What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-05-12 compared with 2025-11-05 · 164 added, 250 removed, 288 unchanged (59% of the section changed)

4 unchanged sentences

(In thousands, except par value)

September 30, 2025 December 31, 2024

March 31, 2026

December 31, 2025

Current assets:

8 unchanged sentences

Intangible assets, net

Goodwill 82,407 82,407

Operating lease right-of-use assets

Other non-current assets

Total assets $ 385,160 $ 459,129

LIABILITIES AND STOCKHOLDERS' EQUITY

3 unchanged sentences

Operating lease liabilities, current

Current debt, net 24,127 16,405

Total current liabilities

Operating lease liabilities, non-current

Non-current debt, net 235,109 255,118

Long-term debt, net

Deferred tax liability

4 unchanged sentences

Class A common stock $ 0.0001 par value;

500,000 shares authorized, 8,100 and 7,365 Class A shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

500,000 shares authorized, 8,302 and 8,225 Class A shares issued as of March 31, 2026 and December 31, 2025, respectively

Class C common stock $ 0.0001 par value;

25,000 shares authorized, 1,869 and 1,870 Class C shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

25,000 shares authorized, 1,813 and 1,813 Class C shares issued as of March 31, 2026 and December 31, 2025, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Treasury stock, at cost - 190 and 137 shares as of March 31, 2026 and December 31, 2025, respectively

Total stockholders' equity attributable to System1, Inc.

42,683 80,264

Non-controlling interest

6 unchanged sentences

(In thousands, except for per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Revenue $ 61,561 $ 88,832 $ 214,189 $ 268,330

Three Months Ended March 31,

Operating expenses:

2 unchanged sentences

Selling, general, and administrative

Impairment of long-lived assets

Total operating expenses

Operating loss

Other expense (income):

Other expense:

Interest expense, net

Gain on extinguishment of debt — — — ( 20,109 )

Change in fair value of warrant liabilities

1 unchanged sentence

Loss before income tax

Income tax (benefit) expense ( 543 ) 585 ( 2,477 ) 359

Net loss ( 22,003 ) ( 30,639 ) ( 63,401 ) ( 79,275 )

Income tax benefit

Net loss attributable to non-controlling interest

Net loss attributable to System1, Inc.

$ ( 18,516 ) $ ( 23,602 ) $ ( 51,862 ) $ ( 60,512 )

Basic and diluted net loss per share:

$ ( 2.30 ) $ ( 3.37 ) $ ( 6.67 ) $ ( 8.76 )

Weighted average number of shares outstanding - basic and diluted

4 unchanged sentences

(In thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Net loss $ ( 22,003 ) $ ( 30,639 ) $ ( 63,401 ) $ ( 79,275 )

Other comprehensive (loss) income:

Three Months Ended March 31,

Other comprehensive loss:

Foreign currency translation (loss) income

2 unchanged sentences

Comprehensive loss attributable to System1, Inc.

$ ( 18,613 ) $ ( 23,569 ) $ ( 51,649 ) $ ( 60,593 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Class A Common Stock

Class C Common Stock

Amount Shares

Amount Additional Paid-In-Capital

Treasury Stock,

Additional Paid-In-Capital

Accumulated Deficit

3 unchanged sentences

Balance at December 31, 2025

Net loss — — — — — ( 15,883 ) — ( 3,973 ) ( 19,856 )

Issuance of restricted stock, net of forfeitures and shares withheld for taxes

Other comprehensive income — — — — — — 11 2 13

Stock-based compensation — — — — 2,766 — — 44 2,810

Distributions to members, net of contributions — — — — — — — ( 12 ) ( 12 )

Balance at March 31, 2025 7,485 1 1,870 — 865,840 ( 798,218 ) ( 432 ) 468 67,659

Net loss — — — — — ( 17,463 ) — ( 4,079 ) ( 21,542 )

Issuance of restricted stock, net of forfeitures and shares withheld for taxes 75 — — — 145 — — ( 165 ) ( 20 )

Conversion of Class C shares to Class A shares 1 — ( 1 ) — — — — — —

Issuance of common stock in private placement 450 — — — 3,275 — — ( 1,025 ) 2,250

Class A common stock repurchases

Other comprehensive income — — — — — — 299 70 369

Stock-based compensation — — — — 4,748 — — — 4,748

Distributions to members, net of contributions — — — — — — — ( 21 ) ( 21 )

Balance at June 30, 2025 8,011 $ 1 1,869 $ — $ 874,008 $ ( 815,680 ) $ ( 133 ) $ ( 4,752 ) $ 53,444

Net loss — — — — — ( 18,516 ) — ( 3,487 ) ( 22,003 )

Issuance of restricted stock, net of forfeitures and shares withheld for taxes 89 — — — 149 — — ( 162 ) ( 13 )

Other comprehensive loss

Stock-based compensation

Balance at September 30, 2025 8,100 $ 1 1,869 $ — $ 877,108 $ ( 834,196 ) $ ( 230 ) $ ( 8,423 ) $ 34,260

System1, Inc.

and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(In thousands)

Class A Common Stock

Class C Common Stock

Amount Shares

Amount Additional Paid-In-Capital

Contribution from members

Balance at March 31, 2026

Treasury Stock,

Additional Paid-In-Capital

Accumulated Deficit

3 unchanged sentences

Balance at December 31, 2024

Net loss — — — — — ( 10,537 ) — ( 3,254 ) ( 13,791 )

Issuance of common stock in connection with settlement of incentive plan 97 — — — 2,464 — — ( 757 ) 1,707

Conversion of Class C shares to Class A shares 31 — ( 31 ) — 241 — — ( 241 ) —

Tax receivable agreement liability and deferred taxes arising from LLC interest ownership exchanges and the issuance of common stock from equity incentive plans — — — — ( 110 ) — — — ( 110 )

Issuance of restricted stock, net of forfeitures and shares withheld for taxes

Other comprehensive loss — — — — — — ( 90 ) ( 45 ) ( 135 )

Other comprehensive income

Stock-based compensation

Contributions from members, net of distributions — — — — — — — 5 5

Distribution to members

Balance at March 31, 2025

Net loss — — — — — ( 26,373 ) — ( 8,472 ) ( 34,845 )

Issuance of restricted stock, net of forfeitures and shares withheld for taxes 62 — — — 284 — — ( 308 ) ( 24 )

Other comprehensive loss — — — — — — ( 24 ) ( 72 ) ( 96 )

Stock-based compensation — — — — 3,784 — — 87 3,871

Distributions to members — — — — — — — ( 32 ) ( 32 )

Balance at June 30, 2024 6,925 $ 1 2,120 $ — $ 854,278 $ ( 744,572 ) $ ( 295 ) $ 19,867 $ 129,279

Net loss — — — — — ( 23,602 ) — ( 7,037 ) ( 30,639 )

Issuance of restricted stock, net of forfeitures and shares withheld for taxes 121 — — — 288 — — ( 308 ) ( 20 )

Other comprehensive loss — — — — — — 33 ( 77 ) ( 44 )

Stock-based compensation — — — — 4,182 — — 88 4,270

Balance at September 30, 2024 7,046 $ 1 2,120 $ — $ 858,748 $ ( 768,174 ) $ ( 262 ) $ 12,533 $ 102,846

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows from Operating Activities

Net loss $ ( 63,401 ) $ ( 79,275 )

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Stock-based compensation

Impairment of long-lived assets

Amortization of debt issuance costs

2 unchanged sentences

Deferred tax benefits

Gain on extinguishment of debt — ( 20,109 )

Share-based compensation liabilities

Other, net 32 ( 27 )

Changes in operating assets and liabilities:

4 unchanged sentences

Other non-current liabilities

Net cash provided by (used in) operating activities 6,491 ( 6,027 )

Net cash used in operating activities

Cash Flows from Investing Activities

6 unchanged sentences

Taxes paid related to net settlement of stock awards

Distributions to members, net of contributions ( 33 ) ( 27 )

Proceeds from private placement of Class A common stock 2,250 —

Contributions from (Distributions to) members, net

Repurchases of Class A common stock

Net cash used in financing activities

Effect of exchange rate changes in cash, cash equivalents and restricted cash ( 26 ) 81

Effect of exchange rate changes in cash, cash equivalent and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of the period 67,948 143,450

Cash and cash equivalents and restricted cash, end of the period $ 56,210 $ 73,592

Cash, cash equivalents and restricted cash, beginning of the period

Cash, cash equivalents and restricted cash, end of the period

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:

3 unchanged sentences

Supplemental cash flow information:

Cash paid for income taxes, net

Cash paid for interest

Stock-based compensation included in capitalized software development costs

Settlement of incentive plan through issuance of common stock $ — $ 1,707

Right-of-use assets obtained in exchange for operating lease obligations $ 1,700 $ —

The accompanying notes are an integral part of these condensed consolidated financial statements.

4 unchanged sentences

System1, Inc.

and subsidiaries (the "Company", "we", "our" or "us") operates several flagship brands across multiple consumer verticals, including shopping, travel and search, and a best-in-class customer acquisition and marketing platform powered by AI and machine learning.

The Company's platform is omnichannel and omnivertical, delivering high-intent customers to its advertising partners to maximize their reach and effectiveness.

We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform ("RAMP").

Operating seamlessly across major advertising networks and advertising category verticals to acquire end-users, RAMP allows us to monetize such end-users through our relationships with third party advertisers and advertising networks ("Advertising Partners").

RAMP operates across our network of owned and operated websites and related products, allowing us to monetize user traffic that we source from various acquisition marketing channels, including Google, Meta, Outbrain, and TikTok.

RAMP also allows third party advertising platforms and publishers ("Network Partners"), to send user traffic to, and monetize end-user traffic on, our owned and operated websites or through our monetization agreements.

and subsidiaries (the "Company", "we", "our" or "us") operates flagship internet utilities including CouponFollow, MapQuest, and Startpage.com, and a best-in-class marketing platform powered by artificial intelligence, enabling third party publishers ("Network Partners") to monetize and maximize the value of user traffic across a wide range of advertising category verticals.

On August 1, 2024, we undertook a corporate reorganization, the result of which was that all of the assets and business operations of the Company are now held by System1 Holdings, LLC ("System1 Holdings"), a newly formed intermediate holding company of which we maintain the controlling interest and in which the non-controlling interest is owned by the holders of our Class C common stock.

Following the corporate reorganization, (a) System1 Holdings now owns 100 % of S1 Holdco, LLC ("S1 Holdco"), the previous intermediate holding company with the non-controlling interests, and 100 % of S1 Media, LLC ("S1 Media"), another new subsidiary formed in connection with the corporate reorganization, (b) S1 Media holds the assets and business operations associated with our Products businesses, which include CouponFollow, Startpage and MapQuest, and (c) S1 Holdco holds our assets related to our Marketing businesses.

Following the corporate reorganization, (a) System1 Holdings now owns 100 % of S1 Holdco, LLC ("S1 Holdco"), the previous intermediate holding company with the non-controlling interests, and 100 % of S1 Media, LLC ("S1 Media"), another new subsidiary formed in connection with the corporate reorganization, (b) S1 Media holds the assets and business operations associated with our Products businesses, which include CouponFollow, Startpage and MapQuest, and our acquisition marketing platform and (c) S1 Holdco holds our assets related to our Marketing businesses.

System1 Holdings holds our remaining assets and business operations.

S1 Holdco and its subsidiaries remain obligors and guarantors under our Term Loan and Revolving Facility, and System1 Holdings and S1 Media are not parties thereto.

Liquidity and Going Concern

We have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

We have experienced declining cash flows and financial performance primarily as a result of reductions in Advertising Partners and overall consumer demand for our marketing services.

As of March 31, 2026, we had cash and cash equivalents of $ 51.5 million and negative net working capital, which we define as current assets less current liabilities, of $ 14.1 million.

We had an aggregate principal amount outstanding of $ 50.0 million under our revolving facility (as defined in Note 5, Debt, Net) with a maturity date of January 27, 2027, and $ 252.6 million of term debt outstanding on our term loan which matures in July 2027.

Management determined, as a result of this evaluation, that our current cash and cash equivalents, net working capital position, and the upcoming maturity date of our revolving facility raise substantial doubt about our ability to continue as a going concern for the twelve-month period following the date of this filing.

Our plan is to continue exploring options of refinancing all of our debt obligations.

Management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented.

There can be no assurance that we will be able to obtain financing that will provide us with sufficient liquidity to satisfy our revolving facility in January 2027 or our term loan in July 2027.

As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.

Our condensed consolidated financial statements have been prepared on a basis that assumes we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Accordingly, the accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements and related disclosures are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

System1, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Our condensed consolidated financial statements include the accounts of System1, Inc.

4 unchanged sentences

In our opinion, the condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows.

The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2025 or future operating periods.

The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2026 or future operating periods.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 that have had a material impact on our condensed consolidated financial statements and related notes.

To conform to the current period’s presentation, (i) warrant liability was combined with other non-current liabilities in the comparative condensed consolidated balance sheet and (ii) depreciation and amortization expense was reclassified to cost of revenue and selling, general, and administrative in the prior periods condensed consolidated statement of operations.

System1, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

On June 10, 2025, we filed a certificate of amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-10 reverse stock split of the Class A and Class C common stock (the "Reverse Stock Split").

The Reverse Stock Split does not reduce the number of authorized shares of Class A and Class C common stock which remains at 500,000,000 and 25,000,000 , respectively, and does not change the par value of the common stock, which remains at $ 0.0001 per share.

Accordingly, all share and per share amounts of common stock for all periods presented in these unaudited condensed consolidated financial statements and related notes have been retroactively adjusted to give effect to the Reverse Stock Split.

All share data and per share data amounts included in this Form 10-Q have been retrospectively adjusted to reflect the effect of the Reverse Stock Split.

Use of Estimates

4 unchanged sentences

On an ongoing basis, management evaluates our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

As of December 31, 2024 , the Company had outstanding warrants classified as a liability.

These warrants were measured at fair value using Level 1 inputs based on quoted market prices in active markets.

During the quarter ended September 30, 2025, the fair value measurement of the warrants changed from Level 1 to Level 3 due to the delisting of the warrants from an exchange and lack of observable inputs.

We are subject to certain business and operational risks, including competition from alternative technologies, as well as dependence on key Advertising Partners, key employees, key contracts, and growth to achieve our business and operational objectives.

Concentrations

As of September 30, 2025, we had two paid search advertising partnership agreements with Google, and one paid search advertising partnership agreement with Microsoft.

The Google agreements are in effect through February 28, 2027 and September 30, 2027 .

The agreement with Microsoft (our next largest Advertising Partner by revenue) was renewed through December 31, 2026.

As of March 31, 2026, we had one paid search advertising partnership agreement with Google, and one paid search advertising partnership agreement with Microsoft.

The agreement with Google (our largest Advertising Partner by revenue) is in effect through September 30, 2027.

We had a second Google agreement that originally was scheduled to remain in effect through February 28, 2027, but was terminated for convenience by Google effective as of February 10, 2026 .

The agreement with Microsoft (our next largest Advertising Partner by revenue) is in effect through December 31, 2026.

Under certain circumstances, each of these agreements may be terminated by either us or the respective Advertising Partner immediately, or with minimal notice .

Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

This guidance will be effective for the annual periods beginning with the year ending December 31, 2025.

Early adoption is permitted.

Upon adoption, the guidance can be applied prospectively or retrospectively.

We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements.

System1, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Unaudited)

Accounting Pronouncements Not Yet Adopted

In November 2024, the Financial Accounting Standards Board issued ASU No.

12 unchanged sentences

Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net

Goodwill was $ 82.4 million as of September 30, 2025 and December 31, 2024, all of which is attributable to the Partner Network reporting unit.

In the second quarter of fiscal year 2025, as a result of organizational restructuring, the Company changed its identified segments and determined there are now two operating and reportable segments, Marketing and Products.

In the second quarter of 2025, as a result of organizational restructuring, we changed our identified segments and determined there are now two operating and reportable segments, Marketing and Products.

There was no change to the Partner Network reporting unit.

See Note 9, Segment Reporting, for further discussion of the Company’s operating segments.

See Note 9, Segment Reporting, for further discussion of our operating and reportable segments.

No impairment of goodwill was recognized in any of the periods presented.

If revenue and gross profit performance deteriorate further, is it possible that there could be impairment of Goodwill and Intangible Assets in future periods in the Partner Network reporting unit.

If revenue and gross profit performance deteriorate further, it is possible that there could be impairment of Goodwill in future periods in the Partner Network reporting unit.

Goodwill was $ 82.4 million as of March 31, 2026 and December 31, 2025, all of which was attributable to the Partner Network reporting unit.

Internal-use Software Development Costs, Net and Intangible Assets, Net

During the first quarter of 2026, we significantly reduced our marketing activities for search monetization in our publishing business and performed an analysis of the carrying value of the long-lived assets in our Marketing asset group.

The asset group was tested for recoverability using the undiscounted cash flows over the remaining useful life of the primary asset in the asset group.

The estimated net cash flows were determined utilizing internal forecasts.

If forecasted net cash flows were less than the carrying amount of the asset group, an impairment expense would be measured by comparing the fair value of the asset group to its carrying amount.

The carrying amount of an individual asset in the group cannot be reduced below its fair value.

We concluded that the carry ing amount of the Marketing asset group exceeded the undiscounted cash flows.

Consequently, our Marketing asset group was no longer recoverable from future operations and we recognized an impairment to our Marketing asset group trademarks, the only asset in the group to which an impairment could be allocated under ASC 360.

The impairment of long-lived assets expense was $ 36.8 million duri ng the three months ended March 31, 2026, presented in our condensed consolidated statements of operations.

During the first quarter of 2026, we implemented measures to optimize and improve operating efficiency in response to changes in products offered by Advertising Partners.

As a result of these actions, we incurred $ 2.2 million of one-time costs which were recorded during the three months ended March 31, 2026 , presented within salaries and benefits expense in our condensed consolidated statements of operations.

These actions impacted our publishing business by reducing future cashflows.

Internal-use software development costs and intangible assets consisted of the following (in thousands):

September 30, 2025

System1, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2026

Gross Carrying Amount

2 unchanged sentences

Internal-use software development costs

$ 26,534 $ ( 12,364 ) $ 14,170

Intangible assets:

Developed technology

$ 196,403 $ ( 180,344 ) $ 16,059

Trademarks and trade names

236,053 ( 86,350 ) 149,703

5,100 ( 4,572 ) 528

Customer relationships

2,900 ( 2,476 ) 424

$ 440,456 $ ( 273,742 ) $ 166,714

System1, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

December 31, 2025

Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Internal-use software development costs

2 unchanged sentences

Trademarks and trade names

Software 5,100 ( 3,616 ) 1,484

Customer relationships

Total $ 440,181 $ ( 217,840 ) $ 222,341

The internal-use software development costs include work in progress which is not being amortized of $ 2.2 million and $ 5.0 million as of September 30, 2025 and December 31, 2024 , respectively.

The internal-use software development costs include work in progress which is not being amortized of $ 4.6 million and $ 2.9 million as of March 31, 2026 and December 31, 2025 , respectively.

Amortization expense for internal-use software development costs and intangible assets were as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Amortization expense for internal-use software development $

Amortization expense for intangible assets $

Amortization expense was presented as follows in the Statements of Operations (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Amortization expense was presented as follows in the condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Cost of revenue $

Selling, general, and administrative $

No impairment of internal-use software development cost or intangible assets was recognized for any of the periods presented.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

System1, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Unaudited)

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

September 30, 2025 December 31, 2024

March 31, 2026

December 31, 2025

Accrued revenue share

2 unchanged sentences

Shared-based compensation liability

Advertising partner liability 5,494 —

Other current liabilities

1 unchanged sentence

CouponFollow Incentive Plan

During the 2024 Performance Period, the CouponFollow business achieved all applicable performance conditions under the CouponFollow Incentive Plan.

As a result, the full performance-based award of $ 21.3 million vested or was expected to vest.

During the 2024 Performance Period, the CouponFollow business achieved all performance conditions such that the entire performance-based portion of the award vested or was expected to vest.

Accordingly, we recognized a current share-based compensation liability of $ 17.8 million within accrued expenses and other current liabilities as of December 31, 2024 , of which $ 7.8 million was paid in cash in February 2025.

The final payment to settle the achievement of all the performance conditions of $ 13.5 million is payable 60 days following December 31, 2025 .

The carrying amount of the share-based liabilities approximates its fair value, which is determined using Level 3 inputs under the fair value hierarchy.

For the three and nine months ended September 30, 2025, we recognized $ 0.9 million and $ 2.5 million in salaries and benefits expenses on the condensed consolidated statements of operations for the performance-based portion of the awards under the CouponFollow Incentive Plan, respectively.

As of September 30, 2025, the remaining share-based compensation expense to be recognized in 2025 is $ 0.9 million.

We entered into a term loan ("Term Loan") and revolving facility ("2022 Revolving Facility") with Bank of America, N.A., on January 27, 2022, providing for a 5.5 -year term loan with a principal balance of $ 400.0 million and with the net proceeds of $ 376.0 million .

During the 2025 Performance Period, we recognized $ 3.5 million in shared-based compensation liability expense within accrued expenses and other current liabilities for the performance-based portion of the award that vested on December 31, 2025.

The total amount recognized under the CouponFollow Incentive Plan representing performance-based conditions was $ 21.3 million, of which $ 2.5 million is a discretionary bonus.

The carrying amount of the share-based liabilities approximates its fair value, determined using Level 3 fair value inputs.

In the first quarter of 2026, we paid $ 10.9 million and $ 2.1 million in cash for the last performance-based portion of the award and the discretionary bonus, respectively.

The remaining $ 0.4 million discretionary bonus will be settled at management's discretion.

We entered into a term loan ("Term Loan") and revolving facility ("Revolving Facility" and, together with the Term Loan, "Credit Agreement" ) with Bank of America, N.A., on January 27, 2022, providing for a 5.5 year term loan with a principal balance of $ 400.0 million and with the net proceeds of $ 376.0 million .

The Revolving Facility provided for borrowing availability of up to $ 50.0 million .

As of September 30, 2025 , principal of $ 265.1 million was outstanding on the Term Loan and there was no balance outstanding on the 2022 Revolving Facility.

Through December 31, 2025, $ 5.0 million of the Term Loan is payable quarterly.

As of March 31, 2026 , there was principal of $ 252.6 million outstanding on the Term Loan.

Through December 31, 2025, $ 5.0 million of the Term Loan was payable quarterly.

From March 31, 2026, $ 7.5 million of the Term Loan is payable quarterly.

3 unchanged sentences

The Term Loan comes with a leverage covenant, which goes into effect only if the utilization on the Revolving Facility exceeds 35 % of the $ 50.0 million Revolving Facility at each quarter-end starting the second quarter 2022, such that the first lien leverage ratio (as defined in the credit agreement) should not exceed 5.40 .

The facility has certain financial and nonfinancial covenants, including a leverage ratio.

The facility also requires that we deliver our audited consolidated financial statements to our lender within 120 days of our fiscal year end, December 31.

The Credit Agreement has certain financial and nonfinancial covenants, including the "springing" leverage ratio covenant.

The Credit Agreement also requires that we deliver our audited consolidated financial statements to our lender within 120 days of our fiscal year end, December 31.

Should we fail to distribute the financial statements to our lender within 120 days, we are allowed an additional 30 days to cure.

We were in compliance with the financial covenants under the Term Loan as of September 30, 2025.

We were in compliance with the financial covenants under the Term Loan as of March 31, 2026.

The interest rate on the Revolving Facility is the adjusted SOFR plus 2.5 % with an adjusted SOFR floor of 0 %.

As of September 30, 2025 and December 31, 2024, respectively, we had $ 50.0 million available on the 2022 Revolving Facility.

During the fourth quarter of 2025, we borrowed $ 50.0 million under the Revolving Facility and the balance outstanding as of March 31, 2026 and December 31, 2025 was $ 50.0 million, presented within current liabilities.

We were in compliance with the financial covenants under the Revolving Facility as of March 31, 2026.

System1, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Unaudited)

During 2024, we completed the repurchase of $ 64.9 million in principal amount of our Term Loan for an aggregate purchase price of $ 41.6 million (at an average discount of 64.1 % of its par value) pursuant to a Dutch auction tender offer and a privately negotiated repurchase transaction.

We used available cash on hand to fund the repurchase.

Our aggregate gain on the repurchase during 2024 was $ 20.1 million before fees and expenses incurred to negotiate, document and consummate the repurchase.

Reorganization

Following the corporate reorganization, (a) System1 Holdings now owns 100 % of S1 Holdco, LLC ("S1 Holdco"), the previous intermediate holding company with the non-controlling interests, and 100 % of S1 Media, LLC ("S1 Media"), another new subsidiary formed in connection with the corporate reorganization, (b) S1 Media holds the assets and business operations associated with our Products businesses, which include CouponFollow, Startpage and MapQuest, and our acquisition marketing platform and (c) S1 Holdco holds our assets related to our Marketing businesses.

System1 Holdings holds our remaining assets and business operations.

S1 Holdco and its subsidiaries remain obligors and guarantors under our Term Loan and Revolving Facility, and System1 Holdings and S1 Media are not parties thereto.

The carrying values of our debt, net of discounts, deferred financing and debt issuance costs were as follows (in thousands):

September 30, 2025 December 31, 2024

Term Loan 1, 2

$ 259,236 $ 271,523

March 31, 2026

December 31, 2025

Revolving Facility

Total debt, net 2

_______________

1 Includes unamortized discount of $ 5.6 million and $ 8.1 million and unamortized loan fees of $ 0.3 million and $ 0.4 million, as of September 30, 2025 and December 31, 2024, respectively, recorded as a reduction of the carrying amount of the debt and amortized to interest expense using the effective interest method.

2 Estimated fair value of the Term Loan was $ 129.2 million as of September 30, 2025.

During 2023 and through July 31, 2024, we were the sole managing member of S1 Holdco and, as a result, consolidated the financial results of S1 Holdco .

S1 Holdco was treated as a partnership for U.S.

federal and most applicable state and local income tax purposes.

As a partnership, S1 Holdco was not subject to U.S.

federal and certain state and local income taxes.

Any taxable income or loss generated by S1 Holdco was passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis.

We were subject to U.S.

federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by us.

1 Includes unamortized discount of $ 3.9 million and $ 4.7 million and unamortized loan fees of $ 0.2 million and $ 0.3 million, as of March 31, 2026 and December 31, 2025, respectively, recorded as a reduction of the carrying amount of the debt and amortized to interest expense using the effective interest method.

2 Estimated fair value of our debt was $ 229.3 million as of March 31, 2026.

As of August 1, 2024, we are the sole managing member of System1 Holdings and, as a result, consolidate the financial results of System1 Holdings.

6 unchanged sentences

federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of System1 Holdings, as well as any stand-alone income or loss generated by us.

We recorded an income tax benefit of $ 0.5 million and $ 2.5 million for the three and nine months ended September 30, 2025, respectively and an income tax expense of $ 0.6 million and $ 0.4 million for the three and nine months ended September 30, 2024.

The effective tax rate was 2.4 % and 3.7 % for the three and nine months ended September 30, 2025, respectively and ( 1.9 )% and ( 0.5 )% for the three and nine months ended September 30, 2024, respectively.

We recorded an immaterial income tax benefit for the three months ended March 31, 2026 and an income tax benefit of $ 0.4 million for the three months ended March 31, 2025.

The effective tax rate was 0.1 % for the three months ended March 31, 2026 and 2.0 % for the three months ended March 31, 2025.

The provision for income taxes differs from the amount of income tax computed by applying the U.S.

statutory federal tax rate of 21% to the loss before income taxes due to the exclusion of non-controlling loss, state taxes, foreign rate differential, non-deductible expenses, increase to the valuation allowance related to unrealizable deferred tax assets, and outside basis adjustments.

As of September 30, 2025 , we had a full valuation allowance on our U.S.

statutory federal tax rate of 21% to the loss before income taxes due to the exclusion of non-controlling loss, state taxes, foreign rate differential, non-deductible expenses, the valuation allowance activity related to unrealizable deferred tax assets and outside basis adjustments.

As of March 31, 2026 , we had a full valuation allowance on our U.S.

federal and state net deferred tax assets as it was more likely than not that those deferred tax assets would not be realized.

During the three and nine months ended September 30, 2025 and 2024 , inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement.

The total amount of Tax Receivable Agreement

During the three months ended March 31, 2026 and 2025 , inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement and there were no amounts due, respectively.

System1, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Unaudited)

Payments due under the Tax Receivable Agreement was $ 5.3 million as of September 30, 2025 and December 31, 2024 .

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA").

The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation.

The Company does not expect these tax law changes to have a material impact on the Company's financial statements;

however, the Company will continue to evaluate their impact as further information becomes available.

Commitments and Contingencies

In June 2023, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $ 5.0 million in each annual period between July 2023 and June 2026.

As of September 30, 2025, we remain contractually obligated to spend $ 3.4 million towards this commitment.

As of September 30, 2025, we had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities.

In June 2023, we entered into a multi-year agreement with a data cloud platform service provider whereby we are contractually obligated to spend $ 5.0 million in each annual period between July 2023 and June 2026.

As of March 31, 2026, we have fulfilled our contractual obligation towards this commitment.

As of March 31, 2026, we had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities.

We are subject to various legal proceedings and claims that arise in the ordinary course of business.

We believe the ultimate liability, if any, with respect to these actions will not materially affect the consolidated financial position, results of operations, or cash flows reflected in the condensed consolidated financial statements as of September 30, 2025.

There can be no assurance, however, that the ultimate resolution of such actions will not materially or adversely affect our consolidated financial position, results of operations, or cash flows.

We accrue for losses when the loss is deemed probable and the liability can reasonably be estimated.

In September 2025, certain lenders (the "Lenders") under the Company’s Credit Agreement, dated January 27, 2022 (the "Credit Agreement"), filed a lawsuit in the Supreme Court of the State of New York (the "New York Loan Matter") alleging (i) breach of contract against certain named subsidiaries of the Company that are parties to the Credit Agreement related to the corporate reorganization transactions undertaken by the Company in August 2024 to better align its corporate entity structure with its reportable business segments (the "Corporate Reorg Transactions"), (ii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with certain transactions undertaken by the Company related to the sale of its Total Security business in November 2023 (the "Total Security Transactions") and (iii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with the Corporate Reorg Transactions.

Concurrently with the filing of the New York Loan Matter, the same Lenders under the Company’s Credit Agreement filed a lawsuit in California Superior Court (Los Angeles County) (the "California Matter" and, together with the New York Loan Matter, the "Creditor Lawsuits") alleging intentional and constructive fraudulent transfer against Openmail2, LLC, an entity controlled by the Company’s co-founders ("Openmail2") and certain trusts established for the benefit of the co-founders families (the "Co-founder Trusts") which are significant shareholders of the Company in connection with certain arm’s-length negotiated loans that Openmail2 and the Co-founder Trusts extended to certain subsidiaries of the Company in fiscal year 2023 (the "Affiliate Loans") and which were repaid with a portion of the proceeds of the Total Security sale.

The Company subsidiaries that were parties to the Affiliate Loans agreed to indemnify Openmail2 and the Co-founder Trusts for any third-party claims asserted against such parties in connection with extending the Affiliate Loans.

The Lenders are consolidating the Creditor Lawsuits into a single matter in New York since the Lawsuits principally relate to the same allegations and underlying transactions.

The Company disputes all of the allegations set forth in the Creditor Lawsuits, denies any liability related thereto and intends to defend itself vigorously against the allegations and claims set forth therein.

The Company has not accrued a loss related to the Creditor Lawsuits, as a loss is not currently probable and a loss, or range of loss, is not reasonably estimable.

We accrued for losses when the loss is deemed probable and the liability can reasonably be estimated.

In September 2025, certain lenders (the "Lenders") under our Credit Agreement, dated January 27, 2022 (the "Credit Agreement"), filed a lawsuit in the Supreme Court of the State of New York (the "New York Loan Matter") alleging (i) breach of contract against certain named subsidiaries of the Company that are parties to the Credit Agreement related to the corporate reorganization transactions undertaken by us in August 2024 to better align its corporate entity structure with its reportable business segments (the "Corporate Reorg Transactions"), (ii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with certain transactions undertaken by the Company related to the sale of its Total Security business in November 2023 (the "Total Security Transactions") and (iii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with the Corporate Reorg Transactions.

Concurrently with the filing of the New York Loan Matter, the same Lenders under our Credit Agreement filed a lawsuit in California Superior Court (Los Angeles County) (the "California Matter" and, together with the New York Loan Matter, the "Creditor Lawsuits") alleging intentional and constructive fraudulent transfer against Openmail2, LLC, an entity controlled by our co-founders ("Openmail2") and certain trusts established for the benefit of the co-founders families (the "Co-founder Trusts") which are significant shareholders of the Company in connection with certain arm's-length negotiated loans that Openmail2 and the Co-founder Trusts extended to certain subsidiaries of the Company in fiscal year 2023 (the "Affiliate Loans") and which were repaid with a portion of the proceeds of the Total Security sale.

In November 2025, the Creditor Lawsuits were consolidated into an amended complaint filed in U.S.

District Court for the Southern District of New York, setting forth the same allegations against the same parties as those set forth in the Creditor Lawsuits, since the Lawsuits principally relate to the same allegations and underlying transactions.

Our subsidiaries that were parties to the Affiliate Loans agreed to indemnify Openmail2 and the Co-founder Trusts for any third-party claims asserted against such parties in connection with extending the Affiliate Loans.

We dispute all of the allegations set forth in the Creditor Lawsuits, deny any liability related thereto and intend to defend ourselves vigorously against the allegations and claims set forth therein.

We have not accrued a loss related to the Creditor Lawsuits, as a loss is not currently probable and a loss, or range of loss, is not reasonably estimable.

Indemnifications

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties.

These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments we could be required to make under these indemnification provisions may not be subject to claims related to these

System1, Inc.

2 unchanged sentences

indemnifications.

As a result, we believe the estimated fair value of these agreements was immaterial.

Accordingly, we have no liabilities recorded for these agreements as of September 30, 2025 or December 31, 2024, respectively .

Accordingly, we have no liabilities recorded for these agreements as of March 31, 2026 or December 31, 2025, respectively .

Net Loss Per Share

For the three and nine months ended September 30, 2025 and 2024, basic net loss per share was calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding.

For the three months ended March 31, 2026 and 2025, basic net loss per share was calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding.

Basic and diluted net loss per share was calculated as follows (in thousands, except per share data) :

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Basic and diluted net loss per share

Net loss attributable to System1, Inc.

$ ( 2.30 ) $ ( 3.37 ) $ ( 6.67 ) $ ( 8.76 )

Net loss attributable to System1, Inc.

$ ( 18,516 ) $ ( 23,602 ) $ ( 51,862 ) $ ( 60,512 )

Weighted-average common shares outstanding used in computing basic and diluted net loss per share

Shares of Class C common stock, restricted stock units, Stock Appreciation Rights ("SARs") and warrants outstanding for the three and nine months ended September 30, 2025 and 2024, are considered potentially dilutive to the shares of Class A common stock and are included in the computation of diluted loss per share, except when the effect would be anti-dilutive.

For the three and nine months ended September 30, 2025, a total of 16.8 million Warrants and 0.5 million vested SARs were excluded from the computation of diluted net loss per share as the impact was anti-dilutive.

In addition, for the three and nine months ended September 30, 2025, we excluded 1.5 million SARs as they are contingently issuable based on performance conditions which were not achieved.

For the three and nine months ended September 30, 2024, a total of 16.8 million Warrants were excluded from the computation of diluted net loss per share as the impact was anti-dilutive.

In addition, for the three and nine months ended September 30, 2024, we excluded 2.2 million SARs as they are contingently issuable based on performance conditions which were not achieved.

Shares of Class C common stock, restricted stock units, Stock Appreciation Rights ("SARs") and Warrants outstanding for the three months ended March 31, 2026 and 2025, are considered potentially dilutive of the shares of Class A common stock and are included in the computation of diluted loss per share, except when the effect would be anti-dilutive.

For the three months ended March 31, 2026, 16.8 million Warrants and 0.5 million vested SARs were excluded from the computation of net loss per share as their impact was anti-dilutive.

Additionally, 1.3 million SARs were excluded as they are contingently issuable upon the achievement of certain performance conditions, which were not achieved as of March 31, 2026.

For the three months ended March 31, 2025, 16.8 million Warrants were excluded from the computation of net loss per share as their impact was anti-dilutive.

Additionally, 2.1 million SARs were excluded as they are contingently issuable upon the achievement of certain performance conditions, which were not achieved as of March 31, 2025.

See Note 10, Stock-Based Compensation, for additional details.

We do not consider unvested Class A common stock related to the replacement awards as outstanding for accounting purposes as they are subject to continued service requirements or contingencies.

These shares are not included in the denominator of the net loss per share calculation until the employee provides the requisite service resulting in the vesting of the award or the contingency is removed, or upon termination of an employee at which point the common stock underlying the award becomes issuable to the previous investors.

Shares associated with the vested or forfeited replacement awards are deemed to be issued and outstanding for accounting purposes on the day of vesting or forfeiture.

System1, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Segment Reporting

We previously managed our business across two operating and reportable segments:

the monetization of end-users acquired directly by the Company to its websites and products ("Owned & Operated Advertising"), and the monetization of end-users acquired by our Network Partners ("Partner Network").

the monetization of end-users acquired directly by us to our websites and products ("Owned & Operated Advertising"), and the monetization of end-users acquired by our Network Partners ("Partner Network").

In the second quarter of 2025, we had an internal organizational change that resulted in a change in how we manage our businesses.

6 unchanged sentences

Our Chief Executive Officer, who is considered to be our CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.

The CODM measures and evaluates operating and reportable segments based on segment adjusted gross profit.

The CODM evaluates both potential future, as well as historical budget to actual variances, segment adjusted gross profit by segment on a quarterly basis to determine the allocation of capital for acquisition marketing, as well as technical and personnel resources.

Segment adjusted gross profit is also used to determine variable compensation expense for certain employees.

The tables below include the following operating expenses that are not allocated to the reportable segments presented to our CODM, such as other cost of revenue (total cost of revenue excluding traffic acquisition cost and agency fees), salaries and benefits, selling, general and administrative expenses and, at times, certain other transactions or adjustments.

The CODM does not consider these expenses for the purposes of making decisions to allocate resources among segments or to assess segment performance, however these costs are included in reported condensed consolidated net loss before income tax and are included in the reconciliation that follows.

The following table summarizes revenue, segment cost of revenue and segment adjusted gross profit by reportable segment (in thousands):

Three Months Ended September 30, 2025 Three Months Ended September 30, 2024

Marketing Products

Products Total

Revenue $ 39,065 $ 22,496 $ 61,561 $ 68,083 $ 20,749 $ 88,832

segment cost of revenue 22,417 1,278 23,695 48,693 680 49,373

Segment adjusted gross profit 16,648 21,218 37,866 19,390 20,069 39,459

Other cost of revenue 15,124 14,626

Salaries and benefits 21,354 29,177

Selling, general, and administrative 16,953 17,472

Interest expense, net 7,052 7,957

Change in fair value of warrant liabilities ( 71 ) 281

Loss before income tax $ ( 22,546 ) $ ( 30,054 )

The CODM measures and evaluates reportable segments based on segment adjusted gross profit.

The CODM evaluates both potential future, as well as historical budget to actual variances, adjusted gross profit by segment on a quarterly basis to determine the allocation of capital for acquisition marketing, as well as technical and personnel resources.

Adjusted gross profit is also used to determine variable compensation

System1, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Unaudited)

Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024

Marketing Products Total

Revenue $ 145,457 $ 68,732 $ 214,189 $ 214,867 $ 53,463 $ 268,330

expense for certain employees.

We have not presented segment assets as our CODM does not regularly use segment assets to evaluate or measure segment performance or allocate resources.

The following table summarizes revenue, segment cost of revenue and segment adjusted gross profit by reportable segments (in thousands):

Three Months Ended March 31, 2026

Three Months Ended March 31, 2025

segment cost of revenue

3 unchanged sentences

Selling, general, and administrative

Impairment of long-lived assets

Interest expense, net

Gain on extinguishment of debt — ( 20,109 )

Change in fair value of warrant liabilities

1 unchanged sentence

The following table summarizes revenue by geographic region (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

United States

2 unchanged sentences

Stock-Based Compensation

We are authorized to issue and/or grant stock options, SARs, restricted stock, restricted stock units, dividend equivalents or other stock-based and cash-based awards under our 2022 Incentive Award Plan.

We recorded the following stock-based compensation expense for equity-classified awards included within salaries and benefits in the condensed consolidated statement of operations (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

We are authorized to issue and/or grant restricted stock, restricted stock units, stock options, SARs, and other stock-based and cash-based awards under our 2022 Incentive Award Plan.

We recorded the following stock-based compensation expenses for equity-classified awards included within salaries and benefits in the condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Stock-based compensation expense

System1, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Restricted Stock Units

In July 2025, we granted 2.0 million restricted stock unit awards in accordance with the 2022 Incentive Award Plan.

For the three months ended March 31, 2026 and 2025, we recognized stock-based compensation of $ 1.5 million and $ 2.3 million, respectively, within equity.

Stock Appreciation Rights

2 unchanged sentences

2024 Stock Appreciation Rights Plan, (as amended, the "2024 SARs Plan") and the repricing ("Repricing") of certain outstanding SARs previously granted to our employees and consultants under the SARs Plan (collectively, the "SARs Plan Amendment and Repricing").

The strike price of the SARs granted changed from $ 1.44 to $ 0.44 and the adjusted

System1, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

EBITDA performance threshold for any TTM period concluding on or after the applicable date of grant was modified from (i) $ 60 million ("Tranche II"), (ii) $ 70 million ("Tranche III") and (iii) $ 80 million ("Tranche IV") to (i) $ 55 million, (ii) $ 60 million and (iii) $ 65 million, respectively ("the Modification").

The strike price of the SARs granted changed from $ 1.44 to $ 0.44 and the adjusted EBITDA performance threshold for any TTM period concluding on or after the applicable date of grant was modified from (i) $ 60 million ("Tranche II"), (ii) $ 70 million ("Tranche III") and (iii) $ 80 million ("Tranche IV") to (i) $ 55 million, (ii) $ 60 million and (iii) $ 65 million, respectively ("the Modification").

There were no changes to the other terms of the SARs Plan.

2 unchanged sentences

Risk-free interest rate

3.87 % - 4.11 %

Term (in years)

Volatility factor

84.27 % - 97.65 %

Dividend yield

3 unchanged sentences

Volatility is based on a blend of the historical volatility of our common stock and the peer-leveraged volatility.

As of September 30, 2025, we recognized compensation cost for the Vested SARs and determined it is probable we would achieve the performance conditions of Tranche II before the fifth anniversary grant date of the awards.

Accordingly, we recognized $ 0.8 million and $ 4.4 million of stock-based compensation expense, within equity for the three and nine months ended September 30, 2025, respectively.

As of September 30, 2025, the total unrecognized compensation cost related to unvested Tranche II SARs was $ 0.5 million.

During the three and nine months ended September 30, 2025, there were an immaterial number of SARs were exercised.

Related Party Transaction

During the second quarter of 2025, we entered into a Securities Purchase Agreement with one of our Founders' family foundation, pursuant to which we agreed to sell 450,000 shares of our Class A common stock at a price of $ 5.00 per share.

The aggregate proceeds, which were received on May 2, 2025, was $ 2.3 million.

As of March 31, 2026, achievement of the performance conditions associated with Tranches II, III and IV before the fifth, sixth and seventh anniversary dates of the grant date, respectively, remains not probable.

No stock-based compensation expense was recorded for the SARs for the three months ended March 31, 2026.

For the three months ended March 31, 2025, we recognized $ 0.4 million in stock-based compensation expense within equity relating to Tranche I awards which vested during the third quarter of 2025.

During the three months ended March 31, 2026 and 2025, no SARs were exercised.

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 1. Financial Statements