F-12

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures. The Company adopted ASU 2023-07 effective December 31, 2024, on a retrospective basis. The adoption of 2023-07 did not change the way that the Company identifies its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the recognition of revenues and expenses during the reporting period. Actual results may differ from these estimates, and such differences could be material.

Changes in estimates are recorded in the period in which they become known and are accounted for prospectively. The Company bases its estimates on historical experience, industry trends, and other relevant factors, incorporating both quantitative and qualitative assessments that it believes are reasonable under the circumstances.

Significant estimates during the years ended December 31, 2025 and 2024 include:

Risks and Uncertainties

The Company operates in a highly competitive industry that is subject to intense market dynamics, shifting consumer demand, and economic fluctuations. The Company’s operations are exposed to significant financial, operational, and strategic risks, including potential business disruptions, supply chain constraints, and liquidity challenges.

In accordance with FASB ASC 275, “Risks and Uncertainties,” the Company evaluates and discloses risks that could materially affect its financial condition, results of operations, and business outlook. Key factors contributing to variability in sales and earnings include:

Given these uncertainties, the Company faces challenges in accurately forecasting financial performance and may experience material risks affecting liquidity, business continuity, and long-term strategic growth. The Company continuously assesses these risks and implements measures to mitigate their potential impact.

Fair Value of Financial Instruments

The Company accounts for financial instruments in accordance with Financial Accounting Standards Board (FASB) ASC 820, “Fair Value Measurements”, which establishes a framework for measuring fair value and requires related disclosures. 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. The fair value measurement is based on the Company’s principal market or, if none exists, the most advantageous market for the asset or liability.

Fair Value Hierarchy

FASB ASC 820 requires the use of observable inputs whenever available and establishes a three-tier hierarchy for measuring fair value:

The classification of an asset or liability within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Level 3 valuations generally require more judgment and complexity, often involving a combination of cost, market, or income approaches, as well as assumptions about market conditions, pricing, and other factors.

Fair Value Determination

The Company assesses the fair value of its financial instruments and, where appropriate, may engage external valuation specialists to assist in determining fair value. While management believes that recorded fair values are reasonable, they may not necessarily reflect net realizable values or future fair values.

Financial Instruments Carried at Historical Cost

The Company’s financial instruments—including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses (including related party balances)—are recorded at historical cost. As of December 31, 2025 and 2024, respectively, the carrying amounts of these instruments approximated their fair values due to their short-term maturities.

Cash and Cash Equivalents and Concentration of Credit Risk

For purposes of the statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less from the date of purchase, including money market accounts and short-term certificates of deposit, to be cash equivalents.

At December 31, 2025, the Company’s cash equivalents consisted of a money market account.

At December 31, 2024, the Company did not hold any cash equivalents.

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000.

At December 31, 2025 and 2024, the Company had cash in excess of the insured FDIC limit of $2,272,502 and $0, respectively. From time to time the Company has amounts that exceed the FDIC insured amount but does not expect any non-performance.

Accounts Receivable

The Company accounts for accounts receivable in accordance with FASB ASC 326, “Financial Instruments – Credit Losses. Receivables are recorded at their net realizable value, which represents the amount management expects to collect from outstanding customer balances.

The Company extends credit to customers based on an evaluation of their financial condition and other factors. The Company does not require collateral, and interest is not accrued on overdue accounts receivable.

Allowance for Expected Credit Losses

The Company has elected the practical expedient in Accounting Standards Update (ASU) 2025-05 for its current (short-term) accounts receivable. Under this practical expedient, the Company assumes that current economic conditions as of the balance sheet date will not change over the remaining life of these receivables when estimating expected credit losses.

Management periodically assesses the collectability of accounts receivable and establishes an allowance for expected credit losses as needed. The allowance is determined based on:

Accounts deemed uncollectible are written off against the allowance when determined to be uncollectible.

Allowance for expected credit losses was $0 at December 31, 2025 and 2024, respectively.

Inventory

Inventory consists of scanning equipment and is stated at the lower of cost or net realizable value (“LCNRV”) using the first-in, first-out (“FIFO”) method.

Management assesses the recoverability of inventory each reporting period and records write-downs to net realizable value when the carrying value exceeds estimated proceeds from sale, less costs to complete and sell.

Factors considered in this assessment include:

During the year ended December 31, 2025, the Company recorded an inventory write-down of $576,862 (included in cost of sales) to reduce the carrying value of its scanning equipment to net realizable value. Net realizable value was determined considering estimated selling prices and costs to complete and sell equipment.

Equipment sold under installment payment arrangements is delivered upon receipt of the full contract price; consideration received prior to delivery is recorded as deferred revenue (see below).

No write-downs were recorded during the year ended December 31, 2024.

At December 31, 2025 and 2024, inventory was as follows:

 Schedule Of Inventory

Deposits

The Company has deposits on hand with a third-party manufacturer related to the purchase of equipment. As of December 31, 2025 and 2024, deposits were as follows:

 Schedule of Deposits

In 2022, the Company made an initial deposit of $1,000,000, which was subsequently used to purchase inventory during the same year. As part of this transaction, the Company was required to pay a Non-Recurring Engineering (NRE) Fee of $700,000 to the manufacturer for research, development, and technology transfer services. Of this amount, $210,000 was paid in 2022.

The Company has not yet received FDA clearance for its PET-CT system, however, the balance of $490,000 was paid in 2025 and is included as a component of general and administrative expenses in the accompanying statements of operations.

If the equipment fails validation or FDA approval, the Company has the contractual right to return the equipment and receive a refund of the $1,000,000 purchase price, less any applicable shipping and handling costs.

Additionally, the manufacturer has agreed to provide a one-year warranty on the equipment and related software, commencing upon the closing of the equipment purchase.

Concentrations

The Company evaluates and discloses significant concentrations of risk in accordance with FASB ASC 275-10, “Risks and Uncertainties”. These risks may arise from customer concentrations, vendor reliance, geographic dependence, or other economic factors that could materially impact the Company’s financial position, results of operations, and cash flows.

A concentration exists when a single customer, supplier, or market accounts for a significant portion (typically greater than 10%) of the Company’s total revenues, accounts receivable, or vendor purchases

For the years ended December 31, 2025 and 2024, respectively, the Company has no such concentrations.

Property and Equipment

Property and equipment are recorded at cost, net of accumulated depreciation, in accordance with FASB ASC 360, “Property, Plant, and Equipment.” Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.

Repairs and maintenance expenditures that do not materially extend the useful life of an asset are expensed as incurred. Significant improvements or upgrades that increase the asset’s productivity, efficiency, or useful life are capitalized.

Upon disposal or sale of property and equipment, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the statement of operations.

The Company evaluates the carrying value of property and equipment whenever events or changes in circumstances indicate that the asset may be impaired. If impairment indicators exist, the Company assesses recoverability based on the undiscounted future cash flows expected from the use and disposition of the asset. If the carrying amount exceeds the estimated recoverable amount, an impairment loss is recognized.

Financial Instruments with Characteristics of Both Liabilities and Equity

The Company evaluates equity or liability classification for freestanding financial instruments, including convertible preferred stock, warrants, and options, pursuant to the guidance under FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). The Company classifies as liabilities all freestanding financial instruments that are (i) mandatorily redeemable, (ii) represent an obligation to repurchase the Company’s equity shares by transferring assets, or (iii) represent an unconditional obligation (or conditional obligation if the financial instrument is not an outstanding share) to issue a variable number of shares predominantly based on a fixed monetary amount, variations in something other than the fair value of the Company’s equity shares, or variations inversely related to changes in fair value of the Company’s equity shares.

If a freestanding financial instrument does not represent an outstanding equity share and does not meet liability classification under ASC 480, the Company then assesses whether the freestanding financial instrument is indexed to its own stock and meets equity classification pursuant to FASB ASC 815-40, “Contracts in Entity’s Own Equity” (“ASC 815”).

The Company further assesses whether the freestanding financial instruments should be classified as temporary equity. Freestanding financial instruments that are redeemable for cash or other assets at a fixed or determinable date, at the option of the holder, or upon the occurrence of an event are classified in temporary equity in accordance with FASB ASC 480. Otherwise, the freestanding financial instruments are classified in permanent equity.

Conversion and Extinguishment of Derivative Liabilities

When a debt instrument with an embedded conversion option (e.g., convertible debt or warrants) is converted into shares of common stock or repaid, the Company:

For equity-based derivative liabilities (e.g., warrants) that are extinguished, any remaining liability balance is reclassified to additional paid-in capital.

Original Issue Discounts and Other Debt Discounts

The Company accounts for original issue discounts (OID) and other debt discounts in accordance with FASB ASC 835-30, “Interest—Imputation of Interest”. These discounts are recorded as a reduction of the carrying amount of the related debt and are amortized to interest expense over the term of the debt using the effective interest method, unless the straight-line method is materially similar.

Original Issue Discounts (OID)

For certain notes issued, the Company may provide the debt holder with an original issue discount (OID), which is recorded as a debt discount, reducing the face value of the note. The discount is amortized to interest expense over the term of the debt in the Statements of Operations.

Stock and Other Equity Issued with Debt

The Company may issue common stock or other equity instruments in connection with debt issuance. When stock is issued, it is recorded at relative fair value and treated as a debt discount, reducing the carrying amount of the note. These discounts are amortized to interest expense over the life of the debt.

The combined debt discounts, including OID and stock-related discounts, cannot exceed the face amount of the debt.

Debt Issuance Costs

Debt issuance costs, including fees paid to lenders or third parties, are capitalized as a debt discount and amortized to interest expense over the life of the debt. These costs are presented as a direct deduction from the carrying amount of the debt liability rather than as a separate asset.

Warranties and Maintenance Contracts

Product Warranties

The Company provides an assurance-type warranty on its products covering defects in design, materials, and workmanship for a period of one year from customer acceptance. Assurance-type warranties do not represent a separate performance obligation under ASC 606; rather, the estimated cost of fulfilling the warranty obligation is accrued at the time of product delivery in accordance with ASC 460-10-25-5 and ASC 450-20-25, when the obligation is probable and reasonably estimable.

The warranty provision is based on historical trends in defect nature, frequency, and average cost of claims for each product line. These estimates are reassessed each reporting period using the best available information, and adjustments are made as necessary.

Historically, the Company has incurred insignificant warranty-related costs. At December 31, 2025 and 2024, no warranty liability was recorded, as the estimated obligation was deemed immaterial.

Certain components used in the Company’s products are covered under supplier-provided limited warranties, which include replacement and service coverage for parts. The Company does not have direct responsibility for these supplier warranties.

As of December 31, 2025 and 2024, the Company is not aware of any pending or asserted claims related to product warranty obligations.

Maintenance Contracts

The Company separately offers post-delivery maintenance contracts to customers. Maintenance contracts are distinct from the Company’s assurance-type product warranty and represent separate performance obligations under ASC 606. Revenue attributable to maintenance contracts is deferred at contract inception and recognized ratably over the maintenance period as the related services are performed. At December 31, 2025 and 2024, no maintenance contract revenue was deferred.

Treasury Stock

The Company accounts for treasury stock transactions under the cost method in accordance with FASB ASC 505-30, “Treasury Stock”. Under this method, when the Company repurchases its own shares, the full acquisition cost is recorded as a reduction to stockholders’ equity under the treasury stock account. These shares remain issued but are not considered outstanding and do not participate in dividends or earnings per share calculations.

As of December 31, 2025 and 2024, respectively, the Company had 750 shares of treasury stock recorded at an aggregate cost of $375.

Right of Use Assets and Lease Obligations

The Company accounts for right-of-use (ROU) assets and lease liabilities in accordance with FASB ASC 842, “Leases”. These amounts reflect the present value of the Company’s estimated future minimum lease payments over the lease term, including any reasonably certain renewal options, discounted using a collateralized incremental borrowing rate.

The Company classifies its leases as either operating or finance leases. The Company’s leases primarily consist of operating leases, which are included as Right-of-Use Assets and Operating Lease Liabilities on the balance sheet.

Short-Term Leases

The Company has elected the short-term lease exemption, whereby leases with a term of 12 months or less are not recorded on the balance sheet. Instead, lease payments are expensed on a straight-line basis over the lease term.

Lease Term and Renewal Options

In determining the lease term, the Company evaluates whether renewal options are reasonably certain to be exercised. Factors considered include:

If a renewal option is deemed reasonably certain to be exercised, the ROU asset and lease liability reflect those additional future lease payments. The Company’s operating leases contain renewal options with no residual value guarantees. Currently, management does not expect to exercise any renewal options, which are therefore excluded in the measurement of lease obligations.

Discount Rate and Lease Liability Measurement

Since the implicit rate in the leases is not readily determinable, the Company applies an incremental borrowing rate that represents the rate it would incur to borrow on a collateralized basis over a similar term and currency environment.

Lease Impairment

The Company evaluates ROU assets for impairment indicators whenever events or changes in circumstances suggest the carrying amount may not be recoverable.

See Note 6 for further discussion on lease cancellation during the year December 31, 2025.

POSITRON CORPORATION 

NOTES TO FINANCIAL STATEMENTS 

DECEMBER 31, 2025 AND 2024

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when or as control of promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company applies the following five-step model:

(i) identify the contract with a 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, performance obligations are satisfied.

Nature of Services and Performance Obligations

The Company generates revenue primarily from clinical, technical, and maintenance service contracts that provide customers with ongoing product support and from equipment sales. These contracts are generally one-year agreements that automatically renew for successive one-year periods unless terminated by either party with at least 90 days’ notice. The Company considers only the noncancelable initial term and any renewal periods for which the customer has a material right when determining the contract term and performance obligations.

Each maintenance contract represents a single distinct performance obligation. The various service elements - including priority response, 24/7 clinical and technical support, parts and labor, preventative maintenance, software upgrades, uptime guarantees, remote diagnostic capabilities, daily quality assurance inspections, and applications training - are highly integrated and interdependent. They are not separately identifiable from one another and are accounted for as a single stand-ready performance obligation that is satisfied continuously over the contract term.

Significant Judgments

In applying ASC 606, the Company makes the following significant judgments that affect the timing and amount of revenue recognized:

(i) the Company concluded that all services under each maintenance contract constitute a single performance obligation because they are highly interrelated and provide a combined integrated service to the customer;

(ii) for maintenance contracts, the Company uses a time-based, straight-line output method to measure progress, which it has determined faithfully depicts the Company’s performance as the customer simultaneously receives and consumes the benefits of the services; and

POSITRON CORPORATION 

NOTES TO FINANCIAL STATEMENTS 

DECEMBER 31, 2025 AND 2024

(iii) for equipment sales, the Company applies judgment in assessing when control transfers to the customer.

No changes to these judgments have occurred during the periods presented.

Transaction Price and Allocation

The transaction price is the fixed fee stated in each contract. The Company does not offer refunds, rebates, discounts, or variable pricing incentives. Maintenance contract fees are typically billed monthly in advance with payment due within 30 days. As permitted by the practical expedient in ASC 606-10-32-18, the Company does not adjust the transaction price for the effects of a significant financing component when the period between transfer of control of the good or service and customer payment is one year or less. Because each contract contains a single performance obligation, the entire transaction price is allocated to that obligation.

Revenue Recognition – Timing

The Company recognizes revenue either over time or at a point in time depending on the nature of the performance obligation.

Maintenance contract revenue is recognized over time as the customer simultaneously receives and consumes the benefits of the services as they are provided. Revenue is recognized ratably on a straight-line basis over the contract term. Amounts received in advance of services being provided are recorded as deferred revenue and recognized as revenue as the related performance obligations are satisfied.

Equipment sale revenue is recognized at a point in time when control of the equipment transfers to the customer, which occurs upon physical delivery and acceptance of the equipment and where collection is probable. In years December 31, 2025 and 2024, no equipment sale revenue had been recognized, as the conditions for transfer of control had not yet been met.

Principal vs. Agent Considerations

The Company has determined that it acts as a principal in all revenue transactions. The Company controls the services prior to transfer to the customer, is responsible for fulfilling all contractual obligations including uptime guarantees, bears the risk of performance, and has discretion in establishing contract pricing. Accordingly, revenue is recognized on a gross basis.

Contract Balances and Remaining Performance Obligations

The Company’s contract liabilities consist of deferred revenue related to maintenance contracts billed in advance and customer deposits on pending equipment sales. These amounts are presented as deferred revenue on the accompanying balance sheets. There were no contract assets as of December 31, 2025 or 2024.

The Company has elected the practical expedient under ASC 606-10-50-14 not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for contracts with an original expected duration of one year or less.

Disaggregation of Revenue

The following table presents the Company’s revenues disaggregated by type for the years ended December 31, 2025 and 2024:

 Schedule of  Company’s revenues disaggregated

All revenue recognized in both periods was derived from maintenance service contracts. No equipment sale revenue has been recognized in either period, as transfer of control of the equipment to the customer had not yet occurred as of each respective balance sheet date.

Deferred Revenue (Contract Liabilities)

Deferred revenue represents consideration received from customers prior to the satisfaction of the related performance obligation.

At December 31, 2025 and 2024, deferred revenue consisted of the following:

 Schedule of deferred revenue

Equipment sale deposits represent cumulative installment payments received from customers under executed purchase agreements for medical scanning equipment. Title and physical possession of the equipment will transfer to each customer upon receipt of the full contract price. As of December 31, 2025, cumulative payments received totaled $70,000. Revenue will be recognized upon transfer of control of the equipment to customers. Subsequent to December 31, 2025, additional installment payments of $140,000 were received.

The $50,000 deposit balance at December 31, 2025 represents a payment received from a separate customer. Subsequent to December 31, 2025, this deposit was refunded in full.

Maintenance contract amounts billed in advance represent consideration received from customers prior to the applicable service period. These amounts are recognized as revenue ratably over the service period as performance obligations are satisfied.

At December 31, 2024, $16,330 of maintenance contract consideration remained deferred. All such amounts were fully recognized as revenue during the year ended December 31, 2025.

Cost of Sales

Cost of sales consists of direct expenses incurred in the delivery of services related to the Company’s maintenance contracts. These costs are recognized as incurred and are directly attributable to fulfilling service obligations under customer agreements.

The primary components of cost of sales include:

All costs included in cost of sales are directly related to the provision of contracted maintenance services and align with revenue recognition principles under FASB ASC 606.

For the year ended December 31, 2025, see above regarding inventory write-down to net realizable value, which has been included as a component of cost of sales.

The Company continually evaluates its cost structure to optimize service delivery while maintaining contractual uptime guarantees and quality assurance standards.

Income Taxes

The Company accounts for income taxes using the asset and liability method prescribed by FASB ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of differences between the financial reporting and tax bases of assets and liabilities. These amounts are measured using enacted tax rates expected to apply in the periods when temporary differences reverse.

The effect of a change in tax rates on deferred tax balances is recognized as income or expense in the period that includes the enactment date.

Uncertain Tax Positions

The Company evaluates uncertain tax positions which requires that a tax position be recognized in the financial statements only if it is more likely than not (greater than 50% likelihood) to be sustained upon examination by tax authorities.

As of December 31, 2025 and 2024, the Company had no uncertain tax positions that qualified for recognition or disclosure in the financial statements.

The Company also recognizes interest and penalties related to uncertain tax positions in other expense in the Statement of Operations. No interest and penalties were recorded for the years ended December 31, 2025 and 2024.

Valuation of Deferred Tax Assets

The Company’s deferred tax assets include certain future tax benefits, such as net operating losses (NOLs), tax credits, and deductible temporary differences. A valuation allowance is required if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

The Company reviews the realizability of deferred tax assets on a quarterly basis, or more frequently if circumstances warrant, considering both positive and negative evidence.

Considered in Valuation Allowance Assessment

The Company evaluates multiple factors in determining whether a valuation allowance is necessary, including:

While cumulative three-year losses are a strong indicator that a valuation allowance may be needed, a valuation allowance determination is not solely based on past losses—all available positive and negative evidence must be considered.

Valuation Allowance Determination

At December 31, 2025 and 2024, the Company recorded a full valuation allowance against its deferred tax assets, resulting in a net carrying amount of $0. This determination was based on cumulative losses in recent years and the lack of sufficient positive evidence to support the realization of deferred tax assets in the near term.

The Company will continue to evaluate its valuation allowance each reporting period and will recognize deferred tax assets in the future if sufficient positive evidence emerges to support their realization.

Advertising Costs

Advertising costs are expensed as incurred. These costs are recognized as operating expenses in the period in which they are incurred and are classified within general and administrative expenses in the statements of operations.

The Company does not capitalize direct-response advertising costs, as they do not meet the criteria for deferral.

The Company recognized marketing and advertising costs as follows:

Schedule of marketing and advertising costs 

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Compensation cost is measured at the grant-date fair value of the award and is recognized over the requisite service period (generally the vesting period) on a straight-line basis.

The guidance applies to share-based payment awards granted to both employees and non-employees. Pursuant to ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, awards granted to non-employees are accounted for in substantially the same manner as awards granted to employees, with fair value determined on the grant date.

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The model incorporates the following key assumptions:

The Company has elected the practical expedient under ASU 2016-09 to account for forfeitures as they occur rather than estimating them in advance. This election is applied consistently to all stock-based awards.

Stock-based compensation expense is classified in the statements of operations as a component of general and administrative expenses.

In addition, the Company applies the provisions of ASU 2016-09 related to the recognition of all excess tax benefits and tax deficiencies in income tax expense in the period in which they occur and the classification of cash paid for tax withholdings on behalf of employees as financing activities in the statement of cash flows.

Stock Warrants

In connection with certain financing transactions (debt or equity), consulting arrangements, or strategic partnerships, the Company may issue warrants to purchase shares of its common stock. Warrants that do not meet liability classification under ASC 480, “Distinguishing Liabilities from Equity”, are evaluated under ASC 815-40, “Contracts in Entity’s Own Equity”. The Company’s outstanding warrants are not puttable or mandatorily redeemable, do not require net cash settlement, and are indexed to the Company’s own common stock. Accordingly, they are classified as equity instruments in additional paid-in capital.

The fair value of warrants issued for compensation purposes is measured using the Black-Scholes option pricing model.

Accounting Treatment of Warrants

Basic and Diluted Earnings (Loss) per Share

The Company computes net loss per share in accordance with ASC 260, “Earnings Per Share.” Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

During all periods presented, the Company reported a net loss. Accordingly, all potentially dilutive common stock equivalents were excluded from the computation of diluted net loss per share because their inclusion would have been anti-dilutive. As a result, diluted net loss per share is equal to basic net loss per share for all periods presented.

The following potentially dilutive equity securities outstanding as of December 31, 2025 and 2024 were as follows:

Schedule of potentially dilutive equity securities outstanding 

Based on the potential common stock equivalents noted above at December 31, 2025, the Company has sufficient authorized shares of common stock (100,000,000) to settle any potential exercises of common stock equivalents.

Preferred Stock Classification

The Company applies the guidance outlined in ASC 480, “Distinguishing Liabilities from Equity”, in determining the appropriate classification and measurement of preferred stock. Under FASB ASC 480-10-25-4, financial instruments that embody an obligation to repurchase equity shares or require mandatory redemption at a fixed or determinable date must be classified as a liability and measured at fair value.

Preferred shares that are conditionally redeemable - including those redeemable at the option of the holder or subject to redemption upon the occurrence of events outside the issuer’s control - are classified as temporary equity in accordance with FASB ASC 480-10-S99-3A. Conversely, preferred shares that are not mandatorily redeemable and whose redemption rights are within the issuer’s control are appropriately classified as a component of stockholders’ deficit.

The Company’s Series A and Series B Preferred Stock contain conditional redemption rights, but these rights are exercisable solely at the option of the Company. Because the redemption provisions are within the Company’s exclusive control, the preferred shares do not meet the criteria for liability classification under FASB ASC 480-10-25-7. Furthermore, the shares do not meet the temporary equity classification criteria under FASB ASC 480-10-S99-3A since redemption is not outside of the Company’s control.

Accordingly, unless otherwise noted, the Company presents all issuances of Series A and Series B Preferred Stock as a component of stockholders’ equity in the financial statements.

As of December 31, 2025, all outstanding shares of both Series A and B, convertible preferred stock had been converted to common stock.

Related Parties

The Company defines related parties in accordance with FASB ASC 850, “Related Party Disclosures,” and SEC Regulation S-X, Rule 4-08(k). Related parties include entities and individuals that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company.

Related parties include, but are not limited to:

A party is considered related if it has the ability to control or significantly influence the management or operating policies of the Company in a manner that could prevent either party from fully pursuing its own separate economic interests.

The Company discloses all material related party transactions, including:

Disclosures are made in accordance with FASB ASC 850-10-50-1 through 50-6 and SEC Regulation S-X, Rule 4-08(k), which requires registrants to disclose material related party transactions and their effects on the financial position and results of operations.

See Note 5 for related party debt.

Recent Accounting Standards

Recently Adopted Accounting Standards

FASB ASU 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, which enhances reportable segment disclosure requirements by:

This ASU was effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with retrospective application required.

The Company adopted ASU 2023-07 effective January 1, 2025, for interim reporting, and for its annual reporting period ended December 31, 2024. The adoption resulted in enhanced segment disclosures but did not have a material impact on the Company’s financial position, results of operations, or cash flows.

FASB ASU 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, which enhances income tax disclosure requirements by:

This ASU was effective for annual periods beginning after December 15, 2024, and may be applied on a prospective or retrospective basis.

The Company adopted ASU 2023-09 effective January 1, 2025. The adoption resulted in enhanced income tax disclosures but did not have a material impact on the Company’s financial position, results of operations, or cash flows.

FASB ASU 2025-05 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU provides a practical expedient that permits entities to assume that current economic conditions as of the balance sheet date will remain unchanged over the remaining life of current (short-term) accounts receivable and current contract assets arising from transactions accounted for under ASC 606.

The Company early adopted ASU 2025-05 effective January 1, 2025 and elected the practical expedient. The amendments were applied prospectively. The adoption did not have a material impact on the Company’s financial position, results of operations, or cash flows.