From time to time, the Company is a party to various claims and legal proceedings that arise in the ordinary course of business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain and we cannot assure you that their ultimate disposition will not have a material adverse effect on our business, financial condition, cash flows, or results of operations. Except as discussed below, the Company is not currently a party to any pending or threatened litigation, the outcome of which would be expected to have a material adverse effect on its financial condition, results of operations, or cash flows. The Company discloses contingent liabilities even if the liability is not probable or estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. Employee Class Action On July 24, 2024, a former employee (“Plaintiff”) filed a class action lawsuit against the Company and its subsidiary C Enterprises, Inc., in San Diego County Superior Court. The case is before the Honorable Gregory W. Pollack, and asserts allegations of California state law violations pertaining to: (1) straight time wages; (2) overtime wages; (3) meal periods; (4) rest periods; (5) business expense reimbursement; (6) timely payment of wages at termination; (7) provision of accurate itemized wage statements; and (8) California’s unfair competition law. This action seeks damages on behalf of a putative class of non-exempt employees who worked for the Company in California at any time from July 24, 2020, through the present. On July 23, 2024, Plaintiff provided notice of the alleged violations of law above to California’s Labor and Workforce Development Agency (“LWDA”) under the Private Attorneys General Act of 2004 (“PAGA”). On or about October 18, 2024, Plaintiff filed her First Amended Complaint (“FAC”), which amended her class complaint to include a cause of action under PAGA, whereby Plaintiff seeks penalties on behalf of the State of California and other similarly situated employees for the period of August 14, 2023, through the present. On October 30, 2025, we executed a memorandum of understanding, pursuant to which the Company agrees to pay, on an all-in and non-reversionary basis, a total settlement amount of $855,000, which has been accrued as of October 31, 2025. As of June 15, 2026, no class certification deadline or trial date has been set. The parties attended private mediation on August 7, 2025. The parties thereafter reached a settlement agreement, which will be subject to Court approval. The Motion for Preliminary Approval of the Settlement is scheduled to be heard in Court on August 7, 2026. 20