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

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on May 14, 2025. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below as well as those discussed elsewhere in this Quarterly Report on Form 10-Q (including under "Risk Factors") and in our Annual Report on Form 10-K filed with the SEC on May 14, 2025. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and we caution investors against unduly relying upon these statements. In all events, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, change in circumstances, future events or otherwise, and you are advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.

Overview

Our mission is to develop and deploy security screening systems that protect travelers and other members of the public from criminals, terrorists and other bad actors. We have developed a proprietary fixed-gantry Computed Tomography ("CT") scanning system that detects explosives, weapons, narcotics and other contraband.

Our initial market focus is domestic and international aviation checkpoints. However, we believe a significant global market opportunity also exists for deploying our scanners in (i) other government facilities such as border crossings, seaports, military bases, embassies, federal buildings, prisons and postal facilities and (ii) the private sector at manufacturing plants, entertainment facilities, power plants, petrochemical facilities, convention centers, schools, sports stadiums and other highly-trafficked public buildings or venues.

Our SENTINEL fixed-gantry scanner has already achieved several third-party certifications, including the TSA's Tier 2 Explosive Detection Certification. Certification to the TSA's Accessible Property Screening System 6.2.0 Explosive Detection Standard and to the European Civil Aviation Conference Explosive Detection System for Cabin Baggage Certification are in advanced stages.

We believe that our scanner systems and fixed-gantry CT technology have advantages and improved threat detection capacity as compared to traditional rotating-gantry systems.

Our SENTINEL scanners are designed to be deployed at security checkpoints. They can be quickly installed and easily maintained without major infrastructure modifications to existing checkpoints.

Most CT security scanners on the market are based on rotating-gantry technology, which was first developed in the 1970s for use in medical imaging. Rotating gantry involves a single X-ray tube and detectors opposite this tube. These revolve around the object being scanned, generating images which are reconstructed to produce a three-dimensional image.

SENTINEL Scanner Description

SENTINEL's fix-gantry CT architecture incorporates four discrete pairs of fixed multi-energy X-ray generators and detector arrays. Each generator/ detector pair is optimally configured to provide non- traditional planar slices significantly expanding the robustness, reliability and repeatability of image data reconstruction and improving the system's ability to discriminate/interrogate threat materials and hidden objects. The orientation of the generators/detectors yield three discrete slices of the target for interrogation: 1) Perpendicular to the tunnel; 2) 45° angle along the Belt from Entrance to Exit, and; 3) 45° angle backwards along the Belt from Exit to Entrance. The three slices of metadata are used to reconstruct a three- dimensional map of the effective atomic numbers (Zeff) and mass densities of the scanned contents. The projections in this innovative geometry provide three unique planes while the projections of conventional CT systems are essentially in a single plane. Three integrated & interlaced slices through an object versus the typical single plane slice of data in rotating-gantry CT improves spatial recognition, particularly in high clutter situations, as the four X-ray projections are traveling through unique paths for a given area of interest. Coupled with few-view CT reconstruction and advanced threat detection algorithms, SENTINEL'S architecture expands the robustness, reliability and repeatability of the measurement data.

The figure below depicts the SENTINEL's fixed-gantry projection geometry showing the four X-ray sources tunnel entrance, exit, top and side projections. The red box depicts the traditional 90° planer slice perpendicular to the conveyor. Two additional 45° planar slices (not shown) are also created.

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SENTINEL Scanner Installation

First and foremost, the SENTINEL has been designed for easy deployment and installation at domestic and international checkpoints. Following production, assembly and factory acceptance testing, SENTINEL systems, simulators and peripheral equipment are packaged and marked in accordance with TSA packaging and marking requirements for transportation security screening equipment. The system is shipped directly to the customer's site in one piece along with ingress and egress conveyors, primary and auxiliary viewing stations and peripheral equipment in three simple shipping crates. We assign an installation site lead to coordinate system receipt, rigging unloading, installation and start-up. For installed systems, the installation site lead collects data, performs on-site functional testing, and prepares a commissioning report. For each system installed, the commissioning report will document i) Visual Inspection; ii) Operational/ Functional Test; iii) Image Quality Test; and, iv) Explosive Simulant Detection Test. Because the system is delivered to the site in one piece, the installation, setup, startup and functional test process is typically completed in four to six hours if the checkpoint has been prepared for system setting.

SENTINEL Scanner Maintenance

Modular construction of SENTINEL plays a major role in the system's serviceability and ensures fast field service to get the machine back online. Furthermore, as system upgrades and enhancements are designed, engineered, tested and approved, respective modules can easily be changed-out in the field. System electrical and control components are mounted on four (4) back-plates that are easy to inspect, basic troubleshoot, and remove & replace if necessary. All modules are individually certified by Underwriter's Laboratory (UL) in addition to the entire machine being UL certified. The four back-plate modules are located behind the same exterior panel and can easily be accessed by an authorized service technician. If a module is diagnosed with a problem, the entire module is removed by unplugging the wiring harness connectors, unscrewing four nuts, removing the module and simply installing a new module, which takes five to ten minutes to complete. The defective module is then returned to ScanTech for detailed troubleshooting, evaluation and if economical, repair. Likewise, X-ray generators are a modular monoblock design hermetically enclosing the X-ray tube, high-voltage power supply, collimator, and cooling system. The replacement of an X-ray generator takes less than an hour as the monoblock is mounted on a factory laser- aligned mounting frame. The monoblock is removed by unbolting four bolts plus two connectors. Simply remove and replace the unit with a new X-ray monoblock and the system is ready to scan. No alignment of the X-ray monoblock is required because of the pre-aligned precision of the X-ray generator and detector array mounting frames, so an X-ray monoblock change out is simply a 'pull-plug-scan' service call. Detector Arrays can also be easily replaced. Each array is a modular unit mounted on a precision mounting bracket or frame. To replace the detector board(s), one must merely remove the access plate(s), unplug the communication & power connectors, remove the array bracket or frame, and repeat the process to reinstall. SENTINEL's modular design provides a low-cost component upgrade path, reduced system downtime, faster field service and troubleshooting, and lower maintenance costs.

SENTINEL Scanner Operation

In similar fashion to current protocols at aviation checkpoint security stations, 'carry-on' baggage and other approved 'carry-on' items are loaded onto the SENTINEL's conveyor and queued for scanning through the system's tunnel. Once loaded onto the conveyor belt, each item passes through the system's X-ray inspection tunnel, and within a matter of seconds, reappears at the opposite end. Instead of a rotating gantry, SENTINEL's four fixed independent and synchronized X-ray sources project X-ray images of scanned items onto the system's four independent arrays of detectors where various signatures associated with the materials the X-rays interact with inside of the tunnel are measured or calculated. Advanced and proprietary algorithms provide highly reliable automatic threat detection, not only differentiating between threatening and non-threatening materials, but also specifically identifying the items as benign (such as face cream,) or dangerous (such as explosives), as well as drugs and other hazardous materials. During a scan, four separate high-definition visual images are generated and displayed on the system's high definition monitor. Operators can access vertical, horizontal and ±45o snapshots of each item being scanned and will also be able to access a 3D reconstructed image of the scanned item. This supplies the operator with the necessary visual tools to identify threats which otherwise would be difficult to distinguish. During the inspection process, the image scrolls in the direction of conveyor travel to simulate the conveyor moving a target through the inspection tunnel. The system provides real time storage of a selectable number of individual scanned items, which are maintained in a historical memory buffer depicted at the bottom of the screen. Touch screen access allows screeners to easily move back and forth between items in the system's immediate memory. In addition, item scans can easily be saved to permanent storage and subsequently re-loaded and analyzed as if the scan was just made. SENTINEL also has the ability to wirelessly transmit large bits of data in real time to any number of on- and off-site ancillary locations. Systems can be connected to a network in a matrix networked architecture allowing remote system threat reporting and operation, remote management of diagnostics, remote reporting of operator performance, remote handling of the data of interest and even remote and automatic software upgrades. Any supervisor, manager or regulatory agency, and any number of other off-site personnel can look in on any particular system in action as dictated by conduct of operations.

SENTINEL systems are based on the company's proprietary fixed-gantry CT technology, which employs four fixed X-ray generators and detector arrays to create a three-dimensional visualization of the object being scanned. Each generator/detector array is optimally configured to provide planar projections that significantly expand the robustness, reliability and repeatability of image data and volumetric reconstruction to improve the discrimination and interrogation of threat materials and hidden objects.

While nearly identical in size and overall appearance to traditional rotating-gantry scanners, we believe that SENTINEL has several important advantages, including modular design, improved image quality, increased throughput, operation on simple 120V power and plug and play installation.

Our proprietary operator-friendly SENTINEL software, which includes modules that we refer to as Automatic Threat Identification and Ray Trace Biopsy, enables SENTINEL to automatically identify materials and substances hidden inside a scanned bag or parcel, by measuring X-ray attenuation data and calculating Zeff number and mass densities by volumetric element and then comparing these calculated values to values of known materials. Potential threat materials are then highlighted on the operator's screen and flagged for further action by a screener. ATI and RTB data can be provided to the operator or alternatively directed to remote auxiliary viewing or centralized monitoring stations.

SENTINEL successfully completed TSA's Tier 2 Explosive Detection Standard testing in March 2018. Our application for APSS 6.2 certification is in advanced stages, and we currently anticipate receiving APSS 6.2 certification in the first quarter of 2026. We were invited by ECAC to submit SENTINEL for ECAC certification, and we expect to commence EDSCB certification testing and receive certification. We have applied for certification of our SENTINEL CT scanner for placement on TSA's Air Cargo Screening Technology List as a small bore air cargo visual inspection system for inspecting small parcels and packages, and expect to receive such certification. We are also designing and developing a large bore fixed gantry CT scanner for air cargo screening of break-bulk cargo and larger packages and parcels, and except to receive ACSTL certification of this scanner in 2026.

Components of Results of Operations

We have not been profitable since inception. As of June 30, 2025, our accumulated deficit was $208.3 million and as of December 31, 2024, our accumulated deficit was $184.5 million. Since inception, we have financed our operations primarily through different forms of debt, primarily promissory notes.

Operating expenses primarily consist of general and administrative costs, including payroll, as well as research and development expenses. As of June 30, 2025, and December 31, 2024, general and administrative expenses represented the largest

component of our operating expenses. These costs have increased significantly over the past 12 months, primarily due to expenses associated with capital markets activities related to the Business Combination.

For the three ended June 30, 2025 and 2024, operating expenses were $3.3 million and $2.3 million, respectively, an increase of 43% during the period. For the six ended June 30, 2025 and 2024, operating expenses were $9.1 million and $4.3 million, respectively, an increase of 112% during the period.

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Research and Development Expense

Research and development expenses consist primarily of engineering and regulatory activities.

We expense R&D costs as incurred. We recognize expenses for certain development activities, such as software and hardware development and manufacturing, based on an evaluation of the progress to completion of specific tasks using data or other information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of expenses incurred. Nonrefundable advance payments for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses. These amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. R&D activities account for a significant portion of our operating expenses. We expect our R&D expenses to increase significantly in future periods as we continue to implement our business strategy, which includes advancing our business plan, expanding our R&D efforts, including hiring additional personnel to support our R&D efforts, and seeking regulatory approvals.

General and Administrative Expense

General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources and administrative personnel, as well as the costs of information technology, professional services, insurance, travel, and other administrative expenses. We expect to invest in our corporate organization and incur additional expenses associated with transitioning to, and operating as, a public company, including increased legal, audit, tax and accounting costs, investor relations costs, higher insurance premiums and compliance costs. As a result, we expect that general and administrative expenses will increase in absolute dollars in future periods. General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources and administrative personnel, as well as the costs of information technology, professional services, insurance, travel, and other administrative expenses.

We expect to invest in our corporate organization and incur additional expenses associated with transitioning to, and operating as, a public company, including increased legal, audit, tax and accounting costs, investor relations costs, higher insurance premiums and compliance costs. As a result, we expect that general and administrative expenses will increase in absolute dollars in future periods.

Interest Expense

Interest expense consists of accrued and unpaid interest, including default interest, due on the Company's outstanding promissory notes. Interest expense consists of accrued and unpaid interest, including default interest, due on the Company's outstanding promissory notes.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the Company's financial statements for the three and six months ended June 30, 2025 and for the year ended December 31, 2024, and other information included elsewhere in this filing.

The following table sets forth our statement of operations for the three and six months ended June 30, 2025 and 2024, respectively.

For the three and six months ended June 30, 2025, the Company reported net loss of $21.1 million and $23.8 million. The primary driver of net loss during the period was de-SPAC transaction costs and equity recapitalization that occurred upon the Closing of the Business Combination.

As of January 2, 2025, nearly all lenders agreed to convert their outstanding principal and accrued interest balances into the Company's common stock, with the exception of Aegus Corporation, Azure SJBT, LAM LHA, Polar, Seaport Group SIBS, and Steele loans. The Azure SJBT loans were consolidated into a new $2.9 million loan with SJBT bearing interest at 12% per annum. The Polar loan was settled through the issuance of 1,500,000 shares of the Company's Common Stock, and the LAM LHA loan was settled pursuant to the arrangement with Silverback Capital Corporation. As a result of these conversions, the Company recognized a net loss on extinguishment of debt of $7.8 million for the three months ended June 30, 2025, and a net gain of $4.8 millionfor the six months ended June 30, 2025. For the six months ended June 30, 2025, the Company also recorded transaction costs of $18.2 million, primarily related to the de-SPAC transactions.

For the three and six months ended June 30, 2024, the Company reported a net loss of $5.7 million and $24.1 million. The loss was primarily driven by a non-cash increase in warrant and derivative liabilities, as well as higher interest expenses, reflecting the impact of increased outstanding debt and fair value adjustments related to warrants and derivative instruments during the period.

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General and Administrative Expense

For the three ended June 30, 2025 and 2024, general and administrative expenses were $2.0 million and $1.4 million, respectively, representing a year-over-year increase of 44%. For the six ended June 30, 2025 and 2024, general and administrative expenses were $6.8 million and $2.5 million, respectively, representing a year-over-year increase of 172%. This significant increase was primarily driven by higher professional service fees related to the Business Combination and stock-based compensation issued to service providers who supported the completion of the Business Combination.

Several vendors provided critical services in connection with the Business Combination, and the Company agreed to compensate them with shares of Common Stock upon the completion of the Business Combination. On January 2, 2025, the Company

issued 75,000 shares to MG Partners, LLC; 50,000 shares to Outside The Box Capital Inc; 100,000 shares to Roth Capital Partners LLC; and 50,000 shares to Maximcash Solution LLC. The aggregate fair value of these shares was $518.0 thousand, which the Company recorded as stock-based compensation expense for the six months ended June 30, 2025. In addition, the Company incurred legal service fees totaling $3.0 million in connection with the Business Combination, of which $2.1 million were payable to Ellenoff Grossman & Schole LLP.

Research and Development Expense

For the three months ended June 30, 2025 and 2024, research and development expenses were $1.3 million and $914.6 thousand, respectively, a 42% increase during the period. For the six months ended June 30, 2025 and 2024, research and development expenses were $2.3 million and $1.8 million1, respectively, a 29% increase during the period.

The increase in research and development expenses was attributable primarily to a continued and ongoing increase in investment in the Company's artificial intelligence software and continued investment in its proprietary algorithms with the anticipation of filing additional patents in the future.

Depreciation and Amortization

For the three months ended June 30, 2025 and 2024, depreciation and amortization expenses were $8.9 thousand and $8.1 thousand, respectively. For the six months ended June 30, 2025 and 2024, depreciation and amortization expenses were $17.1 thousand and $16.2 thousand, respectively. The change was not material.

Interest Expense

For the three months ended June 30, 2025 and 2024, interest expense was $631.6 thousand and $3.0 million, respectively, representing a decrease of 79% year over year. For the six months ended June 30, 2025 and 2024, interest expense was $1.4 million and $5.9 million, respectively, representing a decrease of 77% year over year. Interest expense includes accrued interest and any penalties, including default interest, on outstanding promissory notes. The decrease in interest expense is primarily attributable to the settlement of a majority of the Company's debt obligations through conversion into Common Stock upon the completion of the Business Combination. As a result, only a limited number of debt instruments remained outstanding on the Company's condensed consolidated Balance Sheets as of June 30, 2025.

Other Income (Expense)

For the three months ended June 30, 2025 and 2024, the Company recorded total other expenses of $18.1 million and $3.5 million, respectively. The increase was primarily driven by a $7.8 million net loss on extinguishment of debt, a $1.2 million decrease in the fair value of pledged securities, and $8.5 million of transaction costs expensed. These increases were partially offset by a $2.4 million decrease in interest expense and the elimination of derivative and warrant liabilities totaling $469 thousand.

For the six months ended June 30, 2025 and 2024, the Company recorded total other expenses of $15.1 million and $19.9 million respectively. The decrease was primarily attributable to a net $12.2 million decrease in the fair value of warrant liabilities and pledged security, a $4.5 million reduction in interest expense, a $1.4 million gain on settlement of the forward purchase agreement, and a $4.8 million gain from extinguishment of debt. These favorable impacts were partially offset by $18.2 million of transaction costs expensed.

Upon completion of the Business Combination, all outstanding warrants and options were exercised and converted into shares of the Company's common stock, except for the options related to Seaport's second bridge loan, which were exercised on January 7, 2025. The options and warrants were fair valued prior to conversion, and the resulting changes in the fair value of derivative and warrant liabilities were recorded accordingly. As of June 30, 2026, no derivative or warrant liabilities were recorded in the Company's condensed consolidated Balance Sheets.

Trend Information

Other than as disclosed elsewhere in this Quarterly Report on Form 10-Q, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our revenues, net income, profitability,

liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

Liquidity and Capital Resources

To date, we have financed our operations primarily through the issuance of debt. Since our inception, we have incurred significant operating losses and negative cash flows. As of June 30, 2025 and December 31, 2024, we had an accumulated deficit of $208.3 million and $184.5 million , respectively. The Company's liabilities ae significantly greater than its assets.

We did not receive sufficient proceeds from the Business Combination to fund our operating expenses for at least 12 months after the date of our financial statements included in this filing. As a result, management has determined that there is substantial doubt about our ability to continue as a going concern.

We expect to incur significant expenses in connection with our ongoing activities as we continue to implement our business strategy. We will need additional funding in connection with these activities. Our future funding requirements, both short-term and long-term, will depend on many factors, including the level of sales, the expansion of our sales and marketing activities, the timing and extent of our spending to support our research and development efforts, investments in infrastructure, operating costs, expansion into other markets, and the costs of operating as a public company (including hiring additional personnel as well as increased director and officer insurance premiums, audit and legal fees, investor relations fees and expenses related to compliance with public company reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq).

For the foreseeable future, we expect to continue financing our operations through the sale of equity, debt, borrowings under credit facilities or through potential collaborations with other companies, other strategic transactions or government or other grants. Adequate capital may not be available to us when needed or on acceptable terms. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures. Debt financing would also result in fixed payment obligations. If we are unable to raise additional funds through equity or debt financing or other arrangements when needed, we may be required to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition. See the section entitled "Risk Factors" for additional risks associated with our substantial capital requirements.

The Company's operating losses raise substantial doubt about our ability to continue as a going concern for one year from the date the financial statements are issued or available to be issued. As of June 30, 2025 and December 31, 2024, our cash balance was $41.1 thousand and $22.3 thousand, respectively. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the year ended December 31, 2024 with respect to this uncertainty.

Prior to the Business Combination, the Company financed operations primarily through cash generated from debt offerings and equity raises. The Company's primary short-term requirements for liquidity and capital are to fund general working capital and capital expenditures. The Company's principal long-term working capital uses primarily include research and development expenses and operational payroll.

In connection with the consummation of the Business Combination, certain current debt holders of ScanTech agreed to convert their existing indebtedness into equity and to cancel any outstanding warrants. Specifically, Polar received 1,187,500 shares of Common Stock upon the conversion of its Series P Membership Units. Steele Interests SIBS LLC received 200,000 shares of Common Stock pursuant to a supplemental agreement entered into as of January 31, 2025. Aegus Corp. received 234,380 shares of Common Stock pursuant to BCA Amendment No. 4, 70,000 shares under a settlement agreement and mutual release dated October 14, 2024, and 23,000 shares under a letter agreement dated February 7, 2025. MG Partners, LLC received 75,000 shares of Common Stock under a settlement agreement and mutual release dated October 14, 2024. St. James Bank & Trust Co. Ltd. received 316,616 shares of Common Stock in accordance with the NACS/ScanTech refinance and repayment summary of non-binding terms dated February 7, 2025. Bay Point Capital Partners LP received 200,000 shares, Catalytic Holdings I LLC received 100,000 shares, and Seaport received 100,000 shares, each pursuant to supplemental agreements dated January 2, 2025. In addition, the Company registered 1,149,230 shares of Common Stock to Seaport Group SIBS LLC pursuant to BCA Amendment No. 4 and in connection

with the promissory bridge note dated March 27, 2024; 1,000,000 shares in connection with the senior unsecured promissory note dated November 14, 2024; and 100,000 shares to Seaport pursuant to the supplemental agreement dated January 2, 2025.

Following the completion of restructuring the Company's condensed consolidated Balance Sheets, recapitalizing outstanding indebtedness and converting it into equity as described above, our liquidity needs will depend on both the performance of our business and our ability to obtain additional financing. If we do not generate sufficient proceeds from operations or financing activities to execute our business plan or if our business underperforms relative to expectations, we may need to seek additional funding or implement other measures to enhance our liquidity position. See "Risk Factors - We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all." in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on May 14, 2025.

Cash Flow

The following table provides information regarding our cash flows for the periods presented:

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For the six months ended June 30, 2025, cash used in operating activities was $4.8 million, reflecting a net loss of $23.8 million, adjusted for non-cash charges of $15.4 million and changes in operating assets and liabilities of $3.6 million. Non-cash charges primarily included $18.2 million of transaction costs expensed and $1.8 million of change in fair value expense, partially offset by a $4.8 million gain on extinguishment of debt and a $1.4 million gain on settlement of the forward purchase agreement.

For the six months ended June 30, 2024, cash used in operating activities was $3.0 million, reflecting a net loss of $24.1 million, adjusted for non-cash charges of $14.1 million and changes in operating assets and liabilities of $7.0 million. Non-cash charges primarily included $14.1 million of change in fair value expense.

For the six months ended June 30, 2025, cash used in investing activities was $16.0 thousand, consisting of purchases of property, plant and equipment of $16.0 thousand.

For the six months ended June 30, 2024, no cash was used in investing activities.

For the six months ended June 30, 2025, cash provided by financing activities was $4.8 million, consisting of proceeds from loans of $3.5 million, proceeds from stock options and warrant exercised of $30.0 thousand, and proceeds from settlement of forward purchase agreement of $1.4 million, partially offset by the repayment of loans of $122.6 thousand.

For the six months ended June 30, 2024, cash provided by financing activities was $2.8 million, consisting of proceeds from loans of $2.8 million.

Indebtedness Conversion

The Company continuously worked with its creditors to secure agreements to convert its existing indebtedness to equity for the six months ended June 30, 2025.

On March 20, 2025, the Company entered into a settlement agreement and stipulation with Silverback Capital Corporation ("SCC"). Under the terms of the agreement, SCC agreed to acquire Company liabilities totaling $8,230,977 in exchange for shares of Common Stock at a conversion price of $1.50 per share. On March 26, 2025, SCC completed the first tranche of the agreement, acquiring $1,378,303 in accounts payable and receiving 918,869 shares of Common Stock in exchange. In addition, the Company agreed to issue 33,000 shares as settlement fees and 150,000 shares for legal fees. The total number of shares issued to SCC under the first tranche was 1,101,869 shares.

On March 31, 2025, the Company entered into an amendment to the Seaport bridge loan agreements. Under the terms of the amendment, Seaport agreed to convert the cumulative principal and accrued interest from the first and second bridge loans, purchase order loans, and OPG loans into 5,350,000 shares of the Company's Common Stock. 5,350,000 shares of Common Stock were subsequently issued to Seaport on April 17, 2025. In addition, in the same amendment, the Company granted Seaport a warrant to

purchase 3,000,000 shares of Common Stock at an exercise price of $0.01 per share. Seaport exercised the warrant on March 31, 2025 by paying $30,000 in cash, and 3,000,000 shares of Common Stock were subsequently issued to Seaport on April 2, 2025.

On May 19, 2025, the Company issued 1,700,000 shares of common stock in full settlement of the $2,326,241 liability to York pursuant to the Fifth Amended and Restated Operating Agreement of SIBS. On the same date, the Company also issued 1,500,000 shares of common stock to fully settle the $1,250,000 loan owed to Polar Multi-Strategy Master Fund.
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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC, over the past three fiscal years, as of December 31, 2024 and for the six month ending June 30, 2025.