Financial Analysis

Note J Commitments and Contingencies [1] Operating Leases: The Company leases office space under an operating lease from November 1, 2024 through December 31, 2026 where the Company and its subsidiaries have maintained operations. As discussed in Note B, the Company adopted Topic 842 as of January 1, 2019. Upon adoption of Topic 842, the Company's office lease remained an operating lease and a lease liability in the amount of $85,000 was recognized based on the present value of the remaining minimum lease payments, discounted using the Companys incremental borrowing rate. The related lease ROU asset was recorded in the amount of $85,000, reflecting the present value of future minimum lease payments, adjusted for deferred rent. As of December 31, 2025, the operating lease right-of-use liability and asset amounted to $38,000 and $37,000, respectively. As of December 31, 2024, operating lease right-of-use liability and asset amounted to $76,000 and $72,000, respectively. Total operating lease expense for the years ended December 31, 2025 and 2024, was $38,000 and $40,000, respectively. [2] Guarantees: Holdings is a guarantor of the full amount of the outstanding CBOP loan with BB&T Bank entered into in 2017, as described In Note C[2]. The outstanding balance on this loan was $854,000 and $1,358,000 at December 31, 2025 and 2024, respectively. The Company expected any potential obligations from these guarantees to be reduced by the recoveries of the respective collateral and …

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Note E 2025 Equity Incentive Plan The Companys stockholders approved the 2025 Equity Incentive Plan at a special meeting of stockholders on October 31, 2025. The plan provides for an aggregate maximum of 4,500,000 shares of common stock to be issued under the plan. At December 31, 2025, 398,000 options were outstanding under the plan with no options exercisable. The Company recorded non-cash equity expense of $66,000 in 2025 and had no expense in 2024. At December 31, 2025 there is $297,465 of unamortized expense to be recorded over 2.4 years. Number of Shares Weighted Average Exercise Price Aggregate Fair Market Value Weighted Average Remaining Contractual Term Options outstanding at December 31, 2024 - - - - Options granted 398,000 $ 0.95 $ 0.86 9.6 Options forfeited or expired - - - - Options outstanding at December 31, 2025 398,000 $ 0.95 $ 0.86 9.6 Exercisable options at December 31, 2025 - Assumptions included in the fair value per share calculations during the year ended December 31, 2025 were (1) expected life of 5.5 years; (2) five year treasury rate of 3.92%; and a (3) historical volatility rate of 139.97% …

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Note I Taxes The components of the provision for income taxes are as follows: Years Ended December 31, 2025 2024 Current taxes: Federal $ $ - State - Current taxes - - Deferred taxes: Federal $ - $ (163,000 ) State - - Deferred taxes - (163,000 ) Income tax provision $ - $ (163,000 ) A reconciliation of the tax provision calculated at the statutory federal income tax rate with amounts reported follows: Year Ended December 31, 2025 2024 Amount Percent Amount Percent Income tax benefit at the federal statutory rate $ (1,639,000 ) 21.0 % $ (466,000 ) 21.0 % State income tax, net of federal taxes (529,000 ) 6.7 (106,000 ) 5.2 Permanent differences and other 37,000 (0.5 ) (6,000 ) 0.3 True up to tax return for JV investments Stock-based compensation shortfall 504,000 (6.4 ) Variance-reversal of previous tax provision - 163,000 (7.9 ) Change in valuation allowance 1,627,000 (20.8 ) 252,000 (12.3 ) Income tax benefit $ - 0 % $ (163,000 ) 7.9 % Items which give rise to deferred tax assets and liabilities are as follows: December 31, 2025 2024 Deferred tax asset: Basis differences in unconsolidated entities, including advances and loans to those entities $ 230,000 $ 210,000 Net intangible assets and other capitalized costs 1,013,000 Net operating loss 1,015,000 499,000 Net effect of conversion from the accrual basis of accounting to the cash basis of accounting for tax purposes primarily related to accounts receivable, prepaid expense, deferred revenue, and accounts payable 63,000 11, …

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Note K Transactions with Related Parties The Company recorded compensation with directors and officers of the Company for the year ended December 31, 2025 consisting of stock grants valued at $0.95 per share of 40,000 for each of directors St. Lawrence and Leimkuhler; 75,000 for Executive Director Ms. Reeher; and 375,000 for CEO and Board Chair, Dr. Jeereddi. Additionally, the Company awarded stock options to the Board of 25,000 each, or prorated for new director Dr. Policherla, 75,000 each for Mr. Minor and Ms. Reeher and 125,000 for Dr. Jeereddi. During the year, the Company compensated PSS for services of Ms. Reeher and others as well as the sharing of rental space and other services. Dr. Jeereddi was the majority owner of PSS and Ms. Reeher is the Executive Director. PSS was acquired by the Company on November 4, 2025. In addition, each of the customers of PSS are companies with either a familial and or management relationship to Dr. Jeereddi. Accordingly, all revenue of $1,024,000 reported for fiscal 2025 comes from related parties. …

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Note L Segment Reporting The Company applies ASC 280, Segment Reporting, in determining reportable segments for its financial statement disclosure. Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance. The Companys CODM is its Chief Executive Officer (CEO). The Company has determined that it operates two operating segments, EHP and PSS, but that these segments meet the criteria for aggregation for reporting purposes as one reportable segment. …

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Note M Subsequent Events The Company has been in a contract dispute with a services provider. An agreement was reached to settle the matter for $30,000, subject to execution of a settlement agreement. …

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