Evolv Technologies Holdings, Inc.

1. Nature of the Business and Basis of Presentation

Evolv Technologies Holdings, Inc. (the “Company”), a Delaware corporation, is a leading security technology company pioneering Artificial Intelligence (“AI”)-powered screening solutions designed to help create safer environments while maintaining efficient visitor flow and a positive visitor experience. The Company serves customers across a range of end markets, including education, healthcare, sports, live entertainment, tourist attractions, houses of worship, and industrial workplaces.

The Company offers two primary products, Evolv Express® and Evolv eXpedite™, which are designed to efficiently screen high volumes of people and bags for concealed threats. These products and their associated services are designed to capture valuable visitor data customers can leverage to inform their security operations, while providing end-users with an approachable and non-intrusive security experience. The Company is headquartered in Waltham, Massachusetts.

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 wholly owned subsidiaries, which include Evolv Technologies, Inc., Evolv Technologies UK Ltd. (“Evolv UK”) and Give Evolv LLC. References to “NHIC” refer to our legal predecessor, a special-purpose acquisition company, prior to the consummation of our business combination on July 16, 2021 (the “Merger”), and references to “Legacy Evolv” refer to Evolv Technologies, Inc. d/b/a Evolv Technology, Inc. prior to the consummation of the Merger. The Merger was contemplated by the Agreement and Plan of Merger, dated March 5, 2021, with NHIC Sub Inc., NHIC, and Legacy Evolv, as amended by that certain First Amendment to Agreement and Plan of Merger dated June 5, 2021 (as amended, the “Merger Agreement”).

Basis of presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Liquidity and capital resources

The Company’s 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. The Company's primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, debt obligations, and general corporate needs. The Company expects these needs to continue as it develops and grows its business. As of September 30, 2026, the Company had $66.9 million in cash, cash equivalents, and marketable securities, with outstanding debt of $30.0 million and available additional borrowings of up to $45.0 million, as detailed below. We incurred a net loss of $29.9 million and $44.0 million for the nine months ended September 30, 2026 and 2025, respectively, and operating activities resulted in cash inflows of $26.7 million and $3.1 million during the nine months ended September 30, 2026 and 2025, respectively. The Company expects to continue to generate losses for the foreseeable future.

The Company maintains substantially all of its cash, cash equivalents, and marketable securities in accounts with U.S. and multi-national financial institutions and its cash deposits at these institutions exceed Federal Deposit Insurance Corporation insured limits. The Company does not believe it is exposed to any unusual credit risk or deposit concentration risk beyond the ordinary credit risk associated with commercial banking relationships.

On July 29, 2025 (the “Closing Date”), the Company entered into a $75.0 million credit, security, and guaranty agreement with MidCap Financial Trust and the other lenders party thereto (the “MidCap Credit Agreement”), the proceeds of which will be used for general corporate purposes, including to support growing long-term demand for the Company’s pure subscription sales model. The MidCap Credit Agreement provided an initial $30.0 million term loan facility (the

“Initial Term Loan”), a $30.0 million delayed draw facility (the “Delayed Draw Term Loan”) (available for drawdown during thetwo-year period following the Closing Date), and a $15.0 million revolving line of credit (the “Revolving Credit Facility”), each with a maturity date of July 1, 2030 (collectively, the “Senior Secured Credit Facilities”). On the Closing Date, the Company received net proceeds of $26.6 million, after deducting $3.4 million in debt issuance costs paid at closing. As of September 30, 2026, $30.0 million under the Initial Term Loan was drawn and outstanding, while the $30.0 million Delayed Draw Term Loan and $15.0 million Revolving Credit Facility remained undrawn and available. See Note 9, Long-term Debt, for additional information.

The Company expects its cash, cash equivalents, and marketable securities of $66.9 million as of September 30, 2026, together with cash it expects to generate from future operations and borrowing availability under the Senior Secured Credit Facilities, will be sufficient to fund its operating expenses and capital expenditure requirements for a period of at least twelve months from the date of this Quarterly Report on Form 10-Q. As the Company is in the growth stage of its business and operates in an emerging field of technology, the Company expects to continue to strategically and carefully invest in various areas of the business to support that growth.

Under the MidCap Credit Agreement, the Company is also required to comply with certain customary reporting requirements of periodic financial results and affirmative and negative covenants, including: (1) a minimum ending balance for annual recurring revenue (“ARR”), as defined, that began at $106.0 million on December 31, 2025 and increases quarterly thereafter; (2) minimum liquidity, as defined, of 50% of outstanding borrowings (this covenant would cease to apply following the resolution of certain litigation and regulatory matters); and (3) a minimum earnings before interest, taxes, depreciation, and amortization ("EBITDA") covenant that takes effect on June 30, 2027. As of September 30, 2026, the minimum required ARR is $110.0 million, and the Company is in full compliance with all applicable covenant requirements, and expects to remain in compliance for a period of at least twelve months from the date of this Quarterly Report on Form 10-Q.

There is significant uncertainty in the current geopolitical and macroeconomic environment due to various factors, including but not limited to inflationary pressures globally, conflicts in Europe and the Middle East, and foreign currency volatility and their impacts on the Company’s business. If economic conditions were to worsen, the Company’s results of operations, financial condition, and cash flows from operations may be materially and adversely impacted.

Additionally, there continues to be significant uncertainty regarding recent changes and potential future developments related to increased trade restrictions, tariffs or taxes on imports or exports relating to countries where we source or sell materials or products. The exact magnitude of any potential impact remains uncertain, as there may be further changes to tariffs and policies and, consequently, potential increased tension between the U.S. and targeted countries, and the Company'sfinancial condition and results of operations could be adversely affected.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements as of September 30, 2026, and for the three and nine months ended September 30, 2026 and 2025 have been prepared on the same basis as the audited annual consolidated financial statements as of December 31, 2025 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2026, the results of its operations for the three and nine months ended September 30, 2026 and 2025 and cash flows for the nine months ended September 30, 2026 and 2025. The results for the three and nine months ended September 30, 2026 are not necessarily indicative of results to be expected for the year ending December 31, 2026, any other interim periods, or any future year or period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

2. Summary of Significant Accounting Policies

Significant Accounting Policies

The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2025, and the notes thereto, which are included in our 2025 Form 10-K. Except for the estimates used to determine the grant date valuation for certain performance stock units (“PSUs”), as described in Note 10, Stock-Based Compensation, and the retirement of common stock, as described below, there have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2026.

Retirement of Common Stock

The Company accounts for shares that are reacquired and legally or constructively retired in accordance with ASC 505, Equity. Upon legal or constructive retirement, the shares are canceled and returned to the status of authorized but unissued shares. The par value is removed from common stock, and the excess of the carrying amount over par is recorded as a reduction of additional paid-in capital to the extent available, with any remaining amount charged to accumulated deficit.

Recently Adopted Accounting Pronouncements

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” ASU 2025-05 provides a practical expedient that allows entities to estimate expected credit losses by assuming that current conditions as of the balance sheet date will not change over the remaining life of the asset. The amendment is applied prospectively and is effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. The Company adopted ASU 2025-05 effective January 1, 2026 and elected to adopt the practical expedient that permits entities to assume that current conditions as of the balance sheet date do not change over the remaining life of the asset when estimating expected credit losses. The adoption did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which includes amendments to require the disclosure of certain specific costs and expenses that are included in a relevant expense caption on the face of the income statement. Specific costs and expenses that would be required to be disclosed include: purchases of inventory, employee compensation, depreciation, and intangible asset amortization. Additionally, a qualitative description of other items is required, equal to the difference between the relevant expense caption and the separately disclosed specific costs. Further, in January 2025, the FASB issued ASU 2025-01, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Clarifying the Effective Date)" to clarify the effective date of ASU 2024-03. Early adoption is permitted. A public entity should apply the amendments in ASU 2024-03 and ASU 2025-01 prospectively to all annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on the disclosures within the condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which amends guidance on capitalization of software development costs and introduces a probable-to-complete recognition threshold, along with factors to consider for evaluating significant development uncertainty. The amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual periods. Early adoption is permitted and this amendment is applied prospectively. The Company is currently evaluating the impact of this ASU on its accounting policies and disclosures within the condensed consolidated financial statements.

3. Marketable Securities

Marketable securities as of September 30, 2026 and December 31, 2025 consisted of the following:

Marketable securities at September 30, 2026 and December 31, 2025 are comprised solely of zero coupon U.S. treasury bills with maturities of greater than three months but less than one year that are classified as available-for-sale debt securities. Unrealized gains or losses were not material for each of the three and nine months ended September 30, 2026 and 2025. The amortization of premium on marketable securities is included in interest income on the condensed consolidated statements of operations and comprehensive loss.

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):

Money market funds are included in cash and cash equivalents on the condensed consolidated balance sheets. As of September 30, 2026, U.S. treasury bills with maturities less than three months, which totaled $10.0 million, are included in cash and cash equivalents, while treasury bills with maturities greater than three months, which totaled $5.0 million, are reflected as marketable securities. As of December 31, 2025, U.S. treasury bills with maturities greater than three months, which totaled $19.9 million, are reflected as marketable securities. The fair value of the treasury bills, which are classified as Level 2 securities, is calculated by a third-party pricing service and is based on estimates obtained from various sources.

The Company may also value its non-financial assets and liabilities, including items such as inventories and property and equipment, at fair value on a non-recurring basis if it is determined that impairment has occurred. Such fair value measurements use significant unobservable inputs and are classified as Level 3.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and other accrued expenses approximate fair value because of their short maturity.

The carrying value of the Company’s long-term debt approximates its fair value (a Level 2 measurement) at each balance sheet date due to its variable interest rate, which approximates a market interest rate.

During each of the nine months ended September 30, 2026 and 2025, there were no transfers between Level 1, Level 2 and Level 3.

Valuation of Contingent Earn-out

Pursuant to the Merger Agreement, the Legacy Evolv stockholders, immediately prior to the Merger, were entitled to receive additional shares of the Company’s common stock upon the Company achieving certain milestones as described in Note 2 of our consolidated financial statements of our 2025 Form 10-K. The Company’s contingent earn-out shares were recorded at fair value as a contingent earn-out liability upon the closing of the Merger and were remeasured each reporting period through the expiration of the earn-out period. The earn-out period expired on March 8, 2026 without achievement of the required milestones. As a result, the Company has no remaining contingent earn-out liability as of September 30, 2026.

The fair value of the contingent earn-out was calculated using a Monte Carlo analysis in order to simulate the future path of the Company’s stock price over the earn-out period.

The following table provides a rollforward of the contingent earn-out liability (in thousands):

Valuation of Contingently Issuable/Returnable Common Stock Liability/Asset and Measurement of Common Stock Receivable

Prior to the Merger, certain NHIC stockholders owned 4,312,500 shares of NHIC Class B common stock which were converted into shares of the Company's stock in connection with the Merger (the “Founder Shares”). Of these shares,1,897,500 shares vested at the closing of the Merger,517,500 shares were transferred back to NHIC and then contributed to Give Evolv LLC, and the remaining 1,897,500 unvested shares were subject to vesting upon the Company achieving certain milestones as described in Note 2 of our consolidated financial statements of our 2025 Form 10-K (“Vesting Conditions”). The Company’s contingently issuable common shares were recorded at fair value on the closing of the Merger and were remeasured each reporting period. None of the milestones were achieved prior to the expiration of the vesting period on July 16, 2026.

Under the Founder Shares arrangement, Founder Shares could be transferred to third parties, subject to certain conditions. The unvested shares are required to be returned to the Company for cancellation if the specified Vesting Conditions are not met. As of September 30, 2026, a total of 471,241 Founder Shares that had been previously transferred to individual stockholders' brokerage accounts remained outstanding and are subject to recovery by the Company, while all the other Founder Shares had either been forfeited upon expiration of the vesting period, if held in directly registered form at the transfer agent, or retired upon their subsequent return by stockholders. Prior to the expiration of the vesting period, the contractual obligation of the holders to return unvested shares upon failure to meet the Vesting Conditions was accounted for as a freestanding financial asset in accordance with ASC 815-40. This asset was initially recognized at fair value and remeasured at each reporting period through the expiration of the vesting period on July 16, 2026. Upon the expiration of the vesting period with none of the milestones having been achieved, the Company reassessed the arrangement under ASC 815-40 as of July 16, 2026 and determined that it met the criteria for equity classification and reclassified it to equity. Certain holders have not yet returned their shares, and the Company has applied the accounting model to the shares prescribed by ASC 470-20 for equity-classified own-share lending agreements following the July 16, 2026 contractual expiration. Under this model, the Company measures its right to recover the unreturned shares (i.e., common stock receivable) at the end of each reporting period based on the fair value of the unreturned shares which are probable of recovery. Changes in the measurement of the common stock receivable are recognized as a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss each reporting period, with the offset to additional paid-in capital.

Through March 31, 2026, the fair value of the contingently issuable common shares and the contingently returnable common stock asset was determined using a Monte Carlo analysis in order to simulate the future path of the Company’s stock price over the vesting period. However, starting June 30, 2026 and through the expiration of the vesting period, the Company determined that the required milestones were not achieved within the remaining term, and as a result, concluded there areno remaining contingently issuable common shares. As of July 16, 2026, the Company had recognized a $3.6 million contingently returnable common stock asset, based on the estimated fair value of the underlying returnable shares. Upon expiration of the vesting period, the contingently returnable common stock asset was reclassified to equity as common stock receivable, which is included within additional paid-in capital in our condensed consolidated balance sheets and statements of stockholders’ equity, with loss on remeasurement of common stock receivable recorded as a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2026, common stock receivable was $1.8 million.

The following table provides a rollforward of the contingently issuable common stock liability (in thousands):

The following table provides a rollforward of the contingently returnable common stock asset (in thousands):

The following table provides a rollforward of the common stock receivable (in thousands), which is included within additional paid-in capital in our condensed consolidated balance sheets and statements of stockholders’ equity:

Valuation of Public Warrant Liability

In connection with the closing of the Merger, the Company assumed warrants to purchase 14,325,000 shares of common stock (the “Public Warrants”) at an exercise price of $11.50. The Public Warrants were immediately exercisable and were classified as a liability and remeasured to fair value at each reporting date based on the closing price reported by Nasdaq on the last date of the reporting period. On July 16, 2026, all Public Warrants expired. As a result, the Company hasno remaining public warrant liability as of September 30, 2026.

The following table provides a rollforward of the public warrant liability (in thousands):

5. Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606 –Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In order to achieve this core principle, the Company applies the following five steps when recording revenue: (1) identify the contract, or contracts, with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when, or as, performance obligations are satisfied.

The Company derives revenue from (1) subscription arrangements generally accounted for as operating leases, including SaaS and maintenance, (2) the sale of products, (3) SaaS and maintenance related to products sold to customers either by the Company or by Columbia Tech pursuant to the Distribution and License Agreement (as defined below), (4) license fees related to the Distribution and License Agreement (as defined below), and (5) professional services, including installation, training, and event support. Maintenance consists of preventative maintenance, technical support, bug fixes, and when-and-if available threat updates. Our arrangements are generally noncancelable and nonrefundable after shipment to the customer. Revenue is recognized net of sales tax.

Distribution and License Agreement

In March 2023, the Company entered into a distributor licensing agreement (the "Distribution and License Agreement") with Columbia Electrical Contractors, Inc. ("Columbia Tech"). Columbia Tech is a wholly-owned subsidiary of Coghlin Companies, which had served as the Company's primary contract manufacturer. Under this arrangement, the Company granted a license of its intellectual property to Columbia Tech, which contracted directly with certain of the Company's resellers to fulfill sales demand where the end-user customer preferred to purchase the hardware equipment as opposed to lease the equipment. Columbia Tech paid the Company a hardware license fee for each system it manufactured and sold under the agreement. In these instances, the Company still contracted directly with the reseller to provide a multi-year SaaS and maintenance subscription to the end-users. The Distribution and License Agreement expired on December 31, 2025, and the Company no longer offers the distributor license model.

The Company previously assessed whether it operated as the principal or as an agent in relation to the sale of product made by Columbia Tech to the Company's resellers pursuant to the Distribution and License Agreement. The Company considered various factors, including but not limited to, inventory risk, discretion in establishing pricing, and which entity is primarily responsible for fulfillment. Based on an evaluation of the facts and circumstances, the Company concluded that Columbia Tech was the principal in the arrangement. The Company therefore did not recognize revenue in relation to sales of product pursuant to the Distribution and License Agreement, but did recognize revenue in relation to license fees received from Columbia Tech and the SaaS and maintenance subscription contracts.

Remaining Performance Obligations

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) as of September 30, 2026:

Contract Balances from Contracts with Customers

Contract assets arise from unbilled amounts in customer arrangements when revenue recognized exceeds the amount billed to the customer and the Company’s right to payment is unconditional and only subject to the passage of time. As of September 30, 2026, the Company had $1.6 million in current portion of contract assets and less than $0.1 million in contract assets, noncurrent on the condensed consolidated balance sheets. As of December 31, 2025, the Company had $0.9 million in current portion of contract assets and less than $0.1 million in contract assets, noncurrent on the condensed consolidated balance sheets.

Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer. The Company has a contract liability related to subscription revenue and service revenue, which consists of amounts that have been invoiced but that have not been recognized as revenue. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue and amounts expected to be recognized as revenue beyond 12 months of the balance sheet date are classified as deferred revenue, noncurrent. The Company recognized revenue of $15.0 million and $67.9 million during the three and nine months ended September 30, 2026 that was included in the December 31, 2025 deferred revenue balance. The Company recognized revenue of $13.9 million and $58.0 million during the three and nine months ended September 30, 2025 that was included in the December 31, 2024 deferred revenue balance.

The following table provides a rollforward of deferred revenue (in thousands):

The following table presents the Company’s components of sales-type lease net profit (in thousands):

The revenue from sales-type leases is classified as product revenue in the condensed consolidated statements of operations and comprehensive loss. The interest income on lease receivables is classified under interest income in the condensed consolidated statements of operations and comprehensive loss. The cost of revenue from sales-type leases is classified as cost of product revenue in the condensed consolidated statements of operations and comprehensive loss.

Lease income from operating leases is related to the leased equipment under subscription arrangements and is classified as subscription revenue in the condensed consolidated statements of operations and comprehensive loss. During the three months ended September 30, 2026 and 2025, the Company recognized lease income from operating leases of $24.5 million and $22.7 million, respectively. During the nine months ended September 30, 2026 and 2025, the Company recognized lease income from operating leases of $72.4 million and $62.1 million, respectively.

Disaggregated Revenue

The following table presents the Company’s revenue by revenue stream (in thousands):

Partner Rebate Program

In 2025, the Company implemented a channel partner rebate program (the “Rebate Program”) for eligible resellers. Under the Rebate Program, eligible resellers that attain at least 25% of their current fiscal year total contract value (“TCV”) target (“Annual Target”) in a given quarter are eligible for a rebate based upon a percentage of their TCV for that quarter. In addition, resellers that meet their Annual Target are eligible for a one-time rebate based upon a percentage of their total fiscal year TCV, applied as a credit in the subsequent fiscal year. All rebates are issued as credits against future purchases, and no cash rebates are paid. Unused rebate credits are forfeited in the event of a reseller agreement termination.

As of September 30, 2026 and December 31, 2025, the Company has accrued $1.1 million and $1.2 million, respectively, related to the Rebate Program, which is included in accrued expenses and other current liabilities in our condensed consolidated balance sheets. As a substantial amount of the Company's revenue from eligible resellers is recognized over-time, rebate liabilities are recognized as a commission asset and amortized as reductions to revenue over time, consistent with the recognition of the underlying revenue. The Company recognized $0.3 million and $1.3 million of current portion of commission asset and commission asset, noncurrent in our condensed consolidated balance sheets, respectively, as of September 30, 2026, and recognized $0.1 million and $0.5 million as reduction of revenue for the three and nine months ended September 30, 2026, respectively. The Company recognized $0.2 million and $0.6 million of current portion of commission asset and commission asset, noncurrent in our condensed consolidated balance sheets, respectively, as of December 31, 2025, and recognized $0.2 million and $0.4 millionas reduction of revenue for the three and nine months ended September 30, 2025.

Commissions

The Company incurs and pays commissions on sales of its products and services. The Company applies the practical expedient for contracts less than one year in duration to expense the commission costs in the period in which they were incurred. Commissions on product sales and services are expensed in the period in which the related revenue is recognized. Commissions on subscription arrangements and maintenance are expensed ratably over the life of the contract. The Company had a deferred asset related to commissions of $12.3 million and $13.1 million as of September 30, 2026 and December 31, 2025, respectively. During the three months ended September 30, 2026 and 2025, the Company recognized commission expense of $2.1 million and $2.1 million, respectively. During the nine months ended September 30, 2026 and 2025, the Company recognized commission expense of $6.3 million and $5.4 million, respectively.

Leases

The amount of minimum future leases is based on expected income recognition. As of September 30, 2026, total future minimum payments on noncancelable operating leases are as follows in the table below (in thousands). Future minimum payments on sales-type leases are not material.

6. Accounts Receivable

Allowance for Expected Credit Losses

Changes in the allowance for expected credit losses were as follows (in thousands):

7. Inventory

Inventory consisted of the following (in thousands):

1 Uninstalled inventory is the cost of equipment that has been shipped to a customer, but for which revenue recognition has not started due to the timing of the transfer of control, until the point in time that the Company transfers control of the equipment to the customer, corresponding with the revenue recognition start date.

8. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

1 Represents equipment that has not yet been deployed to a customer and, accordingly, is not being depreciated.

As of September 30, 2026 and December 31, 2025, the net book value of capitalized software was $15.0 million and $13.6 million, respectively. These amounts include $3.8 million and $2.8 million of cumulative capitalized stock-based compensation costs, respectively. Depreciation and amortization expense related to property and equipment was $7.5 million and $6.5 million for the three months ended September 30, 2026 and 2025, respectively, which included amortization expense of capitalized software of $1.4 million and $1.0 million for the three months ended September 30,

2026 and 2025, respectively. Depreciation and amortization expense related to property and equipment was $21.4 million and $17.9 million for the nine months ended September 30, 2026 and 2025, respectively, which included amortization expense of capitalized software of $3.9 million and $2.8 million for the nine months ended September 30, 2026 and 2025, respectively.

Leased equipment and the related accumulated depreciation were as follows:

Depreciation expense related to leased equipment was $5.5 million and $5.0 million during the three months ended September 30, 2026 and 2025, respectively. Depreciation expense related to leased equipment was $15.8 million and $13.4 million during the nine months ended September 30, 2026 and 2025, respectively. Depreciable lives are generally 7 years, consistent with the Company’s planned and historical usage of the equipment subject to operating leases.

The Company recorded losses of less than $0.1 million and $0.3 million from disposals of property and equipment during the three and nine months ended September 30, 2026 related to the disposal of previously leased Evolv Express systems primarily in connection with customer upgrades to the second generation of Express systems, which were recorded in cost of subscription revenue. The Company recorded losses of $1.9 million and $3.5 million from disposal of property and equipment during the three and nine months ended September 30, 2025 primarily related to the disposal of leased Evolv Express systems, which were recorded in cost of subscription revenue and cost of product revenue.

9. Long-term Debt

The components of the Company’s long-term debt consisted of the following (in thousands):

On July 29, 2025, the Company entered into the $75.0 million credit, security, and guaranty agreement with MidCap Financial Trust and the other lenders party thereto (the “MidCap Credit Agreement”), the proceeds of which will be used for general corporate purposes, including to support growing long-term demand for the Company's pure subscription sales model. The MidCap Credit Agreement provided for an initial $30.0 million term loan facility (the “Initial Term Loan”), a $30.0 million delayed draw facility (the “Delayed Draw Term Loan”) (available for drawdown during thetwo-year period following the Closing Date), and a $15.0 million revolving line of credit (the "Revolving Credit Facility”), each with a maturity date of July 1, 2030 (collectively, the “Senior Secured Credit Facilities”). As of September 30, 2026, $30.0 million under the Initial Term Loan was drawn and outstanding, while the $30.0 million Delayed Draw Term Loan and $15.0 million Revolving Credit Facility remained undrawn and available.

On the Closing Date, the Company received net proceeds of $26.6 million, after deducting $3.4 million in debt issuance costs funded at closing. The total debt issuance costs of $3.7 million, which included $0.3 million of additional issuance costs paid by the Company, have been allocated to each component of the facility in accordance with ASC 835. The Senior Secured Credit Facilities are guaranteed by the Company, and in the future, may be guaranteed by certain material subsidiaries. The Senior Secured Credit Facilities are secured by a first lien on substantially all of the assets of the Company.

The Senior Secured Credit Facilities bear interest at a fluctuating rate per annum equal to Term Secured Overnight Financing Rate (“Term SOFR”) and an applicable margin calculated based on EBITDA. At closing, the applicable margin on Term SOFR loans was 5.25%. If the event described under the MidCap Credit Agreement related to Term SOFR occurs, a base rate is determined by reference to the higher of (1) the prime rate of Wells Fargo and (2)2.00%. Interest and principal are payable monthly. Monthly interest payments are due in arrears on the first day of each month.

Under the MidCap Credit Agreement, the Company is also required to comply with certain customary reporting requirements of periodic financial results and affirmative and negative covenants, including: (1) a minimum ending balance for ARR, as defined, that began at $106.0 million on December 31, 2025 and increases quarterly thereafter; (2) minimum liquidity, as defined, of 50% of outstanding borrowings (this covenant would cease to apply following the resolution of certain litigation and regulatory matters); and (3) a minimum EBITDA covenant that takes effect on June 30, 2027. As of September 30, 2026, the minimum required ARR is $110.0 million, and the Company is in full compliance with all applicable covenant requirements.

Initial Term Loan

The borrowing under the $30.0 million Initial Term Loan is subject to principal repayments beginning in August 2029, following a 48-month interest-only period, and will be repaid in equal installments over the final 12 months of the loan term.

As of September 30, 2026, the unamortized debt issuance costs totaled $1.2 million, and are presented as a direct deduction from the carrying amount of the Initial Term Loan on the condensed consolidated balance sheet and are amortized as interest expense using the effective interest method in accordance with ASC 835. Interest expense related to the Initial Term Loan totaled $0.8 million and $2.2 million for the three and nine months ended September 30, 2026. The interest rate in effect as of September 30, 2026 was approximately 8.68%, which includes Term SOFR of 3.68% and an applicable margin of 5.00%. Interest expense related to the amortization of debt issuance costs totaled $0.1 million and $0.2 million for the three and nine months ended September 30, 2026. Interest expense related to the Initial Term Loan totaled $0.6 million for both the three and nine months ended September 30, 2025. Interest expense related to the amortization of debt issuance costs totaled less than $0.1 million for both the three and nine months ended September 30, 2025.

As of September 30, 2026, future principal payments on long-term debt are as follows (in thousands):

Delayed Draw Term Loan and Revolving Credit Facility

As of September 30, 2026, no amounts had been drawn under the Delayed Draw Term Loan or Revolving Credit Facility. Unused commitments amounted to $30.0 million and $15.0 million under the Delayed Draw Term Loan and Revolving Credit Facility, respectively, as of September 30, 2026. Debt issuance costs allocated to these facilities are paid regardless of whether the funds are drawn down. Such costs are capitalized as prepaid assets and amortized as interest expense on a straight-line basis over their respective access periods, which end on August 1, 2027 and July 1, 2030 for Delayed Draw Term Loan and Revolving Credit Facility, respectively. As of September 30, 2026, the Company recorded

$0.6 million in prepaid expenses and other current assets and $0.6 million in other assets in the condensed consolidated balance sheets for costs associated with Delayed Draw Term Loan and Revolving Credit Facility. As of December 31, 2025, the Company recorded $0.7 million in prepaid expenses and other current assets and $1.1 million in other assets in the condensed consolidated balance sheets for costs associated with Delayed Draw Term Loan and Revolving Credit Facility. Capitalized debt issuance cost is amortized as interest expense on a straight-line basis over the period each facility is available to be drawn. Interest expense related to the amortization of debt issuance costs totaled $0.2 million and $0.6 million for the three and nine months ended September 30, 2026. Interest expense related to the amortization of debt issuance costs totaled $0.2 million for both the three and nine months ended September 30, 2025.

The Revolving Credit Facility provides for an unused commitment fee of 0.25% on the undrawn portion of the facility. Interest expense related to the unused commitment fees totaled less than $0.1 million for both the three and nine months ended September 30, 2026. Interest expense related to the unused commitment fees totaled less than $0.1 million for both the three and nine months ended September 30, 2025.

10. Stock-Based Compensation

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2025 (in thousands, except for share and per share data):

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock.

Restricted Stock Units

The following table summarizes the Company's restricted stock units activity since December 31, 2025:

Market‑Condition Stock‑Based Awards

Market-based Stock Units

During the nine months ended September 30, 2025, the Company granted market-based stock units ("MSUs") for which the vesting conditions consist of market-based vesting conditions, determined by the Company's level of achievement of pre-established parameters relating to the performance of the Company's stock price as set by the Board as well as service-based vesting conditions. No MSUs were granted during the nine months ended September 30, 2026. Vesting may range from 0% to 200% of the target MSUs granted, based on the achievement of specified market conditions. The awards will be measured at each anniversary of the grant date and will vest following the completion of a performance period, which is generally three years unless shortened in the event of a change in control.

Performance Stock Units

During the nine months ended September 30, 2026, the Company granted performance stock units ("PSUs") with market-based vesting conditions based on the Company's relative total shareholder return percentile ranking compared to the specified stock market index over the applicable performance period, subject to a continued service-based vesting requirement. No PSUs were granted during the nine months ended September 30, 2025. The number of PSUs that may vest ranges from 0% to 250% of the target PSUs granted, based on the achievement of the specified market-based measures. The awards vest following the completion of a performance period, which is generally three years, subject to continued service-based vesting requirement, except that the awards may provide for prorated vesting upon a termination by the Company without cause or by the participant for good reason (as defined in the applicable award agreements). The Company may, at its discretion, settle vested PSUs in shares of common stock or in cash equal to the fair value of the shares. The PSUs are accounted for as equity-classified awards.

Compensation expense for MSUs and PSUs is based on the estimated value of the awards on the grant date, and is recognized over the period from the grant date through the performance period, regardless of level of achievement of the market conditions. The fair value of the awards was estimated based on a Monte Carlo simulation model, on a weighted average basis:

The following table summarizes the Company's market-condition stock-based awards activity since December 31, 2025:

Stock-Based Compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

11. Income Taxes

The Company regularly evaluates the realizability of its deferred tax assets by considering all available positive and negative evidence, including consideration of future taxable income. Primarily due to the Company’s history of incurred net losses, the Company maintains a full valuation allowance against its deferred tax assets, as it is not more likely than not that these assets will be realized. Thus, the Company has not recognized material provisions for or benefits from income taxes.

The Company’s tax provision and resulting effective tax rate for interim periods are determined using the estimated annual effective tax rate (“AETR”), which is updated each quarter and adjusted for discrete items recognized in the period. For the three and nine months ended September 30, 2026, the AETR reflects expected taxable income of Evolv UK, consistent with its intercompany transfer pricing policy. The forecast is consistent with year-to-date actual results through September 30, 2026, and excludes any mark-to-market adjustments. While the overall tax provision remains immaterial due to the Company's full valuation allowance, a portion of the prior-year net operating losses of Evolv UK expected to be utilized is subject to uncertainty. As a result, a corresponding unrecognized tax benefit has been included within the AETR.

The Company's income tax provision reflects an estimate of federal, state, and foreign income taxes based on enacted tax rates in the jurisdictions in which we operate. The provision is adjusted for the impact of allowable tax credits and deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in tax law. The Company has historically incurred net operating losses.

12. Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders are calculated as follows (in thousands, except share and per share amounts):

The following potentially dilutive outstanding securities were excluded from the computation of diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:

*Issuance of MSUs, PSUs, Earn-out shares, and Contingently issuable common stock was contingent upon the satisfaction of certain conditions, which were not satisfied by the end of the period.

13. Commitments and Contingencies

At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses the costs related to such legal proceedings as incurred. Insurance proceeds, if any, will be recognized as reductions to the related expenses in the period the proceeds are probable. Below is a summary of the various types of matters subject to this guidance.

Indemnification Agreements

In the ordinary course of business, the Company provides indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board of Directors and certain of its executive officers and employees that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their role, status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited.

Based on historical experience and evaluation of the agreements, we do not believe that any payments related to our indemnities will have a material impact on our financial condition or results of operations.

Legal Proceedings

We are from time to time subject to various claims, lawsuits, government and regulatory examinations, inquiries, information requests and investigations, and other legal and administrative proceedings arising in the ordinary course of business. The Company has identified certain claims as a result of which a loss may be incurred. This assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Actual outcomes of these legal and regulatory proceedings may materially differ from our current estimates. The pending proceedings involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources. The results of legal proceedings are inherently uncertain, and material adverse outcomes are reasonably possible.

General Litigation

Class Action Lawsuits

On March 25, 2024 and November 1, 2024, putative class action lawsuits were filed against the Company in the United States District Court for the District of Massachusetts. On December 13, 2024, the Court consolidated thetwo lawsuits into one action (the “Class Action”), pursuant to which a consolidated amended complaint was filed against the Company, certain former executives, a current director, and individuals associated with NewHold Investment Corp. Lead Plaintiff Robert Falk and additional plaintiffs Chris Williams, Tim R. Carrillo and Chris Swanson (“Class Action Plaintiffs”) alleged that the Company violated federal securities laws by making false or misleading statements relating to the effectiveness of certain products and the Company’s revenue recognition. The Class Action Plaintiffs sought various forms of relief, including compensatory damages, reasonable costs and expenses, attorneys’ fees, and expert fees. The Company filed its motion to dismiss the Class Action on March 28, 2025, and the Class Action Plaintiffs filed their opposition to the motion to dismiss on June 24, 2025. On June 30, 2025, the Court issued an order staying the Class Action, including disposition on the motion to dismiss, pending settlement negotiations. On August 5, 2025, the parties to the Class Action engaged in mediation and reached a settlement in principle in the amount of $15.0 million, of which the Company estimated at that time that $14.0 million would be funded by the Company's Directors and Officers insurance coverage. On August 19, 2025, after receiving notice of the anticipated settlement agreement, the Court denied the motion to dismiss with leave to renew if warranted. During the three months ended March 31, 2026, the Company was subsequently notified that an additional $0.3 million would be funded by the Company's Directors and Officers insurance coverage. On April 13, 2026, Class Action Plaintiffs filed a motion for preliminary approval of the settlement agreement. On April 16, 2026, the Court granted preliminary approval of the settlement agreement, stayed all proceedings in the Class Action other than to carry out and enforce the settlement agreement, and scheduled a final fairness hearing for September 24, 2026. Following the fairness hearing on September 24, 2026, the Court issued Orders granting final approval of the proposed settlement in the amount of $15.0 million, entering a final judgment, and dismissing the Class Action with prejudice.

The Company previously recognized settlement accrual of $15.0 million and an estimated insurance recovery of $14.0 million, which were recorded in accrued expenses and other current liabilities and prepaid and other current assets, respectively, in the condensed consolidated balance sheets as of December 31, 2025, representing management's best estimate of the outcome at that time. The Company was subsequently notified that an additional $0.3 million would be recovered and adjusted the insurance recovery receivable to $14.3 million as of March 31, 2026. The related adjustment was recorded in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2026. During the three months ended June 30, 2026, the $15.0 million settlement was funded by the Company and its insurance provider, amounting to $0.7 million and $14.3 million, respectively, and the settlement proceeds were placed into a court-approved settlement fund. The $0.7 million funded by the Company was classified as restricted cash in the condensed consolidated balance sheets as of June 30, 2026.

During the three months ended September 30, 2026, following the final approval of the settlement by the Court and dismissal of the Class Action, the $0.7 million restricted cash and the related $15.0 million settlement accrual and $14.3 million insurance recovery receivable were derecognized from the condensed consolidated balance sheets.

Derivative Lawsuits

On November 12, 2024, a shareholder derivative lawsuit was filed in the United States District Court for the District of Massachusetts (the “Massachusetts Derivative Action”). The Massachusetts Derivative Action is a consolidation oftwo shareholder derivative lawsuits based on the same allegations in the Class Action, and filed against certain former and current officers and directors, and nominally against the Company. Plaintiff Bonnie Maas, derivatively on behalf of nominal defendant the Company, brought claims for breach of fiduciary duty, violation of federal securities law, unjust enrichment, waste of corporate assets, and gross mismanagement, seeking monetary damages, including restitution and fees, equitable relief, and an order directing the Company to take all necessary actions to reform and improve its corporate governance and internal procedures. The Massachusetts Derivative Action was stayed pending the outcome of the motion to dismiss in the Class Action or a final order dismissing the Class Action with prejudice, and was subsequently dismissed with prejudice as described below.

On March 10, 2025, a shareholder derivative lawsuit was filed in the Delaware Court of Chancery (the “First Delaware Derivative Action”). The First Delaware Derivative Action is based on the same allegations in the Class Action, and was filed against certain former and current officers, and nominally against the Company. Plaintiff Steve Bersch, derivatively on behalf of nominal defendant Evolv, brought claims for breach of fiduciary duty, unjust enrichment, and insider trading, seeking various forms of relief, including equitable relief, monetary damages, including restitution and fees, and a declaratory judgment. On June 30, 2026, the Court granted the parties’ request to continue the stay of the First Delaware Derivative Action while the parties pursued informal resolution.

On October 2, 2025, another shareholder derivative lawsuit was filed in the Delaware Court of Chancery (the “Second Delaware Derivative Action”). The Second Delaware Derivative Action is based on the same allegations in the Class Action, and was filed against certain former and current officers and directors, NHIC directors and officers, and nominally against the Company. Plaintiff Robert Patrick, derivatively on behalf of nominal defendant Evolv, brought claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, seeking various forms of relief, including equitable relief directing reform of corporate governance and internal controls, monetary damages including restitution and other fees, and a declaration that the individual defendants breached or aided and abetted breaches of fiduciary duties. On June 30, 2026, the Court granted the parties’ request to continue the stay of the Second Delaware Derivative Action while the parties pursue informal resolution.

On May 4, 2026, the Company reached an agreement in principle to settle the Massachusetts Derivative Action, the First Delaware Derivative Action, and the Second Delaware Derivative Action (together, the "Derivative Actions"). On August 5, 2026, the parties executed a Stipulation and Agreement of Settlement to fully and finally resolve the Derivative Actions, and the January 6, 2026 stockholder litigation demand (the "Stockholder Demand"). On August 6, 2026, the U.S. District Court for the District of Massachusetts preliminarily approved the parties’ Stipulation and Agreement of Settlement and scheduled a final settlement hearing for October 21, 2026.

Under the Stipulation and Agreement of Settlement, the Company has agreed to implement certain corporate governance reforms within 30 days after the effective date of the settlement and to cause the Company’s directors’ and officers’ liability insurance carriers to pay plaintiffs’ counsel a fee of $1.3 million. The Company does not expect the settlement to have a material adverse effect on its condensed consolidated balance sheet, condensed consolidated statements of operations and comprehensive loss, and condensed consolidated statements of cash flows. During the three months ended March 31, 2026, the Company recognized a settlement accrual of $1.3 million and an estimated insurance recovery of $1.3 million, which remain included in accrued expenses and other current liabilities and prepaid and other current assets, respectively, in the condensed consolidated balance sheets, representing management's best estimate of the outcome as of September 30, 2026.

Following the fairness hearing on October 21, 2026, the Court issued a Final Order and Judgment granting final approval of the proposed settlement, awarding $1.3 million in attorneys' fees and expenses to plaintiffs' counsel in the

Derivative Actions and the Stockholder's counsel in the Stockholder Demand, dismissing the Massachusetts Derivative Action with prejudice, and requiring plaintiffs in the First Delaware Derivative Action and Second Delaware Derivative Action to file paperwork dismissing those actions within seven calendar days. On October 28, 2026, the parties in the First Delaware Derivative Action and Second Delaware Derivative Action filed stipulations to dismiss those two actions, which remain pending for the Court’s approval.

Regulatory and Governmental Matters

As previously disclosed, since February 2024, the Company has been cooperating with the Securities and Exchange Commission's (the "SEC") investigations into issues relating to certain aspects of the Company’s marketing practices and, also since 2024, the events leading to a previously disclosed internal investigation relating to the Company’s sales practices, including whether certain sales of products and subscriptions to channel partners and end users were subject to extra-contractual terms and conditions that impacted revenue recognition and other metrics and if so, when senior Company personnel became aware of these issues, as well as the related restatement of prior period financial statements.

During the quarter ended September 30, 2026, the Company engaged in discussions with the Staff of the SEC regarding a potential resolution of the previously disclosed investigations. The Company has reached a settlement in principle with the Staff of the SEC to resolve the matter, subject to approval by the SEC. Under the terms of the settlement in principle, the Company would, among other things, pay a civil monetary penalty of $3.5 million in connection with alleged violations of the reporting, books and records, and internal accounting controls provisions of the Securities Exchange Act of 1934, as amended, and the rules thereunder arising from the events leading to the investigation. The settlement in principle does not allege any violations related to the Company’s marketing practices.

Although the Company has determined its liability to be probable in connection with this matter, the settlement remains subject to final documentation and approval by the SEC. The Company cannot predict the timing of any final resolution, whether the SEC will approve the settlement, or whether the final terms of any resolution will differ from the terms agreed in principle.

In view of the inherent unpredictability of regulatory and governmental matters, the Company cannot determine with certainty the timing or ultimate resolution of such matters or the eventual loss, fines or penalties, if any, that may result from such matters. The Company establishes reserves for such matters when those matters present loss contingencies that are both probable and can be reasonably estimated. The actual costs of resolving such matters, however, may be substantially higher than the amounts reserved for those matters, and an adverse outcome in certain of these matters could have a material adverse effect on the consolidated financial statements in particular quarterly or annual periods. The Company accrues amounts for certain matters for which losses are considered to be probable of occurring based on its reasonable estimate of the most likely outcome. It is reasonably possible actual losses could be significantly different from the Company's current estimates. In addition, there are some matters for which it is reasonably possible that a loss will occur, however the Company cannot estimate a range of the potential losses for these matters.

Any resolution or litigation with the SEC or other parties could ultimately result in monetary and injunctive relief that may impose costs on the Company and/or require it to make changes to its business practices. These costs and requirements may be material both individually and in the aggregate. During the three months ended June 30, 2026, the Company had accrued $0.1 million as an estimated liability related to the SEC matter, which was recorded in other accrued liabilities in the condensed consolidated balance sheets and the associated expense was recorded in general and administrative expense in the condensed consolidated statements of operations. Under the terms of the settlement in principle, the Company adjusted the liability related to the SEC matter to $3.5 million as of September 30, 2026. The Company will not receive an insurance recovery for any cash settlement in the SEC matter. However, in addition to the expected insurance recovery discussed above related to the Class Action litigation, the Company's defense costs for counsel and consultants in connection with the securities litigation and the related SEC and DOJ matters, including certain expenses that have previously been paid, are also expected to be reimbursed. The Company recognized estimated loss recoveries related to insurance coverage for these matters of $1.6 million and $4.9 million for the three and nine months ended September 30, 2026 and $1.2 million and $6.8 million for the three and nine months ended September 30, 2025, respectively, which were recorded as reductions of general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. These amounts reflect costs that have been confirmed covered by the

Company’s insurance providers, as well as an estimate of other claims the Company has determined are probable of recovery. During the three and nine months ended September 30, 2026, $2.5 million and $5.8 million of these recoveries were paid out by the Company's insurance provider, respectively. $4.7 million and $5.6 million of insurance recoveries were paid out during the three and nine months ended September 30, 2025, respectively. As of September 30, 2026 and December 31, 2025, remaining estimated recoveries of $0.5 million and $1.3 million were included in prepaid and other current assets in the condensed consolidated balance sheets, respectively.

As it relates to these losses for which the Company has determined recovery to be probable, the Company cannot provide any assurance that additional costs related to these matters will not exceed the limits of its insurance policies, that other such claims, for which a loss recovery could not be estimated, are covered by the terms of its insurance policies or that its insurance carrier will be able to cover all related claims. There can be no assurance as to the timing or the terms of the ultimate outcome of these investigations or their potential effect, if any, on us or our results of operations. We expect to incur legal and professional services expenses associated with this litigation in future periods. We will recognize these expenses as services are received, net of estimated recoveries.

Contract manufacturers

The Company generally contracts with its contract manufacturers on a cancellable, purchase-order basis. The Company has a contract in the normal course of business with its contract manufacturers to provide manufacturing services for the Company's equipment sold or leased to customers. While these contracts are cancellable by the Company upon prior notice, payments due upon cancellation consist of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. These payments are not determinable, but could result in a material purchase commitment if the Company were to cancel their open purchase orders.

14. Segment Information

The Company determined that it hasone reportable segment after considering the Company’s organizational structure and the information regularly reviewed and evaluated by the Company’s Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has determined that its CODM is its President and Chief Executive Officer. The CODM evaluates the performance of our segment based upon consolidated net income (loss) and considers budget-to-actual or forecast-to-actual variances to assess performance and make decisions about allocating resources. The CODM evaluates segment assets based on total assets on the consolidated balance sheets. Asset information is not presented here because its presentation here would be duplicative of the consolidated balance sheets. On the basis of these factors, the Company determined that it operates and manages its business asone reportable segment that develops, manufactures, markets and sells security screening products and specific services.

Information by reportable segment is as follows (in thousands):

1 For the nine months ended September 30, 2025, excludes incremental expense related to modified awards included in the Restructuring costs line. See Note 15, Restructuring Charges for additional information.

2 For the three and nine months ended September 30, 2026, primarily includes legal fees incurred in connection with a previously disclosed investigation and restatement of prior period financial statements, net of estimated insurance recoveries, and expenses recognized for estimated legal settlements and ongoing legal and regulatory matters. For the three and nine months ended September 30, 2025, primarily includes consulting and legal fees and additional audit fees incurred in connection with a previously disclosed investigation and restatement of prior period financial statements, net of estimated insurance recoveries.

3 Refer to Total other income (expense), net and provision for income taxes in the condensed consolidated statements of operations and comprehensive loss.

4 Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on previously reported total segment net loss.

15. Restructuring Charges

In January 2025, the Company implemented a Board-approved reduction in force affecting 41 members of its workforce. This action was part of the Company’s initiative to increase its profitability and cash flow as the Company seeks further flexibility to pursue its investment strategy with certain growth opportunities.

The Company incurred charges of $2.7 million for the reduction in force during the three months ended March 31, 2025. These charges consisted of termination charges arising from severance obligations of approximately $2.0 million, extended eligibility for the vesting of certain equity awards originally scheduled to vest on or before March 1, 2025, resulting in incremental non-cash expense of $0.5 million, and other customary employee benefit payments in connection with a reduction in force of $0.2 million. All of these restructuring costs are reported within restructuring costs in our condensed consolidated statements of operations and comprehensive loss.

All actions related to the reduction in force were completed by March 31, 2025, with the exception of certain severance obligations that were payable over various periods through November 2025 under the Company's Severance And Change In Control Plan. All amounts were paid out prior to December 31, 2025.