Momentus (US:MNTS)2025-08-19 21:28General Information & Forward-Looking Statements This section provides company identification details and a cautionary note regarding forward-looking statements and associated risks Company Information Momentus Inc. is a Delaware-incorporated company listed on Nasdaq (MNTS, MNTSW), classified as a non-accelerated filer and smaller reporting company, with 11,634,365 shares of Class A common stock outstanding as of August 15, 2025 Company Details | Detail | Value | | :----- | :---- | | Company Name | Momentus Inc. | | State of Incorporation | Delaware | | Trading Symbols | MNTS (Class A common stock), MNTSW (Warrants) | | Exchange | Nasdaq Stock Market LLC | | Filer Status | Non-accelerated filer, Smaller reporting company | | Class A Common Stock Outstanding (as of Aug 15, 2025) | 11,634,365 shares | Cautionary Note Regarding Forward-Looking Statements This section warns that the Form 10-Q contains forward-looking statements that involve risks and uncertainties, and actual results may differ materially from expectations - Forward-looking statements are subject to risks and uncertainties, including the ability to raise capital, obtain government approvals, successfully develop and operate spacecraft, market satellite buses, protect intellectual property, and navigate regulatory changes789 Part I - Financial Information This part presents the company's condensed consolidated interim financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Condensed Consolidated Interim Financial Statements This section provides the company's condensed consolidated balance sheets, statements of operations, stockholders' deficit, cash flows, and accompanying notes Condensed Consolidated Balance Sheets The company's total assets decreased from $9,952 thousand at December 31, 2024, to $9,192 thousand at June 30, 2025, while total liabilities and stockholders' deficit increased, indicating a worsening financial position Condensed Consolidated Balance Sheet Summary (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total Assets | $9,192 | $9,952 | $(760) | | Total Liabilities | $19,163 | $17,762 | $1,401 | | Total Stockholders' Deficit | $(9,971) | $(7,810) | $(2,161) | Condensed Consolidated Statements of Operations For the six months ended June 30, 2025, Momentus Inc. reported a net loss of $12,622 thousand, an improvement from $15,329 thousand in the prior year period, with service revenue significantly decreasing by 70% and operating expenses seeing a 26% reduction Condensed Consolidated Statements of Operations Summary (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | :------- | | Service Revenue | $513 | $1,722 | $(1,209) | (70%) | | Gross Profit | $511 | $1,722 | $(1,211) | (70%) | | Total Operating Expenses | $12,640 | $17,013 | $(4,373) | (26%) | | Loss from Operations | $(12,129) | $(15,291) | $3,162 | (21%) | | Net Loss | $(12,622) | $(15,329) | $2,707 | (18%) | | Net Loss per Share (basic & diluted) | $(2.81) | $(14.72) | $11.91 | (81%) | Condensed Consolidated Statements of Stockholders' Deficit The total stockholders' deficit increased from $7,810 thousand at December 31, 2024, to $9,971 thousand at June 30, 2025, primarily due to net losses partially offset by increases in additional paid-in capital from equity issuances Condensed Consolidated Statements of Stockholders' Deficit Summary (in thousands) | Metric (in thousands) | December 31, 2024 | June 30, 2025 | Change | | :-------------------- | :---------------- | :------------ | :----- | | Additional Paid-in Capital | $400,183 | $410,644 | $10,461 | | Accumulated Deficit | $(407,993) | $(420,615) | $(12,622) | | Total Stockholders' Deficit | $(7,810) | $(9,971) | $(2,161) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company used $7,422 thousand in operating activities, had no investing activities, and generated $5,982 thousand from financing activities, resulting in a net decrease in cash and cash equivalents of $1,440 thousand Condensed Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash used in operating activities | $(7,422) | $(6,374) | $(1,048) | | Net cash used in investing activities | $0 | $(40) | $40 | | Net cash provided by financing activities | $5,982 | $5,199 | $783 | | Decrease in cash and cash equivalents | $(1,440) | $(1,215) | $(225) | | Cash and cash equivalents, end of period | $132 | $1,277 | $(1,145) | Notes to the Condensed Consolidated Interim Financial Statements This section provides detailed disclosures and explanations for the figures presented in the condensed consolidated interim financial statements Note 1. Nature of Operations Momentus Inc. is a commercial space company offering satellites, satellite buses, and in-space infrastructure services, utilizing its water plasma-based propulsion system, but its financial position raises substantial doubt about its ability to continue as a going concern - Momentus Inc. is a U.S. commercial space company providing satellites, satellite buses, and in-space infrastructure services, including transportation and hosted payloads, powered by its water plasma-based propulsion system22 - The company has launched four missions, deployed 17 customer satellites, and successfully demonstrated its Vigoride Orbital Service Vehicle (OSV) in space, accumulating significant flight heritage, and also offers the M-1000 satellite bus2324282 - The company's financial position raises substantial doubt about its ability to continue as a going concern, evidenced by a $12.6 million net loss for the six months ended June 30, 2025, an accumulated deficit of $420.6 million, and $7.4 million net cash used in operating activities, requiring additional capital to fund operations272830 - A 1-for-14 reverse stock split of Class A common stock was effective December 12, 2024, retroactively adjusted for all periods presented3336153 Note 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies, including interim financial statement preparation, consolidation, estimates, and specific policies for various financial statement components, along with recently issued and adopted accounting standards - Revenue is recognized for 'last-mile' satellite and cargo delivery upon payload delivery, and for in-orbit services ratably over time, while engineering services for U.S. Government organizations are recognized upon milestone achievement525356 - The company uses a three-tiered fair value hierarchy (Level 1, 2, 3) for financial instruments, with warrants and convertible notes classified within Level 3, fair values determined using models like Black-Scholes or convertible bond pricing, relying on unobservable inputs such as expected stock price volatility585960 - Recently adopted accounting standards include ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-02 (Codification updates), none of which had a material impact on the interim financial statements101102103 Note 3. Prepaids and Other Current Assets As of June 30, 2025, total prepaids and other current assets were $3,832 thousand, primarily consisting of current prepaid launch costs and prepaid insurance Prepaids and Other Current Assets (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Prepaid launch costs, current | $2,450 | $0 | | Prepaid insurance and other assets | $1,382 | $1,667 | | Total | $3,832 | $1,667 | - Non-current portion of prepaid launch costs was approximately $1.3 million as of June 30, 2025, down from $2.6 million in 2024104 Note 4. Property, Machinery and Equipment Net property, machinery, and equipment decreased to $1,561 thousand as of June 30, 2025, primarily due to accumulated depreciation, with depreciation expense for the six months ended June 30, 2025, being $0.6 million Property, Machinery and Equipment, Net (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Property, machinery and equipment, net | $1,561 | $2,182 | - Depreciation expense was $0.6 million for the six months ended June 30, 2025, compared to $0.4 million for the same period in 2024105 Note 5. Intangible Assets Net intangible assets, primarily patents, were $227 thousand as of June 30, 2025, with a weighted-average remaining amortization period of 4.8 years and amortization expense of $0.03 million for the six months ended June 30, 2025 Intangible Assets, Net Value (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Patents/Intellectual Property, Net Value | $227 | $253 | - The weighted-average remaining amortization period for intangible assets was 4.8 years as of June 30, 2025106 - Future estimated amortization expense for intangible assets is $26 thousand for the remainder of 2025, $52 thousand for 2026, and $52 thousand for 2027107 Note 6. Leases The company's office lease was remeasured due to an event of default and early termination, now expiring March 31, 2026, with total lease expense of $871 thousand for the six months ended June 30, 2025 - The office lease was remeasured due to an event of default and early termination by the landlord, with a new expiration date of March 31, 2026109 Total Lease Expense (in thousands) | (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Total Lease Expense | $871 | $1,072 | - As of June 30, 2025, the weighted-average remaining lease term was 0.8 years, and the present value of lease liabilities was $716 thousand110 Note 7. Accrued Liabilities Total accrued liabilities increased to $3,385 thousand as of June 30, 2025, primarily driven by higher compensation expense and other accrued liabilities, partially offset by a decrease in legal and other professional services Accrued Liabilities (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :------------- | :------------ | :---------------- | :----- | | Legal and other professional services | $1,363 | $1,906 | $(543) | | Compensation expense | $618 | $84 | $534 | | Research and development projects | $94 | $75 | $19 | | Other accrued liabilities | $1,310 | $941 | $369 | | Total | $3,385 | $3,006 | $379 | Note 8. Loan Payable The company has various loan agreements, including the May 2025 Loan, the AGP Convertible Promissory Note, and SIV Convertible Promissory Notes, which involve convertible features, warrants, and recognized gains/losses on debt extinguishment and fair value changes - The May 2025 Loan, allowing borrowing up to $1.5 million, was drawn for $0.75 million and subsequently extinguished on July 1, 2025, with an anticipated loss on extinguishment112117265 - The AGP Convertible Promissory Note, initially for $1.2 million for services, was amended to reduce its principal to $0.5 million and is classified as a liability measured at fair value118119121 - The July and October SIV Convertible Notes, totaling $5.3 million, have undergone multiple amendments and partial conversions into Class A common stock, resulting in recognized gains and losses on debt extinguishment128132140 Note 9. Stockholders' Equity (Deficit) The company's Class A common stock underwent a 1-for-14 reverse stock split in December 2024, following a 1-for-50 split in August 2023, with significant equity transactions including a Master Services Agreement with Velo3D, Inc. and various public offerings and warrant inducement agreements - The company implemented a 1-for-14 reverse stock split on December 12, 2024, and a prior 1-for-50 reverse stock split on August 22, 2023, affecting Class A common stock and related securities153154159 - In April 2025, the company entered a Master Services Agreement with Velo3D, Inc., issuing 477,455 Class A common shares and 673,408 Series A preferred shares with a grant-date fair value of $10.7 million, to be recognized over a five-year vesting period161162 Equity Offerings and Warrant Inducements (in thousands, except share data) | Offering/Agreement | Date | Gross Proceeds (in thousands) | Net Proceeds (in thousands) | Shares Issued (Class A) | Warrants Issued | | :----------------- | :--- | :---------------------------- | :-------------------------- | :---------------------- | :-------------- | | February 2025 Public Offering | Feb 2025 | $5,000 | $4,400 | 300,000 | 1,273,886 | | March 2025 Warrant Inducement | Mar 2025 | $2,100 | $1,900 | 1,071,429 | 2,142,858 | | December 2024 Offering | Dec 2024 | $5,000 | $4,400 | 230,000 | 800,000 | | September 2024 Offering | Sep 2024 | $2,800 | $2,400 | 357,143 (pre-funded) | 1,071,429 | | March 2024 Offering | Mar 2024 | $4,000 | $3,500 | 94,286 | 330,306 | | January 2024 Offering | Jan 2024 | $4,000 | $3,600 | 64,286 | 263,358 | Note 10. Stock-based Compensation The company operates under the 2021 Equity Incentive Plan and the 2022 Inducement Equity Plan, with 30,000 options and 715,280 RSUs granted for the six months ended June 30, 2025, resulting in total stock-based compensation expense of $2,024 thousand - The company's primary equity compensation plans are the 2021 Equity Incentive Plan and the 2022 Inducement Equity Plan, with the 2021 Employee Stock Purchase Plan (ESPP) currently suspended207210211 Options Activity (in thousands, except share-based data) | Options Activity (in thousands, except share-based data) | As of Dec 31, 2024 | Granted | Forfeitures | As of June 30, 2025 | | :----------------------------------------------------- | :----------------- | :------ | :---------- | :------------------ | | Total Options | 1,386 | 30,000 | (62) | 31,324 | | Weighted-Average Exercise Price Per Share | $1,139.61 | $1.78 | $1,115.64 | $49.99 | RSU & RSA Activity (shares) | RSU & RSA Activity (shares) | As of Dec 31, 2024 | Granted | Vested | Forfeited | As of June 30, 2025 | | :-------------------------- | :----------------- | :------ | :----- | :-------- | :------------------ | | Shares | 5,924 | 715,280 | (2,234) | (732) | 718,238 | Stock-based Compensation (in thousands) | Stock-based Compensation (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Research and development expenses | $348 | $224 | | Selling, general and administrative expenses | $1,676 | $2,954 | | Total | $2,024 | $3,178 | Note 11. Earnings Per Share Due to net losses for the three and six months ended June 30, 2025 and 2024, all potential common shares were considered anti-dilutive and excluded from diluted loss per share calculations - Due to net losses, all potential common shares (preferred stock, options, RSUs, warrants, convertible notes, Sponsor Earnout Shares) were considered anti-dilutive and excluded from diluted EPS calculations for the periods presented219 Anti-Dilutive Potential Common Shares | Anti-Dilutive Potential Common Shares | June 30, 2025 (3 Months) | June 30, 2024 (3 Months) | June 30, 2025 (6 Months) | June 30, 2024 (6 Months) | | :------------------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Preferred shares outstanding | 6,734,080 | 0 | 6,734,080 | 0 | | Options and unvested stock units outstanding | 749,562 | 19,753 | 749,562 | 19,753 | | Warrants outstanding | 4,076,371 | 1,036,983 | 4,076,371 | 1,036,983 | | Convertible promissory notes | 1,580,647 | 0 | 1,580,647 | 0 | | Unvested shares related to VLD MSA | 477,455 | 0 | 477,455 | 0 | | Contingent Sponsor Earnout Shares | 2,054 | 2,054 | 2,054 | 2,054 | | Total | 13,620,169 | 1,058,790 | 13,620,169 | 1,058,790 | Note 12. Commitments and Contingencies The company has future unconditional purchase obligations of $180 thousand for the remainder of 2025 and is involved in several legal proceedings, including settled Securities Class Actions and Shareholder Derivative Litigation, and ongoing SAFE Note and Founder Litigation - Future unconditional purchase obligations total $180 thousand for the remainder of 2025222 - Securities Class Actions were settled for $8.5 million, with $4.0 million funded by insurance, and the settlement was finally approved by the court in April 2024224225226 - Shareholder Derivative Litigation was settled in September 2024, requiring corporate governance reforms and attorney's fees covered by the company's insurance policy232233234 - Founder Litigation regarding indemnification claims by former co-founders Mikhail Kokorich and Lev Khasis has seen Kokorich's appeal dismissed and Khasis's complaint voluntarily dismissed239242 Note 13. Income Taxes The company's effective tax rate for the three and six months ended June 30, 2025 and 2024, was zero percent, primarily due to non-deductible items, state/local taxes, absence of current income tax, and a full valuation allowance for deferred tax assets - The effective tax rate was zero percent for the three and six months ended June 30, 2025 and 2024, primarily due to non-deductible items, state/local taxes, absence of current income tax, and a full valuation allowance for deferred tax assets253 Note 14. Related Party Transactions On June 21, 2024, the company issued $0.5 million in promissory notes to participating directors and an officer, which were fully repaid by September 12, 2024 - The company issued $0.5 million in promissory notes to directors and an officer on June 21, 2024, which were fully repaid by September 12, 2024254 Note 15. Segment Information The company operates as a single operating segment, with its CEO as the chief operating decision maker, and all long-lived tangible assets and operating right-of-use assets are located in the United States - The company operates as a single operating and reportable segment, with the CEO as CODM, evaluating performance based on consolidated net loss and net cash used in operations9495255 - All long-lived tangible assets and operating right-of-use assets are located in the United States, and no revenue was derived from foreign customers for the periods presented95257 Note 16. Supplemental Disclosures for Condensed Consolidated Statements of Cash Flows Supplemental disclosures include non-cash investing and financing activities such as the issuance of common stock in settlement of accounts payable ($338 thousand) and deferred issuance costs related to warrant modifications ($400 thousand) for the six months ended June 30, 2025 Non-Cash Activities (in thousands) | Non-Cash Activities (in thousands) | 6 Months Ended June 30, 2025 | | :--------------------------------- | :----------------------------- | | Issuance of common stock in settlement of accounts payable | $338 | | Deferred issuance costs related to warrant modifications | $400 | | Issuance of common stock upon partial conversion of convertible note | $862 | - Cash paid for interest was $58 thousand for the six months ended June 30, 2025, compared to $12 thousand for the same period in 2024258 Note 17. Subsequent Events Subsequent events include a July 2025 Public Offering generating $3.6 million net proceeds, the extinguishment of the May 2025 Loan, a waiver of certain MSA provisions with Velo3D, Inc., and an August 2025 Warrant Inducement Agreement generating $2.7 million gross proceeds, with the impact of the One Big Beautiful Bill Act being evaluated - A July 2025 Public Offering closed on July 1, 2025, generating approximately $3.6 million in net proceeds from the issuance of Class A common stock and warrants259260261 - The May 2025 Loan was prepaid and extinguished on July 1, 2025, with an anticipated loss on extinguishment in Q3 2025265 - An August 2025 Warrant Inducement Agreement on August 13, 2025, resulted in the exercise of existing warrants for $2.7 million gross proceeds and the issuance of new inducement warrants267268269 - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, amends U.S. tax law, and the company is evaluating its impact on financial statements271 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, changes in financial position, and results of operations Overview Momentus Inc. is a commercial space company focused on providing satellites, satellite buses, and in-space infrastructure services, leveraging its water plasma propulsion technology and successfully demonstrated Vigoride OSV, while anticipating significant growth in space transportation - Momentus offers satellites, satellite buses, satellite technologies, and space infrastructure services, including "last-mile" transportation, hosted payloads, and in-orbit services, for commercial and U.S. government missions274275276 - The company's services are enabled by its innovative, space-proven water plasma-based propulsion system and its Vigoride Orbital Service Vehicle (OSV), which has accumulated significant flight heritage across three missions277282 - Momentus also offers the M-1000 satellite bus, which has substantial commonality with Vigoride, to meet growing demand in the satellite bus market24281 Components of Results of Operations This section defines the key components of the company's results of operations, including revenue recognition, cost of revenue, research and development, selling, general and administrative expenses, and other income/expense items - Service revenue is recognized for 'last-mile' satellite delivery upon payload release, for in-orbit services ratably over time, and for engineering services upon milestone achievement283287340 - Research and development expenses cover activities for developing satellites, satellite technologies, and Orbital Service Vehicles, including equipment, labor, and launch costs for Vigoride testing, with all R&D costs expensed as incurred289290 - Selling, general and administrative expenses include human capital, facilities, professional fees, and costs associated with operating as a public company291292 Results of Operations This section provides a comparative analysis of the company's financial performance for the three and six months ended June 30, 2025 and 2024 Comparison of Financial Results for the Three Months Ended June 30, 2025 and 2024 For the three months ended June 30, 2025, net loss decreased by 8% to $6,450 thousand, despite an 84% decline in service revenue, due to a 25% reduction in operating expenses Financial Results Comparison (3 Months Ended June 30, in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | $ Change | % Change | | :-------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Service Revenue | $191 | $1,209 | $(1,018) | (84%) | | Gross Profit | $189 | $1,209 | $(1,020) | (84%) | | Research and development expenses | $2,193 | $2,850 | $(657) | (23%) | | Selling, general and administrative expenses | $3,940 | $5,323 | $(1,383) | (26%) | | Total Operating Expenses | $6,133 | $8,173 | $(2,040) | (25%) | | Loss from Operations | $(5,944) | $(6,964) | $1,020 | (15%) | | Net Loss | $(6,450) | $(7,016) | $566 | (8%) | - Other income (expense), net, decreased by $454 thousand, primarily due to an $835 thousand change in fair value of convertible debt, partially offset by a $406 thousand increase in other income from an employee retention credit302308309 Comparison of Financial Results for the Six Months Ended June 30, 2025 and 2024 For the six months ended June 30, 2025, net loss decreased by 18% to $12,622 thousand, driven by a 26% reduction in operating expenses, despite a 70% decrease in service revenue Financial Results Comparison (6 Months Ended June 30, in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | $ Change | % Change | | :-------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Service Revenue | $513 | $1,722 | $(1,209) | (70%) | | Gross Profit | $511 | $1,722 | $(1,211) | (70%) | | Research and development expenses | $4,108 | $5,526 | $(1,418) | (26%) | | Selling, general and administrative expenses | $8,532 | $11,487 | $(2,955) | (26%) | | Total Operating Expenses | $12,640 | $17,013 | $(4,373) | (26%) | | Loss from Operations | $(12,129) | $(15,291) | $3,162 | (21%) | | Net Loss | $(12,622) | $(15,329) | $2,707 | (18%) | - The decrease in R&D expenses was primarily due to a $1.0 million reduction in payroll costs, $0.2 million in subcontractor costs, and $0.2 million in other R&D expenses313 - The decrease in SG&A expenses was mainly due to a $2.0 million decrease in payroll-related expenses (including $1.3 million in non-cash stock-based compensation) and a $0.9 million decrease in legal expenses314 - Other income (expense), net, worsened by $455 thousand, primarily due to an $835 thousand change in fair value of convertible debt, partially offset by a $148 thousand increase in other income from an employee retention credit310320321 Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations, including its going concern status and cash flow activities Going Concern The company's ability to continue as a going concern is in substantial doubt due to recurring net losses, a significant accumulated deficit, and substantial cash used in operating activities, necessitating additional capital - The company's ability to continue as a going concern is in substantial doubt, reflected by a $12.6 million net loss for the six months ended June 30, 2025, an accumulated deficit of $420.6 million, and $7.4 million net cash used in operating activities322323 - Current cash and cash equivalents of $0.1 million are insufficient to fund operations, requiring substantial additional capital through equity or debt financings, which may not be available on needed timing or favorable terms323324 Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $7.4 million, investing activities were zero, and net cash provided by financing activities was $6.0 million, mainly from equity offerings Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(7,422) | $(6,374) | | Net cash used in investing activities | $0 | $(40) | | Net cash provided by financing activities | $5,982 | $5,199 | - Operating cash outflows for H1 2025 were driven by $3.3 million in payroll, $3.5 million in professional fees (including $0.9 million legal), $2.4 million in office overheads, and $0.8 million in R&D activity expenses328 - Financing cash inflows for H1 2025 included $5.0 million from the February Offering and $2.1 million from the March 2025 Warrant Inducement, offset by $0.7 million in convertible note repayments and $1.1 million in issuance costs332 Funding Requirements The company anticipates continued cash consumption for ongoing operations and will require additional equity or debt financing, which may not be available on acceptable terms - The company anticipates continued cash consumption for ongoing operations, including corporate infrastructure, sales, R&D, regulatory approvals, workforce management, IP protection, public company compliance, and litigation defense334339 - Additional equity or debt financing is required, and the company faces the risk that such financing may not be available on acceptable terms or at all, which could adversely affect its business334 Commitments and Contingencies The company has non-cancellable operating leases for facilities and purchase obligations in the normal course of business, with further details provided in Note 12 - The company has non-cancellable operating leases for facilities and purchase obligations in the normal course of business, with further details in Note 12335336 Off-Balance Sheet Arrangements The company does not engage in any off-balance sheet activities or have arrangements with unconsolidated entities - The company does not engage in any off-balance sheet activities or have arrangements with unconsolidated entities337 Critical Accounting Policies and Estimates The company's critical accounting policies and estimates, requiring significant management judgment, include revenue recognition, loss contingencies, deferred fulfillment and prepaid launch costs, contract liabilities, stock-based compensation, and income taxes, as detailed in Note 2 - Critical accounting policies requiring significant management judgment include revenue recognition, loss contingencies, deferred fulfillment and prepaid launch costs, contract liabilities, stock-based compensation, and income taxes338340346 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks, primarily interest rate risk, but an immediate 10% change in interest rates would not materially affect the fair value of its cash and cash equivalents, and foreign currency risk is immaterial - An immediate 10% change in interest rates would not materially affect the fair value of cash and cash equivalents due to their short-term maturities and low-risk profile360 - Foreign currency risk is immaterial as a significant portion of cash receipts and expenses are generated in U.S. dollars361 Item 4. Controls and Procedures The CEO and CFO concluded that the company's disclosure controls were not effective as of June 30, 2025, due to a material weakness related to misclassification errors, for which management is implementing a remediation plan - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting364 - The material weakness involved misclassification errors, including $0.2 million of other income as revenue, $0.1 million in legal expenses as operating costs instead of a reduction to additional paid-in capital, $1.7 million in prepaid R&D expense, and $0.3 million of accounts payable as accrued liabilities366371 - Management is implementing a remediation plan, including revised control processes and engaging outside consultants, with progress regularly reviewed by management and the Disclosure and Audit Committees368 Part II - Other Information This part includes disclosures on legal proceedings, risk factors, unregistered sales of equity, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings This section refers to Note 12 for detailed disclosures regarding the company's legal proceedings - For disclosures related to legal proceedings, refer to Note 12 in the notes to the condensed consolidated interim financial statements372 Item 1A. Risk Factors This section directs readers to the "Risk Factors" discussed in the company's most recent Annual Report on Form 10-K for a comprehensive understanding of potential risks - For a comprehensive discussion of risk factors, refer to "Risk Factors" in the company's most recent Annual Report on Form 10-K filed on April 1, 2025, as amended on April 9, 2025373 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On May 13, 2025, the company issued 26,946 shares of Class A common stock to a vendor to settle $45,000 in outstanding debts, exempt from registration under Section 4(a)(2) of the Securities Act - On May 13, 2025, the company issued 26,946 shares of Class A common stock to a vendor to settle $45,000 in outstanding debts, exempt from registration under Section 4(a)(2) of the Securities Act374375 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities376 Item 4. Mine Safety Disclosures The company reported no mine safety disclosures - There were no mine safety disclosures377 Item 5. Other Information The company irrevocably waived its right to cancel shares held by Velo3D, Inc. under the MSA on August 14, 2025, and estimates its stockholders' equity to exceed $2.5 million as of that date, also detailing the May 2025 Convertible Note and debt settlements - On August 14, 2025, the company irrevocably waived its right under the Master Services Agreement (MSA) with Velo3D, Inc. to cancel shares of its capital stock held by VLD upon expiration or termination266378 - After accounting for the MSA waiver and proceeds from the July 2025 Offering and August 2025 Warrant Inducement, the company's stockholders' equity is estimated to exceed $2.5 million as of August 14, 2025379 - The May 2025 Convertible Note with A.G.P./Alliance Global Partners, initially for $1.2 million, was amended to a reduced principal of $0.5 million, bearing 4.5% interest and maturing November 13, 2026, with conversion options into Class A common stock at $1.67 per share380381385 - Between April 21, 2025, and May 13, 2025, the company issued 191,339 shares of Class A common stock to four vendors and one customer to settle $337,942 in outstanding debts, exempt from registration under Section 4(a)(2) of the Securities Act386387 Item 6. Exhibits This section provides a list of exhibits filed as part of the Form 10-Q, including certificates, warrants, agreements, and certifications - The report includes a list of exhibits such as certificates of designations, forms of warrants, amendments to agreements, and certifications required by the Securities Act of 1934389 Signatures The report is signed by John Rood, Chief Executive Officer, and Lon Ensler, Chief Financial Officer, on August 19, 2025 - The report is signed by John Rood, Chief Executive Officer, and Lon Ensler, Chief Financial Officer, on August 19, 2025393