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

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

The following discussion reviews the operating results of Elauwit Connection, Inc. ("Elauwit," the "Company," "we," "our," or "us") for the three months ended June 30, 2026 (the "second quarter"), the six months ended June 30, 2026 (the "six months"), the respective prior year periods ended June 30, 2025 (the "prior year periods"), and our financial condition as of June 30, 2026, and should be read in conjunction with our financial statements and notes thereto included elsewhere in this report and our other documents filed with the Securities and Exchange Commission ("SEC"). Forward-looking statements in this Quarterly Report on Form 10-Q (this "Form 10-Q") are qualified by the cautionary statement included under the next subheading, "Forward-Looking Statements."

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which provides a "safe harbor" for forward-looking statements made by us. All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends, and other information, may be forward-looking statements. Words such as "aim," "anticipate," "believe," "can," "continue," "could," "expect," "may," "opportunity," "plan," "potential," "will," "would" and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs, estimates, and projections will occur or can be achieved. Actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including:

BUSINESS OVERVIEW

We are a customer-centric service provider of broadband Internet networks for the multifamily and student housing community sectors across the United States. Our managed WiFi networks provide community-wide Internet access for residents, guests, property management staff, and third-party technology vendors at each community we serve. We provide our service offering wholesale to REITs, community ownership groups, and community management companies, engaged in our target real estate sectors, who then offer the service to their residents.

In building out a managed WiFi network, we provide network design, project management, network engineering, network installation, and quality control. As part of our service delivery model, we provide dedicated bandwidth, 24/7 network monitoring, network maintenance, and resident support.

Our mission is to be the leading experience provider of Internet access solutions. For our community ownership customers, this means clear communication and timely execution. For the end users of our service, residents and their guests, this means dedication to the objective of providing an excellent resident experience. We differentiate ourselves in the area of resident experience by building reliable networks, responding to service requests quickly, establishing support protocols that lead to industry-leading first touch resolution metrics, and communicating effectively with key stakeholders throughout.

While anyone can claim top tier operational capabilities, we have grown quickly through word-of-mouth, as a trusted partner for real estate development and ownership groups. We have an excellent track record of repeat business from parties we contract with. Internet access has become a utility, but unlike electricity and water, reliability is not something community owners can take for granted. Our performance has created the opportunity to expand within ownership portfolios and is a key aspect of our growth strategy moving forward.

We closely monitor the challenges and needs of development and ownership groups in the real estate sectors in focus. A continued theme has been the fragmented market of service providers in the space in which we operate and issues stemming out of such. We view these issues to be a large opportunity for our business and an indication that consolidation is likely in the near future. We aim to be a driver of consolidation.

RESULTS OF OPERATIONS

Comparison of the Three and Six Months ended June 30, 2026 and 2025

Summary

Revenue

Revenue for the three months ended June 30, 2026 decreased $2.5 million, or 46.4%, to $2.9 million, compared to $5.3 million for the three months ended June 30, 2025. Revenue for the six months ended June 30, 2026 decreased $3.5 million, or 32.4%, to $7.3 million, compared to $10.8 million for the six months ended June 30, 2025.

The decrease was primarily driven by lower network design and installation revenue of $1.6 million and $5.0 million for the three and six months ended June 30, 2026, respectively, compared to $4.6 million and $9.6 million for the three and six months ended June 30, 2025, respectively, reflecting the timing of project starts and the completion in 2025 of several large network construction projects that did not recur at the same level in 2026. Network design and installation revenue is project-based and recognized over time using a cost-to-cost input method and, as a result, is inherently lumpy from quarter to quarter as we continue to build our recurring revenue base with the continued completion of construction projects converting to recurring revenues.

Recurring revenue, which is recognized ratably over the contract term as the Company provides ongoing managed network services to community owners and their residents, increased $0.6 million, or 81.8%, to $1.2 million for the three months ended June 30, 2026, compared to $0.7 million for the three months ended June 30, 2025, and increased $1.1 million, or 98.2%, to $2.3 million for the six months ended June 30, 2026, compared to $1.2 million for the six months ended June 30, 2025. The increase reflects the ramp in recurring service revenue from networks deployed in 2024 and 2025 that reached activation and began billing under long-term service agreements during the periods, which the Company expects to continue to grow as a share of total revenue as additional construction projects complete and convert to ongoing recurring service contracts.

Cost of Revenue

Cost of revenue decreased $2.1 million, or 46.6%, to $2.4 million for the three months ended June 30, 2026, compared to $4.5 million for the three months ended June 30, 2025. Cost of revenue decreased $2.7 million, or 30.9%, to $6.0 million for the six months ended June 30, 2026, compared to $8.7 million for the six months ended June 30, 2025.

The decrease was primarily driven by reduced direct project costs, including hardware, contracted labor and project management, corresponding to lower network design and installation revenue in the periods.

Gross Profit

Gross profit decreased 45.1% to $0.4 million for the three months ended June 30, 2026, compared to $0.8 million for the three months ended June 30, 2025. Gross profit decreased 38.5% to $1.3 million for the six months ended June 30, 2026, compared to $2.1 million for the six months ended June 30, 2025.

Our gross margin for the three months ended June 30, 2026 was 15.5%, compared to 15.1% for the three months ended June 30, 2025. Our gross margin for the six months ended June 30, 2026 was 17.4%, compared to 19.2% for the six months ended June 30, 2025. The change in gross margin was primarily attributable to network construction activities with an increased rate of network activations in the second quarter whereby we recognize the majority of contribution from a given project. Over time, we expect our gross margin to increase as higher-margin recurring service revenue continues to grow as a share of total revenue.

Operating Expenses

Operating expenses were $3.5 million for the second quarter compared to $1.5 million for the prior year period. Operating expenses were $6.6 million for the six months ended June 30, 2026 compared to $3.2 million for the six months ended June 30, 2025. The increase was driven by:

Operating Loss

Operating loss was $3.1 million for the three months ended June 30, 2026, compared to an operating loss of $0.7 million for the three months ended June 30, 2025. Operating loss was $5.3 million for the six months ended June 30, 2026, compared to an operating loss of

$1.1 million for the six months ended June 30, 2025. The increase in operating loss was primarily driven by the higher operating expenses described above.

Interest Income (Expense)

Interest expense was $0.03 million for the three months ended June 30, 2026, compared to interest expense of $0.1 million for the prior year period. Interest income was less than $0.01 million for the six months ended June 30, 2026, compared to interest expense of $0.2 million for the prior year period. The shift primarily reflects interest earned on cash proceeds from our IPO and a reduction in interest expense due to the repayment of related party debt outstanding during the prior year period.

Net Loss

Net loss increased $2.3 million and $4.0 million to net loss of $3.1 million and $5.3 million for the three and six months ended June 30, 2026 and 2025, respectively, compared to net loss of $0.9 million and $1.3 million for the prior year periods, respectively. The reasons for the increase in net loss are discussed above.

Non-GAAP Measures

Adjusted earnings before interest (income) expense, income taxes, depreciation and amortization ("EBITDA") is provided for informational purposes only and is not a measure of financial performance under accounting principles generally accepted in the U.S. ("GAAP").

Management believes the presentation of adjusted EBITDA, reflecting non-GAAP adjustments, provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company. In particular, by excluding expenses that are not directly related to our operating performance, we are able to present a view of our underlying business that the management team uses to analyze our historical performance and plan for our future performance. Adjusted EBITDA is a key metric used by management and the Board of Directors to assess the Company's financial and operating performance. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for net income (loss) determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following tables present a reconciliation of adjusted EBITDA to net loss (the most comparable GAAP measure) in accordance with GAAP for the three and six months ended June 30, 2026 and 2025:

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Key Performance Metrics

Management uses recurring service revenue, contracted units, activated units, billed units, and backlog as key performance metrics to assess our financial performance and results of operations. The measures of recurring service revenue, contracted units, activated units, billed units, and backlog may vary across the internet services or real estate industries. Therefore, our recurring service revenue, contracted units, activated units, billed units, and backlog measures are not necessarily comparable to similarly titled measures reported by other companies.

We define recurring service revenue as the monthly recurring service revenue initiated by network activation under our long-term service agreements. Management believes that the Company's ability to retain and expand revenue from existing customers is an indicator of the long-term value of its customer relationships and potential future business opportunities.

We define contracted units as the total number of individual units waiting to be built or in the process of being installed across the properties using our networks along with the individual units we currently serve. We believe this metric is useful to investors because it illustrates the total number of units we will serve once the construction process is complete.

We define activated units as the total number of individual units that are fully installed and on, but not yet collecting revenue due to onboarding process, across the properties using our networks. We believe this metric is useful for investors because it illustrates the total number of individual units we will collect revenue on once the onboarding process is complete, and can be tracked over time to show the reach of our networks.

We define billed units as the total number of individual units we are currently collecting revenue on across the properties using our networks. We believe this metric is useful to investors because it illustrates the total number of individual units we collect revenue on and can be tracked over time to show the reach of our networks. We believe it is more useful to compare total billed units as opposed to total customers or total subscribers because our revenue is more closely tied to the number of units we serve than the total number of customers or subscribers.

Backlog is defined as the aggregate amount of a contract price allocated to remaining performance obligations. Total backlog can include network design and installation performance obligations and internet network services and hardware and internet services performance obligations. We believe tracking backlog is useful to investors because it illustrates the remaining performance obligations under our contracts and the revenue we expect to recognize in the future.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2026, the Company had cash and cash equivalents of approximately $1.2 million and net working capital deficit of approximately $0.9 million. The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception, with an accumulated deficit of approximately $19.9 million as of June 30, 2026. During the six months ended June 30, 2026, the Company used approximately $5.2 million in cash for operating activities.

These conditions raise initial substantial doubt about the Company's ability to continue as a going concern. On November 6, 2025, the Company completed the IPO, raising gross proceeds of approximately $15.0 million. As of June 30, 2026, the Company has no required debt repayments other than scheduled monthly principal and/or interest payments on its outstanding promissory notes and Network Service Agreements (see Notes 6 and 7).

On May 14, 2026, the Company entered into a new $2.0 million business loan agreement (the "May 2026 Term Loan") with Endurance Opportunities (as defined below), an existing related-party lender. In connection with the May 2026 Term Loan, the Company issued a commercial promissory note in favor of Endurance Opportunities with a principal amount of $500 thousand (the "May 2026 Note") and agreed to issue three additional commercial promissory notes in favor of Endurance Opportunities, each with a principal amount of $500 thousand. The May 2026 Note bears interest at a fixed rate of 15.5% per annum, requires monthly interest payments, and matures 36 months from the closing date. The Company closed on the May 2026 Term Loan during the second quarter of 2026 and used the proceeds for general working capital and continued network deployment activities. See Note 6, "Related Party Debt," for additional information.

Management expects operating losses and negative cash flows from operations to continue for the foreseeable future as the Company invests in its commercial capabilities; however, management expects such losses and negative cash flows to decrease over time as the Company scales its operations and grows its revenue base.

In evaluating the Company's ability to continue as a going concern for a period of one year from the date these financial statements are issued, management considered the Company's current liquidity position, the availability of additional borrowings under the May 2026 Term Loan, forecasted cash flows reflecting the anticipated improvement in operating results, and the ability, if necessary, to reduce discretionary spending and other operating costs to preserve liquidity. Based on this assessment, management has concluded that the Company's current liquidity position, existing available financing and expected cash flows are sufficient to fund operations for at least

the next twelve months, and that substantial doubt about the Company's ability to continue as a going concern does not exist as of the date these financial statements are issued.

Liquidity

Our primary liquidity requirements are for working capital, debt repayment and Network-as-a-Service (NaaS) project deployment. Although income taxes are not currently a significant use of funds, after the benefits of our net operating loss carryforwards are fully recognized, they could become a material use of funds, depending on our future profitability and future tax rates. Our liquidity needs have been met primarily through equity offerings and related party loans.

As of June 30, 2026, we had approximately $1.2 million in cash and cash equivalents. As of December 31, 2025, we had approximately $6.2 million in cash and cash equivalents. During the six months ended June 30, 2026 and 2025, we used net cash in operating activities of $5.2 million and $1.5 million, respectively. As of June 30, 2026 and December 31, 2025, we had a working capital deficit of $0.9 million and working capital surplus of $4.1 million, respectively. Key drivers of our working capital position have been, and continue to be, network construction receivables and deferred revenue.

Capital Resources

On November 6, 2025, we closed our IPO and sold the underwriters 1,667,000 shares of common stock for gross proceeds of approximately $15.0 million, before deducting underwriting discounts and commissions and other offering expenses. On November 24, 2025, we closed on the partial exercise of the underwriters' over-allotment option to purchase 68,989 shares of common stock for additional gross proceeds of approximately $0.6 million. See Note 1, "Organization and Nature of Operations," for additional information.

As of June 30, 2026 and December 31, 2025, we had total outstanding debt of $2.2 million and $2.0 million, respectively.

On April 12, 2024, we issued a promissory note to Motherlode, LLC ("Motherlode") for $1.0 million as part of an agreement to repurchase and retire Series Seed Preferred Shares previously issued to Motherlode. See Note 7, "Notes Payable," for additional information.

We have financing arrangements with Endurance Financial LLC ("Endurance Financial"), the manager of Endurance Opportunities I LLC ("Endurance Opportunities"), and Endurance Opportunities. On March 1, 2025 and March 25, 2025, we issued commercial promissory notes to Endurance Financial in exchange for $1.0 million in total, that have a term of 18 months and 221 days, respectively, and on November 12, 2024, we issued a commercial promissory note to Endurance Opportunities in exchange for $0.3 million, that has a term of 18 months, using certain accounts receivable as collateral for each of the commercial promissory notes (collectively, the "Endurance Notes"). The purpose of these facilities was to support our working capital position. On April 1, 2024, we entered into a Fixed Rate Loan Agreement with Endurance Opportunities for $1.0 million to refinance previously held long-term debt (the "Fixed Rate Loan Agreement"). On November 7, 2025, we paid off the outstanding principal and interest of the Fixed Rate Loan Agreement and the Endurance Notes, thereby satisfying these obligations in their entirety. See Note 6, "Related Party Debt," for additional information.

During the six months ended June 30, 2026, we entered into the May 2026 Term Loan with Endurance Opportunities, pursuant to which we issued the May 2026 Note in a principal amount of $500 thousand and agreed to issue three additional commercial promissory notes in the same form as the May 2026 Note in favor of Endurance Opportunities, each with a principal amount of $500 thousand. The May 2026 Note has a maturity date of 36 months and bears interest at 15.5% per annum on the outstanding principal balance. Monthly payments of interest are required under the May 2026 Note, with the outstanding principal amount due on the maturity date. In 2025 and 2024, we entered into various participation and agency agreements with Endurance Opportunities pursuant to which Endurance provided us with the financing necessary to support our Network-as-a-Service (NaaS) product offerings under certain network service agreements (the "NSAs"). During the six months ended June 30, 2026 and fiscal 2025, we financed $0 million and $0.3 million, respectively, from Endurance Opportunities, and as of June 30, 2026, the NSAs had a balance of $1.1 million. See Note 6, "Related Party Debt," for additional information.

On January 6, 2025, we entered into a simple agreement for future equity ("SAFE") agreement with an investor, pursuant to which we received an aggregate amount of $1.0 million. Following the closing of the IPO, the SAFE converted into 130,719 shares of common stock. See Note 10, "SAFE," for additional information.

Cash Flow Analysis

Operating Activities

Net cash used in operating activities was $5.2 million for the six months ended June 30, 2026, compared to $1.5 million for the six months ended June 30, 2025. The $3.7 million increase reflects a larger net loss driven primarily by elevated general and administrative expenses associated with operating as a publicly traded company, increases in accounts receivable and inventories from growing construction activity, and growth in deferred revenue from new construction contracts, partially offset by changes in other working capital items.

Investing Activities

Net cash used in investing activities was $0.1 million for the six months ended June 30, 2026, reflecting purchases of property and equipment. There were no cash flows from investing activities for the six months ended June 30, 2025.

Financing Activities

Net cash provided by financing activities was $0.2 million for the six months ended June 30, 2026, compared to net cash provided by financing activities of $1.7 million for the six months ended June 30, 2025. The change primarily reflects lower financing activity in 2026 compared to the prior-year period, partially offset by proceeds from the May 2026 Term Loan.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management's estimates are based on historical experience, the relevant information available at the end of each period, and their judgment. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could differ materially from these estimates under different assumptions or market conditions. See Note 2, "Summary of Significant Accounting Policies," for information about our significant accounting policies.

Accounts Receivable, Unbilled Receivables, Network Financing Receivables and Allowance for Credit Losses

The estimation of expected credit losses on the Company's accounts receivable, unbilled receivables, and network financing receivables requires significant management judgment and is therefore a critical accounting estimate.

Under the current expected credit loss ("CECL") impairment model, the Company applies different estimation methodologies depending on the nature of the receivable. For trade accounts receivable, the Company applies an aging schedule method, under which reserve percentages of 50%, 75%, and 100% are applied to invoices aged 91 to 120 days, 121 to 180 days, and over 180 days past due, respectively. Invoices aged 90 days or fewer are reserved at a de minimis rate based on historical collection experience. For unbilled receivables and network financing receivables, the Company applies a historical loss rate method. The Company has not experienced any credit losses on unbilled receivables or network financing receivables since inception; accordingly, the historical loss rate applied to those balances is zero and no allowance has been recorded against those balances as of June 30, 2026 or December 31, 2025.

Effective for the year ended December 31, 2025 and continuing for the three and six months ended June 30, 2026, the Company changed its estimation methodology for trade accounts receivable from a historical loss rate method to an aging schedule method, accounted for prospectively as a change in accounting estimate. The change reflects the growth of the trade accounts receivable portfolio and the availability of more granular invoice-level aging data, which now support a more precise estimate of expected credit losses. As of June 30, 2026 and December 31, 2025, the Company's allowance for credit losses related to trade accounts receivable was approximately $0.5 million and $0.3 million, respectively.

Significant judgments in determining the allowance include the selection of aging buckets and reserve percentages, the assessment of qualitative factors (including current economic conditions, customer-specific credit considerations, and the overall credit profile of our customer base), and the identification of macroeconomic factors that could affect future loss rates.

Changes in any of these inputs could result in a material change in the allowance for credit losses and the related provision in the periods of change. See Note 2 - Summary of Significant Accounting Policies and Note 4 - Accounts Receivable for additional information.

Revenue Recognition

We generate revenue from the following sources: (1) network design and installation and (2) internet network services. In accordance with Accounting Standards Codification ("ASC") 606 "Revenue Recognition," there is significant judgment required in determining when to recognize revenue as performance obligations are satisfied. Recognition of network design and installation revenue occurs in line with incurred costs along set project milestones, with the most meaningful being delivery of provisioned network hardware to a customer's community, installation of the fiber backbone, and installation of endpoint electronics. Recognition of internet network services revenue occurs monthly as services are delivered.

Income Taxes

We account for income taxes using an asset and liability approach. Our provision for income taxes requires management to make significant estimates and judgments regarding the determination of deferred tax assets and liabilities, as well as the likelihood of realizing the benefits of positions taken in our tax returns. We evaluate our deferred tax assets each reporting period to determine whether a valuation allowance is necessary based on the weight of available evidence, including expectations of future taxable income. Actual results could differ from these estimates, which could have a material effect on our financial condition and results of operations.

Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies," for information about recent accounting pronouncements.

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