NOTE L — COMMITMENTS AND CONTINGENCIES

The Company is subject to various legal and regulatory proceedings, claims, and assessments, as well as other contingencies, that arise in the ordinary course of business. The Company accrues for these contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company regularly reviews and updates its accruals for contingencies and makes adjustments as necessary based on changes in circumstances and the emergence of new information.

Leases

In September 2024, the Company entered into an operating lease for its office space in South Korea which expires in 2027. The Company’s operating lease right-of-use (“ROU”) asset and related lease liability was initially measured at the present value of future lease payments over the lease term. The Company is responsible for payment of certain real estate taxes and other expenses on its lease. These amounts are generally considered to be variable and are not included in its measurement of the ROU asset and lease liability. The Company accounts for non-lease components, such as maintenance, separately from lease components.

During the three and six months ended June 30, 2025, the Company’s operating lease costs were $53,051 and 106,102, respectively. As of June 30, 2025, the remaining term of the Company’s operating lease was 2.1 years and the discount rate was 8%.

Operating cash used in operating leases was $51,491 during the three months ended June 30, 2025. Operating cash used in operating leases was $102,981 during the six months ended June 30, 2025.

Future maturities of the operating lease liability was as follows as of June 30, 2025:

 SCHEDULE OF FUTURE MATURITIES OF THE OPERATING LEASE LIABILITY

Litigation

AFG Litigation

On January 16, 2025, the Company filed a lawsuit against AFG and its Chief Executive Officer, Ralph Wright Brewer III, in the Northern District of Texas, Dallas Division alleging fraudulent misrepresentation, breach of contract, and the concealment of a ransomware attack on its own network shortly before the Reseller Agreement was executed. Given that the litigation remains in its early stages, the Company is currently unable to estimate the potential range of recoverable damages or the potential loss or range of loss, if any, resulting from a favorable or unfavorable outcome.

Recoverables and liabilities for contingencies, arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a recoverable or liability has been earned or incurred and the amount of the assessment and/or remediation can be reasonably estimated.

Related Party Investigation

The Company’s management team assigned an advisor to the Board to conduct an internal investigation of potential related party transactions with certain members of DHC Sponsor, LLC, prior to the merger with Brand Engagement Network, Inc. These matters are still under investigation.

Employment contracts

The Company has entered into employment contracts with its officers and certain employees that provide for severance and continuation benefits in the event of termination of employment either by the Company without cause or by the employee for good reason, both as defined in the agreements, along with any unpaid vested options, equity or earned bonuses. In addition, in the event of termination of employment following a change in control, as defined in each agreement the employee shall receive a prorated bonus payment and severance payments (as defined in each agreement).