BiomX Inc.

NOTE 1 – GENERAL

BiomX Inc. (individually and together with its subsidiaries, as applicable, the “Company” or “BiomX”) was incorporated in Delaware on November 1, 2017 as a blank check company for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities.

On October 29, 2019, the Company consummated a business combination with BiomX Ltd. (“BiomX Israel”), following which BiomX Israel became a wholly owned subsidiary of the Company. In connection with the transaction, the Company acquired all of the outstanding shares of BiomX Israel, and the former shareholders of BiomX Israel received 79,311 shares of the Company’s Common Stock, representing 65% of the Company’s issued and outstanding shares immediately after the transaction (the “Recapitalization Transaction”). BiomX Israel was deemed the accounting acquirer in the Recapitalization Transaction. The Company’s Common Stock is traded on the NYSE American under the symbol “PHGE.”

Historically, the Company, through BiomX Israel, operated as a clinical-stage biopharmaceutical company focused on developing natural and engineered phage cocktails designed to target and destroy harmful bacteria in chronic diseases.

On August 24, 2025, BiomX Israel filed an application with the Israeli Registrar of Companies for the expedited voluntary liquidation of RondinX Ltd. (“RondinX”), its subsidiary. The voluntary liquidation became effective on December 3, 2025. RondinX had no significant operations as of the liquidation date.

In December 2025, BiomX Israel commenced insolvency proceedings in Israel, following the announcement on December 8, 2025, of its discontinuation of the ongoing Phase 2b clinical trial of nebulized phage therapy BX004 in patients with cystic fibrosis associated with chronic Pseudomonas aeruginosa infections. As a result, BiomX Israel implemented cost-cutting measures including a significant reduction in workforce. On January 25, 2026, the Central District Court in Lod, Israel, appointed a trustee (the “Trustee”) to BiomX Israel to handle the administration of the insolvency proceedings. See further information in Note 7.

Following the discontinuation of the Company’s Phase 2b clinical trial of BX004 and the commencement of insolvency proceedings with respect to BiomX Israel, the Company began transitioning its strategic focus to the defense, security and critical infrastructure technology markets.

During the first quarter of 2026 and through the issuance date of these consolidated financial statements, the Company underwent significant changes in management, capital structure and business operations. The Company’s Board of Directors and executive management team were reconstituted, including the appointment of new Chief Financial Officer, effective February 27, 2026, and new Chief Executive Officer, effective March 4, 2026. The Company raised gross proceeds of $3,000 in January 2026 from the issuance of Series Y Convertible Preferred Stock (net proceeds amounted to $2,623, less $377 of issuance costs). On March 19, 2026, the investors exercised their warrants into common stock of the Company. As of March 31, 2026 the gross proceeds amounting to $3,300 have not yet been received and were used to fund the acquisition of 60% of Dr. Frucht Systems Ltd. (“DFSL”) on April 13, 2026 (see below).

Subsequent to March 31, 2026, the Company acquired Zorro Net Ltd. (“ZorroNet”) on April 10, 2026, acquired 60% of Dr. Frucht Systems Ltd. (“DFSL”) on April 13, 2026, and formed X Security & Defense Ltd. (“X Security”) as a wholly owned Israeli subsidiary focused on security, defense and first-response technologies (see Note 11 - Subsequent Events). In addition, Mandragola Ltd, a company formed under the laws of the State of Israel (“Mandragola”), committed to provide, or make available, a credit line to support DFSL’s operations, subject to terms to be mutually agreed.

NOTE 1 – GENERAL (continued)

As of the issuance date of these consolidated financial statements, following the foregoing events, the Company’s defense and security activities are expected to be conducted through X Security, DFSL and ZorroNet.

On November 13, 2025, the Board of Directors approved a 1-for-19 reverse stock split of the Company’s Common Stock (the “2025 Reverse Stock Split”), which became effective on November 25, 2025. See Note 8A for further information.

The Company has incurred significant losses and negative cash flows from operations and incurred an accumulated deficit of$236,036 as of March 31, 2026. These are expected to continue in the foreseeable future. The Company plans to continue to fund its operations, through issuance of debt and/or equity securities, loans, or other alternatives.

Management believes that its current funds, together with revenues expected to be generated by DFSL and ZorroNet beginning in the second quarter of 2026 will be sufficient to fund its operations only for the next several months following the issuance date of these financial statements. The Company’s ability to raise capital is subject to market conditions and other aspects, which may affect the terms and availability of such funding and there is no assurance that the Company will be successful in such processes. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that may result from the outcome of such circumstances.

NOTE 1 – GENERAL (continued)

In October 2023, a large-scale terrorist attack in southern Israel led to the outbreak of armed conflict between Israel and Hamas. The conflict subsequently expanded to additional regional fronts and contributed to a period of heightened geopolitical and security instability in the region.

During 2024 and 2025, hostilities included military operations in Lebanon and direct confrontations involving Iran. These developments increased regional uncertainty and, at times, resulted in temporary disruptions to the Company’s operations in Israel, including limited interruptions to routine business activities.

In September 2025, a ceasefire agreement was reached between Israel and Hamas, and all remaining living Israeli hostages were released and returned to Israel. While the ceasefire has generally held as of the date of these financial statements, the security situation remains sensitive, and the potential for renewed hostilities or broader regional escalation cannot be ruled out. More recently, in February 2026, hostilities between Israel and Iran escalated again. Israel, together with the United States, launched a major joint military campaign of air and missile strikes against targets in Iran, which triggered a broad Iranian response and contributed to significant regional instability. In addition, In March 2026, tensions escalated once again in the Lebanese border as Hezbollah launched an attack on Israel, firing rockets across the border.

In April 2026, a ceasefire agreement was reached; however, the ceasefire remains fragile and the overall security situation in Israel and the region continues to be uncertain.

In response, Israel carried out targeted airstrikes against Hezbollah positions in Lebanon, raising concerns among the international community about the potential for a wider conflict. The situation remains highly fluid, and we are unable to predict when, or on what terms, this escalation will be resolved. Accordingly, the extent of the continued impact on the Company’s operations and financial results, if any, cannot be reasonably estimated at this time.

As a significant portion of the Company’s future activities, are located in Israel, and members of the Company’s management and certain employees and consultants are located in Israel, the Company’s operations may be affected by economic, political, geopolitical and military conditions affecting Israel. Any escalation or expansion of the war could have a negative impact on both global and regional conditions and may adversely affect Company’s business, financial condition, and results of operations.

The Company is unable to predict the duration or severity of the current conflict or any potential escalation. To date, the conflict did not have a significant effect on Company’s activities however, the Company is continuing to regularly follow developments on the matter and is examining the effects on its operations and the value of its assets.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for condensed financial information. They do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement have been included (consisting only of normal recurring adjustments except as otherwise discussed).

The financial information contained in this report should be read in conjunction with the annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, that the Company filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 19, 2026. The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31, 2025. The significant accounting policies adopted and used in the preparation of the financial statements are consistent with those of the previous financial year.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities in the financial statements and the amounts of expenses during the reported years. The most significant estimates in the Company’s financial statements relate to financial instruments fair value valuation. These estimates and assumptions are based on current facts, future expectations, and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates.

Basic loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period, fully vested warrants with no exercise price for the Company’s Common Stock and fully vested pre-funded warrants for the Company’s Common Stock at an exercise price of $0.01 per share and $0.0001 per share, as well as A&R Warrants (as defined in Note 9A) at an exercise price of $0.0001 per share, as the Company considers these shares to be exercised for little to no additional consideration. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period, plus the number of shares of Common Stock that would have been outstanding if all potentially dilutive shares of Common Stock had been issued, using the treasury stock and if-converted method, in accordance with Accounting Standards Codification (“ASC”) 260-10, “Earnings per Share.”

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company computes net loss per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between shares of Common Stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company considers its Redeemable Convertible Preferred Shares to be participating securities as the holders of the Redeemable Convertible Preferred Shares would be entitled to dividends that would be distributed to the holders of Common Stock, on a pro-rata basis assuming conversion of all Redeemable Convertible Preferred Shares into shares of Common Stock. These participating securities do not contractually require the holders of such shares to participate in the Company’s losses. As such, net loss for the periods presented was not allocated to the Company’s participating securities.

NOTE 3 – FAIR VALUE MEASUREMENTS

The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data.

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

There were no changes in the fair value hierarchy levelling during the three months ended March 31, 2026 and year ended December 31, 2025.

Fair value (continued)

The Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

The Company’s financial liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

The Company determined the fair value of the embedded conversion derivative using the Binomial Option Pricing Model, a Level 3 measurement, within the fair value hierarchy (see Note 7A).

The following table presents the changes in fair value of the level 3 liabilities for the period from December 31, 2025 through March 31, 2026:

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

The Company determined the fair value of the liabilities for the warrants using the Black-Scholes model, a Level 3 measurement, within the fair value hierarchy.

NOTE 4 – OTHER CURRENT ASSETS

NOTE 5 – OTHER ACCOUNT PAYABLES

NOTE 6 – DECONSOLIDATION OF BIOMX LTD

On January 25, 2026, following the commencement of insolvency proceedings with respect to BiomX Israel, the District Court of the Central District, in Lod, Israel, appointed a Trustee to BiomX Israel to handle the administration of the insolvency proceedings. The Trustee is responsible for managing the subsidiary’s assets, evaluating claims from creditors, and overseeing the orderly wind-down or restructuring of BiomX Israel’s operations in accordance with applicable Israeli insolvency law. On February 4, 2026, the Trustee notified BiomX Israel’s Chief Executive Officer and Chief Financial Officer that their roles as officers of BiomX Israel had been terminated. The Company determined that the termination is considered as a change of control as of February 4, 2026, and that BiomX Israel should be deconsolidated from the Company’s consolidated financial statements. The Company does not expect to recover any significant value from its investment in BiomX Israel

As of February 4, 2026, following the deconsolidation, the assets and liabilities of Biomx Ltd. were no longer included in the Company’s consolidated balance sheet.

During the three months ended March 31, 2026, the Company recognized a gain from deconsolidation of Biomx Ltd. of approximately $1,860, which is included in net gain from deconsolidation.

NOTE 6 – DECONSOLIDATION OF BIOMX LTD (continued)

Balance sheet of Biomx Ltd. included in deconsolidation were as follows:

NOTE 7 – STOCKHOLDERS EQUITY

Reverse Stock Split

On October 16, 2025, the Company’s stockholders approved a reverse stock split at a ratio within a range of 1-for-5 and 1-for-20 at such time as the Board of Directors shall determine, in its sole discretion, at any time before October 16, 2026. On November 13, 2025, the Board of Directors approved a 1-for-19 Reverse Stock Split of the Company’s shares of Common Stock.

The 2025 Reverse Stock Split did not change the par value of the Common Stock nor the authorized number of shares of Common Stock, preferred stock or any series of preferred stock.

Unless otherwise indicated, all amounts of issued and outstanding stock contained in the accompanying consolidated financial statements have been adjusted to reflect the 1-for-19 2025 Reverse Stock Split for all prior periods presented. Proportional adjustments were also made to shares underlying outstanding equity awards, warrants and Redeemable Convertible Preferred Shares, and to the number of shares issued and issuable under the Company’s stock incentive plans and certain existing agreements.

Preferred Stock:

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, rights and preferences as may be determined from time to time by the Company’s Board of Directors.

On March 15, 2024, the Company issued 40,470 and 216,417 Redeemable Convertible Preferred Shares, par value $0.0001 per share, as part of the Acquisition and the March 2024 PIPE, respectively.. During the years ended December 31, 2025 and 2024, 223 and 109,152 Redeemable Convertible Preferred Shares were converted into 1,174 and 574,484 shares of the Company’s Common Stock, respectively.

On January 13, 2026, the Company issued 3,300 shares of Series Y Convertible Preferred Stock to investors gross proceeds of $3.0 million. Between March 10 to March 17, 2026 all 3,300 Series Y shares converted in four tranches into 1,650,000 shares of Common Stock (see below)

January 2026 private placement:

On December 26, 2025, the Company entered into a Securities Purchase Agreement (the “2026 Private Placement “) with an investor (the “Investor”) pursuant to which the Company agreed to issue and sell, in a private placement transaction, an aggregate of 3,300 shares of the Company’s newly created Series Y Convertible Preferred Stock, par value $0.0001 per share (the “Series Y Preferred Stock”), convertible into up to 1,650,000 Common Stock shares, with an aggregate stated value of $3,300, together with warrants to purchase shares of the Company’s Common Stock, par value $0.0001 per share (the “Securities Purchase Agreement Warrants”), in exchange for aggregate gross proceeds to the Company of $3,000, before deducting placement agent fees and other offering expenses, subject to customary closing conditions. On January 13, 2026, following the satisfaction of the closing conditions, the Company consummated the private placement and received gross proceeds of $3,000 from the investor, and issued the Series Y Preferred Stock and Securities Purchase Agreement Warrants in accordance with the terms of the Securities Purchase Agreement.

Each share of Series Y Preferred Stock has a stated value of $1,000 and is convertible into shares of Common Stock. The initial conversion price was $2.00 per share of Common Stock, subject to customary adjustments for stock splits, stock dividends, stock combinations, recapitalizations and similar transactions. In addition, following receipt of stockholder approval as required under the applicable rules of NYSE American, the conversion price was reduced to equal the lower of (i) the conversion price, as defined in the Certificate of Designations, then in effect, and (ii) the closing sale price of the Common Stock on the trading day immediately prior to the date such stockholder approval is obtained.

Holders of Series Y Preferred Stock are entitled to receive dividends on the stated value of the Series Y Preferred Stock at a rate of 15% per annum, payable quarterly, at the Investor’s sole election, either in cash or shares of Common Stock, subject to adjustment as set forth in the Certificate of Designations. Except as otherwise required by law or as expressly provided in the Certificate of Designations, the Series Y Preferred Stock does not have voting rights. Each share of Series Y Preferred Stock will have a maturity of one year from the closing date.

Conversion is subject to beneficial ownership limitations of 19.99% of the Company’s outstanding Common Stock. The Series Y Convertible Preferred Stock accrues cumulative dividends on its stated value, compounded quarterly. Dividends are payable, at the Company’s election, either in cash or in shares of common stock through inclusion in the conversion amount upon conversion. Upon the occurrence and during the continuance of a triggering event, dividends accrue at an increased default rate of 24% per annum. All accrued and unpaid dividends are payable upon redemption or at maturity. The Company may be required to redeem the Series Y Preferred Stock at an amount equal to the conversion amount multiplied by the applicable redemption premium, plus any accrued and unpaid dividends and charges.

The Securities Purchase Agreement Warrants entitle the holder to purchase up to an aggregate of 3,300,000 shares of the Company’s Common Stock, representing 200% of the 1,650,000 of shares of Common Stock issuable upon conversion of the Series Y Preferred Stock. The Securities Purchase Agreement Warrants are exercisable immediately upon issuance, subject to beneficial ownership limitations, and will expire five years from the date of issuance. The exercise price of the Securities Purchase Agreement Warrants is $2.00 per share, subject to customary anti-dilution adjustments.

As part of this financing, the Company issued 99,000 warrants to HC Wainwright & Co., LLC, as placement agent fees. These placement agent warrants have an exercise price of $2.50 per share and a five-year term from the date of issuance.

On March 13, 2026, the Company and the Investor entered into an amendment to the Warrant (the “Warrant Amendment”), pursuant to which, the Investor and the Company agreed to (i) amend the term of the Warrant, such that the Warrant will expire on December 31, 2026, (ii) reduce the exercise price of the Warrant from $2.00 to $1.00 per share, and (iii) revise the method of determining the number of shares of Common Stock issuable upon a cashless exercise of the Warrant such that the number of shares of Common Stock issuable upon cashless exercise will be determined by reference, where applicable, to the lowest VWAP on thefive (5) trading days immediately preceding the date on which the notice of exercise is submitted to the Company, rather than the VWAP on the day immediately preceding the date on which the notice of exercise is submitted. No proportional adjustment to the number of shares of Common Stock issuable upon exercise of the Warrants was made as a result of the Warrant Amendment. The value of the change in terms of warrant liability was calculated by the Company as income of $1,219 and was recorded to unaudited condensed consolidated financial statements of comprehensive loss.

Between March 11, 2026 and March 17, 2026, the Investor converted all 3,300 outstanding shares of Series Y Preferred Stock into 1,650,000 shares of Common Stock in accordance with the certificate of designation governing the Series Y Preferred Stock. Following such conversions, no shares of Series Y Preferred Stock remain outstanding.

On March 19, 2026, the Warrants were exercised in full at the amended exercise price of $1.00 per share, resulting in the issuance of 3,300,000 shares of Common Stock and aggregate gross proceeds to the Company of $3,300. Following such exercise, no Series Y Preferred Stock Warrants remained outstanding. As of March 31, 2026 the gross proceeds amounting to $3,300 have not yet been received and were used to fund the acquisition of 60% of DFSL on April 13, 2026 (see Note 11 below).

The Company accounts for the investor warrants as liabilities because certain provisions in the warrants, including Fundamental Transaction-related provisions, preclude equity classification under ASC 815-40. Accordingly, the warrants were initially recorded at fair value on the issuance date and are remeasured to fair value at each reporting date, with changes in fair value recognized in earnings.

In March 2026, in connection with the amendment of certain warrant terms, the Company remeasured the fair value of the warrant liabilities immediately before and immediately after the modification and recognized the resulting incremental fair value in unaudited condensed consolidated statements of comprehensive loss. In addition, immediately prior to the exercise of warrants in March 2026, the Company remeasured the related warrant liabilities to fair value and, upon exercise, reclassified the then-current fair value of the exercised warrants to additional paid-in capital.

The Company accounts for the Placement Agent Warrants as equity-classified awards. The Placement Agent Warrants were issued to the placement agent in connection with the January 2026 private placement as compensation for placement agent services. The Company measured the warrants at fair value on the grant date and recorded the corresponding amount in additional paid-in capital in accordance with ASC 718 “Compensation - Stock Compensation”.

The Company accounts for the Series Y Convertible Preferred Stock as temporary equity. The Series Y Preferred Stock contains redemption features, including a contractual maturity date and redemption rights that are not solely within the Company’s control. However, the Company determined that the holder’s conversion feature was substantive at issuance. As a result, the Series Y Preferred Stock is presented outside of permanent equity as temporary equity. The carrying amount is subsequently accreted to the redemption amount, with such accretion recognized as a deemed dividend. The Series Y Preferred Stock bears dividends at 15% per annum.

The Company also determined that the embedded conversion feature bifurcated from the host instrument. The embedded conversion derivative was initially recognized at fair value and is remeasured to fair value at each reporting date, with changes in fair value recognized in the condensed consolidated statements of comprehensive loss.

The fair value of the embedded conversion derivative was calculated using the Binomial Option Pricing Model. The assumptions used to perform the calculations for the issuance date and exercise date, are volatility of 113% and 166%, risk free rate of 4% and 4%, time to maturity of 1 year and 10 months, respectively.

The fair value of the embedded conversion derivative at issuance date was calculated at $1,886 and was recorded in the condensed consolidated statements of comprehensive loss as Day 1 loss.

In March 2026, immediately prior to the conversion of the Series Y Convertible Preferred Stock into common stock, the Company remeasured the embedded conversion derivative to fair value of $7,818 and changes in fair value were record in the condensed consolidated statements of comprehensive loss. Upon conversion, the carrying amount of the Series Y Convertible Preferred Stock and the fair value of the embedded conversion derivative were reclassified to stockholders’ equity.

The Company allocated the gross proceeds from the January 2026 private placement to the liability-classified investor warrants and to the embedded conversion derivative associated with the Series Y Convertible Preferred Stock, in each case based on their initial fair values, with no proceeds allocated to the Series Y Convertible Preferred Stock.

Issuance costs were recognized immediately in the condensed consolidated statements of comprehensive loss.

Warrants:

As of March 31, 2026, the Company had the following outstanding warrants to purchase Common Stock issued to stockholders:

NOTE 7 – STOCKHOLDERS EQUITY (continued)

The Company accounted for the Agents Warrants under the scope of ASC 718-10 “Stock-Based Payment”, (“ASC 718-10”), and treated them as issuance costs of the March 2024 PIPE as the Company considers these Warrants as consideration for receipt of Private Placement Services.

A summary of options granted to purchase the Company’s Common Stock under the Company’s share option plans is as follows:

Warrants:

As of March 31, 2026, the Company had the following outstanding compensation related warrants to purchase Common Stock:

NOTE 7 – STOCKHOLDERS EQUITY (continued)

The following table sets forth the total stock-based payment expenses resulting from options, RSUs and warrants granted, included in the consolidated statements of operations:

Following the insolvency proceedings of BiomX Israel significantly all Company’s prior employees were dismissed and their unvested options forfeited. As of March 31, 2026, the Company recorded credit to its share based compensation expenses and debit to additional paid for such portion of the non-vested options.

NOTE 8 – BASIC AND DILUTED LOSS PER SHARE

Basic loss per share is computed on the basis of the net loss for the period divided by the weighted average number of shares of Common Stock outstanding during the period, fully vested warrants with no exercise price for the Company’s Common Stock, fully vested pre-funded warrants for the Company’s Common Stock at an exercise price of $0.01 per share and $0.0001 per share and A&R Warrants at an exercise price of $0.0001 per share, as the Company considers these shares to be exercised for little to no additional consideration.

Diluted loss per share is based upon the weighted average number of shares of Common Stock and of potential shares of Common Stock outstanding when dilutive. Potential shares of Common Stock equivalents include outstanding stock options and warrants, which are included under the treasury stock method when dilutive.

The basic and diluted net loss per share and weighted average number of shares of Common Stock used in the calculation of basic and diluted net loss per share are as follows:

NOTE 8 – BASIC AND DILUTED LOSS PER SHARE (continued)

The calculation of diluted loss per share for the three months ended March 31, 2026 and March 31, 2025, does not include the shares underlying the following financial instruments because their effect would be anti-dilutive:

NOTE 9 – SEGMENT REPORTING

The Company operates as asingle operating segment. The Company’s chief operating decision-maker (“CODM”) is itschief executive officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated Net loss and Operating loss to monitor budget versus actual results in assessing segment performance and the allocation of resources. Significant segment expenses are presented in the Company’s consolidated statements of operations.

Additional disaggregated significant segment expenses on a functional basis, that are not separately presented on the Company’s consolidated statements of operations, regularly reviewed by the Company’s CODM, include salaries and clinical trials expenses and presented below.

The Company’s Property and equipment, as well as the Company’s operating lease right-of-use assets recognized on the consolidated balance sheets were located as follows:

NOTE 10 – SUBSEQUENT EVENTS

On April 13, 2026, the Company entered into and simultaneously closed on a Stock Purchase & Assignment Agreement (the “SPA”) with Mandragola, pursuant to which the Company exercised the Option and purchased from Mandragola 100% of Mandragola’s shareholdings in DFSL, representing 60% of the issued and outstanding voting equity capital of DFSL on a fully diluted basis (the “Purchased Shares”). The closing of the SPA occurred simultaneously with its execution and delivery.

In consideration for the Purchased Shares, the Company agreed to the following consideration to Mandragola:

The shares of Common Stock and the Common Stock issuable upon conversion of the Note and exercise of the Pre-Funded Warrants and Five Year Warrant is subject to obtaining approval of the Company’s stockholders (“Stockholder Approval”) as required by the applicable rules and regulations of the NYSE American LLC. The Company intends to use commercially reasonable efforts to obtain Stockholder Approval within one hundred twenty (120) days following the closing of the SPA.

Revenue Bonus

As additional consideration, the Company agreed that in the event that DFSL records annual revenues of Twenty-Five Million Dollars ($25,000,000) or more in any fiscal year on or after fiscal year 2027, Mandragola shall be entitled to a bonus payment equal to five percent (5%) of such recorded annual revenues for such fiscal year. The bonus is payable, at the sole discretion of the Company, in restricted shares of Common Stock (valued at the volume-weighted average price for the ten (10) trading days immediately preceding the date of payment) or cash, within sixty (60) days following the completion of DFSL’s audited financial statements for the applicable fiscal year.

NOTE 10 – SUBSEQUENT EVENTS (continued)

Credit Line Undertaking

Mandragola also agreed to provide to the Company a credit line in an amount and on terms to be mutually agreed upon, to be utilized for the development and expansion of the business of DFSL and the payment of DFSL’s third-party debts.

DFSL is a developer of proprietary LADAR (Laser Radar)–based detection systems for security, defense, and critical infrastructure applications. Its technology combines laser-based sensing with proprietary AI algorithms to detect and respond to both UAV and ground-based intruders. Founded in 1995 by Dr. Yaacov Frucht, a former senior research leader at Rafael Advanced Defense Systems, DFSL builds on defense-originated laser radar technology adapted for civilian and homeland security use. DFSL’s technology is deployed across four primary application areas: counter-UAS (drone detection and response), perimeter and border security (“virtual fencing”), wide-area 360-degree surveillance, and rail and metro safety systems. The platform has been deployed in both pilot and operational environments where reliable, low false-alarm detection is critical, including transportation infrastructure and defense-related settings.

ZorroNet develops and deploys proprietary AI-powered computer vision and autonomous surveillance systems for defense, homeland security and critical infrastructure protection. Its smart software platform performs real-time autonomous threat detection, object recognition, perimeter intrusion identification and automated event-triggered response, with native integration into unmanned aerial systems (UAS/drones), alarm networks and command-and-control (C2) systems. ZorroNet’s technology is operationally deployed at Israel Defense Forces (IDF) bases, military security operations centers and critical national infrastructure sites, with active engagements with Elbit Systems Ltd (TASE/Nasdaq: ESLT) and other top Israel’s preeminent defense prime contractors.

As consideration, the Company issued to Water IO: (i)1,300,000 shares of common stock; and (ii) a non-convertible promissory note in the amount of $1,250,000, bearing interest at the short-term applicable federal rate, payable July 7, 2026. The note is non-convertible and will not result in any additional dilution to existing stockholders.

The Company also assumed certain obligations to ZorroNet’s founders, including a performance-based earnout payable by March 31, 2027 equal to the greater of 125% of ZorroNet’s 2026 consolidated revenue or 8x 2026 consolidated EBITDA, and a commitment to retain key ZorroNet personnel for three years on no less favorable terms.

The Company has agreed to file a registration statement with the SEC within 45 days of closing covering the resale of the shares issued to Water IO.