IP STRATEGY HOLDINGS, INC.IPST
IP STRATEGY HOLDINGS, INC. Commitments Disclosure
COMMITMENTS AND CONTINGENCIES
As an inducement to obtain financing in 2022 and 2023 through convertible notes, the Company agreed to pay a portion of certain future revenues the Company may receive from the sale of FBLLC or the Flavored Bourbon brand to the investors in such financings in the amount of 150% of their subscription amount for an aggregate of approximately $24,495,000. See Note 5 — Payment Upon Sale of Flavored Bourbon, LLC.
The Company maintains operating leases for various facilities. See Note 12, Leases, for further information.
Litigation — From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims.
In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each claim.
Litigation — CFGI — On January 31, 2025, CFGI, LLC (“CFGI”) commenced a litigation against the Company in the Superior Court, Suffolk County, Massachusetts asserting claims arising under a November 1, 2022 written engagement letter agreement whereby CFGI agreed to provide financial, accounting and tax consulting services to the Company. CFGI alleged that, while the Company made some payments under the amended agreement, CFGI was then owed approximately $730,000, plus interest.
On July 30, 2025, the parties entered into a settlement agreement whereby the Company paid $500,000 in full settlement of all amounts claimed by the plaintiff in the litigation and the litigation was terminated.
Litigation — Thinking Tree Dissenter — On April 16, 2025, Kaylon McAlister, a former co-founder of Thinking Tree Spirits, filed suit in the Circuit Court of Oregon against Thinking Tree Spirits and the Company seeking $470,000 under the Oregon dissenter rights statute, plus interest. The parties reached agreement on August 8, 2025 whereby the dissenter relinquished his claims in exchange for $140,000, ending the matter.
As of December 31, 2025 and 2024, the Company has not been subject to any other pending litigation claims.
Notice from Nasdaq — On April 14, 2025, the Company received a notice (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”), which indicated that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), as the Company’s closing bid price for its common stock was below $1.00 per share for the prior thirty (30) consecutive business days.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has been granted a 180-calendar day compliance period, or until October 13, 2025 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement. During the compliance period, the Company’s shares of Common Stock will continue to be listed and traded on the Nasdaq Capital Market. If at any time during the Compliance Period, the bid price of the Common Stock closes at or above $1.00 per share for a minimum of ten (10) consecutive business days, Nasdaq will provide the Company with written confirmation of compliance with the Minimum Bid Price Requirement and the matter will be closed.
On October 13, 2025, the Company sought out a second 180-calendar day compliance period. Nasdaq approved that request on October 14, 2025. On November 5, 2025 the Company effectuated a 1-for-20 reverse stock split, which resulted in the stock exceeding the mini bid price and bringing the Company into compliance. Assuming the closing price of the stock stays above the $1.00 Minimum Bid Price Requirement for the 10 consecutive trading days following the November 5, 2025 reverse split effective date, the Company is expected to regain compliance with the Nasdaq listing rule.
On March 20, 2026, the Company received a notice from the Nasdaq indicating that the Company’s common stock did not meet the minimum bid price required set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), as the closing bid price for the Common Stock was below $1.00 per share for thirty (30) consecutive business days. Although issuers are typically provided a 180-calendar-day compliance period to regain compliance with the Minimum Bid Price Requirement, the notice further stated that, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company is not eligible for any compliance period because the Company effected a reverse stock split within the prior one-year period, specifically a 1-for-20 reverse stock split effected on November 5, 2025.
The Company filed an appeal with Nasdaq regarding the delisting determination letter on March 27, 2026, following which Nasdaq scheduled a hearing on the appeal for April 30, 2026. The Company’s filing of an appeal will stay the delisting of the Common Stock. In anticipation of its filing with Nasdaq of an appeal, on March 20, 2026, the Company
filed with the SEC a proxy statement for a special meeting of its stockholders as of record on March 19, 2026 to be held on April 10, 2026 to consider a proposal to authorize a reverse stock split of the Common Stock at a ratio ranging from 1:3 to 1:20, the actual ratio to be determined by the Company’s board of directors. If the proposed reverse stock split is approved by the Company’s stockholders at the special meeting, the Company expects promptly to effect a reverse stock split of the Common Stock at a ratio that will allow the bid price of the Common Stock to close at or above $1.00 per share. However, there can be no assurance that there will be sufficient time for the Common Stock to reach and exceed such bid price for a minimum of ten (10) consecutive business days prior the scheduled Nasdaq hearing, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement prior to the Company’s hearing before the Nasdaq Hearings Panel (the “Panel”), or that the Panel will grant the Company an additional extension of time to regain Bid Price compliance.
Management Fee — The Company is required to pay a monthly management fee to Summit Distillery, Inc (see Note 15).
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.