Quarterly Report for Quarter Ending September 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, as well as other sections in this Quarterly Report on Form 10-Q, should be read together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC on March 27, 2025.

These and other risks and uncertainties, which are described in more detail in our most recent Annual Report on Form 10-K that we filed with the SEC and those listed under the caption "Risk Factors" within this Quarterly Report on Form 10-Q, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q as exhibits with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

Overview

Guerrilla RF is a fabless semiconductor company based in Greensboro, NC. Guerrilla RF was founded in 2013 with a mission to employ RF semiconductor technology to deliver RF solutions to customers in underserved markets. Over the past several years, Guerrilla RF has become a leader in developing high-performance MMIC products for wireless connectivity. It continues to target underserved markets and customers, delivering a range of high-performance MMIC products and associated technical support to a diverse set of customers that enable a more connected world.

THIRD QUARTER FISCAL 2025 FINANCIAL HIGHLIGHTS

● Revenue for the third quarter of fiscal 2025 increased 39% as compared to the third quarter of fiscal 2024, from $4.5 million to $6.3 million. In the third quarter of 2025, our automotive and catalog categories grew at 130% and 50% respectively, more than offsetting a 62% decrease in our wireless infrastructure category compared to the prior year period when the Company experienced a significant increase in its wireless infrastructure category due to a key design ramp with a new customer.

● Gross profit for the third quarter of fiscal 2025 was 67.5% of revenues as compared to 65.3% for the third quarter of fiscal 2024. The Company's contribution margin of 76.7% decreased from 77.2% in the third quarter of fiscal 2024 as a direct result of a larger mix shift into our automotive category. Over these same periods, overhead spending was relatively flat and as a percentage of sales it decreased from 11.9% in the third quarter of 2024 to 9.2% in the third quarter of 2025, a direct result of the increase in revenue.

● Operating loss was $0.2 million for the third quarter of 2025, as compared to $2.6 million for the third quarter of 2024. This decrease in operating loss was primarily due to an increase in revenue and a reduction in operating expenses. Operating expenses decreased 20.0% primarily due to reductions in employee expenses and other accompanying fixed costs associated with our ongoing cost reduction measures. Operating expenses decreased in absolute terms by $1.2 million from $5.6 million for the three months ended September 30, 2024, to $4.4 million for the three months ended September 30, 2025. From a rate perspective, operating expenses decreased as a percentage of revenues (71% in the third quarter of 2025 vs. 123% in the third quarter of 2024) as a direct result of the increased revenue and reduced operating expenses. R&D costs decreased 21% when compared to the prior year period. Sales and marketing decreased 12%, while administrative costs decreased 28% over the same period.

● The Company generated positive operating cash flow of $0.8 million in the third quarter, compared to average negative operating cash flow of $1.7 million in the first two quarters of 2025. Net cash used in operating activities declined to $2.5 million for the nine months ended September 30, 2025, from $3.3 million for the six months ended June 30, 2025, reflecting the Company's first quarter of positive operating cash generation.

● Net loss per share was $0.06 and $0.71 for the third quarter of fiscal 2025 and 2024, respectively.

Key Metrics (Non-GAAP Measures)

These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of Company results as reported under GAAP. The Company compensates for such limitations by relying primarily on GAAP results and using non-GAAP measures only as supplemental data. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by us, may differ from and may not be comparable to similarly titled measures used by other companies.

We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions, and assess working capital needs.

Number of products released: The total number of distinct new products released into production (products that have completed design, quality, and supply chain readiness) during the period.

Number of total products: The cumulative number of production-released products since our inception through the end of the period.

Number of products with lifetime revenue exceeding $100 thousand: The number of products that have achieved the threshold of cumulative sales of $100,000 since our inception through the end of the period.

Product backlog: The amount of product sales that have been committed to by customers, but have not yet been completed, shipped, or invoiced as of the end of the period. The Company's product backlog can be materially impacted by supply chain constraints, a shift in customer ordering patterns whereby customers place orders in anticipation of extended product delivery lead times, or other customer order delivery request modifications. Furthermore, because the Company partners closely with a number of its customers to produce high-performance, quality components that are often designed into customers' end products, immediate substitution of the Company's products is neither typically desired by customers nor necessarily feasible. As such, the Company has not historically experienced significant order cancellations, and the Company does not expect significant order cancellations in the future. The Company closely monitors product backlog and its potential impact on the Company's financial performance.

Components of Results of Operations

Revenues

We derive our revenue from sales of high-performance RF semiconductor products. We design, integrate, and package differentiated, semiconductor-based products that we sell to customers through our direct sales organization, a network of independent sales representatives, and distributors. We generate revenue from customers located within and outside the U.S. In addition to sales to customers, we generate royalty revenue under a royalty agreement with one semiconductor manufacturer.

Direct Product Costs and Gross Profit

Direct Product Costs. Our direct product costs consist of actual direct product expenses, salaries and related expenses, overhead, third-party services vendors, and depreciation expense related to the equipment and information technology costs incurred directly in the Company's revenue-generating activities.

Gross Profit. Our gross profit is calculated by subtracting our cost of revenues from revenues. Gross margin is expressed as a percentage of total revenues. Our gross profit may fluctuate from period to period as revenues fluctuate due to the mix of products we sell to customers, royalty revenue volume, operational efficiencies, and changes to our technology expenses and customer support.

We plan to focus on and grow the sales volume of new and existing products with the highest gross margin. We intend to continue investing additional resources in our engineering and design capabilities, which drive our research and development efforts and, in turn, drive additional revenue streams and enable us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of revenues in the future.

Operating Expenses

Operating expenses consist primarily of research and development expenses (R&D), sales and marketing expenses, and employee compensation costs for operations management, finance, accounting, information technology, compliance, and human resources personnel. In addition, general and administrative expenses include non-personnel costs, such as facilities, legal, accounting, and other professional fees, and other supporting corporate expenses not allocated to other departments. We expect our general and administrative expenses will increase in absolute dollars as our business grows, but we expect general and administrative expenses to decrease as a percent of revenues in the coming years.

R&D expenses consist of costs for the design, development, testing, and enhancement of our products and are generally expensed as incurred. These costs consist primarily of personnel costs, including salaries, benefits, bonuses, and share-based compensation for our product development personnel. Research and development expenses also include training costs, product management, third-party partner fees, and third-party consulting fees. We expect our research and development expenses to increase in absolute dollars as our business grows, but as a percent of revenues, R&D expenses are expected to decrease.

Sales and marketing expenses consist primarily of employee compensation costs related to sales and marketing, including salaries, benefits, bonuses, and share-based compensation, costs of general marketing activities and promotional activities, travel-related expenses, and allocated overhead. Sales and marketing expenses also include costs for advertising and other marketing activities. Advertising is expensed as incurred. As we expand our sales and marketing efforts, we expect our sales and marketing expenses will increase in absolute dollars, but as a percentage of revenues, sales and marketing expenses are expected to decrease.

Non-income taxes include excise taxes, sales and use taxes, capital stock and franchise taxes, and property taxes. Capital stock and franchise taxes are taxes that states charge the Company for the privilege of incorporating or doing business in a state.

Interest Expense

Interest expense consists primarily of the interest incurred on our debt obligations, our factoring arrangement expense, the non-cash interest expense associated with the amortization of common shares issued to certain of our debtholders, and lease expense related to our finance leases.

Results of Operations

The following table summarizes the results of our operations for the periods presented:

Comparison of the three months ended September 30, 2025 and 2024 (unaudited):

Revenues increased $1.8 million to $6.3 million for the three months ended September 30, 2025, compared to $4.5 million for the three months ended September 30, 2024. The revenue increase was attributable to growth in our automotive category of $1.4 million, or 130%, to $2.4 million, and our catalog business of $1.1 million, or 50%, to $3.2 million. This revenue growth was partially offset by a decrease in our wireless infrastructure category of $0.8 million, or 62% to $0.5 million. A product ramp for a new customer increased revenue in our wireless infrastructure category during the three months ended September 30, 2024, which was not replicated in the most recent quarter.

We generate revenue from customers located within and outside the U.S. While we have several large customers, we define major customers as those responsible for more than 10% of our product shipment revenue during a reporting period. Using this definition, Guerrilla RF had two major customers, RFPD and RFMW for the three months ended September 30, 2025, and one major customer, RFPD, during the three months ended September 30, 2024. RFPD, a large product distributor serving numerous end-user customers, generated 64% and 73% of product shipment revenue for the three months ended September 30, 2025 and 2024, respectively. RFMW, a large product distributor serving numerous end-user customers, generated 15% of product shipment revenue for the three months ended September 30, 2025. Our new product sales increased from $0.5 million for the three months ended September 30, 2024 to $0.9 million for the three months ended September 30, 2025, due to increased sales from design wins that ramped in 2025.

Nonproduct (royalty and non-recurring engineering ("NRE")) revenues were up $0.1 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This was driven by royalties and a new opportunity to develop a custom linear amplifier for a potential new customer of our products.

International shipments grew substantially (by 148%) from $1.1 million to $2.8 million (representing 44% of Q3 2025 sales) for the three months ended September 30, 2024 and 2025, respectively. Domestic sales remained flat for the same period.

Direct Product Costs and Gross Profit

Direct product costs increased $0.4 million to $2.0 million for the three months ended September 30, 2025, compared to $1.6 million for the three months ended September 30, 2024. Increases in direct product costs (30%) were less than the increases in revenues (39%) as other direct product costs remained flat. Gross profit as a percentage of sales increased from 65.3% for the third quarter of 2024, to 67.5% for the third quarter of 2025. This was driven in part by increased revenue leverage while other direct product costs remained flat, which increased gross profit margin by 220 basis points.

Research and Development Expenses

Research and development expenses decreased $0.5 million to $2.0 million for the three months ended September 30, 2025, compared to $2.5 million for the three months ended September 30, 2024. The decrease is a result of the staffing and fixed cost reduction measures the Company has been executing through 2025.

Sales and Marketing Expenses

Sales and marketing expenses decreased $0.2 million to $1.5 million for the three months ended September 30, 2025 compared to $1.7 million for the three months ended September 30, 2024. The decrease is a result of tighter controls and management around travel and office related expenses as well as the staffing and fixed cost reduction measures the Company has been executing through 2025.

General and Administrative Expenses

General and administrative expenses decreased $0.4 million to $0.9 million for the three months ended September 30, 2025, compared to $1.3 million for the three months ended September 30, 2024. The decrease is a result of the staffing and fixed cost reduction measures the Company has been executing through 2025.

Other Income (Expenses)

Interest expense decreased $0.2 million to $0.3 million for the three months ended September 30, 2025, compared to $0.5 million for the three months ended September 30, 2024. The decrease was attributable to a significant paydown of the Company's primary debt facility. On August 5, 2024 the Company paid down the Salem Loan Facility by $7.5 million, leaving a remaining balance of $4.5 million.

The loss on debt extinguishment was zero for three months ended September 30, 2025 compared to $1.5 million for the nine months ended September 30, 2024 as a result of the paydown of the Salem Loan Facility in August 2024.

The change in fair value of warrant liabilities decreased by $2.4 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease (which resulted from a decrease in the reduction in the fair value of warrant liabilities) was the result of the remeasurement of the Historical Warrants and the North Run Warrants that are accounted for as liabilities and carried at fair value at September 30, 2025.

Comparison of the nine months ended September 30, 2025 and 2024 (unaudited):

Revenues increased $0.3 million to $16.0 million for the nine months ended September 30, 2025, compared to $15.7 million for the nine months ended September 30, 2024. The revenue increase was attributable to growth in our automotive category of $3.1 million, or 72%, to $7.4 million, and our catalog category of $1.0 million, or 15%, to $7.3 million. This revenue growth was partially offset by a decrease in our wireless infrastructure category of $3.9 million, or 77%, to $1.2 million. A product ramp for a new customer increased revenue in our wireless infrastructure category during the nine months September 30, 2024, which was not replicated in the most recent nine month period.

We generate revenue from customers located within and outside the U.S. While we have several large customers, we define major customers as those responsible for more than 10% of our product shipment revenue during a reporting period. Using this definition, Guerrilla RF had two major customers, RFPD and RFMW, during the nine months ended September 30, 2025, and one major customer, RFPD, during the nine months ended September 30, 2024 . RFPD, a large product distributor serving numerous end-user customers, generated 69% and 78% of product shipment revenue for the nine months ended September 30, 2025 and 2024, respectively. RFMW, a large product distributor serving numerous end-user customers, generated 10% of product shipment revenue for the nine months ended September 30, 2025. Distributor sales remain a core pillar of our long term growth strategy while we seek to maximize value creating direct opportunities as they become available. Our direct sales increased $0.7 million, or 44%, to $2.2 million for the nine months end September 30, 2025 compared to the prior year period.

Our new product sales increased from $2.1 million for the nine months ended September 30, 2024 to $3.2 million for the nine months ended September 30, 2025, driven by new product innovation and design win ramps in 2025.

Nonproduct (royalty and NRE) revenues increased $0.2 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This was driven by royalties and a new opportunity to develop a custom linear amplifier for a potential new customer of our products.

International shipments grew substantially (by 98%) from $3.0 million for the nine months ended September 2024, to $5.9 million for the nine months ended September 30, 2025 (representing 37% of the total year to date sales in 2025).

Direct Product Costs and Gross Profit

Direct product costs were $5.6 million for both the ninemonths ended September 30, 2025 and 2024, remaining essentially flat year over year. The stable cost base, combined with higher revenue, resulted in improved gross margins. Gross profit as a percentage of sales increased to 64.9% for the nine months ended September 30, 2025, compared to 64.6% for the same period in 2024, primarily reflecting stronger revenue leverage and consistent overhead costs.

Research and Development Expenses

Research and development expenses decreased $0.6 million to $6.6 million for the nine months ended September 30, 2025, compared to $7.2 million for the nine months ended September 30, 2024. The decrease is a result of the staffing and fixed cost reduction measures the Company has been executing through 2025.

Sales and Marketing Expenses

Sales and marketing expenses increased $0.2 million to $4.9 million for the nine months ended September 30, 2025, compared to $4.7 million for the nine months ended September 30, 2024. The increase is due to severance and costs related to CRM implementation as we seek to become a more accountable metric-driven sales organization.

General and Administrative Expenses

General and administrative expenses decreased $0.4 million to $3.6 million for the nine months ended September 30, 2025, compared to $4.0 million for the nine months ended September 30, 2024. The decrease is a result of the staffing and fixed cost reduction measures the Company has been executing through 2025.

Other Income (Expenses)

Interest expense decreased $2.3 million to $0.7 million for the ninemonths ended September 30, 2025, compared to $3.0 million for the ninemonths ended September 30, 2024. The decrease was attributable to a significant paydown of the Company's primary debt facility. On August 5, 2024 the Company paid down the Salem Loan Facility by $7.5 million, leaving a remaining balance of $4.5 million.

The loss on debt extinguishment was zero for the nine months ended September 30, 2025 compared to $1.5 million for the nine months ended September 30, 2024 as a result of the paydown of the Salem Loan Facility in August 2024.

During the nine months ended September 30, 2025, the Company recorded a gain on change in fair value of warrant liabilities of $0.7 million as compared to a loss on the change in fair value of warrant liabilities of $2.6 million during the nine months ended September 30, 2024, which represented a change of $3.3 million. The change (which resulted from a decrease in the fair value of warrant liabilities during the nine months ended September 30, 2025, as compared to a increase in the fair value of warrant liabilities during the nine months ended September 30, 2024) was the result of the remeasurement of the Historical Warrants and the North Run Warrants that are accounted for as liabilities and carried at fair value at September 30, 2025.

Other income (expense) decreased $0.3 million for the nine months ended September 30, 2025 primarily due to a one-time grant received during the nine months ended September 30, 2024. In addition, during the most recent period the Company had other contributors to total other income (expense) including $0.1 million in interest income earned on funds deposited in a money market account, which it did not have in the comparable period of 2024, and a change in its derivative liabilities, reflecting a decrease in fair value of $0.2 million.

Liquidity and Capital Resources

Our primary source of liquidity has been cash raised from private placements and debt financing. As of September 30, 2025, we had cash resources of $4.0 million. We also have two loan facilities, one of which is for up to $3.75 million with a specialty lender (referred to as the Spectrum Loan Facility, described in Note 5 to our unaudited condensed consolidated financial statements), and the other of which is a $4.5 million term loan with a different lender (referred to as the Salem Loan Facility, also described in Note 5 to our unaudited condensed consolidated financial statements). As of September 30, 2025, we had drawn down $1.1 million under the Spectrum Loan Facility and had an outstanding balance of $4.5 million under the Salem Loan Facility.

On August 5, 2024, the Company completed the North Run Private Placement, raising cash proceeds of approximately $21.6 million, net of transaction expenses. Additionally, on August 2, 2024, the Company initiated the amendment of the Salem Loan Facility to (i) reduce the outstanding principal balance from $12.0 million to $4.5 million, (ii) extend the maturity date from January 31, 2026 to December 31, 2028, and (iii) reduce the interest rate from 14% (comprising 3% payment-in-kind (deferred) and 11% cash) to 12% cash. The amendment was effective on August 5, 2024 after the principal balance was reduced from $12.0 million to $4.5 million by using a portion of the proceeds from the North Run transaction.

The Company believes that its existing cash and cash equivalents will provide sufficient resources to support operations and cover existing contractual obligations and other obligations that may arise through the next 12 months.

We have incurred recurring losses and negative cash flows from operations since inception and have an accumulated deficit at September 30, 2025 of $58.5 million. We expect losses and negative cash flows to continue in the near term, primarily due to continued investment in research and development, sales and marketing efforts, and increased administration expenses as our Company grows. We plan to continue to invest in the implementation of our long-term strategic plan and we anticipate that we will continue to narrow cash burn from historical levels so that over time cash reserves will provide the necessary working capital to operate the Company.

Cash (used in) provided by:

Operating Activities

Cash used in operating activities was $2.5 million and $3.8 million for the nine months ended September 30, 2025 and 2024, respectively.

Cash used in operating activities for the nine months ended September 30, 2025 was principally due to our net loss of $4.7 million, non-cash items of $1.0 million, and an increase in working capital of $1.2 million. For the nine months ended September 30, 2025, non-cash items that were a part of the net operating loss included depreciation and amortization of $0.9 million, and share-based compensation of $0.8 million, partially offset by a decrease in inventory allowance and change in the fair value of warrant liabilities of $0.7 million.

Cash used in operating activities for the nine months ended September 30, 2024 was principally due to our net loss of $12.3 million, including non-cash items of $8.0 million, and an increase in working capital of $0.5 million. For the nine months ended September 30, 2024, non-cash items that were a part of the net operating loss included depreciation and amortization of $1.1 million, stock-based compensation of $1.2 million, change in fair value of warrant liabilities and derivative liabilities of $2.5 million, loss on the extinguishment of debt of $1.5 million and non-cash and accretion of notes payable of $1.7 million.

Investing Activities

Cash used in investing activities was $1.2 million and $0.7 million for the nine months ended September 30, 2025 and 2024, respectively. Cash used in investing activities resulted from capital expenditures on property and equipment in each period, and the purchase of intangible assets in the nine months ended September 30, 2024.

Financing Activities

Cash used in financing activities for the nine months ended September 30, 2025 of $0.3 million was due to $0.9 million of payments related to finance leases and finance agreements partially offset by $0.6 million of additional net debt financing and a refund of used offering cost.

Cash provided by financing activities for the nine months ended September 30, 2024 of $15.0 million was primarily attributable to net proceeds of $24.6 million from private placement equity financings in the second and third quarter of 2024 along with significant debt repayments made in the third quarter of 2024 of $8.4 million. A total of $1.2 million, related to principal payments on finance leases and repayment of finance agreements, also contributed to the net cash provided in the nine months ended September 30, 2024.

Contractual Obligations and Commitments

The following summarizes our significant contractual obligations as of September 30, 2025 (unaudited).

Off-Balance Sheet Arrangements

As of September 30, 2025 and December 31, 2024, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments in the preparation of our unaudited interim condensed consolidated financial statements involve derivative and warrant liabilities and the valuation of equity financing. Accordingly, actual results may differ from these estimates. To the extent that there are differences between our estimates and actual results, our future consolidated financial statement presentation, financial condition, results of operations, and cash flows will be affected.

Other than as described under Note 2 to our audited consolidated financial statements and as described above, the Critical Accounting Policies and Significant Judgments and Estimates included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 27, 2025, have not materially changed.

Recently Adopted Accounting Standards

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed inNote 2 to our unaudited interim condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we are no longer an emerging growth company, or affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We have not elected to early adopt certain new accounting standards, as described inNote 2 to our unaudited interim condensed consolidated financial statements. As a result, our unaudited interim condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.