Note 16 - Commitments and Contingencies

GEM Agreement

Pursuant to the terms of the GEM Agreement, we are required to indemnify GEM for any losses it incurs as a result of a breach by us or of our representations and warranties and covenants under the GEM Agreement or for any misstatement or omission of a material fact in a registration statement registering those shares pursuant to the GEM Agreement. Also, GEM is entitled to be reimbursed for legal or other costs or expenses reasonably incurred in investigating, preparing, or defending against any such loss. To date, we have not raised any capital pursuant to the GEM Agreement and we may not raise any capital pursuant to the GEM Agreement prior to its expiration. Restrictions pursuant to terms of our future financings may also affect our ability to raise capital pursuant to the GEM Agreement. The Company cannot reasonably estimate the potential losses, if any, with respect to the GEM Agreement or the related litigation.

GTG Financial Acquisition Agreement

As part of the acquisition of GTG Financial, the Company agreed to pay deferred cash consideration totaling $1,344,750 in three tranches over a six-month period following the closing. As of June 30, 2025, the first scheduled payment had not yet been made. Under the terms of that certain Stock Purchase Agreement entered in connection with the acquisition of GTG Financial, dated as of February 20, 2025, Glenn Groves, the seller has the right to request payment, but no such demand or notice of breach has been issued. The Company is in ongoing discussions with the seller and continues to assess the timing of the payment in accordance with the contractual terms.

Indemnification Agreements

The Company maintains indemnification agreements with our directors and officers that may require the Company to indemnify these individuals against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by law.

Contingent Consideration and Compensation

The Company is party to acquisition-related agreements with former owners of Naamche and reAlpha Mortgage, which include contingent consideration arrangements based on the achievement of certain financial milestones. The terms of these arrangements were previously disclosed on “Note 16 – Commitments and Contingencies” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025. and remains unchanged.

The contingent consideration liabilities are measured at fair value each reporting period, with changes recognized in earnings. During the six months ended June 30, 2025, the Company recorded a $81,000 gain related to an increase in the fair value of the contingent consideration associated with the reAlpha Mortgage acquisition. No payments were made under these arrangements during the period.

Acquisition Agreement – GTG Financial

On February 20, 2025, the Company completed the acquisition of GTG Financial, a mortgage brokerage, for total consideration of up to $4.2 million, which includes equity, deferred cash payments, and performance-based earn-out payments. The earn-out is based on the achievement of specified revenue and EBITDA targets over three years and may be settled in cash or stock at the Company’s discretion. As of June 30, 2025, the Company recorded the fair value of the contingent consideration at $1,959,000, classified as a Level 3 liability under the fair value hierarchy. The valuation was based on unobservable inputs, including internal revenue forecasts, and was developed using the scenario-based simulation method with support from a third-party valuation specialist.

As of June 30, 2025, the Company’s contingent consideration liabilities and non-current balances were as follows:

Legal Matters

GEM Yield Bahamas Limited Litigation

On November 1, 2024, we filed a lawsuit against GYBL in the United States District Court for the Southern District of New York (the “Court”), under which we asserted two causes of action: (i) rescission of the GEM Warrants issued to GYBL under the GEM Agreement, by and among us, GYBL and GEM Global Yield LLC SCS, under Section 29(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), due to GYBL’s underlying violation of Section 15(a) of the Exchange Act for effecting the GEM Warrants as an unregistered dealer, and (ii) in the alternative, a declaratory judgment that the exercise price adjustment calculation of the GEM Warrants is governed by the terms provided in the GEM Warrants, rather than the terms of the GEM Agreement. Following a motion to dismiss filed by GYBL on January 17, 2025, the Court granted such motion to dismiss on March 14, 2025. On April 15, 2025, we filed an appeal of the Court’s decision dismissing our case to the United States Court of Appeals for the Second Circuit (the “Second Circuit”). The briefing schedule at the Second Circuit is being held in abeyance in order to allow two previously filed appeals, filed by two other public companies on identical issues against other similar investors, be resolved first. However, if and when the appellate briefing moves forward, there is no assurance that it will be successful.

Additionally, following the Court’s grant of GYBL’s motion to dismiss our lawsuit, GYBL filed a separate lawsuit against us, in which GYBL is asserting two causes of action against us: (1) breach of the terms of the GEM Warrants, and (2) declaratory relief concerning the validity and enforceability of the GEM Warrants. In addition to the declaratory relief, GYBL is seeking monetary damages in an amount to be determined at trial, specific performance of the GEM Warrants and attorneys’ fees and litigation costs. On June 9, 2025, we filed a motion to dismiss this lawsuit from GYBL. GYBL responded to our motion to dismiss on June 23, 2025 asserting that our motion to dismiss should be denied, or, in the alternative, GYBL should be given leave to further amend its complaint. On June 30, 2025, the Company filed a reply in support of its motion to dismiss.