Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report" elsewhere in this Quarterly Report. Accordingly, you should review the disclosure under the heading "Risk Factors" in this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless otherwise indicated or the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" section to "we," "us," "our," the "Company," and "Deep Fission" refer to Deep Fission, Inc. and its consolidated subsidiaries.

Overview

Deep Fission's pioneering design combines proven PWR technology with novel emplacement - 1-mile below the Earth's surface. Our reactor, the "Deep Fission Reactor" uses the Earth's deep subsurface as a natural containment system-eliminating the need for expensive surface shielding. The natural pressure from the column of water above the reactor provides the pressure required, reducing the need for complex and expensive pressure systems. The borehole water can also serve as a source of cooling for the reactor. These features of the Deep Fission Reactor significantly reduce plant costs compared to other PWR designs. Unlike traditional builds that require massive amounts of concrete and steel, Deep Fission Reactors leverage natural gravity and geology to provide containment and safety.

The Deep Fission Reactor system is designed to scale modularly: individual units produce 15 MWe, and by clustering boreholes, we can deliver power installations of 1.5 GW or more for hyperscale data centers and other customers. This makes the platform uniquely suited to meet the explosive demand for power from AI workloads, energy-intense manufacturing, and energy-constrained regions. With site flexibility and no above-ground reactor visibility, Deep Fission Reactors overcome many of the siting and public acceptance challenges facing traditional nuclear power solutions. This innovation is expected to enable grid-scale nuclear deployments in just six months, turning what was once a multi-year construction process into a repeatable infrastructure product.

The Merger

On September 5, 2025 (the "Closing Date"), Surfside, Acquisition Sub and Legacy Deep Fission entered into the Merger Agreement. Pursuant to the terms of the Merger Agreement, on the Closing Date, Acquisition Sub merged with and into Legacy Deep Fission, with Legacy Deep Fission continuing as the surviving corporation. As a result of the Merger, Legacy Deep Fission became our wholly owned subsidiary and will continue its existing business operations. Additionally, we changed our name to Deep Fission, Inc. and will continue to be a public reporting company.

As a result of the Merger, each of 2,224,930 shares of capital stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 38,538,922 shares of common stock (the "Common Share Conversion Ratio"). We also reserved a total of 9,500,882 shares of our common stock under the 2025 EIP for future issuances of equity awards at the discretion of our Board to officers, employees, consultants and directors and reserved 1,000,000 shares of our common stock under the 2025 ESPP for future purchase by employees. Upon consummation of the Merger, Surfside's existing stockholders continued to hold an aggregate of 2,166,667 Retained Pre-Merger Shares, and on the Closing Date we also issued 85,000 Advisor Shares to an accredited investor in consideration for services rendered in connection with the Merger.

The Private Placement

Concurrently with the consummation of the Merger, the Company also issued and sold 10,000,000 shares of our common stock in a private placement to certain accredited and institutional investors at a purchase price of $3.00 per share.

Accounting Considerations

The historical financial statements and related footnotes included in this Quarterly Report for Deep Fission, Inc. include descriptions of Legacy Deep Fission's previously outstanding common stock; however, in connection with the Merger, all shares of Legacy Deep Fission common stock were converted into shares of our common stock, which is to retroactively adjust the Legacy Deep Fission's (accounting acquirer) legal capital to reflect the legal capital of the Legacy Surfside (accounting acquiree). See "The Merger " and "The Private Placement" above for detailed information regarding the Transactions and the related conversion of the shares of Legacy Deep Fission's common stock.

For financial reporting purposes, the Merger was treated as a recapitalization and reverse acquisition. Legacy Deep Fission is considered the acquirer for accounting purposes, meaning that the historical financial results of Legacy Deep Fission prior to the Merger are considered our historical financial results under applicable accounting principles. Thus, a discussion of the past financial results of Surfside is not pertinent.

Background

We were established to provide a first-of-its-kind solution of developing a Deep Fission Reactor placed one mile underground to deliver clean, secure, and low-cost electricity. We are focused on developing, demonstrating and deploying our Deep Fission Reactor technology and have made progress in achieving milestones toward eventual commercialization of our Deep Fission Reactor, the most significant of which was selection by the DOE in August 2025 for participation in the nuclear Reactor Pilot Program. That pilot program anticipates deployment of our first test Deep Fission Reactor by July 2026.

To date our activities have consisted of developing our Deep Fission Reactor technology. We have also established a network of strategic supply chain partnerships to support the development and commercialization of Deep Fission's advanced nuclear technologies. In addition, we have engaged in discussions with hyper-scalers, large data center operators, industrial sites, and utilities - and have signed multiple letters of intent relating to potential commercial agreements and strategic partnerships. We have not yet entered into a binding agreement with any customer, and there is no guarantee that we will be able to do so in the future.

Our activities are subject to significant risks and uncertainties, including the possibility that we may be unable to secure sufficient funding to sustain operations until our SDA applications are approved by the NRC, commercialization is achieved, and customers are secured.

Our leadership team has a combined 100+ years of direct experience with nuclear solutions and engineering, government and community engagement and global strategy development. Our advisory board includes preeminent experts and Nobel laureates in nuclear science, technology and policy, as well as business leaders and entrepreneurs. We believe that the depth of our expertise and our technology solutions uniquely position us to deliver a safer, faster and low-cost alternative to convention nuclear energy.

Our Intended Business

Our growth strategy in the near term focuses on being a technology provider and strategic partner, enabling our customers and development partners to lead project financing, permitting, and construction. This approach allows us to scale quickly without tying up significant capital in project ownership.

We intend to generate upfront and one-time revenue from:

We intend to generate recurring and long-term revenue from:

This blended model captures both upfront value and predictable, long-term revenue streams, while leaving capital-intensive project ownership and financing to our partners.

Components of Our Results of Operations

Operating Expenses

General and administrative expenses primarily consist of costs associated with administrative staff salaries, facilities, utilities, insurance, marketing and advertising, stock-based compensation, legal fees and other office expenses related to our business functions.

Research and development ("R&D") expenses primarily represent costs incurred to develop our technology. These costs consist of personnel costs, including salaries, employee benefit costs, bonuses and stock-based compensation expenses, software costs, computing costs, hardware and experimental supplies, and expenses for outside engineering contractors for analytical work and consulting costs. We expense all R&D costs in the periods in which they are incurred.

Other Non-Operating Income (Expense)

Other non-operating income (expense) consists primarily of change in fair value of SAFE Notes, interest income, interest expenses, and other miscellaneous expenses.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

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Operating Expenses

General and administrative expenses increased by $6.2 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase in general and administrative expenses was primarily attributable to an increase in the number of employees, which resulted in increase in salary and stock-based compensation expense, as well as increased legal, benefits, and marketing costs.

Research and development expenses increased by $1.9 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase in research and development expenses was primarily attributable to the increase in salary and benefits corresponding with our increase in headcount, as well as increased consulting fees paid to our advisors.

Other Non-Operating Income (Expense)

Other non-operating income (expense) increased by $30.3 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, largely due to the increase in the fair value of SAFE Notes, which converted into common stock as a result of the Merger.

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Comparison of the Nine Months Ended September 30, 2025 and 2024

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Operating Expenses

General and administrative expenses increased by $8.2 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase in general and administrative expenses was primarily attributable to an increase in the number of employees, which resulted in increase in salary and stock-based compensation expense, as well as increased legal, benefits, and marketing costs.

Research and development expenses increased by $2.5 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase in research and development expenses was primarily attributable to the increase in salary and benefits corresponding with our increase in headcount, as well as increased consulting fees paid to our advisors.

Other Non-Operating Income (Expense)

Other non-operating income (expense) increased by $32.7 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, largely due to the increase in the fair value of SAFE Notes, which converted into common stock as a result of the Merger.

Liquidity and Capital Resources

Sources of Liquidity

Since inception, we have financed our operations primarily through the issuance and sale of our debt and equity securities. Our primary requirements for liquidity and capital are to finance working capital and capital expenditures associated with operating and managing the company, as well as for general corporate purposes. As of September 30, 2025, our principal source of liquidity was our cash balance of $30.2 million, and we anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments. Since our inception, we have generated significant operating losses as reflected in our accumulated deficit of $56.2 million as of September 30, 2025. We also generated a positive cash flow of $23.5 million for the nine months ended September 30, 2025 as a result of raising capital from the private placement.

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Cash Flows

The following table shows a summary of our cash flows for the periods indicated:

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Operating Activities

Net cash used in operating activities increased by $5.1 million, to $6.5 million for the nine months ended September 30, 2025 compared to the net cash used in operating activities of $1.4 million for the nine months ended September 30, 2024. The increase in net cash used in operating activities was primarily attributable to increased net losses, changes in working capital, including accounts payable, and other current liabilities.

Investing Activities

Net cash used in investing activities increased by $26 thousand, to $29 thousand for the nine months ended September 30, 2025 compared to net cash provided by investing activities of $3 thousand for the nine months ended September 30, 2024. The increase was driven by additions by the Company to property and equipment.

Financing Activities

Net cash provided by financing activities increased by $25.6 million, to $30.0 million for the nine months ended September 30, 2025 compared to the net cash provided by financing activities of $4.5 million for the nine months ended September 30, 2024. The increase in net cash provided by financing activities was primarily attributable to the private placement of $30.0 million and additional issuances of SAFE Notes.

Contractual Obligations and Commitments

As of September 30, 2025 and December 31, 2024, we did not have any material contractual obligations or commitments.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 to our audited financial statements included in Form 8-K filed with the SEC on September 11, 2025, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

SAFE Notes

The Company has issued SAFE Notes in exchange for cash financing. The Company has accounted for its SAFE Notes as derivatives under the FASB ASC 815-40 and ASC 815-10 and presented them as long-term liabilities in the accompanying condensed consolidated balance sheets. If any changes in the fair value of the SAFEs occur, the Company will record such changes through earnings.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. We measure all stock-based awards granted to employees, directors and non-employee consultants based on the fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. We have historically been a private company and lacks company-specific historical information for its stock. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The assumptions used in calculating the fair value of stock-based awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expenses could be materially different for future awards.

Recent Accounting Pronouncements

A discussion of recently issued accounting pronouncements and recently adopted accounting pronouncements is included in Note 2 to our financial statements under the heading "Summary of Significant Accounting Policies."

Emerging Growth Company Status

In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act"), for complying with new or revised accounting standards. Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

We may take advantage of these exemptions until such time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (2) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission ( "SEC"). We may choose to take advantage of some but not all of these exemptions.

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