Blaize Holdings Inc.

03/24/2026 | Press release | Distributed by Public on 03/24/2026 14:23

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, references to "we", "us", "our", "Blaize" or the "Company" in this Management's Discussion and Analysis of Financial Condition and Results of Operations are to Blaize Holdings, Inc. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto, included in Part 1I, Item 8. of this Annual Report on Form 10-K, and risk factors, included in Part I, Item 1A. of this Annual Report on Form 10-K.
Overview
We provide purpose-built, transformative AI-enabled edge computing solutions comprised of both our proprietary hardware and software, and complementary third-party hardware solutions, as further described below. Our computing solutions are designed for efficient processing of AI inference workloads across edge and data center environments. Our architecture supports AI workloads where latency, power efficiency, and cost efficiency are important considerations. Our systems can process data locally at the edge or within data center infrastructure, depending on deployment requirements. Local processing can reduce bandwidth usage and support latency-sensitive applications requiring real-time decision making.
In addition to our internally developed products, we also deliver third-party hardware solutions that complement and enhance our core offerings. By integrating certain third-party hardware components, we believe that we are able to provide customers with comprehensive and flexible computing solutions tailored to their specific needs. These third-party hardware solutions typically are substantially comprised of servers, which are selected to ensure optimal compatibility and performance with our products and our AI-enabled platforms.
Our portfolio includes highly efficient, programmable AI processors in a broad range of form factors, deployable across several verticals, including smart city, defense, retail and enterprise markets. Our accelerated AI computing platforms enable applications such as computer vision, advanced video analytics, and AI inference, and our software tools allow non-expert practitioners to deploy existing and novel AI applications on our hardware without the need to learn or use source code.
On January 13, 2025, BurTech completed the Merger, pursuant to the Merger Agreement, whereby Merger Sub merged with and into Legacy Blaize, with Legacy Blaize being the surviving company and a wholly owned subsidiary of BurTech.
In connection with the de-SPAC, we changed our name from "BurTech Acquisition Corporation" to "Blaize Holdings, Inc.". BurTech was considered the acquired company and Legacy Blaize was considered the acquirer for financial statement reporting purposes, and the Merger was accounted for as a reverse merger and recapitalization.
Trends and Recent Developments
Recent Developments in Our Business
On July 16, 2025, we entered into a Strategic Cooperation Agreement (the "Starshine Agreement") with Starshine Computing Power Technology Limited, a Hong Kong company ("Starshine"). Pursuant to the terms of the Starshine Agreement, we entered into a strategic partnership with Starshine to develop business opportunities for the sale of our hybrid AI platform and other products and services through Starshine in the Asia Pacific region. Starshine agreed to deliver a minimum of $120.0 million in revenue to us over the first 18 months of the Starshine Agreement. Any such commitments made by Starshine are subject to issuance of purchase orders by Starshine. Starshine initiated one purchase order to us in the third quarter of 2025 for $10.4 million. Starshine paid $1.6 million to us in regards to its account receivable, and the remainder of $8.8 million of its account receivable remains outstanding as of March 24, 2026. As of March 24, 2026, we have not received any further purchase orders from Starshine.
On November 10, 2025, Blaize and affiliates of Polar Asset Management Partners Inc. ("Polar") entered into a Securities Purchase Agreement (the "Polar Private Placement"). Pursuant to the Polar Private Placement, we agreed to the direct sale of 9,375,000 shares of our common stock at a purchase price of $3.20 per share and the issuance of 9,375,000 warrants to purchase additional shares of our common stock, resulting in aggregate gross proceeds of approximately $30.0 million, before deducting offering expenses. The warrants have a term of five years and are immediately exercisable, with an exercise price of $5.00 per share.
Key Business Metrics
Pipeline
We have identified potential future business opportunities that we believe could accelerate our growth through near-term customer implementations. Although we have no contractual arrangement(s) with respect to such pipeline and we cannot predict with certainty any future contractual arrangement(s), the pipeline contains target accounts and opportunities that have been identified as potential customers for our products and services. We classify certain key metrics related to our pipeline into the following categories: proof of concept stage, partners, and design wins.
Proof of Concept Stage
A proof-of-concept stage ("POC") represents that a proposal for a proof of concept has either been initiated or is in progress with a potential customer or partner. We utilize POCs to demonstrate our technology's value proposition along with its tailored use scenarios and satisfaction of customer and/or partner requirements. As of December 31, 2025, 25 POCs were initiated or in progress with a potential customer.
Partners
A partner ("Partner") consists of either an independent software vendor or independent hardware vendor with whom we are working to integrate our products and services into the vendor's offerings for their customers. Such vendors may include original equipment manufacturers ("OEMs"), original design manufacturers, system integrators, or hardware resellers or distributors, among others. As of December 31, 2025, we had a total of 30 Partners.
Design Wins
A design win ("Design Win") represents that a Partner or a customer has selected our products and/or services to be incorporated into a product that it intends to produce or consume, as applicable, and has confirmed that our offerings integrate into such product accordingly. As of December 31, 2025, 20 Design Wins had been confirmed with a Partner or customer.
Results of Operations
Revenue
We currently derive revenue through a combination of:
•Hardware revenue - encompasses the sale of our semiconductor products and/or third-party hardware products which support our semiconductor products through various supply agreements.
•Software revenue - encompasses the sale of our applications and other software products through various licensing agreements.
•Strategic consulting services revenue - providing customized design services to our customers, tailored to their specific requirements.
The following table sets forth our revenue for the years ended December 31, 2025 and 2024:
For the Year Ended December 31, Change
(Amounts in thousands, except for percentages) 2025 2024 $ %
Total revenue $ 38,632 $ 1,554 $ 37,078 *
* Percentage change is not meaningful.
For the year ended December 31, 2025, revenue increased to $38.6 million compared to $1.6 million for the year ended December 31, 2024. The increase was due to hardware sales in 2025, primarily comprised of hardware sales to third parties, while revenue from the comparable period in 2024 was derived primarily from strategic consulting services provided to related parties. Strategic consulting services revenue with the related party is no longer expected, as the development contract with this party has been completed.
The following table sets forth our revenue by the geographical location of our customers for years ended December 31, 2025 and 2024:
For the Year Ended December 31, Change
(Amounts in thousands, except for percentages) 2025 2024 $ %
China $ 35,155 $ - $ 35,155 *
United States 3,327 1,215 2,112 *
Japan 3 332 (329) *
Other 147 7 140 *
Total revenue $ 38,632 $ 1,554
* Percentage change is not meaningful.
Since our revenue is concentrated among a small number of customers, revenue from any one significant customer may significantly change the geographical mix of our revenue. Customer C and Customer D, below, are both located in China, along with a customer in "Others," below.
The following table sets forth a summary of our revenue by customer for the years ended December 31, 2025 and 2024:
For the Year Ended December 31,
(Amounts in thousands, except for percentages) 2025 % 2024 %
Customer A (1)
$ - -% $ 1,193 76.8%
Customer B (1)
- -% 332 21.4%
Customer C 10,444 27.0% - -%
Customer D 23,750 61.5% - -%
Others (2) (3)
4,438 11.5% 29 1.9%
Total revenue $ 38,632 $ 1,554
(1)Customers A and B are both related parties.
(2)Each customer within "Others" comprised less than 10% of revenue each.
(3)In 2025, "Others" included $3.4 million in revenue from a related party.
Costs and Expenses
Cost of Revenue
Cost of revenue is currently primarily comprised of the cost of purchase of hardware from third parties (servers into which our GSP products can be placed and can otherwise enhance our branded products), and also includes Blaize-designed semiconductors purchased from foundries and various edge form factors supplied to us by contract manufacturers as well as indirect costs such as inventory carrying costs and inventory valuation reserves.
In addition, cost of revenue has historically also included direct labor costs associated with the servicing of our strategic consulting services revenue contracts with a related party. Strategic consulting services revenue with the related party is no longer expected, as the development contract with this party has been completed. There is no depreciation allocable to cost of revenue; however, if such depreciation expense were to be incurred, it would be allocated to cost of revenue.
Research and Development
Research and development ("R&D") expense primarily consists of personnel costs for our research and development activities. R&D expense includes costs associated with the design and development of our application-specific integrated circuit and intellectual property ("IP") solutions, such as third-party foundry costs, third party computer-aided tools and software licenses, third party IP licenses, and reference design development.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expense primarily consists of personnel-related expenses for our sales and marketing teams, finance, human resources, information technology, and legal organizations. These expenses also include non-personnel costs, such as legal, audit, accounting services, advertising expenses, other professional fees as well as certain tax, corporate software licenses, and insurance-related expenses.
Depreciation
Depreciation consists of ordinary depreciation on long-lived assets such as computer equipment, furniture and fixtures, leasehold improvements, and office equipment and is generally not material to us.
Transaction Costs
Transaction costs consisted of direct incremental legal, consulting, and banking fees related to the consummation of the Merger which was completed in the first quarter of 2025. No additional costs relating to the Merger are expected to be incurred.
Detail of Costs and Expenses
The following table sets forth our costs and expenses, as described above, for the years ended December 31, 2025 and 2024:
For the Year Ended December 31, Change
(Amounts in thousands, except for percentages) 2025 2024 $ %
Cost of revenue $ 32,438 $ 579 $ 31,859 *
Operating expenses:
Research and development 42,523 25,094 17,429 69.5 %
Selling, general and administrative 53,501 22,228 31,273 140.7 %
Selling, general and administrative - related party 773 185 588 *
Depreciation 1,195 886 309 34.9 %
Transaction costs 12,043 217 11,826 *
Total operating expenses $ 110,035 $ 48,610
* Percentage change is not meaningful.
Cost of Revenue
For the year ended December 31, 2025, cost of revenue increased by $31.9 million to $32.4 million, compared to $0.6 million for the year ended December 31, 2024. The increase was primarily driven by purchases of hardware from third party vendors in order to fulfil sales contracts.
R&D
For the year ended December 31, 2025, R&D expense increased by $17.4 million, or 69.5%, to $42.5 million, compared to $25.1 million for the year ended December 31, 2024. The increase during the year ended December 31, 2025 was primarily due to higher stock-based compensation expenses allocated to R&D of $17.1 million and the acquisition of third-party intellectual property for new chip development.
The increases in R&D expenses described above are expected to continue as we support the development of our next generation of products.
SG&A
For the year ended December 31, 2025, SG&A expense increased by $31.3 million, or 140.7%, to $53.5 million, up from $22.2 million for the year ended December 31, 2024. This increase during the year ended December 31, 2025 was primarily due to stock-based compensation expense of $20.5 million, which is the largest component of payroll expense, which is, in turn, the largest component of SG&A.
Other Expense, net
The following table sets forth the details of our total other expense, net, for the years ended December 31, 2025 and 2024:
For the Year Ended December 31, Change
(Amounts in thousands, except for percentages) 2025 2024 $ %
Change in fair value of Legacy Blaize convertible notes and warrants $ (226,048) $ (15,723) $ (210,325) *
Change in fair value of Polar warrants 4,125 - 4,125 *
Change in fair value of other earnout shares 117,113 - 117,113 *
Change in fair value of unissued shares of common stock (238) - (238) *
Change in fair value of committed equity facility, net 1,210 - 1,210 *
Other, net 992 1,211 (219) (18.1) %
Total other expense, net $ (102,846) $ (14,512)
* Percentage change is not meaningful.
Our "total other expense, net" for the year ended December 31, 2025 compared to the year ended December 31, 2024 was driven by the fair value changes in the different financial instruments in place during each period. In the first quarter of 2025, as a result of the Merger, the Legacy Blaize convertible notes and warrants were all converted into shares of our common stock. These instruments were, therefore, only outstanding fully during the comparative period for 2024.
After the Merger, the earnout awards issued to Burkhan that were classified as a derivative liability, and the derivative asset (fair value of the initial put option) and liability (forward contracts at each date of purchase of common stock by B. Riley) associated with the Committed Equity Facility were recorded, and subsequently marked to market at the end of each quarterly period. The derivatives associated with the Committed Equity Facility were marked to zero as of December 31, 2025, due to the immateriality of the remaining balances. "Other, net" includes fines and penalties (and the reversal of the same) regarding non-income tax based tax positions as well as the Committed Equity Facility transaction fees.
Non-GAAP Measures
In addition to financial measures presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"), we report certain key financial measures that are not required by, or presented in accordance with, GAAP. Non-GAAP financial information is presented for supplemental informational purposes only, should not be considered in isolation of, or as a substitute for or superior to, financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. Accordingly, you are cautioned not to place undue reliance on this information. We believe that along with our GAAP financial information, our non-GAAP financial information when taken collectively and evaluated appropriately, is helpful to investors in assessing our operating performance.
In conjunction with net loss calculated in accordance with GAAP, we also use EBITDA and Adjusted EBITDA, as defined below, to evaluate our ongoing operations and for internal planning and forecasting purposes.
EBITDA and Adjusted EBITDA
EBITDA is defined as "Earnings before interest, income taxes, depreciation, and amortization". Adjusted EBITDA is defined as EBITDA further adjusted for non-cash items such as stock-based compensation, changes in fair value,
and operational income and expenses that are not expected to be ongoing, as discussed below in the footnote to "other adjustments".
The following table sets forth a reconciliation of net loss to EBITDA and Adjusted EBITDA for the years ended December 31, 2025 and 2024:
For the Year Ended December 31, Change
(Amounts in thousands, except for percentages) 2025 2024 $ %
Net loss $ (206,904) $ (61,195) $ (145,709) 238.1 %
Depreciation 1,195 886 309 34.9 %
Provision for (benefit from) for income taxes 217 (952) 1,169 (122.8) %
Interest income, net (1,752) (1,904) 152 (8.0) %
EBITDA (207,244) (63,165) (144,079) 228.1 %
Stock-based compensation 37,546 3,847 33,699 876.0 %
Fair value changes and financing charges 104,872 16,187 88,685 547.9 %
Transaction costs 12,043 217 11,826 *
Non-cash inventory cost realignment adjustments (786) (349) (437) 125.2 %
Other adjustments (1)
3,091 567 2,524 445.1 %
Adjusted EBITDA $ (50,478) $ (42,696) $ (7,782) 18.2 %
* Percentage change is not meaningful.
(1)"Other adjustments" includes, but is not limited to, other non-cash expenses, including foreign exchange gains and losses, and income and expenses that are not expected to be ongoing, including litigation expenses, financing advisory fees, and fines and penalties (or the recoveries and reversals of such). We believe that these items are not reflective of our ongoing operating performance and excluding these items provides a more meaningful comparison of our results of operations over comparative periods.
Liquidity and Capital Resources
Our primary sources of cash flows have historically been from financing activities. We expect our primary sources of liquidity to continue to be cash flows from financing activities, as our expenses continue to exceed our revenues, and therefore, we cannot satisfy our cash needs through operations. We intend to raise such capital through issuances of additional equity and/or debt. As discussed below, our liquidity condition raises substantial doubt about our ability to continue as a going concern through a year from the issuance date of our consolidated financial statements, as we cannot expect that the sources of financing currently available to us will be sufficient to fund our ongoing cash requirements for at least the next twelve months and/or into the foreseeable future.
Going Concern
As described in Item 8 - "Financial Statements and Supplementary Data," in Note 2 - "Liquidity and Going Concern," our consolidated financial statements accompanying this Annual Report on Form 10-K have been prepared on a "going concern" basis, which assumes that we will be able to meet our obligations and continue our operations for the foreseeable future. Our consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.
Our ability to continue to meet our obligations, to achieve our business objectives and continue as a going concern is dependent upon several factors, including our revenue growth rate, the timing and extent of spending to support
further sales and marketing initiatives, as well as our research and development efforts. In order to continue to finance our operations, we will need to raise additional financing, if such financing is available at all.
As a result of the above considerations, we have determined that our liquidity condition raises substantial doubt about our ability to continue as a going concern through a year from the date of issuance of our consolidated financial statements.
Issuance of Common Stock During the Current Year
The table below sets forth a description of our issuance of common stock during the year ended December 31, 2025, commencing from the Closing Date of the Merger:
Common stock outstanding immediately after the Merger 98,881,886
Vesting of restricted stock units 3,961,729
Exercise of stock options 562,446
Shares issued under Committed Equity Facility 8,493,674
Shares issued in Polar Private Placement 9,375,000
Shares issued to Cantor Fitzgerald & Co. 769,231
Common stock outstanding as of December 31, 2025 122,043,966
Committed Equity Facility
On July 14, 2025, the Company entered into the Committed Equity Facility with B. Riley Principal Capital II, LLC ("B. Riley"). Pursuant to the agreement governing the Committed Equity Facility, the Company has the right, but not the obligation, to direct B. Riley to purchase newly issued shares of the Company's common stock up to an aggregate value of $50.0 million over a defined 36-month period in distinct individual transactions (each a "Purchase"), subject to certain limitations and conditions set forth in the agreement governing the Committed Equity Facility, as further described below. Without prior stockholder approval, the total aggregate shares of common stock issued to B. Riley under the Committed Equity Facility cannot exceed 20,326,159 shares of common stock, representing 19.99% of the aggregate number of shares issued and outstanding immediately prior to the execution of the Committed Equity Facility.
During the year ended December 31, 2025, the Company sold a total of 8,493,674 shares of its common stock to B. Riley under the Committed Equity Facility for net proceeds of $33.2 million.
Shares issued in Polar Private Placement
See "Trends and Recent Developments - Recent Developments in Our Business"for a description of the shares of our common stock issued in the Polar Private Placement.
Shares issued to Cantor Fitzgerald & Co.
In April 2025, the Company entered into an engagement letter with Cantor Fitzgerald & Co. ("Cantor"), which required a non-refundable advisory fee in the form of 769,231 shares of common stock. In July 2025, the Company issued the shares of common stock due to Cantor.
Future Commitments to Issue Shares of Our Common Stock
As of December 31,
2025
Stock options (1)
28,746,278
RSUs (1)
9,359,499
Employee stock purchase plan shares available for future purchase(1)
3,047,669
Earnout shares(2)
17,600,000
BZAI warrants (3)
29,648,250
Warrants issued to an advisor(3)
50,000
Polar warrants (3)
9,375,000
Issuable under Sales Partner Referral Agreement (4)
*
Issuable under Committed Equity Facility (5)
*
Total potential commitments to issue common stock 97,826,696
* Variable number of shares not determinable as of December 31, 2025.
(1)As of December 31, 2025, we had commitments to issue 28,746,278 shares of common stock to employees and others under stock option awards, and an additional 9,359,499 shares of our common stock under employee and other RSU awards. We have further reserved 3,047,669 shares of our common stock under an employee stock purchase plan, which has not yet commenced.
(2)We have commitments in respect of the Earnout Shares to issue up to 15,000,000 shares of our common stock, primarily to Legacy Blaize shareholders and also to then-outstanding Legacy Blaize employee equity award holders, and 2,600,000 shares of our common stock to Burkhan, subject to our share price achieving certain thresholds over a period of time. These Earnout Shares are dependent upon, among other things, changes in the closing share price of our common stock, the expected timing of settlement, and the probability of achieving certain triggering events.
(3)We have a total of 29,648,250 warrants to purchase shares of our common stock outstanding, exercisable at $11.50 per share (the "BZAI warrants"), which expire on January 13, 2030. Additionally, shortly after the Merger, we issued, to an advisor, 50,000 warrants to purchase shares of our common stock outstanding, exercisable at $11.50 per share, which expire in the first quarter of 2030. See "Trends and Recent Developments - Recent Developments in Our Business"for a description of the warrants issued in the Polar Private Placement (the "Polar warrants").
(4)We have a Sales Partner Referral Agreement with Burkhan LLC (the "Sales Partner"), an affiliate of the Sponsor, that allows partially for shares of our common stock to be issued to that affiliate in respect of a sales commission, at our discretion. Cash or shares of stock for commission payments are to be released upon our receipt of cash on the sales made under the Sales Partner Referral Agreement. During the year ended December 31, 2025, sales were made to an affiliate of the Sales Partner, but no payments were made on amounts due to us, and therefore, no cash or shares of stock relating to the sales commission were released during the year ended December 31, 2025. Subsequent to December 31, 2025, we received the payment from the Sales Partner and then paid the sales commission in cash, although future sales commissions may be partially payable in shares of our common stock at our discretion.
(5)The remaining number of shares that we may sell under the Committed Equity Facility varies in relation to our stock price.
Previously Utilized Financing Facilities
Prior to the Merger, certain arrangements such as Legacy Blaize convertible notes, Legacy Blaize convertible preferred stock, and Legacy Blaize warrants provided us with funding. Upon the consummation of the Merger, these agreements all converted to equity (shares of our common stock or warrants to purchase our common stock).
Cash Flows for the Years Ended December 31, 2025 and 2024
Cash Flows used in Operating Activities
Net cash used in operating activities was $73.8 million for the year ended December 31, 2025, compared to $53.5 million for the year ended December 31, 2024. The increase in cash used in operating activities was primarily due to an increase of $145.7 million in net loss, partially offset by an increase in adjustments to reconcile net loss to net cash used in operating expenses of $126.4 million and an increase in changes in operating assets and liabilities of $0.9 million.
Cash Flows used in Investing Activities
For the years ended December 31, 2025 and 2024, we used $0.8 million and $0.9 million, respectively, of cash to purchase property and equipment.
Cash Flows provided by Financing Activities
For the year ended December 31, 2025, net cash provided by financing activities was $70.1 million, which primarily consisted of $33.2 million of net proceeds from the Committed Equity Facility, $27.9 million of net proceeds from the issuance of common stock to Polar, and $15.9 million of proceeds from the Merger and PIPE financing, partially offset by the $7.7 million payment of deferred offering costs. Net cash provided by financing activities for the year ended December 31, 2024 of $101.7 million primarily consisted of $110.7 million in proceeds from the issuance of secured convertible notes, partially offset by the payment of demand notes of $4.8 million and deferred offering costs of $4.4 million.
Material Cash Requirements, Cash Collections, and Cash Availability
Material cash requirements as of December 31, 2025 included trade accounts payable of $22.8 million for the purchase of finished goods hardware as described below, along with the near-term general corporate expenses of the business, such as employee payroll and consulting fees.
During the fourth quarter of 2025, we sold certain hardware in the amount of $23.8 million, and at the same time, purchased hardware from a third-party vendor in order to fulfil that sales contract, recording the trade account payable referred to, above. During the first quarter of 2026, we received payments of $15.2 million from our customer, and paid our vendor $15.8 million. The remainder of $8.6 million is due from our customer on March 31, 2026.
Subsequent to the year ended December 31, 2025, we collected cash from a related party in the amount of $6.4 million, which fully settled the related party's outstanding accounts receivable balance as of December 31, 2025 of $3.4 million. The remaining $3.0 million was recorded as deferred revenue as of the date of receipt within the first quarter of 2026 and will be recognized as revenue in the first quarter of 2026 as we fulfilled our performance obligations to the related party at that time.
As of December 31, 2025, we had cash and cash equivalents on hand of $45.8 million, and we had approximately $16.6 million remaining available to draw on the Committed Equity Facility.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company ("EGC") as defined in the JOBS Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we are (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer's compensation to median employee compensation.
We will remain an EGC under the JOBS Act until the earliest of (i) December 31, 2026, which is the last day of our first fiscal year following the fifth anniversary of the closing of BurTech's initial public offering, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a "large accelerated filer" under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.
We have also elected to avail ourselves of smaller reporting company ("SRC") status, which is currently available to us as our annual revenues are less than $100.0 million, while at the same time, our public float is less than $700.0 million. Should our annual revenues exceed $100.0 million, then we may continue to elect SRC status if our public float is less than $250.0 million. Annual revenues are determined with reference to our full year revenues as reported on Form 10-K each year, and public float is determined annually at a measurement date of June 30 of each year by multiplying the number of shares of common stock held by non-affiliates by the closing share price of our common stock on June 30 of that year. SRC status allows us, but does not require us, to provide scaled disclosures in our annual reports on Form 10-K and our quarterly reports on Form 10-Q.
The public float and revenue calculations described above also determine our status as an accelerated or non-accelerated filer. Currently, as our revenues are less than $100.0 million, we are a non-accelerated filer, and as long as we are a non-accelerated filer (as determined each year on June 30 as described above) we are not required to provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. Should our revenues exceed $100.0 million and should our public float continue to be in excess of $75.0 million, we would then become an accelerated filer, commencing with our next Annual Report on Form 10-K.
Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. We expect quarter-to-quarter GAAP earnings volatility from our business activities.
Our critical accounting estimates include estimates related to accounting for the Merger and reverse recapitalization, revenue recognition, valuation of accounts receivable, the net realizable value of inventories, and the liability or equity classification and/or valuation of financial instruments, which may be complex financial instruments. Our financial instruments subject to valuation other than a Level 1 valuation technique currently include the earnout shares, stock-based compensation awards such as stock options, and the valuation of the Polar warrants; and historically have included the pre-Merger convertible notes, pre-Merger warrants, and pre-Merger stock-based compensation awards. These estimates and assumptions are based on historical experience and on various other factors which we believe to be reasonable under the circumstances. We engage third-party valuation specialists to assist with estimates related to the valuation of derivative assets or liabilities arising from complex financial instruments.
Management discusses the ongoing development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors.
Refer to Note 3 - "Summary of Significant Accounting Policies," in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies.
Merger and Reverse Recapitalization
Our consolidated financial statements reflect the results of the Merger, which was accounted for as a reverse recapitalization in accordance with U.S. GAAP. The accounting for the Merger required management to make significant estimates and judgments, particularly in identifying the accounting acquirer, determining the fair value of financial instruments issued, and evaluating the classification of certain financial instruments.
Under the guidance in ASC 805 - "Business Combinations," the determination of the accounting acquirer required management to consider a variety of factors, including the relative voting rights of the pre-combination shareholders, the composition of the board of directors and senior management of the combined entity, and the intended purpose and substance of the transaction. After considering this guidance, the Merger was accounted for as a reverse recapitalization, with no goodwill or intangible assets recognized. The net assets of the combined entity are stated at historical cost, and the shares and per-share information presented in the consolidated financial statements were retroactively adjusted to reflect the exchange ratio established in the merger agreement.
In addition, management evaluated the appropriate classification of certain financial instruments such as contingent earnout liabilities under ASC 480, "Distinguishing Liabilities from Equity," and ASC 815, "Derivatives and Hedging". This assessment required complex analysis of contractual terms and applicable accounting guidance to determine whether instruments should be recorded as equity or liability-classified. Liability-classified instruments are subsequently remeasured at fair value each reporting period end, with changes recognized in earnings, which may result in significant volatility in our results of operations.
Because the accounting for the Merger and reverse recapitalization involved estimates that relied on management's assumptions regarding market conditions, valuation methodologies, and the interpretation of complex contractual terms, it represents a critical accounting estimate.
Revenue
We make significant estimates and assumptions as we follow the revenue accounting model of ASC 606 - "Revenue from Contracts with Customers," ("ASC 606") to (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.
Our contracts may contain more than one performance obligation. Judgment is required in determining whether each performance obligation within a customer contract is distinct. Some of our products and services function on a standalone basis and do not require a significant amount of integration or interdependency. Therefore, multiple
performance obligations contained within a customer contract are considered distinct and are not combined for revenue recognition purposes. We allocate the total transaction price to each distinct performance obligation in an arrangement with multiple performance obligations on a relative standalone selling price basis. In certain cases, we can establish standalone selling price based on directly observable prices of products or services sold separately in comparable circumstances to similar customers. If standalone selling price is not directly observable, such as when we do not sell a product or service separately, we determine standalone selling price based on market data and other observable inputs.
Further, the concept of "probability of collection" of revenue is a significant estimate in the step of "identifying a valid contract," in ASC 606, as collection need be assessed as "probable," which is generally considered to be over 75% likely to occur, before revenue can be recognized. Probability estimates hinge upon the management's assessment of a customer's financial ability to pay, credit history or past history of payments, and intent to pay. If there is uncertainty regarding the ability of collecting potential revenue in accordance with the terms of a credit agreement at the time of a sale, it may be appropriate to defer revenue recognition or apply a constraint against revenue recognition until payment is received from the customer. Since we have a concentration in our customer base, management carefully assesses the probability of collection from each customer at the time of sale.
Valuation of Accounts Receivable
The "current expected credit loss" accounting standard, or "CECL" is the accounting model that is used to measure the valuation of trade accounts receivable. Estimates of expected credit losses on trade receivables are required to be recorded at inception, based on historical information, current conditions, and reasonable and supportable forecasts.
Management makes complex judgments about future economic conditions, borrower creditworthiness, and historical loss experience. Our customer base is highly concentrated, and many of our customers have limited or no established credit history. As a result, the estimation of expected credit losses involves significant judgment and is subject to a high degree of uncertainty.
The allowance for credit losses is particularly sensitive to changes in the financial condition or payment behavior of individual customers. A default by a single significant customer could have a material impact on our results of operations and financial position. We regularly review and update our estimates as new information becomes available and as economic conditions evolve.
Given the inherent limitations in the available data and the significant judgment required, actual credit losses may differ materially from our estimates. We believe our approach is reasonable and appropriate given the unique characteristics of our customer base, and we continue to refine our methodology as more information becomes available.
Net Realizable Value of Inventories
The determination of the net realizable value ("NRV") of inventory is a critical accounting estimate that requires management judgment. Inventories are stated at the lower of cost or NRV. Cost is determined using the first-in, first-out method. NRV represents the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Management regularly reviews inventory quantities on hand and compares these amounts to forecasted demand, historical usage, and market conditions to identify excess, slow-moving, obsolete, or otherwise impaired items. When indicators are present that the cost of the inventory exceeds its NRV, we record a write-down. These estimates inherently involve significant judgment, particularly in assessing future demand and technological changes.
Changes in assumptions or market conditions could materially affect the carrying value of our inventory. Once recorded, write-downs to NRV establish a new cost basis and are not subsequently reversed.
Management believes the assumptions and methodologies used in estimating NRV are reasonable and consistent with industry practice; however, actual results may differ materially from these estimates, which could have a significant impact on our results of operations and financial condition.
Classification of Complex Financial Instruments
Our financial statements include various instruments with characteristics of both debt and equity, currently including the Committed Equity Facility, earnout shares, warrants trading under the ticker symbol "BZAIW", and the Polar warrants, and historically have included convertible notes, redeemable preferred stock, and legacy warrants. The determination of whether these instruments should be classified as liabilities or equity requires significant judgment and the application of complex accounting guidance under ASC 480 - "Distinguishing Liabilities from Equity," and ASC 815 - "Derivatives and Hedging".
Management evaluates the specific terms and features of each instrument, including redemption provisions, conversion features, participation rights, and contingencies that could require cash settlement. Instruments that contain certain cash settlement features are generally classified as liabilities and recorded at fair value, with changes in fair value recognized through earnings. Instruments that are not mandatorily redeemable for cash and that meet the criteria for equity classification are recorded in equity.
Determining the appropriate classification requires assessing the likelihood and timing of redemption or conversion events, evaluating embedded derivative features where an instrument embedded in a contract is issued for nominal or no apparent consideration, along with the essential characteristics inherent in a derivative instrument of a notional amount, an underlying security, and a mechanism for net settlement, and estimating fair values where bifurcation is required. These assessments rely on market-based assumptions, volatility estimates, discount rates, and, in certain cases, management's expectations regarding future financing and settlement outcomes. Because these judgments involve estimates that are inherently uncertain, subsequent changes in facts or circumstances could materially impact the classification and measurement of these instruments.
Valuation of Financial Instruments
Valuation of any financial instrument depends on the underlying characteristics of the instrument, which generally dictate the valuation model to be used. Currently outstanding instruments subject to valuation include the earnout shares, stock options, and the Polar warrants. Previously outstanding instruments subject to valuation have included the Committed Equity Facility, convertible notes and previously outstanding warrants.
The earnout shares are valued on a quarterly basis using a Monte Carlo simulation model. This methodology captures the probabilistic nature of mechanisms for our future exercise of the instrument, share price volatility, and contractual constraints, providing a reasonable estimate of the put option's expected economic benefit over its remaining term. Monte Carlo simulation is a numerical method used to estimate the value of uncertain outcomes by repeatedly generating random variables to mimic the behavior of a stochastic (i.e., random) process.
The fair value of stock options granted is determined using the Black-Scholes-Merton ("Black-Scholes") option pricing model using various inputs, including management's estimates of expected share price volatility, term, risk-free rate and future dividends. We have elected the simplified method to determine the expected term of the option grants.
The fair value of the Polar warrants is determined using the Black-Scholes option pricing model as described above.
The fair value of the put option embedded in the Committed Equity Facility at its inception was determined using a Monte Carlo simulation model, as described above. As of December 31, 2025, the fair value of this put option was deemed to be de minimis and was therefore written down to zero.
The fair value of the forward contract embedded in the Committed Equity Facility at each point of issuance of our common stock to B. Riley is the difference between a volume-weighted average purchase price and the settlement
date closing share price of our common stock. The embedded derivative of the forward contract does not involve a complex valuation model. The fair value of this forward contract as of December 31, 2025 was de minimis.
Our previous issuance of legacy warrants was recorded at estimated fair value calculated using the Black-Scholes option pricing model as described above; wherein, depending on the terms of the legacy warrants, certain parameters within the Black-Scholes option pricing model were required to be determined using a Monte Carlo simulation model, as described above.
Our previous issuance of convertible notes was valued at an assumed market price, and did not involve a complex valuation model.
The value of our pre-Merger stock-based compensation awards was determined based on the estimated fair value of shares of common stock at the date of grant, as determined by the Board of Directors, and did not involve a complex valuation model.
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