FTC Solar, Inc.

Previous wording

Government Regulations. Changes in the U.S. trade environment, including the imposition of import tariffs, AD/CVD investigations and the UFLPA, which became effective in June 2022, can have an impact on the timing of developer projects. The UFLPA resulted in new rules for module importers and reviews by CBP. There continues to be some uncertainty in the market around achieving full compliance with UFLPA, whether related to sufficient traceability of materials or other factors. Escalating trade tensions, particularly between the United States and China, have led to increased tariffs and trade restrictions, including tariffs applicable to certain raw materials and components for our products. We have taken measures with the intention of mitigating the effect of tariffs and the impact of AD/CVD and UFLPA on our business by reducing our reliance on China and enhancing our U.S.-based supply chain, including through our investment in Alpha Steel, as described further in Note 9, "Equity method investment" in Part I, Item 1 of this Form 10-Q. In 2019, 90% of our supply chain was sourced from China. As of June 30, 2025, we have qualified suppliers outside of China for certain of our commodities and we continue to work to have second-source capability for all Chinese-manufactured components to help reduce the extent to which our supply chain for U.S.-based projects is subject to existing tariffs and to be able to quickly address potential future regulatory and governmental policy changes. We have entered into partnerships with manufacturers based in the United States, India, South Africa, Spain, Turkey, Thailand and Vietnam to diversify our supply chain and optimize costs. On June 6, 2022, President Biden issued an Executive Order allowing U.S. solar deployers to import solar modules and cells from Cambodia, Malaysia, Thailand and Vietnam free from certain duties for 24 months, along with other incentives designed to accelerate U.S. domestic production of clean energy technologies. This moratorium ended in June 2024 and anti-dumping and countervailing duties on solar products linked to China are now well in excess of 200% for certain countries where Chinese firms have relocated production. Additionally, on December 29, 2023, Auxin and Concept Clean Energy, Inc. filed suit in the U.S. Court of International Trade challenging the legal basis for the moratorium and implementing regulations. Several motions have been filed to date, including a motion to dismiss by the U.S. government, which the court rejected. If the suit proves successful, solar module importers could owe retroactive duties on goods that have already cleared customs.

Current wording

CBP. There continues to be some uncertainty in the market around achieving full compliance with UFLPA, whether related to sufficient traceability of materials or other factors. Escalating trade tensions, particularly between the United States and China, have led to increased tariffs and trade restrictions, including tariffs applicable to certain raw materials and components for our products. We have taken measures with the intention of mitigating the effect of tariffs and the impact of AD/CVD and UFLPA on our business by reducing our reliance on China and enhancing our U.S.-based supply chain, including through our investment in Alpha Steel, as described further in Note 9, "Equity method investment" in Part I, Item 1 of this Form 10-Q. In 2019, 90% of our supply chain was sourced from China. As of September 30, 2025, we have qualified suppliers outside of China for certain of our commodities and we continue to work to have second-source capability for all Chinese-manufactured components to help reduce the extent to which our supply chain for U.S.-based projects is subject to existing tariffs and to be able to quickly address potential future regulatory and governmental policy changes. We have entered into partnerships with manufacturers based in the United States, India, South Africa, Spain, Turkey, Thailand and Vietnam to diversify our supply chain and optimize costs. On June 6, 2022, then-President Biden issued an Executive Order allowing U.S. solar deployers to import solar modules and cells from Cambodia, Malaysia, Thailand and Vietnam free from certain duties for 24 months, along with other incentives designed to accelerate U.S. domestic production of clean energy technologies. This moratorium ended in June 2024 and anti-dumping and countervailing duties on solar products linked to China are now well in excess of 200% for certain countries where Chinese firms have relocated production. Additionally, on December 29, 2023, Auxin and Concept Clean Energy, Inc. filed suit in the U.S. Court of International Trade challenging the legal basis for the moratorium and implementing regulations. Several motions have been filed to date, including a motion to dismiss by the U.S. government, which the court rejected. If the suit proves successful, solar module importers could owe retroactive duties on goods that have already cleared customs.

Previous wording

Effective April 5, 2025, the United States imposed a universal 10% tariff on most imports into the United States, excluding certain trade agreements. Tariff rates continue to change and fluctuate as negotiations continue between the United States and various countries. As an example, the United States previously imposed a 145% tariff on goods imported from China, and China imposed a retaliatory 125% tariff on goods imported from the United States. In May 2025, the U.S. and China agreed to a 90-day rollback whereby the United States cut the Chinese levies from 145% to 30% and China lowered the duties on U.S. goods from 125% to 10%, effective May 14, 2025. Also, in May 2025, the Trump administration announced the doubling of steel and aluminum tariffs to 50%. New reciprocal tariffs have also been announced on selected countries that are well above the universal 10% tariff rate. As of the filing of this Quarterly Report, matters involving tariffs continue to evolve and change, including in some cases, implementation of temporary pauses on certain announced tariffs as negotiations on final trade deals occur. Depending on the terms of our existing contracts with customers, we may not in all cases be able to fully recover the increased cost for delivery of tracker systems currently being manufactured for our customers by our international vendors due to higher tariffs currently in place, which has and may continue to impact our expected profitability under certain contracts. Imposition of new or higher tariffs could also adversely affect the amount or timing of our future revenue, results of operations or cash flows.

Current wording

Effective April 5, 2025, the United States imposed a universal 10% tariff on most imports into the United States, excluding certain trade agreements. Tariff rates continue to change and fluctuate as negotiations continue between the United States and various countries. As an example, the United States previously imposed a 145% tariff on goods imported from China, and China imposed a retaliatory 125% tariff on goods imported from the United States. In May 2025, the U.S. and China agreed to a 90-day rollback whereby the United States cut the Chinese levies from 145% to 30% and China lowered the duties on U.S. goods from 125% to 10%, effective May 14, 2025. In August 2025, the 90-day rollback was further extended through November 9, 2025. Also, in May 2025, the Trump administration announced the doubling of steel and aluminum tariffs to 50%. New reciprocal tariffs have also been announced on selected countries that are well above the universal 10% tariff rate. As of the filing of this Quarterly Report, matters involving tariffs continue to evolve and change, including a review which is underway by the U.S. Supreme Court, following an adverse ruling by the U.S. Court of International Trade, regarding the Trump Administration's use of the International Emergency Economic Powers Act to justify the imposition of tariffs without approval by the U.S. Congress and, in some cases, implementation of new temporary pauses on certain announced tariffs as negotiations on final trade deals occur. Depending on the terms of our existing contracts with customers, we may not in all cases be able to fully recover the increased cost for delivery of tracker systems currently being manufactured for our customers by our international vendors due to higher tariffs currently in place, which has and may continue to impact our expected profitability under certain contracts. Imposition of new or higher tariffs could also adversely affect the amount or timing of our future revenue, results of operations or cash flows.

Previous wording

Investment in Technology and Personnel. We invest in both the people and technology behind our products. We intend to continue making investments in the technology for our products and expansion of our patent portfolio to attract and retain customers, expand the capabilities and scope of our products, and enhance user experience. As an example, in August 2023, we introduced SUNOPS, a cloud-based solar asset monitoring solution, allowing asset owners and managers to evaluate the operation and performance of their solar deployments. Additionally, in May 2024, we announced the launch of our Automated Hail Stow Solution, aimed at minimizing solar panel damage caused by hailstorms. This solution integrates advanced technology with meteorological data to automatically adjust the positioning of solar panels, reducing the risk of hail-related damage. And, in April 2025, we unveiled dual-row configuration for our Pioneer tracker that allows for higher East-West slope tolerance, increased power density and installation on more challenging terrains while minimizing site preparation expense and environmental impact.

Current wording

Investment in Technology and Personnel. We invest in both the people and technology behind our products. We intend to continue making investments in the technology for our products and expansion of our patent portfolio to attract and retain customers, expand the capabilities and scope of our products, and enhance user experience. As an example, in August 2023, we introduced SUNOPS, a cloud-based solar asset monitoring solution, allowing asset owners and managers to evaluate the operation and performance of their solar deployments. Additionally, in May 2024, we announced the launch of our Automated Hail Stow Solution, aimed at minimizing solar panel damage caused by hailstorms. This solution integrates advanced technology with meteorological data to automatically adjust the positioning of solar panels, reducing the risk of hail-related damage. In April 2025, we unveiled dual-row configuration for our Pioneer tracker that allows for higher East-West slope tolerance, increased power density and installation on more challenging terrains while minimizing site preparation expense and environmental impact and, more recently, we released our Pioneer+ High Wind tracker, engineered to withstand wind speeds up to 150 miles per hour and launched an automated 80° high angle stow capability for our 1P Pioneer tracker.

Previous wording

Impact of Climate Change. Climate change has primarily impacted our business operations by increasing demand for solar power generation and, as a result, for use of our products. The U.S. Energy Information Administration, in its July 2025 Short-Term Energy Outlook, estimates that solar generation of electricity this summer will increase in the United States by 34% from last summer and by summer 2026, will grow another 19% and surpass wind to become the leading source of renewables generation during the summer months of June through September.

Current wording

Impact of Climate Change. Climate change has primarily impacted our business operations by increasing demand for solar power generation and, as a result, for use of our products. The U.S. Energy Information Administration, in its October 2025 Short-Term Energy Outlook, estimates that solar generation of electricity in 2026 will increase by 17% compared to 2025 and that renewables will account for 26% of U.S. electricity generation in 2026, compared to 24% in 2025.

Previous wording

For the periods included in this Quarterly Report, no company locations other than those in the United States and Australia accounted for more than 10% of our consolidated revenue. Our revenue growth is dependent on continued growth in the number of solar tracker projects and engineering services we win in competitive bidding processes and growth in our software sales each year, as well as our ability to increase our market share in each of the geographies in which we currently compete, expand our global footprint to new emerging markets, grow our production capabilities to meet demand and continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers, among other things.

Current wording

For the periods included in this Quarterly Report, no company locations other than in the United States accounted for more than 10% of our consolidated revenue. Our revenue growth is dependent on continued growth in the number of solar tracker projects and engineering services we win in competitive bidding processes and growth in our software sales each year, as well as our ability to increase our market share in each of the geographies in which we currently compete, expand our global footprint to new emerging markets, grow our production capabilities to meet demand and continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers, among other things.

Previous wording

Although we continue to add new employees in certain areas, we have reduced our total headcount over the last two years through adjustments made during the fourth quarter of 2024 and in August 2023, in response to project activity levels and process efficiencies we have gained due to our design-to-value and cost reduction efforts. Certain headcount changes also reflect a shift of our employee base to more cost-effective markets with exceptional talent. Our gross profit may vary period-to-period due to changes in our headcount, ASP, product costs, product versus service mix, customer mix, geographical mix, shipping methods, warranty costs and due to seasonal factors.

Current wording

Although we continue to add new employees in certain areas, we have reduced our total headcount since the end of the third quarter of 2024, in response to project activity levels and process efficiencies we have gained due to our design-to-value and cost reduction efforts. Certain headcount changes also reflect a shift of our employee base to more cost-effective markets with exceptional talent. Our gross profit may vary period-to-period due to changes in our headcount, ASP, product costs, product versus service mix, customer mix, geographical mix, shipping methods, warranty costs and due to seasonal factors.

Previous wording

The increase in product revenue for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily due to an increase of 147% in the amount of MW produced as activity has been positively impacted by recent project wins mainly associated with our 1P solar tracker solution. This was partially offset by a decrease of 27% in ASP for the three months ended June 30, 2025, resulting from project mix changes as compared to the three months ended June 30, 2024.

Current wording

The increase in product revenue for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was primarily due to an increase of 320% in the amount of MW produced as activity has been positively impacted by recent project wins mainly associated with our 1P solar tracker solution. This was partially offset by a decrease of 36% in ASP for the three months ended September 30, 2025, resulting from project mix changes as compared to the three months ended September 30, 2024.

Previous wording

The increase in service revenue for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, primarily resulted from (i) an increase of 62% in logistics activity levels and (ii) higher engineering consulting revenue associated with new project activity during the six months ended June 30, 2025. This was partially offset by a decrease of 4% in ASP as compared to the six months ended June 30, 2024 as a result of project size and pricing.

Current wording

The increase in service revenue for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, primarily resulted from (i) an increase of 82% in logistics activity levels and (ii) an increase of 20% in ASP as compared to the three months ended September 30, 2024 as a result of project size and pricing. This was partially offset by lower engineering consulting and software revenue during the three months ended September 30, 2025.

Previous wording

The increase in cost of revenue for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily driven by (i) an increase of 147% in MW produced, (ii) additional costs associated with tariffs and specified minimum purchase commitments with Alpha Steel, a related party, and (iii) an increase of 62% in logistics activity levels. Costs associated with these increases in activity levels were partially offset by lower personnel costs from headcount reductions and lower warranty and remediation expenses.

Current wording

The increase in cost of revenue for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was primarily driven by (i) an increase of 320% in MW produced, (ii) additional costs associated with tariffs, and (iii) an increase of 82% in logistics activity levels. Costs associated with these increases in activity levels were partially offset by lower (i) remediation costs, (ii) personnel costs, and (iii) other indirect expenses.

Previous wording

Our gross margin percentage of revenue for the three months ended June 30, 2025 was a negative 19.6%, a slight improvement compared to a negative 20.5% for the three months ended June 30, 2024.

Current wording

Our gross margin percentage of revenue for the three months ended September 30, 2025 was a positive 6.1%, compared to a negative 42.5% for the three months ended September 30, 2024.

Previous wording

The decrease in research and development expenses for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily attributable to (i) lower payroll costs of $0.2 million, and (ii) lower professional service costs of $0.1 million resulting from cost reduction initiatives. Research and development expenses as a percentage of revenue were 5.6% for the three months ended June 30, 2025, as compared to 13.4% for the three months ended June 30, 2024.

Current wording

The decrease in research and development expenses for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was primarily attributable to (i) lower payroll costs of $0.3 million, and (ii) lower facility rental and office costs of $0.1 million. This was partially offset by higher spending on lab and other research activities totaling $0.2 million. Research and development expenses as a percentage of revenue were 4.7% for the three months ended September 30, 2025, as compared to 14.5% for the three months ended September 30, 2024.

Previous wording

The decrease in selling and marketing expenses for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily attributable to (i) lower payroll costs of $0.6 million, (ii) lower marketing costs of $0.2 million, primarily associated with reduced spending for trade shows, (iii) lower professional services and stock-based compensation expense of $0.2 million and (iv) lower travel spending. This was partially offset by higher credit loss provisions of $0.4 million associated with certain specific customer accounts. Selling and marketing costs as a percentage of revenue were 6.5% for the three months ended June 30, 2025, compared to 17.8% for the three months ended June 30, 2024.

Current wording

The decrease in selling and marketing expenses for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was primarily attributable to (i) lower credit loss provisions of $0.4 million, associated primarily with charges for certain specific customer accounts recognized during the three months ended September 30, 2024, (ii) lower payroll costs of $0.2 million due to lower headcount levels, and (iii) lower professional services and stock-based compensation expense of $0.2 million. Selling and marketing costs as a percentage of revenue were 6.4% for the three months ended September 30, 2025, compared to 23.7% for the three months ended September 30, 2024.

Previous wording

The decrease in general and administrative expenses for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily attributable to (i) lower professional service costs of $0.3 million, (ii) lower stock-based compensation totaling $0.2 million, (iii) lower insurance costs of $0.2 million, (iv) lower intangible asset amortization expense of $0.1 million as such assets became fully amortized as of December 31, 2024, and (v) lower payroll and travel expenses. General and administrative expenses as a percentage of revenue were 25.8% for the three months ended June 30, 2025, compared to 52.6% for the three months ended June 30, 2024. The decrease in the percentage was largely attributable to the increased level of revenue during the three months ended June 30, 2025.

Current wording

The decrease in general and administrative expenses for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was primarily attributable to (i) lower payroll expense of $0.4 million, due mainly to lower headcount levels, (ii) lower insurance costs of $0.2 million, and (iii) lower intangible asset amortization expense of $0.1 million as such assets became fully amortized as of December 31, 2024. This was partially offset by higher professional services fees, primarily for audit and tax services, of $0.3 million. General and administrative expenses as a percentage of revenue were 24.6% for the three months ended September 30, 2025, compared to 67.1% for the three months ended September 30, 2024. The decrease in the percentage was largely attributable to the increased level of revenue during the three months ended September 30, 2025.

Previous wording

Interest expense incurred during the six months ended June 30, 2025 was primarily related to paid-in-kind interest added to the principal amount of our Senior Notes, as well as amortization of the discount and deferred loan costs on the Senior Notes. Interest expense during the six months ended June 30, 2024, primarily consisted of letter of credit and commitment fees on our Credit Facility that expired unused in April 2024, along with associated debt issue cost amortization.

Current wording

Interest expense incurred during the three months ended September 30, 2025 was primarily related to cash interest paid, paid-in-kind interest added to the principal amount of our Term Loans, and amortization of the discount and deferred loan costs on the Term Loans. Interest expense during the three months ended September 30, 2024, primarily related to certain short-term vendor financing arrangements.

Previous wording

We sold our Atlas web-based software platform on December 2, 2024. In connection with the sale, the purchaser agreed to future potential earnout payments based on annual license renewals by certain existing customers during 2025. We received such a payment from the purchaser in June 2025. In accordance with our existing accounting policy, we recognize a gain from these contingent earnout payments upon receipt.

Current wording

We sold our Atlas web-based software platform on December 2, 2024. In connection with the sale, the purchaser agreed to future potential earnout payments based on annual license renewals during 2025 by certain existing customers. During 2025, we have received such earnout payments from the purchaser. In accordance with our existing accounting policy, we recognize a gain from these contingent earnout payments upon receipt.

Previous wording

The Original Warrants (as defined below under "Outstanding debt and warrants") issued in connection with the Offering described further in Note 12, "Debt" in our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, were classified as a long-term liability. Due largely to an increase in the price of our common stock during the three months ended June 30, 2025, the fair value of the Original Warrants increased from $4.9 million at March 31, 2025 to approximately $7.8 million when they were exercised in full on June 30, 2025, resulting in recognition of a non-cash loss for the increase in value during the three months ended June 30, 2025.

Current wording

The New Warrants (as defined below under "Outstanding debt and warrants") issued in connection with the Credit Agreement described further in Note 12, "Debt" in our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, were classified as a long-term liability. Due largely to an increase in the price of our common stock during the three months ended September 30, 2025, the fair value of the New Warrants increased from nearly $32.1 million at July 2, 2025 to more than $48.1 million as of September 30, 2025, resulting in recognition of a non-cash loss for the increase in value during the three months ended September 30, 2025.

Previous wording

The losses from unconsolidated subsidiary for the three months ended June 30, 2025 and 2024 represent our share of the net operating losses incurred by Alpha Steel during each period.

Current wording

The income (loss) from unconsolidated subsidiary for the three months ended September 30, 2025 and 2024 represents our share of the net operating results incurred by Alpha Steel during each period. The change in amounts recognized is largely related to the recognition of income by Alpha Steel in connection with the minimum purchase obligation owed by us as described further in Note 16, "Related party transactions" in Part I, Item 1 of this Quarterly Report.

Previous wording

The increase in product revenue for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily due to an increase of 147% in the amount of MW produced as activity has been positively impacted by recent project wins mainly associated with our 1P solar tracker solution. This impact has been partially offset by a decrease of 30% in ASP for the six months ended June 30, 2025, as a result of project mix changes as compared to the six months ended June 30, 2024.

Current wording

The increase in product revenue for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily due to an increase of 185% in the amount of MW produced as activity has been positively impacted by recent project wins mainly associated with our 1P solar tracker solution. This impact has been partially offset by a decrease of 30% in ASP for the nine months ended September 30, 2025, as a result of project mix changes as compared to the nine months ended September 30, 2024.

Previous wording

The increase in service revenue for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, primarily resulted from (i) an increase of 35% in logistics activity levels and (ii) an increase of 15% in ASP as compared to the three months ended June 30, 2024 as a result of project size and pricing. We also had higher engineering consulting revenue associated with new project activity during the three months ended June 30, 2025.

Current wording

The increase in service revenue for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, primarily resulted from (i) an increase of 71% in logistics activity levels, (ii) an increase of 5% in ASP as compared to the nine months ended September 30, 2024, as a result of project size and pricing, and (iii) higher engineering consulting revenue associated with new project activity during the nine months ended September 30, 2025.

Previous wording

The increase in cost of revenue for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily driven by (i) an increase of 147% in MW produced, (ii) additional costs associated with tariffs and specified minimum purchase commitments with Alpha Steel, a related party, and (iii) an increase of 35% in logistics activity levels. Costs associated with these increases in activity levels were partially offset by lower personnel costs from headcount reductions and lower warranty and remediation expenses.

Current wording

The increase in cost of revenue for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily driven by (i) an increase of 185% in MW produced, (ii) additional costs associated with tariffs and specified minimum purchase commitments with Alpha Steel, a related party, and (iii) an increase of 71% in logistics activity levels. Costs associated with these increases in activity levels were partially offset by lower personnel costs from headcount reductions and lower warranty and remediation expenses.

Previous wording

Our gross margin percentage of revenue for the six months ended June 30, 2025 was a negative 18.1%, which was slightly better than the negative 18.5% for the six months ended June 30, 2024.

Current wording

Our gross margin percentage of revenue for the nine months ended September 30, 2025 was a negative 8.6%, compared to negative 25.6% for the nine months ended September 30, 2024.

Previous wording

We had negative gross margin for the six months ended June 30, 2024 as (i) production volumes were not sufficient to cover certain overhead costs and (ii) our service revenue was not sufficient to fully cover our warehousing and certain other costs.

Current wording

We had negative gross margin for the nine months ended September 30, 2024 as (i) production volumes were not sufficient to cover certain overhead costs and (ii) our service revenue was not sufficient to fully cover our warehousing and certain other costs.

Previous wording

The decrease in research and development expenses for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily attributable to (i) lower payroll costs of 0.5 million, (ii) lower spending on lab and other research activities of $0.2 million, and (iii) lower professional service costs of $0.2 million resulting from cost reduction initiatives. Research and development expenses as a percentage of revenue were 5.0% for the six months ended June 30, 2025, as compared to 12.4% for the six months ended June 30, 2024.

Current wording

The decrease in research and development expenses for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily attributable to (i) lower payroll costs of 0.8 million, largely due to changes in the location of headcount and lower bonus expense, (ii) lower professional service costs of $0.2 million resulting from cost reduction initiatives and (iii) lower office costs of $0.2 million, primarily associated with reduced software and other license fees. Research and development expenses as a percentage of revenue were 4.9% for the nine months ended September 30, 2025, as compared to 13.0% for the nine months ended September 30, 2024.

Previous wording

The decrease in selling and marketing expenses for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily attributable to (i) lower payroll costs of $0.9 million, (ii) lower provisions for credit losses of $0.4 million, mainly related to charges associated with specific individual customer accounts during 2024, and (iii) lower travel, marketing and professional service costs of $0.5 million accounted for much of the remaining decrease. Selling and marketing costs as a percentage of revenue were 5.9% for the six months ended June 30, 2025, compared to 18.4% for the six months ended June 30, 2024.

Current wording

The decrease in selling and marketing expenses for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily attributable to (i) lower payroll costs of $1.1 million, due mainly to lower headcount and commission costs, (ii) lower provisions for credit losses of $0.8 million, mainly related to charges associated with specific individual customer accounts during 2024, and (iii) lower travel, marketing, recruiting fees and other professional service costs of $0.6 million. Lower stock-based compensation costs accounted for much of the remaining decrease. Selling and marketing costs as a percentage of revenue were 6.1% for the nine months ended September 30, 2025, compared to 20.0% for the nine months ended September 30, 2024.

Previous wording

The decrease in general and administrative expenses for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily attributable to (i) lower stock-based compensation totaling $1.6 million, largely associated with certain executive award forfeitures during the six months ended June 30, 2025, (ii) lower professional service costs of $0.8 million resulting from our cost reduction initiatives, (iii) lower insurance costs of $0.4 million, and (iv) lower intangible asset amortization expense of $0.3 million as such assets became fully amortized as of December 31, 2024. This was partially offset by higher payroll costs of $0.6 million largely due to higher executive bonus expense. General and administrative expenses as a percentage of revenue were 25.0% for the six months ended June 30, 2025, compared to 52.4% for the six months ended June 30, 2024. The decrease in the percentage was largely attributable to the increased level of revenue during the six months ended June 30, 2025.

Current wording

The decrease in general and administrative expenses for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily attributable to (i) lower stock-based compensation totaling $1.7 million, largely associated with certain executive award forfeitures during the nine months ended September 30, 2025, (ii) lower professional service costs of $0.5 million largely resulting from our cost reduction initiatives to reduce the use of outside consulting services, (iii) lower insurance costs of $0.5 million, and (iv) lower intangible asset amortization expense of $0.4 million as such assets became fully amortized as of December 31, 2024. This was partially offset by (a) higher payroll costs of $0.2 million largely due to higher executive bonus expense and (b) higher rent and other office expenses. General and administrative expenses as a percentage of revenue were 24.9% for the nine months ended September 30, 2025, compared to 56.7% for the nine months ended September 30, 2024. The decrease in the percentage was largely attributable to the increased level of revenue during the nine months ended September 30, 2025.

Previous wording

Interest expense incurred during the three months ended June 30, 2025 was primarily related to paid-in-kind interest added to the principal amount of our Senior Notes, as well as amortization of the discount and deferred loan costs on the Senior Notes. Interest expense during the three months ended June 30, 2024, primarily consisted of letter of credit and commitment fees on our Credit Facility that expired unused in April 2024, along with associated debt issue cost amortization.

Current wording

Interest expense incurred during the nine months ended September 30, 2025 was primarily related to cash interest on our Term Loans and paid-in-kind interest added to the principal amount of our Term Loans and original Senior Notes, as well as amortization of the discount and deferred loan costs on the Term Loans and original Senior Notes. Interest expense during the nine months ended September 30, 2024, primarily consisted of letter of credit and commitment fees on our Credit Facility that expired unused in April 2024, along with associated debt issue cost amortization.

Previous wording

We sold our Atlas web-based software platform on December 2, 2024. In connection with the sale, the purchaser agreed to future potential earnout payments based on annual license renewals by certain existing customers during 2025. We received such a payment from the purchaser in June 2025. In accordance with our existing accounting policy, we recognize a gain from these contingent earnout payments upon receipt.

Current wording

We sold our Atlas web-based software platform on December 2, 2024. In connection with the sale, the purchaser agreed to future potential earnout payments based on annual license renewals during 2025 by certain existing customers. During 2025, we have received such earnout payments from the purchaser. In accordance with our existing accounting policy, we recognize a gain from these contingent earnout payments upon receipt.

Previous wording

During the six months ended June 30, 2025 and 2024, we received earnout payments of $3.2 million and $4.1 million, respectively, that were recognized in accordance with our policy election of recording such gains when realized.

Current wording

During the nine months ended September 30, 2025 and 2024, we received earnout payments of $3.2 million and $4.1 million, respectively, that were recognized in accordance with our policy election of recording such gains when realized.

Previous wording

Gain from change in fair value of warrant liability

Current wording

Loss from change in fair value of warrant liability

Previous wording

The Original Warrants issued in connection with the Offering described further in Note 12, "Debt" in our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, were classified as a long-term liability. Due largely to a decrease in the price of our common stock during the six months ended June 30, 2025, the fair value of the Original Warrants decreased from $9.5 million at December 31, 2024 to approximately $7.8 million when they were exercised in full on June 30, 2025, resulting in recognition of a non-cash gain for the decrease in value during the six months ended June 30, 2025.

Current wording

The New Warrants issued in connection with the Credit Agreement and the Original Warrants issued in connection with the Offering, both as described further in Note 12, "Debt" in our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, were classified as long-term liabilities. Due largely to changes in the price of our common stock during the nine months ended September 30, 2025, the fair value of the Original Warrants decreased from $9.5 million at December 31, 2024 to approximately $7.8 million when they were exercised in full on June 30, 2025, and the New Warrants increased in value from $32.1 million at July 2, 2025, to $48.1 million at September 30, 2025, resulting in recognition of a non-cash loss for the net increase in value during the nine months ended September 30, 2025.

Previous wording

We have incurred cumulative losses since inception and have a history of cash outflows from operations, inclusive of $10.8 million in cash utilized in our operating activities during the six months ended June 30, 2025. As of June 30, 2025, we had cash on hand of $3.5 million and $9.7 million of working capital.

Current wording

We have incurred cumulative losses since inception and have a history of cash outflows from operations, inclusive of $25.4 million in cash utilized in our operating activities during the nine months ended September 30, 2025. As of September 30, 2025, we had cash on hand of $24.4 million, $38.5 million of working capital and a stockholders' deficit of $13.7 million.

Previous wording

As of June 30, 2025, in addition to our cash on hand and working capital, we had nearly $13.8 million of capacity available for future sales of our common stock under our ATM program as defined and described further in Note 14, "ATM Program" in Part I, Item 1 of this Quarterly Report. There can be no assurance regarding the price at which we will be able to sell such shares, and any sales of our common stock under the ATM program may be at prices that result in additional dilution to our existing stockholders.

Current wording

As of September 30, 2025, in addition to our cash on hand and working capital, we had approximately $13.75 million of capacity available for future sales of our common stock under our ATM program as defined and described further in Note 14, "ATM Program" in Part I, Item 1 of this Quarterly Report. There can be no assurance regarding the price at which we will be able to sell such shares, and any sales of our common stock under the ATM program may be at prices that result in additional dilution to our existing stockholders.

Previous wording

As described further in Note 19, "Subsequent events" in Part I, Item 1 of this Quarterly Report, on July 2, 2025 (the "Closing Date"), we entered into a Credit Agreement (the "Credit Agreement") by and among the Company, as borrower, each lender party thereto from time to time (the "Lenders"), and Acquiom Agency Services LLC, as administrative agent for the Lenders. The Credit Agreement provides for a senior secured term facility of up to $75 million, consisting of (i) $14.3 million principal amount of Initial Term Loans that were funded on the Closing Date; (ii) $23.2 million principal amount of First Delayed Draw Term Loans that may be funded during the 90-day period following the Closing Date, subject to Company stockholder approval of the issuance of all of the shares of the Company's common stock issuable upon the full exercise of the warrants issued to the Lenders on the Closing Date in connection with the transactions under the Credit Agreement; and (iii) up to $37.5 million principal amount of Second Delayed Draw Term Loans that may be requested by the Company and approved by the Lenders in their sole discretion. After deductions for certain fees and expenses, the net proceeds received by the Company on the Closing Date from the funding of the Initial Term Loans totaled approximately $13.0 million.

Current wording

Original Credit Agreement as amended by the First Amendment, the "Credit Agreement") to amend certain of the financial covenants applicable to us and in connection with our agreement to acquire 100% of the membership interests of Alpha Steel. The Credit Agreement provides for a senior secured term facility of up to $75 million, consisting of (i) $14.3 million principal amount of Initial Term Loans that were funded on the Closing Date, (ii) $23.2 million principal amount of First Delayed Draw Term Loans that were funded on September 19, 2025, and (iii) up to $37.5 million principal amount of Second Delayed Draw Term Loans that may be requested by the Company and approved by the Lenders in their sole discretion (collectively, with the Initial Term Loans and the First Delayed Draw Term Loans, the "Term Loans"). The Term Loans currently outstanding mature on July 2, 2029.

Previous wording

We also have a contractual obligation that could require us to make additional capital contributions of up to $0.8 million to Alpha Steel, as well as make a minimum level of purchases from Alpha Steel, as described further in Note 9, "Equity method investment" in Part I, Item 1 of this Quarterly Report. In the event we were to fail to meet our minimum required purchase commitments during a specified period, including the period from July 1, 2025 to June 30, 2026, we may be required to make a cash payment for the net profit attributable to any unfilled requirements, calculated as specified in the agreement, in an amount not to exceed $4.0 million in the aggregate.

Current wording

In addition to quarterly cash payments required under the Credit Agreement, as of September 30, 2025, we also had a contractual obligation that would have required us to make additional capital contributions of up to $0.8 million to Alpha Steel, as well as make a minimum level of purchases from Alpha Steel, as described further in Note 9, "Equity method investment" in Part I, Item 1 of this Quarterly Report. On November 11, 2025, we agreed to purchase the membership interests of Alpha Steel owned by Taihua and DAYV and, as a result, Alpha Steel will become our wholly-owned subsidiary at the closing of such transaction. In the event we had failed to meet our minimum required purchase commitments prior to our ownership of 100% of Alpha Steel during a specified period, including the period from July 1, 2025 to June 30, 2026, we would have been required to make a cash payment for the net profit attributable to any unfilled requirements, calculated as specified in the agreement, in an amount not to exceed $4.0 million in the aggregate.

Previous wording

Based on our cash position at June 30, 2025, including consideration of the $13.0 million of net proceeds from the initial funding received on July 2, 2025 under the Credit Agreement, and in view of our recent operating losses and due to the availability of additional financing provided by the Credit Agreement following the Closing Date in the form of the First Delayed Draw Term Loans and Second Delayed Draw Term Loans not being completely within our control, we have concluded that substantial doubt exists as to our ability to continue as a going concern within the next year.

Current wording

Based on our cash position at September 30, 2025, and in view of our recent operating losses and financial performance, which could impact our ability to meet financial covenant requirements during the twelve months following issuance of this Quarterly Report, as well as the availability of additional financing provided by the Credit Agreement in the form of Second Delayed Draw Term Loans not being completely within our control, we have concluded that substantial doubt exists as to our ability to continue as a going concern within the next year.

Previous wording

Our ability to meet our liquidity needs over the next year is dependent upon (i) our cash on hand (subject to a $20.0 million minimum unrestricted cash covenant under the Credit Agreement effective for the quarter ended September 30, 2025 (such minimum cash covenant and the other financial covenants under the Credit Agreement as described further in Note 19, "Subsequent events" in Part I, Item 1 of this Quarterly Report)), (ii) our expectations of increased project activity and cash flow during the twelve-month period following issuance of these Condensed Consolidated Financial Statements, (iii) the availability of expected additional proceeds in the form of First Delayed Draw Term Loans under the Credit Agreement during September 2025, the funding of which is subject to Company stockholder approval of the issuance of all of the shares of the Company's common stock issuable upon the full exercise of the warrants issued, and the potential availability of the Second Delayed Draw Term Loans that may be requested by the Company and approved by the Lenders in their sole discretion, and (iv) utilization, as appropriate, of the capacity available for future sales of our common stock under the ATM program, which is currently constrained to a degree by the size of our non-affiliate market capitalization, our trading volume and other factors. In addition, we continue to remain focused on implementing additional cost savings steps, which could impact, among other things, the location of our headcount and the level of services currently provided by third parties.

Current wording

Our ability to meet our liquidity needs over the next year is dependent upon (i) our cash on hand (subject to a $20.0 million minimum unrestricted cash covenant under the Credit Agreement effective for the quarter ended December 31, 2025) and our compliance with the other financial covenants under the Credit Agreement (such minimum cash covenant and the other financial covenants under the Credit Agreement as described further in Note 12, "Debt" in Part I, Item 1 of this Quarterly Report)), (ii) our expectations of increased project activity and cash flow during the twelve-month period following issuance of these Condensed Consolidated Financial Statements, (iii) the availability of additional proceeds in the form of Second Delayed Draw Term Loans that may be requested by the Company and approved by the Lenders in their sole discretion, and (iv) utilization, as appropriate, of the capacity available for future sales of our common stock under the ATM program. In addition, we continue to remain focused on implementing additional cost savings steps, which could impact, among other things, the location of our headcount and the level of services currently provided by third parties.

Previous wording

Also, in connection with the Credit Agreement and the Subordination Agreement, the Company and Investor entered into an Amended and Restated Promissory Note, dated July 2, 2025 (the “A&R Promissory Note”). The A&R Promissory Note amends and restates the original Senior Notes to remove the seniority terms of those notes, conform the original Senior Notes to the terms of the Credit Agreement and the Subordination Agreement, amend certain prepayment and make-whole terms under the original Senior Notes, delete certain covenants and event of default terms, reduce the interest rate under the original Senior Notes to 5% per annum paid in cash and 7% per annum paid in kind, and to delete the financial covenants set forth in the original Senior Notes. As a result of an amendment to the Purchase Agreement entered into on July 2, 2025 (the "Purchase Agreement Amendment"), among other things, the Investor agreed to release all liens and guarantees securing the obligations under the Senior Notes, the Purchase Agreement, and the A&R Promissory Note.

Current wording

Also, in connection with the Credit Agreement and the Subordination Agreement, the Company and Investor entered into an Amended and Restated Promissory Note, dated July 2, 2025 (the “A&R Promissory Note”). The A&R Promissory Note amends and restates the original Senior Notes to remove the seniority terms of those notes, conform the original Senior Notes to the terms of the Credit Agreement and the Subordination Agreement, amend certain prepayment and make-whole terms under the original Senior Notes, delete certain covenants and event of default terms, reduce the interest rate under the original Senior Notes to 5% per annum paid in cash and 7% per annum paid in kind, both on the final business day of June and December in each year, and to delete the financial covenants set forth in the original Senior Notes. As a result of an amendment to the Purchase Agreement entered into on July 2, 2025 (the "Purchase Agreement

Previous wording

In consideration for the Investor's agreements under the A&R Promissory Note, the Subordination Agreement, and the Purchase Agreement Amendment, the Investor received 1,417,945 warrants with a term of 10 years, to purchase our common stock at an exercise price of $0.01 per share (the "Amendment Warrants").

Current wording

Included as a portion of the aggregate number of New Warrants described above, the Investor received 1,417,945 New Warrants on July 2, 2025, attributable to the Investor's agreements under the A&R Promissory Note, the Subordination Agreement, and the Purchase Agreement Amendment.

Previous wording

During the six months ended June 30, 2025, we used approximately $13.4 million of cash to fund a portion of our current period expenditures for personnel and facilities, legal and professional fees, insurance, research and development and various other operating activities. This compares to approximately $17.1 million of cash used during the six months ended June 30, 2024, also to fund a portion of our prior period expenditures for various operating activities as described above.

Current wording

During the nine months ended September 30, 2025, we used approximately $19.0 million of cash to fund a portion of our current period expenditures for personnel and facilities, legal and professional fees, insurance, research and development and various other operating activities. This compares to approximately $26.3 million used during the nine months ended September 30, 2024, also to fund a portion of our prior period expenditures for various operating activities as described above.

Previous wording

During the six months ended June 30, 2025 and 2024, we generated approximately $2.7 million and $1.5 million of cash, respectively, primarily from working capital reductions, including timing of customer receipts and vendor payments.

Current wording

During the nine months ended September 30, 2025 and 2024, we used approximately $6.4 million and generated $8.3 million of cash, respectively, primarily from changes in working capital, mainly related to timing of customer receipts and vendor payments and changes in activity levels.