Section III - Federal Award Findings and Questioned Costs: U.S. Department of Defense Recommendation: Appropriate written subrecipient monitoring policies and procedures be developed and implemented, including a schedule for various financial reviews to document that subrecipients are complying with the Federal regulations and with the terms and conditions of the subaward. Management has taken the following actions with regards to the current finding. • The five subrecipients are as follows: o Chicago Association for Research and Education o Houston Methodist Research Institute o Tufts Medical Center, Inc. o University of Pittsburgh o Vanderbilt University • Verified that all subrecipients are audited and that none are suspended, debarred, or otherwise excluded from receiving Federal Funds. • Obtained most recent Single Audit Report from each subrecipient and determined that there were no audit findings related to the Company. The following was identfied in each audit report: o Chicago Association for Research and Education – Year Ended September 30, 2024 - The Company is not listed in the Single Audit Report – Management is following up with the institution. o Houston Methodist Research Institute - Year Ended December 31, 2023 - Military Medical Research and Development through Liberate Medical, LLC - W81XWH2211123 - 12.420 - $11,107 o Tufts Medical Center, Inc. - Year Ended September 30, 2023 - Military Medical Research and Development Passed Through—Liberate Medical LLC—A Randomized, Sham Controlled, Double-blinded, MulM-center Trial to Evaluate the Efficacy of the VentFree Respiratory Muscle Stmulator to Assist Ventilator Weaning in Critically III Patients - 12.420 - W81XWH2211123 - $14,770 o University of Pittsburgh - Year Ended June 30, 2024 - Liberate Medical, LLC. - 12.420 - PREVENT-LIBERATE – Planning Phase $1,415; Trial Phase $84,087 o Vanderbilt University - Year Ended June 30, 2024 - MILITARY MEDICAL RESEARCH AND DEVELOPMENT - 12.420 - Liberate Medical VUMC108554 -W81XWH2211123 $52,147 • Management is reviewing costs included in the subrecipient’s Single Audit Report noted above and working with the subrecipients to reconcile amounts to the Company’s books and records. For the year ended December 31, 2024, the Company submitted reimbursement voucher requests to the Department of Defense in the amount of $1,766,172. Amounts related to subawards for the same period were $134,695 or 7.6%. In the future management will: • Prepare a standard operating procedure (SOP) for subrecipient monitoring in accordance with CFR Part 200.332 and OMB Compliance Supplement 6-20. • For the current award: o Evaluate each subrecipient’s fraud risk and risk of noncompliance o Develop a subrecipient risk-based monitoring plan sufficient for the Company to comply with federal statues, regulations, and the terms and conditions of the award. o Follow the developed risk-based monitoring plan for the remainder of the award and implement, where appropriate, corrective actions against any noncompliant subrecipients • For future awards, perform subrecipient monitoring in accordance with the SOP described above and in compliance with CFR Part 200.332 and OMB Compliance Supplement 6-20.