07 did not change the way that the Company identifies its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures. Refer to Note 10 for further information on the Company’s reportable segment. Recently Issued Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on our related disclosures. F- 12 In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on our related disclosures. Going Concern The Company has an accumulated deficit of $ 26,382,672 and negative working capital of approximately $ 11,536,076 as of December 31, 2024. The Company has a history of losses, including a loss of $ 2.5 million on revenues of $ 2.8 million for the year ended December 31, 2024, and the Company can give no assurance that it will generate income in the future. Because of the Company’s history of losses, its working capital deficiency, the uncertainty of future revenue, the Company’s obligations to QF3 and Intelligent Partners, the Company’s low stock price and the absence of an active trading market in its common stock and the failure of the Company to have effective internal controls over financial reporting, as reflected in the restatement of its financial statements for the year ended December 31, 2023, the ability of the Company to raise funds in the equity market or from lenders is severely impaired. These conditions, as well as any adverse consequences which would result if the Company fails to meet the continued listing requirements of the OTCQB , raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s revenue is generated exclusively from license fees generated from litigation seeking damages for infringement of the Company’s intellectual property rights. Although the Company may seek to raise funds and to obtain third-party funding for litigation to enforce its intellectual property rights, the availability of such funds is uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 3. INTANGIBLE ASSETS Intangible assets include patents purchased and are recorded at their acquisition cost. Intangible assets consisted of the following: December 31, 2024 2023 Patents $ 6,087,000 $ 6,087,000 Disposal — — Subtotal 6,087,000 6,087,000 Less: accumulated amortization ( 3,048,750 ) ( 2,412,397 ) Net value of intangible assets $ 3,038,250 $ 3,674,603 Weighted Average Amortization Period (Years) 4.87 5.47 Intangible assets are comprised of patents with estimated useful lives. The intangible assets at December 31, 2024 represent: ● patents acquired in October 2021 from AI for a purchase price of $ 550,000 pursuant to which the Company retains an amount equal to the purchase price plus any fees incurred out of net proceeds, as defined in the agreement, after which AI is entitled to a percentage of further net proceeds realized, if any; the useful lives of the patents, at the date of acquisition, was approximately 11 years. ● patents acquired in July 2022 via assignment from AI for a purchase price of $ 92,000 , the useful lives of the patents, at the date of purchase, was approximately 2 - 4 years. ● patents acquired July 2022 pursuant to an agreement with Hewlett Packard Enterprise Development LP and Hewlett Packard Enterprise Company for a purchase price of $ 350,000 . The useful lives of the patents, at the date of purchase, was approximately 2 - 9 years. ● patents acquired March 2023 from Tower for a purchase price of $ 3,300,000 pursuant to which the Company retains an amount equal to the purchase price plus a negotiated return and any fees out of net proceeds, as defined in the agreement, after which Tower in entitled to a percentage of further net proceeds realized, if any. The useful lives of the patents, at the date of purchase, was approximately 5 - 15 years. ● patents acquired in August 2023 pursuant to an agreement with Koji Yoden for a purchase price of $ 30,000 . The useful lives of the patents, at the date of purchase, was approximately 9 - 10 years. F- 13 The Company amortizes the costs of intangible assets over their estimated useful lives on a straight-line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. The Company assesses intangible assets for any impairment to the carrying values. As of December 31, 2024, management concluded that there was no impairment to the intangible assets. Amortization expense for patents was approximately $ 636,000 and $ 787,000 for the years ended December 31, 2024 and 2023, respectively. Amortization expense is included in selling, general and administration expenses in the accompanying consolidated statement of operations. Future amortization of intangible assets is as follows: Year Ended December 31, 2025 540,589 2026 500,064 2027 464,786 2028 397,345 Thereafter 1,135,465 Total $ 3,038,250 4. SHORT-TERM DEBT AND LONG-TERM LIABILITIES Short-Term Debt Loans Payable The loans payable represents demand loans made by former officers and directors, who are third parties and stockholders, whose holdings were insignificant, at December 31, 2024 and 2023, in the amount of $ 138,000 . The loans which bear interest at 10 % per annum, and are payable on demand. Accrued interest on these loans at December 31, 2024 and 2023 was approximately $ 324,000 and $ 310,000 , respectively. Funding Liabilities The following table shows the Company’s funding liabilities to QFL and QF3 at December 31, 2024 and 2023: December 31, 2024 2023 Funding liability – QFL $ - $ 1,525,502 Funding liability – QF3 7,634,381 5,800,000 Funding liabilities $ 7,634,381 $ 7,325,502 F- 14 Funding Liabilities - QFL The QFL funding liability at December 31, 2023 of $ 1,525,502 represented the principal amount of the Company’s obligations to QFL pursuant to a purchase agreement (“Purchase Agreement”) dated February 22, 2021 and amended and restated on May 2, 2024, between the Company and QFL, as described below. As of December 31, 2024, the Company had made total repayments in the amount of approximately $ 6,402,000 since February 22, 2021 and the full outstanding principal balance has been repaid. The obligation to QFL had no repayment term since payment was due solely from a portion of net proceeds generated from the monetization of the Company’s intellectual property and has been classified as a current liability as of December 31, 2023. Accrued interest related to this funding liability as of December 31, 2023 was approximately $ 478,000 . The Company did not request an operating capital advance from QFL during the year ended December 31, 2024 and no further advances are to be made pursuant to the Purchase Agreement. During the year ended December 31, 2023 the Company requested and received from QFL an operating capital advance in the amount of $ 200,000 . Pursuant to the Purchase Agreement with QFL, QFL made available to the Company a total of $ 6,402,000 , consisting of (a) $ 2,653,000 for the acquisition of mutually agreed patent rights that we intended to monetize; (b) $ 2,000,000 for operating expenses; and (iii) $ 1,750,000 to fund the cash payment portion of the restructure of our obligations to Intelligent Partners. In return the Company transferred to QFL a right to receive a portion of net proceeds generated from the monetization of those patents. The Company also granted QFL a ten-year warrant to purchase a total of up to 962,463 shares of our common stock, with an exercise price of $ 0.54 per share (Note 5), and, pursuant to a registration rights agreement, the Company granted QFL certain registration rights to the shares of common stock issuable upon exercise of the warrant. The covenants in the registration rights agreement include a continued listing on the OTCQB. In 2022, the bid price for the Company’s common stock had closed below $ 0.01 per share for more than 30 consecutive days, as a result of which the Company did not meet the Standards for Continued Eligibility under the OTC listing standards. Although the Company has regained compliance, in the event that in the future the Company fails to be in compliance or otherwise breaches the covenants in the agreements with QFL, the Company may have significant financial obligations to QLF. A portion of any gain from sale of the shares, net of taxes and costs of exercise, realized prior to the completion of all monetization activities shall be credited against the total return due to QFL pursuant to the Purchase Agreement. The Company also granted QFL certain board observation rights. Pursuant to the Purchase Agreement, all of the net proceeds from the monetization of the intellectual property acquired with funds from QFL are paid directly to QFL. After QFL has received a negotiated rate of return, the Company and QFL share net proceeds equally until QFL achieves its investment return, as defined in the agreement. Thereafter, the Company retains 100 % of all net proceeds. Except in an Event of Default, as defined therein, all payments by the Company to QFL pursuant to the Purchase Agreement are non-recourse and shall be paid only if and after net proceeds from monetization of the patent rights owned or acquire by us are received, or to be received. Contemporaneously with the execution of the agreements with QFL, the Company entered into a Restructure Agreement with Intelligent Partners to eliminate any obligations the Company had with respect to the outstanding notes and the securities purchase agreement. As part of the restructure of the Company’s agreements with Intelligent Partners, the Company amended the existing MPAs and granted Intelligent Partners certain rights in the monetization proceeds from any new intellectual property we acquire. Under these MPAs, Intelligent Partners receives a 60 % interest in the proceeds from our intellectual property owned by the eight Subsidiary Guarantors. Intelligent Partners also participates in the monetization proceeds from new intellectual property that we acquire until the total payments under all the monetization participation agreements equal $ 2,805,000 , as follows: for net proceeds between $ 0 and $ 1,000,000 , Intelligent Partners receives 10 % of the net proceeds realized from new patents, except that if, in any calendar quarter, net proceeds realized by us exceed $ 1,000,000 , Intelligent Partners’ entitlement for that quarter only increases to 30 % on the portion of net proceeds in excess of $ 1,000,000 but less than $ 3,000,000 . If in the same calendar quarter, net proceeds exceed $ 3,000,000 , Intelligent Partners’ entitlement for that quarter only shall increase to 50 % on the portion of net proceeds in excess of $ 3,000,000 . The payments with respect to the new patents terminate once total payments to Intelligent Partners under all monetization participation agreements reach $ 2,805,000 . The payments to Intellectual Partners with respect new patents are payable from the proceeds which are allocated to us under the QFL and QF3 agreements, which start after QFL and QF3 have received a negotiated rate of return. F- 15 Funding Liabilities - QF3 The QF3 funding liabilities at December 31, 2024 and 2023 of $ 7,634,381 and $ 5,800,000 , respectively, represents the principal amount of the Company’s obligations to QF3 pursuant to a purchase agreement (“QF3 Purchase Agreement”) dated March 12, 2023 between the Company and QF3, as described below. As of December 31, 2024, the Company has made no repayments on this funding liability. The obligation to QF3 has no repayment term since the payment is due from net proceeds generated from the monetization of the Company’s intellectual property and has been classified as a current liability as of December 31, 2024 and 2023. Accrued interest related to this funding liability as of December 31, 2024 and 2023, was approximately $ 865,000 and $ 299,000 , respectively. On March 12, 2023, the Company and HID, entered into a series of agreements, all dated March 12, 2023, with QF3, a non-affiliated party, including a prepaid forward purchase agreement (the “Purchase Agreement QF3”), a security agreement (the “QF3 Security Agreement”), a patent security agreement (the “QF3 Patent Security Agreement” together with the QF3 Security Agreement, the QF3 Patent Security Agreement, and the QF3 Purchase Agreement, the “QF3 Investment Documents”): (i) Pursuant to the QF3 Purchase Agreement, QF3 agreed to make available to the Company a financing facility of: (a) up to $ 4,334,000 for operating expenses, of which the Company has requested and received $ 4,334,000 as of December 31, 2024; (b) $ 3,300,000 to fund the cash payment portion of the purchase of a patent portfolio from Tower Semiconductor Ltd. (“Tower”); and (c) up to an additional $ 25,000,000 for the acquisition of mutually agreed patent rights that the Company intends to monetize, of which no amounts have been requested or received as of December 31, 2024. In return, the Company transferred to QF3 a right to receive a portion of net proceeds generated from the monetization of those patents. (ii) On March 17, 2023, the Company used $ 3,300,000 of proceeds from the QF3 financing as the cash payment portion of the purchase of a seven-patent portfolio from Tower (the “HID Portfolio”). (iii) Pursuant to the QF3 Security Agreement and QF3 Patent Security Agreement, payment of the Company’s obligations under the QF3 Purchase Agreement with QF3 are secured by (a) the value of anything received from the monetization of the intellectual property rights covered by the Security Agreement; (b) the patents (as defined in the Security Agreement); (c) all general intangibles now or hereafter arising from or related to the foregoing (a) and (b); and (d) proceeds (including, without limitation, cash proceeds and insurance proceeds) and products of the foregoing (a)-(c). In connection with the agreements with QF3, the Company, HID and the Subsidiary Guarantors entered into an intercreditor agreement with QF3 and Intelligent Partners which sets forth the priority of QF3 in the collateral under the Investment Documents. Loan Payable Related Party The loan payable – related party at December 31, 2024 and 2023 represents the current amount of a non-interest bearing total monetization proceeds obligation (the “TMPO”) due to Intelligent Partners of $ 2,769,500 at December 31, 2024 and 2023, pursuant to an original agreement dated February 22, 2021. The Restructure Agreement provided for the payment to Intelligent Partners of $ 1,750,000 from the proceeds from the Company’s agreements with QFL. As part of the restructure of the Company’s agreements with Intelligent Partners, the Company amended the existing MPAs and granted Intelligent Partners certain rights in the monetization proceeds from any new intellectual property the Company acquires, as described above. Under these MPAs, Intelligent Partners participates in the monetization proceeds the Company receives with respect to new patents after QFL and QF3 have received a negotiated rate of return. Because of the beneficial ownership percentage of its principals, Intelligent Partners is treated as a related party. F- 16 Long-Term Liabilities Loan Payable – SBA The loans payable – SBA balance at December 31, 2024 and 2023 of $ 150,000 represents the total amount due under a secured Economic Injury Disaster Loan from the U.S. Small Business Association (“SBA”) in the aggregate amount of $ 150,000 , pursuant to Section 7(b) of the Small Business Act as part of the COVID-19 relief effort. The Company’s obligations on the loan are set forth in the Company’s note dated May 14, 2020 which matures on May 14, 2050 and bears interest at a rate of 3.75 % per annum, payable monthly commencing on November 14, 2022. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. As of December 31, 2024, the Company had not made any principal payments on the loan payable. During the year ended December 31, 2024, the Company incurred $ 5,640 of interest expense and has accrued interest of approximately $ 7,800 at December 31, 2024. Purchase Price of Patents The purchase price of patents balance at December 31, 2024 and 2023 of $ 53,665 represents: The non-current portion of our obligations under the unsecured non-recourse funding agreement with a third-party funder entered into in May 2020 whereby the third-party agreed to provide acquisition funding in the amount of $ 95,000 for the Company’s acquisition of the audio messaging portfolio. Under the funding agreement, the third-party funder is entitled to a priority return of funds advanced from net proceeds, as defined, recovered until the funder has received $ 53,665 . The Company did not make any payments with respect to this obligation in 2024 or 2023. The Company has no other obligation to the third-party and has no liability to the funder in the event that the Company does not generate sufficient net proceeds. Pursuant to ASC 470, the Company recorded this monetization obligation as debt and the difference between the purchase price and total obligation as a discount to the debt and fully expensed to interest during the period. 5. WARRANT LIABILITY On February 22, 2021, the Company issued warrants to purchase 962,463 shares of common stock to QFL (see Note 4) in connection with its funding agreement. If on the date of initial exercise the aggregate number of warrant shares purchasable upon exercise of the warrant would yield less than an amount equal to 10 % of the aggregate number of outstanding shares of capital stock of the Company (determined on a fully diluted basis), then the number of warrant shares shall be increased to an amount equal to 10 % of the aggregate number of outstanding shares of capital stock of the Company (determined on a fully diluted basis), and therefore the number of shares underlying the warrants is not fixed until the date of the initial exercise. As such, the warrant issued to QFL requires classification as a liability pursuant to ASC Topic 480, Distinguishing Liabilities from Equity and is valued at its fair value as of the grant date and re-measured at each balance sheet date with the period-to-period change in the fair market value of the warrant liability reflected as a gain or loss in warrant liability and included under other income (expense). As of December 31, 2024 and 2023, the aggregate fair value of the outstanding warrant liability was approximately $ 117,000 and $ 282,000 , respectively. The Company estimated the fair value of the warrant liability using the Black-Scholes option pricing model using the following key assumptions as of December 31, 2024 and 2023: As of December 31, 2024 2023 Volatility 383 % 395 % Exercise price $ 0.54 $ 0.54 Risk-free interest rate 1.37 % 1.37 % Expected dividends — % — % Expected term 6.1 7.1 F- 17 The following schedule summarizes the valuation of financial instruments at fair value in the balance sheets as of December 31, 2023 and 2022: Fair Value Measurements as of December 31, 2024 December 31, 2023 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Liabilities Warrant liability — — 117,130 — — 281,809 Total liabilities $ — $ — $ 117,130 $ — $ — $ 281,809 The following table sets forth a reconciliation of changes in the fair value of warrant liabilities classified as Level 3 in the fair value hierarchy: Fair Value Balance at December 31, 2022 $ 145,428 Loss on subsequent measurement 136,381 Balance at December 31, 2023 281,809 Gain on subsequent measurement ( 164,679 ) Balance at December 31, 2024 $ 117,130 6. STOCKHOLDERS’ EQUITY 2017 Equity Incentive Plan Under the 2017 Equity Incentive Plan (the “Plan”) the Company can issue up to 5,000,000 shares of common stock pursuant to non-qualified stock options, restricted stock grants and other equity-based incentives. At December 31, 2024, 1,760,000 shares are available under the plan. Issuance of Common Stock and Options Issuances to Intelligent Partners On February 22, 2021, pursuant to the Restructure Agreement (Note 4), Intelligent Partners and its controlling members (Fitton and Carper) agreed to extinguish the notes and Transferred Note, and terminate or amend and restate the SPA and Transaction Documents and the Company: (i) issued to Fitton and Carper, as holders of the Transferred Note, pursuant to the Stock Purchase Agreement a total of 462,963 shares of common stock at a purchase price of $ 0.54 per share, which purchase price was paid by the conversion and in full satisfaction of the Company’s obligation under the Transferred Note and is included in the calculation of the repurchase price of the debt; and (ii) granted Intelligent Partners, pursuant to the Option Grant, an option to purchase a total of 500,000 shares of common stock, with an exercise price of $ 0.54 per share which vested immediately and may be exercised through September 30, 2025. The Company valued the purchase option at approximately $ 598,000 using the Black-Scholes pricing model. The Company granted Intelligent Partners, Fitton and Carper certain registration rights with respect to (i) the 500,000 shares currently owned by Fitton and Carper; (ii) the 462,963 Conversion Shares issued to Fitton and Carper, and (iii) the 500,000 shares of common stock issuable upon exercise of the option. Commencing six months from the closing date, if the shares owned by Fitton, Carper and Intelligent Partners cannot be sold pursuant to a registration statement and cannot be sold pursuant to Rule 144 without the Company being in compliance with the current public information requirements of Rule 144, if the Company is not in compliance with the current public information requirements, the Company is required to pay damages to Intelligent Partners. F- 18 Option Grants Pursuant to Consulting Agreements Pursuant to a consulting agreement, the Company granted options to purchase a total of 900,000 shares of common stock of which options to purchase a total of 900,000 shares of common stock which expire on February 21, 2031. Option to purchase 300,000 shares of common stock at $ 1.00 per share, 100,000 shares at $ 3.00 per share and 100,000 shares at $ 5.00 per share are currently exercisable. Option to purchase 200,000 shares at an exercise price of $ 3.00 per share, become exercisable on the first day on which the Company files with the SEC a Form 10-K or Form 10-Q which reports stockholders’ equity of at least $ 5,000,000 and options to purchase 200,000 shares at an exercise price of $ 5.00 per share become exercisable on the date on which the Common Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange. The Company recognized option expense of approximately $ 6,000 and $ 49,000 for the years ended December 31, 2024 and 2023, respectively, with respect to these options. Option Grants to the Chief Executive Officer The Company’s chairman of the board holds an outstanding options to purchase 600,000 shares which options expire February 22, 2031. An option to purchase 200,000 shares of common stock at an exercise price of $ 1.00 per share is currently exercisable. An options to purchase 200,000 shares of common stock at $ 3.00 becomes exercisable on the first day on which the Company files with the SEC a Form 10-K or Form 10-Q which reports stockholders’ equity of at least $ 5,000,000 , and an options to purchase 200,000 shares of Common Stock at an exercise price of $ 5.00 per share becomes exercisable on the date on which the Common Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange. The Company did not recognize an option expense with respect to these options during the year ended December 31, 2024 or 2023. A summary of the status of the Company’s stock options and changes is set forth below: Number of Options (#) Weighted Average Exercise Price ($) Weighted Average Grant Date Fair Value ($) Weighted Average Remaining Contractual Life (Years) Balance - December 31, 2022 2,000,000 2.39 1.20 6.80 Granted — — — — Exercised — — — — Expired — — — — Cancelled — — — — Balance - December 31, 2023 2,000,000 2.39 1.20 5.80 Granted — — — — Exercised — — — — Expired — — — — Cancelled — — — — Balance - December 31, 2024 2,000,000 2.39 1.20 4.80 Options exercisable at end of period 1,200,000 1.31 1.20 3.95 The outstanding options do not have an intrinsic value as of December 31, 2024 and 2023. As of December 31, 2024, there was approximately $ 960,000 of unrecognized compensation expense related to nonvested stock option awards that is expected to be recognized over a weighted average expected term of approximately 6.23 years. F- 19 Issuance of Warrants A summary of the status of the Company’s warrants and changes is set forth below: Number of Warrants (#) Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Life (Years) Balance - December 31, 2022 962,463 0.54 8.15 Granted — — — Exercised — — — Expired — — — Cancelled — — — Balance - December 31, 2023 962,463 0.54 7.14 Granted — — — Exercised — — — Expired — — — Cancelled — — — Balance - December 31, 2024 962,463 0.54 6.14 The warrants contain certain minimum ownership percentage antidilution rights pursuant to which the aggregate number of shares of common stock purchasable upon the initial exercise of the warrant shall not be less than 10 % of the aggregate number of outstanding shares of capital stock of the Company (determined on a fully diluted basis). The outstanding warrants do not have an intrinsic value as of December 31, 2024 and 2023. 7. NON-CONTROLLING INTEREST The following table reconciles equity attributable to the non-controlling interest related to Quest Packaging Solutions Corporation. December 31, 2024 2023 Balance, beginning of year $ 228 $ 228 Net loss attributable to non-controlling interest — — Balance, end of year $ 228 $ 228 8. INCOME TAXES The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. As of December 31, 2024, the Company has approximately $ 10,583,000 of net operating loss (“NOL”) carry forwards which will begin to expire in 2035. Net operating loss carryovers may be subject to a limitation on their usage in future periods if the Company experiences a change in ownership as defined in Internal Revenue Code Section 382. In assessing the realizability of deferred tax assets, Company’s management considers whether it is more likely than not that all or a portion of the Company’s deferred tax assets will be realized. The Company’s management considers all available evidence, both positive and negative, in making this assessment. Due to the Company’s history of generating losses in recent years, and the lack of objectively verifiable evidence that it will be able to generate taxable income in future years, the Company’s management has determined that a valuation allowance against the Company’s deferred tax assets is necessary. The change in the valuation allowance for the year ended December 31, 2024 is $ 413,104 and is recorded as a component of income tax expense. F- 20 The Company’s deferred tax assets consist of the following: December 31, 2024 2023 Net operating loss carry forward $ 2,492,309 $ 2,059,621 Intangible assets 4,907 25,712 Stock-Based Compensation 176,387 175,167 Foreign Tax Credit 30,000 30,000 Valuation allowance ( 2,703,603 ) ( 2,290,500 ) Balance, end of year $ — $ — Tax expense consisted primarily of the following: December 31, 2024 2023 Federal $ — $ — State — — Foreign 100,000 30,000 Deferred — — Total $ 100,000 $ 30,000 The reconciliation between the effective tax rate on loss before income taxes and the statutory rate for the year ended December 31, 2024 is as follows: Tax Percentage Book loss before taxes $ ( 498,047 ) 21.00 % State taxes, net — — Foreign taxes, net 79,000 ( 3.33 )% Meals and entertainment 6,318 ( 0.27 )% Warrant income ( 34,583 ) 1.46 % Interest expense 118,904 ( 5.01 )% Change in valuation allowance 413,104 ( 17.42 )% Change in estimate for prior year taxes 15,304 ( 0.65 )% Total $ 100,000 Effective tax rate ( 4.22 )% The reconciliation between the effective tax rate on loss before income taxes and the statutory rate for the year ended December 31, 2023 is as follows: Tax Percentage Book income before taxes $ 484,650 21.00 % State taxes, net — — Meals and entertainment 1,369 0.06 % Warrant expense 28,640 1.24 % Interest expense 240,013 10.40 % Change in valuation allowance ( 585,185 ) ( 25.36 )% Change in estimate for prior year taxes ( 139,487 ) ( 6.04 )% Total $ 30,000 Effective tax rate 1.30 % F- 21 As of December 31, 2024, the Company’s management believes that it has adequately provided for its tax-related liabilities, and that no liability for unrecognized tax benefits is necessary. No significant change in the total amount of unrecognized tax benefits is expected within the next twelve months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits (if any) in tax expenses, as applicable. At December 31, 2024 and 2023, the Company had no accrual for the payment of interest and penalties. The statute of limitations for assessment of income taxes is open for tax years ending December 31, 2021 and later. 9. RELATED PARTY TRANSACTIONS During 2023, the Company contracted with a law firm more than 10 percent owned by the chief executive officer. The firm is engaged as counsel in connection with general corporate matters, diligence and maintenance of the Company’s patent portfolio. In connection with the engagement, the Company recorded patent service costs of approximately $ 139,000 and $ 50,000 for the years ended December 31, 2024 and 2023, respectively, and these were recorded as part of sales, general and administrative expenses in the accompanying Consolidated Statements of Operations. As of December 31, 2024, approximately $ 11,000 of such costs were payable to the related party. During the years ended December 31, 2024 and 2023, the Company contracted with a law firm more than 10 percent owned, but not controlled, by the father-in-law of the chief executive officer. The firm is engaged on a contingent fee basis and serves as escrow agent in connection with monetization of the Company’s patents in matters where the firm is serving as counsel to the Company. For the years ended December 31, 2024 and 2023, the cost of these services was approximately $ 1,163,000 and $ 5,316,000 , respectively, and these are included in litigation and licensing expenses, in the Consolidated Statements of Operations. As of December 31, 2023, approximately $ 1,379,000 of such costs were payable to the related party. There were no amounts payable to this related party at December 31, 2024 since the services are on a contingent fee basis and no fees are incurred unless there is a recovery. See Note 6 with respect to an option held by the chief executive officer. 10. SEGMENT INFORMATION The Company manages its business activities on a consolidated basis and operates as a single reporting segment: Intellectual Property Management. The Company derives all of its revenue from the licensing of its patents resulting from litigation commenced by the Company. The accounting policies of the Intellectual Property Management segment are the same as described in Note 2 – Summary of Significant Accounting Policies. The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”). The CODM uses Net Income, as reported on the Consolidated Statements of Operations, in evaluating performance of the Intellectual Property Management segment and determining how to allocate resources of the Company as a whole, including investing in future patent portfolios. Significant expenses within income (loss) from operations, as well as within net income, include litigation and licensing expenses and selling, general and administrative expenses, which are each presented separately on the accompanying Consolidated Statements of Operations. Other segment items within net (loss) income include change in fair value of warrant liability, interest expense, net, and income tax expense. F- 22 11. COMMITMENTS AND CONTINGENCIES Employment Agreements Pursuant to a restated employment agreement, dated November 30, 2014, with the Company’s president and chief executive officer, the Company agreed to employ him as president and chief executive officer for a term of three years, commencing January 1, 2014, and continuing on a year-to-year basis unless terminated by either party on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension. The agreement provides for an initial annual salary of $ 252,000 , which may be increased, but not decreased, by the board or the compensation committee, which was increased to $ 600,000 , effective January 1, 2023. The chief executive officer is entitled to a bonus if the Company meets or exceeds performance criteria established by the compensation committee. In August 2016, the Company’s board of directors approved annual bonus compensation equal to 30 % of the amount by which the Company’s consolidated income before income taxes exceeds $ 500,000 , but, if the Company is subject to the limitation on deductibility of executive compensation pursuant to Section 162(m) of the Internal Revenue Code, the bonus cannot exceed the amount which would be deductible pursuant to Section 162(m). The chief executive’s bonus for 2024 and 2023 was approximately $ 334,000 , respectively. The chief executive officer is also eligible to participate in any executive incentive plans which the Company may adopt. SEP IRA Plan Pursuant to the SEP IRA plan adopted by the Company in March 2020, the Company deposited into a SEP IRA account of each of its participating employees a percentage of the employee’s compensation, subject to statutory limitations on the amount of the contribution all as set forth in the IRS Form 5305-SEP. For the years ending December 31, 2024 and 2023, the percentage was set at 12 % and 11 %, respectively. The Company’s chief executive officer and chief technology officer are the only participants and during the years ended December 31, 2024 and 2023, $ 69,000 and $ 66,000 was deposited into the chief executive officer’s SEP IRA account, respectively and $ 14,000 and $ 6,600 was deposited into the chief technology officer’s SEP IRA account, respectively. Inventor Royalties, Contingent Litigation Funding Fees and Contingent Legal Expenses In connection with the investment in certain patents and patent rights, certain of the Company’s operating subsidiaries executed agreements which grant to the former owners of the respective patents or patent rights, the right to receive inventor royalties based on future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios. The Company’s operating subsidiaries may engage third-party funding sources to provide funding for patent licensing and enforcement. The agreements with the third-party funding sources may provide that the funding source receive a portion of any negotiated fees, settlements or judgments. In certain instances, these third-party funding sources are entitled to receive a significant percentage of any proceeds realized until the third-party funder has recouped agreed upon amounts based on formulas set forth in the underlying funding agreement, which may reduce or delay and proceeds due to the Company. The Company’s operating subsidiaries may retain the services of law firms in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby the law firms are paid on a scaled percentage of any negotiated fees, settlements or judgments awarded based on how and when the fees, settlements or judgments are obtained. Depending on the amount of any recovery, it is possible that all the proceeds from a specific settlement may be paid to the funding source and legal counsel. The economic terms of the inventor agreements, funding agreements and contingent legal fee arrangements associated with the patent portfolios owned or controlled by the Company’s operating subsidiaries, if any, including royalty rates, proceeds sharing rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by the operating subsidiaries. Inventor royalties, payments to noncontrolling interests, payments to third-party funding providers and contingent legal fees expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor royalties, payments to third-party funding sources and contingent legal fees expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors. F- 23 Patent Enforcement and Other Litigation Certain of the Company’s operating subsidiaries are engaged in litigation to enforce their patents and patent rights. In connection with these patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against the Company or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material, and if required to be paid by the Company or its operating subsidiaries, could materially impair the Company’s operating results and financial position and could result in a default under the Company’s obligations to QF3. Since the operating subsidiaries do not have any assets other than the patents, and the Company does not have any available financial resources to pay any judgment which a defendant may obtain against a subsidiary, such a judgment may result in the bankruptcy of the subsidiary and/or the loss of the patents, which are the subsidiaries’ only assets. F-24