What changed in this filing

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Item 1. Financial Statements

2024-05-15 compared with 2023-11-13 · 468 added, 690 removed, 337 unchanged (77% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets

Cash and cash equivalents

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

Other current assets

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Current liabilities

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities ($ 1,378,154 due to related

parties at March 31, 2024 and December 31, 2023)

Loans payable

Funding liabilities

Funding liability

Loan payable - related party

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Common stock, par value $ 0.00003 per share;

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

shares issued and outstanding 5,331,973 at September 30, 2023 and December 31, 2022

authorized 30,000,000 at March 31, 2024 and December 31, 2023;

5,331,973 shares issued and outstanding at March 31, 2024 and December 31, 2023

Additional paid-in capital

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QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

Patent licensing fees

Cost of revenues

Cost of revenue

Litigation and licensing expenses

Gross (loss) profit

Operating expenses

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Total operating expenses

Loss from operations

( 2,186,793 )

( 1,402,474 )

Other (expense) income

Income (loss) from operations

Other expenses

Change in fair market value of warrant liability

Interest expense

Total other (expense) income

Income (loss) before income tax

( 2,912,297 )

Total other expenses

Loss before income tax

Income tax expense

Net income (loss)

$ ( 431,442 )

$ ( 939,365 )

$ ( 278,918 )

Income (loss) per share - basic and diluted

Loss per share - basic and diluted

Weighted average shares outstanding - basic and diluted

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QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS’ DEFICIT

Non-controlling

Stockholders’

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ DEFICIT

Additional Paid-In

Non-controlling Interest in

Total Stockholders’

Balances as of January 1, 2023

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$ ( 9,483,619 )

Stock-based compensation

Balances as of June 30, 2022

( 25,818,561 )

( 8,242,299 )

Stock-based compensation

Balances as of September 30, 2022

$ ( 25,714,896 )

$ ( 8,113,431 )

Additional Paid-In

Non-controlling Interest in

Stockholders’

Balances as of January 1, 2023

Total Stockholders’

Balances as of December 31, 2023 (Restated)

$ ( 23,911,021 )

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$ ( 6,661,282 )

Stock-based compensation

( 1,169,646 )

Balances as of June 30, 2023

( 28,298,505 )

( 10,643,293 )

Stock-based compensation

Balances as of September 30, 2023

$ ( 29,131,791 )

$ ( 11,466,498 )

See the accompanying notes to the unaudited condensed consolidated

financial statements.

See the accompanying notes to the unaudited condensed

consolidated financial statements.

QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

For the Nine Months Ended

September 30,

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH

Three Months Ended March 31,

Cash flows from operating activities:

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Change in fair market value of warrant liability

( 1,432,145 )

Stock-based compensation

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Accrued interest

Accounts payable and accrued liabilities

Other current assets

Accounts payable and accrued liabilities

Net cash used in operating activities

( 1,516,520 )

Cash flows from investing activities:

Purchase of intangible assets

( 3,330,000 )

( 1,502,000 )

Net cash used in investing activities

Purchase of patents

( 3,300,000 )

Net cash provided by (used in) investing activities

( 3,300,000 )

Cash flows from financing activities:

Payments on loans - related party

Proceeds from funding liability

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Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Cash paid during the period for:

See the accompanying notes to the unaudited condensed consolidated

financial statements.

See the accompanying notes to the unaudited condensed

consolidated financial statements.

QUEST PATENT RESEARCH CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

DESCRIPTION OF BUSINESS

The Company is a Delaware corporation, incorporated

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activities are conducted by the Company’s wholly and majority-owned and controlled operating subsidiaries.

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with accounting principles generally accepted in the U.S.

(GAAP) for interim financial

information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

Accordingly, these interim financial statements do

not include all of the information and notes required by GAAP for complete financial statements.

All adjustments (consisting of normal

recurring items) necessary to present fairly the Company’s consolidated financial position have been included.

These interim financial

statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our annual report

on Form 10-K for the year ended December 31, 2022.

Operating results for the interim periods presented herein are not necessarily

indicative of the results that may be expected for any other interim period or for the entire year.

The accompanying unaudited condensed

consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S.

for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

Accordingly, these interim

financial statements do not include all of the information and notes required by GAAP for complete financial statements.

adjustments (consisting of normal recurring items) necessary to present fairly the Company’s consolidated financial position

have been included.

These interim financial statements should be read in conjunction with the restated consolidated financial

statements and accompanying notes included in amendment no.1 to the Company’s annual report on Form 10-K/A for the year ended

December 31, 2023.

Operating results for the interim periods presented herein are not necessarily indicative of the results

that may be expected for any other interim period or for the entire year.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements

of the Company and its wholly owned and majority owned subsidiaries as of September 30, 2023.

The consolidated financial statements include

the accounts and operations of:

of the Company and its wholly owned and majority owned subsidiaries as of March 31, 2024.

The consolidated financial statements include the

accounts and operations of:

Quest Patent Research Corporation

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

Quest Licensing Corporation

(DE) (“QLC”) (wholly owned)

Quest Packaging Solutions

Corporation ( 90 % owned)

Quest Nettech Corporation

(“NetTech”) ( 65 % owned)

Quest Licensing Corporation (DE)

(“QLC”) (wholly owned)

Quest Packaging Solutions Corporation

( 90 % owned)

Quest Nettech Corporation (“NetTech”)

( 65 % owned)

Semcon IP, Inc.

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(wholly owned)

Photonic Imaging Solutions

Photonic Imaging Solutions Inc.

(“PIS”) (wholly owned)

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(wholly owned)

Harbor Island Dynamic LLC

(“HID”) (wholly owned)

Harbor Island Dynamic LLC (“HID”)

(wholly owned)

Flash Uplink LLC (“FUL”)

(wholly owned)

In February 2022, the Company changed the name

of Quest Licensing Corporation to Digital IP Advisors Incorporated.

Significant intercompany transactions and balances

have been eliminated in consolidation.

The non-controlling interests are presented in

the unaudited condensed consolidated balance sheets, separately from equity attributable to the shareholders of the Company.

three and nine months ended September 30, 2023 and 2022, none of the Company’s net loss was attributable to non-controlling interests.

Reverse Split, Change in Authorized Common

On July 27, 2022, the Company amended its amended

and restated certificate of incorporation.

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 share 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.

The non-controlling interests are presented in the

unaudited condensed consolidated balance sheets, separately from equity attributable to the stockholders of the Company.

During the three

months ended March 31, 2024 and 2023, none of the Company’s net loss was attributable to non-controlling interests.

Use of Estimates

In preparing financial statements in conformity

with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions

that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the

financial statements and revenue and expenses during the reporting period.

In preparing financial statements in conformity with

accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that

affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial

statements and revenue and expenses during the reporting period.

Actual results could differ from those estimates.

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dates of three months or less when purchased, to be cash equivalents.

The Company had no cash equivalents as of September 30, 2023 and

The Company had no cash equivalents as of March 31, 2024 and

December 31, 2023.

Accounts Receivable

Accounts receivable, which generally relate to

licensed sales, are presented on the balance sheet net of estimated uncollectible amounts.

The Company records an allowance for estimated

uncollectible accounts in an amount approximating anticipated losses.

Individual uncollectible accounts are written off against the allowance

when collection of the individual accounts appears doubtful.

The Company did not record an allowance for doubtful accounts at September

30, 2023 and December 31, 2022.

Accounts receivable, which generally relate to licensed

sales, are presented on the balance sheet net of estimated uncollectible amounts.

The Company records an allowance for estimated uncollectible

accounts in an amount approximating anticipated losses.

Individual uncollectible accounts are written off against the allowance when collection

of the individual accounts appears doubtful.

The Company did not record an allowance for credit losses at March 31, 2024 and December 31,

The accounts receivable balance at March 31,

2024 and December 31, 2023 of approximately $ 3,989,000 and $ 3,015,000 , respectively, represent 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.

In April 2024, the Company collected approximately $ 3,000,000 of the March 31, 2024 balance.

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.

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.

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 impact the assets’ ultimate recoverability as prescribed under the guidance related to impairment of

long-lived assets.

Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on

a straight-line basis with the associated patent.

Patents include the cost of patents or patent rights

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

Patent acquisition

costs are allocated equally across the patents in force at the time of acquisition.

Patent acquisition costs are amortized utilizing the

straight-line method over their remaining economic useful lives, ranging from one to ten years .

Certain patent application and prosecution

costs incurred to secure additional patent claims that, based on management’s estimates, are deemed to be recoverable, are capitalized

and amortized over the remaining estimated economic useful life of the related patent portfolio.

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets with

a finite life, are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) 360, “Property,

Plant, and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable

through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets.

Whenever any such

impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value

of the asset is recorded.

There were no impairments of long-lived assets for

the three months ended March 31, 2024 and 2023.

Warrant Liability

The Company reflects a warrant liability with

respect to warrants for which the number of shares underlying the warrants is not fixed until the date of the initial exercise.

of the liability is determined at the end of each fiscal period and the period-to-period change in the amount of warrant liability is

reflected as a gain or loss in warrant liability and is included under other income (expense) in the accompanying consolidated statements

The Company records a warrant liability with respect

to warrants for which the number of shares underlying the warrants is not fixed until the date of the initial exercise.

The amount of

the liability is determined at the end of each fiscal period and the period-to-period change in the amount of warrant liability is reflected

as a change in fair market value of warrant liability and is included under other income (expense) in the accompanying consolidated statements

of operations.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that

would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset

or liability in an orderly transaction between market participants on the measurement date.

Fair value is defined as the exchange price that would

be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or

liability in an orderly transaction between market participants on the measurement date.

A fair value hierarchy is used which requires

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by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable

inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing

models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires

significant judgment or estimation.

The carrying value reflected in the consolidated

balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and short-term borrowings approximate

Level 3 – Unobservable inputs

that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models,

discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant

judgment or estimation.

The carrying value reflected in the consolidated balance

sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and short-term borrowings approximate

fair value due to the short-term nature of these items.

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respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

The Company’s operating subsidiaries may

retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing

and enforcement activities.

These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of

any negotiated fees, settlements or judgments awarded.

The Company’s operating subsidiaries may

engage with funding sources that provide financing for patent licensing and enforcement.

These litigation finance firms may be engaged

on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded

in exchange for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities.

The economic terms of the inventor agreements,

operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned

or controlled by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary

across the patent portfolios owned or controlled by such operating subsidiaries and are included in cost of revenues as litigation and

licensing expenses.

Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation

finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue

agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues

Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate

and may continue to vary significantly period to period, based primarily on these factors.

The Company’s operating subsidiaries may retain

the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement

These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees,

settlements or judgments awarded.

The Company’s operating subsidiaries may engage

with funding sources that provide financing for patent licensing and enforcement.

These litigation finance firms may be engaged on a non-recourse

basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange

for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities.

The economic terms of the inventor agreements, operating

agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled

by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the

patent portfolios owned or controlled by such operating subsidiaries and are included in cost of revenues as litigation and licensing

Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance

expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements

executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period.

Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue

to vary significantly period to period, based primarily on these factors.

Revenue Recognition

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is not separately identifiable from other promises to transfer intellectual property rights in the contract.

Since the promised intellectual property rights

are not individually distinct, the Company combined each individual IP right in the contract into a bundle of IP rights that is distinct,

Since the promised intellectual property rights are

not individually distinct, the Company combined each individual IP right in the contract into a bundle of IP rights that is distinct

and accounted for all of the intellectual property rights promised in the contract as a single performance obligation.

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component or consideration payable to the customer in these transactions.

The Company’s revenue for the three months ended March

31, 2024 was generated from licenses pursuant to the settlement of patent infringement lawsuits in the TLL portfolio.

Revenue for the

three months ending March 31, 2023 was generated from licenses pursuant to the settlement of patent infringement lawsuits in the Tyche

and STX portfolios.

Cost of Revenues

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or support, as these are included in general and administrative expenses.

Inventor Royalties, Litigation Funding Fees and Contingent Legal

In connection with the investment in certain patents

and patent rights, certain of the Company’s operating subsidiaries may execute agreements which grant to the inventors and/or former

owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective

agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

The Company’s operating subsidiaries may

retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing

and enforcement activities.

These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of

any negotiated fees, settlements or judgments awarded.

The Company’s operating subsidiaries may

engage with funding sources that specialize in providing financing for patent licensing and enforcement.

These litigation finance firms

may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements

or judgments awarded in exchange for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing

and enforcement activities.

The economic terms of the inventor agreements,

operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned

or controlled by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary

across the patent portfolios owned or controlled by such operating subsidiaries.

Inventor/former owner royalties, payments to non-controlling

interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues

recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios

with varying economic terms and obligations generating revenues each period.

Inventor/former owner royalties, contingent legal fees expenses

and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on

these factors.

The Company did not incur any foreign income tax

expense for the three months ended September 30, 2023 and 2022.

The Company incurred foreign income tax expense of $ 30,000 and $ 12,884

for the nine months ended September 30, 2023 and 2022, respectively.

During the three months ended March 31, 2024, the Company received

a reimbursement for costs expensed in prior periods in the amount of approximately $ 334,000 , resulting in a reduction of litigation and

licensing expenses.

Inventor Royalties, Litigation Funding Fees and

Contingent Legal Expenses.

In connection with the investment in or acquisition

of certain patents and patent rights, certain of the Company’s operating subsidiaries may grant the inventors and/or former owners

of the respective patents or patent rights the right to receive a percentage of future net revenues (as defined in the respective agreements)

generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios.

The Company’s operating subsidiaries may retain

the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement

These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees,

settlements or judgments awarded.

The Company’s operating subsidiaries may engage

with funding sources that specialize in providing financing for patent licensing and enforcement.

These litigation finance firms may be

engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments

awarded in exchange for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing and enforcement

The economic terms of the inventor agreements, operating

agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled

by the Company’s operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the

patent portfolios owned or controlled by such operating subsidiaries.

Inventor/former owner royalties, payments to non-controlling interests,

contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized

each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying

economic terms and obligations generating revenues each period.

Inventor/former owner royalties, contingent legal fees expenses and litigation

finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors.

The Company did not incur any foreign income tax expense

for the three months ended March 31, 2024.

The Company incurred $ 30,000 of foreign income tax expense for the three months ended March

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).

The Company recognizes 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

The Company maintains its cash in bank deposit

accounts, which at times, may exceed federally insured limits.

The Company maintains its cash in bank deposit accounts,

which at times, may exceed federally insured limits.

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

Net Loss Per Share

The Company calculates net loss per share by dividing

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 dilutive earnings per share for the three months ended

September 30, 2022.

Because the Company incurred losses for the three months ended September 30, 2023 and the nine months ended September

30, 2023 and 2022, 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 QPRC Finance LLC (“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.

Net Income (Loss) Per Share

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.

Because the Company incurred losses for the three months ended March 31, 2024 and 2023,

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.

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 our financial statements.

Going Concern

The Company has an accumulated deficit of approximately $ 24,342,000

$ 29,132,000 and negative working capital of approximately $ 15,133,000 as of September 30, 2023.

Because of the Company’s continuing

losses, its working capital deficiency, the uncertainty of future revenue, the Company’s obligations to Intelligent Partners, 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 8), raise substantial doubt as to

the Company’s ability to continue as a going concern within one year after the date that these unaudited condensed consolidated

financial statements are issued.

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.

SHORT-TERM DEBT AND LONG-TERM

and negative working capital of approximately $ 9,965,000 as of March 31, 2024.

Although the Company generated income in 2023, it

incurred a loss for the three months ended March 31, 2024 and it 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, its

obligations to Intelligent Partners, QF3, and QFL, the low stock price of the Company’s common stock and the absence of an active trading

market in its common stock and the its failure to have effective internal controls over financial reporting, as reflected in the restatement

of its financial statements for the year ended December 31, 2023, the Company’s ability 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 9), 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 its 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

( 2,579,264 )

( 2,412,397 )

Net value of intangible assets

Weighted Average Amortization Period (Years)

Intangible assets are comprised of patents with estimated

useful lives.

The intangible assets at March 31, 2024 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 (c) 50 % of net revenue in excess of

$ 3,000,000 ;

● 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 amortized 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

● patents acquired March 2023 from Tower for a purchase price of $ 3,300,000 pursuant to which the Company

retains an amount equal to the purchase price plus a negotiated return and any fees out of net proceeds, as defined in the agreement,

after which Tower in entitled to a percentage of further net proceeds realized, if any.

The useful lives of the patents, at the date of

purchase, was approximately 5 - 15 years.

● patents acquired in August 2023 pursuant to an agreement with Koji Yoden for a purchase price of $ 30,000 .

The useful lives of the patents, at the date of purchase, was approximately 9 - 10 years.

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 March 31, 2024, management concluded that there was no impairment to the intangible assets.

Amortization expense for patents was approximately

$ 167,000 and $ 159,000 for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense is included in selling, general

and administration expenses in the accompanying condensed consolidated statement of operations.

Future amortization of intangible assets

is as follows:

Year Ended December 31,

Remainder of 2024

SHORT-TERM DEBT AND LONG-TERM LIABILITIES

Short-Term Debt

Loans Payable

The loans payable represents demand loans made

by former officers and directors, who are third parties and stockholders, whose holdings were insignificant at September 30, 2023 and

December 31, 2022, in the amount of $ 138,000 .

The loans payable represents demand loans made by

former officers and directors, who are third parties and stockholders, whose holdings were insignificant, at March 31, 2024 and December 31,

2023, in the amount of $ 138,000 .

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

Accrued interest

on these loans at September 30, 2023 and December 31, 2022 was approximately $ 306,000 and $ 296,000 , respectively.

Accrued interest at March 31,

2024 and December 31, 2023 was approximately $ 313,000 and $ 310,000 , respectively.

Funding Liabilities

The following table shows the Company’s

funding liabilities to QFL and QF3 at September 30, 2023 and December 31, 2022:

September 30,

The following table shows the Company’s funding

liabilities to QFL and QF3 at March 31, 2024 and December 31, 2023:

Funding liability – QFL

Funding liability – QF3

Net funding liabilities

Funding liabilities

Funding Liabilities - QFL

The QFL funding liabilities at September 30, 2023

and December 31, 2022 of $ 5,520,588 and $ 5,453,204 , respectively, 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

As of September 30, 2023, the Company had made total repayments in the amount of approximately $ 882,000 since February 22,

Approximately $ 133,000 was repaid during the nine months ended September 30, 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 September 30, 2023 and December 31, 2022.

Accrued interest related to this funding liability as

of September 30, 2023 and December 31, 2022, was approximately $ 961,000 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 “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 September 30, 2023;

(b) up to $ 2,000,000

for operating expenses, of which the Company has requested and received $ 2,000,000 as of September 30, 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 Partners.

(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 61 st

day following notice to the Company.

The warrant also contains certain minimum ownership percentage antidilution rights pursuant to which

the aggregate number of shares of common stock purchasable upon the initial exercise of the warrant shall not be less than 10 % of the

aggregate number of outstanding shares of capital stock of the Company (determined on a fully diluted basis).

Because the facility with

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.

See Notes 4 and 5 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 January 27, 2022, the Company acquired, via

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

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

The Company requested and received a capital advance

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

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

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

net proceeds resulting from monetization of the EDI Portfolio.

In July 2022, the Company entered into a purchase

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

Patents for a purchase price of $ 350,000 .

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 $ 0 and $ 200,000 from QFL pursuant to the Purchase Agreement during the three and nine

months ended September 30, 2023.

During the three and nine months ended September 30, 2022, the Company requested and received

operating capital advances in the amount of $ 200,000 and $ 600,000 , respectively.

The QFL funding liabilities at March 31, 2024

and December 31, 2023 of $ 1,526,770 and $ 1,525,502 , 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

As of March 31, 2024, the Company had made total repayments in the amount of approximately $ 4,877,000 since February 22, 2021.

No repayments were made during the three months ended March 31, 2024.

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 March 31, 2024 and December 31, 2023.

Accrued interest related to this funding liability as of March 31,

2024 and December 31, 2023 was approximately $ 492,000 and $ 478,000 , respectively.

The Company did not request an operating capital advance

during the three months ended March 31, 2024.

The Company requested and received an operating capital advance in the amount of $ 200,000

from QFL pursuant to the Purchase Agreement during the three months ended March 31, 2023.

Funding Liabilities - QF3

The QF3 funding liabilities at September 30,

2023 of $ 5,300,000 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 September 30, 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 September 30,

Accrued interest related to this funding liability as of September 30, 2023, was approximately $ 190,000 .

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 $ 2,000,000 as of September 30, 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 September 30,

In return, the Company transferred to QF3 a right to receive a portion of net proceeds generated from the monetization of those

(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 (the

The QF3 funding liabilities at March 31, 2024

and December 31, 2023 of $ 6,634,381 and $ 5,800,000 , respectively, represent 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

As of March 31, 2024, the Company has made no repayments on this funding liability.

The obligation to QF3 has no repayment

term since the payment is due from net proceeds generated from the monetization of the Company’s intellectual property and has been classified

as a current liability as of March 31, 2024 and December 31, 2023.

Accrued interest related to this funding liability as of

March 31, 2024 and December 31, 2023 was approximately $ 418,000 and $ 299,000 , respectively.

On March 12, 2023, the Company and HID, entered into

a series of agreements, all dated March 12, 2023, with QF3, a non-affiliated party, including a prepaid forward purchase agreement (the

“Purchase Agreement QF3”), a security agreement (the “QF3 Security Agreement”), a patent security agreement (the

“QF3 Patent Security Agreement” together with the QF3 Security Agreement, the QF3 Patent Security Agreement, and the QF3 Purchase

Agreement, the “QF3 Investment Documents”) 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 $ 3,334,381

as of March 31, 2024, of which approximately $ 834,000 was received during the three months ended March 31, 2024;

(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 March 31, 2024.

In return, the Company transferred to QF3 a right to receive a portion of net

proceeds generated from the monetization of those patents.

(ii) On March 17, 2023, the Company used

$ 3,300,000 of proceeds from the QF3 financing as the cash payment portion of the purchase of a seven-patent portfolio from Tower (the

“HID Portfolio”).

(iii) Pursuant to the QF3 Security Agreement

and QF3 Patent Security Agreement, payment of our obligations under the QF3 Purchase Agreement with QF3 are secured by (a) the value of

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

(b) the patents (as defined

in the Security Agreement);

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.

and QF3 Patent Security Agreement, payment of the Company’s obligations under the QF3 Purchase Agreement with QF3 are secured by (a) the

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

(b) the patents

(as defined in the Security Agreement);

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

In connection with the agreements with QF3, the Company,

HID and the Subsidiary Guarantors entered into an intercreditor agreement with QF3 and Intelligent Partners which sets forth the priority

of QF3 in the collateral under the Investment Documents.

Loan Payable Related Party

The loan payable – related party at September

The loan payable – related party at March 31,

2024 and December 31, 2023 represents the current amount of a non-interest bearing total monetization proceeds obligation (the “TMPO”)

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

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

Company’s 10 % Note to Intelligent Partners as transferee of the notes issued to United Wireless Holdings, Inc.

(“United Wireless”),

in the amount of $ 4,672,810 pursuant to securities purchase agreement dated October 22, 2015 between the Company and United Wireless.

The notes became due by their terms on September 30, 2020, and the Company did not make any payment on account of principal of and interest

on the notes.

Subsequent to September 30, 2020, the Company engaged in negotiations with Intelligent Partners in parallel with the Company’s

negotiations with QFL, with a view to restructuring the Company’s obligations under the United Wireless agreements, including the

notes, so that the Company no longer had any obligations under the notes or the SPA.

These negotiations resulted in the Restructure Agreement,

described below, which provided for the payment to Intelligent Partners of $ 1,750,000 from the proceeds from the Company’s agreements

As part of the restructure of the Company’s agreements with Intelligent Partners, the Company amended the existing MPAs

and granted Intelligent Partners certain rights in the monetization proceeds from any new intellectual property the Company acquires,

as described below.

Under these MPAs, Intelligent Partners participates in the monetization proceeds the Company receives with respect

to new patents after QFL has received its negotiated rate of return.

due to Intelligent Partners, LLC (“Intelligent Partners”) of $ 2,796,500 , pursuant to a restructure agreement (“Restructure

Agreement”) dated February 22, 2021 whereby the Company and Intelligent Partners, extinguished the Company’s 10 % Note to Intelligent

Partners as transferee of the notes issued to United Wireless Holdings, Inc.

(“United Wireless”), in the amount of $ 4,672,810

pursuant to securities purchase agreement dated October 22, 2015 between the Company and United Wireless.

The notes became due by their

terms on September 30, 2020, and the Company did not make any payment on account of principal of and interest on the notes.

to September 30, 2020, the Company engaged in negotiations with Intelligent Partners in parallel with the Company’s negotiations

with QFL, with a view to restructuring the Company’s obligations under the United Wireless agreements, including the notes, so that

the Company no longer had any obligations under the notes or the SPA.

These negotiations resulted in the Restructure Agreement, described

below, which provided for the payment to Intelligent Partners of $ 1,750,000 from the proceeds from the Company’s agreements with

As part of the restructure of the Company’s agreements with Intelligent Partners, the Company amended the existing MPAs and

granted Intelligent Partners certain rights in the monetization proceeds from any new intellectual property the Company acquires, as described

Under these MPAs, Intelligent Partners participates in the monetization proceeds the Company receives with respect to new patents

after QFL has received its negotiated rate of return.

On or prior to the date of the Restructure Agreement,

1 unchanged sentence

(the “Transferred Note”), thereby reducing the principal amount of the notes held by Intelligent Partners to $ 4,422,810 .

On February 22, 2021, the Company and Intelligent

Partners agreed to extinguish the notes and Transferred Note, and terminate or amend and restate the SPA and Transaction Documents, pursuant

to a series of agreements including:

the Restructure Agreement, a Stock Purchase Agreement (the “Stock Purchase Agreement”),

an Option Grant (the “Option Grant”), an Amended and Restated Pledge Agreement (the “Pledge Agreement”), an Amended

and Restated Registration Rights Agreement (the “Registration Rights Agreement”), a Board Observation Agreement (the “Board

Observation Agreement”), a MPA-NA Security Interest Agreement (the “MPA-NA Security Interest Agreement”), an Amended

and Restated Patent Proceeds Security Agreement (the “Patent Proceeds Security Agreement”, an Amended and Restated MPA-CP

(the “MPA-CP”), an Amended and Restated MPA-CXT (the “MPA-CXT”), a MPA-MR (the “MPA-MR”), a MPA-AMI

(the “MPA-AMI,” and together with the MPA-CP, MPA-CXT and MPA-MR, each a Restructure MPA and together the Restructure MPAs)

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 September 30, 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”).

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

See Note 5 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.

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.

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.

Because of the beneficial ownership percentage

of its principals, Intelligent Partners is treated as a related party.

Because of the beneficial ownership percentage of

its principals, Intelligent Partners is treated as a related party.

Long-Term Liabilities

Loan Payable – SBA

The loans payable – SBA balance at September

The loans payable – SBA balance at March 31,

2024 and December 31, 2023 of $ 150,000 represents the total amount due under a secured Economic Injury Disaster Loan from the U.S.

12 unchanged sentences

Purchase Price of Patents

The purchase price of patents balance at September

The purchase price of patents balance at March 31,

2024 and December 31, 2023 of $ 53,665 represents:

The non-current portion of our obligations under

the unsecured non-recourse funding agreement with a third-party funder entered into in May 2020 whereby the third-party agreed to provide

The non-current portion of our obligations under the

unsecured non-recourse funding agreement with a third-party funder entered into in May 2020 whereby the third-party agreed to provide

acquisition funding in the amount of $ 95,000 for the Company’s acquisition of the audio messaging portfolio.

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received $ 53,665 .

The Company has not paid anything against the 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 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.

The Company did not make any payments with respect to this obligation in 2024.

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.

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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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 September 30, 2023 and December 31, 2022,

fair market value of the warrant liability reflected as a change in fair market value of warrant liability and included under other expenses.

As of March 31, 2024 and December 31, 2023,

the aggregate fair value of the outstanding warrant liability was approximately $ 481,000 and $ 282,000 , respectively.

The Company estimated the fair value of the warrant

liability using the Black-Scholes option pricing model using the following key assumptions as of September 30, 2023 and December 31, 2022:

September 30,

liability using the Black-Scholes option pricing model using the following key assumptions as of March 31, 2024 and December 31,

Exercise price

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Expected term

The following schedule summarizes the valuation

of financial instruments at fair value in the balance sheets as of September 30, 2023 and December 31, 2022:

The following schedule summarizes the valuation of

financial instruments at fair value in the balance sheets as of March 31, 2024 and December 31, 2023:

Fair Value Measurements as of

September 30, 2023

March 31, 2024

December 31, 2023

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Total liabilities

The following tables set forth a reconciliation

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

The following table sets forth a reconciliation of

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

Balance at December 31, 2023

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Balance at March 31, 2024

Loss on subsequent measurement

Balance at June 30, 2023

Gain on subsequent measurement

Balance at September 30, 2023

Balance at December 31, 2021

Gain on subsequent measurement

Balance at March 31, 2022

Gain on subsequent measurement

Balance at June 30, 2022

Gain on subsequent measurement

Balance at September 30, 2022

See Notes 3 and 5 for information on the warrant

See Notes 4 and 6 for information on the warrant issuance.

STOCKHOLDERS’

Amendment to Amended and Restated Certificate

of Incorporation

On July 27, 2022, the Company amended its amended

and restated certificate of incorporation following approval of the amendment by the stockholders at the 2022 annual meeting of stockholders.

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 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.

There was no change in the par value of the common stock.

All historical share and per share amounts in

these financial statements have been retroactively adjusted to reflect the reverse stock split and change in authorized common stock.

Issuance of Options

A summary of the status of the Company’s

stock options and changes is set forth below:

Weighted Average

Exercise Price ($)

Weighted Average

Grant Date Fair

Weighted Average

Contractual Life

A summary of the status of the Company’s stock

options and changes is set forth below:

Number of Options (#)

Weighted Average Exercise

Weighted Average Grant Date Fair Value ($)

Weighted Average Remaining Contractual Life (Years)

Balance - December 31, 2023

Balance - September 30, 2023

Balance - March 31, 2024

Options exercisable at end of period

The outstanding options do not have an intrinsic

value as of September 30, 2023 or December 31, 2022.

As of September 30, 2023, there was approximately

The outstanding options do not have an intrinsic value

as of March 31, 2024 or December 31, 2023.

As of March 31, 2024, there was approximately

$ 960,000 of unrecognized compensation expense related to nonvested stock option awards that is expected to be recognized over a weighted

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Issuance of Warrants

A summary of the status of the Company’s

warrants and changes is set forth below:

Weighted Average

Exercise Price ($)

Weighted Average

Contractual Life

A summary of the status of the Company’s warrants

and changes is set forth below:

Number of Warrants (#)

Weighted Average Exercise

Weighted Average Remaining Contractual Life (Years)

Balance - December 31, 2023

Balance - September 30, 2023

The outstanding warrants do not have an intrinsic

value as of September 30, 2023 or December 31, 2022.

Intangible assets include patents purchased and

are recorded at their acquisition cost.

Intangible assets consisted of the following:

September 30,

accumulated amortization

( 2,217,106 )

( 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 September 30, 2023 represent:

● 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

$ 3,000,000 ;

● 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 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 .