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

We have a history of losses and are continuing to incur losses. During the period from 2008, when we changed our business to become an intellectual property management company, through December 31, 2024,2025, we generated a cumulative loss of approximately $26.4$34.9 million on cumulative revenues of approximately $39.8 million, and our losses are continuing. Although we generated net income in 2023, of approximately $2.3 million on revenues of approximately $13.2 million, the revenue and net income resulted from one-time, paid-up licenses in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by our operating subsidiaries as part of the settlement of patent infringement lawsuits, and we cannot assure you that we will generate any significant revenue or net income in the future. Our total assets were approximately $3,541,000 $10,400,000 at December 31, 2024,2025, of which approximately $2,558,000 $7,733,000 represented the net book value of patents we acquired from TowerMonterey in March April of 2024.2025. At December 31, 2024,2025, we had a working capital deficiency of approximately $11,536,000.$27,200,000.

We require significant funding in order to develop our business. Our business requires substantial funding to evaluate and acquire intellectual property rights and to develop and implement programs to monetize our intellectual property rights, including the prosecution of any litigation necessary to enable us to monetize our intellectual property rights. Our failure to develop and implement these programs could both jeopardize our relationships under our existing agreements and could inhibit our ability to generate new business, either through the acquisition of intellectual property rights or through exclusive management agreements. We cannot be profitable unless we are able to obtain the funding necessary to develop our business, including litigation to monetize our intellectual property, and to pay our ongoing expenses, including compensation to our chief executive officer, which is $600,000 for 2026, as well as professional expenses and other public company expenses. Although we have agreements with QF3 which provide a funding to acquire intellectual property rights, QF3 must approve any intellectual property we acquire and, if QF3 does not fund an intellectual property acquisition, we may not be able to acquire and monetize the intellectual property. QF3 has not approved any intellectual property acquisition, and we cannot assure you that it will provide additional intellectual property acquisition financing. We cannot assure you that we will be able to obtain necessary funding or to develop our business. Our agreement with QPRC Finance covers the purchase of the patent portfolio from Monterey and does not provide for the funding of other intellectual property rights The terms of our agreements with QPRC Finance, QF3, QFL and Intelligent Partners may make it difficult for us to generate cash flow from our operations. We have an agreement with QF3 pursuant to which QF3 agreed to make available to us a financing facility of (i) up to $25,000,000 for the acquisition of mutually agreed patent rights that the Company intends to monetize: (ii) up to $4,334,000 for operating expenses from which the Company may, at its discretion, draw up to $500,000 per calendar quarter, of which we have drawn down $4,334,000 as of December 31, 2024,2025, and (iii) $3,300,000 which was used to fund purchase of a patent portfolio from Tower. We have an agreement with QPRC Financing pursuant to which QPRC Finance advanced us $9,000,000 for the purchase of the patent portfolio form Monterey and of up to $3,000,000 for operating expenses, of which approximately $1,500,000 has been drawn down as of December 31, 2025, up to $7,500,000 for patent enforcement costs, including legal fees subject to budget limitations to be agreed upon in connection with the monetization of the Monterey portfolio, of which approximately $4,054,000 has been advanced by QPRC Finance. Although we have paid QFL the money due QFL, QFL continues to have an interest in the cash flow from patents financed by QFL. Pursuant to the QFLQPRC Finance, QF3 and QF3QFL agreements, QFLQPRC Finance, QF3 and QF3QFL receive all proceeds payable to us from the monetization of those patents which have been financed by QFL and QF3, respectively, until QFLQPRC Finance, QF3 and QF3 QFL have received their respective negotiated rate of return, then we and QFLQPRC Finance. QF3 and QF3,QFL, respectively, share equally in the proceeds from monetization untilas QFLprovided andin QF3, have received theirthe respective investment return and thereafter we receive all of the net proceeds.agreements. Pursuant to our restructure agreement with Intelligent Partners, we have an obligation to pay TMPO totaling $2,805,000. Under our amended monetization proceeds agreements with Intelligent Partners, we pay Intelligent Partners 60% of the net monetization proceeds from associated intellectual property portfolios. Further, until we have paid Intelligent Partners a total of $2,805,000 under all of the monetization proceeds agreements, for net proceeds between $0 and $1,000,000 we are to pay Intelligent Partners 10% of the net proceeds realized from new assets acquired by us, provided, that, if, in any calendar quarter, our net proceeds realized exceed $1,000,000, Intelligent Partner’s entitlement for that quarter shall increase to 30% on the portion of net proceeds in excess of $1,000,000 but less than $3,000,000, and if in the same calendar quarter, net proceeds exceed $3,000,000, Intelligent Partners’ entitlement for that quarter shall increase to 50% on the portion of net proceeds in excess of $3,000,000. These payments come from our share of the proceeds after QFLQPRC Finance, QF3 and QF3QFL have recovered their negotiated rate of return, respectively. Thereafter, Inwe thesereceive agreements,our the monetization proceeds is determined after payment of contingent legal fees and certain other expenses, including payments due by us to as partshare of the purchaseproceeds priceas forprovided intellectualin propertythe rights.respective agreements. We cannot assure you that, as a result of these provisions, that we will generate any meaningful cash flow from the intellectual property we acquire. If we do not generate sufficient cash flow from our monetization activities, we may not be able to fund our operations or continue in business.

Any equity funding we obtain may result in significant dilution to our stockholders. Because of our financial position, our continuing losses, our negative working capital capital from operations, and our low stock price,price and the lack of revenue for the year ended December 31, 2025, we do not expect that we will be able to obtain any debt financing for our operations. Our stock price has generally been trading at a price which is less than $1.00 per share for more than the past two years. As a result, it will be very difficult for us to raise funds in the equity markets. However, in the event that we are able to raise funds in the equity market, the sale of shares would result in significant dilution to the present stockholders, and even a modest equity investment could result in the issuance of a very significant number of shares.

If we are not successful in patent litigation, the defendants may seek to have the court award attorneys’ fees to them against us which could result in the bankruptcy of the plaintiff plaintiff subsidiary and may result in a default under our agreements with QFLQPRC Finance, QF3 and QF3.QFL. The United States patent laws provide that “the court in exceptional cases may award reasonable attorney fees to the prevailing party.” Although the patents are owned by our subsidiaries and any judgment would be awarded against the subsidiaries, the subsidiaries have no assets other than the patent rights. Our funding sources for our patent litigation do not provide for the funding source to pay any judgment against us. Thus, if any defendants obtain a judgment against one of our subsidiaries, they may seek to enforce their judgment against the patents owned by the subsidiary or seek to put the subsidiary into bankruptcy and acquire the patents in the bankruptcy proceeding. As a result, it is possible that an adverse verdict in a petition for legal fees could result in the loss of the patents owned by the subsidiary and a default under our agreements with QFLQPRC Finance, QF3 and QF3.QFL.

We may be unable to enforce our intellectual property rights unless we obtain third-party funding. Because of the expense of litigation and our lack of working capital, we may be unable to enforce our intellectual property rights unless we obtain the agreement of a third-party to provide funding in support of our litigation. We cannot assure you that QPRC Finance, QF3 or any other funding sourcesource, including affiliates of QPRC Finance, QF3 and QFL, will provide us the any necessary funding, and the failure to obtain such funding will impair our ability to monetize our intellectual property portfolio or continue in business.

Because we need to rely on third-party funding sources to provide us with funds to enforce our intellectual property rights we are dependent upon the perception by potential funding sources of the value of our intellectual property. Because we do not have funds to pursue litigation to enforce our intellectual property property rights, we are dependent upon the valuation which potential funding sources, which currently is QF3, give to our intellectual property property or any intellectual property we may acquire. In determining whether to provide funding for intellectual property litigation, the funding sources need to make an evaluation of the strength of our patents, the likelihood of success, the nature of the potential defendants and a determination as to whether there is a sufficient potential recovery to justify a significant investment in intellectual property litigation. Typically, such funding sources receive a percentage of the recoveryrecovery, afteras litigationdefined expenses,in the particular agreements, and seek to generate a sufficient return on investment to justify the investment. Under our agreements with QFLQPRC Finance, QF3 and QF3,QFL, QFLthese funding and QF3sources are allocated all of the net proceeds (after allowable expenses), respectively, until itthey hashave received a negotiated return. QFL is no longer providing us with funding for intellectual property acquisitions but it retains its interest in the assets it funded funded.and QPRC Finance’s obligations are limited to the Monterey portfolio. Unless QF3 or any other funding source believes that it will generate a sufficient return on investment, it will not fund litigation. IfQF3 has not funded any intellectual property acquisition since its initial funding, if QF3 does not fund our acquisition or monetization of intellectual property we propose to acquire, we cannot assure you that we will be able to negotiate funding agreements with third-party funding sources on terms reasonably acceptable to us, if at all. Because of our financial condition, we may only be able to obtain funding on terms which are less favorable to us than we would otherwise be ableseek to obtain.

Because QFL,QPRC QF3Finance, QF3, QFL and Intelligent Partners hold a security interest in almost all of our intellectual property and the proceeds from our intellectual property, we may not be able to raise funds through a debt financing. Pursuant to our agreements with QFL, QF3 and Intelligent Partners, we granted them a security interest in the stock of our subsidiaries that hold the intellectual property covered by their agreements and in the proceeds from the monetization of such intellectual property. The inability to grant a security interest in these assets to a new lender, as well as our financial condition in general, is likely to materially impair our ability to obtain debt financing for our operations, and may also impair our ability to obtain financing to acquire additional intellectual property rights.

Our ability to monetize our intellectual property depends in part upon our ability to retain the qualified legal counsel to represent us in patent enforcement litigation on a contingent or partial contingent fee basis. The success of our licensing business may depend upon our ability to retain the qualified legal counsel counsel to prosecute patent infringement litigation. As our patent enforcement actions increase, it will become more difficult to find the preferred choice for legal counsel to handlemanage all of our cases because many of these firms may have a conflict of interest that prevents their representation of us or because they are not willing to represent us on a contingent or partial contingent fee basis. Because of our financial position, we are not likely to be able to commence litigation unless the legal fees are on a contingent fee basis unless the funding source pays the legal fees, which is not usually the case.

The unpredictability of our revenues may harm our financial condition. Our revenues from licensing have typically been lump sum payments entered into at the time of the license, which is typically in connection with the settlement of litigation, and not from licenses that pay an ongoing royalty. Due to the nature of the licensing business and uncertainties regarding the amount and timing of the receipt of license and other fees from potential infringers, stemming primarily from uncertainties regarding the outcome of enforcement actions, rates of adoption of our patented technologies, the growth rates of potential licensees and certain other factors, our revenues, if any, may vary significantly from quarter to quarter, with no revenues having been generated in 2025, which could make our business difficult to manage, adversely affect our business and operating results, cause our quarterly results to fall below market expectations and adversely affect the market price of our common stock.

The rapid development of technology and artificial intelligence may impair our ability to monetize intellectual property that we own. In order for us to generate revenue from our intellectual property, we need to offer intellectual property that is used in the manufacture or development of products. Rapid technological developments have have reduced the market for products using less advanced technology. To the extent that technology develops in a manner in which our intellectual intellectual property is not a necessary element or to the extent that others design around our intellectual property, our ability to license our intellectual property portfolios or successfully prosecute litigation will be impaired. We cannot assure you that we will have rights to intellectual property for most advanced technology or that there will be a market for products which require our technology.

Weak global economic conditions may cause potential potential licensees to delay entering into licensing agreements, which could prolong our litigation and adversely affect our financial condition condition and operating results. Our business depends significantly on strong economic conditions that would encourage potential licensees to enter into license agreements for our intellectual property rights. The United States and world economies have recently experienced weak economic conditions and the recent war in Iran and the Russian invasion in Ukraine has exacerbated these conditions, including those resulting from inflation and supply chain line issues. Uncertainty about global economic conditions poses a risk as businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset values. Even if economic conditions improve, the uncertainty of the economy could have a material adverse effect on the willingness of parties that we believe are infringing on our assets to enter into settlements or other revenue generating agreements voluntarily.

Our lack of internal controls over financial reporting and our restatement of our 2023 financial statements may affect the market for and price of our common stock. Our disclosure controls and our internal controls over financial reporting are not effective because of material weaknesses, which were the root cause for the error resulting in the restatement of our financial statements for the year ended December 31, 2023.weaknesses. Since we became engaged in the intellectual property management business in 2008, we have not had the financial resources or personnel to develop or implement systems that would provide us with the necessary information on a timely basis so as to be able to implement financial controls. Our continued poor financial condition together with the fact that we have one full time employee, who is both our chief executive officer and our acting chief financial officer, makes it difficult for us to implement a system of internal controls over financial reporting, and we cannot assure you that we will be able to develop and implement the necessary controls. The absence of internal controls over financial reporting may inhibit investors from purchasing our shares and may make it more difficult for us to raise debt or equity financing. Further, our previously reported need to restate our audited financial statements for 2023 reflected a material weakness in our internal controls over financial reporting, which may have an adverse impact on our business.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated audited financial statements and related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements” and “Risk Factors.” Our actual results could differ materially from those anticipated in the forward-looking statements.

Our principal operations include the development, acquisition, licensing and enforcement of intellectual property rights that are either owned or controlled by us or one of our wholly owned subsidiaries. We currently own, control or manage twenty-twotwenty-four intellectual property portfolios, of which we are currently seeking or may seek monetization with respect to six,seven, which principally consist of patent rights. As part of our intellectual property asset management management activities and in the ordinary course of our business, it has been necessary for either us or the intellectual property owner who we represent to initiate, and it is likely to continue to be necessary to initiate patent infringement lawsuits and engage in patent infringement litigation. We anticipate that our primary source of revenue will come from the grant of licenses to use our intellectual property, including licenses granted as part of the settlement of patent infringement lawsuits.

Macroeconomic trends may result in adverse impacts on our business, and we continue to monitor these potential impacts, including potential economic recession, the effects of tariffs by the United States and counter-tariffs by other countriescountries, whether threatened or implemented; changes in the Federal Reserve’s monetary policy, as well as geopolitical risks, including the Ukraine-Russia war and the potential resolution of the war and its effect on Europe; the continuing war between Israel and Hamas and any further intensification of hostilities with others, including Iran and Hezbollah.Hezbollah and potential effects of an intensification of the hostilities between India and Pakistan. We cannot predict the timing, strength, or duration of any future economic slowdown or any subsequent recovery generally, or in any industry. A significant downturn in economic conditions may adversely affect the intellectual property licensing market including the financial condition of financing sources and the willingness of potential financing sources to provide funding for our litigation; a law firms’ ability and willingness to provide us with legal services on acceptable contingent fee terms; and the financial condition and prospects of defendants and potential defendants, defendants, which could make it less likely that they would be willing to settle our claim.

We seek to generate revenue from patent licensing fees from the licensing of our intellectual property, primarily from litigation relating to enforcement of our intellectual property rights. rights. For the year ended December 31, 2025 we did not generate any such revenue. All of the revenue for the yearsyear ended December 31, 2024 and 2023 was from patent licensing fees, of which approximately 84%84%, and 100%, respectively, was paid to the patent seller, funding sources and legal counsel pursuant to our agreements with patent sellers, funding sources and legal counsel.

Because of the nature of our business transactions to date, we recognize revenues from licensing upon execution of a license agreement following settlement of litigation and not over the life of the patent. Thus, we would recognize revenue when we receive the license fee or settlement payment. Although we would prefer to to develop portfolios of intellectual property rights that provide us a continuing stream of revenue, to date we have not been successful in doing so, and we do not anticipate that we will be able to generate any significant revenue from licenses that provide a continuing stream of revenue. Thus, to the extent that we continue to generate cash from single payment licenses, our revenue can, and is likely to, vary significantly from quarter to quarter and year to yearyear. and the net income we generated in 2023 may prove to be an aberration. Our gross profit from license fees reflects the payment of any royalties due in connection with our license.

Pursuant to the Purchase Agreement with QF3, QF3 QF3 agreed to make available to us a financing facility of: (a) up to $25,000,000 for the acquisition of mutually agreed patent rights that that we intend to monetize, of which no amounts have been requested or received as of December 31, 20232025; (b) up to $4,334,000 for operating expenses, of which the we have requested and received $4,334,000 as of December 31, 20242025; and (iii) $3,300,000 to fund the cash payment portion of the purchase price of a patent portfolio acquired from Tower. In return we transferred to QF3 a right to receive a portion of net proceeds generated from the monetization of those patents. We used $3,300,000 proceeds from the QF3 financing as the cash payment portion of the purchase price of a portfolio acquired from Tower. Our obligations to QF3 are secured by the proceeds from the patents acquired with their funding, the patents and all general intangibles now or hereafter arising from or related to the foregoing and the proceeds and products of the foregoing.

On February 22, 2021, we entered into a funding agreement with QFL which was amended and restated on May 2, 2024 to terminate QFL’s funding obligation, and a restructure agreement with Intelligent Partners.

Pursuant to the Purchase Agreement with QFL, QFL QFL made available to us a total of $6,402,000, consisting of (a) $2,653,000 for the acquisition of mutually agreed patent rights that we we intended to monetize; (b) $2,000,000 for operating expenses; and (iii) $1,750,000 to fund the cash payment portion of the restructure of our obligations to Intelligent Partners. In return we transferred to QFL a right to receive a portion of net proceeds generated from the monetization of those patents. On May 2, 2024 the funding agreement with QFL was amended and restated to terminate QFL’s funding obligation. During the year ended December 31, 2024 we repaid the full outstanding principal balance of $1,525,502. No further advances are to be made pursuant to the Purchase Agreement. WeIn alsoconnection with the QFL purchase agreement, we granted QFL a ten-year warrant to purchase a total of up to 962,463 shares of our common stock, with an exercise price of $0.54 per share which may be exercised through February 18, 2031 on a cash or cashless basis, subject to certain limitations on exercisability. The warrant also contains certain minimum ownership percentage antidilution rights pursuant to which the aggregate number of shares of common stock purchasable upon the initial exercise of the Warrant shall not be less than 10% of the aggregate number of outstanding shares of our capital stock (determined on a fully diluted basis). A portion of any gain from sale of the shares, net of taxes and costs of exercise, realized prior to the completion of all monetization activities shall be credited against the total return due to QFL pursuant to the Purchase Agreement. We also agreed to take all commercially reasonable steps necessary to regain compliance with the OTCQB eligibility standards as soon as practicable, but in no event later than 12 months from the closing date, and we regained compliance on May 7, 2021. We granted QFL registration rights with respect to the common stock issuable upon exercise of the warrants. We also granted QFL certain board observation rights. Pursuant to the Purchase Agreement, all of the net proceeds from the monetization of the intellectual property acquired with funds from QFL are paid directly to QFL. After QFL has received a negotiated rate of return, we and QFL share net proceeds equally until QFL achieves its investment return, as defined in the agreement. Thereafter, we retain 100% of all net proceeds. Except in an Event of Default, as defined therein, all payments to be paid by us to QFL pursuant to the Purchase Agreement are non-recourse and shall be paid only if and after net proceeds from monetization of the patent rights owned or acquire by us are received, or to be received.

Contemporaneously with the execution of the agreements with QFL, we entered into a restructure agreement with Intelligent Partners to eliminate any obligations we had with respect to the outstanding notes and the securities purchase agreement. As part of the restructure of our agreements with Intelligent Partners, we amended the existing MPAs and granted Intelligent Partners certain rights in the monetization proceeds from any new intellectual property we acquire. Under these MPAs, Intelligent Partners receives a 60% interest in the proceeds from our intellectual property owned by the eight Subsidiary Guarantors. Intelligent Partners also participates in the monetization proceeds from new intellectual property that we acquire until the the total payments under all the monetization participation agreements equal $2,805,000, as follows: for net proceeds between $0 and $1,000,000, $1,000,000, Intelligent Partners receives 10% of the net proceeds realized from new patents, except that if, in any calendar quarter, net proceeds realized by us exceed $1,000,000, Intelligent Partners’ entitlement for that quarter only shall increase to 30% on the portion of net proceeds in excess of $1,000,000 but less than $3,000,000. If in the same calendar quarter, net proceeds exceed $3,000,000, Intelligent Intelligent Partners’ entitlement for that quarter only shall increase to 50% on the portion of net proceeds in excess of $3,000,000. The payments with respect to the new patents terminate once total payments to Intelligent Partners under all monetization participation agreements agreements reach $2,805,000. The payments to Intellectual Partners with respect new patents are payable from the proceeds which are allocated to to us under the QFL and QF3 agreements, which start after QFL and QF3 have received a negotiated rate of return. In connection with the restructure agreement with Intelligent Partners, we entered into a board observation rights agreement with Intelligent Partners. On April 17, 2025, Intelligent Partners notified us that it plans to exercise its rights under the board observation rights agreement.

In November 2021, TLL brought patent infringement suits in the U.S. District for the Eastern District of Texas against Trend Micro Incorporated. In March 2022, Trend Micro, Inc. filed a complaint against TLL in the U.S. District for the Western District of Texas seeking declaratory judgement of non-infringement of the patents insubject suit.to the litigation. In February 2022, TLL brought patent infringement suits in the U.S. District Court for the Eastern District of Texas against Checkpoint Software Technologies Ltd. and Palo Alto Networks, Inc. In March 2022, TLL voluntarily dismissed, without prejudice, the action against Palo Alto Networks, Inc. In March 2022, Palo Alto Networks, Inc. filed a complaint against TLL and the Company in the U.S. District for the Southern District of New York seeking declaratory judgement of non-infringement of the patents in suit. In May 2022, Trend Micro Inc. filed a motion with the Panel on Multidistrict Litigation seeking to have the pending actions consolidated into a centralized multidistrict litigation for pretrial proceedings. In August 2022, the Judicial Panel on Multidistrict Litigation consolidated all actions in the U.S. District for the Eastern District of Texas. In October 2022, TLL brought patent infringement suits in the U.S. District for the Eastern District of Texas against Fortinet, Inc., Crowdstrike, Inc. et.al., and Musarubra US, LLC. The actions against Trend Micro Incorporated, Checkpoint Software Technologies Ltd, Palo Alto Networks, Inc. and Crowdstrike, Inc. were resolved in 2023 and our revenue for the year ended December 31, 2023 includes revenue from the related settlements. In February 2024, TLL brought patent infringement suits in the U.S. District for the Eastern District of Texas against Sonicwall, Inc. The actions against Fortinet, Inc., Musarubra US LLC, and Sonicwall Inc. have been resolved and revenue for the year ended December 31, 2024 includes revenue from the related settlements.

In February 2024, Harbor Island Dynamic brought a patent infringement suit in the U.S. District for the Eastern District of Texas against Samsung Electronics Co., Ltd. et al. (“Samsung”). In August 2024, Harbor Island Dynamic brought a patent infringement suit in the U.S. District for the Eastern District of Texas against NXP Semiconductors NV et. al. InSamsung’s September 2024, Samsung filed four2024 petitions with the patent trial an appeal board for interreview parteswere review ofgranted thein HarborApril Island Dynamic patents asserted against Samsung2025. These actions are pending.

We did not generate any revenue for the year ended December 31, 2025. For the year ended December 31, 2024 we generated revenuesrevenue of $2,795,000approximately $2,795,000. Our revenue for the year ended December 31, 2024 as compared to approximately $13,152,000 for the year ended December 31, 2023. Our revenue for the year ended December 31, 2024 was generated from licenses pursuantissued toin the settlement of patent infringement lawsuits in the TLL, Deepwell, and and Multimodal Media portfolios. RevenueSince forwe theonly yeargenerate ended December 31, 2023 was generatedrevenue from licenseslitigation pursuantseeking to themonetize settlementour intellectual property rights, although we had pending litigation with respect to three portfolios in 2025, none of patentsuch actions were concluded during 2025, as a result infringementof lawsuitswhich inwe thedid Tyche,not STX,generate MMLany andrevenue TLLduring portfolios.2025. Cost of revenue for the years ended December 31, 20242025 and 20232024 was approximately $1,844,000$4,071,000 and $6,906,000,$1,844,000, respectively. The decreasesubstantial increase in cost of revenues is primarily due to decreasedincreased litigation and licensing expenses expenses associated with contingentthe feesMR incurredportfolio inwhich generatingwere revenues resultingfunded from aadvances lowerto levelfund oflitigation revenuespursuant into 2024.the QPRC Finance financings. The timing and amount of our revenue is dependent upon the results of litigation seeking to enforce our intellectual property rights, and we cannot predict when or whether we will have a recovery and how much of the recovery will be received by us after payments to legal counsel, to our funding sources, to inventors/former patent owners and to Intelligent Partners whoall of whom have an interest in our share of the recovery from certain patent portfolios after deducting payments due to counsel and the litigation funding source.portfolios.

Selling, general, and administrative expenses for the year ended December 31, 20242025 increased by approximately $57,000,$821,000, or approximately 2%,29%, compared to the year ended December 31, 2023.2024. The increase is primarily due to an increase in compensationamortization andof retirementintangible expenseassets asof wellapproximately as increases and travel costs, office supplies and advertising. These increases were$1,172,000 offset by decreasesa decrease in patentcompensation amortizationexpense andof professionalapproximately fees.$329,000. Our principal operating expenses for the year ended December 31, 2025 were compensation expenses of approximately $720,000, amortization of intangible assets of approximately $1,808,000 and professional fees of approximately $600,000. Our principal operating expenses for the year ended December 31, 2024 were compensation expenses of approximately $994,000, amortization of intangible assets of approximately $636,000 and professional fees of approximately $541,000. OurThe principalincrease operating expenses for the year ended December 31, 2023 were compensation expenses of approximately $660,000,in amortization of intangible assets reflects the amortization of approximatelyintellectual $787,000property rights acquired by us in 2024 and professional fees of approximately $696,000.2025.

Other income and expense for the year ended December 31, 2025 included a loss on change in fair value of warrant liability of approximately $102,000. Other income and expense for the year ended December 31, 2024 included a gain on change in fair value of warrant liability of approximately $165,000. We realized a loss on change in fair value of warrant liability of approximately $136,000 for the year ended December 31, 2023. The fair value of the warrant liability is affected by the price of our common stock, so the liability increases as the stock price goes up, resulting in an expense, and decreases as the stock price goes down resulting in income from change in warrant liability. Other expense also reflects interest expense of approximately $690,000 $700,000 for the year ended December 31, 20242025 and approximately $1,061,000$690,000 for the year ended December 31, 2023.2024. The decreaseinterest inexpense interest expenseprimarily reflects the accrued interest payable on the principal amount of QFL and QF3 facilities.

As a result of the foregoing, we realized net loss of approximately $8,492,000, or ($1.59) per share (basic and diluted), for the year ended December 31, 2025, compared to net loss of approximately $2,472,000, or ($0.46) per share (basic and diluted), for the year ended December 31, 2024, compared to net income of approximately $2,278,000, or $0.43 per share (basic and diluted), for the year ended December 31, 2023.2024.

At December 31, 2024,2025, we had current assets of approximately $502,000,$207,000, and current liabilities of approximately $12,038,000.$27,427,000. Our current liabilities include funding liabilities of approximately $22,264,000 of which approximately $7,634,000 is payable to QF3, a non-interest bearing total monetization proceeds obligation (the “TMPO”) to Intelligent Partners in the amount of approximately $2,797,000 under the Restructure Agreement, both ofAgreement which areis only payable from money generated from the monetization of intellectual property,property and approximately $14,629,000 payable to QPRC Finance which is non-interest bearing and only payable from the net proceeds from monetization, if any, of the patent rights owed or acquired by us, loans payable of approximately $138,000, accounts payable and accrued liabilities of approximately $156,000, $122,000, warrant liability of approximately $117,000,$219,000, and accrued interest of approximately $1,196,000.$1,887,000. As of December 31, 2024,2025, we have an accumulated deficit of $26,382,672approximately $34,874,000 and a negative working capital of approximately $11,536,000.$27,220,000. Other than salary and pension benefits to our chief executive officer, we do not contemplate any other material operating expense requiring cash in the near future other than normal general and administrative expenses and legal fees, including expenses relating to our status as a public company filing reports with the SEC.

For the year ended December 31, 2025, cash flows used in operating activities primarily reflects the net loss of $8,491,508, increased by amortization of intangible assets of $1,807,987 and accrued interest of $691,126, offset by a decrease in accounts payable and accrued liabilities of $34,097. For the year ended December 31, 2024, cash flows used in operating activities primarily reflects the net loss of $2,471,651, increased by a reduction in accounts receivable of $3,007,044 and amortization of intangible assets of $636,353, offset by a decrease in accounts payable and accrued liabilities of $1,518,662. For the year ended December 31, 2023, cash flows provided by operating activities primarily reflects net income of $2,278,473, reduced by an increase accounts receivable of $3,015,295, offset by amortization of intangible assets of $786,552 and an increase in accounts payable and accrued liabilities of $1,526,153.

Cash flows provided by financing activities for the year ended December 31, 20242025 werewas approximately $309,000$14,629,000 representing approximately $1,834,000 from fundingfundings by QF3,QPRC offsetFinance by paymentand of a funding liability of approximately $1,526,000 to QFL.QF3. Cash flows provided by financing activities for the year ended December 31, 2023 were2024 $6,000,000was approximately $309,000 representing approximately $1,834,000 from funding advances by QFL and QF3QF3, offset by a payment of a funding liability to QFL of approximately $4,128,000 representing payments of funding liability to QFL.$1,526,000.

We cannot assure you that we will be successful in generating future revenues, in obtaining any third-party funding in connection with any of our intellectual property portfolios or operating expenses or that we will receive any of the proceeds of any litigation settlements after making all required payments to counsel and funding sources and payments to Intelligent Partners, operating expenses, debt or equity financing or that and debt or equity financing will be available on terms acceptable to us. We have no credit facilities. Although our agreement with QF3 provides for QF3 to provide us with funding to acquire intellectual property rights, subject to QF3'sQF3’s approval, it does not provide for financing the litigation necessary necessary for the monetization of the intellectual property rights.rights and we cannot assure you that it will provide financing for any intellectual property acquisition. We do not have any credit facilities or any arrangements for us to finance the litigation necessary to monetize our intellectual property rights other than contingent fee arrangements with counsel with respect to our pending litigation.litigation and our agreement with QPRC finance. If we do not secure contingent representation or obtain litigation financing, we may be unable to monetize our intellectual intellectual property.

We cannot predict the success of any pending or or future litigation. Typically, our agreements with the funding sources provide that the funding sources will participate in any recovery which is generated. We believe that our financial condition, our history of losses and negative cash flow from operations, absence of revenue for 2025 and our low stock price make it difficult for us to raise funds in the debt or equity markets.

Intangible assets consist of patents which are amortized using the straight-line method over their estimated useful lives or statutory lives whichever is shortershorter. andIn aredetermining reviewedthe relevant for impairmentuseful upon any triggering event that may give rise tolives the assetsCompany ultimateconsiders recoverabilityseveral asfactors prescribedincluding the age of the acquired patent portfolio, the statutory lives of the patents acquired, whether the Company has already identified potential litigation under the guidancepatent relatedportfolio, and the expected timeline to impairment of long-lived assets. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis withmonetize the associated patent.asset.

Since the intellectual property rights are not individually distinct, the Company combined each individual IP right in the contract into a bundle of IP rights that is distinct, and accounted for all of the intellectual property rights promised in the contract as a single performance obligation. The intellectual property rights granted were “functional IP rights” that have significant standalone functionality. The Company’s subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. The Company’s subsidiaries have no further obligation with respect to the grant of intellectual property rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for for the grant (i.e., transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the intellectual property rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized at a point in time, upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts within 30 to 90 days of execution of the contract. Contractual payments made by licensees are generally non-refundable. The Company does not have any significant payment terms, as payment is received shortly after goods are delivered or services are provided, therefore there is no significant financing component or consideration payable to the customer in these transactions.

We have an accumulated deficit of approximately $26,382,000$34,874,000 and negative working capital of approximately $11,536,000$27,220,000 as of December 31, 2024.2025. DueBecause toof our history of losses, including which arethe continuing,lack of any revenue for the year ended December 31, 2025, our working capital deficiency, the uncertainty of future revenue, our obligations to QF3QPRC Finance, Intelligent Partners and IntelligentQF3, Partners,the our low stock price of our common stock and the absence of an active trading market in our common stock and our failure to have effective internal controls over financial reporting, as reflected in the restatement of our financial statements for the year ended December 31, 2023,stock, our ability to raise funds in the equity market or from lenders is severely impaired. These conditions, as well as any adverse consequences which would result iffrom weour failfailure to meet the continued listing requirements of the OTCQB, raise substantial doubt as to our ability to continue as a going concern. Our revenue is generated exclusively from license fees generated from litigation seeking damages for infringement of our intellectual property rights and the amount and timing of revenue is dependent upon the success of litigation seeking to enforce the Company’s intellectual property rights. Although we may seek to raise funds and to obtain third-party funding for litigation to enforce itsour intellectual property rights, the terms and availability of such funds is uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated unaudited financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements.

Macroeconomic trends may result in adverse impacts on our business, and we continue to monitor these potential impacts, including potential economic recession, the effects of tariffs by the United States and counter-tariffs by other countries, whether threatened or implemented; changes in the Federal Reserve’s monetary policy, as well as geopolitical risks, including the war with Iran and actions taken by the United States and Iran which effectively block traffic through the Strait of Hormuz, Russian invasion of Ukraine and the potential resolution of the war and its effect on Europe; the continuing warhostilities between Israel and HamasHamas, Hezbollah and HezbollahIran and any further intensification of hostilities with others. We cannot predict the timing, strength, or duration of any future economic slowdown or any subsequent recovery generally, or in any industry. A significant downturn in economic conditions may adversely affect the intellectual property licensing market including the financial condition of financing sources and the willingness of potential financing sources to provide funding for our litigation; a law firms’firm’s ability and willingness to provide us with legal services on acceptable contingent fee terms; and the financial condition and prospects of defendants and potential defendants, which could make it less likely that they would be willing to settle our claim.

Further, to the extent that holders of intellectual property rights considersee these and other macroeconomic factors, they may be reluctant to sell intellectual property to us on terms which are acceptable to us, if at all.all, and defendants in actions commenced by us may be reluctant to enter into a settlement agreement with us.

We seek to generate revenue from patent licensing fees relating to our intellectual property portfolio, which includes fees from the licensing of our intellectual property, primarily from litigation relating to enforcement of our intellectual property rights. For All of the revenue for the three and six months ended MarchJune 31,30, 2026 was from patent licensing fees from the settlement of one litigation in the second quarter of 2026, of which approximately 80% was paid or is payable for taxes, to the patent seller, funding sources and 2025legal wecounsel didpursuant notto generateour anyagreements suchwith revenue.patent sellers, funding sources and legal counsel.

BecauseRevenue contracts executed by the Company primarily provide for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company’s operating subsidiaries as part of the nature of our business transactions to date, we recognize revenues from licensing upon execution of a license agreement following settlement of litigation andcommenced not over the life ofby the patent.Company’s Thus, we would recognize revenue when we receive the license fee or settlement payment.subsidiaries. Although we would prefer to develop portfolios of intellectual property rights that provide us a continuing stream of revenue, to date we have not been successful in doing so, and we do not anticipate that we will be able to generate any significant revenue from licenses that provide a continuing stream of revenue. Thus, to the extent that we continue to generate cash from single payment licenses, our revenue can, and is likely to, vary significantly from quarter to quarter and year to year. Our gross profit from license fees reflects the payment of any royalties due in connection with our license.

ItTo date, it has been necessary for us to commence litigation in order to obtain a recovery for past infringement of, or to license the use of, our intellectual property rights. Intellectual property litigation is very expensive, with no certainty of any recovery. To the extent possible we seek to engage counsel on a contingent fee or partial contingent fee basis, which significantly reduces our litigation cost, but which also reduces the value of the recovery to us. We do not have the resources to enable us to fund the cost of litigation. Because we cannot fund litigation ourselves, we need to enter into an agreement with a third-party funding source. Our agreements with the funding sources typically provide that the funding source pays the litigation costs and that the funding source receives a percentage of the recovery, thus reducing our recovery in connection with any settlement of the litigation. In view of our limited cash and our working capital deficiency, we are not able to institute any monetization program that may require litigation unless we engage counsel on a fully contingent basis or we obtain funding from third party funding sources. In these cases, counsel may be afforded a greater participation in the recovery and the third party that funds the litigation would be entitled to participate in any recovery. To the extent that we have agreements with counsel and/or litigation funding sources pursuant to which payments made to them represent a portion of the gross recovery, and such payment is contingent upon a recovery, our revenue from litigation reflects the gross recovery from litigation as licensing fees, and payments to counsel and/or litigation funding sources are reflected as cost of revenue.

On April 11, 2025, we and our newly-formed wholly-owned subsidiary, MR,MR Licensing LLC, a Texas limited liability company, (“MR”), entered into a series of agreements, all dated April 11, 2025, with QPRC Finance. The agreements are (i) the QPRC Finance Purchase Agreement, (ii) the Security Agreement, the QPRC Finance Patent Security Agreement, (iii) the Subordination Agreement, (iv) the Letter of Instructions to Fabricant LLP, the law firm that is to represent MR in the litigation relating to the monetization of the patents purchased with the proceeds of the financing from QPRC Finance (the “Law Firm”) as to the disposition of any funds generated from the proceeds of the financing, (the “Letter of Instructions”), (v) the Waterfall Agreement among us, MR, QPRC Finance and the Law Firm as to allocation of proceeds of such monetization.

Pursuant to the QPRC Finance Purchase Agreement, QPRC Finance agreed to make available to us a financing facility of: (a) up to $3,000,000 for operating expenses, of which approximately $2,369,000 $2,762,000 has been drawn down as of MarchJune 31,30, 2026; (b) up to $9,000,000 to fund the purchase by MR of certain patent assets from Monterey Research LLC (“Monterey”) pursuant to the agreement between MR and Monterey (the “Monterey Agreement”) and (c) up to $7,500,000 for patent enforcement costs, including legal fees subject to budget limitations to be agreed upon, of which approximately $5,765,000 $6,848,000 has been drawn down as of MarchJune 31,30, 2026. In return, we transferred to QPRC Finance the right to receive a portion of net proceeds generated from the monetization of those patents.

Pursuant to the Purchase Agreement with QF3, QF3 agreed to make available to us a financing facility of: (a) up to $25,000,000 for the acquisition of mutually agreed patent rights that we intend to monetize, of which no amounts have been requested or received as of MarchJune 31,30, 2026; (b) up to $4,334,000 for operating expenses, of which the we have requested and received $4,334,000 as of MarchJune 31,30, 2026; and (c) $3,300,000 to fund the cash payment portion of the purchase price of a patent portfolio acquired from Tower. In return we transferred to QF3 a right to receive a portion of net proceeds generated from the monetization of those patents. We used $3,300,000 proceeds from the QF3 financing as the cash payment portion of the purchase price of a portfolio acquired from Tower. Our obligations to QF3 are secured by the proceeds from the patents acquired with their funding, the patents and all general intangibles now or hereafter arising from or related to the foregoing and the proceeds and products of the foregoing.

In February 2024, HID brought a patent infringement suit in the U.S. District for the Eastern District of Texas against Samsung Electronics Co., Ltd. et al. (“Samsung”). In August 2024, Harbor Island Dynamic brought a patent infringement suit in the U.S. District for the Eastern District of Texas against NXP Semiconductors NV et. al. In September 2024, Samsung requested inter partes review of U.S. Patent 7,745,886, U.S. Patent 9,147,609, U.S. Patent 7,772,673 and U.S. Patent 9,245,826. The petitions for review were granted in April 2025. In February and March 2026, the Patent Trial and Appeal Board issued final written decisions canceling all claims of the four patents. HID has appealed the decision with respect to U.S. Patent 7,772,673 and requested director review of the decisions with respect to U.S. Patent 9,147,609 and U.S. Patent 9,245,826. Both petitions for director review were denied.

In December 2025, Koyo brought patent infringement suits in the U.S. District for the Eastern District of Texas against Samsung Electronics Co., Ltd. et al. The action against Samsung was settled during the second quarter of 2026 and revenue for the three and six months ended June 30, 2026 represents revenue from the settlement.

The actions by HID, MRMR, Flash and KoyoTaasera are pending.

Three Monthsand EndedSix Marchmonths 31,ended June 30, 2026 and 2025

During the three and six months ended June 30, 2026 we generated revenue from licenses pursuant to the settlement of patent infringement lawsuits by Koyo Licensing LLC, a wholly-owned subsidiary (“Koyo”), portfolio. The total settlement recovery is included in revenue and the associated costs are deducted as cost of revenue. We did not generate any revenue for the three months endedand March 31, 2026 or for the threesix months ended MarchJune 31,30, 2025. Cost of revenue for the three months ended MarchJune 31,30, 2026 and 2025 relating to patent service costs was approximately $1,710,000$2,348,000 and $3,500,$5,000, respectively. Cost of revenue for the six months ended June 30, 2026 and 2025 relating to patent service costs was approximately $4,058,000 and $8,000, respectively. The substantial increase in cost of revenues is primarily due to increased litigation and licensing expenses associated with the MR portfolio which were funded from advances to fund litigation pursuant to the QPRC Finance financing.financing along with the associated costs of the Koyo settlement recovery. The timing and amount of our revenue is dependent upon the results of litigation seeking to enforce our intellectual property rights, and we cannot predict when or whether we will have a recovery and how much of the recovery will be received by us after payments to legal counsel, to our funding sources, to inventors/former patent owners and to Intelligent Partners, all of whom or may have an interest in our share of the recovery from certain patent portfolios after deducting payments due to counsel and the litigation funding source.

Selling, general, and administrative expenses for the three months ended MarchJune 31,30, 2026 increased by approximately $464,000,$152,000, or approximately 71%,15%, compared to the three months ended March 31,June 30, 2025, primarily due to increased amortization expense related to the Monterey portfolio.portfolio and increased professional fees. Selling, general, and administrative expenses for the six months ended June 30, 2026 increased by approximately $616,000, or approximately 37% compared to the six months ended June 30, 2025, primarily due to increased amortization expense related to the Monterey portfolio and increased professional fees. Our principal operating expenses for the three and six months ended MarchJune 31,30, 2026 were amortization of intangible assetspatents of approximately $573,000,$575,000 and $1,148,000, respectively, compensation expensesexpense of approximately $180,000, $180,000 and $360,000, respectively, professional fees of approximately $178,000$257,000 and $435,000, respectively and travel related expenses of approximately $59,000.$18,000 and $76,000, respectively. Our principal operating expenses for the three and six months ended MarchJune 31,30, 2025 were amortization of intangible assetspatents of approximately $137,000,$495,000 and $632,000, respectively, compensation expensesexpense of approximately $165,000, $180,000 and $360,000, respectively, professional fees of approximately $172,000$210,000 and $382,000, respectively and travel related expenses of approximately $55,000.$55,000 and $78,000, respectively.

Other income and expense for the three and six months ended MarchJune 31,30, 2026 included a loss on change in fair value of warrant liability of approximately $112,000 and $40,000, respectively. We recognized a gain on change in fair value of warrant liability of approximately $73,000.$26,000 Weand realized a loss on change in fair value of warrant liability of approximately $300$26,000 for the three and six months ended MarchJune 31,30, 2025.2025, respectively. The fair value of the warrant liability is affected by the price of our common stock, so the liability increases as the stock price goes up, resulting in an expense, and decreases as the stock price goes down resulting in income from change in warrant liability. Other expense also reflects interest expense of approximately $181,000 $186,000 and $367,000, respectively for the three and six months ended MarchJune 31,30, 2026 and approximately $168,000$173,000 and $341,000 for the three and six months ended MarchJune 31,30, 2025.2025, respectively.

As a result of the foregoing, we realized aincurred net loss of approximately $2,936,000,$2,117,000, or $0.55$0.40 per share (basic and diluted) for the three months ended June 30, 2026 and net loss of approximately $826,000$5,054,000 or $0.15$0.95 per share (basic and diluted), for the six months ended June 30, 2026 compared to net loss of approximately $1,140,000, or $0.21 per share (basic and diluted) for the three months ended MarchJune 31,30, 20262025 and 2025,net respectively.loss of approximately $1,966,000, or $0.37 per share (basic and diluted) for the six months ended June 30, 2025.

At MarchJune 31,30, 2026, we had current assets of approximately $655,000$927,000 and current liabilities of approximately $30,239,000.$32,053,000. Our current liabilities include funding liabilities to QF3 and QPRC Finance of approximately $24,843,000$26,319,000 which are only payable from money generated from the monetization of intellectual property, loans payable of approximately $2,796,000, a warrant liability of approximately $147,000,$259,000, accounts payable and accrued liabilities of approximately $248,000,$290,000, and accrued interest of approximately $2,066,000.$2,250,000. As of MarchJune 31,30, 2026, we have an accumulated deficit of approximately $37,811,000$39,928,000 and a negative working capital of approximately $29,583,000.$31,125,000. Other than salary and pension benefits to our chief executive officer, we do not contemplate any other material operating expense requiring cash in the near future other than normal general and administrative expenses and legal fees, including expenses relating to our status as a public company filing reports with the SEC.

The following table shows the summary cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025:

We cannot predict the success of any pending or future litigation. Typically, our agreements with the funding sources provide that the funding sources will participate in any recovery which is generated. We believe that our financial condition, our history of losses and negative cash flow from operations, absence of recurring revenue for 2026 and 2025 and our low stock price make it difficult for us to raise funds in the debt or equity markets.

We have an accumulated deficit of approximately $37,811,000$39,928,000 and negative working capital of approximately $29,583,000$31,125,000 as of MarchJune 31,30, 2026. We have a history of losses, including a loss of $2,936,337$5,053,787 on norevenues revenuesof $2,000,000 for the threesix months ended MarchJune 31,30, 2026 and a loss of $8,491,508 on no revenue for the year ended December 31, 2025, and can give no assurance that we will generate income in the future. Because of the Company’s history of losses, our working capital deficiency, the uncertainty of future revenue, our obligations to QPRC Finance, Intelligent Partners and QF3, the low stock price of the Company’sour common stock and the absence of an active trading market in its common stock, our ability to raise funds in the equity market or from lenders is severely impaired. These conditions, as well as any adverse consequences which would result from our failure to meet the continued listing requirements of the OTCQB, raise substantial doubt as to our ability to continue as a going concern. Our revenue is generated exclusively from license fees generated from litigation seeking damages for infringement of its intellectual property rights and the amount and timing of revenue is dependent upon the success of litigation seeking to enforce our intellectual property rights. Although we may seek to raise funds and to obtain third-party funding for litigation to enforce itsour intellectual property rights, the terms and availability of such funds is uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.