[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for InnSuites Hospitality Trust [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for InnSuites Hospitality Trust, including balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes explaining the company's operations, accounting policies, debt, equity, and significant events for the periods ended July 31, 2025, and January 31, 2025 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | **Assets** | | | | Cash | $206,941 | $92,752 | | Total Current Assets | $1,690,994 | $1,720,455 | | Total Assets | $14,197,704 | $14,193,580 | | **Liabilities & Equity** | | | | Total Current Liabilities | $1,441,278 | $1,391,145 | | Total Liabilities | $13,999,091 | $13,548,102 | | Total Equity | $198,613 | $645,478 | - Cash increased significantly from **$92,752** at January 31, 2025, to **$206,941** at July 31, 2025[10](index=10&type=chunk) - Total Equity decreased from **$645,478** at January 31, 2025, to **$198,613** at July 31, 2025[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations (Six Months)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%E2%80%93%20Six%20Months%20Ended%20July%2031%2C%202025%20and%20July%2031%2C%202024) This section outlines the company's financial performance over a six-month period, detailing revenues, expenses, and net loss | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $4,004,635 | $4,134,362 | | Total Operating Expenses | $4,020,939 | $4,249,872 | | Operating Loss | $(16,304) | $(115,510) | | Consolidated Net Loss | $(361,989) | $(331,387) | | Net Loss Attributable to Controlling Interests | $(512,212) | $(527,416) | | Net Loss Per Share – Basic & Diluted | $(0.06) | $(0.06) | - Total revenue decreased by **3.1%** from **$4,134,362** in 2024 to **$4,004,635** in 2025 for the six-month period[12](index=12&type=chunk) - Operating loss significantly improved from **$(115,510)** in 2024 to **$(16,304)** in 2025, an **85.9%** reduction[12](index=12&type=chunk) - Consolidated Net Loss increased by **9.2%** from **$(331,387)** in 2024 to **$(361,989)** in 2025[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations (Three Months)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%E2%80%93%20Three%20Months%20Ended%20July%2031%2C%202025%20and%20July%2031%2C%202024) This section details the company's financial performance over a three-month period, presenting revenues, expenses, and net loss | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Total Revenue | $1,798,872 | $1,840,392 | | Total Operating Expenses | $2,037,572 | $2,126,348 | | Operating Loss | $(238,700) | $(285,956) | | Consolidated Net Loss | $(401,019) | $(410,002) | | Net Loss Attributable to Controlling Interests | $(391,180) | $(370,883) | | Net Loss Per Share – Basic & Diluted | $(0.04) | $(0.04) | - Total revenue decreased by **2.3%** from **$1,840,392** in 2024 to **$1,798,872** in 2025 for the three-month period[14](index=14&type=chunk) - Operating loss improved by **16.5%** from **$(285,956)** in 2024 to **$(238,700)** in 2025[14](index=14&type=chunk) - Consolidated Net Loss improved by **2.2%** from **$(410,002)** in 2024 to **$(401,019)** in 2025[14](index=14&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity%20%E2%80%93%20Six%20Months%20Ended%20July%2031%2C%202025%20and%20July%2031%2C%202024) This section presents changes in the company's equity over time, including trust shareholders' equity and non-controlling interests | Metric | July 31, 2025 | July 31, 2024 | | :------------------------------------ | :------------ | :------------ | | Trust Shareholders' Equity | $3,965,460 | $5,503,977 | | Non-Controlling Interest | $(3,766,847) | $(3,545,148) | | Total Equity | $198,613 | $1,958,829 | | Shares of Beneficial Interest (Shares) | 8,791,300 | 8,763,485 | | Shares of Beneficial Interest (Amount) | $4,882,885 | $6,421,402 | - Total Equity decreased significantly from **$1,958,829** at July 31, 2024, to **$198,613** at July 31, 2025[15](index=15&type=chunk)[18](index=18&type=chunk) - Shares of Beneficial Interest increased slightly from **8,763,485** to **8,791,300**[15](index=15&type=chunk)[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%93%20Six%20Months%20ended%20July%2031%2C%202025%20and%20July%2031%2C%202024) This section details the sources and uses of cash across operating, investing, and financing activities over a six-month period | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided By (Used In) Operating Activities | $126,863 | $(504,012) | | Net Cash Used In Investing Activities | $(415,091) | $(286,939) | | Net Cash Provided By (Used In) Financing Activities | $402,417 | $(116,384) | | Net Increase (Decrease) In Cash | $114,189 | $(907,335) | | Cash and Cash Equivalents at End of Period | $206,941 | $418,033 | - Operating activities generated cash of **$126,863** in 2025, a significant improvement from cash used of **$(504,012)** in 2024[20](index=20&type=chunk) - Investing activities used more cash in 2025 (**$(415,091)**) compared to 2024 (**$(286,939)**), primarily due to hotel property improvements[20](index=20&type=chunk) - Financing activities provided cash of **$402,417** in 2025, a reversal from cash used of **$(116,384)** in 2024, mainly due to related party borrowings[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering operations, policies, and significant events [1. Nature of Operations and Basis of Presentation](index=9&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) This note describes InnSuites Hospitality Trust's business, its ownership structure, and the accounting principles used in preparing the financial statements - InnSuites Hospitality Trust (IHT) is an Ohio REIT, publicly traded and taxed as a C corporation, owning interests in two hotels (Arizona and New Mexico) and holding investments in UniGen Power Inc. and managing IBC Hotels, LLC[22](index=22&type=chunk)[23](index=23&type=chunk) - The Trust owns a **75.89%** interest in RRF Limited Liability Limited Partnership, which manages the hotels and IBC Hotels, LLC[25](index=25&type=chunk)[26](index=26&type=chunk) - Both hotels are classified as operating assets but are available for sale, though not currently listed[27](index=27&type=chunk) - The Trust's liquidity relies on hotel revenues, RRF management fees, asset sales, and returns on diversification investments, with current cash and credit lines deemed sufficient for the next 12 months[31](index=31&type=chunk)[35](index=35&type=chunk) - Hotel operations are seasonal, with Tucson's highest occupancy in Q1/Q4 and Albuquerque's in Q2/Q3, providing some balance[43](index=43&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods applied in the preparation of the financial statements, including revenue recognition and asset valuation - The financial statements are prepared using GAAP, requiring management estimates for items like useful lives of assets and fair values[45](index=45&type=chunk)[46](index=46&type=chunk) - Revenue from hotel operations is recognized as services are rendered, bundling room nights with amenities like Wi-Fi and breakfast[53](index=53&type=chunk)[56](index=56&type=chunk) - The Trust holds a **$1 million** 6% convertible debenture in UniGen Power Inc., approximately **$668,750** in UniGen common stock, and warrants, potentially leading to **15-20%** fully diluted equity ownership[70](index=70&type=chunk)[72](index=72&type=chunk)[81](index=81&type=chunk) - UniGen's engineering is **61%** complete, and the company is focused on raising additional capital, with IHT potentially participating[82](index=82&type=chunk) - The UniGen investment is valued as a Level 3 fair value measurement due to the absence of active or similar observable markets[85](index=85&type=chunk) [3. Ownership Interests in Albuquerque and Tucson Subsidiaries](index=18&type=section&id=3.%20OWNERSHIP%20INTERESTS%20IN%20ALBQUERQUE%20AND%20TUCSON%20SUBSIDIARIES) This note details the Trust's ownership stakes in its Albuquerque and Tucson hotel subsidiaries and their financial obligations - The Trust has sold non-controlling interests in Albuquerque Suite Hospitality, LLC and Tucson Hospitality Properties, LLLP, maintaining at least **50.1%** ownership in one entity[87](index=87&type=chunk) - As of July 31, 2025, the Trust held a **21.90%** ownership in the Albuquerque entity and the Partnership held a **51.75%** ownership in the Tucson entity[91](index=91&type=chunk)[92](index=92&type=chunk) - Neither the Albuquerque nor Tucson entities made quarterly Priority Return payments for the six months ended July 31, 2025[91](index=91&type=chunk)[92](index=92&type=chunk) [4. Variable Interest Entities](index=20&type=section&id=4.%20VARIABLE%20INTEREST%20ENTITIES) This note explains the Trust's involvement with Variable Interest Entities, specifically the Albuquerque entity, and its role as the primary beneficiary - The Albuquerque entity is identified as a Variable Interest Entity (VIE) with the Trust as the primary beneficiary, exercising control through financial guarantees, majority ownership, and operational decision-making[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - The Trust and Partnership provided mortgage loan guarantees to secure financing on favorable terms for their properties[97](index=97&type=chunk) [5. Property and Equipment](index=20&type=section&id=5.%20PROPERTY%20AND%20EQUIPMENT) This note provides a breakdown of the Trust's property and equipment, including hotel properties and corporate assets, net of accumulated depreciation Hotel Segment | Hotel Segment | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total hotel properties | $18,933,321 | $18,518,230 | | Less accumulated depreciation | $(12,099,254) | $(11,729,945) | | Hotel properties, net | $6,834,067 | $6,788,285 | Corporate PP&E | Corporate PP&E | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total property, plant and equipment | $468,540 | $468,540 | | Less accumulated depreciation | $(446,472) | $(445,211) | | Property, Plant and Equipment, net | $22,068 | $23,329 | - Net hotel properties increased slightly from **$6,788,285** to **$6,834,067**, reflecting ongoing investments[98](index=98&type=chunk) [6. Mortgage Notes Payable](index=21&type=section&id=6.%20MORTGAGE%20NOTES%20PAYABLE) This note details the mortgage loans secured by the Trust's hotel properties, including their balances, interest rates, and guarantees - The Tucson Hospitality Properties LLLP has an **$8.4 million** loan at **4.99%** interest, with a balance of approximately **$7,764,000** as of July 31, 2025[100](index=100&type=chunk) - Albuquerque Suites Hospitality, LLC has a **$1.4 million** business loan at an initial **4.90%** interest, with a balance of approximately **$1,136,000** as of July 31, 2025[101](index=101&type=chunk) - Both mortgage loans are guaranteed by InnSuites Hospitality Trust and related parties[100](index=100&type=chunk)[101](index=101&type=chunk) [7. Notes Payable and Notes Receivable – Related Party](index=21&type=section&id=7.%20NOTES%20PAYABLE%20AND%20NOTES%20RECEIVABLE%20%E2%80%93%20RELATED%20PARTY) This note describes the Trust's financial arrangements with related parties, including a demand/revolving line of credit - The Trust has a Demand/Revolving Line of Credit/Promissory Note with Rare Earth Financial, LLC (a related party) with an amount payable of approximately **$1,718,000** as of July 31, 2025, up from **$1,151,000** at January 31, 2025[103](index=103&type=chunk) - The line of credit bears interest at **7.0%** per annum, with interest-only payments paused, and has a maximum borrowing capacity of **$2,000,000**[103](index=103&type=chunk) [8. Other Notes Payable](index=22&type=section&id=8.%20OTHER%20NOTES%20PAYABLE) This note outlines other unsecured notes payable held by the Trust, including their interest rates and maturity dates - The Trust has a **$200,000** unsecured note payable at **5%** interest, due in August 2025 or 90 days notice, which may be extended[104](index=104&type=chunk) - Another unsecured loan of **$270,000** at **5%** interest, entered into with the Partnership, has been extended to May 2026[105](index=105&type=chunk) [9. Notes Payable to Banks](index=23&type=section&id=9.%20NOTES%20PAYABLE%20TO%20BANKS) This note details the Trust's revolving lines of credit with Pima Federal Credit Union, including balances and maturity dates - The Trust has three revolving lines of credit with Pima Federal Credit Union totaling **$250,000**, with balances of **$25,000** (Trust), **$21,000** (Albuquerque Hotel), and **$33,000** (Tucson Hotel) as of July 31, 2025[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - These lines of credit have variable interest rates and maturity dates ranging from November 2025 to January 2027[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [10. Minimum Debt Payments](index=23&type=section&id=10.%20MINIMUM%20DEBT%20PAYMENTS) This note presents a schedule of the Trust's minimum debt payments for mortgages, other notes, bank notes, and related party notes across future fiscal years | Fiscal Year | Mortgages | Other Notes Payable | Notes Payable to Banks | Notes Payable - Related Party | Total | | :---------- | :-------- | :------------------ | :--------------------- | :---------------------------- | :---------- | | 2026 | $123,673 | $470,000 | $79,878 | $- | $673,551 | | 2027 | $260,999 | $- | $- | $1,715,750 | $1,976,749 | | 2028 | $263,125 | $- | $- | $- | $263,125 | | 2029 | $274,685 | $- | $- | $- | $274,685 | | 2030 | $1,164,262 | $- | $- | $- | $1,164,262 | | Thereafter | $6,813,552 | $- | $- | $- | $6,813,552 | | **Total** | **$8,900,296** | **$470,000** | **$79,878** | **$1,715,750** | **$11,165,924** | - Total minimum debt payments are approximately **$673,551** for Fiscal Year 2026 and **$1,976,749** for Fiscal Year 2027[111](index=111&type=chunk) [11. Description of Beneficial Interests](index=23&type=section&id=11.%20DESCRIPTION%20OF%20BENEFICIAL%20INTERESTS) This note describes the rights and characteristics of the Trust's Shares of Beneficial Interest, including dividend entitlements and voting rights - Holders of Shares of Beneficial Interest are entitled to dividends, share ratably in assets upon liquidation, and possess ordinary voting rights (one vote per share)[112](index=112&type=chunk) - The Trust repurchased **0** shares for the six months ended July 31, 2025, compared to **18,456** shares at an average price of **$1.38** in the prior year[113](index=113&type=chunk) [12. Related Party Transactions](index=24&type=section&id=12.%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions and relationships between the Trust and its related parties, including ownership stakes and management agreements - Mr. Wirth and his affiliates held **22.51%** of Partnership units and **73.03%** of the Trust's Shares of Beneficial Interest as of July 31, 2025[114](index=114&type=chunk) - The Trust's subsidiary, RRF LLLP, manages the two hotels and IBC Hotels, LLC, under agreements with **5%** of room revenue and a **$2,000** monthly accounting fee per hotel[116](index=116&type=chunk) - An immediate family member of Mr. Wirth provides part-time IT support, earning up to approximately **$24,000** annually plus bonuses[117](index=117&type=chunk) [13. Statements of Cash Flows, Supplemental Disclosures](index=24&type=section&id=13.%20STATEMENTS%20OF%20CASH%20FLOWS%2C%20SUPPLEMENTAL%20DISCLOSURES) This note provides additional information on cash flow activities, specifically detailing cash paid for interest and taxes - Cash paid for interest was approximately **$245,000** for the six months ended July 31, 2025, compared to **$250,000** in the prior year[118](index=118&type=chunk) - No cash was paid for taxes during the six months ended July 31, 2025 and 2024[118](index=118&type=chunk) [14. Commitments and Contingencies](index=24&type=section&id=14.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the Trust's contractual obligations and potential liabilities, including escrow requirements, membership fees, and legal matters - The Trust is obligated to deposit **4%** of Tucson hotel room revenue into an escrow account for capital expenditures, but no cash balance existed as of July 31, 2025[119](index=119&type=chunk) - Fees paid to Best Western for membership and reservation systems were approximately **$112,000** for the six months ended July 31, 2025, an increase from **$92,000** in the prior year[120](index=120&type=chunk) - Management believes that current legal actions will not materially adversely affect the Trust's financial position, results of operations, or liquidity[121](index=121&type=chunk) [15. Leases](index=25&type=section&id=15.%20LEASES) This note details the Trust's operating leases, including its corporate offices and a non-cancelable ground lease for the Albuquerque Hotel - The Trust has operating leases for its corporate offices (month-to-month) and a non-cancelable ground lease for the Albuquerque Hotel, expiring in 2058[124](index=124&type=chunk)[125](index=125&type=chunk) | Metric | July 31, 2025 | | :------------------------------------ | :------------ | | Weighted average remaining lease term | 31 years | | Weighted average discount rate | 4.85% | | Total minimum lease payments | $4,463,211 | | Total present value of minimum payments | $2,216,563 | | Long term portion of operating lease liability | $2,196,084 | [16. Share-Based Payments](index=26&type=section&id=16.%20SHARE-BASED%20PAYMENTS) This note describes the Trust's share-based compensation program for non-employee Trustees, including restricted share grants and vesting terms - The Trust compensates its three non-employee Trustees with grants of **6,000** restricted shares each per year, vesting over one year[129](index=129&type=chunk) - On February 15, 2025, **18,000** restricted shares with an aggregate fair value of **$7,200** per grant were issued to the independent Trustees[129](index=129&type=chunk) [17. Notes Receivable (IBC)](index=27&type=section&id=17.%20NOTES%20RECEIVEABLE) This note details the secured promissory note held by the Trust from the sale of its technology subsidiary, IBC Hotels LLC, including its terms and security - The Trust holds a secured promissory note of **$1,925,000** from the sale of its technology subsidiary, IBC Hotels LLC, with interest accrued at **3.75%** per annum[131](index=131&type=chunk) - The note's maturity was extended to June 30, 2030, and the interest rate adjusted to **3.25%** payable at maturity, as RRF (IHT's management subsidiary) took over IBC management[135](index=135&type=chunk) - The note is secured by a pledge of the buyer's interest in IBC and a security interest in all IBC assets[136](index=136&type=chunk) [18. Income Taxes](index=28&type=section&id=18.%20INCOME%20TAXES) This note provides information on the Trust's income tax status as a C-Corporation, including deferred tax assets and valuation allowances - The Trust is taxed as a C-Corporation and has deferred tax assets of **$6.1 million**, including **$3.1 million** in net operating loss carryforwards and **$2.9 million** in syndications[137](index=137&type=chunk) - A valuation allowance of approximately **$4.3 million** has been determined against the net deferred tax asset[137](index=137&type=chunk) [19. COVID-19 Disclosure](index=28&type=section&id=19.%20COVID-19%20DISCLOSURE) This note discusses the impact of the COVID-19 pandemic on the Trust's business and the subsequent recovery and current financial outlook - COVID-19 had a material detrimental impact on the business in Fiscal Year 2021, but lodging demand and revenue levels have since recovered[138](index=138&type=chunk) - Fiscal Year 2025 showed a strong rebound, and Fiscal Year 2026 has stable revenue but reduced profits due to inflation and increased costs[139](index=139&type=chunk) [20. Employee Retention Tax Credit](index=28&type=section&id=20.%20EMPLOYEE%20RETENTION%20TAX%20CREDIT) This note details the anticipated and received Employee Retention Tax Credits under the CARES Act and Consolidated Appropriations Act - The Trust is anticipated to receive approximately **$2.7 million** in Employment Tax Refunds and Credits under the CARES Act and Consolidated Appropriations Act[141](index=141&type=chunk) - As of July 31, 2025, IHT has received approximately **$1.5 million** of these funds[141](index=141&type=chunk) [21. Going Concern](index=29&type=section&id=21.%20GOING%20CONCERN) This note addresses the Trust's ability to continue as a going concern, outlining management's strategies to improve profitability and cash flow - Fiscal Year 2025 was the Trust's first loss in four years, prompting a focus on cost-cutting, including a **$350,000** annual reduction in Tucson Hotel insurance costs for Fiscal Year 2026[143](index=143&type=chunk) - Management believes that improved operating profits, diversification opportunities, and NYSE-American listing provide positive equitable assets for continued success and positive cash flow[143](index=143&type=chunk) [22. Best Western Rewards Guest Voucher Expense](index=29&type=section&id=22.%20BEST%20WESTERN%20REWARDS%20GUEST%20VOUCHER%20EXPENSE) This note discloses the expense incurred by the Trust for Best Western Rewards Guest Vouchers, primarily for guest free night redemptions - The Trust recorded approximately **$66,000** in Best Western Rewards Guest Voucher Expense for the six months ended July 31, 2025, primarily for guest free night vouchers[144](index=144&type=chunk) [23. IBC Receivable](index=29&type=section&id=23.%20IBC%20RECEIVABLE) This note provides background on IBC Hotels, LLC, its sale to a related party, and the Trust's ongoing involvement through a management subsidiary - IHT founded IBC Hotels, LLC in 2014 to address the unfulfilled need for independent hotel reservation services, selling it in 2018[145](index=145&type=chunk) - On March 5, 2025, a related party purchased IBC Hotels, LLC, and RRF LLLP (IHT's subsidiary) was hired to manage its revitalization, obtaining a five-year option to purchase IBC at cost[147](index=147&type=chunk)[149](index=149&type=chunk) - This opportunity allows IHT to benefit from the significant global market for independent hotel reservations and branding[149](index=149&type=chunk) [24. Subsequent Events](index=29&type=section&id=24.%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date, including dividend policy, note extensions, and hotel operational performance - The Trust maintains a conservative dividend policy, paying two semi-annual dividends totaling **$0.02** per share per fiscal year since 1971[150](index=150&type=chunk) - The note payable to IHT from the sale of IBC Hotels, LLC was extended to June 30, 2030, with interest at **3.25%** payable at maturity, as RRF took over IBC management[152](index=152&type=chunk) - Hotel operations achieved record revenue and Gross Operating Profit in Fiscal Year 2025, with solid revenue expected for Fiscal Year 2026[153](index=153&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=31&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Trust's financial condition, results of operations, and future outlook, including discussions on hotel performance, diversification investments, liquidity, and key accounting policies [General](index=31&type=section&id=GENERAL) This section provides context for the management discussion and analysis, advising it be read with the financial statements and prior annual report - This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes for the first two Fiscal Quarters of Fiscal 2026 and the audited consolidated Form 10-K for the fiscal year ended January 31, 2025[158](index=158&type=chunk) [Forward-Looking Statements](index=31&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section highlights forward-looking statements within the report, outlining the inherent uncertainties and risk factors that could cause actual results to differ - The report contains forward-looking statements regarding dividends, hotel operations, financing, investments, UniGen expansion, hotel sales, and financial trends, subject to safe harbor provisions[159](index=159&type=chunk) - Uncertainties and factors that may cause actual results to differ materially include tariffs, investment risks (UniGen, IBC), inflation, economic recession, pandemics, political instability, labor costs, and competition[160](index=160&type=chunk)[161](index=161&type=chunk) [Overview](index=33&type=section&id=OVERVIEW) This section provides a general description of the Trust's business, including its hotel operations, diversification investments, and strategic objectives - The Trust owns and operates two moderate-service hotels in Tucson, Arizona, and Albuquerque, New Mexico, with **270** suites, branded as InnSuites and Best Western[163](index=163&type=chunk) - The Trust manages IBC Hotels, LLC, offering independent hotel reservation and branding services, with an option to purchase IBC at cost[165](index=165&type=chunk) - Diversification includes an investment in UniGen Power Inc., developing efficient clean energy generation[165](index=165&type=chunk) - Results are significantly affected by the economy, travel, occupancy, room rates, cost management, and inflationary increases in operating expenses[167](index=167&type=chunk) - The strategic plan includes selling the two hotels at market value within **36** months, expanding IBC, and benefiting from the UniGen investment[171](index=171&type=chunk) [Hotel Operations (Performance Metrics)](index=35&type=section&id=HOTEL%20OPERATIONS%20(Performance%20Metrics)) This section analyzes the performance metrics of the Trust's hotel operations, including occupancy, average daily rate, and revenue per available room - Hotel expenses primarily include property taxes, insurance, corporate overhead, interest on mortgage debt, professional fees, depreciation, payroll, supplies, marketing, and utilities[174](index=174&type=chunk) | Metric | July 31, 2025 | July 31, 2024 | Change | %-Incr/Decr | | :-------------------------- | :------------ | :------------ | :----- | :---------- | | **Albuquerque** | | | | | | Occupancy | 91.97% | 89.86% | 2.11% | 2.35% | | Average Daily Rate (ADR) | $99.55 | $101.88 | $(2.33) | -2.29% | | Revenue Per Available Room (REVPAR) | $91.55 | $91.55 | $- | 0.00% | | **Tucson** | | | | | | Occupancy | 73.11% | 77.42% | -4.31% | -5.57% | | Average Daily Rate (ADR) | $94.62 | $96.23 | $(1.61) | -1.67% | | Revenue Per Available Room (REVPAR) | $69.17 | $74.50 | $(5.33) | -7.15% | | **Combined** | | | | | | Occupancy | 80.96% | 82.58% | -1.62% | -1.96% | | Average Daily Rate (ADR) | $96.95 | $98.78 | $(1.83) | -1.85% | | Revenue Per Available Room (REVPAR) | $78.48 | $81.57 | $(3.09) | -3.79% | - Albuquerque saw increased occupancy but decreased ADR, while Tucson experienced declines in all three metrics (Occupancy, ADR, REVPAR)[175](index=175&type=chunk) [Results of Operations (Twelve Months Trailing)](index=35&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20FISCAL%20TWELVE%20MONTH%20TRAILING%20ENDED%20JULY%2031%2C%202025%20COMPARED%20TO%20THE%20FISCAL%20TWELVE%20MONTH%20TRAILING%20ENDED%20JULY%2031%2C%202024.) This section compares the Trust's financial performance for the twelve months trailing July 31, 2025, against the prior year, focusing on revenues, expenses, and net loss | Metric | FY 2025/2026 | FY 2024/2025 | Change | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Total Revenues | $7,463,789 | $7,691,676 | $(227,887) | (3%) | | Operating Expenses | $8,107,325 | $8,558,603 | $(451,278) | (5%) | | Operating Loss | $(643,536) | $(866,927) | $223,391 | 26% | | Consolidated Net Loss | $(1,422,234) | $(586,036) | $(836,198) | (143%) | - Total revenues decreased by **3%**, while operating expenses decreased by **5%**, leading to a **26%** improvement in operating loss[177](index=177&type=chunk) - Consolidated Net Loss significantly worsened by **143%** to **$(1,422,234)**, partly due to BW Rewards Guest Voucher Expense and the absence of Employee Retention Benefit[179](index=179&type=chunk) [Results of Operations (Six Months)](index=37&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20SIX%20MONTHS%20ENDED%20JULY%2031%2C%202025%20COMPARED%20TO%20THE%20SIX%20MONTHS%20ENDED%20JULY%2031%2C%202024) This section analyzes the Trust's financial performance for the six months ended July 31, 2025, compared to the prior year, detailing revenue, expenses, and net loss | Metric | July 31, 2025 | July 31, 2024 | Change | % Change | | :------------------------------------------ | :------------ | :------------ | :------- | :------- | | Total Revenues | $4,004,635 | $4,134,362 | $(129,727) | (3%) | | Operating Expenses | $4,020,939 | $4,249,872 | $(228,933) | (5%) | | Operating Income (Loss) | $(16,304) | $(115,510) | $99,206 | 86% | | Consolidated Net Loss | $(361,989) | $(331,387) | $(30,602) | 9% | | Net Loss Attributable to Controlling Interests | $(512,212) | $(527,416) | $15,204 | 3% | | Net Loss Per Share – Basic & Diluted | $(0.06) | $(0.06) | $0.00 | 0% | - Total revenues decreased by **3%** due to a **4%** decrease in room revenues, despite prior refurbishments[183](index=183&type=chunk)[186](index=186&type=chunk) - Operating expenses decreased by **5%**, primarily due to cost cuts in corporate staffing and sales/marketing, leading to an **86%** improvement in operating loss[187](index=187&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - Consolidated Net Loss increased by **9%**, while Net Loss Attributable to Controlling Interests improved by **3%**[180](index=180&type=chunk)[184](index=184&type=chunk) [Results of Operations (Three Months)](index=39&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20JULY%2031%2C%202025%20COMPARED%20TO%20THE%20THREE%20MONTHS%20ENDED%20JULY%2031%2C%202024) This section examines the Trust's financial performance for the three months ended July 31, 2025, compared to the prior year, focusing on revenue, expenses, and net loss | Metric | July 31, 2025 | July 31, 2024 | Change | % Change | | :------------------------------------------ | :------------ | :------------ | :------- | :------- | | Total Revenues | $1,798,872 | $1,840,392 | $(41,520) | (2%) | | Operating Expenses | $2,037,572 | $2,126,348 | $88,776 | 4% | | Operating Loss | $(238,700) | $(285,956) | $47,256 | 17% | | Consolidated Net Loss | $(401,019) | $(410,002) | $8,983 | 2% | | Net Loss Attributable to Controlling Interests | $(391,180) | $(370,883) | $(20,297) | (5%) | | Net Loss Per Share – Basic & Diluted | $(0.04) | $(0.04) | $0.00 | 0% | - Total revenues decreased by **2%**, primarily due to a **3%** decrease in room revenues[198](index=198&type=chunk)[201](index=201&type=chunk) - Operating expenses decreased by **4%**, leading to a **17%** improvement in operating loss[197](index=197&type=chunk)[202](index=202&type=chunk) - Consolidated Net Loss improved by **2%**, while Net Loss Attributable to Controlling Interests worsened by **5%**[197](index=197&type=chunk)[199](index=199&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the Trust's ability to meet its short-term and long-term financial obligations, detailing cash sources, credit lines, and cash flow activities - Primary cash sources are hotel management fees and distributions from hotel operations, supplemented by intercompany loan repayments, potential asset sales/refinancing, and diversified investment returns[211](index=211&type=chunk) - As of July 31, 2025, the Trust had approximately **$0.2 million** in cash, three bank lines of credit, and a **$300,000** related party line of credit, which management believes is sufficient for the next twelve months[213](index=213&type=chunk) - Net cash provided by operating activities was **$127,000** for the six months ended July 31, 2025, a significant improvement from cash used of **$504,000** in the prior year[217](index=217&type=chunk) - Net cash used in investing activities increased to **$415,000**, primarily due to improvements and additions to hotel properties[220](index=220&type=chunk) - Net cash provided by financing activities was **$402,000**, mainly due to borrowing on Notes Payable – Related Party[221](index=221&type=chunk)[224](index=224&type=chunk) [Competition in the Hotel Industry](index=42&type=section&id=COMPETITION%20IN%20THE%20HOTEL%20INDUSTRY) This section analyzes the competitive landscape of the hotel industry for the Trust's properties and its strategic response through diversification - The hotel industry is highly competitive, with both Tucson and Albuquerque hotels facing competition from other mid-market hotels and alternative lodging facilities like Airbnb[229](index=229&type=chunk) - Despite record Gross Operating Profit in Fiscal Year 2025, Fiscal Year 2026 is slightly down but stable, with stable room revenue expected for the remainder of the year[229](index=229&type=chunk)[231](index=231&type=chunk) - The Trust may diversify away from hotel investments into ventures like UniGen Power, Inc. and IBC Hotels, LLC, or pursue a reverse merger with a larger non-public entity[232](index=232&type=chunk) [Critical Accounting Policies and Estimates](index=43&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section identifies the most significant accounting policies and estimates that require management's judgment, particularly regarding asset valuation and revenue recognition - The most critical accounting policies relate to the valuation of hotel properties, including methods for recognizing and measuring asset impairment[234](index=234&type=chunk)[235](index=235&type=chunk) - Management believes the current market value of the hotels is significantly higher than their depreciated book value and plans to sell both hotels within **36** months[236](index=236&type=chunk) - Revenue recognition for hotel operations is based on services rendered, bundling room nights with amenities, and is recorded when rooms are occupied and food/beverage sales are delivered[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) [Compliance with Continued Listing Standards of NYSE American](index=44&type=section&id=COMPLIANCE%20WITH%20CONTINUED%20LISTING%20STANDARDS%20OF%20NYSE%20AMERICAN) This section confirms the Trust's compliance with the NYSE American's continued listing standards for equity requirements - The Trust's Management received communication from the NYSE-American on August 29, 2022, confirming full compliance with all Continued Listing Standards Equity Requirements[242](index=242&type=chunk) [Non-GAAP Financial Measures](index=44&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section presents non-GAAP financial measures, Adjusted EBITDA and FFO, to provide additional insights into the Trust's operating and investment performance - Adjusted EBITDA and Funds From Operations (FFO) are presented as non-GAAP measures to evaluate operating performance, reflecting ongoing hotel real estate assets and investment performance[243](index=243&type=chunk)[244](index=244&type=chunk)[246](index=246&type=chunk) Six Months Ended | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $140,000 | $35,000 | | FFO | $9,000 | $15,000 | Three Months Ended | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Adjusted EBITDA | $(73,000) | $(74,000) | | FFO | $(30,000) | $(64,000) | - Adjusted EBITDA significantly increased for the six-month period, while FFO decreased. For the three-month period, both Adjusted EBITDA and FFO showed improvement (less negative)[245](index=245&type=chunk)[247](index=247&type=chunk) [Future Positioning](index=45&type=section&id=FUTURE%20POSITIONING) This section outlines the Trust's strategic plans, including the sale of hotel properties and diversification into clean energy and independent hotel services - The Trust continues to seek buyers for its two remaining hotel properties (Tucson and Albuquerque) at market value, aiming to sell them within **36** months[248](index=248&type=chunk)[251](index=251&type=chunk) | Hotel Property | Book Value | Mortgage Balance | Estimated Market Asking Price | | :------------- | :--------- | :--------------- | :---------------------------- | | Albuquerque | $907,122 | $1,135,926 | $9,500,000 | | Tucson Oracle | $5,926,945 | $7,764,370 | $18,500,000 | | **Total** | **$6,834,067** | **$8,900,296** | **$28,000,000** | - The long-term strategic plan includes benefiting from UniGen Power, Inc. and IBC Hotels, and pursuing a reverse merger with a larger private entity to list on the NYSE AMERICAN Exchange[253](index=253&type=chunk) [Share Repurchase Program](index=47&type=section&id=SHARE%20REPURCHASE%20PROGRAM) This section details the Trust's share repurchase program, driven by management's belief that the company's share price is undervalued - The Trust intends to continue repurchasing Shares of Beneficial Interest, believing the share price does not fully recognize the Trust's value due to depreciated book values, hotel operations, and potential from UniGen and IBC investments[254](index=254&type=chunk)[288](index=288&type=chunk) - No shares were repurchased during the six months ended July 31, 2025, compared to **28,337** shares at an average price of **$1.59** in the prior year[288](index=288&type=chunk) [Off-Balance Sheet Arrangements](index=47&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section confirms that the Trust does not have any off-balance sheet financing arrangements or unconsolidated subsidiaries - The Trust does not have any off-balance sheet financing arrangements or liabilities, nor any majority-owned or controlled subsidiaries not included in consolidated financial statements[255](index=255&type=chunk) [Seasonality](index=47&type=section&id=SEASONALITY) This section discusses the seasonal nature of the Trust's hotel operations and its implications for business vulnerability - Hotel operations are seasonal, with Tucson's highest occupancy in Q1/Q4 and Albuquerque's in Q2/Q3, which balances the Trust's overall hotel business seasonality[256](index=256&type=chunk) - Seasonality increases vulnerability to risks such as travel disruptions, labor shortages, cash flow issues, and adverse events like pandemics or economic downturns[257](index=257&type=chunk) [Inflation](index=47&type=section&id=INFLATION) This section addresses the impact of inflation on the Trust's operations and its strategies to manage rising costs through revenue adjustments - The Trust relies on hotel performance and its ability to increase revenue to keep pace with inflation, though competitive pressures may limit rate increases[258](index=258&type=chunk) - During Fiscal Year 2025, rates generally increased to offset inflationary increases in labor and other expenses, and rates are stable in Fiscal Year 2026[258](index=258&type=chunk) [Investment in UniGen Power, Inc.](index=48&type=section&id=INVESTMENT%20IN%20UNIGEN%20POWER%2C%20INC.) This section details the Trust's diversification investment in UniGen Power Inc., a clean energy company, including its financial terms and development status - IHT made a **$1 million** diversification investment in UniGen Power Inc. in late Fiscal Year 2020/early Fiscal Year 2021, which is developing a patented efficient clean energy generation innovation[259](index=259&type=chunk) - The investment includes **$1 million** in convertible debentures (**6%** interest, convertible into **1 million** shares), approximately **575,000** shares of UniGen stock, and warrants, potentially leading to **15-20%** fully diluted equity ownership[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk) - UniGen is delinquent on principal and interest payments, currently seeking additional investors, and its engineering is **61%** complete for the prototype[261](index=261&type=chunk)[266](index=266&type=chunk) - The market for UniGen's product is strong, with projected doubling of U.S. electricity demand over the next five years due to data centers, electric vehicles, and AI[260](index=260&type=chunk)[267](index=267&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=49&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that quantitative and qualitative disclosures about market risk are not required for smaller reporting companies, which InnSuites Hospitality Trust is - Quantitative and Qualitative Disclosures About Market Risk are not required for smaller reporting companies[271](index=271&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=49&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of the Trust's disclosure controls and procedures and internal control over financial reporting, concluding their effectiveness after remediation efforts [Evaluation of Disclosure Controls and Procedures](index=49&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section presents management's conclusion on the effectiveness of the Trust's disclosure controls and procedures as of July 31, 2025 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were fully effective as of July 31, 2025[272](index=272&type=chunk) - Control systems provide reasonable, not absolute, assurance against error or fraud due to inherent limitations and resource constraints[273](index=273&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=49&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) This section outlines management's responsibility for maintaining adequate internal control over financial reporting and acknowledges its inherent limitations - Management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure reliability and GAAP compliance[274](index=274&type=chunk) - Internal control over financial reporting may not prevent or detect all misstatements due to inherent limitations[275](index=275&type=chunk) [Assessment of Internal Control over Financial Reporting](index=49&type=section&id=Assessment%20of%20Internal%20Control%20over%20Financial%20Reporting) This section details management's assessment of the effectiveness of internal control over financial reporting, concluding its full effectiveness as of July 31, 2025 - Management assessed the effectiveness of internal control over financial reporting as of January 31, 2025, using COSO criteria, and concluded it was fully effective as of July 31, 2025[276](index=276&type=chunk) [Management's Remediation Initiatives](index=49&type=section&id=Management%27s%20Remediation%20Initiatives) This section describes the actions taken by management to address past deficiencies and enhance the Trust's internal controls over financial reporting - The Trust increased technical accounting expertise by hiring a seasoned CFO and Senior Staff Accountants to address past deficiencies and enhance internal controls[277](index=277&type=chunk) - Remediation efforts included improving the control environment, increasing GAAP knowledge, implementing formal processes for non-standard transactions, and enhancing management oversight[278](index=278&type=chunk) - These measures are believed to strengthen internal control over financial reporting and remediate material weaknesses, with ongoing improvements throughout Fiscal Years 2025 and 2026[279](index=279&type=chunk) [Changes in Internal Control over Financial Reporting](index=50&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on positive changes in the Trust's internal control over financial reporting, attributing improvements to new staffing and ongoing efforts - Positive changes in internal control over financial reporting occurred during the three months ended July 31, 2025, with new staffing additions expected to assist with stability, technical accounting, and internal control issues[281](index=281&type=chunk) [PART II. OTHER INFORMATION](index=51&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional disclosures not covered in the financial information, including legal proceedings, risk factors, and exhibit listings [ITEM 1. LEGAL PROCEEDINGS](index=51&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states that there are no legal proceedings to report for the Trust - There are no legal proceedings to report[284](index=284&type=chunk) [ITEM 1A. RISK FACTORS](index=51&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines key risk factors affecting the Trust, including the lingering impact of COVID-19 on travel and the economy, and uncertainties related to tariffs - COVID-19 had a material detrimental impact on business, financial results, and liquidity in Fiscal Year 2021, though lodging demand and revenue have significantly recovered[285](index=285&type=chunk) - Uncertainty regarding tariffs in the current economy is a risk, though it is anticipated that tariff issues will be resolved, allowing travel to normalize[286](index=286&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=51&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the rights of holders of Shares of Beneficial Interest and the Trust's share repurchase activities, driven by management's belief in undervaluation - Holders of Shares of Beneficial Interest are entitled to dividends, share ratably in assets upon liquidation, and possess ordinary voting rights[287](index=287&type=chunk) - The Trust repurchased **0** shares for the six months ended July 31, 2025, compared to **28,337** shares at an average price of **$1.59** in the prior year[288](index=288&type=chunk) - Management believes the Trust's share price is undervalued due to depreciated book values, strong hotel operations, and the potential of UniGen and IBC investments, and intends to continue repurchasing shares[288](index=288&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=52&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms that there have been no defaults upon senior securities - There have been no defaults upon senior securities[290](index=290&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=52&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that there are no mine safety disclosures to report - There are no mine safety disclosures to report[291](index=291&type=chunk) [ITEM 5. OTHER INFORMATION](index=52&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that there is no other information to report - There is no other information to report[292](index=292&type=chunk) [ITEM 6. EXHIBITS](index=52&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications by the Chief Executive Officer and Chief Financial Officer, and Inline XBRL exhibits | Exhibit No. | Exhibit | | :------------ | :--------------------------------------------------- | | 31.1 | Section 302 Certification by Chief Executive Officer | | 31.2 | Section 302 Certification by Chief Financial Officer | | 32.1 * | Section 906 Certification of Principal Executive Officer and Principal Financial Officer | | 101 | Inline XBRL Exhibits | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Schema Document | | 101.CAL | Inline XBRL Calculation Linkbase Document | | 101.LAB | Inline XBRL Labels Linkbase Document | | 101.PRE | Inline XBRL Presentation Linkbase Document | | 101.DEF | Inline XBRL Definition Linkbase Document | | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | [SIGNATURES](index=53&type=section&id=SIGNATURES) This section contains the signatures of the registrant's authorized officers, certifying the report on September 12, 2025 - The report was signed by James F. Wirth, Chairman and Chief Executive Officer, and Sylvin R. Lange, Chief Financial Officer, on September 12, 2025[297](index=297&type=chunk)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) For the transition period from to Commission file number: 001-42769 A PARADISE ACQUISITION CORP. (Exact Name of Registrant as Specified in Its Charter) British Virgin Islands N/A (State or other jurisdi ...

First Quarter 2025 Earnings Announcement [Introduction and Overview](index=1&type=section&id=Introduction%20and%20Overview) National Beverage Corp. announced solid first-quarter results for August 2, 2025, driven by strong brands and price/mix improvements - National Beverage Corp. announced first-quarter results for August 2, 2025, on September 11, 2025[3](index=3&type=chunk) - The company reported solid operating performance in a challenging global environment, attributing success to strong brands and management strategy[4](index=4&type=chunk) - Net sales increased due to price/mix improvements, partially offset by a slight decline in case volume[4](index=4&type=chunk) - Interest income decreased by **$2.1 million** due to lower cash balances after a **$304 million** dividend payment in July 2024[4](index=4&type=chunk) - LaCroix, the most significant brand, achieved organic sales growth in the club channel, with new flavors showing impressive initial sales[4](index=4&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) National Beverage Corp. achieved record net sales of **$331 million**, gross profit of **$125 million**, and operating income of **$71 million** for the quarter First Quarter Financial Highlights | Metric | Amount (Millions USD) | | :----- | :-------------------- | | Net Sales | $331 | | Gross Profit | $125 | | Operating Income | $71 | | Earnings Per Share | $0.60 | | Operating Cash Flow | $59 | | Total Cash | $250 | Management Commentary and Strategic Outlook [Operational Performance and Brand Strength](index=2&type=section&id=Operational%20Performance%20and%20Brand%20Strength) The company emphasizes its commitment to innovation and brand integrity, with new product launches and a focus on developing new flavors - Innovation and brand trust are core to the company's strategy, with new product launches shaping the marketplace[6](index=6&type=chunk) - The company remains focused on developing new flavors and products that delight consumers, while safeguarding shareholder investments[6](index=6&type=chunk) [Innovation, Shareholder Value, and Future Confidence](index=2&type=section&id=Innovation%2C%20Shareholder%20Value%2C%20and%20Future%20Confidence) National Beverage Corp. reaffirms its commitment to shareholders, returning over **$1.5 billion** in dividends and growing revenue by **135%** over two decades - The company has returned more than **$1.5 billion** in dividends to shareholders over the past two decades[6](index=6&type=chunk) - Total revenue has grown by **135%** over the past two decades[6](index=6&type=chunk) - Despite global economic uncertainties, the company is confident its innovation and disciplined management will deliver strong results and long-term value[6](index=6&type=chunk) - The company will soon commemorate its 40th year as National Beverage Corp[6](index=6&type=chunk) Consolidated Financial Results [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three fiscal months ended August 2, 2025, net sales slightly increased to **$330.5 million**, while net income decreased to **$55.8 million** Consolidated Results for Three Fiscal Months Ended | Metric (in thousands, except per share amounts) | August 2, 2025 | July 27, 2024 | Change (YoY) | | :-------------------------------------------- | :------------- | :------------ | :----------- | | Net Sales | $330,515 | $329,473 | +$1,042 | | Net Income | $55,760 | $56,780 | -$1,020 | | Earnings Per Common Share - Basic | $0.60 | $0.61 | -$0.01 | | Earnings Per Common Share - Diluted | $0.60 | $0.61 | -$0.01 | | Average Common Shares Outstanding - Basic | 93,620 | 93,569 | +51 | | Average Common Shares Outstanding - Diluted | 93,699 | 93,667 | +32 | [Forward-Looking Statements Disclaimer](index=3&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section provides a standard disclaimer for forward-looking statements, noting inherent risks and uncertainties detailed in SEC filings - The press release includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995[9](index=9&type=chunk) - Forward-looking statements involve risks, uncertainties, and factors described in SEC filings, which may cause actual results to differ[9](index=9&type=chunk) - The Company disclaims any obligation to update or announce revisions to any forward-looking statements[9](index=9&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission File Number: 001-42549 Kestra Medical Technologies, Ltd. (Exact Name of Registrant as Specified in its Charter) | Bermuda | Not Applicable ...

[Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements subject to risks and uncertainties, covering future financial performance, market expectations, and business plans - The report contains forward-looking statements regarding future periods, events, and financial performance, identified by words like "believe," "expect," "target," and conditional verbs; these statements are subject to various risks and uncertainties that could cause actual results to differ materially from projections[10](index=10&type=chunk)[11](index=11&type=chunk) - Key forward-looking statements include beliefs about non-GAAP operating income, expected benefits of solutions, market opportunities, customer and market expectations, sales cycles, financial metrics, AI automation in contact centers, business plans, technology changes (including AI), product development, competition, demand for solutions, customer composition, reliance on partnerships, cybersecurity risks, regulatory compliance, tax legislation effects, privacy laws, trade policies, intellectual property, capital resources, international operations, foreign currency fluctuations, inflation, and health epidemics[10](index=10&type=chunk) [Summary Risk Factors](index=7&type=section&id=Summary%20Risk%20Factors) The company faces numerous risks including operational unpredictability, SaaS model challenges, intense competition, and regulatory changes, which could impact its strategy and financial results - The company's business is exposed to numerous risks and uncertainties that could impact its strategy and financial results; key risks include the ability to manage business plans, improve solutions, innovate, execute sales and marketing, ensure customer acceptance, predict subscription renewals, adapt to new legislation, compete effectively, manage partnerships, obtain capital, manage growth, retain key personnel, protect intellectual property, and mitigate impacts from foreign currency fluctuations, inflation, global economic environment, trade policies, and public health pandemics[13](index=13&type=chunk)[14](index=14&type=chunk) - Specific operational risks highlighted are the inherent unpredictability of factors beyond control, risks associated with the SaaS business model, revenue and operating result fluctuations due to deferred revenue recognition, inability to accurately predict subscription renewal rates, lengthy and unpredictable sales cycles, dependence on a small number of key customers, intense competition in the customer engagement software market (including generative AI), and challenges in expanding sales and marketing[15](index=15&type=chunk) - Further risks include difficulties in customer product implementation, significant international operations exposure, unplanned system interruptions or capacity issues in third-party data centers, costly software errors, increased costs/liabilities from Service Level Agreements, dependence on broad market acceptance of applications and business model, inability to respond to rapid technological change, reliance on third-party technologies, and challenges in managing offshore product development and services[15](index=15&type=chunk) - Cybersecurity breaches, changes in privacy and data protection laws (e.g., GDPR), evolving regulations for cloud computing and AI, and changes in domestic and foreign trade policies (e.g., tariffs) also pose significant risks[16](index=16&type=chunk) [PART I](index=12&type=section&id=PART%20I) [ITEM 1. BUSINESS](index=12&type=section&id=ITEM%201.%20BUSINESS) eGain Corporation automates customer experience with an AI knowledge hub SaaS solution for enterprises, operating globally to enhance service and reduce costs through integrated AI Agent, AI Knowledge Hub, and Conversation Hub - eGain automates customer experience with an AI knowledge hub SaaS solution, aiming to improve customer experience and reduce costs for enterprises by synthesizing and delivering trusted answers[18](index=18&type=chunk) - The company's solution is structured into three main hubs: eGain AI Agent (for agent assistance), eGain AI Knowledge Hub (for centralized, guided knowledge), and eGain Conversation Hub (for omnichannel interaction management)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - eGain's solutions offer benefits such as enhanced customer experience, reduced operating costs through self-service automation and improved agent productivity, ensured compliance, and delivery of insights for service and product improvement[32](index=32&type=chunk) - The company primarily sells to large enterprises (over **$1 billion** in annual revenue or government organizations), which accounted for over **87%** of its annual recurring cloud revenue in fiscal year 2025; North America and EMEA collectively generated **78%** and **22%** of total revenue, respectively, in FY2025[37](index=37&type=chunk) - eGain competes with application software providers like LivePerson, NICE, and Verint, and occasionally with platform partners such as Five9, Genesys, Microsoft, Salesforce, and ServiceNow[39](index=39&type=chunk) - Growth strategies include advancing product and platform leadership (especially in AI), investing in direct sales and marketing, developing new partner relationships, and expanding within existing enterprise accounts[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - As of June 30, 2025, eGain had **446 employees** (**444 full-time**), with significant portions in product development (**173**) and services/support (**176**)[59](index=59&type=chunk) [ITEM 1A. RISK FACTORS](index=25&type=section&id=ITEM%201A.%20RISK%20FACTORS) eGain faces diverse risks from its business model, market competition, international operations, and technology, including revenue fluctuations, intense AI-driven competition, global operational exposure, cybersecurity threats, and evolving data privacy and AI regulations - The SaaS business model is subject to risks, including customer non-renewal or reduction of subscriptions, which can adversely affect operating and financial results; revenue recognition over time means downturns are not immediately reflected[68](index=68&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) - The market for customer engagement software, including generative AI, is highly competitive; failure to compete successfully against established and new entities with greater resources could adversely affect the business[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - Significant international operations (**22%** of revenue from EMEA, **43%** of workforce in India) expose the company to risks like foreign currency fluctuations, changes in data privacy laws (e.g., GDPR), geopolitical conflicts, and increased compensation costs in regions like India[95](index=95&type=chunk)[97](index=97&type=chunk)[99](index=99&type=chunk) - Cybersecurity breaches, unauthorized access to data, and system interruptions at third-party data centers or PaaS providers could harm reputation, lead to customer attrition, and incur significant legal and financial liabilities[100](index=100&type=chunk)[101](index=101&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[136](index=136&type=chunk) - Evolving data privacy laws (e.g., GDPR, CCPA, CPRA, India's DPDP) and AI regulations (e.g., EU AI Act) increase compliance costs, create legal uncertainties, and may limit the use and adoption of eGain's solutions[137](index=137&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[150](index=150&type=chunk) - The development and use of AI technologies carry risks such as flawed algorithms, biased datasets, and potential for harmful content, which could lead to reputational harm, regulatory scrutiny, or legal liability[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - Dependence on a relatively small number of customers for a substantial portion of revenue means the loss of any significant customer could materially and adversely affect financial condition and results of operations[81](index=81&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=58&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments from the SEC regarding the company's filings - The company has no unresolved staff comments from the Securities and Exchange Commission[176](index=176&type=chunk) [ITEM 1C. CYBERSECURITY](index=58&type=section&id=ITEM%201C.%20CYBERSECURITY) eGain maintains a robust cybersecurity framework aligned with NIST and ISO27001, overseen by a CISO and the Audit Committee, conducting third-party evaluations and managing risks, with no material impact from past incidents - eGain has an enterprise cybersecurity risk mitigation and governance process, detailed in its Information Security Protection Program (Security Plan), which aligns with NIST and ISO27001 frameworks[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - The company engages third-party providers for security control evaluations, including penetration testing and independent audits, to test the design and operational effectiveness of its security controls[178](index=178&type=chunk) - A Third-Party Cyber Risk Management Plan ensures due diligence on third parties, including security and privacy clauses in contracts and regular reviews[181](index=181&type=chunk) - A Cyber Incident Response Plan outlines processes for detecting, identifying, prioritizing, and analyzing security events, involving the CISO, legal counsel, and business stakeholders for appropriate response and mitigation[182](index=182&type=chunk) - The CISO, with over **25 years** of experience in IT and security, leads the company's cybersecurity strategy and reports to the Chief Financial Officer; the Audit Committee of the board oversees data privacy and cybersecurity risks, receiving annual updates from the CISO[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - As of the report date, eGain is not aware of any material risks from cybersecurity threats or past incidents that have materially affected or are likely to materially affect its business strategy, financial condition, results of operations, or cash flows[184](index=184&type=chunk) [ITEM 2. PROPERTIES](index=60&type=section&id=ITEM%202.%20PROPERTIES) eGain leases all its facilities, including headquarters in Sunnyvale, California, and offices in Newbury, England, and Pune, India, which are considered adequate for current and near-future operations - eGain leases all its facilities, including corporate headquarters in Sunnyvale, California, and offices in Newbury, England, and Pune, India[188](index=188&type=chunk) - The company believes its current offices are adequate for its present and near-future operating needs[188](index=188&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=60&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) eGain is not a party to any material legal proceedings and is unaware of significant pending or threatened actions, though it evaluates claims including intellectual property infringement and indemnifies customers - eGain is not currently a party to any legal proceedings, nor is it aware of any pending or threatened legal proceedings that could have a material adverse effect on its business, consolidated operating results, or financial condition[189](index=189&type=chunk) - In the ordinary course of business, the company is involved in various legal proceedings and claims, including alleged infringement of third-party patents and other intellectual property rights, commercial, labor, and employment matters[189](index=189&type=chunk) - The company indemnifies its customers against third-party intellectual property infringement claims, which could increase costs in the event of an adverse ruling[190](index=190&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=60&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to eGain Corporation - The disclosure requirement for mine safety is not applicable to eGain Corporation[191](index=191&type=chunk) [PART II](index=62&type=section&id=PART%20II) [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=62&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) eGain's common stock trades on Nasdaq under 'EGAN', with approximately 120 stockholders as of June 30, 2025; the company has never paid cash dividends and has a $40.0 million stock repurchase program with $1.2 million remaining - eGain's common stock is traded on the Nasdaq Stock Market under the symbol "**EGAN**"[194](index=194&type=chunk) - As of June 30, 2025, there were approximately **120 stockholders of record**[195](index=195&type=chunk) - The company has never declared or paid any cash dividends on its common stock and does not intend to in the foreseeable future, planning to retain all available funds for business operations[196](index=196&type=chunk) - On May 31, 2024, the board authorized a **$20.0 million** increase in its stock repurchase program, bringing the aggregate amount to **$40.0 million**; as of June 30, 2025, approximately **$1.2 million** remained available[197](index=197&type=chunk) Stock Repurchase Activity (Q4 FY2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands) | | :--- | :--- | :--- | :--- | | April 1, 2025 to April 30, 2025 | 183,906 | $5.38 | $3,962 | | May 1, 2025 to May 31, 2025 | 215,648 | $5.87 | $2,696 | | June 1, 2025 to June 30, 2025 | 230,858 | $6.53 | $1,188 | | **Total** | **630,412** | | | Cumulative Total Stockholder Return (FY2020-FY2025) | Index | 6/30/2020 | 6/30/2021 | 6/30/2022 | 6/30/2023 | 6/30/2024 | 6/30/2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | eGain Corporation | $100.00 | $103.33 | $87.76 | $67.42 | $56.80 | $56.26 | | Nasdaq Composite | $100.00 | $145.56 | $111.46 | $140.60 | $182.23 | $210.79 | | S&P Software & Services Select Industry Index | $100.00 | $154.47 | $100.40 | $120.90 | $137.30 | $172.80 | [ITEM 6. RESERVED](index=65&type=section&id=ITEM%206.%20RESERVED) This item is intentionally reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=65&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) eGain's total revenue decreased by **$4.4 million (4.7%)** to **$88.4 million** in FY2025, while net income significantly increased to **$32.3 million** due to a **$26.6 million** deferred tax valuation allowance release, with stable liquidity of **$62.9 million** in cash - eGain automates customer experience with an AI knowledge hub solution, selling its SaaS solution to enterprises to improve customer experience and reduce costs[210](index=210&type=chunk) Total Revenue (FY2025 vs. FY2024) | Revenue Category | FY2025 (in thousands) | FY2024 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | SaaS revenue | $81,921 | $85,082 | $(3,161) | (4)% | | Professional services | $6,510 | $7,721 | $(1,211) | (16)% | | **Total revenue** | **$88,431** | **$92,803** | **$(4,372)** | **(4.7)%** | Non-GAAP Operating Income (FY2025 vs. FY2024) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | | :--- | :--- | :--- | | Income from operations (GAAP) | $4,433 | $5,971 | | Add: Stock-based compensation | $2,449 | $4,529 | | **Non-GAAP income from operations** | **$6,882** | **$10,500** | - Net income significantly increased to **$32.3 million** in FY2025 from **$7.8 million** in FY2024, primarily due to an income tax benefit of **$26.6 million** in FY2025 (compared to a provision of **$1.9 million** in FY2024) resulting from the release of a deferred tax valuation allowance[285](index=285&type=chunk)[319](index=319&type=chunk) - Total costs and operating expenses decreased by **$2.8 million** in FY2025, mainly due to decreases in personnel-related expenses, legal expenses, outside consulting costs, and credit loss expenses, partially offset by increases in cloud computing and lead generation costs[281](index=281&type=chunk) Key Financial Measures (FY2025 vs. FY2024) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Income from operations | $4,433 | $5,971 | $(1,538) | (26)% | | Operating margin | 5% | 6% | -1% | | | Interest income, net | $2,469 | $3,798 | $(1,329) | (35)% | | Other expense, net | $(1,265) | $(51) | $(1,214) | 2380% | | Income before income tax benefit (provision) | $5,637 | $9,718 | $(4,081) | (42)% | | Benefit from (provision for) income taxes | $26,617 | $(1,938) | $28,555 | -1473% | | Net income | $32,254 | $7,780 | $24,474 | 315% | | Basic EPS | $1.15 | $0.25 | $0.90 | 360% | | Diluted EPS | $1.13 | $0.25 | $0.88 | 352% | Liquidity and Capital Resources (FY2025 vs. FY2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $62,909 | $70,003 | | Restricted cash | $8 | $8 | | Total liquidity sources | $95,700 | $101,700 | | Working capital | $38,400 | $44,500 | | Deferred revenue | $50,531 | $49,269 | Cash Flows (FY2025 vs. FY2024) | Cash Flow Activity | FY2025 (in thousands) | FY2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $5,263 | $12,454 | $(7,191) | | Net cash used in investing activities | $(565) | $(198) | $(367) | | Net cash used in financing activities | $(14,393) | $(15,391) | $998 | | Effect of exchange rate differences on cash and cash equivalents | $2,601 | $(62) | $2,663 | | Net decrease in cash, cash equivalents and restricted cash | $(7,094) | $(3,197) | $(3,897) | | Cash, cash equivalents and restricted cash at end of year | $62,917 | $70,011 | $(7,094) | [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=85&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) eGain faces market risks from foreign currency fluctuations, particularly USD, Euro, GBP, and INR, and interest rate changes, but does not use derivatives, with a 10% USD increase potentially decreasing foreign assets by **$2.6 million** - eGain is exposed to foreign currency exchange risk, principally from fluctuations between the U.S. Dollar, Euro, British Pound, and Indian Rupee, as international sales are made in local currencies[299](index=299&type=chunk) - As of June 30, 2025, identifiable assets denominated in foreign currency totaled approximately **$25.9 million**; a **10%** increase in the U.S. dollar's value relative to other currencies would decrease these assets by **$2.6 million**[299](index=299&type=chunk) - The company does not currently use derivative instruments to hedge against foreign exchange risk[299](index=299&type=chunk)[301](index=301&type=chunk) - eGain's exposure to interest rate risk relates primarily to interest earned on cash and cash equivalents; the company's investment policy focuses on short-term, low-risk investment-grade debt instruments[300](index=300&type=chunk) - A hypothetical **10%** change in market interest rates is not expected to have a material impact on the fair value of securities or cash flows/income[301](index=301&type=chunk) [PART III](index=141&type=section&id=PART%20III) [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=141&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on eGain's directors, executive officers, and corporate governance, including an insider trading policy, is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement[477](index=477&type=chunk) - Specific information about executive officers is also provided in Part I, Item 1 of this report[478](index=478&type=chunk) - eGain has adopted an insider trading policy designed to promote compliance with insider trading laws, rules, and Nasdaq listing standards[479](index=479&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=141&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Executive compensation details are incorporated by reference from the Proxy Statement, with the company not granting equity awards in anticipation of material nonpublic information and historically limiting stock option grants to named executive officers - Information on executive compensation is incorporated by reference from the Proxy Statement[480](index=480&type=chunk) - eGain does not grant equity awards in anticipation of material nonpublic information, nor does it time the release of such information based on equity award grant dates[481](index=481&type=chunk) - Historically, including in fiscal year 2025, the compensation committee has not granted stock options, stock appreciation rights, or similar option-like instruments to named executive officers, except in certain circumstances like hiring or promotion[481](index=481&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=141&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Security ownership information is incorporated by reference from the Proxy Statement; as of June 30, 2025, eGain had **3,954,716** outstanding options and rights with a weighted-average exercise price of **$8.80**, and **2,089,443** shares available for future issuance - Information on security ownership of certain beneficial owners and management is incorporated by reference from the Proxy Statement[482](index=482&type=chunk) Equity Compensation Plan Summary (as of June 30, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options and rights (a) | Weighted-average exercise price of outstanding options and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders (2005 Stock Incentive Plan) | 3,477,199 | $9.67 | 2,089,443 | | Equity compensation plans not approved by security holders (2005 Management Stock Option Plan) | 477,517 | $2.49 | — | | **Total** | **3,954,716** | **$8.80** | **2,089,443** | [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE](index=142&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding certain relationships, related party transactions, and director independence is incorporated by reference from the Proxy Statement - Information on related party transactions, director independence, and board meetings/committees is incorporated by reference from the Proxy Statement[484](index=484&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES](index=142&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information concerning principal accounting fees and services is incorporated by reference from the Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the Proxy Statement[485](index=485&type=chunk) [PART IV](index=143&type=section&id=PART%20IV) [ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES](index=143&type=section&id=ITEM%2015.%20EXHIBIT%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section details the financial statements, schedules, and exhibits filed with the Form 10-K, including consolidated financial statements, a valuation and qualifying accounts schedule, and a comprehensive list of corporate documents and certifications - The report includes consolidated financial statements as of June 30, 2025 and 2024, and for the years ended June 30, 2025 and 2024, as listed in Item 8[488](index=488&type=chunk) Schedule II—Valuation and Qualifying Accounts (FY2025 vs. FY2024) | Provision for Credit Losses | Balance at Beginning of Period | Additions Charged to Expense | Written Off, Net of Recoveries | Balance at End of Period | | :--- | :--- | :--- | :--- | :--- | | Year ended June 30, 2025 | $59 | $63 | $(115) | $7 | | Year ended June 30, 2024 | $237 | $93 | $(271) | $59 | - A comprehensive list of exhibits is provided, including organizational documents, stock plans, lease agreements, insider trading policy, and various certifications[492](index=492&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=147&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item is not applicable to the report - The Form 10-K Summary is not applicable[497](index=497&type=chunk) [SIGNATURES](index=148&type=section&id=SIGNATURES) The report is signed by eGain Corporation's CEO, Ashutosh Roy, and CFO, Eric N. Smit, along with other directors, as of September 12, 2025, granting power of attorney for amendments - The report is signed by Ashutosh Roy (Chief Executive Officer) and Eric N. Smit (Chief Financial Officer) on September 12, 2025[502](index=502&type=chunk)[505](index=505&type=chunk) - A power of attorney is granted to the Chief Executive Officer and Chief Financial Officer to sign and file any amendments to this annual report[503](index=503&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended July 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________. Commission file number: 001-41643 TRIO PETROLEUM CORP (Exact name of Registrant as specified in its charter) | Delaware | 87-1968201 | | --- | --- | | ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | August 3, 2025 | February 2, 2025 | Change | |:---|:---|:---|:---| | Total Assets | $278,043 | $313,942 | $(35,899) | | Total Liabilities | $84,923 | $109,559 | $(24,636) | | Total Shareholders' Equity | $193,120 | $204,383 | $(11,263) | [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | Change | |:---|:---|:---|:---|:---|:---|:---| | Net Sales | $82,149 | $95,081 | $(12,932) | $167,465 | $188,652 | $(21,187) | | Gross Profit | $16,837 | $20,922 | $(4,085) | $35,838 | $40,294 | $(4,456) | | Operating (Loss) / Income | $(4,401) | $(3,149) | $(1,252) | $(7,965) | $(8,169) | $204 | | Net (Loss) / Income | $(3,277) | $(1,951) | $(1,326) | $(6,329) | $(6,042) | $(287) | | Basic EPS | $(0.31) | $(0.19) | $(0.12) | $(0.60) | $(0.57) | $(0.03) | | Diluted EPS | $(0.31) | $(0.19) | $(0.12) | $(0.60) | $(0.57) | $(0.03) | [Condensed Consolidated Statements of Comprehensive (Loss) / Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20%2F%20Income) Condensed Consolidated Statements of Comprehensive (Loss) / Income (in thousands) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Actuarial adjustments (net of tax) | $(34) | $(45) | $(68) | $(90) | | Total comprehensive (loss) / income | $(3,311) | $(1,996) | $(6,397) | $(6,132) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | Change | |:---|:---|:---|:---| | Net cash provided by operating activities | $18,107 | $5,314 | $12,793 | | Net cash used in investing activities | $(2,021) | $(808) | $(1,213) | | Net cash used in financing activities | $(21,560) | $(5,615) | $(15,945) | | Net decrease in cash and cash equivalents | $(5,474) | $(1,109) | $(4,365) | | Cash and cash equivalents - end of quarter | $821 | $42,050 | $(41,229) | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance at Feb 2, 2025 | Net loss (26 weeks) | Cash dividends paid | Restricted stock compensation (net) | Balance at Aug 3, 2025 | |:---|:---|:---|:---|:---|:---| | Common Stock Amount | $50,474 | - | - | $356 | $50,619 | | Retained Earnings | $153,336 | $(6,329) | $(5,011) | - | $141,996 | | Accumulated Other Comprehensive Income | $573 | $(68) | - | - | $505 | | Total Shareholders' Equity | $204,383 | $(6,329) | $(5,011) | $356 | $193,120 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The financial statements are prepared in accordance with SEC rules and GAAP, with management's opinion that all necessary adjustments for fair statement are included[21](index=21&type=chunk) - Operating results for interim periods may not be indicative of full fiscal year results[21](index=21&type=chunk) - The company is evaluating the impact of new FASB ASUs 2023-09 (Income Taxes) and 2024-03 (Disaggregation of income statement expenses), effective for fiscal 2026 and 2028, respectively[23](index=23&type=chunk)[24](index=24&type=chunk) [1. Preparation of Interim Financial Statements](index=9&type=section&id=1.%20Preparation%20of%20Interim%20Financial%20Statements) [2. Recently Adopted Accounting Policies](index=9&type=section&id=2.%20Recently%20Adopted%20Accounting%20Policies) [3. Accounts Receivable](index=10&type=section&id=3.%20Accounts%20Receivable) Accounts Receivable (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Gross accounts receivable | $47,132 | $64,344 | | Customer allowances | $(1,084) | $(1,019) | | Allowance for doubtful accounts | $(4,732) | $(5,127) | | Trade accounts receivable | $41,316 | $58,198 | [4. Inventories](index=10&type=section&id=4.%20Inventories) Inventories (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Finished furniture | $70,745 | $82,635 | | Furniture in process | $1,588 | $1,524 | | Materials and supplies | $11,574 | $11,229 | | Inventories at FIFO | $83,907 | $95,388 | | Reduction to LIFO basis | $(25,375) | $(24,633) | | Inventories | $58,532 | $70,755 | [5. Property, Plant and Equipment](index=10&type=section&id=5.%20Property,%20Plant%20and%20Equipment) Property, Plant and Equipment, Net (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Total depreciable property, net | $23,857 | $25,163 | | Land | $1,077 | $1,077 | | Construction-in-progress | $3,288 | $1,955 | | Property, plant and equipment, net | $28,222 | $28,195 | [6. Cloud Computing Hosting Arrangement](index=10&type=section&id=6.%20Cloud%20Computing%20Hosting%20Arrangement) - The company capitalized **$287,000** in implementation costs and interest for ERP and supply chain planning software in Q2 FY26, down from **$1.2 million** in Q2 FY25[31](index=31&type=chunk) - Amortization expense for these costs was **$368,000** in Q2 FY26, up from **$292,000** in Q2 FY25[31](index=31&type=chunk) Capitalized Implementation Costs (in thousands) | Metric | August 3, 2025 (Gross carrying amount) | August 3, 2025 (Accumulated amortization) | February 2, 2025 (Gross carrying amount) | February 2, 2025 (Accumulated amortization) | |:---|:---|:---|:---|:---| | Implementation Costs | $17,210 | $(2,287) | $16,782 | $(1,561) | | Interest Expenses | $720 | $(36) | $596 | $(27) | [7. Fair Value Measurements](index=11&type=section&id=7.%20Fair%20Value%20Measurements) - Company-owned life insurance is measured at fair value on a recurring basis using **Level 2 inputs**, with changes reflected in income each reporting period[33](index=33&type=chunk) Assets Measured at Fair Value (in thousands) | Description | Fair value at August 3, 2025 (Level 2) | Fair value at February 2, 2025 (Level 2) | |:---|:---|:---| | Company-owned life insurance | $30,157 | $29,238 | [8. Intangible Assets](index=12&type=section&id=8.%20Intangible%20Assets) - Amortization expenses for intangible assets with definite lives were **$872,000** in Q2 FY26 and **$1.8 million** for H1 FY26, with an expected **$1.7 million** for the remainder of fiscal 2026[37](index=37&type=chunk) Intangible Assets (in thousands) | Metric | August 3, 2025 (Gross carrying amount) | August 3, 2025 (Accumulated Amortization) | February 2, 2025 (Gross carrying amount) | February 2, 2025 (Accumulated Amortization) | |:---|:---|:---|:---|:---| | Goodwill | $15,036 | - | $15,036 | - | | Trademarks and Trade names (indefinite) | $5,180 | - | $5,180 | - | | Customer Relationships | $38,001 | $(24,029) | $38,001 | $(22,349) | | Trademarks and Trade names (definite) | $2,334 | $(1,164) | $2,334 | $(1,062) | | Intangible assets, net | $45,515 | $(25,193) | $45,515 | $(23,411) | [9. Leases](index=12&type=section&id=9.%20Leases) - The company entered an agreement to terminate the Georgia warehouse lease by October 31, 2025, expected to reduce right-of-use assets by **$10.1 million**, lease liabilities by **$10.7 million**, and lease payments by **$13.4 million**[40](index=40&type=chunk) Lease Costs (in thousands) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Total operating lease cost | $2,639 | $2,699 | $5,318 | $5,447 | | Operating cash outflows | $2,601 | $2,554 | $5,213 | $5,163 | Operating Leases Right-of-Use Assets and Liabilities (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Total operating leases right-of-use assets | $41,797 | $45,575 | | Total operating lease liabilities | $44,901 | $48,575 | [10. Long-Term Debt](index=13&type=section&id=10.%20Long-Term%20Debt) - The company entered an Amended and Restated Loan Agreement on December 5, 2024, providing a revolving credit facility of up to **$70 million**, with an option to increase by **$30 million**[41](index=41&type=chunk)[42](index=42&type=chunk) - The facility is secured by a first priority security interest in substantially all of the Borrowers' assets, excluding real estate[47](index=47&type=chunk) - As of August 3, 2025, outstanding loans were **$5.6 million**, letters of credit were **$6.7 million**, and availability was **$57.7 million**[51](index=51&type=chunk) [11. Earnings Per Share](index=15&type=section&id=11.%20Earnings%20Per%20Share) - Due to net losses, approximately **106,000 shares** (Q2 FY26) and **115,000 shares** (H1 FY26) were excluded from diluted EPS calculation as they would have been antidilutive[56](index=56&type=chunk) Earnings Per Share Calculation (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | (Loss) / Earnings available for common shareholders | $(3,306) | $(1,992) | $(6,391) | $(6,124) | | Weighted average shares outstanding (Basic & Diluted) | 10,612 | 10,521 | 10,587 | 10,509 | | Basic (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | | Diluted (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | [12. Income Taxes](index=17&type=section&id=12.%20Income%20Taxes) - The differences in effective tax rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method[57](index=57&type=chunk) Income Tax (Benefit) / Expense and Effective Tax Rate | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Income tax (benefit) / expense (in thousands) | $(1,203) | $85 | $(1,967) | $(731) | | Effective tax rate | 26.9% | -4.5% | 23.7% | 10.8% | [13. Segment Information](index=17&type=section&id=13.%20Segment%20Information) - The company's segments are Hooker Branded, Home Meridian, Domestic Upholstery, and All Other, with H Contract sales now included in Hooker Branded and Domestic Upholstery[62](index=62&type=chunk) Segment Net Sales (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $36,250 | $35,785 | 1.3% | $73,359 | $72,593 | 1.1% | | Home Meridian | $16,932 | $30,516 | -44.5% | $35,742 | $56,940 | -37.2% | | Domestic Upholstery | $28,677 | $28,556 | 0.4% | $57,590 | $58,583 | -1.7% | | All Other | $290 | $224 | 29.5% | $774 | $536 | 44.4% | | **Consolidated** | **$82,149** | **$95,081** | **-13.6%** | **$167,465** | **$188,652** | **-11.2%** | Segment Operating (Loss) / Income (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $10 | $(329) | 103.0% | $37 | $(150) | 124.7% | | Home Meridian | $(3,916) | $(896) | -337.1% | $(6,754) | $(4,169) | -62.0% | | Domestic Upholstery | $(408) | $(1,285) | 68.2% | $(1,004) | $(2,593) | 61.3% | | All Other | $(87) | $(639) | 86.4% | $(244) | $(1,257) | 80.6% | | **Consolidated** | **$(4,401)** | **$(3,149)** | **-39.8%** | **$(7,965)** | **$(8,169)** | **2.5%** | [14. Subsequent Events](index=19&type=section&id=14.%20Subsequent%20Events) - On September 9, 2025, the board of directors declared a quarterly cash dividend of **$0.23 per share**, payable on September 30, 2025[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial performance, condition, liquidity, and future outlook for the period [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially, including adverse political acts, general economic conditions, asset impairment, and industry cyclicality[70](index=70&type=chunk) - Key risks include challenges in international markets, macroeconomic uncertainties affecting consumer spending, and risks associated with cost reduction plans and the Home Meridian segment restructuring[70](index=70&type=chunk) - Other risks involve reliance on offshore sourcing, supply chain disruptions, information system security breaches, and the terms of the Amended and Restated Loan Agreement[71](index=71&type=chunk) [Quarterly Reporting](index=23&type=section&id=Quarterly%20Reporting) - This report covers the unaudited condensed consolidated financial statements for the 2026 fiscal year's thirteen-week and twenty-six-week periods ending August 3, 2025, compared to the corresponding periods in fiscal 2025[76](index=76&type=chunk) [Overview](index=23&type=section&id=Overview) - Hooker Furnishings Corporation is a designer, marketer, and importer of casegoods, leather, fabric-upholstered furniture, lighting, accessories, and home décor for residential, hospitality, and contract markets, also manufacturing premium domestic custom furniture[80](index=80&type=chunk)[81](index=81&type=chunk) [Orders and Backlog](index=25&type=section&id=Orders%20and%20Backlog) - Consolidated order backlog decreased by **2.8%** from fiscal year-end, driven by Home Meridian's decline due to macroeconomic pressures, tariff-related buying hesitancy, and a major customer's bankruptcy[84](index=84&type=chunk) - Domestic Upholstery backlog rose nearly **7%** compared to both year-end and prior-year quarter-end, while Hooker Branded's backlog increased nearly **20%** from year-end, supported by a **10.6%** rise in incoming orders[85](index=85&type=chunk) Order Backlog (in thousands) | Reporting Segment | August 3, 2025 | February 2, 2025 | July 28, 2024 | |:---|:---|:---|:---| | Hooker Branded | $15,701 | $13,109 | $15,895 | | Home Meridian | $16,138 | $21,002 | $43,918 | | Domestic Upholstery | $19,313 | $18,123 | $18,066 | | All Other | $- | $402 | $- | | **Consolidated** | **$51,152** | **$52,636** | **$77,879** | [Executive Summary](index=26&type=section&id=Executive%20Summary) - The home furnishings industry faced challenges in Q2 FY26 due to low existing home sales, elevated mortgage rates, and persistent inflation, leading to reduced consumer demand[86](index=86&type=chunk) - Home Meridian's net sales declined by **44.5%** in Q2 FY26, and gross margin decreased by **1,330 bps**, primarily due to macroeconomic pressures, tariff-related buying hesitancy, and the loss of a major customer[87](index=87&type=chunk) - Hooker Branded and Domestic Upholstery segments showed modest net sales recovery in Q2 FY26, though sales volumes remain historically low due to housing market weakness[88](index=88&type=chunk) - The company recorded a consolidated net loss of **$3.3 million** (or **$0.31 per diluted share**) for Q2 FY26, compared to a **$2.0 million** net loss (or **$0.19 per diluted share**) in the prior-year quarter[88](index=88&type=chunk) [Multi-Phased Cost Reduction Initiatives](index=26&type=section&id=Multi-Phased%20Cost%20Reduction%20Initiatives) - The company aims for approximately **$25 million** in annualized cost savings by fiscal year 2027 through a multi-phase cost reduction strategy[89](index=89&type=chunk) - In H1 FY26, **$3.7 million** in savings were achieved, despite **$1.7 million** in restructuring charges[89](index=89&type=chunk) - Phase 2 actions include closing the Savannah warehouse by October 31, 2025, and operating a new Vietnam warehouse, which has reduced direct container lead times from six months to four to six weeks[94](index=94&type=chunk) - Total fixed costs are expected to reduce by approximately **$25 million** (nearly **25%**), with **$11 million** from warehousing/distribution and **$14 million** from S&A expenses[92](index=92&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Consolidated Performance Metrics (% of Net Sales) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net sales | 100% | 100% | 100% | 100% | | Cost of sales | 79.5% | 78.0% | 78.6% | 78.6% | | Gross profit | 20.5% | 22.0% | 21.4% | 21.4% | | Selling and administrative expenses | 24.8% | 24.3% | 25.1% | 24.7% | | Operating (loss)/income | (5.4)% | (3.3)% | (4.8)% | (4.3)% | | Net (loss)/income | (4.0)% | (2.1)% | (3.8)% | (3.2)% | [Consolidated Net Sales](index=28&type=section&id=Consolidated%20Net%20Sales) - Consolidated net sales decreased by **$12.9 million (13.6%)** in Q2 FY26 and **$21.2 million (11.2%)** for H1 FY26, mainly due to Home Meridian's decline[98](index=98&type=chunk) - Home Meridian's net sales decreased by **44.5%** in Q2 FY26, with **40%** from hospitality timing, **35%** from macroeconomic pressures/tariffs, and **25%** from a major customer's bankruptcy[101](index=101&type=chunk) - Consolidated average selling price (ASP) increased due to a favorable product mix shift, as lower-priced Home Meridian unit volume declined by **37.7%** in Q2 and **36.7%** for H1[99](index=99&type=chunk) [Consolidated Gross Profit](index=29&type=section&id=Consolidated%20Gross%20Profit) - Consolidated gross profit decreased by **$4.1 million** in Q2 FY26, and gross margin declined by **150 bps**, mainly due to Home Meridian's lower profitability[102](index=102&type=chunk) - Home Meridian's gross profit decreased by **$4.9 million** in Q2 FY26, and gross margin decreased by **1,330 bps** due to reduced sales, unfavorable product mix, increased warehousing/distribution expenses, and inventory liquidation losses[104](index=104&type=chunk) - Domestic Upholstery's gross profit increased by **$659,000** in Q2 FY26, with gross margin rising by **220 bps**, driven by consistent material costs and reduced labor/indirect costs[104](index=104&type=chunk) [Consolidated Selling and Administrative Expenses](index=30&type=section&id=Consolidated%20Selling%20and%20Administrative%20Expenses) - Consolidated S&A expenses decreased by **$2.8 million** in Q2 FY26 and **$4.6 million** in H1 FY26, driven by cost-reduction and restructuring plans across all segments[103](index=103&type=chunk) - As a percentage of net sales, S&A expenses increased in both periods due to the overall decline in net sales[103](index=103&type=chunk) - Home Meridian's S&A expenses decreased by **$1.9 million** in Q2 and **$3.0 million** in H1, but as a percentage of net sales, they increased by **610 bps** and **500 bps**, respectively, due to under-absorption from lower sales volumes[109](index=109&type=chunk) [Intangible Asset Amortization](index=31&type=section&id=Intangible%20Asset%20Amortization) - Intangible asset amortization decreased for Q2 FY26 and H1 FY26 compared to prior-year periods due to the full amortization of the Sam Moore trade name[106](index=106&type=chunk) [Consolidated Operating (Loss) / Profit](index=31&type=section&id=Consolidated%20Operating%20(Loss)%20%2F%20Profit) - The Q2 FY26 operating loss of **$4.4 million** was higher than the prior year's **$3.1 million** loss, driven by **$2.0 million** in restructuring costs and Home Meridian's weakness[107](index=107&type=chunk) - Domestic Upholstery significantly reduced its operating loss by **$877,000 (68%)** in Q2 FY26 despite **$152,000** in restructuring costs[88](index=88&type=chunk) Operating (Loss) / Income (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $10 | $(329) | 103.0% | $37 | $(150) | 124.7% | | Home Meridian | $(3,916) | $(896) | -337.1% | $(6,754) | $(4,169) | -62.0% | | Domestic Upholstery | $(408) | $(1,285) | 68.2% | $(1,004) | $(2,593) | 61.3% | | All Other | $(87) | $(639) | 86.4% | $(244) | $(1,257) | 80.6% | | **Consolidated** | **$(4,401)** | **$(3,149)** | **-39.8%** | **$(7,965)** | **$(8,169)** | **2.5%** | [Consolidated Income Taxes](index=31&type=section&id=Consolidated%20Income%20Taxes) - The differences in effective tax rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method[110](index=110&type=chunk) Income Tax (Benefit) / Expense and Effective Tax Rate | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Income tax (benefit) / expense (in thousands) | $(1,203) | $85 | $(1,967) | $(731) | | Effective tax rate | 26.9% | -4.5% | 23.7% | 10.8% | [Consolidated Net (Loss) / Income](index=32&type=section&id=Consolidated%20Net%20(Loss)%20%2F%20Income) Net (Loss) / Income (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Diluted (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | [Outlook](index=32&type=section&id=Outlook) - The company is focused on scaling its cost structure for profitability, preparing for the October debut of the Margaritaville collection, and pursuing growth in hospitality, contract, and outdoor channels, supported by the new Vietnam warehouse[114](index=114&type=chunk) - Home Meridian's fixed cost structure is expected to be aligned by the end of Q3 FY25, positioning it for significantly enhanced performance by the end of the current fiscal year, barring disruptive events[113](index=113&type=chunk) - Hooker Legacy orders showed encouraging momentum in July, with Hooker Branded orders up nearly **11%** and Domestic Upholstery up **1.6%** for the quarter, despite industry headwinds[112](index=112&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=33&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) - Operating cash flow increased significantly due to **$17.1 million** from trade receivable collections and **$12.2 million** from inventory reductions, particularly in Hooker Branded and Home Meridian[118](index=118&type=chunk) - Financing activities used **$21.6 million**, primarily due to **$16.5 million** in repayments on the revolving credit facility[117](index=117&type=chunk) Cash Flow Summary (in thousands) | Metric | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---| | Net cash provided by operating activities | $18,107 | $5,314 | | Net cash used in investing activities | $(2,021) | $(808) | | Net cash used in financing activities | $(21,560) | $(5,615) | | Net decrease in cash and cash equivalents | $(5,474) | $(1,109) | [Cash Flows – Operating, Investing and Financing Activities](index=33&type=section&id=Cash%20Flows%20%E2%80%93%20Operating,%20Investing%20and%20Financing%20Activities) [Liquidity, Financial Resources and Capital Expenditures](index=33&type=section&id=Liquidity,%20Financial%20Resources%20and%20Capital%20Expenditures) - The company's financial resources include available cash and cash equivalents, expected cash flow from operations, available lines of credit, and cash surrender value of Company-owned life insurance[119](index=119&type=chunk) - Short-term cash requirements primarily fund operations, quarterly dividend payments, and capital expenditures for ERP, showroom renovations, and system upgrades[121](index=121&type=chunk) [Loan Agreements and Revolving Credit Facility](index=35&type=section&id=Loan%20Agreements%20and%20Revolving%20Credit%20Facility) - The company entered an Amended and Restated Loan Agreement on December 5, 2024, providing a revolving credit facility of up to **$70 million**, with an option to increase by **$30 million**[122](index=122&type=chunk)[123](index=123&type=chunk) - The facility is secured by a first priority security interest in substantially all of the Borrowers' assets, excluding real estate[127](index=127&type=chunk) - As of August 3, 2025, outstanding loans were **$5.6 million**, letters of credit were **$6.7 million**, and availability was **$57.7 million**[131](index=131&type=chunk) [Capital Expenditures](index=36&type=section&id=Capital%20Expenditures) - The company expects to spend approximately **$1 to $2 million** in capital expenditures for the remainder of fiscal 2026 to maintain and enhance operating systems and facilities[132](index=132&type=chunk) [Enterprise Resource Planning Project](index=36&type=section&id=Enterprise%20Resource%20Planning%20Project) - The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions in early September 2023[133](index=133&type=chunk) [Dividends](index=36&type=section&id=Dividends_FinancialCondition) - On September 9, 2025, the board of directors declared a quarterly cash dividend of **$0.23 per share**, payable on September 30, 2025[134](index=134&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) - There have been no material changes to the company's critical accounting policies and estimates from those provided in the 2025 Annual Report[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines the company's exposure to interest rate, raw material price, and foreign currency risks - The company is exposed to interest rate risk on its variable-rate debt, raw materials price risk (wood, fabric, foam), and foreign currency risk for imported products[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - A **1% increase** in the SOFR rate would result in an annual increase of approximately **$56,000** in interest expenses at current borrowing levels[137](index=137&type=chunk) - The company generally negotiates firm pricing in USD with foreign suppliers for at least one year and does not use derivative financial instruments to manage currency risk[139](index=139&type=chunk) [Interest Rate Risk](index=36&type=section&id=Interest%20Rate%20Risk) [Raw Materials Price Risk](index=37&type=section&id=Raw%20Materials%20Price%20Risk) [Currency Risk](index=37&type=section&id=Currency%20Risk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective and reported no material changes in internal control - Management concluded that disclosure controls and procedures were **effective** as of August 3, 2025[141](index=141&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fiscal quarter ended August 3, 2025[142](index=142&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) PART II. OTHER INFORMATION [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) Confirms no director or officer trading arrangements were adopted, terminated, or modified during the quarter - No director or officer adopted, terminated, or modified a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended August 3, 2025[145](index=145&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and interactive data files - The exhibits include the company's Articles of Incorporation, Amended and Restated Bylaws, Rule 13a-14(a) and 13a-14(b) certifications, and Interactive Data Files (Inline XBRL)[145](index=145&type=chunk)

[Part I - Financial Statements](index=3&type=section&id=Part%20I%20-%20Financial%20Statements) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements for the three months ended August 3, 2025 [Consolidated Statements of Net Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Net%20Loss) Details the company's net sales, gross profit, operating income, and net loss for the recent quarter Consolidated Statements of Net Loss | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net sales | $50,691 | $56,537 | -10.3% | | Gross profit | $7,228 | $5,076 | 42.4% | | Income (loss) from operations | $1,617 | $(6,851) | -123.6% | | Net loss | $(231) | $(7,261) | -96.8% | | Net loss per share - basic | $(0.02) | $(0.58) | -96.6% | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Outlines the comprehensive loss, including net loss and unrealized gains on investments Consolidated Statements of Comprehensive Loss | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Net loss | $(231) | $(7,261) | | Unrealized holding gain on investments, net of tax | $142 | $80 | | Comprehensive loss | $(89) | $(7,181) | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Provides a snapshot of the company's assets, liabilities, and shareholders' equity at the end of the period Consolidated Balance Sheets | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :-------------------- | :------------- | :------------ | :------------- | | Total current assets | $88,891 | $82,678 | $83,534 | | Total assets | $126,414 | $129,139 | $123,370 | | Total current liabilities | $47,903 | $42,221 | $46,964 | | Total liabilities | $68,767 | $60,015 | $65,730 | | Total shareholders' equity | $57,647 | $69,124 | $57,640 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash movements from operating, investing, and financing activities during the quarter Consolidated Statements of Cash Flows | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Net cash used in operating activities | $(695) | $(206) | | Net cash provided by (used in) investing activities | $986 | $(332) | | Net cash provided by financing activities | $5,154 | $4,010 | | Increase in cash and cash equivalents | $5,465 | $3,460 | | Cash and cash equivalents at end of period | $11,094 | $13,472 | [Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Details the changes in shareholders' equity resulting from net loss and other equity-related activities Consolidated Statements of Shareholders' Equity | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Total Shareholders' Equity (end of period) | $57,647 | $69,124 | | Net loss | $(231) | $(7,261) | | Stock-based compensation | $156 | $176 | | Unrealized gain on investments | $142 | $80 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies and specific financial statement items [1. Basis of Presentation](index=11&type=section&id=1.%20Basis%20of%20Presentation) The financial statements include all necessary recurring adjustments for fair presentation - The unaudited condensed consolidated financial statements include all necessary normal recurring adjustments for fair presentation[27](index=27&type=chunk) - The three months ended August 3, 2025, and July 28, 2024, represent **14-week and 13-week periods**, respectively[28](index=28&type=chunk) [2. Significant Accounting Policies](index=11&type=section&id=2.%20Significant%20Accounting%20Policies) Outlines key accounting policies and the impact of new accounting standards - No changes in significant accounting policies as of August 3, 2025; business segments were renamed to **bedding and upholstery**[29](index=29&type=chunk) - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for fiscal 2026 and will **materially impact disclosures**[31](index=31&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal 2028, and the company is **evaluating its impact**[32](index=32&type=chunk)[33](index=33&type=chunk) [3. Allowance for Doubtful Accounts](index=13&type=section&id=3.%20Allowance%20for%20Doubtful%20Accounts) Details the changes in the allowance for doubtful accounts based on customer credit risk - The allowance for doubtful accounts **increased to $723,000** as of August 3, 2025, from $413,000 as of July 28, 2024, based on credit risk assessment of customers[35](index=35&type=chunk) Allowance for Doubtful Accounts | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Beginning balance | $651 | $356 | | Provision for bad debts | $65 | $57 | | Write-offs, net of recoveries | $7 | $0 | | Ending balance | $723 | $413 | [4. Revenue from Contracts with Customers](index=13&type=section&id=4.%20Revenue%20from%20Contracts%20with%20Customers) Discloses revenue recognition policies and disaggregates revenue by type - The company's primary performance obligations include the sale of **bedding and upholstery products**, and customized fabrication/installation services for window treatments[38](index=38&type=chunk) - Deferred revenue, primarily from customer deposits and licensing fees, **increased to $485,000** as of August 3, 2025, from $422,000 as of April 27, 2025[39](index=39&type=chunk)[40](index=40&type=chunk) Revenue by Type | Revenue Type (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------------- | :------------- | :------------ | | Products transferred at a point in time | $48,820 | $53,541 | | Services transferred over time | $1,871 | $2,996 | | Total net sales | $50,691 | $56,537 | [5. Inventories](index=14&type=section&id=5.%20Inventories) Provides a breakdown of inventory components and explains significant changes - Inventories **increased by $8.4 million (20.3%)** from July 28, 2024, to August 3, 2025, due to strategic sourcing of mattress fabrics with longer lead times and rising costs/tariffs[43](index=43&type=chunk)[273](index=273&type=chunk) Inventories by Type | Inventory Type (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Raw materials | $5,698 | $7,076 | $5,733 | | Work-in-process | $3,374 | $1,876 | $2,747 | | Finished goods | $41,037 | $32,716 | $40,829 | | Total Inventories | $50,109 | $41,668 | $49,309 | [6. Intangible Assets](index=16&type=section&id=6.%20Intangible%20Assets) Details the composition of and changes to intangible assets, including impairment charges - The Read tradename was **fully impaired in Q4 fiscal 2025**, resulting in a **$540,000 charge** due to a strategic business transformation[46](index=46&type=chunk) - Customer relationships and non-compete agreements are amortized over 9-17 years and 15 years, respectively; **no impairment was found** for the Bedding Asset Group as of August 3, 2025[47](index=47&type=chunk)[52](index=52&type=chunk)[55](index=55&type=chunk) Intangible Assets | Intangible Asset (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :------------------------------ | :------------- | :------------ | :------------- | | Tradename | $0 | $540 | $0 | | Customer relationships, net | $659 | $960 | $734 | | Non-compete agreement, net | $206 | $282 | $226 | | Total Intangible Assets | $865 | $1,782 | $960 | [7. Notes Receivable](index=18&type=section&id=7.%20Notes%20Receivable) Describes outstanding notes receivable from asset sales and lease terminations - A note receivable of **$4.8 million USD** (6.6 million CAD) is outstanding from the sale of the Quebec, Canada facility, due by April 30, 2026[56](index=56&type=chunk)[57](index=57&type=chunk) - Another note receivable of **$1.4 million** is outstanding from the termination of a lease in Haiti, due by December 31, 2029[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) Future Principal Payments on Notes Receivable | Fiscal Year | Future Principal Payments (in Thousands) | | :---------- | :------------------------------------- | | 2026 | $5,088 | | 2027 | $330 | | 2028 | $360 | | 2029 | $360 | | 2030 | $240 | | Total Undiscounted | $6,378 | | Less: Unearned Interest Income | $(196) | | Present Value of Note Receivable | $6,182 | [8. Assets Held for Sale](index=22&type=section&id=8.%20Assets%20Held%20for%20Sale) Reports on assets classified as held for sale and related gains or impairment charges - During Q1 fiscal 2026, the company sold property in Quebec, Canada, recognizing a **$4.0 million gain** classified as restructuring credit[64](index=64&type=chunk) - Equipment in the U.S. with a carrying value of $296,000 was impaired to its fair value of $40,000, resulting in a **$256,000 impairment charge** in Q1 fiscal 2026[64](index=64&type=chunk) Assets Held for Sale | Asset Category (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Bedding - U.S. | $40 | $357 | $0 | | Bedding - Haiti | $0 | $250 | $0 | | Bedding - Canada | $0 | $0 | $2,177 | | Total Assets Held for Sale | $40 | $607 | $2,177 | [9. Accrued Expenses](index=24&type=section&id=9.%20Accrued%20Expenses) Provides a breakdown of major components within accrued expenses Accrued Expenses | Accrued Expense (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :----------------------------- | :------------- | :------------ | :------------- | | Compensation, commissions and related benefits | $3,360 | $3,310 | $2,534 | | Other accrued expenses | $2,490 | $2,787 | $2,799 | | Total Accrued Expenses | $5,850 | $6,097 | $5,333 | [10. Restructuring Activities](index=24&type=section&id=10.%20Restructuring%20Activities) Details the financial impact of ongoing restructuring and strategic transformation initiatives - Restructuring activities announced May 1, 2024, are completed; a **$4.0 million gain** from the sale of the Quebec facility was recorded as restructuring credit in Q1 fiscal 2026[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - A strategic transformation announced April 24, 2025, will **combine bedding and upholstery segments** into one Culp-branded business and consolidate facilities[69](index=69&type=chunk)[70](index=70&type=chunk) Restructuring Charges | Restructuring Charge (in Thousands) | August 3, 2025 | July 28, 2024 | | :---------------------------------- | :------------- | :------------ | | Additional depreciation expense | $22 | $875 | | Employee termination benefits | $(4) | $689 | | Lease Termination Costs | $62 | $670 | | Facility consolidation and relocation expenses | $52 | $251 | | Net (gain) loss on sale and impairment of property, plant, and equipment | $(3,747) | $95 | | Other Associated Costs | $107 | $51 | | Loss on disposal and markdowns of inventory | $0 | $116 | | Restructuring (credit) expense and restructuring related charge | $(3,508) | $2,747 | [11. Lines of Credit](index=27&type=section&id=11.%20Lines%20of%20Credit) Summarizes the company's various credit facilities, terms, and available borrowings - The U.S. ABL Facility term was **extended to June 12, 2028**, with a maximum principal of **$30.0 million**[75](index=75&type=chunk)[76](index=76&type=chunk)[79](index=79&type=chunk) - As of August 3, 2025, available borrowings under the U.S. Credit Agreement totaled **$17.6 million**, and the company was in compliance with all financial covenants[86](index=86&type=chunk)[93](index=93&type=chunk) Lines of Credit | Line of Credit (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Wells Fargo - U.S. revolving line of credit | $7,025 | $0 | $4,600 | | Agricultural Bank of China - revolving line of credit | $4,031 | $4,017 | $3,988 | | Agricultural Bank of China - supplier financing arrangements | $2,780 | $0 | $2,751 | | Agricultural Bank of China - working capital loan | $2,919 | $0 | $0 | | Bank of China - working capital loan | $1,390 | $0 | $1,375 | | Total Lines of Credit | $18,145 | $4,017 | $12,714 | [12. Fair Value](index=31&type=section&id=12.%20Fair%20Value) Discloses the fair value hierarchy and measurements for financial assets and liabilities - The company uses a **fair value hierarchy (Level 1, 2, 3)** to classify assets and liabilities based on observability of inputs[94](index=94&type=chunk)[95](index=95&type=chunk) - Investments in the rabbi trust for the deferred compensation plan totaled **$7.1 million** as of August 3, 2025, with accumulated unrealized gains of $292,000[98](index=98&type=chunk)[99](index=99&type=chunk) Fair Value of Assets | Asset (in Thousands) | August 3, 2025 (Level 1) | July 28, 2024 (Level 1) | April 27, 2025 (Level 1) | | :------------------- | :----------------------- | :---------------------- | :----------------------- | | U.S. Government Money Market Fund | $5,568 | $6,823 | $5,682 | | Growth Allocation Mutual Funds | $894 | $756 | $808 | | S&P 500 Index Fund | $340 | $212 | $275 | | Other | $308 | $252 | $282 | | Total | $7,110 | $8,043 | $7,047 | [13. Net Loss Per Share](index=35&type=section&id=13.%20Net%20Loss%20Per%20Share) Provides the calculation of basic and diluted net loss per share - Basic and diluted net loss per share were both **$(0.02)** for the three months ended August 3, 2025, compared to **$(0.58)** for the prior year[7](index=7&type=chunk) Net Loss Per Share Calculation | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Weighted average shares outstanding, basic | 12,570 | 12,470 | | Weighted average shares outstanding, diluted | 12,570 | 12,470 | | Antidilutive effect from net loss incurred | 90 | 137 | [14. Segment Information](index=35&type=section&id=14.%20Segment%20Information) Presents financial data for the company's operating segments, bedding and upholstery - Business segments were renamed to **'bedding' and 'upholstery'** to better reflect product offerings, with performance evaluated on net sales and gross profit[104](index=104&type=chunk)[106](index=106&type=chunk) Segment Performance | Segment (in Thousands) | Net Sales (Aug 3, 2025) | Net Sales (Jul 28, 2024) | Gross Profit (Aug 3, 2025) | Gross Profit (Jul 28, 2024) | | :--------------------- | :---------------------- | :----------------------- | :------------------------- | :-------------------------- | | Bedding | $28,046 | $28,076 | $2,942 | $(326) | | Upholstery | $22,645 | $28,461 | $4,286 | $5,518 | | Total | $50,691 | $56,537 | $7,228 | $5,076 | Segment Assets | Segment Assets (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Bedding Total Assets | $67,469 | $65,391 | $69,430 | | Upholstery Total Assets | $26,288 | $30,459 | $30,972 | | Total Segment Assets | $93,757 | $95,850 | $100,402 | [15. Income Taxes](index=41&type=section&id=15.%20Income%20Taxes) Explains the components of income tax expense and the effective tax rate - The effective income tax rate was significantly affected by the mix of earnings from U.S. and foreign operations and a **full valuation allowance** against U.S. deferred tax assets[114](index=114&type=chunk)[118](index=118&type=chunk) - The One Big Beautiful Bill Act (OBBBA) **did not impact the effective tax rate** due to the existing full U.S. valuation allowance[117](index=117&type=chunk)[250](index=250&type=chunk) - A full valuation allowance is maintained against U.S. net deferred income tax assets due to a **history of significant U.S. pre-tax losses**[121](index=121&type=chunk)[252](index=252&type=chunk) Income Tax Expense | Metric | August 3, 2025 | July 28, 2024 | | :----- | :------------- | :------------ | | Income tax expense | $1,369 | $240 | | Effective income tax rate | 120.3% | (3.4)% | [16. Stock-Based Compensation](index=45&type=section&id=16.%20Stock-Based%20Compensation) Details the company's equity incentive plan and related compensation expenses - The Amended and Restated 2015 Equity Incentive Plan authorizes an additional **960,000 shares**, with 669,853 shares available for future grants[129](index=129&type=chunk)[130](index=130&type=chunk) - Performance-based restricted stock units are granted to senior executives, measured by fair market value using **Monte Carlo simulation** for market-based components[131](index=131&type=chunk)[132](index=132&type=chunk) - Compensation expense for time-based restricted stock units was **$153,000** for the quarter, with $392,000 remaining unrecognized[141](index=141&type=chunk)[142](index=142&type=chunk) [17. Leases](index=48&type=section&id=17.%20Leases) Discloses information about the company's operating leases, including assets and liabilities - Operating lease expense was **$735,000** for the three months ended August 3, 2025, with a weighted average remaining lease term of **2.82 years**[146](index=146&type=chunk) Lease Balances | Lease Metric (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :-------------------------- | :------------- | :------------ | :------------- | | Right of use assets | $5,162 | $4,483 | $5,908 | | Operating lease liability - current | $2,209 | $1,565 | $2,394 | | Operating lease liability – long-term | $1,995 | $2,219 | $2,535 | [18. Commitments and Contingencies](index=50&type=section&id=18.%20Commitments%20and%20Contingencies) States management's assessment of the potential impact of legal proceedings and claims - Management believes current legal proceedings and claims will **not have a material adverse effect** on the company's financial position or results[147](index=147&type=chunk) [19. Statutory Reserves](index=50&type=section&id=19.%20Statutory%20Reserves) Describes the statutory reserve requirements for the company's China subsidiary - The China subsidiary's statutory surplus reserve fund reached its **50% registered capital requirement** ($4.0 million), ending the mandatory 10% net income transfer[148](index=148&type=chunk)[149](index=149&type=chunk) - The statutory surplus reserve fund is **non-distributable** except during liquidation but can be used for business expansion or converted into share capital[149](index=149&type=chunk) [20. Common Stock Repurchase Program](index=50&type=section&id=20.%20Common%20Stock%20Repurchase%20Program) Provides an update on the company's stock repurchase program activity - The board authorized a **$5.0 million** common stock repurchase program in March 2020; no shares were repurchased during the quarter[151](index=151&type=chunk)[153](index=153&type=chunk) - As of August 3, 2025, **$3.2 million remains available** for additional common stock repurchases[153](index=153&type=chunk) [Cautionary Statement Concerning Forward-Looking Information](index=53&type=section&id=Cautionary%20Statement%20Concerning%20Forward-Looking%20Information) Warns that forward-looking statements are subject to various risks and uncertainties - The report contains forward-looking statements subject to risks that may cause actual results to differ materially, including economic indicators, tariffs, and geopolitical instability[154](index=154&type=chunk)[155](index=155&type=chunk) - Key factors influencing future performance include housing starts, consumer tastes, trade policy, and the **success of restructuring initiatives**[155](index=155&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=55&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides an in-depth analysis of financial condition, operational results, and strategic initiatives [General](index=55&type=section&id=General) Provides an overview of the company's business segments and recent strategic transformations - The first quarter of fiscal 2026 was a **14-week period**, compared to a 13-week period in the prior year[158](index=158&type=chunk)[159](index=159&type=chunk) - The bedding segment manufactures fabrics and covers, while the upholstery segment sources and sells fabrics to furniture manufacturers[160](index=160&type=chunk)[162](index=162&type=chunk) - Strategic transformations include consolidating North American operations and **combining bedding and upholstery activities** into one Culp-branded business[161](index=161&type=chunk)[163](index=163&type=chunk) [Executive Summary](index=56&type=section&id=Executive%20Summary) Summarizes key financial results, including sales, gross profit, and liquidity for the quarter [Consolidated Results of Operations](index=56&type=section&id=Consolidated%20Results%20of%20Operations) Presents a high-level overview of the company's consolidated performance metrics Consolidated Results of Operations | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net sales | $50,691 | $56,537 | (10.3)% | | Gross profit | $7,228 | $5,076 | 42.4% | | Gross profit margin | 14.3% | 9.0% | 530bp | | Income (loss) from operations | $1,617 | $(6,851) | (123.6)% | | Net loss | $(231) | $(7,261) | (96.8)% | [Net Sales](index=56&type=section&id=Net%20Sales) Analyzes the drivers behind the year-over-year decrease in consolidated net sales - Consolidated net sales **decreased by 10.3%** year-over-year, with bedding sales flat and upholstery sales down **20.4%**[166](index=166&type=chunk) - Upholstery sales were impacted by **weakness in the residential furniture market** and tariff-related challenges[168](index=168&type=chunk) - The company is positioned for market share gains due to its **diversified production platform** offering supply chain optionality[169](index=169&type=chunk) [Gross Profit](index=56&type=section&id=Gross%20Profit) Explains the significant increase in consolidated gross profit and margin - Consolidated gross profit **increased by $2.1 million (42.4%)** to $7.2 million, driven by cost reductions and efficiency gains in the bedding segment[171](index=171&type=chunk)[172](index=172&type=chunk) - Bedding gross profit **increased by $3.3 million**, while upholstery gross profit decreased by $1.2 million[171](index=171&type=chunk) [Income (Loss) Before Income Taxes](index=58&type=section&id=Income%20(Loss)%20Before%20Income%20Taxes) Details the substantial improvement in pre-tax income compared to the prior year - Income before income taxes was **$1.1 million**, a significant improvement from a loss of **$(7.0) million** in the prior-year period[174](index=174&type=chunk) - Operating performance benefited from a more efficient bedding segment and a **$3.5 million restructuring credit** from the sale of the Canada facility[175](index=175&type=chunk) - Further cost benefits are expected in Q2 and Q3 fiscal 2026 from the **integration of upholstery and window business operations**[176](index=176&type=chunk) [Income Taxes](index=58&type=section&id=Income%20Taxes) Analyzes the factors contributing to the high effective income tax rate - Income tax expense was **$1.4 million (120.3% effective rate)**, compared to $240,000 ((3.4%) effective rate) in the prior-year period[177](index=177&type=chunk) - The effective tax rate was adversely affected by the mix of earnings from U.S. operations (pre-tax losses) and foreign subsidiaries, and a **full valuation allowance** against U.S. deferred tax assets[178](index=178&type=chunk) - Haitian operations' pre-tax losses of **$(362,000)** did not receive an income tax benefit due to a 0% income tax rate[178](index=178&type=chunk) [Liquidity](index=58&type=section&id=Liquidity) Summarizes the company's cash position and key cash flow activities - Cash and cash equivalents **increased by $5.5 million to $11.1 million**, primarily due to net borrowings on lines of credit and asset sales[181](index=181&type=chunk) - Net cash used in operating activities increased to **$(695,000)**, reflecting increased inventory and decreased accounts payable[182](index=182&type=chunk)[183](index=183&type=chunk) - Outstanding borrowings under lines of credit totaled **$18.1 million** as of August 3, 2025[184](index=184&type=chunk) [Segment Analysis](index=60&type=section&id=Segment%20Analysis) Provides a detailed performance review of the bedding and upholstery segments [Bedding Segment](index=60&type=section&id=Bedding%20Segment) Analyzes the bedding segment's flat sales but significantly improved profitability - Net sales were **flat year-over-year** due to low consumer demand and tariff uncertainty, despite growth in knit fabric product lines[188](index=188&type=chunk)[189](index=189&type=chunk) - Gross profit **significantly improved to $2.9 million** from a loss of $(326,000), driven by cost reductions from restructuring[192](index=192&type=chunk)[193](index=193&type=chunk) - Inventory **increased by $9.8 million (38.9%)** to $35.1 million, reflecting a transition to strategically source mattress fabrics[197](index=197&type=chunk) Bedding Segment Performance | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net sales | $28,046 | $28,076 | (0.1)% | | Gross profit (loss) | $2,942 | $(326) | N.M. | | Gross profit margin | 10.5% | (1.2)% | N.M. | [Upholstery Segment](index=64&type=section&id=Upholstery%20Segment) Discusses the decline in the upholstery segment's sales and profitability - Sales **declined 20.4%** due to muted residential demand, global trade uncertainty, and an uneven comparison from a large customer's prior-year purchasing[205](index=205&type=chunk) - Profitability decreased primarily due to lower sales; cost benefits from consolidating the Read Window business are expected in **Q3 fiscal 2026**[210](index=210&type=chunk)[211](index=211&type=chunk) - Accounts receivable **decreased by $3.3 million (28.9%)** and inventory **decreased by $1.4 million (8.4%)**, reflecting lower net sales[214](index=214&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) Upholstery Segment Performance | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net Sales | $22,645 | $28,461 | (20.4)% | | Gross profit | $4,286 | $5,518 | (22.3)% | | Gross margin | 18.9% | 19.4% | (50)bp | [Consolidated - Other Income Statement Categories](index=68&type=section&id=Consolidated%20-%20Other%20Income%20Statement%20Categories) Analyzes other key line items on the consolidated income statement [Selling, General, and Administrative Expenses ("SG&A")](index=68&type=section&id=Selling%2C%20General%2C%20and%20Administrative%20Expenses%20(%22SG%26A%22)) Details the slight decrease in SG&A expenses despite a longer reporting period - SG&A expenses **slightly decreased by 1.9%** due to lower net sales and cost reduction initiatives, partially offset by the longer 14-week period[227](index=227&type=chunk)[229](index=229&type=chunk) SG&A Expenses | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | SG&A expenses | $9,119 | $9,296 | (1.9)% | [Restructuring Credit (Expense)](index=70&type=section&id=Restructuring%20Credit%20(Expense)) Explains the significant restructuring credit recorded in the quarter - A **$3.9 million restructuring credit** was recorded, primarily from a **$4.0 million gain** on the sale of the Quebec, Canada facility[231](index=231&type=chunk)[232](index=232&type=chunk) - Restructuring expense of **$349,000** was incurred for the strategic transformation, with estimated cumulative charges of $2.2 million[234](index=234&type=chunk) Restructuring Credit (Expense) | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Restructuring credit (expense) | $3,508 | $(2,631) | [Interest Expense](index=71&type=section&id=Interest%20Expense) Highlights the substantial increase in interest expense due to higher borrowings - Interest expense **increased significantly** due to higher borrowings under line of credit agreements in the U.S. and China[237](index=237&type=chunk) Interest Expense | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Interest expense | $(183) | $(28) | 553.6% | [Interest Income](index=71&type=section&id=Interest%20Income) Notes the decrease in interest income resulting from lower cash balances - Interest income **decreased** due to lower average cash balances in Q1 fiscal 2026 compared to the prior year[238](index=238&type=chunk) Interest Income | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Interest income | $235 | $262 | (10.3)% | [Other Expense](index=71&type=section&id=Other%20Expense) Attributes the increase in other expense to unfavorable foreign currency exchange rates - The increase in other expense was primarily due to less favorable foreign currency exchange rates, resulting in a **$189,000 foreign currency exchange rate loss**[240](index=240&type=chunk) Other Expense | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Other expense | $531 | $404 | 31.4% | [Income Taxes](index=71&type=section&id=Income%20Taxes) Provides a detailed analysis of the effective tax rate and income taxes paid - The effective tax rate was significantly impacted by the mix of earnings from U.S. operations (pre-tax losses) and foreign subsidiaries, and a **full valuation allowance** against U.S. deferred tax assets[249](index=249&type=chunk) - The One Big Beautiful Bill Act (OBBBA) **did not impact the effective tax rate** due to the existing full U.S. valuation allowance[248](index=248&type=chunk)[250](index=250&type=chunk) - A full valuation allowance is maintained against U.S. net deferred income tax assets due to a **history of significant U.S. pre-tax losses**[252](index=252&type=chunk) Income Tax Expense | Metric | August 3, 2025 | July 28, 2024 | | :----- | :------------- | :------------ | | Income tax expense | $1,369 | $240 | | Effective income tax rate | 120.3% | (3.4)% | Income Taxes Paid | Income Taxes Paid (in Thousands) | August 3, 2025 | July 28, 2024 | | :------------------------------- | :------------- | :------------ | | China Income Taxes, Net of Refunds | $46 | $561 | | Canada - Income Taxes, Net of Refunds | $0 | $0 | | Total | $46 | $561 | [Liquidity and Capital Resources](index=77&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's liquidity position, capital resources, and working capital management [Overall](index=77&type=section&id=Overall) Outlines the company's primary sources of liquidity and key cash flow drivers - Current liquidity sources include **$11.1 million in cash**, cash flow from operations, and **$17.6 million available** under the U.S. revolving credit line[260](index=260&type=chunk) - Net cash used in operating activities increased to **$(695,000)**, primarily due to increased inventory and decreased accounts payable[262](index=262&type=chunk) - Cash balance may be adversely affected by low customer demand, **increased tariffs**, and supply chain disruptions[264](index=264&type=chunk) [By Geographic Area](index=78&type=section&id=By%20Geographic%20Area) Presents a breakdown of cash and cash equivalents by geographic location Cash and Cash Equivalents by Geography | Geographic Area (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :----------------------------- | :------------- | :------------ | :------------- | | United States | $510 | $2,472 | $151 | | China | $9,229 | $10,462 | $4,723 | | Canada | $1,316 | $326 | $701 | | Haiti | $17 | $141 | $38 | | Vietnam | $15 | $62 | $8 | | Cayman Islands | $7 | $9 | $8 | | Total | $11,094 | $13,472 | $5,629 | [Common Stock Repurchase Program](index=78&type=section&id=Common%20Stock%20Repurchase%20Program) Confirms no share repurchase activity during the quarter - **No shares were repurchased** during Q1 fiscal 2026 or Q1 fiscal 2025; **$3.2 million remains available** for repurchases[266](index=266&type=chunk)[267](index=267&type=chunk) [Dividends](index=78&type=section&id=Dividends) Notes the continued suspension of the quarterly cash dividend - The company **suspended its quarterly cash dividend** on June 29, 2022, to preserve capital, with no payments made in fiscal 2023-2026[268](index=268&type=chunk) [Consolidated Basis - Working Capital](index=78&type=section&id=Consolidated%20Basis%20-%20Working%20Capital) Analyzes the key changes in operating working capital components - Operating working capital was **$43.7 million** as of August 3, 2025, up from $35.1 million as of July 28, 2024[269](index=269&type=chunk) - Accounts receivable **decreased by $3.2 million (14.8%)** to $18.4 million, reflecting lower net sales[270](index=270&type=chunk) - Inventory **increased by $8.4 million (20.3%)** to $50.1 million, driven by strategic sourcing and rising costs/tariffs[273](index=273&type=chunk) - Accounts payable **decreased to $24.3 million**, primarily due to decreased consumer demand and timing of vendor payments[276](index=276&type=chunk) [Financing Arrangements](index=80&type=section&id=Financing%20Arrangements) Confirms compliance with financial covenants related to credit agreements - Outstanding borrowings under line of credit agreements totaled **$18.1 million**, with the company in compliance with all financial covenants[277](index=277&type=chunk) [Leases](index=80&type=section&id=Leases) References the detailed disclosure of lease obligations in the financial statement notes - Lease obligations are detailed in Note 17, including a **five-year maturity schedule**[279](index=279&type=chunk) [Capital Expenditures and Depreciation](index=80&type=section&id=Capital%20Expenditures%20and%20Depreciation) Discusses the reduction in capital spending and provides future projections - Cash capital expenditures **decreased to $179,000** from $501,000 in the prior year, reflecting reduced spending[280](index=280&type=chunk) - Depreciation expense was **$1.1 million**, down from $1.6 million in the prior year[281](index=281&type=chunk) - Fiscal 2026 capital spending is projected to be **comparable to fiscal 2025**, focusing on efficiency and future growth[283](index=283&type=chunk) [Critical Accounting Policies and Recent Accounting Developments](index=82&type=section&id=Critical%20Accounting%20Policies%20and%20Recent%20Accounting%20Developments) Confirms no changes to significant accounting policies during the period - No changes in significant accounting policies as of August 3, 2025; refer to Note 2 for recent accounting pronouncements[284](index=284&type=chunk) [Contractual Obligations](index=82&type=section&id=Contractual%20Obligations) States that there have been no significant changes to contractual obligations - There were **no significant or new contractual obligations** since the last Annual Report on Form 10-K[285](index=285&type=chunk) [Inflation](index=82&type=section&id=Inflation) Discusses the adverse impact of inflation and tariffs on costs and consumer demand - Rising raw material, energy, and labor costs could **adversely affect operating results** as market dynamics limit price increases[286](index=286&type=chunk) - New tariffs have increased upward pressure on raw material costs; **price increases were initiated in Q2 fiscal 2026** to mitigate these impacts[287](index=287&type=chunk)[288](index=288&type=chunk) - Persistent inflationary pressures **curtailed consumer spending** in fiscal 2023-2025, leading to lower demand[289](index=289&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=83&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines the company's exposure to interest rate and foreign currency market risks [Interest Rates](index=83&type=section&id=Interest%20Rates) Details the company's exposure to variable interest rates on its credit agreements - The U.S. revolving credit agreement has a variable interest rate based on SOFR (**6.11%** as of August 3, 2025), with **$7.0 million outstanding**[291](index=291&type=chunk) - Chinese credit agreements have variable interest rates based on the China Loan Prime Rate (**2.6%** as of August 3, 2025), with total outstanding balances of **$8.3 million USD**[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) [Foreign Currency](index=83&type=section&id=Foreign%20Currency) Assesses the company's exposure to fluctuations in foreign currency exchange rates - The company is exposed to foreign currency risk but attempts to maintain a **natural hedge** by balancing assets and liabilities in local currencies[296](index=296&type=chunk) - A **10% change in exchange rates** as of August 3, 2025, would not have materially affected results of operations or financial position[296](index=296&type=chunk) [Item 4. Controls and Procedures](index=83&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures as of the quarter-end - Disclosure controls and procedures were evaluated and **deemed effective** as of August 3, 2025, ensuring timely and accurate reporting[297](index=297&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended August 3, 2025[298](index=298&type=chunk) [Part II - Other Information](index=85&type=section&id=Part%20II%20-%20Other%20Information) [Item 1. Legal Proceedings](index=85&type=section&id=Item%201.%20Legal%20Proceedings) Confirms no material changes to legal proceedings during the quarter - **No material changes** to legal proceedings during the three months ended August 3, 2025[299](index=299&type=chunk) [Item 1A. Risk Factors](index=85&type=section&id=Item%201A.%20Risk%20Factors) States that no material changes to risk factors occurred during the quarter - **No material changes** to risk factors during the three months ended August 3, 2025[300](index=300&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no stock repurchase activity and the remaining authorization under the program - **No shares were purchased** under the common stock repurchase program during the reported period[301](index=301&type=chunk) Common Stock Repurchase Program Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :----- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------- | | April 28, 2025 to June 1, 2025 | — | — | — | $3,248,094 | | June 2, 2025 to June 29, 2025 | — | — | — | $3,248,094 | | June 30, 2025 to August 3, 2025 | — | — | — | $3,248,094 | | Total | — | — | — | $3,248,094 | [Item 5. Other Information](index=85&type=section&id=Item%205.%20Other%20Information) Discloses no adoption or termination of trading arrangements by directors or officers - **No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** were adopted or terminated by directors or officers during the quarter[304](index=304&type=chunk) [Item 6. Exhibits](index=86&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed as part of the Form 10-Q report - Exhibits include **certifications from the CEO and CFO** (31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents[307](index=307&type=chunk) [Signatures](index=87&type=section&id=Signatures) Provides the official signatures authorizing the filing of the report - The report was signed by **Kenneth R. Bowling (EVP & CFO)** and **Ronald S. Chandler (VP & Corporate Controller)** on September 12, 2025[311](index=311&type=chunk)

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and related disclosures for the company [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Kewaunee Scientific Corporation's unaudited condensed consolidated financial statements, including statements of operations, comprehensive earnings, stockholders' equity, balance sheets, and cash flows, along with detailed notes explaining accounting policies, significant transactions like the Nu Aire acquisition, and financial instrument valuations for the three months ended July 31, 2025, and comparative periods [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Summarizes the company's net sales, gross profit, operating profit, and net earnings for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | YoY Change (%) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------- | | Net sales | 71,104 | 48,393 | 46.9% | | Cost of products sold | 50,174 | 35,905 | 39.7% | | Gross profit | 20,930 | 12,488 | 67.6% | | Operating expenses | 16,120 | 9,913 | 62.6% | | Operating profit | 4,810 | 2,575 | 86.8% | | Profit before income taxes | 3,920 | 2,430 | 61.3% | | Income tax expense | 761 | 192 | 296.4% | | Net earnings | 3,159 | 2,238 | 41.2% | | Net earnings attributable to Kewaunee Scientific Corporation | 3,093 | 2,193 | 41.0% | | Basic EPS | 1.08 | 0.77 | 40.3% | | Diluted EPS | 1.04 | 0.74 | 40.5% | [Condensed Consolidated Statements of Comprehensive Earnings](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Earnings) Presents net earnings and other comprehensive income/loss, including foreign currency adjustments, for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | YoY Change (%) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------- | | Net earnings | 3,159 | 2,238 | 41.2% | | Foreign currency translation adjustments | (410) | (116) | 253.4% | | Other comprehensive loss | (410) | (116) | 253.4% | | Comprehensive earnings, net of tax | 2,749 | 2,122 | 29.5% | | Comprehensive earnings attributable to Kewaunee Scientific Corporation | 2,683 | 2,077 | 29.2% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Details changes in stockholders' equity, including retained earnings and accumulated other comprehensive loss, between April 30, 2025 and July 31, 2025 | Metric | As of July 31, 2025 ($ thousands) | As of April 30, 2025 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------- | | Total Kewaunee Scientific Corporation Stockholders' Equity | 67,078 | 64,457 | 2,621 | | Retained Earnings | 62,012 | 58,919 | 3,093 | | Accumulated Other Comprehensive Loss | (4,213) | (3,803) | (410) | - Net earnings attributable to Kewaunee Scientific Corporation for the three months ended July 31, 2025, were **$3,093 thousand**, contributing to the increase in retained earnings[16](index=16&type=chunk) - Other comprehensive loss for the three months ended July 31, 2025, was **$(410) thousand**[16](index=16&type=chunk) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Outlines the company's financial position, including assets, liabilities, and equity, as of July 31, 2025 and April 30, 2025 | Metric | As of July 31, 2025 ($ thousands) | As of April 30, 2025 ($ thousands) | Change ($ thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------- | | Total Current Assets | 117,148 | 118,363 | (1,215) | | Total Assets | 193,486 | 194,654 | (1,168) | | Total Current Liabilities | 50,486 | 53,712 | (3,226) | | Total Liabilities | 124,617 | 128,409 | (3,792) | | Total Stockholders' Equity | 68,869 | 66,245 | 2,624 | | Cash and cash equivalents | 19,489 | 14,942 | 4,547 | | Receivables, net | 56,897 | 62,384 | (5,487) | | Inventories | 34,923 | 32,849 | 2,074 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------- | | Net cash provided by (used in) operating activities | 5,791 | (794) | 6,585 | | Net cash used in investing activities | (771) | (278) | (493) | | Net cash (used in) provided by financing activities | (1,463) | 343 | (1,806) | | Increase (decrease) in cash, cash equivalents and restricted cash | 3,277 | (752) | 4,029 | | Cash, cash equivalents and restricted cash, end of period | 20,441 | 25,186 | (4,745) | - Operating activities provided **$5,791 thousand** in cash for the three months ended July 31, 2025, a substantial improvement from **$794 thousand** used in the prior year[21](index=21&type=chunk) - Capital expenditures increased to **$771 thousand** for the three months ended July 31, 2025, from **$278 thousand** in the prior year[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, acquisitions, and financial instruments [A. Financial Information](index=11&type=section&id=A.%20Financial%20Information) Clarifies the basis of preparation for unaudited interim financial statements and their relation to the annual report - The interim financial statements are unaudited and prepared under SEC rules, condensing GAAP disclosures, and should be read in conjunction with the Company's 2025 Annual Report on Form 10-K[26](index=26&type=chunk)[27](index=27&type=chunk) - Interim results are not necessarily indicative of full-year results, and management's estimates and assumptions are subject to actual results differing[27](index=27&type=chunk)[28](index=28&type=chunk) [B. Cash, Cash Equivalents and Restricted Cash](index=11&type=section&id=B.%20Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) Details the composition of cash, cash equivalents, and restricted cash, including performance guarantee amounts - Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders[29](index=29&type=chunk) | Metric | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :-------------------------------------- | :-------------------------- | :--------------------------- | | Cash and cash equivalents | 19,489 | 14,942 | | Restricted cash | 952 | 2,222 | | Total cash, cash equivalents and restricted cash | 20,441 | 17,164 | [C. Nu Aire Acquisition](index=11&type=section&id=C.%20Nu%20Aire%20Acquisition) Describes the Nu Aire, Inc. acquisition, its financial impact, purchase price allocation, and pro forma information - Kewaunee Scientific Corporation acquired Nu Aire, Inc. on November 1, 2024, for **$53.0 million**, expanding its capabilities in laboratory furnishings and technical products[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The acquisition was funded by **$29.669 million** cash and **$23.0 million** in subordinated seller notes[32](index=32&type=chunk)[33](index=33&type=chunk) - Nu Aire contributed **$19.7 million** in revenue and **$696,000** in net earnings for the three months ended July 31, 2025[37](index=37&type=chunk) Nu Aire Purchase Price Allocation (as of July 31, 2025) | Asset/Liability | Final Allocation ($ thousands) | | :-------------------------------- | :----------------------------- | | Cash and cash equivalents | 1,245 | | Receivables | 10,650 | | Inventories | 15,522 | | Property, plant and equipment | 7,349 | | Other intangible assets | 18,600 | | Goodwill | 12,487 | | Total assets acquired | 74,088 | | Total liabilities assumed | (21,108) | | Aggregate acquisition consideration | 52,980 | Pro Forma Financial Information (Three Months Ended July 31, 2024, as if Nu Aire acquired May 1, 2023) | Metric | 2025 (actual) ($ thousands) | 2024 (pro forma) ($ thousands) | | :------------------------------------------ | :-------------------------- | :----------------------------- | | Net sales | 71,104 | 65,448 | | Net earnings | 3,093 | 4,273 | | Basic EPS | 1.08 | 1.50 | | Diluted EPS | 1.04 | 1.44 | [D. Revenue Recognition](index=14&type=section&id=D.%20Revenue%20Recognition) Explains revenue recognition policies, disaggregated revenue by type and geography, and deferred revenue balances - The majority of the Company's revenues are recognized over time as the customer receives control, with a portion recognized at a distinct point in time[41](index=41&type=chunk) Disaggregated Revenue (Three Months Ended July 31) | Revenue Type | July 31, 2025 Domestic ($ thousands) | July 31, 2025 International ($ thousands) | July 31, 2025 Total ($ thousands) | July 31, 2024 Domestic ($ thousands) | July 31, 2024 International ($ thousands) | July 31, 2024 Total ($ thousands) | | :----------- | :----------------------------------- | :---------------------------------------- | :-------------------------------- | :----------------------------------- | :---------------------------------------- | :-------------------------------- | | Over Time | 32,713 | 16,752 | 49,465 | 34,389 | 12,870 | 47,259 | | Point in Time | 21,639 | — | 21,639 | 1,134 | — | 1,134 | | Total | 54,352 | 16,752 | 71,104 | 35,523 | 12,870 | 48,393 | - Deferred revenue at July 31, 2025, was **$4,983 thousand**, with approximately **100%** expected to be recognized as revenue in the succeeding **12 months**[43](index=43&type=chunk) [E. Inventories](index=14&type=section&id=E.%20Inventories) Outlines the valuation method and composition of inventories, including finished products, work in process, and raw materials - Inventories are measured using the first-in, first-out (FIFO) method at the lower of cost or net realizable value[44](index=44&type=chunk) Inventories Composition | Inventory Type | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :------------- | :-------------------------- | :--------------------------- | | Finished products | 6,056 | 5,543 | | Work in process | 6,827 | 3,784 | | Raw materials | 22,040 | 23,522 | | Total | 34,923 | 32,849 | [F. Fair Value of Financial Instruments](index=15&type=section&id=F.%20Fair%20Value%20of%20Financial%20Instruments) Discusses fair value measurement of financial instruments and their classification within the fair value hierarchy - The carrying value of the Company's financial instruments, including cash, mutual funds, and debt, approximates their fair value[45](index=45&type=chunk) Fair Value Hierarchy (July 31, 2025) | Financial Assets | Level 1 ($ thousands) | Level 2 ($ thousands) | Total ($ thousands) | | :------------------------------------------------- | :-------------------- | :-------------------- | :------------------ | | Trading securities held in non-qualified compensation plans | 2,340 | — | 2,340 | | Cash surrender value of life insurance policies | — | 1,514 | 1,514 | | Total Financial Assets | 2,340 | 1,514 | 3,854 | | Financial Liabilities | | | | | Non-qualified compensation plans | — | 4,334 | 4,334 | | Total Financial Liabilities | — | 4,334 | 4,334 | [G. Goodwill and Other Intangible Assets](index=15&type=section&id=G.%20Goodwill%20and%20Other%20Intangible%20Assets) Details goodwill from the Nu Aire acquisition and the composition, useful lives, and amortization of other intangible assets - Goodwill of approximately **$12.5 million** was recorded from the Nu Aire Acquisition, with no impairment losses during the three months ended July 31, 2025[45](index=45&type=chunk) Intangible Assets (July 31, 2025) | Intangible Asset | Estimated Useful Life | Gross Carrying Amount ($ thousands) | Accumulated Amortization ($ thousands) | Net Book Value ($ thousands) | | :----------------------- | :-------------------- | :---------------------------------- | :------------------------------------- | :--------------------------- | | Customer relationships | **10 years** | 9,800 | (735) | 9,065 | | Trade names and trademarks | indefinite | 4,900 | — | 4,900 | | Developed technology | **7 years** | 3,900 | (418) | 3,482 | | Total | | 18,600 | (1,153) | 17,447 | Expected Future Amortization Expense (excluding trade names and trademarks) | Fiscal Year | Amortization Expense ($ thousands) | | :------------------ | :------------------------------- | | Remainder of fiscal 2026 | 1,153 | | 2027 | 1,537 | | 2028 | 1,537 | | 2029 | 1,537 | | 2030 | 1,537 | | Thereafter | 5,246 | | Total | 12,547 | [H. Long-term Debt and Other Credit Arrangements](index=16&type=section&id=H.%20Long-term%20Debt%20and%20Other%20Credit%20Arrangements) Describes long-term debt, including the PNC Loan Agreement, Subordinated Seller Notes, and other credit facilities Long-term Debt Components | Debt Type | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :---------------- | :-------------------------- | :--------------------------- | | PNC Loan Agreement | 13,000 | 13,750 | | Seller Notes | 24,380 | 23,935 | | Total long-term debt | 37,380 | 37,685 | - The PNC Loan Agreement includes a **$20.0 million** Revolving Credit Facility (unused at July 31, 2025) and a **$15.0 million** Term Loan, both maturing on November 1, 2029[49](index=49&type=chunk)[51](index=51&type=chunk) - Subordinated Seller Notes of **$23.0 million**, accruing **8%** interest per annum, mature on November 1, 2027, and are subordinate to PNC's rights[53](index=53&type=chunk)[55](index=55&type=chunk) - International subsidiaries had **$495,000** in short-term borrowings at July 31, 2025[57](index=57&type=chunk) [I. Sale-Leaseback Financing Transaction](index=17&type=section&id=I.%20Sale-Leaseback%20Financing%20Transaction) Explains the headquarters sale-leaseback as a financing transaction, detailing associated liabilities and interest expense - The sale-leaseback arrangement for the Company's headquarters was accounted for as a financing transaction due to the lease being classified as a finance lease, indicating control of the property did not transfer[60](index=60&type=chunk)[62](index=62&type=chunk) - The carrying value of the financing liability was **$27,227 thousand** at July 31, 2025, with **$807 thousand** classified as current[63](index=63&type=chunk) - Interest expense associated with the financing arrangement was **$308 thousand** for the three months ended July 31, 2025[63](index=63&type=chunk) [J. Leases](index=18&type=section&id=J.%20Leases) Provides information on right-of-use assets, lease liabilities, and future minimum payments for operating and financing leases - Right-of-use assets totaled **$12,022 thousand** at July 31, 2025, for operating and financing leases[66](index=66&type=chunk) - Operating cash paid to settle lease liabilities was **$1,040 thousand** for the three months ended July 31, 2025, and operating lease expense was **$1,458 thousand**[66](index=66&type=chunk) Future Minimum Lease Payments (July 31, 2025) | Fiscal Year | Operating ($ thousands) | Financing ($ thousands) | | :------------------ | :---------------------- | :---------------------- | | Remainder of fiscal 2026 | 2,843 | 94 | | 2027 | 3,345 | 40 | | 2028 | 2,462 | 40 | | 2029 | 2,108 | 40 | | 2030 | 1,630 | 40 | | Thereafter | 160 | 22 | | Total Minimum Lease Payments | 12,548 | 276 | | Imputed Interest | (1,403) | (45) | | Total | 11,145 | 231 | [K. Stockholders' Equity](index=19&type=section&id=K.%20Stockholders'%20Equity) Details the number of outstanding common shares and the company's share repurchase program - As of July 31, 2025, there were approximately **2,865,000 shares** of Common Stock outstanding[69](index=69&type=chunk) - The Board of Directors amended the share repurchase program on March 12, 2025, authorizing an additional **100,000 shares**[71](index=71&type=chunk) - No shares were repurchased under the program during the three months ended July 31, 2025, with **100,603 shares** remaining authorized for purchase[71](index=71&type=chunk) [L. Earnings Per Share](index=19&type=section&id=L.%20Earnings%20Per%20Share) Explains basic and diluted earnings per share calculation and reconciliation of weighted average common shares outstanding - Basic EPS is based on the weighted average number of common shares outstanding, while diluted EPS reflects the assumed exercise of outstanding options and conversion of restricted stock units (RSUs)[72](index=72&type=chunk) Reconciliation of Basic to Diluted Weighted Average Common Shares Outstanding | Metric | Three Months Ended July 31, 2025 (thousands) | Three Months Ended July 31, 2024 (thousands) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Basic | 2,851 | 2,849 | | Dilutive effect of stock options and RSUs | 112 | 118 | | Weighted average common shares outstanding - diluted | 2,963 | 2,967 | [M. Stock Options and Stock-based Compensation](index=20&type=section&id=M.%20Stock%20Options%20and%20Stock-based%20Compensation) Describes the company's stock incentive plans, RSU grants, and stock-based compensation expense - The 2023 Omnibus Incentive Plan replaced the 2017 Plan, reserving **374,633 shares** for issuance, with **291,326 shares** available at July 31, 2025[74](index=74&type=chunk) - The Company granted **72,728 RSUs** in June 2025, vesting over **three years** with service and performance components[75](index=75&type=chunk) - Stock-based compensation expense was **$431 thousand** for the three months ended July 31, 2025, with **$3,877 thousand** remaining to be recorded[75](index=75&type=chunk) [N. Income Taxes](index=20&type=section&id=N.%20Income%20Taxes) Presents income tax expense, effective tax rates, and the impact of discrete tax benefits and new tax legislation Income Tax Expense and Effective Tax Rate | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | | Income tax expense | 761 | 192 | | Effective tax rate | 19.4% | 7.9% | - The effective tax rate for Q1 FY2026 (**19.4%**) reflects foreign operations' tax rates and a **$303 thousand** discrete tax benefit from RSU vesting[76](index=76&type=chunk) - The U.S. government enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, and the Company is evaluating its potential impact on future tax obligations[78](index=78&type=chunk) [O. Segment Information](index=21&type=section&id=O.%20Segment%20Information) Provides financial data disaggregated by domestic and international operating segments, evaluated by earnings before income taxes - The Company operates in two business segments: Domestic (including the Nu Aire acquisition) and International, with the CEO evaluating performance based on earnings before income taxes[79](index=79&type=chunk)[80](index=80&type=chunk) Segment Financial Information (Three Months Ended July 31, 2025 vs. 2024) | Metric | Domestic Operations 2025 ($ thousands) | International Operations 2025 ($ thousands) | Total 2025 ($ thousands) | Domestic Operations 2024 ($ thousands) | International Operations 2024 ($ thousands) | Total 2024 ($ thousands) | | :------------------------------------ | :------------------------------------- | :------------------------------------------ | :----------------------- | :------------------------------------- | :------------------------------------------ | :----------------------- | | Revenues from external customers | 54,352 | 16,752 | 71,104 | 35,523 | 12,870 | 48,393 | | Depreciation and amortization | 1,428 | 96 | 1,549 | 662 | 107 | 815 | | Interest expense | 313 | 13 | 1,058 | 441 | 21 | 472 | | Earnings (loss) before income taxes | 5,835 | 1,143 | 3,920 | 3,635 | 787 | 2,430 | | Segment assets | 153,302 | 40,184 | 193,486 | 90,235 | 41,783 | 132,018 | [P. New Accounting Standards](index=22&type=section&id=P.%20New%20Accounting%20Standards) Discusses recently issued accounting pronouncements and their expected impact on financial statements - ASU 2023-09, "Improvements for Income Tax Disclosures," is effective for fiscal year 2026, with no significant impact expected[82](index=82&type=chunk) - ASU 2024-03/2025-01, "Expense Disaggregation Disclosures," is effective for annual disclosures in fiscal year 2028 and interim disclosures in fiscal year 2029, with no significant impact expected[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, highlighting the impact of the Nu Aire acquisition on sales and gross profit, discussing liquidity, and outlining the outlook amidst market challenges and strategic growth initiatives [Acquisition of Nu Aire, Inc.](index=22&type=section&id=Acquisition%20of%20Nu%20Aire,%20Inc.) Details the strategic rationale and financial aspects of the Nu Aire acquisition, expanding product offerings - The Nu Aire acquisition, completed November 1, 2024, for **$55.0 million**, significantly expands the Company's product portfolio to include biological safety cabinets, CO2 incubators, and ultralow freezers[85](index=85&type=chunk)[86](index=86&type=chunk) - This acquisition accelerates the Company's vision of becoming a market leader in laboratory furniture and technical products by combining capabilities and leveraging Nu Aire's established distribution partners[87](index=87&type=chunk) [Critical Accounting Estimates](index=22&type=section&id=Critical%20Accounting%20Estimates) Confirms no material changes to critical accounting estimates since the last annual report, except as noted - There have been no material changes to the Company's critical accounting estimates since the 2025 Annual Report on Form 10-K, beyond those set forth in this quarterly report[88](index=88&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Analyzes key financial performance indicators like sales, gross profit, operating expenses, and net earnings for the three months ended July 31, 2025 and 2024 Key Financial Performance Indicators (Three Months Ended July 31) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | YoY Change ($ thousands) | YoY Change (%) | | :-------------------------- | :----------------- | :----------------- | :----------------------- | :------------- | | Sales | 71,104 | 48,393 | 22,711 | 46.9% | | Domestic Sales | 54,352 | 35,523 | 18,829 | 53.0% | | International Sales | 16,752 | 12,870 | 3,882 | 30.2% | | Gross Profit Margin | 29.4% | 25.8% | 3.6 pp | - | | Operating Expenses | 16,120 | 9,913 | 6,207 | 62.6% | | Interest Expense | 1,058 | 472 | 586 | 124.2% | | Income Tax Expense | 761 | 192 | 569 | 296.4% | | Net Earnings | 3,093 | 2,193 | 900 | 41.0% | | Diluted EPS | 1.04 | 0.74 | 0.30 | 40.5% | - Domestic sales increased **53.0%** primarily due to the Nu Aire acquisition, while International sales increased **30.2%** due to large project deliveries[89](index=89&type=chunk) - The Company's order backlog was **$205.0 million** at July 31, 2025, compared to **$159.4 million** at July 31, 2024[90](index=90&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses liquidity sources, working capital, and cash flows from operating, investing, and financing activities - Principal liquidity sources are funds from operating activities and the new PNC Revolving Credit Facility, which replaced the terminated Mid Cap Revolving Credit Facility[97](index=97&type=chunk) Working Capital and Ratios | Metric | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Working Capital | 66,662 | 64,651 | | Ratio of Current Assets to Current Liabilities | 2.3-to-1.0 | 2.2-to-1.0 | - Operating activities provided **$5,791 thousand** in cash, driven by decreases in receivables, partially offset by increases in inventories and decreases in accounts payable[99](index=99&type=chunk) - Investing activities used **$771 thousand** for capital expenditures, and financing activities used **$1,463 thousand**, primarily for long-term debt servicing[99](index=99&type=chunk) [Outlook](index=24&type=section&id=Outlook) Provides management's expectations for future performance, including project timelines, backlog, and strategic growth initiatives - The Company anticipates some volatility in project delivery timelines for fiscal year 2026 but maintains a strong overall backlog of **$205.0 million**[101](index=101&type=chunk)[90](index=90&type=chunk) - Management is focused on organic and inorganic growth, making strategic investments in people, processes, and technology to support sustainable growth[102](index=102&type=chunk) - The Company believes its strategic investments and healthy backlog position it well to manage short-term headwinds and ensure long-term business health[102](index=102&type=chunk) [Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995](index=24&type=section&id=Safe%20Harbor%20Statement%20under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) Warns about forward-looking statements, outlining risks and uncertainties that could cause actual results to differ - The document contains forward-looking statements subject to known and unknown risks, uncertainties, and assumptions that could significantly impact results[103](index=103&type=chunk) - Factors that could cause differences include the ability to realize Nu Aire acquisition benefits, competitive and economic conditions, customer demands, technological changes, international operations risks, and raw material costs[103](index=103&type=chunk) - The Company assumes no obligation to update any forward-looking statements[103](index=103&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) States no material changes to market risk disclosures from the most recent annual report - No material changes to market risk disclosures compared to the 2025 Annual Report on Form 10-K[104](index=104&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Reports on the effectiveness of disclosure controls and procedures and the ongoing integration of Nu Aire into the control environment - As of July 31, 2025, the Company's disclosure controls and procedures were deemed adequate and effective by management, including the CEO and CFO[105](index=105&type=chunk) - The Company is integrating Nu Aire into its systems and control environment, monitoring and maintaining appropriate internal control over financial reporting during this process[106](index=106&type=chunk) - No other significant changes in internal control over financial reporting occurred during the quarter[106](index=106&type=chunk) PART II. OTHER INFORMATION Contains additional information not covered in financial statements, including risk factors, equity sales, and exhibits [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) Refers to previously disclosed risk factors and notes any updates or new factors impacting the company's business - No material changes to risk factors from the 2025 Annual Report on Form 10-K, except as noted in this quarterly report[109](index=109&type=chunk) - Various known or unknown factors could materially and adversely affect the Company's business, financial condition, operating results, and stock price[109](index=109&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on unregistered sales of equity securities and details the company's share repurchase activities - No unregistered sales of equity securities occurred during the period[110](index=110&type=chunk) - The Company did not purchase any shares under its share repurchase program during the three months ended July 31, 2025, with **100,603 shares** remaining authorized for purchase[111](index=111&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) Discloses information regarding Rule 10b5-1 trading arrangements by directors and executive officers - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended July 31, 2025[113](index=113&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) Lists all documents filed as exhibits to the Form 10-Q, including certifications and financial data in XBRL format - Exhibits include bylaws, CEO/CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and Inline XBRL documents for financial data[116](index=116&type=chunk) SIGNATURE Confirms the official signing of the report by an authorized financial officer - The report was signed by Donald T. Gardner III, Vice President, Finance and Chief Financial Officer, on behalf of Kewaunee Scientific Corporation on September 12, 2025[118](index=118&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________ FORM 10-Q ____________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ Commission file number 001-40958 RENT THE RUNWAY, INC. __________________________ ...