Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operation

Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements". You should review the "Risk Factors" section of this Annual Report for a discussion of important factors

that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a vertically integrated health intelligence platform with a mission to power the behavior changes that drive better health. Unlike software-only digital health platforms, Dario owns the complete chain of value in chronic care management - connected FDA-cleared hardware devices that generate continuous physiological data, AI built on that proprietary data, and a behavior change and coaching layer validated through over 100 peer-reviewed clinical studies. We are committed to transforming healthcare by delivering a comprehensive and highly engaging whole-person health platform, which enables us to create a future where healthy change is effortless and accessible to all.

At the core of our mission and vision is engagement. We believe that most existing digital health solutions in the market fail to deliver improved health outcomes because users are not engaged due to a lack relevance, personalization, consumerization, and longitudinal data and information. We, and our acquired companies, first commercialized our digital behavioral health products in the D2C marketplace, and we continue to use the D2C marketplace as a sandbox and laboratory to innovation. These consumers pay for these digital health products out of their own pockets and are therefore the most value driven among all healthcare consumers. These consumers demanded that we deliver highly engaging user experiences that deliver strong clinical health outcomes for which consumers will pay. The bottom line is that if users are not engaged in digital solutions over a long period of time, they cannot change their behavior and they cannot get healthier - we first deliver engagement followed by sustained behavior change that then leads to measurable health outcomes and improvement. We believe that our D2C marketplace roots and continued focus delivers better user experiences, longer sustained engagement, stronger clinical outcomes, at the most affordable prices, that then delivers the highest ROI in the industry.

Our principal operating subsidiary, LabStyle Innovation Ltd., is an Israeli company ("LabStyle") with its headquarters in Caesarea, Israel. We were formed on August 11, 2011, as a Delaware corporation with the name LabStyle Innovations Corp. On July 28, 2016, we changed our name to DarioHealth Corp. We began our sales in the direct-to-consumer space, solving first for what we deemed the most difficult problems: how to engage users and support behavior change to improve clinical outcomes in diabetes. Our most developed AI tools leverage direct-to-consumer experience from over 150,000 members to drive superior engagement and outcomes. In early 2020, we broadened our solutions to include other medical conditions in addition to diabetes, and to serve business customers who seek to improve the health of their stakeholders. We also subsequently acquired Upright, PsyInnovations, Physimax Technology, and most recently Twill, to further our platform. Presently, we have deployed solutions for diabetes, hypertension, pre-diabetes, MSK and behavioral health, which conditions will also be powered by our AI-driven behavior change platform. We are currently delivering our solutions to providers, employers, health plans and pharmaceutical companies. We continue to achieve key benchmarks as we rapidly scale our B2B2C model, including more than 100 total signed contracts as of today. We believe we have a unique and defensible position in the market thanks to our unique solution origin in consumer markets.

On January 26, 2021, Dario, Labstyle, Upright Technologies Ltd., an Israeli limited company, Vertex C (C.I.) Fund L.P. (in its capacity as the representative of the Selling Shareholders), and all holders of Upright's outstanding securities (the "Selling Shareholders"), entered into a share purchase agreement (the "Upright Agreement") pursuant to which Dario, through Labstyle, acquired all of the outstanding securities of Upright. The agreement was consummated on February 1, 2021, and Upright now operates as our wholly owned subsidiary. As part of the acquisition, we issued the Selling Shareholders 84,381 shares of our common stock and agreed to assume options to purchase up to 5,010 shares of our common stock, subject to certain escrow and indemnity provisions contained in the Upright Agreement (in the aggregate, the "Consideration Shares"). In addition, the shares issued are subject to the terms of a lock-up agreement, pursuant to which the Selling Shareholders (subject to certain exceptions) have agreed to restrict their ability to transfer their shares as follows: (i) shares representing 20% of their respective Consideration Shares will be restricted from transfer for a period of one hundred and eighty (180) days from the date of the closing of the acquisition, (ii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of two hundred and seventy (270) days from the closing date, (iii) shares representing 30% of their respective Consideration Shares will be restricted from transfer for a period of three hundred and sixty (360) days from the closing date and (iv) shares representing 20% of their respective Consideration Shares will be restricted from transfer for a period of four hundred and fifty (450) days from the closing date.

We, along with Twill Merger Sub, Inc. ("Merger Sub"), Twill and Bilal Khan, solely in his capacity as the representatives of Twill's stockholders and other equity holders, entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated February 15, 2024 (the "Closing Date"). Pursuant to the provisions of the Merger Agreement, on the Closing Date, (i) Merger Sub was merged with and into Twill (the "Merger"), the separate corporate existence of Merger Sub ceased and Twill continued as the surviving company and a wholly owned subsidiary of the Company, (ii) we paid to Twill's debt holders and equity holders aggregate consideration ("Merger Consideration") of (A) $10.0 million in cash, (B) pre-funded warrants (the "Pre-Funded Warrants") to purchase up to 500,020 shares (the "Warrant Shares") of our common stock issuable to a trust (the "Trust") formed for the benefit of certain equity and debt holders of Twill, issuable in 4 equal tranches, (C) stock options to purchase up to 148,173 shares of common stock issued to employees of Twill as an inducement to their employment with us, issued outside of our equity compensation plans, pursuant to Nasdaq Rule 5635(c)(4), with an exercise price of $51.00 per share, and (D) a combination of warrants and RSUs to acquire up to 88,326 shares of common stock issued to certain outgoing board members, consultants and outgoing officers of Twill (all of such RSUs and warrants being subject to the approval of the Company's stockholders, pursuant to Nasdaq Rule 5635), and (iii) the parties to the Merger Agreement consummated the transactions contemplated thereby. The Merger Agreement contains various customary representations, warranties and covenants. As a result of the Merger, Twill will operate as our wholly owned subsidiary.

The Pre-Funded Warrants were subject to a non-waivable 19.99% ownership blocker and the issuance of any shares of common stock underlying such warrants that are in excess of such amount shall be subject to the approval of our stockholders. In addition, the Company, the Trust and WhiteHawk Capital Partner LP (the "Beneficiary"), have executed a Lock Up/Leak Out Agreement (the "Leak Out Agreement"), pursuant to which until such time as the Trust receives $10,600,000 in aggregate net proceeds (the "Leak Out Period"), (i) the Trust shall only be allowed to sell such Warrant Shares at a rate of up to 10% of the average daily trading volume of the common stock in a manner which will not negatively affect the share price, (ii) all such sales shall be conducted pursuant to Rule 144 and (iii) that the Beneficiary shall not cause the Trust to engage in any short selling of such Warrant Shares during the Leak-Out Period. On January 29, 2026, we held our Annual Meeting of Stockholders pursuant to which our stockholders voted to approve the issuance of shares of common stock issuable upon exercise of the Pre-Funded Warrants, among other agenda items. As of February 11, 2026 all of the Pre-Funded Warrants related to Merger were issued to the trustee.

Pursuant to the terms of the Merger Agreement, we also agreed to appoint a new member to our board of directors, nominated by Twill equity holders and subject to such nominee being acceptable to us, within 90 days following the closing of the Merger. Such appointment right shall continue until the earlier of 540 days following the closing of the Merger, or the date which the Trust exercises its third tranche of Pre-Funded Warrants. As of December 31, 2025, the Trust had exercised its third tranche of Pre-Funded Warrants, and accordingly, the related board appointment right has terminated and is no longer in effect.

In addition, we executed certain consulting agreements (the "Consulting Agreements") with Ofer Leidner and Bilal Khan, each former officers of Twill. Pursuant to the terms of the Consulting Agreements, we agreed to retain the services of Messrs. Leidner and Khan for a period of at least 14 months and 6 months respectively, in exchange for monthly consulting fees of $35,416 and $35,417, respectively. As of December 31, 2025, both Consulting Agreements have been concluded. In addition, we agreed to issue to Mr. Leidner warrants to purchase up to 51,648 shares of common stock, of which 35,898 are subject to time vesting and 15,750 are subject to certain performance-based metrics. As of December 31, 2025, all 35,898 time-vesting warrants have vested. The 15,750 performance-based warrants expired upon conclusion of the Consulting Agreement. We also agreed to issue to Mr. Khan 17,500 fully vested RSUs

In addition, in August 2024 we agreed to issue to Mr. Leidner warrants to purchase up to 25,000 warrants subject to time vesting, 15,625 vested upon conclusion of the consulting services and 9,375 remain unvested. We also agreed to issue to Mr. Leidner performance-based warrants to purchase up to 40,000. The performance-based warrants expired upon conclusion of the Consulting Agreement.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Our fiscal year ends on December 31.

This Management's Discussion and Analysis of Financial Condition and Results of Operations discuss our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses for the reporting periods. On an ongoing basis, we evaluate such estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ (perhaps significantly) from these estimates under different assumptions or conditions.

While all the accounting policies impact the consolidated financial statements, certain policies may be viewed to be critical. Our management believes that the accounting policies which involve more significant judgments and estimates used in the preparation of our consolidated financial statements include revenue recognition, inventories, liability related to certain warrants, and accounting for production lines and its related useful life and impairment.

Revenue Recognition

We recognize revenue in accordance with ASC 606, when (or as) it satisfies performance obligations by transferring promised hardware or services to its customers in an amount that reflects the consideration we expect to receive. We apply the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price ("SSP") for each performance obligation. We use judgment in determining the SSP for its performance obligations. To determine SSP, we maximize the use of observable standalone sales and observable data, where available. In instances where performance obligations do not have observable standalone sales, we may use alternative methods to estimate the standalone selling price, such as cost plus margin approach.

Our payment terms are generally 45 days or less. In instances where the timing of revenue recognition differs from the timing of invoicing, we determine our contracts generally do not include a significant financing component since our selling prices are not subject to billing terms nor is our purpose to receive financing from our customers or to provide customers with financing. In addition, we elected to apply the practical expedient not to adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at the inception of a contract, that the period between when we will transfer a promised good or service to a customer and when the customer will pay for that good or service will be one year or less. Revenue is recognized net of any taxes collected from customers which are subsequently remitted to governmental entities. We elected to account for shipping and handling activities as fulfillment activities. Shipping and handling activities are classified as part of cost of revenues.

We derive our revenue principally from:

Consumers revenue

We consider customer and distributor purchase orders to be contracts with customers. For each contract, the Company considers the promise to transfer tangible hardware and/or services, each of which are distinct, and accounted for as separate performance obligations. In determining the transaction price we evaluate whether the price is subject to rebates and adjustments to determine the net consideration to which we expect to receive. Revenue from tangible hardware is recognized when control of the hardware is transferred to the customer (i.e., when our performance obligation is satisfied), which typically occurs at shipment. The revenues from fixed-price service arrangements are recognized over time based on the pattern of transfer of services to the customer.

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Commercial revenue - B2B2C

We provide a mobile and web-based digital therapeutics health management programs to employers and health plans for their employees or covered individuals. Such programs include live clinical coaching, content, automated journeys, hardware, and lifestyle coaching, currently supporting diabetes, prediabetes and obesity, hypertension, behavioral health (BH) and MSK. At contract inception, we assess the type of services being provided and assesses the performance obligations in the contract. These solutions integrate access to our web-based platform, and clinical and data services to provide an overall health management solution. The promises to transfer these goods and services are not separately identifiable and are considered a single continuous service comprised of a series of distinct services recognized over time that are substantially the same and have the same pattern of transfer (i.e., distinct days of service). Revenues related to the Twill platform are recognized over time, since the customer simultaneously receives and consumes the benefits provided by our performance. Revenues related to health management programs and to the Twill platform are recognized using a time-elapsed measure of progress, since those services have a consistent continuous pattern of transfer to the customer.

To the extent the transaction price includes variable consideration, revenue is recognized using the variable consideration allocation exception, or, if the allocation exception is not met, the Company recognizes revenue ratably based on estimates of the variable consideration to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. When the variable consideration allocation exception is met, we recognize revenue each month using either on a PEMPM or a PEPM basis.

We generally recognize revenues for professional services using an input method, based on labor hours consumed, which the Company believes best depicts the transfer of the services to the customer.

Certain of our contracts include client performance guarantees and a portion of the fees in those contracts are subject to performance-based metrics such as clinical outcomes or minimum member utilization rates. The Company includes in the transaction price some or all of an amount of variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Refunds to a customer that result from performance levels that were not met by the end of the measurement period are adjusted to the transaction price and therefore estimated at the outset of the arrangement.

We follow the guidance provided in ASC 606 for determining whether it is a principal (i.e., report revenues on a gross basis) or an agent (i.e., report revenues on a net basis) in arrangements with customers that involve another party that contributes to providing specified services to a customer, based on whether we control the specified good or service.

In the 2025 fiscal year, our B2B2C channel included 85 new employers and health plan clients, which brought our total client base to 167.

Commercial revenue - Strategic partnerships

We have also entered into contracts with a preferred partner and a health plan provider in which we provide data license, development and implementation services.

Inventories

Inventory write-down is measured as the difference between the cost of the inventory and net realized value based upon assumptions about future demand, and is charged to the cost of sales. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

If there were to be a sudden and significant decrease in demand for our products or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, we could be required to increase our inventory write-downs and our gross margin could be adversely affected. Inventory and supply chain

management remain areas of focus as we balance the need to maintain supply chain flexibility, to help ensure competitive lead times with the risk of inventory obsolescence.

During the year ended December 31, 2025, total inventory write-downs expenses amounted to $320.

Business combination and asset acquisitions. We apply the provisions of ASC 805, "Business Combination" and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets.

Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

We account for a transaction as an asset acquisition when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, or otherwise does not meet the definition of a business. Asset acquisition-related direct costs are capitalized as part of the asset or assets acquired

Results of Operations

Comparison of the Year Ended December 31, 2025 to Year Ended December 31, 2024 (dollar amounts in thousands)

Revenues

Revenues for the year ended December 31, 2025, amounted to $22,359 compared to $27,040 during the year ended December 31, 2024. The decrease in revenues for the year ended December 31, 2025, compared to the year ended December 31, 2024, resulted primarily from a non-renewal of one customer acquired through the Twill acquisition.

Revenues generated during the year ended December 31, 2025, were derived from the sale of services to our commercial customers and consumers located mainly in the United States.

Cost of Revenues

Cost of revenues for the years ended December 31, 2025 and 2024 was $9,694 and $13,773, respectively. The decrease was primarily driven by lower amortization of technology, hardware and consumables, reduced payroll-related expenses allocated to cost of revenues, and lower hosting and server expenses.

Cost of revenues consist mainly of cost of device production, employees' salaries and related overhead costs, stock-based compensation, depreciation of production lines and related cost of equipment used in production, amortization of technologies, hosting costs, shipping and handling costs and inventory write-downs.

Gross Profit

Gross profit for the year ended December 31, 2025, amounted to $12,665 (56.6% of revenues) compared to $13,267 (49.1% of revenues) for the year ended December 31, 2024. The increase in gross profit as a percentage of revenue for the year ended December 31, 2025, compared to the year ended December 31, 2024, resulted mainly from lower amortization of technology, hardware and consumables and reduced hosting costs. Gross profit for the year ended December 31, 2025, excluding amortization of acquired technology, depreciation and stock-based compensation was $14,404 (64.4% of revenues) compared to $18,366 (67.9% of revenues) during the year ended December 31, 2024.

Research and Development Expenses

Our research and development expenses decreased by $10,388 to $13,791 for the year ended December 31, 2025, compared to $24,179 for the year ended December 31, 2024. The decrease in research and development expenses was mainly due to efficiency and post-merger integration activities resulting in a decrease in payroll expenses, subcontractors and consulting and stock-based compensation expenses. Our research and development expenses, excluding stock-based compensation and depreciation, for the year ended December 31, 2025, were $12,033 compared to $20,645 for the year

ended December 31, 2024, a decrease of $8,612. This decrease was mainly due to efficiency and post-merger integration activities resulting in a decrease in payroll, and subcontractors and consulting expenses.

Research and development expenses consist mainly of employees' salaries and related overhead costs involved in research and development activities, expenses related to: (i) our solutions including our Diabetes Management, MSK and our digital behavioral health solutions, (ii) labor, stock-based compensation contractors and engineering expenses, (iii) depreciation and maintenance fees related to equipment and software tools used in research and development and (iv) facilities expenses associated with and allocated to research and development activities.

Sales and Marketing

Our sales and marketing expenses decreased by $6,012 to $20,338 for the year ended December 31, 2025, compared to $26,350 for the year ended December 31, 2024. This decrease was mainly a result of lower payroll related expenses, lower stock-based compensation expenses, partially offset by an increase in subcontractors and consulting expenses and digital marketing expenses. Our sales and marketing expenses, excluding stock-based compensation, depreciation and amortization, for the year ended December 31, 2025, were $16,851 compared to $20,277 for the year ended December 31, 2024, a decrease of $3,426. This decrease was mainly due to a reduction in payroll expenses resulting from post-merger integration activities and a reduction in headcount. partially offset by an increase in subcontractors and consulting expenses and digital marketing expenses.

Sales and marketing expenses consist mainly of employees' salaries and related overhead costs, stock-based compensation, depreciation of customer relationship intangible asset, online marketing campaigns of our service offering, trade show expenses and marketing consultants and subcontractors.

General and Administrative Expenses

Our general and administrative expenses decreased by $5,291 to $15,191 for the year ended December 31, 2025, compared to $20,482 for the year ended December 31, 2024. The decrease was mainly due to lower stock-based compensation expenses, lower accounting and legal fees and reduced acquisition costs that were related to the acquisition of Twill on February 15, 2024. Our general and administrative expenses, excluding stock-based compensation, share-based payments, acquisition costs and depreciation, for the year ended December 31, 2025, were $9,667 compared to $11,236 for the year ended December 31, 2024, a decrease of $1,569, and was mainly due to lower accounting and legal fees, reduced subcontractor and consulting expenses.

Our general and administrative expenses consist mainly of employees' salaries and related overhead costs, stock-based compensation, insurance costs, legal and accounting fees, acquisition related costs, expenses related to investor relations.

Finance income (expenses), net

Our finance expenses, net, were $4,954 for the year ended December 31, 2025, compared to $13,145 of finance income, net, for the year ended December 31, 2024, a change of $18,100. The change from finance income to finance expenses was primarily due to the decrease in income from revaluation of the pre-funded warrants (income of $1,580 in 2025 compared to income of $16,435 in 2024) issued in the first quarter of 2024, which are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of comprehensive loss.

Financial expenses, net, primarily consist of credit facility interest expense, interest income from cash balances, revaluation of warrants and pre-funded warrants, revaluation of a long-term loan, bank charges, lease liability and foreign currency translation differences.

Income tax

Income tax expense was $105 for the year ended December 31, 2025, compared to income from tax of $1,852 for the year ended December 31, 2024. The change was primarily due to a reduction in the valuation allowance for deferred tax liability that resulted from the acquisition of Twill in 2024.

Net loss

Net loss for the year ended December 31, 2025 was $41,714. Net loss for the year ended December 31, 2024, was $42,747. The decrease from 2024 was mainly due to the decrease in our operating expenses.

The factors described above resulted in net loss attributable to common stockholders of $61,735 and $40,982 for the year ended December 31, 2025 and 2024, respectively.

Net operating loss carryforwards

As of December 31, 2025, we, WayForward and Twill had a U.S. federal net operating loss carryforward of approximately $47,055, $5,803, and $156,686 of which $7,120, $371 and $18,832 respectively, were generated from tax years 2011-2017 and can be carried forward and offset against taxable income and that expires during the years 2031 to 2037.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act of 2017 (the "TCJA") modified the rules regarding utilization of net operating loss and net operating losses generated subsequent to the TCJA can only be used to offset 80% of taxable income with an indefinite carryforward period for unused carryforwards (i.e., they should not expire). The remaining net operating losses carryforwards of approximately $183,221 were generated during 2018 - 2024 and are not subject to the annual limitation described above.

Our Israeli subsidiary, Labstyle, accumulated net operating losses for Israeli income tax purposes as of December 31, 2025, in the amount of approximately $273,548. The net operating losses may be carried forward and offset against taxable income in the future for an indefinite period.

In accordance with U.S. GAAP, it is required that a deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount which is more likely than not to be realized. As a result, we recorded a valuation allowance with respect to our deferred tax asset. Under Sections 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a "loss corporation" (as defined in the Internal Revenue Code), there are annual limitations on the amount of the net operating loss and other deductions which are available to us.

The factors described above resulted in net loss attributable to common stockholders of $61,735 and $40,982 for the year ended December 31, 2025 and 2024, respectively.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with U.S. GAAP within this Annual Report on Form 10-K, management provides certain non-GAAP financial measures ("NGFM") of our financial results, including such amounts captioned: "Non-GAAP Adjusted Loss," as presented herein below. Importantly, we note the NGFM measures captioned "Non-GAAP Adjusted Loss" are not recognized terms under U.S. GAAP, and as such, they are not a substitute for, considered superior to, considered separately from, nor as an alternative to, U.S. GAAP and /or the most directly comparable U.S. GAAP financial measures.

Such NGFM are presented with the intent of providing greater transparency of information used by us in our financial performance analysis and operational decision-making. Additionally, we believe these NGFM provide meaningful information to assist investors, shareholders, and other readers of our consolidated financial statements, in making comparisons to our historical financial results, and analyzing the underlying financial results of our operations. The NGFM are provided to enhance readers' overall understanding of our current financial results and to provide further information to enhance the comparability of results between the current year period and the prior year period.

We believe the NGFM provide useful information by isolating certain expenses, gains, and losses, which are not necessarily indicative of our operating financial results and business outlook. In this regard, the presentation of the NGFM herein below, is to help the reader of our consolidated financial statements to understand the effects of the non-cash impact

on our (U.S. GAAP) audited statement of operations such as the revaluation of the warrants and the expense related to stock-based compensation, each as discussed herein above.

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A reconciliation to the most directly comparable U.S. GAAP measure to NGFM, as discussed above, is as follows:

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Liquidity and Capital Resources (amounts in thousands except for share and share amounts)

As of December 31, 2025, we has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $452,078 as of December 31, 2025. For the year ended December 31, 2025, we incurred approximately $25,941 of negative cash flows in operations. Management believes we have sufficient funds to support its operation for at least a period of twelve months from the date of the issuance of these consolidated financial statements. Our current operating budget includes various assumptions concerning the level and timing of cash receipts and cash outlays for operating expenses and capital expenditures. We expect to incur future net losses and its transition to profitability is dependent upon, among other things, the successful commercialization of our products and the achievement of a level of revenues adequate to support the cost structure. Until we achieve profitability or generates positive cash flows, it will continue to be dependent on raising additional funds to fund its operations. We intend to fund our future operations including meeting its covenants related to loan facility, through cash on hand, additional private and/or public offerings of debt or equity securities, cost-saving plan intended to reduce operating expenses and extend its cash runway, or a combination of the foregoing. There are no assurances, however, that we will be able to obtain an adequate level of financial resources that are required for the long-term development and commercialization of its product offerings.

As of December 31, 2025, we had approximately $26,017 in cash and cash equivalents and short-term bank deposits compared to $28,461 at December 31, 2024.

We have experienced cumulative losses of $452,078from inception (August 11, 2011) through December 31, 2025 and have a stockholders' equity of $67,922at December 31, 2025. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future.

Since inception, we have financed our operations primarily through private placements and public offerings of our common stock and warrants to purchase shares of our common stock, receiving aggregate net proceeds totaling $307,133 and a credit facility of $25,795 as of December 31, 2025.

On June 9, 2022, we entered into a Credit Agreement (the "OrbiMed Credit Agreement"), with OrbiMed Royalty and Credit Opportunities III, LP ("Orbimed"), as the lender for a five-year senior secured credit facility in an aggregate principal amount of up to $50 million, of which $25 million was made available on the closing date and up to $25 million was to be made available on or prior to June 30, 2023, subject to certain revenue requirements.

On May 1, 2023, we entered into a Loan and Security Agreement, and Supplement thereto (the "LSA"), with our subsidiary, PsyInnovations, collectively as the borrowers (the "Borrowers") and Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund, L.P., collectively as the lenders (the "Avenue Lenders"). The LSA provides for a four-year secured credit facility in an aggregate principal amount of up to $40,000 (the "Avenue Loan Facility"), of which $30,000 was made available on the closing date (the "Initial Tranche") and up to $10,000 (the "Discretionary Tranche") may be made available on the later of July 1, 2023, or the date the Avenue Lenders approve the issuance of the Discretionary Tranche. On May 1, 2023, the Borrowers closed on the Initial Tranche, less certain fees and expenses payable to or on behalf of the Avenue Lenders. As a result of the execution of the LSA and the funding of the Initial Tranche, we satisfied our prior OrbiMed Credit Agreement we previously executed with OrbiMed, on June 9, 2022, and terminated the OrbiMed Credit Agreement with Orbimed.

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All obligations under the LSA are guaranteed by our wholly owned subsidiary, Labstyle. All obligations under the LSA, and the guarantees of those obligations, are secured by substantially all of our, PsyInnovations' and the guarantor's assets. Subject to certain milestones set forth in the LSA, the Borrowers shall make monthly payments to the Avenue Lenders of the interest at the then effective rate. If the Borrowers fail to meet the milestones set forth in the LSA, the Borrowers shall make monthly principal installments in advance in an amount sufficient to fully amortize the Loan. The Borrowers shall repay amounts outstanding under the Avenue Loan Facility in full immediately upon an acceleration as a result of an event of default as set forth in the LSA.

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During the term of the Avenue Loan Facility, interest payable in cash by the Borrowers shall accrue on any outstanding balance due under the Avenue Loan Facility at a rate per annum equal to the higher of (x) the sum of four one-half percent (4.50%) plus the prime rate as published in the Wall Street Journal and (y) twelve and one-half percent (12.50%). During an event of default, any outstanding amount under the Avenue Loan Facility will bear interest at a rate of 5.00% in excess of the otherwise applicable rate of interest. The Borrowers will pay certain fees with respect to the Avenue Loan Facility, including an upfront commitment fee, an administration fee and a prepayment premium, as well as certain other fees and expenses of the Avenue Lenders.

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On February 15, 2024, we entered into the First Amendment to Loan and Security Agreement and Supplement (the "Avenue Amendment") with the Avenue Lenders. Pursuant to the Avenue Amendment, the parties agreed to include the Merger Sub and Twill as parties to our existing Avenue Loan Facility with Avenue Lenders. In addition, the Avenue Amendment provides (i) that we will seek stockholder approval to reprice the warrants issued to the lenders on May 1, 2023 to permit an amendment to the exercise price of such warrants to the "minimum price" as defined by Nasdaq rules as of the closing of the Twill Agreement and (ii) permit the Avenue Lenders, subject to Nasdaq rules, to convert up to two million of the principal amount of its loan to us at a conversion price of $80.02 per share.

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On December 16, 2024, we entered into the Third Amendment to Loan and Security Agreement and Supplement (the "Third Avenue Amendment") with Avenue Lenders. Pursuant to the Third Avenue Amendment, the parties agreed to (i) amend the potential interest only period under the Avenue Loan Facility such that the existing interest only period ending on April 30, 2024 was extended by a period of six months provided that we net certain proceeds from an equity financing on or before March 31, 2025 in the aggregate; (ii) an additional sixth month interest only extension period was added, which is conditioned on our achieving a multi-million dollar net revenue milestone, with cash burn not to exceed a certain multi-million dollar level, for the trailing six month period ending September 30, 2025; (iii) the interest only period may not exceed a total of 36 months from the closing of the loan as of May 1, 2023; and (iv) the maturity date of the loan will be extended from May 1, 2027 to November 1, 2027, provided that we meet the foregoing amended milestones.

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In addition, the Third Avenue Amendment provides (i) that we will seek stockholder approval to reprice the warrants issued to the Avenue Lenders on May 1, 2023 to permit an amendment to the exercise price of such warrants to the "minimum price" as defined by Nasdaq rules as of the closing of the Avenue Amendment (or $14.416 per share) and (ii) permit the Avenue Lenders, subject to Nasdaq rules, to convert up to two million of the principal amount of its loan to us at a conversion price of $17.30 per share. On April 28, 2025, we held a special meeting of stockholders in which the stockholders approved the following: (i) reduce the exercise price of certain warrants to purchase 29,246 shares of Common Stock issued to Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund, L.P. (collectively "Avenue") to $14.42 per share, and (ii) to permit the conversion of up to two million dollars of the principal amount of the loan issued by Avenue to us at a conversion price of $17.30 per share.

In consideration for the Third Avenue Amendment, we agreed to pay a certain amendment fee at closing, and the exit payment due under the loan was increased by a certain amount, in addition to accrued interest and then outstanding principal. On April 30, 2025, the Avenue Loan Facility pursuant to the LSA was repaid in full.

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On May 1, 2023, we executed an agreement (the "Preferred Agreement") with existing holders of our Series A-1 Convertible Preferred Stock (the "Series A-1 Preferred Stock"). Pursuant to the Preferred Agreement, we agreed to issue such holders of Series A-1 Preferred Stock up to an aggregate of an additional 19,103 shares of common stock, in addition to the 63,675 shares of common stock issuable upon conversion of the Series A-1 Preferred Stock, in consideration for such holders agreeing not to convert their shares of Series A-1 Preferred Stock. Such shares of common stock are issuable on the following dates, assuming the Series A-1 Preferred Stock has not yet been converted: (i) up to an aggregate of 3,184 shares of Common Stock before July 1, 2023, if not converted for at least one quarter, (ii) up to an aggregate of 6,368 shares of Common Stock before October 1, 2023, if not converted for at least two quarters, (iii) up to an aggregate of 9,551 shares of Common Stock before January 1, 2024, if not converted for at least three quarters, (iv) up to an aggregate of 12,735 shares of Common Stock before April 1, 2024, if not converted for at least four quarters, and (v) up to an aggregate of 19,103 shares of Common Stock before July 1, 2024, if not converted for at least five quarters. The holders of Series A-1 Preferred Stock will not be entitled to receive any such shares if the issuance of such shares will exceed a non-waivable 19.99% ownership blocker.

On February 15, 2024, we entered into securities purchase agreements (each, a "Series C Purchase Agreement") with accredited investors relating to an offering (the "Series C Offering") and the sale of an aggregate of (i) 17,307 shares of newly designated Series C Preferred Stock (the "Series C Preferred Stock"), and (ii) 4,000 shares of Series C-1 Preferred Stock (the "Series C-1 Preferred Stock"), at a purchase price of $1,000 for each share of preferred stock. In addition, on February 16, 2024, we entered into Series C Purchase Agreements with accredited investors relating to the Series C Offering and the sale of an aggregate of 1,115 shares of Series C-2 Preferred Stock (the "Series C-2 Preferred Stock" and together with the Series C Preferred Stock and the Series C-1 Preferred Stock, the "Series C Preferred Stock"), at a purchase price of $1,000 for each share of preferred stock. We received aggregate gross proceeds of approximately $22,422 from the offering of preferred stock. The closing of the Series C Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock occurred on February 21, 2024.

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On December 16, 2024, we entered into securities purchase agreements with accredited investors relating to an offering and the sale of an aggregate of (i) 7,055 shares of newly designated Series D Preferred Stock, and (ii) 11,750 shares of Series D-1 Preferred Stock, at a purchase price of $1,000 for each share of preferred stock. We received aggregate gross proceeds of approximately $18,805 from the offering of preferred stock. The closing of the offering occurred on December 18, 2024.

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On December 16, 2024, we and certain purchasers that were holders of our Series B and C Preferred Stock executed lock up agreements (the "Lock Up Agreement"), pursuant to which we agreed to issue, subject to stockholder approval, up to forty percent (40%) of the shares of common stock issuable upon conversion of the preferred stock held by such purchaser, including dividend shares of common stock due upon conversion of these shares into shares of common stock , over the course of twelve (12) months (the "Additional Shares"). Each holder shall be entitled to receive 10% of the Additional Shares for each three (3) month period each holder agrees not to transfer or otherwise sell (subject to certain limitations) the shares of common stock issuable upon conversion of the Series B Preferred Stock and Series C Preferred Stock and the dividend shares of common stock due upon conversion. Between May 23, 2025 and May 28, 2025, the Company and holders that previously entered into Lock-Up Agreements, entered into an Amended and Restated Lock-Up Agreement (the "A&R Lock-Up Agreement") pursuant to which the holders agreed to extend the restrictive period previously provided in the Lock-Up Agreements until February 21, 2026 (the "Lock Up Period") for the right to receive an additional 10% of the common stock underlying the Series B Preferred Stock and the Series C Preferred Stock held by the holders. On October 20, 2025, we and holders that previously entered into the Lock-Up Agreement and the A&R Lock-Up Agreement entered into a Second Amended and Restated Lock-Up Agreement (the "Second A&R Lock-Up Agreement") pursuant to which the Lock-Up Period shall automatically terminate, and all share consideration shall be accelerated and immediately be issued by us in full (to the extent not already issued) upon (A) any merger or consolidation of our with or into another individual, entity, corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust or unincorporated organization, (B) any sale of all or substantially all of our assets in one transaction or a series of related transactions, or (C) any reclassification of the Common Stock or any

compulsory share exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property.

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On February 21, 2026, all lockup shares were issued to the holders in the form of common stock and pre-funded warrants.

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On January 7, 2025, we entered into securities purchase agreements (each, a "Series D Purchase Agreement") with accredited investors relating to an offering (the "Series D Offering") and the sale of an aggregate of (i) 4,950 shares of newly designated Series D-2 Preferred Stock (the "Series D-2 Preferred Stock"), and (ii) 1,850 shares of Series D-3 Preferred Stock (the "Series D-3 Preferred Stock"), at a purchase price of $1,000 for each share of preferred stock. As a result of the sale of the preferred stock, the aggregate gross proceeds we received from the Series D Offering are approximately $6,800. The closing of the Series D-2 Preferred Stock, and Series D-3 Preferred Stock occurred on January 14, 2025. The conversion of the preferred stock was subject to stockholder approval. In addition, the preferred stock will automatically convert into shares of common stock, subject to certain beneficial ownership limitations, on the 12-month anniversary of the issuance date. The holders of preferred stock will also be entitled to dividends equal to a number of shares of common stock equal to ten percent (10%) of the number of shares of common stock issuable upon conversion of the preferred stock then held by such holder for each full quarter anniversary of holding for a total of four quarters from the Closing Date, all issuable upon conversion of the preferred stock.

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On April 28, 2025, we held a special meeting of stockholders in which the stockholders approved among other agenda items the (A) the issuance of shares of our common stock, in excess of 20% of our issued and outstanding shares of common stock, upon: (i) the conversion of 25,605 shares of our Series D, D-1, D-2 and D-3 Preferred Stock into an aggregate of 1,697,677 shares of common stock, which were issued pursuant to private placement transactions that closed on December 18, 2024 and January 14, 2025 (the "Private Placements"), (ii) the issuance of up to 679,085 shares of common stock issuable as dividends to the Series D, D-1, D-2 and D-3 Preferred Stock; and (iii) the issuance of up to 208,754 shares of common stock issuable as share consideration provided under the Lock Up Agreements.

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On May 20, 2025, we filed an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of the Company's Series C Preferred Stock (the "Series C Certificate of Designation"), an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of the Company's Series C-1 Preferred Stock (the "Series C-1 Certificate of Designation"), and an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of the Company's Series C-2 Preferred Stock (the "Series C-2 Certificate of Designation", collectively with the Series C Certificate of Designation and the Series C-1 Certificate of Designation, the "Series C Certificates of Designation"), all with the Secretary of State of the State of Delaware. The Series C Certificates of Designation were amended to extend the mandatory conversion period from fifteen (15) to twenty-four (24) months from the original issue date. We will issue a dividend equal to fifteen percent (15%) of the number of shares of Common Stock issuable upon conversion of the Series C Preferred Stock, Series C-1 Preferred Stock and/or Series C-2 Preferred Stock then held by such holder for each full quarter anniversary of holding following the filing of the Series C Certificates of Designation with the Secretary of State of the State of Delaware.

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On September 18, 2025, upon obtaining the vote of a majority of the holders of the relevant classes of preferred stock and the approval of our board of directors, we filed an Amended and Restated Series A-1 Certificate of Designation, an Amended and Restated Series C Certificates of Designation, an Amended and Restated Series D Certificates of Designation, all with the Secretary of State of the State of Delaware. The Series C Certificates of Designation and Series D Certificates of Designation were amended to accelerate the mandatory conversion period of all outstanding shares of each such series into shares of the Company's common stock, or at each holder's election in pre-funded warrants, effective as of September 18, 2025. The Series A-1 Certificate of Designation was amended to provide holders with the option to receive pre-funded warrants in lieu of common stock.

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On September 25, 2025, upon obtaining the vote of a majority of the holders of the relevant classes of preferred stock and the approval of our board of directors, we filed an Amended and Restated Series C-1 Certificate of Designation with the Secretary of State of the State of Delaware. The Series C-1 Certificate of Designation was amended to accelerate the mandatory conversion period of all outstanding shares of such series into shares of the Company's common stock, or at each holder's election in pre-funded warrants, effective as of September 25, 2025.

In connection with such mandatory conversion, each holder of preferred stock also received all accrued and unpaid dividends, including any dividend shares or payment-in-kind shares, in addition to the conversion shares issuable upon conversion, subject to certain beneficial ownership blockers.

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The filings of the Series A-1 Certificate of Designation, the Series C Certificates of Designation and the Series D Certificates of Designation were intended to amend and restate the terms mentioned above, and no additional securities were issued or sold as a result.

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In September 2025, all outstanding shares of Series C, C-1 and C-2 Preferred Stock, totaling 20,957 shares, were converted into 982,845 shares of common stock, and as of September 30, 2025, no Series C, C-1 and C-2 Preferred Stock remains outstanding.

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In September 2025, all outstanding shares of Series D, D-1, D-2 and D-3 Preferred Stock, totaling 25,605 shares, were converted into 1,600,043 and 776,719 shares of common stock and pre-funded warrants, respectively, and as of September 30, 2025, no shares of Series D, D-1, D-2 and D-3 Preferred Stock remains outstanding.

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In September 2025, all outstanding shares of Series A-1 Preferred Stock and B-1 Preferred Stock, totaling 1,882 and 4,946 shares, were converted into 43,803 and 114,974 shares of common stock, respectively, and as of September 30, 2025, no shares of Series A-1 Preferred Stock and B-1 Preferred Stock remains outstanding.

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On April 30, 2025, we entered into a debt financing facility for up to $50 million (the "Callodine Loan Facility") provided by Callodine (the "Callodine Lenders"). The capital refinances our existing credit facility, providing additional operational flexibility and supporting the commercial execution of our B2B2C strategy across pharmaceutical companies, self-insured employers and payer channels. Under the terms of the credit agreement (the "Callodine Credit Agreement"), we borrowed $32.5 million at closing. In addition, an aggregate of up to an additional $17.5 million is available to be drawn down at our option, based on the achievement of certain revenue thresholds. The Callodine Credit Agreement has a five-year term that matures in April 2030. In connection with the funding of the closing amount, we also issued a warrant to purchase 105,707 shares of our common stock, with an exercise price of $16.556. In addition, up to $2.5 million of the loaned amount can be converted into shares of our common stock at a price of $19.866 per share. With the refinancing and current cash on hand, we believe that deferring the debt amortization from the end of 2025 to 2028 will allow the time to generate funds from operations to support our cash flow.

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On August 15, 2025, we did not meet one of the financial covenants under the Callodine Credit Agreement. Upon an Event of Default (as defined in the Callodine Credit Agreement) under the Callodine Credit Agreement, interest shall accrue to at a rate per annum equal to the lesser of (i) three percent (3%) over the Contract Rate (as defined in the Callodine Credit Agreement), or (ii) the maximum rate of interest permitted to be charged by applicable laws or regulations, until paid. The Company notified Callodine of its intention to utilize an Equity Cure (as defined in the Callodine Credit Agreement) to address the event of default.

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On November 5, 2025, we entered into an amendment (the "Callodine Credit Agreement Amendment") to its existing Callodine Loan Facility, with the Callodine Lenders. Among other things, the Callodine Credit Agreement Amendment provides for (i) a reset of financial covenants and waives financial-covenant testing for the second and third quarters of 2025; (ii) the replacement of the existing minimum cash covenant to a $10,000,000 minimum consolidated unencumbered liquid assets covenant; (iii) a monthly 13-week cash-flow reporting requirement when liquidity is below $11,000,000 (subject to a certain EBITDA exception); (iv) a clarification that an additional funding of $2,500,000 by the Callodine Lenders is uncommitted and at the Callodine Lenders' discretion; and (v) an increase in the exit fee by an additional $150,000 (which may be waived if a change-of-control prepayment fee is triggered). The Company paid an amendment fee of $150,000 to Callodine. In connection with the Callodine Credit Agreement Amendment, we also amended and restated the warrants issued to the Lenders upon the execution of the Callodine Loan Facility, to reduce the exercise price of the Callodine Lender Warrants from $16.556 (post reverse stock split) to $15.3495 per share as well as to reduce the conversion price of up to $2,500,000 of the Callodine Loan Facility from $19.866 (post reverse stock split) to $15.3495.

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On September 22, 2025, we entered into securities purchase agreements with accredited investors relating to the offering and the sale of an aggregate of 1,154,420 shares of common stock and pre-funded warrants to purchase up to 1,558,760 shares of common stock, at a purchase price of $6.45 per share. We received aggregate gross proceeds of approximately $17,500 from the offering of common stock and pre-funded warrants. The closing of the offering occurred on September 23, 2025.

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Readers are advised that available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than expected. Should this occur, we will need to seek additional capital earlier than anticipated in order to fund (1) further development and, if needed (2) expenses which will be required in order to expand manufacturing of our products, (3) sales and marketing efforts and (4) general working capital. Such funding may be unavailable to us on acceptable terms, or at all. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to the failure of our company. This would particularly be the case if we are unable to commercially distribute our products and services in the jurisdictions and in the timeframes we expect. We believe that we have sufficient cash to fund our operations for at least the next twelve months.

Cash Flows (dollar amounts in thousands)

The following tables sets forth selected cash flow information for the periods indicated:

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Net cash used in operating activities

Net cash used in operating activities was $25,941 for the year ended December 31, 2025, compared to $38,562 used in operations for the year ended December 31, 2024. Cash used in operations decreased mainly due to the decrease in our operating expenses and a decrease in our working capital, specifically due to efficiencies and post-merger activities.

Net cash used in investing activities

Net cash used for investing activities was $4,342 for the year ended December 31, 2025, compared to cash used in investing activities of $8,934 for the year ended December 31, 2024. The decrease is mainly due to the acquisition of Twill in the year ended December 31, 2024, compared to the year ended December 31, 2025.

Net cash provided by financing activities

Net cash provided by financing activities was $24,313 for the year ended December 31, 2025, compared to $38,531 for the year ended December 31, 2024. During the year ended December 31, 2025, we raised net proceeds in an amount of approximately $24,128 through our January and September 2025 offerings and net proceeds in an amount of approximately $185 through the refinance with the Callodine Loan Facility Lenders.

Contingencies

We account for our contingent liabilities in accordance with ASC 450 "Contingencies". A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Currently, we are not a party to any ligation that we believe could have a material adverse effect on our business, financial position, results of operations or cash flows.

Recently Issued and Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. The Company implemented the new income tax disclosures prospectively. The implementation of ASU 2023-09 affected disclosures only and had no impact on the Company's financial condition or results of operations (See Note 15 Taxes on Income).

Recently issued accounting pronouncements, not yet adopted:

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses. The ASU requires, among other items, additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the Statements of Operations. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the effect of adopting the ASU on its disclosures.

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 ("ASU 2025-05"). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. ASU 2025-05 is not expected to have a material impact on the Company's consolidated financial statements.

In September 2025, the FASB issued Accounting Standards Update 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"). ASU 2025-06 provides targeted improvements to the accounting for internal-use software costs by replacing the existing project-stage model with a principles-based approach to determine when capitalization of costs should begin. ASU 2025-06 is effective for all entities for annual reporting periods beginning after December 15, 2027 on a prospective basis, with early adoption permitted. The Company is currently evaluating the potential impact that ASU 2025-06 will have on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements ("ASU 2025-11"). ASU 2025-11 provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. The guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years.

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