NOTE 14 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

During the six months ended June 30, 2025 and 2024, various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company. In the opinion of management, after consultation with legal counsel, resolution of any of these matters is not expected to have a material effect on the Company’s consolidated financial statements.

Liberty Safe and Security Products, Inc.

On July 23, 2024, the Company received notice of a complaint filed in the U.S. District Court for the District of Utah by Liberty Safe and Security Products, Inc. (“Liberty”), in connection with the marketing and sale of the Company’s and its subsidiaries, Champion Safe Company, Inc., line of safe products. As of the date of this Report, the complaint has not been served on the Company or Champion Safe. In the complaint, Liberty alleges trademark infringement as a result of the purported use of the term “Freedom” in the sale of safes, federal false designation of origin and unfair competition, violation of Utah deceptive trade practices, Utah unfair competition, and damages to Liberty. Management believes that this lawsuit is without merit; however has initiated settlement discussions with Liberty and anticipates an amicable settlement to be forthcoming. At this time, Management does not believe a settlement with Liberty will have a material effect on its business or financial condition.

Bank of America

On May 30, 2025, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”). Subject to the terms of the Forbearance Agreement, Bank of America has agreed to forbear, during the Forbearance Period (as defined below), from exercising certain of their available remedies under the Credit Agreement with respect to or arising out of the Company’s failure to make payment on the outstanding principal amount on the Line of Credit. As a result of the uncured default, Bank of America filed a complaint against the Company on March 21, 2025 in the Fourth Judicial District Court, in and for Utah County, Utah (Case No. 250401345) seeking no less than $1,906,743, plus outstanding and accruing attorneys’ fees, all pre and post- judgment interest, equitable relief in favor of Bank of America , and any other relief that the Court deemed just and proper (collectively, the “Litigation”). Subject to the terms of the Forbearance Agreement, Bank of America will abstain from pursuing its claims against the Company in the Litigation through the Forbearance Period (defined below), provided that the Company breach any terms of the Forbearance Agreement. Further, the Company executed a Confession of Judgment and Verified Statement in connection with the Forbearance Agreement. Bank of America agrees to forbear from exercising its rights and remedies under the Credit Agreement through the close of business on June 30, 2025 (the “Forbearance Period”) on the following terms and conditions:

Legal fees: $36,129 Contractual Obligations

The Company does not believe there are any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the condensed consolidated financial statements. As of June 30, 2025 and December 31, 2024 there were no outstanding letters of credit issued during the normal course of business. These letters of credit could reduce the Company’s available borrowings. The amount due on the line of credit as of June 30, 2025 was $1,642,129. The Company is currently not in compliance with its terms and covenants.

Nasdaq Compliance

As previously disclosed, on February 19, 2025, the Company received a letter (the “Notification Letter”) from The Nasdaq Stock Market (“Nasdaq”) stating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”) because the stockholders’ equity of the Company as of September 30, 2024, as reported in the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 7, 2025, was below the minimum requirement of $2,500,000 (the “Stockholders’ Equity Requirement”).

Pursuant to Nasdaq’s Listing Rules, the Company had 45 calendar days (until April 7, 2025), to submit a plan to evidence compliance with the Rule (a “Compliance Plan”). The Company submitted a Compliance Plan within the required time and amended it subsequently to provide additional information to Nasdaq.

On June 11, 2025, the Company received a letter from Nasdaq accepting the Compliance Plan and granting an extension through August 18, 2025 to evidence compliance with the Rule.

In the event the Company fails to evidence compliance within the extension period, the Company will have the right to a hearing before Nasdaq’s Hearing Panel. The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing.

Executive Employment Agreements and Independent Contractor Agreements

The Company has written employment agreements with various other executive officers. All payments made to its executive officers and significant outside service providers are analyzed and determined by the board of directors’ compensation committee; some payments made to independent contractors (or officer payments characterized as non-employee compensation) may be subject to backup withholding or general withholding of payroll taxes, may make the Company responsible for the withholding and remittance of those taxes. Generally outside service providers are responsible for their own withholding and payment of taxes. Certain state taxing authorities may otherwise disagree with that analysis and Company policy.