FiscalNote Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion provides information that FiscalNote’s management believes is relevant to an assessment and understanding of FiscalNote’s condensed consolidated results of operations and financial condition. The discussion should be read together with the unaudited interim condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Certain monetary amounts, percentages and other figures included below have been subject to rounding adjustments as amounts are presented in thousands or millions, as the context describes. Percentage amounts included below have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere herein. Certain other amounts that appear below may not sum due to rounding.

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A, “Risk Factors” and other factors set forth in other parts of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “FiscalNote,” “we,” “us,” or “our” refer to the business of Old FiscalNote, which became the business of New FiscalNote and its subsidiaries following the Closing.

Overview

FiscalNote is a leading provider of artificial intelligence (AI) driven policy and regulatory intelligence solutions. It delivers critical, actionable legal and policy insights in a rapidly evolving political, regulatory and macroeconomic environment. By combining AI technology, other technologies with analytics, workflow tools, and expert peer insights, FiscalNote empowers customers to manage policy, address regulatory developments, and mitigate global risk. FiscalNote ingests unstructured legislative and regulatory data, and employs AI and data science to deliver structured, relevant and actionable information in order to facilitate key operational and strategic decisions by global enterprises, midsized and smaller businesses, government institutions, trade groups and nonprofits. FiscalNote delivers that intelligence through its suite of public policy and issues management products, coupled with expert research and analysis of markets and geopolitical events, as well as powerful tools to manage workflows, advocacy campaigns and constituent relationships.

Business Combination

On July 29, 2022, the Company consummated the transactions contemplated by the Agreement and Plan of Merger, dated as of November 7, 2021, and as amended on May 9, 2022, (the “Merger Agreement”), by and among FiscalNote Holdings, Inc., a Delaware corporation (“Old FiscalNote”), Duddell Street Acquisition Corp., a Cayman Islands exempted company (“DSAC”), and Grassroots Merger Sub, Inc., a Delaware Corporation and a wholly owned direct subsidiary of DSAC (“Merger Sub” and, together with DSAC, the “DSAC Parties”). Pursuant to these transactions, Merger Sub merged with and into Old FiscalNote, with Old FiscalNote becoming a wholly owned subsidiary of DSAC (the “Business Combination” and, collectively with the other transactions described in the Business Combination Agreement, the “Transactions”). In connection with the closing of the Transactions, DSAC domesticated and continued as a Delaware corporation under the name of “FiscalNote Holdings, Inc.” (“New FiscalNote”). Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “FiscalNote,” “we,” “us,” or “our” refer to the business of Old FiscalNote, which became the business of New FiscalNote and its subsidiaries following the closing on July 29, 2022. Subsequent to the closing of the Business Combination, the Company's Class A common stock and public warrants began trading on the New York Stock Exchange (“NYSE”) under the symbols “NOTE” and “NOTE.WS,” respectively. The Company accounted for the Business Combination as a reverse recapitalization whereby Old FiscalNote was determined as the accounting acquirer and DSAC as the accounting acquiree. Accordingly, the Business Combination was treated as the equivalent of Old FiscalNote issuing stock for the net assets of DSAC, accompanied by a recapitalization. The net assets of DSAC are stated at historical cost, with no goodwill or other intangible assets recorded.

Significant Events

Debt Refinance

As described in Note 8 “Debt” to the condensed consolidated financial statements included elsewhere herein, on August 12, 2025, the Company closed a series of transactions whereby the Company (a) retired all of its then outstanding obligations under the senior term loan consummated pursuant to the Credit Agreement with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC entered into concurrent with the Business Combination (the "Prior Senior Term Loan") totaling approximately $62.7 million (including accrued and unpaid interest and deferred finance costs) and replaced it with a $75.0 million new senior term loan maturing in August 2029; (b) issued $21,9 million of Convertible Debentures in exchange for $18.9 million of cash; (c) paid the holder of the GPO Convertible Note $27.0 million to redeem $30.0 million of aggregate principal under the GPO Convertible Note and exchanged the GPO Convertible Note for a new convertible note with a principal balance of $20.4 million maturing in November 2029 (the "2025 GPO Convertible Note"), and (d) retired all of its then outstanding obligations under the Amended Legacy Notes by paying the holders $3.6 million in cash. On September 11, 2025, the Company issued another $12.3 million of Convertible Debentures whereby the net proceeds of approximately $11.1 million was used to repay the outstanding obligations under the Third Era Convertible Note totaling $8.2 million.

As a result of these series of transactions, beginning August 12, 2025, the Company's annualized cash interest payments will be approximately $9.0 million (based on current SOFR interest rates), and its principal repayments will be approximately $1.9 million during year one, and approximately $3.8 million thereafter.

Factors Impacting the Comparability of Our Operating Results

Dispositions

On July 1, 2025, we completed the sale of TimeBase for $7.4 million comprised of a cash payment to the Company of $6.7 million and a buyer holdback of $0.7 million. The Company recorded a gain of $1.3 million from the sale of TimeBase during the nine months ended September 30, 2025.

On March 31, 2025, we completed the sale of Dragonfly and Oxford Analytica for $40.3 million in cash. The Company recorded a gain of $15.3 million from the sale of Dragonfly and Oxford Analytica during the nine months ended September 30, 2025.

On October 31, 2024, we completed the sale of Aicel Technologies business ("Aicel") for $9.7 million comprising of $8.5 million of cash and the assumption of an existing convertible note issued by Aicel in 2022, with an outstanding total principal and accrued paid-in-kind interest amount of $1.2 million. The Company recorded a gain of $0.5 million from the sale of Aicel in the fourth quarter of 2024.

On March 11, 2024, we completed the sale of Board.org for $90.9 million in cash at closing. The Company recorded a gain on sale of business of $71.5 million during the nine months ended September 30, 2024.

These businesses contributed the following:

• Subscription revenue of approximately $4.3 million for the three months ended September 30, 2024 and approximately $4.0 million and $15.5 million for the nine months ended September 30, 2025 and 2024, respectively.
• Non-subscription revenue of approximately $0.8 million for the three months ended September 30, 2024 and approximately $0.7 million and $2.4 million for the nine months ended September 30, 2025 and 2024, respectively.
• ARR of approximately $17.3 and $15.5 million at September 30, 2024 and December 31, 2024, respectively.

At the beginning of the third quarter of 2025 the Company had approximately 439 employees. As a result of the Company's business dispositions, product rationalization, business simplification, and cost takeout actions, the Company's full-time equivalent headcount reduced by approximately 27 from the beginning of the third quarter of 2025 through September 30, 2025. As a result, the Company has seen a reduction in overall cash costs across all operating expenses. Management will continue evaluating for additional rationalization opportunities to further reduce the complexity of the business and reduce ongoing operating expenses.

We continue to invest for future growth. We are focused on several key growth levers, including cross-selling and upselling opportunities at existing clients, expanding our client base with a focus on enterprise and government customers, expansion into adjacent markets and deepening our offerings for regulated industries or sectors. Several of these growth drivers require investment in and refinement of our go-to-market approach and, as a result, we may continue to incur additional costs upfront to obtain new customers and expand our relationships with existing customers, including additional sales and marketing expenses specific to subscription revenue.

We plan to invest a portion of our available capital resources in building innovative products, attracting new customers and expanding our leadership role in the legal and regulatory information market to drive growth organically. We may also evaluate acquisitions and investment opportunities in complementary businesses to supplement our existing platform, enable us to enter new markets and ensure that we are well positioned to provide critical insights to the regulated sectors of the future. Past acquisitions have enabled us to deliver innovative solutions in new categories and enhance the functionality of our existing products. Strategic acquisitions may be a component of our growth strategy in the future.

Key Performance Indicators

In addition to our GAAP results further described and discussed below in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we monitor the following key performance indicators to evaluate growth trends, prepare financial projections, make strategic decisions, and measure the effectiveness of our sales and marketing efforts. Our management team assesses our performance based on these key performance indicators because it believes they reflect the underlying trends of our business and serve as meaningful measures of our ongoing operational performance.

Annual Recurring Revenue (“ARR”)

Approximately 93% of our revenues are subscription based. Our ability to retain existing subscription customers is a key performance indicator that helps explain the evolution of our historical results and is a leading indicator of our revenues and cash flows for subsequent periods. We use ARR as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring subscription customer contracts. We calculate ARR on a parent account level by annualizing the contracted subscription revenue, and our total ARR as of the end of a period is the aggregate thereof. ARR is not adjusted for the impact of any known or projected future customer cancellations, upgrades or downgrades, or price increases or decreases. The amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to timing of the revenue bookings during the period, cancellations, upgrades, or downgrades and pending renewals. ARR should be viewed independently of revenue as it is an operating metric and is not intended to be a replacement or forecast of revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.

Our ARR at September 30, 2025 and December 31, 2024, was $84.8 million and $107.5 million, respectively. ARR at September 30, 2024 and December 31, 2024, excluding products we discontinued in 2023, and the impact of the sale of Board.org, Aicel, Oxford Analytica, Dragonfly, and TimeBase was $92.2 million and $91.9 million, respectively.

Net Revenue Retention (“NRR”)

Our NRR, which we use to measure our success in retaining and growing recurring revenue from our existing customers, compares our recognized recurring revenue from a set of customers across comparable periods. We calculate our NRR for a given period as ARR at the end of the period minus ARR contracted from new clients for which there is no historical revenue booked during the period, divided by the beginning ARR for the period. We calculate NRR at our parent account level. Our calculation of NRR for any fiscal period includes the positive recurring revenue impacts of selling additional licenses and services to existing customers and the negative recognized recurring revenue impacts of contraction and attrition among this set of customers. Our NRR may fluctuate as a result of a number of factors, including the level of our revenue base, the level of penetration within our customer base, expansion of products and features, the timing of renewals, and our ability to retain our customers. Our calculation of NRR may differ from similarly titled metrics presented by other companies. NRR, excluding the impact of Board.org, Aicel, Oxford Analytica, Dragonfly, and TimeBase was 98% for the three months ended September 30, 2025 and 2024, respectively.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. Where applicable, we provide reconciliations of these non-GAAP measures to the corresponding most closely related GAAP measure. Investors are encouraged to review the reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure. While we believe that these non-GAAP financial measures provide useful supplemental information, non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be comparable to similarly titled measures of other companies due to potential differences in their financing and accounting methods, the book value of their assets, their capital structures, the method by which their assets were acquired and the manner in which they define non-GAAP measures.

Adjusted Gross Profit and Adjusted Gross Profit Margin

We define Adjusted Gross Profit as Total revenues minus cost of revenues, including amortization of capitalized software development costs and acquired developed technology, before amortization of intangible assets that are included in costs of revenues. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by Total revenues.

We use Adjusted Gross Profit and Adjusted Gross Profit Margin to understand and evaluate our core operating performance and trends. We believe these metrics are useful measures to us and to our investors to assist in evaluating our core operating performance because they provide consistency and direct comparability with our past financial performance and between fiscal periods, as the metrics eliminate the non-cash effects of amortization of intangible assets that may fluctuate for reasons unrelated to overall operating performance.

Adjusted Gross Profit and Adjusted Gross Profit Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. They should not be considered as replacements for gross profit and gross profit margin, as determined by GAAP, or as measures of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes. Adjusted Gross Profit and Adjusted Gross Profit Margin as presented herein are not necessarily comparable to similarly titled measures presented by other companies.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to exclude certain non-cash items and other items that management believes are not indicative of ongoing operations. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by Total revenues.

We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin in this Quarterly Report on Form 10-Q because these non-GAAP measures are key measures used by management to evaluate our business, measure our operating performance and make strategic decisions. We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors and others in understanding and evaluating our operating results in the same manner as management. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for net income (loss), net income (loss) before income taxes, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business would have material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may otherwise find significant. In addition, although other companies in our industry may report measures titled EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate non-GAAP financial measures, which reduces their comparability. Because of these limitations, you should consider EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.

Key Components of Results of Operations

Revenues

We derive our revenues from subscription revenue arrangements and advisory, advertising and other revenues. Subscription revenues accounted for approximately 93% of our total revenues for the nine months ended September 30, 2025 and 2024.

Subscription revenue

Subscription revenues consist of revenue earned from subscription-based arrangements that provide customers the right to use the Company’s software and products in a cloud-based infrastructure. Subscription revenues are driven primarily by the number of active licenses, the types of products and the price of the subscriptions. The Company also earns subscription revenues by licensing to customers its digital content, including transcripts, news and analysis, images, video and podcast data.

Our subscription arrangements generally have contractual terms of 12 months or more and are non-refundable regardless of the actual use of the service. Subscription revenues are recognized ratably over the non-cancellable contract terms beginning on the commencement date of each contract, which is the date our service is first made available to customers.

Advisory, advertising, and other revenues

Advisory revenues are typically earned under contracts for specific deliverables and are non-recurring in nature, although we regularly sell different advisory services to repeat customers. One-time advisory revenues are invoiced according to the terms of the contract, usually delivered to the customer over a short period of time, during which revenues are recognized.

Advertising revenues are primarily generated by delivering advertising in our own publications (Roll Call and CQ) in both print and digital formats. Revenues for print advertising are recognized upon publication of the advertisement. Revenues for digital advertising are recognized over the period of the advertisement or, if the contract contains impression guarantees, based on delivered impressions.

Cost of revenues, including amortization

Cost of revenues, including amortization primarily consists of expenses related to hosting our service, the costs of data center capacity, amortization of developed technology and capitalized software development costs, certain fees paid to various third parties for the use of their technology, services, or data, costs of compensation, including bonuses, stock compensation, benefits and other expenses for employees associated with providing professional services and other direct costs of production. Also included in cost of revenues, including amortization are our costs related to the preparation of contracted advisory deliverables, as well as costs to develop, publish, print and deliver our publications underlying our books revenue.

Research and development

Research and development expenses include the costs of compensation, including bonuses, stock compensation, benefits and other expenses for employees associated with the creation and testing of the products we offer, related software subscriptions, consulting and contractor fees and allocated overhead.

Sales and marketing

Sales and marketing expenses consist primarily of salaries and related expenses, including bonuses, stock compensation, benefits and other expenses for our sales and marketing staff, including commissions, related software subscriptions, consulting fees, marketing programs and allocated overhead. Marketing programs consist of advertising, events, corporate communications, brand building and product marketing activities.

Editorial

Editorial expenses consist of salaries and related expenses, including bonuses, stock compensation, benefits and other expenses for the editorial team involved in acquiring, creating, and distributing content and allocated overhead.

General and administrative

General and administrative expenses are primarily related to our executive offices, finance and accounting, human resources, legal, internal operations and other corporate functions. These expenses consist of salaries and related expenses, including bonuses, stock compensation, benefits and other expenses, along with professional fees, depreciation and other allocated overhead.

Amortization of intangible assets

Amortization expense relates to our finite-lived intangible assets, including developed technology, customer relationship, databases and tradenames. These assets are amortized over periods of between three and twenty years. Finite-lived intangible assets are tested for impairment when indicators are present, and, if impaired, are written down to fair value. No impairment of intangible assets has been identified during any financial period included in our accompanying condensed consolidated financial statements.

Interest expense, net

Interest expense, net, consists of expense related to interest on our borrowings, the amortization and write off of debt issuance costs and original discount, and interest related to certain derivative instruments.

Change in fair value of financial instruments

The fair value of financial instruments are accounted for in accordance with ASC 815 and ASC 480. The warrant and derivative liabilities are marked to market each reporting period in accordance with ASC 820 with all gains and losses being recorded within the consolidated statement of operations and comprehensive income (loss).

Income taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the condensed consolidated financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the condensed consolidated statements of operations and comprehensive income (loss) in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts that are expected to be realized based on the weighting of positive and negative evidence.

Results of Operations

The period-to-period comparisons of our results of operations have been prepared using the historical periods included in our condensed consolidated financial statements. The following discussion should be read in conjunction with those condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the Consolidated Results for the Three and Nine Months Ended September 30, 2025 and September 30, 2024

The following table presents our results of operations for the periods indicated:

(In thousands)

NM - Not meaningful

Revenue:

Subscription revenue

Subscription revenue of $21.2 million for the three months ended September 30, 2025 decreased $6.1 million, or 22%, from $27.2 million for the three months ended September 30, 2024. Subscription revenue of $67.8 million for the nine months ended September 30, 2025 decreased $16.2 million for the nine months ended September 30, 2024.

The comparability of our revenues between periods was impacted by the sales of the businesses of Dragonfly, Oxford Analytica, TimeBase, Board.org, and Aicel, described under “Factors Impacting the Comparability of Our Results of Operations” above. The table below presents the primary items that impacted the comparability of our subscription revenues between periods.

(In thousands)

The decrease in subscription revenue during the three and nine month periods is largely due to the impact from the sale of businesses of Dragonfly and Oxford Analytica on March 31, 2025 and TimeBase on July 1, 2025. The decrease in organic subscription revenue is primarily the result of customer retention challenges combined with the impact of Federal government cuts.

Advisory, advertising, and other revenue

Advisory, advertising, and other revenue was $1.2 million for the three months ended September 30, 2025, as compared to $2.2 million for the three months ended September 30, 2024. The decrease of $1.0 million, or 43%, was primarily the result of the reduction of revenue from the sale of businesses in 2024 and 2025.

Advisory, advertising, and other revenue was $5.4 million for the nine months ended September 30, 2025, as compared to $6.8 million for the three months ended September 30, 2024. The decrease of $1.4 million, or 20%, was the result of the reduction of revenue from the sales of businesses of $1.7 million partially offset by increases in revenue for advocacy campaigns.

Revenue by Geography

The below tables present our revenues split by geographic region for the periods presented:

(In thousands)

(In thousands)

Revenues by geography are determined based on the region of the FiscalNote contracting entity, which may be different than the region of the customer. North America revenues decreased primarily for the reasons stated above. Asia revenues decreased primarily due to the sale of Aicel in October 2024. Europe revenues decreased primarily due to the sales of Dragonfly and Oxford Analytica on March 31, 2025. Australia revenues decreased primarily due to sales of TimeBase on July 1, 2025.

Cost of revenues, including amortization

Cost of revenues, including amortization, was $4.8 million for the three months ended September 30, 2025, as compared to $6.2 million for the three months ended September 30, 2024. The decrease of $1.5 million, or 23%, was primarily attributable to the impact from the business dispositions totaling approximately $1.0 million combined with a decrease in amortization expense of $0.4 million, which related to the introduction of PolicyNote.

Cost of revenues, including amortization, was $16.7 million for the nine months ended September 30, 2025, as compared to $20.3 million for the nine months ended September 30, 2024. The decrease of $3.6 million, or 18%, was primarily attributable to the impact from the business dispositions totaling approximately $2.9 million and other decreases in third party costs.

Research and development

Research and development expense was $2.1 million for the three months ended September 30, 2025 as compared to $3.3 million for the three months ended September 30, 2024. The decrease of $1.2 million, or 36%, was primarily attributable to the impact from the business dispositions totaling approximately $0.3 million and a result of workforce planning actions.

Research and development expense was $7.5 million for the nine months ended September 30, 2025 as compared to $9.9 million for the nine months ended September 30, 2024. The decrease of $2.5 million, or 25%, was primarily attributable to the impact from the business dispositions totaling approximately $0.6 million and a result of workforce planning actions.

Sales and marketing

Sales and marketing expense was $6.3 million for the three months ended September 30, 2025 as compared to $9.1 million for the three months ended September 30, 2024. The decrease of $2.8 million, or 31%, was primarily attributable to the impact from the business dispositions totaling approximately $1.7 million and a result of workforce planning actions.

Sales and marketing expense was $20.7 million for the nine months ended September 30, 2025 as compared to $27.5 million for the nine months ended September 30, 2024. The decrease of $6.8 million, or 25%, was primarily attributable to the impact from the business dispositions totaling approximately $4.3 million and a result of workforce planning actions.

Editorial expense

Editorial expense was $3.2 million for the three months ended September 30, 2025 as compared to $4.6 million for the three months ended September 30, 2024. The decrease of $1.4 million, or 30%, was primarily attributable to the impact from the business dispositions.

Editorial expense was $11.5 million for the nine months ended September 30, 2025 as compared to $13.8 million for the nine months ended September 30, 2024. The decrease of $2.2 million, or 16%, was primarily attributable to the impact from the business dispositions.

General and administrative

General and administrative expense was $13.9 million for the three months ended September 30, 2025 as compared to $10.6 million for the three months ended September 30, 2024. The increase of $3.3 million, or 31%, was primarily attributable to an increase related to overall legal and accounting costs associated with the debt transaction discussed in "Significant Events-Debt Refinance" partially offset by decreases from the business dispositions.

General and administrative expense was $41.6 million for the nine months ended September 30, 2025 as compared to $38.0 million for the nine months ended September 30, 2024. The increase of $3.6 million, or 10%, was primarily attributable to an increase related to overall legal and accounting costs associated with the debt transaction discussed in "Significant Events-Debt Refinance" partially offset by a decrease in stock compensation expense and decreases from the business dispositions.

Amortization of intangibles

Amortization of intangibles was $1.9 million for the three months ended September 30, 2025 as compared to $2.4 million for the three months ended September 30, 2024. The decrease was primarily attributable to the impact from the business dispositions.

Amortization of intangibles was $6.2 million for the nine months ended September 30, 2025 as compared to $7.5 million for the nine months ended September 30, 2024. The decrease was primarily attributable to the impact from the business dispositions.

Interest expense, net

Interest expense was $3.7 million for the three months ended September 30, 2025 as compared to $5.6 million for the three months ended September 30, 2024. The decrease in interest expense of $1.9 million was primarily due to the principal repayments made on the Prior Senior Term Loan made throughout 2024 and the first half of 2025 as part of the business dispositions.

Interest expense was $13.2 million for the nine months ended September 30, 2025 as compared to $18.3 million for the nine months ended September 30, 2024. The decrease in interest expense of $5.1 million was primarily due to the principal repayments made on the Prior Senior Term Loan made throughout 2024 and the first half of 2025 as part of the business dispositions.

Change in fair value of financial instruments

Change in fair value of financial instruments was a $7.0 million loss for the three months ended September 30, 2025 as compared to a $3.5 million loss for the three months ended September 30, 2024. The change in financial instruments of $3.5 million is primarily related to the changes in the Dragonfly Seller Convertible Notes, Era Note, Convertible Debentures, Prior GPO Convertible Note, and the 2025 GPO Convertible Note partially offset by the change in the fair value adjustment of the warrant liabilities.

Change in fair value of financial instruments was a $7.9 million loss for the nine months ended September 30, 2025 as compared to a $3.2 million loss for the nine months ended September 30, 2024. The change in financial instruments of $4.7 million is primarily related to the changes in the Dragonfly Seller Convertible Notes, Era Note, Convertible Debentures, Prior GPO Convertible Note, and the 2025 GPO Convertible Note partially offset by the change in the fair value adjustment of the warrant liabilities.

Certain Non-GAAP Measures

We present certain non-GAAP financial measures including Adjusted Gross Profit, Adjusted Gross Profit Margin and Adjusted EBITDA. Our management team assesses our performance based on these non-GAAP measures because it believes they reflect the underlying trends and indicators of our business and serve as meaningful indicators of our continuous operational performance. We believe these measures are useful for investors for the same reasons. Investors should be aware that these measures are not a substitute for GAAP financial measures or disclosures. Where applicable, we provide reconciliations of these non-GAAP measures to the corresponding most closely related GAAP measure.

Adjusted Gross Profit and Adjusted Gross Profit Margin

The following table presents our calculation of Adjusted Gross Profit and Adjusted Gross Profit Margin for the periods presented:

(In thousands)

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

The following table presents our calculation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the periods presented:

(In thousands)

(a) Reflects the gain on disposal from the sale of TimeBase on July 1, 2025, Dragonfly and Oxford Analytica on March 31, 2025, and the gain on sale of Board.org on March 11, 2024.

(b) Reflects the non-cash impact from the mark to market adjustments on our financial instruments.

(c) Reflects the non-cash impact of the following: (i) charge of $40 in the first quarter of 2025, charge of $30 in the second quarter of 2025, and a charge of $9 in the third quarter of 2025 related to the unrealized loss on investments; (ii) charge of $315 for fees satisfied with Common Stock of the Company during the first quarter of 2025; (iii) charge of $1,784 from the loss on debt extinguishment during the first quarter of 2025 and a charge of $6,174 in the third quarter of 2025 from the loss on debt extinguishment; (iv) charge of $632 in the second quarter of 2025 and a gain of $167 in the third quarter of 2025 related to foreign currency translation losses, principally arising from converting a GBP denominated convertible note into USD, (v) non-cash charge of $49 in the first quarter of 2024, charge of $31 in the second quarter of 2024, and a charge of $17 in the third quarter of 2024 related to the unrealized loss on investments; and (vi) gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions.

(d) Reflects the costs incurred related to the sale of TimeBase on July 1, 2025, Oxford Analytica and Dragonfly on March 31, 2025 and Board.org in March 11, 2024, principally consisting of transaction advisory, accounting, tax, and legal fees.

(e) Severance costs associated with workforce changes related to business realignment actions.

(f) Reflects costs incurred related to the Special Committee.

(g) Reflects non-operating income from the Transition Services Agreement that was entered into with the acquirer of Dragonfly and Oxford Analytica on March 31, 2025.

Liquidity and Capital Resources

Historically the Company has partially funded its operations through raising equity and debt. At September 30, 2025, the Company’s cash, cash equivalents, restricted cash, and short-term investments was $31.8 million compared to $35.3 million at December 31, 2024.

The Company had a negative working capital balance of $31.3 million (excluding cash and short-term investments) at September 30, 2025 and had an accumulated deficit of $849.3 million and $806.9 million as of September 30, 2025 and December 31, 2024, respectively, and has incurred net losses (excluding the gain on sale of businesses) of $59.0 million for the nine months ended September 30, 2025 and $48.7 million for the nine months ended September 30, 2024, respectively.

As described in Note 8 “Debt” to the condensed consolidated financial statements included elsewhere herein, we refinanced a substantial amount of our legacy indebtedness. We believe the impact of these actions provides us the flexibility to fund future operations and provide a path toward generating positive cash flows from operations.

Our ability to maintain our minimum cash requirement, fund our future cash interest and principal repayment requirements under our 2025 Senior Term Loan and fund our operating expenses and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control. The Company has implemented various cost saving measures throughout 2024 and 2025 that have also contributed toward our overall improvement in cash flows used in operations.

Our historical financing activities included borrowings under senior secured credit facilities, senior secured promissory notes, and convertible debt. Our principal debt outstanding, including paid-in kind interest as applicable, as of September 30, 2025 and December 31, 2024 consisted of the following (excluding any fair value adjustments and debt discounts, as applicable):

(In thousands)

2025 Senior Term Loan

On August 12, 2025 the Company closed on its new $75.0 million senior term loan that matures on August 12, 2029 (the "2025 Senior Term Loan") and received net proceeds of $72.9 million after original issue discount (“OID”) of $2.1 million, or 2.75%. The Company incurred approximately $1.9 million of lender fees and fees paid to third parties. OID and capitalized debt issuance costs totaled $3,985 and is treated as a debt discount and will be amortized over the term of the 2025 Senior Term Loan using the effective interest method.

Obligations under the 2025 Senior Term Loan bear interest at variable rates, set at the Company’s option, based on a reference rate plus 7%, or the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) plus 8%. Interest is payable in cash monthly in arrears. The Company has elected to pay cash interest based on SOFR, which was 12.23% at September 30, 2025. For the three months ended September 30, 2025, the Company recognized $1,248 of cash interest on the 2025 Senior Term Loan, representing the cash interest on the 2025 Senior Term Loan from August 12, 2025 to September 30, 2025. Going forward, the Company expects to incur approximately $2.2 million of quarterly cash interest based on current SOFR rates and expected outstanding principal balances.

The 2025 Senior Term Loan is repayable in consecutive quarterly installments on the last business day of each March, June, September and December of each fiscal year commencing September 30, 2025, in an amount equal to (i) $0.5 million with respect to each payment due on September 30, 2025, December 31, 2025, March 31, 2026 and June 30, 2026 and (ii) $0.9 million with respect to each payment due thereafter, with the remaining principal amount due at the maturity of the 2025 Senior Term Loan, or such earlier time as it may become payable. The Company must also pay a quarterly fee commencing on September 30, 2025, in an amount equal to (i) $0.1 million due on September 30, 2025, December 31, 2025, and March 31, 2026 and (ii) $38 with respect to each quarterly payment due thereafter.

The 2025 Senior Term Loan is senior to all other debt and has a first priority lien on substantially all of the Company’s assets. The 2025 Senior Term Loan contains customary negative covenants related to borrowing, events of default and covenants, including certain non-financial covenants and covenants limiting the Company’s ability to dispose of assets, undergo a change in control, merge with or acquire stock, and make investments, in each case subject to certain exceptions. In addition to the negative covenants, there are four financial covenants in place at August 12, 2025: a minimum cash balance requirement, minimum annual recurring revenue requirement, an adjusted EBITDA requirement (as defined in the 2025 Senior Term Loan) and a capital expenditure limitation. The Company believes it will maintain future compliance with all of its covenants.

On August 12, 2025 the Prior Senior Term Loan was replaced with the 2025 Senior Term Loan and the Company retired all of its then outstanding obligations with a cash payment of approximately $62.7 million.

Convertible Debentures

In conjunction with the establishment of the 2025 Senior Term Loan and in order to fund the GPO Redemption (defined below), on August 5, 2025 (the “Purchase Agreement Date”), the Company entered into a securities purchase agreement (the “Purchase Agreement”), with YA II PN, Ltd (“YA”), pursuant to which the Company issued YA convertible debentures in an aggregate principal amount of $33.3 million (the “Convertible Debentures”) for a total cash purchase price of approximately $30.0 million, subject to satisfaction of certain closing conditions.

On August 12, 2025, the initial tranche of Convertible Debentures comprising $21.0 million in stated principal amount were issued to YA, in accordance with the Purchase Agreement, with the Company receiving net proceeds of $18.9 million (the "First YA Debenture"). On September 11, 2025, the second, and final tranche of Debentures comprising $12.3 million in stated principal amount were issued to YA, in accordance with the Purchase Agreement with the Company receiving net proceeds of $11.0 million (the "Second YA Debenture").

The Company’s obligations under the Purchase Agreement and the Debentures are guaranteed by FiscalNote, Inc., a wholly owned subsidiary of the Company, and are contractually subordinated to the Company’s obligations under its 2025 Senior Term Loan and the 2025 GPO Convertible Note. The First YA Debenture matures on February 12, 2027 and the Second YA Debenture matures on March 11, 2027 and both bear interest at a rate of 5% per annum or 18% per annum in the event of an event of default.

At any time prior to the maturity dates, and subject to certain ownership and conversion limitations, YA is entitled to convert any portion of the principal amount of the Debentures and accrued interest thereon into shares of the Company’s Class A Common Stock (the

“Debenture Conversion Shares”) at a conversion price equal to 94% of the lowest daily volume weighted average trading price (“VWAP”) during the five trading days prior to the conversion date, subject to a floor price of $0.8884 (the “Floor Price”).

2025 GPO Convertible Note / Prior GPO Convertible Note

On June 30, 2023 the Company issued to GPO FN Noteholder LLC (the “GPO Investor”) a subordinated convertible promissory note in an initial principal amount of $46.8 million(the “Prior GPO Convertible Note”). Pursuant to the terms of the Prior GPO Convertible Note, paid-in-kind interest accrued from the date of issuance through June 30, 2024. Beginning on July 1, 2024 the Company was required to pay interest with either cash or shares, solely at the discretion of the Company. Accordingly, since September 30, 2024 and through September 30, 2025, the Company issued the GPO Investor 346,059 Class A Common Shares, in the aggregate, in satisfaction of quarterly interest.

In conjunction with the establishment of the 2025 Senior Term Loan, on August 5, 2025, the Company entered into a redemption and exchange agreement with the GPO Investor.

Pursuant to the redemption and exchange with the GPO Investor, on August 12, 2025, the Company redeemed $30,000 of the Prior GPO Convertible Note in exchange for a cash payment of $27,000 to the GPO Investor (the "GPO Redemption"). The Company also issued a new senior subordinated promissory note to the GPO Investor in the aggregate principal amount of $20,434 (the "2025 GPO Convertible Note") in exchange for, and the cancellation of, the remaining obligations under the existing Prior GPO Convertible Note.

The 2025 GPO Convertible Note is guaranteed by the Company’s domestic subsidiaries, which are parties to the 2025 Senior Term Loan, and is contractually subordinated to the Company’s obligations under the 2025 Senior Term Loan. The 2025 GPO Convertible Note matures on November 13, 2029 and bears interest at a rate of 7.50% per annum payable quarterly in arrears, in cash or, provided no event of default is then occurring under the 2025 GPO Convertible Note, freely tradeable shares of the Company's Class A Common Stock, at the Company’s option, with the value per share determined with reference to the VWAP of the Class A Common Stock over the trading days occurring within the thirty calendar days prior to the applicable interest payment date. At any time prior to November 13, 2029, the GPO Investor is entitled to convert all or any portion of the principal amount of the 2025 GPO Convertible Note and accrued interest thereon into shares of the Company's Class A Common Stock at an initial conversion price of $82.92 per share (subject to customary anti-dilution adjustments). Under the terms of the 2025 GPO Convertible Note, the Company is required to make quarterly installment payments of $2.0 million of the outstanding principal beginning April 1, 2026 in the form of freely tradeable shares of the Company's Class A Common Stock, cash, or a combination thereof, solely at the determination of the Company. Class A Common Stock issued to satisfy quarterly interest and principal repayments will be issued at a price equal to the lowest of (i) the then-effective Conversion Price under the 2025 GPO Convertible Note, (ii) 95% of the VWAP of the Class A Common Stock over the ten trading days immediately preceding the applicable Installment Date and (iii) 95% of the VWAP of the Class A Common Stock over the trading days occurring within the ninety calendar day period immediately preceding the applicable payment date..

Dragonfly Seller Convertible Note

On January 27, 2023, we acquired Dragonfly and financed part of the purchase with the issuance of convertible notes. The Dragonfly Convertible Note is subordinate to our 2025 Senior Term Loan, accrues interest of 8% per annum, payable in kind or in cash, and matures in January 2028.

Capital expenditures

Capital expenditures primarily consist of purchases of capitalized software costs and property and equipment. Our capital expenditures program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment to grow our business. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital expenditures, our long-term growth strategy could be significantly affected. Our total capital expenditures were $5.6 million and $6.9 million for the nine months ended September 30, 2025 and 2024, respectively.

Cash Flow Summary

The following tables summarizes our cash flows for the periods presented:

Operating activities

Cash used in operating activities consists of net loss adjusted for certain non-cash items including depreciation and amortization, stock-based compensation, changes in fair value of warrant liabilities, non-cash interest expense, and loss on debt extinguishment, as well as the effect of changes in working capital and other activities.

Cash used in operating activities in the nine months ended September 30, 2025 was $11.2 million, an increase of $7.2 million compared to the nine months ended September 30, 2024. The primary factors affecting our net operating cash flows during this period was our net loss of $42.4 million, which includes non-cash expense items totaling $34.1 million, including a gain on disposal of business of $16.6 million, non-cash and paid-in kind interest expense of $6.8 million, loss on debt extinguishment of $8.0 million, stock-based compensation expense of $11.0 million, a change in fair value of financial instruments of $7.9 million, non-cash lease expense of $1.5 million, amortization and depreciation of $16.5 million, other non-cash items of $1.0 million and the effect of changes in operating assets and liabilities that resulted in cash outflows of $2.9 million.

Cash used in operating activities in the nine months ended September 30, 2024 was $4.0 million, a decrease of $28.0 million compared to the nine months ended September 30, 2023. The primary factors affecting our net operating cash flows during this period was our net income of $22.9 million, which includes non-cash expense items totaling $26.9 million, including a gain on disposal of business of $71.6 million, non-cash and paid-in kind interest expense of $8.2 million, stock-based compensation expense of $13.9 million, a gain due to the change in fair value of financial instruments of $3.2 million, non-cash lease expense of $1.6 million, amortization and depreciation of $18.4 million, and other non-cash items of $0.6 million.

Investing activities

Net cash provided by investing activities in the nine months ended September 30, 2025 was $41.4 million compared to $84.5 million in the nine months ended September 30, 2024. Net cash provided by investing activities in the nine months ended September 30, 2025 primarily consisted of cash proceeds from the sale of a business of $46.9 million partially offset by cash paid of $5.6 million of capital expenditures primarily related to software development costs. Net cash provided by investing activities in the nine months ended September 30, 2024 was $84.5 million, which primarily consisted of cash paid for acquisitions, net of cash acquired of $91.4 million partially offset by cash paid of $6.9 million of capital expenditures primarily related to software development costs.

Financing activities

Net cash used in financing activities in the nine months ended September 30, 2025 was $32.4 million, compared to $71.6 million for the nine months ended September 30, 2024. Net cash used in financing activities during the nine months ended September 30, 2025 primarily consisted of payments of long-term debt and deferred financing costs primarily related to the repayments of debt obligations of $133.6 million partially offset by cash proceeds from the issuance of debt of $101.0 million and $0.3 million from the proceeds of the exercise of stock options and ESPP purchases. Net cash used in financing activities in the nine months ended September 30, 2024 was $71.6 million, which primarily consisted of payments of long-term debt and deferred financing costs primarily related to Amendment 4 to the Credit Agreement and the sale of Board.org of $72.8 million partially offset by the proceeds from the issuance of Era Convertible Notes of $0.8 million and proceeds from the issuance of stock options and ESPP purchases of $0.5 million.

Commitments and Contingencies

Our principal commitments consist of obligations under leases for office space. For more information regarding our lease obligations, see Note 5 “Leases” to the condensed consolidated financial statements included elsewhere herein. For more information regarding our debt service obligations, see Note 8 “Debt” to the condensed consolidated financial statements included elsewhere herein.

Off-Balance Sheet Arrangements

During the periods presented, we did not engage in any off-balance sheet financing activities or other arrangements that have or are reasonably likely to have a current or future material effect on our financial condition or results of operations.

Recently Issued Accounting Pronouncements and Tax Reform

For information regarding new accounting pronouncements, and the impact of these pronouncements on our condensed consolidated financial statements, if any, refer to Note 1 of the notes to our financial statements included in this Quarterly Report on Form 10-Q.

On July 4, 2025, U.S. legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (“The Act”) was signed into law. The Act, among other things, extended key provisions of the 2017 Tax Cuts and Jobs Act and introduced targeted changes to the U.S. federal income tax regime. Adoption of The Act has not had a material impact on the Company.

Critical Accounting Estimates and Policies

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that involve a significant level of estimation uncertainty and are reasonably likely to have a material impact on the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

There were no significant and material changes in our critical accounting policies and use of estimates during the nine months ended September 30, 2025, as compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates and Accounting Policies" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on April 1, 2025.

We are exposed to market risks in the ordinary course of our business. These risks primarily consist of inflation risk and fluctuations in interest rates and foreign currency exchange rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Foreign Currency Exchange Risk

We use the U.S. Dollar ("USD") as our reporting currency. Our local subsidiaries transact generally in their local currency, considered the functional currency for that subsidiary. Our foreign currency exchange rate risk is related to translation of our assets and liabilities from the subsidiaries' functional currencies to USD. These adjustments are recorded in accumulated other comprehensive income (loss) on our consolidated balance sheets. Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro and British Pound Sterling. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States as well as the European Union, United Kingdom, and India. Our results of operations and cash flows in the future may be adversely affected due to an expansion of non-U.S. dollar denominated contracts, growth of our international entities and changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our cash denominated in foreign currency. To date, we have not engaged in any hedging strategies. We will continue to reassess our approach to manage the risk relating to fluctuations in currency rates.

Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into USD. Total revenue for the three and nine months ended September 30, 2025, was impacted by approximately 1.0% compared to the three and nine months ended September 30, 2024.

Interest Rate Risk

We are subject to market risk associated with changing interest rates within our variable rate 2025 Senior Term Loan. Our exposure to changes in interest rates in the future is currently associated with the secured overnight financing rate as determined by the Federal Reserve Bank of New York ("SOFR").

As of September 30, 2025, we had outstanding borrowings on our 2025 Senior Term Loan of $74.5 million, which bear interest at variable rates, set at the Company’s option, based on a reference rate plus 7%, or SOFR plus 8%. At September 30, 2025, the interest rate on our 2025 Senior Term Loan was 12.23% determined based on SOFR plus 8%%. Assuming no change in the outstanding borrowings on our 2025 Senior Term Loan, we estimate that a one percentage point increase in SOFR would increase our annual cash interest expense by approximately $0.7 million.

Inflation Risk

Although we do not believe inflation has had a material impact on our financial condition, results of operations or cash flows to date, a high rate of inflation in the future may have an adverse effect on our business.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective as of September 30, 2025 due to the material weakness in internal control over financial reporting described below.

Material Weakness in Internal Control over Financial Reporting

During the third quarter of 2025, management identified a deficiency in the design of the Company’s internal controls over financial reporting. The deficiency related to the failure to ensure that all manual journal entries throughout fiscal year 2025 were independently reviewed and approved prior to posting, which could impact all financial statement accounts. This deficiency represents a material weakness in the design of certain controls intended to prevent or detect potential misstatements in the financial statements on a timely basis. As of the date of this Form 10-Q, management does not believe this design deficiency resulted in any identified misstatements in the Company’s financial statements and management has concluded that the consolidated financial statements included in this Form 10-Q are fairly stated in all material respects, although the control design deficiency represents a material weakness in the Company’s internal control over financial reporting.

Remediation Plan

Subsequent to the identification of this design deficiency management has implemented and is continuing to implement remediation measures designed to address the underlying control deficiency. Specifically, management implemented a review process to ensure that all manual journal entries are subject to an independent review and approval process prior to posting. The Company is also enhancing documentation and monitoring procedures to ensure the consistent operation of these controls.

Limitations on Effectiveness of Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of the disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on April 1, 2025, except as set forth below.

The protracted U.S. government shutdown has had a negative impact on our revenues, profitability and cash flows, and we expect that such effects will worsen to the extent that the shutdown continues.

In years when the U.S. government fails to complete its budget process or to provide for a continuing resolution, a federal government shutdown may result, as is the case as of the filing of this quarterly report. A protracted government shutdown can result in the non-renewal, delay or cancellation of public sector subscription contracts, which negatively affects our revenues, annual recurring revenues and cash flows, as well as our future results. In addition, we may be unable to generate revenue to the extent anticipated from our CQ-Roll Call advertising and events business during a federal government shutdown. We expect the negative impacts of a government shutdown on our results of operations to worsen as the shutdown becomes increasingly protracted, and the Company may be required to reduce costs or take other near-term operational measures that may adversely affect our results in future periods.

We have identified a material weakness in our internal control over financial reporting. If we are unable to develop and maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us; materially and adversely affect our business and operating results; and expose us to potential litigation.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected and corrected on a timely basis.

During the third quarter of 2025, management identified a deficiency in the design of the Company’s internal controls over financial reporting related to the failure to ensure that all manual journal entries were independently reviewed and approved prior to posting. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

If we are not able to remediate the material weakness, or if we identify any new material weaknesses in the future, we may be unable to maintain compliance with the requirements of securities laws, stock exchange listing rules, or debt instrument covenants regarding timely filing of information; we could lose access to sources of capital or liquidity; and investors may lose confidence in our financial reporting and our stock price may decline as a result. Though we are evaluating steps to remediate the material weakness, we cannot assure you that any measures we may take in the future will be sufficient to remediate the material weakness or avoid potential future material weaknesses.