NETWORK-1 TECHNOLOGIES, INC.

NOTE A –BASIS OF PRESENTATION AND NATURE OF BUSINESS

[1] BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements are unaudited, but, in the opinion of the management of Network-1 Technologies, Inc. (the “Company”), contain all adjustments consisting only of normal recurring items which the Company considers necessary for the fair presentation of the Company’s financial position as of June 30, 2026, and the results of its operations, its statement of cash flows and its changes in stockholders’ equity for the three and six month periods ended June 30, 2026 and June 30, 2025. The unaudited condensed consolidated financial statements included herein have been prepared in accordance with the accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP may have been omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2026. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results of operations to be expected for the full year.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Mirror Worlds Technologies, LLC and HFT Solutions, LLC. All intercompany balances and transactions have been eliminated in consolidation.

[2] BUSINESS

The Company is engaged in the development, licensing and protection of its intellectual property assets. The Company presently owns one-hundred twenty-one (121) U.S. patents, fifty-four (54) of which have expired, and fifteen (15) international patents related to (i) the M2M/IoT patent portfolio (the “M2M/IoT Patent Portfolio”) relating to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in Internet of Things (“IoT”), Machine-to-Machine, and other mobile devices, including smartphones, tablets and computers, as well as automobiles; (ii) the HFT patent portfolio (the “HFT Patent Portfolio”) covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems; (iii) the Cox patent portfolio (the “Cox Patent Portfolio”) relating to enabling technology for identifying media content on the Internet and taking further actions to be performed after such identification; and (iv) the smart home patent portfolio (the “Smart Home Patent Portfolio”) relating to, among other things, the enabling technology to support the interoperability of smart home IoT devices.

NOTE A – BASIS OF PRESENTATION AND NATURE OF BUSINESS (continued)

The Company’s current strategy includes continuing to pursue licensing opportunities for its patent portfolios. In addition, the Company reviews opportunities to acquire or license additional intellectual property as well as other strategic alternatives. The Company’s patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as the Company had achieved with respect to its Remote Power Patent and Mirror Worlds Patent Portfolio. In addition, the Company may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.

The Company has also made equity investments totaling $7,000,000 in ILiAD Biotechnologies, Inc. (“ILiAD”, formerly ILiAD Biotechnologies, LLC), a clinical stage biotechnology company (see Note K hereof).

NOTE B –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1]Use of Estimates and Assumptions

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The significant estimates and assumptions made in the preparation of the Company’s unaudited condensed consolidated financial statements include costs related to the Company’s assertion of litigation, the valuation and carrying value of the Company’s equity investment, valuation of the Company’s patent portfolios, stock-based compensation and the recoverability of deferred tax assets. Actual results could be materially different from those estimates upon which the carrying values were based.

[2]Revenue Recognition

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), revenue is recognized in accordance with ASC 606 -Revenue from Contracts with Customers. Revenue is recognized when the Company completes the licensing of its intellectual property to its licensees, obtains a final judgment (after all appeals have been exhausted) or enters into a litigation settlement agreement involving any of its expired patents. With respect to licensing its intellectual property, final judgment or a litigation settlement, revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for licensing its intellectual property, the final judgment or litigation settlement.

The Company determines revenue recognition through the following steps:

Revenue disaggregated by source is as follows:

Revenue from the Company’s patent licensing and enforcement business is typically generated from negotiated license agreements, final judgment or settlement agreements as a result of litigation involving the Company’s patents. The timing and amount of revenue recognized from each licensee or from final judgment or settlement agreement depends upon a variety of factors, including the terms of each agreement and the nature of the obligations of the parties. These agreements may include, but are limited to, elements related to past infringement liabilities, non-refundable upfront license fees, and ongoing royalties on licensed products sold by the licensee. Generally, in the event of settlement of litigation related to the Company’s assertion of patent infringement involving its intellectual property, defendants will either pay (i) a non-refundable lump sum payment for a non-exclusive fully-paid license, (ii) a non-refundable lump sum payment (license initiation fee) together with an ongoing obligation to pay quarterly or monthly royalties to the Company for the life of the licensed patent, or (iii) a lump sum settlement payment with respect to litigation involving the Company’s patents.

Fully-paid licenses provide for a non-refundable up-front payment for which the Company has no future obligations or performance requirements, revenue is generally recognized when the Company has obtained the signed license agreement, all performance obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. Revenue from fully-paid licenses may consist of one or more installments. The timing and amount of revenue recognized from each licensee depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations.

[3]Equity Investments

Investments accounted for under the equity method are equity securities in entities the Company does not control but over which it has the ability to exercise significant influence. These investments are accounted for under the equity method of accounting in accordance with ASC 323 -Investments — Equity Method and Joint Ventures. Equity method investments are measured at cost minus impairment, if any, plus or minus the Company’s share of an investee’s income or loss. The Company’s proportionate share of the income or loss from equity method investments is recognized on a one-quarter lag.

Investments accounted for under the cost method are accounted for in accordance with ASC 321,Investments – Equity Securities (“ASC 321”). Under this guidance, investments in equity securities in privately-held companies without readily determinable fair values are generally recorded at cost, plus or minus subsequent observable price changes in identical or similar investments, less impairments. As a part of the assessment for impairment indicators, the Company considers significant deterioration in the earnings performance and overall business prospects of the investee, as well as significant adverse changes in the external environment in which the investment operates. If qualitative assessment indicates the carrying value of the investment is impaired, the fair value of the investments would be estimated, which would involve a significant degree of judgment and subjectivity.

The Company evaluates the investment on a quarterly basis for such indicators of impairment or observable price changes in orderly transactions for the same or similar investments. Changes in fair value are reported in Other Income (Expense) in the unaudited condensed consolidated statements of operations (See Note K hereof).

[4]Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (ASC 740), which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary(timing) differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. As of June 30, 2026, the Company had total deferred tax assets generated from its activities of $2,355,000. The Company’s deferred tax assets were offset by a valuation allowance of $2,355,000 as it was determined that it is more likely than not that certain deferred tax assets will not be realized. As of June 30, 2026, the Company also had a deferred tax liability of $245,000.

The personal holding company (“PHC”) rules under the Internal Revenue Code impose a 20% tax on a PHC’s undistributed personal holding company income (“UPHCI”), which means, in general, taxable income subject to certain adjustments and reduced by certain distributions to shareholders. For a corporation to be classified as a PHC, it must satisfy two tests: (i) that more than 50% in value of its outstanding shares must be owned directly or indirectly by five or fewer individuals at any time during the second half of the year (after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties) (the “Ownership Test”) and (ii) at least 60% of its adjusted ordinary gross income for a taxable year consists of dividends, interest, royalties, annuities and rents (the “Income Test”). As of July 15, 2026, based on available information concerning the Company’s shareholder ownership, the Company did not satisfy the Ownership Test or the Income Test. However, the Company may subsequently be determined to be a PHC in 2026 or in future years if it satisfies both the Ownership Test and Income Test. If the Company were to become a PHC in 2026 or any future year, it would be subject to the 20% tax on its UPHCI. In such event, the Company may issue a special cash dividend to its shareholders in an amount equal to the UPHCI rather than incur the 20% tax.

ASC 740-10 - Accounting for Uncertainty in Income Taxes, defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The Company had no uncertain tax positions as of June 30, 2026.

U.S. federal, state and local income tax returns prior to 2022 are not subject to examination by any applicable tax authorities, except that tax authorities could challenge returns (only under certain circumstances) for earlier years to the extent they generated loss carry-forwards that are available for those future years.

[5]Segment Reporting

The Company reports its segment information to reflect the manner in which the Company’s chief operating decision maker (“CODM”) reviews and assesses performance. The Company’s Chief Executive Officer is the CODM. The primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income (loss). Such measures are used to evaluate the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes. Net loss and Operating loss are disclosed in the unaudited condensed consolidated statements of operations. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the unaudited condensed consolidated statements of operations. The Company has a single reporting segment.

[6]Recent Accounting Pronouncements

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued Accounting Standards Update ("ASU") 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires additional information about specific expenses in certain notes to the Consolidated Financial Statements. The guidance will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating ASU 2024-03 to determine its impact on the Company's disclosures.

Income Tax Disclosure

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The new requirements became effective for annual periods beginning after December 15, 2024. The Company adopted ASU 2023-09 for the year ended December 31, 2025. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures.

NOTE C –PATENTS

The Company’s intangible assets at June 30, 2026 include patents with estimated remaining economic useful lives ranging from approximately 7 to 13 years. For all periods presented, all of the Company’s unexpired patents were subject to amortization. The gross carrying amounts and accumulated amortization related to acquired intangible assets as of June 30, 2026 and December 31, 2025 were as follows:

Amortization expense for the three months ended June 30, 2026 and 2025 was $44,000 and $37,000, respectively. Amortization expense for the six months ended June 30, 2026 and 2025 was $88,000 and $67,000, respectively. Future amortization of intangible assets for the next five years and thereafter is as follows:

The expiration dates of patents within the Company’s M2M/IoT Patent Portfolio range from September 2033 to December 2034. The expiration dates of patents within the Company’s HFT Patent Portfolio range from October 2039 to February 2040. The expiration dates of patents within the Company’s Smart Home Patent Portfolio range from May 2039 to May 2040. All of the patents within the Company’s Mirror Worlds Patent Portfolio, Cox Patent Portfolio and the Remote Power Patent have expired.

NOTE D –STOCKHOLDERS’ EQUITY

Stock Incentive Plan

The Company adopted the 2022 Stock Incentive Plan, (the “2022 Plan”) upon approval by its Board of Directors on July 25, 2022 and its stockholders on September 20, 2022. The 2022 Plan provides for the grant of any or all of the following types of awards: (a) stock options, (b) restricted stock, (c) deferred stock, (d) stock appreciation rights, and (e) other stock-based awards including restricted stock units.

As of June 30, 2026, there were 125,000 shares of common stock subject to outstanding awards under the 2022 Plan and 1,920,000 shares of common stock available for issuance under the 2022 Plan.

NOTE D – STOCKHOLDERS’ EQUITY (CONTINUED)

Restricted Stock Units

A summary of restricted stock unit activity for the three months ended June 30, 2026 is as follows (each restricted stock unit issued by the Company represents the right to receive one share of the Company’s common stock):

Restricted stock unit compensation expense was $42,000 and $80,000 for the three months ended June 30, 2026 and 2025, respectively. Restricted stock unit compensation expense was $121,000 and $161,000 for the six months ended June 30, 2026 and 2025, respectively. Stock-based compensation expense is included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

The Company had an aggregate of $111,000 of unrecognized restricted stock unit compensation as of June 30, 2026 to be expensed over a weighted average period of approximately one year.

All of the Company’s outstanding (unvested) restricted stock units have dividend equivalent rights. As of June 30, 2026 and December 31, 2025, there was $20,000 and $161,000, respectively, accrued for dividend equivalent rights which were included in other accrued expenses.

NOTE E – NETLOSS PER SHARE

Basic loss per share is calculated by dividing the net loss by the weighted average number of outstanding common shares during the period. Diluted per share data includes the dilutive effects of restricted stock units. Potentially dilutive shares of 125,000 and 517,500 at June 30, 2026 and 2025, respectively, consisted of outstanding restricted stock units. However, since the Company generated a net loss for the three and six months ended June 30, 2026 and 2025, potentially dilutive shares were not reflected in diluted net loss per share because the impact of such instruments was anti-dilutive.

NOTE E – NET LOSS PER SHARE** (CONTINUED)**

Computations of basic and diluted weighted average common shares outstanding were as follows:

NOTE F –FAIR VALUE MEASUREMENTS

ASC Topic 820 - Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value.

There are three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in an active market for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that are supported by little or no market activity; therefore, the inputs are developed by the Company using estimates and assumptions that the Company expects a market participant would use, including pricing models, discounted cash flow methodologies, or similar techniques.

The carrying value of the Company’s financial instruments, including cash and cash equivalents and accounts payable, approximates fair value because of the short-term nature of these financial instruments.

The Company’s marketable securities are classified within Level 1 because they are valued using quoted market prices in an active market.

The Company’s equity investment in ILiAD is measured on a non-recurring basis and is classified within Level 3 as it does not have a readily determinable value and is valued using observable price transactions for identical or similar investments of the same issuer and applying an option pricing model to adjust for differences and allocate enterprise value among ILiAD’s various classes of securities (see Note B[3] and Note K hereof).

NOTE F –FAIR VALUE MEASUREMENTS** (CONTINUED)**

The Company estimates the fair value of its equity investment in ILiAD using an option pricing model. Volatility is a significant unobservable input because the ILiAD’s equity is not publicly traded. The volatility assumption was developed using guideline public companies in similar industries, adjusted for size and illiquidity. The expected time to a liquidity event is estimated based on management’s assessment of potential scenarios. The risk-free rate corresponds to the U.S. Treasury yield with a term matching the expected time to liquidity. A discount for lack of marketability was applied, reflecting the restricted nature of the ILiAD shares held by the Company. The resulting fair value per-share range was estimated based on scenario weighting. Increases in volatility or the expected time to liquidity, or reductions in the marketability discount, would result in a higher fair value measurement under the option pricing model.

The following assumptions were used to calculate the fair value of the Company’s equity investment in ILiAD as of February 5, 2026 (since such date there have been no observable price changes in identical or similar securities of ILiAD):

NOTE G –MARKETABLE SECURITIES

Marketable securities as of June 30, 2026 and December 31, 2025 were composed of the following:

The Company’s marketable securities are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in an active market.

NOTE H –COMMITMENTS AND CONTINGENCIES

[1] Legal Fees

The Company engages law firms with respect to its patent litigation on a full contingency basis ranging from 15-40% (with certain exceptions) of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. The Company is responsible for all or a portion of the expenses incurred with respect to such litigation. With respect to proceedings at the U.S Patent and Trademark Office, the Company engages law firms on a fixed fee basis.

[2] Patent Acquisition

On March 31, 2025, the Company acquired its Smart Home Patent Portfolio from IoT and M2M Technologies, LLC for a purchase price of $400,000. In addition, the Company is obligated to pay the seller an additional $50,000 upon certain events. The Company is also obligated to pay the seller 12.5% of the first $100 million of net proceeds (after the deduction of expenses) and 5% of the net proceeds in excess of $100 million from Monetization Activities (as defined) related to the patent portfolio.

In connection with the Company’s acquisition of its HFT Patent Portfolio in March 2022, the Company paid the seller $500,000 in cash and had a contingent obligation to pay $500,000 and issue $375,000 of the Company’s common stock (up to a maximum of 375,000 shares) upon achieving certain milestones with respect to the HFT Patent Portfolio. The Company also has a contingent obligation to pay the seller 15% of the first $50 million of net proceeds (after deduction of expenses) generated by the HFT Patent Portfolio and 17.5% of net proceeds greater than $50 million. During the six months ended June 30, 2026, a milestone was achieved which entitled the seller to receive $250,000 in cash and $125,000 of the Company’s common stock (94,778 shares). This contingent purchase price of $375,000 was capitalized and amortized over the remaining useful life of the underlying patents and recorded in patents, net of accumulated amortization on the Company’s unaudited condensed consolidated balance sheet.

In connection with the Company’s acquisition of its Cox Patent Portfolio in February 2013, the Company is obligated to pay Dr. Cox 12.5% of the net proceeds (after deduction of expenses) generated by the Company from licensing, sale or enforcement of the patent portfolio.

In connection with the Company’s acquisition of its M2M/IoT Patent Portfolio in December 2017, the Company isobligated to pay the seller 14% of the first $100 million of net proceeds (after deduction of expenses) and 5% of net proceeds greater than $100 million from Monetization Activities (as defined) related to the patent portfolio. In addition, the seller will be entitled to receive from the Company $250,000 of additional consideration upon the occurrence of certain future events related to the patent portfolio.

NOTE H –COMMITMENTS AND CONTINGENCIES** (CONTINUED)**

[3] Leases

The Company has one operating lease for its principal office space in New Canaan, Connecticut that was extended through September 30, 2026.

There are no material residual guarantees associated with the Company’s lease and there are no significant restrictions or covenants included in the Company’s lease agreement.

The table below presents certain information related to the Company’s lease costs for the period ended:

NOTE I -EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS

On March 22, 2022, the Company entered into an employment agreement with its Chairman and Chief Executive Officer for a four-year term (“Term”), which among other things, included an annual base salary of $535,000 which was increased by 3% per annum during the Term, a discretionary annual bonus, an equity grant and certain incentive compensation. The Company’s Compensation Committee and the Chairman and Chief Executive Officer are currently discussing the terms of a new employment agreement while the Chairman and Chief Executive Officer continues to serve in such capacity.

Under the surviving terms of the prior employment agreement, so long as our Chairman and Chief Executive Officer continues to serve as an executive officer of the Company, whether pursuant to the Agreement or otherwise, he shall also receive incentive compensation in an amount equal to 5% of our gross royalties or other payments from Licensing Activities (as defined) (without deduction of legal fees or any other expenses) with respect to our Remote Power Patent and a 10% net interest (gross royalties and other payments after deduction of all legal fees and litigation expenses related to licensing, enforcement and sale activities, but in no event shall he receive less than 6.25% of the gross recovery) of our royalties and other payments relating to Licensing Activities with respect to patents other than our Remote Power Patent (including all of our existing patent portfolios and our investment in ILiAD).

In the event of a merger or sale of substantially all of our assets, we have the option to extinguish the right of our Chairman and Chief Executive Officer to receive future Incentive Compensation by payment to him of a lump sum payment, in an amount equal to the fair market value of such future interest as determined by an independent third party expert if the parties do not reach agreement as to such value.

NOTE J –LEGAL PROCEEDINGS

NOTE J – LEGAL PROCEEDINGS (CONTINUED)

On May 14, 2024, the Company filed a notice of appeal to the U. S. Court of Appeals for the Federal Circuit. On April 23, 2026, the U.S. Court of Appeals for the Federal Circuit issued a decision on the appeal overturning the judgment of non-infringement of the U.S District Court for the Southern District of New York relating to the Company’s Patent No. 8,205,237 (the “ ’237 Patent ”) for certain implementations of Google’s Content ID system. The Federal Circuit also affirmed the District Court’s judgement that (i) certain claims in other asserted patents were invalid, and (ii) a previous implementation of Content ID does not infringe the claims of the ’237 Patent. The Federal Circuit remanded the case to the District Court for further proceedings on the infringement case consistent with its decision. A trial date has been scheduled for December 7, 2026.

NOTE K –EQUITY INVESTMENTS

During the period December 2018 through August 2022, the Company made aggregate investments of $7,000,000 in ILiAD, a privately held clinical stage biotechnology company dedicated to the prevention and treatment of human disease caused by Bordetella pertussis. ILiAD is focused on validating its proprietary intranasal vaccine, BPZE1, for the prevention of pertussis (whooping cough). In connection with its initial investment, the Company’s Chairman and Chief Executive Officer obtained a seat on ILiAD’s Board of Managers. These investments were accounted for under the equity method of accounting in accordance with ASC 323 (see Note B[3]).

On February 5, 2026, ILiAD completed a $115,000,000 Series B preferred stock financing (the “Financing”). As part of the Financing, ILiAD converted from a limited liability company to a corporation. Following the closing of the Financing, ILiAD’s Board was reconstituted and the Company’s Chairman and Chief Executive officer no longer serves on the Board of ILiAD.

As a result of ILiAD’s closing of the Financing and the conversion to a corporation, as of February 5, 2026 the Company no longer accounted for its investment in ILiAD using the equity method, under which the Company recorded its proportionate share of ILiAD’s losses each reporting period, and adopted the cost value method of accounting in accordance with ASC 321. Under this guidance, investments in equity securities in privately-held companies without readily determinable fair values are generally recorded at cost, plus or minus subsequent observable price changes in identical or similar investments, less impairments (see Note B[3] hereof). Since February 5, 2026 (the closing date of the Financing), there have been no observable price changes in identical or similar securities of ILiAD.

As a result of an observable price change due to the Financing discussed above, the equity investment was remeasured during the six month period ended June 30, 2026 and the Company recorded an increase of $1,052,000 in the carrying value of its equity investment in ILiAD and recognized a corresponding gain of $1,052,000, which is included in “Other income – Gain on equity investment” in its unaudited condensed consolidated statements of operations.

After the closing of the Financing and on June 30, 2026, the Company holds 2,054,507 shares of common stock,262,908 shares of Series A preferred stock and 319,789 shares of Series A-1 preferred stock, representing approximately 2.5% of the outstanding securities of ILiAD on a fully diluted basis.

NOTE K – EQUITY INVESTMENTS (CONTINUED)

The Company evaluated the Financing and determined that it represented an orderly transaction for a similar investment of the same issuer. To estimate the fair value of its common stock, Series A preferred stock and Series A-1 preferred stock for purpose of remeasuring the carrying value of the investment, the Company considered the transaction price of the Series B preferred stock in the Financing and made adjustments, as necessary, to reflect differences in liquidation preferences, dividend rights, conversion features and other terms as compared to the classes of equity held by the Company. The Company applied a valuation model consistent with a market approach, which included the use of an option pricing model to allocate enterprise value among ILiAD’s various classes of equity (see Note F).

The Company has elected the practical expedient permitted by ASC 321, recorded the above equity investment on a cost basis and will continue to monitor the equity investment for impairment and additional observable price changes in future reporting periods.

NOTE L –STOCK REPURCHASES

On June 17, 2025, the Board of Directors authorized an extension and increase of the Company’s share repurchase program (the “Share Repurchase Program”) to repurchase up to $5,000,000 of common stock over the subsequent 24 month period. The common stock may be repurchased from time to time in open market transactions or privately negotiated transactions at the Company’s discretion except for repurchases under the Company’s 10b5-1 plans. The timing and amount of the shares repurchased is determined by management, except for repurchases under the Company’s 10b5-1 plans, based on its evaluation of market conditions and other factors. The Share Repurchase Program may be increased, suspended or discontinued at any time.

Since inception of the Share Repurchase Program in August 2011 through June 30, 2026, the Company has repurchased an aggregate of 10,682,470 shares of its common stock at an aggregate cost of $20,402,985 (exclusive of commissions) or an average per share price of $1.91.

During the three months ended June 30, 2026, the Company repurchased an aggregate of 34,980 shares of its common stock at an aggregate cost of $50,333 (exclusive of commissions ) or an average per share price of $1.44. During the six months ended June 30, 2026, the Company repurchased an aggregate of 95,976 shares of its common stock at an aggregate cost of $133,014 (exclusive of commissions) or an average per share price of $1.39.

On June 29 2026, the Company entered into a written trading plan (the “10b5-1 Plan”) under Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”). Adopting a trading plan that satisfies the conditions of Rule 10b5-1 allows a company to repurchase its shares at times when it might otherwise be prevented from doing so due to self-imposed trading black-outs or pursuant to insider trading laws. Purchases under the 10b5-1 Plan may be made during the following periods: (1) beginning on July 10, 2026 until two trading days after the Company issues a press release announcing its financial results for the quarter ended June 30, 2026, and (2) beginning on October 1, 2026 until two trading days after the Company issues a press release announcing its financial results for the quarter ended September 30, 2026. Under the 10b5-1 Plan, the Company’s third party broker may purchase up to 500,000 shares of the Company’s common stock, subject to certain price**,** market, volume and timing constraints, in accordance with the terms of the plan and subject to Rule 10b5-1 and Rule 10b-18 of the Exchange Act.

NOTE L – STOCK REPURCHASES (CONTINUED)

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations occurring on or after January 1, 2023. The amount of the excise tax is generally 1% of the net fair market value of the net shares repurchased (repurchases net of new share issuances) at the time of the repurchase. The excise tax applies in cases where the total value ofthe stock repurchased during the taxable year exceeds $1,000,000. During the three and six months ended June 30, 2026 and 2025, the Company didnot incur such excise tax.

At June 30, 2026, the dollar value of remaining shares that may be repurchased under the Share Repurchase Program was $4,777,417.

NOTE M –CONCENTRATIONS OF CREDIT RISK

The Company maintains cash and certificates of deposit in accounts at financial institutions. The accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. At June 30, 2026 and December 31, 2025, the Company had $4,000 and $9,000, respectively, of cash and certificates of deposit in excess of the FDIC insured limit. The Company maintains cash equivalents in brokerage accounts at financial institutions. At June 30, 2026 and December 31, 2025, the Company had cash equivalents of $9,221,000 and $13,302,000, respectively, in these brokerage accounts.

NOTE N –DIVIDEND POLICY

The Company’s dividend policy consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) anticipated to be paid in March and September of each year. The Company has paid semi-annual cash dividends consistent with its policy. The Company’s dividend policy undergoes a periodic review by the Board of Directors and is subject to change at any time depending upon the Company’s earnings, financial requirements and other factors existing at the time.