What changed in this filing

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Item 1A. Risk Factors

2020-08-14 compared with 2020-05-12 · 192 added, 122 removed, 35 unchanged (90% of the section changed)

6 unchanged sentences

Risks Related to our Operations

Our financial status raises doubt

about our ability to continue as a going concern.

Our cash and cash equivalents

were approximately $6.1 million at March 31, 2020, compared with approximately $4.8 million at December 31, 2019.

We continue to

incur significant operating losses, and management expects that significant on-going operating expenditures will be necessary to

successfully implement our business plan and develop and market our products.

These circumstances raise substantial doubt about

our ability to continue as a going concern within one year after the date that the financial statements included elsewhere in this

Form 10-Q are issued.

Implementation of our plans and our ability to continue as a going concern will depend upon our ability to

market our technology and raise additional capital.

As a result of the

COVID-19 pandemic, U.S.

capital markets have experienced extreme volatility and disruption, which has resulted in illiquidity in

parts of the capital markets.

Despite such disruption, during the quarter ended March 31, 2020, we were able to access capital

resources through our ATM program with Maxim, pursuant to which we received net proceeds of approximately $1.3 million and an issuance

of a promissory note in an initial principal amount of $6.45 million for cash proceeds of $5.0 million.

We have continued to use

our ATM program subsequent to the quarter ended March 31, 2020 and management believes that we will be able to continue to do so.

Management also believes that the COVID-19 related capital markets disruption will not restrict our access to additional capital

resources through possible public or private equity offerings, exchange offers, debt financings, corporate collaborations or other

In addition, we continue to explore opportunities to strategically monetize our technology and our services, although there

can be no assurance that we will be successful with such plans.

We have historically been able to raise capital through debt and

equity offerings, although no assurance can be provided that we will continue to be successful in the future.

If we are unable

to raise sufficient capital to fund our operations, we will not be able to pay our obligations as they become due.

The effects of the COVID-19 pandemic

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the duration and scope of the pandemic;

● the extent and effectiveness of responsive

actions by authorities and the impact of these and other factors on our employees, customers and vendors;

● the impact of the pandemic on our employees,

including key personnel;

● the extent to which we are able to maintain

and replace critical internet infrastructure components, when necessary;

● any disruption of our supply chain and

the impact of such disruptions on our suppliers or our ability to deliver products and services to our customers;

● our continued ability to execute on business

continuity plans for the maintenance of our critical internet infrastructure, while most of our employees continue to work remotely;

● any negative impact on the demand for

our services and products resulting from the economic disruption caused by the pandemic and responses thereto.

the extent and effectiveness of responsive actions by authorities and the impact of these and other factors on our employees, customers and vendors;

the impact of the pandemic on our employees, including key personnel;

the extent to which we are able to maintain and replace critical internet infrastructure components, when necessary;

any disruption of our supply chain and the impact of such disruptions on our suppliers or our ability to deliver products and services to our customers;

our continued ability to execute on business continuity plans for the maintenance of our critical internet infrastructure, while most of our employees continue to work remotely;

any negative impact on the demand for our services and products resulting from the economic disruption caused by the pandemic and responses thereto.

If we are unable to

1 unchanged sentence

condition and results of operations could be adversely impacted.

We have a significant amount of

debt outstanding.

Such indebtedness, along with the other contractual commitments of our Company, could adversely affect our business,

financial condition and results of operations.

As of April 30,

2020, we have an aggregate outstanding principal and accrued interest balance of approximately $8.8 million underlying the

promissory notes issued to Iliad Research and Trading, L.P., Chicago Venture Partners, L.P.

George Investments LLC,

which are affiliates of each other.

These promissory notes mature at different times between March 2020 and May 2020.

addition, Iliad Research and Trading, L.P and Chicago Venture Partners, L.P may, subject to current standstill agreements,

require us to redeem 1/3 of the initial principal balance of their promissory notes each month in cash.

The ability to meet

payment and other obligations under these notes depends on our ability to generate significant cash flow in the future.

to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our

control as described in this Form 10-Q.

If we are not able to generate sufficient cash flow to service our debt obligations,

we may need to refinance or restructure debt, exchange debt for other securities, sell assets, reduce or delay capital

investments, or seek to raise additional capital.

If we are unable to implement one or more of these alternatives, we may not

be able to meet debt payment and other obligations, which could have a material adverse effect on our financial

We have a significant amount of debt outstanding.

indebtedness, along with the other contractual commitments of our Company, could adversely affect our business, financial condition

and results of operations.

As of June 30,

2020, we have an aggregate outstanding principal and accrued interest balance of approximately $6.7 million underlying the promissory

note issued to Iliad Research and Trading, L.P.

(“Iliad”).

This promissory note matures in March 2021.

Iliad may, subject to current standstill agreements, require us to redeem 1/3 of the initial principal balance of their promissory

notes each month in cash.

The ability to meet payment and other obligations under this note depends on our ability to generate

significant cash flow in the future.

This, to some extent, is subject to general economic, financial, competitive, legislative,

regulatory and other factors beyond our control as described in this Form 10-Q.

If we are not able to generate sufficient cash

flow to service our debt obligations, we may need to refinance or restructure debt, exchange debt for other securities, sell assets,

reduce or delay capital investments, or seek to raise additional capital.

If we are unable to implement one or more of these alternatives,

we may not be able to meet debt payment and other obligations, which could have a material adverse effect on our financial condition.

In addition, so long

as the notes are outstanding, the holders will have a right of first refusal on more favorable equity-linked financings and will

be entitled to participate in certain equity or debt financings, in each case, subject to certain exceptions.

The existence of

these rights may deter potential financing sources and may lead to delays in our ability to close proposed financings.

or inability to complete a financing when needed could have a material adverse effect on our financial condition.

We may also incur

additional indebtedness in the future.

If new debt or other liabilities are added to our current consolidated debt levels, the

related risks that we now face could intensify.

We identified a material weakness in

our internal control over financial reporting for the year ended December 31, 2019 and may identify additional material weaknesses

as the note is outstanding, the holder will have a right of first refusal on more favorable equity-linked financings and will be

entitled to participate in certain equity or debt financings, in each case, subject to certain exceptions.

The existence of these

rights may deter potential financing sources and may lead to delays in our ability to close proposed financings.

Any delay or inability

to complete a financing when needed could have a material adverse effect on our financial condition.

We may also incur additional

indebtedness in the future.

If new debt or other liabilities are added to our current consolidated debt levels, the related risks

that we now face could intensify.

We identified a material weakness

in our internal control over financial reporting for the year ended December 31, 2019 and may identify additional material weaknesses

in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements

of our financial statements or could have a material adverse effect on our business and trading price of our securities.

are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the

Nasdaq Capital Market.

Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to perform system and process evaluation

and testing of our internal control over financial reporting to allow our management to report on the effectiveness of our internal

control over financial reporting.

connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2019, we identified

a material weakness in our internal control over financial reporting.

We are subject to the

reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the Nasdaq Capital Market.

Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to perform system and process evaluation and testing of our

internal control over financial reporting to allow our management to report on the effectiveness of our internal control over financial

In connection with

the audit of our consolidated financial statements as of and for the year ended December 31, 2019, we identified a material

weakness in our internal control over financial reporting.

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

1 unchanged sentence

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

The material weakness resulted from a determination following

initial audit procedures that the documentation underlying the preparation of forward projections which included copies of customer

contracts underlying the basis of projecting revenues and support for the projected cost structures associated with determining

the fair value of the Sysorex note as of December 31, 2019 was not supportable thereby requiring material adjustments to be made

to the carrying value of the note as determined by management as of December 31, 2019.

address the material weakness, during February 2020, we enhanced our internal technical accounting capabilities by engaging and

using third-party advisors to assist in areas requiring specialized technical accounting expertise, including with respect to designing

the procedures and processes associated with assessing the fair value of our equity and debt instruments.

we believe that these actions will be sufficient to remediate the material weakness, it will not be considered remediated until

the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls

are operating effectively.

We expect that the remediation of this material weakness will be completed by June 30, 2020.

Additionally,

with each prospective acquisition we may make we will conduct whatever due diligence is necessary or prudent to assure us that

the acquisition target can comply with the internal controls requirements of the Sarbanes-Oxley Act.

Notwithstanding our diligence,

certain internal controls deficiencies may not be detected.

As a result, any internal control deficiencies may adversely affect

our financial condition, results of operations and access to capital.

We have not performed an in-depth analysis to determine if

historical undiscovered failures of internal controls exist and may in the future discover areas of our internal controls that

need improvement.

assure you that the measures we have taken to date, together with any measures we may take in the future, will be sufficient to

avoid potential future material weaknesses.

If we are unable to successfully remediate any future material weakness in our internal

control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial

reporting may be adversely affected.

If we are unable to maintain effective internal controls, we may not have adequate, accurate

or timely financial information, and we may be unable to meet our reporting obligations as a public company, including the requirements

of the Sarbanes-Oxley Act.

Failure to comply with the Sarbanes-Oxley Act, when and as applicable, could also potentially

subject us to sanctions or investigations by the SEC or other regulatory authorities.

Any failure to maintain or implement required

new or improved controls, or any difficulties we encounter in their implementation, could result in identification of additional

material weaknesses or significant deficiencies, cause us to fail to meet our reporting obligations or result in material misstatements

The material weakness resulted from a determination

following initial audit procedures that the documentation underlying the preparation of forward projections which included copies

of customer contracts underlying the basis of projecting revenues and support for the projected cost structures associated with

determining the fair value of the Sysorex note as of December 31, 2019 was not supportable thereby requiring material adjustments

to be made to the carrying value of the note as determined by management as of December 31, 2019.

To address the material

weakness, during February 2020, we enhanced our internal technical accounting capabilities by engaging and using third-party advisors

to assist in areas requiring specialized technical accounting expertise, including with respect to designing the procedures and

processes associated with assessing the fair value of our equity and debt instruments.

We have remediated this

material weakness during the quarter ended June 30, 2020.

Additionally, with

each prospective acquisition we may make we will conduct whatever due diligence is necessary or prudent to assure us that the acquisition

target can comply with the internal controls requirements of the Sarbanes-Oxley Act.

Notwithstanding our diligence, certain internal

controls deficiencies may not be detected.

As a result, any internal control deficiencies may adversely affect our financial condition,

results of operations and access to capital.

We have not performed an in-depth analysis to determine if historical undiscovered

failures of internal controls exist and may in the future discover areas of our internal controls that need improvement.

We cannot assure you

that the measures we have taken to date, together with any measures we may take in the future, will be sufficient to avoid potential

future material weaknesses.

If we are unable to successfully remediate any future material weakness in our internal control over

financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may

be adversely affected.

If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely financial

information, and we may be unable to meet our reporting obligations as a public company, including the requirements of the

Sarbanes-Oxley Act.

Failure to comply with the Sarbanes-Oxley Act, when and as applicable, could also potentially subject

us to sanctions or investigations by the SEC or other regulatory authorities.

Any failure to maintain or implement required new

or improved controls, or any difficulties we encounter in their implementation, could result in identification of additional material

weaknesses or significant deficiencies, cause us to fail to meet our reporting obligations or result in material misstatements

in our financial statements.

1 unchanged sentence

of operations could be harmed and investors could lose confidence in our reported financial information.

Unregistered Sales of Equity Securities and Use of Proceeds

a) Sales of Unregistered Securities

c) Issuer Purchases of Equity Securities

Defaults Upon Senior Securities

Not applicable.

Mine Safety Disclosure

Not applicable.

Domestic and foreign government regulation

and enforcement of data practices and data tracking technologies is expansive, broadly defined and rapidly evolving.

Such regulation

could directly restrict portions of our business or indirectly affect our business by constraining our customers’

our technology and services or limiting the growth of our markets.

Federal, state, municipal

and/or foreign governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, and

regulations covering user privacy, data security, technologies that are used to collect, store and/or process data, and/or the

collection, use, processing, transfer, storage and/or disclosure of data associated with individuals.

The categories of data regulated

under these laws vary widely, are often broadly defined, and subject to new applications or interpretation by regulators.

The uncertainty

and inconsistency among these laws, coupled with a lack of guidance as to how these laws will be applied to current and emerging

indoor positioning analytics technologies, creates a risk that regulators, lawmakers or other third parties, such as potential

plaintiffs, may assert claims, pursue investigations or audits, or engage in civil or criminal enforcement.

These actions could

limit the market for our services and technologies or impose burdensome requirements on our services and/or customers’

of our services, thereby rendering our business unprofitable.

Risks Related to the Systat License Grant

We may not be

able to successfully integrate the License Grant, or retain the existing customer base, which may result in our inability to fully

realize the intended benefits of the Systat transactions.

In addition the integration of the sale of these software products into

our business operation may disrupt our current operations, which could have a material adverse effect on our business, financial

position and/or results of operations.

During the second quarter,

we acquired the license to use, modify, develop, market and distribute certain software owned or licensed by the Systat Parties.

Incorporating the marketing and distribution of this software on a worldwide basis into our operations may result in operational,

technological and personnel-related challenges, which are time-consuming and expensive and may disrupt our ongoing business operations.

Furthermore, integration involves a number of risks, including, but not limited to:

difficulties or complications in combining the acquired technologies, equipment and personnel into

our operations;

differences in controls, procedures and policies, regulatory standards and business cultures between

the acquired personnel and our current personnel;

the diversion of management’s attention from our ongoing core business operations;

the potential loss of key personnel;

the potential loss of key customers or suppliers who choose not to do business with us;

difficulties or delays in consolidating the acquired technologies;

unanticipated costs and other assumed contingent liabilities.

These factors could cause us to not

fully realize the anticipated financial and/or strategic benefits of the transactions, which could have a material adverse effect

on our business, financial condition and/or results of operations.

Several of our

directors may be deemed to be interested parties in the transactions by virtue of their relationships with Sysorex, Cranes, or

These interrelationships may create, or appear to create, conflicts of interest.

Nadir Ali, our chief

executive officer and director, is also a director of Sysorex, the issuer of the Sysorex Note that was assigned as consideration

for the transactions.

Ali’s dual roles may create conflicts of interest between Mr.

Ali’s obligations to our company

and its shareholders and his obligations to Sysorex and its shareholders.

For example, Mr.

Ali may be in a position to influence

whether Sysorex complies with its obligations under the note purchase agreement pursuant to which the promissory note was issued,

and whether we lend additional amounts to Sysorex, waive defaults or accelerate such indebtedness or take other steps as a secured

creditor in a manner that may be viewed as contrary to the best interests of either our company or Sysorex and their respective

stockholders.

Any such decision may also affect Systat the holder of a substantial portion of the indebtedness under the note purchase

There is substantial

risk that Cranes may be forced into involuntary bankruptcy or receivership because it is defending several petitions from creditors

seeking to wind-up its business, it is subject to considerable potential fines from Indian regulators, and owes significant amounts

in taxes to Indian tax authorities.

Should Cranes be forced

into bankruptcy or receivership, Cranes would likely reduce or discontinue its operations, and its assets and those of its subsidiaries

could be sold to the benefit of creditors or to satisfy statutory amounts due to Indian authorities and regulators.

Cranes and Indian authorities may also seek to, in some circumstances, terminate, unwind or void, licensing agreements between

Cranes and other entities, including its subsidiaries,.

Should Cranes be forced into bankruptcy or receivership, our rights and

remedies under the License Agreement may be impaired or inadequate, including our ability to purchase the software licensed thereunder.

The bankruptcy of Cranes would only affect us to the extent that it affects the License Agreement, and the indemnification obligations

thereunder, or the License Grant.

For example, creditors of Cranes or Indian authorities could seek to withdraw authorization or

otherwise void the License Agreement, in whole or in part, between us and Cranes, thereby depriving us of the intellectual property

licenses thereunder.

If we are unable to remedy the situation under the applicable circumstances, such an event would cause substantial

harm to our business and any of our operations to the extent that they rely on or are structured around such licensed intellectual

We may not realize

the full benefit of the License Grant if the licensed material has less market appeal than expected.

In addition to designing

and developing our own products and services, we evaluate various strategic transactions and acquisitions of companies with technologies

and intellectual property that complement our products and services by adding technology, differentiation, customers and/or revenue.

We believe these complementary technologies will add value to the Company and allow us to provide a comprehensive indoor intelligence

platform, offering a one-stop shop to our customers.

We anticipate that the License Grant will result in an increase

in our revenues;

however, there can be no assurance that we will be able to retain the existing customer base or expand the technologies

and products licensed from Systat with existing customers and finding new customers to sell our products and services to.

may require increasingly sophisticated and costly sales efforts and may not result in additional sales.

In addition, the rate at

which our customers purchase additional products and services, and our ability to attract new customers, depends on a number of

factors, including the perceived need for indoor mapping products and services, as well as general economic conditions.

efforts to sell additional products and services are not successful, our business may suffer.

If we fail to

comply with our obligations in our intellectual property licenses, we could lose license rights that may important to our business

and results of operations.

The License Agreement

imposes certain obligations on us.

If we fail to comply with the terms and obligations of the License Agreement, including the

obligation to assign a portion of our right to repayment from the Sysorex Note in accordance with the schedule set forth in the

License Agreement, our rights may be reduced or terminated, in which event we may not be able to develop and market any product

that is covered by the License Grant.

Termination of the License Grant for failure to comply with such

obligations or for other reasons, or reduction or elimination of our licensed rights under it, may result in our having to negotiate

new or reinstated licenses on less favorable terms or cause us to enter into a new license for a similar intellectual property.

The occurrence of such events could materially harm our business and financial condition.

adequately protect our intellectual property rights received in connection with the License Agreement, we may experience a

loss of revenue and our operations and growth prospects may be materially harmed.

The Systat Parties

have represented to us that the licensed intellectual property is legally and beneficially owned or licensed by the Systat Parties.

Although we are not aware of any infringement claims, it is possible that such claims are made during the Term.

While the Systat

Parties have agreed to indemnify us in connection with any losses or claims relating to any infringement of the licensed intellectual

property, any loss of the intellectual property rights could result in a loss of revenue and our operations and growth prospects

may be materially harmed.

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

What changed 10-Q

Item 1A. Risk Factors