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Item 1A. Risk Factors

2024-12-13 compared with 2023-12-27 · 690 added, 770 removed, 595 unchanged (71% of the section changed)

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following list provides a summary of risk factors discussed in further detail below:

Related to Our Financial Position and Need for Capital, including:

have incurred net losses and may never achieve profitability.

ability to continue as a going concern may depend upon our ability to raise additional capital

and such capital may not be available on acceptable terms, or at all.

we can raise additional funding, we may be required to do so on terms that are dilutive to

our stockholders.

Related to Our Business and Results of Operations, including:

depend significantly upon the continued involvement of our present management and on our

ability to attract and retain talented employees.

products and services face significant competition in our markets.

face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other

Related to Our Business and Results of Operations

and related geo-political events increase the risk that we are unable to achieve and maintain profitable operations.

depend significantly upon the continued involvement of our present management and on our ability to attract and retain talented employees.

we are unable to develop new and enhanced products and services, or if we are unable to continually improve the performance, features,

and reliability of our existing products and services, our competitive position would weaken, and our business and operating results

could be adversely affected.

operating results may vary significantly from period to period and have been unpredictable, which has and might continue to cause

the market price of our common stock to be volatile.

future revenue and operating results will depend significantly on our ability to retain clients and customers and the ability to

add new clients and customers.

Any decline in our retention rates or failure to add new clients and customers will harm our business prospects and

operating results.

face intense competition, especially from larger, well-established companies, and we may lack sufficient financial or other

resources to maintain or improve our competitive position.

If we are unable to develop new and enhanced products and services, or if

we are unable to continually improve the performance, features, and reliability of our existing products and services, our competitive

position would weaken, and our business and operating results could be adversely affected.

operating results may vary significantly from period to period and have been unpredictable,

which has and might continue to cause the market price of our common stock to be volatile.

future revenue and operating results will depend significantly on our ability to retain clients

and customers and the ability to add new clients and customers.

network or data security incident may allow unauthorized access to our or our end users’

network or data, harm our reputation, create additional liability and adversely impact our

network or data security incident may allow unauthorized access to our or our end users’ network or data, harm our reputation,

create additional liability and adversely impact our financial results.

Our services, products, systems, and website and the data on these sources may be subject to intentional disruption

that could materially harm our reputation and future sales.

Our products are complex and operate in a wide variety of environments, systems and configurations, which could result

in failures of our products to function as designed and negatively impact our brand recognition and reputation.

our products and services do not work properly, our business, financial condition and financial results could be negatively affected,

and we could experience negative publicity declining sales, and legal liability.

or problems with systems and infrastructure supplied by third-parties could negatively affect our business, financial condition and

financial results.

services, products, systems, and website and the related data may be subject to

intentional disruption that could materially harm our reputation and future sales.

products are complex and operate in a wide variety of environments, systems and configurations,

which could result in failures of our products to function as designed.

or problems with systems and infrastructure supplied by third-parties could negatively affect

our business, financial condition and financial results.

global financial conditions have been characterized by increased volatility, which could

negatively impact our business, prospects, liquidity and financial condition.

global financial conditions have been characterized by increased volatility, which could negatively impact our business, prospects,

liquidity and financial condition.

we experience delays and/or defaults in payments, we could be unable to recover all expenditures.

Related to Our Industry, including:

If we do not effectively manage our growth, our business resources and systems may become strained, and we may be

unable to increase revenue growth.

Our growth depends in part on the success of our strategic relationships with third-parties.

Claims, litigation, government investigations, and other proceedings may adversely affect our business and results

of operations.

The ability of our executive officers and directors to control our business may limit or eliminate other stockholders’

ability to influence corporate affairs.

Related to Our Industry

face intense competition.

in product development schedules may adversely affect our revenues.

we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological

and market developments, our competitive position, financial results and prospects will be

● Actual, possible, or perceived defects or vulnerabilities in our products or services could harm our

reputation and divert resources.

Related to Our Intellectual Property, including:

proprietary rights may be difficult to enforce.

our end users experience data losses, our brand, reputation and business could be harmed.

by others that we infringe their proprietary technology could harm our business.

rely on the availability of third-party licenses.

use of open-source software could negatively affect us.

Related to Cyberattacks, including:

● Cyberattacks

and security vulnerabilities could lead to reduced revenue, increased costs, liability claims,

or harm to our reputation or competitive position.

If we do not accurately predict, prepare for, and respond

promptly to rapidly evolving technological and market developments

and successfully manage product introductions and transitions to meet changing needs in the cybersecurity technology market, our

competitive position, financial results, and prospects will be harmed.

possible, or perceived defects or vulnerabilities in our products or services, the failure of our products or services to detect

or prevent a security breach, or the misuse of our products could harm our reputation and divert resources.

Related to Our Intellectual Property

proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our products without compensating

by others that we infringe their proprietary technology or other litigation matters could harm our business.

rely on the availability of third-party licenses, and our inability to maintain those licenses could harm our business.

use of open-source software in our products could negatively affect our ability to sell our products and subject us to possible

Related to Cyberattacks

of our information technology may be threatened.

of our products, services, devices, and customers’ data may be breached.

● Development

and deployment of defensive measures are ongoing.

and misuse of personal data could result in liability and harm our reputation.

Related to Our Common Stock, including:

market price for our common stock has been volatile and our common stock is thinly traded.

● Substantial

sales of our common stock, or the perception that such sales might occur, could depress the

market price of our common stock.

of our common stock have a risk of potential dilution.

anti-dilutive rights of certain warrants could result in significant dilution to our existing

stockholders.

common stock is subject to restrictions on sales by broker-dealers and penny stock rules.

common stock is not listed on a national exchange.

Related to Regulations and Our Compliance with Such Regulations, including:

previously identified material weaknesses in our disclosure controls and procedures and internal

control over financial reporting, which have not yet been remediated by us.

our end users experience data losses, our brand, reputation and business could be harmed.

Related to Regulations and Our Compliance with Such Regulations

We previously identified material weaknesses in our disclosure controls and procedures and internal control over

financial reporting.

If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal

control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting

and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our

common stock.

are subject to changing laws and regulations.

Related to Our Contractual Agreements, including:

accounting treatment of the proposed exchange offer of our issued warrants could have a material adverse impact

on our financial statements and reduce our net income.

purchase agreement related to our 2021 private placement includes customary covenants that

we must comply with, or we may suffer potential monetary and other penalties.

Risk Factors, including:

charter allows us to issue “blank check” preferred stock and establish its terms,

conditions, rights, powers and preferences without stockholder approval.

will continue to incur increased costs as a result of being a reporting company and, given

our limited capital resources, such additional costs may have an adverse impact on our profitability.

to adequately manage our planned aggressive growth strategy may harm our business or increase

our risk of failure.

may apply working capital and future funding to uses that ultimately do not improve our operating

results or increase the market price of our securities.

websites may encounter technical problems and service interruptions.

have never paid or declared any dividends on our common stock.

Related to Our Financial Position and Need for Capital

have incurred net losses and may never achieve profitability.

likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered

in connection with development of a new business enterprise.

Our accumulated deficit as of September 30, 2023, was $18.9 million primarily driven by $11.9 million of one-time charges related to the Business Combination, which closed on July 1,

2022 and the $4.9 million of intangible asset impairment charge during the year ended September 30, 2023.

cannot assure you that that any of our new products and services currently under development will be successfully commercialized, and

the extent of our future losses and the timing of any possible profitability, if ever achieved, are highly uncertain.

If we are unable

to achieve profitability, we may be unable to continue our operations.

ability to continue as a going concern may depend upon our ability to raise additional capital and such capital may not be available

on acceptable terms, or at all.

currently believe that our available cash will allow us to fund our operations through at least December 2024.

Nevertheless, we may

need to raise additional capital to fund operating losses, support future expansion, develop new or enhanced products and services,

hire employees, respond to competitive pressures, acquire technologies, or respond to unanticipated events or requirements before

Our management’s plans include attempting to improve our profitability and our ability to generate sufficient cash flow

from operations to meet our operating needs on a timely basis, obtaining additional working capital funds through equity and debt

financing arrangements, and restructuring on-going operations to eliminate inefficiencies and reduce our expenses.

However, we are not assured that these plans and arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other

requirements.

The outcome of these actions cannot be predicted at this time.

There can be no assurance that any additional

financings will be available to us on satisfactory terms and conditions, if at all.

If adequate funds are not available on

acceptable terms, we may be unable to develop or enhance our products and services, take advantage of future opportunities or

respond to competitive pressures or unanticipated requirements, any of which could have a material adverse effect on our business,

financial condition and operating results.

If we raise additional funds through the issuance of equity securities, or convertible

debt, the percentage ownership of our stockholders will be reduced, and holders may experience dilution in net book value per

amount of capital we may need depends on many factors, including the progress, timing, scope and market acceptance of our product development

the time and cost required to obtain any necessary regulatory approvals;

our ability to enter into and maintain collaborative,

licensing and other commercial relationships;

and our ability to secure commitment of time and resources from third-parties to the development

and commercialization of our products.

capital markets have been unpredictable for unprofitable companies such as ours.

The amount of capital that we may be able to raise depends

on variables that are beyond our control.

As a result, we may not be able to secure financing on terms acceptable to us, or at all.

if we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs.

If adequate funds

are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued

viability will be materially adversely affected.

we can raise additional funding, we may be required to do so on terms that are dilutive to our stockholders.

future issuances of new equity may dilute the ownership percentage of our existing stockholders.

The extent of such dilution will depend

on the number of shares issued.

Neither the amount of funds that may be received in such an equity financing, nor the price per share

of our equity securities issued are known at this time.

Our failure to comply with laws and regulations applicable

to our business could subject us to fines and penalties and could also cause us to lose potential customers, clients,

licensees, resellers and/or for licensees and resellers to lose potential customers in the public sector or negatively impact our

ability to contract with the public sector.

Governmental restrictions on the sale of our products and

services in non-U.S.

markets could negatively affect our

business, financial condition, and financial results.

Risks Related to Our Financial Position and Need

We have incurred net losses

and may never achieve profitability.

Our ability to continue

as a going concern may depend upon our ability to raise additional capital and such capital may not be available on acceptable terms,

If we can raise additional

funding, we may be required to do so on terms that are dilutive to our stockholders.

We will continue to incur

increased costs as a result of being a reporting company and, given our limited capital resources, such additional costs may have

an adverse impact on our profitability.

We may apply working capital

and future funding to uses that ultimately do not improve our operating results or increase the market price of our securities.

Risks Related to Our Common Stock

The market price for our

common stock has been volatile, and you may not be able to sell our stock at a favorable price, or at all.

Substantial sales of our

common stock, or the perception that such sales might occur, could depress the market price of our common stock.

Holders of our common stock

have a risk of potential dilution if we issue additional shares of common stock in the future.

The anti-dilutive rights

of certain warrants could result in significant dilution to our existing stockholders and/or require us to issue a substantially

greater number of shares, which may adversely affect the market price of our common stock.

Certain warrants issued

in 2021 inhibit our access to equity capital, if we should need it, which may limit our ability to grow and maintain our competitiveness.

The purchase agreement related

to our 2021 private placement includes covenants that we must comply with, or we may suffer potential monetary and other penalties.

Our common shares are thinly

traded, and in the future may continue to be thinly traded, and you may be unable to sell your shares at or near ask prices or at

all, if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

A significant number of

our shares have been registered for resale, and their sale or potential sale may depress the market price of our common stock.

Future sales and issuances

of our securities could result in additional dilution of the percentage ownership of our stockholders and could cause our share price

Our common stock is subject

to restrictions on sales by broker-dealers and penny stock rules, which may be detrimental to investors.

Because our common stock

is quoted on the OTCQB instead of a national exchange, our investors may have difficulty selling their stock or may experience negative

volatility on the market price of our common stock.

Our charter allows us to

issue “blank check” preferred stock and establish its terms, conditions, rights, powers and preferences without stockholder

We have never paid or declared

any dividends on our common stock.

If securities or industry

analysts do not initiate research coverage on us and, if initiated, fail to publish research or reports, or publish unfavorable research

or reports, about our business, our stock price and trading volume may decline.

The sale of shares of our

common stock by our directors and officers may adversely affect the market price for our common stock.

Related to Our Business and Results of Operations

Inflation and geo-political events increase the risk that we are unable to achieve and maintain profitable operations.

Inflation may cause our costs to increase, which we may not be able to pass onto customers.

Inflation may also impact

our customers’ profitability and the budgets they have available to spend on cybersecurity and other products we offer.

The wars in Ukraine

and the Middle East and tensions between China and the US could have impacts on many variables that impact our business or our customers’

Inflation and related geo-political events increase

the risk that we are unable to achieve and maintain profitable operations.

business may be affected by general economic, political, and market conditions, including any resulting negative impact on spending by

our clients and customers.

Some of our clients may view our services as a discretionary purchase and may in the future reduce their

spending on our services during an economic downturn, especially in the event of a prolonged recessionary period.

Concerns about inflation,

rising interest rates, unemployment trends, geopolitical issues, including wars and other armed conflicts, global health epidemics and

other highly communicable diseases, bank insolvency and related uncertainty and volatility in the financial services industry, or a widespread

economic slowdown or recession (in the United States or internationally) have led to, and could continue to lead to, increased market

volatility and economic uncertainty, which could cause current and prospective customers and clients to delay, decrease, or cancel purchases

of our services, or delay or default on their payment obligations.

As a result, our business, results of operations, and financial condition

may be significantly affected by changes in the economy generally.

depend significantly upon the continued involvement of our present management and on our ability to attract and retain talented employees.

success depends significantly upon our present management, who are involved in our strategic planning and operations.

Our business requires

that we successfully attract and retain talented employees and contractors.

The competition for individuals with expertise in our industry

is intense, and we cannot assure that such individuals will be available to us on acceptable terms, or at all.

success depends significantly upon our present management, most notable our Chief Executive Officer, Brian Haugli, and our Chief Financial

Officer, Ryan Polk, who are involved in the development of our products as well as in our strategic planning and operations.

officers and key personnel are at-will employees.

In addition, many of our key technologies and systems are custom-made for our business

by our key personnel.

The loss of key personnel, including key members of our management team, as well as certain of our key marketing,

sales, product development, or technology personnel, could disrupt our operations and have an adverse effect on our ability to grow our

Additionally, we will need to adapt and respond to frequently changing circumstances that may impact our workforce, such as

natural disasters or pandemics, or our ability to maintain an effective workforce may be impacted.

execute our business plan, we must attract and retain highly qualified personnel.

Competition for these employees is intense, and we may

not be successful in attracting and retaining qualified personnel.

We have experienced, and we may continue to experience, difficulty

in hiring and retaining highly skilled employees with appropriate qualifications.

we are less successful in our recruiting efforts, or if we are unable to retain key existing employees, our ability to develop and deliver

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and execution.

products and services face significant competition in our markets, and if they do not compete successfully, our business will suffer.

current and proposed products and services face, and will continue to face, intense competition from larger and smaller companies,

as well as from academic and research institutions.

We compete in an industry that is characterized by:

(i) rapid technological

change, (ii) evolving industry standards, (iii) emerging competition, and (iv) new service and product introductions.

competitors have existing products and technologies that will compete with our products and technologies and may develop and

commercialize additional products and technologies that will compete with our products and technologies.

Some of these new products

and services may have functionality that ours do not have.

Because many competing companies and institutions have greater financial

resources than us, they may be able to:

(i) provide broader services and product lines, and (ii) fully develop and deploy new products faster than we can with their larger and broader resources.

Our competitors also generally have

greater development capabilities than we do and have greater experience in undertaking testing of products, obtaining regulatory

approvals, and manufacturing and marketing their products.

They also have greater name recognition and better access to customers,

clients, licensees, and resellers than we do.

Our chief services competitors include companies such as Optiv, NCC, Coalfire, PwC,

EY, Deloitte, and GuidePoint.

Our primary product competitors for Enclave are companies such as Perimeter 81, Zscaler, Palo Alto,

we are unable to develop new and enhanced products and services, or if we are unable to continually improve the performance, features,

and reliability of our existing products and services, our competitive position would weaken, and our business and operating results

could be adversely affected.

future success depends on our ability to effectively respond to evolving threats to consumers and potential customers, as well as competitive

technological developments and industry changes, by developing or introducing new and enhanced products and services on a timely basis.

In the past, Cipherloc has incurred significant research and development expenses.

As a result of the Business Combination, we expect

to continue to incur research and development expenses as we strive to remain competitive and as we focus on organic growth through

internal innovation.

If we are unable to anticipate or react to competitive challenges or if existing or new competitors gain market

share in any of our markets, our competitive position would weaken, and we could experience a decline in our revenues and net income, which could adversely affect our business and operating results.

Additionally, we must continually address the challenges of

dynamic and accelerating market trends, increasingly sophisticated cyber-attacks and intrusions and competitive developments.

may require features and capabilities that our current products do not have.

Our failure to develop new products and improve our existing

products to satisfy customer preferences and needs and effectively compete with other market offerings in a timely and cost-effective

manner will harm our ability to retain our customers (if any) and the ability of our licensees or resellers to retain their customers,

and to create or increase demand for our products, which may adversely impact our operating results.

The development and introduction

of our new or enhanced products will involve a significant commitment of time and resources and will be subject to a number of risks

and challenges, including but not limited to:

development cycles;

industry and regulatory standards and technological developments by our competitors and customers

(if any) and the customers of our licensees and resellers;

changing customer preferences and needs;

platforms, operating systems, and hardware products, such as mobile devices, and related

product and service interoperability challenges;

into new or unproven markets;

new product and service strategies.

we are not successful in managing these risks and challenges, or if our new or improved products and services are not technologically

competitive in the market, or do not achieve market acceptance, our business and operating results would be adversely affected, our market

share would decline, and our margins would contract.

If we are unable to develop new and enhanced

products and services, or if we are unable to continually improve the performance, features, and reliability of our existing products

and services, our competitive position would weaken, and our business and operating results could be adversely affected.

Our future success depends on our ability to effectively

respond to evolving threats to consumers and potential customers, as well as competitive technological developments and industry changes,

by developing or introducing new and enhanced products and services on a timely basis.

In the past, Cipherloc incurred significant research

and development expenses.

As a result of the Business Combination, we expect to continue to incur research and development expenses as

we strive to remain competitive and as we focus on organic growth through internal innovation.

If we are unable to anticipate or react

to competitive challenges or if existing or new competitors gain market share in any of our markets, our competitive position would weaken,

and we could experience a decline in our revenues and net income, which could adversely affect our business and operating results.

Additionally,

we must continually address the challenges of dynamic and accelerating market trends, increasingly sophisticated cyber-attacks and intrusions

and competitive developments.

Customers may require features and capabilities that our current products do not have.

Our failure to develop

new products and improve our existing products to satisfy customer preferences and needs and effectively compete with other market offerings

in a timely and cost-effective manner will harm our ability to retain our customers (if any) and the ability of our licensees or resellers

to retain their customers, and to create or increase demand for our products, which may adversely impact our operating results.

The development

and introduction of our new or enhanced products will involve a significant commitment of time and resources and will be subject to a

number of risks and challenges, including but not limited to:

Lengthy development cycles;

Evolving industry and regulatory standards and technological developments by our competitors and customers (if any) and the customers of our licensees and resellers;

Rapidly changing customer preferences and needs;

Evolving platforms, operating systems, and hardware products, such as mobile devices, and related product and service interoperability challenges;

Entering new or unproven markets;

Executing new product and service strategies.

If we are not successful in managing these risks and

challenges, or if our new or improved products and services are not technologically competitive in the market, or do not achieve market

acceptance, our business and operating results would be adversely affected, our market share would decline, and our margins would contract.

operating results may vary significantly from period to period and have been unpredictable, which has and might continue to cause the

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control and may be difficult to predict, including:

ability to attract and retain customers (if any) and/or the ability of our licensees and

resellers to retain customers or sell products and services;

budgeting cycles, seasonal buying patterns, and purchasing practices of potential customers

and customers of our licensees and resellers;

timing and success of our new product and service introductions by us or our competitors

or any other change in the competitive landscape of our industry, including consolidation

among our competitors, licensees, resellers, clients, or customers, and strategic relationships

ability to attract and retain customers (if any) and/or the ability of our licensees and resellers to retain customers or sell products

and services;

budgeting cycles, seasonal buying patterns, and purchasing practices of potential customers and customers of our licensees and resellers;

timing and success of our new product and service introductions by us or our competitors or any other change in the competitive landscape

of our industry, including consolidation among our competitors, licensees, resellers, clients, or customers, and strategic relationships

entered into by and between our competitors;

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in the growth rate of the cybersecurity technology market;

timing and costs related to the development or acquisition of technologies or businesses

or strategic partnerships;

of synergy, or the inability to realize expected synergies, resulting from any acquisitions

or strategic partnerships;

inability to execute, complete or integrate efficiently any acquisitions that we have or

may hereafter undertake;

expenses, unforeseen liabilities, or write-downs and any impact on our operating results

from any acquisitions we may consummate;

timing and costs related to the development or acquisition of technologies or businesses or strategic partnerships;

of synergy, or the inability to realize expected synergies, resulting from any acquisitions or strategic partnerships;

inability to execute, complete or integrate efficiently any acquisitions that we have or may hereafter undertake;

expenses, unforeseen liabilities, or write-downs and any impact on our operating results from any acquisitions we may consummate;

ability to create sizeable and productive distribution channels for our proprietary software;

by potential customers, or the customers of our licensees and resellers, to purchase cybersecurity

solutions from larger, more established cybersecurity software and service vendors, or from

their sales channel partners;

by potential customers, or the customers of our licensees and resellers, to purchase cybersecurity solutions from larger, more established

cybersecurity software and service vendors, or from their sales channel partners;

of revenue recognition from the delivery of existing and future statements of work;

or credit difficulties confronting customers (if any), our licensees and resellers, or the

customers of our licensees and resellers, which could adversely affect their ability to purchase

or pay for our products and services and offerings;

cost and potential outcomes of any litigation, which could have a material adverse effect

on our business;

● seasonality

or cyclical fluctuations in our markets due to holiday schedules, industry events, or customer

funding policies that may impact our ability to secure new clients or deliver services to

existing clients;

accounting pronouncements or changes in our accounting policies, including the potential

impact of the adoption and implementation of the Financial Accounting Standards Board’s

new standard regarding revenue recognition;

or credit difficulties confronting customers (if any), our licensees and resellers, or the customers of our licensees and resellers,

which could adversely affect their ability to purchase or pay for our products and services and offerings;

cost and potential outcomes of any litigation, which could have a material adverse effect on our business;

or cyclical fluctuations in our markets due to holiday schedules, industry events, or customer funding policies that may impact our

ability to secure new clients or deliver services to existing clients;

accounting pronouncements or changes in our accounting policies;

macroeconomic conditions including interest rates, inflation and increasing labor costs, in some or all regions in which we operate.

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and we could face costly lawsuits, including securities class action suits.

face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other

resources to maintain or improve our competitive position.

market for cybersecurity technologies is intensely competitive, and we expect competition to increase in the future from established

competitors and new market entrants.

Our main competitors fall into three categories:

companies that incorporate security or encryption features in their services and products,

such as Google’s Cloud Platform, Amazon’s AWS services, and Microsoft’s

Azure, or those that have acquired, or may acquire, cybersecurity services, products, or technologies

and have the technical and financial resources to bring competitive solutions to the market;

● independent

security vendors, such as Optiv and Coalfire, that offer cybersecurity products;

and large companies that offer cybersecurity services and technologies that compete with our services and products.

of our existing competitors have, and some of our potential competitors may have, substantial competitive advantages such as:

name recognition and longer operating histories;

sales and marketing budgets and resources;

distribution and established relationships with distributors and customers (if any), or the

customers of our licensees and resellers;

customer support resources;

resources to make strategic acquisitions or enter strategic partnerships;

financial, technical, and other resources.

addition, some of our larger competitors have substantially broader and more diverse product and service offerings, which may make them

less susceptible to downturns in a particular market and allow them to leverage their relationships based on other services and products

or incorporate functionality into existing services and products to gain business in a manner that discourages users from purchasing

our services, products and subscriptions, including through selling at zero or negative margins, offering concessions, product bundling,

or closed technology platforms.

Many of our smaller competitors that specialize in providing protection from a single type of security

threat are often able to deliver these specialized cybersecurity or security products to the market more quickly than we can.

Organizations

that use legacy products and services may believe that these products and services are sufficient to meet their security needs, or that

our platform only serves the needs of a portion of the cybersecurity technology market.

Accordingly, many organizations have invested

substantial personnel and financial resources to design and operate their networks and have established deep relationships with other

providers of cybersecurity services and products.

As a result, these organizations may prefer to purchase from their existing suppliers

rather than add or switch to a new supplier such as us, regardless of product performance, features, or greater services offerings, or

may be more willing to incrementally add solutions to their cybersecurity infrastructure from existing suppliers than to replace it wholesale

with our solutions.

in our market could change rapidly and significantly because of technological advancements, partnering or acquisitions by our competitors,

or continuing market consolidation.

New start-up companies that innovate and large competitors that are making significant investments

in research and development may invent similar or superior services, products, and technologies that compete with our services and products.

Some of our competitors have made or could make acquisitions of businesses that may allow them to offer more directly competitive and

comprehensive solutions than they had previously offered and adapt more quickly to innovative technologies and changing needs.

and potential competitors may also establish cooperative relationships among themselves or with third-parties that may further enhance

their resources and reduce their expenses.

These competitive pressures in our market or our failure to compete effectively may result

in price reductions, fewer orders, reduced revenue and gross margins, and loss of market share.

Any failure to meet and address these

factors could materially harm our business and operating results.

future revenue and operating results will depend significantly on our ability to retain clients and customers and the ability to add

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Our retention rates may decline or fluctuate due to a variety of factors, including the following:

clients’ and customers’ levels of satisfaction or dissatisfaction with our products

and services;

clients’ and customers’ levels of satisfaction or dissatisfaction with our products and services;

quality, breadth, and prices of our products and services;

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products and services and related pricing offered by our competitors;

by new services or changes in law or regulations that impact the need for or efficacy of

our products and services;

by new services or changes in law or regulations that impact the need for or efficacy of our products and services;

customer service activities and responsiveness to any customer issues;

dissatisfaction if they do not receive the full benefit of our services due to their failure

to provide all relevant data;

dissatisfaction if they do not receive the full benefit of our services due to their failure to provide all relevant data;

dissatisfaction with the methods or sufficiency of our remediation services;

in target customers’ planned spending levels as a result of general economic conditions

or other factors such as inflation.

in target customers’ planned spending levels as a result of general economic conditions or other factors such as inflation.

we do not retain our existing clients and customers, or add new clients and customers, we may not generate revenue and/or our revenue

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and to grow our business beyond our current level.

If we are unable to attract new clients and customers in numbers greater than number

that cancel or elect not to renew their agreements with us, our client base will decrease, and our business, operating results, and financial

condition would be adversely affected.

If we are unable to attract new clients and customers in numbers greater than the

number that cancel or elect not to renew their agreements with us, our client base will decrease, and our business, operating

results, and financial condition would be adversely affected.

We face intense

competition, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain

or improve our competitive position.

The market for cybersecurity

technologies is intensely competitive, and we expect competition to increase in the future from established competitors and new market

Our main competitors fall into three categories:

large companies that incorporate

security or encryption features in their services and products, such as Google’s Cloud Platform, Amazon’s AWS services,

and Microsoft’s Azure, or those that have acquired, or may acquire, cybersecurity services, products, or technologies and have

the technical and financial resources to bring competitive solutions to the market;

independent security vendors,

such as Optiv and Coalfire, that offer cybersecurity products;

small and large companies

that offer cybersecurity services and technologies that compete with our services and products.

Our current and proposed

products and services face, and will continue to face, intense competition from larger and smaller companies, as well as from academic

and research institutions.

We compete in an industry that is characterized by:

(i) rapid technological change, (ii) evolving industry

standards, (iii) emerging competition, and (iv) new service and product introductions.

Our competitors have existing products and technologies

that will compete with our products and technologies and may develop and commercialize additional products and technologies that will

compete with our products and technologies.

Some of these new products and services may have functionality that ours do not have.

many competing companies and institutions have greater financial resources than us, they may be able to:

(i) provide broader services

and product lines, and (ii) fully develop and deploy new products faster than we can with their larger and broader resources.

Our competitors

also generally have greater development capabilities than we do and have greater experience in undertaking testing of products, obtaining

regulatory approvals, and manufacturing and marketing their products.

They may also have greater name recognition and better access to

customers, clients, licensees, and resellers than we do.

Our chief services competitors include companies such as Optiv, NCC, Coalfire,

PwC, EY, Deloitte, and GuidePoint.

Our primary product competitors for Enclave are companies such as Perimeter 81, Zscaler, Palo Alto,

Many of our existing

competitors have, and some of our potential competitors may have, substantial competitive advantages such as:

greater name recognition

and longer operating histories;

larger sales and marketing

budgets and resources;

broader distribution and

established relationships with distributors and customers (if any), or the customers of our licensees and resellers;

greater customer support

greater resources to make

strategic acquisitions or enter strategic partnerships;

greater financial, technical,

and other resources.

In addition, some of

our larger competitors have substantially broader and more diverse product and service offerings, which may make them less susceptible

to downturns in a particular market and allow them to leverage their relationships based on other services and products or incorporate

functionality into existing services and products to gain business in a manner that discourages users from purchasing our services, products

and subscriptions, including through selling at zero or negative margins, offering concessions, product bundling, or closed technology

Many of our smaller competitors that specialize in providing protection from a single type of security threat are often able

to deliver these specialized cybersecurity or security products to the market more quickly than we can.

Organizations that use

legacy products and services may believe that these products and services are sufficient to meet their security needs, or that our platform

only serves the needs of a portion of the cybersecurity technology market.

Accordingly, many organizations have invested substantial

personnel and financial resources to design and operate their networks and have established deep relationships with other providers of

cybersecurity services and products.

As a result, these organizations may prefer to purchase from their existing suppliers rather than

add or switch to a new supplier such as us, regardless of product performance, features, or greater services offerings, or may be more

willing to incrementally add solutions to their cybersecurity infrastructure from existing suppliers than to replace it wholesale with

our solutions.

Conditions in our market

could change rapidly and significantly because of technological advancements, partnering or acquisitions by our competitors, or continuing

market consolidation.

New start-up companies that innovate and large competitors that are making significant investments in research

and development may invent similar or superior services, products, and technologies that compete with our services and products.

of our competitors have made or could make acquisitions of businesses that may allow them to offer more directly competitive and comprehensive

solutions than they had previously offered and adapt more quickly to innovative technologies and changing needs.

Our current and potential

competitors may also establish cooperative relationships among themselves or with third-parties that may further enhance their resources

and reduce their expenses.

These competitive pressures in our market or our failure to compete effectively may result in price reductions,

fewer orders, reduced revenue and gross margins, and loss of market share.

Any failure to meet and address these factors could materially

harm our business and operating results.

network or data security incident may allow unauthorized access to our or our end users’ network or data, harm our reputation,

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proprietary information or cause interruptions of our services.

This risk has increased as more

individuals are working from home and utilize home networks for the transmission of sensitive information.

Such attempts are increasing

in number and in technical sophistication, and if successful could expose us and the affected parties, to risk of loss or misuse of proprietary

or confidential information or disruptions of our business operations.

While we engage in a number of measures aimed to protect against

security breaches and to minimize problems if a data breach were to occur, our information technology systems and infrastructure may

be vulnerable to damage, compromise, disruption, and shutdown due to attacks or breaches by hackers or due to other circumstances, such

as error or malfeasance by employees or third-party service providers or technology malfunction.

The occurrence of any of these events,

as well as a failure to promptly remedy these events should they occur, could compromise our systems, and the information stored in our

systems could be accessed, publicly disclosed, lost, stolen, or damaged.

Any such circumstance could adversely affect our ability to

attract and maintain licensees and resellers, and/or for us or our licensees and resellers to retain customers, as well as strategic

partners, cause us to suffer negative publicity, and subject us to legal claims and liabilities or regulatory penalties.

unauthorized parties might alter information in our databases, which would adversely affect both the reliability of that information

and our ability to market and perform our services.

Techniques used to obtain unauthorized access or to sabotage systems change frequently,

are constantly evolving and generally are difficult to recognize and react to effectively.

We may be unable to anticipate these techniques

or to implement adequate preventive or reactive measures.

Several recent, highly publicized data security breaches at other companies

have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of our licensees,

resellers, or strategic partners, or our or their customers.

This risk has increased as more individuals are working from home and

utilize home networks for the transmission of sensitive information.

Such attempts are increasing in number and in technical sophistication,

and if successful could expose us and the affected parties to risk of loss or misuse of proprietary or confidential information or disruptions

of our business operations.

While we engage in a number of measures aimed to protect against security breaches and to minimize problems

if a data breach were to occur, our information technology systems and infrastructure may be vulnerable to damage, compromise, disruption,

and shutdown due to attacks or breaches by hackers or due to other circumstances, such as error or malfeasance by employees or third-party

service providers or technology malfunction.

The occurrence of any of these events, as well as a failure to promptly remedy these events

should they occur, could compromise our systems, and the information stored in our systems could be accessed, publicly disclosed, lost,

stolen, or damaged.

Any such circumstance could adversely affect our ability to attract and maintain licensees and resellers, and/or

for us or our licensees and resellers to retain customers, as well as strategic partners, cause us to suffer negative publicity, and

subject us to legal claims and liabilities or regulatory penalties.

In addition, unauthorized parties might alter information in our

databases, which would adversely affect both the reliability of that information and our ability to market and perform our services.

Techniques used to obtain unauthorized access or to sabotage systems change frequently, are constantly evolving and generally are difficult

to recognize and react to effectively.

We may be unable to anticipate these techniques or to implement adequate preventive or reactive

Several recent, highly publicized data security breaches at other companies have heightened consumer awareness of this issue

and may embolden individuals or groups to target our systems or those of our licensees, resellers, or strategic partners, or our or their

products are complex and operate in a wide variety of environments, systems and configurations, which could result in failures of our

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a material adverse effect on our business, financial condition, results of operations or cash flows.

If we do not effectively

manage our growth, our business resources and systems may become strained, and we may be unable to increase revenue growth.

We plan to grow aggressively

and, if successful, our future growth may provide challenges to our organization, requiring us to expand our personnel and our operations.

Future growth may strain our infrastructure, operations and other managerial and operating resources.

If our business resources become

strained, our earnings may be adversely affected, and we may be unable to increase revenue growth.

Further, we may undertake contractual

commitments that exceed our labor resources, which could also adversely affect our earnings and our ability to increase revenue growth.

Our growth depends

in part on the success of our strategic relationships with third-parties.

In order to grow our

business, we anticipate that we will need to continue to depend on our relationships with third-parties, including our technology providers.

Identifying such third-parties, and negotiating and documenting relationships with them, requires significant time and resources.

competitors may be effective in providing incentives to third-parties to favor their products or services over utilization of our products

and services.

In addition, acquisitions of our business partners by our competitors could result in a decrease in the number of our current

and potential clients, customers, licensees, resellers, and end users.

If we are unsuccessful in establishing or maintaining our relationships

with third-parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations

Even if we are successful, we cannot assure you that these relationships will result in increased use of our products or

increased revenue.

litigation, government investigations, and other proceedings may adversely affect our business and results of operations.

a company offering a wide range of products and services, we are regularly subject to actual and threatened claims, litigation, reviews,

investigations, and other proceedings, including proceedings relating to goods and services offered by us and by third-parties, and other

Any of these types of proceedings, including currently pending proceedings as discussed herein, may have an adverse effect on

us because of legal costs, disruption of our operations, diversion of management resources, negative publicity, and other factors.

outcomes of these matters are inherently unpredictable and subject to significant uncertainties.

Determining legal reserves and possible

losses from such matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes.

final resolution of such matters, we may be exposed to losses in excess of the amount recorded, and such amounts could be material.

any of our estimates and assumptions change or prove to have been incorrect, it could have a material effect on our business, consolidated

financial position, results of operations, or cash flows.

In addition, it is possible that a resolution of one or more such proceedings,

including as a result of a settlement, could require us to make substantial future payments, prevent us from offering certain products

or services, require us to change our business practices in a manner materially adverse to our business, requiring development of non-infringing

or otherwise altered products or technologies, damaging our reputation, or otherwise having a material adverse effect on our operations.

The ability of

our executive officers and directors to control our business may limit or eliminate other stockholders’ ability to influence corporate

As of September 30,

2024, our executive officers and directors owned approximately 46.0% of the Company’s total issued and outstanding shares.

of this voting control through share ownership by the executive officers and directors, these individuals, acting as a group, have significant

influence over corporate actions requiring a shareholder vote, including the selection of our directors, who in turn approve all executive

officers, authorizing change-in-control transactions, amendments to our Articles of Incorporation, and other significant corporate matters.

The interests of our executive officers and directors may differ from the interests of other stockholders with respect to the issuance

of shares, business transactions with or sales to other companies, selection of future officers and directors and other business decisions.

The minority stockholders will have no way of overriding the decisions made by our executive officers and directors acting as a group.

Related to Our Industry

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or technologies obsolete or noncompetitive.

Actual, possible, or perceived defects or vulnerabilities in our products or services, the failure of our products or services to detect or prevent

possible, or perceived defects or vulnerabilities in our products or services, the failure of our products or services to detect or prevent

a security breach, or the misuse of our products could harm our reputation and divert resources.

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against a target, we may be unable to anticipate these techniques.

An actual, possible, or perceived security breach or infection of the

network of one of the users of our products, regardless of whether the breach is attributable to the failure of our products or services

An actual, possible, or perceived security breach or infection of

the network of one of the users of our products, regardless of whether the breach is attributable to the failure of our products or services

to prevent the security breach, could adversely affect the market’s perception of our security products and services and, in some

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could result in:

expenditure of significant financial and development resources in efforts to analyze, correct,

eliminate or work around errors or defects or to address and eliminate vulnerabilities;

expenditure of significant financial and development resources in efforts to analyze, correct, eliminate or work around errors or

defects or to address and eliminate vulnerabilities;

loss of potential clients, customers, licensees, resellers, or distribution partners;

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publicity and harm to our reputation;

● litigation,

regulatory inquiries, or investigations that may be costly and harm our reputation and, in

some instances, subject us to potential liability that is not contractually limited.

regulatory inquiries, or investigations that may be costly and harm our reputation and, in some instances, subject us to potential

liability that is not contractually limited.

Related to Our Intellectual Property

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Patent applications in the United States are

typically not published until at least 18 months after filing, or, in some cases, not at all, and publications of discoveries in industry-related

literature lag behind actual discoveries.

We cannot be certain that we were the first to make the inventions claimed in our pending patent

applications, or that we were the first to file for patent protection.

Additionally, the process of obtaining patent protection is expensive

and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely

In addition, recent changes to the patent laws in the United States, including but not limited to “adversary proceedings,”

“first to file,” and “post-grant review” provisions, may bring into question the validity of certain software

patents and may make it more difficult and costly to prosecute patent applications.

As a result, we may not be able to obtain adequate

patent protection or effectively enforce our issued patents.

typically not published until at least eighteen (18) months after filing, or, in some cases, not at all, and publications of discoveries

in industry-related literature lag behind actual discoveries.

We cannot be certain that we were the first to make the inventions claimed

in our pending patent applications, or that we were the first to file for patent protection.

Additionally, the process of obtaining patent

protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable

cost or in a timely manner.

In addition, recent changes to the patent laws in the United States, including but not limited to “adversary

proceedings,” “first to file,” and “post-grant review” provisions, may bring into question the validity

of certain software patents and may make it more difficult and costly to prosecute patent applications.

As a result, we may not be able

to obtain adequate patent protection or effectively enforce our issued patents.

our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information

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not incur the additional expense, time and effort required to create the innovative products that would compete with our products.

our end users experience data losses, our brand, reputation and business could be harmed.

breach of our end users’ network security and systems, or other events that cause the loss or public disclosure of, or access by

third-parties to, our end users’ files or data, could have serious negative consequences for our business, including reduced demand

for our services, an unwillingness of our clients and customers, and our licensees and resellers or their customers to use our products

or services, harm to our brand and reputation.

The techniques used to obtain unauthorized access, disable or degrade service, or sabotage

systems change frequently, often are not recognized until launched against a target, and may originate from less regulated or remote

areas around the world.

As a result, our end users may be unable to proactively prevent these techniques, implement adequate preventative

or remedial measures, or enforce the laws and regulations that govern such activities.

If our end users experience any data loss, data

disruption, or any data corruption or inaccuracies, whether caused by security breaches or otherwise, our brand, reputation and business

could be harmed.

insurance may not be available now or in the future on acceptable terms, or at all.

In addition, our policy may not cover claims against

us for loss of data or other indirect or consequential damages.

Defending a suit based on any data loss or system disruption, regardless

of its merit, could be costly and divert our management’s attention.

by others that we infringe their proprietary technology or other litigation matters could harm our business.

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use of open-source software in our products could negatively affect our ability to sell our products and subject us to possible litigation.

current products, and/or those under development, contain software modules licensed to or used by us from third-party authors under “open-source” licenses.

Some open-source licenses contain requirements that we make available applicable source code for modifications

or derivative works we create based upon the type of open-source software we use.

If we combine our proprietary software with open-source

software in a certain manner, we could be required to release the source code of our proprietary software to the public under certain

open-source licenses.

This would allow our competitors to create similar products with lower development effort and time, and ultimately

could result in a loss of product sales for us.

we monitor our use of open-source software to avoid subjecting our products and subscriptions to conditions we do not intend, the terms

of many open-source licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed

in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products.

From time to time,

there have been claims against companies that distribute or use open-source software in their products, asserting that open-source software

infringes the claimants’ intellectual property rights.

We could be subject to suits by parties claiming infringement of intellectual

property rights in what we believe to be licensed open-source software.

If we are held to have breached the terms of an open-source software

license, we could be required to seek licenses from third-parties to continue offering our products on terms that are not economically

feasible, to reengineer our products, to discontinue the sale of our products if reengineering could not be accomplished on a timely

basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating

results, financial condition and ability to differentiate our products and services.

addition to risks related to license requirements, usage of open-source software can lead to greater risks than use of third-party commercial

software, as open-source licensors generally do not provide warranties or assurance of title or controls on origin of the software.

addition, many of the risks associated with usage of open-source software, such as the lack of warranties or assurances of title, cannot

be eliminated, and could, if not properly addressed, negatively affect our business.

We have established processes to help alleviate

these risks, including a review process for screening requests from our development organizations for the use of open-source software,

but we cannot be sure that our processes for controlling our use of open-source software in our products will be effective.

and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive

A portion of the technologies we use incorporates open source software,

and we may incorporate open source software in the future.

Open source software is generally licensed by its authors or other third parties

under open source licenses.

These licenses may subject us to certain unfavorable conditions, including requirements that we offer our

platform that incorporates the open source software for no cost, that we make publicly available source code for modifications or derivative

works we create based upon incorporating or using the open source software, or that we license such modifications or derivative works

under the terms of the particular open source license.

Additionally, if a third-party software provider has incorporated open source software

into software that we license from such provider, we could be required to disclose any of our source code that incorporates or is a modification

of our licensed software.

If an author or other third party that distributes open source software that we use or license were to allege

that we had not complied with the conditions of the applicable license, we could be required to incur significant legal expenses defending

against those allegations and could be subject to significant damages, enjoined from offering or selling our solutions that contained

the open source software, and required to comply with the foregoing conditions.

Any of the foregoing could disrupt and harm our business,

results of operations, and financial condition.

We have established processes to help alleviate these risks, including a review process

for screening requests from our development organizations for the use of open-source software, but we cannot be sure that our processes

for controlling our use of open-source software in our products will be effective.

Related to Cyberattacks

of our information technology may be threatened.

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We are increasingly incorporating open-source software into our products.

There may be vulnerabilities in open-source software

that may make our products susceptible to cyberattacks.

There may be vulnerabilities in open-source software that may

make our products susceptible to cyberattacks.

customers operate complex IT systems with third-party hardware and software from multiple vendors that may include systems acquired over

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expenses or hinder growth of our products and services.

our end users experience data losses, our brand, reputation and business could be harmed.

breach of our end users’ network security and systems, or other events that cause the loss or public disclosure of, or access by

third-parties to, our end users’ files or data, could have serious negative consequences for our business, including reduced demand

for our services, an unwillingness of our clients and customers, and our licensees and resellers or their customers to use our products

or services, harm to our brand and reputation.

The techniques used to obtain unauthorized access, disable or degrade service, or sabotage

systems change frequently, often are not recognized until launched against a target, and may originate from less regulated or remote

areas around the world.

As a result, our end users may be unable to proactively prevent these techniques, implement adequate preventative

or remedial measures, or enforce the laws and regulations that govern such activities.

If our end users experience any data loss, data

disruption, or any data corruption or inaccuracies, whether caused by security breaches or otherwise, our brand, reputation and business

could be harmed.

insurance may not be available now or in the future on acceptable terms, or at all.

In addition, our policy may not cover claims against

us for loss of data or other indirect or consequential damages.

Defending a suit based on any data loss or system disruption, regardless

of its merit, could be costly and divert our management’s attention.

Risks Related

to Regulations and Our Compliance with Such Regulations

We previously

identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting.

If not remediated,

our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could

result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which

could have a material adverse effect on our financial condition and the trading price of our common stock.

Maintaining effective

internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial

Our disclosure controls and procedures and internal controls over financial reporting are currently ineffective and have

in the past been subject to material weaknesses.

A material weakness is a deficiency, or a combination of deficiencies, in internal control

over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim

financial statements will not be prevented or detected on a timely basis.

A control deficiency exists when the design or operation of

a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements

on a timely basis.

We cannot assure you

that additional material weaknesses will not arise in the future.

The development of new material weaknesses in our internal control

over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting

and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading price of our

common stock, and/or result in litigation against us or our management.

We are subject to

changing laws and regulations.

government agencies

continue to implement extensive requirements on our industry.

These regulations have both positive and negative impacts, with much remaining

uncertainty as to how various provisions will ultimately affect our customers, clients, licensees, resellers, end users, and our business.

As to prospective legislation and regulation concerning collection, transmission, storage and use of personal data, we cannot determine

what effect additional state or federal governmental legislation, regulations, or administrative orders would have on our business in

New legislation or regulation may require the reformulation of our business to meet new standards, require us to cease operations,

impose stricter qualification and/or registration standards, impose additional record keeping, or require expanded consumer protection

measures (such as heightened notification procedures and data subject access rights).

Our failure to

comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose potential

customers, clients, licensees, resellers and/or for licensees and resellers to lose potential customers in the public sector or negatively

impact our ability to contract with the public sector.

Our business is subject

to regulation by various federal, state, regional, local and foreign governmental agencies, including agencies responsible for monitoring

and enforcing employment and labor laws, workplace safety, product safety, product labeling, environmental laws, consumer protection

laws, anti-bribery laws, data privacy laws, import and export controls, federal securities laws and tax laws and regulations.

jurisdictions, these regulatory requirements may be more stringent than in the United States.

Noncompliance with applicable regulations

or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages and civil

and criminal penalties or injunctions.

If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal

litigation, our business, operating results and financial condition could be adversely affected.

In addition, responding to any legal

action will likely result in a significant diversion of our management’s attention and resources and an increase in professional

fees and expenses.

Enforcement actions and sanctions could harm our business, operating results and financial condition.

Additionally, we may

be subject to other laws and regulations throughout the world governing data handling, protection and privacy.

For example, in June of

2018, California passed the California Consumer Privacy Act, or the “CCPA,” which provides new data privacy rights for consumers

and new operational requirements for companies, became effective in 2021, and in March 2022, Virginia passed a consumer data protection

law, the “VCDPA,” which includes similar rights as set forth in the CCPA.

Fines for noncompliance may be up to $7,500 per

Additionally, many other states have passed differing privacy and data protection laws in recent years.

Significantly, several

bills are being worked on in the Senate and the House dealing with these issues, and while it is uncertain that any of them will reach

the floor of either chamber, if they do so they will likely impose substantial additional burdens on companies.

The costs of compliance

with, and other burdens imposed by, the CCPA, the VCDPA and other state or foreign laws, may limit the use and adoption of our products

and services and would have an adverse impact on our business.

These laws and regulations impose added costs on our business, and failure

to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for

damages from our channel partners, penalties, termination of contracts, loss of exclusive rights in our intellectual property and temporary

suspension or permanent debarment from government contracting.

Any such damages, penalties, disruptions, or limitations in our ability

to do business with the public sector could have an adverse effect on our business and operating results.

restrictions on the sale of our products and services in non-U.S.

markets could negatively affect our business, financial condition,

and financial results.

of software products and services using cybersecurity technology such as ours are generally restricted by the U.S.

some countries impose restrictions on the use of cybersecurity products and services such as ours.

The cost of compliance with U.S.

other export laws, or our failure to obtain governmental approvals to offer our products and services in non-U.S.

markets, could affect

our ability to sell our products and services and could impair our international expansion.

We face a variety of other legal and compliance

If we or our distributors fail to comply with applicable law and regulations, we may become subject to penalties, fines or restrictions

that could materially adversely affect our business, financial condition and financial results.

Risks Related

to Our Financial Position and Need for Capital

We have incurred

net losses and may never achieve profitability.

Our likelihood of success

must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with

development of a new business enterprise.

Our accumulated deficit as of September 30, 2024, was $19.8 million.

We cannot assure our

current stockholders or future investors that that any of our new products and services currently under development will be successfully

commercialized, and the extent of our future losses and the timing of any possible profitability, if ever achieved, are highly uncertain.

If we are unable to achieve profitability, we may, at any time, be unable to continue our operations.

Our ability to

continue as a going concern may depend upon our ability to raise additional capital and such capital may not be available on acceptable

terms, or at all.

We currently believe

that our available cash will allow us to fund our operations through at least December 2025.

Nevertheless, we may need to raise additional

capital to fund operating losses, support future expansion, develop new or enhanced products and services, hire employees, respond to

competitive pressures, acquire technologies, or respond to unanticipated events or requirements before then.

Our management’s plans

include attempting to improve our profitability and our ability to generate sufficient cash flow from operations to meet our operating

needs on a timely basis, obtaining additional working capital funds through equity and debt financing arrangements, and restructuring

on-going operations to eliminate inefficiencies and reduce our expenses.

However, we are not assured that these plans and arrangements

will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements.

The outcome of these actions cannot

be predicted at this time.

There can be no assurance that any additional financings will be available to us on satisfactory terms and

conditions, if at all.

If adequate funds are not available on acceptable terms, we may be unable to develop or enhance our products and

services, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, any of which could

have a material adverse effect on our business, financial condition and operating results.

If we raise additional funds through the issuance

of equity securities, or convertible debt, the percentage ownership of our stockholders will be reduced, and holders may experience dilution

in net book value per share.

The amount of capital

we may need depends on many factors, including the progress, timing, scope and market acceptance of our product development programs;

the time and cost required to obtain any necessary regulatory approvals;

the possibility of litigation;

our ability to enter into and

maintain collaborative, licensing and other commercial relationships;

and our ability to secure commitment of time and resources from

third-parties to the development and commercialization of our products.

The capital markets

have been unpredictable for unprofitable companies such as ours.

The amount of capital that we may be able to raise depends on variables

that are beyond our control.

As a result, we may not be able to secure financing on terms acceptable to us, or at all.

Even if we are

able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs.

If adequate funds are not

available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued viability

will be materially adversely affected.

If we can raise

additional funding, we may be required to do so on terms that are dilutive to our stockholders.

Our future issuances

of new equity will dilute the ownership percentage of our existing stockholders.

The extent of such dilution will depend on the number

of shares issued.

Neither the amount of funds that may be received in such equity financing, nor the price per share of our equity securities

issued are known at this time.

We will continue

to incur increased costs as a result of being a reporting company and, given our limited capital resources, such additional costs may

have an adverse impact on our profitability.

We are a reporting company

to the Securities and Exchange Commission, or SEC.

The rules and regulations under the Exchange Act require reporting companies to provide

periodic reports with interactive data files, which require that we engage legal, accounting and auditing professionals, and XBRL (eXtensible

Business Reporting Language) and EDGAR (Electronic Data Gathering, Analysis, and Retrieval) service providers.

The engagement of such

services can be costly, and we may continue to incur additional financial losses, which may adversely affect our ability to continue

as a going concern.

In addition, the Sarbanes Oxley Act of 2002, as well as a variety of new related and unrelated rules implemented

by the SEC, have required changes in corporate governance practices and generally increased the disclosure requirements of public companies.

For example, as a result of being a reporting company, we are required to file periodic and current reports and other information with

the SEC, and we are adopting and revising policies regarding disclosure controls and procedures, including internal controls over financial

The additional costs

we continue to incur in connection with being a reporting company (expected to be approximately seven to eight hundred thousand dollars

per year) will continue to further stretch our limited capital resources.

Due to our limited resources, we have to allocate resources

away from other productive uses in order to continue to comply with our obligations as an SEC reporting company.

Further, there is no

guarantee that we will have sufficient resources to continue to meet our reporting and filing obligations with the SEC as they come due.

We may apply working

capital and future funding to uses that ultimately do not improve our operating results or increase the market price of our securities.

In general, we have

complete discretion over the use of our working capital and any new investment capital we may obtain in the future that has no dedicated

use of proceeds.

Because of the number and variety of factors that could determine our use of funds, our ultimate expenditure of funds

(and their uses) may vary substantially from our current intended operating plan for such funds.

We intend to use existing

working capital and future funding to support the development of our products and services, the expansion of our marketing, or the support

of operations to educate the end users of the software we sell.

We will also use capital for market and network expansion, acquisitions,

and general working capital purposes.

However, we do not have more specific plans for the use and expenditure of our capital.

Our management

has broad discretion to use any or all of our available capital reserves.

Our capital could be applied in ways that do not improve our

operating results or otherwise increase the market value of a stockholder’s shares.

Related to Our Common Stock

Historically,

The market price for our common stock has been volatile, and you may not be able to sell our stock at a favorable price, or at all.

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in price and level of trading volumes of our shares of common stock;

ability to obtain financings to conduct and complete research and development activities

and other business activities;

timing and success of introductions of new products and services by us or our competitors

or any other change in the competitive dynamics of our industry, including consolidation

among competitors;

ability to obtain financings to conduct and complete research and development activities and other business activities;

timing and success of introductions of new products and services by us or our competitors or any other change in the competitive

dynamics of our industry, including consolidation among competitors;

ability to attract new customers, clients, licensees, and resellers;

in the development status of our products and services;

in our capital structure, future issuances of securities, and sales of large blocks of common

stock by our stockholders;

in our capital structure, future issuances of securities, and sales of large blocks of common stock by our stockholders;

cash position;

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inability to enter into new markets or develop new products and services;

● reputational

announcements

of acquisitions, partnerships, collaborations, joint ventures, new products and services,

capital commitments, or other events by us or our competitors;

of acquisitions, partnerships, collaborations, joint ventures, new products and services, capital commitments, or other events by

us or our competitors;

in industry conditions or perceptions;

ability to attract analyst to initiate research coverage and once obtained, having such analysts

issue research reports, recommendations and any changes in recommendations, price targets,

and withdrawals of coverage;

ability to attract analysts to initiate research coverage and once obtained, having such analysts issue research reports, recommendations

and any changes in recommendations, price targets, and withdrawals of coverage;

and additions of key personnel;

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of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.

exercise of outstanding options and warrants to purchase our common stock will dilute existing stockholders’ ownership

On November 7, 2023, we offered to exchange certain outstanding warrants for shares of common stock and new warrants.

We closed the November 7 Offer to Exchange on December 26, 2023, resulting

in the issuance of 7,270,958 shares of common stock and 17,415,437 new warrants.

On September 13, 2021, our stockholders approved an employee stock option

plan authorized by our Board of Directors under which we may issue equity awards that may increase the number of outstanding shares of common stock.

In the future, we may grant additional stock options, warrants, preferred stock or

convertible securities.

The exercise or conversion of stock options, warrants, preferred stock, or convertible securities will

dilute the ownership percentage of our then existing stockholders.

The dilutive effect of the exercise or conversion of these

securities may adversely affect our ability to obtain additional capital.

The holders of these securities may be expected to

exercise or convert their securities when we are able to obtain additional equity capital on terms more favorable than these

exercise or conversion of stock options, warrants, preferred stock, or convertible securities will dilute the ownership percentage of

our then existing stockholders.

The dilutive effect of the exercise or conversion of these securities may adversely affect our ability

to obtain additional capital.

The holders of these securities may be expected to exercise or convert their securities when we are able

to obtain additional equity capital on terms more favorable than these securities.

On September 13, 2021, our stockholders approved an

equity incentive plan authorized by our Board of Directors under which we may issue equity awards that may increase the number of outstanding

shares of common stock.

In the future, we may grant additional stock options, warrants, preferred stock or convertible securities.

anti-dilutive rights of certain warrants could result in significant dilution to our existing stockholders and/or require us to issue

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warrants to purchase 12,011,114 shares of our common stock issued to investors in a private placement transaction that closed on April

16, 2021, contain anti-dilution rights such that if we issue, or are deemed to have issued, common stock or common stock equivalents at

a price less than the then exercise price of those warrants, the exercise price of those warrants will automatically be reduced to such

lower value, and the number of shares of common stock issuable upon exercise thereafter will be adjusted proportionately, so that the

aggregate exercise price payable upon exercise of such warrants is the same prior to and after such reduction in exercise price.

result, the effect of the anti-dilution right may cause significant dilution to our other stockholders.

The warrants to purchase 8,332,439

shares of our common stock issuable upon exercise of warrants issued to the placement agent in the private placement include a weighted

average anti-dilution right in the event we issue any shares of common stock or equivalents with a value less than the then exercise

16, 2021, contain anti-dilution rights such that if we issue, or are deemed to have issued, common stock or common stock equivalents

at a price less than the then exercise price of those warrants, the exercise price of those warrants will automatically be reduced to

such lower value, and the number of shares of common stock issuable upon exercise thereafter will be adjusted proportionately, so that

the aggregate exercise price payable upon exercise of such warrants is the same prior to and after such reduction in exercise price.

As a result, the effect of the anti-dilution right may cause significant dilution to our other stockholders.

The triggering of

the anti-dilution rights in the warrants issued in the private placement may result in such securities being exercisable for a significant

number of additional shares of common stock and/or exercisable for a reduced exercise price.

As a result, the number of shares issuable

could prove to be significantly greater than they are currently and could result in substantial dilution to our other stockholders.

of September 30, 2023, no anti-dilution triggers have occurred.

August 22, 2023, the Company commenced a Tender Offer for the 69,281,020 Warrants subject to our Offer to Exchange consisting

of (i) warrants to purchase an aggregate of 5,398,966 Shares issued to certain designees of Paulson Investment Company, LLC (“Paulson”)

in 2018 with a ten-year term and with an exercise price of $1.00 (“2018 Paulson Warrants”), (ii) warrants to purchase an

aggregate of 8,332,439 Shares that were issued to certain designees of Paulson in 2021 with a ten-year term and that had an exercise

price of $0.18 (“2021 Paulson Warrants”);

and (iii) warrants to purchase an aggregate of 55,549,615 Shares issued to certain

investors in 2021 with a five-year term and with an exercise price of $0.36 (“2021 Investor Warrants”).

The 2018 Paulson Warrants and the 2021 Paulson Warrants are collectively

referred to as the “Paulson Warrants.” Under the Offer to Exchange, the holders of the Paulson Warrants were entitled to receive

one (1) share of Common Stock for each four (4) Paulson Warrants exchanged (“Paulson Exchange Ratio”), and (ii) the holders

of the Investor Warrants were entitled to receive one (1) share of Common Stock for each six (6) Investor Warrants exchanged (“Investor

Exchange Ratio”).

This Offer to Exchange was withdrawn by the Company on November 1, 2023 after deciding that the 24,008,341 warrants

that had been validly tendered into and not validly withdrawn, represented 42.3% of the warrant subject to the Offer to Exchange, were

insufficient to close the Offer to Exchange.

A new Tender Offer (“Offer to Exchange”) was filed on November 7, 2023.

The November 7, 2023 Tender Offer contained two

material differences from the Tender Offer filed on August 22, 2023:

November 7, 2023, Offer to Exchange excluded the 2018 and 2021 Paulson Warrants (the Paulson Warrants”);

November 7, 2023, Offer to Exchange offered the 2021 Investor Warrant holders one (1) additional Warrant for every 2.5 Warrants

exchanged from the 2021 Investor Warrants.

The New Warrant includes the following features:

$0.18 exercise price;

a five (5) year

exercise term;

a cashless exercise option;

and an automatic conversion at $0.36.

The New Warrant excludes the anti-dilution rights

in the 2021 Investor Warrants.

55,549,615 2021 Investor Warrants were subject to the November 7, 2023, Offer to Exchange.

We closed the November 7 Offer to Exchange on December 26, 2023, resulting

in the issuance of 7,270,958 shares of common stock and 17,415,437 new warrants in exchange for 43,538,501 2021 Investor Warrants.

warrants to purchase 8,332,439 shares of our common stock issuable upon exercise of warrants issued to the placement agent in the private

placement include a weighted average anti-dilution right in the event we issue any shares of common stock or equivalents with a value

less than the then exercise price.

As a result, the effect of the anti-dilution right may cause significant dilution to our other stockholders.

The triggering of the anti-dilution rights in the warrants issued in the private placement may result in such securities being exercisable

for a reduced exercise price.

of September 30, 2024, no anti-dilution triggers had occurred.

Certain warrants issued

in 2021 inhibit our access to equity capital, if we should need it, which may limit our ability to grow and maintain our competitiveness.

The warrants we issued in

the 2021 private placement described in Part II, Item 8, Financial Statements, Note 11 , contain various provisions including,

but not limited to, various price reset and anti-dilution provisions when new equity is issued in certain transactions including stock

issued for cash at a price less than the $0.36 exercise price stated in the 2021 private placement warrants.

These provisions inhibit

our access to cash for the issuance of common stock which may limit our ability to compete in a very dynamic market through new investments

in research and development or selling and marketing.

We cannot predict the financial impact of the issuance of the warrants on our financial

statements, specifically our balance sheet.

We also cannot predict the financial impact of the various provisions included in the warrant

The purchase agreement

related to our 2021 private placement includes covenants that we must comply with, or we may suffer potential monetary and other penalties.

The securities purchase agreement we entered into in

connection with the recent private placement contains certain customary covenants.

If we do not comply with these covenants, we will be

in breach of our obligations under the securities purchase agreement, which may lead to exercise by the investors of the remedies available

to them under the securities purchase agreement, which may cause a material impact upon our financial condition.

common shares are thinly traded, and in the future may continue to be thinly traded, and you may be unable to sell your shares at or

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common stock.

of September 30, 2023, we had 213,854,781 shares of common stock outstanding and total warrants issued for 69,281,020 shares of common

If all 69,281,020 warrants are exercised in full for cash, then they would represent 24.5% of the total shares outstanding.

of a significant number of shares of our common stock in the public market, or the potential or expectation of such sales, could harm

the market price of our common stock.

As large numbers of our common stock are sold, it would increase the supply of our common stock,

which would thereby cause a decrease in its price.

of September 30, 2024, we had 225,975,331 shares of common stock outstanding and total warrants issued for 43,157,956 shares of

common stock.

If all 43,157,956 warrants are exercised in full for cash, then they would represent 16.0% of the total shares

outstanding after including the exercised warrants.

Sales of a significant number of shares of our common stock in the public

market, or the potential or expectation of such sales, could harm the market price of our common stock.

If a large volume of our

common stock was sold, it would increase the supply of our common stock, which could cause a decrease in its

sales and issuances of our securities could result in additional dilution of the percentage ownership of our stockholders and could cause

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to sell them or may have to hold them for a substantial period of time until the liquidity of the market for our common stock improves.

Related to Regulations and Our Compliance with Such Regulations

previously identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting.

not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial

reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations,

each of which could have a material adverse effect on our financial condition and the trading price of our common stock.

effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce

reliable financial statements.

Our disclosure controls and procedures and internal controls over financial reporting are currently ineffective

and have in the past been subject to material weaknesses.

A material weakness is a deficiency, or a combination of deficiencies, in internal

control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual

or interim financial statements will not be prevented or detected on a timely basis.

A control deficiency exists when the design or operation

of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect

misstatements on a timely basis.

cannot assure you that additional material weaknesses will not arise in the future.

The development of new material weaknesses in our

internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to

meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading

price of our common stock, and/or result in litigation against us or our management.

are subject to changing laws and regulations.

government agencies continue to implement extensive requirements on our industry.

These regulations have both positive and negative impacts,

with much remaining uncertainty as to how various provisions will ultimately affect our customers, clients, licensees, resellers, end

users, and our business.

As to prospective legislation and regulation concerning collection, transmission, storage and use of personal

data, we cannot determine what effect additional state or federal governmental legislation, regulations, or administrative orders would

have on our business in the future.

New legislation or regulation may require the reformulation of our business to meet new standards,

require us to cease operations, impose stricter qualification and/or registration standards, impose additional record keeping, or require

expanded consumer protection measures (such as heightened notification procedures and data subject access rights).

failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us

to lose potential customers, clients, licensees, resellers and/or for licensees and resellers to lose potential customers in the public

sector or negatively impact our ability to contract with the public sector.

business is subject to regulation by various federal, state, regional, local and foreign governmental agencies, including agencies responsible

for monitoring and enforcing employment and labor laws, workplace safety, product safety, product labeling, environmental laws, consumer

protection laws, anti-bribery laws, data privacy laws, import and export controls, federal securities laws and tax laws and regulations.

In certain jurisdictions, these regulatory requirements may be more stringent than in the United States.

Noncompliance with applicable

regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages

and civil and criminal penalties or injunctions.

If any governmental sanctions are imposed, or if we do not prevail in any possible civil

or criminal litigation, our business, operating results and financial condition could be adversely affected.

In addition, responding

to any legal action will likely result in a significant diversion of our management’s attention and resources and an increase in

professional fees and expenses.

Enforcement actions and sanctions could harm our business, operating results and financial condition.

Additionally,

we may be subject to other laws and regulations throughout the world governing data handling, protection and privacy.

For example, in

June of 2018, California passed the California Consumer Privacy Act, or the “CCPA,” which provides new data privacy rights

for consumers and new operational requirements for companies, became effective in 2021, and in March 2022, Virginia passed a consumer

data protection law, the “VCDPA,” which includes similar rights as set forth in the CCPA.

Fines for noncompliance may be

up to $7,500 per violation.

Additionally, many other states have passed differing privacy and data protection laws in recent years.

Significantly,

several bills are being worked on in the Senate and the House dealing with these issues, and while it is uncertain that any of them will

reach the floor of either chamber, if they do so they will likely impose substantial additional burdens on companies.