From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business.

On May 1, 2026, Daniel R. Thompson, the Company’s former Chairman of the Board and a significant stockholder, commenced a lawsuit against the Company by filing a complaint against it in the Eighth Judicial District Court, Clark County, Nevada. In the complaint, Mr. Thompson alleges that he entered into an employment agreement and addendum thereto with the Company, and that we failed to provide him with restricted preferred stock and separation compensation allegedly owed to him under those agreements, and he alleges that the Company has improperly continued to defer payment of accrued salary and other compensation he claims to be owed. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Mr. Thompson alleges damages in an unspecified amount in excess of $15,000 under each of those claims. Mr. Thompson also seeks declaratory relief regarding compensation that he claims to be owed and regarding the validity of a conversion agreement between him and the Company. Pursuant to the conversion agreement, Mr. Thompson agreed to cancel $2,352,994 in deferred compensation owed to him in exchange for receiving 588,249 shares of common stock. Mr. Thompson contends in the complaint that he revoked the conversion agreement or that it is otherwise unenforceable and, in the alternative, seeks its reformation to provide that it was contingent on the successful uplisting of the Company’s stock to the Nasdaq Stock Market. The complaint also asserts a claim for accounting, seeking inspection of the Company’s books, records, and accounts. The complaint also seeks an award of attorneys’ fees and costs.

On May 21, 2026, the Company filed a motion to dismiss Mr. Thompson’s complaint, arguing, among other things, that the employment agreement contains a prelitigation mediation requirement that Mr. Thompson did not satisfy before filing suit. Mr. Thompson opposed the motion and filed a countermotion for partial summary judgment, contending that he is entitled to separation package compensation totaling $1,350,000 under the addendum to the employment agreement. On July 17, 2026, the court entered an order that granted the Company’s motion to dismiss without prejudice, dismissed the countermotion without prejudice, and dismissed the case without prejudice so that the parties may submit to mediation for 60 days before commencing any claims for breach of the employment agreement. In that order, the court found that the addendum to the employment agreement did not remove the prelitigation mediation requirement but, rather, expressly preserved it.

Should Mr. Thompson re-file a lawsuit asserting the same claims he asserted in the dismissed lawsuit, the Company intends to vigorously defend against those claims. Although the Company believes that it would have meritorious defenses to such claims, the Company is unable to reasonably estimate the potential loss or range of loss, if any, that may result from the litigation of such claims because the outcome of litigation is inherently uncertain. It is possible that an adverse outcome in such litigation, if it were to be commenced, could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows, and prospects.