AMASS BRANDS

Previous wording

and analysis of our financial condition and results of operations together with our financial statements and related notes and other financial information appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of our Prospectuses dated May 18, 2026 and July 6, 2026, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Previous wording

.” This MD&A, which should be read in conjunction with our Financial Statements, is organized as follows:

Current wording

This MD&A, which should be read in conjunction with our financial statements, is organized as follows: Overview: a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends. Strategy: a description of our strategy and a discussion of recent developments, and significant divestitures, acquisitions, and investments. Recent developments: a summary of the material transactions and events that occurred during, or shortly after, the three months ended June 30, 2026. Results of operations: an analysis of our results of operations presented on a business segment basis, including Adjusted EBITDA, a non-GAAP measure. Liquidity and capital resources: an analysis of our cash flows, outstanding debt, liquidity position, and commitments. Critical accounting policies and estimates: accounting policies that are considered important to our results of operations and financial condition, require significant judgment, and involve significant management estimates. Emerging Growth Company and Smaller Reporting Company Status: a discussion of our reporting status

Previous wording

We are a consumer packaged goods company focused on developing, marketing, and distributing a portfolio of premium beverage brands across the wine, spirits, and functional non-alcoholic categories with the ethos of meeting the needs of the modern day consumer. We have also historically offered a limited selection of personal and self-care products, but such products are not a priority on a go-forward basis as we focus on growing our beverage portfolio. Our products are primarily sold through a three-tier system to wholesale distributors, who then sell to retailers, bars, and restaurants, as well as directly to consumers through our e-commerce platforms.

Current wording

We are a consumer packaged goods company focused on developing, marketing, and distributing a portfolio of premium beverage brands across the wine, spirits, and functional non-alcoholic categories with the ethos of meeting the needs of the modern day consumer. Our products are primarily sold through a three-tier system to wholesale distributors, who then sell to retailers, bars, and restaurants, as well as directly to consumers through our e-commerce platforms. Our direct-to-consumer and e-commerce channel is growing, led by our non-alcoholic brands (Good Twin, which sells through its own e-commerce store and digital marketplaces, and AMASS Electrolytes, which launched direct-to-consumer during the second quarter of 2026), and we expect to continue developing direct sales alongside our three-tier wholesale distribution. Beginning in the second quarter of 2026, we report our operating results in two segments: (i) Wine & Spirits, comprising our alcoholic wine and spirits portfolios, and (ii) Non-Alcoholic and Functional, comprising our functional non-alcoholic beverage brands Good Twin and AMASS Electrolytes. Prior-period segment information has been recast to the new basis. See Note 16 to our unaudited condensed consolidated financial statements

Previous wording

Substantially all of our net revenues are currently generated in the United States, which represents our primary market across our spirits, wine, and non-alcoholic beverage portfolios. We have limited international exposure, with 99.7% of our revenues from the three months ended March 31, 2026 coming from the U.S. Certain of our brands have historically been sold in Europe, Canada, and Asia on a limited basis, primarily through third-party distributors or production-related arrangements, and such sales have not been material to our consolidated revenues. In addition, certain of our agave-based spirits products are produced in Mexico by our fully owned Mexican subsidiary and third-party production arrangements, but we do not currently operate material direct sales or distribution operations outside the United States. While our brands may reach consumers outside the United States through isolated or opportunistic transactions, we do not presently have established, ongoing commercial operations in Canada, Europe, Asia, or Latin America.

Current wording

Substantially all of our net revenues are currently generated in the United States, which represents our primary market across our spirits, wine, and non-alcoholic beverage portfolios. Certain of our agave-based spirits products are produced in Mexico by our fully owned Mexican subsidiary and third-party production arrangements, but we do not currently operate material direct sales or distribution operations outside the United States.

Previous wording

Our long-term strategy, customer and market environment, marketing, sales, and distribution is unchanged from the strategy described in the S-1/A. For the Wine segment, our strategy is centered on generating consistent cash flow while preserving market positioning and selectively growing key brands that drive long-term enterprise value. We continue to optimize the portfolio with a focus on brands that demonstrate sustainable velocity and margin expansion, while rationalizing non-core labels to reduce complexity and improve working capital efficiency. For the Spirits segment, our strategy reflects a disciplined approach, with a near-term deprioritization in 2026 as we position the business for renewed growth in subsequent periods. We are actively managing existing brands to protect cash flow and maintain distribution presence, while deferring significant incremental investment until market conditions and capital allocation priorities support accelerated expansion.

Current wording

Our long-term strategy, customer and market environment, marketing, sales, and distribution is unchanged from the strategy described in the S-1/A. Within the Wine & Spirits segment, our wine strategy is centered on generating consistent cash flow while preserving market positioning and selectively growing key brands that drive long-term enterprise value, and our spirits strategy reflects a disciplined approach, with a near-term deprioritization in 2026 as we position the business for renewed growth in subsequent periods. In the Non-Alcoholic and Functional segment, we are investing behind Good Twin and the launch of AMASS Electrolytes to build our position in the functional non-alcoholic category. In the second quarter of 2026, we completed the Direct Listing of our common stock on the Nasdaq Global Market.

Previous wording

The wine business declined 2% from the first quarter of 2025 to the first quarter of 2026. This decline was largely due to portfolio optimization and strategic investment in core brands. We believe this optimization will better utilize working capital and allow for more stable growth in future periods, as marketing resources and focus can be more directed to the brands we have higher conviction behind. In the first quarter of 2026, sales of our three priority core brands – Summer Water, Pizzolato MUSE, and Good Twin increased by 5.8% over 2025. As our core and priority brands continue to become a larger composition of total wine revenue, we anticipate revenue to not only grow but to be more capital efficient.

Current wording

Wine & Spirits net revenues declined 3% for the second quarter of 2026 and 5% for the six-month period, reflecting continued portfolio optimization in the wine portfolio and the near-term deprioritization of certain legacy spirits products, partially offset by growth in Calirosa. We believe this optimization will better utilize working capital and allow for more stable growth in future periods, as marketing resources and focus can be more directed to the brands we have higher conviction behind

Previous wording

The decline in comparable adjustments is largely due to the sale of the Winc DTC business in 2023.

Current wording

The decline in comparable adjustments for the six-month period is due to the absence in 2026 of bulk wine sales associated with the divested Winc.com business.

Previous wording

We did not have material research and development costs in the first quarter of 2026 nor the first quarter of 2025.

Current wording

We did not have material research and development costs in the three or six months ended June 30, 2026 or June 30, 2025.

Previous wording

” below for additional detail. As of March 31, 2026, we had cash and cash equivalents of $1.0 million.

Current wording

We have historically funded our operations through issuances of stock, credit facilities, term loans, revenue producing activities, convertible debt, and SAFE agreements. During the second quarter of 2026, we received $7.0 million in aggregate from the issuance of Series C Convertible Preferred Stock and the associated warrant across the First and Second Closings (before a $30,000 transaction expense deduction) under the Streeterville SPA, and our Convertible Notes (aggregate principal of $2.8 million plus accrued interest) converted into common stock, eliminating that indebtedness. As of June 30, 2026, we had cash and cash equivalents of $1.6 million, and the outstanding balance under our ABL was $3.8 million against a maximum credit of $5.0 million (subject to borrowing-base availability).

Previous wording

Based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance our future operations and, without giving effect to this offering, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date of our audited consolidated financial statements. See the section entitled “

Current wording

Based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance our future operations, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date of these financial statements.

Previous wording

Net cash used in operating activities was $1.8 million in the first quarter of 2026, compared with $0.7 million in the first quarter of 2025. The increase in operating cash use reflects unfavorable movements in working capital, including a $0.8 million increase in accounts receivable, a $0.8 increase in inventory, and a $0.2 increase in prepaid expenses and other current assets, partially offset by a $1.3 million increase in accounts payable and a $0.6 million increase in accrued expenses. Net loss before non-cash items improved year-over-year, reflecting the lower net loss discussed above and the inclusion of $0.7 million in noncash issuance of advisory common stock shares, $0.2 million of stock-based compensation, $0.1 million of depreciation and amortization, $0.1 million of impairment, and $49 thousand of fair-value losses on derivative liabilities.

Current wording

Operating activities. Net cash used in operating activities was $6.1 million for the six months ended June 30, 2026, compared with $1.3 million for the prior-year period. The increase in operating cash use reflects the higher net loss, a $1.7 million increase in accounts receivable, a $0.6 million increase in inventory, and a $0.3 million increase in prepaid expenses and other current assets, partially offset by a $1.4 million increase in accounts payable.

Previous wording

Subsequent purchases are at our election, subject to conditions that include trading volume, market capitalization, shareholder approval for issuances exceeding Nasdaq thresholds, maintenance of sufficient authorized shares, and trading above a floor price metric. Conversions would initially be at a fixed price based on the Nasdaq listing valuation and, after the earlier of 180 days post-listing or specified trigger events, at an alternate price equal to the lower of the fixed price and 90% of the lowest daily VWAP in the ten trading days prior to conversion, in each case subject to a floor. In connection with First Closing, we issued Commitment Shares equal to $450,000 divided by the Expected Reference Price of $16.00 per share (28,125 shares), pursuant to the Amendment. At the First Closing on April 8, 2026, we also issued to Streeterville the Warrant to purchase up to 3,500,000 shares of Common Stock, cash-exercisable at 110% of the Fixed Price, for a Warrant Purchase Price of $10,000. The arrangement contemplates Streeterville consent rights over certain future debt and equity issuances and a post-listing registration of all shares issuable under the commitment; failure to cause the registration to become effective within a specified period would increase outstanding stated value by a stated percentage per month, subject to caps and tolling. We believe this facility will enhance near-term liquidity but will also result in dilution to existing stockholders and could constrain other financing alternatives.

Current wording

Under the SPA, subsequent purchases of Series C Convertible Preferred Stock (up to the $30.0 million commitment) are at our election during the two-year commitment period, subject to conditions including minimum market capitalization, outstanding-balance limits, minimum median and average daily trading volumes, stockholder-equity thresholds, trading-price conditions relative to the Floor Price, and an effective registration statement. Conversions are initially at a fixed price based on the Nasdaq listing valuation and, after the earlier of 180 days post-listing or specified trigger events (a Trigger Event occurred in July 2026 in connection with the Nasdaq notices described under “Recent Developments” above; see Note 17), at an alternate price equal to the lower of the fixed price and 90% of the lowest daily VWAP in the ten trading days prior to conversion, subject to a floor. We believe this facility will enhance near-term liquidity but will also result in dilution to existing stockholders and could constrain other financing alternatives.

Previous wording

Our material cash requirements consist primarily of debt obligations, amounts due under convertible instruments and SAFEs upon triggering events, leases and licensing fees, payables to inventory suppliers, and payables for professional services. The timing and magnitude of these cash requirements depend on a variety of factors, including operating performance, compliance with debt covenants, access to capital, and the timing of any liquidity events.

Current wording

Our material cash requirements consist primarily of debt obligations, amounts due under SAFEs upon triggering events, leases and licensing fees, payables to inventory suppliers, and payables for professional services. The table below summarizes our material cash requirements as of June 30, 2026, separated between short-term (within the next twelve months) and long-term (thereafter):

Previous wording

Amounts reflect contractual obligations and known commitments as of March 31, 2026 and do not include discretionary operating expenditures. Amounts also do not include principal and interest of approximately $2.7 million of convertible notes, including $1,000,000 issued to MVL Inc. (f/k/a Alchemi Project Inc.) in February 2026, that automatically converted into shares of Common Stock upon the consummation of the Company’s Direct Listing that occurred on May 20, 2026. The conversion occurred at a conversion price equal to 80% of the price per share of equity securities sold in the Qualified Financing.

Current wording

Note: Amounts reflect contractual obligations and known commitments as of June 30, 2026 and do not include discretionary operating expenditures.

Previous wording

(ASC 825), allows for entities to elect the “fair value option,” which permits entities to choose, at specified election dates, to measure eligible financial assets and financial liabilities at fair value. The decision to elect the fair value option is: (a) applied on an instrument-by-instrument basis (except as delineated within the guidance of ASC 825); (b) irrevocable, unless a new election date occurs; and (c) applied to an entire instrument.

Current wording

ASC 825, Financial Instruments (ASC 825), allows for entities to elect the “fair value option,” which permits entities to choose, at specified election dates, to measure eligible financial assets and financial liabilities at fair value. The decision to elect the fair value option is: (a) applied on an instrument-by-instrument basis (except as delineated within the guidance of ASC 825); (b) irrevocable, unless a new election date occurs; and (c) applied to an entire instrument. The Company has elected the fair value option on its equity investment in De Soi, Inc. (“De Soi”). Management determined to elect the fair value option on these investments in order to provide more useful information to the shareholders regarding the performance of its investment.

Previous wording

, which requires that the assets acquired and the liabilities assumed be recorded at the date of acquisition at their respective fair value and that direct costs of acquisitions be expensed as they are incurred. The excess purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Current wording

The Company accounts for business combinations under ASC 805, Business Combinations, which requires that the assets acquired and the liabilities assumed be recorded at the date of acquisition at their respective fair value and that direct costs of acquisitions be expensed as they are incurred. The excess purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Previous wording

(ASC 360). In accordance with ASC 360, the Company reviews its long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future undiscounted net cash flows that it expects the asset to generate. When an asset is determined to be impaired, the Company recognizes the impairment amount, which is measured by the amount the carrying value of the asset exceeds its fair value. In addition, the Company evaluates goodwill for impairment in accordance with ASC 350,

Current wording

The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC Subtopic 360-10-35, Property, Plant, and Equipment – Overall – Subsequent Measurement (ASC 360). In accordance with ASC 360, the Company reviews its long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future undiscounted net cash flows that it expects the asset to generate. When an asset is determined to be impaired, the Company recognizes the impairment amount, which is measured by the amount the carrying value of the asset exceeds its fair value. In addition, the Company evaluates goodwill for impairment in accordance with ASC 350, Intangibles-Goodwill and Other (ASC 350). Goodwill is tested at least annually, or more frequently if a triggering event occurs. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess, not to exceed the total amount of goodwill.

Previous wording

The fair value of each stock option and warrant grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information for its stock. Therefore, it estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. Forfeitures are recognized as they occur. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

Current wording

The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, advisors, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The fair value of each stock option and warrant grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information for its stock. Therefore, it estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Previous wording

Net revenues reflect reductions attributable to consideration given to customers in various customer incentive programs, including pricing discounts on single transactions, volume discounts, promotional and advertising allowances, coupons, and rebates. This variable consideration is recognized as a reduction of the transaction price based upon expected amounts at the time revenue for the corresponding product sale is recognized. For example, customer promotional discount programs are entered into with certain distributors for certain periods of time. The amount ultimately reimbursed to distributors is determined based upon agreed-upon promotional discounts which are applied to distributors’ sales to retailers. Other common forms of variable consideration include volume rebates for meeting established sales targets, including discounts offered to the end customer. The determination of the reduction of the transaction price for variable consideration requires certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recognized. Management estimates this variable consideration by taking into account factors such as the nature of the promotional activity, historical information, and current trends, availability of actual results, and expectations of customer and consumer behavior. All such estimates were not material for the three months ended March 31, 2026 and March 31, 2025.

Current wording

The Company recognizes revenue under FASB ASC 606, Revenue from Contracts with Customers. The Company derives its revenue primarily through the sale of alcohol and non-alcoholic spirits, wine, seltzers, and personal care products in both wholesale and direct to consumer channels. The Company’s revenue generating activities have a single performance obligation and are recognized when the ordered goods are shipped to the end customer, which is when control transfers. Net revenues reflect reductions attributable to consideration given to customers in various customer incentive programs, including pricing discounts on single transactions, volume discounts, promotional and advertising allowances, coupons, and rebates. The determination of the reduction of the transaction price for variable consideration requires certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recognized. All such estimates were not material for the three and six months ended June 30, 2026 and June 30, 2025.

Previous wording

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method and includes materials, labor, and applicable overhead. We regularly evaluate inventory for potential obsolescence, slow-moving or excess quantities, spoilage, shrinkage, and changes in net realizable value. These estimates require management judgment and are influenced by factors such as changes in consumer demand, supply chain disruptions, inflation, and raw material price volatility, any of which could materially impact our results.

Current wording

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method and includes materials, labor, and applicable overhead. We regularly evaluate inventory for potential obsolescence, slow-moving or excess quantities, spoilage, shrinkage, and changes in net realizable value. These estimates require management judgment and are influenced by factors such as changes in consumer demand, supply chain disruptions, inflation, and raw material price volatility, any of which could materially impact our results. Estimation in the periods presented included expected losses on long-term supply contracts where the net realizable value of certain inventoriable goods are believed to be below the contractual purchase price. As it pertains to the Company’s bulk wine purchase, this includes consideration of the varietal, vintage, and volume of product versus the market price.

Previous wording

We evaluate long-term supply and purchase contracts to determine whether the expected costs to fulfill our obligations exceed the anticipated economic benefits. When estimated costs under a supply contract exceed its realizable value, we recognize a loss for the difference in accordance with U.S. GAAP. These estimates require management judgment regarding future market prices, utilization, and recoverability, and actual results may differ from those estimates. Changes in these assumptions could materially affect the amount of expense recognized in our financial statements.

Current wording

We evaluate long-term supply and purchase contracts to determine whether the expected costs to fulfill our obligations exceed the anticipated economic benefits. When estimated costs under a supply contract exceed its realizable value, we recognize a loss for the difference in accordance with U.S. GAAP. These estimates require management judgment regarding future market prices, utilization, and recoverability, and actual results may differ from those estimates.

Previous wording

The determination of the fair value of identifiable intangible assets acquired in business combinations requires significant management judgment. The Company values trademarks and other brand-related intangible assets using the relief-from-royalty method, which estimates the present value of future after-tax cash flows saved by owning the asset rather than licensing it.

Current wording

The determination of the fair value of identifiable intangible assets acquired in business combinations requires significant management judgment. The Company values trademarks and other brand-related intangible assets using the relief-from-royalty method, which estimates the present value of future after-tax cash flows saved by owning the asset rather than licensing it. Key inputs include projected revenues attributable to the acquired brands, an assumed royalty rate, and a discount rate that reflects the time value of money and the risk characteristics of the underlying cash flows.

Previous wording

We grant equity-based awards for compensation purposes. The measurement of compensation expense for these awards requires management to estimate the fair value of the underlying common stock, for which there is no market, as well as the awards on the grant date, which require assumptions regarding expected term, volatility, dividend yield, and forfeiture rates. Changes in these assumptions could materially affect the amount of expense recognized in our financial statements.

Current wording

We grant equity-based awards for compensation purposes. The measurement of compensation expense for these awards requires management to estimate the fair value of the underlying common stock (for awards granted prior to our Direct Listing), as well as the awards on the grant date, which require assumptions regarding expected term, volatility, dividend yield, and forfeiture rates. Changes in these assumptions could materially affect the amount of expense recognized in our financial statements.

Previous wording

The Company measures certain investments at fair value on a recurring basis under ASC 820, using Level 3 inputs due to significant unobservable assumptions. Fair value is determined using a market-based approach that considers comparable company multiples, liquidity discounts, and recent transactions, including partial investment sales. Further, the investment’s management’s projections are utilized in the analysis, which is also subject to significant estimation. Changes in these assumptions could materially affect the valuation. There were no changes in valuation methodologies during the three months ended March 31, 2026 and fiscal year 2025.

Current wording

The Company measures certain investments at fair value on a recurring basis under ASC 820, using Level 3 inputs due to significant unobservable assumptions. Fair value is determined using a market-based approach that considers comparable company multiples, liquidity discounts, and recent transactions, including partial investment sales. Changes in these assumptions could materially affect the valuation. There were no changes in valuation methodologies during the six months ended June 30, 2026.

Previous wording

Accounts receivable are derived from products and services delivered to customers and are stated at their net realizable value. The Company evaluates the creditworthiness of its customers prior to extending credit and monitors the aging and collectability of receivables on a continuous basis. The Company establishes an allowance for expected credit losses on financial assets, including trade and other receivables, at each reporting date. The allowance reflects management’s estimate of lifetime expected credit losses based on historical collection experience, the type and credit quality of the customer, the age of outstanding receivables, and current and expected future economic conditions. Management uses the best information available to make these estimates; however, future adjustments may be required if there are significant changes in customer financial condition or broader economic trends.

Current wording

Accounts receivable are derived from products and services delivered to customers and are stated at their net realizable value. The Company establishes an allowance for expected credit losses on financial assets, including trade and other receivables, at each reporting date. The allowance reflects management’s estimate of lifetime expected credit losses based on historical collection experience, the type and credit quality of the customer, the age of outstanding receivables, and current and expected future economic conditions.

Previous wording

The accounting for the Company’s derivative liabilities requires the use of significant estimates and management judgment. These derivative liabilities arise from embedded features within certain convertible debt instruments and associated warrants that do not qualify for equity classification under applicable accounting guidance. As a result, the Company records these instruments as liabilities at fair value and remeasures them at each reporting date, with changes in fair value recognized in earnings. The fair value of these derivative instruments is determined using valuation models that incorporate probability-weighted scenarios, including “with and without” methodologies, to estimate potential settlement outcomes. These models require the use of significant unobservable inputs, including assumptions regarding the probability and timing of conversion or listing events, expected volatility, discount rates, and other market participant assumptions. Because these inputs are not directly observable in the market, the derivative liabilities are classified as Level 3 within the fair value hierarchy. Changes in these assumptions could materially affect the estimated fair value of the derivative liabilities and result in significant non-cash gains or losses recognized in the Company’s consolidated statements of operations.

Current wording

The accounting for the Company’s derivative liabilities requires the use of significant estimates and management judgment. These derivative liabilities arise from embedded features within certain convertible debt instruments and associated warrants that do not qualify for equity classification under applicable accounting guidance. The fair value of these derivative instruments is determined using valuation models that incorporate probability-weighted scenarios, including “with and without” methodologies, to estimate potential settlement outcomes. Because these inputs are not directly observable in the market, the derivative liabilities are classified as Level 3 within the fair value hierarchy.

Previous wording

The accounting for the Company’s convertible promissory notes and associated warrants requires the application of complex accounting guidance and the use of significant estimates and assumptions. The Company evaluated the embedded conversion features and related warrants under applicable accounting standards to determine whether these instruments qualify for equity classification or must be accounted for as derivative liabilities. This evaluation requires judgment regarding the interpretation of contractual terms, the potential settlement outcomes under various triggering events, and whether the instruments may require cash settlement or variable share settlement outside the Company’s control. For those features that do not qualify for equity classification, the Company records them at fair value as derivative liabilities, with changes in fair value recognized in earnings until settlement or expiration. Estimating the fair value of these instruments requires the use of valuation models that incorporate significant assumptions, including the Company’s expected volatility, estimated equity value, probability and timing of potential financing or change-of-control events, and other market-based inputs. Changes in these assumptions could materially impact the estimated fair value of the derivative liabilities and the amount of non-cash gains or losses recognized in the Company’s results of operations.

Current wording

The accounting for the Company’s convertible promissory notes and associated warrants requires the application of complex accounting guidance and the use of significant estimates and assumptions. The Company evaluated the embedded conversion features and related warrants under applicable accounting standards to determine whether these instruments qualify for equity classification or must be accounted for as derivative liabilities. For those features that do not qualify for equity classification, the Company records them at fair value as derivative liabilities, with changes in fair value recognized in earnings until settlement or expiration. The Convertible Notes converted into Common Stock upon the Direct Listing in May 2026 (see Note 10).

Previous wording

The accounting for the Simple Agreement for Future Equity (“SAFE”) issued in connection with the Good Twin business requires the application of significant judgment and the use of estimates. The Company evaluated the contractual terms of the SAFE to determine the appropriate classification under applicable accounting guidance, including whether the instrument qualifies for equity classification or must be accounted for as a liability. Because the SAFE contains contingent settlement provisions that could require cash settlement upon certain events outside the Company’s control, the Company concluded that the instrument should be classified as a liability and measured at fair value, with changes in fair value recognized in earnings until conversion or settlement. Estimating the fair value of the SAFE requires the use of valuation models and significant assumptions, including the estimated equity value of Good Twin, expected volatility, the probability and timing of potential equity financings or liquidity events, and other market-based inputs. Changes in these assumptions could materially impact the estimated fair value of the SAFE liability and the amount of non-cash gains or losses recognized in the Company’s results of operations.

Current wording

The accounting for the Simple Agreement for Future Equity (“SAFE”) issued in connection with the Good Twin business requires the application of significant judgment and the use of estimates. Because the SAFE contains contingent settlement provisions that could require cash settlement upon certain events outside the Company’s control, the Company concluded that the instrument should be classified as a liability and measured at fair value, with changes in fair value recognized in earnings until conversion or settlement. Estimating the fair value of the SAFE requires the use of valuation models and significant assumptions, including the estimated equity value of Good Twin, expected volatility, the probability and timing of potential equity financings or liquidity events, and other market-based inputs.

Previous wording

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. As a result of this election, our consolidated financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

Current wording

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period. As a result of this election, our consolidated financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates.