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Item 1. Legal Proceedings

2026-10-15 compared with 2026-07-15 · 26 added, 18 removed, 1 unchanged (98% of the section changed)

LEGAL PROCEEDINGS.

On July 13, 2026, Luis Barberi,

Mitch Toren, and Ashish Tembe, the former members of TA Pipeline LLC, filed a Demand for Arbitration against the Company with the American

Arbitration Association, to be conducted in Las Vegas, Nevada.

The claim asserts breach of the Membership Interest Purchase Agreement

dated August 6, 2025, based on the Company's alleged failure to repurchase 96,774 restricted shares of the Company's common stock at the

$3.10 per share Base Price following the claimants’ February 24, 2026 exercise of a put right under the agreement.

The claimants seek

damages of not less than $299,999.40, together with attorneys' fees, pre-judgment and post-judgment interest, and arbitration costs.

Company believes the claimants are in breach of the agreement, believes it has meritorious defenses, and intends to defend the matter

vigorously and to assert available counterclaims.

Other than as described above,

from time to time, the Company is subject to various claims, disputes, and legal proceedings arising in the ordinary course of its business,

including matters relating to employment, contractual, and commercial relationships.

The Company is not currently a party to any other

legal proceeding that management believes is reasonably likely to have a material adverse effect on the Company's business, financial

condition, results of operations, or cash flows.

Regardless of the outcome, litigation and other proceedings can have an adverse impact

on the Company because of associated defense and settlement costs, the diversion of management resources, and other factors.

TA Pipeline Arbitration

On August 6, 2025, the Company acquired all of the issued and outstanding membership interests of TA Pipeline LLC ("TA") from its members pursuant to a Membership Interest Purchase Agreement (the "TA MIPA").

As partial consideration, the Company issued 96,774 restricted shares of its common stock (the "TA Closing Shares") to the former members of TA.

The TA MIPA also provides for (i) an earnout payment equal to five percent of TA's net revenue during the twelve-month period following the closing, up to a maximum of $200,000, payable one-half in cash and one-half in restricted shares of the Company's common stock valued at $3.10 per share (the "Milestone Payment" and, as to the share portion, the "Milestone Shares"), and (ii) a limited, one-time put right, exercisable if the fair market value of the Company's common stock is below $3.10 per share (the "Base Price"), under which each former member of TA may, among other things, require the Company to repurchase his shares at the Base Price (the "Put Right").

On July 14, 2026, Luis Barberi, Mitch Toren, and Ashish Tembe, the former members of TA (the "Claimants"), commenced a binding arbitration proceeding against the Company by filing a Demand for Arbitration with the American Arbitration Association (the "AAA") under its Commercial Arbitration Rules.

The arbitration is to be conducted in Las Vegas, Nevada.

The Demand for Arbitration alleges that the Company breached Section 7.5(a)(i) of the TA MIPA by failing to repurchase the 96,774 TA Closing Shares at the Base Price of $3.10 per share, for an aggregate of approximately $300,000, after the Claimants delivered written notice on February 24, 2026 purporting to exercise the Put Right.

On September 3, 2026, the Claimants filed an Amended Statement of Claim adding a claim that the Company breached Sections 2.2(b) and 2.3(c)(i) of the TA MIPA by failing to pay the Milestone Payment, which the Claimants allege became due no later than August 16, 2026.

The Claimants allege that TA generated net revenue of $3,940,126 during the Milestone Payment measurement period, which ended August 6, 2026, and that the resulting Milestone Payment is $197,006.

The Claimants now seek damages of not less than $497,005, consisting of approximately $299,999 relating to the Put Right and $197,006 relating to the Milestone Payment, together with pre- and post-judgment interest, attorneys' fees, and arbitration costs.

The Company has not repurchased the TA Closing Shares or paid the Milestone Payment because it believes the Claimants are in material breach of the TA MIPA.

On September 9, 2026, the Company filed its Answer and Counterclaim, in which it denies liability and asserts affirmative defenses including prior material breach and excuse, waiver, estoppel, setoff, unclean hands, and failure to mitigate.

The Company also asserts counterclaims against the Claimants for (i) breach of the TA MIPA and of the Confidentiality, Non-Competition, and Non-Solicitation Agreements that each Claimant executed in connection with the closing, (ii) breach of the implied covenant of good faith and fair dealing, and (iii) intentional misrepresentation.

Among other things, the counterclaims allege that, following the acquisition, one of the Claimants caused an entity that he owns and operates, which was a significant customer of TA, to divert business opportunities away from TA, and that the Claimants misrepresented TA's expected post-acquisition revenue to induce the Company to enter into the TA MIPA.

The Company seeks damages of not less than $1,000,000, together with interest, attorneys' fees, and costs.

An evidentiary hearing in the arbitration is scheduled for January 21, 2027.

The arbitration remains at an early stage, and the Company is unable to predict its outcome.

The Company believes it has meritorious defenses and intends to defend against the Claimants' claims and to pursue its counterclaims vigorously;

however, there can be no assurance that the Company will prevail on its defenses or recover any amount on its counterclaims.

As of August 31, 2026, the Company had recorded liabilities of $300,000 for the repurchase of the TA Closing Shares and $200,000 for the Milestone Payment, both of which are included in accrued expenses.

The recording of these liabilities does not represent an assessment by the Company of the likely outcome of the arbitration.

The Company has not accrued pre- or post-judgment interest, attorneys' fees, or arbitration costs that could be awarded if the arbitration is resolved adversely to the Company, and is unable to estimate those amounts or any other reasonably possible loss in excess of the amounts accrued.

See Note 8 - Acquisition of TA Pipeline LLC, Note 17 - Commitments and Contingencies, and Note 20 - Subsequent Events to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other than as described above, from time to time, the Company is subject to various claims, disputes, and legal proceedings arising in the ordinary course of its business, including matters relating to employment, contractual, and commercial relationships.

The Company is not currently a party to any other legal proceeding that management believes is reasonably likely to have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows.

Regardless of the outcome, litigation and other proceedings can have an adverse impact on the Company because of associated defense and settlement costs, the diversion of management resources, and other factors.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings