SNTL 10-K & 10-Q changes, risk factors and insider trading

General

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and the Company could have a material and adverse impact on our business, financial condition, results of operations and cash flows. You should carefully consider the risks described below and in our subsequent periodic filings with the SEC. The following risk factors should be read in conjunction with "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes in this Annual Report on Form 10-K.

Risks Relating to Our Business

We have incurred net losses and cannot assure you that we will achieve or maintain profitable operations.

Our net losses from operations were $4,462,697 and $7,916,574 for the years ended December 31, 2025, and 2024, respectively. We may continue to incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications, delays and other unknown events.

We anticipate that our operating expenses will increase substantially in the foreseeable future as we undertake increased development and production efforts to support our business and increase our marketing and sales efforts to drive an increase in the number of our product offerings and an increase in customers purchasing our products and services. These expenditures may make it more difficult to achieve and maintain profitability. In addition, our efforts to grow our business may be more expensive than we expect, and we may not be able to generate sufficient revenue to offset increased operating expenses. If we are forced to reduce our expenses, our growth strategy could be compromised. To offset these anticipated increased operating expenses, we will need to generate and sustain significant revenue levels in future periods in order to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability.

Accordingly, we cannot assure you that we will achieve sustainable operating profits as we continue to expand our infrastructure, further develop our marketing efforts, and otherwise implement our growth initiatives. Any failure to achieve and maintain profitability would have a materially adverse effect on our ability to implement our business plan, our results and operations, and our financial condition, and could cause the value of our common stock, to decline, resulting in a significant or complete loss of your investment.

We will need to raise additional capital to fund new products and services, and further expand our existing operations.

Based on our current business plan, we believe our current cash, cash equivalents and marketable securities may be sufficient to meet our anticipated cash requirements over at least the next 12 months If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, or we make new acquisitions, we likely will seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt financing.

We may consider raising additional capital in the future to further expand our business, to pursue strategic investments, to take advantage of financing opportunities, or for other reasons. We expect that we will need additional liquidity and capital resources through debt and/or equity financings to fulfill our anticipated future product and services development efforts. We may not be able to obtain adequate financing in a timely manner, on commercially reasonable terms or at all. Our failure to raise sufficient capital in a timely manner will restrict our growth and hinder our ability to compete. Our failure to obtain timely and adequate capital could have a material adverse effect on our business, financial condition and results of operations.

No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to our common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. At a minimum, we expect these covenants to include restrictions on our ability to pay dividends on our common stock. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

If adequate funds are not available, we may be required to delay, scale back or eliminate portions of our operations and product development efforts or to obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our technologies or potential products or other assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our proprietary technology and other important assets and could also adversely affect our ability to fund our continued operations and our development efforts and adversely affect our business.

Our future growth is dependent upon our ability to keep pace with rapid technological and industry changes in order to develop or acquire new technologies for our products and service introductions that achieve market acceptance with acceptable margins.

Our business operates in a market that is characterized by rapidly changing technologies, evolving industry standards, potential new entrants and changes in customer needs and expectations. For example, a number of cable and other telecommunications companies and large technology companies with home automation solutions offer interactive security services that are competitive with our products and services. If these services gain greater market acceptance and traction, our ability to grow our business could be materially and adversely affected. Accordingly, our future success depends in part on our ability to identify emerging technological trends in our market; develop, acquire and maintain competitive products and services that capitalize on existing and emerging trends; enhance our existing products and services by adding innovative features.

We sell our services in highly competitive markets, including the home automation market, which may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products and services.

The monitored security industry is highly fragmented and subject to significant competition and pricing pressures. We experience significant competitive pricing pressures on installation, monitoring and service fees. Several competitors offer installation fees that match or are lower than ours. Other competitors charge significantly more for installation but, in many cases, less for monitoring. In addition, cable and telecommunications companies have expanded into the monitored security industry and are bundling their existing offerings with monitored security services. In some instances, it appears that the monitored security services component of such bundled offerings is significantly underpriced and, in effect, subsidized by the rates charged for the other services offered by these companies. These pricing alternatives may influence customers’ desire to subscribe to our services at rates and fees we consider appropriate. In many cases, we face competition for direct sales from our independent, third-party authorized dealers, who may offer installation for considerably less than we do in particular markets. We believe that the monitoring and service fees we offer are generally competitive with rates offered by other security service providers. We face competition from other providers such as cable and telecommunications companies that may have highly recognized brands which may drive increased awareness of their security/automation offerings than ours, have access to greater capital and resources than us, and may spend significantly more on advertising, marketing and promotional resources which could have a material adverse effect on our ability to drive awareness and demand for our products and services. Continued pricing pressure, improvements in technology and shifts in customer preferences towards self-monitoring or DIY could adversely impact our customer base and/or pricing structure and have a material adverse effect on our business, financial condition, results of operations and cash flows.

We rely on a significant number of our customers remaining with us as customers for long periods of time.

We operate our business with the goal of retaining customers for long periods of time in order to recoup our initial investment in new customers. Accordingly, our long-term profitability is dependent on long customer tenure. This requires that we minimize our rate of customer disconnects, or attrition. Disconnects occur because customers relocate, or experience problems with our service quality, customer service, customer non-pay, unfavorable general economic conditions, and the preference for lower pricing of competitors' products and services over ours. If we fail to keep our customers for a sufficiently long period of time, our profitability, business, financial condition, results of operations and cash flows could be materially and adversely affected.

General economic conditions can affect our business and we are susceptible to changes in the housing market and consumer discretionary income, which may inhibit our ability to sustain customer base growth rates.

Demand for alarm monitoring services and home automation systems is affected by the turnover in the housing market. Downturns in the rate of the sale of new and existing homes, which we believe drives a substantial portion of our new customer volume in any given year, would reduce opportunities to make sales of new security and home automation systems and services and reduce opportunities to take over existing security and home automation systems. Recoveries in the housing market increase the occurrence of relocations which may lead to customers disconnecting service and not contracting with us in their new homes. In addition, general economic conditions can affect our business. For example, changes in personal economic circumstances may cause current security alarm and home automation customers to disconnect our services in an effort to reduce their monthly spending and such customers may default on their remaining contractual obligations to us. Our long-term revenue growth rate depends on installations exceeding disconnects. If customer disconnects and defaults increase, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

Due to the ever changing threat landscape, our services may be subject to potential vulnerabilities of wireless and IoT devices and our services may be subject to certain risks including hacking or other unauthorized access to control or view systems and obtain private information.

We are dependent on information technology networks and systems, including Internet and Internet-based or "cloud" computing services, to process, transmit and store electronic information. Along with our own confidential data and information in the normal course of our business, we or our partners collect and retain significant volumes of certain types of personally identifiable data, protected health information pursuant to the Health Insurance Portability Accountability Act (“HIPAA”) and other information pertaining to our customers and employees, including video images of customer sites. We must comply with applicable federal and state laws and regulations governing the collection, processing, sharing, access, use, security and privacy of personally identifiable information, including protected health information in addition to our own posted information security and privacy policies.

The legal, regulatory and contractual environment surrounding the foregoing is constantly evolving. If we fail to comply with applicable privacy and security laws, regulations and standards, properly protect the integrity and security of our facilities and systems and the data located within them, or defend against cybersecurity attacks, , our business, reputation, results of operations and cash flows could be materially and adversely affected.

Third parties, including our partners and vendors, could also be a source of security risk to us in the event of a failure of their own security systems and infrastructure. In addition, we cannot be certain that advances in criminal capabilities, new discoveries in the field of cryptography or other developments will not compromise or breach the technology protecting the networks that access our products and services. A significant actual or perceived (whether or not valid) theft, loss, fraudulent use or misuse of customer, employee or other personally identifiable data, whether by us, our partners and vendors, or other third parties or as a result of employee error or malfeasance or otherwise, non-compliance with our contractual or other legal obligations regarding such data or a violation of our privacy and information security policies with respect to such data could result in significant costs, fines, litigation or regulatory actions against us. While we maintain cyber liability insurance that provides both third party liability and first party insurance coverages, our insurance may not be sufficient to protect against all of our losses from any future disruptions or breaches of our systems or other events as described above.

We depend on third party providers and suppliers for components of our security and home/business automation systems, and third-party software licenses for our products and services, and any failure or interruption in products or services provided by these third parties could harm our ability to operate our business.

The components for the security and home/business automation systems that we install are manufactured by third parties. We are therefore susceptible to interruptions in supply and to the receipt of components that do not meet our high standards. We also rely on third party software for key home automation features, and on the interoperation of that software with our own. Any financial or other difficulties our providers face may have negative effects on our business.

An event causing a disruption in the ability of our monitoring facilities to operate could adversely affect our business.

A disruption in our ability to provide security monitoring services could have a material adverse effect on our business. A disruption could occur for many reasons, including fire, natural disasters, weather, disease, transportation interruption, extended power outages, human or other error, terrorism or sabotage or as a result of disruptions to third-party transmission lines. Monitoring could also be disrupted by information systems and network-related events or cyber security attacks.

Our business strategy includes plans to make acquisitions and investments that complement our existing business.

These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.

We face risks in acquiring and integrating customer accounts.

An element of our business strategy may involve the bulk acquisition of customer accounts. Acquisitions of customer accounts involve a number of special risks, including the possibility of unexpectedly high rates of attrition and unanticipated deficiencies in the accounts and systems acquired despite our investigations prior to acquisition. We face competition from other alarm monitoring companies, including companies that may offer higher prices and more favorable terms for customer accounts purchased, and/or lower minimum financial or operational qualifications requirements for purchased accounts. This competition could reduce the acquisition opportunities available to us, slowing our rate of growth and/or increase the price we pay for such account acquisitions, thus reducing our return on investment and negatively impacting our revenue and results of operations. We cannot assure you that we will be able to purchase customer accounts on favorable terms in the future.

Unauthorized use of our brand name by third parties, and the expenses incurred in developing and preserving the value of our brand name, may adversely affect our business.

Our brand name is critical to our success. Unauthorized use of our brand name by third parties may adversely affect our business and reputation, including the perceived quality and reliability of our products and services. We rely on trademark law, company brand name protection policies and agreements with our employees, customers, business partners and others to protect the value of our brand name. Despite our precautions, we cannot provide assurance that those procedures are sufficiently effective to protect against unauthorized third-party use of our brand name.

Infringement of our intellectual property rights could negatively affect us.

We rely on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. We cannot guarantee, however, that the steps we have taken to protect our intellectual property will be adequate to prevent infringement of our rights or misappropriation of our technology. Adverse events affecting the use of our trademarks could affect our use of those trademarks and negatively impact our brands. If it becomes necessary for us to resort to litigation to protect our intellectual property rights, any proceedings could be burdensome and costly, and we may not prevail.

We may not be able to continue to develop and execute a competitive yet profitable pricing structure.

We resist competing on price alone because we believe we have competitive advantage such as brand name recognition and a reputation for a high level of service and security. However, with cable and telecommunications companies actively targeting the home automation market and expanding into the monitored security space, and with large technology companies expanding into the connected home market through the development of their own solutions or the acquisition of other companies with home automation solution offerings, this increased competition could result in pricing pressure, a shift in customer preferences towards the services of these companies and reduce our market share and have an adverse effect on our business, financial condition, results of operations and cash flows.

Increasing government regulation of telemarketing, email marketing and other marketing methods may increase our costs and restrict the operation and growth of our business.

We may rely on telemarketing and email marketing conducted internally and through third parties to generate a substantial number of leads for our business. The telemarketing and email marketing services industries are subject to an increasing amount of regulation. In the United States, the FTC and FCC have issued regulations that place restrictions on unsolicited automated telephone calls to residential and wireless telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice messages and telephone fax machines, and require us to maintain a "do not call" list and to train our personnel to comply with these restrictions. The FTC regulates both general sales practices and telemarketing specifically and has broad authority to prohibit a variety of advertising or marketing practices that may constitute "unfair or deceptive acts or practices." Most of the statutes and regulations in the United States allow a private right of action for the recovery of damages or provide for enforcement by the FTC and FCC, state attorneys general or state agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys’ fees in the event that regulations are violated. The CRTC enforces rules regarding unsolicited communications using automatic dialing and announcing devices, live voice and fax. The Canadian Anti-Spam Law ("CASL") regulations prohibit the sending of commercial emails without prior consent of the consumer or an existing business relationship and sets forth rules governing the sending of commercial emails. CASL allows for a private right of action for the recovery of damages or provides for enforcement by CRTC permitting the recovery of significant civil penalties, costs and attorneys' fees in the event that regulations are violated. Changes in such regulations or the interpretation thereof that further restrict such activities could result in a material reduction in the number of leads for our business and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our business operates in a regulated industry.

Our operations and employees are subject to various federal, state, provincial and local laws and regulations such areas as consumer protection, occupational licensing, environmental protection, labor and employment, tax and other laws and regulations. Most states and provinces in which we intend to operate have licensing laws directed specifically toward the security services industry.

In certain jurisdictions, we are required to obtain licenses or permits in order to comply with standards governing employee selection and training and to meet certain standards in the conduct of our business. The loss of such licenses or permits or the imposition of conditions to the granting or retention of such licenses or permits could have a material adverse effect on us. Furthermore, in certain jurisdictions, certain security systems must meet fire and building codes in order to be installed, and it is possible that our current or future products or service offerings will fail to meet such codes, which could require us to make costly modifications to our products and services or to forgo marketing in certain jurisdictions.

Failure to comply with any applicable laws or regulations could result in substantial fines or revocation of our operating permits and licenses. If laws and regulations were to change or if we or our products or services failed to comply with them, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

We are exposed to greater risks of liability for employee acts or omissions or system failures, than may be inherent in other businesses.

If a customer or third party believes that he or she has suffered harm to person or property due to an actual or alleged act or omission of one of our employees or a security system failure, he or she (or their insurers) may pursue legal action against us, and the cost of defending the legal action and of any judgment against us could be substantial. In particular, because our products and services are intended to help protect lives and real and personal property, we may have greater exposure to litigation risks than businesses that provide other consumer and small business products and services. Substantially all of our customer contracts contain a series of risk-mitigation provisions that serve to limit our liability and/or limit a claimant’s ability to pursue legal action; however, in the event of litigation with respect to such matters, it is possible that these risk-mitigation provisions may be deemed not applicable or unenforceable and, regardless of the ultimate outcome, we may incur significant costs of defense that could materially and adversely affect our business, financial condition, results of operations and cash flows.

If we are unable to recruit and retain key personnel, including an effective sales force, our ability to manage our business could be adversely affected.

Our success will depend in part upon the continued services of our management team and sales representatives. Our ability to recruit and retain key personnel for management positions and effective sales representatives could be impacted adversely by the competitive environment for management and sales talent. The loss, incapacity or unavailability for any reason of key members of our management team and the inability or delay in hiring new key employees including sales force personnel could adversely affect our ability to manage our business and our future operational and financial results.

Adverse developments in our relationship with our employees could adversely affect our business, results of operations, and financial condition.

Presently, none of our employees are represented by unions or covered by collective bargaining agreements. Our relationships with our employees have generally been good. We cannot predict the outcome of future negotiations over collective bargaining agreements covering our employees. New labor agreements or the renewal of existing agreements may impose significant new costs on us, which could adversely affect our financial condition and results of operations in the future. (delete if not applicable.)

We plan to increase our debt and/or raise additional capital in the future, which could affect our financial health and may decrease our profitability.

We intend to raise additional capital and/or increase our debt in the future, in pursuit of our business plan and in connection with new acquisitions. However, debt or equity financing may not be available to us on terms acceptable to us, if at all. If we incur additional debt or raise equity through the issuance of additional capital stock, the terms of the debt or our capital stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. The terms of the debt may also impose additional and more stringent restrictions on our operations than we currently have. If we raise funds through the issuance of additional equity, your percentage ownership in us would decline. If we are unable to raise additional capital when needed, it could affect our financial health.

Material adverse legal judgments, fines, penalties or settlements could adversely affect our financial health and prevent us from fulfilling our obligations under our outstanding indebtedness.

We estimate that our available cash, our cash flow from operations and amounts available to us under our revolving credit facility will be adequate to fund our operations and service our debt over both the short term and the long term. However, material adverse legal judgments, fines, penalties or settlements arising from litigation and similar contingencies could require additional funding. If such developments require us to obtain additional funding, we cannot provide assurance that we will be able to obtain the additional funding that we need on commercially reasonable terms or at all, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Risks Relating to Our Common Stock

There is a limited trading market for our common stock.

Although our common stock is quoted on the OTC, it is an unorganized, inter-dealer, over-the-counter market which provides significantly less liquidity than The Nasdaq Capital Market or other national securities exchanges. This may have an adverse impact on the trading and price of our common stock.

The market price of our common stock has been and may continue to be volatile, and the value of an investment in our common stock may decline.

The market price of our common stock is subject to fluctuations due to a number of factors, many of which are beyond our control. The stock markets have experienced price and volume fluctuations that have affected our stock price and the market prices of equity securities of many other companies. These broad market and industry fluctuations, as well as general, economic, political and market conditions, may negatively affect the market price of our common stock. Accordingly, investors in our common stock may not be able to resell their shares at or above their original purchase price.

We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment.

During the years ended December 31, 2025 and 2024, the Company’s primary business focused upon providing armed and unarmed security services through its Sentry and USS subsidiaries. They offer professional security personnel and services, including on-site protection, mobile patrol, and event security, enhanced by smartphone-based security applications. They operate primarily in California and serve a diverse clientele, including businesses, residential communities, and event organizers.

The Company’s remaining subsidiary, Gladiator, previously focused on the production and sale of personal protective products, including body armor and ballistic plates. However, as of mid-2023, the Company ceased selling personal protective equipment under the Gladiator brand due to ongoing litigation. Presently, Gladiator’s operations are limited, and the Company may relaunch the product line and expand its offerings once such litigation is resolved.

Effective October 16, 2025 and through its newly formed Sentry subsidiary, the Company acquired the client contracts for professional security services of an entity located in California for cash consideration of $650,000 plus additional cash of $150,000 on April 16, 2026 provided those contracts continue to provide at least 80% of the level of revenue per month as they were as of the date of the closing. As part of the acquisition agreement, the Company agreed to retain the former principal of the seller as a consultant for a period of six months at the rate of $50,000 per month. Effective that same date, the Company combined the day-to-day activities of USS with Sentry for logistical and operational purposes.

Effective December 31, 2025 and in conjunction with: a) the preparation of the Company’s consolidated financial statements as of that date and for the year then ended, and b) the growth strategy described in the following paragraph, Management reassessed the propriety of certain assets and liabilities previously carried on its balance sheet and made repositioning adjustments related thereto. Such adjustments had the net effect of recording a benefit of $2,205,292 in the Consolidated Statement of Operations for the year then ended as discussed in the footnotes to those financial statements presented elsewhere in this Report.

Critical accounting policies consist of the following and are described in Note 4, Summary of Significant Accounting Policies, in the Company’s financial statements included elsewhere in this Report.

Critical accounting estimates consist primarily of those described in Note 17, Business Reassessment and Repositioning Adjustment, in the Company’s financial statements included elsewhere in this Report

Liquidity

We manage liquidity risk by monitoring on an ongoing basis several key financial factors such as our operational forecasts, actual operating results, cash flows, and the resulting financial position.

The following table summarizes several selected key financial factors as of and for the six months ended June 30, 2026 and 2025:

Capital Resources

Going Concern

The results of operations for the three and six months ended June 30, 2026 and 2025 are summarized in the table below and discussed in the following paragraphs. Such amounts have not been adjusted for the reclassification of discontinued operations in the interest of clarity and all amounts in the following table and the related commentary have been rounded to the nearest thousand. Any apparent addition or subtraction errors in the table below are the result of rounding.

* - Not meaningful

The $2,643,000 or 153% increase in revenues during the six-month period ended June 30, 2026 versus the comparable period in the prior year is attributable to the acquisition of the Opsec business in October 2025 and a 2026/2027 growth strategy consisting of the competitive pricing of services during 2026 to stimulate growth in top line revenue, establish a formidable presence in the California marketplace, and develop relationships with new key clients with the intent of selling additional services and higher margin services in the future. The $1,246,000 or 142% change in revenues during the three-month periods ending on those same dates is comparable in magnitude and is also attributable to the acquisition of the Opsec business and the 2026/2027 growth strategy.

The $2,740,000 or 186% increase in cost of revenues during the six-month period ended June 30, 2026 versus the comparable period in the prior year is attributable to the acquisition of the Opsec business in October 2025 and the 2026/2027 growth strategy discussed in the Revenue section above. The $1,439,000 or 217% change in cost of revenues during the three-month periods ending on those same dates is somewhat higher from a percentage perspective and is also attributable to the 2026/2027 growth strategy discussed in the Revenue section above.

The $97,000 or 38% decrease in gross profits during the six-month period ended June 30, 2026 versus the comparable period in the prior year is attributable to the 2026/2027 growth strategy discussed in the Revenue section above. The $184,000 or 84% decrease in gross profits during the three-month periods ending on those same dates clearly demonstrates the Company’s investment in the 2026/2027 growth strategy discussed in the Revenue section above.

The $52,000 or 1% increase in general and administrative expenses during the six-month period ended June 30, 2026 versus the comparable period in the prior year was minimal and is attributable to a reduction in the reliance upon external consultants for fundraising and other purposes as well as cost control and expense reduction initiatives. The $369,000 or 27% decrease in general and administrative expenses during the three-month periods ending on those same dates illustrates the effectiveness of those expense reduction initiatives.

The $148,000 or 7% increase in loss from operations during the six-month period ended June 30, 2026 versus the comparable period in the prior year is directly attributable to the $97,000 decrease in gross profits and the $52,000 increase in general and administrative expenses discussed in the sections immediately above. The $185,000 or 17% decrease in loss from operations during the three-month periods ending on those dates is directly attributable to the $184,000 decrease in gross profits offset by the $369,000 decrease in general and administrative expenses discussed in the sections immediately above.

The $1,040,000 swing to other income of $820,000 during the six-month period ended June 30, 2026 from other expense of $220,000 during the comparable period in the prior year is directly attributable to a gain of $997,000 on the sale of the USS subsidiary in February 2026. In the absence of that gain, the majority of the amount in this caption for all periods consists primarily of interest expense which remains relatively unchanged from each reporting period to the next.

The $892,000 or 46% decrease in this caption during the six-month period ended June 30, 2026 versus the comparable period in the prior year as well as the $231,000 or 18% decrease in this caption during the three-month period ended June 30, 2026 versus the comparable period in the prior year are directly attributable to the combined changes in the Loss From Operations and the Other Income (Expense) captions discussed immediately above.

The $886,000 or 46% decrease in this caption during the six-month period ended June 30, 2026 versus the comparable period in the prior year as well as the $224,000 or 18% decrease in this caption during the three-month period ended June 30, 2026 versus the comparable period in the prior year are directly attributable to the combined changes in the Net Income (Loss) From Continuing Operations Including Non-Controlling Interest and the Non-Controlling Interest captions discussed immediately above.