What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-31 · 763 added, 869 removed, 936 unchanged (64% of the section changed)

48 unchanged sentences

condition makes it difficult for us to implement a system of internal controls over financial reporting.

Until we generate significantly greater revenues

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.

Due to the nature of this material weakness in our internal control over financial reporting, there

is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements could not be

prevented or detected.

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.

Due to the nature of this material weakness in our internal control over financial

reporting, there is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements

could not be prevented or detected.

A material weakness (within the meaning of PCAOB

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William Ryall Carroll

Prior to January 2016, our directors were elected

to serve for a term of one year until our next annual meeting of the stockholders or unless he resigns earlier.

On January 22, 2016, following

approval by the stockholders, we amended and restated our certificate of incorporation.

Our amended and restated certificate of incorporation

provides for a classified board of directors.

Our classified board of directors has three classes of directors – Class I directors,

Class II directors and Class III directors.

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.

At the meeting, the stockholders voted on the election of two Class I directors, one Class II director and one Class III director.

Scahill, a Class I director, has been president

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director since October 2014 and our chief technology officer since 2007.

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.

As chief technology officer, Mr Scahill is responsible for our

cybersecurity protection.

Scahill is also currently a managing partner of Managed Services Team LLC, an IT services provider.

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

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.

William Ryall Carroll, a Class III director,

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Name & Principal Position

Warrant Awards

Non-Equity Plan Compensation

Nonqualified Deferred Earnings

All Other Compensation (3)

Options/Warrant

CEO and President

$ 588,000 (1)

$ 240,000 (2)

(1) Represents the value of 490,000 shares granted Mr.

(2) Represents the value of an option to purchase 200,000 shares

of common stock

(3) Represents the payments made by the Company under the SEP

IRA adopted in March 2020

(1) Represents the payments made by the Company under the SEP IRA.

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.

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.

annual salary to $600,000, effective January 1, 2016.

Scahill is entitled to a bonus if we meet or exceed performance criteria established

by the 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).

Scahill is also eligible to participate in any executive incentive plans which we may adopt.

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.

Scahill’s annual salary to $600,000,

effective January 1, 2023.

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

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).

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.

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’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.

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.

Scahill is our only

employee covered by the plan.

In March 2020, the Company adopted a SEP IRA plan for its

Scahill is our only employee covered by the plan.

Pension Benefits

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For the year ending December 31, 2023 the percentage was set at 11%.

our only employee covered by the plan.

Our Chief Executive

Officer and Chief Technology Officer, who are our only employees, are covered by the plan.

2017 Equity Incentive Plan

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2021, the board amended the Plan to increase the number of shares subject to the plan to 5,000,000.

Set forth below is a summary of the

plan, as amended, but this summary is qualified in its entirety by reference to the full text of the plan, a copy of which is included

as an exhibit to this annual report.

The plan provides for the grant of non-qualified

options, stock grants and other equity-based incentives to employees, including officers, directors and consultants.

On February 19, 2021, the board of directors:

● granted restricted stock grants for 100,000 shares, which

vested in full immediately upon issuance, to each of three consultants pursuant to agreements with the consultants;

● granted restricted stock grants for a total of 690,000 shares,

which vested in full immediately upon issuance, to our directors, Jon C.

Scahill (490,000 shares), Timothy J.

Scahill (100,000 shares)

Carroll (100,000 shares) as compensation for services rendered;

● granted a restricted stock grant to Ryan T.

Logue for 50,000

shares upon his acceptance of his appointment as a director;

● granted non-qualified ten-year stock options to purchase

300,000 shares to each of three consultants pursuant to agreements with the consultants, the options to vest as provided in their agreements.

● granted a non-qualified ten-year stock option to purchase

600,000 shares to Jon C.

Scahill, which vest in installments as described under Item 11.

Executive Compensation.

The options granted to two of the consultants

become exercisable as follows:

● 100,000 shares at an exercise price of $1.00 per share becoming

exercisable upon the commencement of trading of the Common Stock on the OTCQB which occurred on May 7, 2021.

● 100,000 shares at an exercise price of $3.00 per share, becoming

exercisable on the first day on which the Company files with the SEC a Form 10-K or Form 10-Q which stockholders’ equity of at

least $5,000,000, and

● 100,000 shares at an exercise price of $5.00 per share becoming

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 options granted the third consultant become

exercisable as follows:

The plan provides for the grant of

non-qualified options, stock grants and other equity-based incentives to employees, including officers, directors and consultants.

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.

As of December 31, 2023, there were outstanding

options to purchase a total of 2,000,000 shares of common stock, of which options to purchase 600,000 shares were held by Jon Scahill,

our chief executive officer.

Of the options held by Mr.

Scahill, options to purchase 200,000 shares at an exercise price of $1.00 per

share are currently exercisable, and options to purchase 200,000 shares become exercisable upon each of the following events -- 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, and on the date on which

our common stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange.

Also outstanding on December 31, 2023 were options granted to two consultants

at prices from $1.00 to $5.00 which become exercisable as follows:

● 100,000 shares at an exercise price of $1.00 per share becoming exercisable

upon the commencement of trading of the Common Stock on the OTCQB which occurred on May 7, 2021.

● 100,000 shares at an exercise price of $3.00 per share, becoming exercisable

on the first day on which the Company files a Form 10-K or Form 10-Q which stockholders’ equity of at least $5,000,000, and

● 100,000 shares at an exercise price of $5.00 per share becoming exercisable

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

Also outstanding on December 31, 2023 were options granted to one consultant

at prices from $1.00 to $5.00 which become exercisable as follows:

● 100,000 shares at an exercise price of $1.00 per share became

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become exercisable on February 22, 2024, which will be the third anniversary of the date of the agreement.

The options granted to Jon C.

Scahill become exercisable

● 200,000 shares at an exercise price of $1.00 per share becoming

exercisable upon the commencement of trading of the Common Stock on the OTCQB, which occurred on May 7, 2021.

● 200,000 shares at an exercise price of $3.00 per share, becoming

exercisable on the first day on which the Company files with the SEC a Form 10-K or Form 10-Q which stockholders’ equity of at

least $5,000,000, and

● 200,000 shares at an exercise price of $5.00 per share becoming

exercisable on the date on which the Common Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange.

Outstanding Equity Awards at Fiscal Year-End

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Option awards

Number of securities

underlying unexercised

options (#) exercisable

Number of securities

underlying unexercised

options (#) unexercisable

incentive plan

Equity incentive plan

securities underlying

unexercised unearned

(1) Represents 200,000 shares granted to Mr.

Scahill on February

22, 2021 at an exercise price of $1.00 per share becoming exercisable upon the commencement of trading of the Common Stock on the OTCQB.

The Company regained such compliance on May 7, 2021, at which time the common stock recommenced trading on the OTCQB.

(2) Represents 200,000 shares granted to Mr.

Scahill on February

22, 2021 at an exercise price of $3.00 per share, becoming exercisable on the first day on which the Company files with the SEC a Form

10-K or Form 10-Q which stockholders” equity of at least $5,000,000

(3) Represents 200,000 shares granted to Mr.

Scahill on February

22, 2021 at an exercise price of $5.00 per share becoming exercisable on the date on which the Common Stock is listed for trading on

the Nasdaq Stock Market or the New York Stock Exchange

Option exercise

Option expiration date

(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

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of Beneficial

Fitton (2) 300 Bowie St., Apt.

2803 Austin, TX 78703

Intelligent Partners, LLC (3) 300 Bowie St., Apt.

2803 Austin, TX 78703

Carper (4) 13218 Tamayo Drive Austin, TX 78729

Intelligent Partners, LLC (4)

William Ryall Carroll

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(2) Represents (a) 1,400,000 shares owned by Mr.

Scahill and (b)

200,000 shares issuable upon exercise of options held by Mr.

(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

2803 Austin, TX 78703.

(4) Represents 500,000 shares of common stock issuable upon exercise

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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 issuable upon exercise of an option held by Intelligent Partners.

and (b) 500,000 shares of common stock issuable upon exercise of an option held by Intelligent Partners.

CERTAIN RELATIONSHIPS AND RELATED

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Related Transactions

In prior periods, we incurred interest expense

on our 10% notes issued to United Wireless pursuant to the securities purchase agreement dated October 22, 2015 more fully described in

our annual report on Form 10-K for the year ended December 31, 2021.

The notes were extinguished in February 2021, and we did not incur

interest expense on the notes for the years ended December 31, 2022 and 2021.

Reference is made to the discussion of our agreements

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Timothy Scahill, our chief technology officer and a director, is a managing partner, provides information technology services to us.

are obligated to pay for these services at usual and customary rates.

The cost of these services was approximately $205 and $434 for the

year ended December 31, 2022 and 2021, respectively.

pay for these services at usual and customary rates.

The cost of these services was approximately $0 and $205 for the years ended December

31, 2023 and 2022, respectively.

During 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 patent service costs of approximately $85,000 and $763,000 for the years ended December 31, 2022 and

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 $50,000 and $0 for the years ended December 31, 2023 and 2022, respectively.

During 2023 and 2022, 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 $5,316,000 and $85,000 for the years ended December 31, 2023 and 2022,

respectively.

In prior periods, we engaged a firm at which the father-in-law of the chief executive was formerly a partner.

his interest in the prior firm was less than 10%, the prior firm was not considered a related party in prior periods.

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

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by our independent accountants, Rosenberg Rich Baker Berman P.A.

(“RRBB”) and MaloneBailey for 2022 and 2021 for the categories

of services indicated.

(“RRBB”) for 2023 and 2022 for the categories of services

Fiscal Year Ended

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Bylaws of the Company.

Restated Employment Agreement dated as of November 30, 2014 between the issuer and between the Company and Jon C.

Restated Employment Agreement dated as of November 30, 2014 between the Company and Jon C.

Restricted Stock Grant dated October 30, 2014 between the Company and Jon C.

5 unchanged sentences

William Ryall Carroll.

Indemnification

agreement, dated February 19, 2021 between the Company and Ryan T.

Indemnification agreement, dated February 19, 2021 between the Company and Ryan T.

Patent Sale Agreement, effective July 8, 2015 between Intellectual Ventures Assets 16 LLC and the Company.(2)

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Purchase Agreement dated March 12, 2023 among the Company and QPRC Finance III LLC (9) †

Certification of Chief Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.

Certification of Chief Executive Officer and Acting Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Section 1350 Certification of the Chief Executive Officer and Acting Chief Financial Officer.

Inline XBRL Instance Document.

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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.

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.

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.

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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.

Filed herewith

Certain confidential information has been deleted from this Exhibit.

Incorporated by reference to the Form 10-K for the year ended December

31, 2022 which was filed on March 31, 2023.

† Certain confidential information

has been deleted from this Exhibit.

FORM 10-K SUMMARY

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the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

March 31, 2023

QUEST PATENT RESEARCH CORPORATION

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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.

Director, Chief Executive Officer, Acting Chief Financial Officer, and President (Principal Executive, Financial and Accounting Officer)

March 31, 2023

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.

Director, Chief Executive Officer, Acting Chief

Financial Officer, and President (Principal Executive,

Financial and Accounting Officer)

/s/ Timothy J.

March 31, 2023

William Ryall Carroll

March 31, 2023

William Ryall Carroll

March 31, 2023

QUEST PATENT RESEARCH CORPORATION

DECEMBER 31, 2022

Index to Consolidated Financial Statements

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Notes to Consolidated Financial Statements F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

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balance sheets of Quest Patent Research Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022,

and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the years then

ended, and the related notes (collectively referred to as the “consolidated financial statements”).

and the related consolidated statements of operations, 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 at December, 2022 and 2021, 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.

financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022,

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

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standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

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.

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

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Our audits included performing procedures to assess

the risks of material misstatement of the consolidated 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

consolidated 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 consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Emphasis of Matter

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.

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

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Cash and cash equivalents

Accounts receivable, net of allowance for credit losses of $ 0 and $ 0 , respectively

Other current assets

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authorized 30,000,000 at December 31, 2023 and 2022;

shares issued and outstanding 5,331,973 at December 31, 2022 and 5,333,347 ,at December 31, 2021

5,331,973 shares issued and outstanding at December 31, 2023 and December 31, 2022

Additional paid-in capital

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Total liabilities and stockholders’ deficit

See the accompanying notes to the consolidated

financial statements.

See the accompanying notes to the consolidated financial statements.

QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

Year Ended December 31,

Patent licensing fees

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Total operating expenses

Loss from operations

( 1,832,195 )

Income (loss) from operations

( 1,832,195 )

Other income (expense)

Gain on forgiveness of debt

Gain on settlement of accounts payable

Warrant expense

( 1,154,905 )

Change in fair market value of warrant liability

Loss on conversion of debt

Loss on debt extinguishment

Loss on impairment of assets

( 1,651,614 )

Interest expense

Total other income (expense)

( 1,061,387 )

Loss before income tax

Total other income (expense)

( 1,197,768 )

Income (loss) before income tax

Income tax benefit (expense)

$ ( 753,516 )

Net income (loss)

$ ( 753,516 )

Loss per share - basic and diluted

Income (loss) per share - basic and diluted

Weighted average shares outstanding - basic and diluted

See the accompanying notes to the consolidated

financial statements.

See the accompanying notes to the consolidated financial statements.

QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Non-controlling

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$ ( 7,926,723 )

Restricted shares issued for services

Shares issued for conversion of debt

Option issued for debt extinguishment

Stock-based compensation

( 4,154,799 )

Effect of reverse split

Balances as of December 31, 2022

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Stock-based compensation

Effect of reverse split

Balances as of December 31, 2023

1 unchanged sentence

$ ( 4,864,539 )

See the accompanying notes to the consolidated

financial statements.

See the accompanying notes to the consolidated financial statements.

QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS

Year Ended December 31,

Cash flows from operating activities:

$ ( 753,516 )

Net income (loss)

$ ( 753,516 )

Adjustments to reconcile net loss to cash used in operating activities:

Amortization of debt discount

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

Change in fair market value of warrant liability

1 unchanged sentence

Stock-based compensation

Warrant expense

Gain on settlement of accounts payable

( 1,725,965 )

Gain on forgiveness of debt

( 1,850,018 )

Amortization of intangible assets

Loss on conversion of debt

Loss on debt extinguishment

Loss on impairment of assets

Bad debt expense

Change in operating assets and liabilities:

Accounts receivable

( 3,008,250 )

Accrued interest

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Accounts payable and accrued liabilities

( 1,036,637 )

Patents loan payable

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchase of patents

Purchase of intangible assets

( 3,330,000 )

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Payments on loans - related party

( 1,750,000 )

Payment on loan payable - third party

Proceeds from funding liability

Payment of funding liability

Payment of purchase price of patents

( 4,127,702 )

Net cash provided by financing activities

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Non-cash investing and financing activities:

Shares issued for conversion of debt

Interest added to principal

Options granted for settlement of debt

Supplemental disclosure of cash flow information:

Cash paid during the period for:

See the accompanying notes to the consolidated

financial statements.

See the accompanying notes to the consolidated financial statements.

QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Financial Statement

Principles of Consolidation and Financial

Statement Presentation

The consolidated financial statements are prepared

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Digital IP Advisors Inc.

(wholly owned) (formerly Quest Licensing Corporation (NY))

(“DIPA”) (wholly owned) (formerly Quest Licensing Corporation (NY))

Quest Licensing Corporation

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(wholly owned)

In February 2022, the Company changed the name

of Quest Licensing Corporation to Digital IP Advisors Incorporated.

Significant intercompany transaction and balances

Harbor Island Dynamic LLC

(“HID”) (wholly owned)

Flash Uplink LLC (“FUL”)

(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, 2023 and 2022, none of the Company’s net income or loss was attributable to non-controlling interests.

Reverse Split, Change in Authorized Common

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The amendment (i) decreased the number of authorized shares of common stock from 10,000,000,000

shares to 30,000,000 shares and (ii) effected a one-for-100 reverse split whereby each share of common stock, par value $ 0.00003 per share,

became and was converted into 0.01 shares of such common stock, with fractional shares being rounded up to the next higher whole number

All authorized share and share information in these financial statements retroactively reflect the reverse split and change

in authorized common stock.

shares to 30,000,000 shares and (ii) effected a one-for-100 reverse split whereby each share of common stock, par value $ 0.00003 per

share, became and was converted into 0.01 share of such common stock, with fractional shares being rounded up to the next higher whole

number of shares.

All authorized share and share information in these financial statements retroactively reflect the reverse split and

change in authorized common stock.

Use of Estimates

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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 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,

2023 and 2022.

Accounts Receivable

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when collection of the individual accounts appears doubtful.

The Company did not record an allowance for doubtful accounts at December 31,

The Company did not record an allowance for credit losses at December 31,

2023 and 2022.

The accounts receivable balance at December 31,

2023 of approximately $ 3,008,000 represents amounts due and payable in connection with the settlement of patent infringement lawsuits.

The amounts were fully guaranteed by the licensee pursuant to the license agreement.

The full balance was collected in February 2024.

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 asset’s 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.

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

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 (hereinafter, collectively “patents”) acquired from third-parties or acquired in connection with business combinations.

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.

rights (collectively “patents”) acquired from third-parties or acquired in connection with business combinations.

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

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of the asset is recorded.

The Company recorded a non-cash impairment charge of approximately $ 1,652,000 for the year ended December 31,

2021 to write down finite lived intangible assets in the Power Management/Bus Controller, CXT and M-RED portfolios.

There were no impairments of long-lived assets

for the year ended December 31, 2022.

for the year ended December 31, 2023 and 2022.

Warrant Liability

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an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

See Note 4 for

information about our warrant liability.

for information about our warrant liability.

The fair value hierarchy based on the three levels

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rates of interest approximate current market rates.

The fair value of warrant liabilities are classified as Level 3 in the fair value

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.

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

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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.

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

The economic terms of the inventor agreements,

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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.

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 promised intellectual property rights

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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

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.

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component or consideration payable to the customer in these transactions.

The Company’s revenue for the year ended December 31, 2023 was

generated from licenses pursuant to the settlement of patent infringement lawsuits in the Tyche, STX, MML and TLL portfolios.

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.

Cost of Revenues

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and Contingent Legal Expenses.

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.

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

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these factors.

Revenue from one customer comprised approximately 55 % and approximately 82 % of revenue for the years ended December 31, 2022 and 2021,

respectively.

Deferred income tax assets and liabilities are

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Stock-Based Compensation

The Company recognizes stock-based compensation

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

stock-based 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

Stock-based payments to employees and non-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 or

non-employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

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.

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

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The Company has not experienced any such losses in these accounts.

Business Acquisitions

In August and November 2021, the Company acquired

all of the issued and outstanding equity interests of STX and LSC, respectively.

The acquisitions 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.

Under ASC 805, the company concluded that the acquisitions did not constitute

acquisition of a business and therefore were accounted for as asset acquisitions in accordance with ASC 805.

See Note 11 for more information

regarding the STX and LSC acquisitions.

Gain from Cancellation of Indebtedness

On July 23, 2021, the Company paid $ 1,150,000

in full satisfaction of the disputed and unpaid legal services performed by the Company’s former legal counsel for services relating

to the monetization of the Company’s intellectual property rights.

The Company recognized a gain on settlement of accounts payable

of approximately $ 1,726,000 as a result of the resolution of the dispute.

Net Income (Loss) Per Share

The Company calculates net losses per share by

dividing losses allocated to the Company’s stockholders by the weighted average number of shares of common stock outstanding for

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.

the Company incurred losses in all periods covered by the financial statements the inclusion of diluted weighted average shares would

be anti-dilutive, and therefore, the diluted net loss per share is the same as the basic net loss per share.

The Company’s potentially

dilutive securities include 962,463 potential shares of common stock issuable upon exercise of warrants granted to QFL in connection with

the Purchase Agreement, 500,000 shares of common stock issuable upon exercise of stock options granted to Intelligent Partners in connection

with the Restructure Agreement and 600,000 shares of common stock issuable upon exercise of stock options granted to officers and consultants.

The Company calculates net income (loss) 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.

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.

Because the Company incurred losses for the year ended December 31, 2022, 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.

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 in connection with the Restructure Agreement described in Note 4 and 600,000 shares

of common stock issuable upon exercise of stock options granted to officers and consultants.

See Notes 4, 5 and 6.

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.

Accounting Pronouncements Recently Adopted

In June 2016, the FASB issued ASU No.

Financial Instruments:

Credit Losses (Topic 326) (“ASU 2016-13”), which requires measurement and recognition of expected losses

for financial assets held.

The new standard changes the impairment model for most financial instruments, including trade receivables,

from an incurred loss method to a new forward looking approach, based on expected losses.

The estimate of expected credit losses will

require organizations to incorporate considerations of historical information, current conditions, and reasonable and supportable forecasts.

The standards update is effective prospectively for annual and interim periods beginning after December 15, 2022 for private and smaller

reporting companies.

The Company adopted ASU 2016-13 on January 1, 2023.

The adoption of this standard did not have any impact on these

consolidated financial statements.

Going Concern

As shown in the accompanying financial statements,

the Company has an accumulated deficit of approximately $ 26,189,000 and negative working capital of approximately $ 9,490,000 as of December 31,

Because of the Company’s continuing losses, its working capital deficiency, the uncertainty of future revenue, the Company’s

obligations to Intelligent Partners, and QPRC Finance LLC (“QFL”), the Company’s low stock price and the absence of

an active trading market in its common stock, the ability of the Company to raise funds in the equity market or from lenders is severely

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 its business as well as any adverse consequences which would result from our failure to meet the continued

listing requirements of the OTCQB (see Note 10), raise substantial doubt as to the Company’s ability to continue as a going concern.

The Company’s revenue is generated almost 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.

SHORT-TERM DEBT AND LONG-TERM

The Company has an accumulated deficit of approximately

$ 22,540,000 and negative working capital of approximately $ 8,335,000 as of December 31, 2023.

Although the Company generated income

in 2023, the Company has a history of losses and 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 Intelligent

Partners, QF3, and QFL, the Company’s low stock price and the absence of an active trading market in its common stock, 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 from the Company’s failure to meet the continued listing requirements of the OTCQB (see Note 10), 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.

INTANGIBLE ASSETS

Intangible assets include patents purchased and

are recorded at their acquisition cost.

Intangible assets consisted of the following:

accumulated amortization

( 2,412,397 )

( 1,625,846 )

Net value of intangible assets

Weighted Average Amortization Period (Years)

Intangible assets are comprised of patents with

estimated useful lives.

The intangible assets at December 31, 2023 represent:

● patents (which were fully amortized at the date of acquisition)

acquired in January 2018 pursuant to an agreement with Intellectual Ventures Assets 62 LLC and Intellectual Ventures Assets 71 LLC “(IV

62/71”), pursuant to which CXT has an obligation to distribute 50 % of net revenues to IV 62/71;

● patents (which were fully amortized at the date of acquisition)

acquired in January 2018 by Photonic Imaging Solutions Inc.

(“PIS”) from Intellectual Ventures Assets 64 LLC (“IV 64”)

pursuant to which PIS is to pay IV 64 (a) 70 % of the first $ 1,500,000 of net revenue, (b) 30 % of the next $ 1,500,000 of net revenue and

● patents (which were fully amortized at the date of acquisition)

acquired in May 2020 for a purchase price of $ 95,000 pursuant to an agreement with Texas Technology Ventures 2, LLP (“TTV”),

pursuant to which of the Company retains the first $ 230,000 of net proceeds, as defined in the agreement, after which the company has

an obligation to distribute 50 % of net proceeds to TTV.

● patents (which were fully amortized at the date of acquisition)

acquired in February 2021 pursuant to an agreement with PKT for a purchase price of $ 350,000 , pursuant to which $ 350,000 was paid at

closing, and upon the realization of gross proceeds, as defined in the agreement, the Company shall make a subsequent or payments in

the aggregate amount of $ 93,900 , representing reimbursement to PKT, as the prosecuting attorney, for legal fees associated with prosecution

of the portfolio, such reimbursement shall be due and payable to PKT from time to time as gross proceeds are realized, if any, and paid

to PKT along with and in proportion to reimbursement to other third parties of costs incurred in realizing gross proceeds.

PKT is entitled to a percentage of gross proceeds realized, if any.

● patents (which were fully depreciated at the date of acquisition)

acquired in May 2021 for a purchase price of $ 250,000 .

● 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 January 2022 for a purchase price of

$ 1,060,000 , the useful lives of the patents, at the date of purchase, was approximately 1 - 2 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.

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.

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, 2023, management concluded that there was no impairment to the intangible

Amortization expense for patents was approximately

$ 787,000 and $ 910,000 for the years ended December 31, 2023 and 2022, 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

Year Ended December 31,

SHORT-TERM DEBT AND LONG-TERM LIABILITIES

Short-Term Debt

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The loans are payable on demand plus accrued interest at 10 % per annum.

Accrued interest at December

31, 2022 and 2021 was approximately $ 296,000 and $ 282,000 , respectively.

Funding Liability

The funding liability at December 31, 2022

and 2021 represents the principal amount of the Company’s obligations to QFL pursuant to a purchase agreement (“Purchase Agreement”)

dated February 22, 2021 between the Company and QFL, as described below.

As of December 31, 2022, the Company had made total repayments

in the amount of approximately $ 750,000 since February 22, 2021.

Approximately $ 53,000 was repaid during the year ended December 31, 2022.

The obligation to QFL has no repayment term and has been classified as a current liability as of December 31, 2022.

Accrued interest on these

loans at December 31, 2023 and 2022 was approximately $ 310,000 and $ 296,000 , respectively.

Funding Liabilities

The following table shows the Company’s funding liabilities

to QFL and QF3 at December 31, 2023 and 2022:

Funding liability – QFL

Funding liability – QF3

Funding liabilities

Funding Liabilities - QFL

The QFL funding liabilities at December 31, 2023

and 2022 of $ 1,525,502 and $ 5,453,204 , respectively, represent the principal amount of the Company’s obligations to QFL pursuant

to a purchase agreement (“Purchase Agreement”) dated February 22, 2021 between the Company and QFL, as described below.

of December 31, 2023, the Company had made total repayments in the amount of approximately $ 4,877,000 since February 22, 2021.

Approximately

$ 4,128,000 was repaid during the year ended December 31, 2023.

The obligation to QFL has no repayment term since payment is 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 and 2022.

Accrued interest related to this funding liability as of December 31, 2023 and 2022, was

approximately $ 478,000 and $ 600,000 , respectively.

On February 22, 2021, the Company entered into

a series of agreements, all dated February 19, 2021, with QFL, a non-affiliated party, including the “Purchase Agreement”,

a security agreement (the “Security Agreement”), a subsidiary security agreement (the “Subsidiary Security Agreement”),

a subsidiary guaranty (the “Subsidiary Guaranty”), a warrant issue agreement (the “Warrant Issue Agreement”),

a registration rights agreement (the “Registration Rights Agreement”) and a board observation rights agreement (the “Board

Observation Rights Agreement” together with the Security Agreement, the Subsidiary Guaranty, the Subsidiary Security Agreement,

Warrant Issuance Agreement, Registration Rights Agreement and the Purchase Agreement, the “Investment Documents”) pursuant

to which, at the closing held contemporaneously with the execution of the agreements:

(i) Pursuant to the Purchase Agreement,

QFL agreed to make available to the Company a financing facility of:

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

rights that the Company intends to monetize, of which $ 2,653,000 has been advanced as of December 31, 2022;

(b) up to $ 2,000,000

for operating expenses, of which the Company has requested and received $ 1,800,000 as of December 31, 2022;

and (iii) $ 1,750,000

to fund the cash payment portion of the restructure of the Company’s 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.

(ii) The Company used $ 1,750,000 of

proceeds from the QFL financing as the cash payment portion of the restructure of the Company’s obligations to Intelligent Partners

pursuant to the Restructure Agreement executed contemporaneously with the closing of the Investment Documents.

The payment was made directly

from QFL to Intelligent Partners.

(iii) Pursuant to the Security Agreement,

the Company’s obligations under the Purchase Agreement with QFL are secured by:

a series of agreements, all dated February 19, 2021, with QFL, a non-affiliated party, including the Purchase Agreement, a security agreement

(the “Security Agreement”), a subsidiary security agreement (the “Subsidiary Security Agreement”), a subsidiary

guaranty (the “Subsidiary Guaranty”), a warrant issue agreement (the “Warrant Issue Agreement”), a registration

rights agreement (the “Registration Rights Agreement”) and a board observation rights agreement (the “Board Observation

Rights Agreement” together with the Security Agreement, the Subsidiary Guaranty, the Subsidiary Security Agreement, Warrant Issuance

Agreement, Registration Rights Agreement and the Purchase Agreement, the “QFL Investment Documents”) pursuant to which, at

the closing on February 22, 2021 held contemporaneously with the execution of the agreements:

(i) Pursuant to the Purchase Agreement, QFL agreed to make available

to the Company a financing facility of:

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

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

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

the Company has requested and received $ 2,000,000 as of December 31, 2023;

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

of the restructure of the Company’s 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.

(ii) The Company used $ 1,750,000 of proceeds from the QFL financing

as the cash payment portion of the restructure of the Company’s obligations to Intelligent Partners pursuant to the Restructure

Agreement executed contemporaneously with the closing of the Investment Documents.

The payment was made directly from QFL to Intelligent

(iii) Pursuant to the Security Agreement, the Company’s obligations

under the Purchase Agreement with QFL are secured by:

(a) the proceeds (as defined in the Purchase Agreement);

(b) the patents (as defined in the Purchase Agreement;

and (d) proceeds (including, without limitation, cash proceeds and insurance proceeds) and products of the foregoing (a)-(c).

(iv) Pursuant to the Subsidiary Guaranty,

eight of the Company’s subsidiaries – QLC, NetTech, Mariner, Semcon, IC, CXT, M-Red, and AMI, collectively, the “Subsidiary

Guarantors”) guaranteed the Company’s obligations to QFL under the Purchase Agreement.

(v) Pursuant to the Subsidiary Security

Agreement, the Subsidiary Guarantors granted QFL a security interest in the proceeds from the future monetization of their respective

patent portfolios.

(vi) Pursuant to the Warrant Issue Agreement,

the Company granted QFL ten-year warrants to purchase a total of up to 962,463 shares of the Company’s common stock, at an exercise

price of $ 0.54 per share which may be exercised from the grant date through February 18, 2031 on a cash or cashless basis.

Exercisability

of the warrant is limited if, upon exercise, the holder or any of holder’s affiliates would beneficially own more than 4.99 % (the

“Maximum Percentage”) of the Company’s common stock, except that by written notice to the Company, the holder may change

the Maximum Percentage to any other percentage not in excess of 9.99 % provided any such change will not be effective until the 61st day

(b) the patents (as defined

in the Purchase Agreement);

proceeds (including, without limitation, cash proceeds and insurance proceeds) and products of the foregoing (a)-(c).

(iv) Pursuant to the Subsidiary Guaranty, eight of the Company’s

subsidiaries – (QLC, NetTech, Mariner, Semcon, IC, CXT, M-Red, and AMI, collectively, the “Subsidiary Guarantors”)

guaranteed the Company’s obligations to QFL under the Purchase Agreement.

(v) Pursuant to the Subsidiary Security Agreement, the Subsidiary

Guarantors granted QFL a security interest in the proceeds from the future monetization of their respective patent portfolios.

(vi) Pursuant to the Warrant Issue Agreement, the Company granted

QFL ten-year warrants to purchase a total of up to 962,463 shares of the Company’s common stock, at an exercise price of $ 0.54

per share which may be exercised from the grant date through February 18, 2031 on a cash or cashless basis.

Exercisability of the warrant

is limited if, upon exercise, the holder or any of holder’s affiliates would beneficially own more than 4.99 % (the “Maximum

Percentage”) of the Company’s common stock, except that by written notice to the Company, the holder may change the Maximum

Percentage to any other percentage not in excess of 9.99 % provided any such change will not be effective until the 61 st day

following notice to the Company.

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QFL has no term, the fair value of the warrants was expensed at the grant date.

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.

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.

See Notes 5 and 6 for information on the warrant issue and associated liability.

(vii) The Company regained compliance

with the OTCQB Eligibility Requirements on May 7, 2021, at which time the common stock recommenced trading on the OTCQB.

(viii) The Company granted QFL certain

registration rights with respect to the 962,463 shares of common stock issuable upon exercise of the warrant.

See Note 5 for information

on the warrant issue.

(ix) Pursuant to the Board Observation

Rights Agreement, until the later of the date on which QFL or its affiliates (i) have received the entirety of their Investment Return

(as defined in Purchase Agreement), and (ii) no longer hold any Securities (the “Observation Period”), the Company granted

QFL the right, exercisable at any time during the Observation Period, to appoint a representative to attend meetings (including, without

limitation, telephonic or other electronic meetings) of the Board or any committee thereof, including executive sessions, in an observer

On February 26, 2021, the Company entered into

an agreement with Peter K.

Trzyna (“PKT”) pursuant to which PKT assigned to the Company all right, title, and interest in

a portfolio of eight United States patents (the “Peregrin Portfolio”).

Under the agreement, the Company paid PKT $ 350,000

at closing and agreed that upon the realization of gross proceeds, if any, the Company shall make a second installment payment or payments

in the aggregate amount of $ 93,900 representing reimbursement to PKT, as the prosecuting attorney, for legal fees associated with prosecution

of the portfolio, such reimbursement shall be due and payable to PKT from time to time as gross proceeds are realized, and paid to PKT

along with and in proportion to reimbursement to other third parties of costs incurred in realizing gross proceeds from the Peregrin Portfolio.

Thereafter, PKT is entitled to a percentage of gross proceeds realized, if any, from the Peregrin Portfolio.

The Company requested and

received a capital advance from QFL in the amount of $ 350,000 pursuant to the Purchase Agreement, which was used to make payment to PKT.

On May 20, 2021, TLL, entered into an agreement

with Taasera, Inc.

to acquire all right, title, and interest in a portfolio of seven United States patents (the “Taasera Portfolio”)

for $ 250,000 .

The Company requested and received a capital advance from QFL in the amount of $ 250,000 pursuant to the Purchase Agreement,

which was used to make payment to Taasera, Inc.

On October 15, 2021, MML, acquired all right,

title, and interest in a portfolio of nine United States patents (the “MML Portfolio”) for a purchase price of $ 550,000 pursuant

to an agreement with Aawaaz Inc.

(“AI”), pursuant to which MML 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,

The Company requested and received a capital advance from QFL in the amount of $ 550,000 pursuant to the Purchase Agreement, which

was used to make payment to AI.

(vii) The Company regained compliance with the OTCQB Eligibility Requirements

on May 7, 2021, at which time the common stock recommenced trading on the OTCQB.

(viii) The Company granted QFL certain registration rights with respect

to the 962,463 shares of common stock issuable upon exercise of the warrant.

See Note 5 for information on the warrant issue.

(ix) Pursuant to the Board Observation Rights Agreement, until the

later of the date on which QFL or its affiliates (i) have received the entirety of their Investment Return (as defined in Purchase Agreement),

and (ii) no longer hold any Securities (the “Observation Period”), the Company granted QFL the right, exercisable at any

time during the Observation Period, to appoint a representative to attend meetings (including, without limitation, telephonic or other

electronic meetings) of the Board or any committee thereof, including executive sessions, in an observer capacity.

On January 27, 2022, the Company acquired, via

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The Company requested and received a capital advance

in the amount of the $ 1,060,000 purchase price from the facility with QFL.

Two of the patents were assigned to Tyche and the balance of

the patents were assigned to DIP.

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

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

The Company requested and received a capital advance from QFL

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

in the amount of the $ 1,060,000 purchase price from QFL.

Two of the patents were assigned to Tyche and the balance of the patents were

assigned to DIP.

In June 2022, MML and AI agreed to amend the

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

The Company requested and received a capital advance

from QFL in the amount of $ 92,000 , which was 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

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Patents for a purchase price of $ 350,000 .

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

requested 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.

The Company requested and received operating capital

advances in the amount of $ 800,000 and $ 1,000,000 from QFL pursuant to the Purchase Agreement during the years ended December 31, 2022

The Company paid $ 35,000 upon execution of the agreement with the balance payable within 30

The Company requested 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.

The Company requested and received an operating

capital advance in the amount of $ 200,000 and $ 800,000 from QFL pursuant to the Purchase Agreement during the years ended December 31,

2023 and 2022, respectively.

Funding Liabilities - QF3

The QF3 funding liabilities at December 31,

2023 of $ 5,800,000 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, 2023, 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,

Accrued interest related to this funding liability as of December 31, 2023, was approximately $ 299,000 .

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”) pursuant to which, at the closing held contemporaneously with the

execution of the agreements on March 12, 2023:

(i) Pursuant to the QF3 Purchase Agreement, QF3 agreed to make

available to the Company a financing facility of:

(a) up to $ 4,000,000 for operating expenses, of which the Company has requested and

received $ 2,500,000 as of December 31, 2023;

(b) $ 3,300,000 to fund the cash payment portion of the purchase of a patent portfolio

from Tower Semiconductor Ltd.

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, 2023.

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

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

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2023 and 2022 represents the current amount of a non-interest bearing total monetization proceeds obligation (the “TMPO”)

to Intelligent Partners, LLC (“Intelligent Partners”) of $ 2,796,500 and $ 2,805,000 , respectively, pursuant to a restructure

due to Intelligent Partners, LLC (“Intelligent Partners”) of $ 2,796,500 at December 31, 2023 and 2022, pursuant to a restructure

agreement (“Restructure Agreement”) dated February 22, 2021 whereby the Company and Intelligent Partners, extinguished the

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and a MPA-NA (the “MPA-NA”).

(i) Pursuant to the Restructure Agreement,

the Company paid Intelligent Partners $ 1,750,000 at closing, which the Company received from QFL and which QFL paid directly to Intelligent

Partners, and recognized the TMPO, which shall, from and after the Restructure Date, be reduced on a dollar for dollar basis by (a) payments

to Intelligent Partners pursuant to the Restructure Agreement, the Restructure MPAs and the MPA-NA and (b) any election by the Intelligent

Partners to pay the Exercise Price of the Restructure Option, in whole or part, by means of a reduction in the then outstanding TMPO.

The TMPO has been classified as a current liability as of December 31, 2022.

(ii) Pursuant to the Stock Purchase

Agreement, the Company issued to Fitton and Carper, as holders of the Transferred Note, 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 Transferred Note (the

“Conversion Shares”).

For purposes of extinguishment, the issuance of the Conversion Shares in full satisfaction of the Transferred

Note balance of $ 250,000 is included in the reacquisition price of the debt.

The Company recognized a loss on debt conversion of $ 305,556

which is the difference between the agreed conversion price and the fair value of the Conversion Shares at the date of conversion.

Note 5 for information on the share issue.

(iii) Pursuant to the Option Grant,

the Company granted Intelligent Partners an option to purchase a total of 500,000 shares of common stock, with an exercise price of $ 0.54

per share which vests immediately and may be exercised through September 30, 2025.

The Company valued the option at approximately $ 598,000

using the Black-Scholes pricing model.

The proceeds were allocated to the repurchase price of the debt extinguishment based on its fair

(i) Pursuant to the Restructure Agreement, the Company paid Intelligent

Partners $ 1,750,000 at closing, which the Company received from QFL and which QFL paid directly to Intelligent Partners, and recognized

the TMPO, which shall, from and after the Restructure Date, be reduced on a dollar for dollar basis by (a) payments to Intelligent Partners

pursuant to the Restructure Agreement, the Restructure MPAs and the MPA-NA and (b) any election by the Intelligent Partners to pay the

Exercise Price of the Restructure Option, in whole or part, by means of a reduction in the then outstanding TMPO.

The TMPO has been classified

as a current liability as of December 31, 2023.

(ii) Pursuant to the Stock Purchase Agreement, the Company issued

to Fitton and Carper, as holders of the Transferred Note, 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 Transferred Note (the “Conversion Shares”).

See Note 6 for information on the share issue.

(iii) Pursuant to the Option Grant, the Company granted Intelligent

Partners an option to purchase a total of 500,000 shares of common stock, with an exercise price of $ 0.54 per share which vests immediately

and may be exercised through September 30, 2025.

See Note 6 for information on the option grant.

(iv) Pursuant to the restructured monetization

proceeds agreement, Intelligent Partners has a right to receive 60 % of the net monetization proceeds from the patents currently owned

by the Subsidiary Guarantors.

The agreement has no termination provisions, so Intelligent Partners will be entitled to its percentage

interest as long as revenue is generated from the intellectual property covered by the agreement.

(v) Pursuant to the MPA-NA, until the

TMPO has been paid in full, Intelligent Partners is entitled to receive 10% of the net proceeds realized from new assets acquired by the

If, in any calendar quarter, net proceeds realized exceed $1,000,000, Intelligent Partners’ entitlement for that quarter

only shall increase 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.

After satisfaction of the TMPO, the MPA-NA and Intelligent Partners’ interest in new asset

proceeds shall terminate.

(vi) 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;

the 462,963 Conversion Shares issued to Fitton and Carper, and (iii) the 500,000 shares of common stock issuable upon exercise of the

(vii) Pursuant to the Subsidiary Security

Agreement, the Company’s obligations under its agreements with Intelligent Partners, including its obligations under the Restructure

Agreement and the Restructure MPAs are secured by a security interest in the net proceeds realized from the future monetization of the

patents currently owned by the eight subsidiaries named above.

(viii) Pursuant to the MPA-NA-Security

Interest Agreement, our obligations under the MPA-NA are secured by a security interest in net proceeds realized from the future monetization

of new patents acquired until the TMPO is satisfied, provided Intelligent Partners’ secured interest shall be limited to its entitlement

in Net Proceeds under the MPA-NA.

(iv) Pursuant to the restructured monetization proceeds agreement,

Intelligent Partners has a right to receive 60 % of the net monetization proceeds from the patents currently owned by the Subsidiary Guarantors.

The agreement has no termination provisions, so Intelligent Partners will be entitled to its percentage interest as long as revenue is

generated from the intellectual property covered by the agreement.

(v) Pursuant to the MPA-NA, until the TMPO has been paid in full,

Intelligent Partners is entitled to receive 10% of the net proceeds realized from new assets acquired by the Company.

If, in any calendar

quarter, net proceeds realized exceed $1,000,000, Intelligent Partners’ entitlement for that quarter only shall increase 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.

After satisfaction of the TMPO, the MPA-NA and Intelligent Partners’ interest in new asset proceeds shall terminate.

(vi) 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.

(vii) Pursuant to the Subsidiary Security Agreement, the Company’s

obligations under its agreements with Intelligent Partners, including its obligations under the Restructure Agreement and the Restructure

MPAs are secured by a security interest in the net proceeds realized from the future monetization of the patents currently owned by the

eight subsidiaries named above.

(viii) Pursuant to the MPA-NA-Security Interest Agreement, our obligations

under the MPA-NA are secured by a security interest in net proceeds realized from the future monetization of new patents acquired until

the TMPO is satisfied, provided Intelligent Partners’ secured interest shall be limited to its entitlement in Net Proceeds under

After satisfaction of the TMPO the security interest in proceeds from new assets shall terminate.

(ix) Pursuant to the Board Observation

Rights Agreement, until the Total Monetization Proceeds Obligation has been satisfied (the “Observation Period”), the Company

granted Intelligent Partners the option and right, exercisable at any time during the Observation Period, to appoint a representative

to attend meetings of the Board or any committee thereof, including executive sessions, in an observer capacity.

Intelligent Partners

has no right to appoint a director to the board.

(ix) Pursuant to the Board Observation Rights Agreement, until

the Total Monetization Proceeds Obligation has been satisfied (the “Observation Period”), the Company granted Intelligent

Partners the option and right, exercisable at any time during the Observation Period, to appoint a representative to attend meetings

of the Board or any committee thereof, including executive sessions, in an observer capacity.

Intelligent Partners has no right to appoint

a director to the board.

Events of Default include (i) a Change of Control

of the Company (ii) any uncured default on payment due to Intelligent Partners in an amount totaling in excess of $ 275,000 , which is not

the subject of a Dispute or other formal dispute resolution proceeding initiated in good faith pursuant to this Agreement or other Restructure

Documents (iii) the filing of a voluntary petition for relief under the United States Bankruptcy Code by Company or any of its material

subsidiaries, (iv) the filing of an involuntary petition for relief under the United States Bankruptcy Code against the Company, which

is not stayed or dismissed within sixty (60) days of such filing, except for an involuntary petition for relief filed solely by Intelligent

Partners, or any Affiliate or member of Intelligent Partners, or (v) acceleration of an obligation in excess of $ 1,000,000 to another

provider of financing following a final determination by arbitration or other judicial proceeding that such obligation is due and owing.

During the year ended December 31, 2021, the Company

recognized a loss on extinguishment of the note of $ 730,378 reflected as follows:

Carrying amount as of the restructure date

Less unamortized debt discount and issuance costs

Net carrying amount

Reacquisition price

Cash payment via QFL

( 1,750,000 )

Conversion of transferred note

Fair value of option grant

TMPO undiscounted future cash flows

( 2,805,000 )

Loss on debt extinguishment

$ ( 730,378 )

of the Company (ii) any uncured default on payment due to Intelligent Partners in an amount totaling in excess of $ 275,000 , which is

not the subject of a Dispute or other formal dispute resolution proceeding initiated in good faith pursuant to this Agreement or other

Restructure Documents (iii) the filing of a voluntary petition for relief under the United States Bankruptcy Code by Company or any of

its material subsidiaries, (iv) the filing of an involuntary petition for relief under the United States Bankruptcy Code against the

Company, which is not stayed or dismissed within sixty (60) days of such filing, except for an involuntary petition for relief filed

solely by Intelligent Partners, or any Affiliate or member of Intelligent Partners, or (v) acceleration of an obligation in excess of

$ 1,000,000 to another provider of financing following a final determination by arbitration or other judicial proceeding that such obligation

is due and owing.

Because of the beneficial ownership percentage

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2023 and 2022 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

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.

Funds from the Loan may be used solely as working capital to alleviate

economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter and to pay Uniform Commercial

Code (UCC) lien filing fees and a third-party UCC handling charge of $ 100 which were deducted from the loan amount stated above.

to the loan, as part of the COVID-19 relief effort, the Company obtained an Emergency EIDL Grant from the SBA in the amount of $ 1,000 .

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.

be prepaid by the Company at any time prior to maturity with no prepayment penalties.

Funds from the Loan may be used solely as working

capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter and to pay

Uniform Commercial Code (UCC) lien filing fees and a third-party UCC handling charge of $ 100 which were deducted from the loan amount

stated above.

In addition to the loan, as part of the COVID-19 relief effort, the Company obtained an Emergency EIDL Grant from the SBA

in the amount of $ 1,000 .

The Company is not required to repay the grant.

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The purchase price of patents balance at December 31,

2022 and 2021 of $53,665 and $190,000 , respectively represents:

2023 and 2022 of $ 53,665 represents:

The non-current portion of our obligations under

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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 $ 190,000 .

The Company paid approximately $ 136,000 against the obligation in 2022.

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 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.

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 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.

On February 22, 2021, the Company issued warrants

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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 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, 2023 and 2022, the aggregate

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of changes in the fair value of warrant liabilities classified as Level 3 in the fair value hierarchy:

Fair value at grant date

Change in fair value

Balance at December 31, 2021

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Balance at December 31, 2022

Loss on subsequent measurement

Balance at December 31, 2023

See Notes 3 and 5 for information on the warrant

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shares of common stock from 10,000,000,000 shares to 30,000,000 shares and (ii) effected a one-for-100 reverse split whereby each share

of common stock became and was converted into 0.01 shares of such common stock, with fractional shares being rounded up to the next higher

of common stock became and was converted into 0.01 shares of common stock, with fractional shares being rounded up to the next higher

whole number of shares.

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Amendment to the 2017 Equity Incentive Plan

On February 19, 2021, the board of directors amended

the 2017 Equity Incentive Plan (the “Plan”) increasing the shares the Company can issue under the Plan to 5,000,000 shares

of common stock pursuant to non-qualified stock options, restricted stock grants and other equity-based incentives.

The amendment to the

Plan and the grants of awards pursuant to the Plan, were effective upon the closing of the agreements with QFL.

On February 19, 2021, the board of directors

amended the 2017 Equity Incentive Plan (the “Plan”) increasing the shares the Company can issue under the Plan to 5,000,000

shares of common stock pursuant to non-qualified stock options, restricted stock grants and other equity-based incentives.

The amendment

to the Plan and the grants of awards pursuant to the Plan, were effective upon the closing of the agreements with QFL.

At December 31,

2023, 1,760,000 shares are available under the plan.

Issuance of Common Stock and Options

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On February 22, 2021, pursuant to the Restructure

Agreement, 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.

Agreement, 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.

Variables used in the valuation include (1) discount rate of 1.37 %;

(2) option life of 5 years;

(3) computed volatility

of 252 % and (4) zero expected dividends.

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.

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.

Consulting Agreements

On February 22, 2021, the Company entered into

advisory service agreement with three consultants pursuant to which they will provide services to the Company in connection with the development

of the Company’s business.

The agreements have a term of ten years and may be terminated by the Company for cause or upon the death

or disability of the consultants.

advisory service agreement with three consultants pursuant to which they will provide services to the Company in connection with the

development of the Company’s business.

The agreements have a term of ten years and may be terminated by the Company for cause or

upon the death or disability of the consultants.

Pursuant to the agreements with two of the consultants,

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in full and a ten-year option to purchase a total of 300,000 shares of Common Stock, which become exercisable cumulatively as follows:

100,000 shares at an exercise price of $ 1.00 per share becoming

exercisable upon the commencement of trading of the Common Stock on the OTCQB.

The Company regained such compliance on May 7, 2021, at

which time the common stock recommenced trading on the OTCQB.

100,000 shares at an exercise price of $ 3.00 per share, becoming

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

100,000 shares at an exercise price of $ 5.00 per share becoming

exercisable on the date on which the Common Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange.

100,000 shares at an exercise price of $ 1.00 per share becoming exercisable upon the commencement of trading of the Common Stock on the OTCQB.

The Company regained such compliance on May 7, 2021, at which time the common stock recommenced trading on the OTCQB.

100,000 shares at an exercise price of $ 3.00 per share, becoming 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

100,000 shares at an exercise price of $ 5.00 per share becoming 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 recorded professional fees in the

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as of the grant date to be approximately $ 720,000 using the Black-Scholes pricing model.

Variables used in the valuation include (1) discount

rate of 1.37%;

(2) term of 10 years;

(3) computed volatility of 252% and (4) zero expected dividends.

The Company determined that the

first performance condition was met and accrued the option expense of approximately $240,000 over the period from the grant date to achievement

of the performance condition.

The Company did not recognize any option expense for the year ended December 31, 2022.

The Company recognized

option expense of approximately $ 240,000 for the year ended December 31, 2021.

The Company determined that the first performance

condition was met and accrued the option expense of approximately $ 240,000 over the period from the grant date to achievement of the

performance condition.

The Company did not recognize any option expense for the years ended December 31, 2023 and 2022.

Pursuant to the agreement with the third consultant,

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in full and a ten-year option to purchase 300,000 shares of Common Stock, which becomes exercisable cumulatively as follows:

100,000 shares at an exercise price of $ 1.00 per share became

exercisable on February 22, 2022, which was the first anniversary of the date of the agreement;

100,000 shares at an exercise price of $ 3.00 per share upon

the second anniversary of the agreement;

100,000 shares at an exercise price of $ 5.00 per share upon

the third anniversary of the agreement.

100,000 shares at an exercise price of $ 1.00 per share became exercisable on February 22, 2022, which was the first anniversary of the date of the agreement;

100,000 shares at an exercise price of $ 3.00 per share upon the second anniversary of the agreement;

100,000 shares at an exercise price of $ 5.00 per share upon the third anniversary of the agreement.

The Company recorded professional fees in the

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as of the grant date to be approximately $ 360,000 using the Black-Scholes pricing model.

Variables used in the valuation include (1) discount

rate of 1.37%;

(2) term of 10 years;

(3) computed volatility of 252% and (4) zero expected dividends.

The Company recognized option expense

of approximately $117,000 and $188,000 for the years ended December 31, 2022 and 2021, respectively.

Compensatory Arrangements of Officers and Directors

The Company recognized option expense of approximately

$ 49,000 and $ 117,000 for the years ended December 31, 2023 and 2022, respectively.

Compensatory Arrangements of Officers and

On February 22, 2021, the board of directors:

(i) Granted restricted stock grants

for services rendered and vesting in full upon grant, to:

(i) Granted restricted stock grants for services rendered and

vesting in full upon grant, to:

Scahill – 490,000 shares

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Carroll - 100,000 shares

(ii) Granted Jon Scahill a ten-year

option (the “Option”) to purchase 600,000 shares of Common Stock which become exercisable cumulatively as follows:

200,000 shares at an exercise price of $1.00 per share becoming exercisable upon the commencement of trading

of the Common Stock on the OTCQB.

200,000 shares at an exercise price of $3.00 per share, becoming 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

200,000 shares at an exercise price of $5.00 per share becoming exercisable on the date on which the Common

Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange

(ii) Granted Jon Scahill a ten-year option (the “Option”)

to purchase 600,000 shares of Common Stock which become exercisable cumulatively as follows:

200,000 shares at an exercise price of $ 1.00 per share becoming

exercisable upon the commencement of trading of the Common Stock on the OTCQB.

200,000 shares at an exercise price of $ 3.00 per share, becoming

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

200,000 shares at an exercise price of $ 5.00 per share becoming

exercisable on the date on which the Common Stock is listed for trading on the Nasdaq Stock Market or the New York Stock Exchange

(iii) Appointed Ryan T.

board of directors and granted Mr.

Logue a restricted stock grant of 500,000 shares of common stock which vested upon his acceptance of

his appointment as a director.

Logue to the board of directors and granted

Logue a restricted stock grant of 500,000 shares of common stock which vested upon his acceptance of his appointment as a director.

The Company recognized compensation expense of

$ 888,000 in conjunction with issuance of common stock to officers and directors during the year ended December 31, 2021.

The Company determined

the fair value of the options to be approximately $720,000 as of the grant date using the Black-Scholes pricing model.

Variables used

in the valuation include (1) discount rate of 1.37%;

determined the fair value of the options to be approximately $ 720,000 as of the grant date using the Black-Scholes pricing model.

used in the valuation include (1) discount rate of 1.37 %;

(2) term of 10 years;

(3) computed volatility of 252% and (4) zero expected dividends.

The Company did not recognize any option expense for the year ended December 31, 2022.

The Company recognized option expense of approximately

$ 240,000 for the year ended December 31, 2021.

(3) computed volatility of 252 % and (4) zero expected

The Company did not recognize any option expense for the years ended December 31, 2023 and 2022.

A summary of the status of the Company’s

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Weighted Average

Exercise Price ($)

Weighted Average

Grant Date Fair

Weighted Average

Contractual Life

Balance - December 31, 2021

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The outstanding options do not have an intrinsic

value as of December 31, 2022.

As of December 31, 2021 the intrinsic value of the outstanding options was $ 930,000 .

value as of December 31, 2023 and 2022.

As of December 31, 2023, there was approximately

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Weighted Average

Exercise Price ($)

Weighted Average

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Balance - December 31, 2023

The outstanding warrants do not have an intrinsic

value as of December 31, 2022.

The intrinsic value of the outstanding warrants as of December 31, 2021 was $ 1,116,456 .

Intangible assets include patents purchased and

are recorded based at their acquisition cost.

Intangible assets consisted of the following:

( 4,362,117 )

accumulated amortization

( 1,625,846 )

Net value of intangible assets

Weighted Average Amortization Period (Years)

Intangible assets are comprised of patents with

estimated useful lives.

The intangible assets at December 31, 2022 represent:

● patents acquired in October 2015 for a purchase price of

$3,000,000, the useful lives of the patents, at the date of purchase, was 6-10 years;

these patents were disposed of as of December 31,

● patents acquired in July 2017 pursuant to an obligation to

pay 50% of net revenues to IV 34/37 (see Note 3);

the useful lives of the patents, at the date of acquisition, was 5-6 years;

these patents

were disposed of as of December 31, 2021.

● patents (which were fully amortized at the date of acquisition)

acquired in January 2018 pursuant to an agreement with to Intellectual Ventures Assets 62 LLC and Intellectual Ventures Assets 71 LLC

“(IV 62/71”), pursuant to which CXT has an obligation to distribute 50% of net revenues to IV 62/71;

● patents (which were fully amortized at the date of acquisition) acquired in January 2018 by Photonic Imaging

Solutions Inc.

(“PIS”) from Intellectual Ventures Assets 64 LLC (“IV 64”) pursuant to which PIS is to pay IV 64

(a) 70% of the first $1,500,000 of net revenue, (b) 30% of the next $1,500,000 of net revenue and (c) 50% of net revenue in excess of

● patents acquired in March 2019 pursuant to an obligation to pay 50% of net revenues to IV 113/108 (see

the useful lives of the patents, at the date of acquisition, was approximately 9 years, these patents were disposed of as of

December 31, 2021.

● patents (which were fully amortized at the date of acquisition) acquired in May 2020 for a purchase price

of $95,000 pursuant to an agreement with Texas Technology Ventures 2, LLP (“TTV”), pursuant to which of the Company retains

the first $230,000 of net proceeds, as defined in the agreement, after which the company has an obligation to distribute 50% of net proceeds

● patents (which were fully amortized at the date of acquisition) acquired in February 2021 pursuant to

an agreement with PKT for a purchase price of $350,000, pursuant to which $350,000 was paid at closing, and upon the realization of gross

proceeds, as defined in the agreement, the Company shall make a subsequent or payments in the aggregate amount of $93,900, representing

reimbursement to PKT, as the prosecuting attorney, for legal fees associated with prosecution of the portfolio, such reimbursement shall

be due and payable to PKT from time to time as gross proceeds are realized, if any, and paid to PKT along with and in proportion to reimbursement

to other third parties of costs incurred in realizing gross proceeds.

Thereafter, PKT is entitled to a percentage of gross proceeds realized,

● patents (which were fully depreciated at the date of acquisition) acquired in May 2021 for a purchase

price of $250,000.

● 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 January 2022 for a purchase price of $1,060,000, the useful lives of the patents,

at the date of purchase, was approximately 1-2 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

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, 2022, management concluded that there was no impairment to the intangible assets.

For the year ended December 31, 2021, the Company 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.

Amortization expense for patents was approximately

$ 910,000 and $ 1,159,865 for the years ended December 31, 2022 and 2021, 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,

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, 2023 and 2022.

NON-CONTROLLING INTEREST

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Balance, end of year

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, 2022, the Company has approximately

$ 11,635,198 of net operating loss (“NOL”) carry forwards which will begin to expire in 2024.

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.

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, 2023, the Company

has approximately $ 7,151,711 of net operating loss (“NOL”) carry forwards which will begin to expire in 2024.

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

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.

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, 2022 is $77,946 and is recorded as a component

of income tax expense.

The Company’s deferred tax assets consist of the

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, 2023 is $( 873,118 ) and is recorded as

a component of income tax expense.

The Company’s deferred tax assets consist of

the following:

Net operating loss carry forward

Intangible assets

Stock-Based Compensation

Foreign Tax Credit

Valuation allowance

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Balance, end of year

Tax (benefit) expense consisted primarily of the

The reconciliation between the effective tax rate

on loss before income taxes and the statutory rate for the year ended December 31, 2022 is as follows:

Tax (benefit) expense consisted primarily of

the following:

The reconciliation between the effective tax

rate on income before income taxes and the statutory rate for the year ended December 31, 2023 is as follows:

Book income before taxes

$ ( 158,501 )

State taxes, net

Meals and entertainment

Warrant income

Warrant expense

Interest expense

Change in tax rate

Change in valuation allowance

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Effective tax rate

The reconciliation between the effective tax rate

on loss before income taxes and the statutory rate for the year ended December 31, 2021 is as follows:

The reconciliation between the effective tax

rate on loss before income taxes and the statutory rate for the year ended December 31, 2022 is as follows:

Book income before taxes

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State taxes, net

Tax exempt income - grant and/or SBA

Meals and entertainment

Warrant expense

Stock based compensation

Loss on conversion of debt

Valuation allowance

Derivative valuation adjustment

Warrant income

Interest expense

Change in tax rate

Change in valuation allowance

Change in estimate for prior year taxes

Effective tax rate

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and 2022, 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, 2019 and later.

The statute of limitations for assessment of

income taxes is open for tax years ending December 31, 2020 and later.

RELATED PARTY TRANSACTIONS

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Agreement dated February 22, 2021 with Intelligent Partners.

Because of its ownership percentage, Intelligent Partners is treated as a

related party.

Because of its ownership percentage, Intelligent Partners is treated as

a related party.

See Note 6 with respect to share-based compensation

2 unchanged sentences

with the Company’s president and chief executive officer.

During the year ended December 31, 2021,

the Company contracted with an entity owned by the chief technology officer for the provision of information technology services to the

During the year ended December 31, 2022, the

Company contracted with an entity owned by the chief technology officer for the provision of information technology services to the Company.

In June 2022 the chief technology officer sold his interest in the entity.

The cost of such services was approximately $ 205 and

$ 434 for the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2021,

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, 2022 and 2021, the cost of these services

was approximately $ 85,000 and $ 763,000 , respectively.

The cost of such services was approximately $ 0 and $ 205 for

the years ended December 31, 2023 and 2022, respectively.

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

$ 50,000 and $ 0 for the years ended December 31, 2023 and 2022, respectively, and these were recorded as part of sales, general and administrative

expenses, per the Consolidated Statements of Operations.

During the years ended December 31, 2023 and 2022, 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.

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, 2023 and 2022, the cost of these services was approximately

$ 5,316,000 and $ 85,000 , respectively, and these were recorded as part of litigation and licensing expenses, per the Consolidated Statements

of Operations.

Since the services are on a contingent fee basis, no fees are incurred unless there is a recovery.

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.

2016, the Company’s board of directors increased the chief executive officer’s annual salary to $ 300,000 , effective January

The chief executive officer is entitled to a bonus if the Company meets or exceeds performance criteria established by the compensation

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 officer is also eligible to participate in any executive incentive plans which the Company

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 in 2016 to $ 300,000 and 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).

executive’s bonus for 2023 was approximately $ 334,000 .

The chief executive officer is also eligible to participate in any executive incentive

plans which the Company may adopt.

Pursuant to the SEP IRA plan adopted by the Company

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ending December 31, 2023 and 2022, the percentage was set at 11 % and 20 %, respectively.

The Company’s president and chief executive

officer is the only participant and during the years ended December 31, 2022 and 2021, $ 61,000 and $58,000 was deposited into his

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 chief executive officer

and chief technology officer are the only participants and during the years ended December 31, 2023 and 2022, $ 66,000 and $ 61,000

was deposited into the chief executive officer’s SEP IRA account, respectively and $ 6,600 and $ 0 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

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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.

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

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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

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.

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 QFL and 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.

Effects of possible delisting of common stock

On May 23, 2022, the Company received notice from

OTC Markets Group, that, because the bid price for its common stock had closed below $ 0.01 per share for more than 30 consecutive days,

the Company no longer meets the Standards for Continued Eligibility under the OTC listing standards and, if this deficiency is not met

by August 21, 2022, the Company’s common stock will be removed from the OTCQB marketplace, in which event the 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

(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 the Company amended its Certificate of Incorporation to effect a one-for-100

reverse split of its common stock (see Note 5).

The OTC Markets Group confirmed to the Company that the deficiency has been cured.

BUSINESS COMBINATIONS

On August 6, 2021 the Company acquired all of

the issued and outstanding equity interests of STX from Soundstreak, LLC in exchange for an obligation to coordinate and launch a structured

licensing program around the STX patent portfolio which consists of three United States patents and one United States patent application.

Soundstreak LLC is entitled to 50 % of the net proceeds, as defined in the agreement, if any, resulting from monetization of the STX patent

On November 16, 2021 the Company acquired all

of the issued and outstanding equity interests of LS Cloud Storage Technologies, LLC (“LSC”) in exchange for assuming ownership

and management of the entity and bearing the transaction costs.

The acquisitions 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.

The STX and LSC were recorded as asset acquisitions.

The cost of the LSC asset acquisition was $ 500

in legal fees, expensed at closing.

The initial cost of the STX asset acquisition was $ 0 with total consideration coming in the form of

contingent consideration, which will be recognized if and when it becomes payable.

SUBSEQUENT EVENTS

Summary of Agreements with QPRC Finance III

On March 12, 2023, the Company and its newly formed

wholly-owned subsidiary, Harbor Island Dynamic LLC (“Harbor”), 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”), a security agreement

(the “Security Agreement”), a patent security agreement (the “Patent Security Agreement” together with the Security

Agreement, the Patent Security Agreement, and the Purchase Agreement, the “Investment Documents”) pursuant to which, at the

closing held contemporaneously with the execution of the agreements:

(i) Pursuant to the Purchase Agreement,

QF3 agreed to make available to the Company a financing facility of:

(a) up to $ 4,000,000 for operating expenses;

(b) $ 3,300,000 to fund

the cash payment portion of the purchase of a patent portfolio from Tower Semiconductor Ltd.;

and (c) up to an additional $ 25,000,000

for the acquisition of mutually agreed patent rights that the Company intends to monetize.

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 ten-patent portfolio from Tower Semiconductor

(the “HID Portfolio”).

(iii) Pursuant to the Security Agreement

and Patent Security Agreement, payment of our obligations under the 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);

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, Harbor 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.

On May 23, 2022, the Company received notice

from OTC Markets Group, that, because the bid price for its common stock had closed below $ 0.01 per share for more than 30 consecutive

days, the Company no longer meets the Standards for Continued Eligibility under the OTC listing standards and, if this deficiency is

not met by August 21, 2022, the Company’s common stock will be removed from the OTCQB marketplace, in which event the 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:

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 the Company amended its Certificate of Incorporation

to effect a one-for-100 reverse split of its common stock (see Note 6).

The OTC Markets Group confirmed to the Company that the deficiency

has been cured.

The Company cannot assure it 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.

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 9A. Controls and Procedures