# Guerrilla RF, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Guerrilla RF, Inc.](/companies/guer.md) (CIK 1832487)
- Form: 10-Q
- Filed: 2025-05-13
- Accepted by EDGAR: May 13, 2025, 13:34 ET
- Period: 2025-03-31
- Accession: 0001437749-25-016378
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1832487/000143774925016378/guer20250331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1832487/000143774925016378/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $4.4m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $1.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $2.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $2.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$3.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $210.8k | us-gaap:InterestExpenseNonoperating |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$3.5m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.34 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$2.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $47.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-03-31 | $6.1m | us-gaap:Cash |
| Current assets | at 2025-03-31 | $10.3m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $22.3m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $7.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $17.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | −$15.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,783 characters.

*The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC on March 27, 2025.*

### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the exhibits hereto and the information incorporated by reference herein, sections entitled “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to risks and uncertainties. Information regarding activities, events, and developments that we expect or anticipate will or may occur in the future, including, but not limited to, information relating to our future growth and profitability targets and strategies designed to increase total shareholder value, are forward-looking statements based on management’s estimates, assumptions and projections. Forward-looking statements also include, but are not limited to, statements regarding our future economic and financial condition and results of operations, the plans and objectives of management and our assumptions regarding our performance and such plans and objectives, as well as the amount and timing of other uses of cash flows. Forward-looking statements generally can be identified through the use of words such as “guidance,” "believe,” “could,” “potential,” “continue,” “outlook,” “project,” “believe,” “target,” “predict,” “estimate,” “forecast,” “strategy,” “may,” “goal,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “should” and other similar expressions that do not relate solely to historical matters. Forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Although we believe that the expectations reflected in forward-looking statements are reasonable, such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by forward-looking statements.

Forward-looking statements contained in this Quarterly Report on Form 10-Q are predictions only, and actual results could differ materially from management’s expectations due to a variety of factors, including those described below. All forward-looking statements are expressly qualified in their entirety by such risk factors.

The forward-looking statements that we make in this Quarterly Report on Form 10-Q are based on management’s current views and assumptions regarding future events and speak only as of their dates. We disclaim any obligation to update developments of these risk factors or to announce publicly any revisions to any of the forward-looking statements that we make, or to make corrections to reflect future events or developments, except as required by the federal securities laws.

Our business is subject to numerous risks and uncertainties, including the following:

- we may not be able to generate sufficient cash to service all of our debt or meet our operating needs;
- we may not be able to achieve profitability or raise sufficient equity capital to support our operating needs and fund our strategic plans;
- international trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects;
- those relating to fluctuations in our operating results;
- our dependence on developing new products, achieving design wins, and several large customers for a substantial portion of our revenue;
- a loss of revenue if purchase contracts are canceled or delayed;
- our dependence on third parties such as suppliers, product manufacturers, and product assemblers and testers;
- risks related to sales through independent sales representatives and distributors;
- risks associated with the operation of our third-party manufacturing providers;
- anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
- our ability to further penetrate our existing customer base;
- our estimates regarding future revenues, capital requirements, general and administrative expenses, sales and marketing expenses, research and development expenses, and our need for or ability to obtain additional financing to fund our operations;
- developments and projections relating to our competitors and our industry, including semiconductor availability, which has affected the automotive industry, impacting vehicle production and thereby demand irregularities for our business;
- business disruptions;
- poor manufacturing yields;
- increased inventory risks and costs due to the timing of customer forecasts;
- our ability to continue to innovate in a very competitive industry;
- unfavorable changes in interest rates, pricing of certain precious metals, utility rates, and shipping and freight costs;
- our strategic investments failing to achieve financial or strategic objectives;
- our ability to attract, retain, and motivate key employees;
- warranty claims, product recalls, and product liability;
- changes in our effective tax rate and the enactment of international or domestic tax legislation, or changes in regulatory guidance;
- risks associated with environmental, health and safety regulations, and climate change;
- risks from international sales and third-party vendor operations;
- the impact of, and our expectations regarding, changes in current and future laws and regulations;
- changes in government trade policies, including the imposition of tariffs and export restrictions;
- our ability to protect and enforce our intellectual property protection and the scope and duration of such protection;
- claims of infringement of third-party intellectual property rights;
- security breaches and other similar disruptions compromising our information;
- theft, loss, or misuse of personal data by or about our employees, customers, or third parties;
- our inability to remediate the material weakness identified in internal controls over financial reporting relating to certain control processes;
- provisions in our governing documents and Delaware law may discourage takeovers and business combinations that our stockholders might consider to be in their best interests; and,
- volatility in the price of our common stock.

These and other risks and uncertainties, which are described in more detail in our most recent Annual Report on Form 10-K that we filed with the SEC and those listed under the caption "Risk Factors" within this Quarterly Report on Form 10-Q, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q as exhibits with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

### Overview

Guerrilla RF is a fabless semiconductor company based in Greensboro, NC. Guerrilla RF was founded in 2013 with a mission to employ RF semiconductor technology to deliver RF solutions to customers in underserved markets. Over the past several years, Guerrilla RF has become a leader in developing high-performance MMIC products for wireless connectivity. It continues to target underserved markets and customers, delivering a range of high-performance MMIC products and associated technical support to a diverse set of customers that enable a more connected world.

Guerrilla RF possesses in-house design, applications, sales, and customer support functions as a fabless semiconductor company. We outsource the manufacture and production of our MMIC products to subcontractors, providing access to multiple semiconductor process technologies. Guerrilla RF’s primary external wafer foundries are located in Taiwan and Singapore, and our primary assembly and test suppliers are located in Malaysia and the Philippines.

### FIRST QUARTER FISCAL 2025 FINANCIAL HIGHLIGHTS

- Total revenues for the first quarter of fiscal 2025 declined 14% to $4.4 million, compared to $5.1 million in Q1 2024. A $1.4 million decline in wireless infrastructure shipments was primarily responsible, partially offset by a 72% increase in automotive revenue and modest gains in catalog sales for military, aerospace, and navigation products. The overall shift in the sales mix reflects weaker infrastructure sales and stronger automotive sales.
- Gross profit margin decreased to 61.1% in the first quarter of fiscal 2025, down from 63.3% in the first quarter of fiscal 2024. Contribution margin declined to 73.0% from 74.3% over the same period. This margin compression was primarily driven by a product‐mix shift from higher‑margin wireless infrastructure products to lower‑margin automotive business. Overhead costs were slightly down in the first quarter but as a percentage of sales they increased from 11% in first quarter 2024 to 12% in the first quarter 2025.
- Operating loss was $3.2 million in the first quarter of 2025, compared with $1.8 million in the first quarter of 2024. The $1.4 million increase resulted from a ($0.6 million) decline in gross profit driven by lower revenues and mix shift, ($0.4 million) in additional consulting fees, and ($0.4 million) of severance costs related to organizational rationalization. Operating expenses rose $0.7 million from $5.1 million in the quarter ended March 31, 2024, to $5.8 million in the quarter ended March 31, 2025 reflecting the same one‑time consulting and severance costs. The severance costs are a one-time occurrence, and are part of significant cost reduction measures focused on organizational efficiency that were executed in the quarter. These actions are expected to meaningfully improve both our cash position and profit margin going forward.
- Net loss per share was $0.34 and $0.42 for the first quarter of fiscal 2025 and 2024, respectively.

### Key Metrics (Non-GAAP Measures)

These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of Company results as reported under GAAP. The Company compensates for such limitations by relying primarily on GAAP results and using non-GAAP measures only as supplemental data. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by us, may differ from and may not be comparable to similarly titled measures used by other companies.

We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions, and assess working capital needs.

| Key Metrics | Three Months Ended March 31, 2025 (unaudited) | 2024 (unaudited) |
| --- | ---: | ---: |
| Number of products released | 8 | 2 |
| Number of total products | 171 | 133 |
| Number of products with lifetime revenue exceeding $100 thousand | 76 | 67 |
| Product backlog (in millions) | $6.7 | $8.3 |

*Number of products released:* The total number of distinct new products released into production (products that have completed design, quality, and supply chain readiness) during the period.

*Number of total products:* The cumulative number of production-released products since our inception through the end of the period.

*Number of products with lifetime revenue exceeding $100 thousand:* The number of products that have achieved the threshold of cumulative sales of $100,000 since our inception through the end of the period.

*Product backlog:* The amount of product sales that have been committed to by customers, but have not yet been completed, shipped, or invoiced. The Company's product backlog can be materially impacted by supply chain constraints, a shift in customer ordering patterns whereby customers place orders in anticipation of extended product delivery lead times, or other customer order delivery request modifications. Furthermore, because the Company partners closely with a number of its customers to produce high-performance, quality components that are often designed into customers’ end products, immediate substitution of the Company’s products is neither typically desired by customers nor necessarily feasible. As such, the Company has not historically experienced significant order cancellations, and the Company does not expect significant order cancellations in the future. The Company closely monitors product backlog and its potential impact on the Company’s financial performance.

### Components of Results of Operations

#### Revenues

We derive our revenue from sales of high-performance RF semiconductor products. We design, integrate, and package differentiated, semiconductor-based products that we sell to customers through our direct sales organization, a network of independent sales representatives, and distributors. We generate revenue from customers located within and outside the U.S. In addition to sales to customers, we generate royalty revenue under a royalty agreement with one semiconductor manufacturer.

#### Direct Product Costs and Gross Profit

*Direct Product Costs.* Our direct product costs consist of actual direct product expenses, salaries and related expenses, overhead, third-party services vendors, and depreciation expense related to the equipment and information technology costs incurred directly in the Company’s revenue-generating activities.

*Gross Profit.* Our gross profit is calculated by subtracting our cost of revenues from revenues. Gross margin is expressed as a percentage of total revenues. Our gross profit may fluctuate from period to period as revenues fluctuate due to the mix of products we sell to customers, royalty revenue volume, operational efficiencies, and changes to our technology expenses and customer support.

We plan to focus on and grow the sales volume of new and existing products with the highest gross margin. We intend to continue investing additional resources in our engineering and design capabilities, which drive our research and development efforts and, in turn, drive additional revenue streams and enable us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of revenues in the future.

#### Operating Expenses

Operating expenses consist primarily of research and development expenses (R&D), sales and marketing expenses, and employee compensation costs for operations management, finance, accounting, information technology, compliance, and human resources personnel. In addition, general and administrative expenses include non-personnel costs, such as facilities, legal, accounting, and other professional fees, and other supporting corporate expenses not allocated to other departments. We expect our general and administrative expenses will increase in absolute dollars as our business grows, but we expect general and administrative expenses to decrease as a percent of revenues in the coming years.

R&D expenses consist of costs for the design, development, testing, and enhancement of our products and are generally expensed as incurred. These costs consist primarily of personnel costs, including salaries, benefits, bonuses, and share-based compensation for our product development personnel. Research and development expenses also include training costs, product management, third-party partner fees, and third-party consulting fees. We expect our research and development expenses to increase in absolute dollars as our business grows, but as a percent of revenues, R&D expenses are expected to decrease.

Sales and marketing expenses consist primarily of employee compensation costs related to sales and marketing, including salaries, benefits, bonuses, and share-based compensation, costs of general marketing activities and promotional activities, travel-related expenses, and allocated overhead. Sales and marketing expenses also include costs for advertising and other marketing activities. Advertising is expensed as incurred. As we expand our sales and marketing efforts, we expect our sales and marketing expenses will increase in absolute dollars.

Non-income taxes include excise taxes, sales and use taxes, capital stock and franchise taxes, and property taxes. Capital stock and franchise taxes are taxes that states charge the Company for the privilege of incorporating or doing business in a state.

#### Interest Expense

Interest expense consists primarily of the interest incurred on our debt obligations, our factoring arrangement expense, the non-cash interest expense associated with the amortization of common shares issued to certain of our debtholders, and lease expense related to our capital leases.

#### Results of Operations

The following table summarizes the results of our operations for the periods presented:

*(unaudited)*

*(unaudited)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Revenues | $4,372,904 | $5,091,249 |
| Direct product costs | 1,702,780 | 1,870,675 |
| Gross profit | 2,670,124 | 3,220,574 |
| Operating expenses: |  |  |
| Research and development | 2,492,927 | 2,251,533 |
| Sales and marketing | 1,885,465 | 1,352,909 |
| General and administrative | 1,453,560 | 1,454,695 |
| Total operating expenses | 5,831,952 | 5,059,137 |
| Operating loss | (3,161,828) | (1,838,563) |
| Other income (expenses): |  |  |
| Interest income | 65,629 | — |
| Interest expense | (210,770) | (1,684,787) |
| Change in fair value of warrant liabilities | (235,896) | — |
| Change in fair value of derivative liabilities | — | 158,000 |
| Other income (expenses) | — | (7,202) |
| Total other income (expenses), net | (381,037) | (1,533,989) |
| Net loss | $(3,542,865) | $(3,372,552) |

### Comparison of the three months ended March 31, 2025 and 2024 (unaudited):

|  | Three Months Ended March 31, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $4,372,904 | $5,091,249 | (718,345) | (14)% |

Revenues decreased $0.7 million to $4.4 million for the three months ended March 31, 2025, compared to $5.1 million for the three months ended March 31, 2024. A $1.4 million decline in wireless infrastructure shipments was primarily responsible for the decrease. This decline was partially offset by increases in automotive revenue of $0.9 million. All other product categories remained relatively consistent with the prior year period, with modest gains in catalog sales for military, aerospace and navigation products.

Major customers; those responsible for more than 10% of annual product shipment revenue; accounted for a significant portion of sales in both periods. For the three months ended March 31, 2025 and 2024, RFPD, a large product distributor, represented 72% and 82% of product revenue, respectively. The year-over-year decrease in RFPD’s share reflects a higher proportion of sales transacted directly with end customers.

Our existing product sales declined from $4.4 million in the first quarter of 2024 to $3.4 million in the first quarter of 2025. New product sales increased from $0.6 million to $1.0 million over the same period. Revenue decreased in part because of a $1.5 million initial shipment to a new customer in the prior year, which did not repeat this year.

International shipments increased 63%, rising from $0.7 million in the first quarter of 2024 to $1.1 million in the first quarter of 2025, and accounted for approximately 26% of total revenues in Q1 2025.

### Direct Product Costs and Gross Profit

|  | Three Months Ended March 31, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Direct product costs | $1,702,780 | $1,870,675 | (167,895) | (9)% |
| Gross profit | $2,670,124 | $3,220,574 | (550,450) | (17)% |

Direct product costs decreased ($0.2 million) to $1.7 million for the three months ended March 31, 2025, compared to $1.9 million for the three months ended March 31, 2024. The 9% decrease was driven by a sales volume decrease of 14%. The lower drop in product costs when compared to sales resulted in gross profit compression due to lower volume and changes in product mix. Gross profit as a percentage of sales decreased from 63.3% for the first quarter of 2024, to 61.1% for the first quarter of 2025 driven by lower contribution margins from product mix shifts.

### Research and Development Expenses

|  | Three Months Ended March 31, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $2,492,927 | $2,251,533 | 241,394 | 11% |

Research and development expenses increased $0.2 million to $2.5 million for the three months ended March 31, 2025, compared to $2.3 million for the three months ended March 31, 2024. This increase primarily reflects $0.1 million of severance expenses related to headcount rationalization and $0.1 million of higher facilities, IT support, and laboratory costs.

### Sales and Marketing Expenses

|  | Three Months Ended March 31, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing | $1,885,465 | $1,352,909 | 532,556 | 39% |

Sales and marketing expenses increased $0.5 million to $1.9 million for the three months ended March 31, 2025 compared to $1.4 million for the three months ended March 31, 2024. The increase reflects a $0.3 million increase in staffing costs to promote international market expansion, $0.3 million of severance from headcount rationalization, and $0.1 million of consulting fees for CRM implementation, partially offset by a $0.2 million reduction in facilities and support allocations.

### General and Administrative Expenses

|  | Three Months Ended March 31, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $1,453,560 | $1,454,695 | (1,135) | (0)% |

General and administrative expenses remained flat at $1.5 million for the three months ended March 31, 2025 and 2024; a $0.2 million increase in consulting fees was offset by a $0.2 million decrease in franchise tax due to a 2024 overpayment.

### Other Income (Expenses)

|  | Three Months Ended March 31, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $65,629 | $— | $65,629 | 100% |
| Interest expense | $(210,770) | $(1,684,787) | $1,474,017 | (87)% |
| Change in fair value of warrant liabilities | $(235,896) | $— | $(235,896) | 100% |
| Change in fair value of derivative liabilities | $— | $158,000 | $(158,000) | (100)% |
| Other expense | $- | $(7,202) | $7,202 | (100)% |
| Total other expenses, net | $(381,037) | $(1,533,989) | $1,152,952 | (75)% |

Interest expense decreased $1.5 million to $0.2 million for the three months ended March 31, 2025, compared to $1.7 million for the three months ended March 31, 2024. The decrease was attributable to a significant paydown of two debt facilities. On August 5, 2024 the Company paid down the Salem Loan Facility by $7.5 million, leaving a remaining balance of $4.5 million. In addition, the Company utilized less of its asset-based loan during the first quarter of 2025. As of March 31, 2025, the amount drawn under the Spectrum Loan Facility was $1.3 million compared to $2.2 million on March 31, 2024.

The change in fair value of warrant liabilities increased by $0.2 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was the result of the remeasurement of the Historical Warrants and the North Run Warrants that are accounted for as liabilities and carried at fair value at March 31, 2025.

In addition, the Company had other contributors to other income including $0.1 million in interest income earned on funds deposited in a money market account which it did not have in the first quarter of 2024, and a change in its derivative liabilities, reflecting an decrease in fair value of $0.2 million.

### Liquidity and Capital Resources

Our primary source of liquidity has been cash raised from private placements and debt financing. As of March 31, 2025, we had cash resources of $6.1 million. We also have two loan facilities, one of which is for up to $3.75 million with a specialty lender (referred to as the Spectrum Loan Facility, described in Note 5 to our unaudited condensed consolidated financial statements), and the other of which is a $4.5 million term loan with a different lender (referred to as the Salem Loan Facility, also described in Note 5 to our unaudited condensed consolidated financial statements). As of March 31, 2025, we had drawn down $1.3 million under the Spectrum Loan Facility and had an outstanding balance of $4.5 million under the Salem Loan Facility.

On August 5, 2024, the Company completed the North Run Private Placement, raising cash proceeds of approximately $21.6 million, net of transaction expenses. Additionally, on August 2, 2024, the Company initiated the amendment of the Salem Loan Facility to (i) reduce the outstanding principal balance from $12.0 million to $4.5 million, (ii) extend the maturity date from January 31, 2026 to December 31, 2028, and (iii) reduce the interest rate from 14% (comprising 3% payment-in-kind (deferred) and 11% cash) to 12% cash. The amendment was effective on August 5, 2024 after the principal balance was reduced from $12.0 million to $4.5 million by using a portion of the proceeds from the North Run transaction.

The Company believes that its existing cash and cash equivalents will provide sufficient resources to support operations and cover existing contractual obligations and other obligations that may arise through the next 12 months.

We have incurred recurring losses and negative cash flows from operations since inception and have an accumulated deficit at March 31, 2025 of $57.3 million. We expect losses and negative cash flows to continue in the near term, primarily due to continued investment in research and development, sales and marketing efforts, and increased administration expenses as our Company grows. We plan to continue to invest in the implementation of our long-term strategic plan and we anticipate that we will continue to narrow cash burn from historical levels so that over time cash reserves will provide the necessary working capital to operate the Company.

Cash (used in) provided by:

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating activities | $(2,263,187) | $(842,394) |
| Investing activities | (47,345) | (26,000) |
| Financing activities | 470,591 | 3,687,786 |
| Net increase (decrease) in cash | $(1,839,941) | $2,819,392 |

29

#### Operating Activities

Cash used in operating activities was $2.3 million for the three months ended March 31, 2025. Cash used in operating activities for the three months ended March 31, 2025 was principally due to our net loss of $3.6 million, non-cash items of $0.9 million, decrease in accounts receivables of $0.3 million and inventories of $0.1 million. For the three months ended March 31, 2025, non-cash items that were a part of the net operating loss included depreciation and amortization of $0.3 million, stock-based compensation of $0.4 million, and non-cash and change in fair value of warrant liabilities of $0.2 million.

Cash used in operating activities was $0.8 million for the three months ended March 31, 2024. Cash used in operating activities for the three months ended March 31, 2024 was principally due to our net loss of $3.4 million, non-cash items of $1.9 million, increase in accounts receivables of $0.7 million, inventories of $0.2 million, and offset by payable and accrued liabilities increase of $1.4 million. For the three months ended March 31, 2024, non-cash items that were a part of the net operating loss included depreciation and amortization of $0.4 million, stock-based compensation of $0.4 million, and non-cash and accretion of notes payable of $1.2 million.

#### Investing Activities

Cash used in investing activities was $47 thousand and $26 thousand for the three months ended March 31, 2025 and 2024, respectively. Cash used in investing activities resulted from the purchase of capital expenditures on property and equipment for all periods presented.

#### Financing Activities

Cash provided by financing activities for the three months ended March 31, 2025 of $0.5 million was due to $0.8 million of additional net debt financing and $0.3 million of payments related to finance leases and insurance premiums.

Cash provided by financing activities for the three months ended March 31, 2024 of $3.7 million was primarily attributable to net proceeds of $3.0 million from private placement equity financing, $1.0 million of additional net debt financing, and $0.3 million of payments related finance leases and insurance premiums.

### Contractual Obligations and Commitments

The following summarizes our significant contractual obligations as of March 31, 2025 (*unaudited).*

|  | Payments due by period Total | Less than 1 year | 1 – 3 years | 4 – 5 years | More than 5 years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Purchase order obligations | $782,724 | $782,724 | $— | $— | $— |
| Short-term notes | 500,000 | 500,000 | — | — | — |
| Long-term notes | 4,000,000 | — | 4,000,000 | — | — |
| Long-term debt | 388,443 | — | 388,443 | — | — |
| Short-term debt | 1,533,616 | 1,533,616 | — | — | — |
| Operating lease obligations | 6,106,946 | 601,721 | 1,589,798 | 3,915,427 | — |
| Finance lease obligations | 1,308,619 | 634,137 | 661,248 | 13,234 | — |
| Total | $14,620,348 | $4,052,198 | $6,639,489 | $3,928,661 | $— |

### Off-Balance Sheet Arrangements

As of March 31, 2024 and December 31, 2024, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

### Critical Accounting Policies and Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments in the preparation of our unaudited interim condensed consolidated financial statements involve derivative and warrant liabilities and the valuation of equity financing. Accordingly, actual results may differ from these estimates. To the extent that there are differences between our estimates and actual results, our future consolidated financial statement presentation, financial condition, results of operations, and cash flows will be affected.

Other than as described under Note 2 to our audited consolidated financial statements and as described above, the Critical Accounting Policies and Significant Judgments and Estimates included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 27, 2025, have not materially changed.

We believe that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the policies we think are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

### Recently Adopted Accounting Standards

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited interim condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

### JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we are no longer an emerging growth company, or affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We have not elected to early adopt certain new accounting standards, as described in Note 2 to our unaudited interim condensed consolidated financial statements. As a result, our unaudited interim condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

## Market risk

As filed, 153 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

## Controls and procedures

As filed, 5,645 characters.

**Management’s Evaluation of our Disclosure Controls and Procedures**

Under the supervision of and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as set forth in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance 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 rules and forms promulgated by the SEC. 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 the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Based on this evaluation, as a result of the material weakness in internal controls over financial reporting disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, management concluded that our disclosure controls and procedures were not effective as of March 31, 2025. While the existence of the material weakness did not result in a material misstatement to the financial statements, it presented a reasonable possibility that a material misstatement in the financial statements could have occurred.

### Status of Remediation of Previously Identified Material Weaknesses in Internal Control Over Financial Reporting

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 the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.

To respond to the material weakness disclosed within our Annual Report on Form 10-K for the year ended December 31, 2024, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. Our remediation efforts are ongoing and we have designed control procedures to address the material weakness. The actions taken by management include, but are not limited to:

- Hiring of Mike-John Williams as Chief Financial Officer effective January 8, 2025;
- Formalization of separate policies and procedures surrounding significant unusual transactions;
- Enhancement of management review controls of significant unusual transactions; and
- Establishment of controls surrounding detailed ledgers related to equity-linked instruments;

We can offer no assurance that these remediation steps will prevent any future deficiencies in our internal control over financial reporting. Any failure to maintain adequate internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. Furthermore, we can give no assurance that the measures we have taken will remediate the outstanding material weakness, or will prevent any future material weaknesses, or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, our strengthened controls and procedures may not be adequate to prevent or identify irregularities or errors, which could affect the fair presentation of our consolidated financial statements.

### Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2025, there have been changes in our internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. These changes are a result of our above-noted actions taken to remedy the material weakness in internal controls over financial reporting disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

## Risk factors

As filed, 2,421 characters.

*The risks set out below represent updates to risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 27, 2025. The information in this Quarterly Report on Form 10-Q should be read in conjunction with the other factors described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.*

***International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects.***

The recent announcements of substantial new tariffs and other restrictive trade policies have created a dynamic and unpredictable trade landscape, which may adversely impact our business.

Current or future tariffs or other restrictive trade measures may raise the costs of raw materials, components or finished goods, which may adversely impact both our product offerings and our operational expenses. Such cost increases may reduce our margins and require us to increase prices, which could harm our competitive position, reduce customer demand and damage customer relationships.

Trade disputes, trade restrictions, tariffs and other political tensions between the U.S. and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also negatively impact customer demand for our products or services, delay purchases or renewals, limit expansion opportunities with customers, limit our access to capital, or otherwise negatively impact our business and operations. Ongoing tariff, trade restrictions and macroeconomic uncertainty has and may continue to contribute to volatility in the price of our common stock.

While we continue to monitor trade developments, the ultimate impact of these risks remains uncertain and any prolonged economic downturn, escalation in trade tensions, or deterioration in international perception of U.S.-based companies could materially and adversely affect our business, results of operations, financial condition and prospects. In addition, tariffs and other trade developments have and may continue to heighten the risks related to the other risk factors described in our Annual Report on Form 10-K for our fiscal year ended December 31, 2024.

Filed May 13, 2025.
Source: SEC EDGAR, the filing index for accession 0001437749-25-016378. Last ingested by Listed: Nov 3, 2026, 08:49 ET. No prices; not investment advice.