HeartBeam, Inc.

NOTE 1 – ORGANIZATION AND OPERATIONS

HeartBeam, Inc. (“HeartBeam” or the “Company”) is medical technology company focused on transforming cardiac care through the power of personalized insights. The Company’s aim is to deliver innovative, higher resolution ambulatory cardiac monitoring solutions that can be used by patients anywhere to enable the detection and monitoring of cardiac disease outside of a healthcare facility. The Company’s ability to develop higher resolution Electrocardiogram (“ECG”) solutions is achieved through the development of our proprietary and patented technology platform that allows us to collect the heart’s electrical activity from three dimensions and synthesize a 12-Lead (“12L”) ECG from these signals.

The Company has validated this technology and has received U.S. Food and Drug Administration (“FDA”) clearance of its initial telehealth products. HeartBeam’s credit card sized 3D ECG technology received FDA clearance for arrhythmia assessment in December 2024 and the 12-Lead ECG synthesis software received FDA clearance in December 2025. The HeartBeam System did not generate any revenue in 2025.

The Company was incorporated in 2015 as a Delaware corporation. The Company operates asone segment and its operations are based in Santa Clara, California.

NOTE 2 – GOING CONCERN

The Company has incurred losses each year since inception and has experienced negative cash flows from operations in each year since inception. As of December 31, 2025 the Company had approximately$4.4 million cash and cash equivalents.

Based on the current business plan assumptions, existing financing arrangements and expected cash burn rate, the Company believes that its existing liquidity is insufficient to fund operations for the next twelve months following the issuance of these financial statements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

Therefore, the Company’s continued operations will depend on its ability to raise additional capital through various potential sources, such as equity and/or debt financings or strategic relationships until sufficient revenue can be generated to achieve positive cash flow from operations. The Company has an At-the-Market (ATM) sales agreement pursuant to which the Company may sell up to an aggregate of $17.0 million shares of the Company’s common stock. There were 5,859,704 shares issued under the ATM during the year ended December 31, 2025. After December 31, 2025, the Company issued 970,467 shares under the ATM program, generating $1.5 million in net proceeds. As of March 11, 2026, there was approximately $8.1 million available for issuance as of the financial statement issuance date, potentially subject to other baby shelf limitations.

The Company continues to maintain strong financial discipline as it achieves critical clinical and regulatory milestones and begins a limited commercial launch for the HeartBeam System. Management believes the continued achievement of these milestones will provide the Company the ability to raise additional capital. However, management can provide no assurance that such financing or strategic relationships will be available on acceptable terms, or at all, which if not consummated would likely have a material adverse effect on the Company and its financial statements. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.

The Company is also subject to a number of risks similar to those of early stage companies, including dependence on key individuals and product candidates, the difficulties inherent in the development of a commercial market, competition from larger companies, other technology companies and other technologies.

The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying audited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP") and in conformity with the instructions on Form 10-K and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”) and have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

USE OF ESTIMATES

The preparation of financial statements in conformity with US 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 financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based on amounts that differ from those estimates. On an ongoing basis, management evaluates its estimate related to probability and timing related to vesting of the stock-based compensation related to probability and timing related to vesting of milestone options.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. As of December 31, 2025, the Company has$4.4 million held as cash and cash equivalents, of which $116,000 was held as cash equivalents. As of December 31, 2024, the Company had$2.4 million held as cash and cash equivalents, of which$1.1 million was held as cash equivalents. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”) and has cash balances in accounts which exceed the federally insured limits as of December 31, 2025 and December 31, 2024. The Company has made a deposit to the bank for their credit cards in the amount of$56,000 and is classified as restricted cash included in other assets as of December 31, 2025, and December 31, 2024.

PROPERTY AND EQUIPMENT, NET

Property and equipment including software development costs are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. In addition, the Company capitalizes internal use software development costs in accordance with ASC 350 and tooling cost in accordance with ASC 360. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment, net, to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are expensed as incurred.

The Company capitalizes tools that are depreciated based on useful life of 7 years. Construction-in-progress amounts are not subject to depreciation as such assets are not yet available for their intended use. During the year ended December 31, 2025, capitalization of tools into service was $311,100 and depreciation and amortization expense was $39,500. Property and equipment, net represents machinery and equipment of $475,400 and $203,800 as of December 31, 2025, and December 31, 2024, respectively. The capitalized internal use software cost represents software development expenses in relation to tools being developed for final testing of HeartBeam device to be sold post commercialization. Construction-in-progress related to tooling, internal use software and external software development that has not been placed into service amounting to $626,500 and $245,700 as of December 31, 2025, and December 31, 2024, respectively.

INVENTORY

Inventory is valued at the lower of cost and net realizable value using the First In First Out (FIFO) method. As of December 31, 2025, total inventory amounted to $103,000, representing initial raw material purchases to be used in commercial production. Inventory cost includes purchase price, import duties, transportation, and other directly attributable costs incurred in bringing the inventory to its present location and condition. The Company performs periodic physical counts and monitors inventory for obsolescence. No material write-downs were recorded during the year ended December 31, 2025.

RESEARCH AND DEVELOPMENT EXPENSE

The Company expenses the cost of research and development as incurred. Research and development expenses consist primarily of professional services costs associated with the development of cardiovascular technologies and products.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist primarily of cash, and accounts payable. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset transaction between market participants on the measurement date. Where available, fair value is based on observable market prices or is derived from such prices. The Company uses the market approach valuation technique to value its investments. The market approach uses prices and other pertinent information generated from market transactions involving identical or comparable assets or liabilities. The types of factors that the Company may consider in fair value pricing the investments include available current market data, including relevant and applicable market quotes.

Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

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Level 1 - Observable inputs such as quoted prices in active markets.

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Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

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Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the assignment of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

ACCOUNTING FOR WARRANTS

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company accounts for its currently issued warrant instruments in conjunction with the Company’s common stock in permanent equity. These warrants are indexed to the Company’s stock and meet the requirements of equity classification as prescribed under ASC 815. Warrants classified as equity are initially measured at fair value, and subsequent changes in fair value are not recognized so long as the warrants continue to be classified as equity.

STOCK-BASED COMPENSATION

The Company periodically issues stock options and restricted stock awards (“RSUs”) to employees and non-employees for services. The Company accounts for such grants issued and vesting to employees and non-employees based on ASC 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense over the vesting period. Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments. For awards with performance-based conditions, the Company evaluates the probability that the performance condition will be achieved and recognizes compensation cost over the service period based on that probability. If it becomes probable that the performance condition will be met, the Company recognizes the related compensation expense over that time period and if the expected performance obligation timing is modified due to changes, the expense attribution period is also modified on a prospective basis. If the performance condition is not expected to be met, no compensation cost is recognized, and any previously recognized expense is reversed.

The fair value of stock options on the date of grant is calculated using the Black-Scholes option pricing model, based on key assumptions such as the fair value of common stock, expected volatility and expected term. These estimates require the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the calculation of the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. These assumptions are primarily based on historical data, peer company data and the judgment of management regarding future trends and other factors. The Company has estimated the expected term of its employee stock options using the “simplified” method, whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the option due to its lack of sufficient historical data. The risk-free interest rates for periods within the expected term of the option are based on the US Treasury securities with a maturity date commensurate with the expected term of the associated award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The Company accounts for forfeitures when they occur.

Compensation cost for RSUs issued to employees and non-employees is measured using the grant date fair value of the award, and expense is recognized over the service period, adjusted to reflect actual forfeitures.

INCOME TAXES

The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being recognized. Changes in recognition and measurement are reflected in the period in which the change in judgment occurs. Interest and penalties related to unrecognized tax benefits are included in income tax expense.

NET LOSS PER COMMON SHARE

Basic net loss per share excludes the effect of dilution and is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options and warrants to the extent dilutive. Basic net loss per share was the same as diluted net loss per share for the years ended December 31, 2025 and 2024 as the inclusion of all potential common shares outstanding would have an anti-dilutive effect.

In accordance with ASC 260-10-45-13, exercisable penny options are included in the calculation of weighted average basic and diluted earnings per share. As of December 31, 2025 and 2024,113,809 and 153,443 penny options have been included in the calculation of weighted average basic and diluted earnings per share.

The following is a summary of awards outstanding as of December 31,2025 and 2024, which are not included in the computation of basic and diluted weighted average shares:

Segment Reporting

The Company operates inone reporting segment, The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM uses operating expenses to measure performance against progress in its clinical trials and its product development. The determination of a single business segment is consistent with the financial information regularly provided to the Company’s CODM. The Company’s CODM reviews and evaluates the total net loss for purposes of assessing performance, making operating decisions, allocating resources, and planning and forecasting for future periods. In addition to the significant expense categories included within the total net loss presented on the Company's Statements of Operations, the following table sets forth significant segment expenses:

*Other primarily includes patent fees and testing expenses for years ended December 31,2025 and 2024.

RECENTLY ISSUED ACCOUNTING STANDARDS

Not Yet Adopted as of December 31, 2025:

In November 2024, the FASB issued ASU 2024-03 (updated ASU 2025-01 issued in January 2025), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires the disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting ASU 2024-03.

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 simplifies the accounting for internal-use software by removing the project-stage model and establishing a single capitalization threshold based on management’s authorization and commitment to fund a project and the probability that the software will be completed and used as intended. ASU 2025-06 is effective for the Company’s annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-06.

In November 2025, the FASB issued ASU 2025-11 "Interim Reporting (Topic 270): Narrow-Scope Improvements" to clarify and improve the interim reporting guidance in ASC Topic 270. ASU 2025-11 is effective for the Company’s annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.

Adopted as of December 31, 2025:

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted. The Company adopted the guidance prospectively in the fiscal year beginning January 1, 2025 and additional required disclosures have been included in Note 8.

NOTE 4 – STOCKHOLDERS’ EQUITY

COMMON STOCK

On May 2, 2024, the Company entered into a Sales Agreement (“PV Sales Agreement”) with Public Ventures, LLC, as sales agent (“Public Ventures” or “Agent”), pursuant to which Company may sell up to an aggregate of approximately $17 million of shares of the Company’s common stock. There were 309,634 shares issued under the ATM during the year ended December 31,2024. There were 5,859,704 shares issued under the ATM during the year ended December 31, 2025 resulting in net proceeds of $6.3 million (net of issuance cost of $0.2 million).

During the year ended December 31, 2025, the Company entered into an Underwriting Agreement with Public Ventures, LLC to consummate an offering (the “February Public Offering”) and raised approximately $11.5 million in gross proceeds. This equated to approximately $10.3 million in net proceeds from the offering after deducting commissions and other estimated offering expenses amounting to $1.2 million payable by the Company as listed below:

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On February 12, 2025, the Company entered into a Underwriting Agreement with Public Ventures LLC to consummate an offering of 5,882,353 shares of Common Stock at an offering price of $1.70 per share, which closed on February 14, 2025. The Company received $10.0 million in gross proceeds from the offering, before deducting underwriter agent discounts and commissions. In addition, the subscription agreement granted 588,235 underwriter warrants with an exercise price of exercise price is $2.13 as part of this transaction.

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On February 25, 2025, the Company announced that Public Ventures, LLC exercised its over-allotment option to purchase an additional 864,033 shares of Common Stock at $1.70 per share, resulting in additional gross proceeds of approximately $1.5 million, before deducting the underwriting discount and commissions. In addition, the subscription agreement granted 86,403 underwriter warrants with an exercise price of $2.13 as part of this transaction. After giving effect to the exercise of the overallotment option, the total number of shares sold by HeartBeam in the public offering increased to 6,746,386 shares and gross proceeds increased to approximately $11.5 million.

During the years ended December 31, 2025 and 2024 the Company issued 452,518 and 322,235 shares of common stock upon exercise of vested stock options and vesting of restricted stock units. Further the Company issued 97,895 shares of common stock for services during the year ended December 31,2025.

WARRANTS

As part of February Public Offering, the Company issued 674,638 placement agent underwriter warrants to purchase shares of Common Stock sold in the offering, with an exercise price of $2.13 per share and are exercisable forfive years from the date of issuance, after a 360-day lockup period. The Company performed an assessment and accounted for these warrant instruments in conjunction with the Company’s common stock in permanent equity. These warrants are indexed to the Company’s stock and meet the requirements of equity classification as prescribed under ASC 815. These warrants classified as equity are initially measured at fair value of $1.2 million treated as offering cost, which is recorded as additional paid in capital, and subsequent changes in fair value are not recognized so long as the warrants continue to be classified as equity. The Company used an exercise price of $2.13, expected term of 5 years, risk free rate of 4.48%, and volatility of 115% to calculate the fair value of warrants.

A summary of the outstanding warrants as of December 31,2025 and 2024 is as follows:

NOTE 5 – STOCK-BASED COMPENSATION

In 2015, the Company’s Board of Directors approved the HeartBeam, Inc. 2015 Equity Incentive Plan ("2015 Plan"), to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors, and consultants, and to promote the success of the Company’s business. The 2015 Plan provides for the grant of stock options and RSU’s to purchase common stock of which 1,636,362 were authorized by the board of which 876,797 are outstanding as of December 31,2024. The 2015 Plan was terminated upon shareholder approval of the 2022 Equity Incentive Plan (“2022 Equity Plan”) whereby no new awards can be issued under the 2015 Plan.

The Company’s shareholders approved the 2022 Equity Plan at the annual meeting of stockholders held on June 15, 2022. Under the 2022 Equity Plan, the number of shares available for issuance will be increased on the first day of each fiscal year beginning with the 2023 fiscal year, in an amount equal to the lesser of 3,800,000 shares, five percent

(5%) of the total number of shares of all classes of common stock of the Company outstanding on the last day of the immediately preceding fiscal year, and a lesser number of shares determined by the administrator.

At the July 11, 2025, annual stockholders’ meeting the 2022 Equity Incentive Plan was amended to increase the number of authorized shares to 11,900,000 shares and was approved by stockholders’.

The 2022 Equity Plan includes a provision to add-back any cancelled options from the 2015 Plan up to 1,372,816 shares. As of December 31, 2025, there are 295,674 shares from the 2015 Plan that are included in the 5,440,666 shares available for issuance under the 2022 Equity Plan.

During 2023, the Company granted 2,208,000 options to various executives and employees. Sixty percent (60%) of these options vest based on FDA Clearance for marketing of HeartBeam’s synthesized 12L product and the remaining forty percent (40%) vest monthly over a period of 48 months. The Company calculated the fair value for each of these grants using the Black-Scholes option pricing model and it is expensed based on management’s probability assessment of FDA clearance. During the year, management performed its probability assessment regarding the milestone achievement date and as a result of FDA clearance in December 2025, these awards are now fully vested as of December 31,2025. The 60% milestone options are issued and outstanding as of December 31,2025.

The Company received proceeds of$13,000 from the exercise of stock options during the year ended December 31,2025 and$0.1 million during the year ended December 31,2024.

STOCK OPTIONS

The following is a summary of stock option activity during the years ended December 31,2025 and 2024:

(*)Intrinsic value is based onthe fair market value of the Company's common stock.

During the year ended December 31, 2025 and December 31, 2024, options were granted to consultants and employees. During the year ended December 31, 2025,40,625 options were exercised by one employee using net settlement, which resulted in net issuance of 9,081 shares,7,708 options were exercised by one employee using sell to cover, and 41,451 options were exercised by consultants for a de minimis amount of proceeds.

For the years ended December 31, 2025 and 2024, the assumptions used in the Black-Scholes option pricing model, which was used to estimate the grant date fair value per option, were as follows:

RESTRICTED STOCK UNITS

The following is a summary of RSUs award activity during the years ended December 31,2025 and 2024:

STOCK BASED COMPENSATION

The following is a summary of stock-based compensation expense:

As of December 31, 2025 total compensation cost not yet recognized related to unvested stock options and unvested RSUs was approximately$6.0 million and$0.3 million, respectively, which is expected to be recognized over a weighted-average period of 2.40 years and 0.52 years, respectively.

NOTE 6 – RELATED PARTY TRANSACTIONS

During April 2024, the Company entered into consulting agreement withone of the independent Board of Directors to provide business development consulting services. For these consulting services, the Company agreed to pay$5,000 per month as remuneration and granted 70,000 options to vest during over a period of 36 months. During year ended December 31,2025, the Company recognized approximately$102,300 related to these consulting services, which includes stock based compensation expense of approximately$42,300. During year ended December 31, 2024, the Company recognized approximately$75,800 related to these consulting services, which includes stock based compensation expense of approximately$30,800.

NOTE 7 – COMMITMENTS

Lease Obligations

Prior to February 1, 2024, the Company was in a month-to-month lease agreement for its headquarters. The agreement was for an undefined term that could be cancelled at any time, givenone month’s notice by either party. The Company’s monthly rent expense associated with this agreement was approximately $1,800. This headquarters lease was in the name of the Company’s Chief Executive Officer, and the cost was reimbursed monthly to CEO until January 31, 2024 when the Company terminated the month-to-month lease, and entered into a new lease in name of the Company with the same landlord. The new lease commenced on February 1, 2024, for initial period of 3 years. The Company performed an assessment and concluded that amount of operating lease right-of-use, or ROU assets was below the Company’s capitalization thresholds set in accordance with ASC 842. For the year ended December 31, 2025 and 2024, rent was approximately$22,200 and$21,000, respectively.

Professional Services Agreement

On August 12, 2025, the Company has entered into an agreement with an independent contractor to perform certain services related to development and enhancement of the HeartBeam 12-lead ECG patch. As per terms of the agreement, the Company will pay the contractor approximately $0.7 million for these services. For the year ended, December 31, 2025, the Company has expensed $0.7 million based on actual services performed by the contractor and accrued liability balance of $0.6 million as of December 31, 2025. As of December 31, 2025, the Company has a remaining commitment of $0.6 million.

NOTE 8 - INCOME TAX

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

Income tax expense consisted of the following for the years ended December 31, 2025 and December 31, 2024:

Supplemental disclosure of cash paid during the period for income taxes (net of refunds received) is as follows:

The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory tax rate for the years ended December 31,2025 and December 31, 2024 is as follows:

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

Realization of net deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $4,450,800 for the period ended December 31,2025.

On July 4, 2025, the One Big Beautiful Bill was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal tax system. Significant components include restoration of 100% accelerated tax depreciation on qualifying property including expansion to cover qualified production property. Another major aspect includes the return to immediate expensing of domestic research and experimental expenditures (“R&E”) which in some cases may include retroactive application back to 2021 for businesses with gross receipts of less than $31 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses. The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent. Less favorable business provisions include limitations on tax deductions for charitable contributions.

The OBBBA modified the U.S. International Tax provisions for Global Intangible Low-Taxed Income (“GILTI”), Foreign-Derived Intangible Income (“FDII”), and the Base-erosion Anti-abuse Tax (“BEAT”) effective for tax years starting after December 31, 2025. The tax rate on GILTI, now renamed to Net CFC Tested Income (“NCTI”), is now 12.6%. The FDII rules, now renamed to Foreign Derived Deduction Eligible Income (“FDDEI”), now carry a 14% tax rate on FDDEI eligible income. The OBBB Act increases the BEAT rate from 10% to 10.5%.

As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $46.9 million and $18.4 million respectively. Federal net operating loss carryforwards in the amount of $2.4 million begin expiring in 2035. Federal net operating loss carryforwards in the amount of $44.5 million have an indefinite life. Federal NOL carryforwards generated after tax year 2021 are subject to an 80% limitation on taxable income, do not expire and will carryforward indefinitely. State net operating loss carryforwards in the amount of $18.4 million begin expiring in 2035 and approximately $0.0 thousand have an indefinite life.

The Company has federal R&D credit carryforwards of approximately $1,417,700 which will begin to expire in 2041 and California R&D credit carryforwards of approximately $646,400 which do not expire.

The utilization of the Company’s net operating losses may be subject to a U.S. federal limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and other similar limitations in various state jurisdictions. Such limitations may result in a reduction of the amount of net operating loss carryforwards in future years and possibly the expiration of certain net operating loss carryforwards before their utilization.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examinations by federal, state and local jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from inception to the present in the U.S. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities to the extent utilized in a future period.

As required by the uncertain tax position guidance in ASC No. 740, Income Tax the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied the uncertain tax position guidance in ASC No. 740, Accounting for Income to all tax positions for which the statute of limitations remained open. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision. As of the December 31, 2025, the Company had no interest related to unrecognized tax benefits. No amounts of penalties related to unrecognized tax benefits were recognized in the provision for income taxes.

The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors.