Air Industries Group: Form 10-Q for the period ended Jun 30, 2026

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Form 10-Q and with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K, for the year ended December 31, 2025 (the “2025 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this report and our 2025 Form 10-K and the Registration Statement on Form S-4 filed with the SEC on July 22, 2026, that could cause actual results to differ materially from those anticipated in these forward-looking statements.

Business Overview

We believe we are one of the leading manufacturers of precision components and assemblies for large aerospace and defense contractors. Our rich history dates to 1941, producing parts for World War II fighter aircraft. Since then, we have maintained an impeccable record with no known incidents of part failure leading to a fatal mission. We became a public company in 2005.

Our products include landing gear, flight controls, engine mounts and components for aircraft jet engines and ground turbines and other complex machines. The ultimate end-user for most of our products is the U.S. government, foreign governments, and commercial global airlines. Whether it is a small individual component for assembly by others or complete assemblies we manufacture ourselves, our high quality and extremely reliable products are used in mission critical operations that are essential for safety of military personnel and civilians.

Although our net sales are concentrated amongst a number of defense and aerospace prime contractors, we have cultivated long-standing relationships with a number of their subsidiaries and/or business units. Additionally, our net sales are generated across several high-profile platforms and programs including: the F-18 Hornet, the E-2 Hawkeye, the UH-60 Black Hawk Helicopters, Geared Turbo-Fan (“GTF”) Engines (used on smaller aircraft such as the Airbus A220 and Embraer E2), the CH-53 Helicopter, the F-35 Lightning II and the F-15 Eagle Tactical Fighter. In many cases, we are the sole or single supplier of certain parts and components and receive LTAs from our customers, both demonstrating their commitment to us.

Winning a new contract award is highly competitive. Our ability to win new contract awards generally requires us to deliver superior quality products, more quickly and with lower pricing than our competitors. Accordingly, we must continually invest in process improvements and capital equipment. Recent investments in new equipment have improved the productive capacity of our employees, increased our efficiency and speed, and expanded the size of products we can manufacture. We strategically operate two state-of-the-art manufacturing centers in the U.S. This allows for rigorous oversight of production and the adherence to stringent quality standards. Although there is currently a shortage of skilled workers, we maintain a highly trained and close-knit team of over 150 professionals committed to driving excellence and precision in every aspect of our operations.

Our period-to-period net sales and operating results are significantly impacted by timing. In addition, our gross profit is affected by a variety of factors, including the mix and complexity of products, production efficiencies, price competition and general business operating environments. In some cases, our gross profit is impacted by our ability to deliver replacement parts on short notice. Our operations have a large percentage of fixed factory overhead. As a result, our profit margins are highly variable with sales volumes.

For the past several years, despite facing significant financial and operational challenges, we have strategically invested substantial amounts in new capital equipment, tooling, and processes to bolster our competitive position. Additionally, we expanded our sales and marketing efforts, with a sharp focus on expanding relationships with existing customers and cultivating new ones. Looking forward for the rest of fiscal 2026, we are focused on securing new contract awards, improving operations and successful completion of the Merger Agreement (as discussed below).

As of June 30, 2026, we have total unfilled contract values amounting to $279.0 million (including our $139.7 million in backlog and all potential orders against LTA agreements previously awarded to us).

Recent Developments

On February 16, 2026, we and Transitory Air Sub LLC, our wholly owned subsidiary (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Original Merger Agreement”) with Tenax Aerospace Acquisition, LLC, a Delaware limited liability company (“Tenax”), pursuant to which we agreed to combine with Tenax and issue shares of our common stock to the holders of the membership interests of Tenax (the “Tenax Members”) at the closing of the merger based on a calculation of AIR Net Indebtedness (as defined in the Original Merger Agreement). On June 2, 2026, our subsidiary, Air Industries Machining Corp., received a payment of $1,971,070, (the “Advance”), from one of its customers for product to be delivered after receipt of the Advance. Subsequently, on June 8, 2026, we, Merger Sub and Tenax entered into an amendment (“Amendment No. 1”) to the Original Merger Agreement which amended the definition of AIR Net Indebtedness (as defined in the Original Merger Agreement) to mitigate the impact of the Advance on the calculation of AIR Net Indebtedness and thereby the number of shares of common stock to be issued pursuant to the Original Merger Agreement.

On July 2, 2026, we, Merger Sub and Tenax entered into an Amended and Restated Agreement and Plan of Merger (the “A&R Merger Agreement”), which amended and restated the Original Merger Agreement, as amended by Amendment No. 1, in its entirety. Pursuant to the A&R Merger Agreement, Merger Sub will merge with and into Tenax, with Tenax continuing as the surviving company in such merger (the “Merger”) and becoming our wholly owned subsidiary.

Pursuant to the A&R Merger Agreement, the number of shares of common stock we will issue has been fixed at 126,900,000 shares (25,380,000 shares after giving effect to a 1 for 5 Reverse Stock Split described herein) (the “Merger Consideration”) for the Tenax Members in connection with the Merger. A portion of the Merger Consideration allocated in respect of membership interests of Tenax underlying certain Tenax warrants that remain unexercised as of the closing, if any, will be reserved by us for future issuance upon the exercise of such warrants. The A&R Merger Agreement further provides that the Debt Adjusted AIR Share Price (as defined in the A&R Merger Agreement) shall be $3.05 ($15.25 after giving effect to a 1 for 5 Reverse Stock Split described herein). Each of the Merger Consideration and the Debt Adjusted AIR Share Price is subject to appropriate and equitable adjustment in the event of any subdivision, stock dividend or stock split, combination, recapitalization, exchange or reclassification of our common stock prior to the closing, including the 1 for 5 Reverse Stock Split described herein.

The A&R Merger Agreement requires us to amend our articles of incorporation (the “AIR Charter Amendment”) to increase the number of authorized shares of our common stock from 20 million to 200 million. Subsequent to the effectiveness of the AIR Charter Amendment, we shall cause a certificate of change to be filed with the Secretary of State of the State of Nevada effecting a reverse stock split of the issued and outstanding shares of our common stock at a ratio of one post-split share of our common stock for every five pre-split shares of our common stock while simultaneously reducing the number of authorized shares of our common stock under our articles of incorporation (after giving effect to the AIR Charter Amendment) by a corresponding factor, with any fractional share of our common stock otherwise resulting from the split rounded up to the nearest whole share (the “1 for 5 Reverse Stock Split”). Unless the parties agree otherwise, the number of authorized shares of our common stock immediately after the closing will be 40,000,000.

The A&R Merger Agreement eliminates the post-closing tender offer contemplated by the Original Merger Agreement, under which we would have been required, within five business days following the closing, to commence a tender offer to purchase up to 1,000,000 shares of our common stock at a purchase price equal to the Debt Adjusted AIR Share Price (as defined in the Original Merger Agreement) if the volume weighted average price of our common stock during the 20 trading days preceding the closing was less than the Debt Adjusted AIR Share Price.

The A&R Merger Agreement further requires that, promptly following the date of the A&R Merger Agreement, we file with the SEC a Registration Statement on Form S-4, which will register the shares of our common stock to be issued to the Tenax Members pursuant to the A&R Merger Agreement, and will include a proxy statement/prospectus relating to the Merger, and the matters to be voted on by our stockholders. We and Tenax have agreed to use reasonable best efforts to cause the Registration Statement to become effective under the Securities Act as promptly as practicable and to keep the Registration Statement effective for so long as necessary to consummate the Merger.

On July 31, 2026, we, Merger Sub and Tenax entered into an amendment (the “Amendment”) to the A&R Merger Agreement, which extended the Outside Date (as defined in the A&R Merger Agreement) to close the transaction from September 30, 2026 to November 30, 2026.

The closing of the Merger pursuant to the A&R Merger Agreement is subject to risks and uncertainties and certain specified conditions, including, among other things: (a) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, (b) the listing of the Merger Consideration on the NYSE American, and (c) other customary conditions for a transaction such as the Merger, such as the absence of any legal restraint prohibiting the consummation of the Merger and there not having occurred with respect to the Company or Tenax’s business a material adverse event, subject to certain customary exceptions.

For a more complete description of the A & R Merger Agreement as amended by the Amendment, transactions to be consummated, actions to be taken and agreements entered into or to be entered into in connection therewith, reference is made to the Current Reports on Form 8-K filed July 9, 2026, and August 3, 2026 and the full text of the A & R Merger Agreement, the Amendment and the documents that are exhibits thereto.

Except where specifically noted, the discussion of our business, operations, management team and financial results contained herein gives no effect to changes that would occur as a result of or subsequent to the consummation of the Merger.

Tenax is a leading provider of special mission aviation solutions that combine aircraft sourcing, financing and modification with aviation services including pilots, maintenance and other types of program support. Additionally, Tenax has a long-standing relationship with key government customers.

RESULTS OF OPERATIONS

Selected Financial Information:

Balance Sheet Data:

24

Results of Operations for the three months ended June 30, 2026

Net Sales: Net sales for the three months ended June 30, 2026 were $11,995,000, a decrease of $664,000, or 5.2%, compared with $12,659,000 that we achieved in the three months ended June 30, 2025. The period-over-period decrease in net sales was primarily due to overall changes in the mix of products delivered in response to customer orders.

The composition of customers that exceeded 10% of our net sales for the three months ended June 30, 2026 and 2025 are shown below:

(a) RTX includes Collins Landing Systems and Collins Aerostructures

The composition of our net sales by platform or program profiles for the three months ended June 30, 2026 and 2025 are shown below:

Period-to-period changes in customer mix and related platforms and programs are largely attributable to customer requirements, availability of parts, production capacity and timing.

Gross Profit: Gross profit for the three months ended June 30, 2026, was $2,483,000 as compared to $2,028,000 for the three months ended June 30, 2025. Our gross profit percentage for the three months ended June 30, 2026 increased to 20.7% from 16.0% for the three months ended June 30, 2025. The increase in margin was attributed to changes in the sales across our major platforms, shifts in product mix, and overall operating efficiencies. During the second half of 2025, we implemented several cost reductions that benefited our gross profit during the three months ended June 30, 2026 that were not in place during the three months ended June 30, 2025.

Operating Expenses: Operating expenses were $2,849,000, for the three months ended June 30, 2026, an increase of $829,000, from $2,020,000 for the three months ended June 30, 2025. As a percentage of consolidated net sales, operating expenses increased to 23.8%, compared to the 16.0% achieved during the three months ended June 30, 2025. The dollar increase was primarily driven by professional expenses associated with our pending merger, as well as costs associated with the continued improvement of our information technology system and hardening our cyber-security defenses, offset by decreases in stock-based compensation costs. The professional expenses related to the merger were approximately $1,195,000. We continue to look for ways to reduce our costs and improve our operating performance and financial results.

Interest Expense: Interest expense was $500,000 during the three months ended June 30, 2026, an increase of $54,000 or 12.1% from $446,000 during the three months ended June 30, 2025. The increase is primarily attributable to higher borrowing levels during a portion of the period partially offset by a decrease in the average interest rate on outstanding debt pursuant to our Current Credit Facility which decreased to 6.10% in 2026 as compared to 6.85% in 2025.

Net Loss: Net loss for the three months ended June 30, 2026 was $846,000, compared to a net loss of $422,000 for the three months ended June 30, 2025, for the reasons discussed above.

Results of Operations for the six months ended June 30, 2026

Net Sales: Net sales for the six months ended June 30, 2026 were $23,601,000, a decrease of $1,201,000, or 4.8%, compared with $24,802,000 that we achieved in the six months ended June 30, 2025. The period-over-period decrease in net sales was primarily due to overall changes in the mix of products delivered in response to customer orders.

The composition of customers that exceeded 10% of our net sales for the six months ended June 30, 2026 and 2025 are shown below:

(a) RTX includes Collins Landing Systems and Collins Aerostructures

The composition of our net sales by platform or program profiles for the six months ended June 30, 2026 and 2025 are shown below:

Gross Profit: Gross profit for the six months ended June 30, 2026, was $5,085,000 as compared to $4,062,000 for the six months ended June 30, 2025. Our gross profit percentage for the six months ended June 30, 2026 increased to 21.5% from 16.4% for the six months ended June 30, 2025. The increase in margin was attributed to changes in the sales across our major platforms, shifts in product mix and overall operating efficiencies.

Operating Expenses: Operating expenses were $6,016,000, for the six months ended June 30, 2026, an increase of $1,216,000, from $4,800,000 for the six months ended June 30, 2025. As a percentage of consolidated net sales, operating expenses increased to 25.5%, compared to 19.4% incurred during the six months ended June 30, 2025. The dollar increase was primarily driven by professional expenses associated with our pending merger and increases in stock compensation expense, and costs associated with the continued improvement of our information technology system and hardening our cyber-security defenses. The professional expenses related to the merger were approximately $1,195,000. We continue to look for ways to reduce our costs and improve our operating performance and financial results.

Interest Expense: Interest expense was $994,000 during the six months ended June 30, 2026, an increase of $104,000 or 11.7% from $890,000 during the six months ended June 30, 2025. The increase is primarily attributable to higher borrowing levels during a portion of the period partially offset by a reduction in the average interest rate on outstanding debt pursuant to our Current Credit Facility which decreased to 6.10% in 2026 as compared to 6.85% in 2025.

Net Loss: Net Loss for the six months ended June 30, 2026 was $1,866,000, compared to a net loss of $1,410,000 for the six months ended June 30, 2025, for the reasons discussed above.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2026, we have debt service requirements related to:

1) Outstanding indebtedness under our Current Credit Facility of $24,014,000 (consisting of a Revolving Loan of $18,683,000 and a Term Loan of $5,331,000). This debt matures on September 30, 2026, and we are required to make monthly payments on the Term Loan of approximately $87,000 until the loan matures.

2) Related Party Notes of approximately $4,871,000, maturing on October 1, 2026.

3) Various equipment leases and contractual obligations related to our business, including advances under our Solar Facility for the installation of solar energy systems including the replacement of the existing roof at our Sterling Facility.

Under the terms of the Current Credit Facility, as amended, we are required to meet a prescribed Fixed Charge Coverage Ratio (as defined) that is determined at the end of each fiscal quarter on a rolling twelve-month basis. This ratio is a financial metric that we use to measure our ability to cover fixed charges such as interest and lease expenses divided by EBITDA (as defined in the Current Credit Facility) which represents net income (loss) before interest, taxes, depreciation and amortization. As of June 30, 2026, the Company is required to meet a Fixed Charge Coverage Ratio on a rolling twelve-month basis of 1.10x. As of June 30, 2026, we were in compliance with this ratio having attained a ratio of 1.36x. Additionally, we are in compliance with all other required business and financial covenants in the Current Credit Facility.

The Current Credit Facility and Related Party Notes are due on September 30 and October 1, 2026, respectively and are classified as current liabilities on the condensed consolidated balance sheet as of June 30, 2026. As a result of the due dates of this debt, there is substantial doubt about our ability to continue as a going concern for the twelve months following the date of filing of these consolidated financial statements. Moreover, Webster Bank has advised us that it does not want to renew our Current Credit Facility. In addition to discussions with our lenders, as discussed in our Current Report on Form 8-K filed on February 17, 2026, and Registration Statement on Form S-4 filed on July 22, 2026, we are seeking to merge with Tenax pursuant to the terms of the A&R Merger Agreement, as amended by the Amendment. It is likely that we will not complete the Merger with Tenax prior to September 30, 2026. However, we are currently engaged in discussions with Webster Bank as well as the holders of the Related Party Notes as to the terms and conditions on which they will extend the maturity dates of their debt to the Outside Date of November 30, 2026, as defined in the Amendment to the A&R Merger Agreement.

Pursuant to the Current Credit Facility we are required to maintain a collection account with our lender into which substantially all cash receipts are remitted. Should our lender choose to increase the rate of interest or refuse to make loans under the revolving portion of the Current Credit Facility and keep the funds remitted to the collection account, it would adversely impact our operating results. If the lender were to cease making new loans under the revolving facility, we would lack the funds to continue operations. The Current Credit Facility expiration date and the rights granted to the lender, combined with the reasonable possibility that we might fail to meet covenants in the future, raise substantial doubt about our ability to continue as a going concern for the one year commencing as of the date of filing this report. To date, the lender has chosen not to exercise any of its remedies, though we have agreed to place $3,930,000 of ATM proceeds in an interest bearing account with the lender to serve as additional security for our obligations under the Current Credit Facility and agreed to pay $150,000 for its agreement to extend the maturity date to September 30, 2026. It is likely that the lender under our Current Credit Facility and the holders of our Related Party Notes will require additional fees for their respective agreement to extend the maturity date of the Current Credit Facility and the Related Party Notes beyond September 30, 2026.

To support current operations and strategic initiatives, beginning in December 2024 we raised capital through public market sales of our common stock and believe we can continue to access equity markets in future periods, though there is no assurance as to our ability to do so or as to the price and terms under which we could issue equity securities. During the year ended December 31, 2025, we sold 1,213,593 shares of common stock in the public market and generated gross proceeds of $4,869,000, of which approximately $3,930,000 is restricted for the benefit of the Current Credit Facility lender. Since initiating the sales in December 2024, we have sold a total of 1,330,444 shares for gross proceeds of $5,375,000. In light of ongoing negotiations with our lenders and in accordance with the A & R Merger Agreement with Tenax, we have temporarily paused all equity raising activity.

The following is a brief discussion of the recent amendments to the Current Credit Facility (all of which have been included as exhibits to reports filed with the SEC):

• On January 30, 2025, we entered into an Eighth Amendment to provide for an additional Term Loan in the amount of $1,640,000 for the acquisition of equipment. The monthly principal installments on this additional Term Loan are $19,524. This amendment further revised our Financial Covenants. For the rolling twelve-month period ending March 31, 2025 and June 30, 2025, we are required to achieve a Fixed Charge Coverage Ratio of 1.05x. Beginning with the rolling twelve-month period ending September 30, 2025 and going forward the Company is required to achieve a Fixed Charge Coverage Ratio of 1.25x. All other covenants remain unchanged. In connection with these changes, the Company paid an amendment fee of $20,000.
• On September 10, 2025, we entered into a Ninth Amendment where we agreed that $3,930,000 of the proceeds from our ATM Offering would be maintained in an interest bearing account. The funds in this account serve as security for our obligations under the Current Credit Facility.
• On December 15, 2025, we entered into a Tenth Amendment which waived the defaults caused by the failure to achieve the required fixed charge coverage ratio for the fiscal quarter ended June 30, 2025, and for exceeding the permitted amount of capital expenditures for the fiscal year ending December 31, 2025. Additionally, the maturity date of the revolving credit and term loans were extended to March 31, 2026, and amended the capital expenditure covenant. The company paid an amendment fee of $40,000.
• On February 26, 2026, we entered into an Eleventh Amendment to which extended the maturity date of the revolving credit and term loans to September 30, 2026. We paid an amendment fee of $25,000 and agreed to pay an additional fee of $150,000 on the maturity date of the Current Credit Facility.

If we are unable to close the merger with Tenax contemplated by the A & R Merger Agreement or obtain a new lender to replace the Current Credit Facility we may not be able to meet our financial obligations. As of June 30, 2026, we have borrowing capacity of approximately $1,317,000 under the Revolving Loan.

In addition to required Term Loan payments we may have to make additional payments under the Current Credit Facility. For so long as the Term Loan under the Current Credit Facility remains outstanding, if Excess Cash Flow (as defined) is a positive amount for any fiscal year, we are obligated to pay an amount equal to the lesser of (i) twenty-five percent (25%) of the Excess Cash Flow and (ii) the outstanding principal balance of the Term Loan. Such payment shall be applied to the outstanding principal balance of the Term loan, on or prior to the April 15 immediately following such fiscal year. For the fiscal year ended December 31, 2025, based on the calculation there is no Excess Cash Flow payment required.

In addition to the outstanding indebtedness under the Current Credit Facility and Related Party Notes, we have various equipment leases and contractual obligations of an ongoing nature which we service in the ordinary course out of our cash flow from operations.

Our material cash requirements are for debt service, funding working capital and capital expenditures. We have historically met these requirements with funds provided by a combination of cash generated from operating activities and cash generated from equity and debt financing transactions. Based on our current revenue visibility, strength of our backlog, and availability under our Current Credit Facility, we believe that we have sufficient liquidity to meet our day-to-day cash requirements for our operations. However, we must pay or refinance large portions of our indebtedness prior to September 30, 2026 and, even if the lender under our Current Credit Facility were to agree to additional extensions, the extensions are likely to be short term and require the payment of significant fees. Further, as a condition to any extension which might be agreed to by our current lender or a refinancing of our Current Credit Facility, our current lender or a new lender may require that the holders of our Related Party Notes extend or otherwise modify the subordination agreements they have given in favor of our current lender and the holders of the Related Party Notes may seek consideration for agreeing to do so.

If we do not close the contemplated Merger, it is unlikely we will be able to pay existing debt and will need to refinance our Current Credit Facility and Related Party Notes. We have engaged in discussions with Webster Bank and the holders of our Related Party Notes to explore potential extensions or refinancings of our obligations. Webster Bank has advised us that it will not extend our Current Credit Facility indefinitely and required us to make significant payments in consideration of its agreement to extend the Current Credit Facility to September 30, 2026. Refinancing our indebtedness may require us to pay higher interest rates than we currently pay, agree to more restrictive business or financial covenants or involve the issuance of debt, equity and/or new securities convertible into or exercisable or exchangeable for our common stock to our lenders or to third parties to reduce the amount of our debt. Any failure to refinance our existing debt or obtain additional working capital when required would have a material adverse effect on our business and financial condition. Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.

Further details regarding outstanding indebtedness are provided in “Note 5. Debt.”

Cash Flow

The following table summarizes our net cash flow from operating, investing and financing activities for the periods indicated below (in thousands):

Cash Provided by Operating Activities

For the six months ended June 30, 2026, we generated $225,000 of cash flows from operations as compared to $1,870,000 for the six months ended June 30, 2025. The decrease was due primarily to the increase in our net loss, increases in inventory and decreases in accounts payable partially offset by an increase in customer deposits.

For the six months ended June 30, 2025, we generated $1,870,000 from operations which was mainly attributable to a decrease in accounts receivable and an increase in non-cash expenses partially offset by the net loss and an increase in inventory.

Cash Used in Investing Activities

During the first half of 2026, we continued to make investments to enhance our competitiveness and market position. Cash used in investing activities of $485,000 and $2,113,000, during the six months ended June 30, 2026 and 2025, respectively, was for new machinery and equipment.

The investments made in 2026 and 2025 increased our production efficiency and speed, while maintaining closer tolerances. We intend to limit capital expenditures until such time as our debt situation is resolved.

Cash Provided by (Used in) Financing Activities

For the six months ended June 30, 2026, cash provided by financing activities was $274,000. During this period, we increased borrowings under our Current Credit Facility by $541,000 (consisting of a net increase in Revolving Loan borrowings of $1,065,000 and a net decrease of $524,000 against the Term Loan). Additionally, we made payments of $118,000 pursuant to financing lease obligations, $14,000 on our Solar Credit Facility, $4,000 on a loan payable and $131,000 for taxes related to the net share settlement of equity awards.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any off-balance sheet arrangements as of June 30, 2026.

Critical Accounting Estimates

A critical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Use of Estimates. The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include inventory valuation, useful lives and impairment of long-lived assets, income tax provision, and allowance for credit losses. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions.

There have been no material changes to the Company’s critical accounting estimates as compared to the estimates described in the 2025 Annual Report which we believe are the most critical to our business and understanding of our results of operations and affect the more significant judgments and estimates that we use in preparation of our condensed consolidated financial statements.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Acting Chief Executive Officer (“CEO”) and Vice President of Finance, who is our principal financial and accounting officer (“PFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2026. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and PFO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Based on this evaluation, and as a result of the material weakness described below, our CEO and PFO have concluded that our disclosure controls and procedures were not effective as of June 30, 2026.

As reported in our 2025 Form 10-K, in connection with their review of our internal controls as of and for the year ended December 31, 2025, our management identified a material weakness in our internal controls over financial reporting related to our IT systems which has yet to be remediated. During fiscal 2025, we implemented new controls and procedures to eliminate this weakness but additional enhancements and more formalized documentation are still required. Tests of such controls and procedures are ongoing and the material weakness noted will only be deemed to have been remediated after the new controls and procedures have been in place for a sufficient period and management has concluded through appropriate testing that the controls are operating effectively. As such, we consider this material weakness to not be remediated as of June 30, 2026. Based on this evaluation and as a result of this material weakness, we have concluded that our disclosure controls and procedures were not effective as of June 30, 2026. For more information, see Item 9A. Controls and Procedures, included in our Annual Report on Form 10-K.

During 2026, the Company is continuing to test such controls and procedures designed to remediate the aforementioned material weakness.

Changes in Internal Control over Financial Reporting

Other than as described above, there have not been any changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter which is the subject of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Investors are encouraged to consider the risks described in our Registration Statement on Form S-4 filed with the SEC on July 22, 2026, our 2025 Form 10-K, our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities.