Women's Health Focus - Daré Bioscience focuses on women's health, aiming to close gaps in care with science-backed solutions across various areas including contraception and menopause [19]. - The company plans to explore opportunities for portfolio expansion through acquisitions and in-licensing of new programs that address unmet needs in women's health [34]. Product Development and Launches - The first product in the DARE to RESTORE™ line, Flora Sync LF5™, is expected to launch in the U.S. in Q2 2026, aligning with the company's vision for integrating evidence-based products into women's health [26]. - DARE to RECLAIM estradiol progesterone intravaginal ring is expected to be available for prescription fulfillment in early 2027, targeting a non-oral, monthly hormone therapy option for menopausal symptoms [47]. - The DARE to RESTORE product line, including vaginal probiotic suppositories, is expected to launch in the U.S. in Q2 2026, with a focus on supporting vaginal microbiome balance [52]. - DARE to PLAY Sildenafil Cream is set to begin pharmacy dispensing and revenue recording in Q2 2026, following a Phase 2b clinical study that was the first to evaluate a therapy for female sexual arousal disorder [43]. Clinical Trials and Research - Daré's product candidates are at various development stages, including Ovaprene®, currently in a pivotal Phase 3 clinical study, and DARE-HRT1, designed for menopausal hormone therapy [32]. - The pivotal Phase 3 clinical study aims to enroll approximately 250 participants to complete about 12 months (13 menstrual cycles) of use, with recruitment initiated in 2025 [69]. - The Phase 3 program for Sildenafil Cream received FDA alignment on key elements, confirming FSAD as an acceptable indication and allowing for a 12-week blinded treatment period [90]. - The Phase 1 clinical trial of DARE-HRT1 showed that both versions of the IVR released estradiol and progesterone in normal ranges, with no serious adverse events reported [98][99]. Financial Strategies and Funding - Daré aims to reduce reliance on dilutive capital by pursuing a capital-efficient commercialization path, leveraging direct-to-consumer marketing and strategic partnerships [28]. - The company has received non-dilutive funding from U.S. federal agencies and private foundations to support various research and development activities across eight programs [36]. - The company is responsible for providing $5.5 million to NICHD for a Phase 3 clinical study of Ovaprene, with all funds paid as of September 30, 2024 [157]. Licensing and Partnerships - The company has entered into a licensing agreement with Organon for XACIATO, which was approved by the FDA in December 2021 and is now available nationwide as of January 2024 [30]. - The company entered into a co-development and licensing agreement with Theramex for the biodegradable contraceptive implant Casea S, with no current development costs [145][146]. - The company entered into a license agreement with Hennepin Life Sciences LLC in August 2022, acquiring exclusive global rights to develop and commercialize treatments using antimicrobial glycerol monolaurate (GML) for various health conditions [151]. Product Efficacy and Safety - The clinical trial for Ovaprene met its primary endpoint, showing that it prevented the requisite number of sperm from reaching the cervix in 100% of women and cycles evaluated [66]. - Preliminary efficacy data from the Phase 1/2 study of DARE-HRT1 indicated significant improvements in vaginal health and menopausal symptoms, with p-values <0.01 for all measured outcomes [102][103]. - DARE-VVA1, a hormone-free treatment for moderate-to-severe dyspareunia, has shown significant improvements in vaginal pH (approximately 30%) and dryness scores (approximately 63%) after three months of treatment [113]. Market Positioning and Consumer Access - The product is positioned as a science-backed, evidence-driven solution for women's sexual health, with clinical data showing increased genital blood flow within 10-15 minutes of application [42]. - DARE to PLAY is currently offered on a cash-pay basis only, with no insurance coverage or reimbursement options available [46]. - The company has partnered with Bravado Pharmaceuticals for the manufacturing and fulfillment of DARE to PLAY prescriptions, ensuring compliance with state-level pharmacy regulations [44]. Future Development Plans - The company plans to utilize the FDA's 505(b)(2) pathway for DARE-HRT1 marketing approval, supported by a single Phase 3 clinical trial [95]. - The company is exploring strategic collaborations to expand the application of its DARE-IDDS platform beyond contraception [134]. - The ongoing Phase 1 study of Casea S is being conducted with no development costs to the company at this time [131].

Financial Performance and Funding - The company has incurred significant operating losses since inception, with expectations of continued losses for the foreseeable future[22] - The company may require substantial additional funding, which may not be available on acceptable terms[22] - Shareholders may not receive dividends in the foreseeable future, limiting their return on investment to potential appreciation in share price[47] - The company may encounter difficulties in completing equity offerings due to limitations on preferential subscription rights for existing shareholders[50] Product Development and Regulatory Risks - The company is substantially dependent on the success of its only product candidate, GLPG3667, for future revenue generation[27] - The regulatory approval processes for product candidates are lengthy and unpredictable, which may affect commercial viability[29] - Clinical trials may reveal adverse events that could inhibit regulatory approvals or market acceptance of product candidates[35] - The company relies on third parties for conducting preclinical studies and clinical trials, which poses risks to obtaining regulatory approval[37] Collaboration and Competition - The company is heavily reliant on global collaboration agreements with Gilead for product development and commercialization, with no assurance of expected benefits[36] - The company faces significant competition in drug discovery and development, which could reduce commercial opportunities[34] Tax and Foreign Exchange Risks - The company may be classified as a passive foreign investment company (PFIC) for U.S. federal income tax purposes, which could lead to adverse tax consequences for certain U.S. holders[42] - The company believes it was not a controlled foreign corporation (CFC) for U.S. federal income tax purposes, but qualifying as a CFC could result in negative tax implications for certain U.S. holders[43] - The company may face significant foreign exchange risk, particularly with fluctuations between the U.S. dollar and the euro[44][46] Market and Shareholder Considerations - The market price of the American Depositary Shares (ADSs) could experience wide fluctuations, impacting shareholder value[45] - As a foreign private issuer, the company is exempt from certain U.S. securities laws, which may limit the information available to ADS holders[51] - The company may lose its foreign private issuer status in the future, potentially resulting in significant additional costs[52] Operational Challenges - The wind-down of cell therapy activities may not be completed in a timely manner or on favorable terms[23] - The ability to successfully implement business development strategies is critical for acquiring and commercializing product candidates[26]

Financing and Capital - The company has raised a total of €310.6 million in equity financing since inception, including €103.6 million from an IPO on Euronext in September 2020 and €75.0 million from an IPO on Nasdaq in July 2021[678]. - The company plans to file a new shelf registration statement on Form F-3 on March 20, 2025, to register the offer and sale of up to $200.0 million of its securities[678]. - Net cash from financing activities decreased to €38.1 million in 2025 from €77.4 million in 2024, reflecting several capital increases during the year[682]. Financial Position - As of December 31, 2025, the company reported cash and cash equivalents of €30.0 million and an accumulated deficit of €305.6 million[688]. - The company has significant contractual obligations totaling €27.96 million in financial debt and €15.49 million in trade and other liabilities due within one year[690]. Operating Performance - Net cash used in operating activities increased to €68.0 million in 2025 from €49.2 million in 2024, primarily due to higher research and development expenses[680]. - The company expects to incur operating losses and generate negative cash flows due to ongoing investments for the U.S. commercial launch and clinical trials, with cash runway extending into Q1 2027[689]. - The company has consistently operated with deficits and sustained negative cash flows since inception, primarily due to high research and development costs for the Genio device[688]. Research and Development - Research and development expenses are expected to decrease in the near term due to the closure of the Israel R&D department and reduced costs related to clinical studies[687]. Currency Risk - The company is minimally exposed to currency risk, with potential impacts on net loss from fluctuations in USD, NIS, and AUD against the Euro[929].

Financial Performance - Revenues for the year ended December 31, 2025, were $22,402,188, a decrease of 15% from $26,350,819 in 2024, primarily due to external headwinds including government shutdowns and reduced Department of Defense funding [105]. - Gross profit decreased by 22% to $15,202,626 for 2025, with a gross profit margin of 68%, down from 74% in 2024, attributed to lower revenues and increased cost of sales [107]. - Net income for 2025 was $258,446, representing an 81% decrease from $1,363,681 in 2024, driven by the decline in revenue [112]. - Adjusted EBITDA for 2025 was $1,601,152, a decrease of 45% from $2,926,169 in 2024, reflecting the overall decline in financial performance [113]. Operating Expenses - Operating expenses decreased by 15% to $14,765,131 in 2025, with general and administrative expenses down by 14% and research and development expenses down by 21% [109]. Cash Flow - Cash and cash equivalents increased to $18,594,598 as of December 31, 2025, compared to $18,040,827 in 2024, indicating improved liquidity [114]. - Net cash provided by operating activities rose significantly to $4,587,967 in 2025, up from $1,257,266 in 2024, due to better collection of accounts receivable [115]. - Net cash used in investing activities increased to $3,780,744 in 2025, driven by the creation of an intangible asset for the VXR product and additional property purchases [116]. - Net cash used in financing activities was $253,452 for the year ended December 31, 2025, compared to $220,709 for the year ended December 31, 2024 [117]. Product and Market Strategy - The company plans to broaden its product offerings and leverage advancements in artificial intelligence to enhance training realism and reduce development costs [104]. - The V-300™ simulator features a 300-degree immersive training environment, emphasizing the importance of quick judgment decisions in high-stress scenarios [104]. Bookings and Backlog - Total bookings for the year ended 2025 reached $26.7 million, with $7.3 million booked in the fourth quarter [118]. - The company's backlog as of December 31, 2025, totaled $25.6 million, comprising $13.8 million in Capital, $5.1 million in Service, and $6.7 million in STEP [119]. - Management estimates that the majority of new bookings received in Q4 2025 will convert to revenue in 2026 [120]. - The company believes there are $2.5 million in renewable STEP contract options outstanding, with an expected 95% exercise rate based on current renewal rates [118]. Capital Resources - Current capital resources are deemed adequate for operations for more than 12 months, but the company is open to raising additional funds for expansion and market opportunities [122]. Accounting Policies - The company has adopted ASC 606 for revenue recognition, which did not significantly affect its financial statements upon adoption [130]. - Revenue includes product sales and services, net of discounts, with significant components being simulators and related services [131]. - The company provides a one-year assurance-type warranty on products, estimating warranty liabilities based on historical claims [139]. - As of December 31, 2025, there were no off-balance sheet arrangements that materially affect the company's financial condition [141].

Financial Performance - Daré Bioscience reported approximately $24.7 million in cash and cash equivalents as of December 31, 2025, with working capital of approximately $3.4 million[18]. - Total revenue for 2025 was $1,030,193, a significant increase from $9,784 in 2024[37]. - Operating expenses for 2025 totaled $14,286,728, down from $23,461,269 in 2024, indicating a reduction in costs[37]. - The net loss for 2025 was $13,399,274, compared to a net loss of $4,053,599 in 2024, reflecting increased operational challenges[37]. - Cash and cash equivalents increased to $24,711,356 in 2025 from $15,698,174 in 2024, showing improved liquidity[39]. - Total assets rose to $32,474,563 in 2025, up from $22,101,131 in 2024, indicating growth in the company's asset base[39]. - The company reported a loss per common share of $1.20 for 2025, compared to $0.48 in 2024, highlighting increased losses on a per-share basis[37]. Funding and Expenses - The company received approximately $20.8 million in net proceeds from equity offerings during 2025, alongside significant non-dilutive funding totaling approximately $16.4 million from various grants[19][22]. - Selling, general and administrative expenses for 2025 were approximately $8.8 million, a decrease from approximately $9.2 million in 2024[20]. - Research and development expenses were approximately $5.5 million for 2025, down from approximately $14.3 million in 2024, with total contra-R&D expenses related to grant funding at approximately $16.4 million[21]. - Daré plans to advance the development of product candidates with non-dilutive grant funding, aiming to reduce reliance on equity financing[32]. Product Development and Strategy - Daré expects to begin recording product revenue from DARE to PLAY and Flora Sync LF5 in Q2 2026, with revenue from DARE to RECLAIM targeted to begin in 2027[23]. - DARE to PLAY is a topical sildenafil cream for women, designed to increase genital blood flow within 10 to 15 minutes, addressing a market of approximately 20 million women in the U.S. experiencing arousal challenges[3][4]. - The company is advancing DARE-HPV into a Phase 2 clinical study with ARPA-H funding, aiming to address high-risk HPV infections affecting approximately 6 million women annually in the U.S.[14][13]. - DARE to RECLAIM, a monthly bio-identical hormone therapy product, is expected to be available for prescription fulfillment in early 2027, targeting a market valued between $2.5 billion and $4.5 billion[9][10]. - The company is pursuing a dual-path strategy for DARE to PLAY, making it available as a compounded product while also advancing it toward the 505(b)(2) NDA pathway[8]. - Daré is building a multi-product revenue profile, with expectations for diversified growth across 2026 and 2027[23]. - The company is focused on launching new consumer health products, including Flora Sync LF5, as part of its commercial strategy[32]. - Daré aims to pursue FDA approval for its drug product candidates, which may strengthen their market position as 503B compounded products[32]. Leadership and Recognition - The leadership has been recognized for contributions to innovation in women's health, enhancing the company's reputation in the biopharma sector[29].

Financial Performance - For the year ended December 31, 2025, the company reported a net income of $233,000, a significant improvement from a net loss of $2.0 million in 2024[228]. - Net income for 2025 was $232,690, compared to a net loss of $1.96 million in 2024, indicating a significant turnaround in profitability[266]. - The company reported a comprehensive income of $5.24 million in 2025, compared to a comprehensive loss of $1.93 million in 2024, indicating a significant improvement[266]. - Net cash flows from operating activities improved to $1,245,094 in 2025, compared to $(2,774,524) in 2024[270]. - Net interest income for the year ended December 31, 2025, was $14.1 million, compared to $9.7 million in 2024, reflecting an increase in the net interest margin to 3.24% from 2.38%[224]. Asset and Equity Growth - Total assets increased by $39.9 million, or 8.9%, to $489.4 million as of December 31, 2025, compared to $449.5 million as of December 31, 2024[213]. - Total equity surged by $75.6 million, or 88.0%, to $161.4 million as of December 31, 2025, driven by net capital raised during the IPO of $79.4 million[221]. - Cash and cash equivalents rose by $32.3 million, or 210.5%, to $47.6 million as of December 31, 2025, primarily due to the initial public offering completed on December 3, 2025[214]. - The company’s total stockholders' equity rose to $161.37 million in 2025, up from $85.83 million in 2024, an increase of about 87.8%[264]. Loan Portfolio and Credit Quality - Loans receivable, net increased by $27.0 million, or 11.2%, to $267.9 million as of December 31, 2025, reflecting efforts to grow the commercial loan portfolio[216]. - The provision for credit losses rose by $72,000, or 15.4%, to $540,000 in 2025, reflecting management's assessment of the growing loan portfolio[231]. - Loans over 90 days delinquent decreased to approximately $444,000 in 2025 from approximately $1,661,000 in 2024, a decline of about 73.3%[322]. - The total loans receivable increased to $276,340,634 in 2025 from $248,204,263 in 2024, representing an increase of approximately 11.3%[321]. - The allowance for credit losses rose to $2,681,819 in 2025, compared to $2,125,993 in 2024, indicating a 26.1% increase[321]. Deposits and Funding - Deposits decreased by $35.7 million, or 10.0%, to $321.6 million as of December 31, 2025, with certificates of deposit declining by $31.6 million due to the interest rate environment[220]. - Total deposits decreased from $357.3 million in 2024 to $321.6 million in 2025, a decline of approximately 10%[336]. - Certificates of deposit fell from $192.9 million in 2024 to $161.2 million in 2025, representing a decrease of about 16.5%[336]. - The Bank had commitments to lend approximately $48.7 million in 2025, up from $33.2 million in 2024, an increase of about 46.5%[341]. Noninterest Income and Expenses - Noninterest income increased by $140,000, or 13.0%, to $1.2 million in 2025, mainly due to higher gains on real estate sales[232]. - Noninterest expense grew by $1.4 million, or 10.8%, to $14.7 million in 2025, influenced by a one-time contribution of $1.9 million to establish a charitable foundation[233]. - The company expects noninterest expenses to rise as operations expand, particularly due to new stock benefit plans[202]. Regulatory and Capital Ratios - As of December 31, 2025, the company maintained a Tier 1 capital ratio of 24.8%, significantly exceeding the regulatory requirement[247]. - The Bank's Tier 1 capital to average assets ratio was 24.8% as of December 31, 2025, significantly exceeding the required minimum of 9.0%[372]. - The Bank's net worth exceeded regulatory capital requirements as of December 31, 2025, maintaining its classification as well capitalized[367]. Investment Securities - Investment securities available-for-sale decreased by $9.9 million, or 8.5%, to $106.7 million as of December 31, 2025, with liquidity used to fund the loan portfolio[215]. - The total available-for-sale securities decreased in fair value to $106,653,763 in 2025 from $116,554,742 in 2024, a decline of approximately 8.5%[315]. - The gross unrealized losses on available-for-sale securities amounted to $15,283,348 in 2025, compared to $22,263,503 in 2024, a reduction of approximately 31.4%[316]. Miscellaneous - The company reported a contribution of $1,869,380 to the charitable foundation in 2025[270]. - The Bank established a loan production office in Oak Park, Illinois in 2023 to enhance its market presence[272]. - The Bank's advertising expense increased to $95,475 in 2025 from $61,975 in 2024[308]. - The Bank's segment performance is evaluated using consolidated net income (loss), with all operations being domestic[314].

Financial Performance and Capital Needs - The company has incurred significant operating losses since its inception, with an accumulated deficit of approximately $154.6 million as of December 31, 2025[207]. - The company expects to continue incurring substantial operating losses over the next several years as it develops and seeks regulatory approval for its product candidate, elraglusib[207]. - As of December 31, 2025, the company had approximately $13.2 million in cash and cash equivalents, with working capital of approximately $7.9 million, which is projected to be insufficient beyond July 2026[211]. - The company anticipates needing substantial additional capital to finance its operations and may seek funding through public or private equity, debt financings, or strategic partnerships[212][213]. - The independent registered public accounting firm has expressed substantial doubt about the company's ability to continue as a going concern[214]. Product Development and Regulatory Risks - The company relies entirely on the success of elraglusib, which is currently in Phase 2 clinical development for mPDAC, making its business highly dependent on this single product candidate[218]. - The company faces significant risks in obtaining regulatory approvals, which are essential for the commercialization of elraglusib, and any delays could materially harm its business[221][222]. - The company has no approved products on the market and may never achieve profitability if it fails to successfully develop and commercialize elraglusib[221]. - The company acknowledges that the drug development process is lengthy, expensive, and fraught with uncertainty, with a high historical failure rate for product candidates in the biopharmaceutical industry[226]. - The company has not yet demonstrated an ability to overcome the risks and uncertainties associated with biopharmaceutical product development, which complicates its ability to predict future expenses and profitability[210]. - Elraglusib has received Fast Track designation from the FDA for the treatment of pancreatic cancer, which may facilitate the review process but does not guarantee marketing approval[247]. - The company has not yet initiated or completed a Phase 3 clinical trial, which is critical for obtaining FDA approval for elraglusib or any future product candidates[239]. - The company may face significant setbacks in clinical development despite promising early results, as many product candidates fail in later trials[228]. - Enrollment delays in clinical trials could materially affect the company's financial condition and development timelines[238]. - The company may need to conduct additional preclinical studies or clinical trials based on negative or inconclusive results, leading to increased operating expenses and delays[229]. Manufacturing and Supply Chain Challenges - The company relies on a single manufacturer in China for elraglusib's drug substance, and geopolitical factors could impact supply and costs[266]. - The company currently has a sole source manufacturer for the drug substance of elraglusib, which poses risks of supply disruption[278]. - There are no long-term supply agreements in place with suppliers, which could delay clinical trials if supplies are not sourced timely[271]. - The company may face challenges in obtaining regulatory approvals for manufacturing facilities, which could significantly affect product development[270]. - Geopolitical tensions with China could impact the company's ability to conduct clinical trials if relying on Chinese vendors[279]. - The company has limited control over third-party manufacturers' compliance with quality standards, which could affect product quality[269]. - The company is dependent on third parties for conducting clinical trials, which could lead to delays if these parties do not meet their obligations[273]. Intellectual Property Risks - Intellectual property rights may not be enforceable in certain foreign jurisdictions, potentially allowing competitors to exploit the company's innovations[281]. - The company has filed several new composition of matter patent applications for elraglusib, which could expire in 2038, with potential for patent term extensions[283]. - Patent applications in the pharmaceutical and biotechnology sectors may be limited in scope, potentially reducing competitive protection[285]. - The company faces risks of patent expirations, which could diminish competitive advantages and product value[286]. - Trade secrets and proprietary know-how are critical for maintaining competitive position, but their protection is uncertain[287]. - Intellectual property claims may not sufficiently prevent competitors from developing similar products, impacting financial performance[288]. - The company may incur significant costs and time in addressing intellectual property disputes, which could adversely affect business operations[289]. - Changes in patent laws could weaken the company's ability to protect its intellectual property and affect its commercial value[293]. - Patent terms are limited to generally 20 years, which may not provide adequate protection for product candidates like elraglusib[294]. - The company may face claims challenging the inventorship or ownership of its patents, which could result in loss of valuable intellectual property rights[296]. - Third-party intellectual property rights could hinder the commercialization of current or future technologies, requiring potential litigation or licensing[299]. - Infringement claims could lead to substantial damages or force the company to abandon technologies, impacting financial condition and operations[300]. - The company may face claims regarding the wrongful use or disclosure of trade secrets by employees or consultants, which could lead to litigation and substantial costs[301]. - Intellectual property rights may be subject to federal regulations due to government funding, potentially limiting exclusive rights and requiring compliance with reporting requirements[303]. - The U.S. government may have rights to inventions developed under government-funded programs, including the ability to require licensing to third parties if commercialization steps are inadequate[304]. Compliance and Operational Risks - Compliance with healthcare laws and regulations may increase operational costs and expose the company to significant penalties if found in violation[305]. - Strategic transactions, such as acquisitions or partnerships, may incur non-recurring charges and increase near- and long-term expenditures, posing integration challenges[308]. - Cybersecurity incidents could disrupt development programs and compromise sensitive information, potentially leading to significant costs and reputational damage[311]. - The company relies on third-party vendors for IT infrastructure, which may expose it to vulnerabilities if those vendors fail to protect confidential information[313]. - Non-compliance with health privacy and data protection laws could result in government enforcement actions, private litigation, and damage to the company's reputation[315]. - The evolving legal framework around privacy issues may impose new obligations and restrictions on data collection and usage, impacting operational capabilities[318]. - Disruptions at the FDA and other government agencies due to funding shortages and personnel changes could delay the approval and commercialization of new products, negatively impacting the company's business[319]. - The FDA postponed most inspections during the COVID-19 pandemic, and future global health concerns may lead to similar delays, significantly affecting the company's regulatory submissions[320]. - The company's lead drug development program, elraglusib, will be reviewed by the FDA's Center for Drug Evaluation and Research (CDER), which is known for demanding high-quality clinical research[321]. - The company lacks in-house expertise in drug approvals and may rely on consultants, which poses risks of delays and increased expenses in the drug approval process[322]. Stock and Corporate Governance Risks - Approximately 43% of the company's common stock is held by funds affiliated with the chairman, potentially limiting other stockholders' influence and creating conflicts of interest[324]. - The company has never declared or paid cash dividends and does not intend to do so in the foreseeable future, relying on stock price appreciation for returns[331]. - The trading price of the company's common stock is likely to be highly volatile, influenced by clinical trial results, regulatory approvals, and market conditions[329]. - The company may face challenges in maintaining compliance with Nasdaq listing requirements, which could lead to delisting and negatively impact stock price[327]. - The company's amended and restated bylaws contain provisions that could make mergers or proxy contests difficult, potentially depressing stock value[332]. - The company is subject to anti-takeover provisions under Delaware law, which may limit business combinations with significant stockholders[335]. - The company faces significant risks due to unstable market and economic conditions, which may adversely affect its ability to raise funds and could lead to operational delays[338]. - The company is at risk of declining stock price and trading volume if analysts downgrade its stock or cease coverage, impacting investor interest[339]. - The company must maintain effective internal control over financial reporting to ensure accurate financial statements; failure to do so could lead to a decline in stock price and investor confidence[340]. - If the company cannot demonstrate effective internal controls, it may face sanctions from regulatory authorities, which could restrict future access to capital markets[341]. - The company is classified as a "smaller reporting company" and is not required to provide certain market risk disclosures[417].

Currency and Inflation Impact - The appreciation of the NIS against the U.S. dollar was 12.5%, 0.6%, and 3.1% for the years ended December 31, 2025, 2024, and 2023, respectively, which may negatively impact financial results [153]. - The Israeli annual rate of inflation was 3.0%, 3.2%, and 2.6% for the years ended December 31, 2023, 2024, and 2025, respectively [153]. - The company has not maintained a program to hedge against foreign currency exchange rate fluctuations, which could affect financial results [153]. Grants and Royalties - The company received approximately $9.6 million in royalty-bearing grants from the Israeli Innovation Authority, with a repayment of approximately $4.4 million in royalties [156]. - The company is committed to paying royalties at a rate of 3.0% - 4.0% on sales proceeds from products developed under IIA programs [155]. - The company may face difficulties in transferring know-how and manufacturing rights outside of Israel due to restrictions from IIA grants [156]. Compliance and Listing Requirements - A reverse share split of 1-for-10 was executed on July 24, 2024, to regain compliance with Nasdaq listing requirements [166]. - As of March 12, 2026, the trading price for the ordinary shares was $0.94, below the $1.00 minimum bid price requirement [166]. - The company received a notification from Nasdaq on September 18, 2023, for non-compliance with the minimum bid price requirement [165]. Market and Trading Conditions - The market price of the ordinary shares may fluctuate significantly due to various factors, including financial performance and market conditions [161]. - The company is listed on both the TASE and Nasdaq, which may lead to price variations due to trading in different currencies and time zones [171]. Financial Reporting and Compliance Costs - The company incurs significant accounting, legal, and compliance costs as a public company, which may adversely affect its financial condition and results of operations [174]. - As a foreign private issuer, the company is exempt from certain U.S. reporting requirements, which may limit the information available to investors compared to U.S. domestic issuers [175]. - The company may lose its foreign private issuer status, resulting in increased compliance costs and more extensive reporting obligations under U.S. securities laws [177]. Tax Implications for Shareholders - The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes in 2025, with risks of being classified as such in 2026, which could lead to adverse tax consequences for U.S. shareholders [179]. - U.S. shareholders may face adverse tax consequences if the company is classified as a PFIC, including gains being treated as ordinary income rather than capital gains [180]. Internal Control and Financial Reporting - The company may experience difficulties in maintaining effective internal control over financial reporting, which could negatively impact the price of its ordinary shares [181].

Financial Position - Total assets increased by $34.5 million, or 2.82%, to $1.26 billion at December 31, 2025, primarily due to growth in securities available for sale [280]. - Loans held for investment decreased by $13.0 million, or 1.73%, to $737.7 million at December 31, 2025, attributed to reduced loan demand in the second half of 2025 [283]. - Deposits increased by $40.7 million, or 5.08%, to $841.4 million at December 31, 2025, with certificates of deposit rising by $42.6 million, or 13.50% [285]. - Core deposits decreased by $2.0 million, or 0.41%, to $482.9 million at December 31, 2025, while the total increase in deposits included $27.0 million from a new branch opened in August 2025 [285]. - Total equity decreased by $11.8 million, or 3.62%, to $314.5 million at December 31, 2025, primarily due to common stock repurchases totaling $22.2 million [286]. Loan and Credit Quality - Commercial real estate loans amounted to $248.7 million, or 33.4% of total loans, while commercial loans totaled $92.2 million, or 12.4% of total loans as of December 31, 2025 [264]. - Non-performing loans totaled 2.27% of total loans at December 31, 2025, reflecting the company's conservative underwriting standards [266]. - Total non-performing loans were $16.9 million at December 31, 2025, compared to $13.0 million at December 31, 2024 [300]. - The allowance for credit losses was $6.3 million at December 31, 2025, representing 0.85% of total loans, compared to 0.82% at December 31, 2024 [299]. - The provision for credit losses was $1.7 million for the year ended December 31, 2025, compared to $1.5 million for 2024, representing a 12.42% increase [299]. Income and Expenses - Net income from continuing operations increased by $2.4 million, or 161.43%, to $3.9 million for the year ended December 31, 2025, compared to $1.5 million for 2024 [292]. - Net interest income rose by $6.6 million, or 15.82%, to $48.0 million for the year ended December 31, 2025, from $41.4 million for 2024 [298]. - Interest income increased by $4.9 million, or 8.10%, to $65.9 million for the year ended December 31, 2025, compared to $60.9 million for 2024 [293]. - Total interest expense decreased by $1.6 million, or 8.38%, to $17.8 million for the year ended December 31, 2025, from $19.4 million for 2024 [297]. - Non-interest income totaled $4.1 million for the year ended December 31, 2025, a decrease of $515 thousand, or 11.07%, from $4.7 million for 2024 [302]. - Non-interest expense increased by $2.7 million, or 6.40%, to $45.6 million for the year ended December 31, 2025, compared to $42.9 million for 2024 [303]. Tax and Discontinued Operations - The provision for income taxes recognized for the year ended December 31, 2025, was $870 thousand, an increase from $195 thousand for the year ended December 31, 2024 [304]. - The net loss from discontinued operations for the year ended December 31, 2025, was $2.7 million, a reduction of $5.0 million from the $7.7 million loss for the year ended December 31, 2024 [305]. Market and Economic Sensitivity - At December 31, 2025, the estimated economic value of equity (EVE) would decrease by 11.74% in the event of a 200 basis point increase in market interest rates [313]. - The estimated net interest income (NII) would increase by 2.40% in the event of a 200 basis point increase in market interest rates [315]. Capital and Borrowings - Fidelity Bank's Tier 1 leverage capital was $255.3 million, representing 20.02% of adjusted assets, categorizing it as well-capitalized [323]. - As of December 31, 2025, the outstanding borrowings from the Federal Home Loan Bank of Dallas were $78.3 million, with an additional borrowing capacity of $351.8 million [318]. - At December 31, 2025, there were $268.0 million of outstanding commitments to originate loans, including $228.2 million in revolving lines of credit [324]. - The company anticipates retaining a significant portion of maturing time deposits, which total $217.7 million scheduled to mature in less than one year from December 31, 2025 [324]. Strategic Initiatives - The company plans to continue expanding its online banking infrastructure and its fully digital bank, "Andi," to meet customer needs and expand its customer base [268]. - The company intends to grow assets organically while considering opportunistic acquisitions or branching to enhance franchise value and stockholder returns [270]. - The company has implemented strategies to manage interest rate risk, including maintaining high liquidity and diversifying the loan portfolio [312]. Accounting Standards - The financial statements are prepared according to GAAP, reflecting historical dollars without considering inflation impacts, which primarily affect operating costs [326].

Financial Performance - Net sales for the fiscal year ended December 27, 2025, were $257.4 million, a decrease of 2.9% compared to $265.0 million in 2024, attributed to lower demand in the floorcovering industry due to high interest rates and inflation [108]. - Gross profit increased to $69.5 million, representing 27.0% of net sales, up from 24.7% in 2024, primarily driven by lower raw material costs and operational cost reductions [109]. - Selling and administrative expenses decreased to $67.7 million in 2025, accounting for 26.3% of net sales, down from 26.4% in 2024, mainly due to reduced sample and marketing expenses [110]. - Operating income improved to $118 thousand in 2025, compared to an operating loss of $5.9 million in 2024, reflecting cost reductions in operations [113]. - The net loss for 2025 was $7.6 million, or $0.52 per diluted share, a significant improvement from a net loss of $13.0 million, or $0.88 per diluted share, in 2024 [117]. Cash Flow and Debt - Cash provided by continuing operations was $9.6 million, with a reduction in inventories generating $482 thousand and an increase in accounts payable and accrued expenses generating $9.3 million [118]. - The company had $52.7 million of outstanding indebtedness classified as current as of December 27, 2025, with existing cash and cash equivalents insufficient to satisfy this debt in whole [121]. - Availability under the MidCap Financial Senior Secured Revolving Credit Facility was $8.2 million as of December 27, 2025, subject to a $6.0 million minimum excess availability requirement [123]. - The company entered into a new $75.0 million revolving credit agreement on February 25, 2025, secured by a security interest on accounts receivable, inventory, and other assets [124]. - As of December 27, 2025, the company had $52.7 million of outstanding indebtedness under its senior credit facility classified as a current liability [140]. Loans and Interest Rates - The company has a $10.0 million USDA Guaranteed term loan with a minimum interest rate of 5.00%, which will reset to 7.11% on October 26, 2025 [126]. - A second USDA Guaranteed term loan of $15.0 million has similar terms, with interest only payments for the first three years and a reset to 7.11% on October 29, 2025 [127]. - The outstanding amount for term loans is $19,822, with an interest rate of 5% for the first five years [147]. - The interest rates for both term loans will reset to 7.11% in 2025 [147]. - A 100 basis point fluctuation in the interest rates applicable to the term loans would have an annual pre-tax impact of approximately $198 [147]. Tax and Environmental Liabilities - The company reported an increase in valuation allowances by $2.1 million related to net deferred tax assets for the year ended December 27, 2025 [132]. - The company has a reserve of $2.1 million for environmental liabilities associated with discontinued operations as of December 27, 2025 [134]. - The company anticipates cash outlays for income taxes during 2026 and 2027 will not exceed $200 thousand due to tax loss carryforwards [133]. Other Financial Considerations - The company is actively monitoring trade policy and tariffs, which could materially impact its business and financial condition [105]. - The company has total unrecognized compensation expense related to unvested restricted stock awards of $598 thousand as of December 27, 2025 [130]. - The company has no off-balance sheet arrangements as of December 27, 2025 [131]. - The company is subject to a minimum excess availability covenant based on a fixed charge coverage ratio that must be above 1.10 to 1.00 [125]. - As of December 27, 2025, approximately 87% of the total debt, amounting to $72,528, is subject to floating interest rates [147]. - A 100 basis point fluctuation in the variable interest rates applicable to the floating rate debt would result in an annual pre-tax impact of approximately $725 [147]. - The 25-year term loan will continue to reset based on the current 5-year treasury rate plus a margin [147]. - The 10-year term loan will not reset again [147].