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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-04-01 · 479 added, 361 removed, 147 unchanged (85% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial

condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included

elsewhere in this report.

condition and results of operations should be read in conjunction with our consolidated audited financial statements and related notes

included elsewhere in this report.

This discussion contains forward-looking statements that involve risks, uncertainties and assumptions.

Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking

statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this report.

See “Forward-Looking Statements” and "Risk Factors." Our actual results could differ materially from those anticipated

in the forward-looking statements.

Our principal operations include the development,

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owned subsidiaries.

We currently own, control or manage ten intellectual property portfolios, which principally consist of patent rights.

As part of our intellectual property asset management activities and in the ordinary course of our business, it has been necessary for

either us or the intellectual property owner who we represent to initiate, and it is likely to continue to be necessary to initiate, patent

infringement lawsuits and engage in patent infringement litigation.

We currently own, control or manage eighteen intellectual property portfolios, which principally consist of patent

As part of our intellectual property asset management activities and in the ordinary course of our business, it has been necessary

for either us or the intellectual property owner who we represent to initiate, and it is likely to continue to be necessary to initiate

patent infringement lawsuits and engage in patent infringement litigation.

We anticipate that our primary source of revenue will come

from the grant of licenses to use our intellectual property, including licenses granted as part of the settlement of patent infringement

Our business, like all businesses at the present

time, are affected by the COVID-19 pandemic and the steps taken by states to seek to reduce the spread of the virus.

Although we do not

manufacture or sell products, the COVID-19 pandemic and the work shutdown imposed in the United States and other countries to limit the

spread of the virus can have a negative impact on our business.

Our revenue is generated almost exclusively from license fees generated

from litigation seeking damages for infringement of our intellectual property rights.

The work shutdown has affected the court system,

with courts operating on a reduced schedule.

As a result, patent infringement actions are likely to be lower priority items in allocation

of court resources, with the effect that deadlines are likely to be postponed which delays may give defendants an incentive to delay negotiations

or offer a lower amount than they might otherwise accept.

These delays continue to have an effect on the court system as a result of the

backlog that developed as a result of court closures.

In addition, the effect of the COVID-19 and the public response may adversely affect

the financial condition and prospects of defendants and potential defendants, which would make it less likely that they would be willing

to settle our claim.

A number of defendants and potential defendants have filed to take advantage of the Bankruptcy Act or have announced

that they may consider such action.

If any defendant filed for protection under the Bankruptcy Act, the action would be stayed and we

may not be able to obtain a judgment or recover on any judgment.

The COVID-19 pandemic and the response to limit

the spread of the infection may affect the financial condition of financing sources and the willingness of potential financing sources

to provide funding for our litigation.

In addition, these factors may affect a law firms’ ability and willingness to provide us

with legal services on a contingent or partial contingent.

The possibility that a defendant may seek protection under the Bankruptcy Act

may make it less likely that a financing source would finance the litigation or that a law firm would work on a contingency or modified

contingency basis.

Further, as the population of the United States becomes vaccinated and restrictions that had been imposed to address

the pandemic are lifted, we cannot assure you that our revenue will increase as a result of the reduction of such restrictions, including

courts being open for longer hours and for in person hearings.

Further, to the extent that holders of intellectual

property rights see these factors impacting our ability to generate revenue from their intellectual property, they may be reluctant to

sell intellectual property to us on terms which are acceptable to us, if at all.

We seek to generate revenue from patent licensing

fees relating to our intellectual property portfolio, which includes fees from the licensing of our intellectual property, primarily from

litigation relating to enforcement of our intellectual property rights.

All of the revenue for the years ended December 31, 2022 and 2021

were from patent licensing fees pursuant to the settlement of patent infringement lawsuits, of which approximately 100% was paid to the

patent seller, funding sources and legal counsel pursuant to our agreements with patent sellers, funding sources and legal counsel.

Because of the nature of our business transactions

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life of the patent.

Thus, we recognize revenue when we enter into the agreement pursuant to which we are to receive the license fee or

settlement payment.

Although we intend to seek to develop portfolios of intellectual property rights that provide us for a continuing

stream of revenue, to date we have not been successful in doing so, and we cannot give you any assurance that we will be able to generate

any significant revenue from licenses that provide a continuing stream of revenue.

Thus, to the extent that we continue to generate cash

from single payment licenses, our revenues can, and are likely to, vary significantly from quarter to quarter and year to year.

profit from license fees reflects any royalties which we pay in connection with our license, including contingent legal fees and the portion

of the recovery payable to QFL and Intelligent Partners.

Our agreements with our funding sources have typically

provided that the funding source pay the litigation costs and receive a percentage of the recovery, thus reducing our recovery in connection

Thus, we would recognize revenue when we receive the license fee or settlement payment.

Although we intend to seek

to develop portfolios of intellectual property rights that provide us for a continuing stream of revenue, to date we have not been successful

in doing so, and we do not anticipate that we will be able to generate any significant revenue from licenses that provide a continuing

stream of revenue.

Thus, to the extent that we continue to generate cash from single payment licenses, our revenue can, and is likely

to, vary significantly from quarter to quarter and year to year.

Our gross profit from license fees reflects any royalties which we pay

in connection with our license.

It is generally necessary to commence litigation

in order to obtain a recovery for past infringement of, or to license the use of, our intellectual property rights.

Intellectual property

litigation is very expensive, with no certainty of any recovery.

To the extent possible we seek to engage counsel on a contingent fee

or partial contingent fee basis, which significantly reduces our litigation cost, but which also reduces the value of the recovery to

We do not have the resources to enable us to fund the cost of litigation.

To the extent that we cannot fund litigation ourselves,

we may enter into an agreement with a third-party funding source.

Our agreements with the funding sources typically provide that the funding

source pays the litigation costs and that the funding source receives a percentage of the recovery, thus reducing our recovery in connection

with any settlement of the litigation.

To the extent that our counsel represents us on a contingent fee basis, our recovery would also

be reduced by the percentage of the settlement payable to counsel.

From September 2015 until December 2021, under our agreements with

QFL and Intelligent Partners, as the assignee of United Wireless, and under the terms of our agreements to purchase certain intellectual

property portfolios, a portion of our recovery may be payable to Intelligent Partners or the seller of the intellectual property rights.

All of these payments, which are reflected as cost of revenues, significantly reduce the net payment to us.

Agreements with QFL and Intelligent Partners

In view of our limited cash and our working capital deficiency, we are not able to institute any

monetization program that may require litigation unless we engage counsel on a fully contingent basis, or we obtain funding from third-party

funding sources.

In these cases, counsel may be afforded a greater participation in the recovery and the third-party that funds the litigation

would be entitled to participate in any recovery.

To the extent that we have agreements with counsel and/or litigation funding sources

pursuant to which payments made to them represent a portion of the gross recovery, and such payment is contingent upon a recovery, our

revenue from litigation reflects the gross recovery from litigation as licensing fees, and payments to counsel and/or litigation funding

sources are reflected as cost of revenue.

Because we were in default under our loans to

Intelligent Partners (as successor to United Wireless), with Intelligent Partners having the ability to declare a default on our notes

in the principal amount of $4,672,810, and with the possibility of our seeking protection under the Bankruptcy Act, we ceased our monetization

activities, since no counsel would represent us on a contingent basis and no potential funding source would provide us with funding in

view of the default and possible bankruptcy, and we devoted our efforts in negotiating the agreements with QFL and Intelligent Partners.

We resumed our monetization activities in February 2021 after we entered into our agreements with QFL and Intelligent Partners.

the intellectual property monetization cycle is lengthy and may ultimately be unsuccessful.

Agreements with QF3, QFL and Intelligent Partners

On March 12, 2023, we entered into a funding agreement

Pursuant to the Purchase Agreement with QF3, QF3

agreed to make available to us a financing facility of:

(a) up to $25,000,000 for the acquisition of mutually agreed patent rights that

we intend to monetize;

(b) up to $4,000,000 for operating expenses, of which the we have requested and received $500,000 as of March 31,

and (iii) $3,300,000 to fund the cash payment portion of the purchase price of a patent portfolio acquired from Tower.

we transferred to QF3 a right to receive a portion of net proceeds generated from the monetization of those patents.

We used $3,300,000

proceeds from the QF3 financing as the cash payment portion of the purchase price of a portfolio acquired from Tower.

Our obligations

to QF3 are secured by the proceeds from the patents acquired with their funding, the patents and all general intangibles now or hereafter

arising from or related to the foregoing and the proceeds and products of the foregoing.

Business – Agreements with

QPRC Finance III LLC (“QF3”) for a description of the agreements with QF3.

On February 22, 2021, we entered into a funding

agreement with QFL and a restructure agreement with Intelligent Partners.

Pursuant to the Purchase Agreement with QFL, QFL agreed to make available

to us a financing facility of:

(a) up to $25,000,000 for the acquisition of mutually agreed patent rights that we intend to monetize,

of which $1,150,000 had been advanced at December 31, 2021 and $2,210,000 has been advanced at March 31, 2022;

(b) up to $2,000,000 for

operating expenses, of which $1,000,000 had been advanced at December 31, 2021 and $1,200,000 has been advanced at March 31, 2022;

(iii) $1,750,000 to fund the cash payment portion of the restructure of our obligations to Intelligent Partners, which was paid to Intelligent

Partners at the closing.

In return we transferred to QFL a right to receive a portion of net proceeds generated from the monetization

of those patents.

Our obligations to QFL are secured by the proceeds from the patents acquired with their funding, the patents and all

general intangibles now or hereafter arising from or related to the foregoing and the proceeds and products of the foregoing.

granted QFL a ten-year warrant to purchase a total of up to 96,246,246 shares of our common stock, with an exercise price of $0.0054 per

share which may be exercised from February 19, 2021 through February 18, 2031 on a cash or cashless basis, subject to certain limitations

on exercisability.

The warrant also contains 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 our capital stock (determined on a fully diluted basis) at the date of such exercise.

A portion of any gain from

the 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.

We also granted QFL registration rights with respect to the common

stock issuable upon exercise of the warrants and certain board observation rights.

Pursuant to the Purchase Agreement, the 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, we and QFL share net proceeds equally until QFL achieves its investment return, as defined in the agreement.

Thereafter, we retain 100% of all net proceeds.

Except in an Event of Default, as defined therein, all payments by us 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.

Pursuant to the Purchase Agreement with QFL, QFL

agreed to make available to us a financing facility of:

(a) up to $25,000,000 for the acquisition of mutually agreed patent rights that

we intend to monetize, of which $2,653,000 has been advanced as of March 31, 2023;

(b) up to $2,000,000 for operating expenses, of which

the we have requested and received $2,000,000 as of March 31, 2023;

and (iii) $1,750,000 to fund the cash payment portion of the restructure

of our obligations to Intelligent Partners.

In return we transferred to QFL a right to receive a portion of net proceeds generated from

the monetization of those patents.

We used $1,750,000 of proceeds from the QFL financing as the cash payment portion of the restructure

of our obligations to Intelligent Partners.

Our obligations to QFL are secured by the proceeds from the patents acquired with their funding,

the patents and all general intangibles now or hereafter arising from or related to the foregoing and the proceeds and products of the

We 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 which may be exercised through February 18, 2031 on a cash or cashless basis, subject to certain limitations on exercisability.

Business – Agreements with QFL for a description of the agreements with QFL

Contemporaneously with the execution of the agreement

with QFL, we entered into a restructure agreement with Intelligent Partners to eliminate any obligations we had with respect to the

outstanding notes and the securities purchase agreement.

As part of the restructure of our agreements with Intelligent Partners, we 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

with QFL, we entered into a restructure agreement with Intelligent Partners to eliminate any obligations we had with respect to the outstanding

notes and the securities purchase agreement.

As part of the restructure of our agreements with Intelligent Partners, we amended the existing

MPAs and granted Intelligent Partners certain rights in the monetization proceeds from any new intellectual property we acquire.

these MPAs, Intelligent Partners receives a 60% interest in the proceeds from our intellectual property owned by the eight Subsidiary

Intelligent Partners also participates in the monetization proceeds from new intellectual property that we acquire until the

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reach $2,805,000.

The payments to Intelligent Partners with respect new patents are payable from the proceeds which are allocated to us

under the QFL agreements, which start after QFL has received a negotiated rate of return.

The payments to Intellectual Partners with respect new patents are payable from the proceeds which are allocated to

us under the QFL agreements, which start after QFL has received a negotiated rate of return.

See Item 1 Business – Agreements for

Intelligent Partners for a description of the agreements with Intellectual Partners.

Inventor Royalties, Contingent Litigation Funding

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of funds advanced from net proceeds recovered.

There are not pending actions.

There are no pending actions.

In connection with any litigation seeking to enforce

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to consultants (300,000 shares) and to our officers and directors (740,000 shares) all of which vested immediately.

the shares is be reflected as non-cash compensation in 2021.

Also in February 2021, we granted restricted stock options to consultants

(90,000,000 shares) and to our chief executive officer (60,000,000 shares).

With respect to two of the consultants and the chief executive

officer the options become cumulatively exercisable as follows:

1/3 rd at an exercise price of $0.01 per share, becoming exercisable

upon the commencement of trading of the Common Stock on the OTCQB;

1/3 rd at an exercise price of $0.03 per share becoming exercisable

on the first day on which we file with the SEC a Form 10-K or Form 10-Q with stockholders’ equity of at least $5,000,000;

at an exercise price of $0.05 per share on the date on which the Common Stock is listed for trading on the Nasdaq Stock Market or

the New York Stock Exchange.

We will incur non-cash compensation with respect to the value of the options, based of Black-Scholes valuation,

as the options become exercisable.

The value of the shares

is be reflected as non-cash compensation in 2021.

Also in February 2021, we granted restricted stock options to consultants (900,000 shares)

and to our chief executive officer (600,000 shares).

With respect to two of the consultants and the chief executive officer the options

become cumulatively exercisable as follows:

1/3rd at an exercise price of $1.00 per share, becoming exercisable upon the commencement

of trading of the Common Stock on the OTCQB;

1/3rd at an exercise price of $3.00 per share becoming exercisable on the first day on which

we file with the SEC a Form 10-K or Form 10-Q with stockholders’ equity of at least $5,000,000;

and 1/3rd at an exercise price of

$5.00 per share on the date on which the Common Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange.

We will incur non-cash compensation with respect to the value of the options, based of Black-Scholes valuation, as the options become

Effects of Possible Delisting of Common Stock

On May 23, 2022, we received notice from OTC Markets

Group, that, because the bid price for our common stock had closed below $0.01 per share for more than 30 consecutive days, we no longer

met the Standards for Continued Eligibility under the OTC listing standards and, if this deficiency is not met by August 21, 2022, our

stock would be removed from the OTCQB marketplace, in which event our common stock will be traded on the OTC Pink market.

Our registration

rights agreement with QFL provides that, in the event of a failure to comply with certain covenants, which includes the failure of our

common stock to be traded on the OTCQB, in addition to any other remedies available to QFL, we are to pay to QFL an amount in cash equal

to 2.0% of the aggregate value of QFL’s Registrable Securities, as defined in the Registration Rights Agreement, whether or not

included in such registration statement, on each of the following dates:

(i) the initial day of a maintenance failure;

(ii) on the 30th

day after the date of such a failure and (iii) every 30th day thereafter (prorated for periods totaling less than thirty (30) days) until

such failure is cured.

In July 2022, we amended our certificate of incorporation to effect a one-for-100 reverse split of our common stock.

We subsequently received advice from OTC Markets Group that the deficiency had been cured.

We had previously received a similar notice,

and our common stock was taken off the OTCQB effective August 31, 2020, and it traded on the OTC Pink Market until May 7, 2021 when trading

resumed on the OTCQB.

We cannot assure you that we will continue to meet the requirements for continued listing on the OTCQB, including

the maintenance of a bid price of at least $0.01 per share.

In August 2021, STX brought a patent infringement

suit in the U.S.

District for the Eastern District of Texas against Yamaha Corporation and Steinberg Media Technologies GMBH.

2022, STX brought a patent infringement suit in the U.S.

District for the Eastern District of Texas against Parrot SA, Delair SAS, Drone

Volt, SA, EHang Holdings Limited and Flyability SA.

In July 2022, STX brought a patent infringement suit in the U.S.

District for the

Eastern District of Texas against FUJIFILM Holdings Corporation et al As of December 31, 2022 the matter against FUJIFILM Holdings Corporation

et al has been stayed pending settlement.

The matters against Yamaha Corporation, Steinberg Media Technologies GMBH, Parrot SA, Drone

Volt, SA, Delair SAS and Flyability SA have been resolved, and revenue for the year ended December 31, 2022 includes revenue from

any related settlement.

In September 2021, M-RED Inc.

brought patent infringement

suits in the U.S.

District for the Eastern District of Texas against Biostar Microtech International Corp.

and Giga-Byte Technology Co.,

As of December 31, 2022, those matters have been resolved, and revenue for the year ended December 31, 2022 includes revenue

from any related settlements.

In November 2021, TLL brought patent infringement

suits in the U.S.

District for the Eastern District of Texas against Trend Micro Incorporated.

In March 2022, Trend Micro, Inc.

a complaint against TLL in the U.S.

District for the Western District of Texas seeking declaratory judgement of non-infringement of the

patents in suit.

In February 2022, TLL brought patent infringement suits in the U.S.

District for the Eastern District of Texas against

Checkpoint Software Technologies Ltd.

and Palo Alto Networks, Inc.

In March 2022, TLL voluntarily dismissed, without prejudice, the action

against Palo Alto Networks, Inc.

In March 2022, Palo Alto Networks, Inc.

filed a complaint against TLL and the Company in the U.S.

for the Southern District of New York seeking declaratory judgement of non-infringement of the patents in suit.

In May 2022, Trend Micro

filed a motion with the Panel on Multidistrict Litigation seeking to have the pending actions consolidated into a centralized multidistrict

litigation for pretrial proceedings.

In August 2022, the Judicial Panel on Multidistrict Litigation consolidated all actions in the U.S.

District for the Eastern District of Texas.

In October 2022, TLL brought patent infringement suits in the U.S.

District for the Eastern

District of Texas against Fortinet, inc., Crowdstrike, Inc.

et.al., and Musarubra US, LLC.

In March 2022, LSC brought patent infringement

suits in the U.S.

District for the Eastern District of Texas against Microsoft Corporation, Google LLC, Cisco Systems, Inc.

and Amazon.com,

In November 2022, Google LLC filed a petition before the patent trial and appeal board for inter partes review of US Patent

On January 27, 2022, the Company acquired, via

assignment from Intellectual Ventures Assets 181 LLC and Intellectual Ventures Assets 174 LLC, all right title and interest to four patent

portfolios consisting of fifteen United States patents and three foreign patents for a purchase price of $1,060,000.

The Company requested

and received a capital advance in the amount of the $1,060,000 purchase price from the facility with QFL.

The patents were assigned to

our wholly owned subsidiaries Tyche Licensing LLC and Deepwell IP LLC.

In May 2022, Tyche brought patent infringement suits in the U.S.

District for the Eastern District of Texas against MediaTek Inc., Realtek Semiconductor Corporation, Texas Instruments Incorporated, Infineon

Technologies AG and STMicroelectronics NV et.

In May 2022, Tyche voluntarily dismissed, without prejudice, the action against STMicroelectronics

In May 2022, STMicroelectronics, Inc.

filed an action for declaratory judgement of non-infringement in the U.S.

the Northern District of Texas, the action was dismissed without prejudice in July 2022.

In September 2022, the action against Texas Instruments

Incorporated was dismissed with prejudice.

As of December 31, 2022 the actions against MediaTek Inc.

and Infineon Technologies AG

have been stayed pending settlement discussions, which are pending.

In June 2022, MML and AI agreed to amend the Purchase

Agreement to add two additional patent families for an additional $92,000.

We requested and received a capital advance from QFL in the

amount of $92,000, which we used to make payment to AI in August 2022 pursuant to the amendment to the Purchase Agreement.

In July 2022, EDI acquired, via assignment from

Ioli Trust, all right title and interest to a portfolio of five United States patents relating to a system and method for controlling

vehicles and for providing assistance to operated vehicles (“EDI Portfolio”) for a purchase price consisting of 50% of the

net proceeds resulting from monetization of the EDI Portfolio.

In July 2022, we entered into a purchase agreement

with Hewlett Packard Enterprise Development LP and Hewlett Packard Enterprise Company for the purchase of eight United States Patents

for a purchase price of $350,000.

We paid $35,000 upon execution of the agreement with the balance payable within 30 days.

and received a capital advance from QFL in the amount of $350,000, which was used to make payment of the balance in August 2022 pursuant

to the terms of the purchase agreement.

Results of Operations

Years Ended December 31, 2021 and 2020

The following table shows the revenue and operating

expenses for the years ended December 31, 2021 and 2020:

Year ended December 31,

The years ended December 31, 2022 and 2021:

Revenues (patent licensing fees)

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Selling, general and administrative expenses

Total operating expenses

Loss from operations

Revenues for the year ended December 31, 2021

were $2,050,000, as compared with $5,488,088 in 2020, a decrease of $3,438,088, or approximately 63%.

The decrease in 2021 principally

reflects a decrease in patent licensing fees of $3,438,088, or 63%.

Our licensing fees reflect the settlement of litigation for infringement

of our patent rights.

These fees are one-time fees, with the result that there is no continuity of revenues from period to period, and

any revenue we generate in future periods will be solely dependent upon the results of pending and future litigation.

We did not generate

any revenue during the fourth quarter of 2020 or the first three quarters of 2021.

We cannot assure you that we will generate any revenue

from patent licensing fees in the future.

The patent licensing fees of $2,050,000 in 2021 resulted from the licensing and settlements

of the CXT Portfolio, the M-RED Portfolio, the Peregrin Portfolio and the Soundstreak Portfolio litigations.

The patent licensing fees

for 2020 resulted from licensing and settlements of Power Management/Bus Control Portfolio, the CXT Portfolio, the MRED Portfolio and

the Financial Data Portfolio.

Because we were in default under our loans to Intelligent Partners (as successor to United Wireless), with

Intelligent Partners having the ability to declare a default on our notes in the principal amount of $4,672,810, with the possibility

of our seeking protection under the Bankruptcy Act, we ceased our monetization activities, since no counsel would represent us on a contingent

basis in view of the default and possible bankruptcy, and devoted our efforts in negotiating the agreements with QFL and Intelligent Partners.

We resumed our efforts to monetize our intellectual property when we signed the agreements with QFL and Intelligent Partners in February

Our revenue, at least in the near future if not longer, may be affected by factors relating to the COVID-19 pandemic and other domestic

and international issues, including the Russian invasion of Ukraine.

Cost of revenues for 2021 was $1,314,928 which

we incurred in connection with our pending litigations and fees we pay to litigation funding sources, legal counsel, prior owners and

pursuant to monetization proceeds agreements in connection with CXT Portfolio, M-RED Portfolio, Peregrin Portfolio and Soundstreak Portfolio

Cost of revenue for 2021 decreased approximately 72% from cost of revenue for 2020, reflecting the decline in revenue and the

difference in the components of cost of revenue.

Cost of revenue for 2020 was $4,692,969 of litigation and licensing fees paid to litigation

funding sources and legal counsel in connection with the Power Management/Bus Control, the CXT Portfolio, the M-RED Portfolio and the

Financial Data Portfolio licensing programs.

Other income (expense)

Gain on forgiveness of debt

Gain on settlement of accounts payable

Warrant expense

Change in fair market value of warrant liability

Loss on conversion of debt

Loss on debt extinguishment

Loss on impairment of assets

Interest expense

Total other income (expense)

Loss before income tax

Income tax benefit (expense)

$ (4,154,799 )

We generated revenues of approximately $451,000

for the year ended December 31, 2022 as compared to $2,050,000 for the year ended December 31, 2021.

Our revenue for the year ended December 31,

2022 was generated from licenses pursuant to the settlement of patent infringement lawsuits in the M-RED, AMI and STX portfolios.

for the year ended December 31, 2021 resulted from the licenses granted pursuant to the settlement of patent infringement lawsuits in

the CXT Portfolio, the M-RED Portfolio, the Peregrin Portfolio and the Soundstreak Portfolio litigations.

Cost of revenue for the years

ended December 31, 2022 and 2021 was approximately $304,000 and $1,315,000, respectively.

The timing and amount of our revenue is dependent

upon the results of litigation seeking to enforce our intellectual property rights, and we cannot predict when or whether we will have

a recovery and how much of the recovery will be received by us after payments to legal counsel, to our funding sources, to inventors/former

patent owners and to Intelligent Partners who have an interest in our share of the recovery from certain patent portfolios after deducting

payments due to counsel and the litigation funding source.

Selling, general, and administrative expenses

for 2021 increased by approximately $2,335,000, or by approximately 154%, from approximately $1,514,000 in 2020 to approximately $3,849,000

Our principal selling, general and administrative expense for 2021 was stock-based compensation of approximately $1,916,000 resulting

from stock and options granted to officers, directors and consultants.

We did not incur stock-based compensation in 2020.

Our principal

selling, general and administrative expense for 2020 was amortization expense of approximately $648,000 relating to amortization of our

patent portfolios.

Amortization expense for 2021 was approximately $1,160,000

Other income (expense) for 2021 included an approximately $730,000

loss on the extinguishment of debt, an approximately $306,000 loss on conversion of debt and warrant expense of approximately $1,155,000.

The warrants issued to QFL were accounted for as liabilities and the warrant liability is fair valued at each reporting period.

in fair market value between reporting periods is recorded as other income.

Other income (expense) for 2021 included an increase in the

fair value of the warrant liability of approximately $481,000.

We realized a gain of approximately $275,000 on derivative liability in

the comparable period of 2020, which related to our obligations under our agreements with Intellectual Partners as transferee of United

In connection with the termination of our obligations under the United Wireless notes, the associated derivative liability was

settled and written off to additional paid in capital and commencing in 2021, we no longer have a derivative liability.

See Note 4 of

Notes to Consolidated Financial Statements.

Other income also reflects a gain on forgiveness of debt of approximately

$3,593,000 for the year ended December 31, 2021 which represents the gain on resolution of the disputed and unpaid legal services performed

our former legal counsel for services relating to the monetization of our intellectual property rights and the gain on forgiveness of

debt resulting from amendment to our agreements with IV.

The gain on forgiveness was offset by a loss on impairment of assets of approximately

$1,652,000 associated with the write down of the Power Management/Bus Controller, CXT and M-RED portfolios resulting from our decision

to no longer allocate resources to their monetization.

Other income also reflects interest expense of

approximately $292,000 for the year ended December 31, 2021 which reflects the accrued interest payable on the principal amount of QFL

Interest expense for the year ended December 31, 2020 was approximately $804,000 which reflects the interest accrued on our

note to Intelligent Partners.

The decrease in interest expense reflects the termination of accrued interest upon maturity on our note

to Intelligent Partners.

We had an income tax expense of approximately

$2,000 for 2021 as compared with approximately $65,000 in 2020.

The income tax expense in 2020 results primarily from foreign taxes paid

with respect to certain of our settlement agreements.

As a result of the foregoing, we had a net loss

of approximately $4,155,000, or $0.01 per share (basic and diluted) for 2021 compared to net loss of approximately $1,313,000, or $0.00

per share (basic and diluted), for 2020.

for the year ended December 31, 2022 decreased by approximately $1,869,000, or approximately 49%, compared to the year ended December,

Our principal expenses for the year ended December 31, 2022 was amortization of intangible assets of approximately $910,000 and

professional fees of $513,000.

Our compensation expense includes stock-based compensation of approximately $117,000 and $1,916,000 for

the years ended December 31, 2022 and 2021, respectively.

Other income and expense for the year ended December

31, 2022 included a gain on change in fair value of warrant liability of approximately $1,491,000.

We realized a loss on change in fair

value of warrant liability of approximately $481,000 for the year ended December 31, 2021.

The fair value of the warrant liability is

affected by the price of our common stock, so the liability increases as the stock price goes up, resulting in an expense, and decreases

as the stock price goes down resulting in income from change in warrant liability.

Other expense also reflects interest expense of approximately

$413,000 for the year ended December 31, 2022 and approximately $292,000 for the year ended December 31, 2021.

The increase in interest

expense reflects the accrued interest payable on the principal amount of QFL facility.

During the year ended December 31, 2021, we realized

a gain on settlement of accounts payable of approximately $1,726,000 and a gain on forgiveness of debt of approximately $1,850,000.

expense during year ended December 31, 2021 also included an approximately $730,000 loss on extinguishment of debt, an approximately $306,000

loss on conversion of debt, an approximately $1,652,000 loss on impairment of assets, and warrant expense of approximately $1,155,000.

We incurred income tax benefit (expense) of approximately

$1,000 and $(2,000) for the years ended December 31, 2022 and 2021, respectively.

As a result of the foregoing, we realized a net

loss of approximately $754,000, or $0.14 per share (basic and diluted), for the year ended December 31, 2022, compared to net loss of

approximately $4,155,000, or $0.81 per share (basic and diluted), for the year ended December 31, 2021.

Liquidity and Capital Resources

At December 31, 2021, we had current assets of

approximately $277,000, current liabilities of approximately $8,403,000.

Our current liabilities include liabilities of $3,203,000 payable

to QFL, a non-interest bearing total monetization proceeds obligation (the “TMPO”) to Intelligent Partners in the amount of

$2,805,000 under the Restructure Agreement, which is only payable from money generated from the monetization of intellectual property,

loans payable of $138,000 due to former directors and minority stockholders and accrued interest of approximately $492,000.

As of December

31, 2021, we have an accumulated deficit of approximately $25,436,000 and a negative working capital of approximately $8,126,000.

than salary to our chief executive officer, we do not contemplate any other material operating expense in the near future other than normal

general and administrative expenses, including expenses relating to our status as a public company filing reports with the SEC and the

amortization of stock-based equity issued to consultants, which is a non-cash item.

Because our agreements with our litigation funding

sources do not require us to make any payments relating to the litigation, we do not incur expenses with respect to litigation covered

by the funding sources.

As of December 31, 2021, there was approximately $1,132,000 of unrecognized compensation expense related to nonvested

stock option awards that is expected to be recognized over a weighted average expected term of 8 years.

As a result of our restructure of our agreement

with Intelligent Partners, the outstanding notes to Intelligent Partners were cancelled and replaced with agreements that provide for

payments if we receive proceeds from our intellectual property as described above under “Agreements for QFL and Intelligent Partners.”

At December 31, 2022, we had current assets

of approximately $96,000, and current liabilities of approximately $9,586,000.

Our current liabilities include funding liabilities of

approximately $5,453,000 payable to QFL, a non-interest bearing total monetization proceeds obligation (the “TMPO”) to Intelligent

Partners in the amount of approximately $2,797,000 under the Restructure Agreement, both of which are only payable from money generated

from the monetization of intellectual property, loans payable of approximately $138,000, accounts payable and accrued liabilities of approximately

$149,000, warrant liability of approximately $145,000, and accrued interest of approximately $905,000.

As of December 31, 2022, we have

an accumulated deficit of approximately $26,189,000 and a negative working capital of approximately $9,490,000.

Other than salary and

pension benefits to our chief executive officer, we do not contemplate any other material operating expense requiring cash in the near

future other than normal general and administrative expenses, including expenses relating to our status as a public company filing reports

with the SEC.

The following table shows the summary cash flows

for the years ended December 31, 2022 and 2021:

Year ended December 31,

Cash flows from operating activities

Cash flows from investing activities

For the Year Ended

Cash flows used in operating activities

Cash flows used in investing activities

Cash flows from financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

Cash at beginning of year

Cash at end of year

For 2021, we used approximately $50,000 in operations.

Our cash flow used in operations for 2021 reflected our loss of approximately $4,155,000, which was offset principally by a loss on impairment

of assets of approximately $1,652,000, stock based compensation of approximately $1,916,000, amortization of intangible assets of approximately

$1,160,000, warrant expense of approximately $1,155,000, a decrease in accounts receivable of approximately $1,032,000, a decrease in

accounts payable and accrued expenses of approximately $1,037,000, a loss on debt extinguishment of approximately $730,000, a loss on

warrant liability of approximately $481,000 and a loss on conversion of debt of approximately $306,000, and increased by a gain on forgiveness

of debt of approximately $1,850,000 and a gain on settlement of accounts payable of approximately $1,726,000.

For 2020, we used approximately $246,000 in operations.

Our cash flow used in operations for 2020 reflected our loss of approximately $1,300,000, and the amount used in operations increased

primarily by a decrease in accounts payable and accrued expenses of approximately $471,000, and the gain on derivative liability of $275,000

offset by a decrease in accounts receivable of approximately $750,000, depreciation and amortization of approximately $648,000, amortization

of debt discount of approximately $435,000 and bad debt expense of $66,000.

Cash flow from financing activities in 2021 included proceeds from

a third-party loan of approximately $3,900,000 offset by the payment of the purchase price of patents of approximately $924,000, payment

of $1,750,000 of a loan from a related party from the proceeds of the third-party loan and the payment of $9,000 of a loan from a third

Cash flow from financing activities for 2020 reflected

the proceeds of an SBA loan of approximately $172,000, the payment of the purchase price of patents of approximately $194,000 and proceeds

from the sale of future revenues of approximately $95,000 offset by payment made on the sale of future revenues of approximately $20,000.

Under the agreement with the litigation funder, the third party lender receives an interest in the proceeds.

In 2021 and 2020, cash flow from investing activities

included $1,150,000 and $95,000, respectively for the purchase of patents from third parties.

In 2021, non-cash investing and financing activities

consisted of shares issued for conversion of debt of approximately $556,000, interest added to principal of approximately $6,000 and options

granted for settlement of debt of approximately $598,000.

In 2020, non-cash investing and financing activities consisted of resolution

of derivative liability of $320,000 and interest added to principal of approximately $3,000.

We cannot assure you that we will be successful

in generating future revenues, in obtaining additional debt or equity financing or that such additional debt or equity financing will

be available on terms acceptable to us, if at all, or that we will be able to obtain any third party funding in connection with any of

our intellectual property portfolios.

be available on terms acceptable to us, if at all, or that we will be able to obtain any third-party funding the

value of anything received from the monetization of the intellectual property rights covered by the Security Agreement;

in connection

with any of our intellectual property portfolios or that we will receive any of the proceeds of any litigation settlements after making

all required payments to counsel and funding sources and payments to Intelligent Partners.

We have no credit facilities.

agreements provide for QFL or QF3 to provide us with funding to acquire intellectual property rights, subject to QFL’s or QF3’s

approval, it does not provide for financing the litigation necessary for the monetization of the intellectual property rights.

have any credit facilities or any arrangements for us to finance the litigation necessary to monetize our intellectual property rights

other than contingent fee arrangements with counsel with respect to our pending litigation.

If we do not secure contingent representation

or obtain litigation financing, we may be unable to monetize our intellectual property.

We cannot predict the success of any pending or

future litigation seeking to enforce our intellectual property rights.

In February 2021, we signed a funding agreement

with QFL, as described in “Agreements with QFL and Intelligent Partners” above and in “Summary of Agreements with QFL”

future litigation.

Typically, our agreements with the funding sources provide that the funding sources will participate in any recovery

which is generated.

We believe that our financial condition, our history of losses and negative cash flow from operations, and our low

stock price make it difficult for us to raise funds in the debt or equity markets.

As noted below, there is a substantial doubt about

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On an on-going basis, we evaluate our estimates including the allowance for doubtful

accounts, the salability and recoverability of our products, income taxes and contingencies.

We base our estimates on historical experience

and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments

about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these

estimates under different assumptions or conditions.

accounts, income taxes and contingencies.

We base our estimates on historical experience and on other assumptions that we believe to be

reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities

that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting

policies affect the significant judgments and estimates used in the preparation of the financial statements.

Principles of Consolidation

Our consolidated financial statements are prepared

in accordance with US GAAP and present the financial statements of us and our wholly-owned subsidiaries.

In the preparation of our consolidated

financial statements, intercompany transactions and balances are eliminated.

The consolidated financial statements are prepared

in accordance with US GAAP and Rule 8-03 of Regulation S-X of the SEC, and present the financial statements of the Company and our wholly-owned

and majority-owned subsidiaries.

In the preparation of our consolidated financial statements, intercompany transactions and balances are

Use of Estimates and Assumptions

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Actual results could differ from those estimates.

Revenue Recognition

Patent Licensing Fees

Revenue is recognized upon transfer of control

of promised bundled intellectual property rights and other contractual performance obligations to licensees in an amount that reflects

the consideration we expect to receive in exchange for those intellectual property rights.

Revenue contracts that provide promises to

grant “the right” to use intellectual property rights as they exist at the point in time at which the intellectual property

rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in

time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met.

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.

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 promised 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

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.

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 30-90 days of

execution of the contract.

Contractual payments made by licensees are generally non-refundable.

We do 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.

Cost of Revenues

Cost of revenues include the costs and expenses

incurred in connection with our patent licensing and enforcement activities, including inventor royalties paid to original patent owners,

contingent litigation funding fees, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to

external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization

of patent-related investment costs.

These costs are included under the caption “Cost of revenues” in the accompanying consolidated

statements of operations.

No such fees are recognized as a cost of revenue to the extent that we have no obligation with respect to fees

prior to a settlement or license.

Inventor Royalties, Contingent Litigation Funding

Fees and Contingent Legal Expenses.

Inventor royalties are expensed in the consolidated

statements of operations in the period that the related revenues are recognized.

Contingent litigation funding and legal fees are expensed

in the consolidated statements of operations in the period that the related revenues are recognized.

In instances where there are no recoveries

from potential infringers, no contingent litigation funding fees are due.

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.

We recorded an allowance for doubtful accounts of $0 and $66,000 as of December

31, 2021 and December 31, 2020, respectively.

Intangible Assets

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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.

impairment upon any triggering event that may impact 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

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Patent acquisition

costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to twenty years.

costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years.

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 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.

the year ended December 31, 2021, the we recorded non-cash impairment charges of approximately $1,652,000 to write down finite lived intangible

assets in the Power Management/Bus Controller, CXT and M-RED portfolios.

See Note 6 of Notes to Consolidated Financial Statements.

Warrant Liability

We reflect a warrant liability with respect to

warrants for which 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 include under other income (expense).

See Note 4 of Notes to Consolidated Financial Statements.

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).

Fair Value of Financial Instruments

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These inputs are prioritized below:

Observable inputs such as quoted market prices in active markets for identical assets or liabilities

Observable market-based inputs or unobservable inputs that are corroborated by market data

Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Observable inputs such as quoted

market prices in active markets for identical assets or liabilities

Observable market-based inputs

or unobservable inputs that are corroborated by market data

Unobservable inputs for

which there is little or no market data, which require the use of the reporting entity’s own assumptions.

In addition, FASB ASC 825-10-25 “Fair Value

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and permits entities to choose to measure many financial instruments and certain other items at fair value.

We record revenues on a gross basis, before deduction

for income taxes.

We incurred income tax expenses of approximately $2,000 and $65,000 for the years ended December 31, 2021 and 2020,

respectively.

Stock-Based Compensation

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to ASC 718, “Compensation — Stock Compensation,” which prescribes accounting and reporting standards for all stock-based

payment transactions in which employee services, and, since January1, 2019, non-employee services, are acquired.

Transactions include

incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans

and stock appreciation rights.

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.

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).

Business Combinations

The acquisition of STX and LS Cloud Storage Technologies,

LLC (“LSC”) were accounted for in accordance with ASC 805, Business Combinations (“ASC 805”).

ASC 805 provides,

among other things, that the assets acquired and liabilities assumed constitute a business.

If the assets acquired are not a business,

the reporting entity shall account for the transaction or other event as an asset acquisition which are accounted for using a cost accumulation

and allocation model under which the cost of the acquisition is allocated to the assets acquired and liabilities assumed.

LSC were recorded as asset acquisitions.

See Note 9 of Notes to Consolidated Financial Statements.

Gain from Cancelation of Indebtedness

We recognized a gain from the elimination of liability

for minimum cumulative net proceeds distributions constituting a portion of the purchase price due to the seller of two of our patent

portfolios and the reduction of liability for legal services resulting from the settlement of our recorded obligation for unpaid legal

See Note 3 of Notes to Consolidated Financial Statements.

payment transactions in which employee and non-employee services, are acquired.

Transactions include incurring liabilities, or issuing

or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights.

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.

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).

Long-Lived Assets

We review for impairment whenever events or circumstances

indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment

or Disposal of Long-Lived Assets”.

We recognize an impairment loss when the sum of expected undiscounted future cash flows is less

than the carrying amount of the asset.

The amount of impairment is measured as the difference between the asset’s estimated fair

value and its book value.

Revenue Recognition

We recognize 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

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.

We adopted Topic 606 as of January 1, 2018 using the modified retrospective

transition method, with no impact on the consolidated financial position or results of operations.

Patent Licensing Fees

Revenue is recognized upon transfer of control

of promised bundled intellectual property rights and other contractual performance obligations to licensees in an amount that reflects

the consideration we expect to receive in exchange for those intellectual property rights.

Revenue contracts that provide promises to

grant “the right” to use intellectual property rights as they exist at the point in time at which the intellectual property

rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in

time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met.

For the periods presented, revenue contracts executed

by us 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 our operating 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) our 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 promised intellectual property rights

are not individually distinct, we 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.

Our subsequent activities do not substantively

change that functionality and do not significantly affect the utility of the IP to which the licensee has rights.

Our 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.

contracts generally provide for payment of contractual amounts within 30-90 days of execution of the contract.

Contractual payments made

by licensees are generally non-refundable.

We do 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.

Cost of Revenue

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 patent amortization, integration or support,

as these are included in general and administrative expenses.

Commitments and Contingencies

In connection with the investment in certain patents

and patent rights, certain of our 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.

Our 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.

Our 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 our 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.

Recent Accounting Pronouncements

Management does not believe that there are any

recently issued, but not effective, accounting standards which, if currently adopted, would have a material effect on the Company’s

financial statements.

recently issued, but not effective, accounting standards which, if currently adopted, would have a material effect on our financial statements.

Going Concern

We have an accumulated deficit of approximately

$25.4 million and negative working capital of approximately $8.1 million as of December 31, 2021.

$26,189,000 and negative working capital of approximately $9,490,000 as of December 31, 2022.

Because of our continuing losses, our

working capital deficiency, the uncertainty of future revenue, the possible effect of a judgement against one or more of our subsidiaries

for legal fees;

our low stock price and the absence of a trading market in our common stock, our ability to raise funds in equity market

or from lenders is severely impaired.

These conditions raise substantial doubt as to our ability to continue as a going concern.

we may seek to raise funds and to obtain third party funding for litigation to enforce its intellectual property rights, the availability

of such funds in uncertain, and our use of the funds from funding sources relating to the monetization of our intellectual property may

not be available for working capital purposes.

Our financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

working capital deficiency, the uncertainty of future revenue, our obligations to QF3, QFL, Intelligent Partners, our low stock price

and the absence of a trading market in our common stock, our ability to raise funds in the equity market or from lenders is severely impaired.

These conditions, together with the effects of the COVID-19 pandemic and the steps taken by the states to slow the spread of the virus

and its effect on our business as well as any adverse consequences which would result from our failure to remain listed on the OTCQB,

raise substantial doubt as to our ability to continue as a going concern.

Our revenue is generated almost exclusively from license fees

generated from litigation seeking damages for infringement of our intellectual property rights.

Although we 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.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

We have not entered into any other financial guarantees

or other commitments to guarantee the payment obligations of any third parties.

We have not entered into any derivative contracts that

are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements.

Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit,

liquidity or market risk support to such entity.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined

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

What changed 10-K

Item 7. Management’s Discussion and Analysis