Ideal Power Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Ideal Power Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Ideal Power Inc. (the “Company”) as of December 31, 2025 and 2024, and the related statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Carrying Value of Intangible Assets

As described in Notes 2 and 5 to the financial statements, the Company’s intangible asset, net balance was $2.7 million as of December 31, 2025. The Company capitalizes third-party legal costs and filing fees, if any, associated with obtaining patents or other intangible assets. Once the patent asset has been placed in service, the Company amortizes these costs over the shorter of the asset’s legal or estimated economic life using the straight-line method. The Company also evaluates for potential impairment of long-lived assets, including intangible assets composed of patents, no less frequently than annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The principal considerations for our determination that performing procedures relating to the carrying value of intangible assets is a critical audit matter are the significant amount of judgment by management in developing the assumptions of future economic benefit in an impairment analysis, which in turn led to significant auditor judgment, subjectivity and effort in performing audit procedures and evaluating audit evidence relating to the analysis.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others, reviewing current and forecasted operating conditions for indication of impairment. We also reviewed board minutes, news, and industry reports for indications of impairment. Last, we obtained an understanding of potential future customers indicating future recoverability.

/s/BPM LLP

We have served as the Company’s auditor since 2013.

San Jose, California

March 27, 2026

Balance Sheets

Statements of Operations

Statement of Stockholders’** Equity**

For the Years Ended December 31, 2025 and 2024

Statements of Cash Flows

Ideal Power Inc.

Notes to Financial Statements

Note 1 —Organization and Description of Business

Ideal Power Inc. (the “Company”) was incorporated in Texas in May 2007 under the name Ideal Power Converters, Inc. The Company changed its name to Ideal Power Inc. and re-incorporated in Delaware on July 2013. With headquarters in Austin, Texas, the Company is focused on the further development and commercialization of its Bidirectional bipolar junction TRANsistor (B-TRAN®) solid-state switch technology.

Since its inception, the Company has financed its research and development efforts and operations primarily through the sale of common stock and pre-funded warrants. The Company’s continued operations are dependent upon, among other things, its ability to obtain adequate sources of funding through future revenues, follow-on stock offerings, issuances of warrants, debt financing, co-development agreements, government grants, sale or licensing of developed intellectual property or other alternatives.

Note 2 —Summary of Significant Accounting Policies

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Liquidity

These financial statements have been prepared on a going concern basis, which assumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the ordinary course of business. The Company completed an underwritten public offering and concurrent private placement subsequent to December 31, 2025. See Note 13. As a result, the Company alleviated the substantial doubt regarding its ability to continue as a going concern for a period of twelve months from the issuance of this Annual Report on Form 10-K.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Trade accounts receivable are stated net of a provision for credit losses. The provision for credit losses represents an estimate of the lifetime expected credit losses inherent in trade receivables as of the balance sheet date. The Company assesses the adequacy of the provision for credit losses on a quarterly basis based on historical information and current economic conditions and forecasts. Subsequent changes in the provision for credit losses are recorded in current earnings and reversal of previous losses are permitted under the current guidance. While the Company believes it has exercised prudent judgment and applied reasonable assumptions, there can be no assurance that in the future, changes in economic conditions or other factors will not cause changes in the financial health of its customers. If the financial health of customers deteriorates, the timing and level of payments received could be impacted and therefore, could result in a change to the Company’s estimated losses.

Trade accounts receivable at December 31, 2025 relate to development revenue. At December 31, 2025, the provision for credit losses was $0.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and amortization. Major additions and improvements are capitalized while maintenance and repairs that do not improve or extend the useful life of the respective asset are expensed. Depreciation and amortization of property and equipment is computed using the straight-line method over their estimated useful lives. Leasehold improvements are amortized over the shorter of the life of the asset or the related leases. Estimated useful lives of the principal classes of assets are as follows:

Intangible Assets

The Company’s intangible assets are composed of patents and trademarks, which are recorded at cost, and other intangible assets, which are recorded at cost plus the estimated present value of all future payments associated with the other intangible assets. The Company capitalizes third-party legal costs and filing fees, if any, associated with obtaining patents, trademarks or other intangible assets. Once the patent asset has been placed in service, the Company amortizes these costs over the shorter of the asset’s legal life, generally 20 years from the initial filing date, or its estimated economic life using the straight-line method. Trademarks are not amortized as trademarks have an indefinite useful life. For the other intangible assets, the Company amortizes the assets over the 11-year and 17‑year terms of the underlying agreements.

Impairment of Long-Lived Assets

The long-lived assets, consisting of property and equipment and intangible assets, held and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. Management has determined that there was an impairment in the value of long-lived assets in the amount of $41,122 and $77,444, respectively, during the years ended December 31, 2025 and 2024.

Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs used to establish fair value are the following:

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, net, accounts payable and long-term liabilities. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributed to the short-term nature of these instruments.

In 2015, the Company recorded a long-term liability for the estimated present value of future payments under licensing agreements. In 2021, the Company recorded an adjustment to increase the long-term liability due to an increase in the future payments due under these licensing agreements. In 2023, the Company recorded a long-term liability for the estimated present value of future payments under a separate licensing agreement. The Company determined the discount rate to estimate the present value of the future payments based on the applicable treasury rates. The Company’s long-term liability is classified within Level 3. See Note 5 and Note 8 for more details regarding the licensing agreements. The Company did not identify any other assets and liabilities that are required to be presented in the balance sheets at fair value.

Revenue Recognition

The Company recognizes revenue and related cost of revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.”

Commercial revenue relates to either the development agreements with customers or product sales. Commercial revenue under development agreements is generally recognized upon the completion of contractual deliverables. Commercial revenue from product sales is generally recognized upon shipment of products.

Research and Development

Research and development costs are presented as a line item under operating expenses and are expensed as incurred. Research and development costs include costs to further develop the Company’s B-TRAN® technology and related products and include, but are not limited to, the cost of engineering personnel, wafer fabrication, contract labor, driver design and fabrication, device packaging, product development, testing and other engineering services, stock-based compensation for engineering personnel, consulting and materials and supplies.

Income Taxes

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. At December 31, 2025 and 2024, the Company established a full reserve against all the net deferred tax assets.

Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

Net Loss Per Share

The Company applies FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of equity awards and warrants using the treasury stock method. In periods with a net loss, no common share equivalents are included because their effect would be anti-dilutive.

In accordance with ASC 260, shares issuable for little or no cash consideration are considered outstanding common shares and included in the computation of basic earnings per share. As such, the Company includes pre-funded warrants to purchase shares of common stock in its computation of earnings per share. The pre-funded warrants were issued in March 2024 and November 2019 with an exercise price of $0.001. See Note 11.

At December 31, 2025 and 2024, potentially dilutive shares outstanding amounted to 1,373,809 and 1,297,369 shares, respectively, and exclude pre-funded warrants to purchase shares of common stock.

Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a company-wide basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates asone operating segment. The Company has concluded that net income (loss) is the measure of segment profitability. The CODM assesses performance for the Company, monitors budget versus actual results, and determines how to allocate resources based on net income (loss) as reported in the statements of operations. There are no other expense categories regularly provided to the CODM that are not already included in the financial statements herein.

During the years ended December 31, 2025 and 2024, the Company did not generate material international revenues and as of December 31, 2025 and 2024, the Company did not have material assets located outside of the United States.

Stock Based Compensation

The Company applies FASB ASC 718, “Stock Compensation,” when recording stock-based compensation. Grants to non-employees are also accounted for under ASC 718. The fair value of each restricted stock unit award is the closing pricing of the Company’s stock on the date of grant. The fair value of each performance stock unit award with market conditions is estimated on the date of grant using a Monte Carlo simulation. The fair value of each performance stock unit award with performance conditions is determined based on the closing price of the Company’s stock on the date of grant and on whether it is probable that the performance conditions will be achieved. The Company reassesses the probability of vesting at each reporting period for performance stock units with performance conditions.

The Company issues common stock upon exercise of equity awards and warrants and upon the vesting of performance stock units and restricted stock units. The Company accounts for forfeitures of stock-based awards when they occur.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash with a major financial institution located in the United States. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company maintains balances in excess of federally insured limits. The Company has not experienced losses in such accounts and believes it is not exposed to significant credit risk regarding its cash and cash equivalents.

Recent Accounting Pronouncements

In December 2023, FASB issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” to enhance disclosures about income taxes. The amendments in this ASU require a public entity to disclose in tabular format, using both percentages and reporting currency amounts, specific categories in the rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold. The amendments in this ASU also require taxes paid (net of refunds received) to be disaggregated by federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. For public business entities, the provisions of ASU 2023-09, which are required on an annual basis, are effective for fiscal years beginning after December 15, 2024. The Company adopted this ASU on a prospective basis.

Management does not believe that any recently issued, but not yet effective, accounting standards, if adopted, would have a material impact on the Company’s financial statements.

Note 3 —Prepayments and Other Current Assets

Prepayments and other current assets consisted of the following:

Note 4 —Property and Equipment

Property and equipment, net consisted of the following:

Depreciation expense amounted to $151,237 and $125,888 for the years ended December 31, 2025 and 2024, respectively. During the year ended December 31, 2025, the Company wrote off $19,944 in property and equipment and related accumulated depreciation of $13,185 for a net write-off of $6,759 of which $6,642 is included in research and development expenses and $117 is included in sales and marketing expenses in the accompanying statements of operations. During the year ended December 31, 2024, the Company wrote off $52,551 in property and equipment and related accumulated depreciation of $37,180 for a net write-off of $15,371 of which $10,293 is included in research and development expenses and $5,078 is included in general and administrative expenses in the accompanying statements of operations.

Note 5 —Intangible Assets

Intangible assets, net consisted of the following:

At December 31, 2025 and 2024, the Company had capitalized $723,156 and $541,081, respectively, for costs related to patents that have not been awarded. Costs related to patents that have not been awarded are not amortized until patent issuance. For the years ended December 31, 2025 and 2024, the Company wrote-off capitalized patents of $34,363 and $62,073, respectively, included in general and administrative expenses in the accompanying statements of operations.

At December 31, 2025 and 2024, the Company had capitalized $26,529 and $22,767, respectively, for costs related to trademarks. Costs related to indefinite life trademarks are not amortized but are subject to evaluation for potential impairment.

Amortization expense amounted to $220,182 and $215,157 for the years ended December 31, 2025 and 2024, respectively. Amortization expense for the succeeding five years and thereafter is $224,376 annually (2026‑2030) and $815,901 (thereafter).

Note 6 —Accrued Expenses

Accrued expenses consisted of the following:

Note 7—** Lease**

In March 2021, the Company entered into a lease agreement (the “Original Lease”) for 4,070 square feet of office and laboratory space located in Austin, Texas (the “Original Suite”). The commencement of the lease occurred on June 1, 2021 and the initial term of the lease was 63 months.

In April 2024, the Company entered into a first amendment and relocation agreement (the “Amended Lease”) with its landlord. Under the Amended Lease, the Company relocated to another, larger suite in the same office building. The Amended Lease is for 5,775 square feet of office and laboratory space (the “New Suite”) and, upon occupancy, replaced the 4,070 square feet of office and laboratory space previously leased by the Company. The term of the Amended Lease expires sixty-two (62) months from July 1, 2024, the commencement date. The annual base rent for the first year of the Amended Lease is $118,388 and the annual base rent increases approximately 2.75% each year during the lease term. The Company is required to pay its proportionate share of operating costs for the building under this triple net lease.

In accordance with ASC 842, the Company accounted for the modification of the lease contract as a separate lease contract. The lease for the Original Suite terminated on June 30, 2024 and the Company recorded a gain on the termination of the lease for the Original Suite of $15,319 in general and administrative expenses. The Company recognized a right of use asset of $524,025 and a corresponding lease liability for the Amended Lease on the commencement date. For purposes of calculating the right of use asset and lease liability, the Company estimated its incremental borrowing rate at 8.5% per annum.

Future minimum payments under the Amended Lease are as follows:

For the year ended December 31, 2025, operating cash outflows for lease payments totaled $120,005, and the operating lease cost, recognized on a straight-line basis, totaled $123,424. For the year ended December 31, 2024, operating cash outflows for lease payments totaled $99,046 and the operating lease cost, recognized on a straight-line basis, totaled $100,466. At December 31, 2025, the remaining lease term was 44 months.

Note 8—** Commitments and Contingencies**

Licensing Agreements

In 2015, the Company entered into a licensing agreement which expires in February 2033. Per the agreement, the Company has an exclusive royalty-free license associated with semiconductor power switches which enhances its intellectual property portfolio. The Company pays $100,000 annually under this agreement.

In 2023, the Company amended a 2021 license agreement which expires in February 2034. Per the agreement, the Company has an exclusive royalty-free license associated with semiconductor drive circuitry which enhances its intellectual property portfolio. The Company pays $50,000 annually under this agreement.

At December 31, 2025, the estimated present value of future payments under these licensing agreements was $1,036,538 with $150,000 due and payable in 2026. The Company is accruing interest for future payments related to these agreements.

Legal Proceedings

The Company may be subject to litigation from time to time in the ordinary course of business. The Company is not currently party to any legal proceedings.

Indemnification Obligations

The employment agreements of Company executives include an indemnification provision whereby the Company shall indemnify and defend, at the Company’s expense, its executives so as long as an executive’s actions were taken in good faith and in furtherance of Company’s business and within the scope of executive’s duties and authority.

Note 9 —Equity

All shares of common stock have a par value of $0.001. Each holder of common stock is entitled toone vote per share outstanding.

2024 Public Offering

In March 2024, the Company issued and sold 1,366,668 shares of its common stock at a price of $7.50 per share and 633,332 pre-funded warrants to purchase shares of common stock at a price of $7.499 per pre-funded warrant in an underwritten public offering. The pre-funded warrants have an exercise price of $0.001 per share. The underwriter had a 30-day option to purchase up to an additional 300,000 shares of common stock at the offering price, less the underwriting discounts and commissions. In April 2024, the underwriter exercised in full its 30-day option to purchase an additional 300,000 shares of the Company’s common stock at the offering price of $7.50 per share, less underwriting discounts and commissions. The net proceeds to the Company from the public offering, including the underwriter’s exercise of its option to purchase additional shares, were $15.7 million.

Note 10 —** Equity Incentive Plan**

In May 2013, the Company adopted the 2013 Equity Incentive Plan (as amended and restated, the “Plan”) and reserved shares of common stock for issuance under the Plan, which was last amended in June 2023. The plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Board”). At December 31, 2025, there were 240,567 shares of common stock available for issuance under the Plan.

During the year ended December 31, 2025, the Company granted 38,660 restricted stock units to Board members,40,000 restricted stock units and 80,000 performance stock units to executives, and 230,427 restricted stock units and 30,000 performance stock units to employees under the Plan. The estimated fair value of these equity grants was $2,029,516, of which $755,500 was recognized in the respective department expenses in the accompanying statements of operations for the year ended December 31, 2025.

In connection with the retirement of the Company’s former CEO, certain of his awards were modified and he forfeited 70,000 performance stock units prior to achievement of the underlying performance metrics. The grant date fair value of, and previously recognized expense for, these performance stock units of $597,841 was recognized as a reduction in research and development expenses in the accompanying statements of operations for the year ended December 31, 2025. The former CEO’s unvested restricted stock units, otherwise subject to forfeiture, were modified to vest fifty percent (50%) on January 3, 2026 and fifty percent (50%) on April 3, 2026, subject to his continued service as a consultant through the vesting dates. In addition, a prior grant of 60,000 performance stock units, otherwise subject to forfeiture, were modified to remain outstanding and be eligible for vesting through November 2, 2026 subject to his continued service as a consultant through the vesting date. The incremental cost of these modifications was $600,566 and is being recognized over the requisite service period, as applicable.

During the year ended December 31, 2025, the Company granted awards of 247,438 restricted stock units and 247,438 performance stock units to its CEO as a material inducement to enter into employment with the Company. The inducement awards were granted outside of the Plan but are subject to its applicable terms. The estimated fair value of these equity awards was $2,083,739, of which $67,712 was recognized in general and administrative expenses in the accompanying statements of operations for the year ended December 31, 2025.

During the year ended December 31, 2024, the Company granted 38,710 restricted stock units to Board members,125,000 restricted stock units to executives and 128,922 restricted stock units to employees under the Plan. The estimated fair value of these equity grants was $2,072,676, of which $541,957 was recognized in the respective department expenses in the accompanying statements of operations for the year ended December 31, 2024.

As permitted by SAB 107, management utilizes the simplified approach to estimate the expected term of stock options, which represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield in effect at the time of grant. The volatility is estimated based on the historical volatilities of comparable companies. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

No stock options were granted in the years ended December 31, 2025 and 2024.

A summary of the Company’s stock option activity and related information is as follows:

The following table sets forth additional information about stock options outstanding at December 31, 2024:

Stock options granted under the Plan have ten-year terms. All outstanding stock options are exercisable at December 31, 2025.

The estimated aggregate pretax intrinsic value (the difference between the Company’s stock price on the last day of the year ended December 31, 2025 and the exercise prices, multiplied by the number of in-the-money options) is $89,764 for outstanding options. This amount changes based on the fair value of the Company’s stock.

A summary of the Company’s restricted stock unit (“RSU”) and performance stock unit (“PSU”) activity is as follows:

In the year ended December 31, 2025,121,252 restricted stock units vested of which 29,356 restricted stock units were forfeited to cover employee and executive payroll tax withholding obligations. In the year ended December 31, 2024,130,447 restricted stock units vested of which 31,450 restricted stock units were forfeited to cover employee and executive payroll tax withholding obligations. The payment of the taxes on the vesting of the restricted stock units is shown as a financing activity on the accompanying statements of cash flows.

As of December 31, 2025, there was $3,874,071 of unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 1.0 years.

Note 11 —Warrants

Warrants

During the year ended December 31, 2025,342,240 warrants with an exercise price of $8.90 expired. No warrants were outstanding at December 31, 2025.

During the year ended December 31, 2024, warrant holders exercised 444,180 warrants with a weighted average exercise price of $2.33. At December 31, 2024, there were 342,240 warrants outstanding at an exercise price of $8.90.

Pre-Funded Warrants

All pre-funded warrants have an exercise price of $0.001 and no expiration date.

During the year ended December 31, 2025, warrant holders exercised 110,000 pre-funded warrants. At December 31, 2025, there were 653,827 pre-funded warrants outstanding.

During the year ended December 31, 2024, the Company issued 633,332 pre-funded warrants (See Note 9) and warrant holders exercised 123,333 pre-funded warrants. At December 31, 2024, there were 763,827 pre-funded warrants outstanding.

All pre-funded warrants were exercisable at December 31, 2025 although pre-funded warrants may generally be exercised only to the extent that the total number of shares of common stock then beneficially owned by these shareholders does not exceed 9.99% of the outstanding shares of the Company’s stock.

The estimated aggregate pre-tax intrinsic value (the difference between the Company’s stock price on the last day of the year ended December 31, 2025 and the exercise price, multiplied by the number of pre-funded warrants) is $2.0 million.

Note 12 —Income Taxes

Income taxes are disproportionate to income due to net operating loss carryforwards, which are fully reserved. As of December 31, 2025, the Company has federal net operating loss carryforwards of approximately $94 million. The federal net operating loss carryforward for years prior to 2018 expire from 2031 through 2038. Federal net operating loss carryforwards for year 2018 and thereafter do not expire.

Pursuant to Internal Revenue Code Sections 382 and 383, use of the Company’s net operating loss and credit carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period since the last ownership change. The Company may have had one or more changes in control under these Sections. However, the Company does not anticipate performing a complete analysis of the limitation on the annual use of the net operating loss and tax credit carryforwards until the time that it projects it will be able to utilize these tax attributes.

Management has concluded that it is more likely than not that the Company will not have sufficient foreseeable taxable income within the carryforward period as applicable and permitted by current law to allow for the utilization of certain of the deductible amounts generating the deferred tax assets; therefore, a full valuation allowance has been established to reduce the net deferred tax assets tozero at December 31, 2025 and 2024.

The following is a summary of the significant components of the Company’s net deferred income tax assets and liabilities as of December 31, 2025 and 2024:

The Company has applied the provisions of FASB ASC 740,Income Tax, which clarifies the accounting for uncertainty in tax positions. FASB ASC 740 requires the recognition of the impact of a tax position in the financial statements if that position is more likely than not of being sustained on a tax return upon examination by the relevant taxing authority, based on the technical merits of the position. At December 31, 2025 and 2024, the Company hadno unrecognized tax benefits.

The Company recognizes interest and penalties related to income tax matters in interest expense and operating expenses, respectively. As of December 31, 2025 and 2024, the Company hasno accrued interest and penalties related to uncertain tax positions.

The Company is subject to tax in the United States (“U.S.”) and files tax returns in the U.S. federal and certain state jurisdictions. The details of income taxes paid, net of refunds received, for the year ended December 31, 2025 are as follows:

The Company is generally no longer subject to U.S. federal, state and local income tax examinations by tax authorities for all tax years since inception due to the carryover of unused net operating losses and tax credits. The Company currently is not under examination by any tax authority.

The reconciliation between the statutory income tax rate and the effective tax rate is as follows:

Note 13 —Subsequent Event

In February 2026, the Company issued and sold 3,505,855 shares of its common stock at a price of $2.75 per share and 952,881 pre-funded warrants to purchase shares of common stock at a price of $2.749 per pre-funded warrant in an underwritten public offering and 631,332 pre-funded warrants to purchase shares of common stock at a price of $2.749 per pre-funded warrant in a concurrent private placement (taken together, the “February 2026 Offering”). The pre-funded warrants have an exercise price of $0.001 per share. The estimated net proceeds to the Company from the February 2026 Offering are $12.6 million.