NOTE 14: COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company operates virtually, with a virtual office space rented. The Company has no future minimum annual payments under non-cancelable operating leases at June 30, 2026.

Contingencies

The Company accounts for contingent liabilities under ASC 450, Contingencies. Management assesses known contingencies to determine whether a loss is probable and reasonably estimable and accrues a liability when those conditions are met. For reasonably possible material losses, management discloses the nature of the contingency and an estimate of the possible loss or range of loss when determinable. As of June 30, 2026, management had not identified a probable and reasonably estimable loss contingency requiring accrual. No holder of Series A or Series B Preferred Stock, or any other person, had asserted or threatened a claim relating to the Series G designation, the April 16, 2026 Form 8-K, or the Series D exchanges as of the date of this Annual Report.

The Company has not filed Forms W-2 or Forms 1099 for certain officer compensation paid in fiscal 2026 and prior years. The Company may be subject to penalties, interest and employment taxes as a result. Officer compensation paid without the related information returns totaled approximately $316,800 in fiscal 2026 and $204,850 in fiscal 2025. Management estimates the exposure for employment taxes, penalties and interest at approximately $65,000 to $125,000.

Employment Agreement Commitments

The Company has entered into employment agreements with its Chief Executive Officer and its Chief Financial Officer, the material terms of which are described in Item 11 - Executive Compensation. These agreements require minimum annual base salaries (not less than $400,000 for the Chief Financial Officer and $251,846 for the Chief Executive Officer) and provide for severance upon a qualifying termination ranging from twelve months of base salary continuation up to, in the case of a termination following a change of control, a lump-sum payment of up to three times base salary and average annual bonus. The Chief Executive Officer's agreement also provides for a non-discretionary performance bonus equal to 3.0% of gross increases in the Company's market capitalization, with unpaid balances accruing interest at 13% per annum, and requires the Company to maintain a $5,000,000 directors' and officers' liability insurance policy covering the Chief Executive Officer for at least ten years following termination of employment. These obligations are contingent upon continued employment, the occurrence of specified triggering events, or both, and, other than base salary as services are rendered, are not reflected as liabilities in the accompanying consolidated financial statements. Given the Company's working capital deficit and history of recurring losses, there can be no assurance that the Company will have sufficient resources to satisfy these obligations if and when they become due. See Item 11 - Executive Compensation for a complete description of these agreements.  

Because the performance bonus is based on the Company's market capitalization, it is accounted for as a liability-classified share-based award under ASC 718-30 and remeasured at fair value at each reporting date. The fair value at June 30, 2026 was not material.