Fusemachines Inc.

Previous wording

In January 2026, 1,217,210 awards had been granted as Restricted stock units under the 2025 Plan as of period ended March 31, 2026, whose impact has been considered on the Company’s unaudited condensed consolidated interim financial statements as of that date. Restricted stock units are valued on the date of grant and have no purchase price for the recipient. Restricted stock units typically vest over period ranging from one to four years corresponding to anniversaries of the grant date.

Current wording

In January 2026, 1,217,210 awards had been granted as Restricted stock units under the 2025 Plan in previous quarter ended March 31, 2026, whose impact has been considered on the Company’s unaudited condensed consolidated interim financial statements as of that date. Restricted stock units are valued on the date of grant and have no purchase price for the recipient. Restricted stock units typically vest over period ranging from one to four years corresponding to anniversaries of the grant date.

Previous wording

On April 10, 2026, the Company and a vendor under a Work Labor & Services agreement entered into a settlement agreement pursuant to which the Company agreed to pay a total of $32.9 thousand, including the $7.5 thousand previously paid in escrow account, in full and final settlement of all claims. The Company paid the agreed remaining amount to the vendor and subsequently on April 17, 2026, the vendor filed a Satisfaction of Judgment with the Kings County Clerk, confirming full satisfaction and extinguishment of the judgment. Accordingly, the Company has no remaining exposure related to this matter at the time of filing of form 10-Q (Quarterly Report).

Current wording

On April 10, 2026, the Company and a vendor under a Work Labor & Services agreement entered into a settlement agreement pursuant to which the Company agreed to pay a total of $32.9 thousand, including the $7.5 thousand previously paid in escrow account, in full and final settlement of all claims. The Company paid the agreed remaining amount to the vendor and subsequently on April 17, 2026, the vendor filed a Satisfaction of Judgment with the Kings County Clerk, confirming full satisfaction and extinguishment of the judgment. Accordingly, the Company has no remaining exposure related to this matter as of June 30, 2026.

Previous wording

For the three months ended March 31, 2026, and March 31, 2025, we generated revenues of $1.88 million and $1.95 million and reported a net loss of $0.87 million and $0.25 million, respectively. Net cash used in operating activities was $2.22 million for the three months ended March 31, 2026, and $0.23 million for the three months ended March 31, 2025. As noted in our unaudited condensed consolidated interim financial statements, we had an accumulated deficit of $36.10 million as of March 31, 2026 and $35.15 million as of December 31, 2025.

Current wording

For the three months ended June 30, 2026, and June 30, 2025, we generated revenues of $1.79 million and $2.03 million and reported a net loss of $2.85 million and $3.79 million, respectively. For the six months ended June 30, 2026, and June 30, 2025, we generated revenues of $3.67 million and $3.99 million and reported a net loss of $3.72 million and $4.04 million, respectively. Net cash used in operating activities was $3.51 million for the six months ended June 30, 2026, and $0.15 million for the six months ended June 30, 2025. As noted in our unaudited condensed consolidated interim financial statements, we had an accumulated deficit of $38.95 million as of June 30, 2026 and $35.15 million as of December 31, 2025.

Previous wording

●Adequate Capital Raise: As of March 31, 2026, we had limited financial resources However, on April 17, 2026, subsequent to the balance sheet date of March 31, 2026, Fusemachines Inc. entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a related Registration Rights Agreement with Roth Principal Investments, LLC (“Roth Principal Investments”), an affiliate of Roth Capital Partners, LLC. Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to sell to Roth Principal Investments up to $20,000,000 in aggregate gross proceeds of shares of common stock (par value $0.0001 per share) from time to time over a 36-month commitment period, at the Company’s sole discretion. Although we entered into the Purchase Agreement during 2026, we expect that additional capital will be required to fund operations, support product development, expand selling and marketing activities, and meet our working capital requirements.

Current wording

●Adequate Capital Raise: On April 17, 2026, Fusemachines Inc. entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a related Registration Rights Agreement with Roth Principal Investments, LLC (“Roth Principal Investments”), an affiliate of Roth Capital Partners, LLC. Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to sell to Roth Principal Investments up to $20,000,000 in aggregate gross proceeds of shares of common stock (par value $0.0001 per share) from time to time over a 36-month commitment period, at the Company’s sole discretion. Although we entered into the Purchase Agreement during 2026, we expect that additional capital will be required to fund operations, support product development, expand selling and marketing activities, and meet our working capital requirements. As of the date these unaudited condensed consolidated interim financial statements along with Management Discussion and Analysis were available to be issued, the S-1 is not yet effective, and there can be no assurance as to the timing or ultimate effectiveness thereof.

Previous wording

Revenue for the three months ended March 31, 2026, reduced to $1.88 million as compared to $1.95 million for the three months ended March 31, 2025, primarily due to lower revenue from AI Solutions (Products and Services). Overall revenue decreased by $0.07 million during the period.

Current wording

Revenue for the three months ended June 30, 2026, reduced to $ 1.79 million as compared to $ 2.03 million for the three months ended June 30, 2025, primarily due to lower revenue from AI Solutions (Products and Services) of $0.13 million and AI Education Service of $0.11 million. Overall revenue decreased by $0.24 million during the period. The decrease is attributable to net decrease in total clients for the period.

Previous wording

Cost of revenue – Cost of revenue primarily consists of consulting and payroll expenses that are assigned to building AI solutions. Cost of revenue increased by $0.07 million, to $0.93 million for the three months ended March 31, 2026, compared to $0.86 million for the three months ended March 31, 2025. The increase was primarily driven by annual salary increments.

Current wording

*Cost of revenue –*Cost of revenue primarily consists of consulting and payroll expenses that are assigned to building AI solutions. Cost of revenue increased by $0.003 million, to $0.83 million for the three months ended June 30, 2026, compared to $0.83 million for the three months ended June 30, 2025. The increase was primarily driven by annual salary increments.

Previous wording

Selling and marketing expenses increased by $0.10 million, from $0.31 million for the three months ended March 31, 2025, to $0.41 million for the three months ended March 31, 2026. The increase was primarily attributable to higher consulting fees.

Current wording

Selling and marketing expenses increased by $0.05 million, from $0.33 million for the three months ended June 30, 2025, to $0.38 million for the three months ended June 30, 2026. The increase was primarily attributable to higher consulting fees and advertising expenses.

Previous wording

General and administrative expenses increased by $1.34 million, from $1.93 million for the three months ended March 31, 2025, to $3.27 million for the three months ended March 31, 2026. The increase was primarily driven by a rise in stock-based compensation expense of $0.35 million attributable to the issuance of restricted stock units (“RSUs”) during the current period, which did not exist in the prior year quarter. Further, the Professional services costs increased by $0.37 million, driven by an increment in audit and consulting fees.

Current wording

General and administrative expenses increased by $1.41 million, from $1.57 million for the three months ended June 30, 2025, to $2.98 million for the three months ended June 30, 2026. The increase was primarily driven by a rise in stock-based compensation expense of $0.40 million attributable to the issuance of restricted stock units (“RSUs”) during the current period, which did not exist in the prior year quarter. Further, the Professional services costs increased by $0.47 million, driven by an increment in audit and consulting fees. In 2025, $0.15 million of the professional service cost was capitalized as IPO transaction cost in 2025 whereas it is NIL in 2026. In addition, other general expenses, payroll increased by $0.26 million due to annual salary increments, insurance policy by $0.11 million, other operating expenses by $0.10 million and BOD’s compensation by $0.07 million.

Previous wording

Research and development expenses for the three months ended March 31, 2026, increased by $0.13 million to $0.30 million as compared to $0.17 million for the three months ended March 31, 2025. The increase was primarily due to increase in payroll expenses.

Current wording

Research and development expenses for the three months ended June 30, 2026, increased by**$**0.13 million to $0.29 million as compared to $0.16 million for the three months ended June 30, 2025. The increase was primarily due to increase in payroll expenses.

Previous wording

Interest expense decreased by $0.02 million to $0.05 million for the three months ended March 31, 2026, from $0.07 million for the three months ended March 31, 2025. The decrease was primarily due to a lower outstanding balance of promissory notes, as pursuant of the consummation of the Business Combination on October 22, 2025, substantially all Fusemachines convertible notes that were issued and outstanding immediately prior to the Closing were converted into shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements. As a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of March 31, 2026 other than related party note payable related to Dolma amounting to $300 thousand.

Current wording

Interest expense decreased by $0.03 million to $0.11 million for the six months ended June 30, 2026, from $0.14 million for the six months ended June 30, 2025. The decrease for both three months ended and six months ended June 30, 2026 was primarily due to a lower outstanding balance of promissory notes, as pursuant of the consummation of the Business Combination on October 22, 2025, substantially all Fusemachines convertible notes that were issued and outstanding immediately prior to the Closing were converted into shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements. As a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of June 30, 2026 other than related party note payable related to Dolma amounting to $300 thousand.

Previous wording

Loss on extinguishment of debt – Loss on extinguishment of debt for the three month ended March 31, 2026 was Nil, as compared to $0.39 million for the three months ended March 31, 2025, represents $0.1 million related to April 2024 Convertible Note, $0.1 million related to June 2024 Convertible Note and $0.2 million related to September 2024 Convertible Notes. Loss on extinguishment of debt are related to modification of the aforementioned loans on account of change in conversion price from $4.94 to $3.15 was accounted for under the substantial premium model in accordance with ASC 470, Debt where the excess above the fair value of these notes was recorded as loss on extinguishment of debt.

Current wording

Loss on extinguishment of debt – Loss on extinguishment of debt for the three months ended June 30, 2026 and 2025 was Nil. Loss on extinguishment of debt for the six months ended June 30, 2026 was Nil as compared to $0.39 million for the six months ended June 30, 2025, represents $0.1 million related to April 2024 Convertible Note, $0.1 million related to June 2024 Convertible Note and $0.2 million related to September 2024 Convertible Notes. Loss on extinguishment of debt are related to modification of the aforementioned loans on account of change in conversion price from $4.94 to $3.15 was accounted for under the substantial premium model in accordance with ASC 470, Debt where the excess above the fair value of these notes was recorded as loss on extinguishment of debt.

Previous wording

Gain on extinguishment of payable- During the three months ended March 31, 2026, the Company recognized a gain on extinguishment of payable of $0.50 million, with no corresponding amount recorded in the three months ended March 31, 2025. The gain arose in connection with the Settlement Agreement and General Release (the “Settlement Agreement”) entered into effective March 13, 2026.

Current wording

Gain on extinguishment of payable- During the three months ended June 30, 2026 , gain on extinguishment of payable of $0.01 million and three months ended June 30, 2025 gain on extinguishment of payable was NIL. During the six months ended June 30, 2026, the Company recognized a gain on extinguishment of payable of $0.51 million, with no corresponding amount recorded in the six months ended June 30, 2025.

Previous wording

Gain on change in fair value for the three months ended March 31, 2026 was 1.65 million as compared to $1.52 million for the three months ended March 31, 2025. Out of the aforementioned gain for the three months ended March 31, 2026, gain of $1.59 million related to fair value of forward purchase derivative liability and remaining gain in fair value of $0.06 million related to common stock warrant liability. This gain in fair value of common stock warrant liability was primarily driven by changes in key valuation inputs, including the Company’s relatively low share price of $0.95, elevated equity volatility of 62.0%, and the remaining contractual term of approximately 7.41 years. These factors increased the probability-weighted value of the potential share settlement under the arrangement. In addition, gain of approximately $1.59 million in the fair value of forward purchase derivative liability is driven by changes in key valuation inputs, including the Company’s relatively Volume weighted average price (VWAP) of $1.31, elevated equity volatility of 62.5%, and the remaining contractual term of approximately 2.56 years. These factors increased the probability-weighted value of the potential share settlement under the arrangement. Further impacted by adjustments for counterparty credit risk of 6.6%.

Current wording

Gain on change in fair value for the three months ended June 30, 2026 was $0.01 million as compared to loss of $2.86 million for the three months ended June 30, 2025. Out of the aforementioned gain for the three months ended June 30, 2026, gain of $0.02 million related to fair value of forward purchase derivative liability and remaining loss in fair value of $0.01 million related to common stock warrant liability. This gain in fair value of common stock warrant liability was primarily driven by changes in key valuation inputs, including the Company’s relatively low share price of $1.05, elevated equity volatility of 65.0%, and the remaining contractual term of approximately 7.16 years. These factors increased the probability-weighted value of the potential share settlement under the arrangement. In addition, gain of approximately $0.02 million in the fair value of forward purchase derivative liability is driven by changes in key valuation inputs, including the Company’s relatively Volume weighted average price (VWAP) of $1.06, elevated equity volatility of 65%, and the remaining contractual term of approximately 2.32 years. These factors increased the probability-weighted value of the potential share settlement under the arrangement. Further impacted by adjustments for counterparty credit risk of 6.6%.

Previous wording

For the quarter ended March 31, 2025, Gain in fair value of $1.52 million which primarily represents related to change in fair value of convertible notes. We qualified for and elected to account for the convertible notes under the fair value option and, in doing so, bypassed the analysis of potential embedded derivative features. As a result, the convertible notes were recorded at fair value upon issuance and recorded as gain and loss on change in fair value in the unaudited condensed consolidated interim statements of operations and comprehensive loss, for the three months ended March 31, 2025.

Current wording

For the quarter ended June 30, 2025, loss in fair value of $2.86 million which primarily represents related to change in fair value of convertible notes. We qualified for and elected to account for the convertible notes under the fair value option and, in doing so, bypassed the analysis of potential embedded derivative features. As a result, the convertible notes were recorded at fair value upon issuance and recorded as gain and loss on change in fair value in the unaudited condensed consolidated interim statements of operations and comprehensive loss, for the three months ended June 30, 2025.

Previous wording

Other income for the three months ended March 31, 2026, was $75 thousand, compared to other income of $4 thousand for the three months ended March 31, 2025, representing other income primarily related to foreign exchange.

Current wording

Other loss for the three months ended June 30, 2026, was $125 thousand, compared to other loss of $1 thousand for the three months ended June 30, 2025, representing other loss primarily related to foreign exchange.

Previous wording

Provision for income tax is $4 thousand for the three months ended March 31, 2026 and Nil for the three months ended March 31, 2025.

Current wording

Provision for income tax is Nil thousand for the three months ended June 30, 2026 and Nil for the three months ended June 30, 2025.

Previous wording

Net loss – Net loss for the three months ended March 31, 2026 was $0.87 million, compared to a net loss of $0.25 million for three months ended March 31, 2025. The change was the result of increase in selling and marketing expenses, general and administrative, research and development in the current period. These unfavorable items were partially offset by a gain on extinguishment of payable, lower interest expense, combined with a gain on the change in fair value of the forward purchase derivative liability and the absence of a loss on extinguishment of convertible notes payable that was recorded in the prior year period.

Current wording

Net loss – Net loss for the three months ended June 30, 2026 was $2.85 million, compared to a net loss of $3.79 million for three months ended June 30, 2025. The change was the result of increase in selling and marketing expenses, general and administrative, research and development in the current period. These unfavorable items were partially offset by a gain on extinguishment of payable, lower interest expense, combined with a gain on the change in fair value of the forward purchase derivative liability and the absence of a loss on extinguishment of convertible notes payable that was recorded in the prior year period.

Previous wording

The Company defines adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) as net loss before interest expense, income tax expense (benefit), depreciation and amortization, as adjusted to exclude stock-based compensation, fair value changes and loss on extinguishment of debt and payable.

Current wording

The Company defines adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) as net loss before interest expense, income tax expense (benefit), depreciation and amortization, as adjusted to exclude stock-based compensation, fair value changes and gain or loss on extinguishment of debt and payable.

Previous wording

The reconciliation of our net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2026, and March 31, 2025, is as follows:

Current wording

The reconciliation of our net loss to EBITDA and Adjusted EBITDA for the three months ended June 30, 2026, and June 30, 2025, as well as for six months ended June 30, 2026, and June 30, 2025, are as follows:

Previous wording

We formally evaluated our liquidity and cash position most recently in 2026 when preparing our 2026 unaudited condensed consolidated interim financial statements. As of March 31, 2026, we had cash of approximately $1.77 million and a net working capital deficit of approximately $14.39 million. As of that date, we also had an accumulated deficit of approximately $36.10 million and a net loss of $0.87 million for the three months ended March 31, 2026.

Current wording

We formally evaluated our liquidity and cash position most recently in 2026 when preparing our 2026 unaudited condensed consolidated interim financial statements. As of June 30, 2026, we had cash of approximately $0.37 million and a net working capital deficit of approximately $16.75 million. As of that date, we also had an accumulated deficit of approximately $38.95 million and a net loss of $3.72 million for the six months ended June 30, 2026.

Previous wording

As of December 31, 2025, we had cash of approximately $4.22 million and a net working capital deficit of approximately $13.80 million. As of December 31, 2025, we had an accumulated deficit of $35.15 million and a net loss of $0.93 million for the year ended December 31, 2025.

Current wording

As of June 30, 2025, we had cash of approximately $0.47 million and a net working capital deficit of approximately $13.80 million. As of June 30, 2025, we had an accumulated deficit of $38.26 million and a net loss of $4.04 million for the six months ended June 30, 2025.

Previous wording

Subsequent to March 31, 2026, on April 17, 2026, the Company entered into a Common Stock Purchase Agreement with Roth Principal Investments, LLC providing for up to $20,000,000 in additional equity financing (the Committed Equity Facility (CEF)). While the CEF improves the Company’s access to capital, no proceeds have been received as of the date of issuance and draws remain at the Company’s sole discretion. As of the date these unaudited condensed consolidated interim financial statements were available to be issued, the S-1 has not yet been declared effective, and there can be no assurance as to the timing or ultimate effectiveness thereof.

Current wording

On April 17, 2026, the Company entered into a Common Stock Purchase Agreement with Roth Principal Investments, LLC providing for up to $20,000,000 in additional equity financing (the Committed Equity Facility (CEF)). While the CEF improves the Company’s access to capital, no proceeds have been received as of the date of issuance and draws remain at the Company’s sole discretion. As of the date these unaudited condensed consolidated interim financial statements were available to be issued, the S-1 has not yet been declared effective, and there can be no assurance as to the timing or ultimate effectiveness thereof.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2026 increased by $2.00 million to $2.22 million, compared to $0.23 million in the same period in 2025. This increase was primarily driven by an increase in Selling and marketing expenses, General and administrative, Research and development, Gain on extinguishment of payable and decrease in Interest expense, Gain/loss on change in fair value. Further, changes in working capital decreased to $0.32 million from $0.92 million in the prior year. The $2.22 million net cash used in operating activities in 2026 was primarily related to (i) a net loss of $0.87 million, offset by; (ii) depreciation and amortization of $0.05 million; (iii) provision for credit losses of ($0.04) million; (iv) stock-based compensation and restricted stock unit compensation of $0.41 million; (v) amortization of right-of-use assets of $0.02 million; (vi) Changes in fair value of common stock warrant liability and forward purchase derivative liability at fair value of ($1.65) million (vii) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.03 million; (viii) Gain on extinguishment of payable of ($0.50) million (ix) Working capital changes of $0.32 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2026 increased by $3.36 million to $3.51 million, compared to $0.15 million in the same period in 2025. This increase was primarily driven by an increase in Selling and marketing expenses, General and administrative, Research and development, Gain on extinguishment of payable and decrease in Interest expense, Gain/loss on change in fair value. Further, changes in working capital decreased to $1.32 million from $1.8 million in the prior year. The $3.51 million net cash used in operating activities in 2026 was primarily related to (i) a net loss of $3.72 million, offset by; (ii) depreciation and amortization of $0.12 million; (iii) provision for credit losses of ($0.04) million; (iv) stock-based compensation and restricted stock unit compensation of $0.88 million; (v) amortization of right-of-use assets of $0.04 million; (vi) Changes in fair value of common stock warrant liability and forward purchase derivative liability at fair value of ($1.61) million (vii) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.06 million; (viii) Gain on extinguishment of payable of ($0.51) million (ix) Working capital changes of $1.3 million.

Previous wording

Net cash used in operating activities during the three months ended March 31, 2025 was $0.23 million. The $0.23 million net cash used in operating activities in 2025 was primarily related to (i) a net loss of $0.25 million, offset by; (ii) depreciation and amortization of $0.06 million; (iii) provision for credit losses of $0.08 million; (iv) stock-based compensation of $0.07 million; (v) amortization of right-of-use assets of $0.02 million; (vi) changes in fair value of convertible notes and common stock warrant liability ($1.52) million; (vii) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.02 million; (viii) Loss on extinguishment of convertible note payable of $0.39 million and (ix) Working capital changes of $0.92 million.

Current wording

Net cash used in operating activities during the six months ended June 30, 2025 was $0.15 million. The $0.15 million net cash used in operating activities in 2025 was primarily related to (i) a net loss of $4.04 million, offset by; (ii) depreciation and amortization of $0.09 million; (iii) provision for credit losses of $0.06 million; (iv) stock-based compensation of $0.12 million; (v) amortization of right-of-use assets of $0.04 million; (vi) changes in fair value of convertible notes and common stock warrant liability ($1.34) million; (vii) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.05 million; (viii) Loss on extinguishment of convertible note payable of $0.39 million and (ix) Working capital changes of $1.8 million.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2026, was $(0.06) million compared to ($0.02) million during the three months ended March 31, 2025. The $0.06 million net cash used in investing activities in 2026 consisted of $0.04 million in costs capitalized for internally developed software and $0.02 million in purchases of property and equipment.

Current wording

Net cash used in investing activities during the six months ended June 30, 2026, was $(0.12) million compared to ($0.06) million during the six months ended June 30, 2025. The $0.12 million net cash used in investing activities in 2026 consisted of $0.09 million in costs capitalized for internally developed software and $0.03 million in purchases of property and equipment.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 was $(0.02) million and consisted of purchases of property and equipment of $0.001 million, costs capitalized for internally developed software of $0.02 million.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 was $(0.06) million and consisted of purchases of property and equipment of $0.006 million, costs capitalized for internally developed software of $0.05 million.

Previous wording

Net cash used in financing activities was $(0.17) million in the three months ended March 31, 2026, compared to $0.18 million in March 2025, representing decrease of $0.35 million over the respective periods. The decrease in cash flow from financing activities was primarily due to payments of director and officer insurance liability of $0.20 million.

Current wording

Net cash used in financing activities was $(0.22) million in the six months ended June 30, 2026, compared to $0.18 million in June 30, 2025, representing a decrease of $0.40 million over the respective periods. The decrease in cash flow from financing activities was primarily due to payments of director and officer insurance liability of $0.28 million.

Previous wording

Net cash provided by financing activities was $0.18 million in the three months ended March 31, 2025. The $0.18 million net cash provided by financing activities in 2025 consisted of Proceeds from convertible notes payable of $0.18 million.

Current wording

Net cash provided by financing activities was $0.18 million in the six months ended June 30, 2025. The $0.18 million net cash provided by financing activities in 2025 consisted of Proceeds from convertible notes payable of $0.18 million.

Previous wording

The Company derives the majority of its revenue from AI Solutions (Products and Services) that largely represents the professional services Fusemachines provides to its customers to help them achieve any AI-related goals within their organization. Standard contractual arrangements are governed by Master Services Agreements (“MSAs”), which set out general terms including payment, termination rights, and intellectual property ownership. Detailed scope, pricing, and performance obligations are defined in Statements of Work (“SOWs”), which are executed for each engagement or project phase. The Company’s contracts for AI Services have different terms based on the scope and complexity of engagements; pricing for the majority of contracts are invoiced monthly on a time-and-materials basis. The Company notes that its contracts meet the requirements for over-time revenue recognition, as the customer is simultaneously receiving the benefits and able to consume the benefits of the services being provided. For professional services that are distinct and billed on a time-and-materials basis, revenue is generally recognized as the services are provided, which is reflective of the transfer of the services to the customer. The Company elected the “right to invoice” practical expedient based on the Company’s right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

Current wording

The Company derives the majority of its revenue from AI Solutions (Products and Services) that largely represents professional services the company provides to its customers to help them achieve any AI-related goals within their organization. Standard contractual arrangements are governed by Master Services Agreements (“MSAs”), which set out general terms including payment, termination rights, and intellectual property ownership. Detailed scope, pricing, and performance obligations are defined in Statements of Work (“SOWs”), which are executed for each engagement or project phase. The Company’s contracts for AI Services have different terms based on the scope and complexity of engagements; pricing for the majority of contracts are invoiced monthly on a time-and-materials basis. The Company notes that its contracts meet the requirements for over-time revenue recognition, as the customer is simultaneously receiving the benefits and able to consume the benefits of the services being provided. For professional services that are distinct and billed on a time-and-materials basis, revenue is generally recognized as the services are provided, which is reflective of the transfer of the services to the customer. The Company elected the “right to invoice” practical expedient based on the Company’s right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

Previous wording

The Company also provides AI Education Services which represents a customized curriculum of educational services provided to train the customer’s C-suite on AI for Business. The Company provides AI Education Services over time as the course proceeds and the students retain knowledge over time. Thus, the customer receives and consumes benefits as the Company performs the AI Education Services, and revenue is recognized over time.

Current wording

The Company also provides AI Education Services which represents a customized curriculum of educational services provided to train the customer’s C-suite on AI for Business. The Company provides AI Education Services over time as the course proceeds and the students retain knowledge over time. Thus, the customer receives and consumes benefits as the Company performs the AI Education Services, and revenue is recognized overtime.

Previous wording

Company’s AI Solutions includes product revenues primarily comprising software license fees from sales of term-based license contracts, under which we grant customers the license right to use the software for a specified period (i.e. when the customer can access, use, and benefit from the software license). Term software licenses are satisfied at a point in time and associated revenue is recognized upon the later of 1) delivery of the software, or 2) the beginning of the period in which the customer has received the license right to use the software. For customer contracts that include software license fees, implementation and/or other consulting services, the portion of the transaction price allocated to software licenses is generally recognized when delivered. Implementation, customization, or model tuning services if applicable, when included, are evaluated as separate performance obligations when they are distinct from the software and not highly interdependent. These services are generally satisfied over time as the work progresses. During the three months ended March 31, 2026, and March 31, 2025, the product revenues were insignificant.

Current wording

Company’s AI Solutions includes product revenues primarily comprising of software license fees from sales of term-based license contracts, under which we grant customers the license right to use the software for a specified period (i.e. when the customer can access, use, and benefit from the software license). Term software licenses are satisfied at a point in time and associated revenue is recognized upon the later of 1) delivery of the software, or 2) the beginning of the period in which the customer has received the license right to use the software. For customer contracts that include software license fees, implementation and/or other consulting services, the portion of the transaction price allocated to software licenses is generally recognized when delivered. Implementation, customization, or model tuning services if applicable, when included, are evaluated as separate performance obligations when they are distinct from the software and not highly interdependent. These services are generally satisfied over time as the work progresses. During the three and six months ended June 30, 2026 and June 30, 2025 the product revenues were insignificant.

Previous wording

For most contracts, the Company uses a Master Services Agreements (“MSA”) to govern the overall relevant terms and conditions of the business agreement, and a Statement of Work (“SOW”) to specify the services delivered and the associated prices. Performance obligations specific to each individual contract are defined within the terms of each SOW. Each performance obligation is identified based on the services that will be transferred to our customers that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which the Company will be entitled and expect to receive in exchange for transferring services to the customer.

Current wording

For most contracts, the Company uses a Master Service Agreements (“MSA”) to govern the overall relevant terms and conditions of the business agreement, and a Statement of Work (“SOW”) to specify the services delivered and the associated prices. Performance obligations specific to each individual contract are defined within the terms of each SOW. Each performance obligation is identified based on the services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which the Company will be entitled and expect to receive in exchange for transferring services to the customer.