What changed in this filing

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Item 1. Financial Statements

2026-08-10 compared with 2026-05-11 · 185 added, 127 removed, 425 unchanged (42% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands, except per share amounts)

15 unchanged sentences

Income (loss) before income taxes 704 ( 9,471 ) 2,745 ( 18,079 )

(Provision for) benefit from income taxes ( 18 ) 4

Provision for income taxes ( 44 ) ( 46 ) ( 62 ) ( 42 )

Net income (loss) $ 660 $ ( 9,517 ) $ 2,683 $ ( 18,121 )

2 unchanged sentences

Diluted $ 0.01 $ ( 0.13 ) $ 0.03 $ ( 0.25 )

Weighted-average number of shares outstanding:

Weighted-average shares outstanding:

Basic 74,895 73,163 74,361 72,940

3 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands)

3 unchanged sentences

Actuarial gain on pension liability adjustment — — — 8

Other comprehensive income (loss) 3 ( 5 ) ( 5 ) 83

Comprehensive income (loss) $ 663 $ ( 9,522 ) $ 2,678 $ ( 18,038 )

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

(in thousands, except per share amount and share data)

1 unchanged sentence

Accounts receivable, net 18,000 17,000

Inventories, net 4,917 996

Prepaid expenses 7,562 10,565

25 unchanged sentences

Stockholders’ equity:

Common stock, $ 0.001 par value, 250,000,000 shares authorized, 74,819,175 shares and 72,773,272 shares issued and outstanding as of March 31, 2026, and December 31, 2025, respectively

Common stock, $ 0.001 par value, 250,000,000 shares authorized, 74,736,789 shares and 72,773,272 shares issued and outstanding as of June 30, 2026, and December 31, 2025, respectively

Additional paid-in capital 454,611 459,828

6 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Six Months Ended

June 30, 2026 June 30, 2025

(in thousands)

5 unchanged sentences

Loss on disposal of fixed assets 52 —

Provision for inventory obsolescence 42 —

Amortization of debt issuance costs 17 35

Provision for (benefit from) deferred income tax 2 ( 4 )

Deferred income taxes 4 27

Provision for (recovery from) doubtful accounts 1 ( 20 )

Changes in other operating assets and liabilities:

Changes in operating assets and liabilities:

Accounts receivable ( 1,001 ) 86

Inventories ( 1,942 ) ( 1,079 )

Prepaid expenses, deferred program expenses, other current assets and other assets 4,445 ( 1,933 )

9 unchanged sentences

Cash flows from financing activities:

Payments under finance lease obligations ( 491 ) ( 452 )

Payment of tax withholding related to net share settlement of equity awards ( 7,626 ) ( 1,062 )

Repurchases of common stock ( 6,889 ) ( 4,002 )

Payments under finance lease obligations ( 992 ) ( 914 )

Payments for debt issuance costs ( 21 ) —

11 unchanged sentences

(in thousands)

Balance at March 31, 2026 74,819 $ 113 $ 458,392 $ ( 104 ) $ ( 361,870 ) $ 96,531

Net income — — — — 660 660

Foreign currency translation gain — — — 3 — 3

Restricted stock unit awards vested, net of shares withheld to cover tax withholding 960 1 ( 1,007 ) — — ( 1,006 )

Stock-based compensation — — 1,916 — — 1,916

Repurchases of common stock ( 1,042 ) ( 1 ) ( 4,690 ) — — ( 4,691 )

Balance at June 30, 2026 74,737 $ 113 $ 454,611 $ ( 101 ) $ ( 361,210 ) $ 93,413

Balance at March 31, 2025 73,319 $ 112 $ 461,994 $ ( 41 ) $ ( 335,951 ) $ 126,114

Net loss — — — — ( 9,517 ) ( 9,517 )

Foreign currency translation loss — — — ( 5 ) — ( 5 )

Restricted stock unit awards vested, net of shares withheld to cover tax withholding 611 — ( 958 ) — — ( 958 )

Stock-based compensation — — 6,781 — — 6,781

Repurchases of common stock ( 1,488 ) ( 1 ) ( 4,001 ) — — ( 4,002 )

Balance at June 30, 2025 72,442 $ 111 $ 463,816 $ ( 46 ) $ ( 345,468 ) $ 118,413

Common Stock Additional Paid-in

Capital Accumulated

Other Comprehensive Loss Accumulated Deficit Total Stockholders’

Shares Amount

(in thousands)

Balance at December 31, 2025 72,773 $ 111 $ 459,828 $ ( 96 ) $ ( 363,893 ) $ 95,950

1 unchanged sentence

Foreign currency translation loss — — — ( 5 ) — ( 5 )

Repurchase of common stock ( 517 ) — ( 2,198 ) — — ( 2,198 )

Restricted stock unit awards vested, net of shares withheld to cover tax withholding 2,404 2 ( 6,408 ) — — ( 6,406 )

Stock-based compensation — — 3,654 — — 3,654

Repurchases of common stock ( 1,559 ) ( 1 ) ( 6,888 ) — — ( 6,889 )

Issuance of common stock for annual incentive plan ("AIP") payment, net of shares withheld to cover tax withholding 706 1 2,766 — — 2,767

Issuance of common stock for 401(k) match 413 — 1,659 — — 1,659

Balance at March 31, 2026 74,819 $ 113 $ 458,392 $ ( 104 ) $ ( 361,870 ) $ 96,531

Balance at June 30, 2026 74,737 $ 113 $ 454,611 $ ( 101 ) $ ( 361,210 ) $ 93,413

Balance at December 31, 2024 72,515 $ 111 $ 454,502 $ ( 129 ) $ ( 327,347 ) $ 127,137

4 unchanged sentences

Stock-based compensation — — 12,315 — — 12,315

Repurchases of common stock ( 1,488 ) ( 1 ) ( 4,001 ) — — ( 4,002 )

Issuance of common stock for 401(k) match 728 1 2,062 — — 2,063

Balance at March 31, 2025 73,319 $ 112 $ 461,994 $ ( 41 ) $ ( 335,951 ) $ 126,114

Balance at June 30, 2025 72,442 $ 111 $ 463,816 $ ( 46 ) $ ( 345,468 ) $ 118,413

See accompanying notes to the unaudited consolidated financial statements.

16 unchanged sentences

We believe that the unaudited interim financial statements include all adjustments (which are normal and recurring) necessary to state fairly our financial position and the results of operations and cash flows for the periods presented.

The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the year or future periods.

The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the full year or future periods.

The financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2025, included in our Annual Report on Form 10-K for the fiscal year then ended.

We have continued to follow the accounting policies set forth in those financial statements.

Reclassification

Certain prior-period amounts have been reclassified to conform to the current period presentation.

This reclassification relates to presenting "Inventories, net" as a separate line item on the unaudited consolidated balance sheets from "Other current assets."

Use of Estimates

4 unchanged sentences

We base our estimates on historical experience, currently available information, and various other assumptions that we believe are reasonable under the circumstances.

Management evaluates these estimates and assumptions on an ongoing basis, including those relating to revenue recognition on cost estimation on certain contracts, allowance for credit losses, inventory obsolescence, valuation allowance for deferred tax assets, income taxes, certain assumptions related to share-based compensation, valuation of intangible assets and goodwill, restructuring expenses accruals, and contingencies.

Actual results could differ from those estimates.

Management evaluates these estimates and assumptions on an ongoing basis, including those relating to revenue recognition and cost estimation on certain contracts, allowance for credit losses, inventory obsolescence, valuation allowance for deferred tax assets, income taxes, certain assumptions related to stock-based compensation, valuation of intangible assets and goodwill, restructuring expenses accruals, and contingencies.

Actual results could differ from these estimates.

The impact of changes in estimates is recorded in the period in which they become known .

11 unchanged sentences

Cash payments ( 751 )

Balance at March 31, 2026 $ 1,071

(1) Restructuring-related liabilities are reported as part of "Accrued liabilities" in the Company's unaudited consolidated balance sheets, see Note 8 - Other Balance Sheet Components for further details.

Balance at June 30, 2026 $ 700

(1) Restructuring-related liabilities are reported as part of "Accrued liabilities" in the Company's unaudited consolidated balance sheets;

see Note 9 - Other Balance Sheet Components for further details.

Recent Accounting Pronouncements

The Company adopted all applicable standards effective as of December 31, 2025, within these unaudited consolidated financial statements, with no material impact as a result of the adoption.

In November 2024, the FASB issued ASU 2024-03, "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220):

4 unchanged sentences

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivables and Contract Assets.” This standard provides simplified guidance on measuring credit losses for accounts receivable and contract assets.

Measurement of Credit Losses for Accounts Receivable and Contract Assets.” This standard provides simplified guidance on measuring credit losses for accounts receivable and contract assets.

The update introduces a practical expedient and an accounting policy election to ease the process.

12 unchanged sentences

Narrow-Scope Improvements," which was intended to improve the navigability of the guidance in ASC 270 and clarify when it applies.

Public entities are required to adopt the guidance for interim reporting periods within annual reporting period beginning after December 15, 2027, with early adoption permitted.

Public entities are required to adopt the guidance for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

We are currently assessing the impact of adopting this ASU on our unaudited consolidated financial statements.

9 unchanged sentences

The majority of our revenue is recognized over time, as control is transferred continuously to our customers, who receive and consume benefits as we perform.

Revenue transferred to customers over time accounted for 71 % and 79 % of our revenue for the three months ended March 31, 2026, and 2025, respectively.

For performance obligations in which control does not continuously transfer to the customer, we recognize revenue when each performance obligation is fully satisfied.

Revenue transferred to customers over time accounted for 69 % and 70 % of our revenue for the three and six months ended June 30, 2026, respectively, and 68 % and 73 % of our revenue for the three and six months ended June 30, 2025, respectively.

For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time when each performance obligation is fully satisfied.

This coincides with the point in time the customer obtains control of the product or service, which typically occurs upon customer acceptance or receipt of the product or service, given that we maintain control of the product or service until that point.

Revenue transferred to customers at a point in time accounted for 29 % and 21 % of our revenue for the three months ended March 31, 2026, and 2025, respectively.

The change in revenue mix for the three months ended March 31, 2026, as compared to the prior period, was primarily driven by an increase in product sales volume from a successful ramp-up of a significant program.

Revenue transferred to customers at a point in time accounted for 31 % and 30 % of our revenue for the three and six months ended June 30, 2026, respectively, and 32 % and 27 % of our revenue for the three and six months ended June 30, 2025, respectively.

The change in revenue mix for the three and six months ended June 30, 2026, as compared to the prior period, was primarily driven by an increase in product sales volume from a successful ramp-up of a significant program.

Our contracts may include various types of variable considerations and may include estimated amounts in the transaction price, based on all of the information available to us, and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when any uncertainty associated with the variable consideration is resolved.

We evaluate and include these estimated amounts of variable consideration in the transaction price and as performance on these contracts is complete, we adjust our revenue, when deemed necessary.

No revenue adjustments were recorded during the three months ended March 31, 2026, and 2025.

We provide for anticipated losses on contracts during the period when the loss is determined by recording an expense for the total expected costs that exceed the total estimated revenue for a performance obligation.

No contract loss was recorded during the three months ended March 31, 2026.

We recorded an immaterial contract loss during the three months ended March 31, 2025.

No revenue adjustments were recorded during the three and six months ended June 30, 2026, and 2025.

We provide for anticipated losses on contracts during the period when the loss is determined by recording an expense for the total expected costs that exceeds the total estimated revenue for a performance obligation.

No contract loss was recorded during the three and six months ended June 30, 2026.

No contract loss was recorded during the three months ended June 30, 2025, while we recorded an immaterial contract loss during the six months ended June 30, 2025.

Disaggregated Revenues

1 unchanged sentence

We treat sales to U.S.

customers as sales within the U.S.

regardless of where the services are performed.

customers as sales within the United States, regardless of where the services are performed.

Substantially most of our revenues are generated from U.S.

2 unchanged sentences

Revenue by Customer Type

For the Three Months Ended

March 31, 2026 March 31, 2025

Amount % Amount %

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

Amount % Amount % Amount % Amount %

(dollars in thousands)

3 unchanged sentences

Revenue by Contract Type

For the Three Months Ended

March 31, 2026 March 31, 2025

Amount % Amount %

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

Amount % Amount % Amount % Amount %

(dollars in thousands)

3 unchanged sentences

Total revenue $ 47,745 100 % $ 35,968 100 % $ 95,487 100 % $ 66,584 100 %

A majority of the Company's revenue was derived under prime contracts and subcontracts with agencies and departments of the U.S.

federal government.

No other customer accounted for 10% or more of the Company's revenue during the three months ended March 31, 2026, and 2025.

A majority of the Company's revenue was derived under prime contracts and subcontracts with agencies and departments of the federal government.

No other customer accounted for 10% or more of the Company's revenue during the three and six months ended June 30, 2026, and 2025.

Revenue Concentration Greater than 10% of Total Revenue

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands)

Federal government:

Security Solutions segment $ 42,432 $ 22,652

Secure Networks segment 1,772 4,649

Security Solutions $ 42,854 $ 29,032 $ 85,286 $ 51,684

Secure Networks 1,083 3,640 2,855 8,288

Total $ 43,937 $ 32,672 $ 88,141 $ 59,972

Contract Balances

Balance Sheet Presentation March 31, 2026 December 31, 2025

Balance Sheet Presentation June 30, 2026 December 31, 2025

(in thousands)

Billed accounts receivables (1)

Billed accounts receivable (1)

Accounts receivable, net $ 11,315 $ 9,375

5 unchanged sentences

The changes in the Company's contract assets and contract liabilities during the current period were primarily the result of the timing differences between the Company's performance, invoicing and customer payments.

Revenue recognized for the three months ended March 31, 2026, and 2025, which was included in the contract liabilities balance at December 31, 2025, and 2024, was $ 4.8 million and $ 2.4 million, respectively.

As of March 31, 2026, we had approximately $ 61.9 million of remaining performance obligations, which we also refer to as funded backlog.

Revenue recognized for the three and six months ended June 30, 2026, which was included in the contract liabilities balance at December 31, 2025, was $ 3.3 million and $ 8.1 million, respectively.

Revenue recognized for the three and six months ended June 30, 2025, which was included in the contract liabilities balance at December 31, 2024, was $ 1.7 million and $ 4.1 million, respectively.

As of June 30, 2026, we had approximately $ 56.5 million of remaining performance obligations, which we also refer to as funded backlog.

We expect to recognize approximately 98 % of our remaining performance obligations over the next 12 months, and the balance thereafter.

1 unchanged sentence

Details of Accounts Receivable, Net

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

(in thousands)

5 unchanged sentences

Accounts receivable, net $ 18,000 $ 17,000

(1) Includes recoveries from credit losses, net of provision.

Because our primary customer base includes agencies of the U.S.

federal government, we have a concentration of credit risk associated with our accounts receivable, as 88 % and 85 % of our billed and unbilled accounts receivable as of March 31, 2026, and December 31, 2025, respectively, were with U.S.

(1) Includes provision for credit losses, net of recoveries.

As our primary customer base includes agencies of the U.S.

federal government, we have a concentration of credit risk associated with our accounts receivable, as 87 % and 85 % of our billed and unbilled accounts receivable as of June 30, 2026, and December 31, 2025, respectively, were with U.S.

federal government customers.

While we acknowledge the potential material and adverse risk of such a significant concentration of credit risk, our past experience collecting substantially all of such receivables provides us with an informed basis that such risk, if any, is manageable.

We perform ongoing credit evaluations of all of our customers and generally do not require collateral or other guarantees from our customers.

We perform ongoing credit evaluations of all of our customers and generally do not require collateral or other guarantees.

We maintain allowances for potential losses, where appropriate.

2 unchanged sentences

government prime contracts or subcontracts for sale (the "Purchased Receivables") to the Factor, and the Factor may purchase such receivables at its sole discretion, on a non-recourse basis.

These transactions are accounted for as a "true sale" as we have surrendered control over the receivables, and is not obligated to repay all or any portion of the advance amount if any portion of the accounts receivable is not paid by the customers due to an inability to pay.

These transactions are accounted for as a "true sale" as we have surrendered control over the receivables, and we are not obligated to repay all or any portion of the advance amount if any portion of the accounts receivable is not paid by the customers due to an inability to pay.

The total amount of Purchased Receivables is subject to a maximum limit of $ 10.0 million of outstanding Purchased Receivables at any given time.

The initial term of the Factoring Agreement expires on March 10, 2027, and automatically renews annually thereafter unless terminated in writing by the parties.

There were no accounts receivables sold during the three months ended March 31, 2026.

There were no accounts receivable sold during the six months ended June 30, 2026.

INVENTORIES, NET

Details of Inventories, Net

June 30, 2026 December 31, 2025

(in thousands)

Gross inventory $ 5,458 $ 1,495

Allowance for inventory obsolescence ( 541 ) ( 499 )

Inventories, net $ 4,917 $ 996

PROPERTY AND EQUIPMENT, NET

Details of Property and Equipment, Net

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value

4 unchanged sentences

Depreciation and Amortization Expense

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands)

Depreciation and amortization expense $ 444 $ 422 $ 902 $ 867

The goodwill balance was $ 3.0 million as of March 31, 2026, and December 31, 2025, allocated to the Security Solutions segment.

The goodwill balance was $ 3.0 million as of June 30, 2026, and December 31, 2025, allocated to the Security Solutions segment.

Goodwill is subject to annual impairment tests and if triggering events are present in the interim before the annual tests, we will assess impairment.

No impairment charges were recorded for the three months ended March 31, 2026, and 2025 .

No impairment charges were recorded for the three and six months ended June 30, 2026, and 2025.

INTANGIBLE ASSETS, NET

Details of Intangible Assets, Net

March 31, 2026

December 31, 2025

June 30, 2026 December 31, 2025

Estimated Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value

10 unchanged sentences

Amortization Expense

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands)

6 unchanged sentences

OTHER BALANCE SHEET COMPONENTS

Details of Other Current Assets

March 31, 2026 December 31, 2025

(in thousands)

Inventories, net $ 2,890 $ 996

Deferred costs 791 887

Receivables - other — 529

Other — 1,250

Other current assets $ 3,681 $ 3,662

Details of Other Assets

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

(in thousands)

7 unchanged sentences

Upon settlement of the SAFE, the investment was remeasured to its fair value of $ 3.8 million.

The SAFE investment was settled into equitable shares of the privately-held company's common stock.

The investment does not have a readily determinable fair value and the Company elected the measurement alternative to value its investment.

1 unchanged sentence

The investment was carried at cost less impairment, if any, and subsequently measured to fair value upon observable price changes in an orderly transaction for the identical or similar investment of the same issuer, with any gains or losses recorded within "other income" on the unaudited consolidated statement of operations.

We did not note any changes in the fair value during the three months ended March 31, 2026, and 2025.

We did not note any changes in the fair value during the three and six months ended June 30, 2026, and 2025.

Details of Accrued Liabilities

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

(in thousands)

12 unchanged sentences

(ii) Adjusted Daily Simple Secured Overnight Financing Rate ("SOFR"), plus 1.9 %;

or (iii) Adjusted Term SOFR, plus 1.9 %, as such capitalized terms are defined and calculated in the Credit Agreement.

and (iii) Adjusted Term SOFR, plus 1.9 %, as such capitalized terms are defined and calculated in the Credit Agreement.

The Company may elect to convert borrowings from one type of borrowing to another type per the terms of the Credit Agreement.

5 unchanged sentences

The Credit Agreement also requires certain financial covenants to maintain a Senior Leverage Ratio on the last day of any fiscal quarter, no greater than 3 to 1.

We were in compliance with all covenants as of March 31, 2026.

We were in compliance with all covenants as of June 30, 2026.

The occurrence of an event of default under the Credit Agreement could result in the Loan and other obligations becoming immediately due and payable and allow the Lenders to exercise all rights and remedies available to them under the Credit Agreement.

6 unchanged sentences

2 to the Amended and Restated 2016 Omnibus Long-Term Incentive Plan ("2016 LTIP") that increased the number of shares available for issuance under the 2016 LTIP by an additional 5,380,000 shares.

As of March 31, 2026, approximately 0.5 million shares of our common stock were available for future grants under the 2016 LTIP.

There were no income tax benefits recognized on the share-based compensation expense (as reflected on the table below) for the three months ended March 31, 2026, and 2025.

As of June 30, 2026, approximately 1.8 million shares of our common stock were available for future grants under the 2016 LTIP.

There were no income tax benefits recognized on the stock-based compensation expense (as reflected on the table below) for the three and six months ended June 30, 2026, and 2025.

Details of Stock Compensation Expense by Statements of Operations Line Item

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands)

4 unchanged sentences

Restricted Stock

Restricted Stock Activity

Restricted Stock Unit Activity

Service-Based Performance-Based Total Shares Weighted-Average Grant Date Fair Value

3 unchanged sentences

Forfeited ( 27,255 ) — ( 27,255 ) 3.70

Unvested outstanding units as of March 31, 2026 2,155,581 8,441,163 10,596,744 $ 3.27

As of March 31, 2026, and 2025, the intrinsic value of the restricted stock units with time-base vesting ("RSUs") and restricted stock units with performance-based vesting ("PSUs") outstanding, exercisable, and vested or expected to vest was $ 44.4 million and $ 29.5 million, respectively.

There were approximately $ 6.8 million of total compensation costs related to stock-based awards not yet recognized as of March 31, 2026, which is expected to be recognized on a straight-line basis over a weighted-average remaining vesting period of 0.4 years.

Unvested outstanding units as of June 30, 2026 2,332,569 9,810,404 12,142,973 $ 3.90

On May 26, 2026, the Company granted performance-based restricted stock units ("PSUs") with market conditions dependent on total shareholder return ("TSR") to certain executives and senior employees.

The vesting criteria for these awards are based on the Company's TSR performance relative to the TSR performance of the Company's current compensation peer group over the three-year performance period, June 1, 2026, through May 31, 2029, and conditioned upon neutral or positive free cash flow (i.e.

cash flows from operating activities less capital expenditures) at the end of each fiscal year in the performance period.

The final payout of these PSUs will vary between 0% to 200 % of the target number of PSUs granted, depending on the TSR performance and meeting the free cash flow requirements.

The grant date fair value per share is estimated at the grant date using a Monte Carlo simulation model.

Stock-based compensation expense for PSUs with a TSR market condition is recognized over the service period based on target probability.

PSUs with a TSR Market Condition Fair Value and Assumptions

Expected Volatility 92.1 %

Risk-free rate 4.0 %

Service period 3.0 years

Grant date fair value $ 7.66

As of June 30, 2026, and 2025, the intrinsic value of the RSUs and PSUs outstanding, exercisable, and vested or expected to vest was $ 55.9 million and $ 50.1 million, respectively.

There was approximately $ 21.9 million of total compensation costs related to stock-based awards not yet recognized as of June 30, 2026, which is expected to be recognized on a straight-line basis over a weighted-average remaining vesting period of 0.9 years.

Stock Options

5 unchanged sentences

Forfeited, cancelled, or expired — — 0.0 —

Outstanding option balance as of March 31, 2026 227,000 $ 1.80 7.1 $ 542,530

Exercisable stock option as of March 31, 2026 227,000 $ 1.80 7.1 $ 542,530

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the quoted closing price of the Company's common stock as of March 31, 2026.

The fair value of the stock options is expensed on a straight-line basis over the vesting period of one year , including the stock options granted to directors, as the next annual stockholders meeting is expected to occur at the same approximate time each year.

As of March 31, 2026, there were no unrecognized compensation costs related to non-vested stock options.

Outstanding option balance as of June 30, 2026 227,000 $ 1.80 6.9 $ 635,600

Exercisable stock options as of June 30, 2026 227,000 $ 1.80 6.9 $ 635,600

The fair value of the stock options is expensed on a straight-line basis over the vesting period of one year , including the stock options granted to directors, as the annual stockholders' meeting is expected to occur at the same approximate time each year.

As of June 30, 2026, there were no unrecognized compensation costs related to non-vested stock options.

SHARE REPURCHASES

On May 24, 2022, the Company announced that the Board of Directors ("Board") approved a new share repurchase program ("SRP") authorizing the Company to repurchase up to $ 50.0 million of its common stock.

On May 24, 2022, the Company announced that the Board of Directors ("Board") approved a share repurchase program ("SRP") authorizing the Company to repurchase up to $ 50.0 million of its common stock.

On March 12, 2026, the Board further authorized the Company to repurchase up to an additional $ 25.0 million of its common stock under its existing repurchase program.

1 unchanged sentence

The repurchase program has no expiration date and may be modified, suspended, or terminated at any time.

As of March 31, 2026, there was approximately $ 47.9 million of the authorization remaining for future common stock repurchases under the SRP.

Share Repurchase Program Activity

For the Three Months Ended

March 31, 2026 March 31, 2025

As of June 30, 2026, there was approximately $ 43.2 million of the authorization remaining for future common stock repurchases under the SRP.

Share Repurchase Activity

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands, except per share and share data)

Amounts paid for shares repurchased (1)

$ 4,691 $ 4,002 $ 6,889 $ 4,002

Number of shares repurchased 1,042,350 1,488,227 1,559,486 1,488,227

Average per share price paid (1)

(1) Includes commissions paid for repurchases on the open market.

$ 4.50 $ 2.69 $ 4.42 $ 2.69

(1) Includes commission paid for repurchases on the open market .

ACCUMULATED OTHER COMPREHENSIVE LOSS

4 unchanged sentences

Other comprehensive loss before reclassification, net of tax ( 5 ) — ( 5 )

Balance as of March 31, 2026 $ ( 185 ) $ 81 $ ( 104 )

Balance as of June 30, 2026 $ ( 182 ) $ 81 $ ( 101 )

EARNINGS (LOSS) PER SHARE

2 unchanged sentences

The dilutive effects of outstanding common stock equivalents are determined using the treasury-stock and if-converted method, only in periods in which such effect would have been dilutive for the period.

Weighted-Average Number of Shares Outstanding – Earnings per Share

For the Three Months Ended

March 31, 2026 March 31, 2025

Weighted-Average Number of Shares Outstanding – Earnings (Loss) per Share

For the Three Months Ended For the Six Months Ended

June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

(in thousands)

Basic weighted-average number of shares outstanding 74,895 73,163 74,361 72,940

Dilutive effect of unvested restricted stock units and stock options 3,793 —

Dilutive effect on unvested restricted stock units and stock options 2,652 — 3,215 —

Diluted weighted-average number of shares outstanding 77,547 73,163 77,576 72,940

For a period of net loss, potentially dilutive securities are not included in the calculation of diluted net earnings (loss) per share, because to do so would be anti-dilutive.

For the three months ended March 31, 2025, the diluted earnings per share calculation excludes 627,612 of potentially dilutive securities that were anti-dilutive.

For the three months ended March 31, 2026, and 2025, outstanding PSUs aggregating 6,235,000 and 10,604,187 , respectively, have been excluded from the calculation of potentially dilutive securities above because the issuance of shares is contingent upon the satisfaction of certain conditions, which were not satisfied by the end of the period.

For the period of net loss, potentially dilutive securities are not included in the calculation of diluted net earnings (loss) per share, because to do so would be anti-dilutive.

For the three and six months ended June 30, 2025, the diluted earnings per share calculation excludes 976,000 and 1,158,000 , respectively, of potentially dilutive securities that were anti-dilutive.

For the three and six months ended June 30, 2026, and 2025, outstanding PSUs aggregating to 7,604,241 and 11,372,034 shares, respectively, have been excluded from the calculation of potentially dilutive securities above because the issuance of these shares is contingent upon certain conditions which were not satisfied by the end of the period.

SEGMENT INFORMATION

4 unchanged sentences

We measure each segment's profitability based on gross profit.

The Chief Executive Officer ("CEO"), whom we identified as the chief operating decision maker ("CODM"), evaluates the segment's performance based on metrics, such as segment revenue and gross profit, to align with our strategies and objectives, and provide a framework for the timely and rational allocation of resources between the segments.

Our Chief Executive Officer ("CEO"), whom we identified as the chief operating decision maker ("CODM"), evaluates the segment's performance based on metrics, such as segment revenue and gross profit, that align with our strategies and objectives, and provide a framework for the timely and rational allocation of resources between the segments.

We account for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices, if any.

There were no inter-segment sales and transfers during the three months ended March 31, 2026, and 2025.

There were no inter-segment sales and transfers during the three and six months ended June 30, 2026, and 2025.

Interest income, interest expense, other income and expense items, and income taxes, as reported in the consolidated financial statements, are not part of the segment profitability measure and are primarily recorded at the corporate level.

1 unchanged sentence

As a result, assets are not tracked by segment, and therefore, total assets by segment are not disclosed.

Results of Operations by Business Segment

Results of Operations by Business Segment (Quarter)

For the Three Months Ended

March 31, 2026 March 31, 2025

June 30, 2026 June 30, 2025

Security Solutions Secure Networks Total Security Solutions Secure Networks Total

18 unchanged sentences

Income (loss) before income taxes 704 ( 9,471 )

(Provision for) benefit from income taxes ( 18 ) 4

Provision for income taxes ( 44 ) ( 46 )

Net income (loss) $ 660 $ ( 9,517 )

(1) The significant segment expense categories and amounts align with the segment-level information regularly provided by the CODM.

(1) The significant segment expense categories and amounts align with the segment-level information regularly provided to the CODM.

(2) Other segment items for each reportable segment include direct labor, direct subcontractor costs, direct materials and inventory, other direct non-labor costs, fringes, overhead, and facility costs.

Results of Operations by Business Segment (Year-to-Date)

For the Six Months Ended

June 30, 2026 June 30, 2025

Security Solutions Secure Networks Total Security Solutions Secure Networks Total

(in thousands)

Revenues $ 92,632 $ 2,855 $ 95,487 $ 58,292 $ 8,292 $ 66,584

Cost of Sales

Depreciation and amortization (1)

5,104 6 5,110 3,215 3 3,218

Stock-based compensation expense (1)

378 40 418 308 31 339

Other segment items (2)

53,787 2,105 55,892 32,411 6,502 38,913

Total cost of sales 59,269 2,151 61,420 35,934 6,536 42,470

Gross profit $ 33,363 $ 704 34,067 $ 22,358 $ 1,756 24,114

Operating expenses

Research and development expenses 2,702 3,083

Selling, general and administrative expenses 29,600 39,936

Total operating expenses 32,302 43,019

Operating income (loss) 1,765 ( 18,905 )

Other income 1,198 1,114

Interest expense ( 218 ) ( 288 )

Income (loss) before income taxes 2,745 ( 18,079 )

Provision for income taxes ( 62 ) ( 42 )

Net income (loss) $ 2,683 $ ( 18,121 )

(1) The significant segment expense categories and amounts align with the segment-level information regularly provided to the CODM.

SUPPLEMENTAL CASH FLOW INFORMATION

Details of Cash, Cash Equivalents, and Restricted Cash

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

(in thousands)

4 unchanged sentences

Supplemental Cash Flow Information

For the Three Months Ended

March 31, 2026 March 31, 2025

For the Six Months Ended

June 30, 2026 June 30, 2025

(in thousands)

1 unchanged sentence

Interest $ 203 $ 252

Income taxes 106 39

Non-cash investing and financing activities:

Capital expenditure activity in accounts payable and other accrued liabilities $ 54 $ 288

Issuance of common stock for 401(k) match $ 1,659 $ 2,063

Capital expenditure activity in accounts payable and other accrued liabilities 23 130

Issuance of common stock for AIP payment 3,987 —

COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

1 unchanged sentence

These legal proceedings typically seek various remedies, including claims for monetary damages in varying amounts or unspecified amounts.

Although the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, management believes that the outcome of any such known matters will not have a material adverse effect on the Company's business or its unaudited consolidated financial statements as of March 31, 2026.

Other - Government Contracts

10 unchanged sentences

federal government regulations may also be audited or investigated.

Subsequent Events

On April 29, 2026, the Company announced that John Wood, the President, CEO and Chairman of the Board, was taking a medical leave of absence.

Effective April 28, 2026, Mark Griffin, Executive Vice President, Security Solutions, Mark Bendza, Executive Vice President and Chief Financial Officer, and Hutch Robbins, Executive Vice President and General Counsel (under the oversight of and reporting to the Company’s Board) have assumed the responsibilities of the Chief Executive Officer on an interim basis.

Fred Schaufeld has been appointed by the Board of Directors to serve as its Chairman on an interim basis effective immediately.

The Board and executive leadership team are working closely to ensure continuity of the Company’s operations during Mr.

Wood’s absence.

The Company does not anticipate material disruption to its operations.

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