Financial Performance - The company reported net losses before noncontrolling interest of $151.6 million, $163.3 million, and $135.4 million for the years ended December 31, 2025, 2024, and 2023, respectively [240]. - As of December 31, 2025, the company had an accumulated deficit of $1,269.8 million [240]. - The company had approximately $270.0 million in cash, cash equivalents, and short-term investments as of December 31, 2025, which is expected to fund operations into mid-2027 [245]. Product Development and Regulatory Challenges - The company has no products approved for commercial sale and has not generated any revenue to date [248]. - The company anticipates significant increases in expenses related to ongoing clinical trials and regulatory approvals for its lead product candidate, rilparencel [241]. - The company has not yet demonstrated the ability to progress any product candidate through later-stage clinical trials leading to successful marketing authorization [249]. - The regulatory approval process for rilparencel may be lengthy and costly, with potential delays due to evolving regulatory requirements [261][262]. - The company must demonstrate that rilparencel is safe, pure, and potent for its intended use, which involves extensive testing [270]. - The company has not completed any pivotal trials required for the approval of rilparencel, which may lead to delays in clinical trials due to various factors [277]. - The company may need to conduct additional studies if initial clinical trial results are negative or inconclusive, potentially leading to abandonment of development programs [279]. - The FDA may require additional clinical trials or impose restrictions on marketing approvals, which could limit the scope of commercialization [292]. - The time required to obtain regulatory approval varies among jurisdictions, and approval by the FDA does not guarantee approval by foreign regulatory authorities [283]. Clinical Trial Risks and Challenges - The company faces challenges in clinical trials, including high attrition rates and the risk of negative or inconclusive results [270][273]. - Clinical trials can be delayed or terminated for reasons such as insufficient development of manufacturing processes and quality criteria, or difficulties in patient recruitment [277]. - The company faces challenges in patient enrollment for clinical trials due to stringent inclusion criteria and competition from other trials [306]. - Adverse events in clinical trials could lead to suspension or termination of trials, affecting the commercial prospects of rilparencel [298]. - The design and execution of clinical trials are critical, and flaws may not be apparent until well into the trials, affecting marketing approval [312]. Manufacturing and Supply Chain Issues - The company has experienced manufacturing problems that could delay the development or commercialization of rilparencel, which is technically complex and requires substantial expertise and capital investment [326]. - An audit in 2023 identified deficiencies in the quality management systems for rilparencel, leading to a pause in manufacturing while optimizations were made to meet EU and global standards [327]. - The company may need to expand its manufacturing vendors to meet rising demand, which could require significant capital investment and regulatory approvals [338]. - Manufacturing processes for cell therapies are complex, and any microbial contamination or raw material shortages could lead to delays in clinical development and marketing schedules [354]. - The complexity of managing an autologous cell therapy supply chain poses risks, including potential delays in patient treatment if treatment centers do not perform satisfactorily [349]. Market and Competitive Landscape - The company faces significant competition in the biologics market, particularly in the treatment of kidney disease, from both established and emerging companies [252]. - The market acceptance of rilparencel and future product candidates is uncertain, with potential challenges in achieving sufficient acceptance from physicians and payors [361]. - Rilparencel may face competition from biosimilar products sooner than anticipated, impacting future commercial prospects [374]. Financial and Capital Requirements - The company may need to raise additional capital through public or private equity offerings, debt financings, or collaborations to support its operations and development efforts [247]. - Significant additional funding is required to support ongoing operations and pursue growth strategies, including clinical development and regulatory approval [257]. - The company may need to raise additional capital to pursue further development or commercialization of product candidates if collaborations are terminated [408]. Compliance and Regulatory Environment - Regulatory compliance is critical, and failure to adhere to health care laws could result in significant penalties, reputational harm, and operational restrictions [410]. - Changes in health care policies and regulations could impact the ability to obtain approval for or commercialize rilparencel and other product candidates [419]. - The company may be required to report financial relationships with principal investigators to the FDA, which could affect the integrity of clinical trial data [398]. Insurance and Liability Risks - The company faces inherent risks of product liability, which could lead to substantial financial liabilities and limit commercialization efforts [384]. - The inability to obtain sufficient product liability insurance could inhibit the commercialization of products developed by the company [387]. Collaborations and Partnerships - Future collaborations for the development and commercialization of rilparencel and other product candidates are crucial, and failure to establish these partnerships could adversely affect the business [401]. - The negotiation process for collaborations is complex and time-consuming, and recent business combinations among large biopharmaceutical companies have reduced the number of potential collaborators [406]. Legislative and Policy Changes - The Inflation Reduction Act of 2022 requires drug manufacturers to pay rebates to the federal government if product prices increase faster than inflation, impacting revenue from Medicare [428]. - Legislative changes and increased scrutiny on pharmaceutical pricing practices may significantly affect the profitability of drug products and development projects [426][429]. - The U.S. Supreme Court's ruling in December 2020 allows states to regulate pharmaceutical benefit managers, which may lead to more aggressive state-level regulations [427].

Payment Volume and Transactions - Usio processed over $8.4 billion in payment volume in 2025, a 19% increase from $7.1 billion in 2024[5] - Total payment transactions processed exceeded 60.4 million, up 29% from 47 million in the previous year[5] - The ACH division set all-time quarterly records for transactions and dollar volumes processed in Q4 2025, with a sequential growth of 14% compared to Q3[6] Card Issuing Division Performance - Prepaid load volume in the Card Issuing division declined to approximately $300 million in 2025 from $500 million in 2024, with prepaid transactions falling to over 8 million from 11 million[17] - Nearly 50% of loaded dollars in 2025 were spent through signature-based transactions, generating interchange revenue of 2% per dollar spent, compared to 34% in 2024[22] Revenue Expectations and Business Model - Usio expects to report record revenues in 2025, driven by increases in payment volumes and growth in segments like ACH and real-time payments[24] - The company maintained positive adjusted EBITDA over multiple consecutive quarters, affirming the consistency of its business model[25] Strategic Investments and Future Plans - Usio made significant investments in its go-to-market strategy and technology stack, enhancing its operational capabilities[26] - Strategic priorities for 2026 include scaling recurring revenue streams and expanding offerings to include emerging payment technologies[30] - The integration of PostCredit, a recent acquisition, is expected to leverage banking services for Usio's customer base[30]

Store Expansion and Operations - In Fiscal 2025, the company added 1 store, completing its initiative to open 7 stores[25] - The company aims to refurbish existing buildings for retail expansion rather than pursue new construction, focusing on sustainability[49] Consumer Segment Performance - The consumer segment focuses on sustainable luxury hard assets, with a unique buying experience through sustainably sourced diamonds and gemstones[21] - In Fiscal 2025, the consumer segment sold 3.3 metric tons of refining-grade precious metals, up from 2.2 metric tons in Fiscal 2024[50] - The consumer segment's business model is heavily dependent on in-store sales activity, which can be affected by weather patterns[43] Commercial Segment Performance - The commercial segment's electronics recycling business was founded in 2009, emphasizing responsible electronic waste disposal and adherence to regulations[23] - The commercial segment sold 921,480 individual units of secondary electronics in Fiscal 2025, a decrease from 1,267,632 units in Fiscal 2024[52] - The commercial segment also sold 9,158.5 metric tons of electronic scrap in Fiscal 2025, down from 12,837.7 metric tons in Fiscal 2024[52] - The commercial segment benefits from the proliferation of electronics, providing ample feedstock for its operations[36] - The commercial segment's business is subject to both multi-year and spot transactions, with multi-year contracts potentially subject to cancellation on short notice[40] Market Dynamics - The gold and silver bullion markets are influenced by macroeconomic forces and demand in industrial applications, particularly for silver[32] - The luxury watch market is driven by wealth, collectability, and limited availability, impacting pricing in the secondary market[33] - The product returns market is driven by higher return rates in online commerce, providing business partners with greater control over secondary-market sales[39] Company Operations and Strategy - The company completed its corporate-wide ERP system implementation in Fiscal 2024, enhancing reporting capabilities and business intelligence[28] - The company operates in highly competitive markets with significant choices for customers regarding price, quality, and service[34] - The company differentiates itself through product authentication, price competitiveness, and exceptional customer service[35] - The company experienced greater diversification in its business lines, strengthening margins through fee-for-service relationships[27] Sustainability and Resource Consumption - The company's electricity, natural gas, and water consumption represented 0.2% and 0.3% of sales in Fiscal 2025 and 2024, respectively[47] Workforce and Safety - The total recordable injury frequency rate (TRIFR) was 1.0 in Fiscal 2025, compared to 0.6 in Fiscal 2024[58] - The company employed 276 persons in Fiscal 2025, a decrease from 309 in Fiscal 2024[55]

Financial Performance - In 2025, the company processed $8.4 billion across all payment types, a 19% increase from $7.1 billion in 2024, driven by strong growth in ACH and complementary services [281]. - Total revenues for 2025 increased by 3% to $85.4 million from $82.9 million in 2024, primarily driven by a 33% increase in ACH and complementary services revenue [315]. - The company processed record metrics for dollars and transactions in 2025, indicating strong performance in the payments ecosystem [288]. - Net income reported a loss of $2.5 million in 2025 compared to net income of $3.3 million in 2024, primarily due to the absence of a $1.7 million employee retention tax credit received in 2024 [327]. Transaction Metrics - Total transactions processed rose by 30% in 2025, reaching 60.8 million [281]. - ACH transactions processed increased by 29.3% in 2025 compared to 2024, while returned check transactions rose by 31.2% [284]. - Credit card dollars processed grew by 12.7% in 2025, with credit card transactions increasing by 66.3% [286]. - Total revenues from prepaid card services declined by 22% to $11.0 million in 2025, impacted by the loss of a key downstream customer [315]. Expenses and Profitability - SG&A expenses increased to $18.4 million in 2025 from $16.7 million in the prior year, primarily due to higher salaries and network infrastructure costs [279]. - Adjusted EBITDA loss for the quarter ended December 31, 2025, was ($0.2) million, down from $0.5 million in the same period in the prior year, attributed to increased SG&A and reduced gross profit [308]. - Adjusted EBITDA for the twelve months ended December 31, 2025, was $1.3 million, compared to $2.9 million for the same period in 2024, reflecting increased SG&A expenses [309]. - Gross profit for 2025 was $19.7 million, a nominal increase of $0.1 million, with gross profit margins declining from 23.7% in 2024 to 23.1% in 2025 [317]. - Stock-based compensation expense decreased to $1.7 million in 2025 from $2.1 million in 2024, primarily due to vesting of previous stock grants [318]. Cash Flow and Capital Management - Net cash provided by operating activities totaled $1.5 million for 2025, down from $2.9 million in 2024, mainly due to the lack of the employee retention tax credit and increased SG&A expenses [338]. - Net cash used by investing activities increased to $1.5 million in 2025 from $0.9 million in 2024, driven by higher expenditures related to capitalized labor for internal use software [339]. - Net cash provided by financing activities was $28.7 million in 2025, a significant increase compared to net cash used of $5.1 million in 2024, primarily due to changes in customer payment processing assets and proceeds from a new equipment loan [340]. - As of December 31, 2025, the company had $7.4 million in cash and cash equivalents, down from $8.1 million in 2024, reflecting increased SG&A and lower interest income [328]. - Working capital decreased to $9.4 million in 2025 from $10.2 million in 2024, attributed to declines in cash and cash equivalents and lower accounts receivable [329]. Strategic Initiatives - The company acquired the assets of PostCredit in 2025, enhancing its product offerings in the expense management market [278]. - The company aims to expand its product offerings and deepen partner relationships to drive recurring revenues and operational execution [275]. Reserves and Allowances - The reserve for processing losses was $784,937 and $897,116 at December 31, 2025 and 2024, respectively, indicating a decrease in reserves [298]. - Accounts receivable allowance for expected credit losses was $404,132 and $324,000 at December 31, 2025 and 2024, respectively [299]. Debt and Credit Arrangements - The company entered into a debt arrangement on September 19, 2025, financing $1,017,954 for a new printer, with monthly payments of $20,088 required [332]. - The company maintains an unsecured revolving line of credit with a maximum borrowing capacity of $475,000, established on May 29, 2024, with no amounts drawn as of December 31, 2025 [334]. - The company has no off-balance sheet arrangements that could materially affect its financial condition or results of operations [341].

Regulatory Approvals and Clearances - The company received FDA clearance for the ReWalk Personal Exoskeleton with stair and curb functionality in March 2023, enhancing user mobility in real-world environments[33]. - The ReWalk Personal Exoskeleton is now classified under the Medicare brace benefit category, with a reimbursement rate of $91,032 effective January 1, 2024[44]. - An Administrative Law Judge ruled in favor of Medicare coverage for the ReWalk Personal Exoskeleton as a "reasonable and necessary" medical device in June 2025[45]. - The ReWalk 7, the next-generation model of the ReWalk system, received FDA clearance in March 2025, featuring cloud connectivity and customizable walking speeds[54]. - The ReWalk Personal Exoskeleton has received regulatory approval for sale in multiple countries, with plans for further approvals in additional jurisdictions[58]. - The ReStore Exo-Suit received FDA clearance in June 2019 and CE mark in May 2019, but sales in the EU were ceased in May 2024 due to MDR conformity issues[92]. - The ReStore device received 510(k) clearance in June 2019, intended for use in rehabilitation institutions for individuals with hemiplegia or hemiparesis due to stroke[142]. - The company has received a Notified Body Certificate of Conformity under the MDR for the ReWalk 7 Personal Exoskeleton, allowing it to be marketed in the EU[152]. - The FDA's Breakthrough Devices Program aims to expedite the development and review of devices that provide more effective treatment for life-threatening conditions[144]. - The company must comply with special controls and general controls for marketing ReStore and ReWalk, including quality controls and reporting of adverse events[142]. Financial Performance and Revenue - Total revenue for the year ended December 31, 2025, was $22.034 million, a decrease of approximately 14.3% from $25.663 million in 2024[193]. - Revenue from the United States was $13.237 million in 2025, down from $14.425 million in 2024, representing a decline of about 8.2%[193]. - The company had an accumulated deficit of approximately $284.7 million as of December 31, 2025, raising substantial doubt about its ability to continue as a going concern[201]. - The company completed a public offering in June 2025, generating gross proceeds of approximately $2.6 million to support ongoing operations[198]. - A strategic investment and collaboration agreement was entered into with Oramed, involving $20 million in senior secured convertible notes, subject to certain conditions[208]. Market Expansion and Product Offerings - In August 2023, the company acquired AlterG for approximately $19 million to expand its product offerings in physical rehabilitation[35]. - The company entered into a distribution agreement with CorLife to increase penetration of SCI Products into the workers' compensation market, leveraging CorLife's network[38]. - The company is pursuing additional distribution agreements to expand access to the ReWalk Personal Exoskeleton in international markets, including Mexico and the UAE[39]. - The company has established relationships with over 6,000 facilities globally for the AlterG Anti-Gravity systems, enhancing its market presence[35]. - The company is working with various German insurers to secure reimbursement for the ReWalk Personal Exoskeleton, formalizing processes with BARMER in February 2025[46]. - The company has made progress in securing reimbursement agreements in Europe, particularly in Germany, with several health insurers now providing coverage for the ReWalk systems[78]. - The Italian Ministry of Labor and Social Policy implemented a coverage policy for exoskeleton systems, resulting in the supply of 10 ReWalk units to beneficiaries since March 2018[80]. - The company plans to issue up to $20 million in senior secured convertible notes as part of its financing strategy related to the acquisition of Oramed Pharmaceuticals[48]. Product Development and Innovation - The company is conducting research on next-generation exoskeletons that may include applications for multiple sclerosis, cerebral palsy, and Parkinson's disease[118]. - The company is evaluating new generations of anti-gravity systems utilizing DAP technology, including the NEO model introduced in 2024[119]. - The company collaborates with Harvard on research for lightweight soft suit exoskeleton technologies, with obligations for milestone payments and reimbursement for patent-related expenses[123][124]. - The ReWalk 7 system has received regulatory clearance and has been commercially launched, indicating progress in product development[117]. - The ReStore soft exo-suit aims to improve walking speed and propulsion symmetry in stroke rehabilitation, with clinical trials showing varying levels of improvement[95]. Manufacturing and Supply Chain - The company transitioned the manufacturing of ReWalk exoskeletons to Lifeward Ltd. and contracted Cirtronics for AlterG product manufacturing starting January 2025[182]. - The company transitioned to in-house manufacturing of the ReWalk Personal Exoskeleton in the second quarter of 2025, leading to cost savings and improved quality control[199]. - The company has established contract manufacturing relationships to enhance operational efficiency and scale-up capacity[183]. - The company sources components and raw materials from suppliers in the U.S., Europe, China, Taiwan, and Israel[186]. - The company terminated its contract with Sanmina Corporation for ReWalk exoskeletons and ReStore exo-suits manufacturing in 2025[182]. Market Challenges and Risks - The company faces economic and political risks associated with operations in Taiwan and Russia, which could adversely affect its business[217]. - The market for medical exoskeletons, including soft suit devices, remains relatively new and unproven, making it difficult to predict future size and growth rates[228]. - Limited sources exist for reliable market data regarding the number of mobility-impaired individuals and the incidence of spinal cord injuries and strokes in target markets[231]. - Future growth will depend on the successful development and commercialization of new products addressing mobility impairments[221]. - The company may need to pursue strategic transactions, such as joint ventures or asset sales, if financial stability is uncertain[211]. Employment and Operational Changes - The company reduced its total headcount by greater than 35% since the closing of the AlterG acquisition, streamlining U.S. operations[213]. - The company expects to fulfill customer orders for products in regular production within two weeks of receipt of the order[184]. - The company has not experienced significant volatility in the prices of components and raw materials, although prices may fluctuate due to various factors[186]. - The company anticipates that its manufacturing and supply arrangements will support its capacity needs for the foreseeable future[187]. Advocacy and Community Engagement - The ReWalk Personal Exoskeleton has received endorsements from multiple advocacy groups, including the United Spinal Association and the Dana and Christopher Reeves Foundation[114]. - The National Spinal Cord Injury Statistical Center estimates that complications related to paraplegia cost approximately $670,000 in the first year post-injury, highlighting the economic impact of spinal cord injuries[63]. - Approximately 308,000 people in the United States are living with spinal cord injuries, with an annual incidence of about 18,000 new cases[64].

Revenue Performance - Total revenues for 2025 were $191.4 million, a decline of 3.8% from $198.9 million in 2024, with a 9.1% decrease in Data and Analytics Services and a 2.6% decrease in IT Staffing Services [187]. - Total revenues for 2024 were $198.9 million, a 1.1% decline from $201.1 million in 2023, with a 6.6% increase in Data and Analytics Services and a 2.6% decrease in IT Staffing Services [198]. - Data and Analytics Services revenues decreased to $33.3 million in 2025 from $36.6 million in 2024, attributed to reduced client spending and lower bookings of $34.8 million compared to $41.0 million in 2024 [188]. - Data and Analytics Services segment revenues increased to $36.6 million in 2024 from $34.4 million in 2023, driven by increased client spending and strong bookings of $41 million [199]. - IT Staffing Services revenues declined due to a 16.7% decrease in billable consultants, ending 2025 with 840 compared to 1,008 in 2024, while the average bill rate increased to $86.10 per hour from $82.77 [189]. - IT Staffing Services segment revenues declined due to a lower average level of billable consultants, though the number of billable consultants increased by 6.6% to 1,008 by the end of 2024 [200]. Profitability and Margins - Gross profit decreased to $53.1 million in 2025, a 4.6% decline year-over-year, with gross margin percentage remaining at 27.7% [191]. - Gross profit for 2024 increased to $55.6 million, an 8.9% increase year-over-year, with gross margin as a percentage of revenue rising to 27.9% from 25.4% [202]. - Gross margins for Data and Analytics Services were 46.2% in 2025, down from 49.1% in 2024, due to lower utilization rates [192]. - IT Staffing Services gross margins improved to 24.0% in 2025 from 23.2% in 2024, primarily due to higher bill rates [193]. Expenses and Taxation - SG&A expenses totaled $53.1 million in 2025, representing 27.7% of total revenues, an increase from 26.0% in 2024 [194]. - SG&A expenses in 2024 totaled $51.8 million, representing 26.0% of total revenues, down from $60.3 million or 30.0% in 2023 [204]. - The effective tax rate for 2025 was 42.7%, significantly higher than 23.1% in 2024, influenced by disallowed executive compensation [196]. Cash Flow and Liquidity - Cash provided by operating activities for 2025 was $11.1 million, compared to $7.2 million in 2024 and $16.0 million in 2023 [213]. - The company had cash balances of $36.5 million and no bank debt as of December 31, 2025, with $19.9 million of borrowing capacity available [208]. - The company expects to fund business needs over the next 12 months with existing cash and cash equivalents, including potential share repurchases of up to $5.0 million [210]. - As of December 31, 2025, the company had no outstanding borrowings under its Credit Agreement, indicating a strong liquidity position [255]. Operational Changes and Future Outlook - The company plans to revise its segment structure starting in the 2026 fiscal year to align with account-centric management and industry-focused leadership [173]. - Demand for services is expected to be influenced by economic growth and corporate hiring trends, with macroeconomic uncertainty potentially impacting future project activity [176]. - The Company expects annualized cost savings of approximately $1.2 million beginning in 2026 from a fully implemented initiative [222]. - Transition expenses related to moving finance and accounting functions to India totaled $1.9 million in 2025, with the transition completed by December 31, 2025 [221]. Currency and Foreign Exchange - The company's reporting currency is the U.S. dollar, with its Canadian subsidiary also primarily generating revenue in U.S. dollars, minimizing currency risk exposure [256]. - A hypothetical 10% fluctuation in foreign currency rates in 2025 would not materially impact the company's consolidated financial statements, demonstrating resilience to currency volatility [256]. - The company will continue to evaluate and reassess its approach to managing currency fluctuation risks as international operations grow [256]. - Foreign exchange gains in 2025 totaled $217,000, compared to $27,000 in 2024 and losses of ($75,000) in 2023 [252]. Accounting and Valuation - Revenue is recognized on time-and-material contracts as services are performed, with out-of-pocket expenses historically representing less than 2% of total contract revenues [228]. - The Company recognizes revenue on fixed price contracts using a cost-based input method, measuring progress based on costs incurred [229]. - The Company accounts for stock-based compensation expense based on estimated fair value, recognizing it over the requisite service period [247]. - The Company provided a valuation allowance of $435,000 and $452,000 for deferred tax assets related to foreign net operating losses as of December 31, 2025 and 2024, respectively [249]. - The Company recorded a goodwill impairment charge of $5.3 million due to declining revenue trends and lower future revenue projections as of December 31, 2023 [240]. Economic Impact - Inflation has not significantly impacted the Company's operations, but economic uncertainty may adversely affect demand for services [224]. - The Company typically experiences lower utilization rates and higher benefit costs during the fourth quarter due to seasonality [226]. - A hypothetical 10% increase in interest rates would have no impact on the company's annual interest expense, reflecting effective interest rate management [255]. - Days sales outstanding (DSO) increased slightly to 54 days at year-end 2025 from 52 days at year-end 2024, reflecting changes in accounts receivable management [209].

Revenue Performance - Total net revenues decreased by 33.7% to $2.1 million in 2025 from $3.1 million in 2024, primarily due to lower license and non-recurring engineering revenues[115] - License fees accounted for $1.8 million (88.4% of total revenues) in 2025, down 32.2% from $2.7 million in 2024[113] - Non-recurring engineering revenues fell by 43.0% to $0.2 million in 2025 from $0.4 million in 2024, attributed to decreased project deliveries[117] Profitability and Margins - Gross margin improved to 98.7% in 2025 compared to 96.3% in 2024, driven by a decrease in non-recurring engineering revenues[118] - The company reported a net income of $8.0 million in 2025, a significant turnaround from a net loss of $5.9 million in 2024[126] Expenses - Research and development expenses increased by 9.7% to $3.8 million in 2025, mainly due to unfavorable exchange rates[119] - General and administrative expenses rose by 9.5% to $4.1 million in 2025, primarily due to higher professional fees[122] Cash and Working Capital - Cash and cash equivalents increased to $25.4 million as of December 31, 2025, up from $16.4 million in 2024[127] - Working capital improved to $24.1 million in 2025, compared to $16.1 million in 2024[128] Capital and Financing - The company may require additional sources of capital beyond cash on hand and the Ladenburg ATM Facility to continue operations and implement its strategy[135] - The company may face challenges in obtaining additional financing on reasonable terms, which could negatively impact its business and financial condition[136] Assets and Liabilities - The gain from patent assignment was $19.4 million in 2025, with a brokerage fee of $3.8 million recognized[123] - The company has no off-balance sheet financing arrangements that could affect liquidity or capital resources[139] Lease and Office Operations - The company operates through a virtual office in California and has a lease for 6,684 square feet of office space in Stockholm, Sweden, valid through January 2027[140] - For the years ended December 31, 2025 and 2024, the company recorded approximately $455,000 and $449,000, respectively, for rent expense in continuing operations[141] Legal Matters - The company has a pending patent infringement case against Apple in the Northern District of California, with trial scheduled for February 22, 2027[159] Foreign Currency Risk - The company is subject to foreign currency exchange rate risk with its subsidiaries operating in Sweden, Japan, and South Korea[137] Financing Arrangements - The implicit interest rate of the finance lease for a Volkswagen ID Buzz is approximately 3.47% per annum[142] - The company has not made any payments under the Analog Device Development Agreement with Texas Instruments as of December 31, 2025[143]

Financial Performance - Revenues from continuing operations for fiscal 2025 were $2.1 million, a decrease of 33.7% compared to the prior year[7] - Operating expenses from continuing operations were $10.2 million, an increase of 6.7% compared to the prior year[9] - Income from continuing operations was $8.0 million, or $0.48 per share, compared to a loss of $5.9 million, or $0.37 per share for the prior year[10] - Net income for 2025 was $8,493,000, a significant recovery from a net loss of $6,466,000 in 2024[26] Cash Flow and Liquidity - Cash used by operations was $10.3 million, compared to $5.6 million for the prior year[11] - Cash and accounts receivable totaled $25.7 million as of December 31, 2025, up from $17.2 million at the end of 2024[12] - Cash and cash equivalents at the end of 2025 increased to $25,358,000, up from $16,427,000 at the end of 2024[26] - Net cash used in operating activities for 2025 was $10,254,000, compared to $5,592,000 in 2024, indicating increased operational cash outflow[26] - Proceeds from patent assignment contributed $19,389,000 to cash flows from investing activities in 2025[26] Business Strategy and Focus - The company is focusing on driving growth for its MultiSensing business and expanding license revenues from its first DMS production customer in 2026[6] - The transition of the zForce platform into maintenance mode allows the company to concentrate on MultiSensing technology and machine learning advancements[4] - The company experienced a decline in legacy zForce business but saw growth with NEXTY Electronics' next-generation amusement systems[5] Equity and Stockholder Information - Total stockholders' equity decreased to $16,442,000 by December 31, 2024, from $17,163,000 at the beginning of the year[24] - The company issued 1,424,000 shares for cash, net of offering costs, raising $5,796,000[24] - The company reported a stock-based compensation expense of $3,000 in 2025, down from $3,000 in 2024[26] Other Financial Adjustments - Gain from patent assignment amounted to $15.5 million after brokerage fees, significantly contributing to income[10] - The company reported a gain from patent assignment of $19,389,000, which significantly impacted cash flows[26] - Operating lease obligations increased by $288,000 in 2025, compared to a decrease of $144,000 in 2024[26] - The company experienced a foreign currency translation adjustment loss of $246,000 in 2025[24]

Revenue Performance - Q4 comparable brand revenue increased by 3.2%[5] - Net revenues for the fiscal year ended February 1, 2026, were $7,806,816, a 1.2% increase from $7,711,541 in the previous year[22] - Comparable brand revenue growth for the total was 3.5% in FY 2025, compared to a decline of 1.6% in FY 2024[22] - For fiscal 2026, the company expects annual net revenue growth of 2.7% to 6.7% and comparable brand revenue growth of 2.0% to 6.0%[9] Earnings and Margins - Q4 operating margin was 20.3%, with diluted EPS of $3.04, a decrease of 7.3% year-over-year[5] - Fiscal year 2025 recorded diluted EPS of $8.84, representing a 0.6% increase compared to the previous year[9] - Gross profit margin decreased to 46.2% in FY 2025 from 46.5% in FY 2024, with gross profit amounting to $3,603,051[22] - Net earnings for FY 2025 were $1,088,437, representing a decrease of 3.3% from $1,125,251 in FY 2024, with a net earnings margin of 13.9%[22] - Operating income for FY 2025 was $1,415,722, slightly down from $1,430,184 in FY 2024, with an operating income margin of 18.1%[22] Costs and Expenses - Gross margin for Q4 was 46.9%, down 40 basis points year-over-year, impacted by lower merchandise margins and occupancy deleverage[5] - SG&A expenses for Q4 were $627 million, a decrease of 1.3% year-over-year, with an SG&A rate of 26.6%[5] - Merchandise inventories rose by 9.8% year-over-year to $1.5 billion, influenced by approximately $80 million in incremental tariff costs[5] Liquidity and Capital Management - The company maintained a strong liquidity position with $1.0 billion in cash and $1.3 billion in operating cash flow, returning nearly $1.2 billion to shareholders through stock repurchases and dividends[9] - Cash and cash equivalents decreased to $1,019,801 from $1,212,977, reflecting a net decrease of $193,176[28] Store Operations - The company opened 3 new retail stores but closed 10, resulting in a total of 506 stores as of February 1, 2026[26] Long-term Outlook - Long-term expectations include mid-to-high single-digit annual net revenue growth and operating margins in the mid-to-high teens[9] - Adjusted Return on Invested Capital (Adjusted ROIC) for FY 2025 was 51.6%, down from 54.0% in FY 2024[34]

Financial Performance - Net loss attributable to common stockholders for Q4 2025 was $3.8 million, or $0.26 per share, compared to a net loss of $8.2 million, or $6.29 per share, in Q4 2024[6]. - The net loss for the full year 2025 was $35.5 million, or $7.13 per share, compared to a net loss of $12.9 million, or $12.52 per share, in 2024[9]. Expenses - Research and development expenses for Q4 2025 were $2.3 million, consistent with Q4 2024[4]. - Full year 2025 research and development expenses increased to $21.8 million from $3.5 million in 2024, driven by acquired in-process research and development expenses and clinical trial costs[7]. - General and administrative expenses for Q4 2025 decreased to $1.5 million from $5.2 million in Q4 2024, primarily due to a reduction in nonrecurring transaction costs[5]. - Full year 2025 general and administrative expenses were $6.1 million, down from $8.7 million in 2024, mainly due to lower transaction costs[8]. Cash Position - As of December 31, 2025, cash and cash equivalents totaled $6.5 million, expected to fund operations through the Phase 2b final data readout[10]. Clinical Trials - The Halneuron® Phase 2b trial has enrolled 143 patients, with top-line results expected in Q3 2026[2]. Financing - A financing of up to $26.9 million was completed in January 2026, with gross proceeds of $12.5 million received[5]. Regulatory Designation - Halneuron® has received fast track designation from the FDA for treating chemotherapy-induced neuropathic pain[13].