Litigation and other matters

The Company, from time to time, is subject to legal proceedings and claims that arise in the ordinary course of business. Resolution of any such matter could have a material adverse effect on the results of operations and financial condition. The Company considers all claims on a periodic basis and based on known facts assesses whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, the Company then evaluates disclosure requirements and whether to accrue for such claims in its consolidated financial statements.

The Company records a provision for a contingent liability when it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

On September 12, 2023, a contract research organization (“CRO”) vendor filed a lawsuit against the Company based on the Company’s failure to make certain installments pursuant to a settlement agreement entered into with this vendor on January 23, 2023. Under the settlement agreement, the Company agreed to pay a total of $1,644 to the vendor, with $600 due 5 business days after the settlement effective date and ten monthly installments, approximately $104 each, starting in February 2023. The Company made the upfront payment and the first four monthly installments for a total of $1,016 but failed to make the monthly installment payments due after May 2023. On January 24, 2024, the Company received endorsement on motion for default judgment which requested the Company to pay approximately $700 to the CRO vendor. During the year ended December 31, 2025, the Company accrued an additional $84 in interest, included in interest expense. During the year ended December 31, 2024, the Company made an $11 payment to CRO. As of December 31, 2025 and 2024, the outstanding balance under this settlement agreement was $858 and $785, respectively. These amounts are included in accounts payable and accrued expenses in the consolidated financial statements.

In addition to the lawsuit from a CRO vendor above, the Company accrued $325 as of both December 31, 2025 and 2024, related to disputed invoices with vendors.

In June 2023, the Company received a notice of breach from MSK followed by a notice of termination in September 2023, pursuant to which MSK demanded payments totaling $1,230 for the services performed under the MSK License Agreement (see Note 8). The corresponding liability is included in accounts payable and accrued expenses in the consolidated financial statements as of both December 31, 2025 and 2024.

The MedImmune License Agreement (see Note 8) provides for a research plan with target dates for an IND application (July 2021) and Phase II commencement (December 2022). These target dates were not met, which gives MedImmune (now AstraZeneca) a termination right. The Company does not expect a material impact on its business if MedImmune/AstraZeneca terminates this agreement. This license was originally entered into in connection with the development of ABP-200, which the Company is no longer developing. The Company believes that it does not need the intellectual property licensed under that agreement for the development and eventual commercialization of ABP-201 or any of its other programs.

On June 17, 2025, the Company received a complaint from a former director asserting that the Company owes the former director a total of $748 for consulting fees, bonuses, and for unpaid promissory note principal and interest. The total principal and interest on the promissory note were $135 and $130, as of December 31, 2025 and December 31, 2024, respectively (see Note 12). In November 2025, the Company made $140 payment to the former director in relation to the consulting services. The remaining liability of $473 was included in accrued expenses in the consolidated financial statements as of December 31, 2025. On November 10, 2025, the Suffolk Superior Court in Massachusetts issued a preliminary injunction prohibiting the transfer of the Company’s assets outside the ordinary course of business. On April 15, 2026, the Company settled this claim in full for the total amount of approximately $390,000 pending payment of the settlement amount.

On October 22, 2025, the Company received a demand for payment from Integral Molecular, Inc. in the amount of approximately $182, recorded in accounts payable on the consolidated balance sheet as of December 31, 2025. The Company is currently in negotiations to settle this claim.

On October 23, 2025, the Company received a demand for payment from Brookline Capital Markets, a division of Arcadia Securities LLC, in the amount of $140, recorded in accounts payable on the consolidated balance sheet as of December 31, 2025. The Company is currently in negotiations to settle this claim.

Non-Redemption Agreement

On November 5, 2024, Legacy Abpro and ACAB entered into a non-redemption agreement (the “Non-Redemption Agreement”), with Sandia Investment Management LP on behalf of certain funds, investors, entities or accounts for which it or its affiliates acts as manager, sponsor or advisor (the “NRA Investors”). Pursuant to such Non-Redemption Agreement, each NRA Investor agreed to rescind or reverse any previously submitted redemption demand of the common stock of the Company held or to be acquired by such NRA Investor (the “NRA Investor Shares”) up to 4,145 shares of common stock in the aggregate.

At the Closing Date, the NRA Investors reversed redemption demands with respect to 11,043 Series A Common stock shares of ACAB. Pursuant to the Non-Redemption Agreement, upon consummation of the Merger, the Company had to pay to the NRA Investors a payment equal to the number of NRA Investor Shares multiplied by the redemption price, minus the number of NRA Investor Shares multiplied by $9.00 (pre-split). As of December 31, 2025 and 2024, the Company owed NRA Investors $26, based on the redemption price of $340.80 at the Closing Date.

Excise Tax Liability

At the Closing Date, the Company assumed the excise tax liability of $4,330, as adjusted as discussed further below, from ACAB related to the redemptions of shares in 2023 and calculated as 1% of the shares redeemed during fiscal year 2023.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of corporate stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

During the second quarter of 2024, the IRS issued regulations with respect to the timing and payment of the excise tax. Pursuant to those regulations, the Company would need to file a return and remit payment for any liability incurred during the period from January 1, 2023 to December 31, 2023 on or before October 31, 2024. The Company has filed the excise tax return in October 2024 and has engaged with the IRS in determining a payment plan for the balance.

The Company was unable to pay its obligation in full, and, as such, it was subject to additional interest and penalties which were estimated at 8% interest per annum and a 0.5% underpayment penalty per month or portion of a month up to 25% of the total liability for any amount that was unpaid from November 1, 2024 until paid in full. The Company accrued $71 in penalties and interest through December 31, 2024.

In March 2025, the Company received the letter from the Internal Revenue Service of the United States Department of Treasury (the “IRS”), setting up the meeting with the Company to discuss the unsettled tax matters of ACAB and referencing $4,401 amount owed in relation to the 2023 excise taxes, of which $210 was in interest and penalties. Pending further discussions with the IRS, the Company recorded the excess of $1,268 over the Company’s estimate as the additional excise tax liability assumed from ACAB in the consolidated financial statements as of December 31, 2024.

On November 24, 2025, the IRS published the rule providing additional clarification on the application of the excise tax to redemptions of stock (the “2025 Rule”). Among other things, the 2025 Rule provided transitional relief for stock issued before August 16, 2022 that was subject to mandatory redemption or a unilateral put option. As ACAB issued the redeemable stock prior to August 16, 2022 and this stock was subject to mandatory repurchase upon certain events outside of ACAB’s control, the Company concluded that the redemptions of ACAB redeemable stock qualified for the transitional relief. As a result, the Company derecognized the $4,401 excise tax liability at December 31, 2025, since the excise tax liability was no longer considered probable, and included the liability reversal in other income on the consolidated statement of operations for the year ended December 31, 2025.