Financial Performance - For the three months ended September 30, 2025, the company recognized $8,847,550 in collaboration and license revenue, a significant increase from $0 for the same period in 2024, attributed to the Boehringer Ingelheim Agreement[144] - Selling, general and administrative expenses were $1,660,731 for the three months ended September 30, 2025, compared to $2,020,931 for the same period in 2024, reflecting decreased compensation costs[149] - Net cash used in operating activities was $1,619,382 for the three months ended September 30, 2025, a decrease from $7,016,213 in the same period of 2024, primarily due to recognized license and produce revenue[154] - As of September 30, 2025, the company had cash and cash equivalents of $1,273,083 and current liabilities of $8,218,261[156] Research and Development - Research and development expenses decreased to $2,525,766 for the three months ended September 30, 2025, down from $5,743,754 in the same period of 2024, primarily due to reduced spending on MCR programs[145] - Cumulative spending on the Vyleesi program reached approximately $311,900,000, while spending on all other programs totaled approximately $251,400,000 as of September 30, 2025[148] - The company expects to report topline results for PL8177, an oral peptide formulation for ulcerative colitis, later in the current quarter, with one-third of patients achieving clinical remission in the Phase 2 trial[136] - The company anticipates positive topline data for the co-administration of bremelanotide with tirzepatide in obesity treatment to be reported in the first quarter of calendar year 2025[136] Agreements and Collaborations - The company entered into a Research Collaboration, License and Patent Assignment Agreement with Boehringer Ingelheim in August 2025 to develop melanocortin receptor-targeted peptides for retinal diseases[135] Financial Outlook and Concerns - The company has concluded that prior conditions raising substantial doubt about its ability to continue as a going concern no longer exist, based on available cash and expected proceeds from upcoming financing activities[159] - The company requires additional funding to complete necessary clinical trials for its product candidates and development programs[160] - Current economic conditions, including high interest rates and rising inflation, may negatively impact the company's operations and financial condition[160] - The company is evaluating the potential effects of economic uncertainty on its operations and cash flows during fiscal year 2026 and beyond[160]

International Operations and Risks - Approximately 81% of the products purchased in the fiscal year ended June 30, 2025, were manufactured abroad, primarily in China, exposing the company to international risks and costs[52] - The company faces risks related to labor shortages in the transportation industry, which could affect transportation costs and timely product delivery[51] - Fluctuations in product costs due to inflationary pressures and supply chain constraints could negatively impact the company’s sales and profitability[49] - The ongoing geopolitical tensions, particularly the Russia-Ukraine conflict, may impact global financial markets and indirectly affect the company’s operations and investments[58] - The company relies on third-party suppliers and manufacturers, which subjects it to risks such as supply chain disruptions and quality control issues[98] - Approximately 85% of the company's products are sourced from overseas suppliers, with a focus on made-to-order products[219] - The company has a broad network of 30 suppliers, with 15 based in Australia and 15 overseas, to mitigate supply chain risks[218] Financial Performance and Condition - The company’s intangible assets, including brand names and goodwill, were valued at approximately $337,504 and $1,161,052 as of June 30, 2025, and 2024, respectively, with no impairments reported for both years[56] - Uncertain global economic conditions, including inflation and potential recessions, could materially affect the company’s business prospects and financial condition[44] - The company may require additional capital to support business growth, which could result in stockholder dilution if raised through equity or convertible debt securities[95] - The company is exposed to payment processing risks, which could adversely impact revenue and operating results if there are disruptions or changes in payment processing systems[96] - The company faces risks related to warranty claims and product returns, which could lead to significant costs and adversely affect financial condition and operating results[92] - The company's quarterly operating results may fluctuate significantly, making it difficult to predict future performance and potentially leading to market price volatility[89] - The company is subject to foreign currency exchange rate fluctuations, which can affect revenue and operating results[97] - The company maintains liability insurance, but coverage may not be adequate to cover all claims, potentially leading to substantial losses from accidents or safety incidents[86] - Legal proceedings, including lawsuits and arbitration, may adversely affect the company's financial condition and divert management's attention from business operations[108] - Changes in tax laws and regulations could unfavorably impact the company's effective income tax rates and overall profitability[111] Market and Competitive Environment - The company’s business is highly dependent on consumer discretionary spending, which is influenced by macroeconomic conditions and consumer confidence in the Australian and Asian economies[43] - Intense competition in the gym and fitness equipment industry may limit the company’s growth and profitability, as it competes with various retailers across multiple channels[47] - Market growth forecasts may prove inaccurate, and the company cannot assure that its business will grow at a similar rate even if the market does[123] - The company is vulnerable to catastrophic events such as natural disasters and public health crises, which could disrupt operations and negatively impact financial results[125] Strategic Initiatives and Development - The company began developing new interactive fitness equipment and platforms/mobile applications with subscription services in 2021, including smart cardio exercise equipment and an AI-powered interactive platform[61] - The company launched three new business verticals in 2021, integrating technology into its offerings[199] - The company is developing an AI-powered interactive platform, 1FinalRound, which is currently in internal testing prior to public launch[209] - The company aims to expand into digital subscription-based fitness solutions, leveraging trends seen in the U.S. market[236] - The company is developing functional health supplement products targeting health-conscious consumers, including muscle protein powder and multi-vitamins[237] Subscriber and Customer Engagement - The company faces challenges in attracting and retaining subscribers, which could lead to a decline in subscriber levels and adversely affect its business and financial condition[62] - The company served over 200,000 customers, with a significant portion of sales coming from repeat customers, indicating strong brand loyalty[198] - Revenue from the company's e-commerce website accounted for approximately 65.95% of total sales for the fiscal year ended June 30, 2025[201] - E-commerce conversion rates increased by 59.72% from 0.72% in fiscal year 2024 to 1.15% in fiscal year 2025, with 32.27% of orders coming from existing customers[223] - Retail customers accounted for 70.35% of the company's total revenue for fiscal year 2025[227] Corporate Governance and Compliance - The company is classified as an "emerging growth company" and may remain so until the fiscal year-end following August 10, 2028, unless certain conditions are met, such as gross revenue exceeding $1.235 billion in any fiscal year[128] - Ms. Jieting Zhao, a director, beneficially owns approximately 16.6% of the outstanding shares, which may lead to a material decline in the value of the company's Ordinary Shares due to potential conflicts of interest[129] - Flying Height Consulting Services Limited owns approximately 48.5% of the outstanding shares and has significant influence over corporate transactions, which could adversely affect the market price of the Ordinary Shares[131] - The company faced non-compliance with Nasdaq's minimum bid price requirement of $1.00 per share, receiving a notification on April 2, 2025, and was granted an additional compliance period until March 30, 2026[139][142] - A share consolidation at a ratio of 1-for-16 was executed on September 23, 2025, to address the non-compliance issue, changing the authorized share capital structure[141] - The company identified a material weakness in its internal control over financial reporting, which could impair its ability to comply with financial reporting requirements and adversely affect the market price of its Ordinary Shares[148][149] - The dual-class share structure limits the ability of Class A shareholders to influence corporate matters, which may adversely affect the trading price of the Ordinary Shares[136][138] - The company has never declared or paid cash dividends on its Ordinary Shares, and the ability to pay dividends is contingent upon generating sufficient distributable profits[150] Digital Assets and Cryptocurrency - The company plans to establish a Solana-based corporate treasury program, exposing it to significant risks associated with digital assets, including volatility[162] - The price of Solana may be materially impacted by competition from other crypto assets, which could adversely affect the company's treasury value and stock price[163] - The company currently does not hedge its Solana exposure, leaving it fully exposed to price volatility[168] - Security breaches or cyberattacks could result in the loss of digital assets, materially affecting the company's financial condition and results of operations[164] - The implementation of the Treasury Program is subject to uncertainties, including market conditions and regulatory approvals, with no assurance of success[167] - The use of digital assets may subject the company to reputational risk, potentially harming investor confidence and its ability to raise capital[166] - Staking Solana tokens may limit liquidity and expose the company to additional risks, including potential losses from market fluctuations[169] - The company is not subject to extensive regulations applicable to investment companies, allowing broad discretion over its cryptocurrency strategy[170] - The Treasury Program exposes the company to counterparty risks, including potential non-performance by execution partners and custodians[171] - Recent events in the digital asset industry have highlighted counterparty risks, although the company has not yet experienced losses from its custodians[172] - The use of leverage to acquire cryptocurrency could magnify potential losses, increasing risks associated with the company's treasury strategy[174] - The company's diversification into other digital assets beyond Solana may introduce unique operational and regulatory challenges[176] - Regulatory changes could classify the company as an "investment company," imposing significant additional regulatory controls[177] - The company's operating results are highly dependent on the price of digital assets, with significant volatility historically observed[185] - There is no assurance that any digital asset will maintain its value, and declines in demand could adversely affect the company's financial condition[186] - Bitcoin, Solana, and other digital assets are subject to significant legal and regulatory uncertainty, which could materially impact the company's operations[187] Marketing and Brand Strategy - The company’s marketing strategy involves various channels, including social media and online advertising, which must be effectively managed to avoid negative impacts on customer acquisition[94] - The company’s marketing strategy includes a multi-channel approach, utilizing Google Ads, social media, and a loyalty program to enhance brand awareness and customer retention[212] - The company plans to develop proprietary branded cardio equipment to increase profitability, as profit margins for cardio fitness equipment are higher than for strength and weight equipment[230] - A native mobile application has been launched to enhance customer shopping experiences and track consumer trends, with beta versions in trial since March 2022 and the official version launched in November 2023[231]

Regulatory Approvals and Designations - NRx Pharmaceuticals has received Fast Track Designation from the FDA for NRX-100, expanding the addressable market to approximately 13 million Americans, a tenfold increase compared to the previous designation for bipolar depression alone [261]. - The ANDA for NRX-100 was refiled in September 2025, with FDA communication on November 6, 2025, indicating no major deficiencies, anticipating approval in Q2 2026 [260]. - The NDA for NRX-100 is expected to be completed in Q4 2025, with real-world efficacy data from 65,000 patients being submitted to support the application [260]. - NRX-101 has received Breakthrough Therapy Designation from the FDA and is anticipated to be filed for Accelerated Approval for treatment of "Suicidal Bipolar Depression" [284]. Product Launches and Market Opportunities - The company aims to launch KETAFREE™ in Q1 2026, following the successful re-filing of the ANDA for preservative-free ketamine [260]. - The market for generic ketamine is estimated at $750 million, with expectations to enter this market in early 2026 [264]. - NRX-100 is expected to be used in millions of patients each year, with data supporting its efficacy in reducing suicidal ideation and depression [275]. Financial Performance - For the three months ended September 30, 2025, the Company's net loss was $5.9 million, compared to a net loss of $1.6 million for the same period in 2024 [298]. - For the nine months ended September 30, 2025, the Company's net loss was $29.0 million, up from $16.1 million in the same period in 2024 [298]. - As of September 30, 2025, the Company had an accumulated deficit of $307.3 million and a stockholders' deficit of $25.8 million [298]. - The Company recorded total revenue of approximately $0.2 million for the three and nine months ended September 30, 2025, solely from patient services provided by Dura following its acquisition [303]. - The Company anticipates that revenue will increase in subsequent periods as Dura's operations are fully integrated and additional clinical capacity is expanded [304]. Operating Expenses and Financial Obligations - Operating expenses for the three months ended September 30, 2025, totaled $4.3 million, up from $3.0 million in 2024, representing an increase of $1.2 million [311]. - Research and development expenses rose to $1.4 million for the three months ended September 30, 2025, compared to $0.6 million in 2024, an increase of $0.8 million attributed to clinical trials and consulting costs [314]. - General and administrative expenses increased to $2.8 million for the three months ended September 30, 2025, from $2.4 million in 2024, reflecting a $0.5 million rise primarily due to employee expenses [315]. - The Company plans to pursue additional equity or debt financing to fund ongoing clinical activities and meet obligations under current debt arrangements [299]. Acquisitions and Partnerships - HOPE Therapeutics became a revenue-generating clinical enterprise after acquiring Dura Medical, which offers precision-based interventional psychiatry services [258]. - The Company is in active acquisition mode and establishing partnerships with TMS providers to enhance its clinical footprint [296]. - The company has a contractual obligation to pay up to $3.0 million in contingent earn-out payments based on EBITDA performance following the acquisition of Dura [352]. Goodwill and Impairment Testing - Goodwill from the Dura acquisition is attributed to the assembled workforce, anticipated growth in the Florida region, and expected synergies from integrating the clinics into existing operations [367]. - Goodwill is subject to annual impairment testing, conducted on December 31st, or more frequently if impairment indicators arise [368]. - The impairment assessment of goodwill involves evaluating qualitative factors such as macroeconomic conditions, industry conditions, and overall financial performance of reporting units [369]. - If the carrying value of a reporting unit exceeds its fair value, the impairment amount recognized is the difference between the carrying amount and the fair value [370]. - Fair value estimates may utilize a discounted cash flow methodology, requiring significant judgment regarding future cash flows and discount rates [371]. Cash Flow and Financing Activities - The company generated net cash proceeds of approximately $6.1 million from the ATM Offering through September 30, 2025 [341]. - Net cash used in investing activities was $2.6 million for the nine months ended September 30, 2025, primarily related to the acquisition of Dura [346]. - Financing activities provided $18.7 million of cash during the nine months ended September 30, 2025, driven by proceeds from the issuance of Common Stock and warrants [347]. - The company expects to continue incurring significant operating losses for the foreseeable future and may never become profitable [339].

Table of Contents 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 September 30, 2025 ☐ 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 001-41529 SPRING VALLEY ACQUISITION CORP. II (Exact name of registrant as specified in its charter) Cayman Island ...

Table of Contents 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 September 30, 2025 ☐ 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 001-41529 SPRING VALLEY ACQUISITION CORP. II (Exact name of registrant as specified in its charter) Cayman Island ...

Financial Performance - Vuzix reported total revenues of $1.2 million for Q3 2025, a decrease of 16% compared to $1.4 million in Q3 2024[8] - The company achieved a gross loss of $0.4 million in Q3 2025, compared to a gross loss of $0.3 million in Q3 2024, attributed to lower revenues not covering fixed manufacturing overheads[9] - The net loss for Q3 2025 was $7.4 million, or $0.09 per share, compared to a net loss of $9.2 million, or $0.14 per share in Q3 2024[13] Revenue Breakdown - Sales of smart glasses products decreased by 9%, primarily due to lower sales of the M400 smart glasses, while engineering services revenues fell by 33% year-over-year[8] Expenses - Research and Development expenses increased by approximately 26% to $2.9 million in Q3 2025, driven by higher external development costs for new products[10] - Selling and Marketing expenses decreased by approximately 35% to $1.1 million in Q3 2025, primarily due to reduced bad debt expense and recovery of previously written-off bad debt[11] - General and Administrative expenses were down approximately 41% to $2.6 million in Q3 2025, largely due to a reduction in non-cash stock-based compensation[12] - Total operating expenses decreased by 22% year-over-year, enhancing financial efficiency[5] Cash Position and Future Outlook - Vuzix ended Q3 2025 with $22.6 million in cash and cash equivalents, and a working capital position of $24.3 million[14] - The company expects robust growth in Q4 2025 across product revenue and engineering services, driven by progress on OEM programs and fulfilling a backlog for a leading global online retailer[15]

Financial Performance - For the three months ended September 30, 2025, the Company reported revenue of $17,110,425, a 37.8% increase year-over-year, and a net loss of $5,352,890, compared to a net loss of $2,182,534 in the same period of 2024 [326]. - For the nine months ended September 30, 2025, revenue totaled $45,568,655, up 13.4% from $40,202,238 in 2024, while the net loss increased to $8,999,055 from $6,639,935 [326]. - Cost of Goods Sold (COGS) for the three months ended September 30, 2025, was $14,507,807, an increase of 29.5% from $11,204,186 in 2024 [328]. - Gross profit for the three months ended September 30, 2025, was $2,602,618, representing an increase of 115.6% from $1,206,862 in 2024 [330]. - Total operating expenses for the three-month period ended September 30, 2025, were $4,421,333, up 28.3% from $3,446,726 in 2024 [332]. - The Company recognized foreign currency translation gains of $255,263 for Q3 2025, compared to gains of $747,879 in the prior year [338]. - The Company had an accumulated deficit of $123,021,330 and stockholders' equity of $23,134,884 as of September 30, 2025 [347]. - The company reported significant net loss and negative operating cash flows, raising substantial doubt about its ability to continue as a going concern within one year after the issuance of the consolidated financial statements [352]. Capital and Financing - The company expects to continue incurring significant operating losses and may need to reduce costs to sustain operations if additional capital is not secured [293]. - The company has access to additional capital resources through public and private equity offerings, but there is uncertainty regarding obtaining financing on acceptable terms [294]. - The primary source of cash inflows during the nine months ended September 30, 2025, was financing activities, generating net inflows of $9,357,403 [343]. - The company raised capital through the issuance of convertible notes and new third-party debt facilities, including a Securities Purchase Agreement for up to $300 million in senior secured convertible promissory notes, significantly improving liquidity [350]. - The company issued 3,992,541 shares of common stock under its At-the-Market sales program, generating gross proceeds of $4,376,622, enhancing its cash position and liquidity [351]. - The Company anticipates using cash from various sources to conduct its business in the upcoming year, highlighting reliance on external financing [346]. Business Operations and Strategy - The company operates a diversified healthcare group, focusing on proprietary pharmaceutical and nutraceutical brands, with significant growth opportunities through product additions and geographic expansion [300]. - The company launched its proprietary nutraceutical products "Sky Premium Life®" in 2018 and "Mediterranation®" in 2022, with over 160 product codes [306]. - The company signed an exclusive distribution agreement for its Sky Premium Life products in the UAE, anticipating orders of over 3,000,000 units over the next five years [318]. - The company acquired ZipDoctor Inc. for $150,000, enhancing its telemedicine platform capabilities [320]. - The company completed the acquisition of Cana Laboratories for €800,000 and 46,377 shares, enhancing its manufacturing capabilities within the EU [321]. - The acquisition of Bikas is expected to increase annual revenue by more than $10 million and improve gross margins due to economies of scale [324]. - The company plans to expand its portfolio of brand-name and private-label products, launch new distribution channels, and increase sales from exclusive agreements, such as the distribution of Sky Premium Life products in the UAE, which is expected to contribute to operating cash inflows in the near term [349]. - The company aims to enhance its manufacturing capacities and build a multinational network of wholesalers, distributors, and pharmacies while expanding its portfolio of innovative products [356]. - The company is focusing on high-margin segments and has shown strong performance in proprietary brands such as Sky Premium Life, Mediterranation, and C-Sept/C-Scrub, with launches into new geographical regions [360]. - The company is optimizing its production facilities and establishing a global footprint in the pharmaceutical fields of contract manufacturing organization (CMO) and contract development and manufacturing organization (CDMO) [360]. - The company intends to invest in R&D to deliver innovative products, including treatments for obesity, gastrointestinal disorders, and various cancers, as well as an AI-driven drug repurposing platform [360]. - The company’s product portfolio includes generics, OTC pharmaceutical products, innovative medicines, and nutraceuticals, optimizing product lifecycle across therapeutic areas [362]. - The company is committed to driving organic growth at attractive margins by improving execution, optimizing cash flow, and leveraging its strong market position [357]. Accounting and Financial Reporting - The Company has net operating loss carry-forwards applicable to future taxable income in the United States, but potential benefits have not been recognized due to uncertainty in utilization [384]. - The Company follows ASC 310 to estimate the allowance for doubtful accounts, reviewing each trade receivable for collectability and adjusting credit limits based on payment history [385]. - Merchandise inventories are valued at the lower of cost or market using the weighted-average cost method, with reserves for damaged and slow-moving items recorded annually [386]. - The Company accounts for its convertible promissory note at fair value, with changes recorded as non-operating loss in the consolidated statements of operations [388]. - The fair value of the convertible promissory note is estimated using a Monte Carlo simulation model, considering factors such as stock volatility and risk-free interest rates [389]. - Digital assets are recorded at cost and measured at fair value, with changes recognized in the consolidated statement of income as "Gain (loss) on digital assets" [390][391]. - As of September 30, 2025, the Company had 31,869,041 common shares issued and outstanding, with an additional 26,305,652 common shares issuable upon conversion of convertible notes and exercise of warrants [392].

Financial Performance - Net income for the three months ended September 30, 2025, was $4,481,000, a 54.7% increase compared to $2,901,000 for the same period in 2024[9]. - Earnings per common share attributable to First Capital, Inc. increased to $1.34 for the three months ended September 30, 2025, compared to $0.87 in 2024, reflecting a growth of 54.0%[9]. - Comprehensive income attributable to First Capital, Inc. for the nine months ended September 30, 2025, was $20,809,000, up from $14,210,000 in 2024, reflecting a 46.5% increase[12]. - For the nine months ended September 30, 2025, net income attributable to First Capital, Inc. was $11,488,000, compared to $8,678,000 in 2024, indicating a 32.5% increase[84]. - Net income attributable to the Company was $4.5 million ($1.34 per diluted share) for the three months ended September 30, 2025, compared to $2.9 million ($0.87 per diluted share) for the same period in 2024[127]. Asset and Liability Management - Total assets increased to $1,235,477,000 as of September 30, 2025, up from $1,187,523,000 at the end of 2024, representing a growth of 4.0%[7]. - Total liabilities increased to $1,102,928,000 as of September 30, 2025, compared to $1,072,812,000 at the end of 2024, representing a growth of 2.8%[7]. - Total deposits reached $1,094,733,000 as of September 30, 2025, an increase of 2.5% from $1,066,439,000 at the end of 2024[7]. - Cash and cash equivalents increased from $105.9 million at December 31, 2024, to $112.2 million at September 30, 2025, primarily due to net deposit inflows[121]. Income and Expense Analysis - Total interest income rose to $14,658,000 for the three months ended September 30, 2025, up 10.9% from $13,224,000 in the prior year[9]. - Noninterest income increased to $2,306,000 for the three months ended September 30, 2025, compared to $1,800,000 in 2024, marking a growth of 28.1%[9]. - Noninterest expenses increased by $540,000 for the quarter ended September 30, 2025, primarily due to increases in occupancy and equipment and compensation and benefits expenses[133]. - Cash payments for interest for the nine months ended September 30, 2025, totaled $10,899,000, an increase from $9,604,000 in 2024, representing a 13.4% increase[93]. Credit Quality and Loan Performance - The provision for credit losses was $150,000 for the three months ended September 30, 2025, down from $463,000 in the same period of 2024, indicating improved credit quality[9]. - The allowance for credit losses increased to $9,861,000 from $9,281,000, indicating a rise of 6.24%[40]. - Nonperforming loans totaled $3,866 million as of September 30, 2025, consisting of $2,006 million in nonaccrual loans and $1,860 million in loans 90 days or more past due[60]. - The total for Special Mention loans across all categories is $667,000, indicating potential risk[67]. - The company continues to assess risks associated with various loan segments, including economic conditions and property values, which may impact repayment[40][41][42][43][44][45][46][47][48]. Securities and Investments - Total securities available for sale amounted to $439.2 million, with a fair value of $421.6 million, reflecting a gross unrealized loss of $19.8 million[24]. - The company’s investment in equity securities had a fair value of $1.0 million as of September 30, 2025, up from $887,000 at December 31, 2024[38]. - Securities available for sale increased by $32.4 million from $389.2 million at December 31, 2024, to $421.6 million at September 30, 2025[122]. Capital Management - The Bank's CBLR was 10.82% as of September 30, 2025, indicating compliance with capital adequacy requirements[152]. - The Company has a borrowing capacity limit of $50.2 million with the FHLB based on pledged collateral as of September 30, 2025[79]. - The Company purchased a total of 1,443 shares at an average price of $43.55 during the reporting period, with a remaining repurchase authorization of 113,236 shares[176]. Risk Management - The Company aims for long-term profitability while managing interest rate exposure through strategies like shortening asset maturities and relying on retail deposits[158]. - Management monitors the differences between estimated and actual incurred loan losses to evaluate the effectiveness of the estimation process[57]. - The Company has not engaged in trading accounts or high-risk derivatives, thus avoiding foreign currency exchange rate risk and commodity price risk[159]. Corporate Governance - The report is signed by Michael C. Frederick, President and CEO, and Joshua P. Stevens, Executive Vice President, CFO and Treasurer[184]. - Management has effective disclosure controls and procedures in place, ensuring timely and accurate reporting[170].

Product and Customer Metrics - As of September 27, 2025, Sonos had nearly 53.4 million products registered across approximately 17.1 million households globally, with 61% of these households owning more than one product [18]. - In fiscal 2025, existing customers accounted for approximately 45% of new product registrations, indicating strong customer retention and engagement [18]. - The average Sonos household owned 3.13 products, while multi-product households averaged 4.49 products, highlighting significant growth potential in expanding product ownership [27]. - Sonos introduced several new products in fiscal 2025, including Arc Ultra, Sub (Gen 4), and Era 100 Pro, aimed at enhancing its product portfolio and customer experience [29]. - Sonos experienced the highest revenue levels in the first fiscal quarter, coinciding with the holiday shopping season [57]. - The company generates a substantial majority of its revenue from smart speakers, particularly wireless speakers and home theater soundbars, making market demand critical for its success [81]. - Sonos speakers accounted for 77.7% of total revenue in fiscal 2025, decreasing by 4.1% from fiscal 2024, driven by declines in Arc and Sonos One [194]. Financial Performance - Sonos reported net losses of $10.3 million, $38.1 million, and $61.1 million for fiscal years 2023, 2024, and 2025, respectively, with an accumulated deficit of $112.1 million as of September 27, 2025 [75]. - Total revenue for fiscal year 2025 was $1,443,276, a decrease of 4.9% from $1,518,056 in fiscal year 2024 [181]. - Net loss for fiscal year 2025 was $61,144, compared to a net loss of $38,146 in fiscal year 2024, indicating a worsening financial performance [181]. - Adjusted EBITDA for fiscal year 2025 was $132,291, with an Adjusted EBITDA margin of 7.1%, down from $107,862 and 9.3% in fiscal year 2024 [181]. - Gross profit for fiscal 2025 was $630.5 million, down $58.8 million or 8.5% from fiscal 2024, resulting in a gross margin of 43.7% [198]. - Operating expenses for fiscal 2025 totaled $681.0 million, down $56.4 million, or 7.7%, from fiscal 2024, with net operating expenses after restructuring charges at $650.9 million [201]. Cost Management and Operational Efficiency - Sonos initiated a cost transformation initiative in fiscal 2024, resulting in workforce reductions of approximately 6% in August 2024 and 12% in February 2025 to enhance operational efficiency [20]. - The company has implemented a comprehensive cybersecurity program to manage risks and protect confidential information [157]. - The company has a credit agreement allowing it to borrow up to $80.0 million, maturing in October 2030, indicating potential future capital needs [151]. - The company has authorized a common stock repurchase program of up to $200 million as of November 15, 2023 [172]. Supply Chain and Manufacturing - As of September 27, 2025, Sonos had open purchase orders to contract manufacturers for finished goods amounting to approximately $173 million, with expected commitments to suppliers for components ranging from $131 million to $149 million [47]. - Sonos is exiting a partnership with one of its contract manufacturers to consolidate and improve supply chain efficiency, expected to be completed with minimal disruption by the second quarter of fiscal 2026 [20]. - Sonos maintains a diversified contract manufacturing strategy, with production primarily in Malaysia and Vietnam, to optimize its supply chain [46]. - The company is dependent on a limited number of contract manufacturers, which poses risks to production capacity and could lead to increased costs and delays [107]. Market and Competitive Landscape - The company faces global macroeconomic challenges, including inflation and geopolitical conflicts, which may impact demand for its products and operational costs [21]. - The company faces intense competition from established brands like Bose, Samsung, Sony, and new entrants, which may impact its market share and pricing strategies [82][83]. - The company competes favorably based on brand awareness, product quality, and customer support, distinguishing itself with its proprietary Sonos App and open platform [55]. - The company faces competition from content partners that may limit the availability of streaming services on its products, potentially lowering demand [106]. Research and Development - As of the end of calendar year 2024, Sonos had obtained 1,779 issued patents in the United States, with 228 patents obtained in 2024 alone, and is on pace to obtain more than 200 patents in 2025 [56]. - The company has invested heavily in research and development to enhance its product offerings, but these investments may not yield expected results in a timely manner [88]. - Sonos aims to enhance its global brand awareness and expand its customer base through ongoing investments in research and development and marketing efforts [76]. Risks and Compliance - The company is subject to risks associated with intellectual property rights claims, which could lead to significant legal expenses and impact its operations [96][97]. - The use of AI technologies presents challenges, including reputational harm and legal liability, which could adversely affect operational results [121]. - The company must comply with extensive regulatory requirements, which may increase operational costs and create procurement challenges [137]. - Changes in international trade policies and tariffs could adversely affect the company's business and financial results [135]. Employee and Organizational Structure - The company has approximately 1,404 full-time employees, with 931 in the United States and 473 internationally [59]. - Sonos' compensation program includes base salary, cash incentive bonuses, and long-term equity awards, aimed at aligning employee and stockholder interests [61]. - The Board of Directors oversees the management of cybersecurity risks, with regular updates provided by the information security team [163].

Financial Performance - The company reported a net loss of $25.76 million for the three months ended September 30, 2025, compared to a net loss of $3.56 million for the same period in 2024, indicating an increase in losses of about 620%[19] - For the nine months ended September 30, 2025, net loss was $40.0 million compared to $10.2 million in the same period of 2024, driven by a $24.7 million increase in exploration expenses[129] - Net loss for Q3 2025 was $25.8 million, up from a net loss of $3.6 million in Q3 2024, primarily due to a $17.6 million increase in exploration expenses[128] Assets and Liabilities - Total assets increased significantly to $544.89 million as of September 30, 2025, compared to $117.61 million at December 31, 2024, representing a growth of approximately 363%[18] - Total liabilities stood at $12.89 million as of September 30, 2025, compared to $8.75 million at December 31, 2024, reflecting an increase of approximately 47%[18] - Shareholders' equity increased to $531.99 million as of September 30, 2025, from $108.86 million at December 31, 2024, representing a growth of about 388%[21] Cash Flow and Financing - Cash and cash equivalents rose to $445.83 million at the end of September 2025, a substantial increase from $44.10 million at the beginning of the period, marking an increase of about 910%[23] - The company raised $473.76 million from the sale of common shares during the nine months ended September 30, 2025, compared to $11.01 million in the same period of 2024, indicating a significant increase in financing activities[23] - The company raised $807 million in aggregate gross proceeds from several equity offerings from June 2025 through October 2025[111] Exploration and Development Costs - Exploration expenses surged to $32.13 million for the three months ended September 30, 2025, up from $14.51 million in the same period of 2024, reflecting a year-over-year increase of approximately 121%[19] - Total exploration expenses for the nine months ended September 30, 2025, were $56.2 million, compared to $31.5 million in the same period of 2024[132] - Engineering costs for the nine months ended September 30, 2025, reached $32,486,009, more than double the $16,778,292 reported in 2024[94] Grants and Funding - The Company has been awarded government grants by the U.S. Department of War to fund research and development related to the Stibnite Gold Project[89] - For the three months ended September 30, 2025, the total grant income was $3,332,365, a decrease from $12,920,417 in the same period of 2024[90] - The DPA grant received cash of $592,242 during the three months ended September 30, 2025, compared to $11,667,011 in 2024, indicating a significant decline[90] Project Financing and Development - The Company received a preliminary financing term sheet from U.S. EXIM for $2 billion in debt financing for the Stibnite Gold Project, with due diligence expected to be completed by spring 2026[29] - The Company has a long-term plan to develop the Stibnite Gold Project, which will require additional financing expected to be secured in 2026[28] - The estimated total initial capital cost for the Stibnite Gold Project is approximately $2,215 million, excluding debt service and other financing costs[174] Legal and Regulatory Matters - The Company is involved in ongoing legal proceedings related to environmental claims, with a settlement agreement requiring total payments of $5.0 million over four years[79] - The Idaho Board of Environmental Quality upheld the air permit for the Project, but challenges to this permit are ongoing[169] - The Company believes the USFS ROD and other federal approvals were conducted thoroughly, but outcomes of ongoing lawsuits remain uncertain[167] Environmental and Community Engagement - The Company contributed $450,000 in cash to the Stibnite Foundation during the nine months ended September 30, 2025, totaling $750,000 since its establishment[74] - Future cash payments to the Stibnite Foundation include $500,000 upon commercial production and annual payments of at least $500,000 during commercial production[74] Management and Personnel - The company appointed Mark Murchison as Chief Financial Officer effective October 1, 2025[108] - The company is dependent on a small number of key personnel for critical management decisions, and the loss of any key personnel could adversely affect its operations[202] Risks and Challenges - The successful development of the Project requires obtaining committed financing and completing a multi-year construction process, with significant risks associated with establishing new mining operations[189] - Legal challenges may impact the company's mining, exploration, and development operations, potentially resulting in increased defense costs and delays in project approvals[196] - A prolonged U.S. federal government shutdown could materially affect the company's operations and financial condition, delaying regulatory approvals and impacting construction activities[204]