Evolv Technologies Holdings, Inc.

Previous wording

As used in this Quarterly Report on Form 10-Q, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Evolv” refer to the consolidated operations of Evolv Technologies Holdings, Inc. and its subsidiaries. References to “NHIC” refer to the company prior to the consummation of our business combination (the “Merger”) and references to “Legacy Evolv” refer to Evolv Technologies, Inc. dba Evolv Technology, Inc. prior to the consummation of the Merger.

Current wording

As used in this Quarterly Report on Form 10-Q, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Evolv” refer to the consolidated operations of Evolv Technologies Holdings, Inc. and its subsidiaries. References to “NHIC” refer to the company prior to the consummation of our business combination (the “Merger”) and references to “Legacy Evolv” refer to Evolv Technologies, Inc. dba Evolv Technology, Inc. prior to the consummation of the Merger. References to “Investigations” refer to the investigation commenced in September 2024 by an ad hoc committee of independent directors of our Board of Directors into our sales practices, as previously disclosed in prior filings.

Previous wording

Our innovative technology is designed to enhance security and provide an efficient, positive visitor and customer security experience. In addition to screening capabilities, our solution includes Evolv Insights®, a powerful software analytics dashboard that allows customers to comprehensively review, analyze, and gather insights from the Evolv Express screening systems at their various venues or facility locations. Available data includes visitor arrival patterns, throughput volumes, system detection performance, alarm statistics, weapons detected and detection settings. Our customers can leverage this data to inform their security operations, while providing end-users with an approachable security experience.

Current wording

Our innovative technology is designed to enhance security and provide an efficient, positive visitor and customer security experience. In addition to screening capabilities, our solution includes Evolv Insights®, a powerful software analytics dashboard that allows customers to comprehensively review, analyze, and gather insights from the Evolv Express screening systems at their various venues or facility locations. Available data includes visitor arrival patterns, throughput volumes, system detection performance, alarm statistics, weapons detected and detection settings. Our customers can leverage this data to inform their security operations, while providing end-users with an approachable security experience. Our products, which are offered to our customers primarily under a multi-year subscription model, provide predictable revenue streams for us in addition to value for our customers.

Previous wording

We sell our solutions under two primary sales models. We offer a “pure subscription” model, where the customer leases hardware from us and we provide a multi-year security-as-a-service subscription. For end-user customers that prefer to purchase our hardware outright, we offer our “distributor licensing” model based on the Distribution and License Agreement we entered into with Columbia Tech in March of 2023. Columbia Tech, a wholly-owned subsidiary of Coghlin Companies, currently serves as our primary contract manufacturer. Under this arrangement, we have granted a license of our intellectual property to Columbia Tech, which contracts directly with certain of our resellers to fulfill sales demand where the end-user customer prefers to purchase the hardware equipment. Columbia Tech pays us a hardware license fee for each system it manufactures and sells under this agreement. In these instances, we still contract directly with the reseller to provide a multi-year security-as-a-service subscription to the end-users. In addition to our two primary sales models, end-user customers also have the option of purchasing our hardware outright directly from us through our “purchase subscription” model, and we expect this will displace much of the "distributor licensing" model in the coming months. We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our revenue, gross profit, gross margin, and overall profitability in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments. We have been experiencing a growing mix of customers adopting our pure subscription model, which reduces upfront revenue recognition in favor of building a more predictable recurring revenue base and our purchase subscription model, which has more product revenue and no license fee revenue.

Current wording

We sell our solutions under two primary sales models. We offer a “pure subscription” model, where the customer leases hardware from us and we provide a multi-year security-as-a-service subscription. For end-user customers that prefer to purchase our hardware outright, we offer customers the option of purchasing our hardware outright directly from us through our “purchase subscription” model. In addition to our two primary sales models, we have historically offered our “distributor licensing” model based on the Distribution and License Agreement we entered into with Columbia Tech in March of 2023. Under this arrangement, we have granted a license of our intellectual property to Columbia Tech, which contracts directly with certain of our resellers to fulfill sales demand where the end-user customer prefers to purchase the hardware equipment. Columbia Tech pays us a hardware license fee for each system it manufactures and sells under this agreement. In these instances, we still contract directly with the reseller to provide a multi-year security-as-a-service subscription to the end-users. During the three months ended September 30, 2025, we discontinued quoting on this basis, and while any outstanding quotes will be honored, all new quotes for end-user customers wishing to purchase the hardware equipment will be fulfilled through our purchase subscription model going forward. Thus, license revenue from this agreement is expected to reduce to zero over time, replaced by increased product revenue, which will in turn provide an increase in gross profit and a decrease in gross margin percentage. We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our revenue, gross profit, gross margin, and overall profitability in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments.

Previous wording

Since our inception, we have incurred significant operating losses. Our ability to generate revenue and achieve cost improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $64.6 million and $47.4 million for the six months ended June 30, 2025 and 2024, respectively. We generated a net loss of $42.2 million and $7.9 million for the six months ended June 30, 2025 and 2024, respectively. We expect to continue to incur operating losses as we focus on growing and establishing recurring commercial sales of our products, including growing our sales and marketing teams, scaling our manufacturing operations, and continuing research and development efforts to develop new products and further enhance our existing products.

Current wording

Since our inception, we have incurred significant operating losses. Our ability to generate revenue and achieve cost improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $107.4 million and $74.8 million for the nine months ended September 30, 2025 and 2024, respectively. We generated a net loss of $44.0 million and $38.3 million for the nine months ended September 30, 2025 and 2024, respectively. We expect to continue to incur operating losses as we focus on growing and establishing recurring commercial sales of our products, including growing our sales and marketing teams, scaling our manufacturing operations, and continuing research and development efforts to develop new products and further enhance our existing products.

Previous wording

Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through cash generated from operations and our Senior Secured Credit Facilities. See “Liquidity and Capital Resources” as well as “Risks Related to Our Financial Condition and Liquidity” for more information. Additionally, as discussed in Note 14, Commitments and Contingencies, to our condensed consolidated financial statements for the three and six months ended June 30, 2025, we are involved in certain legal proceedings, including government investigations. Given the uncertainty of such matters, no assurance can be given regarding the final outcome of such matters. However, the ultimate amount or range of potential loss, which might result to the Company, may differ materially from our current estimates.

Current wording

Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through cash generated from operations and our Senior Secured Credit Facilities. See “Liquidity and Capital Resources” as well as “Risks Related to Our Financial Condition and Liquidity” for more information. Additionally, as discussed in Note 14, Commitments and Contingencies, to our condensed consolidated financial statements for the three and nine months ended September 30, 2025, we are involved in certain legal proceedings, including a government investigation. Given the uncertainty of such matters, no assurance can be given regarding the final outcome of such matters. However, the ultimate amount or range of potential loss, which might result to the Company, may differ materially from our current estimates.

Previous wording

We derive a portion of our revenue from the sale of our Evolv Express and eXpedite equipment and related add-on accessories to customers. Revenue is recognized when control of the product has transferred to the customer, which follows the terms of each contract. We anticipate future growth in product revenue as more customers purchase systems through our direct purchase subscription model.

Current wording

We derive a portion of our revenue from the sale of our Evolv Express and eXpedite equipment and related add-on accessories to customers. Revenue is recognized when control of the product has transferred to the customer, which follows the terms of each contract. We anticipate future growth in product revenue as more customers purchase systems through our purchase subscription model.

Previous wording

License fee and other revenue includes license fee revenue from the Distribution and License Agreement, revenue from professional services, and other one-time revenue. License fee revenue is recognized upon the shipment of product from Columbia Tech to the reseller. Revenue for professional services is recognized upon transfer of control of these services, which are normally rendered over a short duration. Revenue for professional services and other one-time revenue, which had previously been included in service revenue, has been reclassified for prior periods to License fee and other revenue on the condensed consolidated statements of operations and comprehensive loss. We anticipate license fee and other revenue to decrease going forward as more customers purchase systems through our purchase subscription model.

Current wording

License fee and other revenue includes license fee revenue from the Distribution and License Agreement, revenue from professional services, and other one-time revenue. License fee revenue is recognized upon the shipment of product from Columbia Tech to the reseller. Revenue for professional services is recognized upon transfer of control of these services, which are normally rendered over a short duration. Revenue for professional services and other one-time revenue, which had previously been included in service revenue, has been reclassified for prior periods to License fee and other revenue on the condensed consolidated statements of operations and comprehensive loss. During the three months ended September 30, 2025, we discontinued quoting under the Distribution and License Agreement, and while any outstanding quotes will be honored, all new quotes for end-user customers wishing to purchase the hardware equipment will be fulfilled through our purchase subscription model going forward. Thus, license revenue from this agreement is expected to reduce to zero over time, replaced by increased product revenue.

Previous wording

We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our gross profit and gross margin in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments. We currently expect gross margins in the near term to decrease due to certain significant opportunities in our pipeline that are expected to be fulfilled through our purchase subscription model.

Current wording

We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our gross profit and gross margin in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments.

Previous wording

Our research and development expenses represent costs incurred to support activities that advance the development of innovative security screening technologies, new product platforms, as well as activities that enhance the capabilities of our existing product platforms. Our research and development expenses consist primarily of salaries and bonuses, employee benefits, stock-based compensation, prototypes, design expenses, and consulting and contractor costs. We expect our research and development costs will remain relatively consistent for the year ending December 31, 2025 compared to the year ended December 31, 2024 as we look to leverage previous investments made in people and processes.

Current wording

Our research and development expenses represent costs incurred to support activities that advance the development of innovative security screening technologies, new product platforms, as well as activities that enhance the capabilities of our existing product platforms. Our research and development expenses consist primarily of salaries and bonuses, employee benefits, stock-based compensation, prototypes, design expenses, and consulting and contractor costs. We expect our research and development costs to decrease for the year ending December 31, 2025 compared to the year ended December 31, 2024 as a result of certain cost cutting measures we have taken, including the reduction in force implemented in January 2025, as well as decrease in consulting costs related to the second generation of our Evolv Express systems that were launched in prior year.

Previous wording

General and administrative expenses consist primarily of personnel related expenses associated with our executive, finance, investor relations, legal, information technology, and human resources functions, as well as professional fees for legal, audit, accounting and other consulting services, stock-based compensation, and insurance, net of any probable and reasonably estimable insurance recoveries or received insurance recoveries. During the year ended 2024, we experienced a significant increase in general and administrative expenses, primarily for legal fees and consulting expenses, as a result of the Investigation and related actions, as described in Note 2, Restatement of Previously Issued Condensed Consolidated Financial Statements. This increased level of expenses continued through the second quarter of 2025. As such actions have been completed, we expect our general and administrative expenses to decrease in the second half of 2025 and to remain consistent at more normalized levels thereafter.

Current wording

General and administrative expenses consist primarily of personnel related expenses associated with our executive, finance, investor relations, legal, information technology, and human resources functions, as well as professional fees for legal, audit, accounting and other consulting services, stock-based compensation, and insurance, net of any probable and reasonably estimable insurance recoveries or received insurance recoveries. During the year ended 2024, we experienced a significant increase in general and administrative expenses, primarily for legal fees and consulting expenses, as a result of the Investigation and related actions. This increased level of expenses continued through the second quarter of 2025 and has reduced in the third quarter of 2025. We expect our general and administrative expenses to remain at this lower level in the fourth quarter of 2025.

Previous wording

Prior to the Merger, certain NHIC stockholders owned 4,312,500 shares of NHIC Class B common stock, referred to as Founder Shares. Upon the closing of the Merger, NHIC Class A and Class B common stock became the Company's common stock. 1,897,500 Founder Shares vested at the closing of the Merger, 1,897,500 Founder Shares are contingently issuable and shall vest upon the Company achieving certain milestones, and 517,500 Founder Shares were contributed to Give Evolv LLC. The 1,897,500 outstanding contingently issuable common shares are accounted for as a liability and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in thecondensed consolidated statements of operations and comprehensive loss.

Current wording

Prior to the Merger, certain NHIC stockholders owned 4,312,500 shares of NHIC Class B common stock, referred to as Founder Shares. Upon the closing of the Merger, NHIC Class A and Class B common stock became the Company's common stock. 1,897,500 Founder Shares vested at the closing of the Merger, 1,897,500 Founder Shares are contingently issuable and shall vest upon the Company achieving certain milestones, and 517,500 Founder Shares were contributed to Give Evolv LLC. The 1,897,500 outstanding contingently issuable common shares are accounted for as a liability and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA introduces various corporate and international tax law changes with staggered effective dates through 2027. Key provisions include immediate R&D expensing, permanent bonus depreciation, modifications to interest expense limitations, and changes to certain international tax rules. While we continue to evaluate the potential impact of the OBBBA on our consolidated financial statements, due to our full valuation allowance position on U.S. deferred tax assets, immaterial current tax liabilities, and insignificant foreign earnings from Evolv Technologies UK Ltd., we do not expect the OBBBA to have a material impact on our financial position, results of operations, or effective tax rate.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA introduces various corporate and international tax law changes with staggered effective dates through 2027. Key provisions include immediate R&D expensing, permanent bonus depreciation, modifications to interest expense limitations, and changes to certain international tax rules. The enacted legislation did not have a material impact on our financial position, results of operations, or effective tax rate for the nine months ended September 30, 2025, primarily due to our full valuation allowance position on U.S. deferred tax assets, immaterial current tax liabilities, and insignificant foreign earnings from Evolv UK. We will continue to monitor and evaluate all applicable provisions of the OBBBA and any potential future impact on our consolidated financial statements.

Previous wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 63 new customers during the three months ended June 30, 2025, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations as well as expanding their fleet with our Evolv eXpedite offering, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Current wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 62 new customers during the three months ended September 30, 2025, and (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations as well as expanding their fleet with our Evolv eXpedite offering.

Previous wording

The increases in product revenue and cost of product revenue are primarily due to an increased utilization of our purchase subscription model, in which the customers purchase Evolv Express and Evolv eXpedite systems directly from us, for the three months ended June 30, 2025 compared to the prior year period. The decrease in product gross profit margin was due to a $1.4 million increase in inventory reserves on first generation Evolv Express parts during the three months ended June 30, 2025, as well as the initial deployments of our Evolv eXpedite systems, which as a new product offering reflect a higher initial cost to produce that we expect to gradually decline in the future.

Current wording

The increases in product revenue and cost of product revenue for the three months ended September 30, 2025 compared to the prior year period are primarily due to an increased utilization of our purchase subscription model, in which customers purchase Evolv Express and Evolv eXpedite systems directly from us instead of through our distributor licensing model. The increase in product gross profit margin was due to an expense related to our inventory reserve of $1.5 million recognized in the three months ended September 30, 2024, which related primarily to the transition of our manufacturing operations to the next generation of Evolv Express systems and the determination that certain components within our legacy systems will not be used in the next generation systems, partially offset by the initial deployments of our Evolv eXpedite systems, which as a new product offering reflect a higher initial cost to produce that we expect to gradually decline in the future.

Previous wording

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to continued growth in our customer base as of June 30, 2025 compared to the prior year, with a higher number of active Evolv Express systems deployed under our pure subscription model and an increase in short term rental subscription revenue during the three months ended June 30, 2025. Gross profit margin decreased primarily due to an increase of $1.3 million of expense related to disposals of certain first generation Evolv Express systems, partially offset by our ability to leverage our fixed costs over a higher revenue base and lower costs related to our second generation of Evolv Express systems.

Current wording

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to continued growth in our customer base as of September 30, 2025 compared to the prior year, with a higher number of active Evolv Express systems deployed under our pure subscription model and an increase in short term rental subscription revenue during the three months ended September 30, 2025. The decrease in subscription gross profit margin was due to a $1.9 million loss on disposal of leased equipment and a $0.6 million estimated field services cost related to the replacement of certain Express system parts.

Previous wording

The increases in service revenue, cost of service revenue, and service gross profit are primarily due to an increased number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers directly from Columbia Tech under our distributor licensing model, for the three months ended June 30, 2025 compared to the prior year period. The decrease in gross profit margin is primarily due to a $0.2 million expense related to certain accrued service fees and a $0.2 million increase in amortization of capitalized software costs during the three months ended June 30, 2025 due to the release of Evolv eXpedite and our second generation of Evolv Express systems.

Current wording

The increases in service revenue, cost of service revenue, and service gross profit are primarily due to increased maintenance revenue associated with growth in number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers directly from Columbia Tech under our distributor licensing model, for the three months ended September 30, 2025 compared to the prior year period. The decrease in gross profit margin is primarily due to a $0.5 million estimated field services cost related to the replacement of certain Express system parts and a $0.2 million increase in amortization of capitalized software costs during the three months ended September 30, 2025 due to the release of Evolv eXpedite and our second generation of Evolv Express systems.

Previous wording

The increases in license fee and other revenue and gross profit are primarily driven by $2.3 million of license fee revenue earned during the three months ended June 30, 2025 compared to $1.7 million earned during the prior year period under the Distribution and License Agreement with Columbia Tech. Although the unit sales through our distributor licensing model declined, the license fee and other revenue increased due to an increase in per-unit license fees for our second generation of Evolv Express systems. Product gross profit margin decreased for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 due to an increase in personnel and overhead costs of $0.3 million.

Current wording

The increases in license fee and other revenue and gross profit are primarily driven by $2.3 million of license fee revenue earned during the three months ended September 30, 2025 compared to $1.6 million earned during the prior year period under the distributor licensing model, as well as a $0.2 million increase in installation and training service fees. Although the unit sales through our distributor licensing model declined, the license fee and other revenue increased due to an increase in per-unit license fees for our second generation of Evolv Express systems.

Previous wording

The decrease in personnel related expenses is due to the January 2025 reductions in force, which resulted in a decrease in payroll costs of $0.6 million, partially offset by a lower amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.2 million. The decrease in materials and prototypes expense is due to a decrease of $0.2 million in design and engineering costs related to the development of the next generation of our Evolv Express system and new product offerings in the prior year. The decrease in professional fees primarily relates to a decrease in consulting costs incurred for product development and engineering of $0.3 million.

Current wording

The increase in personnel related expenses is primarily due to a decrease in payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.2 million. The decrease in materials and prototypes expense is primarily due to a decrease of $0.3 million in design and engineering costs reflecting the timing of certain product releases in the prior year.

Previous wording

The decrease in personnel related expenses is due to a decrease in payroll costs and stock-based compensation of $3.3 million, which resulted primarily from the reductions in force in May 2024 and January 2025, partially offset by an increase in severance cost of $0.5 million. Stock compensation expense included in sales and marketing expenses was $1.7 million for the three months ended June 30, 2025 compared to $2.7 million for the three months ended June 30, 2024. The decrease in advertising and direct marketing expense is primarily due to a decrease in sponsorship fees of $0.2 million. The decrease in travel and entertainment expense of $0.7 million is due to a decrease in travel costs for in-person sales meetings as a result of our reductions in force. Professional fees decreased due to a decrease in marketing consulting costs. Other expense decreased primarily due to reduction in shipping costs related to demo units of $0.2 million.

Current wording

The decrease in personnel related expenses is due to a decrease in payroll costs and stock-based compensation of $1.1 million, which resulted primarily from the reduction in force in January 2025. Stock-based compensation expense included in sales and marketing expenses was $1.5 million for the three months ended September 30, 2025 compared to $2.5 million for the three months ended September 30, 2024. The decrease in advertising and direct marketing expense is primarily due to a decrease in expenses related to trade shows and events of $0.5 million and decrease in sponsorship fees of $0.2 million. The decrease in travel and entertainment expense is due to a decrease in travel costs for in-person sales meetings as a result of our reductions in force. Professional fees decreased primarily due to a decrease in marketing consulting costs.

Previous wording

The decrease in personnel related expenses is due to a decrease in stock-based compensation of $0.9 million, which resulted primarily from the termination of certain executives as well as the reduction in force in January 2025, partially offset by an increase in severance costs of $0.2 million. Stock compensation expense included in general and administrative expenses was $2.4 million for the three months ended June 30, 2025 compared to $3.3 million for the three months ended June 30, 2024. Professional fees increased primarily due to an increase in outsourced accounting consultancy of $0.6 million. Non-recurring professional fees and other expense increased primarily due to a $4.5 million increase in consulting and legal fees related to the Investigation (as defined in Note 2 in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q) and related matters, as well as additional audit fees incurred in connection with the restatement of prior period financial statements, partially offset by insurance recoveries of $1.7 million, $1.0 million of estimated net losses related to ongoing legal matters, and an increase in rent of $0.3 million for additional leased space, partially offset by a decrease in expected credit loss expense of $0.3 million.

Current wording

Personnel related expenses increased due to a $1.5 million increase in payroll costs, primarily from an increase in accrued bonuses, offset by a decrease in stock-based compensation of $1.1 million, which resulted primarily from the termination of certain executives as well as the reduction in force in January 2025. Stock-based compensation expense included in general and administrative expenses was $2.4 million for the three months ended September 30, 2025 compared to $3.5 million for the three months ended September 30, 2024. Professional fees increased primarily due to an increase in legal fees of $0.4 million and an increase in audit and tax fees of $0.2 million. Non-recurring professional fees and other expenses decreased primarily due to a $1.2 million decrease in consulting and legal fees and audit fees incurred in connection with the previous restatement of prior period financial statements, additional insurance recoveries of $1.2 million, and a decrease in IT and software subscription costs of $0.3 million, partially offset by an increase in rent of $0.2 million for additional leased space.

Previous wording

Restructuring costs of $0.9 million for the three months ended June 30, 2024 resulted from the reduction in force in May 2024. No restructuring cost was recognized for the three months ended June 30, 2025.

Current wording

No restructuring cost was recognized for the three months ended September 30, 2025 and 2024.

Previous wording

Interest income of $0.2 million for the three months ended June 30, 2025 and $0.7 million for the three months ended June 30, 2024 related primarily to interest earned on money market funds and the accretion of discounts on treasury bills. The interest earned decreased primarily due to lower average balances in interest-bearing accounts during the three months ended June 30, 2025 compared to during the three months ended June 30, 2024.

Current wording

Interest income of $0.4 million for the three months ended September 30, 2025 and $0.6 million for the three months ended September 30, 2024 related primarily to interest earned on money market funds and the accretion of discounts on treasury bills. The interest earned decreased primarily due to lower average balances in interest-bearing accounts during the three months ended September 30, 2025 compared to during the three months ended September 30, 2024.

Previous wording

Change in the fair value of the contingent earn-out liability resulted in a $14.2 million loss and $16.5 million gain for the three months ended June 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Current wording

Change in the fair value of the contingent earn-out liability resulted in a $7.5 million gain and $8.3 million loss for the three months ended September 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments.

Previous wording

Change in the fair value of the contingently issuable common stock liability resulted in a $3.9 million loss and $3.7 million gain for the three months ended June 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Current wording

Change in the fair value of the contingently issuable common stock liability resulted in a $2.2 million gain for the three months ended September 30, 2025, resulting from quarterly mark-to-market adjustments and common shares issuance, and a $2.1 million loss for the three months ended September 30, 2024, resulting from quarterly mark-to-market adjustments.

Previous wording

Change in the fair value of the public warrant liability resulted in a $5.3 million loss and $4.9 million gain for the three months ended June 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

Current wording

Change in the fair value of the public warrant liability resulted in losses of $2.6 million and $1.6 million for the three months ended September 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024 (in thousands):

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2025 and 2024 (in thousands):

Previous wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 117 new customers during the six months ended June 30, 2025, (iii) the expansion of our existing customers’ initial Evolv Express deployments to other venues and locations as well as expanding their fleet with our Evolv eXpedite offering, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Current wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 179 new customers during the nine months ended September 30, 2025, and (iii) the expansion of our existing customers’ initial Evolv Express deployments to other venues and locations as well as expanding their fleet with our Evolv eXpedite offering.

Previous wording

The increases in product revenue and cost of product revenue are primarily due to an increased utilization of our purchase subscription model, in which the customers purchase Evolv Express and Evolv eXpedite systems directly from us, for the six months ended June 30, 2025 compared to the prior year period. The decrease in product gross profit margin for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 is primarily due to a $0.8 million increase in inventory reserves during the six months ended June 30, 2025, partially offset by a $1.1 million expense associated with adverse non-cancellable inventory purchase commitments recognized during the six months ended June 30, 2024, and a net $0.6 million decrease in manufacturing expense during the six months ended June 30, 2025, primarily related to the deployments of second generation of Evolv Express systems, which provide improved gross margins as compared to the first generation products, partially offset by the initial deployments of Evolv eXpedite systems, which, as a new product offering, reflect a higher initial cost to produce that we expect to gradually decline in the future.

Current wording

The increases in product revenue and cost of product revenue for the nine months ended September 30, 2025 compared to the prior year period are primarily due to an increased utilization of our purchase subscription model, in which the customers purchase Evolv Express and Evolv eXpedite systems directly from us. The increase in product gross profit margin for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 is primarily due to expense recognized during the nine months ended September 30, 2024 of a $1.1 million related to non-cancellable inventory purchase commitments, a $0.6 million decrease in charges for inventory reserves during the nine months ended September 30, 2025 as compared to the same period in the prior year, and a $0.7 million decrease in manufacturing expense during the nine months ended September 30, 2025, primarily related to the deployments of second generation of Evolv Express systems, which provide improved gross margins as compared to the first generation products, all partially offset by the initial deployments of Evolv eXpedite systems, which, as a new product offering, reflect a higher initial cost to produce that we expect to gradually decline in the future.

Previous wording

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to continued growth in our customer base as of June 30, 2025 compared to the prior year, with a higher number of active Evolv Express systems deployed under our pure subscription model and an increase in short term rental subscription revenue during the six months ended June 30, 2025. Gross profit margin decreased primarily due to a $1.3 million of loss on disposals of certain first generation Evolv Express systems, partially offset by our ability to leverage our fixed costs over a higher revenue base and lower costs related to our second generation of Evolv Express systems.

Current wording

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to continued growth in our customer base as of September 30, 2025 compared to the prior year, with a higher number of active Evolv Express systems deployed under our pure subscription model and an increase in short term rental subscription revenue during the nine months ended September 30, 2025. Gross profit margin decreased primarily due to a $3.1 million loss on disposals of certain first generation Evolv Express systems and a $0.6 million estimated field services costs related to the replacement of certain Express system parts during the nine months ended September 30, 2025.

Previous wording

The increases in service revenue, cost of service revenue, and gross profit are primarily due to an increased number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers directly from Columbia Tech under our distributor licensing model, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease in gross profit margin is primarily due to a $0.2 million expense related to certain accrued service fees and increased amortization of capitalized software costs during the six months ended June 30, 2025 of $0.4 million due to the release of Evolv eXpedite and our second generation of Evolv Express systems.

Current wording

The increases in service revenue, cost of service revenue, and gross profit are primarily due to increased maintenance revenue associated with growth in number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease in gross profit margin is primarily due to an accrual of $0.5 million estimated field services costs related to the replacement of certain Express system parts and increased amortization of capitalized software costs during the nine months ended September 30, 2025 by $0.7 million due to the release of Evolv eXpedite and our second generation of Evolv Express systems.

Previous wording

The increase in license fee and other revenue and gross profit was primarily driven by $5.5 million of license fees earned during the six months ended June 30, 2025 compared to $2.4 million earned during the six months ended June 30, 2024 under the Distribution and License Agreement which was executed in March 2023. In addition to the increase in the unit sales through our distributor licensing model, per-unit license fees also increased for our second generation of Evolv Express systems. License fee revenue earned under the agreement has no associated cost of revenue.

Current wording

The increase in license fee and other revenue and gross profit was primarily driven by $7.8 million of license fees earned during the nine months ended September 30, 2025 compared to $4.0 million earned during the nine months ended September 30, 2024 under the distributor licensing model, as well as a $0.4 million increase in installation and training service fees. In addition to the increase in the unit sales through our distributor licensing model, per-unit license fees also increased for our second generation of Evolv Express systems.

Previous wording

The decrease in personnel related expenses is primarily due to the January 2025 reductions in force, which resulted in a decrease in payroll costs of $0.8 million, partially offset by a $0.2 million increase in stock-based compensation. The decrease in materials and prototypes expense is primarily due to a decrease of $0.5 million in design and engineering costs and $0.4 million inventory reserve on unused components recognized in the prior year, both of which relate primarily to the development of the next generation of our Evolv Express system and new product offerings. The decrease in professional fees primarily relates to a decrease in consulting costs incurred for product development and engineering of $0.5 million. The decrease in other expense is primarily due to a decrease in IT and software subscription and supplies costs of $0.2 million.

Current wording

The decrease in personnel related expenses is primarily due to the January 2025 reduction in force, which resulted in a decrease in payroll costs of $0.9 million, partially offset by a $0.1 million increase in stock-based compensation and a decrease in payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.1 million. The decrease in materials and prototypes expense is primarily due to a decrease of $1.0 million in design and engineering costs and $0.4 million inventory reserve on unused components recognized in the prior year, both of which relate primarily to the development of the next generation of our Evolv Express system and new product offerings. The decrease in professional fees primarily relates to a decrease in consulting costs incurred for product development and engineering of $0.5 million.

Previous wording

The decrease in personnel related expenses is due to a decrease in payroll costs and stock-based compensation of $6.5 million, which resulted primarily from the reductions in force in May 2024 and January 2025, partially offset by an increase in severance cost of $0.5 million. Stock compensation expense included in sales and marketing expenses was $2.8 million for the six months ended June 30, 2025 compared to $5.7 million for the six months ended June 30, 2024. The decrease in advertising and direct marketing expense is primarily due to a decrease in sponsorship fees of $0.4 million. The decrease in travel and entertainment expense of $1.5 million is due to a decrease in travel costs for in-person sales meetings as a result of our reductions in force. Professional fees decreased due to a decrease in marketing consulting costs of $0.6 million. Other expense decreased primarily due to reduction in shipping costs related to demo units of $0.3 million and supplies costs of $0.2 million.

Current wording

The decrease in personnel related expenses is due to a decrease in payroll costs and stock-based compensation of $7.2 million, which resulted primarily from the reductions in force in May 2024 and January 2025. Stock-based compensation expense included in sales and marketing expenses was $4.2 million for the nine months ended September 30, 2025 compared to $8.2 million for the nine months ended September 30, 2024. The decrease in advertising and direct marketing expense is primarily due to a decrease in expenses related to trade shows and events of $0.6 million and a decrease in sponsorship fees of $0.5 million. The decrease in travel and entertainment expense is due to a decrease in travel costs for in-person sales meetings of $2.1 million as a result of our reductions in force. Professional fees decreased due to a decrease in marketing consulting costs of $1.0 million. Other expense decreased primarily due to reduction in shipping costs related to demonstration units of $0.4 million and supplies costs of $0.3 million.

Previous wording

The decrease in personnel related expenses is due to a decrease in payroll costs and stock-based compensation of $1.7 million, which resulted primarily from the termination of certain executives and the reduction in force in January 2025, partially offset by an increase in severance costs of $0.2 million. Stock compensation expense included in general and administrative expenses was $4.4 million for the six months ended June 30, 2025 compared to $5.7 million for the six months ended June 30, 2024. Professional fees increased primarily due to an increase in outsourced accounting consultancy of $1.3 million, partially offset by a decrease in audit and tax fees of $0.7 million. Non-recurring professional fees and other expense increased primarily due to a $11.5 million increase in consulting and legal fees related to the Investigation (as defined in Note 2 in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q) and related matters, as well as additional audit fees incurred in connection with the restatement of prior period financial statements, $1.0 million of estimated net losses related to ongoing legal matters, and an increase in rent of $0.7 million for additional leased space, partially offset by insurance recoveries of $5.6 million.

Current wording

The decrease in personnel related expenses is due to a decrease in stock-based compensation of $2.5 million, which resulted primarily from the termination of certain executives and the reduction in force in January 2025, partially offset by a $1.4 million increase in payroll costs, which resulted primarily from an increase in accrued bonuses. Stock-based compensation expense included in general and administrative expenses was $6.8 million for the nine months ended September 30, 2025 compared to $9.2 million for the nine months ended September 30, 2024. Professional fees increased primarily due to an increase in outsourced accounting consultancy of $1.5 million and an increase in legal fees of $0.3 million, partially offset by a decrease in audit and tax fees of $0.4 million. Non-recurring professional fees and other expenses increased primarily due to a $10.3 million increase in consulting and legal fees related to the Investigation and related matters and audit fees incurred in connection with the restatement of prior period financial statements, $1.0 million of estimated net losses related to class action lawsuits, and an increase in rent of $0.9 million for additional leased space, partially offset by insurance recoveries of $6.8 million and a decrease in IT and software subscription costs of $0.3 million.

Previous wording

Restructuring costs of $2.7 million for the six months ended June 30, 2025 resulted from the reduction in force in January 2025. Stock compensation expense included in restructuring costs was $0.5 million for the six months ended June 30, 2025. Smaller restructuring costs of $0.9 million for the six months ended June 30, 2024 resulted from the reduction in force in May 2024.

Current wording

Restructuring costs of $2.7 million for the nine months ended September 30, 2025 resulted from the reduction in force in January 2025. Stock-based compensation expense included in restructuring costs was $0.5 million for the nine months ended September 30, 2025. Smaller restructuring costs of $0.9 million for the nine months ended September 30, 2024 resulted from the reduction in force in May 2024.

Previous wording

Interest income of $0.6 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively, related primarily to interest earned on money market funds and the accretion of discounts on treasury bills. The interest earned decreased primarily due to lower average balances in interest-bearing accounts during the six months ended June 30, 2025 compared to during the six months ended June 30, 2024.

Current wording

Interest income of $1.0 million and $2.4 million for the nine months ended September 30, 2025 and 2024, respectively, related primarily to interest earned on money market funds and the accretion of discounts on treasury bills. The interest earned decreased primarily due to lower average balances in interest-bearing accounts during the nine months ended September 30, 2025 compared to during the nine months ended September 30, 2024.

Previous wording

Change in the fair value of the contingent earn-out liability resulted in a $5.2 million loss and $23.4 million gain for the six months ended June 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Current wording

Change in the fair value of the contingent earn-out liability resulted in gains of $2.3 million and $15.1 million for the nine months ended September 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments.

Previous wording

Change in the fair value of the contingently issuable common stock liability resulted in a $2.2 million loss and $4.3 million gain for the six months ended June 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Current wording

Change in the fair value of the contingently issuable common stock liability resulted in a $0.1 million loss for the nine months ended September 30, 2025, resulting from quarterly mark-to-market adjustments and common shares issuance, and $2.2 million gain for the nine months ended September 30, 2024, resulting from quarterly mark-to-market adjustments.

Previous wording

Change in the fair value of the public warrant liability resulted in a $3.6 million loss and a $7.0 million gain for the six months ended June 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

Current wording

Change in the fair value of the public warrant liability resulted in a $6.2 million loss and a $5.5 million gain for the nine months ended September 30, 2025 and 2024, respectively, resulting from quarterly mark-to-market adjustments.

Previous wording

Our financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures and general corporate needs. We expect these needs to continue as we develop and grow our business. As of June 30, 2025, we had $36.9 million in cash, cash equivalents, and marketable securities. We incurred a net loss of $40.5 million and a net income of $3.4 million (as restated) for the three months ended June 30, 2025 and 2024, respectively, and incurred a net loss of $42.2 million and $7.9 million (as restated) for the six months ended June 30, 2025 and 2024, respectively. We incurred cash outflows from operating activities of $0.4 million and $37.7 million (as restated) during the six months ended June 30, 2025 and 2024, respectively. We expect to continue to generate net losses for the foreseeable future.

Current wording

Our financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, debt obligations, and general corporate needs. We expect these needs to continue as we develop and grow our business. As of September 30, 2025, we had $56.2 million in cash, cash equivalents, and marketable securities, with outstanding debt of $28.5 million and available additional debt of up to $45.0 million, as detailed below. We incurred a net loss of $1.8 million and $30.4 million for the three months ended September 30, 2025 and 2024, respectively, and incurred a net loss of $44.0 million and $38.3 million for the nine months ended September 30, 2025 and 2024, respectively. Operating activities resulted in cash inflow of $3.1 million and cash outflow of $34.1 million during the nine months ended September 30, 2025 and 2024, respectively. We expect to continue to generate net losses for the foreseeable future.