EXOZYMES INC.

(Audited)

Years ended December 31, 2024 and 2023

1. Organization and Description of Business

eXoZymes Inc. formerly known as Invizyne Technologies Inc. was formed in Nevada in 2019 and its wholly owned subsidiary Invizyne Technologies Inc was formed in California in 2014, together (“eXoZymes”). eXoZymes was formed with the vision of taking nature’s building blocks to make molecules of interest, effectively simplifying nature. eXoZymes’ technology is a differentiated and unique synthetic biology platform which would enable the scalable exploration of large number of molecules and properties found in nature. eXoZymes was a majority owned technology development subsidiary of MDB Capital Holdings, LLC (“MDB”) until the November 2024 initial public offering, when the holdings by MDB were diluted to a current 48% minority interest as of December 31, 2024. Prior to January 14, 2022, MDB Capital, a subsidiary of MDB, owned a majority interest in eXoZymes. On January 14, 2022, in a corporate reorganization, MDB Capital distributed 100% of its equity interest in eXoZymes to its members in proportion to their respective interests.

On June 1, 2022, the Company signed a joint venture with Neuractas Therapeutics, a preclinical company developing high impact therapeutics, to work with the Company on deuterated cannabinoid molecules, for which the Company has filed a provisional patent application. No business activities have occurred to date. The Company follows Accounting Standards Codification subtopic 323-10, Investments-Equity Methods and Joint Ventures (“ASC 323-10”).

On October 3, 2024, our board of directors approved atwo-for-one (2:1) stock split of our issued and outstanding Common Stock. No fractional shares were issued as a result of the stock split; any fractional share resulting from the stock split was rounded up to the next whole share. As a result of the stock split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock units and warrants issued by us and outstanding immediately prior to the effective time of the stock split, which resulted in a proportionate decrease in the number of shares of our Common Stock reserved for issuance upon exercise or vesting of such stock options, restricted stock units and warrants and a proportionate increase in the exercise price of all such stock options, restricted stock units and warrants. In addition, the number of shares reserved for issuance under our equity compensation plans were decreased proportionately. All share and per share amounts of Common Stock have been retroactively adjusted to reflect the Common Stock split.

Going Concern

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company incurred net losses of $5,861,335 and $2,038,389 during the years ended December 31, 2024 and 2023, respectively, and used cash for operations of $(8,505,650) and $(1,180,870) for the years ended December 31, 2024 and 2023, respectively. Management believes that there remains substantial doubt about its ability to continue as a going concern due to anticipated funding shortfalls and the Company’s pre-revenue status. The Company’s ability to meet its long-term liabilities and obligations depends on securing additional financial support, whether through continued shareholder funding, raising equity or debt financing, or ultimately achieving profitable operations. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts or the classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and wholly owned subsidiary. The accompanying consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.

Reclassification

Certain prior period balances have been reclassified to conform to the Company’s current year presentation. We have reclassified certain prior period income amounts from R&D expenses and a total of $19,186 has been reclassified from general and administrative costs within our consolidated statements of operations to conform to our current period presentation. These reclassifications did not affect total costs, and expenses, (loss) income from operations, or net (loss) income.

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the disclosure of contingent assets and liabilities. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in the calculation of right-of-use asset and lease liabilities, accruals for potential liabilities, SAFE liability, and the realization of any deferred tax assets.

Emerging Growth Company

The Company is an “emerging growth company,” or “EGC” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such choice to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.

Concentration of Risk

The Department of Energy has contributed 69% and the NIH has contributed 31% of all grant reimbursements for the year ended December 31, 2024. The Company believes it is not exposed to significant credit risk on government grant funding, based on the nature of eXoZymes’ grant receivables.

Revenue Recognition

The Company primarily generated revenues from its strategic alliances. The strategic alliances with strategic collaborators typically contain multiple elements, including research and other licenses, research and development services, obligations to develop and manufacture pre-commercial and commercial material, and options to obtain additional research and development services. Such arrangements provide for various types of payments to us, including upfront fees, and funding of research and development services. Such payments are often not commensurate with the timing of revenue recognition and therefore result in deferral of revenue recognition.

The Company analyzes the collaboration arrangements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and the collaboration partner are within the scope of other accounting literature. If the Company concludes that some or all aspects of the arrangement represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of ASC 606. If the Company concludes that some or all aspects of the arrangement are within the scope of ASC 808 and do not represent a transaction with a customer, the Company recognizes its allocation of the shared costs incurred with respect to the jointly conducted activities as a component of the related expense in the period incurred. Pursuant to ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine the appropriate amount of revenue to be recognized for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following steps: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) each performance obligation is satisfied. ASC 606 requires significant judgment and estimates and results in changes to, but not limited to: (i) the determination of the transaction price, including estimates of variable consideration, (ii) the allocation of the transaction price, including the determination of estimated selling price, and (iii) the pattern of recognition, including the application of proportional performance as a measure of progress on service-related promises and application of point-in-time recognition for supply-related promises.

Cash and Cash Equivalents

The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents. There were no cash equivalents held by the Company as of December 31, 2024.

The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”).

The Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments. The Company may periodically have cash balances in financial institutions more than the FDIC insurance limits of $250,000. On December 31, 2024, the Company had approximately $9,353,378 of cash and unrestricted cash in financial institutions in excess of FDIC insured limits. The Company did not experience any credit risk losses during the years ended December 31, 2024 and 2023.

Fair Value Measurements

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring 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). These tiers include:

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of December 31, 2024 and December 31, 2023:

The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying consolidated balance sheets. The fair values of cash and cash equivalents, prepaid expenses and other, accounts payable and accrued expenses, and due to related party are estimated to approximate the carrying values as of December 31, 2024 and December 31, 2023.

Property and Equipment

Property and equipment are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statement of operations when realized. Depreciation is provided using the straight-line method over the following estimated useful lives:

Property and equipment consist of the following as of December 31, 2024 and December 31, 2023, respectively:

Depreciation expenses were $267,382 and $196,937, for the years ended 2024 and 2023, respectively.

Research Grants

eXoZymes receives grant reimbursements, which are offset against research and development expenses in the consolidated statements of operations. In addition to actual reimbursements, eXoZymes also receives indirect expense grants (which are not reimbursement-based) and fees (typically of minor significance). It is important to note that there may be instances where the grants received for indirect costs exceed the actual costs, resulting in a negative impact. For capitalized assets, grant reimbursements are recognized over the useful life of the assets. Any portion of the grant not yet recognized is recorded as deferred grant reimbursements and included as a liability in the consolidated balance sheet.

Grants that operate on a reimbursement basis are recognized on the accrual basis and are offsets to expenses to the extent of disbursements and commitments that are reimbursable for allowable expenses incurred as of December 31, 2024 and 2023, and respectively, expected to be received from funding sources in the subsequent year. Management considers such receivables on December 31, 2024 and 2023, respectively, to be fully collectable due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on the grants receivable was recorded in the accompanying consolidated financial statements.

Summary of grants receivable activity for the years ended December 31, 2024 and 2023, is presented below:

eXoZymes has received three grants provided by the National Institute of Health, the Department of Energy and Department of Defense through December 31, 2024. The first grant was awarded on October 1, 2023 and the latest of these grants was set to expire on May 14, 2026 , however grants can be extended, or new phases can be granted, extending the expiration of the grant. None of the grants has commitments made by the parties, provisions for recapture, or any other contingencies, beyond complying with the terms of each research and development grant. Research grants received from organizations are subject to the contract agreement as to how eXoZymes conducts its research activities, and eXoZymes is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. eXoZymes is permitted to draw down the research grants after incurring the related expenses. Amounts received under research grants are offset against the related research and development costs in the consolidated statements of operations. For the years ended December 31, 2024 and 2023, respectively, grants amounting to $2,235,163 and $2,836,876 were offset against the research and development costs. Grant drawdowns, which includes grants costs expensed, grants for equipment purchased, and grant fees, for the years ended December 31, 2024 and 2023, respectively, totaled $2,333,722 and $2,954,208.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs, fees paid to consultants, and other expenses relating to the development of eXoZymes’s technology. For the years ended December 31, 2024 and 2023, research and development costs prior to offset of the grants amounted to $4,202,488, and $3,481,687, respectively, which includes grant costs expensed, grants fees, and research and development costs, net of the grant received.

Patent and Licensing Legal and Filing Fees and Costs

Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred.

Patent and licensing legal and filing fees and costs were $260,779 and $123,876 for the years ended December 31, 2024 and 2023, respectively. Patent and licensing legal and filing fees and costs are included in general and administrative costs in the consolidated statements of operations.

Related Party and Due to Affiliates Expenses

As of December 31, 2024, The Company has a outstanding payable of $178,966 to MDB Capital Holdings, LLC. The payable is non interest bearing and will be paid in 2025.

Segment Reporting

We manage and operate the business as a single reportable operating segment**, w**ith the Company’s sole focus on the research and commercialization of exozyme biosolutions. Our business is led by our chief executive officer, who is our Chief Operating Decision Maker (“CODM”). The Company is required to apply the guidance in ASC 280 and identify significant segment expenses and other segment items for its single reportable segment. Because the CODM receives detailed financial reports at a lower level than is included on the Company’s consolidated income statement, the Company identifies which of those expenses qualify as significant segment expenses. The CODM manages the business on a consolidated basis and uses consolidated net income as reported on its income statement to allocate resources and assess performance. In accordance with ASC 280, eXoZymes concludes that consolidated net income is the measure of segment profit or loss that is required to be reported because it is the measure determined in accordance with measurement principles most consistent with GAAP. We do not prepare discrete financial information with respect to separate products. Accordingly, we view our business as one reportable operating segment.

3. Equity

Equity

In April 2019, the Company entered into an equity subscription agreement with Public Ventures, LLC, d/b/a MDB Capital (formerly known as MDB Capital Group LLC), which was later transferred to MDB in 2022, whereby MDB would purchase up to $5,000,000 of eXoZymes’s Common Stock at $3.04 per share. At December 31, 2021, MDB had purchased 1,197,246 shares for a total of $3,644,930. On September 22, 2022, MDB completed its equity subscription agreement, purchasing 445,099 shares, thus owning a total of 1,642,345 shares of eXoZymes’s Common Stock. MDB waived its 10% cash fee relative to the Funding Agreement in exchange for other modifications. As a condition of the Funding Agreement, warrants to purchase 98,814 shares of eXoZymes Common Stock were issued (the “Funding Warrants”), which vested as amounts were funded. Through December 31, 2024 and December 31, 2023, respectively,205,293 and 205,293 of Funding Warrants have vested. Total value of the warrants as December 31, 2024 and December 31, 2023 was $320,790.

4. Stock-Based Compensation

eXoZymes’ 2020 Equity Incentive Plan (the “2020 Plan”), which was approved by the eXoZymes shareholders, permits grants to its officers, directors, and employees for up to 938,832 shares of eXoZymes’ Common Stock. On May 1, 2023 the board and shareholders approved an increase of 1,558,175 shares under the plan. The 2020 Plan authorizes the issuance of stock options, shares of restricted stock, and restricted stock units, among other forms of equity-based awards.

On February 1, 2024, stock options to purchase 155,818 shares of Common Stock were granted at an exercise price of $3.32 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $3.32, option exercise price of $3.32, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 4.20%, expected annual volatility of 95.85%, and annual rate of dividends of $0.

On April 1, 2024, stock options to purchase 125,975 shares of Common Stock were granted at an exercise price of $8.00 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $8.00, option exercise price of $8.00, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 4.34%, expected annual volatility of 95.38%, and annual rate of dividends of $0.

On May 19, 2024,2,347 stock options were exercised using a cashless exercise option. The individual received a stock option grant of 5,194 shares of which 3,376 shares were vested and exercisable.1,029 shares were sold using a cashless exercise option to acquire the remaining 2,347 shares. The remaining unvested options totaling 1,818 shares were forfeited.

On June 1, 2024, stock options to purchase 444,076 shares of Common Stock were granted at an exercise price of $8.00 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $8.00, option exercise price of $8.00, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 4.52%, expected annual volatility of 94.78%, and annual rate of dividends of $0.

On December 20, 2024, two individuals exercised their options agreements. Both agreements had identical terms and were exercised on the same date. Each agreement exercised 2,597 stock options using a cashless exercise option.1,200 shares were sold using a cashless exercise option to acquire the remaining 1,397 shares. There wereno remaining unvested options to be forfeited.

As of December 31, 2024 stock options to purchase 545,043 shares of Common Stock were vested, the weighted average exercise price is $4.66, the aggregate intrinsic value is $0.00, and the weighted average remaining contractual term is 6.13 years. eXoZymes stock-based compensation were $1,125,639 and $281,538 for the years ended December 31, 2024 and 2023. As of December 31, 2024, the unrecognized stock-based compensation is $4,554,320.

A summary of stock option activity during the years ended December 31, 2024 and 2023 is presented below:

On March 28, 2022, eXoZymes granted 241,718 restricted stock units (“RSUs”) at a value of $2.44 per share. These RSUs were issued in 2021 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up after an initial public offering of the Company, or upon the change of control of the Company by eXoZymes, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period on November 11, 2025, or upon the change of control of eXoZymes. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $589,792.

On May 1, 2023, eXoZymes granted 100,820 restricted stock units (“RSUs”) at a value of $3.32 per share. These RSUs were issued in 2023 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up after an initial public offering of the Company, or upon the change of control of the Company by eXoZymes, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period, on November 11, 2025, or upon the change of control of eXoZymes. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $334,722.

5. Earnings Per Share

The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to holders of the Common Stockholders divided by the weighted average of the common shares outstanding for the period. Diluted EPS is like basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Loss per common share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because warrants, RSU’s and options outstanding were anti-dilutive, for a total of 1,321,236 and 948,188 shares, respectively.

Basic and fully diluted earnings (loss) per share is calculated as follows for the years ended December 31, 2024 and 2023:

The following financial instruments were not included in the diluted loss per share calculations as of December 31, 2024 and December 31, 2023 because their effect was anti-dilutive:

6. Commitments and Contingencies

Legal Claims

The Company may be subject to legal claims and actions from time to time as part of its business activities. As of December 31, 2024 and 2023, the Company was not subject to any pending or threatened legal claims or actions.

External Risks Associated with the Company’s Business Activities

Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.

Supply Chain Issues. The Company continues to monitor changes in tariffs and indirect trade restraints but does not believe they will have a significant impact on its business activities

Potential Recession. There are various indications that the United States economy may be entering a recessionary period. Also, there is possible economic instability due to the possibility of tariffs and other economic changes due to government policy of the United States and other countries. Although unclear at this time an economic recession would likely impact the general business environment and the capital markets, which could, in turn, affect the Company.

The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.

7. Employee Benefit Plans

eXoZymes sponsors an individual 401(k) defined contribution plan for the benefit of employees when eligible. The plan allows eligible employees to contribute a portion of their annual compensation, not to exceed annual limits for the employee as established by the Department of Treasury. eXoZymes makes matching contributions for participating employees up to a certain percentage of the employee contributions; matching contributions were funded for the years ended December 31, 2024 and 2023. Benefits under this plan were available to all employees, and employees become fully vested in the employer’s contribution upon receipt. A total of $111,336 and $130,912 was contributed to the 401 (k) plan for years ended on December 31, 2024 and 2023, respectively.

eXoZymes also provides health and related benefit plans for eligible employees.

8. Exclusive License Agreement (EXoZymes)

On April 19, 2019, eXoZymes entered into a license agreement (the “License Agreement”) with The Regents of the University of California (“The Regents”) for patent rights and associated technology relating to the biosynthetic platform being developed by the Company. Certain individuals named as inventors of the patent rights are also the founding stockholders of eXoZymes. One of the founders of eXoZymes was the head of the laboratory which was used in the research and development of patents and associated technology subject to the agreement with The Regents.

Under the License Agreement, eXoZymes holds an exclusive license of the patent rights and a non-exclusive license for the associated technology to make, have made, use, have used, sell, have sold, offer for sale, and import licensed products in the field of use. Under the License Agreement, eXoZymes paid an initial license fee and is to pay an annual license fee and royalties on net sales, a minimum annual royalty that is credited against the royalties on net sales, and a percentage of any sublicensing income. The net income royalty commences after the first commercial sale of a licensed product. As of December 31, 2024, there were no accrued royalties recorded.

Under the License Agreement, eXoZymes is required to achieve certain development milestones. eXoZymes is obligated to make payments upon achievement of certain sales thresholds, as defined in the License Agreement. As of December 31, 2024 the development milestones have been met.

The following net sales milestone payments have not yet been incurred. The net sales milestones do not have a deadline and are listed below as of December 31, 2024.

The Regents have the right terminate the License Agreement for breaches of the License Agreement by eXoZymes

eXoZymes may terminate the License Agreement, in whole or in part as to a particular patent right, at any time by providing notice of termination to The Regents as defined in the License Agreement.

The payments made to the Regents in connection with our license agreement with the Regents, from 2019 to December 31, 2024, has aggregated $371,803. This includes payments for patent fees associated with the license and maintenance fees.

Under the License Agreement, the Company issued 249,689 shares of Common Stock, then representing four percent of its common equity, as initial consideration. The Company agreed to issue additional shares of Common Stock to The Regents so that The Regents were to own no less than four percent of all outstanding common shares of the Company until the Company received an aggregate amount of $5,000,000 from the sale of equity securities. The Company received equity funding of $5,000,000 as of June 2022, fulfilling the non-dilution provision of the License Agreement, and no additional common shares are required to be issued to The Regents.

eXoZymes accounts for the costs incurred in connection with the License Agreement in accordance with ASC Topic 730, Research and Development. The Company paid license fees for the years ended December 31, 2024 and 2023, respectively, of $3,389 and $4,868.

9. Leases

For operating leases, the Company records right-of-use assets and corresponding lease liabilities in the consolidated balance sheets for all leases with terms longer than twelve months. The Company has two operating leases, withno variable lease costs, andno finance leases as of December 31, 2024.

On April 3, 2023, the Company executed a lease for new office space next to the existing space at eXoZymes in the Los Angeles, California metropolitan area. The lease with a term of 60 months which began on July 1, 2023 and ends on June 30, 2028, without an option to extend. The initial base rent was $13,277 per month. The lease provides for annual increases. The base rent for the lease in the final year is $14,943 per month.

In April 2023, eXoZymes made changes to an existing lease agreement, which resulted in anextension of the lease term by an additional 21 months. The revised lease maintained the same escalation rate for lease payments as the previous arrangement. To account for this modification, the Company reevaluated the remaining lease term at the time of execution. As the Company was actively utilizing the premises, adjustments were made to reflect the revaluation of both the right-to-use asset and the corresponding lease liability in line with the updated lease term. This was originally entered into in August 2021, with a term of 60 months beginning on May 1, 2023 and ending on April 30, 2028, with an option to extend for 60 additional months. At the time the lease commenced, it was not probable the Company would exercise the one five-year option to extend the facility lease; therefore, this extension option is not included in the lease analysis. The initial base rent is $14,371 per month. The lease provides for annual increases. The base rent for the lease in the final year is $16,259 per month. Additionally, eXoZymes is responsible for annual operating cost increases of 2.5%, which are included in the rent.

On October 30, 2023, the Company executed an addendum to the current lease for additional office space in Monrovia, California, the expected occupancy of the additional space was May 1, 2023. The lease adds a term of 20 months to the current term for a total of 72 months for the current term, the additional space is for 72 months, both spaces will expire on April 30, 2028 without an option to extend. The expansion space will have an initial base rent of $13,277 per month, along with the current lease of $14,371 per month for the current leased space for a new total of $27,648 The lease provides for annual increases. The base rent for the lease in the final year is $15,391 per month for the expansion space and $16,747 for the current space for a total of $32,138.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate in its lease calculations when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate for a fully collateralized loan with a similar term of the lease that is based on the information available at the inception of the lease.

The operating lease costs were $374,531 and $263,761, respectively for the years ended December 31, 2024 and 2023.

Future payments due under operating leases as of December 31, 2024 are as follows:

10. Simple Agreement for Future Equity (SAFE) ****

On July 3, 2023, eXoZymes executed a simple agreement for future equity (SAFE) with MDB Capital Holdings LLC which provided funding of $785,000. On July 3, 2023, eXoZymes executed a simple agreement for future equity (SAFE) with Paul Opgenorth who provided funding of $15,000. Both agreements have identical terms.

On November 11, 2024, the Company gave instruction to issue an aggregate of 125,001 shares of Common Stock on the conversion of the simple agreements for future equity (SAFEs) issued on July 3, 2023, to MDB Capital Holdings LLC and Paul Opgenorth, which provided funding of $800,000. The SAFEs converted by their terms on the sale of the shares of Common Stock in the IPO.

11. Income Taxes

Amounts recognized for income taxes are reported in “income tax expense (benefit)” on the consolidated statements of operations.

Income tax expense (benefit) consisted of the following:

As of December 31, 2024, the Company’s taxable entities had approximately $3,088,149 of net operating loss carryforwards for federal income tax purposes which can be carried forward indefinitely. The company also had approximately $9,424,083 of net operating loss carryforwards for California tax purposes which can be carried forward for 20 years. However, for taxable years 2024 through 2026, California has suspended the net operating loss (NOL) deduction for corporations with income subject to California taxation of $1 million or more. Corporations may continue to compute and carry over NOLs during the suspension period, with the carryover period extended for each suspended year. A similar suspension was in place for taxable years 2020 and 2021 but was lifted for 2022.

A reconciliation of the federal statutory tax rate to the effective tax rate is as follows:

Significant components of the deferred tax assets and liabilities were as follows:

Net deferred tax assets and liabilities were classified on the consolidated balance sheets as follows:

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. At December 31, 2024, based on projections of future taxable income for the periods in which the deferred tax assets are deductible, valuation allowances of approximately $3,065,959 were recorded for tax carryforwards and attributes to reduce the net deferred tax assets to an amount that is more likely than not to be recognized. The amount of deferred tax assets considered realizable could be reduced in the future if estimates of future taxable income during the carryforward period are reduced.

In accordance with the applicable accounting standards, the Company recognizes only the impact of income tax positions that, based on their merits, are more likely than not to be sustained upon audit by a taxing authority. To evaluate its current tax positions in order to identify any material uncertain tax positions, the Company developed a policy of identifying and evaluating uncertain tax positions that considers support for each tax position, industry standards, tax return disclosures and schedules and the significance of each position. It is the Company’s policy to recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company had no material uncertain tax positions at December 31, 2024 and December 31, 2023. The tax years 2021 – 2024 remain open to examination for federal income tax purposes.

In accordance with the applicable accounting standards, the Company recognizes only the impact of income tax positions that, based on their merits, are more likely than not to be sustained upon audit by a taxing authority. To evaluate its current tax positions in order to identify any material uncertain tax positions, the Company developed a policy of identifying and evaluating uncertain tax positions that considers support for each tax position, industry standards, tax return disclosures and schedules and the significance of each position. It is the Company’s policy to recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company had no material uncertain tax positions at December 31, 2024 and December 31, 2023. The tax years 2021 – 2024 remain open to examination for federal income tax purposes.

12. Subsequent Events

The Company has evaluated subsequent events through March 31, 2025, the date on which these financial statements were issued.

b. Exhibits

See “Exhibit Index” on the page following the consolidated financial statements and related footnotes and the signature page to this Annual Report on Form 10-K.

c. Financial Statement Schedules

No financial statement schedules are filed herewith because (i) such schedules are not required, or (ii) the information has been presented in the financial statements.