Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Throughout this section, unless otherwise noted, "Blue Laser Fusion" "BLF," "we," "us," "our," "Company" and similar terms refer to Private Blue Laser Fusion prior to the closing of the Merger, and to the Company after the closing of the Merger. Following is a discussion and analysis of our financial condition and results of operations. You should read the following together with our unaudited condensed consolidated financial statements and the related notes included in Part 1, Item 1 of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2026 (this "Quarterly Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly 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 Statement Regarding Forward-Looking Statements" elsewhere in this Quarterly Report. You should review the disclosure under the heading "Risk Factors" in this Quarterly 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

Blue Laser Fusion is commercializing a proprietary and novel pulsed laser architecture, GigaPulse^™, based on its high peak power, efficient, reliable and cost-effective laser optical enhancement cavity (OEC) technology. BLF is pursuing pulsed laser applications in directed energy defense applications designed to deliver 100,000 times the peak power compared to conventional continuous wave defense lasers. This capability has the potential to neutralize advanced threats with rapid engagement of targets at the speed of light, a deep magazine, and low cost per shot compared to conventional approaches. BLF has not yet completed the full-scale 1 kJ pulsed OEC laser demonstration or tested the laser in a directed energy defense application. BLF currently anticipates using a portion of the proceeds from the Offering (as defined below) to complete the development of the laser with a view toward commercialization. Additionally, BLF is developing gigawatt (GW) scale, safe, secure, clean fusion energy based on the proven ignition and gain demonstrated by the National Ignition Facility (NIF) at Lawrence Livermore National Laboratory (LLNL) in 2022 in order to power economic growth and meet the acute and increasing demand for data centers & AI, EVs, and onshore manufacturing. BLF has been awarded contracts from the U.S. Department of Energy, as well as the Japan Fusion Moonshot program. BLF has published a peer-reviewed overview of the technology architecture, and has presented at multiple defense- and energy-related conferences. BLF has established a comprehensive IP portfolio with more than 140 patents and applications internationally.

BLF's office headquarters is located at 6950 Hollister Ave, Goleta, CA 93117, with a commercial laser engineering facility nearby also in Goleta, and R&D labs with Caltech, as well as Osaka University Blue Laser Fusion Institute. BLF is led by an experienced high-tech management team, consisting of Nobel Prize winner Dr. Shuji Nakamura, Richard Ogawa and Paul Rudy, who have decades of experience commercializing laser and photonics. BLF was organized as a Delaware corporation in November 2022. BLF's telephone number is 704-756-2981. BLF's website address is https://bluelaserfusion.com.

Merger

On September 4, 2026 (the "Closing Date"), Blue Laser Fusion Acquisition Co., a wholly owned subsidiary of Unite Acquisition 2 Corp. ("Unite"), merged with and into BLF pursuant to an Agreement and Plan of Merger (the "Merger Agreement") (the "Merger"). At the Effective Time of the Merger, BLF survived as a wholly owned subsidiary of Unite under the name Blue Laser Fusion Acquisition Co. (changed to Blue Laser Subsidiary, Inc. subsequently), and Unite was renamed "Blue Laser Fusion, Inc." in connection with the Merger.

At the Effective Time, all outstanding shares of BLF capital stock (after giving effect to the conversion of BLF's Series Seed-1 and Series Seed-2 convertible preferred stock into common stock on a one-for-one basis) were converted into an aggregate of 5,993,834 shares of the Company's common stock, par value $0.0001 per share ("Common Stock"), at an exchange ratio of approximately 0.6314 (the "Exchange Ratio"), and all outstanding options to purchase BLF common stock were converted into options to purchase 1,155,632 shares of Common Stock. In connection with the Merger, the Company's board of directors adopted the Blue Laser Fusion, Inc. 2026 Stock Incentive Plan (the "2026

Plan"), under which 3,253,428 shares of Common Stock were reserved as of September 30, 2026, consisting of 2,097,796 shares available for future awards and 1,155,632 shares underlying the converted BLF options. The Company assumed BLF's 2022 Stock Incentive Plan in the Merger, and no further awards will be granted under that plan.

Lucius Partners LLC ("Lucius Partners"), the sole holder of common stock of Unite prior to the Merger, agreed to the cancellation of 4,000,000 shares of Common Stock, and the remaining 1,000,000 shares remained outstanding after the Merger, of which Lucius Partners held 995,000 shares as of September 30, 2026. The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions.

The Merger was accounted for as a reverse recapitalization, with BLF as the accounting acquirer. Unite, a shell company that did not meet the definition of a business under ASC 805, was treated as the acquired company, and its net liabilities of $0.8 million were recognized at historical cost, with no goodwill or other intangible assets recorded. Accordingly, BLF's pre-Merger financial statements are presented as our historical financial statements, and pre-Merger common share, per share and stock option amounts have been retroactively recast to reflect the Exchange Ratio. The convertible preferred stock was not recast and remained in temporary equity until the Closing Date.

The Offering

Immediately following the Effective Time, we completed the initial closing of a private placement (the "Offering") of 910,265 shares of Common Stock at $27.50 per share, followed on September 30, 2026 by a second closing of 122,285 shares at the same price. The Offering generated gross proceeds of approximately $28.4 million and net proceeds of approximately $23.7 million after placement agent fees and other transaction costs of approximately $4.7 million.

On October 14, 2026, subsequent to quarter-end, we completed a third closing of the Offering of 208,082 shares of Common Stock at $27.50 per share for gross proceeds of approximately $5.7 million, before placement agent fees and expenses. Across the initial, second and third closings, we sold 1,240,632 shares of Common Stock in the Offering for aggregate gross proceeds of approximately $34.1 million. On October 29, 2026, we announced the completion of the Offering.

Use of Proceeds

We intend to use the net proceeds of the Offering to accelerate our engineering milestones, operational expansion and technology deployment, allocated principally across three areas: (i) our directed energy defense platforms, including accelerating prototype development and field-testing of our ultra high-power pulsed lasers to address military requirements for defense against advanced threats, counter-unmanned aerial systems, missile defense and other tactical defense capabilities; (ii) our next-generation inertial confinement fusion program, including advancing the semiconductor- and fiber-amplifier-based pulsed laser systems that drive our high-frequency, high-efficiency fusion power architecture; and (iii) manufacturing and supply chain scaling, including establishing and expanding semiconductor-related optical fabrication and pulsed laser engineering and assembly capacity in Goleta, California, to serve defense prime contractors and energy partners. We also intend to use a portion of the net proceeds to pursue a quotation of our Common Stock on an over-the-counter market or a listing on a national securities exchange, and for working capital, capital expenditures and other general corporate purposes. Our management has broad discretion over the application of the net proceeds, and the amounts and timing of our actual expenditures will depend on numerous factors, including the progress of our technology development, customer demand, government funding and strategic partnership opportunities.

In connection with the Offering, the Placement Agent received, from the proceeds of each closing, a cash commission of 10.0% and a non-allocable expense allowance of 2.0% of the gross proceeds of that closing, (the rates applicable under the Engagement Agreement to investors introduced by the Placement Agent; a 5.0% commission and a 1.0% expense allowance apply to investors introduced by the Company), as well as a non-refundable activation fee of $50 thousand. The Placement Agent (or its designees) is also entitled to receive the Placement Agent Warrants described below.

Placement Agent Warrants

We are obligated to issue to the Placement Agent warrants to purchase 101,619 shares of Common Stock at $33.00 per share (90,027 in respect to the initial closing and 11,592 in respect to the second closing of the Offering) (the "Placement Agent Warrants"). Once issued, the warrants are exercisable through the seventh anniversary of the final closing of the Offering for cash or, if no effective registration statement covers the underlying shares, on a cashless basis. The Placement Agent also earned Placement Agent Warrants to purchase an additional 11,171 shares of Common Stock at the third closing on October 14, 2026. The warrant certificates had not been issued as of September 30, 2026 or the date of this Report.

The Placement Agent Warrants are classified as equity. Because they were earned as compensation for services in the Offering, they had no net effect on additional paid-in capital or total stockholders' equity.

Financial Overview

Since our inception in November 2022, we have devoted substantially all of our efforts and financial resources to research and development, engineering design, prototype assembly and hardware demonstrations, building our organization, including raising capital, researching, organizing and staffing the Company, business planning, and providing general and administrative support for these operations. To date, we have funded our operations primarily with proceeds from the sale of convertible preferred stock and, in September 2026, the Offering. Prior to the Merger, we raised aggregate net proceeds of approximately $38.2 million from the issuance of Series Seed-1 convertible preferred stock for cash and Series Seed-2 convertible preferred stock issued in July 2023 upon the conversion of a $0.5 million SAFE, after issuance costs of approximately $0.1 million. In September 2026, we received net proceeds of approximately $23.7 million from the Offering after deducting transaction costs of approximately $4.7 million. In October 2026, subsequent to quarter-end, we received additional gross proceeds of approximately $5.7 million from the third closing of the Offering, before placement agent fees and expenses, and on October 29, 2026 we announced the completion of the Offering with aggregate gross proceeds of approximately $34.1 million across the three closings.

Our net losses were $2.0 million and $2.4 million for the three months ended September 30, 2026 and 2025, respectively, and $6.5 million and $7.4 million for the nine months ended September 30, 2026 and 2025, respectively. As of September 30, 2026, we had an accumulated deficit of $27.6 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and, to a lesser extent, from general and administrative costs associated with our operations.

Components of Results of Operations

Revenue

To date, BLF has generated limited revenue from licensing arrangements. Our revenue to date has been derived from licensing our proprietary radiation-hydrodynamics simulation software to a research institution in Japan. Under a twelve-month Software License and Service Agreement that commenced on April 1, 2026 (the "2026 Agreement"), we recognize total fixed consideration of approximately $0.1 million ratably over the term as a single combined performance obligation. We recognized revenue of $28 thousand and $57 thousand for the three and nine months ended September 30, 2026, respectively, and no revenue for the corresponding periods in 2025. BLF has not generated any revenue from collaboration arrangements during the periods presented. BLF does not expect to generate material recurring revenue unless and until it successfully commercializes its directed energy and fusion energy products.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the design, prototyping, and testing of BLF's pulsed laser architecture and related fusion energy and directed energy applications. These expenses include personnel-related costs (including stock-based compensation) for engineering and scientific staff, materials and components consumed in laboratory and prototype activities, fees paid to research collaborators and third-party service providers, depreciation and facility costs allocated to R&D operations, and other costs that support BLF's R&D programs.

BLF expenses research and development costs as incurred. BLF expects research and development expenses to fluctuate from period to period based on the timing and scope of prototype builds, hardware demonstrations, and external research engagements, and to increase over the long term as BLF advances its technology toward commercial deployment.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance, and other administrative functions. Other significant costs include facilities-related expenses not included in research and development expense, legal fees related to intellectual property and corporate matters, other professional fees for accounting and consulting services, insurance, and other administrative expenses.

BLF expects that its general and administrative expense will increase for the foreseeable future as it continues to support its expanding headcount and operations to support the growth of its business. Following the Merger, BLF also expects increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, board of director fees, investor relations costs and other expenses that it did not incur as a private company.

Other Income (Expense)

Other income (expense) consists of interest earned on our cash and cash equivalents, primarily money market funds. It also includes foreign currency gains and losses related to our Japanese subsidiary and our yen-denominated lease liability.

Income Taxes

Income tax expense consists of foreign income taxes incurred by our Japanese subsidiary, Blue Laser Fusion GK. BLF has historically incurred net losses and maintains a full valuation allowance against its U.S. federal and state net deferred tax assets.

Results of Operations

Three Months Ended September 30, 2026, compared to Three Months Ended September 30, 2025

The following table sets forth our results of operations for the three months ended September 30, 2026 and 2025 (in thousands):

N/M = not meaningful

Nine Months Ended September 30, 2026, compared to Nine Months Ended September 30, 2025

The following table sets forth our results of operations for the nine months ended September 30, 2026 and 2025 (in thousands). The discussion that follows addresses both the three- and nine-month periods.

N/M = not meaningful

Revenue

We recognized revenue of $28 thousand and $57 thousand for the three and nine months ended September 30, 2026, respectively, compared to no revenue for the corresponding periods in 2025. Revenue in 2026 reflects ratable recognition of the fixed consideration under the 2026 Agreement, which commenced on April 1, 2026. We have not generated revenue from collaboration arrangements during the periods presented.

Research and Development Expenses

Research and development expenses decreased by $1.0 million, or 47%, from $2.2 million for the three months ended September 30, 2025 to $1.2 million for the three months ended September 30, 2026, and decreased by $2.8 million, or 41%, from $6.8 million for the nine months ended September 30, 2025 to $4.0 million for the nine months ended September 30, 2026. The decreases were primarily due to lower prototype build costs, which declined by approximately $2.7 million for the nine-month period because the prior-year period included significant prototype equipment purchases, and lower outsourced consulting and third-party engineering services, partially offset by higher laboratory materials costs.

General and Administrative Expenses

General and administrative expenses increased by $0.5 million, or 118%, from $0.4 million for the three months ended September 30, 2025 to $0.9 million for the three months ended September 30, 2026, and increased by $1.5 million, or 119%, from $1.3 million for the nine months ended September 30, 2025 to $2.8 million for the nine months ended September 30, 2026. The increases were primarily due to higher audit, tax and other professional fees incurred in connection with the Merger and becoming a public reporting company, including an increase of approximately $0.4 million in audit and tax fees for the nine-month period, and higher stock-based compensation expense of $0.1 million and $0.3 million for the three and nine months, respectively. The increases also reflect higher personnel-related, travel and patent costs.

Other Income (Expense)

Other income (expense) consist of interest income of $0.1 million and $0.2 million for the three months ended September 30, 2026 and 2025, respectively, a decrease of $0.1 million, or 51%, and $0.4 million and $0.7 million for the nine months ended September 30, 2026 and 2025, respectively, a decrease of $0.3 million, or 49%. The decreases were primarily due to lower average balances of cash equivalents held in money market funds prior to the closing of the Offering in September 2026, reflecting the use of cash to fund operations.

Income Tax Expense

Income tax expense was $10 thousand and less than $1 thousand for the three months ended September 30, 2026 and 2025, respectively, and $8 thousand and $7 thousand for the nine months ended September 30, 2026 and 2025, respectively, and relates to the activity of Blue Laser Fusion GK. We continue to maintain a full valuation allowance against our U.S. federal and state net deferred tax assets.

Liquidity and Capital Resources

Source of Liquidity

BLF has incurred net losses and negative cash flows from operations since its inception. To date, we have funded our operations primarily through the sale and issuance of convertible preferred stock and, in September 2026, the Offering, from which we received net proceeds of approximately $23.7 million, after deducting placement agent fees and other offering costs of approximately $4.7 million, of which $0.9 million was accrued and unpaid as of September 30, 2026. As of September 30, 2026, we had cash and cash equivalents of $33.0 million, including $29.7 million held in money market funds, working capital of $32.0 million and an accumulated deficit of $27.6 million. On October 14, 2026, we completed a third closing of the Offering for gross proceeds of approximately $5.7 million, before placement agent fees and expenses. The proceeds of the third closing are not included in our cash and cash equivalents as of September 30, 2026. Across the three closings, the Offering generated aggregate gross proceeds of approximately $34.1 million, and on October 29, 2026 we announced its completion. We intend to apply the net proceeds as described under "The Offering - Use of Proceeds" above.

We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses, working capital and capital expenditure requirements for at least twelve months from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We will require substantial additional funding to complete development of our pulsed laser and fusion energy technologies and to commercialize any resulting products, and we may seek such funding through equity or debt financings, government contracts and grants, or strategic collaborations. Such funding may not be available on acceptable terms, or at all.

Cash Flows

The following table sets forth a summary of BLF's cash flow activity for the nine months ended September 30, 2026 and 2025 (amounts in thousands):

Operating Activities

Net cash used in operating activities was $6.4 million for the nine months ended September 30, 2026, compared to $7.3 million for the nine months ended September 30, 2025, a decrease of $1.0 million. The decrease was primarily due to our $1.0 million lower net loss and $0.3 million of higher stock-based compensation expense, partially offset by a $0.3 million increase in prepaid expenses and other current assets in 2026, compared to a $0.1 million decrease in 2025. Changes in accounts payable and accrued expenses used net cash of $0.3 million in each of 2026 and 2025.

Investing Activities

Net cash used in investing activities was $0.4 million for the nine months ended September 30, 2026, compared to $0.2 million for the nine months ended September 30, 2025. The increase of $0.2 million, or 118%, was primarily due to higher purchases of laboratory equipment and equipment under construction to support our prototype and engineering programs.

Financing Activities

Net cash provided by financing activities was $23.2 million for the nine months ended September 30, 2026, compared to $10 thousand for the nine months ended September 30, 2025. Financing activities in 2026 consisted primarily of $28.4 million of gross proceeds from the Offering and $24 thousand of proceeds from stock option exercises, partially offset by $3.8 million of Offering issuance costs paid, $1.1 million used to repurchase shares of common stock from WUV 1 Limited Partnership and $0.4 million used to repay notes payable and loans assumed from Unite. Financing activities in 2025 consisted of $10 thousand of proceeds from stock option exercises.

Critical Accounting Policies and Significant Judgments and Estimates

Management's discussion and analysis of BLF's financial condition and results of operations is based on its financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires BLF to make estimates and judgments that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities in its financial

statements, as well as the reported expenses incurred during the reporting periods. BLF bases its estimates on historical experience and on various other factors that BLF's management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

BLF believes that the accounting policies discussed in the financial statements located elsewhere in this Quarterly Report are critical to understanding its historical and future performance, as these policies relate to the more significant areas that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on its financial condition or results of operations.

Contractual Obligations and Commitments

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

Off-Balance Sheet Transactions

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

JOBS Act Accounting Election

We are an "emerging growth company," as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to either early adopt or delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. We do not anticipate that our status as an "emerging growth company" will be impacted by the Merger.