Spectral AI, Inc.: Form 10-Q for the period ended Jun 30, 2026

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section titled “Risk Factors,” in our 2025 Annual Report and in other reports we have filed or may file with the SEC, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are an artificial intelligence (“AI”) company focused on predictive medical diagnostics. We operate in one segment. Currently, we are devoting substantially all of our efforts towards research and development of our DeepView System, an internally developed multi-spectral imaging device that has previously received FDA breakthrough device designation status for an earlier version. On May 26, 2026, the FDA granted De Novo classification for the DeepView System for the burn indication, which authorizes the Company to commence commercial distribution activities in the United States. We expect to generate our first commercial sales in the United States by the end of 2026. Given our receipt of the UKCA mark for the burn indication, we also expect to begin commercialization activities in the United Kingdom in 2026. Our DeepView System uses proprietary algorithms to distinguish between damaged and healthy human tissue invisible to the naked eye, providing “Day One” healing assessments. DeepView’s output is specifically engineered to allow the physician to make a more accurate, timely and informed decision regarding the treatment of the patient’s wound. Our focus has been on the burn indication which is supported by the BARDA PBS contract.

For burn wounds, a non-healing assessment could aid the clinician in making an immediate and objective determination for appropriate candidates for surgery, as well as determining what specific areas of the burn wound will require excision and skin grafting. The Company has completed the enrollment of 164 patients, including 49 pediatric subjects, representing the full enrollment requirements in its validation study for the De Novo submission. In participants, the DeepView System has shown superiority in sensitivity and met non-inferiority margin in specificity compared to clinician assessment. These findings were corroborated by the AI model’s cross-validation in identifying non-healing burn regions. This represents a significant improvement above the diagnostic accuracy of burn physicians assessing the same population. In addition to our validation study, we have conducted three large clinical studies with multiple sites across the United States, enrolling more than 400 patients, including adult and pediatric burn patients.

We have not generated any product revenue to date. We have received substantial support from the U.S. government for our DeepView System’s application for burn wounds, particularly from the Biomedical Advanced Research and Development Authority (“BARDA”), which is part of the HHS Office of the Assistant Secretary for Preparedness and Response in the United States, established to aid in securing the United States from chemical, biological, radiological, and nuclear threats, as well as from pandemic influenza and emerging infectious diseases. We have also received funding from the National Science Foundation, the National Institute of Health and the Defense Health Agency (the “DHA”). Since 2013, we have been awarded approximately $282.5 million in funding from government contracts, substantially all of which is from BARDA, which accounts for $272.9 million. This has allowed us to develop our technology and further our clinical trials.

In September 2023, we executed our third contract with BARDA for a multi-year Project BioShield (“PBS”) agreement, valued at up to approximately $150.0 million (the “PBS BARDA Contract”). This included an initial award of approximately $54.9 million to support the clinical validation study and the distribution of up to 30 DeepView Systems in various burn centers and emergency departments to support our validation study and approximately another $95.1 million for further follow-on development and procurement activities related to the DeepView System. The funding also supported the Company’s FDA De Novo submission of our DeepView AI – Burn software, which was completed on June 30, 2025. In March 2026, BARDA exercised a portion of its contractual options under the contract, providing the Company with (i) a no-cost extension of the base phase of the contract from March 2026 to June 2026 and (ii) accelerated funding of approximately $31.7 million for further follow-on development and procurement activities related to the DeepView System. The contract continues to provide additional options, similar to our prior BARDA contracts, with an additional total value of approximately $63.4 million which can be exercised for additional product development, and the expanded procurement and deployment of DeepView Systems at emergency rooms, trauma and burn centers. These deployments will enable the Company to conduct health economic and outcome research studies to support the broader clinical adoption of the DeepView System. As part of this funding advance, the Company has committed to fund $9.7 million of the total overall development costs associated with these feature advancements. This contract funding is non-dilutive to our shareholders, and we believe it validates the important nature of our mission and technology.

In addition to our PBS BARDA contract, we received a $4.0 million grant award from the Medical Technology Enterprise Consortium (“MTEC”) in April 2023, which, building on prior awards from the DHA, is to be used to support military battlefield burn evaluation via a handheld version of the DeepView System device (the “MTEC Agreement”). In August 2024, the MTEC award was increased to $4.9 million and was extended to run through December 2025 with funding dependent on various milestones. In December 2025, the MTEC Agreement was extended to run through December 31, 2026. In March 2024, we received an additional $0.5 million award from the DHA to further this development, bringing the total value of our DHA awards supporting the handheld device to approximately $2.8 million.

Once commercialized, we anticipate that the DeepView System will have two revenue streams, a SaMD (software as a medical device) model, and an imaging device component. The SaMD model applies a SaaS (software as a service) treatment for the DeepView System which will feature a software licensing fee that includes maintenance, image hosting, and access to algorithm updates. The proprietary imaging device accesses artificial intelligence algorithms and is a universal platform to house multiple clinical applications. Pricing for these components will be evaluated and strategically set per country and site-of-service for heightened customer adoption.

Key Factors that May Influence Future Results of Operations

Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting our results of operations are summarized below.

Revenue Sources. As a pre-commercialization company, we currently generate revenue almost exclusively from two U.S. governmental agencies. We are highly dependent upon the continuation of the existing U.S. governmental contract awards, as well as future governmental procurement or other awards. Our operating results may not be comparable between periods as the timing and amount of awards or procurements from the U.S. government may be inconsistent with the timing of prior awards and the phasing of the development study schedules may be different. Our revenues may continue to be almost exclusively dependent upon the terms of those awards.

Operating Expenses. Following regulatory approval of the DeepView System, we expect operating expenses to increase as we invest in commercialization activities, including sales and marketing, manufacturing scale-up, and personnel growth. Operating expenses may fluctuate from period to period based on the timing of commercialization initiatives, product enhancements, hiring activities, and other strategic investments, which may impact the comparability of our results of operations.

Gross Margin. When we begin commercial sales of the DeepView System, we may need to determine lower pricing and incentives to accelerate adoption and implementation of the DeepView System, which may negatively impact future revenue and gross margin percentages.

Managing our Supply Chain. We are reliant on contract manufacturers and suppliers to produce our components. While we have not been subject to any disruptions in our current limited production, we may be subject to component shortages, which may cause delays in critical components and inventory, longer lead times, increased costs and delays in product shipments. Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high-quality services and deliver components and finished products on time and at reasonable costs. While we do not maintain sole-source suppliers, there is a concentration of suppliers which could lead to supply shortages, long lead times for components and supply changes. In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and installation of our products, which would adversely impact our cash flows and results of operations, including revenue and gross margin.

Components of Consolidated Statements of Operations

Research and Development Revenue

To date, we have not generated any revenues from the sale or license of our products. Our primary source of revenue is research and development revenue. Currently, we are highly dependent upon the reimbursements from BARDA for the burn diagnostic testing of our DeepView System and other U.S. government awards. The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Our research and development revenue is affected by the amount of research and development that is expended each month with respect to our contract with BARDA and other U.S. governmental contract awards, such as our grant under the MTEC Agreement which we earn based on the achievement of milestones and performance milestones. Our revenue growth is dependent upon a number of factors, including expanding the research and development activities under the BARDA contract, research and development reimbursed expenses relating to other contract awards from U.S. governmental agencies and the intended future commercial sales of our DeepView System. See “Liquidity and Capital Resources” for additional information.

Cost of Revenue

Our cost of revenues consists primarily of direct and indirect costs associated with the research and development expenses relating to the BARDA and MTEC contracts. Our revenue costs are affected by the extent of research and development expenses as well as expansion of work on other U.S. governmental projects and the expanded applications for our DeepView System.

Gross Profit

Gross profit may vary from period-to-period and is primarily affected by the current reimbursement rates under the BARDA contract and other U.S. governmental contract awards. These reimbursement rates are fixed under the BARDA contract. Under the BARDA contract our gross profit represents this reimbursement rate plus a fixed fee component relating to non-reimbursed expenses incurred in connection with the work completed. Under the other fixed fee U.S. governmental contract awards our gross profit corresponds to the achievement of pre-determined milestones.

Operating Costs and Expenses

Operating costs and expenses consist of research and development, general and administrative and selling and marketing expenses. These expenses primarily relate to salaries and related costs of our organization’s support and operations staff, consulting fees, rent, insurance and office expenses, and our non-revenue generating research and development expenses, primarily related to salaries and related costs and consulting fees.

Other income (expense)

Other income (expense) consists of net interest expense, financing related costs related to the Avenue Financing, fees related to the Hudson Bay Financing, change in the fair value of warrant liability, and foreign exchange transaction gains/losses. Historic foreign exchange transaction loss primarily relates to changes in the exchange rate between the U.S. dollar and the British pound sterling for our deposit accounts that are denominated in British pound sterling. In addition, this amount includes costs associated with buying British pound sterling for payment of our employees and vendors in the UK.

Results of Operations

The following table summarizes our results of operations for the three and six months ended June 30, 2026 and 2025 (in thousands):

(In thousands)

18

Research and Development Revenue

Research and development revenue was $3.5 million and $7.5 million for the three and six months ended June 30, 2026, respectively, a decrease of 30.4% and 36.2%, respectively compared to the same periods in 2025, reflecting the anticipated reduction in reimbursed costs under the PBS BARDA Contract following the FDA’s De Novo authorization of the DeepView System, as the remaining scope of work narrowed to specific development projects, together with the cost-share provisions applicable to the follow-on development phase of that contract. Revenue from the Company’s other U.S. governmental contracts declined in the three months ended June 30, 2026 and which was offset by an increase primarily related to work on the Company’s handheld device, in the six months ended June 30, 2026.

For the three and six months ended June 30, 2026 and 2025, the Company’s revenues disaggregated by the major sources were as follows (in thousands):

(In thousands, except percentages)

Cost of Revenues and Gross Profit

Cost of revenue for the three and six months ended June 30, 2026 was $2.4 million and $4.4 million, respectively, a decrease of 13.1% and 30.7%, respectively, compared to the same periods in 2025, due to the cost share provisions applicable to the follow-on development phase of the PBS BARDA Contract, under which the Company funds a portion of the development costs it incurs.

Gross margin for the three and six months ended June 30, 2026 was 31.6% and 41.8%, respectively, a decrease of 13.6 percentage points and 4.6 percentage points, respectively, as compared to the same periods in 2025, reflecting the cost-share provisions of the follow-on development phase of the PBS BARDA Contract, under which the Company continues to incur development costs that are not fully reimbursable, and a lower margin on the Company’s fixed-fee MTEC contract. For the six months ended June 30, 2026, the decrease primarily reflects the lower proportion of costs billed under the follow-on development phase of that contract, partially offset by the higher gross margin realized in the first quarter of 2026 prior to the commencement of that phase.

Operating Expense

Research and development expense was $1.7 million and $3.3 million for the three and six months ended June 30, 2026, respectively, an increase of 16.4% and 17.6%, respectively, as compared to the same period in 2025 due to an increase in non-revenue generating research and development activities.

General and administrative expense was $3.1 million and $5.3 million for the three and six months ended June 30, 2026, respectively, an increase of 18.0% and 5.0%, respectively, as compared to the same period in 2025 due to higher stock-based compensation associated with awards granted in the second quarter of 2026, partially offset for the six-month period by lower consultant fees.

Selling and marketing expense was $0.7 million and $0.9 million for the three and six months ended June 30, 2026, respectively, an increase of 92.1% and 33.3%, respectively, as compared to the same period in 2025 due to increased sales and marketing activities in advance of first commercial sales, including a third-party pricing study.

Other income (expense)

Net interest expense for the three and six months ended June 30, 2026 primarily relate to interest expense associated with the Avenue Financing as well as costs related to the Company’s insurance policy financing.

Financing related costs increased $0.1 million and decreased $0.6 million, respectively, for the three and six months ended June 30, 2026, as compared to the comparable period in 2025 primarily due to the elimination of the expenses relating to the Company’s prior financings that were expensed during fiscal year 2025. Amortization of debt discount of $0.1 million and $0.3 million, respectively for the three and six months ended June 30, 2026 relates to amortization of the discount on the Avenue note payable.

Change in fair value of warrant liability reflected a favorable change of approximately $6.2 million and $0.9 million, respectively, for the three and six months ended June 30, 2026 as compared to the comparable periods in 2025. Change in fair value of warrant liability was a benefit of $0.7 million and expense of $0.3 million, respectively, for the three and six months ended June 30, 2026, as compared to an expense of $5.4 million and expense of $1.2 million, respectively, for same periods in 2025. The changes reflect fluctuations in the fair value of the Company’s warrants during the three and six month periods ended June 30, 2026. The Company’s warrants are classified as liabilities and remeasured to fair value at each reporting period, with changes recognized in net loss. As a result, fluctuations in the warrant price of Public Warrants and fluctuations in the fair value of other outstanding warrants may cause significant non-cash gains or losses, leading to volatility in reported net loss.

Liquidity and Capital Resources

Sources of Liquidity

As of June 30, 2026 and December 31, 2025, the Company had approximately $14.0 million and $15.4 million, respectively, in cash and cash equivalents, and an accumulated deficit of $63.4 million and $55.8 million, respectively. As of June 30, 2026 and December 31, 2025, the Company had approximately $14.9 million and $8.4 million, respectively, of debt outstanding of which $11.1 million and $5.5 million represented long-term debt as of such periods, respectively. The Company also had approximately $1.4 million of remaining undiscounted operating lease payments as of June 30, 2026, extending through February 2028.

On March 18, 2026, the Company announced that it has received a contract modification from BARDA for the acceleration of $31.7 million from its existing contract with BARDA which included (i) a no-cost extension of the base phase of the contract, and (ii) the acceleration of certain parts of the next phase of such contract. As part of this funding advance, the Company has committed to fund $9.7 million of the total overall development costs associated with these feature advancements. This funding comes as part of an ongoing partnership with BARDA, which has committed $86.6 million to date under the contract with an overall value of approximately $150 million.

The Company also has an effective shelf registration statement on Form S-3 with an aggregate capacity of $50.0 million, of which approximately $12.1 million had been utilized as of June 30, 2026. Because the aggregate market value of the Common Stock held by non-affiliates is less than $75.0 million, the Company’s ability to sell securities in primary offerings under that registration statement is limited, in any twelve-month period, to one-third of the aggregate market value of the Common Stock held by non-affiliates. After giving effect to approximately $5.8 million of securities sold under that registration statement in the preceding twelve months, approximately $10.9 million remained available to the Company under that limitation based on the Company’s public float as of August 11, 2026. The amount available is not fixed and will increase or decrease with the Company’s share price and public float.

As of June 30, 2026, based on our current operating plan, our cash and cash equivalents, together with the PBS BARDA Contract, and the Yorkville SEPA, provide sufficient working capital to fund operations for at least one year beyond the release date of the condensed consolidated financial statements. We have based this determination on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Changing circumstances could also cause us to consume capital significantly faster than we currently anticipate, and we may need to raise capital sooner or in greater amounts than currently expected because of circumstances beyond our control. To the extent additional capital is necessary, there are no assurances that we will be able to raise additional capital on favorable terms or at all, and therefore we may not be able to execute our business plans and the continued work on indications beyond expanding our burn indication.

Cash Flows

The following table summarizes our cash flows for the six months ended June 30, 2026 and 2025 (in thousands):

Cash Flows Used in Operating Activities

Net cash used in operating activities increased to approximately $7.8 million for the six months ended June 30, 2026, as compared to $4.9 million for the six months ended June 30, 2025, primarily driven by higher net loss and higher cash used from changes in operating assets and liabilities, primarily due to a decrease in accounts payable and accrued expenses.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2026 reflects proceeds received from Avenue Financing and stock option and warrant exercises, offset by repayments of insurance notes payable. Net cash provided by financing activities of $10.2 million for the six months ended June 30, 2025 was primarily attributable to proceeds from the Avenue Financing of $8.3 million partially offset by the loan repayments on the Yorkville debt facility and 2024 Insurance Note.

Current Indebtedness

The Company has the ability under its Avenue Financing agreement to borrow up to $15.0 million. The Company initially drew down $8.5 million in March 2025. On June 18, 2026, the Company drew down the second financing tranche under the Avenue Financing following the achievement of the required funding conditions. The Company received net proceeds of approximately $6.5 million.

The loans under the Avenue Financing mature on March 1, 2028, with an interest-only payment period of no less than 15 months, which has been extended to 24 months upon the achievement of certain milestones prior to the end of such 15-month period as described in the Tranche 2 Milestone Date (as defined in the Supplement to the Loan Agreement). The Company achieved the Tranche 2 Milestone during the three months ended June 30, 2026, and as such, the interest-only period was extended to 24 months.

The Avenue Financing also includes warrant coverage equal to 8.5% of the total funding commitment from Avenue, with an exercise price equal to $1.66.

Related Party Transactions

For the six-month period ended June 30, 2026, the Company did not have any related party transactions.

Off-Balance Sheet Arrangements

During the periods presented, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates which include, but are not limited to, revenue recognition, warrant liabilities, fair value of certain debt, stock-based compensation expense, stock issued for transaction costs, the net realizable value of inventory, right-of-use assets, and income tax valuation allowances. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 25, 2026. During the six months ended June 30, 2026, there were no material changes to our critical accounting policies from those previously disclosed.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, of the notes to our condensed consolidated financial statements included elsewhere in this Form 10-Q for recently adopted accounting standards and recently issued accounting standards as of the dates of the statement of financial position included in this Form 10-Q.

Emerging Growth Company

We are an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act for the adoption of certain accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply more promptly with new or revised accounting pronouncements as of public company effective dates.

In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

• being permitted to present only two years of audited consolidated financial statements in addition to any required unaudited interim consolidated financial statements, with correspondingly reduced disclosure in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
• an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;
• reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements;
• exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and

We may take advantage of these provisions until the last day of the fiscal year ending after the fifth anniversary of the Company’s initial public offering or such earlier time that we no longer qualify as an emerging growth company. We will cease to qualify as an emerging growth company on the date that is the earliest of: (i) December 31, 2026; (ii) the last day of the fiscal year in which we have more than $1.235 billion in total annual gross revenues; (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and we have been a public company for at least 12 months and have filed one annual report on Form 10-K; or (iv) the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests.

We are also a “smaller reporting company.” If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited consolidated financial statements in our Annual Report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Pursuant to Item 305(e) of Regulation S-K, the Company is a smaller reporting company and is not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

Material Weakness: Our financial statement close process controls, including controls over account reconciliations, transaction processing, and financial reporting review, did not operate consistently or with sufficient precision to ensure timely performance and review, including appropriate oversight of financial statement reporting. In conducting our evaluation, management used the updated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, management concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting described below. As discussed in Item 9A of our Form 10-K for the year ended December 31, 2025, we identified a material weakness in our internal control over financial reporting as well as a lack of effective controls over the COSO principles including control environment, risk assessment, control activities, information and communications and monitoring as of December 31, 2025.

Remediation Plan for Material Weakness

Remediation generally requires making changes to how controls are designed and implemented and then adhering to those changes for a sufficient period of time such that the effectiveness of those changes is demonstrated with an appropriate amount of consistency. In response to the material weakness, we implemented, and are continuing to implement and monitor, measures designed to improve our internal control over financial reporting. These efforts include:

• appointing a new Chief Financial Officer with extensive technical accounting and public company financial reporting experience, with remediation of the material weakness as a specific objective, and supplemented accounting personnel to address capacity gaps;
• completing a full-scope documentation and assessment of the design of our internal control over financial reporting, including controls over the financial statement close process and account reconciliations;
• during 2025, enhancing the functionality of our enterprise resource planning system to support certain key financial processes and controls and to enforce certain segregation of duties through automation and approval workflows; and
• with appropriate accounting staffing now in place, engaging external specialists where their use is warranted, including in the areas of technical accounting, SEC reporting, valuation and tax. Management retains responsibility for the work of those specialists, evaluating their qualifications and objectivity and reviewing and approving their analyses and conclusions.

The measures we implemented are subject to continued management review supported by confirmation and testing, as well as audit committee oversight. Management and the Audit Committee remain committed to the implementation of remediation efforts to address the material weakness. We will continue to implement measures to remedy our internal control deficiencies, though there can be no assurance that our efforts will be successful or avoid potential future material weaknesses. In addition, until remediation steps have been completed and are operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weaknesses previously disclosed, and as described above, will continue to exist. These controls have been implemented and management is performing its own testing of their operation for the first and second quarters of 2026. Management expects that this testing, together with the testing performed in the second half of 2026, will support a conclusion that the controls are appropriately designed and operating effectively and that the material weakness has been remediated.

Changes in Internal Control over Financial Reporting

Except for the remediation efforts in connection with the material weakness described above, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our Annual Report on Form 10-K filed with the SEC on March 25, 2026 and in the Registration Statement on Form S-4 filed with the SEC on January 5, 2024, as amended. Any of those factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 25, 2026 and in the Registration Statement on Form S-4 filed with the SEC on January 5, 2024, as amended. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.