Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report. Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements that involve risks and uncertainties as described under the heading "Cautionary Note on Forward-Looking Statements" and Part I, Item 1A, "Risk Factors" in the Annual Report. The forward-looking statements are not historical facts, but rather are based on management's current expectations, estimates, forecasts, projections, beliefs and assumptions and on information available to us as of the date of this Quarterly Report about our industry and business. Our actual results could differ materially from the results contemplated by these forward-looking statements.

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

Overview

We are a nuclear energy technology company developing a small modular reactor ("SMR") based on established pressurized water reactor ("PWR") technology, with novel emplacement in deep boreholes approximately one mile below the Earth's surface. Our reactor, which we refer to as the Gravity Reactor, will leverage subsurface conditions to support key containment and operating functions, including the use of hydrostatic pressure from a water column within the borehole to support reactor operating pressure and cooling, and the surrounding geological formation to provide structural confinement and shielding. This approach is intended to reduce reliance on large surface containment structures and other safety-related infrastructure associated with conventional nuclear power plants, support faster deployment timelines, improve security, enhance safety, and enable lower capital and operating costs relative to conventional nuclear facilities, while reducing exposure to environmental and other surface-level hazards.

Each Gravity Reactor is targeted to produce up to 15 megawatts of electric power output ("MWe"). Individual reactors may be deployed as standalone installations or grouped in clusters of boreholes at a single site, which may enable longer refueling cycles through coordinated fuel management, staggered refueling schedules and more efficient utilization of shared infrastructure, and support larger installations capable of supplying hundreds and potentially thousands of MWe of generation capacity.

The Company's commercialization strategy is based on a phased deployment plan designed to move toward commercialization in the next three years. Given that reactor criticality using established PWR technology is well understood, the Company is prioritizing validation of the hardest and most differentiated parts of our system, to reduce risk earlier and move more directly toward a commercialization outcome. Specifically, the tests that we want to focus on are drilling to depth at commercial scale, installing and integrating a nuclear system a mile underground, and operating as part of a complete energy ecosystem. We also want to prove that we can do this in time to meet the AI-driven surge in demand for energy. The Company is currently participating in the DOE Reactor Pilot Program, and we expect to demonstrate our system as part of the DOE Reactor Pilot Program.

The first phase of the Company's phased deployment plan involves engineering validation and proof of concept wells. The Company has a long-term lease for approximately 100 acres located within the Kansas Site and has commenced initial field development activities at the site. As part of this, the Company already drilled its first data acquisition well to gather real-world data up to 6,000 feet deep. Next, the Company will demonstrate its ability to drill a commercial-scale borehole and safely deploy a prototype reactor. The Company continues to advance its reactor design in parallel with these activities, including planning additional drilling activities and conducting related engineering and emplacement work, and is targeting completion of these activities in the coming months. The balance of this year and into early 2027 will be focused on delivery of key components for full-system installation, including well casing, our reactor canister, and heat exchanger, as well as LEU fabrication and loading.

The second phase of the Company's phased deployment plan involves DOE authorization and one or more commercial pilot wells. Specifically, subject to DOE authorization, the Company intends to demonstrate the Gravity Reactor, and to apply for a commercial license with the NRC in the first half of 2027, converting the same pilot reactor to commercial operation. We are working closely with both the DOE and the NRC to align demonstration and licensing, as we are aiming to move these efforts forward together rather than advancing them in sequence.

The third and final phase of the Company's phased deployment plan involves the construction of surface facilities and seeking high-volume commercial licensing for deployment of multiple reactors at a single site through clustered boreholes, and subsequently, at multiple sites. We are targeting as early as 2027 to seek such high-volume commercial licensing with the NRC.

The Company's approach to subsurface reactor deployment is supported by its intellectual property portfolio, which includes issued patents and pending patent applications relating to reactor configuration, deep subsurface emplacement, drilling and casing techniques, thermal-hydraulic performance, instrumentation and monitoring, and other technologies supporting the deployment of underground nuclear reactors. The Company believes that its intellectual property, together with its engineering expertise and ongoing development activities, supports its competitive position.

Legacy Deep Fission was incorporated in July 2023 and remains in the development stage. The Gravity Reactor remains in conceptual and early engineering stages, and the Company has not constructed or operated a commercial reactor or generated revenue. Current activities include reactor development, geological evaluation, large-diameter borehole drilling research and development, geothermal testing, safety analysis, regulatory engagement, site development, and commercialization planning.

The Merger

On the Merger Closing Date, Surfside completed the Merger with Legacy Deep Fission, pursuant to which a wholly owned subsidiary of Surfside merged with and into Legacy Deep Fission, with Legacy Deep Fission continuing as the surviving corporation and becoming a wholly owned subsidiary of Surfside. In connection with the transaction, Surfside changed its name to Deep Fission, Inc.

On the Merger Closing Date, we issued 38,538,922 shares of our common stock to existing holders of Legacy Deep Fission common stock and 85,000 shares of our common stock (the "Advisor Shares") to an accredited investor in consideration for services rendered in connection with the Merger, while Surfside's existing stockholders continued to hold an aggregate of 2,166,667 shares of our common stock (the "Retained Pre-Merger Shares"). We also reserved a total of 9,500,884 shares of our common stock under the 2025 Plan for future issuances of equity awards at the discretion of our board of directors to officers, employees, consultants and directors and reserved 1,000,000 shares of our common stock under the 2025 Employee Stock Purchase Plan ("2025 ESPP") for future purchase by employees.

The September 2025 Private Placement

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

The February 2026 Private Placement

On February 5, 2026, the Company issued and sold 5,333,333 shares of common stock at a purchase price of $15.00 per share, to certain accredited and institutional investors pursuant to the subscription agreement for an aggregate purchase price of $80 million. The Company incurred offering costs of $4,850,668 in connection with this offering, which are recorded as a reduction of gross proceeds and recognized as a reduction to additional paid-in capital within stockholders' equity.

Concurrently with this offering, the Company also issued warrants to purchase an aggregate 129,418 shares of its common stock, subject to customary anti-dilution adjustments for stock splits, stock dividends, and similar events, at an exercise price of $15.00 per share (the "February 2026 Warrants"). The February 2026 Warrants expire on the earlier of (i) five years after the Merger closing after the Merger Closing Date and (ii) three years after the Company's shares of common stock are listed on a national securities exchange (as defined in the February 2026 Warrants agreement).

Accounting Considerations

The unaudited condensed consolidated financial statements and related footnotes included in this Quarterly Report include descriptions of Legacy Deep Fission's previously outstanding common stock; however, in connection with the Merger, all shares of Legacy Deep Fission common stock were converted into the right to receive shares of our common stock. See "The Merger" and "The September 2025 Private Placement" above for detailed information regarding the transactions and the related conversion of the shares of Legacy Deep Fission's common stock.

For financial reporting purposes, the Merger was treated as a recapitalization and reverse acquisition. Legacy Deep Fission is considered the acquirer for accounting purposes, meaning that the historical financial results of Legacy Deep Fission prior to the Merger are

considered our historical financial results under applicable accounting principles. Accordingly, the unaudited condensed consolidated financial statements included in this Quarterly Report and discussed in this section, for all periods prior to the Merger, are those of Legacy Deep Fission and not Surfside.

Our Intended Business

As described under "Business Model and Revenue Streams" in Item 1, "Business," of the Annual Report on Form 10-K for the year ended December 31, 2025, our business model is designed to generate revenue from (i) project-level equity participation, including indirect participation in project-level cash flows from electricity sales, (ii) one-time upfront revenue, generally expected to be associated with Gravity Reactor deployment and related upfront project development services and (iii) recurring revenue, generally expected to be associated with technology licensing and operations and maintenance services of Gravity Reactor installations. Because we have not yet commercialized a Gravity Reactor, none of these revenue streams have begun to materialize and are not reflected in our historical results.

Components of Results of Operations

Operating Expenses

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

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

Other Non-Operating Income (Expense)

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

Results of Operations

Comparison of the three months ended March 31, 2026 and 2025

The following table sets forth our summarized financial information for the periods indicated:

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Operating Expenses

General and administrative expenses increased by $12.9 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in general and administrative expenses was primarily attributable to a $10.4 million increase in non-cash stock-based compensation expense, as well as increased legal costs, salary and benefit costs due to an increase in the number of employees year over year, and marketing costs.

Research and development expenses increased by $7.2 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase was primarily attributable to the advancement of the Company's operating plans and progression of first phase of the Company's phased deployment plan, as well as higher salary, non-cash stock-based compensation expense, and benefit costs associated with increased headcount, and increased consulting fees supporting research and development activities.

Other Non-Operating Income (Expense)

Other non-operating income increased by $1.9 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. This increase was primarily driven by the absence of a loss from the change in fair value of SAFE Notes in the current period, as all SAFE Notes were converted into common stock in connection with the Merger prior to March 31, 2026. Interest income for the three months ended March 31, 2026 consisted primarily of interest earned on the February 2026 Private Placement funds.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through the issuance and sale of our equity securities. Our primary requirements for liquidity and capital are to finance working capital and capital expenditures associated with operating and managing the Company, as well as for general corporate purposes. As of March 31, 2026, our principal source of liquidity was our cash and cash equivalents of $84.8 million. On February 5, 2026, the Company issued and sold 5,333,333 shares of common stock at a purchase price of $15.00 per share, to certain accredited and institutional investors pursuant to the subscription agreements for an aggregate purchase price of $80.0 million. The aggregate net proceeds to the Company from the offering was approximately $75.1 million, after deducting fees to the placement agents and expenses payable by the Company. We anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments. Since our inception, we have generated significant operating losses as reflected in our accumulated deficit of $88.1 million as of March 31, 2026. We generated a positive cash flow of $61.0 million for the period ended March 31, 2026 due to financing activities.

We expect to use our proceeds from the February 2026 Private Placement for general working capital and corporate purposes, including towards the engineering, research and development of our first pilot nuclear reactor and related technologies. A portion of the net proceeds from the February 2026 Private Placement will also be used to cover management, overhead, legal and accounting fees and expenses relating to the Merger and the February 2026 Private Placement and could include potential acquisitions of complementary businesses or assets (though none is currently contemplated). Based on our expectation of continued operating losses for at least the near term, we anticipate our existing cash and cash equivalents, together with net proceeds from the February 2026 Private Placement, will not be sufficient to operate our business for the next twelve months. Accordingly, we determined that there is substantial doubt about our ability to continue as a going concern. In order to continue to operate our business beyond that time, we will need to raise substantial additional capital.

In addition to our cash and cash equivalents currently available to support these activities, we estimate that we will require $200 million of additional capital to complete development of, and license and commercially deploy, our first commercial reactor, but we expect we can complete the development and begin operation of an initial test reactor with approximately half that amount of additional capital. We are actively evaluating potential financing sources, including equity issuances, debt financing, strategic partnerships, and other capital raising transactions. The Company has historically been able to raise capital through equity and equity-linked instruments, such as SAFE Notes and private placement equity issuances, and believes that it has a reasonable basis for its expectation that it will be able to raise additional funds. However, there can be no assurance that such financing will be available on acceptable terms, on a timely basis, or at all. To the extent that we raise additional capital through the issuance of equity or convertible securities, the ownership interests of our existing stockholders will be diluted. Moreover, the terms of such securities or any other financing may include preferences or other rights that adversely affect the value of, or rights of holders of, our common stock. Debt financing, if available, could result in additional debt service obligations, and debt financings or other financings may involve covenants that restrict our operations or financial flexibility. However, our management team will have broad discretion in making strategic decisions to execute our growth plans, and there can be no assurance that management's decisions will result in successful achievement of our business objectives. In addition, our estimate as to the sufficiency of our current cash, cash equivalents and short-term investments and our current

operating plan as discussed above are based on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we currently anticipate.

Cash Flows

Three months ended March 31, 2026 and 2025

As of March 31, 2026, our cash and cash equivalents were $84.8 million. The following table shows a summary of our cash flows for the periods presented:

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Operating Activities

Net cash used in operating activities increased by $12.4 million, to $14.0 million for the three months ended March 31, 2026, compared to the net cash used in operating activities of $1.6 million for the months ended March 31, 2025. The increase in net cash used in operating activities was primarily attributable to increased net losses, changes in working capital, including prepaids and accounts payable, and other current liabilities.

Investing Activities

Net cash used in investing activities increased by $38.3 thousand, to $53.4 thousand for the months ended March 31, 2026, compared to the net cash used in investing activities of $15.2 thousand for the three months ended March 31, 2025. The increase was driven by additions by the Company to property and equipment.

Financing Activities

Net cash provided by financing activities increased by $74.3 million, to $75.1 million for the three months ended March 31, 2026, compared to the net cash provided by financing activities of $860.8 thousand for the three months ended March 31, 2025. The increase in net cash provided by financing activities was primarily attributable to proceeds from the February 2026 Private Placement.

Contractual Obligations and Commitments

During the three months ended March 31, 2026, the Company entered into an uncancelable commitment with a supplier to purchase low-enriched uranium fuel at a cost of approximately $9.2 million.

Off-Balance Sheet Transactions

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with entities or financial partnerships, such as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements and the related notes thereto included in this Quarterly Report are prepared in accordance with United States generally accepted accounting principles. The preparation of unaudited condensed consolidated financial statements also requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made

by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. We believe that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the estimates we believe are most critical to aid in fully understanding and evaluating our financial condition, results of operations and future performance. We have described our significant accounting policies within Note 2 to our unaudited condensed consolidated financial statements included herein.

SAFE Notes

In 2025, the Company issued SAFE Notes in exchange for cash financing. The SAFE Notes converted into our common stock in connection with the Merger in September 2025. The Company accounted for its SAFE Notes as derivatives under the FASB ASC 815, Derivatives and Hedging, and presented them as long-term liabilities in the accompanying consolidated balance sheets. The determination of fair value for the Company's SAFE Notes required significant judgment and the use of estimates. We have described the valuation of the SAFE Notes in Note 5 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Stock-Based Compensation

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

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

Recent Accounting Pronouncements

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

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