Intellicheck, Inc.

1. NATURE OF BUSINESS

Business

Intellicheck, Inc. (the “Company” or “Intellicheck”) is a prominent technology company that is engaged in developing, integrating and marketing identity verification solutions to address challenges that include commercial retail and banking fraud prevention. Intellicheck’s products include solutions for preventing identity fraud across any industry delivered via smartphone, tablet, POS integration or other electronic devices. Intellicheck continues to develop and release innovative products based upon its rich patent portfolio consisting of ten (10) U.S. and one Canadian patents.

Liquidity

For the year ended December 31, 2025, the Company generated net income of $1,273 and realized cash provided by operating activities of $4,541. As of December 31, 2025, the Company had cash and cash equivalents of $9,650, working capital (defined as current assets minus current liabilities) of $10,123 and an accumulated deficit of $133,210. Based on the Company’s business plan and cash resources, Intellicheck expects its existing and future resources and revenues generated from operations to satisfy its working capital requirements for at least the next 12 months from the date of filing of these financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes.

Significant estimates and assumptions that affect amounts reported in the financial statements include impairment consideration and valuation of goodwill and intangible assets including software development costs, revenue recognition (including breakage revenue), and the fair value of stock options granted under the Company’s equity compensation plan. Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may be different from those estimates.

Cash and Cash Equivalents

The Company classifies time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents. The Company's cash and cash equivalents consist primarily of both cash on deposits with banks, which are maintained with major financial institutions in the United States, and money market funds. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, however amounts may exceed FDIC insured limits. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.

Accounts Receivable, net

Accounts receivable are reported on the balance sheets at the outstanding principal amount adjusted for an allowance for credit losses and any charge offs. Effective January 1, 2023 Intellicheck adopted ASU 2016-13, codified as Accounting Standards Codification ("ASC") 326 "Current Expected Credit Losses". This impacts how the allowance for credit losses is calculated. The Company has applied a loss rate method which takes historical data as the basis for calculating the allowance amount, along with the aging out outstanding receivables and other factors like current and forecasted market conditions, and potential future impacts to the industry. In estimating whether accounts receivable will be collected, the Company performs evaluations of customers and continuously monitors collections and payments and estimates an allowance for credit losses based on collections experience to date and any specific collection issues that have been identified. The allowance for credit losses is recorded in the period in which revenue is recorded or when collection risk is identified.

Property and Equipment, net

Property and equipment are recorded at cost and are depreciated and amortized over their estimated useful lives ranging from three toseven years using the straight-line method. Expenditures for maintenance and repairs are charged to operations as incurred. See Note 4.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations. Pursuant to ASC 350 "Intangibles - Goodwill and Other", the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company first assesses qualitative factors to determine whether it is necessary to perform step one of the quantitative goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price.

The Company performed its annual impairment test of goodwill in the fourth quarter for the years ended December 31, 2025 and 2024. More detail about this is referenced in Note 5. For the years ended December 31, 2025 and 2024, the Company determinedno impairment charge was required.

Intangible Assets, net

Intangible assets include patents, copyrights, developed technology and capitalized software development costs. The Company amortizes these assets on a straight-line basis over their estimated useful lives, as it represents the pattern of economic benefits consumed. There wereno impairment charges recognized for the years ended December 31, 2025 and 2024. See Note 5.

The Company capitalizes internal-use software costs which includes costs incurred in connection with the development of new software solutions and enhancements to existing software solutions that are expected to result in increased functionality. The costs incurred in the preliminary stages of development are expensed as incurred. Once the software has reached the application development stage, internal and external costs, if direct and incremental, are capitalized until the software is complete and available for its intended use. The Company evaluates the useful lives of these assets and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. There wereno impairments of intangible assets including capitalized software development costs for the years ended December 31, 2025 and 2024.

Long-Lived Assets and Impairment of Long-Lived Assets

The Company’s long-lived assets include property and equipment and intangible assets.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance with ASC 350 “Intangibles – Goodwill and Other” and ASC 360 “Property, Plant and Equipment”. To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets. Impairment is measured at fair value. There wereno impairments of long-lived assets for the years ended December 31, 2025 and 2024.

Revenue Recognition and Deferred Revenue

General

Most license fees and services revenue are generated from a combination of fixed-price and per-scan contracts. Under the per-scan revenue model, customers are charged a fee each time the customer scans an identity document, such as a driver’s license, with the Company’s software. Under the fixed-price revenue model customers are charged a fixed monthly fee either per device or physical business location to access the Company’s software. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company measures revenue based on the consideration specified in a customer arrangement, and revenue is recognized when the performance obligations in an arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the customer receives the benefit of the performance obligation. Customers typically receive the benefit of the Company’s services as they are performed. The Company's performance obligations are satisfied over time, and as a result, it may follow the right to invoice practical expedient meaning the Company recognizes revenue monthly as invoiced based on its contract terms.

The Company has an additional revenue model where customers purchase a predetermined number of transactions for the term of the contract. Customers are charged a fixed monthly fee for a set number of scans (fixed consideration), with any overages charged on a per scan basis (variable consideration). The Company estimates the amount of unused transactions at the end of each contract period and recognizes a portion of that revenue as breakage revenue each reporting period. If the Company expects the customer to use all transactions in the specified service period, the Company will recognize the transaction price as revenue in the specified service period as the promised units of service are transferred to the customer. Alternatively, if the Company expects that the customer cannot or will not use all transactions in the specified service period (referred to as “breakage”), the Company will recognize the estimated breakage amount as revenue ratably over the service period in proportion to the revenue that the Company will recognize for actual transactions used by the customer in the service period. The Company does not estimate the variable consideration at any point; rather it calculates and recognizes the variable portion at the end of the contract term since these contracts are considered monthly due to the termination clauses included within them. The fixed and variable performance obligations are recognized monthly based on the contract terms.

The Company also has a revenue model where customers purchase access to the Company's platform that includes a fixed, non-refundable annual access fee associated with a spend commitment that grants the customers stand-ready access to the platform. Revenue for this access is recognized ratably over the contract term, consistent with the nature of the stand-ready service.

Invoicing is based on schedules established in customer contracts. Payment terms are generally established from 30 to 60 days from the invoice date. Accordingly, the Company has determined that its contracts do not include a significant financing component. Product returns are estimated and recorded as a reduction to revenue, however, such amounts are immaterial.

The Company has capitalized costs related to obtaining contracts under the access fee model. Costs to obtain a contract are amortized over the expected period of benefit to which they are related.

Nature of goods and services

The following is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:

Software-as-a-Service (SaaS)

SaaS for hosted subscription services requires the Company to provide a stand-ready obligation and allows customers to access a set of data for a predetermined period of time. As the customer obtains access at a point in time but continues to have access for the remainder of the subscription period, the customer is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the entity performs. Accordingly, the revenue should be recognized over time, under the fixed pricing model, based on the usage of the hosted subscription services, which can vary from month to month. Under the per-scan revenue model, the customer requires access to the Company's hosted subscription service but revenue is recognized over time as the customer scans an identity document.

Equipment Revenue

Revenue from the sale of equipment is recognized at a point in time. The point in time that the revenue is recognized is when the customer has control of the equipment which is when the customer receives the benefit and the Company’s performance obligation has been satisfied. Depending on the contract terms, that could either be at the time the equipment is shipped to the customer or at the time the equipment is received by the customer.

Other Revenue

Other revenues, which historically have not been material, consist primarily of revenues from other subscription and support services, extended warranties and one-time implementation services. The Company’s revenues from other subscription and support services includes jurisdictional updates to certain commercial customers and support services. These subscriptions require continuing service or post contractual customer support and performance. As the customer obtains access at a point in time but continues to have access for the remainder of the subscription period, the customer is considered to simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs. Accordingly, the revenue is recognized over time based on usage, which can vary from month to month. The revenue is typically based on a formula such as number of locations in a given month multiplied by a fee per location.

Extended warranty revenues are generated when a warranty is provided to the customer separately from other performance obligations when the equipment is sold. As the customer obtains access at a point in time and continues to have access for the remainder of the warranty term, the customer is considered to simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs. The related revenue is recognized ratably over the specified term of the warranty period. The extended warranty is separate from the Company’s standard warranty that it receives from its vendor, which is typicallyone year.

Disaggregation of revenue

In the following tables, revenue is disaggregated by product and service and the timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue.

Contract balances

The deferred revenue at December 31, 2025 and 2024 was $1,661 and $1,001, respectively, and primarily consists of revenue that is recognized over time for software license contracts and hosted subscription services. The changes in these balances are related to the satisfaction or partial satisfaction of these contracts. The entire December 31, 2024, deferred revenue balance was recognized as revenue in the year ended December 31, 2025.

Transaction price allocated to the remaining performance obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:

All consideration from contracts with customers is included in the amounts presented above.

Advertising Costs.

Advertising costs, which are charged to expense as incurred and recorded as selling, general and administrative expenses in the Company's statements of operations, were $125 and $418 for the years ended December 31, 2025 and 2024, respectively.

Shipping Costs

The Company’s shipping and handling costs related to sales are included in cost of revenues for all periods presented. All other shipping and handling costs are included as a component of selling, general and administrative expenses within the statements of operations.

Loss Contingencies and Legal Costs

The Company accrues loss contingencies that are believed to be probable and can be reasonably estimated. As events evolve during the administration and litigation process and additional information becomes known, the Company reassesses its estimates related to loss contingencies. Legal costs are expensed in the period in which the costs are incurred.

Sales Taxes

Sales and other taxes collected from customers and remitted to governmental authorities are presented on a net basis and thus excluded from revenues.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities are measured using expected tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. The Company has recorded a full valuation allowance for its net deferred tax assets as of December 31, 2025 and 2024, due to the uncertainty of the realizability of those assets. See Note 8.

Fair Value of Financial Instruments

The Company adheres to the provisions of ASC 820, “Fair Value Measurement” which requires the Company to calculate the fair value of financial instruments and include this additional information in the notes to financial statements when the fair value of those financial instruments is different than the book value. The Company’s financial instruments include cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable and accrued expenses. At December 31, 2025 and 2024, the carrying value of the Company’s financial instruments approximated fair value, due to their short-term nature. Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

•Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. The Company's Level 1 assets consisted primarily of cash and cash equivalents totaling approximately $9,650 and $4,666 as of December 31, 2025 and 2024, respectively.

•Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 2 includes financial instruments that are valued using models or other valuation methodologies. The Company had no Level 2 assets or liabilities as of December 31, 2025 and 2024.

•Level 3—Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when the fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The Company had no Level 3 assets or liabilities as of December 31, 2025 and 2024.

Business Concentration and Credit Risk

Financial instruments, which subject the Company to concentrations of credit risk, consist primarily of cash. The Company maintains cash atthree financial institutions. The Company performs periodic evaluations of the relative credit standing of these institutions.

The Company’s sales are principally made to large retail customers, financial institutions concentrated in the United States and to U.S. government entities. The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for credit losses based upon factors surrounding the credit risk of customers, historical trends, and other market and economic information.

During the year ended December 31, 2025, the Company made sales to three customers that accounted for approximately 55% of revenue;31%,16% and 8%, respectively. The revenue was associated with commercial identity sales customers. These three customers represented 42% of the Company’s December 31, 2025 accounts receivable balance. These three customers accounted for approximately 0%,36%, and 6%, respectively, of the Company's accounts receivable balance at December 31, 2025. During the year ended December 31, 2024, the Company had three customers that accounted for 50% of revenue;20%,18% and 12%, respectively, and those same three customers accounted for 66%;39%,23%, and 4%, respectively, of its December 31, 2024 accounts receivable balance.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock equivalents outstanding during the period. The dilutive effect of these common stock equivalents comprising of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method. The calculation of diluted net loss per share excludes all anti-dilutive shares. In a period of net loss, all common stock equivalents are considered anti-dilutive.

The following table summarizes the common stock equivalents excluded from the loss per diluted share because their effect would be anti-dilutive:

The Company accounts for the issuance of equity awards to employees in accordance ASC 718 “Compensation - Stock Compensation and ASC 505 “Equity”, which requires that the cost resulting from all stock-based transactions be recognized in the financial statements. This pronouncement establishes fair value as the measurement objective in accounting for equity payment arrangements and requires all companies to apply a fair value-based measurement method in accounting for all equity payment transactions with employees and directors. All stock-based compensation expenses are included in operating expenses. The Company recognizes compensation expense related to equity grants on a straight-line basis over the requisite service period. See Note 9.

Segment Information

The Company adheres to the provisions of ASC 280, “Segment Reporting”. The Chief Executive Officer, as the chief operating decision maker (CODM), reviews the financial information presented for purposes of allocating resources and evaluating its financial performance. The key measure that the CODM uses to allocate resources and in assessing performance is the Company's net income (loss). Accordingly, the Company has determined that it operates in a single reportable segment. All of the Company’s assets are located in the United States. Since the Company operates inone operating segment, all required financial segment information can be found in the financial statements.

Research and Development

Research and development expenses are expensed as incurred and consist primarily of employee-related expenses (such as salaries, taxes, benefits and stock-based compensation), allocated overhead costs and outside services costs related to the development and improvement of the Company's SaaS applications.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures(Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change is effective for annual periods beginning after December 15, 2024. The Company adopted this standard effective January 1, 2025 and was applied retrospectively. The adoption of this new standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment requires new financial statement disclosures to provide disaggregated information for certain types of expenses, including employee compensation, depreciation, and amortization in commonly presented expense captions such as cost of revenue, sales and marketing, and general and administrative expenses. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is in the process of evaluating the effect that the adoption of these standards will have on its financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This standard allows entities to apply a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, Revenue from Contracts with Customers. The standard is effective for all the entities for fiscal years beginning after after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted, and the standard is to be applied prospectively. The Company will adopt this ASU in the first quarter of 2026 and adoption is not expected to have a material impact on our consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software by replacing the previous stage-based model and aligning the capitalization process with current development practices, especially agile and iterative methods. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and may be applied prospectively, retrospectively, or using a modified transition approach. The Company is in process of evaluating the impact of the adoption of this ASU on its financial statements.

Subsequent Events

The Company has evaluated subsequent events through the date these financial statements were issued and determined there are no subsequent events that require disclosure and/or accrual.

The Company received a class action complaint on January 8, 2026 alleging that the Company collected biometric information from users in Illinois in violation of the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq. (“BIPA”). The Company is not able to fully assess the probability and outcome of the matter due to the need to conduct further investigation. However, it does not currently believe that a material loss is probable nor estimable. As such, the Company has not recognized a liability and intends to fully defend the matter.

3. CASH ANDCASH EQUIVALENTS

Short-term investments include investments in U.S. Treasury notes. Short-term investments with original maturities of approximately three months or less from the date of purchase are classified within cash and cash equivalents.

The Company didnot hold any securities that were in an unrealized gain/loss position for more than 12 months as of December 31, 2025 and 2024. The Company recognized $245 and $283 in realized gains on short-term investments that matured within the years ended December 31, 2025 and 2024, respectively.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net are comprised of the following as of December 31, 2025 and 2024:

Depreciation and amortization expense for the years ended December 31, 2025 and 2024 amounted to $195 and $187, respectively. Depreciation and amortization expense is included in the Statements of Operations within the selling, general and administrative line item.

5. GOODWILL AND INTANGIBLE ASSETS, NET

Identifiable intangible assets

The following tables set forth the components of intangible assets as of December 31, 2025 and 2024:

The following summarizes amortization of intangible assets included in the Statements of Operations:

The Company's estimated future amortization expense for intangible assets as of December 31, 2025 was as follows:

These amounts are subject to change based upon the review of recoverability and useful lives that are performed at least annually.

Goodwill

Goodwill represents the excess of purchase price over the fair value of the assets acquired in businesses combinations. Under ASC 350, goodwill is not amortized, but rather is tested for impairment. The Company’s goodwill balance was $8,102 as of December 31, 2025 and 2024. This goodwill resulted from the acquisitions of Mobilisa, Inc. and Positive Access Corporation.

For the years ended December 31, 2025 and 2024, the Company performed its annual impairment test of goodwill in the fourth quarter. Under authoritative guidance, the Company can use industry and Company specific qualitative factors to determine whether it is more likely than not that impairment exists before performing step one of the quantitative goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price.

According to ASC 350-20, the Company conducted a qualitative assessment (Step 0) to evaluate goodwill for impairment for the years ended December 31, 2025 and 2024. In the qualitative assessment for the fiscal years ended December 31, 2025 and 2024, the Company found no significant events or circumstances indicating a decline in the value of goodwill. As a result, the fair value of the reporting unit remained above its carrying value as of December 31, 2025 and 2024, and the Company did not proceed with a quantitative assessment for either year.

6. DEBT

As of December 31, 2025, the Company had no outstanding debt, borrowings, or credit facilities. The Company has not entered into any credit agreements, revolving credit facilities, term loans, or other debt arrangements.

In November 2025, the Company closed the credit facility with Citi Personal Wealth Management that previously allowed for borrowings up to the lesser of (i) $2,000 or (ii) the collateralized balance in the Company’s existing fixed income investment account with Citi Personal Wealth Management subject to certain limitations.

The facility bears interest at a rate consistent with the Citi Personal Wealth Management’s Base Rate minus 2%. Interest is payable monthly and there wereno amounts outstanding under this facility and unused availability under this facility was $2,000 as of December 31, 2024. The Company is not subject to any financial covenants related to this revolving line of credit.

7. ACCRUED EXPENSES

Accrued expenses are comprised of the following as of December 31, 2025 and 2024:

Insurance Financing Arrangement

In July 2024, the Company entered into a financing arrangement related to insurance premiums totaling $334 with an interest rate of 8.58%. The monthly loan payments of $30 are paid to financing company over a period of 11 months. As of December 31, 2025, the Company had $0 in remaining commitments related to this financing arrangement. As of December 31, 2024, the Company had $178 in remaining commitments related to this financing arrangement.

The Company was not subject to any financial covenants related to this insurance financing arrangement. The balance of this financing arrangement is included in the balance sheets within the Accrued expenses financial statement line item.

8. INCOME TAXES

The Company’s deferred tax assets and liabilities are measured using the enacted tax rates that the Company believes will apply in the years in which temporary differences are expected to be recovered or paid. The Company is subject to federal and state income taxes as a Subchapter C corporation.

The Company’s deferred tax assets are primarily the result of net operating losses (or NOLs). The Company has recorded a valuation allowance against its net deferred tax assets at December 31, 2025 and 2024, as it is more likely than not that not all of the deferred tax assets will be realized. This determination reflects management's assessment that it is more likely than not that the deferred tax assets will not be realized in the foreseeable future..

For financial reporting purposes, the net pre-tax book income and/or loss for the U.S. entity, in the aggregate was:

The provision for income taxes as of December 31, 2025 and 2024 consists of the following:

A reconciliation of the statutory U.S. Federal rate to the Company’s effective tax rate as of December 31, 2025 and 2024 is as follows:

(a) State taxes in Texas made up the majority (greater than 50 percent) of the tax effect in this category.

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of net deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.

The following items comprise the Company's net deferred tax assets and liabilities as of December 31, 2025 and 2024:

The Company recorded an income tax expense of approximately $58 and $33 for the years ended December 31, 2025 and 2024, respectively, related to state taxes.

The Company files numerous tax returns in various jurisdictions. The Company is not currently under examination by any taxing authority, nor has the Company signed any waiver of the statute of limitations with any taxing authority. The Company remains open to examination by major taxing jurisdictions from 2021 to date. ASC 740 requires evaluation of uncertain tax positions and as of December 31, 2025, the Company has recorded a full reserve against the R&D credits. There wereno tax interest or penalties recorded in the financial statements for the years ended December 31, 2025 and 2024.

Our unrecognized tax benefits at December 31, 2025 relate entirely to research and development tax credits. The total amount of tax benefits at December 31, 2025 is $682. If recognized, none of the unrecognized tax benefits would impact our effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Our policy is to recognize interest and penalties related to income taxes as components of income taxes. We incurred no interest or penalties related to unrecognized tax benefits in the years ended December 31, 2025 or 2024. We do not anticipate any significant changes in our uncertain tax positions within twelve months of this reporting date.

Valuation Allowance

The Company assesses the realizability of its deferred tax assets on a quarterly basis by evaluating the available positive and negative evidence in accordance with ASC 740. Significant weight is given to evidence that is objectively verifiable, particularly the Company’s cumulative results over the most recent three-year period.

As of December 31, 2025, the Company was in a three-year cumulative loss position after adjusting for permanent differences between book and taxable income, which constitutes significant negative evidence. While the Company generated pre-tax income of approximately $1,331 for the year ended December 31, 2025, this was insufficient to offset the cumulative losses of approximately $2,042 in 2023 and $885 in 2024. Accordingly, the Company determined that a full valuation allowance against its net deferred tax assets remained appropriate as of December 31, 2025.

The valuation allowance was approximately $6,677 and $7,651 as of December 31, 2025 and 2024, respectively. The net decrease of approximately $975 during 2025 was primarily attributable to the acceleration of deductions related to research and development costs..

If the Company achieves sustained profitability in future periods and the three-year cumulative result transitions to a positive position, the Company may conclude that sufficient positive evidence exists to support a partial or full release of the valuation allowance. Such a release would result in the recognition of a non-cash deferred income tax benefit in the period the determination is made. Based on gross deferred tax assets of approximately $7,145 as of December 31, 2025, a full release of the valuation allowance would result in a non-cash income tax benefit of up to approximately $6,677, although the actual amount recognized would depend on the circumstances and timing of any such determination.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2025, the Company had federal net operating loss carryforwards of approximately $30,520 of which $10,892 was generated prior to 2018 and will expire between 2035 and 2037. The remaining $19,628 was generated after 2017 and may be carried forward indefinitely, subject to an annual limitation of 80% of taxable income under the Tax Cuts and Jobs Act of 2017.

The Company also had state net operating loss carryforwards of approximately $3,670 as of December 31, 2025, which expire at various dates depending on the jurisdiction.

The Company had federal research and development tax credit carryforwards of approximately $682 as of December 31, 2025, which expire at various dates through 2041 if not utilized.

Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to annual limitations in the event of a change in ownership as defined under Section 382 of the Internal Revenue Code and similar state provisions. The Company has not completed a formal Section 382 analysis to determine whether any ownership changes have occurred since inception. If such a change has occurred, or occurs in the future, the Company’s ability to utilize its net operating loss and tax credit carryforwards could be materially limited, potentially resulting in a significant portion of the carryforwards expiring unused. The Company intends to evaluate whether a formal analysis is warranted in connection with future tax planning activities.

The following summarizes the cash taxes paid in for the periods ending December 31, 2025 and 2024:

9. STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock

In January 1997, the Board of Directors authorized the creation of 30,000 class of Series A Convertible Preferred Stock with a par value of $0.01. The Series A Convertible Preferred Stock is convertible into an equal number of common shares at the holder’s option, subject to adjustment for anti-dilution. The holders of Series A Convertible Preferred Stock are entitled to receive dividends as and if declared by the Board of Directors. In the event of liquidation or dissolution of the Company, the holders of Series A Convertible Preferred Stock are entitled to receive all accrued dividends, if applicable, plus the liquidation price of $1.00 per share. As of December 31, 2025, and 2024, there wereno outstanding shares of Series A Convertible Preferred Stock.

To retain and attract qualified personnel necessary for the success of the Company, the Company adopted the 2025 Omnibus Incentive Plan (the “Plan”) covering up to 2,000,000 of the Company’s common shares, pursuant to which officers, directors, key employees and consultants to the Company are eligible to receive incentive stock options, nonqualified stock options and restricted stock units. All the equity compensation plans prior to the Company’s 2025 Omnibus Incentive Plan have been closed. The Compensation Committee of the Board of Directors administers this Plan and determines the terms and conditions of stock options granted, including the exercise price. The Plan generally provides that all stock options will expire withinten years of the date of grant. Incentive stock options granted under this Plan must be granted at an exercise price that is not less than the fair market value per share at the date of the grant and the exercise price must not be less than 110% of the fair market value per share at the date of the grant for grants to persons owning more than 10% of the voting stock of the Company. The Plan also entitles non-employee directors to receive grants of non-qualified stock options as approved by the Board of Directors.

The Company uses the Black-Scholes option pricing model to value the options on the grant date. The table below presents the weighted average expected life of the stock options in years. The Company uses the simplified method for all stock options to estimate the expected life of the option and assumes that stock options will be exercised evenly over the period from vesting until the awards expire. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on U.S. Treasury yield curve in effect on the grant date. Options, generally, vest fromone year tofour years. The compensation expense is recognized over the requisite service period on a straight-line basis, reduced by forfeitures as they occur.

Certain option awards are classified as liability awards. The fair values of these awards are determined at each reporting date utilizing a Black-Scholes option pricing model, and the associated compensation expense (credit) is recorded at each reporting period is recorded. The Company recorded $0 and $(4) of credits to stock-based compensation expense in the years ended December 31, 2025 and 2024, respectively, as a result of the change in fair value of these awards.

The fair value of the Company’s stock options granted in 2025 that are being classified as equity awards were estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values:

Stock option activity during the periods indicated below was as follows:

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on December 31, 2025. This amount changes based upon the fair market value of the Company’s stock.

The following is a summary of stock options as of December 31, 2025:

The weighted-average fair value of the options granted during the year ended December 31, 2025 was $2.58. All stock options were issued with an exercise price that is equal or above the fair market value of the Company’s common stock on the date of grant. The amount of unrecognized expense of the options for the year ended December 31, 2025 was $871.

Restricted Stock Units

The Company periodically issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company. The Company issues RSUs to certain directors as compensation which vest with the passage of time. The vesting of all RSUs is contingent on continued board and employment services.

The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the date of grant, is amortized on a straight-line basis over the requisite service period and charged to operating expenses with a corresponding increase to additional paid-in capital, reduced by forfeitures when they occur.

The amount of unrecognized expense of the RSUs for the year ended December 31, 2025 was $0.

Restricted stock unit activity during the periods indicated below is as follows:

As of December 31, 2025, there was $871 of total unrecognized compensation costs, related to all unvested stock options and RSUs. These costs are expected to be recognized as compensation expense over a weighted average period of approximately 2.01 years.

Stock-based compensation expense for the years ended December 31, 2025 and 2024 is as follows:

Stock-based compensation is included in operating expenses as follows:

As of December 31, 2025, the Company had 2,063,544 shares available for future grants under the Company’s equity compensation plans.

10. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases an office in Melville, New York, on a month-to-month basis. Rent expense, which includes utilities, was $22 and $30 for the years ended December 31, 2025 and 2024, respectively, and is included in selling, general and administrative expenses on the Statement of Operations.

The Company determines if an arrangement is a lease at lease inception. The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company didnot have an operating lease right of use ("ROU") or operating lease liability as of December 31, 2025, as its office lease is on a month-to-month term and allows for either party to terminate the lease without a significant penalty.

Legal Proceedings

The Company is not aware of any infringement by its products or technology on the proprietary rights of others.

From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business. In accordance with Generally Accepted Accounting Principles, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, ruling, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. If any unfavorable ruling was to occur in any specific period or if a loss becomes probable and estimable, there exists the possibility of a material adverse impact on the Company’s results of operations, financial position or cash flows. As of December 31, 2025 and 2024, no material amounts are recorded related to legal proceedings on the balance sheets.

The Company received a class action complaint on January 8, 2026 alleging that the Company collected biometric information from users in Illinois in violation of the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq.

(“BIPA”). The Company is not able to fully assess the probability and outcome of the matter due to the need to conduct further investigation. However, it does not currently believe that a material loss is probable nor estimable. As such, the Company has not recognized a liability and intends to fully defend the matter.

Cash Incentive Plans

In May 2020, the Board implemented a 2020 separate Executive Incentive Bonus Plan (the "2020 Bonus Plan”) with the Company’s executive management team. Each agreement, under the 2020 Bonus Plan, is based on certain goals achieved by the Company plus individual achievements by each executive.

In June 2020, the Company’s executive management team created a 2020 Employee Incentive Plan for all the Company’s non-executives and non-sales personnel. The incentive payment is based on the Company attaining certain revenue goals plus individual achievements by each individual for the calendar year 2025 and is based as a percentage of the employee’s salary.

At December 31, 2025 and 2024, this bonus liability for the executive and employee bonus plans amounted to $1,171 and $464 and is included in Accrued Expenses on the Balance Sheets.

11. RETIREMENT PLAN

The Company has a retirement savings 401(k) plan. The plan permits eligible employees to make voluntary contributions to a trust, up to a maximum of 35% of compensation, subject to certain limitations. The Company has elected to contribute a matching contribution equal to 50% of the first 6% of an eligible employee’s deferral election. The Company may also make discretionary contributions, subject to certain conditions, as defined in the plan. The Company’s matching contributions were $93 and $0 for 2025 and 2024, respectively.