NOTE 6. COMMITMENTS AND CONTINGENCIES

Concentration of risk. We are exposed to risks associated with customers who represent a significant portion of total revenues.

Employment agreement amendments. On September 8, 2026, the Company entered into an Amended and Restated Employment Agreement, effective September 1, 2026 (the “Kopjo Employment Agreement”), with Steven Kopjo, the Company’s Chief Financial Officer, Secretary and Treasurer. The Kopjo Employment Agreement, among other things (i) extends the term of his employment through February 28, 2029; (ii) provides for base compensation of $262,500 for the one year period ending August 31, 2027 and $275,000 for the remainder of the term; (iii) provides eligibility to receive an annual discretionary bonus with a target equal to 75% of his base salary based on the achievement of individual and corporate performance objectives established by the Board; and (iv) provides for a grant of a stock option to purchase 120,000 shares of Employer’s common stock at a strike price equal to $1.656 (the price per share of the Company’s common stock as reported on OTC Markets on the grant date), which option will vest as follows: (a) as to the first 40,000 shares of stock, on July 25, 2027, (b) as to the next 40,000 shares of stock, on July 25, 2028, (c) as to the next 40,000 shares of stock, on July 25, 2029; and (v) provides for a conditional grant of 100,000 shares of restricted stock subject to Mr. Kopjo meeting target criteria established by the Board based on metrics concluding on December 31, 2028. The Kopjo Employment Agreement contains customary restrictive covenants, including non-competition, non-solicitation of partners, non-disclosure and non-disparagement provisions.

On September 18, 2026, the Company entered into an Amended and Restated Employment Agreement, effective September 1, 2026 (the “Reback Employment Agreement”), with Matt Reback, the Company’s President and Chief Executive Officer. The Reback Employment Agreement, among other things (i) extends the term of his employment through May 31, 2029; (ii) provides for base compensation of $367,500 for the one year period ending August 31, 2027 and $385,000 for the remainder of the term; (iii) provides eligibility to receive an annual discretionary bonus with a target equal to 75% of his base salary based on the achievement of individual and corporate performance objectives established by the Board; (iv) provides for a grant of a stock option to purchase 150,000 shares of common stock at a strike price equal to $1.656 (the price per share of the Company’s common stock as reported on OTC Markets on the grant date), which option will vest as follows: (a) as to the first 50,000 shares of stock, on September 1, 2027, (b) as to the next 50,000 shares of stock, on September 1, 2028, (c) as to the next 50,000 shares of stock, on September 1, 2029; and (v) provides for a conditional grant of 150,000 shares of restricted stock subject to Mr. Reback meeting target criteria established by the Board based on metrics concluding on December 31, 2028. The Reback Employment Agreement contains customary restrictive covenants, including non-competition, non-solicitation of partners, non-disclosure and non-disparagement provisions.

Legal proceedings. In the ordinary course of conducting our business, we are, from time to time, involved in various legal proceedings, administrative proceedings, regulatory government investigations and other matters, including those in which we are a plaintiff or defendant, that are complex in nature and have outcomes that are difficult to predict.

An unexpected adverse judgment in any pending litigation could cause a material impact on our business operations, intellectual property, results of operations or financial position. Unless otherwise expressly stated, we believe costs associated with litigation will not have a material impact on our financial position or liquidity but may be material to the results of operations in any given period and, accordingly, no provision for loss has been reflected in the accompanying financial statements related to those matters.

Regulatory matters. The Company conducted a self-initiated review of its historical sales and use tax compliance as part of its ongoing internal control and process improvement initiatives. In connection with this review, the Company identified a potential compliance gap related to the application of sales and use tax in certain jurisdictions for prior periods.

The Company engaged third-party tax advisors to assist in evaluating the matter and participated in a self-initiated managed audit in a certain jurisdiction. As of September 30, 2026, the managed audit was finalized. Based on the final audit findings, the Company recognized and paid a total of $516,075 of state tax expense, of which $505,361 was recognized in the second quarter of 2026 and $10,714 was recognized upon finalization in the third quarter of 2026, largely relating to sales and use tax not charged to customers, substantially all of which is attributable to periods prior to 2026. As part of the resolution of the managed audit, the taxing authority abated substantially all applicable penalties. The Company does not expect any additional material liabilities related to this certain jurisdiction.

During the third quarter of 2026, the Company initiated voluntary disclosures and managed audits with certain other jurisdictions and recognized additional state tax expense of $175,551, largely relating to sales and use tax not charged to customers, substantially all of which is attributable to periods prior to 2026. Including the managed audit discussed above, the Company recognized $186,265 and $691,626 of state tax expense related to these sales and use tax matters during the three and nine months ended September 30, 2026, respectively.

The Company's review of its historical sales and use tax position is ongoing with respect to other jurisdictions in which it has conducted business. Several of the Company's customer agreements provide that the customer is responsible for determining, self-assessing, and remitting any applicable sales, use, or similar transaction taxes associated with the products and services provided by the Company. These contractual provisions do not necessarily relieve the Company of any statutory obligation to a taxing authority; however, to the extent the Company is ultimately required to remit tax in a jurisdiction, it may have contractual rights to recover such amounts from the

applicable customers. Any such recoveries would be recognized only when realization becomes reasonably assured and, accordingly, no amounts have been recognized in the accompanying financial statements.

The Company does not believe its potential exposure in any individual remaining jurisdiction is material. However, the Company's evaluation of nexus, taxability, the availability of customer exemptions, the extent to which customers have directly assessed and remitted applicable taxes, the enforceability and collectibility of the customer tax-responsibility provisions in its agreements, and applicable lookback periods in these jurisdictions is not complete, and the manner of resolution in each jurisdiction — which may include managed audits, voluntary disclosure agreements, or similar programs — has not been determined. It is reasonably possible that the Company will record additional liabilities as these matters are resolved in future periods. As a result, the Company is unable to estimate the aggregate amount of any additional liability at this time, and no accrual related to these remaining jurisdictions has been recorded as of September 30, 2026.

Intellectual property agreements. From time to time, the Company purchases or licenses intellectual property from third-parties and the Company, in turn, utilizes that intellectual property in certain games licensed to customers. In these purchase or license agreements, the Company may agree to pay the seller of the intellectual property a fee, if and when, the Company receives revenue from games containing the intellectual property.