Guerrilla RF, Inc.: Form 10-Q for the period ended Jun 30, 2026

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, 2025 as filed with the SEC on March 26, 2026.

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;
• 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.

SECOND QUARTER AND FIRST HALF FISCAL 2026 FINANCIAL HIGHLIGHTS

• Revenue for the second quarter of fiscal 2026 increased approximately 49% to $8.0 million, compared with $5.4 million for the second quarter of fiscal 2025. The increase was driven by growth of 142% in our catalog category and 97% in our infrastructure category, partially offset by a 28% decrease in our automotive category. Within the catalog category, revenue from aerospace & defense applications increased to $2.2 million from $0.5 million in the prior year period, driven primarily by increased demand in the drone and satellite communications markets. Aerospace & defense represented approximately 27% of second-quarter revenue, compared with 9% in the prior year period.
• Gross margin for the second quarter of fiscal 2026 was approximately 70.9%, compared with 64.9% in the prior year period. The improvement was primarily attributable to higher sales volumes, favorable product mix, including a greater contribution from aerospace & defense applications, and improved operating leverage. Contribution margin remained strong at approximately 78.7%, reflecting favorable product economics and the scalability of our fabless semiconductor operating model. Although overhead expenses increased modestly in absolute dollars, they declined as a percentage of revenue as higher sales volumes provided improved operating leverage.
• Operating income was $1.0 million for the second quarter of fiscal 2026, compared with an operating loss of $1.4 million for the second quarter of fiscal 2025. The $2.3 million improvement in operating results was primarily attributable to the increase in revenue and gross profit, together with continued operating expense discipline. Total operating expenses decreased approximately 3% year over year to $4.7 million, despite the 49% increase in revenue. The improvement reflects our revenue strength and expense discipline.
• Net cash provided by operating activities during the second quarter of fiscal 2026 was $2.4 million, compared with net cash used in operating activities of $1.2 million during the prior year period. For the six months ended June 30, 2026, net cash provided by operating activities was $1.2 million, compared with net cash used in operating activities of $3.3 million during the prior year period. The improvement primarily reflected stronger operating results and favorable changes in working capital.
• Net loss for the second quarter of fiscal 2026 was $2.2 million, compared with a net loss of $0.5 million for the second quarter of fiscal 2025. The increase in net loss was primarily attributable to a $3.0 million non-cash loss resulting from the change in fair value of warrant liabilities during the second quarter of fiscal 2026, compared with a $1.1 million non-cash gain recognized in the prior year period. The change in the fair value of warrant liabilities therefore resulted in an $4.1 million unfavorable year-over-year variance. These fair-value adjustments were non-cash and did not affect operating income or cash flows from operating activities.
• Net loss per share was $0.21 and $0.05 for the second quarter of fiscal 2026 and 2025, 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.

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 as of the end of the period. 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 continue 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 continue 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, but as a percentage of revenues, sales and marketing expenses are expected to continue to decrease.

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 Income

Interest income consists of interest earned on cash.

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 debt discount, and interest expense related to our finance leases.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities is fully attributable to the revaluation of the warrants.

Other Income (Expense)

Other income was primarily attributable to net proceeds from an employee retention tax credit. Other expense consisted of various individually immaterial items.

Results of Operations

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

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Comparison of the three months ended June 30, 2026 and 2025 (unaudited):

Revenues increased $2.6 million, or 49%, to $8.0 million for the three months ended June 30, 2026, compared to $5.4 million for the three months ended June 30, 2025. The increase was primarily driven by the Company’s catalog category, which grew $3.0 million, or 142.0%, to $5.0 million, reflecting the conversion of prior design wins into production revenue and increased demand across multiple end markets. Within the catalog category, revenue from aerospace and defense applications increased to $2.2 million from $0.5 million in the prior-year period, driven primarily by strength in drone and satellite communications applications.

Revenue from the infrastructure category increased $0.5 million, or 96.5%, to $1.1 million, reflecting higher demand across certain infrastructure programs. These increases were partially offset by a $0.7 million, or 27.6%, decrease in automotive revenue to $1.9 million, primarily due to lower demand from certain legacy automotive programs, including compensator and satellite digital audio radio service applications

The increase in total revenue was also driven by higher shipments of existing products, which increased $3.3 million, or 81.7%, to $7.3 million for the three months ended June 30, 2026, compared to $4.0 million in the prior year period. This growth reflects the continued conversion of prior design wins into production and sales. New product revenue decreased to $0.7 million, compared to $1.3 million in the prior year period, as fewer new products reached initial production during the current quarter.

We generate revenue from customers located within and outside the United States. Domestic revenue increased $0.7 million, or 20.6%, to $4.1 million, while international revenue increased $2.0 million, or 108.3%, to $3.9 million for the three months ended June 30, 2026, compared to the prior year period. International revenue represented 48.6% of total product revenue for the quarter, compared to 35.4% in the prior year period, reflecting continued expansion of the Company’s global distribution footprint.

Beginning in the first quarter of 2026, the Company updated its internal market categorizations to better reflect customer end-market exposure. Market revenue information for prior periods has been recast to conform to the current presentation to provide meaningful period-to-period comparisons. This change did not affect total revenue, net loss, or any amounts reported in the consolidated financial statements.

Direct Product Costs and Gross Profit

Direct product costs increased $0.4 million, or 24%, to $2.3 million for the three months ended June 30, 2026, compared to $1.9 million for the three months ended June 30, 2025. The increase was primarily attributable to increases in production and sales volume which in turn led to the 49% increase in revenue. However, direct product costs increased at a slower rate than revenues over the same period, reflecting improved revenue leverage and favorable product mix.

Gross profit increased $2.2 million, or 63%, to $5.7 million for the three months ended June 30, 2026, compared to $3.5 million for the prior year period. Gross margin expanded to approximately 70.9% for the three months ended June 30, 2026, compared to 64.9% in the prior year period, representing an increase of approximately 601 basis points.

The improvement in gross margin was primarily driven by higher revenue volumes and the improved overhead absorption, as well as a favorable shift in product mix toward higher margin catalog products. Direct product costs as a percentage of revenue declined meaningfully, reflecting the scalability of the Company’s fabless semiconductor model and continued supply discipline.

Overall, the Company’s gross profit performance demonstrates strong operating leverage as incremental revenue gains continue to convert at a high contribution margin, consistent with expectations for analog and RF semiconductor companies operating at increasing scale.

Research and Development Expenses

Research and development expenses decreased $0.1 million, or 4%, to $2.1 million for the three months ended June 30, 2026, compared to $2.2 million for the three months ended June 30, 2025. The decrease was primarily attributable to ongoing expense reduction initiatives and year-over-year headcount rationalization efforts implemented across the organization.

Despite the reduction in absolute spending, the Company continues to prioritize investments in key product development programs aligned with its strategic roadmap, while driving improved efficiency in engineering resources.

Sales and Marketing Expenses

Sales and marketing expenses were $1.5 million for the three months ended June 30, 2026 and 2025. Expenses remained relatively flat despite a 49% increase in revenue, reflecting continued cost discipline while supporting higher sales volumes. The modest increase was primarily attributable to higher travel costs associated with customer engagement activities.

General and Administrative Expenses

General and administrative expenses decreased $0.05 million, or 4%, to $1.1 million for the three months ended June 30, 2026, compared to $1.2 million for the three months ended June 30, 2025. The decrease was primarily attributable to continued execution of the Company’s cost reduction initiatives, including headcount rationalization and reductions in professional services and other administrative expenses.

The Company continues to align its general and administrative cost structure with current operating levels, while maintaining the necessary infrastructure to support its growth and public company requirements.

Other Income (Expenses)

Interest expense was approximately $0.2 million for the three months ended June 30, 2026 and 2025.

During the three months ended June 30, 2026 , the Company recognized a $3.0 million loss related to the change in fair value of warrant liabilities as compared to a gain on the change in fair value of warrant liabilities of $1.0 million during the three months ended June 30, 2025, which represented an unfavorable change of $4.1 million in the aggregate. The changes are 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 June 30, 2026 and 2025.

Other income was immaterial for the three months ended June 30, 2026 and 2025. In addition, during the three months ended June 30, 2026, the Company had interest income of $0.02 million compared to $0.05 million in the comparable period of 2025.

Comparison of the six months ended June 30, 2026 and 2025 (unaudited):

Revenues increased $4.7 million, or 49%, to $14.5 million for the six months ended June 30, 2026, compared to $9.7 million for the six months ended June 30, 2025. The increase was primarily driven by the Company’s catalog category, which increased $6.2 million, or 169.4%, to $9.8 million, reflecting the conversion of prior design wins into production revenue and increased demand across multiple end markets.

Within the catalog category, revenue from aerospace and defense applications increased $4.0 million, or 423.1%, to $4.9 million from $0.9 million in the prior-year period, driven primarily by strength in drone and satellite communications applications. Aerospace and defense revenue represented approximately 34% of total revenue for the six months ended June 30, 2026, compared with approximately 10% in the prior-year period. Revenue from the remaining catalog business increased $2.2 million, or 80.6%, to $4.9 million.

Revenue from the wireless infrastructure category increased $0.6 million, or 50.8%, to $1.7 million, reflecting higher demand across certain infrastructure programs. These increases were partially offset by a $2.0 million, or 39.6%, decrease in automotive revenue to $3.0 million, primarily due to lower demand from certain legacy automotive programs, including compensator and satellite digital audio radio service applications.

The increase in total revenue was also driven by higher shipments of existing products, which increased $6.1 million, or 82.5%, to $13.5 million for the six months ended June 30, 2026, compared to $7.4 million in the prior year period. This growth reflects the continued conversion of prior design wins into production. New product revenue decreased to $0.9 million, compared to $2.3 million in the prior year period, as fewer new product introductions reached initial production during the current quarter.

We generate revenue from customers located within and outside the United States. Domestic revenue increased $1.8 million, or 27.9%, to $8.4 million, while international revenue increased $3.0 million, or 96.6%, to $6.1 million for the six months ended June 30, 2026, compared to the prior year period. International revenue represented 41.8% of total product revenue for the six months ended June 30, 2026, compared to 31.9% in the prior year period, reflecting continued expansion of the Company’s global distribution footprint.

Direct Product Costs and Gross Profit

Direct product costs increased $0.7 million, or 19%, to $4.3 million for the six months ended June 30, 2026, compared to $3.6 million for the six months ended June 30, 2025. The increase in direct product costs was attributable to increases in production and sales volume, but was significantly lower than the 49% increase in revenues over the same period, reflecting improved revenue leverage and favorable product mix.

Gross profit increased $4.0 million, or 66%, to $10.2 million for the six months ended June 30, 2026, compared to $6.2 million for the prior year period. Gross margin expanded to approximately 70.5% for the six months ended June 30, 2026, compared to 63.2 % in the prior year period, representing an increase of approximately 730 basis points.

The improvement in gross margin was primarily driven by higher revenue volumes and the improved overhead absorption, as well as a favorable shift in product mix toward higher margin catalog products. Direct product costs as a percentage of revenue declined meaningfully, reflecting the scalability of the Company’s fabless semiconductor model and continued supply chain discipline.

Overall, the Company’s gross profit performance demonstrates strong operating leverage as incremental revenue gains continue to convert at a high contribution margin, consistent with expectations for analog and RF semiconductor companies operating at increasing scale.

Research and Development Expenses

Research and development expenses decreased $0.6 million, or 13%, to $4.1 million for the six months ended June 30, 2026, compared to $4.7 million for the six months ended June 30, 2025. The decrease was primarily attributable to ongoing expense reduction initiatives and year-over-year headcount rationalization efforts implemented across the organization.

Despite the reduction in absolute spending, the Company continues to prioritize investments in key product development programs aligned with its strategic roadmap, while driving improved efficiency in engineering resources.

Sales and Marketing Expenses

Sales and marketing expenses decreased $0.2 million, or 7%, to $3.1 million for the six months ended June 30, 2026 compared to $3.4 million for the six months ended June 30, 2025. The decrease was primarily driven by ongoing cost reduction initiatives and lower personnel-related expenses as a result of headcount rationalization.

Additional reductions were achieved through tighter controls over discretionary spending, including travel and marketing-related activities, while maintaining support for key customer engagements and revenue-generating programs.

General and Administrative Expenses

General and administrative expenses decreased $0.5 million, or 20%, to $2.1 million for the six months ended June 30, 2026, compared to $2.6 million for the six months ended June 30, 2025. The decrease was primarily attributable to continued execution of the Company’s cost reduction initiatives, including headcount rationalization and reductions in professional services and other administrative expenses.

The Company continues to align its general and administrative cost structure with current operating levels, while maintaining the necessary infrastructure to support its growth and public company requirements.

Other Income (Expenses)

Interest expense decreased $0.03 million, or 7% to $0.4 million for the six months ended June 30, 2026 compared to the prior year period.

During the six months ended June 30, 2026 , the Company recognized a $2.1 million loss related to the change in fair value of warrant liabilities as compared to a gain on the change in fair value of warrant liabilities of $0.8 million during the six months ended June 30, 2025, which represented an unfavorable net change of $2.9 million in the aggregate. The changes are 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 June 30, 2026 and 2025.

Other income increased $0.4 million primarily due to the employee retention tax credit received during the six months ended June 30, 2026. In addition, during the six months ended June 30, 2026, the Company had interest income of $0.04 million compared to $0.1 million in the comparable period of 2025.

Liquidity and Capital Resources

Our primary sources of liquidity have been proceeds from private placements and borrowings under our credit facilities. As of June 30, 2026, we had cash and cash equivalents of $4.6 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 June 30, 2026, we had approximately $0.7 million outstanding under the Spectrum Loan Facility and $4.5 million outstanding under the Salem Loan Facility. On June 10, 2026, we entered into the Second Amendment to the Spectrum Loan Facility, which extended the term of the facility through May 31, 2028 (subject to automatic 24-month renewals), and reduced the annual facility fee to $28,125. See Note 5 to our unaudited condensed consolidated financial statements for additional information.

As discussed in Note 1 to our condensed consolidated financial statements, we have historically incurred losses and negative cash flows from operations since inception and had an accumulated deficit of $61.9 million as of June 30, 2026. We generated positive operating cash flow during the first half of 2026, which is a significant improvement to $3.3 million negative operating cash flow for the same period in 2025.

We expect to continue investing in research and development, sales and marketing, and administrative infrastructure. Management continues to focus on cost control, margin improvement, and capital efficiency.

Based on current operating plans, existing cash balances, positive operating cash flow during the first half of 2026, and availability under the Spectrum Loan Facility, we believe that our liquidity will be sufficient to fund operations for at least the next twelve months from the issuance date of these financial statements. However, this assessment is based on current forecasts and assumptions, and there can be no assurance that we will not require additional capital. We may seek to raise additional funds through equity, debt financings, or other sources as market conditions permit.

The following table summarizes our sources and uses of cash for each of the periods presented.

Cash (used in) provided by:

31

Operating Activities

Net cash provided by operating activities was $1.2 million for the six months ended June 30, 2026, compared to net cash used in operating activities of $3.3 million for the same period in 2025.

Cash provided by operating activities for the six months ended June 30, 2026 was due to our net loss of $1.1 million, an increase in non-cash items of $3.6 million, and a decrease in working capital of $1.3 million. For the six months ended June 30, 2026, non-cash items that were a part of the net loss included depreciation and amortization of $0.7 million, share-based compensation of $0.4 million, non-cash operating lease cost of $0.5 million, and a change in the fair value of warrant liabilities of $2.1 million.

Cash used in operating activities for the six months ended June 30, 2025 was principally due to our net loss of $4.0 million, non-cash items of $1.0 million, and a decrease in working capital of $0.3 million. For the six months ended June 30, 2025, non-cash items that were a part of the net loss included depreciation and amortization of $0.6 million, share-based compensation of $0.6 million, and non-cash operating lease cost of $0.6 million, partially offset by a change in the fair value of warrant liabilities of $0.8 million.

Investing Activities

Cash used in investing activities was $0.2 million and $0.6 million for the six months ended June 30, 2026 and 2025, respectively.

Cash used in investing activities consisted primarily of purchases of property, plant and equipment. The decrease in cash used compared to the prior year period reflects lower capital expenditures as the Company continued to prioritize investments supporting its operations while maintaining disciplined capital spending.

Financing Activities

Cash used in financing activities for the six months ended June 30, 2026 of $0.5 million was due to $0.7 million of payments related to finance leases and finance agreements, which was offset by $0.1 million from the exercise of stock options and net debt financing.

Cash provided by financing activities for the six months ended June 30, 2025 of $0.7 million was due to $1.3 million of additional net debt financing, partially offset by $0.6 million of payments related to finance leases and insurance premiums.

Contractual Obligations and Commitments

The following summarizes our significant contractual obligations as of June 30, 2026 (unaudited).

Off-Balance Sheet Arrangements

As of June 30, 2026 and December 31, 2025, 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, 2025, filed with the SEC on March 26, 2026, have not materially changed.

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.

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.

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 June 30, 2026, the end of the period covered by this 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, management concluded that our disclosure controls and procedures were effective as of June 30, 2026.

Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2026, there have been no 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.