15. COMMITMENTS AND CONTINGENCIES 

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals.

As of August 31, 2023, the Company has recognized a contingent liability related to a contractual agreement with a customer. Under the terms of this agreement, Business Warrior Corporation is obliged to ensure that customer’s revenue share percentage yields payments totaling a minimum of $3,000,000 by December 31, 2023 (the “Penalty Date”). Should the payments accrued to the customer by the Penalty Date fall short of this threshold, Business Warrior Funding is committed to remitting a penalty equivalent to the shortfall. The deadline for this penalty payment, if applicable, was set for March 1, 2024.

The Company has accrued the full $3,000,000 and is currently disputing the total liability amount under this agreement. The two parties are engaged in a legal dispute regarding the performance and terms of the contract. The outcome of this dispute could potentially alter the accrued contract obligation.