MDB Capital Holdings, LLC

1. Organization and Description of Business

MDB Capital Holdings, LLC (“the Company” or “MDB”), a Delaware limited liability company, is a holding company that has three wholly-owned subsidiaries: MDB CG Management Company (“MDB Management”); Public Ventures, LLC, d/b/a MDB Capital (“Public Ventures”); and PatentVest, Inc. (“PatentVest”), and MDB Minnesota One (“M1”).

MDB Management is principally an “administrative” entity whose purpose is to conduct, and wherever possible, to consolidate shared services/resources, for our US-based operations.

Public Ventures is a U.S. registered broker-dealer under the Securities Exchange Act of 1934, and is a member of the Financial Industry Regulatory Authority (“FINRA”) and the Texas State Securities Board. Public Ventures operates on a fully disclosed basis with a nonrelated FINRA member firm, Interactive Brokers, LLC (“Interactive Brokers”), and is not required to maintain a clearing deposit. Interactive Brokers is the clearing firm and custodian of investments maintained by Public Ventures.

PatentVest is a wholly-owned subsidiary that performs intellectual property validation services for Public Ventures’, due diligence functions on the intellectual property of partner and prospective partner companies, and creates an intellectual property roadmap for such partner companies.

M1 is a majority owned subsidiary and was formed with the purpose of developing pharmaceuticals, based on patents and licensed technology from Mayo. The objective of the License Agreement is for Minnesota One to develop a small molecule senescence platform.

On September 20, 2023, MDB completed an initial public offering (IPO), consisting of the sale of 1,666,666 shares of Class A Common Shares at $12.00 per share, for gross proceeds of $19,999,992. Accordingly, the Company received total gross proceeds of $19,999,992 from the sale of 1,666,666 shares of Class A Common Shares, or $17,444,659 net of $2,555,333 of offering expenses. In conjunction with the IPO, the Company issued warrants to the placement agent to purchase 16,667 shares of Class A Common Shares, exercisable upon issuance for a period of 5 years at $15.00 per share, for a cash consideration of $0.001/share. The placement agent’s warrants had a fair value of $65,411, as calculated pursuant to the Black-Scholes option-pricing model and accounted for as issuance costs that were accounted for as equity instruments and recorded against paid in capital. The inputs used to determine the fair value was Common Stock price of $12.00, option exercise price of $15.00, expected life in years of 2.45 years, with a contract life of 5 years, risk-free rate of 4.79%, expected annual volatility of 59.99%, and annual rate of dividends of $0.

On July 1, 2024, the founding ownership of M1 had MDB owning 67% and Mayo Foundation for Medical Education and Research (“Mayo”) owning 33% of the issued and outstanding common stock. M1 was formed with the purpose of developing pharmaceuticals, based on patents and licensed technology from Mayo. After the initial formation of M1 and finalization and entry into a license agreement between Mayo and M1, MDB entered into a Term Equity Purchase Agreement (“Purchase Agreement”) to provide capital for operations of M1 in exchange for the issuance of shares of common stock of M1 to MDB. The objective of the License Agreement is for M1 to develop a small molecule senescence platform. Under the terms of the License Agreement M1 has paid an up-front license fee to Mayo of One Hundred Fifty Thousand Dollars ($150,000). To maintain its rights under the License Agreement, M1 is subject to achieving certain developmental and funding milestones within designated time periods and to paying Mayo royalties on net sales of licensed products. Under the terms of the Purchase Agreement, MDB may invest up to $5,000,000 over a five-year period into M1 in amounts and increments tied to its business operating requirements. In an ancillary agreement to the license agreement, Mayo has the right of participation in future financings of M1.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the financial statements of wholly-owned and majority owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Non-controlling interests at December 31, 2024 and 2023 relate to the interests of third parties in the partially owned subsidiaries.

The managing members of the Company have a controlling interest in PatentVest, S.A., a company organized and based in Nicaragua (which was renamed MDB Capital, S.A in 2022). As the Company itself does not have a controlling financial interest in this entity, management has determined PatentVest, S.A. is not a variable interest entity and should not be consolidated as it has no ownership interests, so has excluded this entity from the Company’s consolidated financial statements. It is the Company’s policy to reevaluate this conclusion on an annual basis or if there are significant changes in ownership.

Deconsolidation

Upon the occurrence of certain events and on a regular basis, the Company evaluates whether it no longer has a controlling interest in its subsidiaries, including consolidated variable interest entities. If the Company determines it no longer has a controlling interest, the subsidiary is deconsolidated. The Company records a gain or loss on deconsolidation based on the difference on the deconsolidation date between (i) the aggregate of (a) the fair value of any consideration received, (b) the fair value of any retained noncontrolling investment in the former subsidiary and (c) the carrying amount of any noncontrolling interest in the subsidiary being deconsolidated, less (ii) the carrying amount of the former subsidiary’s assets and liabilities.

The Company evaluated whether the deconsolidation should be presented as a discontinued operation in its consolidated financial statements as of the deconsolidation date. This assessment considers whether the deconsolidation constitutes a strategic shift that has, or will have, a major impact on the Company’s operations or financial results. Based on this evaluation, the Company concluded that the deconsolidation doesnot meet the criteria for presentation as a discontinued operation. Accordingly, the Consolidated Statement of Operations includes the results of operations for the deconsolidated entity through November 14, 2024, the effective date of deconsolidation.

Equity method investment

The Company applies the equity method to account for investments in entities where it has the ability to exercise significant influence over the operating and financial policies of the investee. Under the equity method, the investment in eXoZymes, formerly known as Invizyne, is initially recorded at cost and subsequently adjusted to reflect the Company’s proportional share of the investee’s results of operations in its consolidated financial statements. Equity method investments are periodically reviewed for any other-than-temporary declines in value. The Company’s investment in eXoZymes is presented as “Equity method investment” on the consolidated balance sheet.

Any excess of the acquisition cost over the Company’s share of the net fair value of eXoZymes’ identifiable assets and liabilities at the acquisition date is recognized as goodwill, which is included in the carrying amount of the investment.

When the Company increases its interest in an affiliate accounted for under the equity method while retaining significant influence, it applies the acquisition method only to the additional interest acquired, leaving the previous interest unchanged. Conversely, when there is a decrease in the interest in an affiliate accounted for under the equity method while retaining significant influence, the Company derecognizes a proportionate part of its investment and recognizes any resulting gain or loss in profit or loss.

Income Taxes

We account for income taxes using the asset and liability method, under which we would recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized.

Use of Estimates

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 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 as a whole 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 valuation of investment securities, accruals for potential liabilities, valuing equity instruments issued for services, assumptions used in the valuation of the equity method investment and gains on the deconsolidation of the subsidiary, the estimate of the fair value of the lease liability and related right of use assets, net realizable value of receivables, useful life of property and equipment, determining impairment of long-lived assets, 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 election to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.

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 $15,782,918 and $598,714 cash equivalents held by the Company at December 31, 2024 and 2023, respectively.

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”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively. The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents. At December 31, 2024, the Company held $4,654,574 of unsegregated cash and $15,782,918 of cash equivalents. For the years ended December 31, 2024 and 2023, respectively, the Company had approximately $4,291,601 and $3,943,000 of cash and segregated cash in financial institutions in excess of FDIC insured limits.

The Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments. The Company did not experience any credit risk losses during the years ended December 31, 2024 and 2023.

The Company’s membership agreement with the DTC requires that we maintain a line of credit with our settlement bank in the amount $2,000,000, to be drawn down upon as needed for self-clearing operations. The Company has established a line of credit with its settlement bank, Lakeside Bank, which is collateralized by a $2,000,000 deposit of cash at Lakeside. The collateral amount may be withdrawn, but the availability of the line of credit is dependent upon the maintenance of such compensating balance and is included in cash and cash equivalents on the Statement of Financial Condition.

Segregated Cash and Deposits

From time to time the Company provides deposits or enters into agreements that would require funds to be held in a segregated cash account. At December 31, 2024 and 2023, respectively, the Company had $843,741 and $1,247,881 of segregated cash consisting of funds held in reserve for customers and non-customers.

Clearing Deposits

The Company is obligated to maintain security deposits with the DTC and NSCC. At December 31, 2024 and 2023, these deposits totaled $1,737,771 and $260,000, respectively.

Prepaid and other current assets

The Company has prepaid and other current assets totaling $513,249 at December 31, 2024 consisting of acquired intangible assets totaling $43,500, prepaid professional fees totaling $50,000, security deposits totaling $18,628, prepaid insurance $159,675, various prepaid expense of $151,606, and other assets of $89,840. Prepaid and other expenses totaling $523,788 at December 31, 2023 consisted of acquired intangible assets totaling $43,500, prepaid professional fees totaling $95,000, security deposits totaling $47,380, various prepaid expense of $325,777, and other assets of $12,131.

Leases

Leases of the Company consist primarily of contracts for the right to use and direct use of an individual property. Leases were analyzed for evidence of significant additional components and to determine if these components were separately identifiable within the context of the contract. As an accounting policy, to account for these components, the Company has elected the practical expedient for property leases that have both lease and non-lease components for them to be combined into a single component and account for as a lease. This policy is effective for all current and future property operating leases and applied uniformly and will be disclosed as such within the financial statements. Operating lease assets are included within right-of-use assets and the corresponding operating lease liabilities are included within liabilities on the Company’s consolidated balance sheet as of December 31, 2024 and 2023.

The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. Because the Company’s leases do not provide an implicit rate of return, the Company used the Company’s incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

Stock Based Compensation

Stock-based compensation primarily consists of restricted stock units with service or market/performance conditions. Equity awards are measured at the fair market value of the underlying stock at the grant date. The Company recognized stock based compensation expense using the straight-line attribution method over the requisite service period. The Company’s subsidiary issued stock-options and the fair value is determined utilizing Black-Scholes options-pricing model. The Company accounts for forfeitures as they occur, rather than applying an estimated forfeiture rate. For performance-based restricted stock units, the compensation cost is recognized based on the number of units expected to vest upon the achievement of the performance conditions. Shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued to the employee than the number of awards outstanding. The Company records a liability for the tax withholding to be paid by it as a reduction to Additional paid-in capital.

Investment Securities

The Company strategically invests funds in U.S. Treasury Bills, early-stage technology companies, and equity securities and options of publicly traded and privately held companies. The Company classifies investment securities as investment securities, at amortized cost, investment securities, at fair value, or investment securities, at cost less impairment.

Investment securities, at amortized cost – From time to time the Company will hold funds in investment securities, at amortized cost. This is comprised of debt securities held by MDB and are classified as investment securities held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. Initially, the cost of these securities was recorded, and later on, they were assessed at amortized cost, which was modified for unamortized purchase premiums and discounts, and also for credit losses provision. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the other operating income in the statements of operations. Interest income is recognized when earned. The Company recognizes estimated expected credit losses over the life of the investment security through the allowance for credit losses account. The allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the investment security to present the net amount expected to be collected. In determining expected credit losses, the Company considers relevant qualitative factors including, but not limited to, term and structure of the instrument, credit rating by rating agencies and historic credit losses adjusted for current conditions and reasonable and supportable forecasts. The Company holds investments in U.S. Treasury Bills or money market funds backed by U.S. Treasury Bills, so there are no expected credit losses. Declines in fair value of these securities is due to changes in market interest rates, and because it expects to hold these securities until maturity, it does not expect to realize any losses.

Investment securities, at fair value- This is comprised of equity investments held by the broker dealer subsidiary and are reported at fair value with changes in fair value recognized in the statement of operations. Purchases and sales of equity securities, consisting of common stock and warrants to purchase common stock, are recorded based on the respective market price quotations on the trade date. Realized gains and losses on investments represent the net gains and losses on investments sold during the period based on the average cost method. Differences between the fair value of investments at the beginning of the year and the end of the year are recorded on the income statement as unrealized gains and losses.

Investment securities, at cost less impairment - This is comprised of equity securities without a readily determinable fair value held by the broker dealer subsidiary, the Company has elected to apply the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company will reassess whether such an investment qualifies for the measurement alternative at each reporting period. In evaluating an investment for impairment or observable price changes, we will use inputs including recent financing events, as well as other available information regarding the investee’s historical and forecasted performance. The Company has assessed this investment and determined that a full impairment of such securities held at the year ended December 31, 2024.

Investment securities are as follows:

Broker/Dealer Securities

Non-Broker/Dealer Securities

For investment securities at fair value held at the end of each year, net unrealized loss and $274,835 and a gain of $1,503,649 were recognized in the statement of operations for years ended December 31, 2024 and 2023, respectively.

There was no amortized cost on December 31, 2024.

The amortized cost, excluding gross unrealized holding loss and fair value of held to maturity securities on December 31, 2023 are as follows:

Fair Value of Financial Instruments

Fair value is defined as 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 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 Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:

Level 1 - Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.

Level 2 - Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

Level 3 - Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.

The Company’s financial instruments primarily consist of cash and investment securities, and securities sold, not yet purchased. As of the statement of financial condition date, investment securities, and securities sold and not yet purchased are required to be recorded at fair value with the change in fair value during the period being recorded as an unrealized gain or loss.

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:

Investment securities, at fair value and securities sold, not yet purchased: These securities are valued based on quoted prices from the exchange or other trading platform. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy.

A description of the valuation techniques applied to the Company’s other financial assets and liabilities is as follows:

Investment securities, at amortized cost: The fair value of U.S. Treasury Bills classified as held-to-maturity investment securities is based on the market price and is classified as level 1 of the fair value hierarchy.

Investment securities, at cost less impairment: Non-public equity securities and simple agreements for future equity are valued based on the initial investment, less impairment. The Company determined that an impairment is warranted. Since these securities are not actively traded, we will apply valuation adjustments when they become available, and they are categorized in level 3 of the fair value hierarchy. The Company fully impaired a SAFE that was previously valued at $100,000 and stock that was previously valued at $50,000 both were held at the year ended December 31, 2023.

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024, except for the Level 3 investment that is recorded at cost:

During the year ended December 31, 2024, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

The following table present information about significant unobservable inputs related to material components of Level 3 warrants as of December 31, 2024.

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023, except for the Level 3 investment that is recorded at cost:

During the year ended December 31, 2023, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

The following table present information about significant unobservable inputs related to material components of Level 3 warrants as of December 31, 2023.

During the year ended December 31, 2023, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

Secured Debt–- Revolving Credit Facility

The Company entered into a revolving credit facility with a bank, (the “Lender”) on July 26, 2024 for a commitment of up to $2,000,000 and which matures July 26, 2025. The loan has a variable interest rate equal to a defined index, currently the Lender’s rate on the sale of Federal Funds, plus 2.25%. The loan commenced with a calculated interest rate of 7.75%. If the Lender determines, in its sole discretion, that the index becomes unavailable or unreliable, either temporary, indefinitely, or permanently, during the term of this loan, the Lender may amend this loan by designating a substantially similar substitute index. The agreement provides for a quarterly payment of the greater of accrued interest or a non-usage fee of $5,000. The Company has not made any draw downs on the credit facility.

The Company granted the Lender a security interest in a cash checking account held at the bank as collateral. The Lender has a right of setoff available from this cash account when the line of credit is accessed. As of December 31, 2024, there is $2,089,831 deposited in this account.

The Company is responsible for the payment of all of the Lender’s legal and other fees incurred in connection with administering the loan. The Company has incurred no such costs or debt issue costs.

As of December 31, 2024 and 2023, respectively, there areno outstanding indebtedness under the credit facility and interest expense totaled $0. The Company is in compliance with all covenants under the agreement.

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 2023, respectively:

Revenue

The Company generates revenue primarily from providing brokerage services and underwriting through Public Ventures. PatentVest and eXoZymes, formerly known as Invizyne, have had limited activity during the years ended December 31, 2024 and 2023.

Brokerage revenues consist of (i) trade-based commission income from executed trade orders, (ii) net realized gains and losses from proprietary trades, and (iii) other income consisting primarily of stock loan income earned on customer accounts. Public Ventures recognizes revenue from trade-based commissions and other income when performance obligations are satisfied through the transfer of control, as specified in the contract, of promised services to the customers of Public Ventures. Commissions are recognized on a trade date basis. Public Ventures believes that each executed trade order represents a single performance obligation that is fulfilled on the trade date because that is when the underlying financial instrument is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to/from the customer. When another party is involved in transferring a good or service to a customer, Public Ventures assesses whether revenue is presented based on the gross consideration received from customers (principal) or net of amounts paid to a third party (agent). Public Ventures has determined that it is acting as the principal as the provider of the brokerage services and therefore records this revenue on a gross basis. Clearing, custody and trade administration fees incurred from Interactive Brokers, the Company’s clearing firm, are recorded effective as of the trade date. The costs are treated as fulfillment costs and are recorded in operating expenses in the consolidated statements of operations.

Brokerage revenue is measured by the transaction price, which is defined as the amount of consideration that Public Ventures expects to receive in exchange for services to customers. The transaction price is adjusted for estimates of known or expected variable consideration based upon the individual contract terms. Variable consideration is recorded as a reduction to revenue based on amounts that Public Ventures expects to refund back to the customer. There were no variable considerations for the years ended December 31, 2024, and 2023, respectively.

Investment banking revenues consist of private placement and underwriting fees. The Company generally does not incur costs to obtain contracts with customers that are eligible for deferral or receive fees prior to recognizing revenue related to investment banking transactions, and therefore, as of December 31, 2024, the Company did not have any contract assets or liabilities related to these revenues on its consolidated balance sheets.

Private placement fees are related to non-underwritten transactions such as private placements of equity securities, private investments in public equity, and Rule 144A private offerings and are recorded on the closing date of the transaction. Client reimbursements for costs associated for private placement fees are recorded gross within investment banking and various expense captions, excluding compensation. The Company typically receives payments on private placements transactions at the completion of the contract. The Company views the majority of placement fees as a single performance obligation that is satisfied when the transaction is complete, and the revenue is recognized at that point in time.

Taxes and regulatory fees assessed by a government authority or agency that are both imposed on and concurrent with a specified revenue-producing transaction, which are collected by Public Ventures from a customer, are excluded from revenue and recorded against general and administrative expenses.

Public Ventures does not incur any costs to obtain contracts with customers for revenues that are eligible for deferral or receive fees prior to recognizing revenue, and therefore, as of December 31, 2024 and 2023, Public Ventures did not have any contract assets or liabilities related to these revenues in its consolidated balance sheet.

During the year ended December 31, 2024, the Company’s technology development segment revenue hadno revenue. During the year ended December 31, 2023, the Company’s technology development segment revenue, had $70,769 of revenue, which was derived from a single feasibility study, which is not a typical service offered by the Company. The revenue generated from this study represents a direct reimbursement of costs incurred in completing the study.

PatentVest recognize revenue when performance obligations are satisfied by transferring promised goods and services to customers in an amount the Company expects to receive in exchange for those goods or services. PatentVest enters into contracts that can include various combinations of its offerings which are generally capable of being distinct and accounted for as a separate performance obligation for the entire contract or a portion of the contract. When performance obligations are combined into a single contract, PatentVest utilizes stand-alone selling price to allocate the transaction price among the performance obligations.

Certain contracts or portions of contracts are duration-based, which in the event of customer cancellation, provide PatentVest with an enforceable right to a proportional payment for the portion of the services provided. Accordingly, revenue from duration-based contracts is recognized using a time-based measure of progress, which PatentVest believes best depicts how it satisfies its performance obligations in these arrangements as control is continuously transferred throughout the contract period. Revenue from certain contracts is recognized over the expected period of performance using a single measure of progress, typically based on hours incurred. Payments received in advance of services being rendered are recorded as a component of contract liabilities.

The PatentVest’s contract liabilities which is presented as deferred revenue, consist of advance payments. The table below shows changes in deferred revenue:

Research Grants

eXoZymes, formerly known as Invizyne, receives grant reimbursements, which are netted against research and development expenses in the consolidated statement of operations. Grant reimbursements for capitalized assets are recognized over the useful life of the assets, with the unrecognized portion recorded as deferred grant reimbursements and included in liabilities in the consolidated balance sheet.

Grants function on a reimbursement model are accounted for using the accrual method. They are treated as reductions to expenses, corresponding to the amount of disbursements and obligations eligible for reimbursement. These are for permissible expenses incurred as of December 31, 2023. The reimbursements are anticipated to be received from the respective funding entities in the following year. Management considers such receivables at December 31, 2023, 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 have commitments made by the parties, provisions for recapture, or any other contingencies, beyond complying with the normal terms of each research and development grant. Research grants received from organizations are subject to the contract agreement as to how eXoZymes, formerly known as 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 Company’s consolidated statement of operations. For the years ended December 31, 2024 and 2023, respectively, totaled $3,467,871 and, grants amounting to $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 $2,002,650 and $2,954,208, which includes grant costs expensed, grants for equipment purchased, and grants fees.

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’ technology. For the years ended December 31, 2024 and 2023, research and development costs prior to offset of the grants amounted to $3,470,521 and $3,482,386, 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 Company’s 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 $296,314 and $107,925 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 Company’s consolidated statements of operations.

Recently Issued Accounting Pronouncements

ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance

On January 1, 2020, The Company adopted ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”) and retrospectively applied the guidance to prior transactions.

The amendments in ASU 2021-10 require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy: (1) information about the nature of the transactions and the related accounting policy used to account for the transactions; (2) the line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item; and (3) significant terms and conditions of the transactions, including commitments and contingencies.

Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s consolidated financial statement presentation or disclosures.

3. Segment Reporting

In its operation of the business, management, including the Company’s chief operating decision maker, who is also the Company’s Chief Executive Officer, reviews certain financial information, including segmented profit and loss and balance sheet statements.

The Company currently operates intwo reportable segments: a broker dealer & intellectual property service and technology development.

The broker dealer & intellectual property service segment currently has two subsidiaries, Public Ventures and PatentVest. Public Ventures is a full-service broker dealer firm focusing on conducting private and public securities offerings. PatentVest offers in-depth patent research used for investment banking due diligence.

The technology development segment currently has two subsidiaries, eXoZymes, formerly known as Invizyne, and MDB Minnesota One. eXoZymes is a research and development stage company synthetic biology company, that is consolidated in the Statement of Operations up to November 14, 2024. Minnesota One research and development stage company that is developing a small molecule senescence platform.

Non-income generating subsidiaries for management of the business, including MDB CG Management Company, Inc. are reported in the Other column in the table below.

The segments are based on the discrete financial information reviewed by the Chief Executive Officer to make resource allocation decisions and to evaluate performance. The reportable segments are each managed separately because they will provide a distinct product or provide services with different processes. All reported segment revenues are derived from external customers.

The accounting policies of the Company’s reportable segments are in consideration of ASC 280 and the same as those described in the summary of significant accounting policies (see Note 2).

The following sets forth the long-lived assets and total assets by segment at December 31, 2024:

The following sets forth the long-lived assets and total assets by segment at December 31, 2023:

4. Equity and Non-Controlling Interests

Equity

Preferred shares –10,000,000 shares authorized, no shares issued and outstanding. The board of directors may designate preferred shares to be issued, and may rank preferred shares as junior to, on parity with or senior to other preferred shares (in each case, with respect to distributions or other payments in respect of shares). Since the board of directors may set all the terms of any class of preferred shares, these are considered “blank check” preferred shares. Currently the board has not defined dividend and liquidation preference, participation rights, call prices and dates, sinking-fund requirements, or terms that may change the conversation or exercise price.

Class A Common Shares –95,000,000 shares authorized,4,950,632 shares issued and outstanding as of December 31, 2024. These shares are common shares and have one vote per share. Currently there is not a defined dividend or liquidation preference.

Class B Common Shares –5,000,000 shares authorized,5,000,000 issued and outstanding as of December 31, 2024. These shares are common shares and have five votes per share. Currently there is not a defined dividend or liquidation preference. These shares may be converted one to one for Class A Common Shares.

Placement Agent and Selling Agent Warrants – 43,420 warrants of Class A common shares have been issued as part of the private placement and the initial public offering. The Placement Agent and Selling Agent Warrants are subject to standard anti-dilution provisions and may include cashless exercise provisions under certain circumstances. The issuance of the Placement and Selling Agent Warrants is a customary part of compensation for the placement or selling agent’s services in connection with prior offerings.

Non-Controlling Interests

On July 1, 2024 M1 was incorporated. During the year ended December 31, 2024, the ownership interest in M1, ranged from 67.0% to 67.9% (weighted average of 67.47 %), with the non-controlling interest ranging from 33.0% to 32.1% (weighted average of 32.53%).

During the year ended December 31, 2024, the ownership interest in eXoZymes, formerly known as Invizyne, ranged from 60.94% to 47.0%, with the non-controlling interest ranging from 39.06 % to 53.0%, on November 14, 2024 the ownership of eXoZymes by MDB Capital Holdings, LLC moved below 50%, therefore on that day the eXoZymes was deconsolidated from the financial statements. During the year ended December 31, 2023, the ownership interest in eXoZymes, formerly known as Invizyne, ranged from 60.94% to 59.0%, with the non-controlling interest ranging from 39.06 % to 41.0% (weighted average of 39.54 %). In 2024 all non-controlling interests of eXoZymes have been removed from the consolidated financial statements and moved to the equity method of accounting.

During each period, controlling and non-controlling interests changes as a result of capital infusions from MDB Capital Holdings, LLC. For the years ended December 31, 2024, and 2023, there were capital infusions of $176,840 (M1) and $0 (eXoZymes), respectively. The NCI ownership will be equal to the NCI percentage as of the reporting period. Therefore, there will be a redistribution of equity between MDB and the non-controlling interest owner. As of December 31, 2024, the Company’s equity interest in M1 was 67.9% to 67.0%, and the remaining equity interest was owned by the non-controlling interests as presented below. As of December 31, 2023, the Company’s equity interest in eXoZymes changed from 60.94% to 59.0%, and the remaining equity interest was owned by the non-controlling interests as presented below:

If there is a change in the parent ownership in a subsidiary from an additional investment or from the issuance of stock based compensation, a change of the non-controlling ownership is recognized based on the amount invested as required, and per ASC 810-45-21A, the carrying amount of the non-controlling interest is adjusted to reflect the change in the non-controlling ownership in the subsidiary’s net assets. Since there was a change in the equity, a reclassification of the non-controlling interest in the subsidiary’s net assets is required and demonstrated in the ending period balance above.

Note 5 –Deconsolidation

On November 14, 2024 (the “Deconsolidation Date”), the Company deconsolidated eXoZymes from its financial statements due to its ownership interest falling below 50%, resulting in the loss of a controlling financial interest. This change occurred in connection with eXoZymes’ completion of its initial public offering, which reduced the Company’s ownership stake.

The consolidated financial statements as of December 31, 2024 reflect the inclusion of eXoZymes’ financial results through the Deconsolidation Date. For the period from November 15, 2024 through December 31, 2024, the Company accounted for its investment in eXoZymes under the equity method, recognizing its proportionate share of eXoZymes’ net loss in the amount of $419,670, based on eXoZymes’ total net loss of $893,310 for that period.

As of December 31, 2024, the Company continues to hold a 47% interest in eXoZymes Class A common stock. While the Company and eXoZymes share certain officers, board members, and accounting personnel, the two entities operate independently. eXoZymes also utilizes professional services provided by Patentvest, a wholly owned subsidiary of the Company

We assess the potential impairment of our equity method investments when indicators such as a history of operating losses, a negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s business segment might indicate a loss in value. We have not recognized any impairment loss on investment in unconsolidated affiliate to date.

The following table represents the consolidated balance sheet of Exozymes immediately prior to the Deconsolidation Date:

For the year ended December 31, 2024 eXoZymes. had current assets of approximately $10,800,000, total assets of approximately $13,000,000, current liabilities of approximately $1,300,000 and total liabilities of approximately $2,600,000. For the year ended December 31, 2024 eXoZymes had revenues of $0 and a net loss of approximately $5,900,000.

The following represents the calculation of the gain on deconsolidation of eXoZymes. from the consolidated financial statements of the Company:

Note 6 –Equity Method Investment

On November 14, 2024, Invizyne underwent an initial public offering in which MDB’s ownership interest in Invizyne decreased from 60% to 47%. MDB and Invizyne deconsolidated the financial statements as the investment in Invizyne fell below 50% majority ownership. Invizyne is consolidated within MDB’s consolidated financial statements for the period of January 1, 2024 through the date of the initial public offering.

On November 14, 2024, MDB uses the equity method to account for our investment in Invizyne as we have the ability to exercise significant influence over the operating and financial policies of the affiliate. The fair value of the equity method investment was determined using the shares owned by MDB and the Invizyne share price on the date of deconsolidation, as well as a fair value estimate for the warrants held for eXoZymes.

The transition resulted in an adjustment to the carrying amount of its investment in Invizyne as of November 14, 2024. The adjustment reflects MDB’s share of Invizyne’s net assets. The impact on the consolidated statements of operations includes recognizing the MDB’s share of Invizyne’s net losses from November 15th onwards for $419,670. MDB recognized a gain on investment of $39,307,216 at November 14, 2024.

As of December 31, 2024, MDB owned 3,931,133 shares of Invizyne shares, representing a 47% ownership of Invizyne.

The following summarizes the Company’ consolidated balance sheet equity method investment as follows:

7. Stock-Based Compensation

Between April 19, 2022 and September 21, 2022, the Company granted 3,675,000 restricted stock units (“RSUs”). These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary, October 20, 2024, of the listing of the Class A Shares on a United States national exchange, then at a rate of 10% of one-half the number of RSUs each six months after the date of the initial vesting, until the last vesting on the fifth year anniversary of the date of grant, at which any previously unvested will fully vest. These RSUs were granted to officers, directors, employees, and contractors. These RSU have begun to vest upon the completion of an initial public offering by the Company on September 20, 2023, compensation expense related to these RSUs has been recorded. The Company will be expensing the RSUs based on the average expense over the vesting period. The total unrecognized compensation expense based on the shares price sold in the private placement as of December 31, 2024 is $23,679,438. During the year 320,000 RSUs were either forfeited by the holders or canceled due to holder leaving the Company.

On April 19, 2022 the Company granted 2,000,000 restricted stock units (“RSUs”). These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary of the listing of the Class A Shares on a United States national exchange, October 20, 2024, when Class A Share has traded in the market on which the Class A Shares are listed for any 90 consecutive calendar days at an average price of $20.00 or more during the period commencing the date of grant and prior to the five year anniversary of the date of grant, with an average monthly trading volume of 2,000,000 Class A Shares or more during the 90 consecutive calendar day period, or (z) a Class A Shares has traded in the market on which the Class A Shares are listed for any 90 consecutive calendar days at an average price of $25.00 or more during the period commencing the date of grant and prior to the five year anniversary of the date of grant; provided further, that if there is a distribution of cash, stock or other property by the Company on the Class A Shares, then the foregoing average amounts of $20.00 or $25.00 will be reduced, from time to time, by the value of any one or more per share distributions after the date of grant until vested. As these RSUs do not begin to vest until the completion of an initial public offering, which was completed on September 20, 2023, by the Company, which is outside of the control of the Company, compensation expense related to these RSUs has been recorded. The estimated unrecognized compensation expense for performance/market vesting RSUs is $10,143,198. A summary of restricted stock unit activity during the years ended December 31, 2024 and 2023 is presented below:

8. 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 common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to 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 stock warrants outstanding were anti-dilutive, for a total of 43,420 warrants.

Earning Earnings per share is presented below for the years ended December 31, 2024 and 2023, respectively.

Basic earnings per share is calculated at follows for the years ended December 31, 2024 and 2023:

Fully diluted earnings per share is calculated at follows for the years ended December 31, 2024 and 2023:

Class A Common Shares and Class B common stock are equal for ownership purposes, but Class B shares have five times the voting rights of Class A shares and Class B shares can be exchanged on a one-to-one basis for purposes of sale.

9. Related Party Transactions

The principal members of the Company have a controlling interest in PatentVest, S.A. (renamed MDB Capital, S.A. in 2022), a company organized and based in Nicaragua that provides outsourced services to the Company and other non-related entities. During the years ended December 31, 2024 and 2023, the Company paid $1,573,202 and $1,123,401, respectively, which is inclusive of expenses and fees, for contracted labor, recorded against general and administrative expenses.

During the year ended December 31, 2024, PatentVest, a 100% entity owned by MDB Capital Holdings, LLC, engaged in transactions with ENDRA Life Sciences Inc – NDRA on Nasdaq, a company for which one of our executive officer serve as a board member. Anthony DiGiandomenico, our Chief of Transactions. For the year ended December 31, 2024, there were no revenue recognized between MDB Capital entities and ENDRA. However, costs incurred amounting to $80,995 related to transactions with ENDRA were recognized during the year.

During the year ended December 31, 2024, PatentVest, a 100% entity owned by MDB Capital Holdings, LLC, engaged in transactions with eXoZymes, a company of which the Company owns 47% of recognized revenues of $41,400.

During the year ended December 31, 2024, the Company recorded related party accrued receivables totaling $63,759. This amount includes $41,400 for services performed by Patentvest on behalf of eXoZymes and $22,359 related to taxes paid by the Company on behalf of certain officers, which was reimbursed in full by January 31, 2025. Additionally, the Company recorded accrued expenses of $22,842 payable to officers and directors, representing reimbursable expenses incurred in the ordinary course of business. All transactions were conducted on an arm’s-length basis and are expected to be settled in the normal course of operations.

10. 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.

Net Capital Requirement (Public Ventures)

Public Ventures is subject to the uniform net capital rule (SEC Rule 15c3-1) of the Securities and Exchange Commission (the “SEC”), which requires both the maintenance of minimum net capital and the maintenance of maximum ratio of aggregate indebtedness to net capital. At December 31, 2024 and 2023, Public Ventures had net capital of $10,736,754 and $7,331,449, respectively, which was $10,486,754 and $7,081,449 in excess of the minimum $250,000, as required by the Securities and Exchange Commission Rule 15c3-1.

During the year ended December 31, 2024, the Company entered into a subordinated loan agreement with its Parent company for $7,300,000. This amount, together with existing subordinated loans totaling $5,900,000 and $775,757 of accrued interest payable, is subordinated to other liabilities of the Company, and is considered members’ equity for calculating net capital, and is not included in aggregate indebtedness.

The Company’s ratio of aggregate indebtedness of $6,535,922 to net capital was 0.61 to 1 compared to the maximum 15 to 1 allowable ratio of a broker dealer. Minimum net capital is based upon the greater of the statutory minimum net capital of $250,000 or 2% of aggregate customer debits, which was $0 at December 31, 2024.

To comply with DTC membership requirements, the Company has committed to maintain at least $5,000,000 of net capital in excess of the $250,000 minimum.

The requirement to comply with the Uniform Net Capital Rule 15c3-1 may limit Public Ventures’ ability to issue dividends to its parent company.

Indemnification Provisions

Public Ventures has agreed to indemnify its clearing brokers for losses that the clearing brokers may sustain from the accounts of customers. Should a customer not fulfill its obligation on a transaction, Public Ventures may be required to buy or sell securities at prevailing market prices in the future on behalf of its customer. The indemnification obligations of Public Ventures to its clearing brokers have no maximum amount. All unsettled trades at December 31, 2024 and 2023 have subsequently settled with no resulting material liability to Public Ventures, LLC. For the years ended December 31, 2024 and 2023, Public Ventures had no material loss due to counterparty failure and had no obligations outstanding under the indemnification arrangement as of December 31, 2024 and 2023.

11. Employee Benefit Plans

MDB Management and eXoZymes, formerly known as Invizyne, both sponsored individual 401(k) defined contribution plans for the benefit of each company’s eligible employees. Public Ventures offered its employees a sponsored 401(k) defined contribution plan for the benefit of the employees; this plan was terminated on July 30, 2021. The plans allow eligible employees to contribute a portion of their annual compensation, not to exceed annual limits 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 year ended December 31, 2024 and 2023. Benefits under the eXoZymes plan were available to all employees, and employees become fully vested in the employer contribution upon receipt. For the year ended December 31, 2024 and 2023, a total of $659,253 and $380,614, respectively, was contributed to the plans. The costs for eXoZymes are recorded up to November 14, 2024 the date of the consolidation of eXoZymes. The majority of the expense was included in general and administrative cost, however, for any research and development employees their portion of the expense is recorded against research and development costs.

MDB Management and eXoZymes also provide health and related benefit plans for eligible employees.

12. Exclusive License Agreement (MDB Minnesota One)

On July 1, 2024, MDB Minnesota One (“M1”) entered into a Patent and Know-How License Agreement (the “License Agreement”) with the Mayo Foundation for Medical Education and Research (“Mayo”) for certain patent rights and associated technology pursuant to which M1 intends to develop a small molecule senescence platform. The License Agreement grants M1 rights to develop and commercialize Mayo’s patented technology and know-how for all fields of use on a worldwide basis. Under the terms of the License Agreement, M1 holds an exclusive license of patent rights and a non-exclusive license for the associated technology to make, have made, use, offer for sale, sell, and import licensed products and derivatives.

As part of initial consideration for the License Agreement, M1 issued 1,980,000 shares of common stock equity to Mayo; which at that time represented thirty-three percent of its shares. M1 also paid an initial license fee of $150,000 as part of the initial consideration. M1 will pay earned royalties on future net sales (including modest minimum annual royalties, which commence in the second year of the term of the License Agreement and gradually increase and plateau over time, and which will be credited against earned royalties due on net sales), and a percentage of any sublicensing income. The earned royalty commences after the first commercial sale of a licensed product. At December 31, 2024 there were no accrued royalties recorded.

Under the License Agreement, M1 is required to achieve certain development milestones within designated time periods. For select development milestones, as listed below, M1 will be required to make a payment to Mayo, also as noted below:

As of December 31, 2024 the development milestones noted above are not required to have been met and have not been met. There are other developmental milestones in the License Agreement relating to funding of the business and to initiating various clinical trial phases over time.

If M1 materially breaches the terms of the License Agreement, and such material breach remains uncured after an opportunity to cure, Mayo may terminate the License Agreement.

13. 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 three operating leases, with no variable lease costs, and no finance leases as of December 31, 2024. The Company has two operating leases, with no variable lease costs, and no finance leases as of December 31, 2023.

eXoZymes, formerly known as Invizyne, was consolidated up to November 14, 2024. In October 2023, eXoZymes, made changes to an existing lease agreement that was originally entered into in August 2021, which resulted in an extension of the lease term by an additional 14 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 August 24, 2021 and ending on September 30, 2026, with an option to extend for 60 additional months and was further modified on April 3, 2023 for an additional 21 months with the lease ending date of April 30, 2028. 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 $16,747 per month. Additionally, eXoZymes is responsible for annual operating cost increases of 2.5%, which are included in the rent. Since eXoZymes is not consolidated for 2024, the information above is only calculated for 2023.

Furthermore, in October 2023, eXoZymes made changes to an second existing lease agreement that was originally entered into in April 2023, which resulted in an extension of the lease term by an additional 12 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 April 2023, with a term of 60 months beginning on July 1, 2023 and ending on June 30, 2028, with anoption 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 $13,277 per month. The lease provides for annual increases. The base rent for the lease in the final year is $15,391 per month. Additionally, eXoZymes is responsible for annual operating cost increases of 3.0%, which are included in the rent. Since eXoZymes is not consolidated for 2024, the information above is only calculated for 2023.

On July 1, 2022 the Company executed a lease for new office space in the Dallas, Texas metropolitan area, the space was occupied on December 20, 2022. The lease with a term of 91 months and began once we took control of the space on December 20, 2022 and ending on July 20, 2030, without an option to extend. The initial base rent was $12,556 per month, after 7 months of free rent. The lease provides for annual increases. The base rent for the lease in the final year is $13,937 per month.

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’s 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.

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

14. Income Taxes

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries, Public Ventures, MDB Management, PatentVest, and MDB Minnesota One are Subchapter C-corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity; it does not directly pay federal and state income taxes and recognition has not been given to federal and state income taxes for the operations of the Company, except as set forth in the tables below. Amounts recognized for income taxes are reported in “income tax expense (benefit)” on the consolidated statements of operations.

On November 14, 2024, eXoZymes, formerly known as Invizyne, previously a corporate subsidiary of the Company, completed its initial public offering (“IPO”), reducing the MDB’s ownership interest to 47%. As a result, the company no longer consolidates eXoZymes Inc for financial reporting purposes and now accounts for its investment using the equity method under ASC 323. For federal income tax purposes, MDB is treated as a partnership and is not subject to entity-level taxation. As a result, no deferred tax assets (“DTAs”) or deferred tax liabilities (“DTLs”) are recognized at the partnership level for differences between the book and tax basis of the equity method investment. Any tax consequences related to book-tax basis differences will be recognized at the partner level upon disposition of the investment or other taxable events.

For financial reporting purposes, as of December 31, 2024, the DTAs and DTLs previously recorded for eXoZymes Inc’s temporary differences were derecognized, resulting in a corresponding reversal of the VA. However, no new DTL related to outside basis differences was recorded at the partnership level due to MDB’s status as a pass-through entity. Additionally, the Company will continue to monitor the book and tax basis of its investment in eXoZymes Inc and assess whether an outside basis difference arises for financial reporting purposes. The Company will also evaluate its assertion regarding the indefinite reinvestment of undistributed earnings of eXoZymes Inc in accordance with ASC 740-30.

The Company’s taxable income or loss, which may vary substantially from the net income or net loss reported on the consolidated statements of operations, is includable in the federal and state income tax return.

Income tax expense (benefit) (including Subchapter C-corporations) consisted of the following:

December 31, 2024, the Company’s taxable entities had approximately $18,003,168 of net operating loss carryforwards for federal income tax purposes which can be carried forward indefinitely.

A reconciliation of the federal statutory tax rate to the effective tax rate (including Subchapter C-corporations) is as follows:

Significant components of the deferred tax assets and liabilities (including Subchapter C-corporations) 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, a valuation allowance of approximately $6,123,515 was 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.

15. Subsequent Events

There were no significant events identified as of date of filing.