What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-14 · 91 added, 185 removed, 91 unchanged (75% of the section changed)

6 unchanged sentences

Backlog and Pipeline

Backlog as of October 6, 2025 was approximately $11 million, representing firm fixed price contracts awarded in the third quarter of 2025 that will be shipped and invoiced through the remainder of calendar year 2025 and early 2026.

Our total validated pipeline as of September 30, 2025 was $166 million, consisting of single and multi-year opportunities for AI- driven edge, video, and sensor and data management platform across our customer verticals.

Backlog as of May 6, 2026 was approximately $4.6 million, representing firm fixed price contracts awarded in the first quarter of 2026 that will be shipped and invoiced through the remainder of 2026.

Our total validated pipeline as of March 31, 2026 was $165.3 million, consisting of single and multi-year opportunities for AI-driven edge, video, and sensor and data management platform across our customer verticals.

Our pipeline includes opportunities at varying stages of progression with expected award timeframes over the next 18-24 months.

Warrant Exercise

On October 8, 2025, we entered into warrant exercise inducement offer letter with the holder of its existing common stock warrants exercisable for an aggregate of 2,162,162 shares of its common stock to exercise its existing warrants at the existing exercise price of $4.50 per share, in exchange for our agreement to issue new common stock warrants to purchase 2,702,702 shares of common stock at an exercise price per share of $6.20.

The aggregate gross proceeds from the exercise of the existing warrants were approximately $9,729,729, before deducting financial advisory fees.

We intend to use the net proceeds from the exercise of the existing warrants for working capital and general corporate purposes.

The shares of common stock issuable upon exercise of the existing warrants are registered for issuance pursuant to a registration statement on Form S-3 (File No.

333-284462), which was declared effective by the SEC on January 31, 2025.

In consideration for the immediate exercise of the existing warrants for cash, the holder received the inducement warrants in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The inducement warrants have an exercise price of $6.20 per share, are immediately exercisable and will be exercisable for five and one-half years from the date of issuance.

The inducement warrants and the shares of common stock underlying the inducement warrants offered in the private placement have not been registered under the Securities Act or applicable state securities laws.

Accordingly, the securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws.

As part of the transaction, we have filed a resale registration statement on Form S-3 with the SEC to register the resale of the shares of common stock underlying the inducement warrants.

We are a robust AI-driven data management platform that solves complex data challenges for large institutions operating in dynamic and mission-critical environments with rapidly increasing volumes of data being ingested from a similarly rapidly growing number of data sources.

17 unchanged sentences

Our offerings allow customers to manage their data across the full data lifecycle, when and where they need it, using a highly secure permissioned based architecture.

Outpost AI is our edge hardware and software offering that is purpose built to structure and analyze data efficiently and effectively at the source using Airship AI trained models.

Once structured, Outpost AI securely encodes the data and streams it to Acropolis for further processing.

In the automobile example, Outpost AI will process the unstructured and unlabeled video data into structured data including images of vehicles, images of plates, make, model, color, locations and plate numbers, as well as confidence levels on the structured results.

Acropolis is our enterprise management software suite which serves as the backbone of our software ecosystem.

Acropolis allows customers with a handful of devices or hundreds of thousands of devices to manage their user and install base efficiently and securely from a single graphical user interface.

Acropolis can be installed and managed locally (on-premises) as well as in cloud/multi-cloud-based system architectures.

Acropolis can work with structured and unstructured data.

In the scenario where Outpost AI processes the unstructured video of vehicles into images, plate numbers and other structured data, Acropolis will compare the structured data against customer repositories of structured data in order to add labels to results for user attention.

Here, Acropolis leaves the initial processing of unstructured data to the edge device (Outpost AI) and handles additional labeling which requires bigger centralized datasets.

Where Acropolis is receiving unstructured data as input from devices, it will do the initial processing of unstructured to structured data similar to what Outpost AI does at the edge before any additional labelling.

This holistic approach allows customers to leverage the benefits of both edge and back-end data structuring and analysis in a “single-pane-of-glass” approach.

Airship Command then allows the customer to view the final labelled data which can be presented in real-time or as search results, as alerts, in automatically updating lists or on maps.

In the vehicle example, Airship Command can present alarms on specific filters such as specific plates, intelligent partial matches, make, model, color and any combination thereof, as well as searches using the same filters against character recognition and vehicle characteristics results.

Airship Command is our suite of visualization tools that allow customers to interact with their data and devices securely and efficiently.

Customer data interaction may include receiving and viewing an alarm triggered by an AI detected event at the edge on a mobile phone, or receiving and viewing events from thousands of edge devices spread across multiple different locations on a large video wall in a Security Operations Center (“SOC”).

Our visualization tools span applications for workstations, web-based browsers, and applications for mobile handheld devices ensuring our customers data is never out of their immediate reach.

We apply AI across the entire offering suite, ensuring that we are extracting as much value from our customers’ existing and emerging data as possible.

Whether it is using machine learning to train new models for deployment at the edge, or using a rules-based approach to detect anomalies based on data generated by machine learning models, we are constantly expanding and evolving our AI capabilities.

Our offerings are used by some of the largest government agencies and commercial organizations in the world.

While we are heavily focused on continuing to grow market share in the United States, our offerings are currently deployed around the world, with significant room to grow in both the governmental and commercial markets.

Our typical customer engagement is a multi-year contractual agreement, an agreement which includes our core offerings as well as professional services, technical support, and software maintenance, which we expect will result in predictable, long-term recurring revenue.

Our history shows that organizations that have chosen to partner with Airship AI stick with Airship AI.

Since our inception and until the Merger in December 2023, we have operated as a 100% employee-owned bootstrapped company with no outside investment, operating in a fiscally conservative model.

based company, we operate in high growth areas, namely the intersection of public safety and AI, with a combined $7 billion edge AI hardware and software addressable market.

Our customers trust us to collect and analyze vast amounts of data in real-time as well as make it available to their users when they need it, where they need it, as securely as possible.

We believe our offerings are purpose-built from the ground up to help ensure we continue to meet or exceed these expectations.

Fair Value Transactions in Connection with Merger

4 unchanged sentences

Liability as of

September 30, 2025

March 31, 2026

December 31, 2025

3 unchanged sentences

Total liabilities measured at fair value

Other income related to instruments recorded at fair value during the three months ended March 31, 2026 and 2025

Private Placement and Public Warrants in Connection with Merger

At the Merger closing, we assumed 515,000 private placement warrants and 16,184,612 public warrants.

On June 3, 2024, we permanently reduced the exercise price of such warrants from $11.50 per share to an exercise price of $7.80 per share.

On June 3, 2024, we reduced the exercise price of such warrants from $11.50 per share to an exercise price of $7.80 per share.

On November 20, 2024, we further reduced the exercise price of the outstanding public warrants and private warrants to an exercise price of $4.50 per share.

The purpose of this reduced exercise price was to potentially raise proceeds received from the exercise of such warrants, if any, for working capital and general corporate purposes.

As of September 30, 2025, there were 515,000 private placement warrants and 16,145,108 public warrants outstanding.

Key Performance Indicators

Historically, a majority of our product revenue has consisted primarily of a bundled hardware and software product and to date we have sold or licensed a minimal amount of standalone software.

In the future, we expect to see more delivery of our products using a cloud-based software solution which will allow us to create additional subscription revenue.

We have historically evaluated our business solely based on revenue generated from customers and we have not tracked any other customer-related metrics.

As we grow and increase our product offerings and customer base, we intend to modify and develop more advanced performance indicators.

We believe the following key performance indicators apply to us in the future:

Growth within existing government customers .

While we currently have a strong footprint across multiple large U.S.

government agencies, growing our business within these agencies outside of the investigation focused departments is a fundamental area of our projected growth.

Our ability to expand our footprint by implementing AI based solutions that leverage our core existing competencies within the agencies will be a critical indicator of the success of this strategy.

We will measure progress against this objective through the disclosure of awards for new business within these agencies during the affected timeframe, providing tangible evidence of the success of our strategy to both management and investors alike.

Greater penetration into the commercial marketplace .

While we have several existing customers in the commercial marketplace, our ability to build on the solutions we provide those customers and expand that base will be critical to our projected growth objectives.

We will measure progress against this objective through the disclosure of the number of new commercial customers added during the affected timeframe, providing tangible evidence of the success of our strategy to both management and investors alike.

Expansion of our edge AI based solutions .

We began to sell AI based solutions in late 2022.

Our current strategy is highly focused on the transition of data management and analysis workloads to the edge, driving efficiency and cost savings for our customers.

This strategy also includes new models being trained to extract data at the edge which enables real-time intelligent decision making for our customers.

We will measure progress against this objective through the disclosure of the numbers of edge AI hardware devices we are selling as well as the growth of our edge AI analytic capabilities, providing tangible evidence of the success of our strategy to both management and investors alike.

Principal Factors Affecting Our Financial Performance

We believe the following factors and trends may cause previously reported financial information not to be necessarily indicative of future operating results or future financial conditions:

Increase in the sales of lower margin solutions as we expand our operational footprint .

While our current focus remains on expanding our AI driven software application portfolio, opportunities will continue to present themselves to provide those software-based solutions as part of a larger hardware-based turn-key solutions where Airship AI can provide a unique value-add to the customer.

While these solutions will positively affect revenue we anticipate our operating profits in future periods may be adversely affected as compared to previous years due to the lower operating margin for hardware versus software applications.

Challenges due to geo-political driven supply-chain constraints .

While many of the COVID-19 driven supply chain issues have been resolved, challenges to the timely production and delivery of Taiwan based products we utilize for our edge AI platform due to geo-political factors is a concern looking forward.

In the event that our suppliers are unable to provide timely delivery of those supplies it will significantly impact our ability to meet delivery schedules for existing and anticipated edge AI hardware-based solutions.

Near-term impacts due to merger and acquisition activity .

If Airship AI merges with or acquires another company, it is reasonably expected that there will be increased operating expenses and costs associated with the merger that could negatively impact operating profits in the future periods immediately following the M&A event.

The extent and longevity of those impacts is not possible to quantify.

Potential tariffs may impact financial performance.

Changes in international trade policies, including the imposition of new tariffs, quotas, trade restrictions, or other government-imposed barriers to trade, could have a material adverse effect on our business, financial condition, and results of operations.

We rely on Taiwan and Canada for certain raw materials, components, and finished goods, For example, if the U.S.

government were to impose additional tariffs on goods imported from countries where we source key inputs—such as Taiwan and Canada —or if retaliatory tariffs were imposed on U.S.

exports, the cost of our products could increase, potentially reducing demand, compressing margins, or requiring us to adjust our pricing structure.

As of March 31, 2026, there were 515,000 private placement warrants and 16,145,006 public warrants outstanding.

Segment Reporting

6 unchanged sentences

Results of Operations

The following table sets forth key components of our results of operations during the three months ended September 30, 2025 and 2024.

The following table sets forth key components of our results of operations during the three months ended March 31, 2026 and 2025.

(dollars in thousands)

Three Months Ended September 30,

Three Months Ended,

Cost of net revenues

4 unchanged sentences

Other income (expense):

Gain from change in fair value of earnout liability

(Loss) gain from change in fair value of earnout liability

Gain change in fair value of warrant liability

Gain from change in fair value of convertible debt

Loss on note conversion

Interest income (expense), net

Interest income, net

Total other income, net

Income before income taxes

(Loss) income before provision for income taxes

Provision for income taxes

Net Revenues — Net revenues for the three months ended September 30, 2025 decreased $1,691,000 to $1,177,000 as compared to $2,868,000 for the three months ended September 30, 2024.

Net (loss) income

Net Revenues — Net revenues for the three months ended March 31, 2026 increased $850,000 to $6,353,000 as compared to $5,503,000 for the three months ended March 31, 2025.

The increase was due increased commercial orders.

On January 20, 2025, President Trump signed an executive order creating an advisory commission, the Department of Government Efficiency, to reform federal government processes and reduce expenditures.

1 unchanged sentence

federal government’s budget, and potential changes in budgetary priorities and spending levels, could adversely affect staffing levels and the funding for government projects.

Disruptions in how the government agencies operate due to these policies are materially affecting our business.

Disruptions in how the government agencies operate due to these policies is materially affecting our government business.

Cost of Net Revenues — Cost of net revenues primarily consists of product costs and post customer support.

For the three months ended September 30, 2025, cost of sales decreased $140,000 to $574,000 as compared to $714,000 for the three months ended September 30, 2024.

The decrease was due to lower sales, offset by product mix with decreased equipment purchases during the three months ended September 30, 2025.

Research and Development Expenses — Research and development expenses for the three months ended September 30, 2025 decreased $321,000 to $753,000 as compared to $1,074,000 for the three months ended September 30, 2024.

The decrease was due to decreased expenses for product development in the United States and Taiwan.

Selling, General and Administrative Expenses — Selling, general and administrative expenses for the three months ended September 30, 2025 increased $50,000 to $2,667,000.

Other Income (Expense) — Other income for the three months ended September 30, 2025 was $9,277,000 as compared to $7,801,000 for the three months ended September 30, 2024.

Other income for the three months ended September 30, 2025 consisted of (i) gain from change in fair value of earnout liability of $3,893,000;

(ii) gain from change in fair value of warrant liability of $5,331,000;

and (iii) other income of $53,000.

The income from change in fair value of various financial instruments was primarily the result of a decrease in our stock price.

Other income for the three months ended September 30, 2024 consisted of (i) gain from change in fair value of earnout liability of $5,512,000;

For the three months ended March 31, 2026, cost of sales decreased $81,000 to $3,187,000 as compared to $3,268,000 for the three months ended March 31, 2025.

The decrease was due product mix with increased higher margin commercial sales during the three months ended March 31, 2026, offset by raw material cost increases.

Research and Development Expenses — Research and development expenses for the three months ended March 31, 2026 increased $125,000 to $844,000 as compared to $719,000 for the three months ended March 31, 2025.

The increase was due to increased expenses for product development in the United States and Taiwan.

Selling, General and Administrative Expenses — Selling, general and administrative expenses for the three months ended March 31, 2026 increased $674,000 to $3,904,000 as compared to $3,230,000 for the three months ended March 31, 2025.

The increase is primarily due to an increase in stock-based compensation expense of $238,000 and other personnel costs.

Other Income (Expense) — Other income for the three months ended March 31, 2026 was $861,000 as compared to other income for the three months ended March 31, 2025 was $25,422,000.

Other income for the three months ended March 31, 2026 consisted of (i) loss from change in fair value of earnout liability of $726,000;

(ii) gain from change in fair value of warrant liability of $1,499,000;

(iii) gain from change in fair value of convertible debt of $371,000;

(iv) other income of $16,000;

offset by (v) loss on note conversion of $435,000;

and (vi) interest expense of $134,000.

The gain from change in fair value of various financial instruments was primarily the result of a lower stock price.

Net Income — Net income for the three months ended September 30, 2025 was $6,410,000 as compared to net income of $6,214,000 for the three months ended September 30, 2024.

The net income primarily related to noncash income of $8,770,000.

Noncash items included (i) gain from change in warrant liability of $5,331,000;

(ii) gain from change in earnout liability of $3,893,000;

(iii) stock based compensation of $356,000;

and (iv) net amortization of operating lease right of use asset of $98,000.

Net income for the three months ended September 30, 2024 was $6,214,000.

The net income is reduced by noncash items of $7,338,000, primarily the gain from the change in fair value of various financial instruments.

Noncash items included (i) stock based compensation of $557,000;

(ii) net amortization of operating lease right of use asset of $24,000;

(iii) loss on note conversions of $434,000;

offset by (iv) gain from change in fair value of warrant liability of $2,471,000;

(v) gain from change in fair value of earnout liability of $5,571,000;

and (vi) gain from change in fair value of convertible note of $370,000.

The following table sets forth key components of our results of operations during the nine months ended September 30, 2025 and 2024.

(dollars in thousands)

Nine Months Ended September 30,

Cost of net revenues

Research and development expenses

Selling, general and administrative expenses

Total operating expenses

Operating loss

Other income (expense):

Gain (loss) from change in fair value of earnout liability

Gain (loss) change in fair value of warrant liability

Loss from change in fair value of convertible debt

Loss on note conversion

Interest income (expense), net

Other expense

Total income (other expense), net

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Net Revenues — Net revenues for the nine months ended September 30, 2025 decreased $11,017,000 to $8,827,000 as compared to $19,844,000 for the nine months ended September 30, 2024, as a result of purchase orders from various federal government agency customers totaling over $13 million which we primarily shipped in the nine months ended September 30, 2024.

On January 20, 2025, President Trump signed an executive order creating an advisory commission, the Department of Government Efficiency to reform federal government processes and reduce expenditures.

Pressures on and uncertainty surrounding the U.S.

federal government’s budget, and potential changes in budgetary priorities and spending levels, could adversely affect staffing levels and the funding for government projects.

Disruptions in how the government agencies operate due to these policies are materially affecting our business.

Cost of Net Revenues — Cost of net revenues primarily consists of product costs and post customer support.

For the nine months ended September 30, 2025, cost of sales decreased $6,100,000 to $4,456,000 as compared to $10,556,000 for the nine months ended September 30, 2024.

The decrease was due to lower sales, offset by product mix with decreased equipment purchases during the nine months ended September 30, 2025.

Research and Development Expenses — Research and development expenses for the nine months ended September 30, 2025 decreased $259,000 to $2,213,000 as compared to $2,472,000 for the nine months ended September 30, 2024.

The decrease was due to decreased expenses for product development in the United States and Taiwan.

Selling, General and Administrative Expenses — Selling, general and administrative expenses for the nine months ended September 30, 2025 increased $69,000 to $8,761,000 as compared to $8,830,000 for the nine months ended September 30, 2024.

Other Income (Expense) — Other income for the nine months ended September 30, 2025 was $12,964,000 as compared to other expense of $5,275,000 for the nine months ended September 30, 2024.

Other income for the nine months ended September 30, 2025 consisted of (i) gain from change in fair value of earnout liability of $6,415,000;

and (iii) interest income of $88,000.

The loss from change in fair value of earnout liability resulted from the increase in the volatility factor to 78.4%, offset by a decrease in the our share price.

The income from change in fair value of warrant liability was primarily the result of a decrease in our stock price.

Other income for the three months ended March 31, 2025 consisted of (i) gain from change in fair value of earnout liability of $9,824,000;

(ii) gain from change in fair value of warrant liability of $15,521,000;

and (iii) other income of $191,000.

The income from change in fair value of various financial instruments was primarily the result of a decrease in our stock price.

Other expense for the nine months ended September 30, 2024 was $5,275,000 as compared to other expense of $466,000 for the nine months ended September 30, 2023.

Other expense for the nine months ended September 30, 2024 consisted of (i) loss from change in fair value of earnout liability of $1,096,000;

(ii) loss from change in fair value of warrant liability of $2,834,000;

(iii) loss from change in fair value of convertible debt of $142,000;

(iv) loss on note conversion of $593,000;

(v) interest expense of $587,000:

and (vi) other expense of $23,000.

The loss from change in fair value of various financial instruments was primarily the result of an increase in the stock price.

Net Income (Loss) — Net income (loss) for the nine months ended September 30, 2025 was 6,361,000 as compared to a net loss of $7,289,000 for the nine months ended September 30, 2024.

The net income primarily related to noncash items of $11,339,000.

(iii) other income of $77,000.

The gain from change in fair value of various financial instruments was primarily the result of a decrease in our stock price.

Net (Loss) Income — Net (loss) for the three months ended March 31, 2026 was $721,000 as compared to a net income of $23,708,000 for the three months ended March 31, 2025.

The net loss primarily related to increases in selling, general and administrative and research and development expenses.

Net income for the three months ended March 31, 2025 primarily related to noncash items of $24,833,000.

Noncash items included (i) gain from change in warrant liability of $15,521,000;

(ii) gain from change in earnout liability of $6,415,000;

and offset by (iii) stock based compensation of $1,156,000 and (iv) net amortization of operating lease right of use asset of $278,000.

Net loss for the nine months ended September 30, 2024 was $7,289,000 The net loss primarily related to noncash items of $6,649,000.

Noncash items included (i) depreciation of $2,000;

(ii) stock based compensation of $1,088,000;

(iii) net amortization of operating lease right of use asset of $175,000;

(iv) issuance of common stock for services of $198,000;

(v) noncash interest expense of $521,000;

(vi) loss from change in fair value of warrant liability of $2,834,000;

(vii) loss from change in fair value of earnout liability of $1,096,000;

(viii) loss from change in fair value of convertible note of $142,000;

and (ix) loss on note conversions of $593,000.

Liquidity and Capital Resources as of September 30, 2025 and 2024

and (ii) gain from change in earnout liability of $9,823,000;

and offset by (iii) stock based compensation of $428,000;

and (iv) net amortization of operating lease right of use assets of $83,000.

Liquidity and Capital Resources as of March 31, 2026 and 2025

Liquidity is our ability to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis.

Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

We have incurred losses from operations in the past few years and had an accumulated deficit of $68.6 million as of September 30, 2025.

In September 2024, we closed an $8.0 million public offering with approximately $7.3 million in net proceeds.

In December 2024, we received net proceeds of approximately $7.4 million from the exercise of warrants related to an inducement offer agreement.

In October 2025, we received net proceeds of approximately $9.7 million from the exercise of warrants related to an inducement offer agreement.

We formally evaluated our liquidity and cash position in November 2025 when preparing the September 30, 2025 Form 10-Q consolidated financial statements.

During this process, we analyzed our cash requirements and operations at least through November 2026 and determined that, based upon our current available cash and operations, we have no substantial doubt about our ability to continue as a going concern.

Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties.

Our actual results could vary as a result of our near and long-term future capital requirements that will depend on many factors.

We have incurred losses from operations in the past few years and had an accumulated deficit of $46 million as of March 31, 2026.

On October 8, 2025, we entered into warrant exercise inducement offer letter with the holder of existing common stock warrants exercisable for an aggregate of 2,162,162 shares of common stock to exercise such warrants at the existing exercise price of $4.50 per share, in exchange for our agreement to issue new common stock warrants to purchase 2,702,702 shares of common stock at an exercise price per share of $6.20.

The aggregate gross proceeds received from the exercise of the existing warrants were approximately $9,729,729, before deducting financial advisory fees.

We intend to use the net proceeds from the exercise of the existing warrants for working capital and general corporate purposes.

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2025 was $4,502,000.

Net cash generated by operating activities for the three months ended March 31, 2026 was $814,000.

This amount was primarily related to (i) net loss of $721,000;

and (ii) noncash items of $5,000;

offset by (iii) operating assets and liabilities changes of $1,540,000 (including a $493,000 increase in deferred revenues).

Noncash items included (iv) gain from change in warrant liability of $1,499,000;

and offset by (v) loss from change in earnout liability of $726,000;

(vi) stock based compensation of $666,000;

and (vii) net amortization of operating lease right of use asset of $102,000.

Net cash used in operating activities for the three months ended March 31, 2025 was $2,098,000.

This amount was primarily related to (i) net income of $23,708,000;

(ii) net working capital changes of $476,000 (including a $1,211,000 reduction in deferred revenues);

and offset by (iii) noncash items of $11,339,000.

and offset by (ii) operating assets and liabilities reductions of $973,000 (including a $713,000 reduction in deferred revenues);

and (iii) noncash items of $24,833,000.

Noncash items included (iv) gain from change in warrant liability of $15,521,000;

(v) gain from change in earnout liability of $6,415,000;

and offset by (vi) stock based compensation of $1,156,000 and (vii) net amortization of operating lease right of use asset of $278,000.

Net cash used in operating activities for the nine months ended September 30, 2024 was $4,398,000.

This amount was primarily related to (i) net loss of $7,289,000;

and (ii) net working capital reductions of $3,758,000 (including a $2,059,000 reduction in deferred revenues);

offset by (iii) noncash items of $6,649,000.

Noncash items included (iv) depreciation of $2,000;

(v) stock based compensation of $1,088,000;

(vi) net amortization of operating lease right of use asset of $175,000;

(vii) issuance of common stock for services of $198,000;

(viii) noncash interest expense of $521,000;

(ix) loss from change in warrant liability of $2,834,000;

(x) loss from change in earnout liability of $1,096,000;

(xi) loss from change in fair value of convertible note of $142,000;

and (xii) loss on note conversions of $593,000.

and (v) gain from change in earnout liability of $9,823,000;

and offset by (vi) stock based compensation of $428,000;

and (vii) net amortization of operating lease right of use assets of $83,000.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2025 was $1,149,000 and consisted of (i) repayment of advances by founders of $1,300,000;

Net cash provided by financing activities for the three months ended March 31, 2026 was $11,000 and consisted of proceeds from stock option exercises.

Net cash used in financing activities for the three months ended March 31, 2025 was $497,000 and consisted of (i) repayment of advances by founders of $600,000;

and offset by (ii) net proceeds from exercise of warrants of $60,000;

and (iii) proceeds from stock option exercises of $43,000.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $7,780,000 and consisted of (i) proceeds from offering of $7,290,000;

(ii) proceeds from exercise of warrants of $294,000;

and (iii) proceeds from stock option exercises of $196,000.

Contractual Obligations and Commitments

1 unchanged sentence

Operating lease cash payments

On July 13, 2023, we entered into a lease in Redmond, WA for 15,567 square feet of office and warehouse space which started October 1, 2023.

The monthly payment is $25,000 per month.

The lease expires October 31, 2027 and the monthly payment increases 3% on July 31, 2024 and each year thereafter.

There is a one three year option to extend the lease based on the fair market rate on October 31, 2027, which we expect to exercise.

On February 1, 2025, we entered into an office lease in Mooresville, North Carolina.

We lease 5,240 square feet and the net monthly payment is $9,105.

The lease expires January 31, 2028 and the monthly payment increases 3% on February 1, 2026 and each year thereafter.

On September 7, 2023, we entered into a lease in Redmond, WA for 15,567 square feet of office and warehouse space which started August 1, 2024.

The monthly payment is approximately $29,600 per month.

The lease expires October 31, 2027 and the monthly payment increases 3% on August 1, 2025 and each year thereafter.

There is a one three year option to extend the lease based on the fair market rate on October 31, 2027.

We do not believe that is reasonably certain that the lease will be extended.

On December 6, 2024, we entered into two separate office leases in Mooresville, North Carolina, the terms of which commenced on February 1, 2025.

We lease an aggregate of 5,240 square feet and the net monthly payment is approximately $9,105.

The leases expire January 31, 2028 and the monthly payment increases 3% on February 1, 2026 and each year thereafter.

There is no option to extend the lease.

9 unchanged sentences

We believe that the significant accounting policies described in “ Note 2, Summary of Significant Accounting Policies ” to our audited consolidated financial statements are accurate and complete.

The critical accounting estimates and policies during the nine months ended September 30, 2025 have not materially changed to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2024.

The critical accounting estimates and policies during the three months ended March 31, 2026 have not materially changed to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2025.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis