Commitments and Contingencies

9 Months Ended

Sep. 30, 2025

Commitments and Contingencies

Commitments and Contingencies

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company accounts for leases in accordance with ASC 842: Leases, which requires lessees to apply the right-of-use (ROU) model by recognizing a right-of-use asset and a lease liability for all leases with terms exceeding 12 months. Lease classification determines the pattern of expense recognition in the consolidated statement of operations:

· Operating leases: Recognized on a straight-line basis as lease expense over the lease term.

· Finance leases: Recognized with amortization of the ROU asset and interest expense on the lease liability.

Lessors classify leases as sales-type, direct financing, or operating leases based on whether they transfer risks, rewards, and control of the asset:

· If all risks, rewards, and control transfer, the lease is treated as a sale (sales-type lease).

· If risks and rewards transfer but control does not, the lease is classified as financing.

· If neither risks, rewards, nor control transfer, it is classified as an operating lease.

Lease Recognition and Measurement

The Company evaluates whether an arrangement contains a lease at inception and recognizes the lease in the financial statements upon lease commencement (the date the underlying asset is available for use). ROU assets represent the Company’s right to use an asset over the lease term, while lease liabilities reflect the present value of future lease payments.

At lease commencement:

· ROU assets and lease liabilities are initially measured at the present value of lease payments.

· The Company primarily uses its incremental borrowing rate (IBR) to determine the present value of lease payments, except when an implicit rate is readily determinable.

· The IBR is based on market data, adjusted for credit risk and lease term.

Practical Expedients and Lease Components

The Company applies certain practical expedients to simplify lease accounting:

· Lease and non-lease components are combined for classification and measurement, except for direct sales-type leases and production equipment embedded in supply agreements.

· Short-term leases (12 months or less, without purchase or renewal options) are not recorded on the balance sheet.

Lease Term and Expense Recognition

· Lease liabilities include options to extend or terminate when reasonably certain of exercise.

· Operating lease expense is recognized on a straight-line basis over the lease term and reported under general and administrative expenses.

· Variable lease payments based on an index/rate are initially measured using the rate at lease commencement, with differences expensed as incurred.

Lease Commitments

As of September 30, 2024 and December 31, 2024, the Company had no finance leases under ASC 842.

In July 2020, the Company entered into an office lease for its administrative operations, (the “Saratoga Lease”). That lease had a term of four years and expired on July 31, 2024. As of March 31, 2023, the Company was in default for the Saratoga Lease due to non-payment of rent. The Company subsequently entered into a settlement agreement with the landlord wherein the lease was terminated and the Company agreed to pay the landlord the balance due over a period of time.  As of September 30, 2025 and December 31, 2024, remaining amounts of $15,000 and $17,500 were outstanding under that agreement.

On January 30, 2023, the Company entered a new lease for its headquarters office, (the “Suite 200 Lease”) for a 60-month lease with an expiration date of January 31, 2028 with an initial monthly payment of $7,943.

The tables below present information regarding the Company's operating lease assets and liabilities at September 30, 2025 and December 31, 2024, respectively:

	September 30, 2025			December 31, 2024
Assets
Operating lease - right-of-use asset	$	196,504		$	259,666
Liabilities
Operating lease liability	$	229,403		$	291,169
Weighted-average remaining lease term (years)		2.3			3.1
Weighted-average discount rate		8.00	%		8.00	%

The components of lease expense were as follows:

	September 30, 2025		September 30, 2024
Operating lease costs
Amortization of right-of-use operating lease asset	$	63,162	$	63,162
Lease liability expense in connection with obligation repayment		15,855	$	20,368
Total operating lease costs	$	79,017	$	83,530
Supplemental cash flow information related to operating leases was as follows:
Operating cash outflows from operating lease (obligation payment)	$	77,621	$	73,391
Right-of-use asset obtained in exchange for new operating lease liability	$	-	$	-

Future minimum lease payments under non-cancellable leases as of September 30, 2025 were as follows:

2025 (3 Months)	$	26,040
2026		107,020
2027		110,228
2028		9,208
Total undiscounted cash flows		252,496
Less: amount representing interest		(23,093	)
Present value of operating lease liability		229,403
Less: current portion of operating lease liability		(91,153	)
Long-term operating lease liability	$	138,250

Legal Matters

The Company is subject to litigation claims arising in the ordinary course of business. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries.

As of September 30, 2025 and December 31, 2024, respectively, the Company is not aware of any litigation, pending litigation, or other transactions that would require accrual or disclosure, except for the following:

Gladiator

Historically, the Gladiator brand has been an important part of the Company and an area of focus for future growth and development.  Unfortunately, because the Company has been seeking damages from the prior management of Gladiator, the future of the brand has been uncertain.  While the Company is confident that it will prevail in litigation, management remains hesitant to invest additional resources in developing the brand before the outcome of the litigation has been adjudicated.  Accordingly, brand development efforts remain in a holding pattern, but management intends to reinvest and relaunch the brand once they have clarity about its future.  We continue to believe that the strength of the brand is an asset to the Company based on the reputation and recognition that it commands in the market.  The operations, while significantly pared back, are active but Gladiators future operations are uncertain.