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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 consolidated financial statements and the related notes and other financial information included in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this Annual Report. You should review the disclosure under the heading “Risk Factors” in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

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

Guerrilla RF possesses in-house design, applications, sales, and customer support functions as a fabless semiconductor company. We outsource the manufacture and production of our MMIC products to subcontractors, providing access to multiple semiconductor process technologies. Guerrilla RF’s primary external wafer foundries are located in Taiwan and Singapore, and our primary assembly and test suppliers are located in Malaysia and the Philippines.

FISCAL 2024 FINANCIAL HIGHLIGHTS

● Revenue for fiscal year 2024 increased by 33.4% compared to fiscal year 2023, driven by the acquisition of new customers, the launch of new product programs, and increased market share in our core markets. Catalog, Wireless Infrastructure, Wireless Audio, and SatCom all posted solid gains, while Automotive experienced a temporary decline due to a key customer’s delayed initiative. Despite this delay, our automotive product line remained a significant contributor, with significant order volume OEM customers and from major electronics suppliers to OEM component manufacturers. Our ongoing market‐diversification strategy continued to boost revenue, with notable sales increases in repeaters, wireless audio, and SatCom.

● Gross profit for fiscal year 2024 was 63.7% of revenues as compared to 57.1% for fiscal year 2023. Although the Company has continued to experience supply chain price increases, we have mitigated these cost pressures by carefully shifting our product mix toward higher-margin offerings. Product contribution margins rose from 70.5% in 2023 to 74.8% in 2024. Product contribution margins were partially offset by higher overhead costs, on a comparative period basis, which increased due to headcount additions in our Quality group, as well as increased facility costs.

● Operating loss was $8.8 million for 2024 as compared to $12.9 million for 2023. This decrease in operating loss was due to higher revenue, while our operating expenses remained relatively flat, with expenses in our engineering and research and development areas decreasing $0.6 million or 6% year over year. Sales and marketing expenses increased, rising $0.6 million to $6.3 million or 10% over the prior year period. Administration costs experienced a small increase of $49 thousand or 1% over the prior year period.

● Basic net loss per share was $1.12 and $2.25 for fiscal year 2024 and 2023, respectively.

● Purchases of property, plant and equipment were $0.4 million for fiscal year 2024 and $0.1 million for the fiscal year 2023. The majority of capital expenditures for 2024 are related to capital additions for the Company's laboratory equipment and related facilities.

Ongoing Funding of Operations

As a relatively young company in its early stages of market penetration and customer acquisition, we have historically sought funding to support our operations and our research and development efforts, in furtherance of new product introductions, market share increases, and participation in new markets. On March 28, 2024, we completed a private placement offering of approximately $5 million, raising net cash proceeds of approximately $3 million, after deduction of expenses and the conversion of existing debt. On August 5, 2024, we completed a $22 million private placement offering, raising net cash proceeds of approximately $21.6 million, after deduction of expenses. We project these funds will be adequate to fund the business for the rest of this fiscal year and beyond. However, we may seek additional funding from capital and debt markets to support new product development efforts, take advantage of business opportunities, and expand our sales and marketing capabilities and reach.

New Headquarters and Design Center Capital

In the first quarter of 2023, we moved into a new headquarters building in Greensboro, NC to support our growing employee base and research and development and customer support laboratory space requirements. The new facility incorporates over 50,000 square feet of office and clean laboratory space, and replaced our former headquarters (also in Greensboro) of approximately 10,000 square feet of space.

Distributor and Sales Networks

We work with global distributors and sales representatives to promote and expand our sales force. Guerrilla RF leverages these ongoing business partnerships for long-term sales and market strategies. In 2022, we expanded our sales representative network in North America, Korea, Japan, and the PRC. Currently, we work with three large electronic component distributors and over 19 sales representative organizations worldwide.

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Key Metrics (Non-GAAP Measures)

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

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

Year Ended December 31,

Key Metrics

Number of products released 32 12

Number of total products 163 131

Number of products with lifetime revenue exceeding $100 thousand 73 62

Product backlog (in millions) $ 5.44 $ 5.96

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

Number of total products: The cumulative number of production-released products since Guerrilla RF's inception through the end of the period.

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

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

Components of Results of Operations

Revenues

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

Direct Product Costs and Gross Profit

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

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

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

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Operating Expenses

Operating expenses consist primarily of research and development expenses, sales and marketing expenses, and employee compensation costs for operations management, finance, accounting, information technology, compliance, and human resources personnel. In addition, general and administrative expenses include non-personnel costs, such as facilities, legal, accounting, and other professional fees, and other supporting corporate expenses not allocated to other departments. We expect our general and administrative expenses will decrease in the near term as the Company continues to focus on expense reduction. Over the longer term we expect general and administrative expenses to grow in absolute dollars as our business grows, but we expect general and administrative expenses to decrease as a percentage of revenues in the coming years.

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

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

Administrative expenses consist primarily of employee compensation costs related to executive management of the Company, financial management, human resources and information technology. In addition, administrative expenses include business and liability insurance, audit and legal fees as well as consulting and advising fees. Currently the Company is focused on limiting the growth of administrative expenses and expect such expenses to decline moderately in the coming year.

Interest Expense

Interest expense consists primarily of the interest incurred on our debt obligations, our factoring arrangement expenses, the non-cash interest expense associated with the amortization of shares of common stock issued to certain debtholders as debt discount and debtholders that have a bifurcated conversion feature related to certain convertible notes payable, and lease expense related to our capital leases.

Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities is fully attributable to the call and put options features of the convertible notes for the years ended December 31, 2024 and December 31, 2023.

Other Income (Expenses)

Other income (expense) for the years ended December 31, 2023 and 2024 was immaterial in each period (no more than $281 thousand). Included in other income (expense) were small transactions related to foreign currency transactions and recognition of a county economic development grant.

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

Year Ended December 31,

Operating expenses:

Other income (expenses):

Loss on debt extinguishment (1,523,221 ) —

Change in fair value of derivative liabilities 158,000 (142,200 )

Change in fair value of warrant liabilities 2,198,051 —

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Comparison for the years ended December 31, 2024 and 2023:

Year Ended December 31,

Revenues increased by $5.0 million to $20.1 million for the year ended December 31, 2024, compared to $15.1 million for the year ended December 31, 2023. This growth was primarily driven by increased product sales in our wireless infrastructure and catalog segments. Our product offerings and customer base both expanded during the year, reflecting our ongoing sales strategy of enhancing existing relationships and acquiring new customers through targeted marketing activities. Meanwhile, royalty and non‐recurring revenue declined by 99%, from $400 thousand in 2023 to $2 thousand in 2024, underscoring its reduced significance in our overall revenue plan.

We generate revenue from customers located within and outside the U.S. While we have several large customers, we define major customers as those responsible for more than 10% of Guerrilla RF’s annual product shipment revenue. Using this definition, Guerrilla RF had one major customer, Richardson RFPD, Inc. ("RFPD"), during the years ended December 31, 2024, and December 31, 2023. RFPD, a large product distributor serving numerous end customers, generated 77% and 81% of product shipment revenue for the years ended December 31, 2024 and 2023.

Our existing product sales increased from $11.2 million for the year ended December 31, 2023 to $17.0 million for the year ended December 31, 2024, or 74% and 84% of total product sales, respectively. We continued to develop and sell new products into our markets, however new product sales fell from $3.6 million for the year ended December 31, 2023 to $3.1 million for the year ended December 31, 2024, or 24% and 15% of total product sales, respectively, primarily due to the delays related to a new product program.

International shipments amounted to $4.0 million (approximately 20% of total product revenue) and $2.3 million (approximately 16% of total product revenue) for the years ended December 31, 2024, and December 31, 2023, respectively.

Direct Product Costs and Gross Profit

Year Ended December 31,

Direct product costs increased $0.8 million to $7.3 million for the year ended December 31, 2024, compared to $6.5 million for the year ended December 31, 2023. The 13% increase in direct product costs was driven by increased product sales of 37% (excluding royalty and non-recurring revenue). This increase was also impacted to a lesser extent by an increase in fixed overhead costs (Quality staffing and related costs) of $0.1 million. Year-over-year gross profit increase was due to a sales volume increase of 37% combined with improved product contribution margins from product mix changes between 2023 and 2024, as sales from one of our higher margin categories (5G Infrastructure) grew disproportionately compared to other sales, reflecting a year over year increase of 360%.

Research and Development Expenses

Year Ended December 31,

Research and development expenses decreased $0.6 million to $9.7 million for the year ended December 31, 2024, compared to $10.3 million for the year ended December 31, 2023. R&D spending decreased as prototype mask sets related to new product development declined, driven in part by reduced efforts on silicon development. Lab, facility and information technology support decreased $0.6 million due to expense reduction efforts. This was offset by wages increasing $0.2 million primarily due to executive bonuses being paid for 2024, whereas there were no comparable bonuses in 2023.

Sales and Marketing Expenses

Year Ended December 31,

Sales and marketing expenses increased $0.6 million to $6.3 million for the year ended December 31, 2024, compared to $5.7 million for the year ended December 31, 2023. The 10% increase year over year was driven primarily by increases in wages and benefits of $0.7 million, including sales representative commissions. Driving cost increases in this category were executive bonuses of $0.1 million in 2024, with no comparable bonuses in 2023, increased share-based compensation of $0.2 million, and headcount related increases for the United Kingdom and European sales team of $0.2 million. In addition, sales representative commissions increased almost $0.2 million driven by significant increases in sales volumes in 2024 compared to 2023. Lastly, facility and information support costs declined by $0.1 million from the previous year due to cost-cutting efforts.

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General and Administrative Expenses

Year Ended December 31,

General and administrative expenses were $5.6 million for the years ended December 31, 2024, and 2023. There was a decrease of $0.8 million in wages and benefits resulting from reductions in headcount. In addition, software costs fell by $0.4 million as a result of cost-cutting efforts. These decreases were offset by increases in non-income taxes of $0.3 million and professional fees of $0.2 million. Increases of $0.7 million in general expenses, which included facilities costs, office supplies and expenses, and general information technology support, including cyber security, resulted in a net increase overall in general and administrative costs of less than $0.1 million.

Other Income (Expenses)

Year Ended December 31,

Other expense decreased approximately $1.1 million to $2.0 million for the year ended December 31, 2024, compared to $3.0 million for the year ended December 31, 2023. The decrease was largely attributable to a change in warrant liabilities of $2.2 million, which was driven by a significant decrease in the Company’s share price, which was a key determinant in the value of those warrant liabilities. Offsetting this gain was a loss of $1.5 million on the loss on debt extinguishment. Following the significant funding event in the third quarter of 2024, the Company repaid a significant amount of an existing loan facility (“Salem Loan Facility”) with Salem Investment Partners V, Limited Partnership (“Salem”), resulting in the write-off of unamortized costs associated with that debt that was being amortized over 5 years.

In addition, the Company had smaller contributors to other income including $0.2 million in interest income earned on funds deposited in a money market account which it did not have in 2023, and a change in its derivative liabilities, reflecting an decrease in fair value of $0.2 million.

Finally, an increase in interest expense, as a result of higher levels of debt during the first three quarters of 2024 compared to 2023 of $0.3 million was counteracted by a $0.3 million of other income driven by a grant that was received during 2024.

Liquidity and Capital Resources

Our primary source of liquidity has been cash raised from private placements and debt financing. As of December 31, 2024, we had cash resources of $8.0 million. We also have a loan facility for up to $3.75 million (referred to as the Spectrum Loan Facility, described in Note 5 to our consolidated financial statements) with Spectrum Commercial Services Company, L.L.C. (“Spectrum”). On March 28, 2024 we completed a private placement offering of approximately $5 million, raising net cash proceeds of approximately $3 million, after deduction of expenses and the conversion of existing debt. On August 5, 2024, we completed a $22 million private placement offering, raising net cash proceeds of approximately $21.6 million, after deduction of expenses. As of December 31, 2024, we had drawn down $0.6 million under the Spectrum Loan Facility and had an outstanding balance of $4.5 million under the Salem Loan Facility. The Company believes that its existing cash and cash equivalents following this raise will provide sufficient resources to support operations through the rest of this fiscal year and beyond. However, we may seek additional funding opportunities if management believes such funds can be successfully invested in business opportunities for the Company.

As described in Note 1 to our consolidated financial statements, we have incurred recurring losses and negative cash flows from operations since inception and have an accumulated deficit at December 31, 2024 of $53.8 million. We expect losses and negative cash flows to continue in the near term, primarily due to continued investment in research and development, sales and marketing efforts, and increased administration expenses as our Company grows. We plan to continue to invest in the implementation of our long-term strategic plan and we anticipate that we will continue to narrow cash burn from historical levels. so that cash reserves will provide the necessary working capital to conclude the Company is a going concern.

The following table summarizes our sources and uses of cash for each of the periods presented.

Cash (used in) provided by:

Year Ended December 31,

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Operating Activities

Cash used in operating activities was $6.7 million and $13.5 million for the years ended December 31, 2024 and 2023, respectively. Cash used in operating activities for the year ended December 31, 2024 principally resulted from our net loss of $10.8 million, with uses offset by $1.7 million in share-based compensation, non-cash depreciation and amortization of $1.5 million, accretion of notes payable of $1.3 million, non-cash interest expense related to debt refinancing of $0.4 million, as well as a change in inventory allowance of $0.2 million, and further adjusted by an aggregate gain of $2.3 million on the change in fair value of derivative and warrant liabilities. There was also $0.1 million provided from the decrease of prepaid expenses, an increase of accounts receivable of $0.2 million, and an increase in operating lease liability of $0.4 million. In addition, there was a $0.5 million increase in inventories.

Cash used in operating activities for the year ended December 31, 2023, principally resulted from our net loss of $16.0 million, with uses offset by non-cash depreciation and amortization of $1.6 million, non-cash interest expense related to debt refinancing of $0.4 million, accretion of notes payable of $1.1 million as well as $1.3 million in share-based compensation. There was also $1.0 million provided from the decrease of prepaid expenses, an increase of accounts receivable of $1.0 million, and a decrease in operating lease expense of $0.1 million. In addition, there was a $2.2 million decrease in accounts payable and accrued expenses and a $0.1 million decrease in inventory.

Investing Activities

Cash used in investing activities was $0.8 million and $0.1 million for the years ended December 31, 2024 and 2023, respectively. Cash used in investing activities resulted from capital expenditures on property and equipment for all periods presented, and additional capital expenditures in 2024 for the purchase of intangible assets.

Financing Activities

Cash provided by financing activities during the year ended December 31, 2024, of $14.6 million was principally attributable to $8.3 million in net payments related to the Spectrum Loan Facility and Salem Loan more than offset by total net proceeds from equity financing of $24.6 million. Principal payments on capital leases reduced total cash provided by financing by $1.0 million.

Contractual Obligations and Commitments

The following summarizes our significant contractual obligations as of December 31, 2024.

Payments due by period

Total Less than 1 year 1 – 3 years 4 – 5 years More than 5 years

Off-Balance Sheet Arrangements

As of December 31, 2024 and 2023, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

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

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Other than as described under Note 2 to our audited consolidated financial statements, the Critical Accounting Policies and Significant Judgments and Estimates included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission on March 29, 2024, have not materially changed.

We believe that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the policies we think are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Liquidity and Going Concern

In accordance with Financial Accounting Standards Accounting Standards Update (“ASU”) No.2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The accompanying consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has historically financed its activities through a combination of commercial loans and the proceeds of debt and equity issuances. The consolidated financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company has incurred substantial negative cash flows from operations in nearly every fiscal period since inception. For the years ended December 31, 2024 and 2023, the Company incurred a net loss of $10.8 million and $16.0 million, respectively. For the years ended December 31, 2024 and 2023, the Company used $6.7 million and $13.5 million in cash to fund operations, respectively. As a result, the Company had an accumulated deficit of $53.8 million as of December 31, 2024. The Company's cash and working capital as of December 31, 2024 was $8.0 million and $6.3 million, respectively. We expect losses and negative cash flows to continue in the near term, primarily due to continued investment in research and development, sales and marketing efforts, and increased administration expenses as our Company grows. The Company plans to continue to invest in the implementation of its long-term strategic plan and anticipates that it will continue to narrow cash burn from historical levels.

Our primary source of liquidity has been from cash raised from private placements and debt financing. We also have a loan facility for up to $3.75 million with a specialty lender (referred to as the Spectrum Loan Facility, described in Note 5 to our consolidated financial statements). On March 28, 2024 we completed a private placement offering of approximately $5 million, raising net cash proceeds of approximately $3 million, after deduction of expenses and the conversion of existing debt. On August 5, 2024, we completed a $22 million private placement offering, raising net cash proceeds of approximately $21.6 million, after deduction of expenses. Additionally, on August 2, 2024, the Company initiated the amendment of the a loan facility (referred to as the Salem Loan Facility, described in Note 5) to (i) reduce the outstanding principal balance from $12.0 million to $4.5 million, (ii) extend the maturity date from January 31, 2026 to December 31, 2028, and (iii) reduce the interest rate from 14% (comprising 3% payment-in-kind (deferred) and 11% cash) to 12% cash. The amendment was effective on August 5, 2024 after the principal balance was reduced from $12.0 million to $4.5 million by using a portion of the proceeds from the private placement offering in August 2024. As a result, the Company believes that its existing cash and cash equivalents will provide sufficient resources to fund operations for at least the next twelve months after the issuance date of these financial statements.

Fair Value of Financial Instruments

We measure the fair value of financial assets and liabilities based on ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities;

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

The carrying amounts of our financial instruments, such as cash, accounts receivable, and accounts payable approximate fair values due to the short-term nature of these instruments. We have valued certain warrants as Level 3 warrant liabilities and carried at their fair value computed using a Monte-Carlo simulation. The Monte Carlo simulation considered assumptions including the number of trials, warrant dilution, bid price estimates and multiple VWAP amounts for the cashless conversions of the North Run Warrants. Additionally, other key assumptions used in the Monte-Carlo simulation include the risk-free rate, the expected term of the warrants, expected stock price volatility, expected dividends and management’s assumption that the probability of a fundamental transaction occurring is de minimis.

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JOBS Act Accounting Election

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

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Guerrilla RF, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm 49

Consolidated Balance Sheets 50

Consolidated Statements of Operations 51

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) 52

Consolidated Statements of Cash Flows 53

Notes to Consolidated Financial Statements 54

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Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors, and Audit Committee of Guerrilla RF, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Guerrilla RF, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Forvis Mazars, LLP

We have served as the Company’s auditor since 2021.

Raleigh, NC

March 27, 2025

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Guerrilla RF, Inc.

Consolidated Balance Sheets

December 31, 2024 and 2023

Assets

Prepaid expenses and other 123,185 -

Intangible assets, net 346,547 -

Liabilities, Redeemable Preferred Stock and Stockholders' Deficit

Derivative liabilities - 158,000

Convertible notes - 78,905

Convertible notes - related parties - 700,189

Commitments and Contingencies

Stockholders' Deficit

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Guerrilla RF, Inc.

Consolidated Statements of Operations

For the Years Ended December 31, 2024 and 2023

Year Ended December 31,

Royalties and non-recurring engineering 2,377 394,824

Operating Expenses:

Loss on debt extinguishment (1,523,221 ) -

Change in fair value of derivative liabilities 158,000 (142,200 )

Change in fair value of warrant liabilities 2,198,051 -

Net loss per share - basic and diluted $ (1.12 ) $ (2.25 )

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Guerrilla RF, Inc.

Consolidated Statements of Change in Stockholders' Equity (Deficit)

For the Years Ended December 31, 2024 and 2023

Stock options exercised - - 6,000 - 6,000

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Guerrilla RF, Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2024 and 2023

Year Ended December 31,

Cash flows from operating activities

Adjustment to reconcile net loss to net cash used in operating activities

Non-cash interest expense related to debt financing 413,727 407,710

Impairment on property plant and equipment and operating lease - 115,438

Loss on extinguishment of debt 1,523,221 -

Change in fair value of derivative liabilities (158,000 ) 142,200

Change in fair value of warrant liabilities (2,198,051 ) -

Changes in assets and liabilities:

Cash flows from investing activities

Purchases of property, plant, and equipment (380,880 ) (101,714 )

Purchase of intangible assets (371,300 ) -

Cash flows from financing activities

Proceeds from stock options exercised 6,000 -

Repayments of finance insurance premiums (746,830 ) (569,665 )

Payment of deferred offering costs (30,000 ) -

Noncash investing and financing transactions:

Modification on operating and finance leases $ 1,500 $ 806,617

Conversion of debt into equity $ 2,794,243 $ -

Shares issued for prepaid services $ - $ 100,000

Right-of use assets obtained through operating lease $ 145,987 $ 7,837,471

Financing of property and equipment $ - $ 483,787

Financing of mask set and wafer $ - $ 369,421

Financing of insurance premiums and software $ 249,607 $ 470,860

Property and equipment financed through finance leases $ - $ 271,725

Termination of ROU Asset and Lease Liability $ 98,963 $ -

Property and equipment additions included in accounts payable $ 39,899 $ 35,000

Reclassification of historical warrants $ 2,130,167 $ -

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

1.Organization and Nature of Business

Guerrilla RF, Inc. (formerly known as Laffin Acquisition Corp.) was incorporated in the State of Delaware on November 9, 2020. Guerrilla RF Operating Corporation (formerly known as Guerrilla RF, Inc.), a fabless semiconductor company based in Greensboro, North Carolina, was founded in 2013, initially as a North Carolina limited liability company before converting to a Delaware corporation. On October 22, 2021, Guerrilla RF Acquisition Corp., a wholly owned subsidiary of Guerrilla RF, Inc., merged with and into Guerrilla RF Operating Corporation in a “reverse merger” transaction (the “Merger”), with Guerrilla RF Operating Corporation continuing as the surviving corporation and a wholly-owned subsidiary of Guerrilla RF, Inc. On May 30, 2023, Guerrilla RF Operating Corporation was merged with and into Guerrilla RF, Inc.

All references in these Consolidated Financial Statements to “Guerrilla RF” refer to: (i) for periods prior to May 30, 2023, Guerrilla RF Operating Corporation; and (ii) for subsequent periods, Guerrilla RF, Inc. Unless otherwise stated or the context otherwise indicates, references to the “Company”, “we”, “our”, “us” or similar terms refer to Guerrilla RF, Inc. together with Guerrilla RF Operating Corporation.

Guerrilla RF designs and manufactures high‐performance Monolithic Microwave Integrated Circuits (MMICs) for the wireless infrastructure market. Guerrilla RF primarily focuses on researching and developing its existing products and building an infrastructure to handle a global distribution network; therefore, it has incurred significant start‐up losses.

Liquidity and Going Concern

Our primary source of liquidity has been from cash raised from private placements and debt financing. We also have a loan facility for up to $3.75 million with a specialty lender (referred to as the Spectrum Loan Facility, described in Note 5 to our consolidated financial statements). As of December 31, 2024, we had drawn down $0.6 million under the Spectrum Loan Facility. On March 28, 2024 we completed a private placement offering of approximately $5 million, raising net cash proceeds of approximately $3 million, after deduction of expenses and the conversion of existing debt. On August 5, 2024, we completed a $22 million private placement offering, raising net cash proceeds of approximately $21.6 million, after deduction of expenses. Additionally, on August 2, 2024, the Company initiated the amendment of the a loan facility (referred to as the Salem Loan Facility, described in Note 5) to (i) reduce the outstanding principal balance from $12.0 million to $4.5 million, (ii) extend the maturity date from January 31, 2026 to December 31, 2028, and (iii) reduce the interest rate from 14% (comprising 3% payment-in-kind (deferred) and 11% cash) to 12% cash. The amendment was effective on August 5, 2024 after the principal balance was reduced from $12.0 million to $4.5 million by using a portion of the proceeds from private placement offering in August 2024. As a result, the Company believes that its existing cash and cash equivalents will provide sufficient resources to fund operations for at least the next twelve months after the issuance date of these financial statements.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Risks and Uncertainties

The Company is subject to several risks associated with companies at a similar stage, including dependence on key individuals, competition from similar products and larger companies, volatility of the industry, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions including the current macro-economic conditions impacting the banking and financial markets.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with GAAP and with the rules and regulations for reporting the Annual Report on Form 10-K ("Form 10-K"), and are presented in U.S. dollars. Any reference in these Notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Guerrilla RF Operating Corporation that was merged with and into the Company in May 2023. All intercompany accounts and transactions have been eliminated in consolidation.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public and private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates and judgments involve derivatives and warrant liabilities and the valuation of equity financing. Accordingly, actual results could differ from those estimates.

Concentrations of Credit Risk and Major Customers

Financial instruments at December 31, 2024 and 2023that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company’s cash is deposited with major financial institutions in the U.S. At times, deposits in financial institutions located in the U.S. may be in excess of the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation (FDIC). To date, the Company has not experienced any losses on its cash deposits.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

The Company’s accounts receivable are derived from revenue earned from customers located in and outside of the U.S. Major customers are defined as those generating revenue in excess of 10% of the Company’s annual product shipment revenue. The Company had one major customer during the years ended December 31, 2024 and 2023. Revenues from the major customer accounted for 77% and81% of product shipment revenue for both the years ended December 31, 2024 and 2023, respectively. Accounts receivable from our major customer represented 81% of accounts receivable at December 31, 2024, and 71% of accounts receivable at December 31, 2023.

Accounts Receivable

Accounts receivable primarily relate to amounts due from customers, which are typically due within 30 to 45 days. Accounts receivable also include royalty revenue from our one royalty agreement. The Company provides credit to its customers in the ordinary course of business and evaluates the need for a provision to be added to its allowance for expected credit losses. The allowance represents the Company’s best estimate of expected credit losses it may experience in the Company’s accounts receivable portfolio. Management estimates the allowance for expected credit losses based on an ongoing review of existing economic conditions, the financial conditions of the customers, historical trends in credit losses, and the amount and age of past due accounts. The Company does not require collateral or other security for accounts receivable. To reduce credit risk with accounts receivable, the Company performs ongoing evaluations of its customers’ financial condition. The Company establishes an allowance for expected credit losses and other customer claims. Historically, such losses have been immaterial and within management's expectations; therefore, the Company does not currently have an allowance for expected credit losses.

The Company has a loan facility (the 'Spectrum Loan Facility') with a specialty lender, Spectrum Commercial Services Company, L.L.C ('Spectrum'). The Spectrum Loan Facility provides for advance payments up to $3.75 million, calculated, in part, based on the value of eligible accounts receivable assigned to Spectrum as security for advances under the Spectrum Loan Facility. As of December 31, 2024, there were $0.6 million of advances outstanding under the Spectrum Loan Facility. At December 31, 2024, $27 thousand of excess collateral was due from Spectrum, which is included in accounts receivable on the consolidated balance sheets. See Note 5 for additional discussion on the Spectrum Loan Facility.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. The Company depreciates computer hardware, software, production and computer equipment, and lab equipment using the straight-line method over their estimated useful lives, ranging from three to five years. The Company depreciates furniture and fixtures using the straight-line method over their estimated useful lives of seven years. Leasehold improvements are amortized over the shorter of the asset’s useful life or the remaining lease term. Repairs and maintenance are expensed as incurred by the Company.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The recoverability of assets held and used is measured by comparing the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets, less costs to sell. The Company evaluated its long-lived assets for impairment in the year ended December 31, 2024, and determined no impairment expense was deemed necessary. See Note 4 for further information.

Deferred Offering Costs

The Company will capitalize legal, professional, accounting, and other third-party fees directly associated with common equity financings as deferred offering costs on the balance sheet as a non-current asset until the transaction is complete. The Company will recognize such previously deferred offering costs and any additional incurred offering costs in connection with such transaction, as a reduction of additional paid in capital. Transaction costs consisting of legal, accounting, financial advisory, and other professional fees incurred as part of the Company's equity financing, as mentioned in Note 6 were offset against the total proceeds from such offerings in the accompanying consolidated financial statements for both the years ended December 31, 2024 and 2023.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Revenue Recognition

The Company recognizes product revenue when it satisfies a performance obligation by transferring a product or service to its customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products and services. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. The Company provides an assurance-type warranty to its customers as part of its contracts' standard terms and conditions, which does not include a right of return for properly functioning products not deemed obsolete. These warranties do not provide an additional distinct service to the customer and are not deemed a separate performance obligation. Royalty revenue is recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which some or all the sales-based royalties have been allocated are satisfied.

During the years ended December 31, 2024 and 2023, the Company had $0 and $250 thousand of revenue from contracts with customers to be recognized over time as the services are delivered to the customer. Certain nonrecurring engineering service revenues are recognized over time as the services are delivered to the customer. As of December 31, 2024 and 2023, the Company did not have any contract liabilities where performance obligations have not yet been satisfied. During the years ended December 31, 2024 and 2023, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

The costs incurred by the Company for shipping and handling are classified as direct product costs in the consolidated statements of operations. Any incidental items that are immaterial in the context of a sale to a customer are recognized as expense.

Direct Product Costs

The Company’s direct product costs consist primarily of direct materials salaries and related expenses, overhead, third-party services vendors, shipping and handling, and depreciation expense related to the equipment and information technology costs incurred directly in the Company’s revenue-generating activities.

Share-Based Compensation

The Company measures and recognizes compensation expense for all stock options, shares of stock, and restricted stock units ("RSU") awarded to employees and nonemployees based on the estimated fair market value of the award on the grant date. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards. The Company estimates the fair value of shares of stock and RSU awards based upon the known fair market value of the underlying shares on the grant date. The Company recognizes compensation expense on a straight-line basis over the applicable vesting period. In addition, the Company accounts for forfeitures of awards as they occur.

Estimating the fair market value of options requires the input of subjective assumptions, including the estimated fair value of the Company’s common stock, the expected life of the options, stock price volatility, the risk-free interest rate, and expected dividends. Therefore, the assumptions used in the Company’s Black-Scholes option-pricing model represent management’s best estimates.

The Company applies ASU 2018-7,Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Share-based awards issued to non-employees are no longer required to be revalued at each reporting period.

Research and Development Costs

Research and development costs are expensed as incurred and consist primarily of personnel-related engineering and technical staff wages and benefits, prototype costs, and other direct expenses.

Advertising Costs

All advertising costs are expensed as incurred and included in sales and marketing expenses. Advertising expenses for the years ended December 31, 2024 and 2023 were $12,973 and $19,961, respectively.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Inventories

Inventories are valued at the lower of cost and net realizable value. Cost is determined by the first‐in, first‐out (FIFO) method. The Company analyzes its product portfolio and inventory aging in determining whether an inventory allowance is needed. Historically, such allowances have been immaterial and within management's expectations.

Income Taxes

Income taxes are accounted for under the asset and liability method as required by FASB ASC Topic 740,Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period corresponding to the enactment date. Under ASC 740, a valuation allowance is required when it is more likely than not all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income.

FASB ASC Subtopic 74010,Accounting for Uncertainty of Income Taxes, (“ASC 74010”) defines the criterion upon which an individual tax position must meet for any part of the benefit of the tax position to be recognized in consolidated financial statements prepared in conformity with GAAP. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the respective tax position. The tax benefits recognized in the consolidated financial statements from such a tax position should be measured based on the largest benefit having a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. In accordance with the disclosure requirements of ASC 74010, the Company’s policy on the statements of operations classification of interest and penalties related to income tax obligations is to include such items as part of total income tax expense.

Convertible Debt Instruments

The Company evaluates agreements, including any convertible debt instruments to determine if those agreements or any embedded components of those agreements qualify as derivative financial instruments to be separately accounted for in accordance with FASB ASC Topic 815 “Derivatives and Hedging” (“ASC 815”). The accounting treatment of derivative financial instruments requires that the Company record any bifurcated embedded features at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded in earnings as non-operating, non-cash income or expense. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the agreement is reclassified as of the date of the event that caused the reclassification. Bifurcated embedded features are recorded at their initial fair values which create additional debt discount to the host instrument. The Company amortizes the respective debt discount over the term of the notes, using the effective interest method.

Fair Value of Financial Instruments

The Company measures the fair value of financial assets and liabilities based on ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

Level 1 — quoted prices in active markets for identical assets or liabilities;

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

The carrying amounts of the Company’s financial instruments, such as cash, accounts receivable, and accounts payable approximate fair values due to the short-term nature of these instruments.

See Note 8 – Derivative Liabilities and Warrant Liabilities for additional details regarding the valuation technique and assumptions used in valuing Level 3 inputs.

Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of common stock outstanding during each period. Diluted net loss per common stock includes the effect, if any, from the potential exercise or conversion of securities, such as options and warrants, which would result in the issuance of incremental shares of common stock.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

The following potentially dilutive securities have been excluded from the computation of basic shares years ended December 31, 2024 and 2023, as they would be anti-dilutive:

Year Ended December 31,

Series A convertible preferred stock 7,213,115 -

The table above excludes convertible notes that are contingently convertible upon future events that have not occurred. See Note 5 – Debt – Convertible Notes for terms of conversion of the convertible notes that were outstanding as of December 31, 2023.

Reverse Stock Split

The Company’s board of directors approved a reverse split of shares of the Company’s common stock on a six-for-one basis, which was effective as of 12:01 a.m. Eastern Time on April 17, 2023 (the “Effective Time”). As a result of the reverse stock split, at the Effective Time, every six shares of the issued and outstanding common stock were automatically converted into one share of common stock, but without any change in the par value per share. No fractional shares were issued as a result of the reverse stock split. Any fractional shares that would otherwise have resulted from the reverse stock split were rounded up to the next whole number. The number of authorized shares of common stock remained unchanged at 300,000,000 shares. Proportionate adjustments were made to the per share exercise price and the number of shares of common stock issuable upon the exercise of all outstanding stock options and warrants granted by the Company. The number of shares of common stock deliverable upon vesting of RSUs were similarly adjusted. Concurrently, the number of shares of common stock reserved for future issuance under the Company’s 2014 and 2021 Equity Incentive Plans immediately prior to the Effective Time were reduced proportionately. All share-based information in the Annual Report on Form 10-K and the accompanying consolidated financial statements are presented on a post-split basis.

Convertible Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized for issuance, of which, 22,000 shares have been designated as “Series A convertible preferred stock”, par value $0.0001 per share, have a stated value of $1,000 per share and are initially convertible into 7,213,115 shares of the Company’s common stock. Holders of the Series A convertible preferred stock are entitled to vote on an as-converted basis with the Company’s common stockholders. The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.

The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the FASB ASC. The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. The Company primarily uses the Black-Scholes option pricing model and Monte Carlo simulations to estimate the fair value of its warrants including those issued in connection with preferred stock. The Black-Scholes option pricing model and Monte Carlo simulations include subjective input assumptions that can materially affect the fair value estimates.

Asset Acquisition

On April 26, 2024, the Company finalized the acquisition of Gallium Semiconductor's entire portfolio of GaN power amplifiers and front-end modules for $0.4 million which was funded by cash on hand. The Company acquired all previously released components as well as new cores under development at Gallium Semiconductor. Additionally, all associated intellectual property (IP) has been transferred to the Company as part of this portfolio acquisition. By integrating these assets, the Company intends to significantly enhance its ongoing efforts to develop and commercialize a new line of GaN devices tailored for wireless infrastructure, military, and satellite communications applications. The Company did not acquire any employees or facilities. The acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805. The Company recorded a definite-lived developed technology intangible asset of $0.4 million that will be amortized over 10 years.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU No.2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and to payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in ASU 2021-08 require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. These amendments in ASU 2021-08 became effective for us as of the beginning of our 2024 fiscal year. The Company adopted this accounting guidance effective January 1, 2024. Its adoption did not have a material impact on the Company’s consolidated financial statements.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

In November 2023, FASB issued ASU No.2023-07, Segment Reporting-Improvements to Reportable Segment Disclosures (Topic 280), which allows disclosure of one or more measures of segment profit or loss used by the Chief Operating Decision Maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The adoption of this new guidance did not have a significant impact on our consolidated financial statements.

In December 2023, the FASB issued ASU No.2023-09, Income Tax-Improvements to Income Tax Disclosures (Topic 740), which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and disclosures included within notes to consolidated financial statements.

In November 2024, the FASB issued ASU No.2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to require more detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement. This guidance is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted and may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the potential impact of this guidance on its consolidated financial statements and related disclosures

The Company has reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a material impact on its consolidated financial statements.

3. Inventories

Inventories are summarized as follows:

4.Property and Equipment

Property and equipment is summarized as follows:

Depreciation expense was $1,489,045 and $1,592,567 for the years ended December 31, 2024and2023, respectively.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10,Property, Plant, and Equipment. ASC 360-10 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flowsdo not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

In fiscal 2023, the Company concluded the undiscounted future cash flows associated with certain of its long-lived assets, specifically leasehold improvements for the old headquarters and cameras used for the security equipment at the new headquarters and design center, indicated the carrying amount of those cameras is not recoverable. As a result, the Company reviewed the long-lived assets for impairment and recorded a $20 thousand impairment charge, which is included in General And administrative expenses on the consolidated statements of operations. The impairment was measured under an income approach utilizing forecasted discounted cash flows to determine fair values of the impairment assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, Fair Value Measurement.

At December 31, 2024, the Company concluded it did not have any triggering events requiring assessment of impairment of its long-lived assets.

5. Debt

Spectrum Loan Facility

On June 1, 2022 (the "Spectrum Effective Date"), the Company entered into the Spectrum Loan Facility with Spectrum. Pursuant to the terms of the General Credit and Security Agreement (the "Credit Agreement"), the Company may borrow monies to purchase eligible equipment in an amount equal to the lesser of (i) 75% of the cost of such eligible equipment and (ii) $500,000; provided that this maximum eligibility will automatically be reduced by 1/48th each month during the term of the facility. The Credit Agreement also allows for additional borrowing in an amount equal to the lesser of (i) 50% of the net amount of eligible inventory (as defined in the Credit Agreement), (ii) $350,000, and (iii) 50% of the purchased accounts receivable outstanding under the related Assignment of Accounts and Security Agreement (the “AR Agreement”).

Under the terms of the AR Agreement, Spectrum has agreed to advance funds equal to approximately 85% of eligible accounts receivable that are collected by Spectrum under a “lock box” arrangement. On February 20, 2024, Spectrum increased the maximum amount that may be advanced under the AR Agreement from $3.0 million to $3.75 million less any amounts loaned under the Credit Agreement. In addition, the annual facility fee was increased to $37,500.

The initial term of the Spectrum Loan Facility was 24 months from the Spectrum Effective Date. The term of the facility automatically renews for an additional two-year period unless either party provides at least 60 days’ notice prior to the expiration date. The term automatically renewed on June 1, 2024. Subject to certain exceptions, in the event of an early termination of the AR Agreement by the Company or resulting from the Company’s default or other circumstances impacting the Company (including bankruptcy, reorganization, sale of assets, and cessation of business), the Company will be required to pay a prepayment fee.

The Company’s obligations under the Spectrum Loan Facility are secured by first-priority liens on essentially all of the Company’s assets; provided, however, that the Company is permitted to grant purchase money security interests on certain equipment, furniture and similar tangible assets financed by a third party.

In addition to annual facility fees of $37,500 and other quarterly and transaction fees payable to Spectrum, interest accrues on amounts owed under the Spectrum Loan Facility at the prime rate as quoted by the Wall Street Journal plus 3.5%, but in no event lower than 7.0%.

The Spectrum Loan Facility contains various covenants and restrictions on the Company's financial and business operations including restrictions on the purchase or redemption of any Company shares and the declaration or payment of any dividends on the Company's stock. For the year ended December 31, 2024, the Company maintained compliance with these covenants and restrictions.

The Company has borrowed $0.6 million under the Spectrum Loan Facility as of December 31, 2024. The Company includes the interest expense of the Spectrum Loan Facility ($304 thousand) as part of its interest expense on its consolidated statements of operations, and the total amount of $0.6 million borrowed under the Spectrum Loan Facility is included as short-term debt on the consolidated balance sheet as of December 31, 2024.

SalemLoan Facility

On August 11, 2022 (the 'Salem Effective Date'), the Company entered into the Salem Loan Facility with Salem. The Salem Loan Facility provided financing to the Company in the aggregate amount of up to $8.0 million, with an initial advance of $5.0 million. In addition to a 2.0% closing fee, the Company issued Salem 25,000 shares of common stock as consideration for the Salem Loan Facility. The Company agreed to issue up to an additional 25,000 shares of common stock in the event Salem advanced the additional $3.0 million.

On May 1, 2023, Salem made an additional advance of $1.5 million to the Company. At the same time, the Company agreed to increase the interest rate for the Salem Loan Facility from 13.0% to 14.0% per annum, with 11.0% payable monthly and 3.0% payable either monthly or at maturity, with the outstanding principal and interest due in August 2027. In conjunction with the additional advance of $1.5 million, the Company paid Salem a closing fee of $60 thousand and issued 12,500 shares of common stock to Salem. The $1.5 million advance was allocated between notes payable, common stock and additional paid-in capital based on the relative fair value of the underlying common stock and had an approximate effective interest rate of 17%. If the Company repays the loan during the firstthree years of the term, it is required to pay a prepayment premium equal to (i) 3.0% of the prepaid principal during year 1, (ii) 2.0% of the prepaid principal during year 2, and (iii) 1.0% of the prepaid principal during year 3. The Salem Loan Facility contained customary affirmative and negative covenants that imposed restrictions on the Company’s financial and business operations, including limitations on liens, indebtedness, fundamental changes and changes in the nature of the Company’s business, the purchase or redemption of any Company stock, and the declaration or payment of any dividends on the Company's stock. On June 30, 2023, the Company entered into an amendment to its agreement with Salem that delayed the application of one of the financial covenants.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

On August 14, 2023, Salem made an additional advance of $1.5 million to the Company. The interest rate for the advance was 14.0% per annum, with principal and interest due in August 2027. In conjunction with this advance, the Company incurred cash closing costs of $78 thousand, including a closing fee of $45 thousand, and issued 400,000 shares of common stock to Salem. The $1.5 million advance was allocated between notes payable, common stock and additional paid-in capital based on the relative fair value of the underlying common stock and an approximate effective interest rate of 28%.

On September 5, 2023, the Company and Salem entered into the amended and restated loan agreement (the 'A&R Loan Agreement') in order to (i) provide for additional advances of up to $4.0 million, and (ii) change the maturity date of all previous advances from August 11, 2027 to April 30, 2024. The additional advances have an interest rate of 14.0% per annum, with payment of interest deferred until the April 30, 2024 maturity date. The Company determined that the A&R Loan Agreement represented a debt modification and, accordingly, no extinguishment accounting was required. As a result of prospectively revising the amortization of existing debt discount of previous advances, new approximate effective interest rates between 29% and 98% were established on the previous advances. The A&R Loan Agreement provides that the Company must maintain compliance with certain net cash flow and liquidity requirements.

On September 6, 2023, Salem made an additional discretionary advance of $1.75 million under the Salem Loan Facility. In conjunction with receiving the additional loan facility and drawing down $1.75 million of additional advances, the Company incurred cash closing costs of $88 thousand and issued 660,000 shares of common stock to Salem. The $1.75 million of additional advances was allocated between notes payable, common stock and additional paid-in capital based on the relative fair value of the underlying common stock and had an approximate effective interest rate of 104%.

On October 23, 2023, Salem made an additional advance of $1.25 million under the Salem Loan Facility. The Company incurred cash closing costs of $43 thousand associated with the additional advance, which the Company recognized as deferred debt discount to be amortized over the term of the additional advance and had an approximate effective interest rate of 21%.

On December 18, 2023, Salem made a final advance of $1.0 million under the Salem Loan Facility. In conjunction with receiving the additional advance, the Company incurred cash closing costs of $45 thousand which the Company recognized as deferred debt discount to be amortized over the term of the additional advance and had an approximate effective interest rate of 26%.

In the second half of 2023, AMB Investments, LLC and others purchased participation interests in $5.5 million of additional advances made under Salem Loan Facility (the ‘Additional Advances’). AMB Investments, LLC owned a 47.17% participation interest in those Additional Advances, giving it a pecuniary interest in approximately $2.6 million of the Salem Loan Facility and 500,000 shares of common stock issued to Salem in connection with the Additional Advances. Director, Gary Smith is President of AMB Investments, LLC.

On March 28, 2024, Salem extended the maturity date of the Salem Loan Facility from April 30, 2024 to January 31, 2026. Additional revisions included changing the interest rate to (i) 3% payment-in-kind and (ii) 11% cash interest for the entire Salem Loan Facility. In addition the Company paid Salem an aggregate fee of $100,000 in connection with the revisions and $654,308 of outstanding paid-in-kind interest was exchanged for 261,723 shares of common stock and five-year warrants to purchase 261,723 shares of common stock at an exercise price of $2.50 per share in connection with the closing of a private placement offering in late March and early April, 2024 (the ‘2024 Private Placement') referenced in Note 6. The Company determined that the maturity extension and revisions should be accounted for as troubled debt restructuring pursuant to ASC 470. As a result of the troubled debt restructuring, (i) a new effective interest rate of 16.9% was established, and (ii) the aggregate of $100,000 of fees paid to the lender was recorded as debt discount to be amortized over the remaining term of the debt, and (iii) additional debt discount in the amount of $1,278,516 was recorded and to be amortized over the remaining term of the debt, which represents the difference between $654,308 of paid-in-kind interest exchanged for common stock and warrants with an aggregate fair value of $1,932,824 in connection with the 2024 Private Placement.

On August 2, 2024, the Company entered into Amendment No.2 to Amended and Restated Loan Agreement (the "Salem Amendment") with Salem. Pursuant to the Salem Amendment, which became effective on August 5, 2024, the Company paid down the principal balance on the Salem Loan Facility from $12.0 million to $4.5 million, repaying the Additional Advances in full. Additionally, the maturity date was extended from January 31, 2026 to December 31, 2028 and the interest rate was reduced from 14% (comprising 3% payment-in-kind (deferred) and 11% cash) to 12% cash. The Company determined that the Salem Amendment should be accounted for as a debt extinguishment which resulted in a loss on extinguishment of debt of $1.5 million. As of December 31, 2024, the carrying value of the amount financed under the Salem Loan Facility approximates its fair value as the interest rate is equal to the Company's market rate for equivalent financing terms.

As of December 31, 2024, the total amount the Company has financed under the Salem Loan Facility is:

Principal amount of promissory notes payable $ 4,500,000

Accrued interest -

Less: unamortized debt issue costs -

Less: unamortized debt discount -

Notes payable, current portion, net $ 4,500,000

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Convertible Notes Payable

In July 2023, the Company entered into note purchase agreements with certain accredited investors pursuant to which the Company issued unsecured convertible promissory notes in the aggregate principal amount of $790,000 (the "Convertible Notes"), which mature on December 31, 2024 (the “Maturity Date”). Of such aggregate principal amount, the Company issued Convertible Notes in the aggregate principal amount of $710,000 to the Company’s Chief Executive Officer (in the principal amount of $80,000) and his family members (in the aggregate principal amount of $630,000). Convertible Notes in the aggregate principal amount of $290,000 accrue interest at a simple rate of 8.0% per annum, payable at maturity, and one Convertible Note in the principal amount of $500,000 accrues interest at a simple rate of 16.0% per annum, payable at maturity. Upon the issuance of equity securities pursuant to which the Company receives aggregate gross proceeds of at least $2.0 million (the “Next Equity Financing”), the Convertible Notes will automatically convert into the same equity securities issued in such Next Equity Financing at a conversion price equal to the lowest per share purchase price of equity securities issued in the Next Equity Financing. Further, in the event of a change of control of the Company, each convertible note will, at the election of the holder, either be: (a) repaid in cash at an amount equal to the sum of (i) the outstanding principal balance and all accrued and unpaid interest due on such Convertible Note plus (ii) an additional amount equal to 20% of such outstanding amount due; or (b) converted into shares of the Company’s common stock equal to the outstanding balance of the Convertible Note (including any accrued but unpaid interest thereon) divided by $6.00 per share. At any time on or after the Maturity Date but prior to the date the Convertible Note is repaid by the Company, at the election of the holder thereof, such holder’s Convertible Note will convert into that number of shares of the Company’s common stock equal to the quotient (rounded up to the nearest whole share) obtained by dividing (x) the outstanding principal balance and unpaid accrued interest of such Convertible Note on the date of such conversion by (y) $6.00 per share.

The Company analyzed the embedded features of the Convertible Notes and determined that the Convertible Notes contained (i) an automatic conversion pursuant to which the holders may elect to convert their Convertible Notes into shares of the Company’s common stock at a price of $6.00 per share which did not require bifurcation, (ii) a redemption feature pursuant to an event of a Next Equity Financing which did not require bifurcation, (iii) a put option triggered upon a change of control with a fair value of $15,800 which was bifurcated from the debt host and recorded with a credit to derivative liabilities and a debit to debt discount, and (iv) an automatic conversion pursuant to which the Convertible Notes may be converted into shares of the Company’s common stock at a price of $6.00 per share upon a change of control which did not require bifurcation. Including the impact of the embedded features, Convertible Notes in the aggregate principal amount of $290,000 have an approximate effective simple interest rate of 9.4% per annum, and one Convertible Note in the principal of $500,000 has an approximate effective simple interest rate of 17.4% per annum. The debt discount is being amortized over the term of the Convertible Notes using the effective interest method and the derivative liabilities are marked-to-market at each reporting date. See Note 8 – Derivative Liabilities for additional details regarding the valuation technique and assumptions used in valuing Level 3 inputs. for additional details.

On March 28, 2024, all of the Convertible Notes, including accrued interest, were converted into equity in connection with the 2024 Private Placement referenced in Note 6.

New Headquarters and Design Center Capital Addition Financing

In conjunction with the Company's move into expanded office facilities in early 2023, the Company entered into a financing arrangement related to furniture for the new office facilities in April 2022. The total cost of the furniture financed was $1.1 million, which included tax, freight, interim storage, and installation labor. The Company was responsible for paying interest-only payments to the financing company related to the furniture procurement order (interest on principal of $496 thousand) placed in April 2022 prior to the first scheduled principal financing payment, which occurred in August 2022 ($246 thousand). The Company made interest-only payments to the financing company related to the furniture procurement order through August 2022 in the amount of $17 thousand. The total scheduled principal and interest payments to be made after December 31, 2024 related to the April 2022 furniture financing are $28 thousand.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Debt Maturity

As of December 31, 2024, debt is expected to mature as follows:

Thereafter -

6.Common Stock

Common Stock

The Company is authorized to issue 50,000,000 and 300,000,000 shares of common stock with a par value of $ 0.0001 as of December 31, 2024 and 2023, respectively. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Subject to preferences that may apply to any outstanding preferred stock, holders of common stock are entitled to receive ratably any dividends that the Company’s Board of Directors may declare out of funds legally available for that purpose on a non-cumulative basis. No dividends had been declared through December 31, 2024.

On December 30,2022, the Company completed the initial closing of a private placement (the “2022/23 PIPE”) as it entered into a Unit Purchase Agreement (the “Unit Purchase Agreement”) with investors (the “Purchasers”) pursuant to which the Company sold 647,057 units (the “Units”), each Unit consisting of one share of the Company’s common stock and one warrant to purchase one-half of a share of common stock with an exercise price of $12.00 per share. The purchase price of each Unit was $7.80 per Unit, resulting in gross proceeds at this initial closing of approximately $5.0 million before the deduction of estimated offering expenses of approximately $700,200. The Company continued to accept subscriptions for Units and had additional closings through February 28, 2023. Altogether, the Company sold 1,183,192 Units, resulting in gross proceeds of approximately $9.2 million before the deduction of estimated offering expenses of approximately $1.2 million.

On March 28, 2024, the Company completed the initial closing of the 2024 Private Placement as it entered into a Unit Purchase Agreement with investors pursuant to which the Company sold 2,015,293 units (the “2024 Units”), each 2024 Unit consisting of one share of the Company’s common stock and one warrant to purchase one share of common stock with an exercise price of $2.50 per share. The purchase price of each 2024 Unit was $2.50, resulting in gross proceeds at this initial closing of approximately $5.0 million and net cash proceeds of approximately $3.0 million. There were estimated offering expenses of approximately $0.6 million and conversion of convertible debt and accrued interest of approximately $2.8 million. On April 7, 2024, the Company completed a second closing of the 2024 Private Placement. Altogether, the Company sold 2,071,2932024 Units, resulting in gross proceeds of approximately $5.1 million before the deduction of estimated offering expenses and net cash proceeds of approximately $3.0 million. On the issuance date the warrants were determined to be equity classified and had an aggregate issuance date relative fair value of $2.1 million using the Black-Scholes option pricing model with the following assumptions: expected volatility of 58%, risk-free rate of 4.21%, expected term of 5.5 years, and expected dividends of 0.00%.

See Note 5 – Debt – Salem Loan Facility and Convertible Notes Payable for details regarding common stock issued in connection with debt.

See Note 7 – Share-Based Compensation - Restricted Stock Unit ("RSU") Awards for details regarding RSU grants.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Common Stock Warrants

Through February 28, 2023, in connection with the 2022/23 PIPE, the Company issued warrants to purchase an aggregate of 769,146 common shares (the “2022/2023 PIPE Warrants”). The 2022/2023 PIPE Warrants are exercisable for a period of five years beginning six months following the final closing of the 2022/23 PIPE. The 2024 Units sold in the 2024 Private Placement included warrants to purchase a total of 2,071,293 shares of common stock (the “2024 PIPE Warrants”), which warrants were issued upon the final closing of the 2024 Private Placement. Each 2024 PIPE Warrant is exercisable for a period of five years beginning six months following the final closing of the 2024 Private Placement. On August 5, 2024, the Company completed a private placement (the “North Run Private Placement”), which included the issuance of warrants to purchase an aggregate of 2,885,246 shares of common stock at an exercise price of $3.05 per share (the “North Run Warrants”). Each North Run Warrant is exercisable for a period of five and a half years beginning on the closing date of the North Run Private Placement and were determined to be classified as liabilities on the issuance date and as of December 31, 2024. As of December 31, 2024, the total amount of outstanding common stock warrants is 5,780,955. See Note 8 – Fair Value Measurement – Warrant Liabilities for additional details regarding the Company’s outstanding warrants.

A summary of the warrant activity during the year ended December 31, 2024 is presented below:

Exercised - -

Expired - -

Canceled - -

In applying the Black-Scholes option pricing model to warrants granted during 2024 and 2023, the Company used the following assumptions:

For the Years Ended

December 31,

Contractual term (years) 5.50 5.50

Expected dividends — % — %

The following table presents information related to stock warrants at December 31, 2024:

Warrants Outstanding Warrants Exercisable

Preferred Stock

The Company’s Board of Directors is authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series. There was 22,000 and 0 issued and outstanding shares of preferred stock as of December 31, 2024 or December 31, 2023, respectively.

On August 5, 2024, the Company completed the North Run Private Placement, selling (i) an aggregate of 22,000 shares of Series A convertible preferred stock (the “Preferred Shares”), which are initially convertible into 7,213,115 shares (the “Conversion Shares”) of the Company’s common stock, and (ii) warrants to purchase an aggregate of 2,885,246 shares of common stock at an exercise price of $3.05 per share (the 'North Run Warrants') for an aggregate gross purchase price of $22.0 million. The securities were sold to NR-PRL Partners, LP, a Delaware limited partnership and an affiliate of North Run Capital, LP (the “Buyer”) pursuant to a Securities Purchase Agreement entered into by the Company and the Buyer on August 2, 2024 (the “Purchase Agreement”). The net proceeds from the North Run Private Placement were approximately $21.6 million after transaction expenses.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

For so long as the Buyer of the Preferred Shares beneficially owns at least 20% of the Conversion Shares underlying the Preferred Shares issued pursuant to the Purchase Agreement (the “Buyer Ownership Condition”), the Company may not, without the consent of Buyer, create, authorize, or issue shares of capital stock that are senior or pari passu to the Preferred Shares; incur aggregate indebtedness for borrowed money (subject to certain exceptions) in excess of $10.0 million; change its line of business; or amend, alter or repeal any provision of the Amended and Restated Certificate of Incorporation or bylaws in a manner that adversely affects the special rights, powers and preferences of the Preferred Shares. In addition, the Purchase Agreement provides that, for so long as the Buyer Ownership Condition is satisfied, the Company may not, without the consent of Buyer, issue more than 10% of its outstanding shares of common stock as of August 2, 2024 (subject to exceptions for stock plans and acquisitions) or within 120 days of the closing of the offering issue any equity securities (subject to exceptions for stock plans and acquisitions).

The Purchase Agreement required that the Board of Directors of the Company increase the size of the Board from eight to ten directors and appoint each of Thomas B. Ellis and Todd B. Hammer (the “Board Designees”) to the Board effective immediately following the closing of the offering. The Purchase Agreement further provides that, at any stockholders’ meeting at which directors are to be elected and for so long as the Buyer satisfies the Buyer Ownership Condition, the Board will nominate and recommend the reelection of any Board Designees whose terms of office expire at such stockholder meeting.

Under the Purchase Agreement, the Company has agreed that for so long as the Buyer Ownership Condition is satisfied, the Buyer will have a right to participate on a pro rata basis in equity financings or issuances of securities convertible, exercisable, or exchangeable into equity securities of the Company or any subsidiaries (including debt securities with an equity component), subject to certain exceptions.

The Series A convertible preferred stock is subject to automatic redemption for cash upon a “Fundamental Transaction” by the Company, which includes a merger, sale of all or substantially all the assets of the Company, recapitalization, or the sale of more than 50% of the voting stock of the Company which results in the Series A convertible preferred stock being classified as temporary equity. In such event, the redemption price would be equal to the greater of the stated value of the Series A convertible preferred stock or the consideration per share of common stock in the Fundamental Transaction (or in the absence of such consideration, the volume-weighted average price of the Company’s common stock immediately preceding the closing of the Fundamental Transaction). Additionally, after analyzing the cashless exercise provision within the North Run Warrants, the Company has determined that the North Run Warrants are classified as liabilities to be carried at fair value (See Note 8 – Fair Value Measurement – Warrant Liabilities for additional details). As a result, the Company allocated the gross proceeds and offering costs to the Preferred Shares and the North Run Warrants on a fair value basis. As a result, the Company recorded approximately $20.4 million of gross proceeds, which was partially offset by $403 thousand of offering costs, with a credit to temporary equity to account for the Preferred Shares. Additionally, the Company initially recorded a warrant liability of approximately $1.6 million to account for the North Run Warrants, and expensed approximately $31 thousand of offering costs which were allocated to the North Run Warrants. The Company has not made any adjustments to the carrying value of the Series A convertible preferred stock to reflect the redemption value of the shares upon a change of control because the Company has determined that a change of control event is not probable of occurring.

7. Share-Based Compensation

2014, the Company adopted the Long‐Term Stock Incentive Plan (the

“2014 Plan”), with

94,667 shares of common stock authorized for issuance under the

2014 Plan. Subsequently, stockholders approved an increase in the number of shares available under the

2014 Plan to

210,000shares. Exercise prices range from

$4.20 to

$9.42 per share, depending on the date of the award.

No further awards

may be made under the

2014 Plan.

In 2021, the Board adopted the 2021 Equity Incentive Plan (the “2021 Plan”), which authorizes the award of stock options, restricted stock awards, stock appreciation rights, restricted stock units ("RSU"), performance awards, cash awards, and stock bonus awards. The Company initially reserved 37,166shares of common stock, plus any reserved shares not issued or subject to outstanding grants under the 2014 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan will increase automatically on January 1 each year until 2031 by the number of shares equal to the lesser of 5% of the total number of outstanding shares of our common stock as of the immediately preceding December 31, or a number as may be determined by our Board.

The general purpose of the 2014 Plan and the 2021 Plan is to allow the Company to attract and motivate key employees and directors to align their interests with those of the Company’s shareholders.

Stock Option Awards

The Company measures the fair value of each option award on the date of grant using the Black‐Scholes option-pricing model, which takes into account inputs such as the exercise price, the value of the underlying ordinary shares at the grant date, expected term, expected volatility, risk-free interest rate, and dividend yield. The fair value of each grant of options during the year ended December 31, 2024 was determined using the methods and assumptions discussed below:

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

For the years ended December 31, 2024 and 2023, the grant date fair value of all option grants was estimated at the time of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions:

Year Ended December 31,

Expected term (in years) 6.25 6.25

Expected volatility 58 % 52 %

Dividend rate — —

The weighted average grant date fair value of stock option awards granted was $1.78 and $4.61 during the years ended December 31, 2024 and 2023, respectively.

The value of stock options is recognized as compensation expense by the straight-line method over the vesting period. Unrecognized compensation costs related to non‐vested options at December 31, 2024 amounted to $179,896, which are expected to be recognized over a weighted average term of 1.31 years.

Stock option activity by share is summarized as follows for the years ended December 31, 2024 and 2023:

Exercised - -

In the year ended December 31, 2024, the Company granted 8,500 common stock options to new employees with an exercise price of $2.50 per share. These option awards vest equally over three years (33% per year) on the anniversary of the date the recipient started working for the Company.

In the year ended December 31, 2023, the Company granted 13,135 stock options to new employees at multiple exercise prices between $7.80 and $9.00 per share. These option awards vest equally over four years (25% per year) on the anniversary of the date the recipient started working for the Company.

Restricted Stock Unit Awards

In the years ended December 31, 2024 and 2023 the Company granted 376,542 and 381,127 RSUs, respectively to various employees and directors. The RSU awards made to non-employees in the year ended December 31, 2024 (173,334) vest on the earliest of (i) June 5, 2025, subject to the recipient's continued service with the Company, (ii) the recipient's death, or (iii) the recipient's disability. The RSU awards made to non-employees in the year ended December 31, 2023 (44,877) vest on the earliest of (i) April 5,2024, subject to the recipient's continued service with the Company, (ii) the recipient's death, or (iii) the recipient's disability. The RSUs awarded to employees during the year ended December 31, 2024 (172,857) vest over a period of 3 years or less from the date of the grant. The RSUs are subject to the recipient’s continued service through the applicable vesting date. The share-based compensation expense to be recognized for these RSUs over the remaining vesting period subsequent to December 31,2024 is approximately $2.4 million.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

The fair value of each RSU was estimated on the date of grant, based on the weighted average price of the Company's stock. The Company will issue new shares of common stock to satisfy RSUs upon vesting. The following table summarizes the RSU activity and weighted averages for share-based awards granted under the terms of the 2021 Plan:

Number of RSUs Weighted Average Grant Date Fair Value

Pursuant to awards made under the 2014 Plan and the 2021 Plan, the Company recorded stock-based compensation expense in the following expense categories in the consolidated statements of operations for the years ended December 31, 2024 and 2023:

Year Ended December 31,

No income tax benefits have been recognized in the consolidated statements of operations for stock-based compensation arrangements, and no stock-based compensation costs have been capitalized as property and equipment through December 31, 2024.

8. FAIR VALUE MEASUREMENT

Derivative Liabilities

As of January 1, 2024, the Company had Level 3 derivative liabilities that were measured at fair value at issuance, related to the put options of the Convertible Notes. On March 28, 2024, the redemption feature of the Company’s Convertible Notes was triggered prompting the Company to mark-to-market the fair value of the bifurcated put options of the Convertible Notes. As of March 28, 2024, the Company determined that the probability of settlement pursuant to such put option was de minimis and, as a result, the fair value of such bifurcated put options was $0. As of December 31, 2024, the Company had no derivative liabilities as the underlying Convertible Notes were converted into shares of common stock. See Note 5 – Debt – Convertible Notes Payable for additional details regarding the conversion of the Convertible Notes. The put options were valued using a discounted cash flow valuation technique.

The following table sets forth a summary of the changes in the fair value of Level 3 derivative liabilities that are measured at fair value on a recurring basis:

Beginning balance as of January 1, 2023 $ -

Issuance of Convertible Notes 15,800

Change in fair value of derivative liabilities 142,200

Change in fair value of derivative liabilities (158,000 )

Ending balance on December 31, 2024 $ -

There are derivative liabilities of $0 as of December 31, 2024. For the derivative liabilities valuation, as of the issuance dates of the Convertible Notes between July 12, 2023 and July 21, 2023, the significant unobservable inputs used in the discounted cash flow were a discount rate between 8% to 16% and the probability of a change of control occurring of 10%. For the derivative liabilities valuation, as of December 31, 2023, the significant unobservable inputs used in the discounted cash flow were a discount rate between 8% to 16%.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Warrant Liabilities

The Company determined that the North Run Warrants should be accounted for as Level 3 warrant liabilities and carried at their fair value computed using a Monte-Carlo simulation.

The Monte Carlo simulation considered assumptions including the number of trials, warrant dilution, bid price estimates and multiple VWAP amounts for the cashless conversions of the North Run Warrants. Additionally, other key assumptions used in the Monte-Carlo simulation include the risk-free rate, the expected term of the warrants, expected stock price volatility, expected dividends and management’s assumption that the probability of a fundamental transaction occurring is de minimis. The following table summarizes the significant assumptions used in the Monte-Carlo simulation during the year ended December 31, 2024:

For the Year Ended

Risk-free interest rate 3.55% - 3.58%

Expected term (years) 5.35 - 5.5

Expected dividends 0.00 %

In connection with the North Run Private Placement, the Company determined it should reclassify warrants to purchase an aggregate 2,895,709 shares of common stock (the “Historical Warrants”) as Level 3 warrant liabilities and carried at fair value using a Black-Scholes call option model pursuant to the analysis of a certain tender offer provision (the “Tender Offer Provision”) within the Historical Warrants wherein, in the event of a cash tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of the Company’s common shares, all holders of the warrants would be entitled to receive cash for their warrants.

The following table summarizes the Black-Scholes assumptions used during the year ended December 31, 2024:

For the Year Ended

Risk-free interest rate 3.58% - 4.38%

Expected term (years) 2.32 - 5.15

Expected dividends 0.00 %

The following table sets forth a summary of the changes in the fair value of Level 3 warrant liabilities that are measured at fair value on a recurring basis:

Beginning balance as of January 1, 2024 $ -

Reclassification of Historical Warrants 2,130,167

Issuance of warrant liabilities 1,563,400

Change in fair value of warrant liabilities (2,198,051 )

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

9.Commitments and Contingencies

Lease Commitments

The Company determines whether an arrangement is an operating lease or financing lease at inception. Lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the term of the lease. The Company generally uses its incremental borrowing rate, which is based on information available at the lease commencement date, to determine the present value of lease payments.

The Company has entered into leases primarily for real estate and equipment used in research and development. Operating lease expense is recognized in continuing operations by amortizing the amount recorded as an asset on a straight-line basis over the lease term. Financing lease expense is comprised of both interest expense, which will be recognized using the effective interest method, and amortization of the right-of-use assets. These expenses are presented consistently with other interest expense and amortization or depreciation of similar assets. In determining lease asset values, the Company considers fixed and variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised.

Balance sheet information related to right-of-use assets and liabilities is as follows:

Balance Sheet Location December 31, 2024

Operating Leases:

Noncurrent portion of operating lease liabilities Operating lease 5,636,793

Total operating lease liabilities $ 6,305,794

Finance Leases:

Finance lease right-of-use assets Property, plant, and equipment $ 1,374,503

Noncurrent portion of finance lease liabilities Finance lease 828,171

Total finance lease liabilities $ 1,495,889

Lease cost recognized in the consolidated financial statements is summarized as follows:

For the Year Ended December 31,

Finance lease cost:

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Other supplemental information related to leases is summarized as follows:

Weighted average remaining lease term (in years):

Operating leases 7.89

Finance leases 2.34

Weighted average discount rate:

Operating leases 11.03 %

Finance leases 8.28 %

Operating cash flows from operating leases $ 1,480,431

Operating cash flows from finance leases $ 156,854

Financing cash flows from finance leases $ 979,170

The following table summarizes our future minimum payments under contractual obligations for operating and financing liabilities as of December 31, 2024:

Payments Due by Period

Table of Contents

Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Legal

In the ordinary course of business, the Company may become involved in legal disputes. In the opinion of management, any potential liabilities resulting from any disputes would not have a material adverse effect on the Company’s consolidated financial statements. As a result, no liability related to any such disputes has been recorded at December 31, 2024 or 2023.

Indemnification Agreements

From time to time, in the ordinary course of business, the Company may indemnify other parties when it enters into contractual relationships, including members of the Board of Directors, employees, customers, lessors, lenders, and parties to other transactions with the Company. In addition, the Company may agree to hold other parties harmless against specific losses, such as those that could arise from a breach of representation, covenant, or third-party infringement claims. It may not be possible to determine the maximum potential amount of liability under such indemnification agreements due to the unique facts and circumstances likely to be involved in each particular claim and indemnification provision. Management believes any liability arising from these agreements will not be material to the consolidated financial statements. As a result, no liability for these agreements has been recorded at December 31, 2024 or 2023.

Employment Agreement

The Company has entered into an employment agreement with one executive. This employment agreement was entered into effective as of January 1, 2020 and automatically renews annually. The Company desired the assurance of the executive's continued association and services to retain the executive's experience, skills, abilities, background, and knowledge. The executive’s employment is at-will, and the Company may terminate the employment relationship at any time, with or without cause, and with or without notice. The terms of the agreement stipulate compensation, benefits, specific restrictive covenants, and Company obligations upon termination of the employment agreement, including severance pay calculated as twelve monthly payments of the executive's monthly base salary.

Salary Deferral Program

In 2023, the Company introduced a voluntary salary deferral program in order to facilitate increased employee ownership in the Company, whereby all employees were offered the opportunity to defer a portion of their salaries, in anticipation of some or all of the deferred payments being invested in a future capital raise. Beginning June 28, 2023, Ryan Pratt, Mark Mason, John Berg, and Kellie Chong elected to defer approximately 68%, 68%, 52%, and 25%, respectively, of their salaries as participants in the program along with a number of other employees. The Company subsequently terminated this program and effective September 4, 2023, the Company’s entire executive management team, including Ryan Pratt, CEO and Chairman of the Company, John Berg, the Company’s Chief Financial Officer, Mark Mason, the Company’s Chief Operating Officer, and Kellie Chong, the Company’s Chief Business Officer, voluntarily reduced their salaries by 20% as part of a plan by the Company to reduce expenses. Following the closing of the 2024 Private Placement, the Board of Directors reinstated the salaries of the management team, effective January 1, 2024. The voluntary salary deferred payments were repaid to employees in March 2024 in accordance with the term of the deferral program.

Purchase Order Obligations

As of December 31, 2024 and 2023, the Company had outstanding purchase order obligations of $459,112 and $740,340, respectively, which were not accrued for on the consolidated financial statements.

10. SEGMENT INFORMATION

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company has one operating segment which develops high-performance MMIC products for wireless connectivity. The Company’s Chief Executive Officer, Ryan Pratt, is the Chief Decision Maker and reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The Company does not assess the performance of its individual product lines on measures of profit or loss, or asset-based metrics.

The table below presents the Company’s consolidated operating results including significant segment expenses for the years ended December 31, 2024 and 2023:

For the Year Ended

December 31,

Less:

Operating Expenses:

(a) Includes shipping costs, intangible amortization and overhead.

11. INCOME TAXES

The Company did not have any income tax expense for the years ended December 31, 2024 or 2023.

The provision for income taxes for the years ended December 31, 2024 and 2023 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to a valuation allowance. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known, or the tax environment changes.

Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

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Guerrilla RF, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Significant components of the Company's deferred tax assets for federal income taxes consisted of the following:

Noncurrent deferred income tax asset arising from:

Noncurrent deferred income tax liability arising from:

Warrant liabilities (500,661 ) -

Net $ - $ -

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to realize deferred tax assets. Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of December 31, 2024, and 2023.

The Company does not have unrecognized tax benefits as of December 31, 2024, or 2023. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

On August 9, 2022, the U.S. Government enacted the U.S. CHIPS and Science Act (“CHIPS Act”). The CHIPS Act creates a 25% investment tax credit for certain investments in domestic semiconductor manufacturing. The credit is provided for qualifying property, which is placed in service after December 31, 2022, and any impact to the Company would start in fiscal 2023. On August 16, 2022, the U.S. Government enacted the Inflation Reduction Act. The Inflation Reduction Act impact to the Company would start in fiscal 2023. The Inflation Reduction Act introduces a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations. Applicable corporations would be allowed to claim a credit for the minimum tax paid against regular tax in future years. The Inflation Reduction Act also includes an excise tax that would impose a 1% surcharge on stock repurchases. This excise tax is effective January 1, 2023. The Company is currently evaluating the effect the CHIPS Act and the Inflation Reduction Act will have on its consolidated financial statements. At present, the Company does not expect that any of the provisions included in the two aforementioned pieces of legislation will result in a material impact to the Company’s deferred tax assets, liabilities, or income taxes payable.

The Company had net operating loss carryforwards (“NOL”) for federal and state income tax purposes at December 31, 2024, and December 31, 2023 of approximately:

December 31,

The net operating loss carryforwards generated before 2018 begin expiring in 2033 for federal and 2028 for state income tax purposes. Federal and state net operating losses generated in 2018 and into the future now have an indefinite life.

December 31,

The credit carryforwards begin expiring in 2035 for federal tax purposes.

GUER US Equity

GUER · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GUER US Equity☆

GUER · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GUER US Equity