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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K


x			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39417

EVOLV TECHNOLOGIES HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware			84-4473840
(State of Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
500 Totten Pond Road, 4th Floor, Waltham, Massachusetts			02451
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code: (781) 374-8100

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange
on Which Registered

Class A common stock, par value $0.0001 per share

Warrants to purchase one share of Class A common stock

EVLV

EVLVW

The Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

Smaller reporting company x

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. xo

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). xo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of June 30, ~~2024~~2025, based on the closing price of $26.5524 per share as reported on The Nasdaq Stock Market LLC, was approximately $~~337~~999.90 million.

As of ~~April~~March 213, ~~2025~~2026, the registrant had ~~163~~179,~~470~~350,~~325~~739 shares of Class A common stock, par value $0.0001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the information required to be furnished pursuant to Part III of this Annual Report on Form 10-K will be set forth in, and incorporated by reference from, the registrant’s definitive proxy statement for the annual meeting of stockholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year ended December 31, ~~2024~~2025 (the "Proxy Statement").

EXPLANATORY NOTE

Introduction

As previously announced in the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 25, 2024, the Board of Directors (the “Board”) of Evolv Technologies Holdings, Inc. (“we,” “us,” “our,” the “Company” and “Evolv”) determined on October 24, 2024 that the Company’s previously issued consolidated financial statements and other financial data for the fiscal years ended December 31, 2022 and December 31, 2023 contained in its Annual Report on Form 10-K for the year-ended December 31, 2023, and its condensed consolidated financial statements for the quarters and year-to-date periods ended June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024 and June 30, 2024 contained in its Quarterly Reports on Form 10-Q (collectively, the “Non-Reliance Periods”), should no longer be relied upon because of misstatements related to accounting for certain sales transactions. As a result of these misstatements, the Company is restating certain financial information for the Non-Reliance Periods. All restated financial information is included in this Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”), and we have not filed, and do not intend to file, amendments to any of our filings that we have previously filed with the SEC.

Restatement Background

In September 2024, an ad hoc committee of independent directors (the “Committee”) of the Board, under the direction of the Board, commenced an investigation (the “Investigation”) of the Company’s sales practices, including whether certain sales of products and subscriptions to channel partners and end users were subject to extra-contractual terms and conditions that impacted revenue recognition and other metrics, and if so, when senior Company personnel became aware of these issues.

As a result of the Investigation, the Committee determined that certain sales, including sales to one of its largest channel partners, were subject to extra-contractual terms and conditions, some of which were not shared with the Company’s accounting personnel, and that certain Company personnel engaged in misconduct in connection with those transactions. Furthermore, these extra-contractual terms and conditions were withheld from the Company’s Audit Committee of the Board (the “Audit Committee”) and the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”). The Committee also determined that certain accounting personnel were aware of indications of these extra-contractual terms and conditions during affected periods, and that related allegations were raised internally in July 2024 and known to senior finance and accounting personnel, but that those allegations were not escalated to the Audit Committee or communicated to PwC prior to the filing of the Company’s second quarter 2024 financial statements. As a result of the Investigation, the Board determined that new leadership was critical to moving the Company forward. In November 2024, the Company’s Chief Financial Officer resigned. Additionally, four other employees, including personnel from its sales, finance and accounting departments were terminated or resigned as a result of the investigation.

Accordingly, the Committee determined that the accounting for certain sales transactions was materially inaccurate and that, among other things, revenue was prematurely or incorrectly recognized in connection with financial statements prepared for the Non-Reliance Periods. The Committee has determined that these misstatements are material for certain financial statements prepared for these periods and that the recognition of revenue in the proper periods impacted each of those financial statements. The Committee determined that the vast majority of this revenue was prematurely rather than incorrectly recognized. Other previously reported metrics that are a function of revenue were also misstated as a result of these revenue misstatements.

Following the Investigation, the Company completed a comprehensive review of its previously issued financial statements (the “Financial Statement Review”). As further detailed below, the Company also identified errors in the consolidated financial statements for the Non-Reliance Periods. Additionally, the Company is also adjusting for certain out-of-period errors that had been previously identified and determined to be immaterial.

Items Included in this Filing

This Form 10-K includes the following information, in addition to the financial statements and related disclosures for the year ended December 31, 2024:

•restated audited consolidated financial statements and related disclosures as of and for the years ended December 31, 2023 and 2022; and

•restated unaudited interim financial information and related disclosures as of and for the quarterly periods and year-to-date periods ended June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024 and June 30, 2024.

Refer to Note 2 “Restatement of Previously Issued Consolidated Financial Statements” and Note 23 “Restatement of Quarterly Financial Information (Unaudited)” in the notes to the consolidated financial statements in this Form 10-K for additional information, including a summary of the impacts of these adjustments.

Internal Control-related Considerations

Management evaluated the Company’s internal control over financial reporting and determined that material weaknesses in the control environment, including the lack of a sufficient complement of personnel, risk assessment, and information and communication components of internal control, as well as the material weakness related to revenue control activities resulted in the restatement of the consolidated financial statements for the annual periods ended December 31, 2022 and 2023, and the quarterly periods included in such fiscal years beginning with the second quarter of 2022, and for the quarterly periods as of and for the periods ended March 31, 2024 and June 30, 2024; as well as adjustments to the consolidated annual financial statements for the period ended December 31, 2024, and the quarterly period ended September 30, 2024 that were recorded prior to the issuance of those financial statements. These material weaknesses are in addition to previously disclosed material weaknesses, which resulted in adjustments and certain

immaterial misstatements in the consolidated financial statements for the years ended December 31, 2019, 2020, 2021, 2022, 2023, and 2024, as well as certain quarterly periods within those years; the revision of the Company's previously issued 2020 annual financial statements, 2021 quarterly and annual financial statements, and quarterly financial statements for the three months ended March 31, 2022; as well as the restatement of the Company’s financial statements as of and for the three and six months ended June 30, 2023. Management is taking steps to remediate the material weaknesses in our internal control over financial reporting. See "Part I, Item 4, Controls and Procedures" for more information.

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TABLE OF CONTENTS

		Page
PART I		4
	Item 1. Business	4
	Item 1A. Risk factors	1314
	Item 1B. Unresolved Staff Comments	41
	Item 1C. Cybersecurity	41
	Item 2. Properties	42
	Item 3. Legal Proceedings	42
	Item 4. Mine Safety Disclosures	42
PART II		43
	Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	43
	Item 6. [Reserved]	44
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
	Item 7A. Quantitative and Qualitative Disclosures About Market Risks	~~112~~65
	Item 8. Financial Statements and Supplementary Data	~~113~~66
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	~~202~~115
	Item 9A. Controls and Procedures	~~202~~115
	Item 9B. Other Information	~~205~~119
	Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	~~206~~119
PART III		~~207~~120
	Item 10. Directors, Executive Officers, and Corporate Governance	~~207~~120
	Item 11. Executive Compensation	~~207~~120
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~207~~120
	Item 13. Certain Relationships and Related Transactions, and Director Independence	~~207~~120
	Item 14. Principal Accountant’s Fees and Services	~~207~~120
PART IV	Item 15. Exhibits and Financial Statement Schedules	~~208~~121
	Item 16. Form 10-K Summary	~~210~~123
	Signatures	~~211~~124

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Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Annual Report on Form 10-K, other than statements of historical fact, including, without limitation, statements regarding our results of operations and financial position, business strategy, plans and prospects, our relationship with significant manufacturers and suppliers, our ability to obtain new customers and retain existing customers, and sell existing and prospective products, research and development costs, our ability to recruit, retain and train staff, the potential benefits of ~~any change in~~ our ~~sales~~pure subscription and ~~fulfillment~~purchase ~~model~~subscription models, timing and likelihood of success, macroeconomic, market and technology trends, the government regulations that we are subject to, potential exposure to litigation, and plans and objectives of management for future operations and results, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements though not all forward-looking statement use these word or expressions.

The forward-looking statements in this Annual Report on Form 10-K are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, without limitation the important factors discussed in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K, as any such factors may be updated from time to time in its other filings with the SEC. The forward-looking statements in this Annual Report on Form 10-K are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, it may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed as exhibits to this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements ~~speak~~are current only as of the date of this Annual Report on Form 10-K. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Annual Report on Form 10-K, whether as a result of any new information, future events or otherwise.

Industry and Market Data

The information concerning our industry contained in this Annual Report on Form 10-K is based on data from various industry analyses, our internal research and data, and adjustments and assumptions we believe to be reasonable. We have not independently verified data from industry analyses and cannot guarantee their accuracy or completeness. In addition, we believe that data regarding the industry and market size provide general guidance but are inherently imprecise. Further, ~~the~~our ~~Company’s~~ estimates and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed in Item 1A, “Risk Factors” of this Annual Report on Form 10-K. These and other factors could cause results to differ materially from those expressed in the estimates and assumptions.

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PART I

ITEM 1. BUSINESS

Company Overview

Evolv Technologies Holdings, Inc., a Delaware corporation formed in 2021 (“we,” “us,” “our,” the “Company” and “Evolv”) is a leading security technology company pioneering Artificial Intelligence (“AI”)-powered screening solutions designed to help create safer ~~experiences,~~environments ~~with~~while ~~key~~maintaining ~~market~~efficient ~~categories~~visitor ~~that~~flow ~~include~~and a positive visitor experience. We serve customers across a range of end markets, including education, healthcare, sports, live entertainment, tourist attractions, houses of worship, and industrial workplaces. Our mission is to make the world a safer and more enjoyable place to live, work, learn, and play. Our goal is to help facility operators address ~~the chronic epidemic of~~ escalating gun violence, mass shootings and terrorist attacks while maintaining a positive visitor experience.

Our solutions ~~combine~~are ~~proprietary software and hardware,~~ delivered asthrough a ~~long-term~~ Security-as-a-Service ~~("SaaS") subscription~~ model ~~and~~that ~~are~~integrates ~~designed~~our toproprietary ~~enhance~~sensor ~~security~~platform and ~~improve~~AI-powered ~~the~~software, ~~visitor~~cloud ~~experience~~connectivity, and ongoing services. ~~Evolv~~We ~~provides~~deliver aour ~~cloud-connected,~~solutions ~~AI-driven~~through ~~approach~~two tosales ~~security~~models: ~~that~~a ~~goes~~pure ~~beyond~~subscription ~~just~~model ~~hardware,~~and ~~supporting~~a ~~the~~purchase ~~end-to-end~~subscription ~~screening~~model, ~~experience.~~each ~~Our~~of ~~focus~~which isrequires ~~weapons~~both ~~detection,~~hardware and wean ~~offer~~active, ~~two~~connected ~~core~~software ~~solutions:~~subscription, ~~Evolv~~as ~~Express®~~further ~~and~~described ~~Evolv~~in ~~eXpedite™~~“Sales –Models”. ~~designed~~We tobelieve ~~efficiently~~this ~~screen~~integrated ~~high~~approach ~~volumes~~reflects the full scope of ~~people~~our offering and ~~bags~~aligns ~~for~~our ~~concealed~~long-term ~~threats.~~interests with those of our customers.

Our ~~flagship~~hardware ~~product,~~platforms ~~Evolv~~are ~~Express,~~uniquely ~~uses~~designed ~~advanced sensors, AI-powered software,~~ and ~~cloud~~purpose ~~services~~engineered tofor ~~not~~real ~~only consistently detect firearms~~world, ~~improvised~~high ~~explosives,~~throughput ~~and~~security ~~certain~~environments ~~types of knives~~ and ~~distinguish~~are ~~them~~the ~~from~~foundational ~~many~~component ~~harmless~~of ~~items~~our ~~such~~solutions. asEvolv ~~cell~~Express® ~~phones~~ and ~~keys,~~Evolv ~~but~~eXpedite™ ~~also~~operate ~~visualize~~exclusively ~~the~~with ~~location~~Evolv’s ofproprietary ~~the~~software ~~potential~~and ~~threat~~cloud ~~helping to enable security personnel to conduct targeted, minimally intrusive secondary screenings~~services. ~~Evolv~~When ~~eXpedite,~~deployed ~~our high-speed~~together, ~~autonomous~~the ~~X-ray~~two ~~bag~~products ~~scanning~~are ~~solution,~~designed ~~works with Evolv Express~~ to ~~provide~~support aimproved ~~layered~~operational ~~approach~~efficiency tothrough ~~security~~better ~~for~~threat ~~concealed~~identification ~~weapons~~and ~~detection~~alarm ~~in high clutter environments~~performance. ~~Using~~We ~~eXpedite~~believe ~~with~~our ~~Express~~ability ~~aims~~ to ~~allow~~deliver ~~the~~continuous ~~checkpoint~~improvement tothrough ~~operate~~software atupgrades ~~heightened~~differentiates ~~sensitivity~~our ~~while~~platform ~~potentially~~from ~~reducing~~many ~~the~~legacy ~~burden~~hardware ononly ~~security staff and optimizing the visitor experience~~offerings.

Our ~~innovative~~platform ~~technology~~was is designed tofrom ~~enhance~~inception ~~security~~around ~~and~~AI ~~provide~~operating anin ~~efficient,~~physical ~~positive~~environments. ~~visitor~~Our ~~and~~AI ~~customer~~powered ~~security~~software ~~experience.~~and Inservices ~~addition~~are central to ~~screening~~the ~~capabilities,~~performance ~~our~~and ~~solution includes Evolv Insights®~~ long-term avalue ~~powerful~~of ~~software~~our ~~analytics~~platform. ~~dashboard~~Through ~~that~~continuous ~~allows~~operation ~~customers~~across toa ~~comprehensively~~large ~~review, analyze,~~ and ~~gather~~growing ~~insights~~installed ~~from~~base, ~~the~~our ~~Evolv Express screening~~ systems atgenerate ~~their~~substantial ~~various~~volumes ~~venue~~of oranonymized ~~facility~~screening ~~locations. Available~~ data ~~includes~~related ~~visitor~~to ~~arrival~~the ~~patterns,~~movement ~~throughput~~of ~~volumes,~~people ~~system~~and ~~detection~~bags ~~performance,~~through ~~alarm~~physical ~~statistics,~~spaces. ~~weapons~~We ~~detected~~train ~~and~~our ~~detection~~models ~~settings.~~on ~~Our~~a ~~customers~~proprietary ~~can leverage this~~ data toset ~~inform~~and ~~their~~can ~~security~~improve ~~operations,~~the ~~while~~system ~~providing~~performance ~~end-users~~through ~~with~~new anand ~~approachable~~updated ~~security experience. Our products~~algorithms, which ~~are offered to our~~ customers ~~primarily~~receive ~~under~~from ~~a multi-year subscription model, provide predictable revenue streams for~~ us inthrough ~~addition~~software ~~to value for our customers~~updates.

We ~~are~~focus ~~focused~~ on ~~delivering~~weapons ~~value~~detection inand ~~the~~offer ~~spaces~~two incore solutions that can be deployed independently or together and ~~around~~are ~~the~~supported ~~physical~~by ~~threshold~~data ofand ~~venues~~visual dashboards that provide actionable analytics and ~~facilities~~automated reports designed to help security teams make evidence-based decisions to strengthen security. WeEvolv ~~believe~~Express ~~that~~is ~~digitally~~designed ~~transforming~~to ~~the~~screen ~~visitor~~high ~~experience~~volumes atof ~~the~~people ~~entry~~for ~~point~~concealed threats, while Evolv eXpedite is designed to ~~venues~~screen ~~and~~high ~~facilities~~volumes ~~will~~of bebags aautomatically, ~~critically~~without ~~important~~requiring ~~innovation~~a intrained ~~physical~~X-Ray ~~security~~operator. WeWhen ~~believe~~deployed ~~that~~together, ~~our~~these solutions ~~will~~provide ~~not~~a ~~only~~layered ~~help~~security ~~make~~approach ~~venues~~that ~~and~~allows ~~facilities~~customers ~~safer~~to ~~and~~operate ~~more~~at ~~enjoyable,~~heightened ~~but~~sensitivity ~~also~~levels ~~more~~while ~~efficient,~~seeking ~~and~~to ~~more~~maintain ~~informed~~efficient ~~about~~throughput ~~their~~and ~~visitors’~~a ~~needs~~positive visitor experience.

~~Our~~In ~~products~~addition ~~have~~to ~~screened~~screening ~~over~~capabilities, ~~two billion visitors worldwide since~~ our ~~products~~subscription ~~launched~~includes ~~in 2019. Based on a comparison of self-reported TSA data and~~ Evolv's ~~internal data~~Insights®, ~~we believe that on average, we screen more visitors per day through~~ our AIcloud-based ~~solutions~~analytics ~~than~~solution ~~the~~that ~~United~~provides ~~States~~customers ~~Transportation~~with ~~Security~~operational ~~Administration~~visibility ~~(“TSA”).~~into ~~Our~~system ~~customers~~performance ~~include~~across ~~many~~their ~~iconic~~ venues ~~across~~or afacilities. ~~wide~~Available ~~variety~~data ofincludes ~~industries~~throughput volumes, ~~including~~alarm ~~major sports stadiums and arenas~~statistics, ~~notable~~detection ~~performing arts and entertainment venues~~settings, ~~major tourist destinations~~ and ~~cultural~~system ~~attractions,~~performance ~~hospitals~~metrics, ~~large~~which ~~industrial~~customers ~~workplaces,~~can ~~schools,~~use ~~and~~to ~~prominent~~inform ~~houses of worship. We offer our products for lease or purchase and primarily under a multi-year~~ security~~-as-a-service~~ ~~subscription pricing model that delivers ongoing value to customers~~operations, ~~generates~~staffing ~~predictable revenue~~decisions, and ~~creates~~checkpoint ~~expansion and upsell opportunities~~configuration.

Our ~~Industry~~offering is bundled together by the services included in our subscription. We recognize that the primary mission of our customers is typically not security. Our customers’ mission might be educating children, restoring patients to good health, or entertaining fans in their seats. Our subscription includes full onsite support and repair services for the full term, so that our customers can focus on what they do best while we make sure their equipment is operating as designed. We are security as a service, from the hardware to the software to the data to the support.

~~Security~~Our ~~screening~~platform isincorporates ~~commonly~~both ~~associated~~hardware ~~with~~and ~~airports,~~software ~~courthouses,~~components ~~and~~that ~~prisons.~~are ~~These~~deployed ~~facilities~~across ~~represent~~ a ~~small~~large ~~fraction~~number of ~~the~~operating ~~total~~venues. ~~number~~Each ofdeployed ~~gathering~~unit ~~spaces~~functions ~~where~~not ~~mass~~only ~~shootings,~~as ~~terrorist~~a ~~attacks,~~detection ~~and~~device ~~other~~but ~~forms~~also ofas ~~armed~~a ~~violence~~data ~~might~~collection ~~occur~~mechanism, ~~but~~generating ~~they~~ongoing ~~have~~real‑world ~~historically~~operational ~~had~~data, aincluding ~~disproportionate~~both ~~impact~~threat onand ~~the~~non‑threat ~~design~~events. ~~and~~Some ~~implementation~~ of ~~security~~this ~~screening~~data ~~technology.~~is ~~These~~used ~~specialized~~to ~~facilities~~support ~~are~~the ~~typically~~continued ~~required~~development byand ~~law~~refinement toof ~~meet~~our ~~specific~~algorithms. ~~screening~~We ~~regulations~~believe ~~using~~the ~~products~~integration ~~built~~of toour ~~meet~~hardware ~~technical~~and ~~standards~~software ~~designed~~creates ~~for~~operational ~~these~~interdependencies ~~environments.~~that ~~Many~~are ofintegral ~~these~~to ~~standards~~our ~~and~~platform. ~~regulations~~As ~~were~~a ~~designed~~result, in the ~~pre-digital~~hardware ~~era~~and ofsoftware ~~the last century.~~

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~~Regulated~~components ~~facilities~~of ~~like~~our ~~airports~~system ~~and~~are ~~prisons~~designed ~~usually~~to ~~have~~operate atogether ~~local monopoly on the services they provide~~ and ~~therefore~~are ~~have~~not ~~historically~~intended ~~been incentivized~~ to ~~emphasize~~function ~~technical regulatory compliance over the visitor experience. Security technology providers have historically focused on serving this regulated market and,~~ as astandalone ~~result~~offerings, ~~have~~which ~~similarly~~distinguishes ~~developed~~our ~~solutions~~approach tofrom ~~meet~~cloud‑only ~~such~~software ~~regulatory requirements without regard to the visitor experience~~solutions. However, many unregulated facilities want security screening that is designed with visitor experience in mind, and helps enhance their security posture while providing a positive experience for their valued customers and employees.

~~Security~~We ~~screening~~believe atour ~~many venues and facilities has historically been designed around metal detectors that typically require visitors to enter in single~~hardware-~~file lines after submitting their bags and pocket contents to manual inspection. This process is usually supported by multiple security guards who may perform manual bag inspections~~enabled, ~~hand~~long ~~wand~~term ~~scans,~~subscription ~~and~~model ~~hands-on~~differentiates ~~body~~our ~~‘pat~~business ~~downs’ to resolve alarms. The historical emphasis on technical detection performance using outdated standards tested in isolation has drawn attention away~~ from ~~performance~~purely ~~of the screening process~~ software-as -a-service ~~holistic system~~offerings. ~~Venues~~We ~~are~~believe ~~looking~~our ~~for~~platform ~~modern~~is ~~solutions~~well positioned to ~~modern~~benefit ~~problems,~~from ~~and~~ongoing ~~factors~~advances ~~like~~in ~~efficiency,~~artificial ~~minimizing false alarms~~intelligence, ~~and~~driving ~~visitor~~durable ~~experience~~customer ~~are~~value aand ~~part~~supporting ofpredictable, ~~the~~recurring ~~conversation~~subscription ~~when considering security screening solution~~revenue.

We are focused on delivering value in the spaces in and around the physical threshold of venues and facilities while offering the ability for connected layers of security. We believe that digitally transforming the visitor experience at the entry point to venues and facilities will be a critically important innovation in physical security. We believe that our solutions will not only help make venues and facilities safer and more enjoyable, but also more efficient, and more informed about their visitors’ and security team needs.

Our products have screened over four billion visitors worldwide since the launch of Evolv Express in 2019. Based on a comparison of self-reported TSA data and Evolv's internal data, we believe that on average, we screen more visitors per day through our AI-based solutions than the United States Transportation Security Administration (“TSA”). Our customers include many iconic venues across a wide variety of industries, including major sports stadiums and arenas, notable performing arts and entertainment venues, major tourist destinations and cultural attractions, hospitals, large industrial workplaces, schools, and prominent houses of worship. We offer our products hardware for lease or purchase, combined with Security-as-a-Service annual subscription primarily under a multi-year pricing model that delivers ongoing value to customers, generates predictable revenue, and creates expansion and upsell opportunities.

Key indicators of our performance of market acceptance and customer adoption include Annual Recurring Revenue (“ARR”), a measure of annualized recurring subscription and related service revenue, and Remaining Performance Obligation (“RPO”), a measure of expected future revenue from active customer contracts. We believe these indicators reflect the scale, durability, and growth of our Security‑as‑a‑Service model.

Our Industry

Security screening is commonly associated with airports, courthouses, and prisons. These facilities represent a small fraction of the total number of gathering spaces where mass shootings, terrorist attacks, and other forms of armed violence might occur, but they have historically had a disproportionate impact on the design and implementation of security screening technology. These specialized facilities are typically required by law to meet specific screening regulations using products built to meet technical standards designed for these environments. Many of these standards and regulations were designed in the pre-digital era of the last century.

Regulated facilities like airports and prisons usually have a local monopoly on the services they provide and therefore have historically been incentivized to emphasize technical regulatory compliance over the visitor experience. Security technology providers have historically focused on serving this regulated market and, as a result, have similarly developed solutions to meet such regulatory requirements without regard to the visitor experience. However, many unregulated facilities want security screening that is designed with visitor experience in mind and helps enhance their security posture while providing a positive experience for their valued customers and employees.

Security screening at many venues and facilities has historically been designed around metal detectors that typically require visitors to enter in single-file lines after submitting their bags and pocket contents to manual inspection. This process is usually supported by multiple security guards who may perform manual bag inspections, hand wand scans, and hands-on body ‘pat downs’ to resolve alarms. The historical emphasis on technical detection performance using outdated standards tested in isolation has drawn attention away from performance of the screening process as a holistic system. Many venue operators are looking for modern solutions to modern problems, and factors like efficiency, minimizing false alarms, and visitor experience are a part of the conversation when considering security screening solutions.

Our Market Opportunity

We believe that the current macro trends in firearms ownership and mass shootings suggest that the need for effective security screening processes has never been greater and will continue to grow for the foreseeable future. According to the Gun Violence Archive, in ~~2024~~2025 there were over ~~500~~400 mass shootings in the United States.

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Due to these macro trends, we believe that venues and facilities that may have previously chosen not to implement security screening because of the inherent shortcomings of old screening methods like walk-through metal directors or due to concerns about cost, effectiveness, and/or visitor experience impact may feel increasingly compelled to explore modern security screening options for the first time. Further, we believe that venues and facilities that already conduct security screening may feel increasingly compelled to consider alternatives.

We believe our market opportunity has both a security screening opportunity as well as an adjacent market expansion opportunity as follows:

Security Screening Opportunity

We ~~estimate~~believe that our primary market opportunity is for weapon screening at venues and facilities in the following segments:

•educational institutions including schools,

•hospitals &and health care facilities,

•professional sports and live entertainment venues,

•industrial warehouses,

•distribution facilities,

•large workplaces,

•arts &and entertainment venues,

•government and corporate offices,

•hospitality facilities, and

•houses of worship.

Using a variety of published industry reports and government data, we estimate that the above facilities together comprise nearly 400,000 sites and approximately 700,000 individual thresholds where our security screening products could potentially be deployed.

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could potentially be deployed. We estimate that this market represents over $20 billion in potential weapon screening system sales annually.

Our Growth Strategy

The key elements of our growth strategy within our target market include the following:

•Develop Initial Customer Successes in Specific Target Metropolitan Areas

Decision-makers at our prospective customers are often professionally connected to decision-makers at other prospective customers in different vertical industries within a specific target metropolitan area. We have established a successful pattern of targeting and winning new iconic customers in specific ~~vertical~~geographies ~~industries~~ and then leveraging that success to solicit referrals at other venues and facilities across that metropolitan area in similar or other vertical industries. We have developed a playbook for executing this pattern through orchestration of our direct sales resources and reseller partners in a manner that we believe will continue to scale as we develop the available markets.

•Expand and Activate Our Reseller Strategy

We have a global distribution network consisting of dozens of value-added resellers, which can help us extend our reach in certain geographic or vertical markets where we may have a more limited direct presence. We intend to continue to develop our reseller network by adding further geographic and vertical market coverage and sales capacity based upon demand. We plan to continue to cultivate field level ~~collaboration between our direct sales team and our resellers to develop the ability of the resellers to find, develop, and close customers independently.~~

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collaboration between our direct sales team and our resellers to develop the ability of the resellers to find, develop, and close customer sales independently.

•Concentrate Sales and Marketing Effort in Specific Target Accounts in Specific Vertical Industries

Through our experience to date, we have developed a proprietary list of target vertical industries, developed a list of target accounts within those industries, and identified target decision-makers in our target accounts. We believe that our target account list represents the best immediate growth opportunities for our business. Over time we plan to adjust our target account list to reflect current market conditions and the capabilities of our products. We plan to continue to execute brand awareness strategies, content marketing, lead generation, and sales development activities to our target account list to create qualified sales opportunities.

•Promote Awareness by Gathering and Leveraging Our Customer Community

Our business model presents significant opportunities to bring incremental value to existing customers over time. We intend to realize this value by seeking referrals from existing customers and partners to other prospective qualified customers, selling additional capacity to existing customers, and selling new add-on products and services to existing customers. We are continuing to develop and expand our customer success function within the global revenue organization to focus on helping customers successfully deploy our products and cultivate referrals, expansion, and upsell opportunities. We are also investing in programs to help our customers connect with each other to share best practices on a regional and vertical industry basis. Our buyers are naturally collaborative on security best practices due to their vested interest in collective deterrence and the likelihood that any security event will have a negative collective impact at the metropolitan, regional, or industry level.

•Extend Our Value Proposition with Additional Products ~~and Digital Capabilities~~

Our customers turn to our solutions first and foremost for increased security at the thresholds of the entrances of their venues. In addition to increased security posture, we believe our solutions also provide for a positive visitor experience and unprecedented insights into visitor and security data through our Evolv Insights solution. Our customers often look to us to provide additional applications and services that extend the security perimeter beyond the threshold of their venues. To that end, we believe there is an opportunity to introduce new applications and services that solve adjacent security challenges being faced by our customers. As we adapt to customer demands, we may introduce new solutions to the market via our own internal product development, partnering with third parties, or through acquisitions.

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customers. As we adapt to customer demands, we may introduce new applications and services to the market via our own internal product development, partnering with third parties, or through acquisitions.

Competition

We have experienced, and expect to continue to experience, competition from a number of companies, including other vendors of security screening systems. A variety of security screening technologies compete with our proprietary technologies, including, but not limited to legacy walk-through metal detectors, handheld metal detector wands, and passive or active weapon screening systems based on magnetic field sensing, millimeter wave or terahertz imaging technology.

We believe that we are well-positioned to compete in our industry based on the following core competencies and competitive strengths:

•Strong Detection Effectiveness Based on Artificial Intelligence Software

Our solutions use digital processing and AI to help differentiate between many real weapon threats and many harmless personal items such as cell phones and keys. Our technology also takes an end-to-end approach to security, with the capability to locate threats and visualize the location of that threat on an adjacent tablet, with our “Red Box” technology, enabling a directed secondary search that is minimally intrusive. Our solutions use real-world data to classify threats based on classification models, which allows us to improve performance over time through new and updated algorithms, which customers can ~~get~~receive through software updates. Our core AI also makes it possible to integrate new kinds of sensors and data sources and integrate our solutions with other platforms and applications. We aim to design our products to detect more actual weapon threats with fewer nuisance alarms.

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•Large and Growing Data Set

Evolv maintains a proprietary data set that is essential in training our software to accurately classify a broad range of threats and non-threats under a wide variety of real-world conditions. We continue to grow this data set which we expect will help our detection capabilities through new and updated algorithms. In turn, we expect our customers to benefit from these improvements through regular software updates under our subscription business model. In a world where data is an increasingly decisive competitive advantage, we believe we are well positioned to deliver value to our customers in ways that competitors without such robust data sets may be unable to match.

•Differentiated and Proprietary Technology Platform

We have invested significant resources in developing proprietary and patented technologies across AI software, cloud services, and advanced sensors to accelerate the widespread adoption of modern security screening. These technologies serve as the foundation of our products. We have also designed our platform with application programming interfaces (“APIs”) that allow integration and interoperability with complementary third-party security solutions such as brandished gun detection, biometric authentication, video management software, threat intelligence, messaging, and mass-notification systems.

•High Screening Throughput

Our unique detection methodology is designed to result in low nuisance alarms and to allow visitors to walk through in unstructured flows, without needing to empty their pockets of personal items and without surrendering their bags for manual inspection, except as needed for secondary searches when a potential threat has been identified. The result is a visitor experience designed to be more like walking through a department store shoplifting prevention system than an intrusive airport security checkpoint.

•Digital Access and Analytic Insights

Our solutions are cloud connected. The MyEvolv portal and mobile app enables customers to remotely access their system to perform software updates, change sensitivity settings, and check system status. Evolv Insights® provides our customers self-serve access, insights regarding visitor flow and arrival curves, location specific performance, system detection performance and alarm statistics, and comparisons across multiple business dimensions. The data we collect and the Evolv Insights platform allow us to provide customers with insights that would not be available when utilizing traditional security screening methods.

7•Paired Checkpoint, Proven at Scale

~~Table~~We ofprovide ~~Contents~~a unified people and bag screening solution powered by Evolv proprietary software. Evolv Express® screens people while Evolv eXpedite™ autonomously scans bags, managed together on a single tablet and cloud‑connected to MyEvolv and Evolv Insights® for fleet visibility, software updates, and operational analytics. This configuration is purpose‑built for high‑clutter environments (schools, multi‑tenant offices), enabling higher sensitivity with fewer nuisance alarms and sustained throughput at normal walking pace.

specific performance, system detection performance and alarm statistics, and comparisons across multiple business dimensions. The data we collect and the Evolv Insights platform allow us to provide customers with insights that would not be available when utilizing traditional security screening methods.

•Key Strategic Partners

We have strategic agreements with many globally recognized partners. We believe that these partners will provide us with significant leverage and reach that will allow us to rapidly scale our business and guide customers to success.

•Distribution Capabilities

We have developed a distribution network consisting of dozens of value-added resellers. Our resellers, who have extensive experience in physical security technologies and processes, provide marketing, sales, systems integration, and local support services for customers across an array of vertical markets and regions. They also bring an existing base of customers into which we can drive awareness of and ultimately sell our security screening products. Whenever possible we seek to form relationships with the leading resellers in ~~each region we do business in order to secure access to the most valuable existing customer relationships and the best talent pool available in each region.~~

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each region we do business in order to secure access to the most valuable existing customer relationships and the best talent pool available in each region.

•Visionary and Experienced Management Team and Advisors

Our management team and board of directors blend a range of skills and backgrounds from technology, cybersecurity, materials science, AI, military, ~~and~~ law enforcement, and key customer end markets. Our advisors are renowned industry leaders with experience at the United States Secret Service, the Federal Bureau of Investigation (“FBI”), the U.S. military, the ~~TSA, the~~ United States Department of Homeland Security (the "DHS"), and the United States intelligence community~~, and United States Congress~~. Our engineering and digital products teams are led by accomplished and visionary technologists and scientists who have many years of experience in relevant fields. Our commercialization efforts are managed by individuals with prior successes in building and scaling both direct and indirect, reseller-driven global sales organizations.

•Self-Reinforcing Adoption Cycle

We believe that as we acquire more customers and deploy more of our products, we will be able to gather more digital data that in turn will help inform improvements to the performance of our systems and provide deeper analytic insights to our customers. As we continue to improve the performance and analytic insight of our systems, we believe more prospective customers will be attracted to our products and more engaged prospects will choose to purchase our products. We anticipate that this cycle will continue to operate in the future, creating ongoing competitive advantages for us and our reseller partners.

Our Products

Since our founding in 2013, we have developed an extensive portfolio of proprietary technologies that form the foundation of our integrated security screening products, which are comprised of AI software, cloud services, and advanced sensors. These are designed to be integrated layers for detection. But detection is just the foundation. We support security ~~team~~teams throughout the entire screening process to provide situational awareness and tools to support response. Our products are designed to capture valuable visitor data customers can leverage to inform their security operations, while providing end-users with an approachable and non-intrusive security experience.

Evolv Express

~~Our flagship product,~~ Evolv Express, is designed to quickly detect firearms, improvised explosive devices, and large tactical knives in unstructured people flows. Evolv Express became commercially available in October 2019. The number of Evolv Express solutions deployed across our customer base grew from approximately 4,500 at December 31, 2023 to approximately 6,100 at December 31, 2024. We believe that the number of solutions deployed is closely correlated to our revenues.

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Evolv Insights Analytics Application

The Evolv Express system collects valuable visitor data and data on system use and performance. This data allows us to generate analytics that appear in our Evolv Insights application. Evolv Insights provides self-serve access, insights regarding visitor flow and arrival curves, location specific performance, system detection performance and alarm statistics, and comparisons across multiple business dimensions. Using Evolv Insights, organizations use the powerful dashboards and metrics provided to inform their security decisions, operationalize the way their security and venue operations teams make staffing and traffic flow decisions to avoid overcrowding, rebalance security and operational resources, and improve the overall experience for their guests.

Evolv eXpedite

WeIn ~~launched a second major product line in~~ September 2024, ~~called~~we launched Evolv eXpedite, ~~which is~~ an autonomous AI-based weapons detection system for bags being brought to venues by visitors in high clutter environments. Evolv eXpedite was designed from the ground up with AI computer vision in mind., ~~There~~and there is no ~~screen~~need onfor ~~the~~a ~~Evolv~~screen on eXpedite ~~product~~ for an operator to manually review X-ray images. ~~The product operates at high speed, enabling rapid, automated bag screening.~~ Evolv eXpedite can be used as a stand-alone system or alongside an Evolv Express ~~systems~~system.

Evolv Insights Analytics Application

The Evolv Express system collects valuable data on visitors, system use, and performance. This data allows us to generate analytics that appear in our Evolv Insights application. Evolv Insights provides self-serve access, insights regarding visitor flow and arrival curves, location specific performance, system detection performance and alarm statistics, and comparisons across multiple business dimensions. Using Evolv Insights, organizations can use the powerful dashboards and metrics provided to inform their security decisions, operationalize the way their security and venue operations teams make staffing and traffic flow decisions to avoid overcrowding, rebalance security and operational resources, and improve the overall experience for their guests.

Sales Models

We sell our solutions under ~~several~~two primary sales models. We offer a “pure subscription” model, where the customer leases hardware from us and we provide a multi-year security-as-a-service subscription. For end-user customers that prefer to purchase our hardware outright, they can do that directly from us ("purchase subscription" model) or through the “distributor licensing” model we offer through Columbia Electrical Contractors, Inc. (“Columbia Tech”). Columbia Tech, a wholly-owned subsidiary of Coghlin Companies, currently serves as our primary contract manufacturer. Under this arrangement, we have granted a license of our intellectual property to Columbia Tech, which contracts directly with certain of our resellers to fulfill sales demand where the end-user customer prefers to purchase the hardware equipment through the distributor licensing model. Columbia Tech pays us a hardware license fee for each system it manufactures and sells under this agreement. In these instances, we still contract directly with the reseller to provide a multi-year security-as-a-service subscription to the end-users. We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our revenue, gross profit, gross margin, and overall profitability in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments.

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to purchase our hardware, we offer the option of purchasing our hardware outright directly from us through our “purchase subscription” model, which is coupled with a multi-year security-as-a-service subscription with us to operate the hardware. In addition to our two primary sales models, we previously offered our “distributor licensing” model based on the Distribution and License Agreement we entered into with Columbia Electrical Contractors, Inc. (“Columbia Tech”) in March of 2023, which subsequently expired on December 31, 2025. Under that arrangement, we granted a license of our intellectual property to Columbia Tech, which contracted directly with certain of our resellers to fulfill sales demand where the end-user customer prefers to purchase the hardware equipment. Columbia Tech paid us a hardware license fee for each system it manufactured and sold under this agreement. In these instances, we still contracted directly with the reseller to provide a multi-year security-as-a-service subscription to the end-users to operate the hardware. We no longer offer the distributor licensing model. We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our revenue, gross profit, gross margin, and overall profitability in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments.

Going forward, we expect our products to be adopted in a variety of vertical industry markets and geographic regions. While adoption of our products has primarily been within the United States to date, we expect increased adoption of our products in foreign markets in the future as we explore expansion into international markets. Pricing may vary by region or vertical market due to market-specific dynamics. As a result, our financial performance depends, in part, on the mix of sales, bookings, and business in different markets during a given period. In addition, we are subject to price competition, and our ability to compete in key markets will depend on the success of our investments in new technologies and cost improvements as well as our ability to efficiently and reliably introduce AI-powered security screening solutions to our customers.

Our Customers

Our customers include many iconic venues across a wide variety of industries including education, healthcare, professional sports, notable performing arts and entertainment venues, major tourist destinations and cultural attractions, government and corporate offices, hospitality facilities, distribution facilities, large industrial workplaces, and houses of worship.

The majority of our customer agreements include non-cancelable multi-year commitments, typically for an initial term of four years. One customer ~~and two customers~~, ~~all of~~ which ~~were~~is ~~resellers~~a reseller of our products, accounted for more than 10% of our total revenue for ~~the~~both ~~year~~years ended December 31, ~~2024~~2025 and the year ended December 31, ~~2023, respectively~~2024.

Research and Development

We believe that the security screening market is poised for rapid technological advancements across software, cloud services, and sensors. We invest significant resources into ongoing research and development programs because we believe our ability to maintain and extend our market position depends, in part, on breakthrough technologies that offer a unique value proposition for our customers and differentiation versus our competitors. Our research and development team, which is responsible for both the development of new products and improvements to our existing product portfolio, consists of talented and dedicated engineers, technicians, scientists, and professionals with experience from a wide variety of the world’s leading physical security, ~~cybersecurity,~~ and software technology organizations. Our primary areas of focus in research and development include, but are not limited to:

•Enhanced system usability, operator ergonomics, form factor options, and mobility to drive further efficiencies and opportunities in a variety of operating environments;

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•Continued improvement of the detection algorithm performance, including assessing the ability to detect new threats;

•Additional system sensors and fusion with a variety of other data inputs to expand venue insights, analytics applications, and operational performance;

•New applications that digitally transform operations in and adjacent to the arrival experience at venues and facilities; and

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•Integrations into venue security infrastructure and operating systems.

Sales and Marketing

We sell our security screening products through both our own direct sales force and through a global ~~distribution~~ network consisting of dozens of reseller partners. Our partners sell our products to venue and facility operator customers, for whom they may also perform installation, systems integration, and local support and maintenance services in limited circumstances, with additional services provided by our internal support teams. Many partners offer third-party physical security products including cameras, access control systems, and video monitoring systems in their respective territories and regions, which provides an opportunity to cross-sell our security screening products to a broad, existing customer base that has purchased these other products.

Our marketing strategies are focused on supporting sales growth by (1) driving awareness; (2) developing comprehensive sales and marketing content, tools, and campaigns for each stage of the sales process; (3) scaling those campaigns via our global distribution network, and (4) building our sales pipeline through demand generation efforts. We drive awareness for the Company, our security screening products, and our customers’ successes through public relations and communications efforts that span mainstream, business, social media and trade press across the security sector generally and in key verticals such as education, healthcare, professional sports as well as tourist sites, performing arts and entertainment, theme parks, industrial workplaces, and municipal governments. Our internal marketing team develops content in multiple formats and delivery methods to facilitate marketing campaigns and sales enablement., Asand, as a general matter, marketing content goes through a thorough review process before being released to the market.

Manufacturing and Suppliers

Our physical products ~~are~~have historically been manufactured by ~~our~~a ~~primary~~ third-party contract manufacturer, Columbia Tech, based in the United States with international quality certifications, such as ISO 9001:2015. We have also ~~utilize~~utilized other third-party manufacturers to produce certain components. We design our products and processes and internally manufacture the initial engineering prototypes. Our internal manufacturing and supply chain teams work collaboratively with both our internal engineering department and Columbia Tech to scale up the prototypes for commercialization through a phase gate product launch process. ~~There have been significant efforts made over the last several years with~~ Columbia Tech tohas ~~scale up our production. Columbia Tech~~ also ~~provides~~provided a variety of services including sourcing off-the-shelf components, manufacturing custom components/assemblies, final product assembly and integration, end of line testing and quality assurance per our specifications, material and finished goods inventory, and direct global shipping to our customers.

We initially manage the supply chain for key components and materials, and then, in some cases, set up supply agreements in conjunction with Columbia Tech to enable stable supply and redundancy where applicable. Component purchasing is managed by Columbia Tech's sourcing team under a vendor list approved by us to leverage the buying power of their global scale. All of our products are built to our specifications, work instructions, and testing protocols. Inventory levels are managed with our manufacturing partners to ensure an adequate supply is on hand to meet business forecasts.

On November 5, 2025, we entered into a non-exclusive contract manufacturing agreement with Plexus Corp. (“Plexus”). This shift is part of a broader supply chain strategy aimed at enhancing scalability, geographic diversification, creating long-term cost-saving opportunities, and operational resiliency. As Plexus is brought onboard, we believe we maintain ample inventory and committed production capacity to meet our growth targets with our existing contract manufacturer, ensuring uninterrupted service and consistent delivery to customers.

We regularly evaluate our supply chain structure to mitigate risks, including dependencies, lead times, and cost fluctuations. While no material disruptions are anticipated during the onboarding of Plexus, we continue to monitor potential risks associated with onboarding, logistics, and supplier performance. These factors may influence cost of revenue, inventory levels, and working capital in future periods.

Intellectual Property

Our ability to drive innovation in the security screening market depends in part upon our ability to protect our core technology and intellectual property. We attempt to protect our intellectual property rights, both in the United States and abroad, through a combination of patent, trademark, copyright, and trade secret laws, as well as nondisclosure and invention assignment agreements with our consultants and employees and through non-disclosure agreements with our ~~vendors and business partners. However, our contractual provisions may not always be effective at preventing unauthorized parties from obtaining our intellectual property and proprietary technology.~~

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vendors and business partners. However, our contractual provisions may not always be effective at preventing unauthorized parties from obtaining our intellectual property and proprietary technology.

Unpatented research, development, know-how, and engineering skills make an important contribution to our business, but we pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding intellectual property. We intend to pursue additional intellectual property protection to the extent we believe it would advance our business objectives and maintain our competitive position. Notwithstanding these efforts, there can be no assurance that we will adequately protect our intellectual property or that it will provide any competitive advantage. Intellectual property laws, procedures, and restrictions provide only limited protection and any of our intellectual property or proprietary rights may be challenged, invalidated, circumvented, infringed, misappropriated, or otherwise violated. Further, the laws of certain countries may not protect intellectual property or proprietary rights to the same extent as the laws of the U.S., and, therefore, in certain jurisdictions, we may be unable to protect our intellectual property and proprietary technology.

AsWe ofmaintain ~~March~~a ~~26,~~patent ~~2025,~~portfolio weof ~~own or co-own nine~~ issued ~~United~~U.S. ~~States~~and foreign patents, 27as ~~issued~~well ~~foreign~~as ~~patents,~~pending ~~and~~patent ~~have~~applications, 21covering ~~pending~~various oraspects ~~allowed~~of ~~patent~~our ~~applications~~technologies. Patents generally have a term of twenty years from filing. As our patent portfolio has been built over time, the remaining terms on the individual patents vary. In addition, we ~~have~~own ~~five~~ registered ~~United States~~ trademarks, ~~seven~~and ~~pending~~have ~~United~~additional ~~States~~ trademark applications, 45pending ~~registered~~in ~~foreign~~the ~~trademarks,~~United States and ~~14 pending foreign trademark applications~~internationally. Our patents and patent applications are directed to, among other things, security screening, threat detection and discrimination, imaging systems, and related technologies. In addition to patents owned or co-owned by us, we have in-licensed 95 patents, including but not limited to metamaterials, RF imaging, compressive sensing, and signal processing, for security related applications.

While most of the intellectual property we use is developed and owned by us, we also use a combination of proprietary, open-source and third-party licensed software in connection with our products and services. ~~These~~While ~~licenses are~~ sufficient for the operation of our business, ~~and~~these licenses typically limit our use of the third- parties’ intellectual property to specific uses and for specific time periods.

See Part I, Item 1A, “Risk Factors – Risks Related to Our Intellectual Property” for additional information about risks related to our intellectual property.

Human Capital

Our employees are critical to our success. As of December 31, ~~2024~~2025, we employed ~~287~~286 people, substantially all of whom are full-time employees. We ended 2025 with a total headcount in line with our headcount at the year end of 2024.

On January 21, 2025, we implemented a Board-approved reduction in force affecting 4041 employees. This action was part of our initiative to increase our ~~annualized~~profitability ~~run~~and ~~rate~~ cash ~~savings~~flow as we seek further flexibility to pursue our investment strategy with certain growth opportunities. Refer to Note 2422, ~~“Subsequent~~Restructuring ~~Events”~~Charges, in the notes to the consolidated financial statements in this Form 10-K for additional information.

Changes in 2025 headcount reflect a reduction in third-party service providers and consultants, primarily in technical field support, accounting, and legal. The Company's insourcing of field service is expected to provide more efficient and cost effective customer support as part of its long term growth strategy. The reduction of third party consultants providing general and administrative services resulted from their replacement with permanent headcount to help build a more sustainable, scalable, and cost efficient foundation for business operations and controls.

We also engage numerous consultants and contractors to supplement our permanent workforce. Most of our employees are engaged in research and development and selling functions. We consider our relationship with our employees to be in good standing. None of our employees are subject to a collective bargaining agreement or represented by a labor union.

Commitment to Maintaining a Skilled Workforce. We value ~~the~~having ~~diversity~~a workforce with a broad range of perspectives, experiences, and skills of our employees and are committed to providing an engaging and inclusive atmosphere for all employees that promotes productivity and encourages creativity and innovation. We strive to maintain a highly skilled workforce where employees are hired, retained, compensated, and promoted based on their performance and contribution to the Company.

Employee Development and Retention. The attraction, development, and retention of our employees is a key focus for our Company. We offer training programs to enhance the knowledge, skills, and advancement opportunities for our employees. We focus on maintaining a solid pipeline of talent throughout our organization and we are continually developing the capabilities and skills needed for the future of our business.12

Work Environment. We believe that maintaining a work environment that recognizes effort and teamwork, values mutual respect and open communication, and demonstrates care and concern for our employees is essential to an engaged and productive workforce. In furtherance of this objective, we provide a regular Code of Business Conduct training for our employees to identify and prevent misconduct and report situations that violate our policies and/or negatively impact our

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~~work~~Employee ~~environment~~Development and Retention. WeThe ~~investigate~~attraction, development, and ~~take~~retention ~~prompt~~of ~~action~~our employees is a key focus for our Company. We offer training programs to ~~correct~~enhance ~~conduct~~the ~~that~~knowledge, isskills, ~~inconsistent~~and ~~with~~advancement opportunities for our ~~Code~~employees. We focus on maintaining a solid pipeline of ~~Business~~talent ~~Conduct~~throughout our organization and ~~other~~we ~~policies~~are continually developing the capabilities and skills needed for the future of our business.

Competitive Pay and Benefits. We strive to provide pay and comprehensive benefits that help meet the varying needs of our employees. Our total rewards package includes market-competitive pay, equity compensation, unlimited time off, tuition reimbursement, 401(k) match, and other comprehensive and competitive benefits.

Government Regulations

We are subject to various laws, regulations, and permitting requirements of federal, state, and local authorities, related to health and safety, anti-corruption, and export controls. We believe that we are in material compliance with all such laws, regulations, and permitting requirements.

Anti-Corruption Export and Trade Matters

We are subject to anti-corruption laws and regulations imposed by governments around the world with jurisdiction over our operations, including the U.S. Foreign Corrupt Practices Act (the "FCPA") and the U.K. Bribery Act 2010 (the "Bribery Act"), as well as the laws of the countries where we do business. We are also subject to various trade restrictions, including trade and economic sanctions and export controls, imposed by governments around the world with jurisdiction over our operations. For example, in accordance with trade sanctions administered by the U.S. Treasury Department, Office of Foreign Assets Control (“OFAC”) and the U.S. Department of State, we are prohibited from engaging in transactions involving certain persons and certain designated countries or territories, including Cuba, Iran, ~~Syria,~~ North Korea, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, unless authorized by OFAC or otherwise exempt from the regulations. In recent years, the United States government has a renewed focus on export control matters. For example, the Export Control Reform Act of 2018 and regulatory guidance thereunder have imposed additional controls and may result in the imposition of further additional controls, on the export of certain “emerging and foundational technologies.” Our current and future products may be subject to these heightened regulations, which could increase our compliance costs.

See Part I, Item 1A, “Risk Factors — Failure to comply with applicable anti-corruption legislation, export controls, economic sanctions and other governmental laws and regulations could result in fines and criminal penalties and materially and adversely affect our business, financial condition, and results of operations” for additional information about the environmental, health and safety laws, and regulations that apply to our business.

Additional Information

Our Internet address is https://evolv.com. At our Investor Relations website https://ir.evolvtechnology.com, we make available free of charge a variety of information for investors, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the SEC. Our SEC filings are available to the public ~~over~~via the Internet at the SEC's website at http://www.sec.gov. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. We use our Investor Relations website as a means of disclosing material information and complying with our disclosure obligations under Regulation Fair Disclosure. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, and public conference calls and webcasts.

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ITEM 1A. RISK FACTORS

Our business involves significant risks and uncertainties, some of which are described below. You should carefully consider the risks and uncertainties described below as well as in Management's Discussion and Analysis of Financial Condition and Results of Operations, Legal Proceedings, and Controls and Procedures and of this Annual Report on Form 10-K. The realization of any of these risks and uncertainties could have a material adverse effect on our reputation, business, financial condition, results of operations, growth, and future prospects as well as our ability to accomplish our strategic objectives. In that event, the market price of our common stock could decline and you could lose part or all of your investment.

Summary Risk Factors

The principal risks and uncertainties affecting our business include, among other, things the following:

•WeMaterial ~~identified~~weaknesses ~~certain~~in ~~misstatements to~~ our ~~previously~~internal ~~issued~~control over financial ~~statements~~reporting, ~~and~~which ~~have~~contributed ~~restated~~to ~~the~~a ~~financial~~previously ~~statements~~disclosed ~~described~~restatement ~~below,~~of ~~which~~our ~~has~~prior ~~exposed~~period usfinancial tostatements aexpose ~~number~~us ofto ~~additional~~significant risks and uncertainties.

•We have identified material weaknesses in our internal control over financial reporting.

•Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital.

•We have not been profitable historically and may not achieve or maintain profitability in the future.

•Our operating results may fluctuate for a variety of reasons.

•If we fail to maintain successful relationships with our reseller partners, or if our partners fail to perform, our ability to market, sell and distribute our products will be limited.

•Increases in component costs, long lead times, ~~and~~ supply shortages and changes, or volatility in tariffs could disrupt our supply chain.

•Delays in production, increases in prices charged or the loss of a limited or sole source supplier could have an adverse effect on our business, financial condition and operating results.

•Defects and poor quality which require rework, replacement parts or systems and associated costs of service could have an adverse effect on our business and results of operations.

•We recognize a substantial portion of our revenue ratably over the term of our agreements with customers and, as a result, downturns or upturns in sales may not be immediately reflected in our operating results.

•If we are unable to compete effectively with new entrants and other potential competitors, our sales and profitability could be adversely affected.

•A portion of our revenue is generated by sales to government entities, which are subject to challenges and risks.

•If we are not able to maintain and enhance our brand or reputation as an industry leader, our business and operating results may be adversely affected.

•We may acquire or invest in other companies or technologies in the future, which brings with it risks.

•If our products fail or are perceived to fail to detect threats, or if our products contain undetected errors or defects, ~~these~~this ~~failures~~could orhave ~~errors~~an ~~could~~adverse ~~result~~effect inon ~~injury~~our orbusiness ~~loss~~and results of ~~life~~operations.

•IfCustomers ~~our~~may ~~customers~~be ~~are~~ unable to implement our products successfully, or if we may fail to effectively assist our customers in installing our products and provide effective ongoing support and training~~, customer perceptions of our products may be impaired, or our reputation and brand may suffer~~.

•We face the risk of losing recurring revenue and forecasting certainty if customers choose not to renew their typical four‑year subscriptions or if renewal terms result in lower revenue than expiring agreements, and significant losses if returned systems cannot be profitably redeployed.

•The loss of designation of our Evolv Express system as a Qualified Anti-Terrorism Technology under the Homeland Security SAFETY Act could result in adverse reputational and financial consequences.

•The AI-based weapons detection for security screening market is new and evolving and may not grow as expected or may develop more slowly or differently than we expect.

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•We use AI and machine learning in our development process and in our AI-based weapon detection products.

~~•We may be unable to acquire new customers or sell additional products to our customers and maintain retention rates.~~14

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•Our expansion into international markets exposes us to additional operational, regulatory, and compliance risks that could adversely affect our business.

•Our growth potential outside the U.S. may be limited or vary due to differences in security threats, customer perceptions, regulatory environments, and international market dynamics, as well as our own expansion and investment priorities.

•We may not successfully anticipate market needs and enhance our existing products or develop new products that meet those needs on a timely basis.

•We incorporate technology and components from third parties into our products, and our inability to obtain or maintain rights to the technology could harm our business.

•Our use of “open source” software could subject our proprietary software to ~~certain~~ disclosure obligations, expose us to security risks, and negatively affect our ability to offer our products and subject us to possible litigation.

•Our ~~products~~business ~~collect~~depends on the reliability, availability, and ~~store~~performance ~~personal~~of ~~data~~our ~~about~~information ~~individuals~~technology systems, including key internal enterprise software solutions, and any failure or disruption of these systems could materially and adversely affect our business.

•Our products and operations collect and store personal data about individuals, which exposes us to privacy, cybersecurity, and regulatory risks.

•If we do not effectively expand, train, and retain qualified sales and marketing personnel, we may be unable to acquire new customers or sell additional products to successfully pursue our growth strategy.

•We are dependent on the continued services and performance of our senior management and other key employees, as well as on our ability to successfully hire, train, manage, and retain qualified personnel.

•Our intellectual property rights are valuable and any inability to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.

•Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm to our business and operating results.

•~~Confidentiality~~We ~~arrangements~~are ~~may~~subject ~~not~~to ~~prevent~~government ~~disclosure~~regulation ofand ~~trade~~other ~~secrets~~legal obligations, related to data privacy, anti-corruption legislation, export controls, economic sanctions, tax laws, and use of AI, among other ~~proprietary~~government ~~information~~regulations.

•We are ~~subject to government regulation~~ and ~~other~~may ~~legal~~in ~~obligations,~~the ~~particularly~~future ~~related~~be subject to ~~privacy~~investigations, ~~data~~regulatory ~~protection,~~enforcement ~~information security~~proceedings, and ~~product marketing and our actual or perceived failure to comply with such obligations could harm our business~~litigation.

•Our operating results may be harmed if we are required to collect sales and use or other related taxes for our products in jurisdictions where it has not historically done so.

•Failure to comply with applicable anti-corruption legislation, export controls, economic sanctions and other governmental laws and regulations could result in fines and criminal penalties.

•We are and may in the future be subject to legal proceedings, claims and investigations.

•We may be subject to litigation and regulatory examinations, investigations, proceedings or orders as a result of or relating to the Investigation and our failure to timely file our periodic reports with the SEC.

•There are risks related to our ability to utilize net operating loss carryforwards as well as research and development tax credit carryforwards to offset future taxable income.

•We may require additional capital to support business growth, which might not be available.

•~~The~~Our ~~market~~debt ~~price~~instrument ofcontains ~~our~~affirmative ~~common stock~~ and ~~warrants~~negative ~~has~~covenants, ~~been~~including ~~highly~~financial ~~and~~covenants, that may ~~continue~~limit toour beoperating ~~highly volatile~~flexibility.

•~~Certain~~The market price of our ~~warrants,~~common ~~earn-out~~stock ~~shares,~~ and ~~founders~~warrants ~~shares~~has ~~are~~been ~~accounted for as liabilities~~ and ~~the~~may ~~changes~~continue into ~~value~~be ofhighly ~~such securities could have a material effect on our financial results~~volatile.

•WeCertain doof ~~not~~our ~~intend~~warrants, toearn-out ~~pay~~shares, ~~any~~and ~~cash~~founder ~~dividends~~shares are accounted for as liabilities and the ~~foreseeable~~changes ~~future~~in value of such securities could have a material effect on our financial results.

•Future sales, or the perception of future sales, of common stock by our existing security holders in the public market may cause the market price of our securities to decline.

•Increasing attention to, and evolving expectations for, sustainability initiatives could increase our costs, harm our reputation, or otherwise adversely impact our business.

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•Our reported financial results may be adversely affected by changes in accounting principles.

•Securities or industry analysts do not publish research or reports about us, or publish negative reports.

•Our business operations are vulnerable to disruption due to natural or other disasters~~, including climate-related events, strikes and other events beyond our control~~.

Risks Related to Our Restatement and Internal Controls

We identified certain misstatements to our previously issued financial statements and have restated the financial statements described below, which has exposed us to a number of additional risks and uncertainties.

As discussed in the Explanatory Note, in Note 2, Restatement of Previously Issued Consolidated Financial Statements, and in Note 23, Restatement of Quarterly Financial Information (Unaudited), we restated our previously issued consolidated financial statements and other financial data for the fiscal years ended December 31, 2022 and December 31, 2023 contained in our Annual Report on Form 10-K, and our condensed consolidated financial statements for the quarters and year-to-date periods ended June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024 and June 30, 2024 contained in our Quarterly Reports on Form 10-Q. In our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, we also restated our unaudited financial statements for the quarterly and year-to-date periods ended September 30, 2023. We concluded that the Non-Reliance Periods should be restated because the accounting for certain sales transactions was materially inaccurate and that, among other things, revenue was prematurely or incorrectly recognized in connection with financial statements prepared for the Non-Reliance Periods. Other previously reported metrics that are a function of revenue were also misstated as a result of these revenue misstatements.

As a result of the misstatements and the restatement, we have become subject to a number of additional risks and uncertainties and unanticipated costs for accounting, legal and other fees and expenses, including as a result of a pending class-action lawsuit, derivative actions, and a stockholder request for inspection of our books and records. For more detailed discussion, see Part I, Item 3, "Legal Proceedings" and Note 20 (Commitments and Contingencies) to our consolidated financial statements for the year ended December 31, 2024. We may become subject to enforcement proceedings brought by the SEC or other regulatory or governmental authorities, or subject to other legal proceedings, as a result of the events leading to our internal investigation, the misstatements or the related restatement, and actions and proceedings could also be brought against our current and former employees, officers, or directors. These actions, lawsuits or other legal proceedings related to the misstatements or the restatement could result in reputational harm, additional defense and other costs, regardless of the outcome of the lawsuit or proceeding. If we do not prevail in any such lawsuit or proceeding, we could be subject to substantial damages or settlement costs, criminal and civil penalties and other remedial measures, including, but not limited to, injunctive relief, disgorgement, civil and criminal fines and penalties. In addition, we continue to be at risk for loss of investor confidence, loss of key employees, changes in management or our board of directors and other reputational issues, all of which could have a material adverse effect on our business, financial position and results of operations.

We have identified material weaknesses in our internal control over financial reporting, which have led to restatements and caused us to fail to meet our periodic reporting obligations, and this could occur again the future.

As disclosed in Part II, Item 9A – Controls and Procedures, of this Annual Report on Form 10-K, management determined that material weaknesses in the control environment, including the lack of a sufficient complement of personnel, risk assessment and information and communication components of internal control, as well as the material weakness related to revenue control activities, resulted in the restatement of the consolidated financial statements for the annual periods ended December 31, 2022 and 2023, and the quarterly periods included in such fiscal years beginning with the second quarter of 2022, and for the quarterly periods as of and for the periods ended March 31, 2024 and June 30, 2024; as well as adjustments to the consolidated annual financial statements for the year-ended December 31, 2024, and the quarterly period ended September 30, 2024, that were recorded prior to the issuance of those financial statements. These material weaknesses are in addition to previously disclosed material weaknesses, which had resulted in adjustments and certain immaterial misstatements in the consolidated financial statements for the years ended December 31, 2019, 2020, 2021, 2022, 2023, and 2024 as well as certain quarterly periods within those years; the revision of the Company's previously issued 2020 annual financial statements, 2021 quarterly and annual financial statements, and quarterly financial statements for the three months ended March 31, 2022; as well as the restatement of the Company’s financial statements as of and for the three and six months ended June 30, 2023.

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~~The~~Material ~~material~~ weaknesses will not be considered remediated until management completes the design and implementation of such measures and the controls operate for a sufficient period of time, and we have concluded, through testing, that these controls are operating effectively. At this time, we cannot predict the success of our remediation efforts or the outcome of our assessment of such efforts. We can give no assurance that our efforts will remediate these material weaknesses in our internal control over financial reporting, orwhich ~~that~~contributed ~~additional material weaknesses will not be identified in the future. The effectiveness of our internal control over financial reporting is subject~~ to ~~various inherent limitations, including cost limitations, judgments used in decision making, assumptions about~~ the ~~likelihood~~previously ofdisclosed ~~future~~restatement ~~events, the possibility~~ of ~~human error and the risk of fraud. If we are unable to remediate the material weaknesses,~~ our ~~ability~~prior toperiod ~~record, process, and report~~ financial ~~information accurately, and to prepare financial~~ statements ~~within~~expose ~~the~~us ~~time periods specified by the rules and regulations of the SEC, could continue~~ to besignificant ~~adversely~~risks ~~affected which, in turn, may result in future misstatements, revisions,~~ and~~/or~~ ~~restatements or adversely affect our reputation and business and the trading price of our common stock~~uncertainties. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, which could further result in loss of investor confidence, a decline in the price of our common stock, delisting of our securities, harm to our reputation and financial condition and/or diversion of financial and management resources from the operation of our business.

~~Our~~As ~~failure~~disclosed toin ~~prepare~~Part II, Item 9A – Controls and ~~timely~~Procedures, ~~file~~of this Annual Report on Form 10-K, material weaknesses in our ~~periodic~~internal ~~reports~~control ~~with~~over financial reporting contributed to the ~~SEC~~restatement ~~limits~~of our ~~access~~consolidated tofinancial statements for the ~~public~~annual ~~markets~~periods toended ~~raise~~December ~~debt~~31, or2022 ~~equity~~and ~~capital~~2023, and the quarterly periods included in such fiscal years beginning with the second quarter of 2022, and for the quarterly periods as of and for the periods ended March 31, 2024 and June 30, 2024.

WeThe ~~did~~material ~~not~~weaknesses ~~file~~will ~~our~~not ~~Quarterly~~be ~~Report~~considered onremediated ~~Form~~until ~~10-Q~~management ~~for~~completes the ~~quarterly~~design ~~period~~and ~~ended~~implementation ~~September~~of 30corrective measures, ~~2024~~the orcontrols ~~this~~operate ~~Annual~~for ~~Report~~a onsufficient ~~Form~~period ~~10-K~~of ~~within~~time, ~~the~~and ~~timeframe~~we ~~required~~have byconcluded, ~~the~~through ~~SEC; thus~~testing, wethat ~~have~~these ~~not~~controls ~~remained~~are ~~current~~operating effectively. As detailed in ~~our~~Item ~~reporting~~9A, ~~requirements~~Controls ~~with~~and Procedures, we are working to remediate the ~~SEC.~~material ~~Although~~weaknesses, and while we ~~regained~~have ~~status~~completed asremediation aof ~~current~~certain ~~filer~~material onweaknesses, ~~April 28~~at this time, ~~2025~~we bycannot ~~filing~~predict ~~this~~the ~~Annual~~success ~~Report~~of onfuture ~~Form~~remediation ~~10-K~~efforts ~~and~~or ~~our~~the ~~Quarterly~~outcome ~~Report~~of onour ~~Form~~assessment ~~10-Q~~of ~~for~~such ~~the~~efforts. ~~quarterly~~We ~~period~~can ~~ended~~give ~~September~~no ~~30,~~assurance ~~2024,~~that weour ~~are~~efforts ~~not~~will ~~currently~~remediate ~~eligible~~these tomaterial ~~use~~weaknesses ain ~~registration~~our ~~statement~~internal oncontrol ~~Form~~over ~~S-3~~financial reporting, or that ~~would~~additional ~~allow~~material usweaknesses towill ~~continuously~~not ~~incorporate~~be byidentified ~~reference~~in ~~our~~the ~~SEC~~future. ~~reports~~The ~~into~~effectiveness ~~the~~of ~~registration~~our ~~statement,~~internal orcontrol toover ~~use~~financial ~~“shelf”~~reporting ~~registration~~is ~~statements~~subject to ~~conduct~~various ~~offerings~~inherent limitations, ~~until~~including ~~approximately~~cost ~~one~~limitations, ~~year~~judgments ~~from~~used in decision making, assumptions about the ~~date~~likelihood weof ~~regained~~future ~~and~~events, ~~maintain~~the ~~status~~possibility asof ahuman ~~current~~error ~~filer~~and the risk of fraud. If we ~~wish~~are unable to ~~pursue~~remediate anthe ~~offering~~material ~~now~~weaknesses, weour ~~would~~ability beto ~~required~~record, process, and report financial information accurately, and to ~~conduct~~prepare financial statements within the ~~offering~~time onperiods anspecified ~~exempt~~by ~~basis~~the rules and regulations of the SEC, ~~such~~could ascontinue to be adversely affected which, in ~~accordance~~turn, ~~with~~may ~~Rule~~result ~~144A~~in future misstatements, revisions, and/or ~~file~~restatements aor ~~registration~~adversely ~~statement~~affect onour ~~Form~~reputation ~~S-1.~~and ~~Using~~business aand ~~Form~~the ~~S-1~~trading ~~registration~~price ~~statement~~of ~~for~~our acommon ~~public~~stock. ~~offering~~In ~~would~~addition, ~~likely~~any ~~take~~such ~~significantly~~failures ~~longer~~could ~~than~~result ~~using~~in alitigation ~~registration~~or ~~statement~~regulatory onactions ~~Form~~by ~~S-3~~the ~~and~~SEC ~~increase~~or ~~our~~other ~~transaction~~regulatory ~~costs~~authorities, ~~and~~which could, tofurther ~~the~~result ~~extent~~in weloss ~~are~~of ~~not~~investor ~~able~~confidence, toa ~~conduct~~decline ~~offerings~~in ~~using~~the ~~alternative~~price ~~methods~~of our common stock, ~~adversely~~delisting ~~impact~~of our ~~ability~~securities, harm to ~~raise~~our ~~capital~~reputation orand ~~complete~~financial ~~acquisitions~~condition and/or diversion of ~~other~~financial ~~companies~~and inmanagement aresources ~~timely~~from ~~manner~~the operation of our business.

In addition, we did not file our Q3 2024 Form 10-Q or our 2024 Form 10-K within the timeframe required by the SEC. Although we regained status as a current filer on April 28, 2025, we are not currently eligible to use a registration statement on Form S-3 until approximately one year from the date we regained and maintain status as a current filer. If we wish to pursue an offering now, we would be required to conduct the offering on an exempt basis or file a registration statement on Form S-1, which would likely take significantly longer and increase our transaction costs.

Risks Related to Our Business and Operations

We have a history of losses. We have not been profitable historically and may not achieve or maintain profitability in the future.

We have a history of losses. We have incurred net losses of $5433.01 million and $~~108~~54.0 million for the years ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively. As of December 31, ~~2024~~2025, we had an accumulated deficit of $~~354~~387.78 million. Our ability to forecast our future operating results is subject to a number of uncertainties, including our ability to plan for and model future growth. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries. If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from expectations, our business could suffer, and the trading price of our stock may decline.

We are not certain whether or when we will obtain a high enough volume of sales of our products to sustain or increase our growth or achieve or maintain profitability in the future. We expect our costs to increase in future periods, which could negatively affect our future operating results if our revenue does not increase. In particular, we expect to continue to expend substantial financial and other resources on:

•research and development related to our products, including investments in expanding our research and development team;

•sales and marketing, including a significant expansion of our sales organization, both direct and through reseller partners;

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•continued expansion of our business into new and adjacent vertical markets and the launch of new product offerings; and

•general administration expenses, including legal and accounting expenses related to being a public company and transitioning to large accelerated filer status and remediation of our material weaknesses.

These investments may not result in increased revenue or growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to achieve or maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not be able to achieve or maintain profitability in the future.

Our operating results may fluctuate for a variety of reasons, including our failure to close large volume opportunity customer sales.

A meaningful portion of our revenue is generated by product sales to new customers and sales of additional products to existing customers. The timing of certain large volume opportunities can impact our results from quarter to quarter. In addition, the sales cycle can last several months from initial engagement to contract negotiation and execution, culminating in delivery of our products to our customers, and this sales cycle can be even longer, less predictable and more resource-intensive for both larger volume sales as well as sales to customers in certain market segments. Customers may also require additional internal approvals or seek to pilot our products for a longer trial period before deciding to purchase our solutions. As a result, the timing of individual sales can be difficult to predict. In some cases, sales have occurred in a quarter subsequent to when anticipated, or have not occurred at all, which can significantly impact our quarterly financial results and make it more difficult to meet market expectations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — ~~Critical Accounting Policies —~~ Revenue Recognition.”

We also regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and long-term business objectives. We expect our revenue, gross profit, gross margin, and overall profitability in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments. Any failure to successfully adjust to changes in customer demand for our various sales and fulfillment models or implement strategic decisions relating to these models could have a material adverse impact on our financial results.

In addition to the sales cycle- and sales model-related fluctuations noted above, our financial results, including our billings and deferred revenue, may continue to vary from period to period as a result of numerous factors, many of which are outside of our control and may be difficult to predict, including:

•our ability to attract and retain new customers;

•our ability to sell additional Evolv products to existing customers;

•unforeseen changes or delays in our supply chain or third-party manufacturing partners;

•our ability to expand into adjacent and complementary markets;

•changes in customer or reseller partner requirements or market needs;

•changes in the growth rate of the next-generation security screening market;

•the timing and success of new product introductions by us or our competitors, or any other change in the competitive landscape of the next-generation security screening market, including consolidation among our customers or competitors or significant price competition;

•a disruption in, or termination of, any of our relationships with reseller partners;

•our ability to successfully expand our business globally;

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•reductions in customer retention rates, especially at subscription term expiration;

•changes in our pricing policies or those of our competitors;

•changes in financial markets or macroeconomic conditions, including, for example, due to the effects of recessionary trends, slow economic growth, or political elections in the ~~United~~U.S. ~~States~~ and abroad, inflation and high interest rates, fuel prices, international currency fluctuations, tariffs, corruption, political instability, continuing social concerns and divisions in the ~~United~~U.S. ~~States~~ and abroad, acts of war, including the conflicts in Europe and the Middle East, and acts of terrorism, both domestic and international;

•future accounting pronouncements or changes in our accounting policies or practices;

•the amount and timing of our operating costs, including cost of goods sold;

•the impact of any pandemic, epidemic, or future outbreak of disease or similar public health concern on our existing and new customers, partners, employees, and supply chain; and

•increases or decreases in our revenue and expenses caused by fluctuations in foreign currency exchange rates.

Any of the above factors, individually or in the aggregate, may result in significant fluctuations in our financial and other operating results from period to period. These fluctuations could result in our failure to meet our operating plan or the expectations of investors or analysts for any period. If we fail to meet such expectations for these or other reasons, the trading price of our common stock could fall substantially, and we could face costly lawsuits, including securities class action suits.

If we fail to maintain successful relationships with our reseller partners, or if our partners fail to perform, our ability to market, sell and distribute our products will be limited.

In addition to our direct sales force, we rely on our reseller partners to sell our products. We expect to continue to focus on generating sales to new and existing customers through our reseller partners as a part of our growth strategy, who may not be successful in marketing, selling, and supporting our products.

If we are unable to develop and maintain effective sales incentive programs for our third-party reseller partners, we may not be able to incentivize these partners to sell our products to customers and, in particular, to high profile public and private venues and institutions. Our agreements with our reseller partners are generally non-exclusive and these partners may also market, sell and support products that are competitive with us and may devote more resources to the marketing, sales and support of such competitive products. These partners may have incentives to promote our competitors’ products to the detriment of ours or may cease selling our products altogether. Our reseller partners may cease or de-emphasize the marketing of our products with limited or no notice and with little or no penalty. Our agreements with our reseller partners may generally be terminated for any reason by either party with advance notice prior to each annual renewal date. It cannot be certain that we will retain these reseller partners or that we will be able to secure additional or replacement reseller partners. The loss of one or more of our significant reseller partners or a decline in the number or size of orders from them could harm our operating results. In addition, any new reseller partner requires extensive training and may take several months or more to achieve productivity. Our reseller partner sales structure could subject us to lawsuits, potential liability and reputational harm if, for example, any of our reseller partners misrepresent the functionality of our products, subscriptions or services to customers, or violate laws or our corporate and marketing policies.

If we fail to effectively manage our existing resellers, or if our reseller partners are unsuccessful in fulfilling the orders for our products, or if we are unable to enter into arrangements with, and retain a sufficient number of, high quality reseller partners in each of the regions in which it sells products and keep them motivated to sell our products, our ability to sell our products and operating results will be harmed. The termination of our relationship with any significant reseller partner may also adversely impact our sales and operating results.

Increases in component costs, long lead times, supply shortages, ~~and~~ supply changes, and tariffs could disrupt our supply chain and have an adverse effect on our business, financial condition, and operating results.

We acquire certain of our materials, which are critical to the ongoing operation and future growth of our business, from several third parties, both foreign and domestic. Generally, our third-party contract manufacturers contract directly

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with component suppliers, and we rely on our contract manufacturers to manage their supply chains. Our contract manufacturers have experienced, and may in the future experience, supply chain disruptions as a result of health crises, geopolitical tensions, trade restrictions, as well as other global economic impacts or other changes in macroeconomic trends. In the event our contract manufacturers are unable to adequately manage their supply chain or our relationships with our contract manufacturers terminate or are restricted, we could experience delays, which could negatively impact our business, customer relationships, and margins. We also source some materials and components directly from suppliers. While most components and materials for our products are available from multiple suppliers, certain of those items are only available from limited or sole sources. Should any of these suppliers become unavailable or inadequate, or impose terms unacceptable to us, such as increased pricing terms, we could be required to spend a significant amount of time and expense to develop alternate sources of supply, and may not be successful in doing so on terms acceptable to it, or at all. As a result, the loss of a limited or sole source supplier could adversely affect our manufacturing capacity, and relationships with our customers, as well as our results of operations and financial condition.

~~Since~~In ~~early~~ 2025, the ~~current~~U.S. ~~presidential~~government ~~administration~~ has ~~signed~~imposed ~~a series of executive orders imposing~~ sweeping tariffs on almost all imports into the ~~United~~U.S. ~~States,~~and ~~with~~ certain countries have imposed retaliatory tariffs. ~~already~~There incontinues ~~effect~~to ~~and~~be ~~some~~significant ~~which~~uncertainty ~~have~~regarding ~~been~~these ~~delayed~~recent changes and potential future developments. ~~The~~Increased ~~administration~~trade ~~has~~restrictions, ~~also~~tariffs ~~stated~~or ~~plans~~taxes on imports or exports relating to ~~impose~~countries ~~additional~~where ~~new~~we ~~tariffs~~manufacture, source, or ~~further~~sell ~~increase~~materials or ~~expand~~products, ~~existing~~could ~~tariffs~~have a material adverse effect on our business and financial results. In ~~addition~~If we cannot find ways to mitigate the potential impacts tofrom tariffs or trade restrictions successfully or in a timely manner, these additional tariffs and policies could have a significant impact on our business ~~stemming~~and ~~from~~results ~~the~~of operations. The exact magnitude of any potential impact remains uncertain, as there may be further changes to tariffs ~~imposed~~and bypolicies and, consequently, potential increased tension between the ~~administration~~U.S. and targeted countries. For example, weour risk exposure may ~~also~~increase befurther ~~materially~~if ~~impacted~~any bycountries levy additional retaliatory tariffs, ~~and~~taxes, ~~other penalties~~ or other trade restrictions ~~that~~or ~~may~~penalties ~~be imposed~~ against the ~~United~~U.S. ~~States~~or U.S. companies.

There continues to be significant uncertainty regarding these recent changes and potential future developments. Increased trade restrictions, tariffs or taxes on imports or exports relating to countries where we manufacture, source, or sell materials or products, could have a material adverse effect on our business and financial results. If we cannot find ways to mitigate the potential impacts from tariffs or trade restrictions successfully or in a timely manner, these additional tariffs and policies could have a significant impact on our business and results of operations. The exact magnitude of any potential impact remains uncertain, as there may be further changes to tariffs and policies and, consequently, potential increased tension between the U.S. and targeted countries. For example, our risk exposure may increase further if any countries levy additional retaliatory tariffs, taxes, or other trade restrictions or penalties against the United States or U.S. companies.

Delays in production, increases in prices charged or the loss of a limited or sole source supplier could have an adverse effect on our business, financial condition and operating results.

We depend on our primary third-party contract manufacturer for the production of our security screening systems. While there are several potential contract manufacturers for most of these products, all our systems are currently manufactured, assembled, tested, and packaged by Columbia Tech. InOn ~~most~~November ~~cases~~5, 2025, we ~~rely~~entered oninto ~~this~~a ~~manufacturer~~non-exclusive tocontract ~~procure~~manufacturing ~~components~~agreement ~~and,~~with inPlexus ~~some~~Corp ~~cases,~~which ~~provide~~we ~~manufacturing~~expect ~~engineering~~will ~~work~~help us diversify contract manufacturers. ~~Our~~While ~~current~~we ~~reliance~~anticipate onreduced ~~one~~product ~~contract~~costs ~~manufacturer~~and improved gross margin over time, such results may not materialize. Onboarding a new supplier involves ~~several~~various inherent risks that could adversely affect our production capacity and product quality, ~~including:~~and negatively impact revenue, gross profits and field service costs.

In most cases, we rely on contract manufacturers to procure components and, in some cases, provide manufacturing engineering work. Our current and future reliance on these contract manufacturers involves several risks, including:

•unexpected increases in manufacturing and repair costs;

•inability to control the quality and reliability of finished systems;

•inability to control delivery schedules;

•potential liability for expenses incurred by the third-party contract manufacturer in reliance on our forecasts that later prove to be inaccurate;

•potential lack of adequate capacity to manufacture all components or parts of the products we require;

•potential labor unrest or unavailability affecting the ability of the third-party manufacturers to produce our systems; ~~and~~

•the occurrence of unforeseen force majeure events affecting the third-party manufacturer.

We also use a third-party contract manufacturer located in Massachusetts and the U.K. as a second source for the production of a key sensor component used in our security screening systems. If our third-party contract manufacturers experience a delay, disruption, or quality control problems in their operations or if the third-party contract manufacturers do not renew or terminate our agreement with them, our operations could be significantly disrupted and our product shipments could be delayed. Qualifying new manufacturers and commencing volume production is expensive and time

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~~shipments could be delayed. Qualifying new manufacturers and commencing volume production is expensive and time~~ consuming. Ensuring that a contract manufacturer is qualified to manufacture our products or components to our standards is time consuming. In addition, if our contract manufacturers cannot scale their production of our products or components at the volumes and in the quality that we require, we may have to move production for the products or components to a new or existing third-party manufacturer, which would take significant effort and our business, results of operations and financial condition could be materially and adversely affected.

As we contemplate moving manufacturing into different jurisdictions, we may be subject to additional and significant challenges in ensuring that quality, processes, and costs, among other issues, are consistent with our expectations. For example, we may not be able to collect reimbursements from our third-party contract manufacturers for penalties assessed on us because of excessive failures of products or warranty claims, which causes us to take on additional risk for potential failures of our products. Additionally, the benefits of diversifying contract manufacturers may not materialize and any such transition involves inherent onboarding risks and potential shifts in pricing dynamics and cost allocations.

InDefects ~~addition,~~and ~~because~~poor wequality ~~currently~~which ~~use~~require ~~third-party~~rework, ~~contract~~replacement ~~manufacturers~~parts toor ~~produce our security screening~~ systems and ~~certain~~associated ~~key~~costs ~~components,~~of ~~increases~~service incould ~~the prices charged may~~ have an adverse effect on our ~~results~~business of operations, as we may be unable to find contract manufacturers who can supply us at a lower price. As a result, the loss of a limited or sole source supplier could adversely affect our relationships with our customers and ~~our~~ results of operations ~~and financial condition~~.

We may experience defects or quality issues in our products or components, including those manufactured by third‑party suppliers. Such defects or quality issues could require rework, repairs, replacement parts or systems, or additional service and support efforts. These issues could result in increased costs, including warranty and service expenses, delays in product delivery, and potential customer dissatisfaction or reputational harm. If such defects or quality issues are significant or recurring, they could adversely affect our business and results of operations.

We recognize a substantial portion of our revenue ratably over the term of our agreements with customers and, as a result, downturns or upturns in sales may not be immediately reflected in our operating results.

We recognize a substantial portion of our revenue ratably over the terms of our agreements with customers, which generally occurs over a four-year period. As a result, a substantial portion of the revenue that we report in each period will be derived from the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, a decline in new sales or renewals in any one period may not be immediately reflected in our revenue results for that period. This decline, however, ~~will~~would negatively affect our revenue in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of our products, and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods. Our model also makes it difficult to rapidly increase our revenue through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement.

We also intend to make strategic investments in research and development, sales and marketing, and general and administrative functions and other areas to grow our business. These costs are generally expensed as incurred (with the exception of sales commissions), as compared to our revenue, a substantial portion of which is recognized ratably in future periods. We are likely to recognize the costs associated with these increased investments earlier than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely affect our operating results.

If we are unable to compete effectively with new entrants and other potential competitors, our sales and profitability could be adversely affected.

The sales prices for our products and services may decline for a variety of reasons, including competitive pricing pressures, discounts, a change in our mix of products and services, anticipation of the introduction of new products or promotional programs. Competition continues to increase in the market segments in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse product and service offerings may reduce the price of products that compete with theirs or may bundle them with other products and services. Further, if we are not able to maintain and enhance our brand or reputation as an industry leader, our business and operating results may be adversely affected. Additionally, currency fluctuations in certain countries and regions may negatively impact prices that partners and customers are willing to pay in those countries and regions. We cannot be certain that we will be successful in developing and introducing new products with enhanced functionality on a timely basis, or that our new product offerings, if introduced, will enable it to maintain our prices and gross profits at levels that will allow us to maintain positive gross margins and achieve profitability.

A portion of our revenue is generated by sales to government entities and such sales are subject to a number of challenges and risks.

Selling to government entities can be highly competitive, expensive, and time-consuming, and often requires significant upfront time investment and expense without any assurance of winning a sales contract. Government demand

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~~and~~A ~~payment~~portion ~~for~~of our ~~solutions~~revenue ~~may~~is ~~also~~generated ~~be impacted~~ by changes in fiscal or contracting policies, changes in government programs or applicable requirements, the adoption of new laws or regulations or changes to existing laws or regulations, public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our solutions. Accordingly, increasing sales ~~of our products~~ to government entities ~~may be more challenging than selling to commercial organizations, especially given extensive certification, compliance, clearance,~~ and security requirements. Government agencies may have statutory, contractual, or other legal rights to terminate contracts with us or reseller partners. Further, in the course of providing our solutions to government entities, our employees and those of our reseller partners may be exposed to sensitive government information. Any failure by us or our reseller partners to safeguard and maintain the confidentiality of such ~~information~~sales ~~could~~are subject us to ~~liability~~a ~~and~~number ~~reputational harm, which could materially and adversely affect our results~~ of ~~operations~~challenges and ~~financial performance~~risks. Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit may cause the government to shift away from our solutions and may result in a reduction of revenue, fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could adversely impact our results or operations.

Approximately 3% and 4% of our revenue was generated by sales to government entities during each of the years ended December 31, 2025 and December 31, 2024, respectively. Selling to government entities can be highly competitive, expensive, and time-consuming, and often requires significant upfront time investment and expense without any assurance of winning a sales contract. Government demand and payment for our solutions may also be impacted by changes in fiscal or contracting policies, changes in government programs or applicable requirements, lapses in appropriations, the adoption of new laws or regulations or changes to existing laws or regulations, public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our solutions. Accordingly, increasing sales of our products to government entities may be more challenging than selling to commercial organizations, especially given extensive certification, compliance, clearance, and security requirements. Government agencies may have statutory, contractual, or other legal rights to terminate contracts with us or reseller partners. Further, in the course of providing our solutions to government entities, our employees and those of our reseller partners may be exposed to sensitive government information. Any failure by us or our reseller partners to safeguard and maintain the confidentiality of such information could subject us to liability and reputational harm, which could materially and adversely affect our results of operations and financial performance. Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit may cause the government to shift away from our solutions and may result in a reduction of revenue, fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could adversely impact our results or operations.

We could lose customers and revenue if there are changes in the spending policies or budget priorities for government funding of colleges, universities, K-12 schools and other education providers.

Our customers include colleges, universities, K-12 schools and other education providers, many of which depend substantially on government funding. Accordingly, any general decrease, delay or change in federal, state or local funding for colleges, universities, schools and other education providers could cause our current and potential customers to reduce their purchases of our products, or decide not to renew their subscriptions, any of which could cause us to lose customers and revenue.

If we are not able to maintain and enhance our brand or reputation as an industry leader, our business and operating results may be adversely affected.

We believe that maintaining and enhancing our reputation as a leader in next-generation AI-based weapons detection for security screening is critical to our relationship with our existing end-user customers and reseller partners and our ability to attract new customers and reseller partners. The successful promotion of our brand will depend on multiple factors, including our marketing efforts, our ability to continue to deliver an excellent customer experience and develop high-quality features for our products, and our ability to successfully differentiate our products from those of our competitors. Our brand promotion activities may not be successful or yield increased revenue. Additionally, the performance of our reseller partners may affect our brand and reputation if customers do not have a positive experience with our products as implemented by our reseller partners or with the implementation generally. The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our market becomes more competitive, as we expand into new geographies and vertical markets and as more sales are generated through our reseller partners. To the extent that these activities yield increased revenue, such increase in revenue may not offset the corresponding increase in expenses we incur. If we do not successfully maintain and enhance our brand and reputation, our business and operating results may be adversely affected.

We may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or otherwise harm our operating results.

We may in the future acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses related to identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. Even if they are consummated, we may not be able to fully realize the anticipated benefits of any future acquisitions or anticipated benefits may not transpire.

There are inherent risks in integrating and managing acquisitions. If we acquire additional businesses, we may not be able to assimilate or integrate the acquired personnel, operations, products, services, and technologies successfully or effectively manage the combined business following the acquisition and our management may be distracted from operating our business. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including, without limitation:

•unanticipated costs or liabilities associated with the acquisition;

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•incurrence of acquisition-related costs, which would be recognized as a current period expense;

•inability to generate sufficient revenue to offset acquisition or investment costs;

•inability to maintain relationships with customers and partners of the acquired business;

•difficulty of incorporating acquired technology and rights into our platform and of maintaining quality and security standards consistent with our brand;

•delays in customer purchases due to uncertainty related to any acquisition;

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•the potential loss of key employees;

•use of resources that are needed in other parts of our business and diversion of management and employee resources;

•inability to recognize acquired deferred revenue in accordance with our revenue recognition policies; and

•use of substantial portions of our available cash and equity or the incurrence of debt to consummate the acquisition.

Acquisitions also increase the risk of unforeseen legal liability, including potential shareholder suits or potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses that are not discovered by due diligence during the acquisition process or new regulatory restrictions at the federal, state, or local levels. Generally, if an acquired business fails to meet our expectations, our operating results, business, and financial condition may suffer. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our business, results of operations and financial condition.

In addition, a significant portion of the purchase price of companies we acquire may be allocated to goodwill and other intangible assets, which must be assessed for impairment at least annually. If our acquisitions do not ultimately yield expected returns, we may be required to take charges to our operating results based on our impairment assessment process, which could harm our results of operations.

Risks Related to Our Industry and Products

If our products fail or are perceived to fail to detect threats such as a firearm or other potential weapon or explosive device, or if our products contain undetected errors or defects, this could have an adverse effect on our business and results of operations.

If our products fail or are perceived to fail to detect and prevent attacks or if our products fail to identify and respond to new and increasingly complex and unpredictable methods of attacks, our business and reputation may suffer. There is no guarantee that our products will detect and prevent all attacks, especially in light of the rapidly changing security landscape to which it must respond, as well as unique factors that may be present in our customers’ operating environments. Additionally, our products may falsely detect items that do not actually represent threats. These false positives may impair the perceived reliability of our products and may therefore adversely impact market acceptance of our products, which could, in turn, result in negative publicity and damage to our brand and reputation, loss of customers and sales, and increased costs to remedy any problem.

Our products, which are complex, may also contain undetected errors or defects when first introduced or as new versions are released. We have experienced these errors or defects in the past in connection with new products and product upgrades. We expect that these errors or defects will be found from time to time in the future in new or enhanced products after commercial release. Defects may result in increased vulnerability to attacks, cause our products to fail to detect security threats, or temporarily interrupt our products’ ability to screen visitors in a customer’s location. Any errors, defects, disruptions in service or other performance problems with our products may damage our customers’ business and could harm our reputation. If our products fail to detect security threats for any reason, including failures due to customer personnel or security processes, it may result in significant costs, the attention of our key personnel could be diverted and our customers may delay or withhold payment to us, elect not to renew or cause other significant customer relations problems to arise.

We may also be subject to liability claims for damages related to errors or defects in our products. For example, if our products fail to detect weapons or explosive devices that can be used to cause casualties at a high profile, public venue, we could incur financial damages and our reputation could also be significantly harmed. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products may harm our business and operating results. The limitation of liability provisions in our terms and conditions of sale may not fully or effectively protect us from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the U.S. or other countries. The sale and support of our products also entails the risk of product liability claims. Our insurance coverage may not adequately cover any claim asserted against us. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert or distract management’s time and other resources, and harm our business and reputation.

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We may also be subject to liability claims for damages related to errors or defects in our products. For example, if our products fail to detect weapons or explosive devices that are subsequently used by terrorists, criminals, or unbalanced individuals to cause casualties at a high profile, public venue, we could incur financial damages and our reputation could also be significantly harmed. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products may harm our business and operating results. The limitation of liability provisions in our terms and conditions of sale may not fully or effectively protect us from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the United States or other countries. The sale and support of our products also entails the risk of product liability claims. Our insurance coverage may not adequately cover any claim asserted against us. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert or distract management’s time and other resources, and harm our business and reputation.

If our customers are unable to implement our products successfully, or if we fail to effectively assist our customers in installing our products and provide effective ongoing support and training, customer perceptions of our products may be impaired, or our reputation and brand may suffer.

Our products are deployed in a wide variety of indoor and outdoor environments, including large venues with multiple entry points. Some of our customers have experienced difficulties implementing our products in the past and may experience implementation difficulties in the future. If our customers are unable to implement our products successfully, customer perceptions of our products may be impaired, or our reputation and brand may suffer.

Any failure by our customers to appropriately implement our products or any failure of our products to effectively integrate and operate within our customers’ operating environments could result in customer dissatisfaction, impact the perceived reliability of our products, result in negative press coverage, negatively affect our reputation, and harm our financial results.

Successful deployment and operation of our products depend on the knowledge and skill of the customer security personnel or implementation contractors charged with setting up, configuring, monitoring, and troubleshooting the equipment in their own environment. Many of our customers experience relatively high turnover in their security personnel, creating opportunities for knowledge and skill gaps that can result, and have resulted, in configuration, sensitivity setting, or operational errors that allow prohibited threats into customer facilities. In these situations, customers can perceive, and have perceived, that our products have failed to perform as designed until and unless we have been able to demonstrate otherwise. We or our implementation partners may not successfully isolate and identify failures due to customer error in the future, and this could result in customer dissatisfaction, impact the perceived reliability of our products, result in negative press coverage, negatively affect our reputation, and harm our financial results.

Our customers depend in large part on customer support delivered by us to resolve issues relating to the use of our products. However, even with our support, our customers are ultimately responsible for effectively using our products and ensuring that their staff is properly trained in the use of our products. The failure of our customers to correctly use our products, or our failure to effectively assist customers in installing our products and provide effective ongoing support and training, may result in an increase in the vulnerability of our customers’ facilities and visitors to security threats. It can take significant time and resources to recruit, hire and train qualified technical support and service employees and contractors. We may not be able to keep up with demand, particularly if the sales of our products exceed our internal forecasts. To the extent that we are unsuccessful in hiring, training, and retaining adequate support resources, our ability to provide adequate and timely support to our customers may be negatively impacted, and our customers’ satisfaction with our products may be adversely affected. Additionally, in unusual circumstances, if we needed to rely on our sales engineers to provide post-sales support while growing our service organization, our sales productivity may be negatively impacted. Accordingly, any failure by us to provide satisfactory maintenance and technical support services could have a material and adverse effect on our business and results of operations.

~~The~~We ~~loss~~face ofthe ~~designation~~risk of ~~our~~losing ~~Evolv~~recurring ~~Express~~revenue ~~system~~and asforecasting acertainty ~~Qualified~~if ~~Anti-Terrorism~~customers ~~Technology~~choose ~~under~~not ~~the~~to ~~Homeland~~renew ~~Security~~their ~~SAFETY~~typical ~~Act~~four‑year ~~could~~subscriptions or if renewal terms result in ~~adverse~~lower ~~reputational~~revenue than expiring agreements, and ~~financial~~significant ~~consequences~~losses if returned systems cannot be profitably redeployed.

Our ~~Evolv~~customer ~~Express~~agreements ~~system~~typically ~~has~~include ~~been~~an ~~awarded~~initial ~~the~~subscription ~~DHS~~term ~~SAFETY~~of ~~Act~~approximately ~~Designation~~four asyears, aand ~~Qualified~~our ~~Anti-Terrorism~~customers ~~Technology.~~have ~~Any~~no ~~amendments~~obligation orto ~~interpretive~~renew ~~guidance~~their ~~related~~subscriptions toafter the ~~SAFETY~~expiration ~~Act~~of ~~may~~that ~~affect~~period. ~~our~~We ~~ability~~cannot assure that renewal rates will continue to ~~retain~~remain ~~our~~high, ~~SAFETY~~or ~~Act~~that ~~Designation~~customers will renew their subscriptions at the same prices, ~~may~~on ~~increase~~the same terms, or for the ~~costs~~same level of ~~compliance~~products, ~~and/~~solutions, or ~~may~~number ~~negatively~~of ~~impact~~units. ~~our~~Customers ~~ability~~may also elect not to ~~attract~~renew ~~new~~their ~~customers~~subscriptions at all. ~~The~~Any ~~Safety~~such ~~Act~~non‑renewals ~~Designation~~or ~~provides~~renewals uson ~~with~~less ~~certain~~favorable ~~liability~~terms ~~protections~~could ~~for~~adversely ~~claims~~affect ~~relating~~our recurring revenue, our ability to forecast future results, ~~arising~~and ~~out~~our ofoverall orfinancial ~~resulting~~performance. ~~from~~Even anwhen ~~act~~we ofsuccessfully ~~terrorism~~renew customer contracts, ~~and~~the revenue associated with the ~~loss~~annual ofrenewal ~~these~~rate ~~protections~~may be lower than the expiring rate, which could ~~materially~~result ~~impact~~in ~~our~~a ~~risk~~loss ~~and~~of ~~our~~recurring ~~business~~revenue. Because wea ~~view~~decline ~~our~~in ~~SAFETY~~new ~~Act~~or ~~Designation~~renewed assubscription contracts in any single quarter may only have a ~~differentiating~~modest ~~factor~~immediate ~~among~~impact ~~our~~on ~~industry~~revenue ~~peers~~recognized in that quarter, ifthe ~~laws~~negative ~~and~~effects of reduced renewal activity may be more pronounced in future periods.

In recent years, we have experienced significant growth in both customers and units under subscription. As an increasing number of customers reach the end of their initial subscription terms, renewals have become an increasingly important driver of our recurring revenue and operating results. We have limited historical experience managing renewals at the current and growing scale of our customer base. As a result, we face increased exposure to customer or unit churn, which we define as customers electing not to renew their certain of their subscriptions or renewing at reduced levels. We

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~~regulations~~have ~~change~~limited ~~relating~~historical toexperience managing renewals at the ~~SAFETY~~current ~~Act~~and orgrowing ifscale weof ~~fail~~our tocustomer ~~comply~~base. ~~with~~Increased ~~the~~churn ~~SAFETY~~or ~~Act's~~lower ~~requirements,~~renewal rates could adversely affect our ~~business~~recurring revenue, ~~financial~~forecasting ~~condition~~certainty, ~~results~~and ofoverall ~~operations~~financial performance, ~~customer~~with ~~retention~~impacts ~~and~~that ~~stock~~may ~~price~~become ~~could~~more bepronounced ~~materially~~in ~~and~~future ~~adversely affected~~periods.

In addition, some customers may choose not to renew existing contracts and instead upgrade to our latest product offerings, which may result in the return of prior‑generation systems. While we expect to refurbish and redeploy the majority of returned systems, our ability to do so depends on market demand, which is still emerging and not proven at scale, refurbishment economics, and operational execution. If returned systems cannot be redeployed on favorable terms or at all, we may incur non-cash losses for the impairment of the value of such assets, which could adversely affect our business, financial condition, and results of operations.

The loss of designation of our Evolv Express system as a Qualified Anti-Terrorism Technology under the Homeland Security SAFETY Act could result in adverse reputational and financial consequences.

Our Evolv Express system has been awarded the DHS SAFETY Act Designation as a Qualified Anti-Terrorism Technology. Any amendments or interpretive guidance related to the SAFETY Act may affect our ability to retain our SAFETY Act Designation, may increase the costs of compliance, and/or may negatively impact our ability to attract new customers. The SAFETY Act Designation provides us with certain liability protections for claims relating to, arising out of or resulting from an act of terrorism, and the loss of these protections could materially impact our risk and our business. Because we view our SAFETY Act Designation as a differentiating factor among our industry peers, if laws and regulations change relating to the SAFETY Act or if we fail to comply with the SAFETY Act's requirements, our business, financial condition, results of operations, customer retention and stock price could be materially and adversely affected.

The AI-based weapons detection for security screening market is new and evolving and may not grow as expected or may develop more slowly or differently than we expect.

We believe our future success will depend in large part on the growth in the market for AI-based weapons detection for security screening solutions. This market is new and evolving, and as such, it is difficult to predict important market trends. To date, enterprise and corporate security budgets have allocated a majority of dollars to conventional security solutions, such as lower priced walk-through metal detectors. Organizations that use these security products may be satisfied with them or slow to adapt to technological advances and, as a result, these organizations may not adopt our solutions in addition to, or in lieu of, security products they currently use.

Further, sophisticated attackers are skilled at adapting to new technologies and developing new methods of breaching organizations’ security systems, and changes in the nature of security threats could result in a shift in budgets away from products such as ours. In addition, while recent high visibility attacks at publicly and privately-owned venues and schools have increased market awareness of mass shootings, terrorist, or other attacks, if such attacks were to decline, or enterprises or governments perceived that the general level of attacks has declined, our ability to attract new customers and expand our sales to existing customers could be materially and adversely affected. If products such as ours are not viewed by organizations as necessary, or if customers do not recognize the benefit of our products as a critical element of an effective security strategy, our revenue may not grow as quickly as expected, or may decline, and the trading price of our stock could suffer.

In addition, it is difficult to predict customer adoption and retention rates, customer demand for our products, the size and growth rate of the market for AI-based weapons detection for security screening, the entry of competitive products, or the success of existing competitive products. Any expansion in our market depends on a number of factors, including the cost, performance, and perceived value associated with our products and those of our competitors. If these products do not achieve widespread adoption or there is a reduction in demand for products in our market caused by a lack of customer acceptance, technological challenges, regulatory restrictions, competing technologies or products, decreases in corporate spending, weakening economic conditions or otherwise, it could result in reduced customer orders, early terminations, reduced customer retention rates or decreased revenue, any of which would adversely affect our business operations and financial results.

We use AI and machine learning in our development process and in our AI-based weapon detection products, which could present risks and challenges to our business.

We use ~~AI and~~ machine learning technologies, ~~including~~and ~~propriety~~artificial intelligence (“AI”), ~~and~~including ~~machine~~generative ~~learning algorithms~~AI, in the development and operation of our AI-based weapons detection products for security screening. There are significant risks involved in developing, maintaining, and deploying AI and machine learning technologies and there can be no assurance that the usage of such technologies will always enhance our products or services or be beneficial to our business, including our efficiency or profitability. Furthermore, the rapid pace of AI development may require the continued investment of significant resources for us to remain competitive, and we may not receive commensurate returns if we are not successful in achieving the outcomes we expect (either on the timelines we expect or at all). In addition, our competitors may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively.

Some uses of AI pose emerging ethical issues and present a number of risks that cannot be fully mitigated. Using AI while the technology is still developing may expose us to additional liability, reputational harm and threats of litigation, in particular, if these AI or machine learning models are incorrectly designed, developed or implemented, produce errors, AI bias, discrimination or AI hallucinations, result in intellectual property infringement or misappropriation or are adversely impacted by unforeseen defects, technical challenges, data privacy issues, cyber security threats, material performance issues, or otherwise do not function as intended. For example, AI technologies are highly reliant on the collection and analysis of large amounts of data, which may be overbroad, incomplete, inadequate, inaccurate, biased, or otherwise of poor quality. The accuracy of these data inputs and their subsequent effects on the outputs of AI technologies cannot always be verified, potentially leading to outputs that incorporate or are based on inaccurate or erroneous information. If any of the foregoing were to occur, the performance of our products, services, and business, as well as our reputation and the reputations of our customers, could suffer or we could incur liability.

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~~Because~~involved ~~AI is a developing technology~~ in ~~its infancy~~developing, ~~legal frameworks for AI governance are unsettled~~maintaining, ~~quickly developing,~~ and ~~unpredictable.~~deploying ~~The use of~~ AI ~~could also lead to legal~~ and ~~regulatory~~machine ~~investigations~~learning ~~and~~technologies ~~enforcement actions, or may give rise to specific obligations, including required notices, consents~~ and ~~opt-outs, under various data privacy, protection and cybersecurity laws and regulations in a number of jurisdictions. Further,~~ there iscan be no assurance that ~~new~~the ~~laws~~usage ~~and~~of ~~regulations~~such technologies will ~~not~~always ~~restrict~~enhance ~~the~~our ~~ways~~products weor ~~can~~services ~~use~~or ~~the~~be AIbeneficial weto ~~have~~our ~~adopted~~business, including byour ~~limiting~~efficiency or ~~changing global AI adoption trends that may impede our strategy~~profitability. ~~For example~~Furthermore, ~~Florida has proposed legislation designed to ban~~ the ~~use~~rapid pace of AI ~~for~~development ~~firearm~~may ~~detection~~require inthe ~~certain~~continued ~~public~~investment ~~spaces.~~of Ifsignificant ~~such~~resources ~~legislation~~for isus ~~adopted~~to inremain ~~Florida or similar legislation is proposed and adopted in any other states~~competitive, ~~our operations in such states could be disrupted, which could have a material adverse effect on our business, financial condition~~ and ~~results~~we ofmay ~~operations.~~not ~~Moreover,~~receive ~~regulations~~commensurate ~~relating~~returns toif AIwe ~~technologies~~are ~~may~~not ~~also~~successful ~~impose~~in ~~certain~~achieving ~~obligations on organizations, and~~ the ~~costs~~outcomes ofwe ~~monitoring~~expect ~~and~~(either ~~responding~~on ~~to such regulations, as well as~~ the ~~consequences~~timelines ofwe ~~non-compliance,~~expect ~~could have an adverse effect on our operations~~ or ~~financial~~at ~~condition~~all). ~~Unfavorable~~In ~~legal~~addition, ~~and regulatory developments could also impact~~ our ~~vendors,~~competitors ~~suppliers~~may ~~and~~incorporate ~~industry~~AI asinto atheir ~~whole,~~products ~~and~~more wequickly ~~may~~or bemore ~~exposed~~successfully tothan ~~increased risk of liability~~us, ~~reputational~~which ~~harm,~~could ~~and~~impair ~~other~~our ~~significant~~ability ~~costs if we need~~ to ~~make~~compete ~~business and operational changes in response to such developments~~effectively.

InSome ~~particular,~~uses ~~many~~of ~~U.S.~~AI ~~federal,~~pose ~~state,~~emerging ~~and~~ethical ~~foreign~~issues ~~government bodies~~ and ~~agencies~~present ~~have~~a ~~introduced,~~number ~~and~~of ~~are~~risks ~~currently~~that ~~considering,~~cannot ~~additional~~be ~~laws~~fully ~~and~~mitigated. ~~regulations,~~Using ~~including~~AI ~~related~~while to the ~~development~~technology ~~and~~is ~~integration~~still ofdeveloping ~~AI,~~may ~~machine~~expose ~~learning,~~us ~~and~~to additional ~~emerging~~liability, ~~data~~reputational ~~technologies~~harm ~~while~~and ~~mitigating~~threats orof ~~controlling~~litigation, ~~for bias and discrimination~~ in ~~the~~particular, ~~context~~if ofthese AI ~~and~~or machine learning. ~~For~~models ~~example,~~are ~~the~~incorrectly ~~California~~designed, ~~Privacy~~developed ~~Protection~~or ~~Agency~~implemented, isproduce ~~currently~~errors, inAI ~~the~~bias, ~~process~~discrimination ofor ~~finalizing~~AI ~~regulations~~hallucinations, ~~under~~result ~~the~~in ~~California~~intellectual ~~Consumer~~property ~~Privacy~~infringement ~~Act~~or ~~(as~~misappropriation ~~amended~~or byare ~~the~~adversely ~~California~~impacted ~~Privacy~~by ~~Rights~~unforeseen ~~Act) (“CCPA”)~~defects, ~~regarding~~technical ~~the use of automated decision making~~challenges, ~~which~~open ~~focuses~~source onsoftware ~~notice and transparency requirements~~issues, ~~opt-out~~data ~~and~~privacy ~~access rights and performance of risk assessments. Additionally~~issues, ~~Colorado~~cyber ~~and~~security ~~California have recently passed legislation~~threats, ~~and~~material ~~legislation~~performance ~~is pending in Virginia~~issues, ~~that,~~or ~~among~~otherwise ~~other~~do ~~obligations,~~not ~~will~~function ~~require~~as ~~disclosure and transparency obligations with respect to certain AI systems~~intended. ~~Furthermore,~~For ~~in Europe~~example, ~~the Artificial Intelligence Act (“EU~~ AI ~~Act”),~~technologies ~~which~~are ~~entered~~highly ~~into~~reliant ~~force~~ on ~~August 1, 2024, provides rights and duties designed to ensure~~ the ~~safe~~collection and ~~ethical~~analysis ~~deployment~~ of ~~AI.~~large ~~The~~amounts ~~EU AI Act categorizes AI systems based on their level~~ of ~~risk~~data, ~~prohibiting certain uses of AI (~~which ~~provisions~~may ~~applied~~be asoverbroad, ~~of February 2~~incomplete, ~~2025)~~inadequate, ~~and introduces strict requirements for high-risk AI applications (which provisions apply from August 2~~inaccurate, ~~2027). It is intended to apply to companies that develop~~biased, ~~use and/~~or ~~provide~~otherwise AIof inpoor ~~the~~quality. EUThe ~~and~~accuracy ~~includes~~of ~~requirements~~these ~~around~~data ~~transparency,~~inputs ~~conformity assessments~~ and ~~monitoring,~~their ~~risk~~subsequent ~~assessments,~~effects ~~human oversight, security and accuracy and introduces significant fines for noncompliance. There are also specific rules~~ on the ~~use~~outputs of ~~automated~~AI ~~decision~~technologies ~~making~~cannot ~~under~~always ~~the~~be ~~General~~verified, ~~Data~~potentially ~~Protection~~leading ~~Regulation~~to ~~(“GDPR”)~~outputs that ~~provide~~incorporate ~~the~~or ~~data~~are ~~subject the right not to be subject to a decision~~ based ~~solely~~ on ~~automated~~inaccurate ~~processing, including profiling, which produces legal effects concerning him~~ or ~~her~~erroneous ~~or similarly significantly affects him or her~~information. ~~Additionally,~~If ~~the~~any ~~existence~~ of ~~automated decision making must be disclosed to~~ the ~~data~~foregoing ~~subject~~were ~~with a meaningful explanation of the logic used in such decision making in certain circumstances and safeguards must be implemented~~ to ~~safeguard individual rights~~occur, ~~including~~ the ~~right~~performance toof ~~obtain~~our ~~human~~products, ~~intervention~~services, and ~~to contest any decision. We will likely incur additional expenses and costs associated with complying with existing and evolving laws~~business, as well as ~~face~~our ~~heightened~~reputation ~~potential~~and ~~liability~~the ifreputations ~~we are unable to comply with such laws. While we strive to minimize any physical bias in our product’s identification~~ of ~~threats because~~ our ~~product’s~~customers, AIcould ~~does~~suffer ~~not process~~ or ~~analyze an individual’s physical characteristics,~~ we ~~may~~could ~~not~~ be ~~able~~subject to ~~identify~~claims ~~such~~(including ~~issues~~product inliability ~~advance~~claims), orlitigation if(including ~~identified,~~class weactions) ~~may~~or ~~not~~incur ~~be able to identify mechanisms for effectively mitigating such issues~~liability.

~~Our~~Because ~~failure,~~AI oris ~~perceived~~a ~~failure~~developing technology in its infancy, tolegal ~~comply~~frameworks ~~fully~~for ~~with~~AI governance are unsettled, quickly developing, ~~interpretations~~and unpredictable. The use of AI ~~laws~~could ~~and~~also ~~regulations~~lead orto ~~meet~~legal ~~evolving~~and regulatory investigations and ~~varied~~enforcement ~~stakeholder~~actions, ~~expectations~~or ~~and~~may ~~industry~~give ~~standards~~rise to specific obligations, ~~could~~including ~~harm~~required ~~our~~notices, ~~business~~consents and opt-outs, ~~reputation~~under various data privacy, ~~financial~~protection ~~condition~~and cybersecurity laws and ~~results~~regulations in a number of ~~operation~~jurisdictions. ~~See~~Further, –there ~~“We~~is ~~are~~no ~~subject~~assurance tothat ~~government~~new ~~regulation~~laws and ~~other~~regulations ~~legal~~will ~~obligations,~~not ~~particularly~~restrict ~~related~~the toways ~~privacy~~we can use the AI we have adopted, ~~data~~including ~~protection~~by limiting or changing global AI adoption trends that may impede our strategy. Moreover, ~~information~~regulations ~~security~~relating to AI technologies may also impose certain obligations on organizations, and ~~product~~the ~~marketing~~costs of monitoring and responding to such regulations, as well as the consequences of non-compliance, could have an adverse effect on our ~~actual~~operations or ~~perceived~~financial ~~failure~~condition. toUnfavorable ~~comply~~legal ~~with~~and ~~such~~regulatory ~~obligations~~developments could ~~harm~~also impact our vendors, suppliers and industry as a whole, and we may be exposed to increased risk of liability, reputational harm, and other significant costs if we need to make business and operational changes in response to such developments.”

~~Further~~In particular, ~~our~~many ~~ability~~U.S. federal, state, and foreign government bodies and agencies have introduced, and are currently considering, additional laws and regulations, including related to ~~continue~~the development and integration of AI, machine learning, and additional emerging data technologies while mitigating or controlling for bias and discrimination in the context of AI and machine learning. For example, in the U.S., while the White House signed an Executive Order Removing Barriers to ~~develop~~American Leadership in Artificial Intelligence which prioritizes deregulation, several states are considering enacting or have already enacted regulations concerning the use ~~such~~of AI technologies. ~~may~~These beinclude ~~dependent~~the onCalifornia ~~access~~Generative toArtificial ~~specific~~Intelligence: ~~third-party~~Training ~~software~~Data Transparency Act, the Utah Artificial Intelligence Consumer Protection Amendments, the updated California Consumer Privacy Act and ~~infrastructure~~the Colorado Consumer Protections for Artificial Intelligence Act (effective June 30, ~~such~~2026). asFurthermore, ~~processing~~in ~~hardware~~Europe, orthe ~~third-party~~Artificial Intelligence Act (“EU AI ~~models~~Act”), which entered into force on August 1, 2024, provides rights and weduties ~~cannot~~designed ~~control~~to ensure the ~~availability~~safe orand ~~pricing~~ethical deployment of ~~such~~AI. ~~third~~The ~~party~~EU ~~software~~AI Act categorizes AI systems based on their level of risk, prohibiting certain uses of AI, introduces strict requirements for high-risk AI applications (which provisions apply from August 2, 2027), and ~~infrastructure~~includes requirements around transparency, ~~especially~~conformity inassessments aand ~~highly~~monitoring, ~~competitive~~risk ~~environment~~assessments, human oversight, security and accuracy and introduces significant fines for non-compliance. In addition, ~~market~~AI ~~acceptance~~regulations may require us to conduct complex impact assessments, risk evaluations or other compliance reviews and ~~consumer~~audits ~~perceptions~~prior ofto deploying AI tools for certain high-risk applications, including automated decision-making that affects individuals, and ~~machine~~may ~~learning~~also ~~technologies~~require us to disclose information regarding data sets used to train AI tools or regarding users who are ~~uncertain~~interacting with AI or to obtain consents or provide opt-out rights to individuals. We will likely incur additional expenses and costs associated with complying with existing and evolving laws, as well as face heightened potential liability if we are unable to comply with such laws. While we strive to minimize any physical bias in our product’s identification of threats because our product’s AI does not process or analyze an individual’s physical characteristics, we may not be able to identify such issues in advance, or if identified, we may not be able to identify mechanisms for effectively mitigating such issues.

AOur ~~number~~failure, ofor ~~aspects~~perceived ~~of intellectual property protection in the field of AI and machine learning are currently under development~~failure, ~~and there is uncertainty and ongoing litigation in different jurisdictions as~~ to ~~the~~comply ~~degree~~fully ~~and~~with ~~extent~~developing ofinterpretations ~~protection warranted for the output~~ of AI laws and ~~machine~~regulations ~~learning~~or ~~systems.~~meet ~~See~~evolving ~~– “Our intellectual property rights are valuable~~ and ~~any~~varied ~~inability~~stakeholder toexpectations ~~protect our proprietary technology~~ and ~~intellectual~~industry ~~property~~standards, ~~rights~~could ~~substantially~~ harm our business, ~~and~~reputation, ~~operating~~financial ~~results.”~~

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condition and results of operation. See – “We ~~may~~are besubject ~~unable~~to government regulation and other legal obligations, particularly related to ~~acquire~~privacy, ~~new~~data ~~customers~~protection, ~~sell~~information ~~additional~~security, ~~products~~and toproduct marketing and our ~~customers,~~actual or ~~retain~~perceived ~~our~~failure ~~existing~~to ~~customers~~comply with such obligations could harm our business.”

~~Our~~Further, ~~success depends on~~ our ability to ~~acquire~~continue ~~new customers in new and existing vertical markets, and in new and existing geographic markets. If we are unable~~ to ~~attract~~develop aor ~~sufficient~~use ~~number~~such oftechnologies ~~new customers and retain our existing customers, we~~ may be ~~unable~~dependent toon ~~generate~~access ~~revenue~~to ~~growth~~specific atthird-party ~~desired~~software ~~rates.~~and ~~The physical security solutions market is competitive~~infrastructure, ~~and~~such ~~many~~as ofprocessing ~~our~~hardware ~~competitors~~or ~~have~~third-party ~~significantly~~AI ~~greater financial~~models, ~~personnel,~~ and ~~other resources than~~ we docannot ~~and~~control ~~may~~the beavailability ~~able~~or topricing ~~devote~~of ~~greater~~such ~~resources~~third toparty ~~their~~software ~~efforts to develop solutions~~ and ~~attract~~infrastructure, ~~customers.~~especially Asin a ~~result,~~highly itcompetitive ~~may be difficult for us to add new customers to our customer base~~environment. ~~Competition~~In inaddition, ~~the~~market ~~marketplace~~acceptance ~~may~~and ~~also~~consumer ~~lead~~perceptions usof toAI ~~win fewer new customers or result in us providing discounts~~ and ~~other~~machine ~~commercial~~learning ~~incentives~~technologies toare ~~win~~uncertain. ~~new~~Further, ~~customers or retain~~ our ~~existing~~usage ~~customers.~~of ~~Additional~~open ~~factors~~source ~~that~~AI ~~impact~~technologies ~~our~~may ~~ability~~lead to ~~acquire~~compliance ~~new~~issues, ~~customers~~obligations ~~and~~to ~~retain~~disclose ~~existing customers include~~ the ~~perceived~~source ~~need~~code ~~for AI-based weapons detection for security solutions, the size~~ of our ~~prospective~~software, ~~customers’~~and security ~~budgets,~~risks. ~~the~~See ~~availability~~– of“Our ~~government~~use ~~funding,~~of ~~the~~“open ~~utility~~source” ~~and~~software ~~efficacy~~could ofsubject our ~~existing~~proprietary ~~and~~software ~~new~~to ~~products~~certain ordisclosure ~~product enhancements~~obligations, ~~whether~~expose ~~proven~~us orto ~~perceived~~security risks, and ~~general~~negatively ~~economic~~affect ~~conditions.~~our ~~These~~ability ~~factors~~to ~~may~~offer ~~have~~our aproducts ~~meaningful~~and ~~negative~~subject ~~impact~~us onto ~~our~~possible ~~future revenues and operating results~~litigation.”

InA ~~addition,~~number ~~our~~of ~~future~~aspects ~~success~~of ~~depends,~~intellectual inproperty ~~part,~~protection onin ~~our ability to expand~~ the ~~deployment~~field of ~~our~~AI ~~products~~and ~~with~~machine ~~existing~~learning ~~customers~~are bycurrently ~~selling~~under ~~them~~development, ~~additional products~~ and, inthere ~~part,~~is onuncertainty ~~our ability to maintain~~ and ~~increase~~ongoing ~~subscriptions~~litigation ~~for~~in ~~our~~different ~~proprietary~~jurisdictions ~~products~~ as ~~they~~to ~~generate~~the ~~recurring~~degree ~~revenues. This may require increasingly sophisticated~~ and ~~costly~~extent ~~sales efforts and may not result in additional sales. Existing and future customers~~ of ~~our~~protection ~~products~~warranted ~~may not purchase our subscriptions~~ for ~~our proprietary products at~~ the ~~same~~output ~~rate~~of atAI ~~which~~and ~~customers~~machine ~~currently~~learning ~~purchase those subscriptions~~systems. InSee ~~addition,~~– ~~the~~“Our ~~rate~~intellectual atproperty ~~which~~rights ~~our~~are ~~customers~~valuable ~~purchase~~and ~~additional~~any ~~products~~inability ~~depends on a number of factors, including the perceived need for additional security screening solutions as well as general economic conditions. If our efforts~~ to ~~sell~~protect ~~additional products to~~ our ~~customers~~proprietary ~~are~~technology ~~not~~and ~~successful~~intellectual orproperty ~~our~~rights ~~customers~~could ~~purchase~~substantially aharm ~~lower volume of subscriptions,~~ our business ~~may~~and ~~suffer.~~operating results.”

~~While~~Our ~~our~~expansion ~~immediate~~into ~~focus~~international ismarkets onexposes ~~the~~us ~~United~~to ~~States~~additional ~~market~~operational, ~~our~~regulatory, long-term success in part depends on our ability to acquire new customers outside the United States. The United States has significantly more privately owned firearms than any other country. If customers in other countries do not perceive the threat of firearms and ~~weapons~~compliance torisks bethat ~~significant~~could ~~enough~~adversely toaffect ~~justify the purchase of~~ our ~~products, we will be unable to establish a meaningful~~ business ~~outside the United States~~. ~~If we are unable to attract a sufficient number of new customers outside the United States, we may be unable to generate future revenue growth at desired rates in the long term.~~

As we pursue opportunities to expand our business outside of the United States, we will become subject to additional risks and uncertainties inherent in international operations. Selling, deploying, and supporting our security screening systems in foreign jurisdictions may require us to comply with local product certification regimes, import and export controls, cybersecurity requirements, government procurement rules, and other regulatory frameworks that differ substantially from those in the U.S. Some countries impose stringent testing, safety, or security-technology approvals before products similar to ours may be marketed or deployed, and obtaining these approvals can be costly, time-consuming, or ultimately unsuccessful. We may also be required to modify our products to meet local technical, privacy, data handling, or operational standards, and such modifications may increase our costs or impair product performance.

International expansion also exposes us to increased compliance obligations under foreign data protection, privacy, and AI-related laws, many of which are more restrictive or impose greater penalties than comparable U.S. laws. For example, certain jurisdictions impose limitations on the cross-border transfer, localization, or processing of personal data, and compliance with these rules may require significant investment in technical or organizational measures or the establishment of local infrastructure. Additionally, enforcement of anti-corruption, antibribery, and trade sanction laws may present heightened risks as we engage foreign distributors, resellers, installers, and agents. If these third parties fail to comply with applicable laws or our policies, we could be subject to regulatory inquiries, penalties, or reputational harm.

Further, international operations may involve greater operational challenges, including foreign currency fluctuations, longer sales cycles, local business practices that differ from those of U.S. markets, increased costs related to global logistics and supply chains, and geopolitical instability. If we are unable to manage these risks effectively, or if international demand for our products does not develop as anticipated, our ability to successfully expand outside the U.S. could be limited, and our business, financial condition, and results of operations could be adversely affected. In addition, expansion into foreign jurisdictions introduces tax compliance exposure, as differing and evolving international tax regimes, audit practices, and standards may result in unexpected liabilities, penalties, or requirements to collect and remit taxes in markets where we have not historically done so.

Our growth potential outside the U.S. may be limited or vary due to differences in security threats, customer perceptions, regulatory environments, and international market dynamics, as well as our own expansion and investment priorities.

While our immediate focus is on the U.S. market, our long‑term growth prospects depend in part on international expansion. Customer demand for AI‑based weapons detection systems varies significantly by country and is influenced by factors such as the nature of security threats, cultural attitudes toward security screening, regulatory frameworks, and whether firearms and weapons‑related risks are perceived to be sufficiently prevalent in public venues to justify adoption of our solutions. If customers in other countries do not perceive these risks to warrant the purchase of our products, we may be unable to establish a meaningful business outside the U.S., which could limit our long‑term revenue growth potential.

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As a result, our international expansion efforts are expected to be selective and measured, and we may prioritize investment in markets where customer demand, regulatory frameworks, and perceived security threats align most closely with our solutions, while continuing to direct a substantial portion of our resources toward domestic priorities.

If we do not successfully anticipate market needs and enhance our existing products or develop new products that meet those needs on a timely basis, we may not be able to compete effectively and our ability to generate revenues will suffer.

Our customers face evolving security risks that require them to adapt to increasingly complex infrastructures that incorporate a variety of security solutions. We face significant challenges in ensuring that our products effectively identify and respond to these security risks without disrupting the performance of our customers’ infrastructures. As a result, we must continually modify and improve our products in response to changes in our customers’ infrastructures.

We cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to develop product enhancements or new products to meet such needs or opportunities in a timely manner, if at all. There can be no assurance that enhancements or new products will achieve widespread market acceptance.

New products, as well as enhancements to our existing products, could fail to attain sufficient market acceptance for many reasons, including:

•delays in releasing new products or product enhancements;

•failure to accurately predict market demand and to supply products that meet this demand in a timely fashion;

•inability to protect against new types of attacks or techniques used by terrorists or other threat sources;

•defects in our products, errors or failures of our products;

•negative publicity or perceptions about the performance or effectiveness of our products;

•introduction or anticipated introduction of competing products by our competitors;

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•installation, configuration, sensitivity setting, or usage errors by our customers; and

•easing or changing of regulatory requirements at the federal, state, and/or local levels related to security or other aspects of our business.

If we fail to anticipate market requirements or fail to develop and introduce product enhancements or new products to meet those needs in a timely manner, it could cause us to lose existing customers and prevent us from gaining new customers, which would significantly harm our business, financial condition, and results of operations.

While we continue to invest significant resources in research and development to enable our products to continue to address the security risks that our customers face, the introduction of products embodying new technologies could also render our existing products or services obsolete or less attractive to customers. If we spend significant time and effort on research and development and are unable to generate an adequate return on our investment, our business and results of operations may be materially and adversely affected.

We incorporate technology and components from third parties into our products, and our inability to obtain or maintain rights to the technology could harm our business.

We have incorporated, and may in the future incorporate, technology and components from third parties into our products. We cannot be certain that our suppliers and licensors are not infringing the intellectual property rights of third parties or that the suppliers and licensors have sufficient rights to the technology in all jurisdictions in which it may sell our products. We may not be able to rely on indemnification obligations of third parties, to the extent they offer them. If our implementation or ongoing use of such technology is limited because of intellectual property infringement claims brought by third parties against our suppliers or licensors or against us, or if we are unable to continue to obtain such technology or enter into new agreements therefor on commercially reasonable terms, our ability to develop and sell products, subscriptions, and services containing such technology could be severely limited, and our business could be harmed. Disputes with suppliers, ~~and~~ licensors ~~could result in the payment of additional royalties or penalties by us~~, ~~cancellation~~ or non-renewal of the underlying license or litigation. In the event that we cannot renew existing licenses, or enter into new licenses of comparable technology, we may be required to discontinue or limit our use of the operations, products, or offerings that include or incorporate the licensed intellectual property. ~~Any~~owners ~~such discontinuation or limitation~~ could ~~have~~result ain ~~material~~the ~~and~~payment ~~adverse impact on our business, financial condition, and results~~ of ~~operation.~~additional ~~Additionally,~~royalties ~~if we are unable to obtain necessary technology and components from third parties at all, including certain sole suppliers, we may be forced to acquire~~ or develop alternative technology or components, which may require significant time, cost, and effort and may be of lower quality or performance standards. This could limit or delay our ability to offer new or competitive products and increase our costs of production. If alternative technology or components cannot be obtained or developed, we may not be able to offer certain functionality as part of our products, subscriptions, and services. As a result, our margins, market share and results of operations could be significantly harmed.

Our use of “open source” software could subject our proprietary software to certain disclosure obligations, negatively affect our ability to offer our products and subject us to possible litigation.

We have used “open source” software in connection with the development and deployment of our software products, and we expect to continue to use open source software in the future. Open source software is licensed by its authors or other third parties under open source licenses, which in some instances may subject us to certain unfavorable conditions, including requirements that we offer the software that incorporates, is based on or that links to the open source software for no cost, that we make publicly available all or part of the source code for any modifications or derivative works we create based upon or that incorporate, link to or otherwise use the open source software, or that we license such modifications or derivative works under the terms of the particular open source license. Additionally, the AI technologies used to develop or write software used operations may be trained on data sets that include open source software or may draw from sources that might subject such software developed using AI technologies to certain license restrictions or other obligations. Additionally, if we decide to use AI technologies to develop or write software in our product offerings the AI may be trained on data sets that include open source software or may draw from sources that might subject such software developed using AI technologies to certain license restrictions or other obligations.

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apenalties ~~manner~~by ~~that~~us, ~~would~~infringement ~~subject~~damages, ~~our~~cancellation ~~proprietary~~or ~~software~~non-renewal toof ~~open~~the ~~source~~underlying ~~licensing~~license ~~terms~~or ~~(including~~litigation, ~~requiring~~or require us to ~~disclose~~indemnify ~~our~~third ~~proprietary~~parties ~~source~~(including ~~code~~our customers). orIn the event that ~~would~~we ~~otherwise~~cannot ~~breach~~renew ~~the~~existing ~~terms~~licenses, ofor anenter ~~open~~into ~~source~~new ~~agreement~~licenses of comparable technology, we ~~cannot~~may ~~guarantee~~be ~~that~~required weto ~~will~~discontinue beor ~~successful~~limit our use of the operations, ~~that~~products, ~~all~~or ~~open~~offerings ~~source~~that ~~software~~include isor ~~reviewed~~incorporate ~~prior~~the tolicensed ~~use~~intellectual inproperty. ~~our~~Any ~~products,~~such ~~that~~discontinuation ~~our~~or ~~developers~~limitation could have ~~not~~a ~~incorporated~~material ~~open~~and ~~source~~adverse ~~software~~impact ~~into~~on our ~~products~~business, ~~that~~financial condition, and results of operation. Additionally, if we are ~~unaware~~unable ofto obtain necessary technology and components from third parties at all, including certain sole suppliers, we may be forced to acquire or ~~that~~develop ~~they~~alternative ~~will~~technology ~~not~~or docomponents, sowhich inmay ~~the~~require ~~future.~~significant ~~Further~~time, ~~use~~cost, and effort and may be of ~~open~~lower ~~source~~quality AIor ~~technologies~~performance ~~poses~~standards. ~~additional~~This ~~risks~~could ~~relating~~limit or delay our ability to ~~the~~offer ~~underlying~~new ~~training~~or ~~data~~competitive ~~sets,~~products ~~including~~and anincrease ~~increased~~our ~~risk~~costs inof ~~intellectual~~production. ~~property~~If ~~infringement~~alternative technology or ~~non-compliance~~components ~~with~~cannot ~~open~~be ~~source~~obtained ~~license~~or ~~terms~~developed, aswe amay ~~result~~not ofbe ~~such~~able ~~training~~to ~~data~~offer ~~sets~~certain ~~potentially~~functionality ~~derived~~as ~~from~~part ~~data~~of ~~sourced~~our ~~without~~products, ~~permission~~subscriptions, orand ~~outside~~services. ~~the~~As ~~scope~~a result, our margins, market share and results of ~~the~~operations ~~underlying~~could ~~open~~be ~~source~~significantly ~~license~~harmed.

Our ~~Furthermore,~~use ~~there are an increasing number~~ of “open source” software license types, almost none of which have been interpreted by U.S. or foreign courts, resulting in a dearth of guidance regarding the proper legal interpretation of such licenses. As a result, there is a risk that open source software licenses could besubject ~~construed in a manner that imposes unanticipated conditions or restrictions on~~ our ~~ability~~proprietary ~~to market or provide our products and services. If we are held to have breached or failed to fully comply with all the terms and conditions of an open source~~ software ~~license, we could face infringement claims or other liability, or be required~~ to ~~seek~~certain ~~costly~~disclosure ~~licenses from third parties to continue providing our offerings on terms that are not economically feasible~~obligations, ifexpose atus ~~all,~~ to ~~re-engineer~~security all or a portion of our products, to discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or to make generally available, in source code form, our proprietary code. Further, in addition to risks ~~related to license requirements~~, ~~use of certain open source software carries greater technical~~ and ~~legal~~negatively ~~risks~~affect than does the use of third-party commercial software. For example, open source software is generally provided without any support or warranties or other contractual protections regarding infringement or the quality of the code, including the existence of security vulnerabilities. To the extent that our ~~products~~ability depend upon the successful operation of open source software, any undetected errors or defects in open source software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation. In addition, the public availability of such software may make it easier for others to ~~compromise~~offer our products. ~~Any of the foregoing risks could materially~~ and ~~adversely~~subject ~~affect~~us ~~our~~to ~~business,~~possible ~~financial condition, and results of operations~~litigation.

~~Our~~We ~~products~~have ~~collect~~used “open source” software in connection with the development and ~~store~~deployment ~~personal~~of ~~data~~our ~~about~~software ~~individuals~~products, and we expect to continue to use open source software in the future. Open source software is licensed by its authors or other third parties under open source licenses, which in some instances may subject us to certain unfavorable conditions, including ~~our~~requirements ~~customers~~with respect to proprietary software that incorporates, ~~their~~is ~~visitors~~based on or that links to the open source software, to (i) distribute such software for no cost, (ii) make publicly available all or part of its source code, or (iii) license such software under the terms of the particular open source license. Additionally, the AI technologies used to develop or write software used in our product offerings and operations may be trained on data sets that include open source software or may draw from sources that might subject such software developed using AI technologies to certain license restrictions or other obligations. Additionally, if we decide to use AI technologies to develop or write software in our ~~employees~~product offerings the AI may be trained on data sets that include open source software, aswhich ~~well~~may asbe ~~other~~subject ~~proprietary~~the ~~business~~software ~~and~~generated ~~confidential~~using ~~information~~such AI to similar open source requirements.

Companies that incorporate or use open source software in their products have, from time to time, faced claims challenging the use of open source software and compliance with open source license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming non-compliance with open source licensing terms. While we monitor our use of open source software and try to ensure that none is used in a manner that would subject our proprietary software to open source licensing terms (including requiring us to disclose our proprietary source code) or that would otherwise breach the terms of an open source agreement, we cannot guarantee that we will be successful, that all open source software is reviewed prior to use in our products, that our developers have not incorporated open source software into our products that we are unaware of or that they will not do so in the future. Further, use of open source AI technologies poses additional risks relating to the underlying training data sets, including an increased risk in intellectual property infringement or non-compliance with open source license terms as a result of such training data sets potentially derived from data sourced without permission or outside the scope of the underlying open source license.

Furthermore, there are an increasing number of open source software license types, almost none of which have been interpreted by U.S. or foreign courts, resulting in a dearth of guidance regarding the proper legal interpretation of such licenses. As a result, there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market or provide our products and services. If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, we could face infringement claims or other liability, or be required to seek costly licenses from third parties to continue providing our offerings on terms that are not economically feasible, if at all, to re-engineer all or a portion of our products, to discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or to make generally available, in source code form, our proprietary code. Further, in addition to risks related to license requirements, use of certain open source software carries greater technical and legal risks than does the use of third-party commercial software. For example, open source software is generally provided without any support or warranties or other contractual protections regarding infringement or the quality of the code. For example, open source software often contains undetected errors or other defects, which could prevent the deployment or impair the functionality of our systems, delay the introduction of new solutions, and injure our reputation. In addition, the public availability of such software may make it easier for others to compromise our products. Moreover, open source software may also contain security vulnerabilities, malware and other exploits, which may render our software and product offerings more vulnerable to breaches or security attacks. Any of the foregoing risks could materially and adversely affect our business, financial condition, and results of operations.

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Our business depends on the reliability, availability, and performance of our information technology systems, including key internal enterprise software solutions, and any failure or disruption of these systems could materially and adversely affect our business.

Our operations rely on the performance, availability, scalability, and security of complex information technology systems, including cloud‑based and internal infrastructure, third‑party service providers, and key enterprise software solutions that support the management and operation of our business. These systems include platforms used for enterprise risk management, customer relationship management, customer billing and revenue operations, human capital management, financial reporting and controls, analytics, and other internal business functions, as well as customer‑facing portals used to operate, monitor, manage, and analyze our products.

These systems are critical to our ability to operate efficiently, manage risk, maintain accurate records, support employees, serve customers, and meet contractual, regulatory, and reporting obligations. Our information technology systems may experience outages, interruptions, performance degradation, or other failures due to software or hardware defects, system capacity constraints, cyber incidents, human error, power or telecommunications failures, natural disasters, or disruptions experienced by third‑party service providers, many of which are outside of our direct control.

Any failure or disruption of our internal systems or enterprise software solutions could impair our ability to manage our operations, process transactions accurately and timely, support employees, produce reliable financial information, bill customers, or otherwise operate our business effectively. In addition, failures affecting customer‑facing systems could impair service delivery, system visibility, or customer operations.

If we fail to adequately maintain, update, upgrade, enhance, or timely restore our information technology systems, including our internal enterprise platforms and customer‑facing portals, we could experience operational inefficiencies, customer dissatisfaction, reputational harm, contractual disputes, regulatory or compliance issues, and loss of revenue, which could materially and adversely affect our business, financial condition, and results of operations.

Our products and operations collect and store personal data about individuals, including our customers, their visitors, and our employees, as well as other proprietary business and confidential information, which exposes us to cybersecurity risks that could result in additional costs and liabilities or inhibit sales of our products.

In the ordinary course of our business, we collect, store and otherwise process personal data about individuals, such as our customers, our customers’ visitors and our employees, as well as proprietary business and confidential information and intellectual property of ours and that of our customers. Additionally, we rely on third parties and their security procedures for the storage, processing, maintenance, and transmission of information that is critical to our operations. Remote and hybrid working arrangements also increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks.

Cybersecurity threats as well as the tools (including AI) used to breach security safeguards, circumvent security controls, evade detection, and remove forensic evidence, are constantly evolving and may originate from remote areas increasing the difficulty of detecting and successfully defending against them. For instance, cyber criminals or insiders may target us or third parties with which we have business relationships to gain access to data, or in a manner that disrupts our operations or compromises our products or the systems into which our products are integrated. Protecting against such threats may require us to spend additional resources to further strengthen our defenses. In addition, events such as power losses, telecommunications failures, earthquakes, fires and other natural disasters could result in failures of our, or our third-party vendors’, systems.

Cybersecurity incidents affecting us or our third-party vendors can vary widely, from errors on the part of our personnel, to uncoordinated individual attempts to gain unauthorized access to information technology (“IT”) systems, to sophisticated and targeted measures known as advanced persistent threats. These incidents could be caused by insiders (acting inadvertently or maliciously) or malicious third parties (including nation-states or nation-state supported actors). Attack methods can include sophisticated, targeted methods to circumvent firewalls, encryption, and other security defenses, including hacking, fraud, trickery (such as phishing or social engineering), or other forms of deception. Despite measures designed to prevent, detect, address, and mitigate cybersecurity incidents (including our cybersecurity risk management program and processes, such as our policies, controls, or procedures), we cannot guarantee that such measures will be implemented, complied with or be effective in protecting our systems and information. We or our third-party providers may experience cybersecurity incidents and, depending on their nature and scope, could potentially result in the

Despite measures designed to prevent, detect, address, and mitigate cybersecurity incidents (including our cybersecurity risk management program and processes, such as our policies, controls, or procedures), we cannot guarantee that such measures will be implemented, complied with or effective in protecting our systems and information. Incidents such as spam, spyware, ransomware, viruses, worms, malware, DDoS attacks, password attacks, impersonation of employees or officers, and other threats may nevertheless occur to us or our third-party providers and, depending on their 29

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~~nature and scope, could potentially result in the~~ misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including personal data of our customers, our customers’ visitors and our employees) and the disruption of our business operations.

In fact, we and our third-party vendors have experienced, and expect to continue to experience, cyber-attacks, such as through phishing scams and ransomware attempts., ~~Although~~and ~~none~~such ofincidents ~~these~~could ~~actual~~have ~~or attempted cyber-attacks has had~~ a material adverse impact on our operations or financial condition, ~~we cannot guarantee that any such incidents will not have such an impact~~ in the future.

Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted breach notification and other requirements in the event that information subject to such laws is accessed by unauthorized persons and may continue to adopt additional regulations regarding the use, access, accuracy, and security of such data. For example, in the ~~United States~~U.S., we are subject to laws in all states and numerous territories that require notification of a qualifying data breach~~. In addition~~, ~~the~~which ~~SEC~~may ~~has~~require ~~recently~~us ~~adopted~~to ~~rules~~notify ongovernmental ~~the~~authorities ~~Cybersecurity~~and/or ~~Risk~~affected ~~Management,~~individuals ~~Strategy,~~of ~~Governance,~~data ~~and~~breaches ~~Incident~~involving ~~Disclosure~~certain bypersonal ~~Public~~data ~~Companies~~or ~~that~~other ~~enhances~~unauthorized ~~and~~or ~~standardizes~~inadvertent ~~disclosures~~access ~~for~~to ~~public~~or ~~companies~~disclosure ~~with~~of ~~regards~~such toinformation. ~~their~~These ~~cybersecurity~~state ~~risk~~laws ~~strategy,~~are ~~management,~~not uniform and ~~governance.~~may ~~Complying~~impose ~~with~~conflicting ~~such~~requirements, ~~numerous~~ and ~~complex~~compliance ~~regulations~~ in the event of ~~unauthorized~~a ~~access~~widespread ~~would~~data breach may be ~~expensive~~difficult and ~~difficult~~costly, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability. ~~See~~Any –actual ~~“We~~or ~~are~~perceived ~~subject~~security tobreach ~~government~~could ~~regulation~~harm ~~and~~our ~~other~~reputation ~~legal~~and ~~obligations~~brand, ~~particularly~~expose ~~related~~us to ~~privacy,~~potential ~~data~~liability ~~protection, information security, and product marketing and our actual~~ or ~~perceived~~require ~~failure~~us to ~~comply~~expend ~~with~~significant ~~such obligations could harm our business~~resources.”

In addition, any actual or alleged security breaches could result in mandated user notifications, litigation (including class actions), government investigations, regulatory action, significant fines, and expenditures; divert management’s attention from operations; deter people from using our platform; damage our brand and reputation; and materially and adversely affect our business, results of operations, and financial condition. Defending against claims or litigation based on any security breach or incident, regardless of their merit, would be costly and may cause reputational harm. In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage, and compensation to customers, employees, and business partners. The successful assertion of one or more large claims against us that exceed available insurance coverage, denial of coverage as to any specific claim, or any change or cessation in our insurance policies and coverages, including premium increases or the imposition of large deductible requirements, could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to Our Human Capital

If we do not effectively expand, train, and retain qualified sales and marketing personnel, we may be unable to acquire new customers or sell additional products to successfully pursue our growth strategy.

We depend significantly on our sales force to attract new customers and expand sales to existing customers. As a result, our ability to grow our revenue depends in part on our success in recruiting, training, and retaining sufficient numbers of sales personnel to support our growth, particularly in the ~~United~~U.S. ~~States~~ and, to a more limited extent, internationally. ~~The number of our sales and marketing personnel decreased from 139 as of December 31, 2023 to 124 as of December 31, 2024.~~ We expect to selectively expand our sales and marketing personnel and may face a number of challenges in achieving our hiring and integration goals. There is intense competition for individuals with sales training and experience. In addition, the training and integration of ~~a large number of~~ sales and marketing personnel ~~in a short time~~ requires the allocation of significant internal resources. We invest significant time and resources in training new sales force personnel to understand our products, platform, and our growth strategy. Based on our past experience, it ~~takes~~may take approximately six to 12 months before a new sales force member operates at target performance levels, depending on their role. However, we may be unable to achieve or maintain our target performance levels with large numbers of new sales personnel as quickly as we have done in the past. Our failure to hire a sufficient number of qualified sales force members and train them to operate at target performance levels may materially and adversely impact our projected growth rate.

We are dependent on the continued services and performance of our senior management and other key employees, as well as on our ability to successfully hire, train, manage, and retain qualified personnel, especially those in sales and marketing and research and development.

29Our future performance depends on the continued services and contributions of our senior management, particularly John Kedzierski, our President and Chief Executive Officer, and other key employees to execute on our business plan and to identify and pursue new opportunities and product innovations. We do not maintain keyman insurance for any of our executive officers or key employees. From time to time, there may be changes in our senior management team resulting from the termination or departure of our executive officers and key employees. Our senior management and

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~~Our future performance depends on the continued services and contributions of our senior management, particularly John Kedzierski, our President and Chief Executive Officer, and other~~ key employees to execute on our business plan and to identify and pursue new opportunities and product innovations. We do not maintain key man insurance for any of our executive officers or key employees. From time to time, there may be changes in our senior management team resulting from the termination or departure of our executive officers and key employees. Our senior management and key employees are generally employed on an at-will basis, which means that they could terminate their employment with us at any time. The loss of the services of our senior management, particularly Mr. Kedzierski and other key employees for any reason could significantly delay or prevent our development or the achievement of our strategic objectives and harm our business, financial condition, and results of operations.

Our ability to successfully pursue our growth strategy will also depend on our ability to attract, motivate, and retain our personnel, especially those in sales and marketing and research and development. We face escalating compensation demands from new and prospective employees, as well as intense competition for these employees from numerous technology, software, and other companies, especially in certain geographic areas in which we operate, and we cannot ensure that we will be able to attract, motivate and/or retain additional qualified employees in the future. If we are unable to attract new employees and retain our current employees, we may not be able to adequately develop and maintain new products, or market our existing products at the same levels as our competitors, which may lead us to lose customers and market share. Our failure to attract and retain personnel, especially those in sales and marketing, research and development, and engineering positions, could have an adverse effect on our ability to execute our business objectives. Even if we are able to identify and recruit a sufficient number of new hires, these new hires will require significant training before they achieve full productivity and they may not become productive as quickly as we would like, or at all. Any of these factors may adversely impact our ability to compete and cause our revenue to decrease and our operating results to suffer.

Risks Related to Our Intellectual Property

Our intellectual property rights are valuable and any inability to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.

Our future success and competitive position depend in part on our ability to protect our intellectual property and proprietary technologies. To safeguard these rights, we rely on a combination of patent, trademark, copyright, and trade secret laws and contractual protections in the ~~United~~U.S. ~~States~~ and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage. We maintain a program of identifying technology appropriate for patent protection. Our practice is to require employees and consultants to execute non-disclosure and proprietary rights agreements upon commencement of employment or consulting arrangements. Where applicable, these agreements acknowledge our exclusive ownership of, and assign to us, all intellectual property developed by such individuals or third parties in connection with their work for us and require that all proprietary information disclosed to them by us (or on our behalf) will remain confidential. Such agreements may not be enforceable in full or in part in all jurisdictions and any breach could have a negative effect on our business and our remedy for such breach may be limited. See – “Confidentiality arrangements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.”

AsWe ~~of March 26, 2025, we~~ own or co-own ~~nine~~a number of issued U.S. ~~patents~~ and ~~27 issued~~ foreign patents and have 21a number of pending or allowed patent applications relating to our products. It cannot be certain that any patents will issue from any patent applications, that patents that issue from such applications will give us the protection that we seek or that any such patents will not be challenged, invalidated, or circumvented. Any patents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. Further, our use of AI technologies in connection with the creation or development of intellectual property, including software, may present challenges in asserting ownership over the resulting output given the position of courts and intellectual property offices in the U.S. and in some other jurisdictions that ~~sufficient~~ human inventorship is required for patent protection of an AI-generated invention and sufficient human authorship is required for copyright protection of an AI-generated work of authorship. Additionally, inventions or works of authorship created through the use of AI may be based or rely on, or contain, materials that were used in the training of such AI technologies and which are subject to third-party intellectual property, which could further limit our ability to obtain intellectual property protection in such inventions or works of authorship.

We have registered the Evolv®, Evolv Technology®, Evolv Express®, Evolv Insights®, Evolv Cortex AI®, and Evolv Edge® trademarks in the ~~United~~U.S. ~~States~~ and/or certain other countries. We also have registrations and/or pending applications for additional marks in the U.S. and other countries. We cannot be certain that any pending or future applications will issue as registered trademarks or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights.

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applications for additional marks in the United States and other countries. We cannot be certain that any pending or future applications will issue as registered trademarks or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights.

If we are unable to maintain sufficient intellectual property protection for our proprietary technologies or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors and other third parties could develop and commercialize technologies similar or identical to ours, and our ability to successfully commercialize our technologies may be impaired.

The steps we take to protect our intellectual property may be inadequate to prevent infringement, misappropriation, or other violations of our intellectual property rights. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Any of our patents or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our offerings may be unenforceable under the laws of certain jurisdictions and foreign countries. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the ~~United States~~U.S., and mechanisms for enforcement of intellectual property rights in some foreign countries may be inadequate. Changes in the law or adverse court rulings may also negatively affect our ability to prevent others from using our technology. To the extent we expand our international activities, our exposure to unauthorized copying and use of our technology and proprietary information may increase.

We may be required to spend significant resources to monitor and protect our intellectual property rights. From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights (including to protect our trade secrets), to protect our trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results, and financial condition. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights.

Any such significant impairment of our intellectual property rights or our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation, could delay further sales or the implementation of our products and offerings, impair the functionality of our products and offerings, delay introductions of new features or enhancements, result in our substituting inferior or more costly technologies into our products and offerings, or injure our reputation.

Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm to our business and operating results.

Third parties may in the future assert claims of infringement, misappropriation, or other violations of intellectual property rights against us. There can be no assurance that we will not be found to infringe or otherwise violate any third-party intellectual property rights or to have done so in the past.

If we are not successful in defending any such claims, we may be required to:

•pay substantial damages, including treble damages, if we are found to have willfully infringed a third party’s patents or copyrights;

•make substantial payments for legal fees, settlement payments or other costs or damages;

•cease selling, making, licensing, or using products that are alleged to infringe or misappropriate the intellectual property of others;

•expend additional development resources to attempt to redesign our products or otherwise develop non-infringing technology, which may not be successful;

•enter into potentially unfavorable royalty or license agreements to obtain the right to use necessary technologies or intellectual property rights (which may be unavailable on terms acceptable to us, or at all, may require significant royalty payments and other expenditures and may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us);

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may require significant royalty payments and other expenditures and may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us);

•defend against any allegations of infringement; and

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•indemnify our partners and other third parties.

Third parties may also assert claims against our customers or reseller partners, whom we typically indemnify, that our products infringe, misappropriate, or otherwise violate the intellectual property rights of such third parties. As the number of products and competitors in our market increase and overlaps occur, claims of infringement, misappropriation, and other violations of intellectual property rights may increase. Furthermore, future assertions of patent rights by third parties, and any resulting litigation, may involve patent holding companies or other adverse patent owners who have no relevant product revenues and against whom our own patents may therefore provide little or no deterrence or protection. In addition, the use of AI technologies in our operations may result in claims by third parties of infringement, misappropriation or other violations of intellectual property, including based on the use of large datasets to train the AI technologies, or the use of output generated by AI technologies, in either case which may contain or be substantially similar to third-party material protected by intellectual property, including patents, copyrights or trademarks.

In addition, royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, and may require significant royalty payments and other expenditures. Some licenses may also be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. Any of the foregoing events could seriously harm our business, financial condition, and results of operations.

Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results. Moreover, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our ordinary shares. We expect that the occurrence of infringement claims is likely to grow as the market for our products and solutions grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.

~~Confidentiality~~The ~~arrangements~~measures ~~with~~we ~~employees~~take ~~and~~to ~~others~~protect our trade secrets may not adequately prevent disclosure of trade secrets and other proprietary information.

We have devoted substantial resources to the development of our technology, business operations, and business plans. We cannot guarantee that our physical, technical or administrative security measures will be sufficient to prevent disclosure of our trade secrets. For example, we cannot guarantee that we have entered into confidentiality arrangements with each party that may have or has had access to our trade secrets or proprietary technology and processes. These efforts may also not be effective to prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. For example, our employees or others with whom we have shared confidential information or trade secrets could input such information into AI applications, resulting in such information becoming accessible by third parties, including our competitors or in a loss of trade secret status of such information. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our technologies that we consider proprietary. In addition, if others independently develop equivalent knowledge, methods, and know-how, we would not be able to assert trade secret rights against such parties, and our competitive position could be materially and adversely harmed. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary information will be effective.

Moreover, enforcing a claim that a party illegally disclosed or misappropriated a trade secret ~~are~~would be difficult, expensive, time-consuming, and the outcome is unpredictable. In addition, effective trade secret protection may not be available in every country in which our products are available or where we have employees or independent contractors as some courts inside and outside the ~~United~~U.S. ~~States~~ are less willing or unwilling to protect trade secrets. In addition, any changes in, or unexpected interpretations of, the trade secret and employment laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Legal and Regulatory Risks

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We are subject to government regulation and other legal obligations, particularly related to privacy, data protection, information security, and product marketing and our actual or perceived failure to comply with such obligations could harm our business.

We, our reseller partners, and our customers are subject to a number of domestic and international laws and regulations that apply to the processing of certain types of information as well as cloud services and the internet generally. These laws, rules, and regulations address a range of issues including data privacy and cyber security, breach notification and restrictions or technological requirements regarding the processing of personal data. The regulatory framework for online services, data privacy and cybersecurity issues worldwide can vary substantially from jurisdiction to jurisdiction, is rapidly evolving and is likely to remain uncertain for the foreseeable future. New laws and regulations that apply to our business are being introduced at every level of government in the ~~United States~~U.S., as well as internationally. As we seek to expand our business, we are, and may increasingly become subject to various laws, regulations, and standards in the jurisdictions in which we operate, and may be subject to contractual obligations relating to data privacy and security in the jurisdictions in which we operate.

For example, in the United States, there are numerous data privacy and security laws, rules, and regulations governing the collection, use, disclosure, retention, security, transfer, storage, and other processing of personal data (as defined in such laws), including state data privacy laws, state data breach notification laws, and federal and state consumer protection laws. The U.S. Federal Trade Commission ("FTC") and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. Such standards require us to publish statements that describe how we handle personal data and choices individuals may have about the way we handle their personal data. If such information that we publish is considered untrue or inaccurate, we may be subject to claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Moreover, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal data secure may constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. State consumer protection laws provide similar causes of action for unfair or deceptive practices.

Our failure, or perceived failure, to comply fully with developing interpretations of AI laws and regulations or meet evolving and varied stakeholder expectations and industry standards, could harm our business, reputation, financial condition and results of operation.

Further, some laws may require us to notify governmental authorities and/or affected individuals of data breaches involving certain personal data or other unauthorized or inadvertent access to or disclosure of such information. For example, laws in all 50 U.S. states may require businesses to provide notice to consumers whose personal data has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach may be difficult and costly. Any actual or perceived security breach could harm our reputation and brand, expose us to potential liability or require us to expend significant resources.

Internationally, virtually every jurisdiction in which we operate, have customers or have prospective customers has established its own data security and privacy legal frameworks with which we, our reseller partners or our customers must comply.

For example, in the European Union, the GDPR imposes requirements on controllers and processors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals, a strong individual rights regime, shortened timelines for data breach notifications and restrictions on the transfer of personal data outside of the European Economic Area. Following its departure from the European Union, the United Kingdom has adopted a separate regime based on the GDPR (“UK GDPR”) that imposes similarly onerous requirements. Companies that violate the EU or UK regime can face regulatory investigations, private litigation, prohibitions on data processing, and fines. Other EU and UK data protection laws and evolving regulatory guidance restrict the ability of companies to market electronically, including through the use of cookies and similar technologies, and companies are increasingly subject to strict enforcement action including fines for noncompliance.

Certain data privacy legislation restricts the cross-border transfer of personal data and some countries introduced data localization into their laws. Specifically, the GDPR, the UK GDPR and other European and UK data protection laws generally prohibit the transfer of personal data from Europe, including the European Economic Area, United Kingdom and Switzerland, to third countries, unless the transfer is to a country deemed to provide adequate protection or the parties to the transfer have implemented specific safeguards to protect the transferred personal data. European case law and guidance

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~~have imposed additional onerous requirements in relation to data transfers~~business, ~~and~~ we ~~expect~~are, ~~the existing legal complexity~~ and ~~uncertainty~~may ~~regarding~~increasingly ~~international~~become ~~personal~~subject ~~data transfers~~ to ~~continue~~various inlaws, ~~Europe~~regulations, and ~~globally.~~standards Ifin ~~we do not implement~~ the ~~relevant~~jurisdictions ~~transfer~~in ~~mechanism~~which ~~to transfer personal data,~~ we ~~may violate or infringe data privacy legislation requirements~~operate, and we may be ~~exposed~~subject to ~~regulatory~~contractual ~~proceedings~~obligations orrelating ~~litigation and increased exposure~~ to ~~fines,~~data ~~penalties,~~privacy orand ~~commercial~~security ~~liabilities,~~in asthe ~~well~~jurisdictions asin ~~reputational~~which ~~damages~~we operate.

WeFor ~~strive to comply with all applicable laws~~example, ~~policies,~~in ~~legal obligations relating to privacy and data protection to~~ the ~~extent possible~~U.S., ~~Because~~there ~~the~~are ~~interpretation~~numerous ~~and~~data ~~application of~~ privacy and ~~data~~security ~~protection~~ laws, ~~are still uncertain~~rules, ~~it is possible that these laws may be interpreted~~ and ~~applied~~regulations ingoverning athe ~~manner~~collection, ~~that~~use, isdisclosure, ~~inconsistent~~retention, ~~from~~security, ~~one~~transfer, ~~jurisdiction to another~~storage, and ~~which~~other ~~makes~~processing ~~our~~of ~~compliance~~personal ~~requirements~~data ~~and~~(as ~~the~~defined ~~enforcement~~in ofsuch ~~those requirements ambiguous~~laws), ~~uncertain,~~including ~~and~~state ~~potentially~~data ~~inconsistent.~~privacy ~~Any significant change to applicable~~ laws, ~~regulations~~and orfederal ~~industry~~and ~~practices,~~state orconsumer ~~how~~protection ~~each~~laws. isThe ~~interpreted,~~U.S. ~~regarding~~Federal ~~the~~Trade ~~use~~Commission or(the ~~disclosure~~“FTC”) ofand ~~personal~~many ~~data,~~state orattorneys ~~regarding~~general ~~the~~are ~~manner~~interpreting infederal ~~which~~and ~~the~~state ~~express~~consumer orprotection ~~implied~~laws ~~consent~~to ofimpose ~~customers~~standards for the online collection, use, dissemination, and ~~disclosure~~security of ~~personal~~ data. isSuch ~~obtained,~~standards ~~could~~ require us to ~~modify~~publish ~~our~~statements ~~products~~that ~~and~~describe ~~features,~~how ~~possibly~~we inhandle apersonal ~~material~~data ~~manner~~ and ~~subject~~choices toindividuals ~~increased compliance costs, which~~ may ~~limit~~have ~~our~~about ~~ability~~the toway ~~develop~~we ~~new~~handle ~~products~~their ~~and features that make use of the~~ personal data ~~that our customers voluntarily share~~. ~~Any~~If ~~failure~~such orinformation ~~perceived~~that ~~failure~~we bypublish usis toconsidered ~~comply~~untrue ~~with~~or ~~our~~inaccurate, ~~privacy~~we ~~policies,~~may ~~privacy-related~~be ~~obligations~~subject to ~~customers~~claims orof ~~other~~unfair ~~third parties,~~ or ~~our~~deceptive ~~privacy-related~~trade ~~legal obligations~~practices, orwhich ~~any~~could ~~compromise~~lead ~~of security that results in the unauthorized access~~ to orsignificant ~~unintended~~liabilities ~~release~~and orconsequences. ~~access of personal data or other customer data~~Moreover, ~~may~~according ~~result~~to inthe ~~governmental enforcement actions~~FTC, ~~litigation,~~violating orconsumers’ ~~public~~privacy ~~statements~~rights ~~against us by consumer advocacy groups~~ or ~~others.~~failing ~~Any~~to oftake ~~these~~appropriate ~~events~~steps ~~could cause us~~ to ~~incur~~keep ~~significant~~consumers’ ~~costs~~personal indata ~~investigating~~secure ~~and~~may ~~defending~~constitute ~~such~~unfair ~~claims~~or ~~and,~~deceptive ifacts ~~found~~or ~~liable,~~practices ~~pay~~in ~~significant fines~~ or ~~damages.~~affecting ~~Further,~~commerce ~~these~~in ~~proceedings~~violation ~~and~~of ~~any~~Section ~~subsequent~~5(a) ~~adverse~~of ~~outcomes~~the ~~may~~Federal ~~cause~~Trade ~~our~~Commission ~~customers~~Act. toState ~~lose~~consumer ~~trust~~protection inlaws ~~us,~~provide ~~which~~similar ~~could~~causes ~~have~~of anaction ~~adverse~~for ~~effect~~unfair onor ~~our~~deceptive ~~reputation and business~~practices.

WeSeveral ~~may~~U.S. ~~also~~states behave ~~subject~~enacted tocomprehensive ~~claims~~privacy ~~of liability or responsibility for the actions of third parties with whom we interact or upon whom we rely in relation to various products~~laws, including ~~but~~California, ~~not limited to vendors and business partners. If so~~Virginia, ~~in addition to the possibility of fines~~Colorado, ~~lawsuits and other claims~~Connecticut, weUtah ~~could be required to fundamentally change our business activities~~ and ~~practices or modify our products~~others, which ~~could~~impose ~~have~~obligations anregarding ~~adverse~~consumer ~~effect~~rights, ~~on our business. Any inability to adequately address privacy and/or~~ data ~~concerns,~~processing ~~even if unfounded~~transparency, orconsent ~~comply with applicable privacy~~ or ~~data~~opt-out ~~protection~~requirements ~~laws, regulations,~~ and ~~policies,~~privacy ~~could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business~~assessments.

~~The costs of compliance with~~Internationally, ~~and~~virtually ~~other~~every ~~burdens~~jurisdiction ~~imposed~~in ~~by,~~which ~~the~~we ~~laws~~operate, ~~rules,~~have ~~regulations,~~customers ~~and~~or ~~policies~~have ~~that~~prospective ~~are applicable to the businesses of our~~ customers ~~may~~has ~~limit~~established ~~the~~its ~~use~~own ~~and~~data ~~adoption~~security ~~of,~~ and ~~reduce the overall demand for, our product. Even the perception of~~ privacy orlegal ~~discrimination~~frameworks ~~concerns,~~with ~~whether~~which ~~or not valid~~we, ~~may harm~~ our ~~reputation,~~reseller ~~inhibit~~partners ~~adoption of our products by current and future customers,~~ or ~~adversely impact~~ our ability to attract and retain workforce talent. Our failure to comply with applicable laws and regulations, or to protect data governed by applicable laws, could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by customers ~~and~~must other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could have a material adverse effect on our operations, financial performance and businesscomply. ~~We may also have costs associated with engaging with stakeholders, including investors, insurance providers, and other capital providers, on such issues.~~

~~Our~~For ~~operating~~example, ~~results~~in ~~may~~the beEuropean ~~harmed~~Union, ifthe weGeneral ~~are~~Data ~~required~~Protection toRegulation ~~collect~~(“GDPR”) ~~sales~~imposes requirements on controllers and ~~use~~processors orof ~~other~~personal ~~related~~data, ~~taxes~~including, for ~~our~~example, ~~products~~higher instandards ~~jurisdictions~~for ~~where~~obtaining itconsent from individuals to process their personal data, more robust disclosures to individuals, a strong individual rights regime, shortened timelines for data breach notifications and restrictions on the transfer of personal data outside of the European Economic Area. Following its departure from the European Union, the United Kingdom has ~~not~~adopted ~~historically~~a ~~done~~separate soregime based on the GDPR (“UK GDPR”) that imposes similarly onerous requirements. Companies that violate the EU or UK regime can face regulatory investigations, private litigation, prohibitions on data processing, and fines. Other EU and UK data protection laws and evolving regulatory guidance restrict the ability of companies to market electronically, including through the use of cookies and similar technologies, and companies are increasingly subject to strict enforcement action including fines for non-compliance.

~~Taxing~~Certain ~~jurisdictions,~~data ~~including~~privacy ~~state,~~legislation ~~local,~~restricts ~~and~~the ~~foreign~~cross-border ~~taxing~~transfer ~~authorities,~~of ~~have~~personal ~~differing~~data ~~rules~~ and ~~regulations~~some ~~governing~~countries ~~sales~~have ~~and~~introduced ~~use~~data orlocalization ~~other~~into ~~taxes,~~their ~~and~~laws. ~~these~~Specifically, ~~rules~~the ~~and~~GDPR, ~~regulations~~the ~~are~~UK ~~subject~~GDPR toand ~~varying~~other ~~interpretations~~European ~~that~~and ~~may~~UK ~~change~~data ~~over~~protection ~~time.~~laws Ingenerally ~~particular,~~prohibit ~~significant~~the ~~judgment~~transfer isof ~~required~~personal indata ~~evaluating~~from ~~our~~Europe, ~~tax~~including ~~positions~~the ~~and~~European ~~our~~Economic ~~worldwide~~Area, ~~provision~~United ~~for~~Kingdom ~~taxes.~~and ~~While~~Switzerland, weto ~~believe~~third ~~that~~countries, weunless ~~are~~the intransfer ~~material~~is ~~compliance~~to ~~with~~a ~~our~~country ~~obligations~~deemed ~~under~~to ~~applicable~~provide ~~taxing~~adequate ~~regimes,~~protection ~~one~~ or ~~more~~the ~~states,~~parties ~~localities,~~to orthe ~~countries~~transfer ~~may~~have ~~seek~~implemented tospecific ~~impose~~safeguards ~~additional~~to ~~sales~~protect orthe ~~other~~transferred ~~tax~~personal ~~collection~~data. ~~obligations~~European oncase ~~us,~~law ~~including~~and ~~for~~guidance ~~past~~have ~~sales~~imposed byadditional usonerous orrequirements ~~our~~in ~~reseller~~relation ~~partners.~~to Itdata istransfers, ~~possible~~and ~~that~~ we ~~could~~expect ~~face~~the ~~sales~~existing ~~tax~~legal ~~audits~~complexity and ~~that~~uncertainty ~~such~~regarding ~~audits~~international ~~could~~personal ~~result~~data intransfers ~~tax-related~~to ~~liabilities~~continue ~~for~~in ~~which~~Europe itand ~~has not accrued~~globally. AIf ~~successful~~we ~~assertion~~do ~~that~~not itimplement ~~should~~the berelevant ~~collecting~~transfer ~~additional~~mechanism ~~sales~~to ortransfer ~~other~~personal ~~taxes~~data, onwe ~~our~~may ~~products~~violate inor ~~jurisdictions~~infringe ~~where~~data itprivacy ~~has~~legislation ~~not~~requirements, ~~historically done so~~ and dowe ~~not~~may ~~accrue~~be ~~for~~exposed ~~sales~~to ~~taxes~~regulatory ~~could~~proceedings ~~result~~or inlitigation ~~substantial~~and ~~tax~~increased ~~liabilities~~exposure ~~for~~to ~~past~~fines, ~~sales~~penalties, ~~discourage customers from purchasing our products~~ or ~~otherwise~~commercial ~~harm~~liabilities, ~~our~~as ~~business~~well ~~and~~as ~~operating~~reputational ~~results~~damages.

InWe ~~addition~~strive to comply with all applicable laws, ~~our~~policies, ~~tax~~legal obligations relating to privacy, and ~~effective~~data ~~tax~~protection. ~~rates~~Because ~~could~~the beinterpretation ~~adversely~~and ~~affected~~application byof ~~changes~~privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, and which makes our compliance requirements and the ~~relevant~~enforcement ~~tax~~of those requirements ambiguous, ~~accounting~~uncertain, and ~~other~~potentially inconsistent. Any significant change to applicable laws, regulations or industry practices, ~~principles~~or how each is interpreted, regarding the use or disclosure of personal data, or regarding the manner in which the express or implied consent of customers for the use and ~~interpretations~~disclosure ~~(such~~of aspersonal data is obtained, could require us to modify our products and features, possibly in a material manner and subject to increased compliance costs, which may limit our ability to develop new products and features that make use of the ~~recent~~personal ~~United~~data ~~States~~that ~~Inflation~~our ~~Reduction~~customers voluntarily share. Any failure or perceived failure by us to comply with our privacy policies, privacy-related obligations to customers or other third parties, applicable privacy-related laws and regulations, or any compromise of security that results in the unauthorized access to or unintended release or access of personal data or other customer data, may result in governmental enforcement actions, imprisonment of company officials and public

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~~Act which~~censure, ~~among other changes~~litigation, ~~introduced~~claims afor ~~15%~~damages ~~corporate~~by ~~minimum~~customers ~~tax on certain United States corporations~~ and aother 1%affected ~~excise~~individuals, ~~tax~~public onstatements ~~certain~~against ~~stock~~us ~~redemptions~~ by ~~United~~consumer ~~States~~advocacy ~~corporations),~~groups ~~including~~or ~~those relating to income tax nexus~~others, ~~jurisdictional~~inhibit ~~mix~~adoption of ~~profits~~our atproducts ~~varying statutory tax rates,~~ by ~~changes~~current inand ~~foreign~~future ~~currency exchange rates~~customers, or byadversely ~~changes~~impact ~~in the valuation of~~ our ~~deferred~~ability ~~tax~~to ~~assets~~attract and ~~liabilities.~~retain ~~Although~~workforce wetalent. ~~believe~~Any ~~our tax estimates are reasonable, the final determination~~ of ~~any~~these ~~tax~~events ~~audits or litigation~~ could because ~~materially~~us ~~different~~to ~~from~~incur ~~our~~significant ~~historical~~costs ~~tax~~in ~~provisions~~investigating and ~~accruals,~~defending ~~which~~such ~~could~~claims ~~have~~and, aif ~~material~~found ~~adverse~~liable, ~~effect~~pay onsignificant ~~our~~fines ~~operating results~~ or ~~cash flows in the period or periods for which a determination is made~~damages. ~~For example~~Further, inthese ~~2021~~proceedings weand ~~established~~any asubsequent ~~new~~adverse ~~wholly~~outcomes ~~owned~~may ~~subsidiary~~cause ofour ~~Evolv~~customers ~~Technologies Holdings, Inc., Give Evolv LLC, a Delaware limited liability company,~~ to ~~(1)~~lose ~~promote~~trust ~~our core mission~~ in ~~locations~~us, ~~that~~which ~~might~~could ~~not~~have ~~otherwise~~an beadverse ~~able~~effect toon ~~afford~~ our ~~weapons~~reputation ~~detection security screening systems~~ and ~~related~~business. ~~products~~We ~~and~~may ~~services,~~also ~~(2)~~have ~~make~~costs ~~public~~associated ~~venues~~with ~~and~~engaging ~~institutions~~with ~~safer~~stakeholders, ~~for~~including ~~all patrons~~investors, ~~students,~~insurance ~~visitors~~providers, and other ~~attendees,~~capital ~~and (3) carry out charitable efforts consistent with the foregoing mission~~providers, ~~for~~on ~~which~~such ~~historical tax data does not exist~~issues.

Failure to comply with applicable anti-corruption legislation, export controls, economic sanctions and ~~other~~tax ~~governmental~~ laws ~~and regulations~~ could result in fines and criminal penalties and materially and adversely affect our business, financial condition, and results of operations.

We are required to comply with anti-corruption and anti-bribery laws in the jurisdictions in which we operate, including ~~the~~ FCPA ~~in the United States~~, the Bribery Act, and other similar laws in other countries in which we do business. The FCPA prohibits us or any third party acting on our behalf from corruptly promising, authorizing, making, offering, or providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. The FCPA further requires us to keep and maintain books and records that accurately reflect transactions and dispositions of assets and to maintain a system of internal accounting controls. The Bribery Act also prohibits “commercial” bribery not involving foreign officials, facilitation payments, and the receipt of bribes, while providing a defense to a charge of failure to prevent bribery to companies that demonstrate they had in place adequate procedures to prevent bribery. We may deal with both governments and state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA. Some of the international locations in which we will operate have developing legal systems and may have higher levels of corruption than more developed nations. As a result of doing business in foreign countries, including through reseller partners and agents, we will be exposed to a risk of violating anti-corruption laws.

We are also required to comply with applicable export controls and economic and trade sanctions laws and regulations, such as those administered and enforced by OFAC, the U.S. Department of State, and the U.S. Department of Commerce. Our global operations expose us to the risk of violating or being accused of violating these laws.

Our policies or procedures may not work effectively at all times or protect us against liability under these or other laws for actions taken by our employees, reseller partners, and other third parties who are acting on our behalf with respect to our business. If we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities and/or officials (including local laws) or export controls and economic and trade sanction laws and regulations, we may be subject to criminal and civil penalties and other remedial measures, which could harm our business, financial condition, results of operations, cash flows, and prospects. In addition, investigations of any actual or alleged violations of such laws or policies related to us could harm our business, financial condition, results of operations, cash flows, and prospects.

WeTaxing ~~are~~jurisdictions, including state, local and foreign taxing authorities, have differing rules and regulations governing sales and use or other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, significant judgment is required in ~~the~~evaluating ~~future~~our betax ~~subject~~positions and our worldwide provision for taxes. While we believe that we are in material compliance with our obligations under applicable taxing regimes, one or more states, localities or countries may seek to ~~legal~~impose ~~proceedings~~additional sales or other tax collection obligations on us, ~~claims~~including for past sales by us or our reseller partners. It is possible that we could face sales tax audits and ~~investigations~~that such audits could result in tax-related liabilities for which we have not accrued. A successful assertion that we should be collecting additional sales or ~~outside~~other ~~the~~taxes ~~ordinary~~in ~~course~~jurisdictions ofwhere we have not historically done so could result in substantial tax liabilities for past sales, discourage customers from purchasing our products or otherwise harm our business. and operating results.

WeIn ~~are~~addition, ~~and~~our ~~may~~tax inobligations ~~the~~and ~~future~~effective ~~become,~~tax ~~subject~~rates tocould ~~various~~be ~~legal~~adversely ~~proceedings,~~affected ~~claims~~by ~~and~~changes ~~investigations that arise~~ in ~~or outside~~ the ~~ordinary~~relevant ~~course~~tax, ofaccounting ~~business~~and asother ~~discussed in Part I~~laws, ~~Item 3~~regulations, ~~"Legal~~principles ~~Proceedings"~~ and ~~Note~~interpretations, 20including ~~(Commitments~~those ~~and~~relating ~~Contingencies)~~ to ~~our~~income ~~consolidated~~tax ~~financial~~nexus ~~statements~~and ~~for~~jurisdictional ~~the~~mix ~~year~~of ~~ended~~profits ~~December~~at ~~31,~~varying ~~2024.~~statutory Intax ~~addition~~rates, ~~securities~~by ~~class~~changes ~~action~~in ~~litigation~~foreign ~~has~~currency ~~often~~exchange ~~been~~rates ~~brought~~or ~~against~~by achanges ~~company following a decline~~ in the ~~market~~valuation ~~price~~ of ~~its~~our ~~securities~~deferred ortax ~~the~~assets ~~completion~~and ~~of a merger~~liabilities. WeThe ~~may~~final bedetermination ~~the target~~ of ~~this type of litigation in the future. These proceedings, as well as~~ any ~~pending~~tax audits or ~~future~~litigation ~~government~~could ~~investigation~~be ormaterially ~~proceeding~~different ~~may~~from ~~result~~our inhistorical ~~substantial~~tax ~~costs~~provisions orand ~~liabilities~~accruals, aswhich ~~well~~could ashave a ~~diversion~~material ofadverse ~~management’s~~effect ~~attention~~on ~~and resources, which could harm~~ our ~~business,~~operating ~~result~~results inor acash ~~decline~~flows in the ~~market~~period ~~price~~or ofperiods ~~our~~for ~~common~~which ~~stock~~a ~~and~~determination ~~impact~~is ~~our financing efforts~~made.

The potential costs and liabilities associated with legal proceedings, claims and investigations involving us or members of our leadership team is uncertain, and the results of such legal proceedings, claims and investigations cannot be predicted with certainty. Lawsuits and other administrative or legal proceedings that may arise can involve substantial

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~~costs,~~We ~~including~~are ~~the~~subject ~~costs~~to ~~associated~~government ~~with investigation~~investigations, ~~litigation~~regulatory ~~and~~enforcement ~~possible~~proceedings ~~settlement, judgment, penalty or fine. In addition, lawsuits~~ and ~~other~~litigation ~~legal~~relating ~~proceedings may be time consuming~~ to ~~defend or prosecute and may require a commitment of management and personnel resources that will be diverted from~~ our ~~normal~~ business ~~operations. Also~~conduct, ~~our~~marketing ~~insurance coverage may be insufficient~~practices, ~~our~~financial ~~assets~~restatement ~~may be insufficient to cover any amounts that exceed our insurance coverage,~~ and we may have to pay damage awards or otherwise may enter into settlement arrangements in connection with such claims. We may also be subject to fines or penalties that are not covered by insurance. Moreoverinvestigation, ~~we may be unable to continue to maintain our existing insurance at a reasonable cost, if at all, or to secure additional coverage,~~ which ~~may result in costs associated with lawsuits and other legal proceedings being uninsured. Any such payments or settlement arrangements in current or future litigation~~ could ~~have a material adverse effect on our business, operating results or financial condition. Even if the plaintiffs’ claims are not successful, current or future litigation could~~ result in ~~substantial~~significant ~~costs and significantly and adversely impact our reputation and divert management’s attention and resources~~penalties, ~~which~~injunctive ~~could~~relief ~~have a material adverse effect on our business, operating results~~ and ~~financial~~harm ~~condition, and negatively affect the price of our common stock. In addition, such lawsuits may make it more difficult~~ to ~~finance~~ our ~~operations~~business.

~~Furthermore~~We are, ~~the marketing~~ and ~~sale~~may ofin ~~our~~the ~~products~~future ~~are~~become, ~~also~~ subject to ~~extensive regulation by~~ various ~~federal~~legal ~~agencies~~proceedings, ~~including~~claims ~~the FTC, as well as various other federal, state, provincial, local,~~ and ~~international~~investigations ~~regulatory~~that ~~authorities~~arise in ~~the countries in which our products are distributed~~ or ~~sold~~outside ~~and~~the ~~industry~~ordinary ~~codes~~course of ~~conduct.~~business ~~From~~as ~~time~~discussed toin ~~time~~Part I, weItem ~~receive~~3, ~~government~~“Legal ~~regulatory~~Proceeding” ~~inquiries~~ and ~~requests~~Note ~~for~~19, ~~information~~Commitments and ~~our~~Contingencies, ~~approach is~~ to ~~be cooperative and educate the requesting government bodies about~~ our ~~company~~consolidated ~~and~~financial ~~products.~~statements ~~For~~for ~~example,~~the onyear ~~October~~ended 12December 31, ~~2023, the Company announced that the U~~2025.S. ~~Federal~~In ~~Trade~~addition, ~~Commission~~securities ~~(the~~class ~~“FTC”)~~action ~~had~~litigation ~~requested~~has ~~information~~often ~~about~~been ~~certain~~brought ~~aspects~~against ~~of its marketing practices. The Company reached~~ a ~~settlement~~company ~~with~~following ~~the FTC and on December 5, 2024,~~ a ~~Stipulated~~decline ~~Order for Permanent Injunction and Other Relief (the “Order”) was entered~~ in the ~~United~~market ~~States~~price ~~District Court for the District~~ of ~~Massachusetts~~its ~~Eastern~~securities Division. The Order (i) required that we permit a limited cohort of school customers to cancel their contracts, (ii) required that we take certain compliance actions and meet record keeping obligations, and (iii) enjoined we from making misleading or unsubstantiated marketing claims. The Order did not include any monetary relief. The period during which eligible customers could have cancelled closed on March 30, 2025. Any inability to adequately comply with the ~~terms~~completion of ~~the Order could result in enforcement actions or penalties imposed by the FTC. As previously disclosed, in February 2024, the Company received~~ a subpoena from the Division of Enforcement of the Securities and Exchange Commission, requesting documents and information relating to certain aspects of the Company’s marketing practices, and the Company has since received additional related requestsmerger. The Company is cooperating with the SEC’s investigation. For more detailed discussion, see Note 20 (Commitments and Contingencies) to our consolidated financial statements for the year ended December 31, 2024 for additional information.

InOn ~~September~~October ~~2024~~12, 2023, the Company ~~commenced~~announced anthat ~~investigation of~~ the ~~Company’s~~FTC ~~sales~~had ~~practices,~~requested ~~including~~information ~~whether~~about certain ~~sales~~aspects of ~~products~~its ~~and~~marketing ~~subscriptions~~practices. toOn ~~channel~~December ~~partners and end users were subject to extra-contractual terms and conditions that impacted revenue recognition and other metrics~~5, ~~and if so~~2024, ~~when~~a ~~senior~~Stipulated ~~Company~~Order ~~personnel~~for ~~became~~Permanent ~~aware~~Injunction ofand ~~these~~Other ~~issues~~Relief (~~referred to in~~ the “~~Explanatory Note~~Order”) ~~preceding~~was ~~Item~~entered 1,in ~~Business as~~ the ~~Investigation)~~U.S. InDistrict ~~November~~Court ~~2024,~~for the ~~Company~~District ~~self-reported the Investigation to the Division~~ of ~~Enforcement of the SEC~~Massachusetts. The ~~Company~~Order ~~has~~(i) ~~since~~required ~~received~~that ~~requests~~we ~~for~~permit ~~documents~~a ~~and~~limited ~~information~~cohort ~~from~~of ~~the~~school ~~SEC~~customers ~~relating~~ to ~~this~~cancel ~~matter.~~their ~~The~~contracts ~~Company received a voluntary document request from~~ (the ~~U.S.~~cancellation ~~Attorney’s~~period ~~Office~~closed ofon ~~the~~March ~~Southern~~30, ~~District~~2025), of(ii) ~~New~~required ~~York~~that ~~relating~~we totake ~~these~~certain ~~same~~compliance ~~issues~~actions and ~~has~~meet ~~since~~record-keeping ~~received~~obligations, ~~additional~~and ~~requests~~(iii) ~~for~~enjoined ~~documents~~us ~~and~~from ~~information~~making ~~relating~~misleading toor ~~this~~unsubstantiated ~~matter~~marketing claims. The ~~Company~~Order isdid ~~cooperating~~not ~~with~~include ~~these~~any ~~inquiries~~monetary relief. ~~See~~Any ~~also~~inability ~~Note~~to 20adequately ~~(Commitments~~comply ~~and~~with ~~Contingencies)~~the toterms ~~our~~of ~~consolidated~~the ~~financial~~Order ~~statements~~could ~~for~~result ~~the~~in ~~year~~enforcement ~~ended~~actions ~~December 31,~~or ~~2024~~penalties ~~for~~imposed ~~additional~~by ~~information~~the FTC.

WeFurther, ~~can~~in ~~offer~~February no2024, ~~assurances as to~~ the ~~outcome~~Company ofreceived ~~these~~a ~~inquiries~~subpoena orfrom ~~their~~the ~~potential~~Division ~~effect,~~of ifEnforcement ~~any,~~of onthe usSEC orrequesting ~~our~~documents ~~results~~and ofinformation ~~operations.~~relating ~~Any inability~~ to ~~adequately~~certain ~~address~~aspects ~~the~~of ~~FTC or~~ the ~~SEC~~Company's ~~concerns~~marketing ~~or comply with applicable laws~~practices, ~~regulations,~~ and ~~policies,~~the ~~could~~Company ~~result~~has insince ~~litigation,~~received ~~enforcement~~additional ~~actions~~related ~~or significant penalties or claims, which could, in turn, divert financial and management resources, damage our reputation, inhibit sales, and otherwise adversely affect our business~~requests. ~~Any~~The ~~resolution~~Company oris ~~litigation~~cooperating with the SEC's or other parties could ultimately result in monetary and/or injunctive relief that may impose costs on us and/or require us to make changes to our business practices and marketing activities and could adversely impact our customer relationshipsinvestigation. In addition to the possibility of fines, injunctive relief, lawsuits and other claims, as a result of any pending or any future regulatory enforcement proceedings or inquiries we could be required to fundamentally change our business practices. Responding to these or other investigations alone can be costly and time-consuming. Any of these events could materially adversely affect our operating results and financial condition.

WeIn ~~are~~addition, ~~and~~as ~~may~~a inresult of the ~~future~~previously bedisclosed investigation and restatement of prior period financial statements we are subject to securities class action litigation and ~~regulatory~~shareholder ~~examinations,~~derivative ~~investigations,~~lawsuits ~~proceedings~~alleging orthat ~~orders~~we asviolated afederal ~~result~~securities oflaws by making false or misleading statements relating to the ~~Investigation~~effectiveness of certain products and our ~~failure~~revenue torecognition. ~~timely~~Additionally, ~~file~~we ~~our~~may ~~periodic~~in ~~reports~~the ~~with~~future become subject to enforcement proceedings brought by the SEC or other regulatory or governmental authorities, and actions and proceedings could also be brought against our current and former employees, officers or directors.

36Lawsuits and other administrative or legal proceedings that may arise can involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty or fine. In addition, lawsuits and other legal proceedings may be time consuming to defend or prosecute and may require a commitment of management and personnel resources that will be diverted from our normal business operations. Also, our insurance coverage may be insufficient, our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may have to pay damage awards or otherwise may enter into settlement arrangements in connection with such claims. We may also be subject to fines or penalties that are not covered by insurance. Moreover, we may be unable to continue to maintain our existing insurance at a reasonable cost, if at all, or to secure additional coverage, which may result in costs associated with lawsuits and other legal proceedings being uninsured. Any such payments or settlement arrangements in current or future litigation could have a material adverse effect on our business, operating results or financial condition. Even if the plaintiffs’ claims are not successful, current or future litigation could result in substantial costs and significantly and adversely impact our reputation and divert management’s attention and resources, which could have a material adverse effect on our business, operating results and financial condition, and negatively affect the price of our common stock. In addition, such lawsuits may make it more difficult to finance our operations.

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As a result of the misstatements and related material weaknesses, as described above in the Explanatory Note, we are and may in the future become subject to enforcement proceedings brought by the SEC or other regulatory or governmental authorities as a result of the events leading to our internal investigation, the misstatements or the related restatement, and actions and proceedings could also be brought against our current and former employees, officers, or directors. Additionally, a shareholder derivative lawsuit was filed against us alleging that we violated federal securities laws by making false or misleading statements relating to the effectiveness of certain products and our revenue recognition following the announcement of the Investigation and related restatement and we have an additional securities class action lawsuit and shareholder derivative lawsuit based on the same allegations. These actions, lawsuits or other legal proceedings related to the misstatements or the restatement and our failure to timely file our periodic reports with the SEC could result in reputational harm, additional defense and other costs, regardless of the outcome of the lawsuit or proceeding. Our management has devoted and may be required to devote significant time and attention to these matters. If we do not prevail in any such lawsuit or proceeding, we could be subject to substantial damages or settlement costs, criminal and civil penalties and other remedial measures, including, but not limited to, injunctive relief, disgorgement, civil and criminal fines and penalties. In addition, we continue to be at risk for loss of investor confidence, loss of key employees, changes in management or our board of directors and other reputational issues, all of which could have a material adverse effect on our business, financial position and results of operations. Additionally, while we cannot estimate our potential exposure to these matters at this time, we have already expended a significant amount of time and resources investigating the claims underlying and defending these matters and expect to continue to need to expend our resources to conclude these matters. For further information, see Part I, Item 3, "Legal Proceedings" and Note 20 (Commitments and Contingencies) to our consolidated financial statements for the year ended December 31, 2024.

Risks Related to Our Financial Condition and Liquidity

There are risks related to our ability to utilize net operating loss carryforwards as well as research and development tax credit carryforwards to offset future taxable income or tax liabilities.

As of December 31, ~~2024~~2025, we had federal net operating loss carryforwards of $20.1 million, which begin to expire in 2033. These losses were generated before 2018 and are subject to a 20-year carryforward period under the tax rules in effect at that time. We also had federal net operating loss carryforwards of $~~203~~248.30 million as of December 31, ~~2024~~2025, which do not expire but are generally limited to offsetting up to 80% of taxable income in any given year. These amounts were generated after 2017 and are subject to the provisions of the Tax Cuts and Jobs Act, which eliminated the expiration period but imposed a limitation on usage.

We had state net operating loss carryforwards of $248.0 million and $201.1 million as of December 31, 2025 and 2024, respectively, which may be available to offset future state taxable income and which begin to expire in 2033, depending on jurisdiction-specific rules. Additionally, as of December 31, 2024, we had United Kingdom net operating loss carryforwards of approximately $1.7 million which do not expire under current UK tax law.

As of December 31, 2024, we had gross U.S. federal and state research and development and other tax credit carryforwards of $2.4 million and $1.5 million, respectively, which may be available to offset future tax liabilities and the majority of which begin to expire in 2033 and 2030, respectively.36

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depending on jurisdiction-specific rules. Additionally, as of December 31, 2025 and 2024, we had United Kingdom net operating loss carryforwards of approximately $1.4 million and $1.7 million, respectively, which do not expire under current UK tax law.

As of December 31, 2025, we had gross U.S. federal and state research and development and other tax credit carryforwards of $2.4 million and $1.4 million, respectively, which may be available to offset future tax liabilities and the majority of which begin to expire in 2035 and 2032, respectively. As of December 31, 2024, we had gross U.S. federal and state research and development tax credit carryforwards of $2.4 million and $1.5 million, respectively, which may be available to offset future tax liabilities and the majority of which begin to expire in 2033 and 2030, respectively.

Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income or tax liabilities. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. If we have experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments. Any limitation may result in the expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

~~Refer~~The toCompany ~~Note~~believes 17that an ownership change within the meaning of Section 382 occurred on July 16, 2021 (the “~~Income~~Change ~~Taxes~~Date”), in connection with Merger. Based on the ~~notes~~estimated toannual limitation, the ~~consolidated~~Company ~~financial~~would ~~statements~~have inbeen ~~this~~able ~~Form~~to 10fully utilize all of its Section 382-Klimited ~~for~~net ~~additional~~operating ~~information~~losses and tax credit carryforwards in the 2022 tax year. The Company has not performed an analysis of ownership changes since the Merger, and does not anticipate utilization of net operating losses or credit carryforwards in the near term.

We considered the evidence of our history of cumulative net operating losses incurred since inception, as well as other positive and negative evidence bearing upon our ability to realize the deferred tax assets, in respect of our net operating loss carryforwards, and have concluded that it is more likely than not that we will not realize the benefits of deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2025 and 2024. If or when recognized, the tax benefits related to any reversal of the valuation allowance on deferred tax assets as of December 31, 2025, will be accounted for as follows: approximately $117.1 million will be recognized as a reduction of income tax expense and $2.2 million will be recorded as an increase in equity. The Company reevaluates the positive and negative evidence at each reporting period.

Refer to Note 16, Income Taxes, in the notes to the consolidated financial statements in this Annual Report on Form 10-K for additional information.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our products, improve our operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to it, if at all. Additionally, events related to a previously disclosed investigation and restatement of prior period financial statements may expose us to higher interest rates for additional indebtedness, whether as a result of credit rating downgrades or otherwise, and could restrict our ability to obtain additional or replacement financing on acceptable terms or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to it when we require it, our ability to

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Wecontinue ~~may require additional capital~~ to support our business growth, and ~~this~~to ~~capital~~respond ~~might~~to ~~not~~business bechallenges ~~available~~could onbe ~~acceptable~~significantly ~~terms~~impaired, ifand atour ~~all~~business may be adversely affected.

WeOur ~~intend~~existing ~~to continue to make investments to support our business growth~~ and may require additional funds to respond to business challenges, including the need to develop new features or enhance our products, improve our operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future ~~issuances of equity or convertible~~ debt ~~securities,~~obligations our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing that we may ~~secure~~adversely inaffect ~~the future could involve restrictive covenants relating to~~ our ~~capital~~financial ~~raising~~condition ~~activities~~ and ~~other~~future financial ~~and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions~~results. We may not be able to obtain additional financing on terms favorable to it, if at all. Additionally, events related to the Investigation may expose us to higher interest rates for additional indebtedness, whether as a result of credit rating downgrades or otherwise, and could restrict our ability to obtain additional or replacement financing on acceptable terms or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to it when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.

As of December 31, 2025, the $30.0 million initial term loan under our Senior Secured Credit Facilities, as defined below, was drawn and outstanding, while the $30.0 million delayed draw facility and $15.0 million revolving credit facility remained undrawn and available. Our ability to make payments on, repay or refinance the debt in the future will depend on our future performance which is subject to a variety of risks and uncertainties, many of which are beyond our control.

This debt or future additional indebtedness may adversely affect our financial condition and future financial results by, among other things:

•requiring the dedication of a portion of our expected cash flows from operations to service our debt, thereby reducing the amount of expected cash flows available for other purposes, including capital expenditures and acquisitions;

•increasing our vulnerability to adverse changes in our business and general economic and industry conditions, including, but not limited to, increases in interest rates;

•limiting our ability to obtain future financing for working capital, capital expenditures, future acquisitions, general corporate or other purposes, which may also impact our ability to service and repay outstanding indebtedness as it becomes due;

•restricting our ability to create or incur liens and engage in other transactions and activity; or

•placing us at a competitive disadvantage compared to our less leveraged competitors.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities, as well as the potential costs associated with a refinancing of our debt. Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and affect the terms of any such financing.

Our Senior Secured Credit Facilities contain affirmative and negative covenants, including financial covenants, that may limit our operating flexibility.

Our Senior Secured Credit Facilities contain affirmative and negative covenants, including, among other things, limitations on us and our subsidiaries with respect to liens, incurrence of indebtedness, certain fundamental changes, restricted payments, investments and transactions with affiliates, in each case, subject to exceptions. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lenders or terminate the Senior Secured Credit Facilities, which may limit our operating flexibility. In addition, our Senior Secured Credit Facilities are secured by a first lien on substantially all of our assets and require the Company to comply with a minimum annual recurring revenue covenant, a minimum earnings before interest, taxes, depreciation, and amortization (“EBITDA”) covenant that takes effect on June 30, 2027, and a minimum liquidity covenant that would cease to apply following the resolution of certain litigation and regulatory matters, in addition to reporting requirements of periodic financial results. If we do not meet the financial covenants as specified in the Senior Secured Credit Facilities, we may require forbearance or relief from our financial covenant violations from the lenders or be required to arrange alternative financing.

There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financings will be available to repay or refinance any such debt. A breach of any of these covenants or the occurrence of certain other events specified in the Credit Agreement governing the Senior Secured Credit Facilities and/or the related collateral documents could result in an event of default under the Credit Agreement. If an event of default has occurred and is continuing, the lenders could elect to declare all amounts outstanding under the Senior Secured Credit Facilities immediately due and payable. If we are unable to repay those amounts, the lenders could foreclose on the collateral granted to them to secure our obligations under our Senior Secured Credit Facilities. If the lenders accelerate the repayment of borrowings, if any, we may not have sufficient funds to repay our existing debt.

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Our ability to meet the financial covenants could be affected by events beyond our control. Any inability to make scheduled payments or meet the financial covenants of our Senior Secured Credit Facilities would adversely affect our business.

Risks Related to Our Common Stock and Warrants

The market price of our common stock and warrants has been ~~highly~~ and may continue to be highly volatile, and you may lose some or all of your investment.

The trading price of our common stock as well as warrants has been highly volatile since their initial listing on the Nasdaq and may continue to fluctuate widely in response to a variety of factors, including the following:

•actual or anticipated fluctuations in our financial condition and results of operations;

•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•failure of securities analysts to initiate or maintain coverage of our ~~company~~Company, changes in financial estimates or ratings by any securities analysts who follow our ~~company~~Company, or our failure to meet these estimates or the expectations of investors;

•changes in financial markets, macroeconomic conditions, or global instability;

•changes in market valuations of similar companies;

•the impact of a pandemic, epidemic or a similar future outbreak of disease or public health concern on our business;

•competition in our industry, our ability to grow and manage growth profitability, and retain our key employees;

•lawsuits threatened or filed against us;

•anticipated or actual changes in laws, or regulations or government policies applicable to our business;

•announcements that our previously issued financial statements cannot be relied upon or that our financial statements must be restated;

•delays in the filing of our required SEC reports;

•the announcement of restructuring activities;

•changes in executive leadership;

38•increases in compliance or enforcement inquiries and government inquiries or investigations (such as the ongoing SEC matter and enforcement of the Order);

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•increases in compliance or enforcement inquiries and government inquiries or investigations (such as the ongoing SEC matter and enforcement of the FTC Order);

•risks related to the organic and inorganic growth of our business and the timing of expected business milestones;

•short sales, hedging, and other derivative transactions involving our common stock; and

•the other factors described in this "“Risk Factors"” section of this Annual Report on Form 10-K.

Furthermore, short sellers or those that directly or indirectly assist short sellers may attempt to engage in manipulative activity intended to drive down the market price of a target company's stock. We have in the past been the subject of negative public attacks by certain non-governmental entities purporting to be objective media outlets, and we ~~may in the future become subject to similar attacks, which may lead to increased volatility in the price of our common stock.~~

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may in the future become subject to similar attacks, which may lead to increased volatility in the price of our common stock.

In addition, the stock market has experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies.

Certain of our warrants are accounted for as liabilities and the changes in value of such warrants could have a material effect on our financial results.

We classify our public warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. Due to the recurring fair value measurement, we recognize non-cash gains or losses on our public warrants each reporting period. The amount of such gains or losses could be material.

Certain of our earn-out shares and contingently issuable founder shares are accounted for as liabilities ~~and~~while the ~~changes~~contingently returnable founder shares are accounted for as assets. Changes in the fair value of such shares could have a material effect on our financial results.

We evaluated the accounting treatment of (i) our earn-out shares and (ii) 4,312,500 shares of NHIC Class B common stock owned by certain NHIC stockholders which were converted into shares of the Company's stock in connection with the Merger, (the "“Founder Shares"”) and determined to classify such shares as liabilities measured at fair value, with changes in fair value each period reported in earnings. Further, we evaluated accounting treatment for our contingently returnable founder shares and determined to classify such shares as assets measured at fair value, with changes in fair value each period reported in earnings. Due to the recurring fair value measurement, we recognize non-cash gains or losses on our earn-out and founder shares each reporting period. The amount of such gains or losses could be material.

Because we do not intend to pay any cash dividends for the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We currently intend to retain any future earnings for the development, operation and expansion of our business and do not intend to declare or pay any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common stock would be your sole source of gain on an investment in such shares for the foreseeable future.

Future sales, or the perception of future sales, of common stock by our existing security holders in the public market may cause the market price of our securities to decline.

Future sales of a substantial number of our common stock into the public market, particularly sales by our directors and executive officers or by holders of Founder Shares, or the perception that these sales might occur, could cause the market price of our common stock to decline. Certain of the Founder Shares are also subject to certain performance-based vesting provisions where 25% of the Founder Shares will vest on or before July 16, 2026 if the closing share price of the common stock equals or exceeds $12.50 over any 20 trading days within a 30-day trading period and the remaining 25% will vest on or before July 16, 2026 if the closing share price of the common stock equals or exceeds $15.00 over any 20 trading days within any 30-day trading period. In addition, as of December 31, 2024, we had stock options, restricted stock units (“RSUs”), and performance stock units ("PSUs") outstanding that, if fully exercised or vested, would result in the issuance of 30,241,594 shares of our common stock.

General Risk Factors

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Increasing attention to, and evolving expectations for, sustainability initiatives could increase our costs, harm our reputation, or otherwise adversely impact our business.

Companies across industries are facing increasing scrutiny from a variety of stakeholders related to their sustainability practices. Changing rules, regulations as well as customer, employee and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. For example, developing and acting on evolving sustainability reporting standards, including California’s climate-related disclosure laws, and the European Union's Corporate Sustainability Reporting Directive as well as customer requirements may be costly, difficult and time consuming. These initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and ensuring the accuracy, adequacy, or completeness of the disclosure of our sustainability initiatives can be costly, difficult and time consuming. This and other regulations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Moreover, changing federal enforcement priorities and legal interpretations regarding diversity, equity, and inclusion programs present unknown and evolving risks, particularly the new focus on federal contractors and DEI certifications. Additionally, many of our customers and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us. In addition, we could be criticized by stockholders, stakeholders, regulators, or other interested parties for the scope or nature of our sustainability practices.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

U.S. Generally Accepted Accounting Principles ("GAAP") are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and could affect the reporting of transactions already completed before the announcement of such change.

If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline.

The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts reports. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our common stock, change their opinion, or reduce their target stock price on us, our stock price would likely decline. If one or more of these analysts cease coverage of our ~~company~~Company or fail to regularly publish reports about us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

Our business operations are vulnerable to disruption due to natural or other disasters, including climate-related events, strikes and other events beyond our control.

A major earthquake, fire, tsunami, hurricane, cyclone, or other disaster, such as a major flood, seasonal storms, drought, extreme temperatures, nuclear event, or terrorist attack affecting our facilities or the areas in which we are located, or affecting those of our customers or third-party manufacturers or suppliers, could significantly disrupt our or their operations and delay or prevent product shipment or installation during the time required to repair, reinforce, rebuild or replace our or their damaged manufacturing facilities. These delays could be lengthy and costly. Additionally, customers may delay purchases of our products until operations return to normal. Climate change may contribute to increased frequency or intensity of certain of these events, including increasing frequency and severity of storms, floods, drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with these types of events, or a significant power outage as well as contribute to chronic changes in the physical environment (such as changes to ambient temperature and precipitation patterns or sea-level rise) that may impair the operating conditions of these facilities, or otherwise adversely impact our operations. Climate-related events, including the increasing frequency of extreme weather events and their impact on critical infrastructure in the United States and elsewhere, have the potential to disrupt businesses in general and may cause us to experience higher attrition, losses, and additional costs to maintain and resume operations.

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~~contract~~Our ~~manufacturers,~~business ~~suppliers~~operations ~~and~~are ~~customers,~~vulnerable ~~resulting~~to indisruption ~~delays~~due to natural or other ~~challenges~~disasters, inincluding ~~the~~climate-related ~~deployment of our products and services~~events, ~~among~~strikes ~~others,~~ and ~~thereby~~other ~~negatively~~events ~~impact~~beyond our ~~sales~~control.

A major earthquake, fire, tsunami, hurricane, cyclone, or other disaster, such as a major flood, seasonal storms, drought, extreme temperatures, nuclear event, or terrorist attack affecting our facilities or the areas in which we are located, or affecting those of our customers or third-party manufacturers or suppliers, could significantly disrupt our or their operations and delay or prevent product shipment or installation during the time required to repair, reinforce, rebuild or replace our or their damaged manufacturing facilities. These delays could be lengthy and costly. Additionally, customers may delay purchases of our products until operations return to normal. Climate change may contribute to increased frequency or intensity of certain of these events that may impair the operating conditions of these facilities, or otherwise adversely impact our operations. Climate-related events, including the increasing frequency of extreme weather events and their impact on critical infrastructure in the U.S. and elsewhere, have the potential to disrupt businesses in general and may cause us to experience higher attrition, losses, and additional costs to maintain and resume operations.

In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, strikes or other labor unrest, war, including in Europe and the Middle East, and the related geopolitical impacts, or the outbreak of epidemic diseases could have a negative effect on the operations of our facilities and those of our contract manufacturers, suppliers and customers, resulting in delays or other challenges in the deployment of our products and services, among others, and thereby negatively impact our sales.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

Cybersecurity Risk Management and Strategy

We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.

We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework ("NIST CSF") and SOC 2 trust principles on security. This does not imply that we meet any particular technical standards, specifications, or requirements, but only that we use these frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.

Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Key elements of our cybersecurity risk management program include:

•risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment;

•a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents;

•the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;

•cybersecurity awareness training of our employees, incident response personnel, and senior management;

•a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and

•a third-party risk management process for service providers that includes a diligence and contracting process depending on our assessment of each provider's respective criticality and risk profile.

We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition. We face certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See “Risk Factors – Because our products collect and store visitor and related information and images, domestic and international privacy and cybersecurity concerns, and other laws and regulations, could result in additional costs and liabilities to us or inhibit sales of our products.”41

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We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition. We face certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See “Risk Factors – Our products collect and store personal data about individuals, including our customers, their visitors, and our employees, as well as other proprietary business and confidential information.”

Cybersecurity Governance

Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee ("Audit Committee") oversight of cybersecurity and other IT risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program.

The Audit Committee receives periodic reports from our Vice President of Cybersecurity and Information Technology on our cybersecurity risks, updates, as necessary, regarding any cybersecurity incidents, as well as any incidents with lesser impact potential.

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The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity.

Our Vice President of Cybersecurity and Information Technology is responsible for assessing and managing our material risks from cybersecurity threats and has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our Vice President of Cybersecurity and Information Technology has served in that position since 2022, and has extensive experience assessing and managing cybersecurity programs and technology risk. Prior to joining Evolv, our Vice President of Cybersecurity and Information Technology was the Leader of Global Information Security for New Balance.

Our Vice President of Cybersecurity and Information Technology supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.

ITEM 2. PROPERTIES

Our corporate headquarters is located in an approximately 96,000 square foot facility that we sublease in Waltham, Massachusetts. During the three months ended March 31, 2024, we amended the lease agreement to extend the term through October 31, 2025, with the option to further extend through June 30, 2031 with written notice. Additionally, in August 2024, we amended the lease agreement again to expand our footprint in our headquarters and extend the term of the lease through May ~~31,~~ 2031. ~~As a result of this amendment, no further option exists to extend the sublease.~~ Our executive offices are located at 500 Totten Pond Road, 4th Floor, Waltham, MA 02451 under the foregoing sublease. We believe that our office space is adequate for our current needs and, should we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in Note 2019, (Commitments and Contingencies), in the notes to the consolidated financial statements in this Form 10-K and is incorporated by reference herein.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Shares of our Common Stock and warrants began trading on Nasdaq under the symbol “EVLV” and “EVLVW,” respectively, on July 16, 2021. Prior to that time, there was no established public trading market for our common stock or warrants.

Holders of Records

As of 43/213/~~2025~~2026, there were ~~163~~179,~~470~~350,~~325~~739 issued and outstanding shares of our common stock held by approximately 4740 stockholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of shares of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

Performance Graph

This performance graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

The following graph compares the cumulative total return to stockholders for our common shares for the period from July 16, 2021 (the date of our Merger as defined in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations) through December 31, ~~2024~~2025 with the NASDAQ Composite and NASDAQ Technology Sector Indices. The comparison assumes an investment of $100 was made on July 16, 2021 in our common shares and in each of the indices and, in the case of the indices it also assumes reinvestment of all dividends. The performance shown is not necessarily indicative of future performance.

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Dividend Policy

We have never declared or paid any cash dividends on our ~~common~~capital stock. We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board after considering our financial condition, results of operations, capital requirements, business prospects and other factors the Board deems relevant, and subject to the restrictions contained in any financing instruments. The terms of our existing term loan agreement preclude us from paying cash dividends without consent. Our ability to declare dividends may also be limited by restrictive covenants pursuant to any other future debt financing agreements. See Part I, Item IA, “Risk Factors - Because we do not intend to pay any cash dividends for the foreseeable future, capital appreciation, if any, would be your sole source of gain.” for additional information.

Recent Sales of Unregistered Equity Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6. [RESERVED]

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ITEM 7. 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 audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Annual Report on Form 10-K.

As used in this Annual Report on Form 10-K, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Evolv” refer to the consolidated operations of Evolv Technologies Holdings, Inc. and its wholly owned subsidiaries, which include Evolv Technologies, Inc., ~~References~~Evolv toTechnologies UK Ltd. (“~~NHIC~~Evolv UK”) ~~refer~~and toGive ~~our~~Evolv ~~legal~~LLC. ~~predecessor,~~References ato ~~special~~“NHIC” ~~purpose~~refer ~~acquisition~~to the company, prior to the consummation of our business combination ~~on July 16, 2021~~ (the “Merger”) and references to “Legacy Evolv” refer to Evolv Technologies, Inc. dba Evolv Technology, Inc. prior to the consummation of the Merger.

Restatement of Prior Period Financial Statements

We have restated our previously issued consolidated financial statements contained in this Annual Report on Form 10-K. Refer to the “Explanatory Note” preceding Item 1, Business, for background on the restatement, the periods impacted, control considerations, and other information. In addition, we have restated certain previously reported financial information for the fiscal years ended December 31, 2023 and December 31, 2022 and for the quarterly periods and year-to-date periods ended June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, and June 30, 2024 in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations section. See Notes 2 and 23 in the notes to the consolidated financial statements in this Annual Report on Form 10-K, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements.

Business Overview

Evolv is a leading security technology company pioneering Artificial Intelligence (“AI”)-powered screening solutions designed to help create safer ~~experiences,~~environments ~~with~~while ~~key~~maintaining ~~market~~efficient ~~categories~~visitor ~~that~~flow ~~include~~and a positive visitor experience. We serve customers across a range of end markets, including education, healthcare, sports, ~~and~~ live entertainment, tourist attractions, houses of worship, and industrial workplaces. Our mission is to make the world a safer and more enjoyable place to live, work, learn, and play. Our goal is to help facility operators address ~~the chronic epidemic of~~ escalating gun violence, mass shootings and terrorist attacks while maintaining a positive visitor experience.

Our solutions ~~combine~~are ~~proprietary software and hardware,~~ delivered asthrough a ~~long-term~~ Security-as-a-Service ~~("SaaS") subscription~~ model ~~and~~that ~~are~~integrates ~~designed~~our toproprietary ~~enhance~~sensor ~~security~~platform and ~~improve~~AI-powered ~~the~~software, ~~visitor~~cloud ~~experience~~connectivity, and ongoing services. ~~Evolv~~We ~~provides~~deliver aour ~~cloud-connected,~~solutions ~~AI-driven~~through ~~approach~~two tosales ~~security~~models: ~~that~~a ~~goes~~pure ~~beyond~~subscription ~~just~~model ~~hardware~~and a purchase subscription model, ~~supporting~~each ~~the~~of ~~end-to-end~~which ~~screening~~requires ~~experience.~~both ~~Our~~hardware ~~focus~~and isan ~~weapons~~active, ~~detection~~connected software subscription, ~~and~~as wefurther ~~offer~~described ~~two~~in ~~core~~“Sales ~~solutions:~~Mix, ~~Evolv~~Pricing, ~~Express®~~Product Cost and ~~Evolv~~Margins”. ~~eXpedite®~~We –believe ~~designed~~this tointegrated ~~efficiently~~approach ~~screen~~reflects ~~high~~the ~~volumes~~full scope of ~~people~~our offering and ~~bags~~aligns ~~for~~our ~~concealed~~long-term ~~threats.~~interests with those of our customers.

Our ~~flagship~~hardware ~~product,~~platforms ~~Evolv~~are ~~Express®,~~uniquely ~~uses~~designed ~~advanced sensors, AI-powered software,~~ and ~~cloud~~purpose ~~services~~engineered tofor ~~not~~real ~~only consistently detect firearms~~world, ~~improvised~~high ~~explosives,~~throughput ~~and~~security ~~certain~~environments ~~types of knives~~ and ~~distinguish~~are ~~them~~the ~~from~~foundational ~~many~~component ~~harmless~~of ~~items~~our ~~such~~solutions. asEvolv ~~cell~~Express® ~~phones~~ and ~~keys,~~Evolv ~~but~~eXpedite™ ~~also~~operate ~~visualize~~exclusively ~~the~~with ~~location~~Evolv’s ofproprietary ~~the~~software ~~potential~~and ~~threat~~cloud ~~helping to enable security personnel to conduct targeted, minimally intrusive secondary screenings~~services. ~~Evolv~~When ~~eXpedite,~~deployed ~~our autonomous X-ray bag scanning solution~~together, ~~works~~the ~~with~~two ~~Evolv~~products ~~Express~~are designed to ~~provide~~support aimproved ~~layered~~operational ~~approach~~efficiency tothrough ~~security~~better ~~for~~threat ~~concealed~~identification ~~weapons~~and ~~detection~~alarm ~~in high clutter environments~~performance. ~~Using~~We ~~eXpedite~~believe ~~with~~our ~~Express~~ability ~~aims~~ to ~~allow~~deliver ~~the~~continuous ~~checkpoint~~improvement tothrough ~~operate~~software atupgrades ~~heightened~~differentiates ~~sensitivity~~our ~~while~~platform ~~potentially~~from ~~reducing~~many ~~the~~legacy ~~burden~~hardware ononly ~~security staff and optimizing the visitor experience~~offerings.

Our ~~innovative~~platform ~~technology~~was is designed tofrom ~~enhance~~inception ~~security~~around ~~and~~AI ~~provide~~operating anin ~~efficient,~~physical ~~positive visitor and customer experience~~environments. InOur ~~addition~~AI topowered ~~screening~~software ~~capabilities,~~and ~~our~~services ~~solution~~are ~~includes~~central ~~Evolv~~to ~~Insights,~~the aperformance ~~powerful~~and ~~software~~long-term ~~analytics~~value ~~dashboard~~of ~~that~~our ~~allows~~platform. ~~customers~~Through tocontinuous ~~comprehensively~~operation ~~review,~~across ~~analyze,~~a large and ~~gather~~growing ~~insights~~installed ~~from~~base, ~~the~~our ~~Evolv Express screening~~ systems atgenerate ~~their~~substantial ~~various~~volumes ~~venue~~of oranonymized ~~facility~~screening ~~locations. Available~~ data ~~includes~~related ~~visitor~~to ~~arrival~~the ~~patterns,~~movement ~~throughput~~of ~~volumes,~~people ~~system~~and ~~detection~~bags ~~performance,~~through ~~alarm~~physical ~~statistics,~~spaces. ~~and~~We ~~detection~~train ~~settings. Our~~our ~~customers~~models ~~can~~on ~~leverage~~a ~~this~~proprietary data toset ~~inform~~and ~~their~~can ~~security~~improve ~~operations,~~the ~~while~~system ~~providing~~performance ~~end-users~~through ~~with~~new anand ~~approachable~~updated ~~security experience. Our products~~algorithms, which ~~are offered to our~~ customers ~~primarily~~receive ~~under~~from ~~a multi-year subscription model, provide predictable revenue streams for~~ us inthrough ~~addition~~software ~~to value for our customers~~updates.

We focus on weapons detection and offer two core solutions that can be deployed independently or together and are supported by data and visual dashboards that provide actionable analytics and automated reports designed to help security teams make evidence-based decisions to strengthen security. Evolv Express is designed to screen high volumes of people for concealed threats, while Evolv eXpedite is designed to screen high volumes of bags automatically, without requiring a trained X-Ray operator. When deployed together, these solutions provide a layered security approach that allows customers to operate at heightened sensitivity levels while seeking to maintain efficient throughput and a positive visitor experience.

In addition to screening capabilities, our subscription includes Evolv Insights®, our cloud-based analytics solution that provides customers with operational visibility into system performance across their venues or facilities. Available data includes throughput volumes, alarm statistics, detection settings, and system performance metrics, which customers can use to inform security operations, staffing decisions, and checkpoint configuration.

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WeOur ~~are~~offering ~~focused~~is onbundled ~~delivering~~together ~~value~~by in the ~~spaces~~services included in ~~and~~our ~~around~~subscription. We recognize that the ~~physical~~primary ~~threshold~~mission of ~~venues~~our ~~and~~customers ~~facilities.~~is Wetypically ~~believe~~not ~~that~~security. ~~digitally~~Our ~~transforming~~customers’ ~~the~~mission ~~visitor~~might ~~experience~~be ateducating ~~the~~children, ~~entry~~restoring ~~point~~patients to ~~venues~~good ~~and~~health, ~~facilities~~or ~~will~~entertaining befans ain ~~critically~~their ~~important~~seats. ~~innovation~~Our insubscription ~~physical~~includes ~~security.~~full Weonsite ~~believe~~support and repair services for the full term, so that our ~~solutions~~customers ~~will~~can ~~not~~focus ~~only~~on ~~help~~what they do best while we make ~~venues~~sure ~~and~~their ~~facilities~~equipment ~~safer~~is ~~and~~operating ~~more~~as ~~enjoyable,~~designed. We ~~but~~are ~~also~~security ~~more~~as ~~efficient~~a service, ~~and~~from ~~more~~the ~~informed~~hardware ~~about~~to ~~their~~the ~~visitors’~~software ~~needs~~to the data to the support.

Our platform incorporates both hardware and software components that are deployed across a large number of operating venues. Each deployed unit functions not only as a detection device but also as a data collection mechanism, generating ongoing real‑world operational data, including both threat and non‑threat events. Some of this data is used to support the continued development and refinement of our algorithms. We believe the integration of our hardware and software creates operational interdependencies that are integral to our platform. As a result, the hardware and software components of our system are designed to operate together and are not intended to function as standalone offerings, which distinguishes our approach from cloud‑only software solutions.

We believe our hardware-enabled, long term subscription model differentiates our business from purely software-as-a-service offerings. We believe our platform is well positioned to benefit from ongoing advances in artificial intelligence, driving durable customer value and supporting predictable, recurring subscription revenue.

Key Factors Affecting Our Operating Results

We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the "Risk Factors" section of this Annual Report on Form 10-K.

Supply Chain Strategy

We regularly evaluate our supply chain structure to mitigate risks, including supplier concentration and dependencies, global chipset and semiconductor supply constraints, including memory and compute components used in AI‑enabled products, long and variable lead times, cost volatility, and supplier allocation practices. While no material disruptions are anticipated during the onboarding of Plexus, manufacturing capacity for certain components is limited to a small number of qualified suppliers, and extended or unforeseen disruptions, capacity limitations, or changes in allocation practices could impact our supply. We continue to monitor risks associated with onboarding, logistics, and supplier performance. These factors may influence cost of revenue, inventory levels, working capital, and our ability to meet customer demand in future periods.

General Economic and Market Conditions

We expect that our results of operations, including our revenue and cost of revenue, may fluctuate or continue to fluctuate based on, among other things, the impact of rising inflation and interest rates on business spending; supply chain ~~issues~~constraints, operational challenges, and the impacts on our manufacturing capabilities; public health emergencies; geopolitical conflicts and war, including the conflicts in Europe and the Middle East; and recessionary trends. See the risk factor titled “Our operating results may fluctuate for a variety of reasons, including our failure to close large volume opportunity customer sales” in Item 1A. Risk Factors of this Annual Report on Form 10-K. While these factors continue to evolve, we plan to remain flexible and optimize our business as appropriate and allocate resources, as necessary.

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factor titled “Our operating results may fluctuate for a variety of reasons, including our failure to close large volume opportunity customer sales” in Item 1A. Risk Factors of this Annual Report on Form 10-K. While these factors continue to evolve, we plan to remain flexible and optimize our business as appropriate and allocate resources, as necessary.

Adoption of our Security Screening Products

We believe the world will continue to focus on the safety and security of people in the places where they gather. Many of these locations, such as professional sports venues, educational institutions, and healthcare facilities, are moving toward a more frictionless security screening experience. We are well-positioned to take advantage of this opportunity due to our proprietary technologies and distribution capabilities. Our products are designed to empower venues and facilities to realize the full benefits of touchless security screening, including a rapid visitor throughput and minimal security staff to screened visitor physical contact. We expect that our results of operations, including revenue, will fluctuate for the foreseeable future as venues and facilities continue to shift away from conventional security screening processes towards touchless security screening or consider security screening processes for the first time. The degree to which potential and current customers recognize these benefits and invest in our products will affect our financial results.

Sales Mix, Pricing, Product Cost and Margins

We sell our solutions under two primary sales models. We offer a “pure subscription” model, where the customer leases hardware from us and we provide a multi-year security-as-a-service subscription. For end-user customers that prefer to purchase our hardware outright, we offer customers the option of purchasing our hardware outright directly from us through our “purchase subscription” model that also includes a multi-year security and software-as-a-service subscription. In addition to our two primary sales models, we have historically offered our “distributor licensing” model based on the Distribution and License Agreement we entered into with Columbia Tech in March of 2023. ~~Columbia Tech, a wholly-owned subsidiary of Coghlin Companies, currently serves as our primary contract manufacturer.~~ Under this arrangement, we have granted a license of our intellectual property to Columbia Tech, which contracts directly with certain of our resellers to fulfill sales demand where the end-user customer prefers to purchase the hardware equipment. Columbia Tech pays us a hardware license fee for each system it manufactures and sells under this agreement. In these instances, we still contract directly with the reseller to provide a multi-year security-as-a-service subscription to the end-users. During the three months ended September 30, 2025, we discontinued quoting on this basis, and the agreement with Columbia Tech expired on December 31, 2025. While any outstanding quotes will be honored, all new quotes for end-user customers wishing to purchase the hardware equipment will be fulfilled through our purchase subscription model going forward. Thus, license revenue from this agreement is expected to reduce to zero over time, replaced by increased product revenue, which will in turn provide an increase in gross profit over the duration of the contract. We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our revenue, gross profit, gross margin, and overall profitability in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments.

Going forward, we expect our products to be adopted in a variety of vertical industry markets and geographic regions,. While adoption of our products has primarily been within the United States to date, we expect increased adoption of our products in foreign markets in the near future as we explore expansion into international markets. Pricing may vary by region or vertical market due to market-specific dynamics. As a result, our financial performance depends, in part, on the mix of sales, ~~bookings,~~ and business in different markets during a given period. In addition, we are subject to price competition, and our ability to compete in key markets will depend on the success of our investments in new technologies and cost improvements as well as our ability to efficiently and reliably introduce ~~cost~~AI-~~effective~~powered ~~touchless~~ security screening ~~products~~solutions to our customers.

Development and Commercialization of our Products

46Since our inception, we have incurred significant operating losses. Our ability to generate revenue and achieve cost improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $145.9 million and $103.9 million for the years ended December 31, 2025 and 2024, respectively. We generated a net loss of $33.1 million and $54.0 million for the years ended December 31, 2025 and 2024, respectively. We expect to continue to incur operating losses as we focus on growing and establishing recurring commercial sales of our products, including growing our sales and marketing teams, scaling the use of third-party contract manufacturers, and continuing research and development efforts to develop new products and further enhance our existing products.

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~~Since~~Certain ~~our~~Key ~~inception,~~Metrics ~~we have incurred significant operating losses. Our ability to generate revenue~~ and ~~achieve~~Non-GAAP ~~cost~~Financial improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $103.9 million and $79.6 million for the years ended December 31, 2024 and 2023, respectively. We generated a net loss of $54.0 million and $108.0 million for the years ended December 31, 2024 and 2023, respectively. We expect to continue to incur operating losses as we focus on growing and establishing recurring commercial sales of our products, including growing our sales and marketing teams, scaling our manufacturing operations, and continuing research and development efforts to develop new products and further enhance our existing products.Measures

ARR. We believe annual recurring revenue (“ARR”) is a useful metric for investors because it provides visibility into the scale and sustainability of our recurring revenue base. ARR reflects the annualized value of active subscription arrangements at a point in time and helps investors evaluate trends in customer and unit acquisition, retention, and expansion. As our business continues to shift toward pure subscription and purchase subscription sales models (and away from our legacy distribution subscription model), we believe ARR more accurately captures the recurring nature of our revenue compared to period based revenue measures alone. Management also uses ARR to assess operating performance, inform strategic decisions, and plan for future growth, because it is impacted by multiple dimensions of our business, including new customer and unit acquisition, customer pricing, renewal history, and renewal pricing.

We define ARR as subscription revenue and the recurring service revenue related to purchase subscriptions for the final month of the quarter normalized to a one-year period. Our calculation of ARR is not adjusted for the impact of any known or projected future events (such as customer cancellations, upgrades or downgrades, or price increases or decreases) that may cause any such contract not to be renewed on its existing terms. In addition, the amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to new bookings, cancellations, upgrades, downgrades or other changes in pending renewals, as well as the effects of professional services revenue and acquisitions or divestitures. As a result, ARR should be viewed independently of, and not as a substitute for or forecast of, revenue and deferred revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.

As of December 31, 2025, ARR was $120.5 million, compared to $99.4 million as of December 31, 2024, representing year over year growth of 21%. This increase was driven by the addition of nearly 250 customers during 2025, expanded deployments by existing customers and increased demand for our pure subscription and purchase subscription sales models which generate a higher proportion of recurring revenue compared to our legacy distribution subscription sales model (see "Sales Models”).

RPO. We believe Remaining Performance Obligation ("RPO"), a measure of expected future revenue from active customers, to be a key indicator of our performance. As disclosed in Note 5 to our financial statements, RPO at December 31, 2025 was $293.6 million, an increase of approximately 13% from December 31, 2024, driven by continued market demand.

Adjusted EBITDA. We believe Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is a useful metric for investors because it provides insight into the underlying operating performance of our business by excluding items that are not indicative of our core operating results or that may vary significantly from period to period. Adjusted EBITDA facilitates period-to-period comparisons of our operating performance and enhances investors’ ability to evaluate trends in profitability and operating leverage. In addition, Adjusted EBITDA helps investors better understand the impact of our cost structure and operating efficiency as we scale our business, independent of non‑cash expenses, financing decisions, tax structure, and certain non‑recurring or non‑operational items. While Adjusted EBITDA should be considered in conjunction with our GAAP financial results, we believe it provides supplemental information that enhances investors’ understanding of the performance of our business.

Management uses Adjusted EBITDA internally to assess operating performance, monitor cost discipline, and evaluate the efficiency of our business as we scale. Adjusted EBITDA is a key metric used by management to measure the profitability of our core operations and to assess the impact of operating decisions across the organization. Management reviews Adjusted EBITDA trends to inform strategic decisions related to expense management, investment prioritization, and resource allocation. Because Adjusted EBITDA excludes certain non‑cash and non‑recurring items, it allows management to better evaluate underlying operating performance and comparability across reporting periods. By monitoring Adjusted EBITDA over time, management is able to assess progress toward profitability objectives and make informed decisions regarding long-term operational and financial planning.

Adjusted EBITDA is defined as net income (loss) plus depreciation and amortization, stock based compensation, interest expense (income), provision for income taxes, change in fair value of contingent earn out liability, change in fair value of contingently issuable common stock liability, change in fair value of public warrant liability, loss on impairment of leased equipment, loss on impairment of intangible asset, loss on disposal of leased equipment, non-recurring employee restructuring and other separation costs, non-recurring inventory charges, and other non-recurring legal and regulatory costs, which management believes provides a more meaningful representation of operating results.

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The following table presents a reconciliation of net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA for each of the periods indicated:


	December 31,
		2025		2024
Net loss		$	(33,138)	$	(54,017)
Depreciation and amortization		24,340		17,375
Stock-based compensation		21,096		24,756
Interest expense (income)		196		(2,942)
Provision for income taxes		62		—

Change in fair value of contingent earn-out liability		(12,435)		(16,310)
Change in fair value of contingently issuable/returnable common stock liability/asset		(2,614)		(2,529)
Change in fair value of public warrant liability		(435)		(6,592)
Loss on impairment of leased equipment		—		224
Loss on impairment of intangible asset		—		983
Loss on disposal of leased equipment		3,787		—
Non-recurring employee restructuring and other separation costs		2,976		3,060
Non-recurring inventory charges		—		2,730
Other non-recurring legal and regulatory costs		7,279		12,284
Adjusted EBITDA		$	11,114	$	(20,978)

For the year ended December 31, 2025, Adjusted EBITDA was $11.1 million, compared to negative Adjusted EBITDA of $(21.0) million for the year ended December 31, 2024, representing an improvement of $32.1 million year-over‑year. This improvement was primarily driven by revenue growth, increased operating leverage, and continued discipline in managing operating expenses, partially offset by higher investments to support growth initiatives and customer deployments.

Liquidity and Capital Resources

Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through cash generated from operations, and ifour ~~necessary,~~Senior ~~debt~~Secured ~~financings.~~Credit ~~However, we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all~~Facilities. IfSee we“Liquidity ~~are~~and ~~unable~~Capital toResources” ~~raise~~as ~~capital~~well ~~or enter into such agreements~~ as, ~~and~~“Risks ~~when,~~Related ~~needed, we may have~~ to ~~significantly~~Our ~~delay,~~Financial ~~scale~~Condition ~~back or discontinue the further development~~ and ~~commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations. See “~~Liquidity ~~and Capital Resources~~” for more information. Additionally, as discussed in Note 2019, (Commitments and Contingencies), to our consolidated financial statements for the year ended December 31, ~~2024~~2025, we are involved in certain legal proceedings, including a government ~~investigations~~investigation. Given the uncertainty of such matters, no assurance can be given regarding the final outcome of such matters. However, the ultimate amount or range of potential loss, which might result to the Company, may differ materially from our current estimates.

As described under Supply Chain Strategy section, we entered into a non-exclusive contract manufacturing agreement with Plexus, which is expected to enhance manufacturing scalability and operational efficiency. While the onboarding may temporarily affect working capital due to dual production activities and other onboarding costs, the Company does not anticipate a material impact on overall liquidity in the near term. Once fully operational, we expect improved inventory efficiency and commercial terms. The Company continues to monitor cash flows and capital requirements associated with the transition to ensure sufficient resources are available to support ongoing operations and strategic initiatives.

Components of Results of Operations

Revenue

We derive revenue from (1) subscription arrangements generally accounted for as operating leases, including SaaS and maintenance, (2) the sale of products, (3) SaaS and maintenance related to products sold to customers either by Evolv or by Columbia Tech pursuant to the Distribution and License Agreement, (4) license fees related to the Distribution and License Agreement, and (5) professional services, including installation, training, and event support. Maintenance consists of preventative maintenance, technical support, bug fixes, and when-and-if available threat updates. Our arrangements are generally noncancelable and nonrefundable after shipment to the customer. Revenue is recognized net of sales tax.

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License Agreement, and (5) professional services, including installation, training, and event support. Maintenance consists of preventative maintenance, technical support, bug fixes, and when-and-if available threat updates. Our arrangements are generally noncancelable and nonrefundable after shipment to the customer. Revenue is recognized net of sales tax. To the extent that we see an increase in demand for our pure subscription model, we would expect to see a reduction in upfront revenue recognition in favor of more recurring revenue.

Product Revenue

We derive a portion of our revenue from the sale of our Evolv Express and eXpedite equipment and related add-on accessories to customers. Revenue is recognized when control of the product has transferred to the customer, which follows the terms of each contract. We anticipate future growth in product revenue toas bemore ~~driven~~customers bypurchase ~~underlying~~systems ~~demand~~through ~~for~~ our ~~solutions~~purchase assubscription ~~well~~model asinstead byof through the ~~distribution~~now ~~mix~~cancelled ~~across~~Distribution ~~our~~and ~~various~~License ~~sales~~agreement ~~and~~with ~~fulfillment~~Columbia ~~models~~Tech.

Subscription Revenue

Subscription revenue consists of revenue derived from leasing Evolv Express ~~units~~and eXpedite systems to our customers. Lease terms are typically four years and customers generally pay either a quarterly or annual fixed payment for the lease, SaaS, and maintenance elements over the contractual lease term. Equipment leases are generally classified as operating leases and recognized ratably over the duration of the lease. There are no contingent lease payments as a part of these arrangements.

Lease arrangements generally include both lease and non-lease components. The non-lease components relate to (1) distinct services, including professional services, SaaS, and maintenance, and (2) any add-on accessories. Professional services are included in license fees and other revenue as described below, and add-on accessories are included in product revenue as described above. Because the equipment lease, SaaS, and maintenance components of a subscription arrangement are recognized as revenue over the same time period and in the same pattern, the equipment lease and SaaS/maintenance performance obligations are classified as a single category of subscription revenue in our consolidated statements of operations and comprehensive (loss~~) income~~.

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Service Revenue

Service revenue consists of subscription-based SaaS and maintenance revenue related to Evolv Express ~~units~~and eXpedite systems sold to customers. Customers generally pay either a quarterly or annual fixed payment for SaaS and maintenance. SaaS and maintenance revenue is recognized ratably over the period of the arrangement, which is typically four years.

License Fee and Other Revenue

License fee and other revenue includes license fee revenue from the Distribution and License Agreement, revenue from professional services, and ~~revenue from~~ other one-time ~~services~~revenue. License fee revenue is recognized upon the shipment of product from Columbia Tech to the reseller. Revenue for professional services is recognized upon transfer of control of these services, which are normally rendered over a short duration. Revenue for professional services and other one-time ~~service~~ revenue, which had previously been included in service revenue, has been reclassified for prior periods to License fee and other revenue on the consolidated statements of operations and comprehensive (loss~~) income~~. WeDuring ~~anticipate~~the ~~changes~~three inmonths ~~license~~ended ~~fee~~September 30, 2025, we discontinued quoting under this basis, and ~~other~~the ~~revenue~~agreement towith Columbia Tech expired on December 31, 2025. While any outstanding quotes will be ~~driven~~honored, byall ~~underlying~~new ~~demand~~quotes for ~~our~~end-user ~~solutions~~customers aswishing ~~well~~to aspurchase ~~any~~the ~~changes~~hardware inequipment ~~demand~~will ~~for~~be fulfilled through our ~~distributor~~purchase ~~licensing~~subscription model going forward. Thus, license revenue from this agreement is expected to reduce to zero over time, replaced by increased product revenue, which will in turn provide an increase in gross profit over the duration of the contract.

Cost of Revenue

We recognize cost of revenue in the same manner that the related revenue is recognized.

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Cost of Product Revenue

Cost of product revenue consists primarily of costs paid to our third-party manufacturer and other suppliers, labor costs (including stock-based compensation), and shipping costs.

Cost of Subscription Revenue

Cost of subscription revenue consists primarily of depreciation expense related to leased units, an allocated portion of internal-use software amortization expense, shipping costs, and maintenance costs related to leased units. Maintenance costs consist primarily of labor (including stock-based compensation), spare parts, shipping costs, field service repair costs, equipment, and supplies. Service-related costs reflected in cost of subscription revenue include, in part, the Company’s decision to in-source certain technical and field services support functions that were previously outsourced to a third-party service provider.

Cost of Service Revenue

Cost of ~~services~~service revenue consists of maintenance costs related to units purchased by customers and an allocated portion of internal-use software amortization expense. Maintenance costs consist primarily of labor (including stock-based compensation), spare parts, shipping costs, field service repair costs, equipment, and supplies. Service-related costs reflected in cost of service revenue include, in part, the Company’s decision to in-source certain technical and field services support functions that were previously outsourced to a third-party service provider.

Cost of License Fee and Other Revenue

Cost of license ~~fees~~fee and other revenue consists primarily of internal and third-party costs related to professional services, such as installation, training, and event support. License fee revenue earned under our Distribution and License Agreement with Columbia Tech has no associated cost of revenue.

Gross Profit and Gross Profit Margin

Our gross profit is calculated based on the difference between our revenues and cost of revenues. Gross profit margin is the percentage obtained by dividing gross profit by our revenue.

We expect our gross margins to fluctuate over time based on the following factors:

•Mix of sales between our pure subscription, and purchase subscription, ~~and distributor licensing sales~~ models;

•Market conditions that may impact our pricing;

•Product mix changes between established products and new products;

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•Our cost structure for manufacturing operations, including contract manufacturers, relative to volume, and our product support obligations;

•Our ability to maintain our costs on the components that go into the manufacture of our products; and

•Write-offs of inventory.

We regularly assess our sales and fulfillment models to ensure they align with customer preferences, operational scalability, and our long-term business objectives. We expect our gross profit and gross profit margin in any given fiscal period to be influenced by customer demand for our various sales and fulfillment models, as well as any future strategic management decisions affecting our sales and fulfillment models that may result from such assessments.

Research and Development

Our research and development expenses represent costs incurred to support activities that advance the development of innovative security screening technologies, new product platforms, as well as activities that enhance the capabilities of our existing product platforms. Our research and development expenses consist primarily of salaries and bonuses, employee benefits, stock-based compensation, prototypes, design expenses, and consulting and contractor costs. We expect our research and development costs will remain relatively consistent for the year ending December 31, 2025 compared to the year ended December 31, 2024 as we look to leverage previous investments made in people and processes.

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bonuses, employee benefits, stock-based compensation, prototypes, design expenses, and consulting and contractor costs. We expect our research and development costs to increase for the year ending December 31, 2026 compared to the year ended December 31, 2025 as we continue to invest in product innovation.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing, customer success, business development, and strategy functions, as well as costs related to trade shows and events, and stock-based compensation. We expect our sales and marketing costs will ~~decrease~~increase modestly for the year ending December 31, ~~2025~~2026 compared to the year ended December 31, ~~2024~~2025 as ~~a result of certain cost cutting measures~~ we ~~have~~expand ~~taken,~~our ~~including~~go ~~the~~to ~~reduction~~market inefforts ~~force~~through ~~implemented~~both indirect ~~January~~and ~~2025~~channel investments.

General and Administrative

General and administrative expenses consist primarily of personnel- related expenses associated with our executive, finance, investor relations, legal, information technology, and human resources functions, as well as professional fees for legal, audit, accounting and other consulting services, stock-based compensation, and insurance, net of any probable and reasonably estimable insurance recoveries or received insurance recoveries. During the first and second quarter of the year ended ~~2024~~2025, we experienced a significant increase in general and administrative expenses, primarily for legal ~~fee~~fees and consulting expenses, asin connection with a ~~result~~previously disclosed investigation and restatement of ~~the~~prior ~~Investigation~~period ~~and~~financial ~~related~~statements. ~~actions,~~This ashas ~~described~~declined in the ~~“Explanatory~~second ~~Note”~~half ~~preceding~~of ~~Item~~2025 1,as ~~Business~~certain of our legal and consulting expenses normalized. We expect ~~this~~our ~~increased~~general ~~level~~and ofadministrative expenses to ~~continue~~decrease ~~through~~for the ~~second~~year ~~quarter~~ending ofDecember ~~2025.~~31, ~~As such actions become completed~~2026, weas ~~expect~~expenses ~~our~~incurred ~~general~~in ~~and~~2025 ~~administrative~~related ~~expenses~~ to ~~decrease~~a inpreviously ~~the~~disclosed ~~second~~investigation ~~half~~and restatement of ~~2025~~prior ~~and~~period tofinancial ~~remain~~statements ~~consistent~~are atbelieved ~~more~~to ~~normalized~~be ~~levels~~substantially ~~thereafter~~non-recurring.

~~Loss~~Restructuring ~~From Impairment of Property and Equipment~~Costs

~~Loss~~Restructuring ~~from~~costs ~~impairment~~consist of ~~property~~termination ~~and~~charges ~~equipment~~arising ~~relates~~from toseverance ~~(i)~~obligations, ~~leased~~incremental ~~Evolv~~non-cash ~~Edge~~expenses ~~units~~related ~~and~~to ~~Evolv~~extended ~~Express~~eligibility ~~prototype~~for ~~units~~the ~~that~~vesting ~~are~~of ~~removed~~certain ~~from~~equity ~~service~~awards, and ~~retired~~other ascustomary weemployee ~~transition~~benefit ~~our~~payments ~~domestic~~in ~~customers~~connection towith ~~our~~a ~~most~~reduction ~~current~~in ~~Evolv~~force. ~~Express~~See ~~units~~Note ~~and~~22, ~~(ii)~~Restructuring ~~damaged~~Charges orfor ~~destroyed~~additional ~~leased units~~information.

The restructuring charges, which had previously been included in cost of service revenue, research and development expenses, sales and marketing expenses, and general and administrative expenses, has been reclassified for prior periods to restructuring costs on the consolidated statements of operations and comprehensive loss. See “Reclassifications” below and Note 1 for additional information.

Loss On Impairment of Property and Equipment

Loss on impairment of property and equipment relates to (i) Evolv Express prototype systems that are removed from service and retired as we transition our domestic customers to our most current Evolv Express systems, (ii) damaged or destroyed leased units, and (iii) IT equipment that is removed from service.

Interest Expense

Interest expense includes ~~cash~~ interest ~~paid~~ on our long-term debt, ~~and~~ amortization of ~~deferred~~debt ~~financing~~issuance ~~fees~~costs, and ~~costs~~unused commitment fees.

Interest Income

Interest income relates primarily to interest earned on our money market funds and treasury bills~~, and interest earned on our lease receivables for our Evolv Express units recognized as sales-type leases~~.

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Loss on Extinguishment of Debt

In December 2022, the Company entered into a loan and security agreement (the "2022 SVB Credit Agreement") with Silicon Valley Bank ("SVB") in order to finance purchases of hardware to be leased to customers. On March 10, 2023, SVB was closed by California state regulators and the FDIC was appointed as receiver. Subsequently, the Company terminated the 2022 SVB Credit Agreement on March 31, 2023. As a result of the termination of the SVB Credit Agreement, the Company incurred a loss on extinguishment of debt.

Change in Fair Value of Contingent Earn-out Liability

In connection with the Merger and pursuant to the Merger Agreement, certain of Legacy Evolv’s initial shareholders are entitled to receive additional shares of our common stock upon us achieving certain milestones. The earn-out arrangement with the Legacy Evolv shareholders is accounted for as a liability and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the consolidated ~~statements of operations and comprehensive (loss) income.~~

~~Change in Fair Value of Contingently Issuable Common Stock Liability~~52

~~Prior~~Table ~~to the Merger, certain NHIC stockholders owned 4,312,500 shares~~ of NHIC Class B common stock, referred to as Founder Shares. Upon the closing of the Merger, NHIC Class A and Class B common stock became the Company's common stock. 1,897,500 Founder Shares vested at the closing of the Merger, 1,897,500 Founder Shares are contingently issuable and shall vest upon the Company achieving certain milestones, and 517,500 Founder Shares were contributed to Give Evolv LLC. The 1,897,500 outstanding contingently issuable common shares are accounted for as a liability and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive (loss) income.Contents

statements of operations and comprehensive (loss) income. The earn-out shares under this arrangement expired on March 8, 2026 as the required milestones were not met.

Change in Fair Value of Contingently Issuable/Returnable Common Stock Liability/Asset

Prior to the Merger, certain NHIC stockholders owned 4,312,500 shares of NHIC Class B common stock, referred to as Founder Shares. Upon the closing of the Merger, NHIC Class A and Class B common stock became the Company's common stock. 1,897,500 Founder Shares vested at the closing of the Merger, 1,897,500 Founder Shares are contingently issuable and shall vest upon the Company achieving certain milestones, subject to expiration in July 2026, and 517,500 Founder Shares were contributed to Give Evolv LLC. The 1,897,500 outstanding contingently issuable common shares are accounted for either as a liability, if still held at the Company's transfer agent, or as an asset as described below, and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income, net in the consolidated statements of operations and comprehensive loss.

Under the Founder Shares arrangement, Founder Shares may be transferred to third parties, subject to certain conditions. The unvested shares must be returned to the Company if the specified vesting conditions are not met. As of December 31, 2025, a total of 729,570 unvested shares had been transferred to individual brokerage accounts, resulting in a reduction to the contingently issuable common stock liability and recognition of the value of the shares as outstanding equity. The contractual obligation of the holders to return the transferred shares upon failure to meet vesting conditions is accounted for as a freestanding financial asset. This asset was initially recognized at fair value and is remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

Change in Fair Value of Public Warrant Liability

In connection with the closing of the Merger, the Company assumed warrants to purchase 14,325,000 shares of common stock (the “Public Warrants”) at an exercise price of $11.50. The Public Warrants are currently exercisable and expire in July 2026. We assessed the features of these warrants and determined that they qualify for classification as a liability. Accordingly, we recorded the warrants at fair value upon the closing of the Merger as a component of other income (expense), net in the consolidated statements of operations and comprehensive (loss) income with the offset to additional paid-in capital. The liability is subsequently remeasured at each reporting with changes in fair value.

Income Taxes

Our income tax provision consists of an estimate for federal, state, and foreign income taxes based on enacted rates in the jurisdictions in which we operate, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. We have historically incurred net operating losses and maintain a full valuation allowance against our deferred tax assets.

~~Results~~On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA introduces various corporate and international tax law changes with staggered effective dates through 2027. Key provisions include immediate R&D expensing, permanent bonus depreciation, modifications to interest expense limitations, and changes to certain international tax rules. The enacted legislation did not have a material impact on our financial position, results of ~~Operations~~operations, or effective tax rate for the year ended December 31, 2025, primarily due to our full valuation allowance position on U.S. deferred tax assets, immaterial current tax liabilities, and insignificant foreign earnings from Evolv UK. We will continue to monitor and evaluate all applicable provisions of the OBBBA and any potential future impact on our consolidated financial statements.

~~Comparison of the Years Ended December 31, 2024 and 2023~~Reclassifications

~~The~~During ~~following~~the ~~table~~three ~~summarizes~~months ~~our~~ended ~~results~~March 31, 2025, the Company began classifying restructuring charges, which includes termination charges arising from severance obligations, incremental non-cash expense, and other customary employee benefit payments in connection with a reduction in force, within restructuring costs on the consolidated statements of operations and comprehensive loss, whereas the restructuring costs for these services has previously been included in cost of service revenue, research and development expenses, sales and marketing expenses, and general and administrative expenses. These reclassifications were made to align the ~~years~~presentation ~~ended~~of ~~December 31~~restructuring charges with the Company's internal reporting and analysis. See Note 1, ~~2024~~Nature of the Business and ~~2023~~Basis ~~(in~~of ~~thousands):~~Presentation for additional information.

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	Year Ended December 31,
	2024		2023		$ Change		% Change
			(Restated)
Revenue:
Product revenue	$	6,464	$	22,768	$	(16,304)	(72)	%
Subscription revenue	65,046		36,201		28,845		80
Service revenue	23,467		15,606		7,861		50
License fee and other revenue	8,888		4,990		3,898		78
Total revenue	103,865		79,565		24,300		31
Cost of revenue:
Cost of product revenue	10,735		27,967		(17,232)		(62)
Cost of subscription revenue	27,846		14,760		13,086		89
Cost of service revenue	5,399		3,982		1,417		36
Cost of license fee and other revenue	597		949		(352)		(37)
Total cost of revenue	44,577		47,658		(3,081)		(6)
Gross profit	59,288		31,907		27,381		86
Operating expenses:
Research and development	23,446		24,473		(1,027)		(4)
Sales and marketing	61,291		54,986		6,305		11
General and administrative	56,634		42,182		14,452		34
Loss from impairment of property and equipment	224		322		(98)		(30)
Total operating expenses	141,595		121,963		19,632		16
Loss from operations	(82,307)		(90,056)		7,749		9
Other income (expense), net:
Interest expense	—		(654)		654		*
Interest income	2,942		6,227		(3,285)		(53)
Other expense, net	(83)		(84)		1		1
Loss on extinguishment of debt	—		(626)		626		*
Change in fair value of contingent earn-out liability	16,310		(14,901)		31,211		209
Change in fair value of contingently issuable common stock liability	2,529		(3,138)		5,667		181
Change in fair value of public warrant liability	6,592		(4,765)		11,357		238
Total other income (expense), net	28,290		(17,941)		46,231		258
Loss before income taxes	(54,017)		(107,997)		53,980		50	%
Provision for income taxes	—		(51)		51		*
Net loss	$	(54,017)	$	(108,048)	$	54,031	50	%
Gross profit margin:
Product revenue	(66) %		(23) %		N/A		(43) %
Subscription revenue	57 %		59 %		N/A		(2) %
Service revenue	77 %		74 %		N/A		3 %
License fee and other revenue	93 %		81 %		N/A		12 %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 249 new customers during the year ended December 31, 2024, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decreases in product revenue and cost of product revenue are primarily due to a transition to pure subscription sales and sales under our distributor licensing model during the preceding twelve months. The decrease in product gross profit margin for the year ended December 31, 2024 compared to the year ended December 31, 2023 was also impacted by $2.4 million of expense related to our inventory reserve during the year ended December 31, 2024, which related primarily to the transition of our manufacturing operations to the next generation of Evolv Express systems and the determination that certain components within our legacy systems will not be used in the next generation systems.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue, and gross profit are primarily due to continued growth in our customer base as of December 31, 2024 compared to the prior year, which was due to a transition to our pure subscription model and a higher number of active Evolv Express units deployed under our pure subscription contract model.

Service Revenue

The increases in service revenue, cost of service revenue, and gross profit are primarily due to an increased number of active revenue-generating units purchased by customers directly from Columbia Tech under our distributor licensing model, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

License fee and other revenue

The increase in license fee and other revenue, gross profit, and gross profit margin was primarily driven by $7.2 million of license fees earned during the year ended December 31, 2024 compared to $3.0 million earned during the year ended December 31, 2023 under the Distribution and License Agreement.

Research and Development Expenses

The decrease in research and development expense was due to a decrease in personnel related expenses of $0.4 million due to a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $1.5 million, partially offset by an increase in payroll costs of $1.0 million primarily resulting from new hires in our research and development function during the past twelve months. Materials and prototypes expense decreased by $0.4 million due to lower prototype expenses of $1.0 million, partially offset by an inventory reserve on unused components of $0.4 million, which relate primarily to the development of the next generation of our Evolv Express system. Professional fees decreased by $0.7 million primarily related to a higher amount of costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.6 million, partially offset by increases in IT and software subscription costs of $0.4 million.

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Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $4.8 million, which included an increase in payroll costs of $3.1 million and stock-based compensation of $1.6 million resulting primarily from new hires in our sales and marketing functions during the year to support increased sales volume, and certain other one-time termination benefits. Stock compensation expense included in sales and marketing expenses was $10.9 million for the year ended December 31, 2024 compared to $9.4 million for the year ended December 31, 2023. Advertising and direct marketing expense remained consistent. Travel and entertainment expenses decreased by $0.2 million due to a decrease in travel costs for in-person sales personnel meetings. Professional fees increased by $1.3 million due primarily to an increase in marketing consulting costs. Other expense increased by $0.5 million primarily due to an increase in IT and software subscription costs of $0.4 million.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $0.7 million, which included an increase in severance expenses of $2.0 million partially offset by a decrease in stock-based compensation of $1.4 million mainly driven by the impact of forfeited stock-based awards during the year ended December 31, 2024. Stock compensation expense included in general and administrative expense was $8.5 million for the year ended December 31, 2024 compared to $9.9 million for the year ended December 31, 2023. Professional fees increased by $1.4 million primarily due to an increase in outsourced accounting consultancy and audit fees of $1.1 million. Other expense increased by $12.6 million primarily due to a $10.7 million increase in certain one-time expenses incurred during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to consulting and legal fees related to the Investigation and related matters, as well as increases in rent of $0.9 million for additional leased space, IT and software subscription costs of $1.4 million, and property taxes of $0.4 million, partially offset by decreases in director and officer insurance premiums of $0.3 million.

Loss From Impairment of Property and Equipment

$0.2 million loss from impairment of property and equipment was recognized for the year ended December 31, 2024, compared to $0.3 million for the year ended December 31, 2023, primarily related to the removal of certain Evolv Express units from service, resulting in impairment of the remaining economic value of such units.

Interest Expense

No interest expense was recognized for the year ended December 31, 2024, compared to $0.7 million for the year ended December 31, 2023. During March 2023, the Company fully repaid all borrowings and accrued interest under its term loans with SVB pursuant to the 2022 SVB Credit Agreement.

Interest Income

Interest income of $2.9 million and $6.2 million for the years ended December 31, 2024 and 2023, respectively, related primarily to interest earned on money market funds and for the year ended December 31, 2024, the amortization of premium, and for the year ended December 31, 2023, the accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $16.3 million gain and a $14.9 million loss for the years ended December 31, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $2.5 million gain and a $3.1 million loss for the years ended December 31, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

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~~Change~~Results ~~in Fair Value~~ of ~~Public Warrant Liability~~Operations

~~Change~~Comparison ~~in the fair value~~ of the ~~public~~Years ~~warrant~~Ended ~~liability resulted in a $6.6 million gain and a $4.8 million loss for the years ended~~ December 31, ~~2024~~2025 and ~~2023, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.~~2024

~~Income~~The ~~Taxes~~following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):

Our effective tax rate (“ETR”) on income before taxes for each of the years ended December 31, 2024 and December 31, 2023 was 0%. For the years ended December 31, 2024 and 2023, the ETR was primarily impacted by the full valuation allowance maintained on the Company’s net deferred tax assets and non-deductible fair value adjustments. We have provided a valuation allowance for all of our net deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate. We continue to assess all positive and negative evidence, including our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecasted results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in any given tax jurisdiction, a reversal of all or some related portion of our existing valuation allowances may occur.


	Year Ended December 31,
	2025		2024		$ Change		% Change
Revenue:
Product revenue	$	21,637	$	6,464	$	15,173	235	%
Subscription revenue	83,839		65,046		18,793		29
Service revenue	29,375		23,467		5,908		25
License fee and other revenue	11,054		8,888		2,166		24
Total revenue	145,905		103,865		42,040		40
Cost of revenue:
Cost of product revenue	24,320		10,735		13,585		127
Cost of subscription revenue	36,684		27,846		8,838		32
Cost of service revenue	8,410		5,225		3,185		61
Cost of license fee and other revenue	1,189		597		592		99
Total cost of revenue	70,603		44,403		26,200		59
Gross profit	75,302		59,462		15,840		27
Operating expenses:
Research and development	20,619		23,446		(2,827)		(12)
Sales and marketing	45,626		60,637		(15,011)		(25)
General and administrative	54,858		56,602		(1,744)		(3)
Restructuring costs	2,662		860		1,802		210
Loss on impairment of property and equipment	—		224		(224)		(100)
Total operating expenses	123,765		141,769		(18,004)		(13)
Loss from operations	(48,463)		(82,307)		33,844		41
Other income, net:
Interest expense	(1,732)		—		(1,732)		*
Interest income	1,536		2,942		(1,406)		(48)
Other income (expense), net	99		(83)		182		219

Change in fair value of contingent earn-out liability	12,435		16,310		(3,875)		(24)
Change in fair value of contingently issuable/returnable common stock liability/asset	2,614		2,529		85		3
Change in fair value of public warrant liability	435		6,592		(6,157)		(93)
Total other income, net	15,387		28,290		(12,903)		(46)
Loss before income taxes	(33,076)		(54,017)		20,941		39	%
Provision for income taxes	62		—		62		*
Net loss	$	(33,138)	$	(54,017)	$	20,879	39	%

Gross profit margin:
Product revenue	(12) %		(66) %		N/A		54 %
Subscription revenue	56 %		57 %		N/A		(1) %
Service revenue	71 %		78 %		N/A		(7) %
License fee and other revenue	89 %		93 %		N/A		(4) %

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Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

	Year Ended December 31,
	2023		2022		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	22,768	$	29,787	$	(7,019)	(24)	%
Subscription revenue	36,201		17,041		19,160		112
Service revenue	15,606		4,595		11,011		240
License fee and other revenue	4,990		1,296		3,694		285
Total revenue	79,565		52,719		26,846		51
Cost of revenue:
Cost of product revenue	27,967		39,437		(11,470)		(29)
Cost of subscription revenue	14,760		7,460		7,300		98
Cost of service revenue	3,982		2,200		1,782		81
Cost of license fee and other revenue	949		2,222		(1,273)		(57)
Total cost of revenue	47,658		51,319		(3,661)		(7)
Gross profit	31,907		1,400		30,507		2,179
Operating expenses:
Research and development	24,473		18,537		5,936		32
Sales and marketing	54,986		46,683		8,303		18
General and administrative	42,182		37,969		4,213		11
Loss from impairment of property and equipment	322		1,161		(839)		(72)
Total operating expenses	121,963		104,350		17,613		17
Loss from operations	(90,056)		(102,950)		12,894		13
Other (expense) income, net:
Interest expense	(654)		(712)		58		8
Interest income	6,227		3,165		3,062		97
Other expense, net	(84)		(64)		(20)		(31)
Loss on extinguishment of debt	(626)		—		(626)		*
Change in fair value of contingent earn-out liability	(14,901)		6,988		(21,889)		(313)
Change in fair value of contingently issuable common stock liability	(3,138)		1,872		(5,010)		(268)
Change in fair value of public warrant liability	(4,765)		4,906		(9,671)		(197)
Total other (expense) income, net	(17,941)		16,155		(34,096)		(211)
Loss before income taxes	(107,997)		(86,795)		(21,202)		(24)	%
Provision for income taxes	(51)		—		(51)		*
Net loss	$	(108,048)	$	(86,795)	$	(21,253)	(24)	%
Gross profit margin:
Product revenue	(23) %		(32) %		N/A		10 %
Subscription revenue	59 %		56 %		N/A		3 %
Service revenue	74 %		52 %		N/A		22 %
License fee and other revenue	81 %		(71) %		N/A		152 %

*N/A – Not meaningful

Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 243 new end-users during the year ended December 31, 2025, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

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customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 280 new customers during the year ended December 31, 2023, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decreases in product revenue and cost of product revenue and the increase in gross profit for the year ended December 31, 2023 compared to the year ended December 31, 2022 are primarily due to a gradual transition to pure subscription sales and sales under our distributor licensing model. Cost of product revenue for the year ended December 31, 2023 includes $1.9 million of costs, primarily cancellation fees associated with firm inventory purchase commitments, related to the planned transition of our manufacturing operations to the next generation of the Evolv Express system in 2024.


	Year Ended December 31,
	2025			2024			$ Change		% Change
Product revenue	$	21,637		$	6,464		$	15,173	235	%
Cost of product revenue	$	24,320		$	10,735		$	13,585	127	%
Gross loss - Product revenue	$	(2,683)		$	(4,271)		$	1,588	37	%
Gross profit margin - Product revenue	(12)		%	(66)		%	N/A		54	%

The increases in product revenue and cost of product revenue for the year ended December 31, 2025 compared to the prior year are primarily due to an increased utilization of our purchase subscription model, in which the customers purchase Evolv Express and Evolv eXpedite systems directly from us. In 2025, we were awarded a large customer contract with a U.S.-based education customer in Georgia, which contributed approximately $3.8 million to product revenue in 2025. The increase in product gross profit margin for the year ended December 31, 2025 compared to the year ended December 31, 2024 is primarily due to lower costs of second generation of Evolv Express systems compared to the first generation which was primarily shipping in 2024, a $0.6 million decrease in non-cancellable inventory purchase commitments, and a $0.9 million decrease in manufacturing expense during the year ended December 31, 2025, primarily related to the deployments of second generation of Evolv Express systems. These gross profit improvements were partially offset by the initial deployments of Evolv eXpedite systems, which, as a new product offering, reflect a higher initial cost to produce that we expect to gradually decline in the future and a $0.3 million in expense related to disposals of certain first generation Evolv Express systems during the year ended December 31, 2025 as compared to the same period in the prior year.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue and subscription gross profit are primarily due to growth in our customer base for the year ended December 31, 2023, compared to the year ended December 31, 2022, which was due to a gradual transition to our pure subscription contract model and a higher number of active Evolv Express units deployed under our pure subscription model. Subscription gross profit margin increased slightly as the result of our ability to leverage our fixed costs over a higher revenue base.


	Year Ended December 31,
	2025			2024			$ Change		% Change
Subscription revenue	$	83,839		$	65,046		$	18,793	29	%
Cost of subscription revenue	$	36,684		$	27,846		$	8,838	32	%
Gross profit - Subscription revenue	$	47,155		$	37,200		$	9,955	27	%
Gross profit margin - Subscription revenue	56		%	57		%	N/A		(1)	%

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The increases in subscription revenue, cost of subscription revenue, and gross profit are primarily due to continued growth in our customer base as of December 31, 2025 compared to the prior year, with a higher number of active Evolv Express and Evolv eXpedite systems deployed under our pure subscription model and an increase in short term rental subscription revenue during the year ended December 31, 2025. The gross profit margin remained consistent with the prior year primarily due to $3.3 million in expense related to disposals of certain first generation Evolv Express systems and an accrual of $1.2 million estimated field services costs related to the replacement of certain Express system parts during year ended December 31, 2025, offset by a $1.0 million impairment charge recorded during the year ended December 31, 2024, which related to certain of our software development projects that had previously been capitalized, and our ability to leverage our fixed costs over a higher revenue base and lower costs related to our second generation of Evolv Express systems.

Service Revenue

The increase in service revenue and gross profit is primarily due to an increased number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers directly from Columbia Tech, for the year ended December 31, 2023 compared to the year ended December 31, 2022. Service gross profit margin increased primarily as the result of our ability to leverage our fixed costs over a higher revenue base.


	Year Ended December 31,
	2025			2024			$ Change		% Change
Service revenue	$	29,375		$	23,467		$	5,908	25	%
Cost of service revenue	$	8,410		$	5,225		$	3,185	61	%
Gross profit - Service revenue	$	20,965		$	18,242		$	2,723	15	%
Gross profit margin - Service revenue	71		%	78		%	N/A		(7)	%

The increases in service revenue, cost of service revenue, and gross profit are primarily due to the growth in the number of active revenue-generating purchase subscription units added through December 31, 2024, as well as active revenue-generating units purchased by customers in 2025, compared to the year ended December 31, 2024. The decrease in gross profit margin is primarily due to an accrual of $1.0 million estimated field services costs related to the replacement of certain Express system parts and increased amortization of capitalized software costs during year ended December 31, 2025 of $0.8 million due to the release of Evolv eXpedite and our second generation of Evolv Express systems.

License fee and other revenue

The increase in license fee and other revenue, gross profit, and gross profit margin was primarily driven by $3.0 million of license fees earned during the year ended December 31, 2023 under the Distribution and License Agreement which was executed in March 2023, compared to no license fees earned during the year ended December 31, 2022. Professional services expense, consisting primarily of installation, training, and event support, increased to $1.9 million for the year ended December 31, 2023 compared to $1.0 million for the year ended December 31, 2022, primarily as the result of a higher number of new Express systems deployed during the year ended December 31, 2023 compared to the prior year.


	Year Ended December 31,
	2025			2024			$ Change		% Change
License fee and other revenue	$	11,054		$	8,888		$	2,166	24	%
Cost of license fee and other revenue	$	1,189		$	597		$	592	99	%
Gross profit - License fee and other revenue	$	9,865		$	8,291		$	1,574	19	%
Gross profit margin - License fee and other revenue	89		%	93		%	N/A		(4)	%

The increase in license fee and other revenue and gross profit was primarily driven by $8.1 million of license fees earned during the year ended December 31, 2025 compared to $7.2 million earned during the year ended December 31, 2024 under the Distribution and License Agreement, as well as a $0.6 million increase in installation and training service fees and $0.5 million revenue from the sale of demonstration systems. Although the unit sales through our distributor licensing model declined, the license fee and other revenue increased due to an increase in per-unit license fees for our second generation of Evolv Express systems. The decrease in gross profit margin is primarily due to an increase in personnel and overhead costs of $0.6 million during the year ended December 31, 2025.

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $2.4 million due to an increase in payroll of $3.3 million and stock-based compensation expense of $0.5 million, which was primarily attributable to increased headcount in connection with new hires in our research and development function. This was partially offset by an increase in capitalized personnel costs of $1.3 million. Stock compensation expense was $4.3 million for the year ended December 31, 2023, compared to $3.8 million for the year ended December 31, 2022. Materials and prototype costs increased $1.8 million due to an increase in design and engineering costs in connection with the development of the next generation of our Evolv Express system. Professional fees increased by $1.2 million primarily due to consulting costs incurred for product development and engineering. Other expenses increased by $0.6 million primarily due to an increase in IT and software subscription costs.

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	Year Ended December 31,
	2025		2024		$ Change		% Change
Personnel related (including stock-based compensation)	$	15,796	$	16,352	$	(556)	(3)	%
Materials and prototypes	611		2,050		(1,439)		(70)	%
Professional fees	2,704		3,296		(592)		(18)	%
Other	1,508		1,748		(240)		(14)	%
	$	20,619	$	23,446	$	(2,827)	(12)	%

The decrease in personnel related expenses is primarily due to a $0.8 million decrease in payroll costs, which resulted primarily from the January 2025 reduction in force partially offset by an increase in short term incentive compensation, and a $0.2 million increase in stock-based compensation. The decrease in materials and prototypes expense is primarily due to a decrease of $0.9 million in design and engineering costs and $0.4 million write-off on unused prototype components recognized in the prior year, both of which relate primarily to the development of the next generation of our Evolv Express system and new product offerings. The decrease in professional fees primarily relates to a decrease in consulting costs incurred for product development and engineering of $0.6 million. Other expense decreased primarily due to reduction in supplies costs.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $8.7 million, which included an increase in payroll costs and commissions of $6.0 million resulting primarily from new hires in our sales and marketing functions during the year ended December 31, 2023 to support increased sales volume, as well as an increase of $2.6 million in allocated overhead costs. Stock compensation expense was $9.4 million for the year ended December 31, 2023, compared to $10.0 million for the year ended December 31, 2022. Advertising and direct marketing expense decreased by $1.9 million due to lower spending at trade shows. Travel and entertainment expense increased by $1.7 million due to an increase in travel costs for in-person sales personnel meetings and events. Professional fees increased by $0.8 million primarily due to an increase in marketing consulting costs. Other expense decreased by $1.0 million primarily due to $1.0 million of certain-one-time expenses incurred during the year ended December 31, 2022 related to one-time payments to former employees.


	Year Ended December 31,
	2025		2024		$ Change		% Change
Personnel related (including stock-based compensation)	$	35,361	$	44,439	$	(9,078)	(20)	%
Advertising and direct marketing	2,187		3,573		(1,386)		(39)	%
Travel and entertainment	2,646		4,777		(2,131)		(45)	%
Professional fees	2,226		3,576		(1,350)		(38)	%
Other	3,206		4,272		(1,066)		(25)	%
	$	45,626	$	60,637	$	(15,011)	(25)	%

The decrease in personnel related expenses is primarily due to a $3.5 million decrease in payroll costs, which resulted primarily from reductions in force in May 2024 and January 2025 partially offset by an increase in commission expense and short term incentive compensation, and a $5.4 million decrease in stock-based compensation, which also resulted primarily from the reductions in force. Stock-based compensation expense included in sales and marketing expenses was $5.6 million for the year ended December 31, 2025 compared to $10.9 million for the year ended December 31, 2024. The decrease in advertising and direct marketing expense is primarily due to a decrease in expenses related to trade shows and events of $1.1 million. The decrease in travel and entertainment expense is due to a decrease in travel costs for in-person sales meetings of $2.1 million as a result of our reductions in force. Professional fees decreased due to a decrease in marketing consulting costs of $1.4 million. Other expense decreased primarily due to a reduction in shipping costs related to demonstration units of $0.5 million and supplies costs of $0.4 million.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $5.1 million was primarily due to an increase in payroll costs and stock-based compensation of $3.5 million and $2.0 million respectively as a result of expanding our team during the year ended December 31, 2023. Stock compensation expense was $9.9 million for the year ended December 31, 2023, compared to $7.9 million for the year ended December 31, 2022. Professional fees decreased by $2.0 million due to a decrease in outsourced accounting consultancy and audit fees of $2.1 million. Insurance costs decreased $1.1 million due to a decrease in director and officer insurance premiums. Other expenses increased by $2.1 million due to a $1.0 million increase in IT and software subscription costs, a $0.4 million increase in property taxes, and a $0.3 million increase in the allowance for expected credit losses.


	Year Ended December 31,
	2025		2024		$ Change		% Change
Personnel related (including stock-based compensation)	$	25,408	$	23,749	$	1,659	7	%
Professional fees	9,879		8,266		1,613		20	%
Insurance costs	2,985		3,145		(160)		(5)	%

Non-recurring professional fees and other expenses	16,586		21,442		(4,856)		(23)	%
	$	54,858	$	56,602	$	(1,744)	(3)	%

Loss From Impairment of Property and Equipment

$0.3 million loss from impairment of property and equipment was recognized for the year ended December 31, 2023, compared to $1.2 million for the year ended December 31, 2022, primarily related to the removal of Evolv Edge units and Evolv Express prototypes from service, resulting in impairment of the remaining economic value of such units.

Interest Expense and Loss on Extinguishment of Debt

Interest expense remained flat on a year-over-year basis at $0.7 million for the years ended December 31, 2023 and 2022. In March 2023, the Company fully repaid all borrowings and accrued interest under the 2022 SVB Credit Agreement and terminated the 2022 SVB Credit Agreement. In accordance with the terms of the 2022 SVB Credit Agreement, the Company was required to pay a prepayment premium equal to 1.0% of the principal balance on the date of repayment. The Company incurred a loss on debt extinguishment of $0.6 million, consisting of the prepayment penalty of $0.3 million and the write off of $0.3 million of unamortized debt issuance costs.

Interest Income

Interest income of $6.2 million and $3.2 million for the years ended December 31, 2023 and December 31, 2022, respectively, related primarily to interest earned on money market funds, and for the year ended December 31, 2023, accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in fair value of the contingent earn-out liability resulted in a $14.9 million loss and a $7.0 million gain for the years ended December 31, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $3.1 million loss and a $1.9 million gain for the years ended December 31, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

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~~Change~~The increase in ~~Fair~~personnel ~~Value~~related expenses is due to a $0.9 million increase in payroll costs, which resulted primarily from an increase in short term incentive compensation partially offset by a decrease in severance expense, and a $0.7 million increase in stock-based compensation, mainly driven by the impact of ~~Public~~forfeited ~~Warrant~~stock-based ~~Liability~~awards during the year ended December 31, 2024 following the termination of certain executives. Professional fees increased primarily due to an increase in outsourced accounting consultancy of $2.0 million, partially offset by a decrease in audit and tax fees of $0.5 million. Non-recurring professional fees and other expenses decreased primarily due to insurance recoveries of $10.1 million and a decrease in information technology and software subscription costs of $0.4 million, partially offset by a $4.1 million increase in consulting and legal fees and audit fees incurred in connection with a previously disclosed investigation and restatement of prior period financial statements, $1.0 million of estimated net losses related to class action lawsuits, and an increase in rent of $0.9 million for additional leased space.

~~Change~~Loss inOn ~~the~~Impairment ~~fair value~~ of ~~the~~Property ~~public warrant liability resulted in a $4.8 million loss~~ and a $4.9 million gain for the years ended December 31, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.Equipment

~~Income~~Loss ~~Taxes~~on impairment of property and equipment of $0.2 million for the year ended December 31, 2024 primarily related to the removal of certain Evolv Express systems and IT equipment from service, resulting in impairment of the remaining economic value of such systems. No loss on impairment of property and equipment was recognized for the year ended December 31, 2025.

~~Our~~Restructuring ETR on income before taxes for each of the years ended December 31, 2023 and December 31, 2022 was 0%. For December 31, 2023, the ETR was primarily impacted by the full valuation allowance maintained on the Company’s net deferred tax assets and non-deductible fair value adjustments. For the year ended December 31, 2022, the ETR was primarily impacted by the full valuation allowance maintained on the Company’s net deferred tax assets and non-taxable fair value adjustments. We have provided a valuation allowance for all of our net deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate. We continue to assess all positive and negative evidence, including our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecasted results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in any given tax jurisdiction, a reversal of all or some related portion of our existing valuation allowances may occur.Costs

58Restructuring costs of $2.7 million for the year ended December 31, 2025 resulted from the reduction in force in January 2025. Stock-based compensation expense included in restructuring costs was $0.5 million for the year ended December 31, 2025. Restructuring costs of $0.9 million for the year ended December 31, 2024 resulted from the reduction in force in May 2024.

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Comparison of the Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands):

	Year Ended December 31,
	2022		2021		$ Change		% Change
	(Restated)
Revenue:
Product revenue	$	29,787	$	13,631	$	16,156	119	%
Subscription revenue	17,041		7,803		9,238		118
Service revenue	4,595		792		3,803		480
License fee and other revenue	1,296		1,167		129		11
Total revenue	52,719		23,393		29,326		125
Cost of revenue:
Cost of product revenue	39,437		12,279		27,158		221
Cost of subscription revenue	7,460		4,501		2,959		66
Cost of service revenue	2,200		937		1,263		135
Cost of license fee and other revenue	2,222		1,647		575		35
Total cost of revenue	51,319		19,364		31,955		165
Gross profit	1,400		4,029		(2,629)		(65)
Operating expenses:
Research and development	18,537		11,458		7,079		62
Sales and marketing	46,683		26,099		20,584		79
General and administrative	37,969		19,869		18,100		91
Loss from impairment of property and equipment	1,161		1,869		(708)		(38)
Total operating expenses	104,350		59,295		45,055		76
Loss from operations	(102,950)		(55,266)		(47,684)		(86)
Other income (expense), net:
Interest expense	(712)		(6,068)		5,356		88
Interest income	3,165		—		3,165		*
Other expense, net	(64)		(617)		553		90
Loss on extinguishment of debt	—		(12,685)		12,685		*
Change in fair value of derivative liability	—		(1,745)		1,745		*
Change in fair value of contingent earn-out liability	6,988		47,360		(40,372)		(85)
Change in fair value of contingently issuable common stock liability	1,872		6,406		(4,534)		(71)
Change in fair value of public warrant liability	4,906		12,606		(7,700)		(61)
Change in fair value of common stock warrant liability	—		(879)		879		*
Total other income (expense), net	16,155		44,378		(28,223)		(64)
Net loss	$	(86,795)	$	(10,888)	$	(75,907)	(697)	%
Gross profit margin:
Product revenue	(32) %		10 %		N/A		(42) %
Subscription revenue	56 %		42 %		N/A		14 %
Service revenue	52 %		(18) %		N/A		70 %
License fee and other revenue	(71) %		(41) %		N/A		(30) %

*N/A – Not meaningful

Revenue, Cost of Revenue and Gross Profit

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of 295 new customers during the year ended December 31, 2022, (iii) the expansion of our existing customers' initial Evolv Express deployments to their other owned venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The increases in product revenue and cost of product revenue are primarily due to the increase in product sales of Evolv Express units, which include the significant increase in the adoption of Evolv Express units by schools, healthcare facilities, hotels, casinos, and professional sports arenas. Further, during the year ended December 31, 2022, a higher relative mix of sales contracts were in the form of purchase subscription sales compared to leases.

The decrease in product gross profit and gross profit margin during the year ended December 31, 2022 compared to the year ended December 31, 2021 is attributable to several factors. We experienced strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets. These configurations generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price. Further, a higher percentage of sales were made through our channel partners, which are generally at a lower average sale price, and therefore a lower gross margin, during the year ended December 31, 2022 compared to the prior year. Product gross profit and gross profit margin were also adversely impacted by marketing and sponsorship arrangements with certain customers (which are reflected as an offset to revenue), increases in shipping costs, and the costs associated with the write-off of scrap inventory incurred without corresponding revenue.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to growth in our customer base and a higher number of leased Evolv Express units deployed under our pure subscription contract model during the year ended December 31, 2022 compared to the year ended December 31, 2021. Subscription gross profit margin increased primarily as the result of our ability to leverage our fixed costs over a higher revenue base.

Service Revenue

The increase in service revenue, cost of service revenue, and service gross profit are primarily due to the increased number of purchase subscription units deployed during the year ended December 31, 2022 compared to the year ended December 31, 2021, as well as an increase in the number of installation and training services performed. Service gross profit margin increased primarily as the result of our ability to leverage our fixed costs over a higher revenue base.

License fee and other revenue

The increase in license fee and other revenue, gross profit, and gross profit margin was driven by an increase of $0.1 million of other revenue, primarily related to shipping amounts billed to customers, earned during the year ended December 31, 2022 compared to the prior year period.

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $7.0 million, which included an increase in payroll costs and stock-based compensation of $7.4 million, resulting primarily from a full year of expense related to new employees hired in our research and development function during the year ended December 31, 2021 and, to a lesser extent, new hires during the year ended December 31, 2022. This was partially offset by a decrease in research and development ("R&D") recruiting fees of $0.4 million. Stock compensation expense included in research and development expense was $3.8 million for the year ended December 31, 2022 compared to $0.9 million for the year ended December 31, 2021. Materials and prototype costs decreased by $1.2 million due to the transition from prototype production to standard manufacturing of the Evolv Express. Professional fees increased by $1.2 million due to consulting costs incurred for product development and engineering.

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Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $14.3 million which included an increase in payroll costs and stock-based compensation of $14.3 million resulting primarily from a full year of expense related to new employees hired in our sales and marketing functions during the year ended December 31, 2021, and to a lesser extent, new hires during the year ended December 31, 2022, as well as an increase in commission expense of $1.5 million related to higher sales during the year ended December 31, 2022 compared to the prior year. Stock compensation expense included in sales and marketing expenses was $10.0 million for the year ended December 31, 2022 compared to $5.8 million for the year ended December 31, 2021. Direct marketing increased by $1.0 million primarily due to an increase in trade shows and events of $0.8 million, which have begun to return to pre-pandemic levels. Travel and entertainment expense increased by $1.7 million due to an increase in travel costs for in-person sales personnel meetings and events. Professional fees increased by $0.6 million due to consulting costs incurred for training and website development. Other expenses increased by $3.0 million due to $1.4 million of increased shipping costs related to demo units and $1.0 million of certain termination benefits paid to former employees.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $10.1 million which included an increase in payroll costs and stock-based compensation of $10.0 million resulting from expanding our team during the years ended December 31, 2022 and 2021. Stock compensation expense included in general and administrative expenses was $7.9 million for the year ended December 31, 2022 compared to $2.8 million for the year ended December 31, 2021. Professional fees increased by $3.2 million due to an increase in accounting, audit, tax, and legal services provided to the Company to support public company requirements. Insurance costs increased by $2.1 million due primarily to director and officer insurance expense in relation to being a public company. Non-income taxes decreased $0.8 million due to a reduction in our sales tax contingency liability related to additional sales and use taxes in various jurisdictions we may incur. Other expenses increased by $2.7 million due primarily to $1.5 million increase of certain one-time personnel-related benefits, a $1.0 million increase in IT and software subscription costs, a $0.3 million increase in depreciation and amortization expense, and $0.2 million of expense related to Express units donated through Give Evolv, partially offset by $0.7 million of non-capitalizable transaction costs incurred during the year ended December 31, 2021 related to the Merger.

Loss From Impairment of Property and Equipment

Impairment of property and equipment was $1.2 million and $1.9 million for the years ended December 31, 2022 and 2021, respectively. As we transition existing domestic customers to our current Express model, we are removing Edge units and Express prototype units from service, which results in the impairment of the remaining economic value of such units.

Interest Expense

Interest expense ~~was~~of $01.7 million for the year ended December 31, ~~2022,~~2025 ~~compared~~related to ~~$6.1~~interest ~~million~~on ~~for~~long-term ~~the~~debt, ~~year~~amortization ~~ended~~of ~~December~~debt 31issuance costs, ~~2021.~~and ~~The~~unused ~~decrease~~commitment ~~was~~fees. ~~primarily~~No ~~due to~~ interest expense onwas ~~the~~recognized ~~Convertible~~for ~~Notes during~~ the year ended December 31, ~~2021.~~2024, ~~The~~as ~~Convertible~~there ~~Notes~~was ~~converted~~no todebt ~~the~~outstanding ~~Company’s~~during ~~common stock upon closing of~~ the ~~Merger in July 2021~~period.

Interest Income

Interest income of $31.25 million and $2.9 million for the ~~year~~years ended December 31, ~~2022~~2025 and 2024, respectively, related primarily to interest earned on money market funds and the accretion of discounts on treasury bills. NoThe interest ~~income~~earned ~~was~~decreased ~~earned~~primarily ~~for~~due to lower average balances in interest-bearing accounts during the year ended December 31, 2025 compared to during the year ended December 31, ~~2021~~2024.

Loss on Extinguishment of Debt

Loss on extinguishment of debt of $12.7 million for the year ended December 31, 2021 related to a modification of the 2021 Convertible Notes due to an agreement with noteholders to receive an additional 1,000,000 shares of NHIC common stock as further consideration for the conversion of such notes.

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Change in Fair Value of Derivative Liability

Change in the fair value of the derivative liability resulted in a loss of $1.7 million for the year ended December 31, 2021, resulting from an increase in the fair value of the Company's stock given the pending Merger. The derivative liability was derecognized in connection with the closing of the Merger.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in gains of $712.04 million and $4716.43 million for the years ended December 31, ~~2022~~2025 and ~~2021~~2024, respectively, resulting from quarterly mark-to-market adjustments. ~~The contingent earn-out liability was established in connection with the closing of the Merger.~~

Change in Fair Value of Contingently Issuable/Returnable Common Stock Liability/Asset

Change in the fair value of the contingently issuable/returnable common stock liability/asset resulted in gains of $12.96 million and $62.45 million gain for the years ended December 31, ~~2022~~2025 and ~~2021~~2024, respectively, resulting from quarterly mark-to-market adjustments. ~~The contingently issuable common stock liability was established in connection with the closing of the Merger.~~

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in gains of $40.94 million and $126.6 million for the years ended December 31, ~~2022~~2025 and ~~2021~~2024, respectively, resulting from quarterly mark-to-market adjustments. ~~The public warrant liability was established in connection with the closing of the Merger.~~

Change in Fair Value of Common Stock Warrant Liability

Change in the fair value of the common stock warrant liability resulted in a $0.9 million loss for the year ended December 31, 2021, resulting from the conversion of the common stock warrant liability upon the closing of the Merger and mark-to-market adjustments prior to the closing of the Merger.

Income Taxes

There is no provision for income taxes for the years ended December 31, 2022 and 2021 because we have historically incurred net operating losses and maintain a full valuation allowance against our deferred tax assets. We have provided a valuation allowance for all of our deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate. We continue to assess all positive and negative evidence, including our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecasted results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in any given tax jurisdiction, a reversal of all or some related portion of our existing valuation allowances may occur.58

Quarterly Financial Information (Unaudited)

As a result of the restatement described above, we are restating our comparisons of impacted periods as follows:

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~~Comparison~~Our effective tax rate (“ETR”) on income before taxes for each of the ~~Three~~years ~~Months~~ended ~~Ended~~December 31, ~~June~~2025 30and December 31, 2024 was 0%. For the years ended December 31, 2025 and ~~2023~~2024, the ETR was primarily impacted by the full valuation allowance maintained on the Company’s net deferred tax assets and non-deductible fair value adjustments. We have provided a valuation allowance for all of our net deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate. We continue to assess all positive and negative evidence, including our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecasted results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in any given tax jurisdiction, a reversal of all or some related portion of our existing valuation allowances may occur.

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023 (in thousands):

	Three Months EndedJune 30,
	2024		2023		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	1,954	$	6,852	$	(4,898)	(71)	%
Subscription revenue	15,655		7,702		7,953		103
Service revenue	5,566		3,646		1,920		53
License fee and other revenue	2,049		702		1,347		192
Total revenue	25,224		18,902		6,322		33
Cost of revenue:
Cost of product revenue	2,839		7,417		(4,578)		(62)
Cost of subscription revenue	6,309		3,285		3,024		92
Cost of service revenue	1,321		1,014		307		30
Cost of license fee and other revenue	172		270		(98)		(36)
Total cost of revenue	10,641		11,986		(1,345)		(11)
Gross profit	14,583		6,916		7,667		111
Operating expenses:
Research and development	5,850		6,389		(539)		(8)
Sales and marketing	17,011		13,596		3,415		25
General and administrative	14,093		10,865		3,228		30
Loss from impairment of property and equipment	—		157		(157)		*
Total operating expenses	36,954		31,007		5,947		19
Loss from operations	(22,371)		(24,091)		1,720		7
Other income (expense), net:
Interest income	681		1,853		(1,172)		(63)
Other income (expense), net	(39)		(22)		(17)		(77)
Change in fair value of contingent earn-out liability	16,514		(28,113)		44,627		159
Change in fair value of contingently issuable common stock liability	3,747		(5,095)		8,842		174
Change in fair value of public warrant liability	4,886		(11,751)		16,637		142
Total other income (expense), net	25,789		(43,128)		68,917		160
Net income (loss)	$	3,418	$	(67,219)	$	70,637	105	%
Gross profit margin:
Product revenue	(45) %		(8) %		N/A		(37) %
Subscription revenue	60 %		57 %		N/A		2 %
Service revenue	76 %		72 %		N/A		4 %
License fee and other revenue	92 %		62 %		N/A		30 %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 84 new customers during the three months ended June 30, 2024, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue and subscription gross profit are primarily due to continued growth in our customer base for the three months ended June 30, 2024 compared to the prior year period, which was due to a transition to our pure subscription model and a higher number of active Evolv Express units deployed under our pure subscription model.

Service Revenue

The increases in service revenue, cost of service revenue, and gross profit are primarily due to an increased number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers directly from Columbia Tech under our distributor licensing model, for the three months ended June 30, 2024 compared to the prior year period.

License fee and other revenue

The increase in license fee and other revenue, gross profit, and gross profit margin was primarily driven by $1.7 million of license fees earned during the three months ended June 30, 2024 compared to no license fees earned during the prior year period under the Distribution and License Agreement which was executed in March 2023.

Research and Development Expenses

The decrease in research and development expense was due to a decrease in personnel related expenses of $0.2 million which included a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.7 million, partially offset by an increase of $0.4 million in payroll costs primarily resulting from new hires in our research and development function during the past twelve months. Materials and prototypes expense decreased by $0.3 million due to decreased design and engineering costs related to the development of the next generation of our Evolv Express system. Professional fees and other expense remained consistent.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $2.4 million which included an increase in payroll costs and stock-based compensation of $2.0 million resulting primarily from new hires in our sales and marketing functions to support increased sales volume during the past twelve months and certain other one-time employee-related benefits. Stock compensation expense included in sales and marketing expense was $2.7 million for the three months ended June 30, 2024 compared to $2.5 million for the three months ended June 30, 2023. Advertising and direct marketing expense increased by $0.4 million due to an increase in expenses related to trade shows and events of $0.3 million. Travel and entertainment expense increased by $0.1 million due to an increase in travel costs for in-person sales personnel meetings. Professional fees increased by $0.3 million due primarily to an increase in marketing consulting costs. Other expense increased by $0.1 million primarily due to an increase in IT and software subscription costs.

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General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $0.9 million which included an increase in payroll costs and stock-based compensation of $0.9 million resulting from expanding our administrative team during the past twelve months. Stock compensation expense included in general and administrative expenses was $3.3 million for the three months ended June 30, 2024 compared to $2.8 million for the three months ended June 30, 2023. Professional fees increased by $0.2 million due to an increase in outsourced accounting consultancy and audit fees. Other expense increased by $2.5 million primarily due to an increase of $1.8 million of certain one-time expenses incurred during the three months ended June 30, 2024 compared to $0.4 million for the three months ended June 30, 2023, primarily due to consulting and legal fees related to the FTC and SEC investigations, as well as increases in rent for additional leased space of $0.2 million, IT and software subscription costs of $0.4 million, and bad debt expenses of $0.4 million. Increases in general and administrative expense were partially offset by a decrease in insurance expense as director and officer insurance premiums for the period decreased by $0.3 million.

Loss From Impairment of Property and Equipment

No loss from impairment of property and equipment was recognized for the three months ended June 30, 2024, compared to $0.2 million for the three months ended June 30, 2023, primarily related to the removal of Evolv Express units from service, resulting in impairment of the remaining economic value of such units.

Interest Income

Interest income of $0.7 million for the three months ended June 30, 2024 and $1.9 million for the three months ended June 30, 2023 related primarily to interest earned on money market funds and the accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $16.5 million gain and a $28.1 million loss for the three months ended June 30, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $3.7 million gain and a $5.1 million loss for the three months ended June 30, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $4.9 million gain and a $11.8 million loss for the three months ended June 30, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

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Comparison of the Six Months Ended June 30, 2024 and 2023

	Six Months EndedJune 30,
	2024		2023		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	3,445	$	17,464	$	(14,019)	(80)	%
Subscription revenue	29,874		13,875		15,999		115
Service revenue	10,818		6,405		4,413		69
License fee and other revenue	3,268		1,280		1,988		155
Total revenue	47,405		39,024		8,381		21
Cost of revenue:
Cost of product revenue	5,953		19,779		(13,826)		(70)
Cost of subscription revenue	11,894		5,619		6,275		112
Cost of service revenue	2,519		1,597		922		58
Cost of license fee and other revenue	301		574		(273)		(48)
Total cost of revenue	20,667		27,569		(6,902)		(25)
Gross profit	26,738		11,455		15,283		133
Operating expenses:
Research and development	12,246		11,784		462		4
Sales and marketing	32,870		26,234		6,636		25
General and administrative	25,899		19,793		6,106		31
Loss from impairment of property and equipment	—		294		(294)		*
Total operating expenses	71,015		58,105		12,910		22
Loss from operations	(44,277)		(46,650)		2,373		5
Other income (expense), net:
Interest expense	—		(654)		654		*
Interest income	1,766		2,806		(1,040)		(37)
Other expense, net	(67)		(3)		(64)		(2,133)
Loss on extinguishment of debt	—		(626)		626		*
Change in fair value of contingent earn-out liability	23,413		(31,431)		54,844		174
Change in fair value of contingently issuable common stock liability	4,274		(5,837)		10,111		173
Change in fair value of public warrant liability	7,037		(13,501)		20,538		152
Total other income (expense), net	36,423		(49,246)		85,669		174
Net loss	$	(7,854)	$	(95,896)	$	88,042	92	%
Gross profit margin:
Product revenue	(73) %		(13) %		N/A		(60) %
Subscription revenue	60 %		60 %		N/A		1 %
Service revenue	77 %		75 %		N/A		2 %
License fee and other revenue	91 %		55 %		N/A		36 %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 137 new customers during the six months ended June 30, 2024, (iii) the expansion of our existing customers’ initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decreases in product revenue and cost of product revenue are primarily due to a transition to pure subscription sales and sales under our distributor licensing model during the preceding twelve months. The decrease in product gross profit margin for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is primarily attributable to $1.0 million of expense related to an increase to our inventory reserve and $1.2 million of expense associated with adverse non-cancellable inventory purchase commitments during the six months ended June 30, 2024, both of which relate primarily to the ongoing transition of our manufacturing operations to the next generation of Evolv Express systems and the determination that certain components within our legacy systems will not be used in the next generation systems.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to continued growth in our customer base for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, which was due to a transition to our pure subscription model and a higher number of active Evolv Express units deployed under our pure subscription contract model.

Service Revenue

The increases in service revenue, cost of service revenue, and gross profit are primarily due to an increased number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers directly from Columbia Tech under our distributor licensing model, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

License fee and other revenue

The increase in license fee and other revenue, gross profit, and gross profit margin was primarily driven by $2.4 million of license fees earned during the six months ended June 30, 2024 compared to no license fees earned during the six months ended June 30, 2023 under the Distribution and License Agreement which was executed in March 2023.

Research and Development Expenses

The increase in research and development expense was due to an increase in materials and prototypes expense of $0.1 million, due to an increase of inventory reserve on unused components of $0.4 million offset by the decrease of design and engineering costs of $0.2 million, both of which relate primarily to the development of the next generation of our Evolv Express system. Professional fees decreased by $0.1 million due to consulting costs incurred for product development and engineering. Other expense increased by $0.3 million due to an increase in IT and software subscription costs of $0.2 million. Personnel related expenses increased by $0.1 million due to a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $1.1 million, partially offset by an increase in payroll costs of $1.1 million primarily resulting from new hires in our research and development function during the past twelve months.

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Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $5.0 million which included an increase in payroll costs and stock-based compensation of $4.6 million resulting primarily from new hires in our sales and marketing functions during the past twelve months to support increased sales volume and certain other one-time employee-related termination costs. Stock compensation expense included in sales and marketing expenses was $5.7 million for the six months ended June 30, 2024 compared to $4.5 million for the six months ended June 30, 2023. Advertising and direct marketing expense remained consistent. Travel and entertainment expense increased by $0.5 million due to an increase in travel costs for in-person sales personnel meetings. Professional fees increased by $0.7 million due primarily to an increase in marketing consulting costs. Other expense increased by $0.4 million primarily due to an increase in IT and software subscription costs of $0.2 million.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $2.0 million, which included an increase in payroll costs and stock-based compensation of $2.0 million resulting from expanding our administrative team during the past twelve months. Stock compensation expense included in general and administrative expenses was $5.7 million for the six months ended June 30, 2024 compared to $4.8 million for the six months ended June 30, 2023. Professional fees increased by $1.3 million due to an increase in outsourced accounting consultancy and audit fees. Insurance costs decreased by $0.6 million due to a decrease in director and officer insurance premiums. Other expense increased by $3.4 million primarily due to a $1.1 million accrual for ongoing regulatory matters and an increase of $2.2 million of certain one-time expenses, primarily due to consulting and legal fees, as well as increases in rent for additional leased space of $0.3 million, IT and software subscription costs of $0.6 million, and property taxes of $0.4 million.

Loss From Impairment of Property and Equipment

No loss from impairment of property and equipment was recognized for the six months ended June 30, 2024, compared to $0.3 million for the six months ended June 30, 2023, primarily related to the removal of Evolv Express units from service, resulting in impairment of the remaining economic value of such units.

Interest Expense

No interest expense was recognized for the six months ended June 30, 2024, compared to $0.7 million for the six months ended June 30, 2023. During March 2023, the Company fully repaid all borrowings and accrued interest under its term loans with SVB pursuant to the 2022 SVB Credit Agreement.

Interest Income

Interest income of $1.8 million and $2.8 million for the six months ended June 30, 2024 and 2023, respectively, related primarily to interest earned on money market funds and the accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $23.4 million gain and a $31.4 million loss for the six months ended June 30, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $4.3 million gain and a $5.8 million loss for the six months ended June 30, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $7.0 million gain and a $13.5 million loss for the six months ended June 30, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

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Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

	Three Months EndedMarch 31,
	2024		2023		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	1,491	$	10,612	$	(9,121)	(86)	%
Subscription revenue	14,219		6,173		8,046		130
Service revenue	5,252		2,759		2,493		90
License fee and other revenue	1,219		578		641		111
Total revenue	22,181		20,122		2,059		10
Cost of revenue:
Cost of product revenue	3,114		12,362		(9,248)		(75)
Cost of subscription revenue	5,585		2,334		3,251		139
Cost of service revenue	1,198		583		615		105
Cost of license fee and other revenue	129		304		(175)		(58)
Total cost of revenue	10,026		15,583		(5,557)		(36)
Gross profit	12,155		4,539		7,616		168
Operating expenses:
Research and development	6,396		5,395		1,001		19
Sales and marketing	15,859		12,638		3,221		25
General and administrative	11,806		8,928		2,878		32
Loss from impairment of property and equipment	—		137		(137)		*
Total operating expenses	34,061		27,098		6,963		26
Loss from operations	(21,906)		(22,559)		653		3
Other income (expense), net:
Interest expense	—		(654)		654		*
Interest income	1,085		953		132		14
Other income (expense), net	(28)		19		(47)		(247)
Loss on extinguishment of debt	—		(626)		626		*
Change in fair value of contingent earn-out liability	6,899		(3,318)		10,217		308
Change in fair value of contingently issuable common stock liability	527		(742)		1,269		171
Change in fair value of public warrant liability	2,151		(1,750)		3,901		223
Total other income (expense), net	10,634		(6,118)		16,752		274
Net loss	$	(11,272)	$	(28,677)	$	17,405	61	%
Gross profit margin:
Product revenue	(109) %		(16) %		N/A		(92) %
Subscription revenue	61 %		62 %		N/A		(1) %
Service revenue	77 %		79 %		N/A		(2) %
License fee and other revenue	89 %		47 %		N/A		42 %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 53 new customers during the three months ended March 31, 2024, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Our average sales cycle increased to five months during the first fiscal quarter of 2024 compared to three months during the first fiscal quarter of 2023, an increase of approximately 40%. We believe the FTC and SEC investigations were the primary reason for the lengthening of the sales cycle as customers work to satisfy incremental due diligence requirements. However, the investigations did not materially impact our win rate, which increased year over year.

Product Revenue

The decreases in product revenue and cost of product revenue are primarily due to a transition to pure subscription sales and sales under our distributor licensing model during the preceding twelve months. The decrease in product gross profit margin for the three months ended March 31, 2024 compared to the prior year period is primarily attributable to $0.7 million of expense related to an increase to our inventory reserve and $1.2 million of expense associated with adverse non-cancellable inventory purchase commitments, both of which relate primarily to the ongoing transition of our manufacturing operations to the next generation of Evolv Express systems and the determination that certain components within our legacy systems will not be used in the next generation systems.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to growth in our customer base for the three months ended March 31, 2024 compared to the prior year period, which was due to a transition to our pure subscription model and a higher number of active Evolv Express units deployed under our pure subscription contract model.

Service Revenue

The increases in service revenue, cost of service revenue, and gross profit are primarily due to an increased number of active revenue-generating purchase subscription units, as well as active revenue-generating units purchased by customers directly from Columbia Tech, for the three months ended March 31, 2024 compared to the prior year period.

License fee and other revenue

The increase in license fee and other revenue, gross profit, and gross profit margin was primarily driven by $0.7 million of license fees earned during the three months ended March 31, 2024 compared to no license fees earned during the prior year period under the Distribution and License Agreement which was executed in March 2023. Revenue from install, training, and professional services was $0.5 million for the three months ended March 31, 2024 compared to $0.6 million for the prior year period.

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $0.3 million which included an increase in payroll costs of $0.7 million primarily resulting from new hires in our research and development function during the past twelve months, offset by a $0.4 million higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased. Materials and prototypes expense increased by $0.5 million due to increased design and engineering costs related to the development of the next generation of our Evolv Express system. Other expense increased by $0.3 million due to an increase in IT and software subscription costs of $0.1 million and an increase in supplies cost of $0.1 million. Professional fees decreased by $0.1 million due to higher amount of costs capitalized related to internal-use software and software embedded in products to be sold or leased, offset by consulting costs incurred for product development and engineering.

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Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $2.6 million, due to an increase in payroll costs and stock-based compensation of $2.7 million resulting primarily from new hires in our sales and marketing functions during the past twelve months to support increased sales volume. Stock compensation expense included in sales and marketing expenses was $3.0 million for the three months ended March 31, 2024 compared to $2.0 million for the three months ended March 31, 2023. Travel and entertainment expense increased by $0.4 million due to an increase in travel costs for in-person sales personnel meetings. Professional fees increased by $0.4 million due primarily to an increase in marketing consulting costs. Other expense increased by $0.3 million primarily due to an increase in IT and software subscription costs of $0.1 million. These costs were partially offset by a decrease in advertising and direct marketing expense of $0.4 million primarily due to a decrease in expense related to trade shows and events.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $1.1 million due to an increase in payroll costs and stock-based compensation of $1.0 million resulting from expanding our administrative team during the past twelve months. Stock compensation expense included in general and administrative expense was $2.4 million for the three months ended March 31, 2024 compared to $2.1 million for the three months ended March 31, 2023. Professional fees increased by $1.1 million due to an increase in outsourced accounting consultancy and audit fees. Other expense increased by $0.8 million primarily due to $0.4 million of certain one-time expenses incurred during the three months ended March 31, 2024, primarily due to consulting and legal fees, as well as increases in rent, IT and software subscription costs, and property taxes of $0.2 million each. Increases in general and administrative expense were partially offset by a decrease in director and officer insurance premiums by $0.2 million.

Loss From Impairment of Property and Equipment

No loss from impairment of property and equipment was recognized for the three months ended March 31, 2024, compared to $0.1 million for the three months ended March 31, 2023, primarily related to the removal of Evolv Edge units and Evolv Express prototypes from service, resulting in impairment of the remaining economic value of such units.

Interest Expense

No interest expense was recognized for the three months ended March 31, 2024, compared to $0.7 million for the three months ended March 31, 2023. During March 2023, the Company fully repaid all borrowings and accrued interest under its term loans with SVB pursuant to the 2022 SVB Credit Agreement.

Interest Income

Interest income of $1.1 million for the three months ended March 31, 2024 and $1.0 million for the three months ended March 31, 2023 related primarily to interest earned on money market funds, and for the three months ended March 31, 2024, accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $6.9 million gain and a $3.3 million loss for the three months ended March 31, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $0.5 million gain and a $0.7 million loss for the three months ended March 31, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

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Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $2.2 million gain and a $1.8 million loss for the three months ended March 31, 2024 and 2023, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

Comparison of the Three Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022 (in thousands):

	Three Months EndedSeptember 30,
	2023		2022		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	3,456	$	9,607	$	(6,151)	(64)	%
Subscription revenue	9,858		5,105		4,753		93
Service revenue	4,345		1,303		3,042		233
License fee and other revenue	2,302		281		2,021		719
Total revenue	19,961		16,296		3,665		22
Cost of revenue:
Cost of product revenue	3,496		13,064		(9,568)		(73)
Cost of subscription revenue	4,157		2,177		1,980		91
Cost of service revenue	1,219		500		719		144
Cost of license fee and other revenue	198		638		(440)		(69)
Total cost of revenue	9,070		16,379		(7,309)		(45)
Gross profit	10,891		(83)		10,974		13,222
Operating expenses:
Research and development	6,386		5,182		1,204		23
Sales and marketing	14,408		11,969		2,439		20
General and administrative	11,261		9,093		2,168		24
Loss from impairment of property and equipment	28		189		(161)		(85)
Total operating expenses	32,083		26,433		5,650		21
Loss from operations	(21,192)		(26,516)		5,324		20
Other income (expense), net:
Interest expense	—		(188)		188		*
Interest income	1,791		1,052		739		70
Other income (expense), net	(64)		(57)		(7)		(12)
Change in fair value of contingent earn-out liability	14,078		7,245		6,833		94
Change in fair value of contingently issuable common stock liability	2,277		1,081		1,196		111
Change in fair value of public warrant liability	8,156		(1,146)		9,302		812
Total other income (expense), net	26,238		7,987		18,251		229
Net income (loss)	$	5,046	$	(18,529)	$	23,575	127	%
Gross profit margin:
Product revenue	(1) %		(36) %		N/A		35 %
Subscription revenue	58 %		57 %		N/A		— %
Service revenue	72 %		62 %		N/A		10 %
License fee and other revenue	91 %		(127) %		N/A		218 %

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*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 70 new customers during the three months ended September 30, 2023, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decreases in product revenue and cost of product revenue are primarily due to a transition to pure subscription sales and sales under our distributor licensing model during the preceding twelve months. The increases in product gross profit and product gross profit margin during the three months ended September 30, 2023 compared to the prior year period reflects a higher average number of units sold per transaction across our target end markets, particularly in the professional sports vertical.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to growth in our customer base, a transition to our pure subscription model, and a higher number of active Evolv Express units deployed under our pure subscription contract model. Subscription gross profit margin increased slightly as the result of our ability to leverage our fixed costs over a higher revenue base.

Service Revenue

The increases in service revenue and gross profit are primarily due to an increased number of active revenue-generating purchase subscription units and an increase in installation and training services. Service gross profit margin increased primarily as the result of our ability to leverage our fixed costs over a higher revenue base.

License fee and other revenue

License fee and other revenue for the three months ended September 30, 2023 consists of $2.0 million of license fees earned in connection to the Distribution and License Agreement. The Company did not earn any license fee revenue for periods prior to the three months ended September 30, 2023.

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $0.7 million, which included an increase in payroll costs and stock-based compensation of $0.9 million primarily resulting from new hires in our research and development function during the past twelve months, offset by an increase of $0.4 million of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased. Stock-based compensation expense included in research and development expenses was $1.1 million for the three months ended September 30, 2023 compared to $1.2 million for the three months ended September 30, 2022. Materials and prototypes expense increased by $0.2 million due to increased design and engineering costs related to the development of the next generation of our Evolv Express system. Professional fees increased by $0.1 million due to consulting costs incurred for product development and engineering. Other expense increased by $0.3 million primarily due to software subscriptions.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $2.0 million, which included an increase in payroll costs and commissions of $1.6 million resulting primarily from new hires in our sales and marketing functions during the past twelve months to support increased sales volume. Stock compensation expense included in sales and marketing expenses was $2.3 million for the three months ended September 30, 2023 compared to $2.7 million for the three months ended September 30, 2022. Travel and entertainment expense increased by $0.5 million due to an increase in travel costs for in-person sales personnel meetings and events. Professional fees increased by $0.3 million due primarily to an increase in marketing consulting costs. These increases in sales and marketing expense were partially offset by a decrease in advertising and direct marketing expense of $0.6 million.

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General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $1.3 million, which included an increase in payroll costs and stock-based compensation of $1.1 million resulting from expanding our administrative team during the past twelve months. Stock compensation expense included in general and administrative expenses was $2.5 million for the three months ended September 30, 2023 compared to $2.4 million for the three months ended September 30, 2022. Other expense increased by $1.2 million primarily due to $0.9 million of certain one-time expenses incurred during the three months ended September 30, 2023, primarily related to legal fees for one-time matters, as well as increases in software subscriptions of $0.3 million and other miscellaneous expenses.

Loss From Impairment of Property and Equipment

Loss from impairment of property and equipment was less than $0.1 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively, primarily related to the removal of Evolv Edge units and Evolv Express prototypes from service, resulting in impairment of the remaining economic value of such units.

Interest Expense

No interest expense was recognized for the three months ended September 30, 2023, compared to $0.2 million for the three months ended September 30, 2022. During March 2023, the Company fully repaid all borrowings and accrued interest under its term loans with SVB pursuant to the 2022 SVB Credit Agreement.

Interest Income

Interest income of $1.8 million for the three months ended September 30, 2023 and $1.1 million for the three months ended September 30, 2022 related primarily to interest earned on money market funds, and for the three months ended September 30, 2023, accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in gains of $14.1 million and $7.2 million for the three months ended September 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in gains of $2.3 million and $1.1 million for the three months ended September 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $8.2 million gain and a $1.1 million loss for the three months ended September 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

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Comparison of the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022, (in thousands):

	Nine Months EndedSeptember 30,
	2023		2022		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	20,920	$	18,965	$	1,955	10	%
Subscription revenue	23,733		11,881		11,852		100
Service revenue	10,750		2,411		8,339		346
License fee and other revenue	3,582		670		2,912		435
Total revenue	58,985		33,927		25,058		74
Cost of revenue:
Cost of product revenue	23,275		23,617		(342)		(1)
Cost of subscription revenue	9,776		5,726		4,050		71
Cost of service revenue	2,816		1,652		1,164		70
Cost of license fee and other revenue	772		1,740		(968)		(56)
Total cost of revenue	36,639		32,735		3,904		12
Gross profit	22,346		1,192		21,154		1,775
Operating expenses:
Research and development	18,170		13,731		4,439		32
Sales and marketing	40,642		33,246		7,396		22
General and administrative	31,054		29,484		1,570		5
Loss from impairment of property and equipment	322		1,038		(716)		(69)
Total operating expenses	90,188		77,499		12,689		16
Loss from operations	(67,842)		(76,307)		8,465		11
Other (expense) income, net:
Interest expense	(654)		(489)		(165)		(34)
Interest income	4,597		1,611		2,986		185
Other expense, net	(67)		(57)		(10)		(18)
Loss on extinguishment of debt	(626)		—		(626)		*
Change in fair value of contingent earn-out liability	(17,353)		9,754		(27,107)		(278)
Change in fair value of contingently issuable common stock liability	(3,560)		2,529		(6,089)		(241)
Change in fair value of public warrant liability	(5,345)		4,297		(9,642)		(224)
Total other (expense) income, net	(23,008)		17,645		(40,653)		(230)
Net loss	$	(90,850)	$	(58,662)	$	(32,188)	(55)	%
Gross profit margin:
Product revenue	(11) %		(25) %		N/A		13 %
Subscription revenue	59 %		52 %		N/A		7 %
Service revenue	74 %		31 %		N/A		42 %
License fee and other revenue	78 %		(160) %		N/A		238 %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 205 new customers during the nine months ended September 30, 2023, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decreases in product revenue and cost of product revenue are primarily due to a transition to pure subscription sales and sales under our distributor licensing model during the preceding twelve months. The increases in product gross profit and product gross profit margin during the nine months ended September 30, 2023 compared to the prior year period reflects a higher average number of units sold per transaction across our target end markets, particularly in the professional sports vertical.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to growth in our customer base, a transition to our pure subscription model, and a higher number of active Evolv Express units deployed under our pure subscription contract model. Subscription gross profit margin increased as the result of our ability to leverage our fixed costs over a higher revenue base.

Service Revenue

The increase in service revenue and gross profit is primarily due to an increased number of active revenue-generating purchase subscription units and an increase in installation and training services. Service gross profit margin increased primarily as the result of our ability to leverage our fixed costs over a higher revenue base.

License fee and other revenue

License fee and other revenue for the nine months ended September 30, 2023 consists of $2.0 million of license fees earned in connection to the Distribution and License Agreement. The Company did not earn any license fee revenue for periods prior to the nine months ended September 30, 2023.

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $1.6 million, which included an increase in payroll costs and stock-based compensation of $2.8 million primarily resulting from new hires in our research and development function during the past twelve months, partially offset by a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $1.0 million. Stock compensation expense included in research and development expenses was $3.2 million for the nine months ended September 30, 2023 compared to $2.9 million for the nine months ended September 30, 2022. Materials and prototypes increased by $1.1 million due to design and engineering costs related to the next generation of our Evolv Express system. Professional fees increased by $1.3 million primarily due to consulting costs incurred for product development and engineering, offset by capitalized costs relating to consultants.

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Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $8.1 million, which included an increase in payroll costs and commissions of $4.5 million resulting primarily from new hires in our sales and marketing functions during the past twelve months to support increased sales volume, which drove increases in salaries of $1.8 million and commissions of $1.8 million. Stock compensation expense included in sales and marketing expenses was $6.8 million for the nine months ended September 30, 2023 compared to $6.4 million for the nine months ended September 30, 2022. Advertising and direct marketing expense decreased by $1.7 million due to a decrease in expense related to trade shows and events, and other marketing costs. Travel and entertainment expense increased by $1.1 million due to an increase in travel costs for in-person sales personnel meetings and events. Professional fees increased by $0.8 million due primarily to an increase in marketing consulting costs. Other expense decreased by $0.9 million due primarily to $1.0 million of certain one-time retention benefits incurred during the nine months ended September 30, 2022 that were not incurred during the nine months ended September 30, 2023.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $4.2 million, which included an increase in payroll costs and stock-based compensation of $4.6 million resulting from expanding our administrative team during the past twelve months partially offset by a decrease in recruiting expenses of $0.4 million. Stock compensation expense included in general and administrative expenses was $7.3 million for the nine months ended September 30, 2023 compared to $5.7 million for the nine months ended September 30, 2022. Professional fees decreased by $2.6 million due to a decrease in outsourced accounting consultancy and audit fees. Insurance expense decreased by $0.8 million primarily related to a decrease in director and officer insurance premiums.

Loss From Impairment of Property and Equipment

Loss from impairment of property and equipment was $0.3 million and $1.0 million for the nine months ended September 30, 2023 and 2022, respectively, primarily related to the removal of Evolv Edge units and Evolv Express prototypes from service, resulting in impairment of the remaining economic value of such units.

Interest Expense and Loss on Extinguishment of Debt

Interest expense was $0.7 million for the nine months ended September 30, 2023, compared to $0.5 million for the nine months ended September 30, 2022. The increase was primarily due to interest expense incurred during the three months ended March 31, 2023 related to the Company's term loans with SVB pursuant to the 2022 SVB Credit Agreement. During March 2023, the Company fully repaid all borrowings and accrued interest under the 2022 SVB Credit Agreement and terminated the 2022 SVB Credit Agreement. In accordance with the terms of the 2022 SVB Credit Agreement, the Company was required to pay a prepayment premium equal to 1.0% of the principal balance on the date of repayment. The Company incurred a loss on debt extinguishment of $0.6 million, consisting of the prepayment penalty of $0.3 million and the write off of $0.3 million of unamortized debt issuance costs.

Interest Income

Interest income of $4.6 million for the nine months ended September 30, 2023 and $1.6 million for the nine months ended September 30, 2022 related primarily to interest earned on money market funds, and for the nine months ended September 30, 2023, accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $17.4 million loss and a $9.8 million gain for the nine months ended September 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $3.6 million loss and a $2.5 million gain for the nine months ended September 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

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Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $5.3 million loss and a $4.3 million gain for the nine months ended September 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

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Comparison of the Three Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022 (in thousands):

	Three Months EndedJune 30,
	2023		2022		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	6,852	$	4,164	$	2,688	65	%
Subscription revenue	7,702		3,772		3,930		104
Service revenue	3,646		782		2,864		366
License fee and other revenue	702		203		499		246
Total revenue	18,902		8,921		9,981		112
Cost of revenue:
Cost of product revenue	7,417		5,347		2,070		39
Cost of subscription revenue	3,285		2,007		1,278		64
Cost of service revenue	1,014		467		547		117
Cost of license fee and other revenue	270		722		(452)		(63)
Total cost of revenue	11,986		8,543		3,443		40
Gross profit	6,916		378		6,538		1,730
Operating expenses:
Research and development	6,389		4,374		2,015		46
Sales and marketing	13,596		11,605		1,991		17
General and administrative	10,865		9,574		1,291		13
Loss from impairment of property and equipment	157		753		(596)		(79)
Total operating expenses	31,007		26,306		4,701		18
Loss from operations	(24,091)		(25,928)		1,837		7
Other income (expense), net:
Interest expense	—		(159)		159		*
Interest income	1,853		491		1,362		277
Other income (expense), net	(22)		—		(22)		*
Change in fair value of contingent earn-out liability	(28,113)		(569)		(27,544)		(4,841)
Change in fair value of contingently issuable common stock liability	(5,095)		(24)		(5,071)		(21,129)
Change in fair value of public warrant liability	(11,751)		(143)		(11,608)		(8,117)
Total other income (expense), net	(43,128)		(404)		(42,724)		(10,575)
Net loss	$	(67,219)	$	(26,332)	$	(40,887)	(155)	%
Gross profit margin:
Product revenue	(8) %		(28) %		N/A		20 %
Subscription revenue	57 %		47 %		N/A		11 %
Service revenue	72 %		40 %		N/A		32 %
License fee and other revenue	62 %		(256) %		N/A		317 %

*N/A – Not meaningful

Table of Contents

Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) acceleration in our customer acquisition activities as highlighted by the addition of 74 new customers during the three months ended June 30, 2023, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The increases in product revenue and cost of product revenue are primarily due to the increase in product sales of Evolv Express units, which reflect an ongoing increase in the adoption of Evolv Express units by schools and healthcare facilities. The increase in product gross profit and product gross profit margin during the three months ended June 30, 2023 compared to the prior year period is attributable primarily to higher average revenue per unit sold. These increases were tempered by (i) a continued strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets (single lane configurations typically generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price), and (ii) a higher percentage of sales made through our channel partners, which are generally at a lower average sale price.

Subscription Revenue

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to growth in our customer base and a higher number of active Evolv Express units deployed under our pure subscription contract model. Subscription gross profit margin increased primarily as the result of our ability to leverage our fixed costs over a higher revenue base.

Service Revenue

The increase in service revenue is primarily due to the increased number of purchase subscription units deployed in the preceding year, as well as the increase in the number of installation and training services performed. Service gross profit margin increased primarily as the result of our ability to leverage our fixed costs over a higher revenue base.

License fee and other revenue

The change in license fee and other revenue, gross profit, and gross profit margin was a result of the change in installation, training and professional service revenue earned during the period compared to the prior period.

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $0.5 million, which included an increase in payroll costs and stock-based compensation of $0.8 million primarily resulting from new hires in our research and development function during the past twelve months, offset by a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.4 million. Stock-based compensation expense included in research and development expenses was $1.2 million for the three months ended June 30, 2023 compared to $1.1 million for the three months ended June 30, 2022. Materials and prototypes expense increased by $0.9 million due to increased design and engineering costs related to the development of the next generation of our Evolv Express system. Professional fees increased by $0.5 million primarily due to consulting costs incurred for product development and engineering.

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Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $2.8 million, which included an increase in payroll costs, commissions and stock-based compensation of $1.3 million resulting primarily from new hires in our sales and marketing functions during the past twelve months to support increase sales volume, as well as an increase of $0.9 million in overhead costs. Stock compensation expense included in sales and marketing expenses was $2.5 million for the three months ended June 30, 2023 compared to $2.2 million for the three months ended June 30, 2022. Advertising and direct marketing expense decreased by $0.4 million due to a decrease in expense related to trade shows and events and other marketing. Travel and entertainment expense increased by $0.4 million due to an increase in travel costs for in-person sales personnel meetings and events. Professional fees increased by $0.3 million due to an increase in marketing consulting costs. Other expense decreased by $1.0 million due primarily to $1.0 million of certain one-time retention benefits incurred during the three months ended June 30, 2022 that were not incurred during the three months ended June 30, 2023.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $2.1 million, which included an increase in payroll costs and stock-based compensation of $2.1 million resulting from expanding our administrative team during the past twelve months. Stock compensation expense included in general and administrative expenses was $2.8 million for the three months ended June 30, 2023 compared to $1.5 million for the three months ended June 30, 2022. Professional fees decreased by $0.5 million due to a decrease in outsourced accounting consultancy fees. Insurance costs decreased by $0.3 million due to a decrease in director and officer insurance premiums.

Loss From Impairment of Property and Equipment

Loss from impairment of property and equipment was an immaterial $0.2 million and $0.8 million for the three months ended June 30, 2023 and 2022, respectively.

Interest Expense

Interest expense was $0 for the three months ended June 30, 2023, compared to $0.2 million for the three months ended June 30, 2022. During March 2023, the Company fully repaid all borrowings and accrued interest under its term loans with SVB pursuant to the 2022 SVB Credit Agreement.

Interest Income

Interest income of $1.9 million for the three months ended June 30, 2023 and $0.5 million for the three months ended June 30, 2022 related primarily to interest earned on money market funds, and for the three months ended June 30, 2023, accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in losses of $28.1 million and $0.6 million for the three months ended June 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in losses of $5.1 million and less than $0.1 million for the three months ended June 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in losses of $11.8 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

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Comparison of the Six Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022, (in thousands):

	Six Months EndedJune 30,
	2023		2022		$ Change		% Change
	(Restated)		(Restated)
Revenue:
Product revenue	$	17,464	$	9,358	$	8,106	87	%
Subscription revenue	13,875		6,776		7,099		105
Service revenue	6,405		1,108		5,297		478
License fee and other revenue	1,280		389		891		229
Total revenue	39,024		17,631		21,393		121
Cost of revenue:
Cost of product revenue	19,779		10,553		9,226		87
Cost of subscription revenue	5,619		3,549		2,070		58
Cost of service revenue	1,597		1,152		445		39
Cost of license fee and other revenue	574		1,102		(528)		(48)
Total cost of revenue	27,569		16,356		11,213		69
Gross profit	11,455		1,275		10,180		798
Operating expenses:
Research and development	11,784		8,549		3,235		38
Sales and marketing	26,234		21,277		4,957		23
General and administrative	19,793		20,391		(598)		(3)
Loss from impairment of property and equipment	294		849		(555)		(65)
Total operating expenses	58,105		51,066		7,039		14
Loss from operations	(46,650)		(49,791)		3,141		6
Other (expense) income, net:
Interest expense	(654)		(301)		(353)		(117)
Interest income	2,806		559		2,247		402
Other expense, net	(3)		—		(3)		*
Loss on extinguishment of debt	(626)		—		(626)		*
Change in fair value of contingent earn-out liability	(31,431)		2,509		(33,940)		(1,353)
Change in fair value of contingently issuable common stock liability	(5,837)		1,448		(7,285)		(503)
Change in fair value of public warrant liability	(13,501)		5,443		(18,944)		(348)
Total other (expense) income, net	(49,246)		9,658		(58,904)		(610)
Net loss	$	(95,896)	$	(40,133)	$	(55,763)	(139)	%
Gross profit margin:
Product revenue	(13) %		(13) %		N/A		— %
Subscription revenue	60 %		48 %		N/A		12 %
Service revenue	75 %		(4) %		N/A		79 %
License fee and other revenue	55 %		(183) %		N/A		238 %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) acceleration in our customer acquisition activities as highlighted by the addition of 135 new customers during the six months ended June 30, 2023, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decrease in product gross profit during the six months ended June 30, 2023 compared to the prior year period is attributable primarily to an increase in product sales as product gross profit margin remained relatively consistent between periods. Product gross profit margin improved during the three months ended June 30, 2023 (negative 7%) compared to the three months ended March 31, 2023 (negative 21%) primarily as the result of higher average revenue per unit sold. These increases were tempered by (i) continued strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets (single lane configurations typically generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price), and (ii) a higher percentage of sales made through our channel partners, which are generally at a lower average sale price.

Subscription Revenue

Service Revenue

License fee and other revenue

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $1.0 million, which included an increase in payroll costs and stock-based compensation of $1.9 million primarily resulting from new hires in our research and development function during the past twelve months, offset by a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.7 million. Stock compensation expense included in research and development expenses was $2.1 million for the six months ended June 30, 2023 compared to $1.7 million for the six months ended June 30, 2022. Materials and prototypes increased by $1.0 million due to design and engineering costs related to the next generation of our Evolv Express system. Professional fees increased by $1.2 million primarily due to consulting costs incurred for product development and engineering.

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Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $6.0 million is due to an increase in payroll costs, commissions and stock-based compensation of $3.5 million resulting primarily from new hires in our sales and marketing functions during the past twelve months to support increase sales volume, as well as an increase of $1.9 million in overhead costs. Stock compensation expense included in sales and marketing expenses was $4.5 million for the six months ended June 30, 2023 compared to $3.7 million for the six months ended June 30, 2022. Advertising and direct marketing expense decreased by $1.0 million primarily due to a decrease in expense related to trade shows and events and other marketing costs. Travel and entertainment expense increased by $0.6 million due to an increase in travel costs for in-person sales personnel meetings and events. Professional fees increased by $0.5 million due primarily to an increase in marketing consulting costs. Other expense decreased by $1.2 million due primarily to $1.0 million of certain one-time retention benefits incurred during the six months ended June 30, 2022 that were not incurred during the six months ended June 30, 2023.

General and Administrative Expenses

The decrease in general and administrative expense included an increase in personnel related expenses of $2.9 million, which included an increase in payroll costs and stock-based compensation of $3.5 million resulting from expanding our administrative team during the past twelve months, offset by a decrease of $0.3 million related to restructuring expense. Stock compensation expense included in general and administrative expenses was $4.8 million for the six months ended June 30, 2023 compared to $3.3 million for the six months ended June 30, 2022. Professional fees decreased by $2.4 million primarily related to a decrease in outsourced accounting consultancy fees. Insurance expense decreased by $0.6 million primarily related to a decrease in director and officer insurance premiums. Other expense decreased by $0.5 million primarily due to $1.0 million of certain one-time expenses and a $0.4 million one-time payment to a former employee during the six months ended June 30, 2022, offset by increases in software subscriptions of $0.5 million.

Loss From Impairment of Property and Equipment

Loss from impairment of property and equipment was $0.3 million and $0.8 million for the six months ended June 30, 2023 and 2022, respectively.

Interest Expense and Loss on Extinguishment of Debt

Interest expense was $0.7 million for the six months ended June 30, 2023, compared to $0.3 million for the six months ended June 30, 2022. The increase was primarily due to interest expense incurred during the three months ended March 31, 2023 related to the Company's term loans with SVB pursuant to the 2022 SVB Credit Agreement. During March 2023, the Company fully repaid all borrowings and accrued interest under the 2022 SVB Credit Agreement and terminated the 2022 SVB Credit Agreement. In accordance with the terms of the 2022 SVB Credit Agreement, the Company was required to pay a prepayment premium equal to 1.0% of the principal balance on the date of repayment. The Company incurred a loss on debt extinguishment of $0.6 million, consisting of the prepayment penalty of $0.3 million and the write off of $0.3 million of unamortized debt issuance costs.

Interest Income

Interest income of $2.8 million for the six months ended June 30, 2023 and $0.6 million for the six months ended June 30, 2022 related primarily to interest earned on money market funds, and for the six months ended June 30, 2023, accretion of discounts on treasury bills.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $31.4 million loss and a $2.5 million gain for the six months ended June 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $5.8 million loss and a $1.4 million gain for the six months ended June 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market

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adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $13.5 million loss and a $5.4 million gain for the six months ended June 30, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

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Comparison of the Three Months Ended March 31, 2023 and 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022, (in thousands):

	Three Months EndedMarch 31,
	2023		2022		$ Change		% Change
	(Restated)
Revenue:
Product revenue	$	10,612	$	5,194	$	5,418	104	%
Subscription revenue	6,173		3,004		3,169		105
Service revenue	2,759		326		2,433		746
License fee and other revenue	578		186		392		211
Total revenue	20,122		8,710		11,412		131
Cost of revenue:
Cost of product revenue	12,362		5,206		7,156		137
Cost of subscription revenue	2,334		1,542		792		51
Cost of service revenue	583		685		(102)		(15)
Cost of license fee and other revenue	304		380		(76)		(20)
Total cost of revenue	15,583		7,813		7,770		99
Gross profit	4,539		897		3,642		406
Operating expenses:
Research and development	5,395		4,175		1,220		29
Sales and marketing	12,638		9,672		2,966		31
General and administrative	8,928		10,817		(1,889)		(17)
Loss from impairment of property and equipment	137		96		41		43
Total operating expenses	27,098		24,760		2,338		9
Loss from operations	(22,559)		(23,863)		1,304		5
Other income (expense), net:
Interest expense	(654)		(142)		(512)		(361)
Interest income	953		68		885		1,301
Other income (expense), net	19		—		19		*
Loss on extinguishment of debt	(626)		—		(626)		*
Change in fair value of contingent earn-out liability	(3,318)		3,078		(6,396)		(208)
Change in fair value of contingently issuable common stock liability	(742)		1,472		(2,214)		(150)
Change in fair value of public warrant liability	(1,750)		5,586		(7,336)		(131)
Total other income (expense), net	(6,118)		10,062		(16,180)		(161)
Net loss	$	(28,677)	$	(13,801)	$	(14,876)	(108)	%
Gross profit margin:
Product revenue	(16) %		— %		N/A		(16) %
Subscription revenue	62 %		49 %		N/A		14 %
Service revenue	79 %		(110) %		N/A		189 %
License fee and other revenue	47 %		(104) %		N/A		152 %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) acceleration in our customer acquisition activities as highlighted by the addition of 61 new customers during the three months ended March 31, 2023, (iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The increases in product revenue and cost of product revenue are primarily due to the increase in product sales of Evolv Express units, which include ongoing increase in the adoption of Evolv Express units by schools, healthcare facilities, and professional sports arenas.

The decrease in product gross profit and product gross profit margin during the three months ended March 31, 2023 compared to the prior year period is attributable to several factors. We experienced strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets. These configurations generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price. Further, a higher percentage of sales were made through our channel partners, which are generally at a lower average sale price, and therefore a lower gross profit margin, during the three months ended March 31, 2023 compared to the prior year period.

Subscription Revenue

Service Revenue

License fee and other revenue

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $0.5 million, which included an increase in payroll costs and stock-based compensation of $1.0 million primarily resulting from new hires in our research and development function during the past twelve months, offset by a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.3 million. Stock compensation expense included in research and development expenses was $0.8 million for the three months ended March 31, 2023 compared to $0.5 million for the three months ended March 31, 2022. Professional fees increased by $0.7 million primarily relates to consulting costs incurred for product development and engineering.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $3.3 million, which included an increase in payroll costs, commissions and stock-based compensation of $2.1 million resulting primarily from new hires in our sales and marketing functions during the past twelve months to support increase sales volume, as well as an increase of $1.0 million in overhead costs. Stock compensation expense included in sales and marketing expenses was $2.0 million for the three months ended March 31, 2023 compared to $1.5 million for the three months ended March 31, 2022. Advertising and direct marketing expense decreased by $0.6 million primarily due to a decrease in expense related to trade shows and events and other marketing costs.

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General and Administrative Expenses

The decrease in general and administrative expense included an increase in personnel related expenses of $0.8 million, which included an increase in payroll costs and stock-based compensation of $1.3 million resulting from expanding our administrative team during the past twelve months, offset by $0.3 million in restructuring expense and $0.2 million in recruiting expenses. Stock compensation expense included in general and administrative expenses was $2.1 million for the three months ended March 31, 2023 compared to $1.8 million for the three months ended March 31, 2022. Professional fees decreased by $1.9 million due to a decrease in outsourced accounting consultancy fees. The decrease in non-income taxes of $0.2 million relates to expense incurred during the three months ended March 31, 2022 related to a sales tax contingency liability. Other expenses decreased by $0.5 million primarily due to a $0.4 million one-time payment to a former employee during the three months ended March 31, 2022.

Loss From Impairment of Property and Equipment

Loss from impairment of property and equipment was an immaterial $0.1 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively.

Interest Expense

Interest expense was $0.7 million for the three months ended March 31, 2023, compared to $0.1 million for the three months ended March 31, 2022. The increase was primarily due to interest expense incurred related to the Company's term loans with SVB pursuant to the 2022 SVB Credit Agreement. During March 2023, the Company fully repaid all borrowings and accrued interest under the 2022 SVB Credit Agreement and terminated the 2022 SVB Credit Agreement.

Interest Income

Interest income of $1.0 million for the three months ended March 31, 2023 related primarily to interest earned on money market funds. $0.1 million interest income was earned for the three months ended March 31, 2022.

Change in Fair Value of Contingent Earn-out Liability

Change in fair value of the contingent earn-out liability resulted in a $3.3 million loss and a $3.1 million gain for the three months ended March 31, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $0.7 million loss and a $1.5 million gain for the three months ended March 31, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $1.8 million loss and a $5.6 million gain for the three months ended March 31, 2023 and 2022, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

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Comparison of the Three Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021, (in thousands):

	Three Months EndedSeptember 30,
	2022		2021		$ Change		% Change
	(Restated)
Revenue:
Product revenue	$	9,607	$	5,395	$	4,212	78	%
Subscription revenue	5,105		2,312		2,793		121
Service revenue	1,303		300		1,003		334
License fee and other revenue	281		417		(136)		(33)
Total revenue	16,296		8,424		7,872		93
Cost of revenue:
Cost of product revenue	13,064		2,967		10,097		340
Cost of subscription revenue	2,177		1,277		900		70
Cost of service revenue	500		193		307		159
Cost of license fee and other revenue	638		520		118		23
Total cost of revenue	16,379		4,957		11,422		230
Gross profit	(83)		3,467		(3,550)		(102)
Operating expenses:
Research and development	5,182		3,612		1,570		43
Sales and marketing	11,969		10,024		1,945		19
General and administrative	9,093		7,535		1,558		21
Loss from impairment of property and equipment	189		1,656		(1,467)		(89)
Total operating expenses	26,433		22,827		3,606		16
Loss from operations	(26,516)		(19,360)		(7,156)		(37)
Other income (expense), net:
Interest expense	(188)		(295)		107		36
Interest income	1,052		—		1,052		*
Other income (expense), net	(57)		(669)		612		91
Loss on extinguishment of debt	—		(865)		865		*
Change in fair value of derivative liability	—		475		(475)		*
Change in fair value of contingent earn-out liability	7,245		32,609		(25,364)		(78)
Change in fair value of contingently issuable common stock liability	1,081		5,718		(4,637)		(81)
Change in fair value of public warrant liability	(1,146)		3,152		(4,298)		(136)
Change in fair value of common stock warrant liability	—		42		(42)		*
Total other income (expense), net	7,987		40,167		(32,180)		(80)
Net (loss) income	$	(18,529)	$	20,807	$	(39,336)	(189)	%
Gross profit margin:
Product revenue	(36) %		45 %		N/A		(81) %
Subscription revenue	57 %		45 %		N/A		13 %
Service revenue	62 %		36 %		N/A		26 %
License fee and other revenue	(127) %		(25) %		N/A		(102) %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends driving increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) acceleration in our customer acquisition activities as highlighted by the addition of 92 new customers during the three months ended September 30, 2022, (iii) the expansion of our customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decrease in gross profit and gross profit margin during the three months ended September 30, 2022 compared to the prior year period is attributable to several factors. We experienced strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets. These configurations generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price. Further, a higher percentage of sales were made through our channel partners, which are generally at a lower average sale price, and therefore a lower gross margin, during the three months ended September 30, 2022 compared to the prior year period. Gross profit and gross profit margin were also adversely impacted by marketing and sponsorship arrangements with certain customers, increases in shipping costs, and the costs associated with the write-off of scrap inventory incurred without corresponding revenue.

Subscription Revenue

The increases in subscription revenue and cost of subscription revenue are primarily due to growth in our customer base and a higher number of active Evolv Express units deployed in the preceding twelve months. The increase in gross profit is primarily driven by our increased subscription revenue. The increase in gross profit margin is primarily driven by increased recurring revenue from increased active subscriptions and customer growth.

Service Revenue

The increase in service revenue is primarily due to the increased number of purchase subscription units deployed in the preceding twelve months and increased installation and training related to the Evolv Express units. Gross profit and gross profit margin increased for the three months ended September 30, 2022 compared to the prior year period due

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primarily to a larger mix of service revenue being derived from purchase subscriptions, which typically generate a higher gross profit margin compared to installation and training services.

License fee and other revenue

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $0.9 million, which included an increase in payroll costs and stock-based compensation of $1.4 million primarily resulting from new hires in our research and development function during the past twelve months, offset by a higher amount of payroll costs capitalized related to internal-use software and software embedded in products to be sold or leased of $0.2 million and a decrease of $0.4 million in recruiting expenses. Stock compensation expense included in research and development expenses was $1.2 million for the three months ended September 30, 2022 compared to $0.3 million for the three months ended September 30, 2021. Professional fees increased by $0.5 million due to consulting costs incurred for product development and engineering.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $1.0 million, which included an increase in payroll costs and commissions of $1.5 million resulting from new hires in our sales and marketing functions during the past twelve months, which includes functions such as partner development, customer success, and other business development, partially offset by a decrease in stock compensation expense included in sales and marketing expenses, which was $2.7 million for the three months ended September 30, 2022 compared to $3.3 million for the three months ended September 30, 2021. Travel and entertainment expense increased by $0.5 million due to an increase in travel costs for in-person sales personnel meetings and events. Other expenses increased by $0.4 million primarily due to an increase in shipping costs related to demo units.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $1.5 million, which included an increase in payroll costs and stock-based compensation of $2.1 million resulting from expanding our administrative team during the past twelve months, offset by a large transaction expense of $0.7 million that took place during the three months ended September 30, 2021, related to the merger. Stock compensation expense included in general and administrative expenses was $2.4 million for the three months ended September 30, 2022 compared to $1.0 million for the three months ended September 30, 2021. Other expenses increased by $0.2 million due to $0.6 million increase of property tax offset by a $0.5 million decrease in State and Local taxes.

Loss From Impairment of Property and Equipment

Impairment of property and equipment was $0.2 million and $1.7 million for the three months ended September 30, 2022 and 2021, respectively. As we transition existing domestic customers to our current Express model, we are removing Edge units and Express prototype units from service, resulting in the impairment of the remaining economic value of such units.

Interest Expense

Interest expense was $0.2 million for the three months ended September 30, 2022, compared to $0.3 million for the three months ended September 30, 2021. The decrease was primarily due to interest expense and debt discount amortization related to the Convertible Notes during the three months ended September 30, 2021. The Convertible Notes converted to the Company’s stock upon closing of the Merger in July 2021.

Interest Income

Interest income of $1.1 million for the three months ended September 30, 2022 related primarily to interest earned on money market funds. No interest income was earned for the three months ended September 30, 2021.

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Loss on Extinguishment of Debt

Loss on extinguishment of debt of $0.9 million for the three months ended September 30, 2021 related to a modification of the 2021 Convertible Notes due to an agreement with noteholders to receive an additional 1,000,000 shares of NHIC common stock as further consideration for the conversion of such notes.

Change in Fair Value of Derivative Liability

Change in the fair value of the derivative liability resulted in a $0.5 million gain for the three months ended September 30, 2021, resulting from the settlement of the derivative liability upon the closing of the Merger.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in gains of $7.2 million and $32.6 million for the three months ended September 30, 2022 and 2021, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in gains of $1.1 million and $5.7 million for the three months ended September 30, 2022 and 2021, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $1.1 million loss and a $3.2 million gain for the three months ended September 30, 2022 and 2021, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

Change in Fair Value of Common Stock Warrant Liability

Change in the fair value of the common stock warrant liability resulted in less than $0.1 million gain for the three months ended September 30, 2021, resulting from the conversion of the common stock warrant liability upon the closing of the Merger and mark-to-market adjustments prior to the closing of the Merger.

Comparison of the Nine Months ended September 30, 2022 and 2021

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021, (in thousands):

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	Nine Months EndedSeptember 30,
	2022		2021		$ Change		% Change
	(Restated)
Revenue:
Product revenue	$	18,965	$	10,279	$	8,686	85	%
Subscription revenue	11,881		5,060		6,821		135
Service revenue	2,411		662		1,749		264
License fee and other revenue	670		794		(124)		(16)
Total revenue	33,927		16,795		17,132		102
Cost of revenue:
Cost of product revenue	23,617		7,386		16,231		220
Cost of subscription revenue	5,726		3,080		2,646		86
Cost of service revenue	1,652		733		919		125
Cost of license fee and other revenue	1,740		952		788		83
Total cost of revenue	32,735		12,151		20,584		169
Gross profit	1,192		4,644		(3,452)		(74)
Operating expenses:
Research and development	13,731		8,399		5,332		63
Sales and marketing	33,246		17,756		15,490		87
General and administrative	29,484		12,058		17,426		145
Loss from impairment of property and equipment	1,038		1,656		(618)		(37)
Total operating expenses	77,499		39,869		37,630		94
Loss from operations	(76,307)		(35,225)		(41,082)		(117)
Other income (expense), net:
Interest expense	(489)		(5,952)		5,463		92
Interest income	1,611		—		1,611		*
Other expense, net	(57)		(669)		612		91
Loss on extinguishment of debt	—		(12,685)		12,685		*
Change in fair value of derivative liability	—		(1,745)		1,745		*
Change in fair value of contingent earn-out liability	9,754		32,609		(22,855)		(70)
Change in fair value of contingently issuable common stock liability	2,529		5,718		(3,189)		(56)
Change in fair value of public warrant liability	4,297		3,152		1,145		36
Change in fair value of common stock warrant liability	—		(879)		879		*
Total other income (expense), net	17,645		19,549		(1,904)		(10)
Net loss	$	(58,662)	$	(15,676)	$	(42,986)	(274)	%
Gross profit margin:
Product revenue	(25) %		28 %		N/A		(53) %
Subscription revenue	52 %		39 %		N/A		13 %
Service revenue	31 %		(11) %		N/A		42 %
License fee and other revenue	(160) %		(20) %		N/A		(140) %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

We believe there are several key trends driving increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) acceleration in our customer acquisition activities as highlighted by the addition of 189 new customers during the nine months ended September 30, 2022, (iii) the expansion of our customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Product Revenue

The decrease in gross profit and gross profit margin during the nine months ended September 30, 2022 compared to the prior year period is attributable to several factors. We experienced strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets. These configurations generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price. Further, a higher percentage of sales were made through our channel partners, which are generally at a lower average sale price, and therefore a lower gross margin, during the nine months ended September 30, 2022 compared to the prior year period. Gross profit and gross profit margin were also adversely impacted by marketing and sponsorship arrangements with certain customers, increases in shipping costs, and the costs associated with the write-off of scrap inventory incurred without corresponding revenue.

Subscription Revenue

Service Revenue

The increase in service revenue is primarily due to the increased number of purchase subscription units deployed in the preceding twelve months and increased installation and training related to the Evolv Express units. The negative gross profit and gross profit margin in each period are due primarily to field services costs associated with the Evolv Express units.

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License fee and other revenue

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $5.6 million, which included an increase in payroll costs and stock-based compensation of $6.3 million resulting from new hires in our research and development function during the past twelve months, offset by $0.4 million increase in capitalized cost related to internal use software. Stock compensation expense included in research and development expenses was $2.9 million for the nine months ended September 30, 2022 compared to $0.4 million for the nine months ended September 30, 2021. Materials and prototype costs decreased by $1.1 million due to the transition from prototype production to standard manufacturing of the Evolv Express, which results in lower prototyping costs. Professional fees increased by $0.7 million primarily due to consulting costs incurred for product development and engineering.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $9.2 million, which included an increase in payroll costs, commissions and stock-based compensation of $10.8 million resulting from new hires in our sales and marketing functions during the past twelve months, which includes functions such as partner development, customer success, and other business development, offset primarily by a decrease of $1.0 million in overhead costs. Stock compensation expense included in sales and marketing expenses was $6.4 million for the nine months ended September 30, 2022 compared to $4.4 million for the nine months ended September 30, 2021. Advertising and direct marketing expense increased by $1.6 million due to an increase in trade shows and events, which have begun to return to pre-pandemic levels. Travel and entertainment expense increased by $1.5 million due to an increase in travel costs for in-person sales personnel meetings and events. Professional fees increased by $0.3 million due to consulting fees. Other expenses increased by $2.8 million primarily due to $1.0 million of certain one-time retention benefits as well as an increase in shipping costs related to demo units of $1.2 million.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $8.4 million, which included an increase in payroll costs and stock-based compensation of $8.2 million resulting from expanding our administrative team during the past twelve months. Stock compensation expense included in general and administrative expenses was $5.7 million for the nine months ended September 30, 2022 compared to $1.2 million for the nine months ended September 30, 2021. Professional fees increased by $3.7 million due to an increase in accounting, audit, tax, and legal services provided to the Company to support public company requirements. Insurance costs increased by $2.3 million due primarily to director and officer insurance expense in relation to being a public company. The increase in non-income taxes of $0.4 million is due to a sales tax contingency liability as we may owe additional sales and use taxes in various jurisdictions. Other expenses increased by $3.0 million due primarily to $1.5 million of certain one-time retention benefits, and a $0.7 million increase in IT and software subscription costs, offset by $0.7 million of non-capitalizable transaction costs incurred during the nine months ended September 30, 2021 related to the Merger.

Loss From Impairment of Property and Equipment

Impairment of property and equipment was $1.0 million and $1.7 million for the nine months ended September 30, 2022 and 2021 respectively. As we transition existing domestic customers to our current Express model, we are removing Edge units and Express prototype units from service, which results in the impairment of the remaining economic value of such units.

Interest Expense

Interest expense was $0.5 million for the nine months ended September 30, 2022, compared to $6.0 million for the nine months ended September 30, 2021. The decrease was primarily due to interest expense on the Convertible Notes during the nine months ended September 30, 2021. The Convertible Notes converted to the Company’s common stock upon closing of the Merger in July 2021.

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Interest Income

Interest income of $1.6 million for the nine months ended September 30, 2022 related primarily to interest earned on money market funds. No interest income was earned for the nine months ended September 30, 2021.

Loss on Extinguishment of Debt

Loss on extinguishment of debt of $12.7 million for the nine months ended September 30, 2021 related to a modification of the 2021 Convertible Notes due to an agreement with noteholders to receive an additional 1,000,000 shares of NHIC common stock as further consideration for the conversion of such notes.

Change in Fair Value of Derivative Liability

Change in the fair value of the derivative liability resulted in a loss of $1.7 million for the nine months ended September 30, 2021, resulting from an increase in the fair value of the Company's stock given the pending Merger. The derivative liability was derecognized in connection with the closing of the Merger.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in gains of $9.8 million and $32.6 million for the nine months ended September 30, 2022 and 2021, respectively, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in gains of $2.5 million and $5.7 million for the nine months ended September 30, 2022 and 2021, respectively, resulting from quarterly mark-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in gains of $4.3 million and $3.2 million for the nine months ended September 30, 2022 and 2021, respectively, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

Change in Fair Value of Common Stock Warrant Liability

Change in the fair value of the common stock warrant liability resulted in a loss of $0.9 million for the nine months ended September 30, 2021, resulting from the conversion of the common stock warrant liability upon the closing of the Merger and mark-to-market adjustments prior to the closing of the Merger.

Income Taxes

There is no provision for income taxes for the three and nine months ended September 30, 2022 and 2021 because we have historically incurred net operating losses and maintain a full valuation allowance against our deferred tax assets. We have provided a valuation allowance for all of our deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate. We continue to assess all positive and negative evidence, including our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecasted results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in any given tax jurisdiction, a reversal of all or some related portion of our existing valuation allowances may occur.

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Comparison of the Three Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021, (in thousands):

	Three Months EndedJune 30,
	2022		2021		$ Change		% Change
	(Restated)
Revenue:
Product revenue	$	4,164	$	2,617	$	1,547	59	%
Subscription revenue	3,772		1,521		2,251		148
Service revenue	782		230		552		240
License fee and other revenue	203		310		(107)		(35)
Total revenue	8,921		4,678		4,243		91
Cost of revenue:
Cost of product revenue	5,347		2,203		3,144		143
Cost of subscription revenue	2,007		1,060		947		89
Cost of service revenue	467		413		54		13
Cost of license fee and other revenue	722		274		448		164
Total cost of revenue	8,543		3,950		4,593		116
Gross profit	378		728		(350)		(48)
Operating expenses:
Research and development	4,374		1,047		3,327		318
Sales and marketing	11,605		5,124		6,481		126
General and administrative	9,574		1,471		8,103		551
Loss from impairment of property and equipment	753		—		753		*
Total operating expenses	26,306		7,642		18,664		244
Loss from operations	(25,928)		(6,914)		(19,014)		(275)
Other income (expense), net:
Interest expense	(159)		(3,263)		3,104		95
Interest income	491		—		491		*
Loss on extinguishment of debt	—		(11,820)		11,820		*
Change in fair value of derivative liability	—		(795)		795		*
Change in fair value of contingent earn-out liability	(569)		—		(569)		*
Change in fair value of contingently issuable common stock liability	(24)		—		(24)		*
Change in fair value of public warrant liability	(143)		—		(143)		*
Change in fair value of common stock warrant liability	—		(185)		185		*
Total other income (expense), net	(404)		(16,063)		15,659		97
Net loss	$	(26,332)	$	(22,977)	$	(3,355)	(15)	%
Gross profit margin:
Product revenue	(28) %		16 %		N/A		(44) %
Subscription revenue	47 %		30 %		N/A		16 %
Service revenue	40 %		(80) %		N/A		120 %
License fee and other revenue	(256) %		12 %		N/A		(267) %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

Product Revenue

The increases in product revenue and cost of product revenue are primarily due to the increase in sales of Evolv Express units, which include the significant increase in the adoption of Evolv Express units by schools, hotels and casinos, and professional sports arenas. We experienced strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets. These configurations generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price. Further, a higher percentage of sales were made through our channel partners, which are generally at a lower average sale price, during the three months ended June 30, 2022 compared to the prior year period. Gross profit and gross profit margin were also adversely impacted by purchase price variances recorded on raw materials and the costs associated with the write-off of scrap inventory incurred without corresponding revenue.

Subscription Revenue

The increases in subscription revenue and cost of subscription revenue are primarily due to growth in our customer base and a higher number of active Evolv Express units deployed in the preceding twelve months. The increase in gross profit is primarily driven by our increased subscription revenue. The increase in gross profit margin was primarily driven by increased recurring revenue from increased active subscriptions and customer growth.

Service Revenue

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gross profit and gross profit margin in each period are due primarily to field services costs associated with the Evolv Express units.

License fee and other revenue

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $2.4 million, which included an increase in payroll costs and stock-based compensation of $2.6 million resulting from new hires in our research and development function during the second half of 2021 and the first half of 2022, offset by $0.1 million increase in capitalized cost related to internal use software. Stock compensation expense included in research and development expenses was $1.1 million for the three months ended June 30, 2022 compared to less than $0.1 million for the three months ended June 30, 2021. The $0.7 million decrease in income recognized during the three months ended June 30, 2021, which did was not earned during the three months ended June 30, 2022, related to materials and prototypes is due to capitalization of prototypes during the period which had been expensed in prior periods.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $3.9 million, which included an increase in payroll costs, commissions and stock-based compensation of $4.5 million resulting from new hires in our sales and marketing functions, which includes functions such as partner development, customer success, and other business development, during the second half of 2021 and the first six months of 2022, offset by a decrease of $0.4 million in overhead costs. Stock compensation expense included in sales and marketing expenses was $2.2 million for the three months ended June 30, 2022 compared to $0.9 million for the three months ended June 30, 2021. Advertising and direct marketing increased by $0.3 million due to an increase in trade shows and events, which have begun to return to pre-pandemic levels, and an increase in sales volume. Travel and entertainment expense increased by $0.5 million due to an increase in travel costs for in-person sales personnel meetings and events. Facilities related and other expenses increased by $1.6 million primarily due to $1.0 million of certain one-time retention benefits as well as an increase in shipping costs related to demo units of $0.5 million.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $3.2 million, which included an increase in payroll costs and stock-based compensation of $3.0 million resulting from expanding our administrative team. Stock compensation expense included in general and administrative expenses was $1.5 million for the three months ended June 30, 2022 compared to $0.1 million for the three months ended June 30, 2021. Professional fees increased by $2.3 million due to an increase in accounting, audit, tax, and legal services provided to the Company to support public company requirements. Insurance costs increased by $1.3 million due primarily to director and officer insurance expense in relation to the Merger. Facilities related and other expenses increased by $1.3 million due primarily to $1.0 million of certain one-time retention benefits, as well as increases in software subscriptions and rent expense of $0.2 million and $0.2 million respectively.

Loss From Impairment of Property and Equipment

Impairment of property and equipment was $0.8 million for the three months ended June 30, 2022. This related to Edge units and Express prototype units that were removed from service and retired. We have been and are continuing to transition our domestic customers from the Edge units to our most current Express units, which has resulted in an impairment of the remaining economic value of such assets. There was no impairment for the three months ended June 30, 2021.

Interest Expense

Interest expense was $0.2 million for the three months ended June 30, 2022, compared to $3.3 million for the three months ended June 30, 2021. The decrease was primarily due to interest expense on the Convertible Notes during the three months ended June 30, 2021. The Convertible Notes converted to the Company’s stock upon closing of the Merger in July 2021.

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Interest Income

Interest income of $0.5 million for the three months ended June 30, 2022 related primarily to interest earned on money market funds. No interest income was earned for the three months ended June 30, 2021.

Loss on Extinguishment of Debt

Loss on extinguishment of debt of $11.8 million for the three months ended June 30, 2021 related to a modification of the 2021 Convertible Notes due to an agreement with noteholders to receive an additional 1,000,000 shares of NHIC common stock as further consideration for the conversion of such notes.

Change in Fair Value of Derivative Liability

Change in the fair value of the derivative liability resulted in a $0.8 million loss for the three months ended June 30, 2021, resulting from an increase in the fair value of the Company's stock given the pending Merger. The derivative liability was derecognized in connection with the closing of the Merger.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $0.6 million loss for the three months ended June 30, 2022, resulting from a quarterly mark-to-market adjustment. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in less than $0.1 million loss for the three months ended June 30, 2022, resulting from a quarterly mark-to-market adjustment. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $0.1 million loss for the three months ended June 30, 2022, resulting from a quarterly mark-to-market adjustment. The public warrant liability was established in connection with the closing of the Merger.

Change in Fair Value of Common Stock Warrant Liability

Change in the fair value of the common stock warrant liability resulted in a $0.2 million loss for the three months ended June 30, 2021, resulting from a quarterly mark-to-market adjustment. The common stock warrant liability was derecognized in connection with the closing of the Merger.

Comparison of the Six Months ended June 30, 2022 and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021, (in thousands):

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	Six Months EndedJune 30,
	2022		2021		$ Change		% Change
	(Restated)
Revenue:
Product revenue	$	9,358	$	4,884	$	4,474	92	%
Subscription revenue	6,776		2,748		4,028		147
Service revenue	1,108		362		746		206
License fee and other revenue	389		377		12		3
Total revenue	17,631		8,371		9,260		111
Cost of revenue:
Cost of product revenue	10,553		4,419		6,134		139
Cost of subscription revenue	3,549		1,803		1,746		97
Cost of service revenue	1,152		540		612		113
Cost of license fee and other revenue	1,102		432		670		155
Total cost of revenue	16,356		7,194		9,162		127
Gross profit	1,275		1,177		98		8
Operating expenses:
Research and development	8,549		4,787		3,762		79
Sales and marketing	21,277		7,732		13,545		175
General and administrative	20,391		4,523		15,868		351
Loss from impairment of property and equipment	849		—		849		*
Total operating expenses	51,066		17,042		34,024		200
Loss from operations	(49,791)		(15,865)		(33,926)		(214)
Other income (expense), net:
Interest expense	(301)		(5,657)		5,356		95
Interest income	559		—		559		*
Other expense, net	—		—		—		*
Loss on extinguishment of debt	—		(11,820)		11,820		*
Change in fair value of derivative liability			(2,220)		2,220		*
Change in fair value of contingent earn-out liability	2,509		—		2,509		*
Change in fair value of contingently issuable common stock liability	1,448		—		1,448		*
Change in fair value of public warrant liability	5,443		—		5,443		*
Change in fair value of common stock warrant liability			(921)		921		*
Total other income (expense), net	9,658		(20,618)		30,276		147
Net loss	$	(40,133)	$	(36,483)	$	(3,650)	(10)	%
Gross profit margin:
Product revenue	(13) %		10 %		N/A		(22) %
Subscription revenue	48 %		34 %		N/A		13 %
Service revenue	(4) %		(49) %		N/A		45 %
License fee and other revenue	(183) %		(15) %		N/A		(169) %

*N/A – Not meaningful

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Revenue, Cost of Revenue and Gross Profit

Product Revenue

The increases in product revenue and cost of product revenue are primarily due to the increase in product sales of Evolv Express units, which included the significant increase in the adoption of Evolv Express units by schools, hotels and casinos, and professional sports arenas. We experienced strong demand across our education and healthcare customers for single lane configurations of Evolv Express due to limitations in the lobby size typical of customers in those markets. These configurations generate lower gross profit than our dual lane configurations of Evolv Express due to a lower average sale price. Further, a higher percentage of sales were made through our channel partners, which are generally at a lower average sale price, during the six months ended June 30, 2022 compared to the prior year period. Gross profit and gross profit margin were also adversely impacted by purchase price variances recorded on raw materials and the costs associated with the write-off of scrap inventory incurred without corresponding revenue.

Subscription Revenue

The increases in subscription revenue and cost of subscription revenue are primarily due to growth in our customer base and a higher number of active Evolv Express units deployed in the preceding twelve months. The increase in gross profit is primarily driven by our increased subscription revenue. The increase in gross profit margin was primarily driven by increased recurring revenue from increased active subscriptions and customer growth.

Service Revenue

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gross profit and gross profit margin in each period are due primarily to field services costs associated with the Evolv Express units.

License fee and other revenue

The increase in license fee and other revenue, gross profit, and gross profit margin was a result of increases in installation, training and professional service revenue earned during the period.

Research and Development Expenses

The increase in research and development expense was due to an increase in personnel related expenses of $4.7 million, which included an increase in payroll costs and stock-based compensation of $4.9 million resulting from new hires in our research and development function during the second half of 2021 and the first half of 2022, offset by $0.2 million increase in capitalized cost related to internal use software. Stock compensation expense included in research and development expenses was $1.7 million for the six months ended June 30, 2022 compared to $0.1 million for the six months ended June 30, 2021. Materials and prototype costs decreased by $1.2 million due to the transition from prototype production to standard manufacturing of the Evolv Express, which results in lower prototyping costs. Professional fees increased by $0.2 million due to an increase in consulting fees for the period.

Sales and Marketing Expenses

The increase in sales and marketing expense was due to an increase in personnel related expenses of $8.3 million, which included an increase in payroll costs, commissions and stock-based compensation of $9.3 million resulting from new hires in our sales and marketing functions, which includes functions such as partner development, customer success, and other business development, during the second half of 2021 and the first six months in 2022, offset by a $0.1 million decrease in recruiting costs and by a decrease of $1.0 million in overhead costs. Stock compensation expense included in sales and marketing expenses was $3.7 million for the six months ended June 30, 2022 compared to $1.1 million for the six months ended June 30, 2021. Advertising and direct marketing expense increased by $1.7 million due to an increase in trade shows and events, which have begun to return to pre-pandemic levels, and an increase in sales volume. Travel and entertainment expense increased by $1.0 million due to an increase in travel costs for in-person sales personnel meetings and events. Facilities related and other expenses increased by $2.3 million primarily due to $1.0 million of certain one-time retention benefits as well as an increase in shipping costs related to demo units of $0.7 million.

General and Administrative Expenses

The increase in general and administrative expense was due to an increase in personnel related expenses of $6.9 million, which included an increase in payroll costs and stock-based compensation of $6.1 million resulting from expanding our administrative team. Stock compensation expense included in general and administrative expenses was $3.3 million for the six months ended June 30, 2022 compared to $0.2 million for the six months ended June 30, 2021. Professional fees increased by $3.7 million due to an increase in accounting, audit, tax, and legal services provided to the Company to support public company requirements. Insurance costs increased by $2.4 million due primarily to director and officer insurance expense in relation to the Merger. The increase in non-income taxes is due to a sales tax contingency liability as we may owe additional sales and use taxes in various jurisdictions. Facilities related and other expenses increased by $2.9 million due primarily to $1.5 million of certain one-time retention benefits, and increases in software subscription fees of $0.4 million, and state and local income taxes of $0.6 million.

Loss From Impairment of Property and Equipment

Impairment of property and equipment was $0.8 million for the six months ended June 30, 2022. This related to Edge units and Express prototype units that were removed from service and retired. We have been and are continuing to transition our domestic customers from the Edge units to our most current Express units, which also resulted in an impairment of the remaining economic value of such assets. There was no impairment for the six months ended June 30, 2021.

Interest Expense

Interest expense was $0.3 million for the six months ended June 30, 2022, compared to $5.7 million for the six months ended June 30, 2021. The decrease was primarily due to interest expense on the Convertible Notes during the six months ended June 30, 2021. The Convertible Notes converted to the Company’s common stock upon closing of the Merger in July 2021.

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Interest Income

Interest income of $0.6 million for the six months ended June 30, 2022 related primarily to interest earned on money market funds. No interest income was earned for the six months ended June 30, 2021.

Loss on Extinguishment of Debt

Loss on extinguishment of debt of $11.8 million for the six months ended June 30, 2021 related to a modification of the 2021 Convertible Notes due to an agreement with noteholders to receive an additional 1,000,000 shares of NHIC common stock as further consideration for the conversion of such notes.

Change in Fair Value of Derivative Liability

Change in the fair value of the derivative liability resulted in a $2.2 million loss for the six months ended June 30, 2021, resulting from an increase in the fair value of the Company's stock given the pending Merger. The derivative liability was derecognized in connection with the closing of the Merger.

Change in Fair Value of Contingent Earn-out Liability

Change in the fair value of the contingent earn-out liability resulted in a $2.5 million gain for the six months ended June 30, 2022, resulting from quarterly mark-to-market adjustments. The contingent earn-out liability was established in connection with the closing of the Merger.

Change in Fair Value of Contingently Issuable Common Stock Liability

Change in the fair value of the contingently issuable common stock liability resulted in a $1.4 million gain for the six months ended June 30, 2022, resulting from quarterly market-to-market adjustments. The contingently issuable common stock liability was established in connection with the closing of the Merger.

Change in Fair Value of Public Warrant Liability

Change in the fair value of the public warrant liability resulted in a $5.4 million gain for the six months ended June 30, 2022, resulting from quarterly mark-to-market adjustments. The public warrant liability was established in connection with the closing of the Merger.

Change in Fair Value of Common Stock Warrant Liability

Change in the fair value of the common stock warrant liability resulted in a $0.9 million loss for the six months ended June 30, 2021, resulting from quarterly mark-to-market adjustments. The common stock warrant liability was derecognized in connection with the closing of the Merger.

Income Taxes

There is no provision for income taxes for the three and six months ended June 30, 2022 and 2021 because we have historically incurred net operating losses and maintain a full valuation allowance against our deferred tax assets. We have provided a valuation allowance for all of our deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate. We continue to assess all positive and negative evidence, including our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecasted results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in any given tax jurisdiction, a reversal of all or some related portion of our existing valuation allowances may occur.

Comparison of the Three Months ended March 31, 2022 and 2021

We have not provided a comparison of the three Months ended March 31, 2022 and 2021 as we did not restate any previously reported financial information for these quarterly periods. Our results of operations for the three months ended March 31, 2022, including a discussion of the three months ended March 31, 2022 compared to the three months ended March 31, 2021, have been reported previously in our Quarterly Report on Form 10-Q for the three months ended March

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31, 2022, filed with the SEC on May 13, 2022, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Liquidity and Capital Resources

~~Our~~In ~~financial~~accordance ~~statements~~with ~~have~~Accounting ~~been~~Standards ~~prepared~~Update on(“ASU”) ~~the~~No. ~~basis of continuity of operations~~2014-15, ~~realization~~Disclosures of ~~assets~~Uncertainties ~~and~~about ~~the~~an ~~satisfaction~~Entity’s ofAbility ~~liabilities~~to inContinue ~~the~~as ~~ordinary~~a ~~course~~Going ofConcern ~~business.~~(Subtopic ~~Our primary requirements for liquidity and capital are working capital~~205-40), ~~inventory~~ management, ~~capital~~must ~~expenditures~~evaluate ~~and~~whether ~~general~~there ~~corporate~~are ~~needs.~~conditions Weor ~~expect these needs to continue as we develop and grow our business. As of December 31~~events, ~~2024,~~considered ~~we had $51.9 million~~ in ~~cash,~~the ~~cash equivalents~~aggregate, ~~and~~that ~~marketable~~raise ~~securities,~~substantial ~~and~~doubt asabout ofour ~~March~~ability ~~31,~~to ~~2025,~~continue weas ~~had $35.0 million in cash, cash equivalents, and marketable securities. We incurred~~ a ~~net~~going ~~loss~~concern ofwithin ~~$54.0~~one ~~million~~year ~~and~~after ~~$108.0 million for~~ the ~~years~~date ~~ended~~that ~~December 31, 2024 and 2023, respectively. We incurred cash outflows from operating activities of $30.9 million and $9.8 million during~~ the ~~years~~financial ~~ended~~statements ~~December 31,~~are ~~2024 and 2023, respectively~~issued. ~~We expect to continue to generate losses for the foreseeable future.~~

Our financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, debt obligations, and general corporate needs. We expect these needs to continue as we develop and grow our business. As of December 31, 2025, we had $69.0 million in cash, cash equivalents, and marketable securities, with outstanding debt of $30.0 million and available additional debt of up to $45.0 million, as detailed below. We incurred a net loss of $33.1 million and $54.0 million for the years ended December 31, 2025 and 2024, respectively. Operating activities resulted in cash inflow of $18.7 million and cash outflow of $30.9 million during the years ended December 31, 2025 and 2024, respectively. We expect to continue to generate losses for the foreseeable future.

We maintain substantially all of our cash, cash equivalents, and marketable securities in accounts with U.S. and multi-national financial institutions and our cash deposits at these institutions exceed Federal Deposit Insurance Corporation insured limits. We do not believe we are exposed to any unusual credit risk or deposit concentration risk beyond the ordinary credit risk associated with commercial banking relationships.

WeAs ~~expect~~described ~~our cash~~below, ~~cash~~on ~~equivalents~~July 29, ~~and~~2025 ~~marketable~~(the ~~securities~~"Closing ofDate"), ~~$51.9~~Evolv ~~million as of December 31~~Technologies, ~~2024,~~Inc. ~~together~~entered

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