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Item 7. Management’s Discussion and Analysis

2026-03-30 compared with 2025-03-26 · 347 added, 281 removed, 184 unchanged (77% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial

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

included elsewhere in this report.

included elsewhere in this annual report.

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

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owned subsidiaries.

We currently own, control or manage twenty-two intellectual property portfolios, of which we are currently seeking

or may seek monetization with respect to six, which principally consist of patent rights.

As part of our intellectual property asset management

activities and in the ordinary course of our business, it has been necessary for either us or the intellectual property owner who we represent

to initiate, and it is likely to continue to be necessary to initiate patent infringement lawsuits and engage in patent infringement litigation.

We anticipate that our primary source of revenue will come from the grant of licenses to use our intellectual property, including licenses

granted as part of the settlement of patent infringement lawsuits.

We currently own, control or manage twenty-four intellectual property portfolios, of which we are currently seeking

or may seek monetization with respect to seven, which principally consist of patent rights.

As part of our intellectual property asset

management activities and in the ordinary course of our business, it has been necessary for either us or the intellectual property owner

who we represent to initiate, and it is likely to continue to be necessary to initiate patent infringement lawsuits and engage in patent

infringement litigation.

We anticipate that our primary source of revenue will come from the grant of licenses to use our intellectual

property, including licenses granted as part of the settlement of patent infringement lawsuits.

Market and Economic Conditions

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on our business, and we continue to monitor these potential impacts, including potential economic recession, the effects of tariffs by

the United States and counter-tariffs by other countries;

changes in the Federal Reserve’s monetary policy, as well as geopolitical

risks, including the Ukraine-Russia war and the potential resolution of the war and its effect on Europe;

the continuing war between Israel

and Hamas and any further intensification of hostilities with others, including Iran and Hezbollah.

We cannot predict the timing,

strength, or duration of any future economic slowdown or any subsequent recovery generally, or in any industry.

A significant downturn

in economic conditions may adversely affect the intellectual property licensing market including the financial condition of financing

sources and the willingness of potential financing sources to provide funding for our litigation;

a law firms’ ability and willingness

to provide us with legal services on acceptable contingent fee terms;

and the financial condition and prospects of defendants and potential

defendants, which could make it less likely that they would be willing to settle our claim.

the United States and counter-tariffs by other countries, whether threatened or implemented;

changes in the Federal Reserve’s monetary

policy, as well as geopolitical risks, including the Ukraine-Russia war and the potential resolution of the war and its effect on Europe;

the continuing war between Israel and Hamas and any further intensification of hostilities with others, including Iran and Hezbollah

and potential effects of an intensification of the hostilities between India and Pakistan.

We cannot predict the timing, strength, or

duration of any future economic slowdown or any subsequent recovery generally, or in any industry.

A significant downturn in economic

conditions may adversely affect the intellectual property licensing market including the financial condition of financing sources and

the willingness of potential financing sources to provide funding for our litigation;

a law firms’ ability and willingness to provide

us with legal services on acceptable contingent fee terms;

and the financial condition and prospects of defendants and potential defendants,

which could make it less likely that they would be willing to settle our claim.

Further, to the extent that holders of intellectual

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We seek to generate revenue from patent licensing

fees from the licensing of our intellectual property, primarily from litigation relating to enforcement of our intellectual property rights.

All of the revenue for the years ended December 31, 2024 and 2023 was from patent licensing fees, of which approximately 84% and 100%,

respectively, was paid to the patent seller, funding sources and legal counsel pursuant to our agreements with patent sellers, funding

sources and legal counsel.

fees from the licensing of our intellectual property, primarily from litigation relating to enforcement of our intellectual property

For the year ended December 31, 2025 we did not generate any such revenue.

All of the revenue for the year ended December 31,

2024 was from patent licensing fees, of which approximately 84%, respectively, was paid to the patent seller, funding sources and legal

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

Because of the nature of our business transactions

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

Although we would prefer to

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

Although we would prefer

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

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

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

to, vary significantly from quarter to quarter and year to year and the net income we generated in 2023 may prove to be an aberration.

Our gross profit from license fees reflects the payment of any royalties due in connection with our license.

It has been necessary to commence litigation in

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

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

Our gross profit from license fees reflects the payment of any royalties

due in connection with our license.

It has been necessary to commence litigation

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

Intellectual property

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litigation funding sources are reflected as cost of revenue.

Agreements with QPRC Finance

On April 11, 2025, we and our newly-formed wholly-owned

subsidiary, MR, entered into a series of agreements, all dated April 11, 2025, with QPRC Finance.

The agreements are (i) the QPRC Finance

Purchase Agreement, (iii) the Security Agreement, the QPRC Finance Patent Security Agreement, (iv) the Subordination Agreement, (v) the

Letter of Instructions to Fabricant LLP, the law firm that is to represent MR in the litigation relating to the monetization of the patents

to be purchased with the proceeds of the financing from QPRC Finance (the “Law Firm”) as to the disposition of any funds

generated from the proceeds of the financing, (the “Letter of Instructions”), (vi) the Waterfall Agreement.

Pursuant to the Purchase Agreement, QPRC Finance

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

(a) up to $3,000,000 for operating expenses, of which approximately

$1,500,000 has been drawn down as of December 31, 2025;

(b) up to $9,000,000 to fund the purchase by MR of certain patent assets from

Monterey pursuant to the Monterey Agreement and (c) up to $7,500,000 for patent enforcement costs, including legal fees subject to budget

limitations to be agreed upon, of which approximately $4,054,000 was drawn down during the year ended December 31, 2025.

In return, the

Company transferred to QPRC Finance the right to receive a portion of net proceeds generated from the monetization of those patents.

On April 18, 2025, MR took down $9,000,000 of

proceeds from the QPRC Finance financing to purchase the patent portfolio from Monterey, which consisted of more than 2,500 United States

patents, foreign patents and patent applications, pursuant to the Monterey Agreement.

These patents relate to data storage device security

and semiconductor circuitry.

The payment was made directly from QPRC Finance to Monterey in accordance with instructions from the Company

The Monterey Agreement provides that after MR has received an amount equal to 200% of the sum of the purchase price plus other

money deployed to the monetization of the assigned patents, the next $7,000,000 is paid to Monterey and thereafter Monterey is to receive

20% of net licensing revenues.

Pursuant to the Purchase Agreement, the Company

and MR transferred to QPRC Finance the right to receive a portion of net proceeds generated from the monetization of those patents covered

by the Security Agreement, during which time the Company and MR do not receive any portion of the net proceeds.

The Waterfall Agreement

sets forth the details of the order of payment.

Pursuant to the Waterfall Agreement, (i) 100% of the net proceeds is paid to QPRC Finance

until QPRC Finance has received its initial recovery amount;

(ii) 90% of the net proceeds are distributed to QPRC Finance and 10% to

the Company and MR until QPRC Finance has received an amount determined pursuant to the Purchase Agreement, and (iii) any net proceeds

remaining after the foregoing distributions are paid to the Company and MR and the Law Firm in accordance with the Waterfall Agreement,

in view of the plan to pay the Law Firm pursuant to a budget from the distribution allocated to patent enforcement costs.

Any contingent

payments due Monterey in addition to the $9,000,000 paid from the initial distribution from QPRC Finance shall be paid from the funds

paid to the Company and MR pursuant to the Waterfall Agreement.

Except in an Event of Default, as defined therein, all payment obligations

by the Company and MR to QPRC Finance pursuant to the Purchase Agreement are non-recourse and shall be paid only from net proceeds from

monetization, if any, of the patent rights owned or acquired by the Company or MR utilizing the QPRC Finance facility.

Agreements with QF3, QFL and Intelligent Partners

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

Pursuant to the Purchase Agreement with QF3, QF3

agreed to make available to us a financing facility of:

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

we intend to monetize, of which no amounts have been received as of December 31, 2023;

(b) up to $4,334,000 for operating expenses,

of which the we have requested and received $4,334,000 as of December 31, 2024;

and (iii) $3,300,000 to fund the cash payment portion

of the purchase price of a patent portfolio acquired from Tower.

In return we transferred to QF3 a right to receive a portion of net proceeds

generated from the monetization of those patents.

We used $3,300,000 proceeds from the QF3 financing as the cash payment portion of the

purchase price of a portfolio acquired from Tower.

Our obligations to QF3 are secured by the proceeds from the patents acquired with their

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

of the foregoing.

On February 22, 2021, we entered into a funding agreement with QFL

which was amended and restated on May 2, 2024 to terminate QFL’s funding obligation, and a restructure agreement with Intelligent

Pursuant to the Purchase Agreement with QFL, QFL

made available to us a total of $6,402,000, consisting of (a) $2,653,000 for the acquisition of mutually agreed patent rights that we

intended to monetize;

On March 12, 2023, we entered into a funding

agreement with QF3.

Pursuant to the Purchase Agreement with QF3,

QF3 agreed to make available to us a financing facility of:

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

that we intend to monetize, of which no amounts have been requested or received as of December 31, 2025;

(b) up to $4,334,000 for

operating expenses, of which the we have requested and received $4,334,000 as of December 31, 2025;

and (iii) $3,300,000 to fund

the cash payment portion of the purchase price of a patent portfolio acquired from Tower.

In return we transferred to QF3 a right to

receive a portion of net proceeds generated from the monetization of those patents.

We used $3,300,000 proceeds from the QF3 financing

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

Our obligations to QF3 are secured by the proceeds

from the patents acquired with their funding, the patents and all general intangibles now or hereafter arising from or related to the

foregoing and the proceeds and products of the foregoing.

On February 22, 2021, we entered into a funding

agreement with QFL and a restructure agreement with Intelligent Partners.

Pursuant to the Purchase Agreement with QFL,

QFL made available to us a total of $6,402,000, consisting of (a) $2,653,000 for the acquisition of mutually agreed patent rights that

we intended to monetize;

(b) $2,000,000 for operating expenses;

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the monetization of those patents.

On May 2, 2024 the funding agreement with QFL was amended and restated to terminate QFL’s funding

During the year ended December 31, 2024 we repaid the full outstanding principal balance of $1,525,502.

No further advances are to be made pursuant to the Purchase Agreement.

We also granted QFL a ten-year warrant to purchase a total of up

to 962,463 shares of our common stock, with an exercise price of $0.54 per share which may be exercised through February 18, 2031 on a

cash or cashless basis, subject to certain limitations on exercisability.

The warrant also contains certain minimum ownership percentage

antidilution rights pursuant to which the aggregate number of shares of common stock purchasable upon the initial exercise of the Warrant

shall not be less than 10% of the aggregate number of outstanding shares of our capital stock (determined on a fully diluted basis).

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.

We also agreed to take all commercially

reasonable steps necessary to regain compliance with the OTCQB eligibility standards as soon as practicable, but in no event later than

12 months from the closing date, and we regained compliance on May 7, 2021.

We granted QFL registration rights with respect to the common

stock issuable upon exercise of the warrants.

No further advances

are to be made pursuant to the Purchase Agreement.

In connection with the QFL purchase agreement, we granted QFL a ten-year warrant to

purchase a total of up to 962,463 shares of our common stock, with an exercise price of $0.54 per share which may be exercised through

February 18, 2031 on a cash or cashless basis, subject to certain limitations on exercisability.

The warrant also contains certain minimum

ownership percentage antidilution rights pursuant to which the aggregate number of shares of common stock purchasable upon the initial

exercise of the Warrant shall not be less than 10% of the aggregate number of outstanding shares of our capital stock (determined on

a fully diluted basis).

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.

We also agreed

to take all commercially reasonable steps necessary to regain compliance with the OTCQB eligibility standards as soon as practicable,

but in no event later than 12 months from the closing date, and we regained compliance on May 7, 2021.

We granted QFL registration rights

with respect to the common stock issuable upon exercise of the warrants.

We also granted QFL certain board observation rights.

Pursuant to the Purchase Agreement,

all of the net proceeds from the monetization of the intellectual property acquired with funds from QFL are paid directly to QFL.

QFL has received a negotiated rate of return, we and QFL share net proceeds equally until QFL achieves its investment return, as defined

in the agreement.

to the Purchase Agreement, all of the net proceeds from the monetization of the intellectual property acquired with funds from QFL are

paid directly to QFL.

After QFL has received a negotiated rate of return, we and QFL share net proceeds equally until QFL achieves its

investment return, as defined in the agreement.

Thereafter, we retain 100% of all net proceeds.

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

to QFL pursuant to the Purchase Agreement are non-recourse and shall be paid only if and after net proceeds from monetization of the patent

rights owned or acquire by us are received, or to be received.

Except in an Event of Default, as defined

therein, all payments to be paid by us to QFL pursuant to the Purchase Agreement are non-recourse and shall be paid only if and after

net proceeds from monetization of the patent rights owned or acquire by us are received, or to be received.

Contemporaneously with the execution of the agreements

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

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

total payments under all the monetization participation agreements equal $2,805,000, as follows:

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

the total payments under all the monetization participation agreements equal $2,805,000, as follows:

for net proceeds between $0 and

Intelligent Partners receives 10% of the net proceeds realized from new patents, except that if, in any calendar quarter, net proceeds

realized by us exceed $1,000,000, Intelligent Partners’ entitlement for that quarter only 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.

with respect to the new patents terminate once total payments to Intelligent Partners under all monetization participation agreements

reach $2,805,000.

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

us under the QFL and QF3 agreements, which start after QFL and QF3 have received a negotiated rate of return.

$1,000,000, Intelligent Partners receives 10% of the net proceeds realized from new patents, except that if, in any calendar quarter,

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

The payments with respect to the new patents terminate once total payments to Intelligent Partners under all monetization participation

agreements reach $2,805,000.

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

to us under the QFL and QF3 agreements, which start after QFL and QF3 have received a negotiated rate of return.

In connection with the

restructure agreement with Intelligent Partners, we entered into a board observation rights agreement with Intelligent Partners.

17, 2025, Intelligent Partners notified us that it plans to exercise its rights under the board observation rights agreement.

Current Litigation and Settlements

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

for the Eastern District of Texas against FUJIFILM Holdings Corporation et al.

As of December 31, 2023, the matter against FUJIFILM

was resolved and revenue for the year ended December 31, 2023 includes revenue from the settlement.

In November 2021, TLL brought patent infringement

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

patents in suit.

patents subject to the litigation.

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

District for the Eastern District of Texas against

Checkpoint Software Technologies Ltd.

District Court for the Eastern

District of Texas against Checkpoint Software Technologies Ltd.

and Palo Alto Networks, Inc.

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

against Palo Alto Networks, Inc.

In March 2022, TLL voluntarily dismissed,

without prejudice, the action against Palo Alto Networks, Inc.

In March 2022, Palo Alto Networks, Inc.

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

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

In May 2022, Trend Micro

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

litigation for pretrial proceedings.

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

filed a complaint against TLL

and the Company in the U.S.

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

In May 2022, Trend Micro Inc.

filed a motion with the Panel on Multidistrict Litigation seeking to have the pending actions

consolidated into a centralized multidistrict litigation for pretrial proceedings.

In August 2022, the Judicial Panel on Multidistrict

Litigation consolidated all actions in the U.S.

District for the Eastern District of Texas.

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

District for the Eastern

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

In October 2022, TLL brought patent infringement

suits in the U.S.

District for the Eastern District of Texas against Fortinet, Inc., Crowdstrike, Inc.

et.al., and Musarubra US, LLC.

The actions against Trend Micro Incorporated,

Checkpoint Software Technologies Ltd, Palo Alto Networks, Inc.

The actions against Trend Micro Incorporated, Checkpoint Software Technologies Ltd, Palo Alto Networks, Inc.

and Crowdstrike, Inc.

were resolved in 2023 and our revenue for the year

ended December 31, 2023 includes revenue from the related settlements.

In February 2024, TLL brought patent infringement suits in the

resolved in 2023 and our revenue for the year ended December 31, 2023 includes revenue from the related settlements.

In February 2024,

TLL brought patent infringement suits in the U.S.

District for the Eastern District of Texas against Sonicwall, Inc.

The actions against Fortinet, Inc., Musarubra US LLC, and Sonicwall

have been resolved and revenue for the year ended December 31, 2024 includes revenue from the related settlements.

The actions against

Fortinet, Inc., Musarubra US LLC, and Sonicwall Inc.

have been resolved and revenue for the year ended December 31, 2024 includes revenue

from the related settlements.

In November 2021, MML brought patent infringement

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additional patent families for an additional $92,000.

We requested and received a capital advance from QFL in the amount of $92,000, which

we used to make payment to AI in August 2022 pursuant to the amendment to the Purchase Agreement.

We requested and received a capital advance from QFL in the amount of $92,000,

which we used to make payment to AI in August 2022 pursuant to the amendment to the Purchase Agreement.

The actions against ZTE Corporation

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year ended December 31, 2024 includes revenue from the related settlement.

In May 2022, Tyche brought patent infringement

suits in the U.S.

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

Incorporated, Infineon Technologies AG and STMicroelectronics NV et.

As of December 31, 2023, all actions have been resolved

and revenue for the year ended December 31, 2023 includes revenue from the settlements.

In September 2023, Deepwell brought a patent

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The action against MediaTek, Inc.

resolved and revenue for the year ended December 31, 2024 includes revenue from the related settlement.

In February 2024, Harbor Island Dynamic brought

a patent infringement suit in the U.S.

been resolved and revenue for the year ended December 31, 2024 includes revenue from the related settlement.

In February 2024, Harbor Island Dynamic brought a patent infringement

suit in the U.S.

District for the Eastern District of Texas against Samsung Electronics Co., Ltd.

In August 2024, Harbor Island Dynamic brought a patent infringement suit in the U.S.

District for the Eastern District of Texas against

NXP Semiconductors NV et.

In September 2024, Samsung filed four petitions with the patent trial an appeal board for inter partes review

of the Harbor Island Dynamic patents asserted against Samsung These actions are pending.

2024, Harbor Island Dynamic brought a patent infringement suit in the U.S.

District for the Eastern District of Texas against NXP Semiconductors

Samsung’s 2024 petitions for review were granted in April 2025.

These actions are pending.

In April 2025, MR brought patent infringement

suits in the U.S.

District for the Eastern District of Texas against Renesas Electronics Corporation, Denso Corporation and Denso International

In June 2025, MR brought patent infringement

suits in the U.S.

District for the Eastern District of Texas against Seagate Technology Holdings Plc, Seagate Singapore International

Headquarters Pte.

Ltd, Seagate Technology International, Seagate Technology (Thailand) Limited, and Seagate Technology (Netherlands)

In August 2025, MR brought a patent infringement

suit in the U.S.

District for the Eastern District of Texas against Texas Instruments, Inc.

In December 2025, Koyo brought patent infringement

suits in the U.S.

District for the Eastern District of Texas against Samsung Electronics Co., Ltd.

The actions by MR and Koyo are pending.

Results of Operations

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Selling, general and administrative expenses

(Loss) income from operations

Loss from operations

Other income (expense)

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Total other income (expense)

(Loss) income before income tax

Loss before income tax

Income tax expense

Net (loss) income

$ (8,491,508 )

We generated revenues of $2,795,000 for the year

ended December 31, 2024 as compared to approximately $13,152,000 for the year ended December 31, 2023.

Our revenue for the year ended

December 31, 2024 was generated from licenses pursuant to the settlement of patent infringement lawsuits in the TLL, Deepwell, and

Multimodal Media portfolios.

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.

$ (2,471,651 )

We did not generate any revenue for the year

ended December 31, 2025.

For the year ended December 31, 2024 we generated revenue of approximately $2,795,000.

Our revenue for the year

ended December 31, 2024 was generated from licenses issued in the settlement of patent infringement lawsuits in the TLL, Deepwell,

and Multimodal Media portfolios.

Since we only generate revenue from litigation seeking to monetize our intellectual property rights,

although we had pending litigation with respect to three portfolios in 2025, none of such actions were concluded during 2025, as a result

of which we did not generate any revenue during 2025.

Cost of revenue for the years ended December 31, 2025 and 2024 was approximately

$4,071,000 and $1,844,000, respectively.

The decrease in cost of revenues is primarily due to decreased litigation and licensing expenses

associated with contingent fees incurred in generating revenues resulting from a lower level of revenues in 2024.

The timing and amount

of our revenue is dependent upon the results of litigation seeking to enforce our intellectual property rights, and we cannot predict

when or whether we will have a recovery and how much of the recovery will be received by us after payments to legal counsel, to our funding

sources, to inventors/former patent owners and to Intelligent Partners who have an interest in our share of the recovery from certain

patent portfolios after deducting payments due to counsel and the litigation funding source.

The substantial increase in cost of revenues is primarily due to increased litigation and licensing

expenses associated with the MR portfolio which were funded from advances to fund litigation pursuant to the QPRC Finance financings.

The timing and amount of our revenue is dependent upon the results of litigation seeking to enforce our intellectual property rights,

and we cannot predict when or whether we will have a recovery and how much of the recovery will be received by us after payments to legal

counsel, to our funding sources, to inventors/former patent owners and to Intelligent Partners all of whom have an interest in our share

of the recovery from certain patent portfolios.

Selling, general, and administrative expenses

for the year ended December 31, 2025 increased by approximately $821,000, or approximately 29%, compared to the year ended December 31,

The increase is primarily due to an increase in compensation and retirement expense as well as increases and travel costs, office

supplies and advertising.

These increases were offset by decreases in patent amortization and professional fees.

Our principal operating

expenses for the year ended December 31, 2024 were compensation expenses of approximately $994,000, amortization of intangible assets

of approximately $636,000 and professional fees of approximately $541,000.

Our principal operating expenses for the year ended December

31, 2023 were compensation expenses of approximately $660,000, amortization of intangible assets of approximately $787,000 and professional

fees of approximately $696,000.

The increase is primarily due to an increase in amortization of intangible assets of approximately $1,172,000 offset by a decrease

in compensation expense of approximately $329,000.

Our principal operating expenses for the year ended December 31, 2025 were compensation

expenses of approximately $720,000, amortization of intangible assets of approximately $1,808,000 and professional fees of approximately

Our principal operating expenses for the year ended December 31, 2024 were compensation expenses of approximately $994,000,

amortization of intangible assets of approximately $636,000 and professional fees of approximately $541,000.

The increase in amortization

of intangible assets reflects the amortization of intellectual property rights acquired by us in 2024 and 2025.

Other income and expense for the year ended December

31, 2024 included a gain on change in fair value of warrant liability of approximately $165,000.

We realized a loss on change in fair

value of warrant liability of approximately $136,000 for the year ended December 31, 2023.

The fair value of the warrant liability is

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

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

Other expense also reflects interest expense of approximately

$690,000 for the year ended December 31, 2024 and approximately $1,061,000 for the year ended December 31, 2023.

The decrease in interest

expense reflects the accrued interest payable on the principal amount of QFL and QF3 facilities.

31, 2025 included a loss on change in fair value of warrant liability of approximately $102,000.

Other income and expense for the year

ended December 31, 2024 included a gain on change in fair value of warrant liability of approximately $165,000.

The fair value of the

warrant liability is affected by the price of our common stock, so the liability increases as the stock price goes up, resulting in an

expense, and decreases as the stock price goes down resulting in income from change in warrant liability.

Other expense also reflects

interest expense of approximately $700,000 for the year ended December 31, 2025 and approximately $690,000 for the year ended December

The interest expense primarily reflects the accrued interest on the principal amount of QF3 facilities.

We incurred income tax expense of $0 and $100,000

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As a result of the foregoing, we realized net

loss of approximately $2,472,000, or ($0.46) per share (basic and diluted), for the year ended December 31, 2024, compared to net income

loss of approximately $8,492,000, or ($1.59) per share (basic and diluted), for the year ended December 31, 2025, compared to net loss

of approximately $2,472,000, or ($0.46) per share (basic and diluted), for the year ended December 31, 2024.

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of approximately $207,000, and current liabilities of approximately $27,427,000.

Our current liabilities include funding liabilities of

approximately $7,634,000 payable to QF3, a non-interest bearing total monetization proceeds obligation (the “TMPO”) to Intelligent

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

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

$156,000, warrant liability of approximately $117,000, and accrued interest of approximately $1,196,000.

As of December 31, 2024, we have

an accumulated deficit of $26,382,672 and a negative working capital of approximately $11,536,000.

Other than salary and pension benefits

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

normal general and administrative expenses and legal fees, including expenses relating to our status as a public company filing reports

with the SEC.

Our current liabilities include funding liabilities

of approximately $22,264,000 of which approximately $7,634,000 is payable to QF3, a non-interest bearing total monetization proceeds

obligation (the “TMPO”) to Intelligent Partners under the Restructure Agreement which is only payable from money generated

from the monetization of intellectual property and approximately $14,629,000 payable to QPRC Finance which is non-interest bearing and

only payable from the net proceeds from monetization, if any, of the patent rights owed or acquired by us, loans payable of approximately

$138,000, accounts payable and accrued liabilities of approximately $122,000, warrant liability of approximately $219,000, and accrued

interest of approximately $1,887,000.

As of December 31, 2025, we have an accumulated deficit of approximately $34,874,000 and a negative

working capital of approximately $27,220,000.

Other than salary and pension benefits to our chief executive officer, we do not contemplate

any other material operating expense requiring cash in the near future other than normal general and administrative expenses and legal

fees, including expenses relating to our status as a public company filing reports with the SEC.

The following table shows the summary cash flows

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For the Year Ended

Cash flows (used in) provided by operating activities

Cash flows (used) in operating activities

$ (5,918,552 )

Cash flows (used) in investing activities

Cash flows from financing activities

Net (decrease) increase in cash

Net decrease in cash

Cash at beginning of year

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For the year ended December 31, 2025, cash

flows used in operating activities primarily reflects the net loss of $2,471,651, increased by a reduction in accounts receivable of $3,007,044

and amortization of intangible assets of $636,353, offset by a decrease in accounts payable and accrued liabilities of $1,518,662.

the year ended December 31, 2023, cash flows provided by operating activities primarily reflects net income of $2,278,473, reduced by

an increase accounts receivable of $3,015,295, offset by amortization of intangible assets of $786,552 and an increase in accounts payable

and accrued liabilities of $1,526,153.

During the year ended December 31, 2024 there

were no cash flows from investing activities.

During the year ended December 31, 2023, investing activities consisted of $3,330,000 to

fund the cash payment portion of the purchase of a patent portfolio from Tower.

flows used in operating activities primarily reflects the net loss of $8,491,508, increased by amortization of intangible assets of $1,807,987

and accrued interest of $691,126, offset by a decrease in accounts payable and accrued liabilities of $34,097.

For the year ended December 31,

2024, cash flows used in operating activities primarily reflects the net loss of $2,471,651, increased by a reduction in accounts receivable

of $3,007,044 and amortization of intangible assets of $636,353, offset by a decrease in accounts payable and accrued liabilities of

During the year ended December 31, 2025 cash

flows used in investing activities reflects the patents acquired from Monterey.

During the year ended December 31, 2024 there was no

cash flow from investing activities.

Cash flows provided by financing activities for

the year ended December 31, 2024 were approximately $309,000 representing approximately $1,834,000 from funding by QF3, offset by

payment of a funding liability of approximately $1,526,000 to QFL.

Cash flows provided by financing activities for the year ended December 31,

2023 were $6,000,000 from funding advances by QFL and QF3 offset by a payment of a funding liability of approximately $4,128,000 representing

payments of funding liability to QFL.

the year ended December 31, 2025 was approximately $14,629,000 representing fundings by QPRC Finance and QF3.

Cash flows provided

by financing activities for the year ended December 31, 2024 was approximately $309,000 representing approximately $1,834,000 from

funding by QF3, offset by payment of a funding liability to QFL of approximately $1,526,000.

We cannot assure you that we will be successful

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Although our agreement with QF3 provides for QF3 to provide

us with funding to acquire intellectual property rights, subject to QF3's approval, it does not provide for financing the litigation necessary

for the monetization of the intellectual property rights.

We do not have any credit facilities or any arrangements for us to finance the

litigation necessary to monetize our intellectual property rights other than contingent fee arrangements with counsel with respect to

our pending litigation.

If we do not secure contingent representation or obtain litigation financing, we may be unable to monetize our

intellectual property.

We cannot predict the success of any pending or

future litigation.

us with funding to acquire intellectual property rights, subject to QF3’s approval, it does not provide for financing the litigation

necessary for the monetization of the intellectual property rights and we cannot assure you that it will provide financing for any intellectual

property acquisition.

We do not have any credit facilities or any arrangements for us to finance the litigation necessary to monetize

our intellectual property rights other than contingent fee arrangements with counsel with respect to our pending litigation and our agreement

with QPRC finance.

If we do not secure contingent representation or obtain litigation financing, we may be unable to monetize our intellectual

We cannot predict the success of any pending

or future litigation.

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

which is generated.

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

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

As noted below, there is a substantial doubt about

our ability to continue as a going concern.

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

revenue for 2025 and our low stock price make it difficult for us to raise funds in the debt or equity markets.

As noted below, there is a substantial doubt

about our ability to continue as a going concern.

Critical Accounting Estimates

The discussion and analysis of our financial condition

and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally

accepted in the United States of America.

The preparation of these financial statements requires us to make estimates and judgments that

affect the reported amounts of assets and liabilities.

The discussion and analysis of our financial

condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles

generally accepted in the United States of America.

The preparation of these financial statements requires us to make estimates and judgments

that affect the reported amounts of assets and liabilities.

On an on-going basis, we evaluate our estimates.

We base our estimates on historical

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

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

Actual results

may differ from these estimates under different assumptions or conditions.

We base our estimates on

historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our

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

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

Management believes the following critical accounting

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Intangible assets consist of patents which are

amortized using the straight-line method over their estimated useful lives or statutory lives whichever is shorter and are reviewed for

impairment upon any triggering event that may give rise to the assets ultimate recoverability as prescribed under the guidance related

to impairment of long-lived assets.

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

and amortized on a straight-line basis with the associated patent.

amortized using the straight-line method over their estimated useful lives or statutory lives whichever is shorter.

In determining the

relevant useful lives the Company considers several factors including the age of the acquired patent portfolio, the statutory lives of

the patents acquired, whether the Company has already identified potential litigation under the patent portfolio, and the expected timeline

to monetize the asset.

Intangible assets are reviewed for impairment upon any triggering event

that may give rise to the assets ultimate recoverability as prescribed under the guidance related to impairment of long-lived assets.

In determining whether a trigger event has occurred, the Company contemplates several factors including the status and stage of litigation,

whether a portfolio has received any unfavorable litigation outcomes determined to final and non-appealable, changes in legal factors

or market conditions for patent assets, and whether the ultimate costs to continue to litigate a patent would exceed potential returns.

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

carrying value of the asset is recorded.

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.

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.

Warrant Liability

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liability is determined at the end of each fiscal period by using a Black-Scholes option pricing model to estimate the fair value.

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).

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).

Stock-Based Compensation

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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 intellectual property rights are not

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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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As such, the earnings

process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue

recognition criteria have been met.

Revenue contracts generally provide for payment of contractual amounts within 30 to 90 days of execution

of the contract.

process is complete and revenue is recognized at a point in time, upon the execution of the contract, when collectability is probable

and all other revenue recognition criteria have been met.

Revenue contracts generally provide for payment of contractual amounts within

30 to 90 days of execution of the contract.

Contractual payments made by licensees are generally non-refundable.

The Company does not have any significant payment

terms, as payment is received shortly after goods are delivered or services are provided, therefore there is no significant financing

component or consideration payable to the customer in these transactions.

The Company does not

have any significant payment terms, as payment is received shortly after goods are delivered or services are provided, therefore there

is no significant financing component or consideration payable to the customer in these transactions.

Recent Accounting Pronouncements

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$34,874,000 and negative working capital of approximately $27,220,000 as of December 31, 2025.

Due to our history of losses, which

are continuing, our working capital deficiency, the uncertainty of future revenue, our obligations to QF3 and Intelligent Partners, our

low stock price and the absence of an active trading market in our common stock and our failure to have effective internal controls over

financial reporting, as reflected in the restatement of our financial statements for the year ended December 31, 2023, our 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 if we fail to meet the continued listing requirements of the OTCQB, raise substantial doubt as to our ability to continue as a

going concern.

Our revenue is generated exclusively from license fees generated from litigation seeking damages for infringement of our

intellectual property rights.

Although we may seek to raise funds and to obtain third-party funding for litigation to enforce its intellectual

property rights, the availability of such funds is uncertain.

The financial statements do not include any adjustments that might result

from the outcome of this uncertainty.

Because of our history of losses,

including the lack of any revenue for the year ended December 31, 2025, our working capital deficiency, the uncertainty of future revenue,

our obligations to QPRC Finance, Intelligent Partners and QF3, the low stock price of our common stock and the absence of an active trading

market in our common stock, our 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 our failure to meet the continued listing requirements of the OTCQB, raise substantial

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

Our revenue is generated exclusively from license fees generated from litigation

seeking damages for infringement of our intellectual property rights and the amount and timing of revenue is dependent upon the success

of litigation seeking to enforce the Company’s intellectual property rights.

Although we may seek to raise funds and to obtain

third-party funding for litigation to enforce our intellectual property rights, the terms and availability of such funds is uncertain.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees

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

We have not entered into any derivative contracts that

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

We have not entered into any other financial

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

We have not entered into any derivative contracts

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

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

liquidity or market risk support to such entity.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

We are a smaller reporting company as defined

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The financial statements start on Page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis