ATDS 10-K & 10-Q changes, risk factors and insider trading

Our independent registered public accounting firm has included an explanatory paragraph in their report in our audited financial statements for the fiscal year ended December 31, 20242025 to the effect that our losses from operations and our negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern within one year after the date that the financial statements are issued. We may be required to cease operations which could result in our stockholders losing all or almost all of their investment. As of December 31, 2024,2025, we had cash balance of $168,208$197,364 and our principal sources of liquidity were trade accounts receivable of $31,776$91,686 and other current assets of $-0-,$1,150,000, as compared to cash of $84,570,$168,208, trade accounts receivable of $309,768$31,776 and prepaid and other current assets of $29,467$-0- as of December 31, 2023.2024.

The decrease in revenue is due to our acquisition of intellectual property, accounts receivable, and other assets from the Appointed Receiver Receiver for the Assets of Cyren Ltd which resulted in catchup payments for 2023 which were one-time payments. We also believe that some customers and prospective customers were reluctant to consider deals regarding new business opportunities due to concerns based on economic uncertainty and other global events. However, we continue to see organic growth in increased consumption of our services that contain storage or volume components, matching our expectations and as is reflected in our continuing Annual Recurring Revenue (“ARR’) growth.

The general and administrative expenses primarily consisted of management costs, costs to integrate assets we acquired and to expand sales, product enhancements, audit and review fees, filing fees, professional fees, and other expenses related to SEC reporting, in connection with the projected growth of our business. Additionally, we continue to incur specificcost one-time costs in relation to our planned Nasdaq Capital Markets uplist, additionalof financing activities and related functions. The decrease in general and administrative expense was primarily due to the Company’s cost cutting measures.measures related to reducing overhead costs which resulting in a decrease in our spend in virtually every expense category.

The sales and marketing expenses primarily consisted of continuing to shift our sales operation toward an inbound model, continued high focus on renewals and customer success operations as well as our focus on re-engaging former customers of the Cyren products that we acquired. The increasedecrease in sales and marketing expense was primarily due to our continued efforts to drive renewals and improve the efficiency of our selling process.process and eliminate spend on booth rental and related cost for conferences and other events.

Other income (expenses) for the year ended December 31, 20242025 consisted primarily of interest expense of $1,247,658 gain on the sale of surplus IP addresses acquired with Cyren assets, and gain on settlement of $760,625 related to settlement with vendors. Other expenses for the year ended December 31, 2024 consisted of interest expense of $2,742,421, loss on settlement of $160,304 related to settlement with former employee, and loss on investment of $115,000 related to terminated acquisition. Other expenses for the year ended December 31, 2023 consisted of interest expense of $6,417,407 and forgiveness of debt of $4,913,181 and $43,977 in other income.

Net loss increasedecreased 43%58% from $4,244,708$6,087,182 for the year ended December 31, 20232024 to $6,087,182 $2,567,743 for year ended December 31, 2024.2025. The net loss was mainly derived from an operating loss of $2,130,967 and interest expense of $1,247,658, and gain on settlement of $760,625 that lowered our net loss. The net loss for the year ended December 31, 2024 was mainly derived from an operating loss of $3,064,524 and interest expense of $2,742,421, loss on settlement of $160,304 and loss on investment deposit of $115,000. The net loss for the year ended December 31, 2023 was mainly derived from an operating loss of $2,784,459 and interest expense of $6,417,407 and settlement of debt of $4,913,181.

We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures. As of December 31, 2024,2025, our principal sources of liquidity were cash of $197,364, trade accounts receivable of $91,686 and prepaid and other current assets of $1,150,000, as compared to cash of $168,208, trade accounts receivable of $31,776 and prepaid and other current assets of $-0-, as compared to cash of $84,570, trade accounts receivable of $309,768 and prepaid and other current assets of $29,467$-0- as of December 31, 2023.2024.

During the year ended December 31, 2024,2025, we provided $1,275,006$1,002,250 in operating activities, compared to usingproviding $782,101$1,275,006 during the year ended December 31, 2023. 2024. The increase in cash used in operating activities was primarily due to a decrease in operating liabilities.

During the year ended December 31, 2025, investing activities were $2,636 as a deposit on intangible assets. During the year ended December 31, 2024, investing activities were $115,000 as a deposit on investment which was not completed and recorded as a loss in investment. During the year ended December 31, 2023, we used funds in investing activities of $1,685,523 to acquire intellectual property and to acquire property and equipment.

The following discussion and analysis of the results of operations and financial condition for the threesix months ended MarchJune 31,30, 2026 and for for the year ended December 31, 2025 should be read in conjunction with our consolidated financial statements, and the notes to those financial financial statements that are included elsewhere in this quarterly report on Form 10-Q for the quarter ended MarchJune 31,30, 2026 (the “Quarterly Report”).

Results of Operations for the Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025

Our operations for the three months ended MarchJune 31,30, 2026 and 2025 are outlined below:

For the three months ended MarchJune 31,30, 2026 and 2025 our operating expenses were as follows:

Other income (expenses) for the three months ended MarchJune 31,30, 2026 consisted primarily of interest expense and a gain on settlement as a result of settling with vendors. Other expenses for the three months ended MarchJune 31,30, 20252026 consisted of interest expense.

Net loss increased 50% from $676,664$317,971 for the three months ended MarchJune 31,30, 2025 compared to $1,013,506$944,481 for the three months ended MarchJune 31,30, 2026. The net loss was mainly derived from an operating loss of $714,982,$560,777, and interest expense of $469,334.$385,064. The net loss for the three months ended MarchJune 31,30, 2025 was mainly derived from an operating loss of $342,278,$28,604, and interest expense of $331,293.$291,121. The increase in Net Loss was primarily due to the increase in cost of revenue is a result of purchase of a 1-year license related to our TacitRed acquisition and an increase in interest expense.

The following table provides selected financial data about our company as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures. As of MarchJune 31,30, 2026, we had cash overdraft balance of $40,812$420 and our principal sources of liquidity were trade accounts receivable of $98,695,$41,744, as compared compared to cash of $197,364 and trade accounts receivable of $91,686 as of December 31, 2025.

During the last two years, and through the date of this Report, we have faced an increasingly challenging liquidity situation that has limited our ability to execute our operating plan. We will need to obtain capital to continue operations. There is no assurance that we will be able to secure such funding on acceptable terms. During the threesix months ended MarchJune 31,30, 2026, we reported a loss from operations of of $714,892.$1,274,615.

As of MarchJune 31,30, 2026, we had assets of cash in the amount of $40,812 and other current assets in the amount of $648,695.$41,744. As of MarchJune 31, 30, 2026, we had current liabilities of $18,842,890. $19,699,594. Our accumulated deficit as of MarchJune 31,30, 2026 was $65,325,267.$66,269,748.

During the threesix months ended MarchJune 31,30, 2026, we usedprovided $169,833$209,021 from operating activities, compared to $164,330$32,047 used during the threesix months ended June March 31,30, 2025.

During the threesix months ended MarchJune 31,30, 2026, we used $13,500 funds in investing activities. During the threesix months ended MarchJune 31,30, 2025, we used funds in investing activities of $-0- to acquire property and equipment.equipment

During the threesix months ended MarchJune 31,30, 2026, we raised $26,781 from issuance of convertible debt $82,000$98,400; proceeds on notes payable of $230,750 $527,251 and proceeds from related party of $23,414$147,181 and repaid $136,792; repayment of convertible note payable of $90,086,$131,522, and repayment of $181,604 $897,403 on notes payable. For March 31,June 202530, 2026 we had net cash inflowsouflows for financing activities of $13,773.$392,885. By comparison, duringDuring Marchthe three 31,months ended June 30, 2025, we raised $132,500 from issuance of convertible debt; proceeds from related party of $6,583$25,583 and repaid $19,583 to related party; repayment of convertible note payable of $50,000, and repayment of $75.310$164,987 on notes payable. For June March 31,30, 2025 we had net cash inflowsoutflows for financing activities of $13,773.$76,487.

As of MarchJune 31,30, 2026, we did not have any off-balance sheet arrangements.