SideChannel, Inc. 10-K

ITEM 1A. RISK FACTORS Our business, financial condition and results of operations and the market price for our common stock are subject to numerous risks, many of which are driven by factors that we cannot control or predict. An investment in our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this Annual Report on Form 10-K, including the information regarding “Forward-Looking Statements” earlier in this Form 10-K immediately prior to Part I, Item 1 and “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our common stock. If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected, which could result in a decline in the market price of our common stock, causing you to lose all or part of your investment. Additional risks that we do not yet know of, or that we currently think are immaterial, may also affect our business and results of operations. Summary of Risk Factors The following list provides a summary of risk factors discussed in further detail below: Risks Related to Our Business and Results of Operations ● Inflation and related geo-political events increase the risk that we are unable to achieve and maintain profitable operations. ● We depend significantly upon the continued involvement of our present management and on our ability to attract and retain talented employees. ● 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 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. ● Our 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. ● 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. ● A 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. ● If 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. ● Outages or problems with systems and infrastructure supplied by third-parties could negatively affect our business, financial condition and financial results. ● Current global financial conditions have been characterized by increased volatility, which could negatively impact our business, prospects, liquidity and financial condition. ● If we experience delays and/or defaults in payments, we could be unable to recover all expenditures. ● 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. 10 Risks Related to Our Industry ● We face intense competition. ● Delays in product development schedules may adversely affect our revenues. ● 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. ● Actual, 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. Risks Related to Our Intellectual Property ● Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our products without compensating us. ● Claims by others that we infringe their proprietary technology or other litigation matters could harm our business. ● We rely on the availability of third-party licenses, and our inability to maintain those licenses could harm our business. ● Our use of open-source software in our products could negatively affect our ability to sell our products and subject us to possible litigation. Risks Related to Cyberattacks ● Security of our information technology may be threatened. ● Security of our products, services, devices, and customers’ data may be breached. ● Development and deployment of defensive measures are ongoing. ● Disclosure and misuse of personal data could result in liability and harm our reputation. ● If our end users experience data losses, our brand, reputation and business could be harmed. 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. ● We are subject to changing laws and regulations. ● 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 for Capital ● 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, or at all. ● 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 to fall. ● 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 approval. ● 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. 11 Risks Related to Our Business and Results of Operations Inflation and related geo-political events increase the risk that we are unable to achieve and maintain profitable operations. Our 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. We depend significantly upon the continued involvement of our present management and on our ability to attract and retain talented employees. Our 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. All of our 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 business. 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. To 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. If we are less successful in our recruiting efforts, or if we are unable to retain key existing employees, our ability to develop and deliver successful products and services will be adversely affected. Effective succession planning is also important to our long-term success. Our failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. 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; and ● 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. 12 Our 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. Our operating results, in particular, our revenues, gross margins, operating margins, and operating expenses, have historically varied significantly from period to period, and we expect such variation to continue as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including: ● our 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; ● the budgeting cycles, seasonal buying patterns, and purchasing practices of potential customers and customers of our licensees and resellers; ● price competition; ● the 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; ● changes in the mix of our services, products, and support; ● changes in the growth rate of the cybersecurity technology market; ● the timing and costs related to the development or acquisition of technologies or businesses or strategic partnerships; ● lack of synergy, or the inability to realize expected synergies, resulting from any acquisitions or strategic partnerships; ● our inability to execute, complete or integrate efficiently any acquisitions that we have or may hereafter undertake; ● increased expenses, unforeseen liabilities, or write-downs and any impact on our operating results from any acquisitions we may consummate; ● our ability to create sizeable and productive distribution channels for our proprietary software; ● decisions 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; ● timing of revenue recognition from the delivery of existing and future statements of work; ● Insolvency 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; ● the 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; ● future accounting pronouncements or changes in our accounting policies; and ● general macroeconomic conditions including interest rates, inflation and increasing labor costs, in some or all regions in which we operate. Any one of the factors above, or the cumulative effect of some of the factors referred to above, may result in significant fluctuations in our operating results including our revenue and net income. This variability and unpredictability could result in our failure to meet our revenue, margin, or other operating result expectations, or those of securities analysts or investors for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits. Our 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. We anticipate that our future revenue and operating results will depend significantly on our ability to retain clients and customers and our ability add new clients and customers. In addition, we may not be able to predict or anticipate accurately future trends in retention or effectively respond to such trends. Our retention rates may decline or fluctuate due to a variety of factors, including the following: ● our clients’ and customers’ levels of satisfaction or dissatisfaction with our products and services; ● the quality, breadth, and prices of our products and services; ● our general reputation and events impacting that reputation; ● the products and services and related pricing offered by our competitors; ● disruption by new services or changes in law or regulations that impact the need for or efficacy of our products and services; ● our customer service activities and responsiveness to any customer issues; ● customer dissatisfaction if they do not receive the full benefit of our services due to their failure to provide all relevant data; 13 ● customer dissatisfaction with the methods or sufficiency of our remediation services; and ● changes in target customers’ planned spending levels as a result of general economic conditions or other factors such as inflation. If we do not retain our existing clients and customers, or add new clients and customers, we may not generate revenue and/or our revenue may grow more slowly than expected, or decline, and our operating results and gross margins will be negatively impacted. In addition, our business and operating results may be harmed if we are unable to increase our retention rates or if they decline. We also must continually add new clients and customers, both to replace those who cancel or elect not to renew their agreements with us and to grow our business beyond our current level. 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 entrants. 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; and ● 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. 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 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, and Illumio. 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 resources; ● greater resources to make strategic acquisitions or enter strategic partnerships; and ● 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 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. 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. 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. 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. A 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. Increasingly, companies are subject to a wide variety of attacks on their networks on an ongoing basis. In addition to traditional computer “hackers” malicious code (such as viruses and worms), phishing attempts, employee theft or misuse, and denial of service attacks, sophisticated nation-state and nation-state supported actors engage in intrusions and attacks (including advanced persistent threat intrusions) and add to the risks to internal networks, cloud deployed enterprise and customer-facing environments and the information they store and process. Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks. We, and our third-party software and service providers, may face security threats and attacks from a variety of sources. Our data, corporate systems, third-party systems and security measures and/or those of our licensees, resellers, clients, customers, software providers, independent contractors, employees, end users may be breached due to the actions of outside parties, employee error, malfeasance, a combination of these, or otherwise, and, as a result, an unauthorized party may obtain access to our or our customers’ data. Furthermore, as a provider of cybersecurity technologies, we may be a more attractive target for such attacks. A breach in our data security or an attack against our service availability, or that of our third-party service providers, could impact our networks or networks secured by our services, products and subscriptions, creating system disruptions or slowdowns and exploiting security vulnerabilities of our services, products, and the information stored on our networks or those of our third-party service providers could be accessed, publicly disclosed, altered, lost, or stolen, which could subject us to liability and cause us financial harm. Any actual or perceived breach of network security in our systems or networks, or any other actual or perceived data security incident we or our third-party service providers suffer, could result in damage to our reputation, negative publicity, loss of channel partners, licensees, resellers, clients, customers, and sales, loss of competitive advantages over our competitors, increased costs to remedy any problems and otherwise respond to any incident, regulatory investigations and enforcement actions, costly litigation, and other liability. In addition, we may incur significant costs and operational consequences of investigating, remediating, eliminating, and putting in place additional tools and devices designed to prevent actual or perceived security incidents, as well as the costs to comply with any notification obligations resulting from any security incidents. Any of these negative outcomes could adversely impact the market perception of our services, products and customer and investor confidence in our company and, moreover, could seriously harm our business or operating results. It is essential to our business strategy that our technology and network infrastructure remain secure and are perceived by any clients and customers we have, and others, to be secure. Despite security measures, however, any network infrastructure may be vulnerable to cyber-attacks by hackers and other security threats. We may face cyber-attacks that attempt to penetrate our network security, sabotage or otherwise disable our research, products and services, misappropriate our proprietary information, or that of our licensees and resellers, or their or our customers and partners, which may include personally identifiable information, or cause interruptions of our internal systems and services. Any cyber-attacks could negatively affect our reputation, damage our network infrastructure and our ability to deploy our products and services, harm our business relationships, and expose us to financial liability. 14 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. Despite our precautions and ongoing investments to protect against security risks, data protection breaches, cyber-attacks, and other intentional disruptions of our products and services, we expect to be an ongoing target of attacks specifically designed to impede the performance and availability of our offerings and harm our reputation as a company. Similarly, experienced computer programmers or other sophisticated individuals or entities, including malicious hackers, state-sponsored organizations, and insider threats including actions by employees and third-party service providers, may attempt to penetrate our network security or the security of our systems and websites and misappropriate 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. 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 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. 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. Because we offer very complex products, errors, defects, disruptions, or other performance problems with our products may and have occurred. For example, we may experience disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our websites simultaneously, fraud, or security attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Interruptions in our products could impact our revenues or cause licensees, resellers, clients, and customers to cease doing business with us. Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose end user/customer data or experience material adverse interruptions to our operations or delivery of products and services to our clients in a disaster recovery scenario. Further, our business would be harmed if any of these types of events caused our licensees, resellers, or customers, or our licensees’ and resellers’ customers or potential customers, to believe that our products are unreliable. We believe that our brand recognition and reputation are critical to retaining existing licensees, resellers, clients and customers, and attracting new licensees, resellers, clients, and customers. Furthermore, negative publicity, whether or not justified, relating to events or activities attributed to us, our employees, our strategic partners, our affiliates, or others associated with any of these parties, may tarnish our reputation and reduce the value of our brands. Damage to our reputation may reduce demand for our products and have an adverse effect on our business, operating results, and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of our brands after such an event may be costly and time-consuming, and such efforts may not ultimately be successful. 15 If 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. We produce complex products that incorporate leading-edge technology that must operate in a wide variety of technology environments. Software may contain defects or “bugs” that can interfere with expected operations in these varying technological environments. There can be no assurance that our testing programs will be adequate to detect all defects prior to the product being introduced, which might decrease customer satisfaction with our products and services. The product reengineering cost to remedy a product defect could be material to our operating results. Our inability to cure a product defect could result in the temporary or permanent withdrawal of a product or service, negative publicity, damage to our reputation, failure to achieve market acceptance, lost revenue and increased expense, any of which could have a material adverse effect on our business, financial condition and financial results. Outages or problems with systems and infrastructure supplied by third-parties could negatively affect our business, financial condition and financial results. Our business relies on third-party suppliers of the telecommunications infrastructure. We, our clients and customers and our licensees and resellers, and their customers, will use various communications service suppliers and the global internet to provide network access between our data centers and our customers and end-users of our services. If those suppliers do not enable us to provide our clients and customers, or our licensees’ and resellers’ customers with reliable, real-time access to our systems (to the extent required), we may be unable to gain or retain clients, customers, licensees and resellers. These suppliers periodically experience outages or other operational problems as a result of internal system failures or external third-party actions. Supplier outages or other problems could materially adversely affect our business, financial results and financial condition. Current global financial conditions have been characterized by increased volatility, which could negatively impact our business, prospects, liquidity and financial condition. Current global financial conditions and recent market events have been characterized by increased volatility, and the resulting tightening of the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guarantee that debt or equity financing, or the ability to generate cash from operations, will be available or sufficient to meet or satisfy our initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations will negatively impact our business, prospects, liquidity and financial condition. If we experience delays and/or defaults in payments, we could be unable to recover all expenditures. Because of the nature of our contracts, at times we will commit resources to projects prior to receiving payments from the counterparty in amounts sufficient to cover our expenditures on projects as they are incurred. Delays in payments may require us to make a working capital investment. Defaults by any of our clients, customers, licensees, and resellers could have a significant adverse effect on our revenues, profitability and cash flow. Our clients, customers, licensees, and resellers may in the future default on their obligations to us or them due to bankruptcy, lack of liquidity, operational failure or other reasons deriving from the current general economic environment. If a client, customer, or licensee defaults on its obligations to us or our licensee, or a licensee or reseller defaults in its payments to us, it could have 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. Our 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 may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased use of our products or increased revenue. Claims, litigation, government investigations, and other proceedings may adversely affect our business and results of operations. As 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 matters. 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. The 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. Until the final resolution of such matters, we may be exposed to losses in excess of the amount recorded, and such amounts could be material. Should 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 affairs. As of September 30, 2024, our executive officers and directors owned approximately 46.0% of the Company’s total issued and outstanding shares. Because 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. Risks Related to Our Industry We face intense competition. We expect to experience intense competition across all markets for our products and services. Our competitors that are focused on narrower product lines may be more effective in devoting technical, marketing, and financial resources to compete with us. In addition, barriers to entry in our businesses generally are low, and products and services, once developed, can be distributed broadly and quickly at a relatively low cost. Open-source software vendors are devoting considerable efforts to developing software that mimics the features and functionality of our current and anticipated products. These competitive pressures may result in decreased sales volumes, price reductions, and/or increased operating costs, such as for marketing and sales incentives, resulting in lower revenue, gross margins, and operating income. 16 Delays in product development schedules may adversely affect our revenues. The development of cybersecurity products and services is a complex and time-consuming process. New products and services can require long development and testing periods. Future revenues may include the sale of new products and services that may not yet be developed. Significant delays in product development, including quality assurance testing or significant problems in creating new products and services, could adversely affect our revenue recognition from new products and services. Revenue in certain reporting periods could be lower than anticipated because product development problems could cause the loss of a competitive sale transaction, a delay in invoicing a client, customer, licensee, or reseller or the renegotiation of terms to retain a sale transaction. 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. The cybersecurity technologies market has grown quickly and is expected to continue to evolve rapidly. Moreover, many of our potential licensees and resellers and their customers operate in markets characterized by rapidly changing technologies and business plans, which require them to add numerous network access points and adapt increasingly complex enterprise networks, incorporating a variety of hardware, software applications, operating systems, and networking protocols. If we fail to accurately predict potential changing needs and emerging technological trends in the cybersecurity technology industry, including in the areas of mobility, virtualization, and cloud computing, our business could be harmed. If we experience unanticipated delays in the availability of new services, products, platform features, and subscriptions, or fail to meet expectations for such availability, our competitive position, financial results, and business prospects will be harmed. Additionally, we must commit significant resources to developing new products and services before knowing whether our investments will result in services, products, subscriptions, and features that the market will accept. The success of new platform features depends on several factors, including appropriate new product definition, differentiation of new services, products, subscriptions, and platform features from those of our competitors, and market acceptance of these products, services and platform features. Moreover, successful new product introduction and transition depends on a number of factors including, our ability to manage the risks associated with new product production ramp-up issues, the availability of application software for new products, and the risk that new products may have quality or other defects or deficiencies, especially in the early stages of introduction. We cannot assure you that we will successfully identify opportunities for new products and services, develop and bring new products and subscriptions to market in a timely manner, or achieve market acceptance of our products and subscriptions, or that products, subscriptions, and technologies developed by others will not render our products, subscriptions, or technologies obsolete or noncompetitive. 17 Actual, 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. Because our products and services are complex, they may contain defects or errors that are not detected until after their commercial release and deployment. Defects or vulnerabilities may impede or block network traffic, cause our products or services to be vulnerable to electronic break-ins or cause them to fail to help secure networks. We are also susceptible to errors, defects, vulnerabilities, or attacks that may arise at, or be inserted into our products, which are out of our control. Different users deploy and use cybersecurity products in different ways, and certain deployments and usages may subject our products to adverse conditions that may negatively impact the effectiveness and useful lifetime of our products. Our networks and products, including any cloud-based technology we utilize, could be targeted by attacks specifically designed to disrupt our business and harm our reputation. Our products may not prevent all security threats. Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched 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 to prevent the security breach, could adversely affect the market’s perception of our security products and services and, in some instances, subject us to potential liability that is not contractually limited. We may not be able to correct any security flaws or vulnerabilities promptly, or at all. Our products may also be misused by potential end users or third-parties who obtain access to our products. For example, our products could be used to censor private access to certain information on the internet. Such use of our products for censorship could result in negative press coverage and negatively affect our reputation, even if we take reasonable measures to prevent any improper shipment of our products or if our products are being used improperly or provided by an unauthorized third-party. Any actual, possible, or perceived defects, errors or vulnerabilities in our products and services, or misuse of our products and services, could result in: ● the 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; ● the loss of potential clients, customers, licensees, resellers, or distribution partners; ● delayed or lost revenue; ● delay or failure to attain market acceptance; ● negative publicity and harm to our reputation; and ● 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. Risks Related to Our Intellectual Property Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our products without compensating us. We rely primarily on patent, trademark, copyright and trade secrets laws and confidentiality procedures and contractual provisions to protect our technology. The claims eventually allowed on any patents issued in the future may not be sufficiently broad to protect our technology or products. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate offensive scope, defensive protection or competitive advantages to us. Patent applications in the United States are 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. 18 Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. We generally enter into confidentiality or non-solicitation agreements with our employees, consultants, and vendors, as the case may be, and generally limit access to and distribution of our proprietary information. However, we cannot guarantee that the steps taken by us will prevent misappropriation of our technology. Policing unauthorized use of our technology or products is difficult. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States. From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results and financial condition. If we are unable to protect our proprietary rights (including aspects of our software and products protected other than by patent rights), we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative products that would compete with our products. Claims by others that we infringe their proprietary technology or other litigation matters could harm our business. Patent and other intellectual property disputes are common in the cybersecurity and technology industries. Third-parties may in the future assert claims of infringement of intellectual property rights against us. They may also assert such claims against our licensees, resellers, end users or distribution partners whom we may have to indemnify against claims that our products infringe the intellectual property rights of third-parties. As the number of products and competitors in our market increases and overlaps in service and functionality occur, infringement claims may increase. Any claim of infringement by a third-party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business. In addition, litigation may involve patent holding companies, non-practicing entities, or other adverse patent owners who have no relevant product revenue and against whom our own patents may therefore provide little or no deterrence to such plaintiffs we will counter-claim for infringement and invalidation of their patent(s). Although third-parties may offer a license to their technology, the terms of any offered license may not be acceptable, and the failure to obtain a license or the costs associated with any license could cause our business, financial condition and results of operations to be materially and adversely affected. In addition, some licenses may be non-exclusive and, therefore, our competitors may have access to the same technology licensed to us. Alternatively, we may be required to develop non-infringing technology, which could require significant time, effort, and expense, and may ultimately not be successful. Furthermore, a successful claimant could secure a judgment, or we may agree to a settlement that prevents us from distributing certain products or performing certain services or that requires us to pay substantial damages (including treble damages if we are found to have willfully infringed such claimant’s patents), royalties or other fees. Any of these events could seriously harm our business, financial condition and results of operations. 19 We may be subject to lawsuits claiming patent infringement. We may also be subject to other litigation in addition to patent infringement claims, such as employment-related litigation and disputes, as well as general commercial litigation, and could become subject to other forms of litigation and disputes, including stockholder litigation. If we are unsuccessful in defending any such claims, our operating results and financial condition and results may be materially and adversely affected. For example, we may be required to pay substantial damages and could be prevented from selling certain of our products. Litigation, with or without merit, could negatively impact our business, reputation and sales in a material adverse fashion. We rely on the availability of third-party licenses, and our inability to maintain those licenses could harm our business. Many of our products or products under development include software or other intellectual property licensed from third-parties. It may be necessary in the future to renew licenses relating to various aspects of these products or to seek new licenses for existing or new products. Licensors may claim we owe them additional license fees for past and future use of their software and other intellectual property or that we cannot utilize such software or intellectual property in our products going forward. There can be no assurance that the necessary licenses would be available on acceptable terms, if at all. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms or for reasonable pricing, or the need to engage in litigation regarding these matters, could result in delays in product releases until equivalent technology can be identified, licensed or developed, if at all, and integrated into our products. Further such events may result in significant license fees and have a material adverse effect on our business, operating results, and financial condition. Moreover, the inclusion in our products or software or other intellectual property licensed from third-parties on a non-exclusive basis or the inclusion in our products of opensource software may limit our ability to differentiate our products from those of our competitors. Not differentiating our products from those of our competitors may adversely affect our results of operations, including reducing our revenue and net income. We also rely on technologies licensed from third-parties in order to operate functions of our business. If any of these third-parties allege that we have not properly paid for such licenses or that we have improperly used the technologies under such licenses, we may need to pay additional fees or obtain new licenses, and such licenses may not be available on terms acceptable to us or at all or may be costly. In any such case, or if we were required to redesign our internal operations to function with new technologies, our business, results of operations and financial condition could be harmed. Our use of open-source software in our products could negatively affect our ability to sell our products and subject us to possible litigation. 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. 20 Risks Related to Cyberattacks Security of our information technology may be threatened. Threats to IT security can take a variety of forms. Individual and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our IT. These actors may use a wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities or intentionally designed processes in hardware, software, or other infrastructure in order to attack our products and services or gain access to our networks and datacenters, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ or customers’ data, or acting in a coordinated manner to launch distributed denial of service or other coordinated attacks. Nation-state and state-sponsored actors can deploy significant resources to plan and carry out attacks. Nation-state attacks against us, our customers, or our partners may intensify during periods of intense diplomatic or armed conflict, such as the ongoing conflict in Ukraine. Inadequate account security or organizational security practices may also result in unauthorized access to confidential data. For example, system administrators may fail to timely remove employee account access when no longer appropriate. Employees or third-parties may intentionally compromise our or our users’ security or systems or reveal confidential information. Malicious actors may employ the IT supply chain to introduce malware through software updates or compromised supplier accounts or hardware. Cyberthreats are constantly evolving and becoming increasingly sophisticated and complex, increasing the difficulty of detecting and successfully defending against them. We may have no current capability to detect certain vulnerabilities or new attack methods, which may allow them to persist in the environment over long periods of time. Cyberthreats can have cascading impacts that unfold with increasing speed across our internal networks and systems and those of our partners and customers. Breaches of our facilities, network, or data security could disrupt the security of our systems and business applications, impair our ability to provide services to our customers and protect the privacy of their data, result in product development delays, compromise confidential or technical business information harming our reputation or competitive position, result in theft or misuse of our intellectual property or other assets, subject us to ransomware attacks, require us to allocate more resources to improve technologies or remediate the impacts of attacks, or otherwise adversely affect our business. We are also subject to supply chain cyberattacks where malware can be introduced to a software provider’s customers, including us, through software updates. In addition, our internal IT environment continues to evolve. Often, we are early adopters of new devices and technologies. We embrace new ways of sharing data and communicating internally and with partners and customers using methods such as social networking and other consumer-oriented technologies. Increasing use of generative AI models in our internal systems may create new attack methods for adversaries. Our business policies and internal security controls may not keep pace with these changes as new threats emerge, or emerging cybersecurity regulations in jurisdictions worldwide. 21 Security of our products, services, devices, and customers’ data may be breached. The security of our products and services is important in our customers’ decisions to purchase or use our products or services. Security threats are a significant challenge to companies like us whose business is providing technology products and services to others. Threats to our own IT infrastructure can also affect our customers. Customers using our cloud-based services rely on the security of our infrastructure, including hardware and other elements provided by third-parties, to ensure the reliability of our services and the protection of their data. Adversaries tend to focus their efforts on the most popular operating systems, programs, and services, including many of ours, and we expect that to continue. In addition, adversaries can attack our customers’ cloud environments, sometimes exploiting previously unknown vulnerabilities, Vulnerabilities in these or any product could persist if the attackers exploited the vulnerabilities with the installation of additional malware, to further compromise customers’ systems. Customers using our products will continue to get attacked as they move through their digital transformation projects. Inadequate account security practices may also result in unauthorized access, and user activity may result in ransomware or other malicious software impacting a customer’s use of our products or services. 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. Our customers operate complex IT systems with third-party hardware and software from multiple vendors that may include systems acquired over many years. They expect our products and services to support all these systems and products, including those that no longer incorporate the strongest current security advances or standards. As a result, we may not be able to discontinue support in our services for a product, service, standard, or feature solely because a more secure alternative is available. Failure to utilize the most current security advances and standards can increase our customers’ vulnerability to attack. Further, customers of widely varied size and technical sophistication use our technology, and consequently may still have limited capabilities and resources to help them adopt and implement state of the art cybersecurity practices and technologies. In addition, we must account for this wide variation of technical sophistication when defining default settings for our products and services, including security default settings, as these settings may limit or otherwise impact other aspects of IT operations and some customers may have limited capability to review and reset these defaults. Cyberattacks may adversely impact our customers even if our product services are not directly compromised. We are committed to notifying our customers whose systems have been impacted as we become aware and have actionable information for customers to help protect themselves. We are also committed to providing guidance and support on detection, tracking, and remediation. We may not be able to detect the existence or extent of these attacks for all of our customers or have information on how to detect or track an attack, when we may have no or limited visibility into our customers’ computing environments. Development and deployment of defensive measures are ongoing. To defend against security threats to our internal IT systems, our cloud-based services, and our customers’ systems, we must continuously engineer more secure products and services, enhance security, threat detection, and reliability features, improve the deployment of software updates to address security vulnerabilities in our own products as well as those provided by others, develop mitigation technologies that help to secure customers from attacks even when software updates are not deployed, maintain the digital security infrastructure that protects the integrity of our network, products, and services, and provide security tools such as firewalls, anti-virus software, and advanced security and information about the need to deploy security measures and the impact of doing so. Customers in certain industries such as financial services, health care, and government may have enhanced or specialized requirements to which we must engineer our products and services. The cost of measures to protect products and customer-facing services could reduce our operating margins. If we fail to do these things well, actual or perceived security vulnerabilities in our products and services, data corruption issues, or reduced performance could harm our reputation and lead customers to reduce or delay future purchases of products or subscriptions to services, or to use competing products or services. Customers may also spend more on protecting their existing computer systems from attack, which could delay adoption of additional products or services. Customers, and third-parties granted access to their systems, may fail to update their systems, continue to run software or operating systems we no longer support, or may fail timely to install or enable security patches, or may otherwise fail to adopt adequate security practices. Any of these could adversely affect our reputation and revenue. Actual or perceived vulnerabilities may lead to claims against us. Our license agreements typically contain provisions that eliminate or limit our exposure to liability, but there is no assurance these provisions will withstand legal challenges. At times, to achieve commercial objectives, we may enter into agreements with larger liability exposure to customers. 22 Our products operate in conjunction with and are dependent on products and components across a broad ecosystem of third-parties. If there is a security vulnerability in one of these components, and if there is a security exploit targeting it, we could face increased costs, liability claims, reduced revenue, or harm to our reputation or competitive position. Disclosure and misuse of personal data could result in liability and harm our reputation. As we continue to grow the number, breadth, and scale of our cloud-based offerings, we store and process increasingly large amounts of personal data of our customers and users. The continued occurrence of high-profile data breaches provides evidence of an external environment increasingly hostile to information security. Despite our efforts to improve the security controls across our business groups and geographies, it is possible our security controls over personal data, our training of employees and third-parties on data security, and other practices we follow may not prevent the improper disclosure or misuse of customer or user data we or our vendors store and manage. In addition, third-parties who have limited access to our customer or user data may use this data in unauthorized ways. Improper disclosure or misuse could harm our reputation, lead to legal exposure to customers or users, or subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. Our software products and services also enable our customers and users to store and process personal data on-premises or, increasingly, in a cloud-based environment we host. Government authorities can sometimes require us to produce customer or user data in response to valid legal orders. In the U.S. and elsewhere, we advocate for transparency concerning these requests and appropriate limitations on government authority to compel disclosure. Despite our efforts to protect customer and user data, perceptions that the collection, use, and retention of personal information is not satisfactorily protected could inhibit sales of our products or services and could limit adoption of our cloud-based solutions by consumers, businesses, and government entities. Additional security measures we may take to address customer or user concerns, or constraints on our flexibility to determine where and how to operate datacenters in response to customer or user expectations or governmental rules or actions, may cause higher operating expenses or hinder growth of our products and services. If our end users experience data losses, our brand, reputation and business could be harmed. A 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. Our 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 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. 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. U.S. 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). 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. 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. 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. 23 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. Exports of software products and services using cybersecurity technology such as ours are generally restricted by the U.S. government. In addition, some countries impose restrictions on the use of cybersecurity products and services such as ours. The cost of compliance with U.S. and 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 risks. 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. 24 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 reporting. 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. 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. You should consider an investment in our common stock to be risky, and you should invest in our common stock and securities convertible into our common stock only if you can withstand a complete loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere are: ● sale of our common stock by our stockholders, executives, and directors; ● volatility in price and level of trading volumes of our shares of common stock; ● our ability to obtain financings to conduct and complete research and development activities and other business activities; ● the 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; 25 ● Our ability to attract new customers, clients, licensees, and resellers; ● changes in the development status of our products and services; ● changes in our capital structure, future issuances of securities, and sales of large blocks of common stock by our stockholders; ● our cash position; ● announcements and events surrounding financing efforts, including debt and equity securities; ● our inability to enter into new markets or develop new products and services; ● reputational issues; ● announcements of acquisitions, partnerships, collaborations, joint ventures, new products and services, capital commitments, or other events by us or our competitors; ● changes in industry conditions or perceptions; ● our 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; ● departures and additions of key personnel; ● disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations; ● changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and ● other events or factors, many of which may be out of our control. In addition, if the market for stock of companies in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. Substantial sales of our common stock, or the perception that such sales might occur, could depress the market price of our common stock. We cannot predict whether future issuances of our common stock, or resale of shares in the open market, will decrease the market price of our common stock. The consequence of any such issuances or resale of our common stock on our market price may be increased as a result of the fact that our common stock is thinly, or infrequently, traded. The exercise of any outstanding options, or the vesting of any restricted stock, that we may grant to directors, executive officers and other employees in the future, or the issuance of common stock in connection with acquisitions and other issuances of our common stock, may decrease 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 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. 26 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. The 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. As a 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 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. As 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 agreements. 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. 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. We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on its share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that even current trading levels will be sustained. You may be unable to sell your common stock at or above your purchase price, if at all, which may result in substantial losses to you. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. 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. As 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 price. 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 to fall. We expect that we will need significant additional capital in the future to continue our planned operations, including research and development, increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To the extent that we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions, at prices and in a manner that we determine from time to time, in our discretion. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders. 27 Our common stock is subject to restrictions on sales by broker-dealers and penny stock rules, which may be detrimental to investors. Our common stock is subject to Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which impose certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers and “accredited investors” (as defined in Rule 501(a) of the Securities Act of 1933, as amended (the “Securities Act”)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common stock and holders of our common stock to sell their shares of our common stock. Additionally, our common stock is subject to SEC regulations applicable to “penny stocks.” Penny stocks include any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that, prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the penny stock market must be delivered by a broker-dealer to the purchaser of such penny stock. This disclosure must include the amount of commissions payable and the current price quotations for our common stock. The regulations also require that monthly statements be sent to holders of a penny stock that disclose recent price information for the penny stock and information regarding the limited market for penny stocks. These requirements adversely affect the market liquidity of our common stock. 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 common stock is quoted on the OTCQB Market, operated by the OTC Markets Group. The OTCQB is often highly illiquid, in part because it does not have a national quotation system by which potential investors can follow the market price of shares, except through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on the OTCQB, as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price for their shares when they determine 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. Our charter allows us to issue “blank check” preferred stock and establish its terms, conditions, rights, powers and preferences without stockholder approval. Pursuant to our certificate of incorporation, our Board of Directors has the authority to issue up to 10 million shares of “ blank check ” preferred stock and to determine the price, rights, preferences, privileges, and restrictions, including voting rights, of those shares without any additional vote or action by our stockholders. Because our Board of Directors is able to designate the terms, conditions, rights, powers, and preferences of the preferred stock without the vote of a majority of our stockholders, our stockholders will have no control over what designations and preferences our preferred stock will have. The issuance of shares of preferred stock, or the rights associated therewith, could cause substantial dilution to our existing stockholders. Additionally, the dilutive effect of any preferred stock that we may issue may be exacerbated given the fact that such preferred stock may have voting rights, liquidation and/or other rights or preferences that could provide the preferred stockholders with substantial voting control over us and/or give those holders the power to prevent or cause a change in our control. As a result, the issuance of shares of preferred stock may cause the value of our common stock to decrease. We have never paid or declared any dividends on our common stock. We do not anticipate paying, in the near future, dividends or distributions on our common stock. Any future dividends on our common stock will be declared at the discretion of our Board of Directors and will depend on, among other things, our earnings, our financial requirements for future operations and growth, and other facts as we may then deem appropriate. Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of 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 trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us, our business, our markets, and our competitors. We do not currently have any securities or industry analysts that have initiated research coverage on our business. If and when any securities or industry analysts initiate research coverage on our business, we will not control these analysts. If securities analysts do not cover our common stock, the lack of research or other coverage may adversely affect the market price and decrease the trading volume of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade our stock, or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market, and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business and attract new clients and customers to purchase our cybersecurity products and services. The sale of shares of our common stock by our directors and officers may adversely affect the market price for our common stock. Sales of significant amounts of shares of common stock by our officers and directors, or the prospect of such sales, could adversely affect the market price of our common stock. Our management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock’s market price. 28