[Note About Forward-Looking Statements](index=3&type=section&id=Note%20About%20Forward-Looking%20Statements) This section outlines forward-looking statements in the Form 10-Q, emphasizing inherent risks and uncertainties in macroeconomic conditions, product demand, and investment plans - Forward-looking statements cover a wide range of topics including macroeconomic conditions, demand for products and subscription services (Evergreen//One), market share expansion, international investment plans, and the shift to as-a-Service offerings[9](index=9&type=chunk) - The company acknowledges that actual results may differ materially due to known and unknown risks, uncertainties, and assumptions, as detailed in the 'Risk Factors' section[9](index=9&type=chunk)[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total current assets | $2,567,279 | $2,524,738 | $(42,541) | -1.65% | | Total assets | $3,963,942 | $4,026,537 | $62,595 | 1.58% | | Total current liabilities | $1,596,541 | $1,534,408 | $(62,133) | -3.89% | | Total liabilities | $2,657,467 | $2,707,716 | $50,249 | 1.89% | | Total stockholders' equity | $1,306,475 | $1,318,821 | $12,346 | 0.94% | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Q2 Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Product revenue | $402,595 | $446,303 | $43,708 | 10.86% | | Subscription services revenue | $361,176 | $414,699 | $53,523 | 14.82% | | Total revenue | $763,771 | $861,002 | $97,231 | 12.73% | | Gross profit | $540,080 | $604,336 | $64,256 | 11.90% | | Income (loss) from operations | $24,878 | $4,871 | $(20,007) | -80.42% | | Net income | $35,674 | $47,118 | $11,444 | 32.08% | | Basic EPS | $0.11 | $0.14 | $0.03 | 27.27% | | Diluted EPS | $0.10 | $0.14 | $0.04 | 40.00% | | Metric | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Product revenue | $749,979 | $818,447 | $68,468 | 9.13% | | Subscription services revenue | $707,271 | $821,040 | $113,769 | 16.09% | | Total revenue | $1,457,250 | $1,639,487 | $182,237 | 12.51% | | Gross profit | $1,035,786 | $1,140,489 | $104,703 | 10.11% | | Income (loss) from operations | $(16,896) | $(26,300) | $(9,404) | -55.66% | | Net income | $665 | $33,123 | $32,458 | 4880.90% | | Basic EPS | $0.00 | $0.10 | $0.10 | N/A | | Diluted EPS | $0.00 | $0.10 | $0.10 | N/A | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Q2 Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Net income | $35,674 | $47,118 | $11,444 | 32.08% | | Change in unrealized net gains on available-for-sale securities | $8,291 | $85 | $(8,206) | -98.97% | | Comprehensive income | $43,965 | $47,203 | $3,238 | 7.37% | | Metric | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Net income | $665 | $33,123 | $32,458 | 4880.90% | | Change in unrealized net gains on available-for-sale securities | $6,489 | $962 | $(5,527) | -85.17% | | Comprehensive income | $7,154 | $34,085 | $26,931 | 376.45% | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) | Metric | Q2 Fiscal 2025 (in thousands) | Q2 Fiscal 2026 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Balance at end of Q1 | $1,373,973 | $1,244,055 | $(129,918) | | Stock-based compensation expense | $106,861 | $119,509 | $12,648 | | Tax withholding on equity awards | $(76,183) | $(57,799) | $18,384 | | Repurchases of common stock | — | $(42,242) | $(42,242) | | Net income | $35,674 | $47,118 | $11,444 | | Balance at end of Q2 | $1,453,161 | $1,318,821 | $(134,340) | | Metric | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | | Balance at end of Fiscal 2024/2025 | $1,270,094 | $1,306,475 | $36,381 | | Stock-based compensation expense | $221,478 | $217,687 | $(3,791) | | Tax withholding on equity awards | $(88,661) | $(117,946) | $(29,285) | | Repurchases of common stock | — | $(162,178) | $(162,178) | | Net income | $665 | $33,123 | $32,458 | | Balance at end of Q2 | $1,453,161 | $1,318,821 | $(134,340) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | First Two Quarters Fiscal 2025 (in thousands) | First Two Quarters Fiscal 2026 (in thousands) | Change (in thousands) | % Change | | :--------------------------------

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including earnings, comprehensive income, balance sheets, stockholders' equity, cash flows, and related notes on accounting policies, fair value, stock-based compensation, EPS, debt, taxes, and segment reporting, along with the independent auditor's report [Condensed Consolidated Statements of Earnings](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) This statement presents the company's unaudited financial performance, detailing sales, operating income, net earnings, and basic and diluted earnings per share for the reported periods **Condensed Consolidated Statements of Earnings (Unaudited, $ thousands)** | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Sales | $5,529,152 | $5,287,519 | $10,514,123 | $10,145,586 | | Operating income | $638,274 | $659,233 | $1,244,744 | $1,250,346 | | Net earnings | $507,995 | $527,148 | $987,244 | $1,015,138 | | Basic EPS | $1.57 | $1.60 | $3.05 | $3.07 | | Diluted EPS | $1.56 | $1.59 | $3.03 | $3.05 | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents the company's net earnings and total comprehensive income, highlighting the absence of other comprehensive income for the periods presented **Condensed Consolidated Statements of Comprehensive Income (Unaudited, $ thousands)** | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net earnings | $507,995 | $527,148 | $987,244 | $1,015,138 | | Comprehensive income | $507,995 | $527,148 | $987,244 | $1,015,138 | - The company reported no other comprehensive income for the periods presented[9](index=9&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates **Condensed Consolidated Balance Sheets (Unaudited, $ thousands)** | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------------- | :------------- | :--------------- | :------------- | | Total current assets | $6,925,836 | $7,538,696 | $7,594,983 | | Property and equipment, net | $3,906,340 | $3,792,403 | $3,583,535 | | Total assets | $14,495,519 | $14,905,332 | $14,678,021 | | Total current liabilities | $4,392,008 | $4,661,825 | $4,874,240 | | Total liabilities and stockholders' equity | $14,495,519 | $14,905,332 | $14,678,021 | | Total stockholders' equity | $5,732,569 | $5,509,195 | $5,130,532 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in stockholders' equity, including net earnings, stock repurchases, and dividends declared, for the reported six-month periods **Condensed Consolidated Statements of Stockholders' Equity (Unaudited, $ thousands)** | Metric | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Balance at beginning of period | $5,509,195 | $4,871,326 | | Net earnings | $987,244 | $1,015,138 | | Common stock repurchased (inclusive of excise tax) | $(529,432) | $(529,339) | | Dividends declared | $(265,637) | $(245,751) | | Balance at end of period | $5,732,569 | $5,130,532 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details the company's cash inflows and outflows from operating, investing, and financing activities for the reported six-month periods **Condensed Consolidated Statements of Cash Flows (Unaudited, $ millions)** | Metric | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $1,078 | $961 | | Net cash used in investing activities | $(409) | $(334) | | Net cash used in financing activities | $(1,552) | $(830) | | Net decrease in cash, cash equivalents, and restricted cash | $(883) | $(203) | | Cash, cash equivalents, and restricted cash at end of period | $3,913 | $4,733 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note A: Summary of Significant Accounting Policies](index=8&type=section&id=Note%20A:%20Summary%20of%20Significant%20Accounting%20Policies) This note details the basis of presentation, key accounting estimates, policies for cash, property, leases, supply chain finance, dividends, repurchases, litigation, revenue recognition, and recently issued accounting standards **Restricted Cash and Cash Equivalents ($000)** | Date | Amount | | :--------------- | :------- | | August 2, 2025 | $66,277 | | February 1, 2025 | $65,718 | | August 3, 2024 | $64,571 | **Depreciation and Amortization Expense ($000)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Three Months Ended | $126,399 | $108,595 | | Six Months Ended | $242,337 | $217,781 | **Amounts Owed to Participating Financial Institutions under SCF Program ($000)** | Date | Amount | | :--------------- | :------- | | August 2, 2025 | $186,800 | | February 1, 2025 | $159,200 | | August 3, 2024 | $182,500 | - The Board of Directors declared a quarterly cash dividend of **$0.4050 per common share** on August 20, 2025, payable on September 30, 2025[26](index=26&type=chunk) - During the six months ended August 2, 2025, the Company repurchased **3.9 million shares** for **$525.0 million** under its stock repurchase program, with **$525.0 million** remaining available as of August 2, 2025[27](index=27&type=chunk) **Sales Mix by Merchandise Category** | Category | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Home Accents and Bed and Bath | 23% | 24% | 24% | 25% | | Ladies | 23% | 23% | 23% | 23% | | Men's | 17% | 17% | 16% | 16% | | Accessories, Lingerie, Fine Jewelry, and Cosmetics | 15% | 14% | 15% | 14% | | Shoes | 13% | 13% | 13% | 13% | | Children's | 9% | 9% | 9% | 9% | | Total | 100% | 100% | 100% | 100% | - The Company is evaluating the impact of new accounting standards ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Improvements to Income Tax Disclosures) on its financial statements[31](index=31&type=chunk)[32](index=32&type=chunk) [Note B: Fair Value Measurements](index=11&type=section&id=Note%20B:%20Fair%20Value%20Measurements) This note describes the three-tier fair value hierarchy and provides Level 1 fair value measurements for financial instruments, including cash, restricted cash, and deferred compensation assets **Fair Value of Financial Instruments (Level 1, $000)** | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :--------------------------------------- | :------------- | :--------------- | :------------- | | Cash and cash equivalents | $3,847,016 | $4,730,744 | $4,668,137 | | Restricted cash and cash equivalents | $66,277 | $65,718 | $64,571 | | Nonqualified deferred compensation program | $204,363 | $196,786 | $181,855 | [Note C: Stock-Based Compensation](index=11&type=section&id=Note%20C:%20Stock-Based%20Compensation) This note details stock-based compensation plans, including restricted stock, performance shares, and ESPP, summarizing award activity, recognized expense, and related tax benefits - Unamortized stock awards compensation expense was **$278.2 million** as of August 2, 2025, expected to be recognized over a weighted-average remaining period of **1.9 years**[40](index=40&type=chunk) **Total Stock-Based Compensation Expense ($000)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Three Months Ended | $43,943 | $38,021 | | Six Months Ended | $83,239 | $78,468 | **Tax Benefits Related to Stock-Based Compensation Expense ($000)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Three Months Ended | $7,200 | $7,100 | | Six Months Ended | $13,800 | $15,000 | [Note D: Earnings Per Share](index=13&type=section&id=Note%20D:%20Earnings%20Per%20Share) This note explains the computation of basic and diluted EPS, including the treatment of dilutive and anti-dilutive shares, and reconciles shares used in calculations **Diluted Earnings Per Share ($)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Three Months Ended | $1.56 | $1.59 | | Six Months Ended | $3.03 | $3.05 | **Weighted-Average Diluted Shares Outstanding (000s)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Three Months Ended | 324,796 | 331,511 | | Six Months Ended | 325,909 | 332,620 | - Approximately **28,000** and **57,000** weighted-average shares were excluded from the diluted EPS calculation for the three and six months ended August 2, 2025, respectively, due to their anti-dilutive effect[44](index=44&type=chunk) [Note E: Debt](index=13&type=section&id=Note%20E:%20Debt) This note details Senior Notes, including principal, maturities, and fair values, and outlines revolving credit facilities, highlighting the repayment of $700 million Senior Notes and the new $1.3 billion facility **Senior Notes Outstanding ($000)** | Date | Total Long-Term Debt | Current Portion | | :--------------- | :------------------- | :-------------- | | August 2, 2025 | $1,516,340 | $499,122 | | February 1, 2025 | $2,214,811 | $699,731 | | August 3, 2024 | $2,462,854 | $949,028 | - In April 2025, the Company repaid at maturity the **$700 million** principal amount of its 4.600% Senior Notes[47](index=47&type=chunk) - In June 2025, the Company entered into a new **$1.3 billion** senior unsecured revolving credit facility, replacing its previous facility[49](index=49&type=chunk) - As of August 2, 2025, there were no borrowings outstanding under this facility[50](index=50&type=chunk) [Note F: Taxes on Earnings](index=14&type=section&id=Note%20F:%20Taxes%20on%20Earnings) This note discusses factors influencing effective tax rates, including tax law changes, earnings, and stock-based compensation, detailing rates, the impact of OBBBA on deferred tax liabilities, and audit periods **Effective Tax Rates** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Three Months Ended | 24% | 25% | | Six Months Ended | 25% | 24% | - The one percent decrease in the effective tax rate for the three-month period ended August 2, 2025, was primarily due to the resolution of tax positions with various tax authorities[51](index=51&type=chunk) - The one percent increase in the effective tax rate for the six-month period ended August 2, 2025, was primarily due to the tax effects associated with stock-based compensation[51](index=51&type=chunk) - The 'One Big Beautiful Bill Act' (OBBBA), signed in July 2025, resulted in an approximate **$30 million** increase to the Company's deferred tax liability balance, primarily due to the reinstatement of 100% bonus depreciation[54](index=54&type=chunk) [Note G: Segment Reporting](index=15&type=section&id=Note%20G:%20Segment%20Reporting) This note clarifies that Ross and dd's DISCOUNTS segments are aggregated into one reportable segment due to similar characteristics, with operating income as the primary performance measure - The Company has two operating segments, Ross and dd's DISCOUNTS, which are aggregated into one reportable segment[55](index=55&type=chunk) **Segment Financial Information ($000)** | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Sales | $5,529,152 | $5,287,519 | $10,514,123 | $10,145,586 | | Segment operating income | $638,274 | $659,233 | $1,244,744 | $1,250,346 | [Report of Independent Registered Public Accounting Firm](index=16&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This report confirms that the independent registered public accounting firm reviewed the interim financial information and found no material modifications necessary for GAAP conformity - Deloitte & Touche LLP, the independent registered public accounting firm, reviewed the interim financial information and found no material modifications necessary for conformity with GAAP[58](index=58&type=chunk) - The firm also confirmed that the condensed consolidated balance sheet as of February 1, 2025, is fairly stated in all material respects in relation to the audited consolidated financial statements[59](index=59&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, condition, and outlook, covering operations, macroeconomic influences, store expansion, sales metrics, income statement analysis, liquidity, capital resources, and forward-looking statements [Overview](index=17&type=section&id=Overview) Ross Stores, Inc. operates Ross Dress for Less and dd's DISCOUNTS, offering off-price apparel and home fashions, with 1,873 Ross and 360 dd's DISCOUNTS stores as of August 2, 2025 - Ross Dress for Less operates **1,873 locations** in 44 states, the District of Columbia, Guam, and Puerto Rico[64](index=64&type=chunk) - dd's DISCOUNTS operates **360 stores** in 22 states[64](index=64&type=chunk) - Ross offers savings of **20% to 60% off**, while dd's DISCOUNTS offers savings of **20% to 70% off** regular prices[64](index=64&type=chunk) [Macroeconomic Conditions](index=17&type=section&id=Macroeconomic%20Conditions) The company operates in an uncertain macroeconomic environment with elevated tariffs and inflation, focusing on value delivery and leveraging its off-price model to capture market share - The macroeconomic environment remains uncertain with elevated tariffs and broad-based inflationary pressures[65](index=65&type=chunk) - The Company is focused on offering high-quality, branded merchandise at outstanding values and expects its flexible off-price business model to help navigate challenges and capture market share[65](index=65&type=chunk) [Store Openings](index=17&type=section&id=Store%20Openings) The company opened 31 new stores in Q2 fiscal 2025, totaling 50 for the first six months, and plans to open approximately 90 new stores for the full fiscal year - Opened **31 new stores** in Q2 fiscal 2025, including expansion into the New York Metro area and three inaugural stores in Puerto Rico[66](index=66&type=chunk) - Opened a total of **50 new stores** in the first six months of fiscal 2025[66](index=66&type=chunk) - On track to open approximately **90 new stores** in fiscal 2025 (**80 Ross** and **10 dd's DISCOUNTS**)[66](index=66&type=chunk) [Sales Metrics](index=17&type=section&id=Sales%20Metrics) This section defines comparable store sales for existing store performance, non-comp store sales for new and closed locations, and introduces 'traffic' and 'basket' metrics for deeper sales insights - Comparable store sales are defined as sales from stores open for **14 complete months**[68](index=68&type=chunk) - Non-comp store sales include sales from new stores open less than 14 months and stores that are permanently or temporarily closed[69](index=69&type=chunk) - Customer purchasing behavior metrics, 'traffic' (number of transactions) and 'basket' (average transaction value), provide additional insight into comp store sales[72](index=72&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the three and six-month periods ended August 2, 2025, detailing sales, cost of goods sold, SG&A, operating income, interest, taxes, and EPS, with focus on tariffs and distribution center costs [Sales](index=19&type=section&id=Sales) This section analyzes the company's sales performance, including total sales and comparable store sales growth, for the three and six-month periods ended August 2, 2025 **Sales Performance** | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Sales (billions) | $5.5 | $5.3 | $10.5 | $10.1 | | Sales growth | 5% | 7% | 4% | 8% | | Comparable store sales growth | 2% | 4% | 1% | 3% | - The **2% increase** in comparable store sales for the three-month period reflects an approximate **1% increase in basket** and **1% increase in traffic**[73](index=73&type=chunk) - The **1% increase** in comparable store sales for the six-month period is primarily due to an increase in basket[74](index=74&type=chunk) [Cost of goods sold](index=20&type=section&id=Cost%20of%20goods%20sold) This section analyzes changes in cost of goods sold as a percentage of sales, highlighting impacts from distribution costs, new distribution centers, and merchandise margin, including tariffs **Cost of Goods Sold as a Percentage of Sales** | Period | August 2, 2025 | August 3, 2024 | Change (bps) | | :------------------- | :------------- | :------------- | :----------- | | Three Months Ended | 72.4% | 71.7% | +70 | | Six Months Ended | 72.1% | 71.8% | +35 | - The **70 basis point increase** for the three-month period was primarily due to a **55 basis point increase in distribution costs** (new distribution center and tariff-related processing costs) and a **30 basis point decrease in merchandise margin** (including tariffs)[77](index=77&type=chunk) - The **35 basis point increase** for the six-month period was primarily due to a **35 basis point decrease in merchandise margin** (including tariffs) and a **30 basis point increase in distribution costs** (new distribution center and tariff-related processing costs)[78](index=78&type=chunk) [Selling, general and administrative expenses](index=20&type=section&id=Selling,%20general%20and%20administrative%20expenses) This section analyzes changes in selling, general and administrative expenses as a percentage of sales, primarily attributing increases to CEO transition costs **Selling, General and Administrative Expenses as a Percentage of Sales** | Period | August 2, 2025 | August 3, 2024 | Change (bps) | | :------------------- | :------------- | :------------- | :----------- | | Three Months Ended | 16.1% | 15.8% | +25 | | Six Months Ended | 16.1% | 15.9% | +15 | - The increases were primarily due to costs associated with the Chief Executive Officer transition[80](index=80&type=chunk) [Operating income](index=20&type=section&id=Operating%20income) This section analyzes operating income as a percentage of sales, highlighting the negative impact of tariff-related costs and expected deleverage from the new distribution center **Operating Income as a Percentage of Sales** | Period | August 2, 2025 | August 3, 2024 | Change (bps) | | :------------------- | :------------- | :------------- | :----------- | | Three Months Ended | 11.5% | 12.5% | -95 | | Six Months Ended | 11.8% | 12.3% | -50 | - Operating income for the second quarter of fiscal 2025 included an approximate **90 basis point negative impact** from tariff-related costs[82](index=82&type=chunk) - The Company expects continued negative impact from tariff-related costs and cost of goods sold deleverage from the new distribution center in the second half of fiscal 2025[82](index=82&type=chunk) [Interest income, net](index=20&type=section&id=Interest%20income,%20net) This section analyzes the net interest income, detailing the decrease primarily due to lower average interest rates and cash balances following Senior Notes repayments **Interest Income, Net ($000)** | Period | August 2, 2025 | August 3, 2024 | Change | | :------------------- | :------------- | :------------- | :------- | | Three Months Ended | $(32,346) | $(43,350) | $(11,004) | | Six Months Ended | $(66,755) | $(89,300) | $(22,545) | - The decrease was primarily due to lower average interest rates and lower average cash balances, largely from the repayment of **$700 million Senior Notes** in April 2025 and **$250 million Senior Notes** in September 2024[83](index=83&type=chunk) [Taxes on earnings](index=21&type=section&id=Taxes%20on%20earnings) This section analyzes effective tax rates, explaining changes due to tax position resolutions, stock-based compensation, and the impact of the 'One Big Beautiful Bill Act' on deferred tax liabilities **Effective Tax Rates** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Three Months Ended | 24% | 25% | | Six Months Ended | 25% | 24% | - The three-month effective tax rate decreased by **1%** due to the resolution of tax positions, while the six-month rate increased by **1%** due to tax effects associated with stock-based compensation[85](index=85&type=chunk) - The 'One Big Beautiful Bill Act' (OBBBA) increased the deferred tax liability balance by approximately **$30 million** as of August 2, 2025, primarily due to the reinstatement of 100% bonus depreciation[86](index=86&type=chunk) [Earnings per share](index=21&type=section&id=Earnings%20per%20share) This section analyzes diluted earnings per share, attributing decreases to lower net earnings, partially offset by share repurchases, and highlighting the impact of tariff-related costs **Diluted Earnings Per Share ($)** | Period | August 2, 2025 | August 3, 2024 | Change | | :------------------- | :------------- | :------------- | :------- | | Three Months Ended | $1.56 | $1.59 | $(0.03) | | Six Months Ended | $3.03 | $3.05 | $(0.02) | - The decrease in diluted EPS was primarily attributable to a decrease in net earnings, partially offset by a **2% reduction** in weighted-average diluted shares outstanding due to stock repurchases[87](index=87&type=chunk)[88](index=88&type=chunk) - Tariff-related costs had an approximate **$0.11 per share negative impact** on earnings for both the three and six-month periods ended August 2, 2025[89](index=89&type=chunk) [Stores](index=21&type=section&id=Stores) This section provides a summary of the total store count for Ross Dress for Less and dd's DISCOUNTS at the end of the reported periods **Store Count at End of Period** | Brand | August 2, 2025 | August 3, 2024 | | :-------------- | :------------- | :------------- | | Ross Dress for Less | 1,873 | 1,795 | | dd's DISCOUNTS | 360 | 353 | | Total stores | 2,233 | 2,148 | [Financial Condition](index=22&type=section&id=Financial%20Condition) This section details the company's liquidity and capital resources, analyzing cash flows from operating, investing, and financing activities, including debt, capital expenditures, repurchases, and dividends, while addressing contractual obligations and critical accounting estimates [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section outlines the company's primary sources and uses of funds, including cash flows from operations, trade credit, inventory purchases, payroll, leases, taxes, capital expenditures, stock repurchases, debt repayment, and dividends - Primary sources of funds are cash flows from operations and short-term trade credit[90](index=90&type=chunk) - Primary cash requirements include merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures, stock repurchases, debt repayment, and dividends[90](index=90&type=chunk) - The Company ended Q2 fiscal 2025 with **$3.8 billion** in unrestricted cash balances and **$1.3 billion** available under its new 2025 Credit Facility[107](index=107&type=chunk) - The **$500 million** principal amount of 0.875% Senior Notes is due in April 2026[90](index=90&type=chunk) [Operating Activities](index=22&type=section&id=Operating%20Activities) This section analyzes net cash provided by operating activities, highlighting increases driven by lower income taxes paid and reduced incentive compensation payments **Net Cash Provided by Operating Activities ($ millions)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Six Months Ended | $1,078 | $961 | - The increase in cash flow from operating activities for the six-month period was primarily driven by lower income taxes paid and lower incentive compensation payments[93](index=93&type=chunk) **Accounts Payable Leverage (Accounts Payable / Merchandise Inventory)** | Date | Leverage | | :--------------- | :------- | | August 2, 2025 | 85% | | August 3, 2024 | 89% | - Packaway inventory was **38% of total inventory** as of August 2, 2025, down from **41%** as of February 1, 2025[96](index=96&type=chunk) [Investing Activities](index=22&type=section&id=Investing%20Activities) This section analyzes net cash used in investing activities, primarily attributing changes to higher capital expenditures for a new distribution center and new store openings **Net Cash Used in Investing Activities ($ millions)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Six Months Ended | $(409) | $(334) | - The change was primarily due to higher capital expenditures related to the construction of the next distribution center in Randleman, North Carolina, and new store openings[98](index=98&type=chunk) - Capital expenditures for fiscal 2025 are projected to be approximately **$800 million**, focusing on new and existing stores, supply chain investments (including a new distribution center), and information technology systems[99](index=99&type=chunk) [Financing Activities](index=24&type=section&id=Financing%20Activities) This section analyzes net cash used in financing activities, detailing increases due to Senior Notes repayment, stock repurchases, and dividend payments **Net Cash Used in Financing Activities ($ millions)** | Period | August 2, 2025 | August 3, 2024 | | :------------------- | :------------- | :------------- | | Six Months Ended | $(1,552) | $(830) | - The significant increase in cash used was primarily due to the repayment of **$700 million Senior Notes** in April 2025, stock repurchases, and dividend payments[100](index=100&type=chunk) - During the six months ended August 2, 2025, the Company repurchased **3.9 million shares** for **$525 million** under its stock repurchase program, with **$525 million** remaining available[103](index=103&type=chunk) - Cash dividends paid were **$265.6 million** for the six months ended August 2, 2025, compared to **$245.8 million** in the prior year[105](index=105&type=chunk) [Contractual Obligations and Off-Balance Sheet Arrangements](index=24&type=section&id=Contractual%20Obligations%20and%20Off-Balance%20Sheet%20Arrangements) This section confirms no material changes to contractual obligations since the last annual report, other than those in the ordinary course of business, and details standby letters of credit and collateral trust - There have been no material changes to contractual obligations since the Annual Report on Form 10-K for February 1, 2025, other than those in the ordinary course of business[108](index=108&type=chunk) **Standby Letters of Credit and Collateral Trust ($ millions)** | Date | Standby Letters of Credit | Collateral Trust | | :--------------- | :------------------------ | :--------------- | | August 2, 2025 | $1.0 | $65.3 | | February 1, 2025 | $1.8 | $63.9 | | August 3, 2024 | $2.2 | $62.4 | [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) This section confirms that no significant changes to critical accounting estimates occurred during the second quarter of fiscal 2025 - No significant changes to critical accounting estimates occurred during the second quarter of fiscal 2025[111](index=111&type=chunk) [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements on projected sales, costs, earnings, store growth, capital expenditures, and liquidity, subject to risks like macroeconomic conditions, tariffs, competition, and supply chain disruptions - Forward-looking statements cover projected sales, costs, earnings, planned new store growth, capital expenditures, and liquidity[112](index=112&type=chunk) - Key risks and uncertainties include changes in U.S. tax, tariff, or trade policy (especially regarding China), macroeconomic environment (inflation, interest rates, recession, geopolitical conditions), consumer spending, competitive pressures, inventory management, import risks, unseasonable weather, dependence on merchandise availability, information/data security breaches, supply chain disruptions, new store site acquisition, legal/regulatory/tax matters, reputation damage, talent retention, and liquidity[113](index=113&type=chunk)[121](index=121&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate changes, with fixed-rate Senior Notes and a variable-rate credit facility, and a 100 basis point rate change is not expected to materially impact financial position or results - The Company's primary market risk is from changes in interest rates; it does not engage in speculative financial transactions[115](index=115&type=chunk) - Interest on Senior Notes is based on fixed rates, while the 2025 Credit Facility has variable rates (no outstanding borrowings as of August 2, 2025)[116](index=116&type=chunk) - A hypothetical **100 basis point increase or decrease** in market interest rates would not have a material negative impact on the Company's financial position, results of operations, cash flows, or fair values[118](index=118&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, and no material changes to internal control over financial reporting occurred in Q2 fiscal 2025 [Disclosure Controls and Procedures](index=27&type=section&id=Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the reporting period[119](index=119&type=chunk) [Quarterly Evaluation of Changes in Internal Control Over Financial Reporting](index=29&type=section&id=Quarterly%20Evaluation%20of%20Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) Management concluded that no material changes to the company's internal control over financial reporting occurred during the second fiscal quarter of 2025 - Management concluded that there were no material changes to the Company's internal control over financial reporting during the second fiscal quarter of 2025[122](index=122&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section references legal proceedings from Note A, detailing class/representative action lawsuits primarily in California regarding wage and hour laws, which management believes will not materially impact financial results - The Company is involved in class/representative action lawsuits, primarily in California, alleging violations of wage and hour laws[29](index=29&type=chunk) - Management believes the resolution of currently pending litigation will not have a material adverse effect on the Company's financial condition, results of operations, or cash flows[31](index=31&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key risk factors, including macroeconomic and retail industry business risks like inflation, tariffs, supply chain disruptions, and consumer spending, alongside strategic risks related to importing merchandise, especially from China [MACROECONOMIC AND RETAIL INDUSTRY BUSINESS RISKS](index=29&type=section&id=MACROECONOMIC%20AND%20RETAIL%20INDUSTRY%20BUSINESS%20RISKS) This section details macroeconomic and retail industry business risks, including impacts from financial markets, geopolitical conditions, government policy, inflation, tariffs, and supply chain disruptions - The Company is subject to impacts from changes in the macroeconomic environment, financial and credit markets, geopolitical conditions, and government regulation or policy[125](index=125&type=chunk) - Continuing inflation, tariff increases, potential supply chain disruptions, and other external events may significantly negatively affect costs, consumer confidence, shopping behavior, and spending[125](index=125&type=chunk) - The Company is especially susceptible to changes in the U.S. economy and its trade policy (particularly toward China) as all stores are in the U.S. and over half of goods originate from China[126](index=126&type=chunk) [STRATEGIC RISKS](index=30&type=section&id=STRATEGIC%20RISKS) This section outlines strategic risks related to importing merchandise, including increased tariffs, quotas, economic disruptions, and foreign regulations, particularly concerning goods manufactured in China - Risks associated with importing and selling merchandise produced in other countries include increased tariffs, quotas, economic and supply chain disruptions, and foreign government regulations[131](index=131&type=chunk) - More than half of the merchandise sold by the Company is originally manufactured in China, making it vulnerable to changes in U.S. trade or tax policy towards China[130](index=130&type=chunk)[132](index=132&type=chunk) - Changes in tariffs or the value of the U.S. dollar relative to foreign currencies could increase the cost of products purchased from overseas and domestic vendors reselling foreign-produced goods[132](index=132&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details common stock repurchases in Q2 fiscal 2025, including 1.9 million shares bought for $266.7 million under the $2.1 billion program, with $525.0 million remaining available **Common Stock Repurchases (Q2 Fiscal 2025)** | Period | Total Shares Purchased | Average Price Paid Per Share | | :----- | :--------------------- | :--------------------------- | | May | 445,768 | $144.64 | | June | 824,677 | $133.64 | | July | 688,923 | $133.69 | | Total | 1,959,368 | $136.16 | - As of August 2, 2025, **$525.0 million** remained available for repurchase under the **$2.1 billion** stock repurchase program approved in March 2024[134](index=134&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, credit agreements, stock incentive plans, auditor's letter, CEO/CFO certifications, and XBRL documents - Exhibits include the Certificate of Incorporation, Amended and Restated Bylaws, Credit Agreement dated June 27, 2025, Form of Notice of Grant of Performance Shares, Letter re: Unaudited Interim Financial Information from Deloitte & Touche LLP, CEO and CFO Certifications (Sarbanes-Oxley Act Section 302(a) and 18 U.S.C. Section 1350), and various XBRL documents[136](index=136&type=chunk) [Signatures](index=33&type=section&id=Signatures) This section confirms the report's signing by Jeffrey P. Burrill, Senior Vice President, Chief Accounting Officer, and Corporate Controller, as the Principal Accounting Officer for Ross Stores, Inc - The report was signed by Jeffrey P. Burrill, Senior Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) on September 9, 2025[139](index=139&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Table of Contents 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: 0-15535 LAKELAND INDUSTRIES, INC. (Exact name of Registrant as specified in its ch ...

PART I. [FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%3A%20Financial%20Information) [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed notes for July 31, 2025, and 2024 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's assets, liabilities, and equity as of July 31, 2025, and January 31, 2025, highlighting changes over the period Condensed Consolidated Balance Sheets | ASSETS | July 31, 2025 (Unaudited) | January 31, 2025 | Change (Absolute) | Change (%) | | :-------------------------- | :------------------------ | :----------------- | :---------------- | :--------- | | Cash and cash equivalents | $6,995,101 | $4,311,719 | $2,683,382 | 62.23% | | Accounts receivable-net | $160,804 | $73,847 | $86,957 | 117.75% | | Inventory | $138,031 | $212,041 | $(74,010) | -34.90% | | Prepaid expenses | $226,500 | $196,658 | $29,842 | 15.17% | | Total Current Assets | $7,520,436 | $4,794,265 | $2,726,171 | 56.86% | | PROPERTY & EQUIPMENT-net | $615,857 | $695,063 | $(79,206) | -11.40% | | Goodwill | $1,719,535 | $1,719,535 | $0 | 0.00% | | Operating lease right of use asset | $90,000 | $- | $90,000 | N/A | | Intangible assets-net | $230,760 | $261,092 | $(30,332) | -11.62% | | TOTAL ASSETS | $10,176,588 | $7,469,955 | $2,706,633 | 36.24% | | LIABILITIES | | | | | | Accounts payable and accrued expenses | $1,393,013 | $698,821 | $694,192 | 99.34% | | Deferred revenue | $19,419 | $155,880 | $(136,461) | -87.54% | | Operating lease liability-current portion | $31,007 | $- | $31,007 | N/A | | Notes payable-current portion | $128,369 | $128,144 | $225 | 0.18% | | Total Current Liabilities | $1,571,808 | $982,845 | $588,963 | 59.92% | | Note payable-net of current portion | $47,290 | $58,205 | $(10,915) | -18.75% | | Operating lease liability-net of current portion | $63,682 | $- | $63,682 | N/A | | Total Liabilities | $1,682,780 | $1,041,050 | $641,730 | 61.64% | | STOCKHOLDERS' EQUITY | | | | | | Preferred stock | $3,009 | $- | $3,009 | N/A | | Common stock | $12,016 | $11,075 | $941 | 8.49% | | Additional paid-in-capital | $50,417,781 | $45,029,317 | $5,388,464 | 11.97% | | Accumulated deficit | $(41,851,842) | $(38,462,636) | $(3,389,206) | 8.81% | | Total Stockholders' Equity | $8,493,808 | $6,428,905 | $2,064,903 | 32.12% | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $10,176,588 | $7,469,955 | $2,706,633 | 36.24% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net loss for the three and six months ended July 31, 2025, and 2024 Three Months Ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change (Absolute) | Change (%) | | :------------------------------------- | :------------------------------- | :------------------------------- | :---------------- | :--------- | | Revenue | $622,452 | $442,830 | $179,622 | 40.56% | | Cost of revenues | $465,571 | $341,272 | $124,299 | 36.42% | | Research and development | $562,554 | $773,975 | $(211,421) | -27.32% | | Selling, general and administrative | $1,597,540 | $737,325 | $860,215 | 116.67% | | Total Costs and Expenses | $2,625,665 | $1,852,572 | $773,093 | 41.73% | | Loss from operations | $(2,003,213) | $(1,409,742) | $(593,471) | 42.10% | | Interest income | $8,649 | $77,332 | $(68,683) | -88.81% | | Loss on extinguishment of debt | $- | $(368,036) | $368,036 | -100.00% | | Interest expense | $(5,773) | $(5,019) | $(754) | 15.02% | | Net loss | $(2,000,337) | $(1,705,465) | $(294,872) | 17.29% | | Preferred shares dividend | $(21,814,166) | $- | $(21,814,166) | N/A | | Net loss available to common stockholders - basic and diluted | $(23,814,503) | $(1,705,465) | $(22,109,038) | 1296.35% | | Net loss per share available to common stockholders - basic and diluted | $(2.12) | $(0.15) | $(1.97) | 1313.33% | | Weighted average common shares outstanding - basic and diluted | 11,218,581 | 11,061,725 | 156,856 | 1.42% | Six Months Ended July 31, 2025 and 2024 | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | Change (Absolute) | Change (%) | | :------------------------------------- | :------------------------------- | :------------------------------- | :---------------- | :--------- | | Revenue | $1,289,884 | $851,362 | $438,522 | 51.51% | | Cost of revenues | $881,022 | $585,018 | $296,004 | 50.60% | | Research and development | $1,245,980 | $1,748,510 | $(502,530) | -28.74% | | Selling, general and administrative | $2,579,592 | $1,817,053 | $762,539 | 41.96% | | Total Costs and Expenses | $4,706,594 | $4,150,581 | $556,013 | 13.39% | | Loss from operations | $(3,416,710) | $(3,299,219) | $(117,491) | 3.56% | | Interest income | $39,157 | $77,350 | $(38,193) | -49.38% | | Loss on extinguishment of debt | $- | $(368,036) | $368,036 | -100.00% | | Interest expense | $(11,653) | $(13,637) | $1,984 | -14.55% | | Net loss | $(3,389,206) | $(3,603,542) | $214,336 | -5.95% | | Preferred shares dividend | $(21,814,166) | $- | $(21,814,166) | N/A | | Net loss available to common stockholders - basic and diluted | $(25,203,372) | $(3,603,542) | $(21,599,830) | 599.39% |\n| Net loss per share available to common stockholders - basic and diluted | $(2.26) | $(0.36) | $(1.90) | 527.78% | | Weighted average common shares outstanding - basic and diluted | 11,172,543 | 10,111,357 | 1,061,186 | 10.50% | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Outlines changes in stockholders' equity, including preferred stock, common stock, additional paid-in capital, and accumulated deficit for the periods presented - For the six months ended July 31, 2025, total stockholders' equity increased by **$2,064,903** to **$8,493,808**. Key activities included the issuance of **3,008,642** preferred shares as a common stock dividend valued at **$3,009**, and significant proceeds from the exercise of warrants (**$5,305,503**) and employee stock options (**$44,206**). The accumulated deficit increased by **$3,389,206** due to net loss[12](index=12&type=chunk)[15](index=15&type=chunk) - For the six months ended July 31, 2024, total stockholders' equity increased by **$6,022,751** to **$12,460,986**. This was primarily driven by **$8,400,000** in proceeds from the sale of common stock and warrants, and **$553,335** from options issued for services. The period also saw a net loss of **$3,603,542**[13](index=13&type=chunk)[14](index=14&type=chunk)[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Presents the cash inflows and outflows from operating, investing, and financing activities for the six months ended July 31, 2025, and 2024 Cash Flow Activity Summary | Cash Flow Activity | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :---------------- | :--------- | | Net Cash Used In Operating Activities | $(2,650,313) | $(2,377,673) | $(272,640) | 11.47% | | Net Cash Used in Investing Activities | $(5,324) | $(45,085) | $39,761 | -88.19% | | Net Cash Provided by Financing Activities | $5,339,019 | $8,689,783 | $(3,350,764) | -38.56% | | Net change in cash | $2,683,382 | $6,267,025 | $(3,583,643) | -57.18% | | Cash and cash equivalents - End of period | $6,995,101 | $6,759,967 | $235,134 | 3.48% | - Non-cash financing activities for the six months ended July 31, 2025, included **$21,814,166** for Preferred Shares issued as Common stock dividend and **$108,000** for the measurement of operating lease right-of-use assets and liabilities[19](index=19&type=chunk) - Non-cash financing activities for the six months ended July 31, 2024, included **$672,956** for debt settlement issued by the issuance of common stock and warrants[19](index=19&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [1. ORGANIZATION AND DESCRIPTION OF BUSINESS](index=13&type=section&id=1.%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) Nutriband Inc. develops transdermal pharmaceutical products using Aversa technology, operating through 4P Therapeutics (drug development) and Pocono Pharmaceuticals (contract manufacturing) - Nutriband Inc. was incorporated in Nevada on January 4, 2016, and acquired Nutriband Ltd. in the same month[22](index=22&type=chunk) - On August 1, 2018, the Company acquired 4P Therapeutics LLC for **$2,250,000**, making its drug development business the principal focus, particularly incorporating Aversa abuse deterrent technology into transdermal patches[23](index=23&type=chunk)[24](index=24&type=chunk) - On August 31, 2020, the Company acquired assets and liabilities of Pocono Coated Products LLC and **100%** of Active Intelligence LLC, contributing them to its wholly-owned subsidiary Pocono Pharmaceuticals Inc., which specializes in coated products contract development and manufacturing[25](index=25&type=chunk)[26](index=26&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines Nutriband Inc.'s significant accounting policies, including going concern, consolidation, revenue recognition, and asset valuation, with no major changes from the prior fiscal year - As of July 31, 2025, the Company had cash and cash equivalents of **$6,995,101** and working capital of **$5,948,628**. For the six months ended July 31, 2025, the Company incurred a net loss from operations of **$3,416,710** and used cash flow from operations of **$2,650,313**[31](index=31&type=chunk) - Management believes sufficient funds will be generated from operations and recent financing activities (including **$8,400,000** from equity financing in April 2024 and **$5,305,503** from warrant exercises in the six months ended July 31, 2025) to fund operations for one year, alleviating substantial doubt about going concern[31](index=31&type=chunk)[32](index=32&type=chunk) Revenue Disaggregation by Type and Geographic Location | Revenue by type | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Sale of goods | $1,289,884 | $851,362 | $622,452 | $442,830 | | Services | $- | $- | $- | $- | | Total | $1,289,884 | $851,362 | $622,452 | $442,830 | | Revenue by geographic location | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | United States | $1,282,254 | $851,362 | $614,822 | $442,830 | | Foreign | $7,630 | $- | $7,630 | $- | | Total | $1,289,884 | $851,362 | $622,452 | $442,830 | [3. PROPERTY AND EQUIPMENT](index=22&type=section&id=3.%20PROPERTY%20AND%20EQUIPMENT) Net property and equipment decreased to $615,857 by July 31, 2025, primarily due to accumulated depreciation, with $84,530 in depreciation expenses Property and Equipment Details | Category | July 31, 2025 | January 31, 2025 | | :-------------------------- | :-------------- | :--------------- | | Lab equipment | $144,585 | $144,585 | | Machinery and equipment | $1,389,756 | $1,384,432 | | Furniture and fixtures | $19,643 | $19,643 | | Total | $1,553,984 | $1,548,660 | | Less: Accumulated depreciation | $(938,127) | $(853,597) | | Net Property and Equipment | $615,857 | $695,063 | - Depreciation expenses amounted to **$84,530** for the six months ended July 31, 2025, compared to **$82,475** for the same period in 2024. **$67,624** of the 2025 depreciation expense was allocated to the cost of goods sold[64](index=64&type=chunk) [4. NOTES PAYABLE](index=23&type=section&id=4.%20NOTES%20PAYABLE) Details various notes payable, including a $160,000 line of credit, a converted $5,000,000 related-party credit line, and a $106,528 secured borrowing liability - Active Intelligence has a **$160,000** line of credit due October 16, 2028, with **5%** annual interest. As of July 31, 2025, **$60,748** was due, with **$17,109** current[66](index=66&type=chunk) - A **$5,000,000** related-party credit line note was amended on July 17, 2023. On May 15, 2024, **$300,000** of principal and **$4,922** of accrued interest were converted into **76,230** common shares and **152,460** warrants, resulting in a **$368,036** loss on extinguishment. The balance due as of July 31, 2025, was **$-0-**[68](index=68&type=chunk) - A secured borrowing liability of **$106,528** was recorded on July 19, 2023, from an accounts receivable sale related to a bankruptcy claim, bearing **10%** interest. This is classified as a current liability[69](index=69&type=chunk) - Total interest expenses for the six months ended July 31, 2025, were **$11,653**, compared to **$12,401** for the same period in 2024[70](index=70&type=chunk) [5. INTANGIBLE ASSETS](index=23&type=section&id=5.%20INTANGIBLE%20ASSETS) Net intangible assets decreased to $230,760 by July 31, 2025, due to amortization expenses and a prior impairment charge to intellectual property Intangible Asset Details | Intangible Asset Category | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :-------------- | :--------------- | | Customer base | $214,640 | $214,640 | | Intellectual property and trademarks | $623,822 | $623,822 | | Total | $838,462 | $838,462 | | Less: Accumulated amortization | $(607,702) | $(577,370) |\n| Net Intangible Assets | $230,760 | $261,092 | - Amortization expenses for the six months ended July 31, 2025, amounted to **$30,332**, a decrease from **$56,575** for the same period in 2024[71](index=71&type=chunk) - During the year ended January 31, 2025, the Company recorded an impairment charge of **$293,038** to its Intellectual property[71](index=71&type=chunk) [6. RELATED PARTY TRANSACTIONS](index=24&type=section&id=6.%20RELATED%20PARTY%20TRANSACTIONS) Details related party transactions, including warrant exercises, participation in equity financing, and conversion of a credit line into common stock and warrants - During the six months ended July 31, 2025, a director and a related party exercised warrants, resulting in the issuance of **311,041** and **160,000** shares of common stock, respectively[73](index=73&type=chunk) - On April 19, 2024, related parties invested **$7,120,000** in an **$8,400,000** equity financing, receiving **1,780,000** shares of common stock and warrants to purchase **3,560,000** shares[78](index=78&type=chunk) - On May 14, 2024, a **$300,000** credit line facility from TII Jet Services LDA (a related party) was converted into **76,240** shares of common stock and **152,460** warrants[78](index=78&type=chunk) [7. STOCKHOLDERS' EQUITY](index=24&type=section&id=7.%20STOCKHOLDERS%27%20EQUITY) Covers the issuance of Series A Convertible Preferred Stock dividend, convertible upon FDA approval, and various common stock activities including warrant conversions and option exercises - On July 9, 2025, the board authorized a preferred stock dividend, issuing one share of Series A Preferred Stock for each four shares of common stock held. On August 5, 2025, **3,008,642** shares of Series A Preferred Stock were issued, with a fair value of **$21,814,166**[75](index=75&type=chunk)[127](index=127&type=chunk) - Series A Preferred Stock is convertible into one share of Common Stock at the holder's option following FDA approval for commercial sale of the Company's AVERSA abuse deterrent transdermal products[76](index=76&type=chunk)[82](index=82&type=chunk)[127](index=127&type=chunk) - During the six months ended July 31, 2025, common stock activities included issuing **8,500** treasury shares for services (**$65,410** expense), issuing **5,000** common shares to a consultant (**$39,050** expense), cashless conversions of warrants resulting in **46,961** and **35,540** common shares, and employee stock option exercises for **20,055** common shares (**$44,206** proceeds)[86](index=86&type=chunk) [8. OPTIONS and WARRANTS](index=28&type=section&id=8.%20OPTIONS%20and%20WARRANTS) Details outstanding warrants and stock options as of July 31, 2025, including issuance, exercise activities, and Black-Scholes valuation parameters Warrants Outstanding Summary | | Shares | Exercise Price | Remaining Life | Intrinsic Value | | :-------------------------- | :----- | :------------- | :------------- | :-------------- | | Outstanding, January 31, 2025 | 5,546,973 | $6.37 | 3.68 years | $- | | Exercised | (982,010) | $6.15 | - | $- | | Outstanding- July 31, 2025 | 4,564,963 | $6.42 | 3.19 years | $3,614,071 | | Exercisable - July 31, 2025 | 4,564,963 | $6.42 | 3.19 years | $3,614,071 | Options Outstanding Summary | | Shares | Exercise Price | Remaining Life | Intrinsic Value | | :-------------------------- | :----- | :------------- | :------------- | :-------------- | | Outstanding, January 31, 2025 | 1,373,668 | $3.68 | 1.90 years | $- | | Exercised | (20,055) | $1.07 | - | $- | | Outstanding- July 31, 2025 | 1,353,613 | $3.70 | 1.40 years | $4,822,505 | | Exercisable - July 31, 2025 | 1,353,613 | $3.70 | 1.40 years | $4,822,505 | - The Company used the Black-Scholes valuation model for warrants and options, with dividend rates of **0%**, expected terms of **1.5-2.5** years for warrants and **1.5** years for options, volatility rates of **105.98%-145.05%** for warrants and **97.83%-114.86%** for options, and risk-free rates of **3.65%-4.45%** for warrants and **4.00%-4.87%** for options[91](index=91&type=chunk)[97](index=97&type=chunk) [9. SEGMENT REPORTING](index=31&type=section&id=9.%20SEGMENT%20REPORTING) Reports financial performance for Pocono Pharmaceuticals (contract manufacturing) and 4P Therapeutics (drug development), with Pocono generating $1,289,884 in net sales Net Sales and Gross Profit by Segment | Segment | Six Months Ended July 31, 2025 (Net Sales) | Six Months Ended July 31, 2024 (Net Sales) | Six Months Ended July 31, 2025 (Gross Profit) | Six Months Ended July 31, 2024 (Gross Profit) | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Pocono Pharmaceuticals | $1,289,884 | $851,362 | $408,862 | $266,344 | | 4P Therapeutics | $- | $- | $- | $- | | Total | $1,289,884 | $851,362 | $408,862 | $266,344 | Operating Expenses by Segment (Six Months Ended July 31, 2025) | Operating Expense Category | Amount | | :--------------------------------------- | :----- | | Selling, general and administrative-Pocono Pharmaceuticals | $311,354 | | Selling, general and administrative-4P Therapeutics | $52,627 | | Selling, general and administrative-Corporate | $2,215,615 | | Research and development-4P Therapeutics | $1,245,980 | | Total Operating Expenses | $3,825,576 | Assets by Segment (July 31, 2025) | Segment | Assets | | :--------------------- | :------------- | | Corporate | $6,435,611 | | Pocono Pharmaceuticals | $1,899,844 | | 4P Therapeutics | $1,841,133 | | Total | $10,176,588 | [10. COMMITMENTS AND CONTINGENCIES](index=32&type=section&id=10.%20COMMITMENTS%20AND%20CONTIGENCIES) Details employment agreements, Aversa Fentanyl development budget and milestone, a secured loan, and ongoing litigation with Joseph Gunnar, LLC - CEO Gareth Sheridan and President Serguei Melnik have three-year employment agreements (effective Feb 1, 2022) with annual salaries of **$150,000** (reduced from **$250,000**). CFO Gerald Goodman's agreement (effective Feb 1, 2022) has an annual salary of **$110,000** (reduced from **$210,000**)[105](index=105&type=chunk)[106](index=106&type=chunk) - The commercial development and clinical supply agreement with Kindeva Drug Delivery for Aversa Fentanyl has a remaining budget of approximately **$3.6 million** through NDA submission (amended from **$5.2 million**) and includes a **$3.0 million** milestone payment upon FDA approval[107](index=107&type=chunk) - The Company is a defendant in a lawsuit by Joseph Gunnar, LLC and Lucosky Brookman LLP, alleging breach of contract and seeking over **$500,000** in damages. The Company denies allegations and has initiated counterclaims seeking **$1,000,000** for each claim[110](index=110&type=chunk)[111](index=111&type=chunk) [11. SUBSEQUENT EVENTS](index=33&type=section&id=11.%20SUBSEQUENT%20EVENTS) Reports subsequent grants of stock options to executive officers and employees in August 2025, totaling 409,167 options with a combined fair value of $1,285,142 - On August 11, 2025, **40,000** options to purchase common shares were issued to an executive officer at **$6.85** per share, with a fair value of **$137,040**[113](index=113&type=chunk) - On August 20, 2025, **369,167** options to purchase common shares were issued to executive officers and employees at prices of **$6.22 - $6.84** per share, with a fair value of **$1,148,102**[113](index=113&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=34&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results of operations, covering transdermal products, recent developments, performance comparison, liquidity, and critical accounting policies [FORWARD LOOKING STATEMENTS](index=34&type=section&id=Forward%20Looking%20Statements) Discusses the nature of forward-looking statements in the report, their inherent risks, and the Company's policy on updates - This report contains forward-looking statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions[115](index=115&type=chunk) - Forward-looking statements are subject to inherent risks and uncertainties, and actual results may differ materially due to factors discussed in the 10-K and 10-Q reports[116](index=116&type=chunk) - The Company undertakes no obligation to revise or update any forward-looking statements, except as required by law[117](index=117&type=chunk) [Overview](index=34&type=section&id=Overview) Provides a general description of Nutriband Inc.'s primary business, revenue generation through subsidiaries, and operational locations - Nutriband Inc.'s primary business is the development of transdermal pharmaceutical products, particularly those based on its proprietary AVERSA abuse deterrent transdermal technology[118](index=118&type=chunk) - Revenues are generated through subsidiaries Pocono Pharmaceuticals (contract manufacturing for health, wellness, and OTC products) and 4P Therapeutics (contract research and development for pharmaceutical and medical devices)[119](index=119&type=chunk) - The Company's principal offices are in Orlando, Florida, with a manufacturing facility in Cherryville, North Carolina, and primarily operates in the United States[120](index=120&type=chunk) [Recent Developments](index=34&type=section&id=Recent%20Developments) Highlights key recent events, including the revised agreement with Kindeva Drug Delivery for Aversa™ Fentanyl and an $8,400,000 equity financing - On February 13, 2025, Nutriband and Kindeva Drug Delivery revised their Commercial Development and Clinical Supply Agreement for Aversa™ Fentanyl, formalizing an exclusive product development partnership with shared development costs and milestone payments[121](index=121&type=chunk) - On April 19, 2024, the Company completed an **$8,400,000** equity financing with European investors, issuing **2,100,000** units (each consisting of one common stock share and two warrants exercisable at **$6.43**)[122](index=122&type=chunk) [Our Business](index=35&type=section&id=Our%20Business) Details the Company's core business activities, including its AVERSA abuse deterrent transdermal products, employee stock option plan, and preferred stock dividend [AVERSA Abuse Deterrent Transdermal Products](index=35&type=section&id=AVERSA%20Abuse%20Deterrent%20Transdermal%20Products) Focuses on the development of AVERSA Fentanyl and the expansion of AVERSA technology to other transdermal pharmaceutical products - The lead product under development is AVERSA Fentanyl, an abuse deterrent fentanyl transdermal system, which combines an approved generic fentanyl patch with the Company's AVERSA technology[123](index=123&type=chunk) - The AVERSA technology is being expanded to include AVERSA Buprenorphine and AVERSA Methylphenidate, and other transdermal pharmaceutical products for drugs typically delivered by injection[123](index=123&type=chunk) - In January 2024, a commercial development and clinical supply agreement was signed with Kindeva Drug Delivery for AVERSA Fentanyl, focusing on developing the commercial manufacturing process[124](index=124&type=chunk) [Employee Stock Option Plan](index=35&type=section&id=Employee%20Stock%20Option%20Plan) Describes the 2021 Employee Stock Option Plan, including reserved shares, automatic annual increases, and recent amendments - The 2021 Employee Stock Option Plan initially reserved **350,000** shares, increasing to **1,645,751** shares as of September 8, 2025[125](index=125&type=chunk) - The Plan includes an automatic annual increase on February 1st, equal to the lesser of **250,000** shares or **5%** of outstanding common stock[126](index=126&type=chunk) - An amendment to the Plan, increasing shares to **1,400,000**, was approved by stockholders at the 2025 Annual Meeting[126](index=126&type=chunk) [Preferred Stock Dividend](index=35&type=section&id=Preferred%20Stock%20Dividend) Details the issuance of Series A Convertible Preferred Stock dividend on August 5, 2025, and its conversion terms upon FDA approval - On August 5, 2025, the Company issued a preferred stock dividend of Series A Convertible Preferred Stock to shareholders of record July 25, 2025[127](index=127&type=chunk) - **3,008,643** shares of Series A Preferred Stock were issued, with a fair value of **$21,814,166**[127](index=127&type=chunk) - Each Series A Preferred Stock share is convertible into one common stock share following FDA approval for commercial sale of the Company's AVERSA abuse deterrent transdermal technology[127](index=127&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Analyzes the Company's financial performance, including revenue, gross profit, expenses, and net loss for the three and six months ended July 31, 2025, and 2024 [Three Months Ended July 31, 2025 and 2024](index=36&type=section&id=Three%20Months%20Ended%20July%2031%2C%202025%20and%202024) Compares key financial metrics for the three months ended July 31, 2025, and 2024, highlighting revenue growth, expense increases, and net loss - Revenue increased by **40.56%** to **$622,452** for the three months ended July 31, 2025, primarily from the Pocono Pharmaceuticals segment due to increased demand and equipment implementation[128](index=128&type=chunk) - Gross profit increased by **54.42%** to **$156,881**, driven by higher margins in the sales mix[128](index=128&type=chunk) - Selling, general and administrative expenses surged by **116.67%** to **$1,597,540**, mainly due to increases in compensation-based expenses[129](index=129&type=chunk) - Net loss available to common stockholders significantly increased to **$(23,814,503)** or **$(2.12)** per share, primarily due to a preferred stock dividend of **$(21,814,166)**[132](index=132&type=chunk) [Six Months Ended July 31, 2025 and 2024](index=36&type=section&id=Six%20Months%20Ended%20July%2031%2C%202025%20and%202024) Compares key financial metrics for the six months ended July 31, 2025, and 2024, detailing revenue growth, expense changes, and net loss - Revenue increased by **51.51%** to **$1,289,884** for the six months ended July 31, 2025, driven by sales from the Pocono Pharmaceuticals segment[133](index=133&type=chunk) - Gross profit increased by **53.51%** to **$408,862**, attributed to higher margins in the sales mix[133](index=133&type=chunk) - Selling, general and administrative expenses rose by **41.96%** to **$2,579,592**, mainly due to increases in equity-based expenses[134](index=134&type=chunk) - Net loss available to common stockholders significantly increased to **$(25,203,372)** or **$(2.26)** per share, primarily due to a preferred stock dividend of **$(21,814,166)**[137](index=137&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the Company's cash position, working capital, and cash flow activities from operations, investing, and financing Liquidity and Capital Resources Summary | Metric | July 31, 2025 | January 31, 2025 | Change (Absolute) | Change (%) | | :-------------------------- | :-------------- | :--------------- | :---------------- | :--------- | | Cash and cash equivalents | $6,995,101 | $4,311,719 | $2,683,382 | 62.23% | | Working capital | $5,948,628 | $3,811,420 | $2,137,208 | 56.07% | - For the six months ended July 31, 2025, the Company used **$2,650,313** in operating activities, **$5,324** in investing activities (primarily equipment purchases), and generated **$5,339,019** from financing activities (primarily warrant exercises)[139](index=139&type=chunk)[140](index=140&type=chunk) [Off Balance Sheet Arrangements](index=37&type=section&id=Off%20Balance%20Sheet%20Arrangements) States the Company has no off-balance sheet arrangements with a material effect on its financial condition or results of operations - The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources[141](index=141&type=chunk) [Critical Accounting Policies](index=37&type=section&id=Critical%20Accounting%20Policies) Confirms that critical accounting policies remained consistent from the prior fiscal year - Critical accounting policies remained relatively consistent from the year ended January 31, 2025[142](index=142&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=37&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) States that quantitative and qualitative disclosures about market risk are not applicable to the Company - Quantitative and qualitative disclosures about market risk are not applicable[143](index=143&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=37&type=section&id=Item%204%20Controls%20and%20Procedures) Details the evaluation of disclosure controls and procedures, identifying material weaknesses and outlining corrective actions, with no material changes to internal controls [Disclosure controls and procedures](index=37&type=section&id=Disclosure%20controls%20and%20procedures) Reports that disclosure controls and procedures were not effective as of July 31, 2025, due to material weaknesses, and outlines corrective actions - As of July 31, 2025, the Company's disclosure controls and procedures were evaluated and concluded to be not effective[145](index=145&type=chunk) - Material weaknesses identified include the absence of segregation of duties, lack of qualified accounting personnel, and excessive reliance on third-party consultants[146](index=146&type=chunk) - Corrective actions include adding qualified accounting personnel, establishing additional monitoring controls, and improving internal controls for detailed accounting review of revenue, accounts receivable, and accounts payable transactions[146](index=146&type=chunk) [Changes in internal controls over financial reporting](index=37&type=section&id=Changes%20in%20internal%20controls%20over%20financial%20reporting) States that no material changes were made to internal controls over financial reporting during the quarter - No changes were made to internal controls in the quarterly period covered by this report that have materially affected, or are reasonably likely materially to affect, internal control over financial reporting[148](index=148&type=chunk) PART II. [OTHER INFORMATION](index=38&type=section&id=Part%20II%3A%20Other%20Information) [ITEM 1. LEGAL PROCEEDINGS](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Details ongoing litigation where Nutriband Inc. is a defendant, denying allegations and pursuing counterclaims for breach of contract and other claims - The Company is a defendant in a lawsuit by Joseph Gunnar, LLC and Lucosky Brookman LLP, alleging breach of contract, fraudulent activities, and tortious interference, seeking over **$500,000** in damages[151](index=151&type=chunk) - Nutriband denies all allegations, claiming the engagement letter was unenforceable, and has initiated counterclaims against Joseph Gunnar & Co. for intentional interference and breach of fiduciary duty, seeking **$1,000,000** for each claim[152](index=152&type=chunk) - The case is in the discovery stage, and the Company has not responded to a settlement offer of **$100,000** proposed by the plaintiffs in early 2024[153](index=153&type=chunk) [ITEM 1A. RISK FACTORS](index=38&type=section&id=Item%201A%20Risk%20Factors) Outlines significant risks including economic uncertainty, substantial losses in drug development, stock price volatility, potential dilution, and rapid technological changes - Economic uncertainty, including U.S. economic policies and inflationary factors, may affect product costs, timing of FDA approvals, and overall profitability[155](index=155&type=chunk) - As a low-revenue start-up in drug development, the Company incurs substantial losses during product development and FDA testing, with no assurance of achieving profitability or positive cash flow[156](index=156&type=chunk)[157](index=157&type=chunk) - The Company's stock price is likely to remain volatile, and future equity offerings or sales of common stock could lead to significant dilution for stockholders[159](index=159&type=chunk)[160](index=160&type=chunk) - The drug delivery industry is subject to rapid technological change, and the Company's future success depends on its ability to keep pace with these advancements to avoid product obsolescence[161](index=161&type=chunk) [ITEM 5. OTHER INFORMATION](index=41&type=section&id=Item%205%20Other%20Information) Reports CEO Gareth Sheridan's temporary leave for an election campaign, with Co-Founder Serguei Melnik assuming interim CEO responsibilities - On August 11, 2025, CEO Gareth Sheridan stepped aside for three months to enter the Irish Presidential election campaign[163](index=163&type=chunk) - Serguei Melnik, co-Founder and Chairman, has taken over as interim CEO, guiding the Company towards its target NDA filing with the FDA in 2026 and focusing on strategic development and shareholder value[164](index=164&type=chunk) [ITEM 6. EXHIBITS](index=41&type=section&id=Item%206%20Exhibits) Lists exhibits filed with the Form 10-Q, including Section 302 and 906 certifications and various Inline XBRL documents - The exhibits include Section 302 Certifications from the CEO and CFO, Section 906 Certifications from the CEO and CFO, and various Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File)[165](index=165&type=chunk)

[FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines that the Form 10-Q contains forward-looking statements, subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to **risks, uncertainties, and assumptions**, based on current expectations and not guarantees of future performance[5](index=5&type=chunk) - Factors that may cause actual results to differ materially include **projections of revenue, gross profit, expenses, and earnings per share**, impact of acquisitions, macroeconomic trends, legal matters, and supply chain disruptions[8](index=8&type=chunk) - The company does not undertake any obligation to update or revise forward-looking statements, except as required by applicable securities laws[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.Financial%20Statements%3A) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and shareholders' equity, with detailed explanatory notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets remained stable at $301.2 million as of July 31, 2025, compared to $301.1 million at October 31, 2024, with improved working capital and increased shareholders' equity | Metric | July 31, 2025 | October 31, 2024 | Change (2025 vs 2024) | | :-------------------------------- | :------------ | :--------------- | :-------------------- | | **Assets** | | | | | Cash and cash equivalents | $63,754 | $57,031 | +$6,723 | | Total current assets | $159,112 | $158,579 | +$533 | | Property, plant, and equipment, net | $50,603 | $54,200 | -$3,597 | | Total assets | $301,249 | $301,119 | +$130 | | **Liabilities** | | | | | Payable to growers | $31,849 | $18,377 | +$13,472 | | Accrued expenses | $10,459 | $28,149 | -$17,690 | | Income tax payable | $1,721 | $2,767 | -$1,046 | | Total current liabilities | $69,201 | $73,205 | -$4,004 | | Total long-term liabilities | $24,048 | $26,138 | -$2,090 | | **Shareholders' Equity** | | | | | Total shareholders' equity | $208,000 | $201,776 | +$6,224 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended July 31, 2025, net sales remained stable, but gross profit and operating income decreased, while net income significantly improved due to the absence of discontinued operations, and for the nine months, net sales, gross profit, and net income all showed positive growth | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :------------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Net sales | $178,822 | $179,596 | -0.4% | $523,753 | $491,585 | +6.5% | | Gross profit | $18,198 | $20,093 | -9.4% | $52,015 | $51,514 | +1.0% | | Operating income | $8,659 | $9,358 | -7.5% | $21,335 | $13,711 | +55.6% | | Net income (loss) from discontinued operations | — | $(6,127) | N/A | — | $(10,218) | N/A | | Net income (loss) attributable to Calavo Growers, Inc. | $4,714 | $(732) | N/A | $15,979 | $(937) | N/A | | Basic EPS (Continuing Operations) | $0.26 | $0.30 | -13.3% | $0.90 | $0.52 | +73.1% | | Basic EPS (Net income (loss)) | $0.26 | $(0.04) | N/A | $0.90 | $(0.05) | N/A | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended July 31, 2025, net cash provided by operating activities increased significantly to $19.2 million, while cash used in investing activities decreased and financing activities remained stable | Metric | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :-------------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Net income (loss) | $16,111 | $(920) | N/A | | Net cash provided by operating activities | $19,234 | $13,583 | +41.6% | | Net cash used in investing activities | $(1,066) | $(2,519) | -57.7% | | Net cash (used in) financing activities | $(11,445) | $(12,790) | -10.5% | | Net increase (decrease) in cash | $6,723 | $(1,726) | N/A | | Cash, cash equivalents, end of period | $63,754 | $1,126 | +5576.2% | [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Total shareholders' equity increased to $208.0 million by July 31, 2025, driven by net income, partially offset by dividend payments | Metric | Balance, October 31, 2024 | Balance, July 31, 2025 | Change | | :-------------------------------------- | :------------------------ | :--------------------- | :------- | | Common Stock (Amount) | $18 | $18 | $0 | | Additional Paid-in Capital | $177,973 | $178,803 | +$830 | | Retained Earnings | $22,341 | $27,603 | +$5,262 | | Noncontrolling Interest | $1,444 | $1,576 | +$132 | | Total Shareholders' Equity | $201,776 | $208,000 | +$6,224 | - **Net income attributable to Calavo Growers, Inc.** for the nine months ended July 31, 2025, was **$15,979 thousand**, contributing significantly to the increase in retained earnings[15](index=15&type=chunk) - **Dividends declared to shareholders** for the nine months ended July 31, 2025, totaled **$10,717 thousand**[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on business operations, segment reporting, inventory, related party transactions, significant events, and tax matters [1. Description of the business](index=10&type=section&id=1.%20Description%20of%20the%20business) Calavo Growers, Inc. is a global leader in sourcing, packing, and distributing fresh avocados, tomatoes, papayas, and processing guacamole and other avocado products - Calavo is a global leader in **fresh avocados, tomatoes, papayas, and processed avocado products** (guacamole)[17](index=17&type=chunk) - The "Grown" segment was renamed "**Fresh**" in Q1 fiscal 2025 to better reflect activities, with no change to its composition or financial results[18](index=18&type=chunk) [2. Information regarding our operations in different segments](index=12&type=section&id=2.%20Information%20regarding%20our%20operations%20in%20different%20segments) Calavo operates in Fresh and Prepared segments, with Fresh sales increasing 6.2% and Prepared sales increasing 10.0% for the nine months ended July 31, 2025 - The "Grown" segment was renamed "**Fresh**" in Q1 fiscal 2025, comprising fresh avocados, tomatoes, and papayas, while the "**Prepared**" segment includes guacamole and avocado pulp[23](index=23&type=chunk) Net Sales by Segment | Segment | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Fresh | $155,851 | $163,218 | -4.5% | $470,307 | $442,999 | +6.2% | | Prepared | $22,971 | $16,378 | +40.2% | $53,446 | $48,586 | +10.0% | | Total | $178,822 | $179,596 | -0.4% | $523,753 | $491,585 | +6.5% | Gross Profit by Segment | Segment | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Fresh | $12,427 | $18,175 | -31.6% | $38,617 | $40,958 | -5.7% | | Prepared | $5,771 | $1,918 | +200.9% | $13,398 | $10,556 | +26.9% | | Total | $18,198 | $20,093 | -9.4% | $52,015 | $51,514 | +1.0% | [3. Inventories](index=13&type=section&id=3.%20Inventories) Total inventories decreased to $30.3 million by July 31, 2025, with a significant increase in inventory reserves due to slow-moving items and market factors | Inventory Type | July 31, 2025 | October 31, 2024 | Change | | :---------------------- | :------------ | :--------------- | :----- | | Fresh fruit | $16,233 | $20,002 | -$3,769 | | Packing supplies and ingredients | $6,932 | $6,936 | -$4 | | Finished prepared foods | $7,163 | $7,219 | -$56 | | Total | $30,328 | $34,157 | -$3,829 | - **Inventory reserves increased to $2.6 million** as of July 31, 2025, from $0.4 million at October 31, 2024, reflecting higher slow-moving inventories and market factors, including the FDA detention hold on Mexican avocados[26](index=26&type=chunk)[27](index=27&type=chunk) [4. Related party transactions](index=15&type=section&id=4.%20Related%20party%20transactions) Calavo engages in various related party transactions, including avocado procurement from affiliated entities and advances with unconsolidated entities - Avocados procured from entities owned or controlled by Board members totaled **$2.7 million (3 months) and $4.3 million (9 months)** for July 31, 2025[28](index=28&type=chunk) - Avocados procured from entities affiliated with the CEO totaled **$2.5 million (3 months) and $6 million (9 months)** for July 31, 2025[29](index=29&type=chunk) - Calavo has a **50% ownership in Agricola Don Memo**, with outstanding advances of **$8.2 million** as of July 31, 2025, and incurred **$10.6 million in cost of sales** for the nine months ended July 31, 2025[31](index=31&type=chunk) - Calavo had grower advances due from Belher totaling **$4.3 million** as of July 31, 2025, and incurred **$16 million in cost of sales** for the nine months ended July 31, 2025[32](index=32&type=chunk)[34](index=34&type=chunk) - Avocados de Jalisco, **83% owned by Calavo**, purchased approximately **$3 million of avocados** from its partners for the nine months ended July 31, 2025[35](index=35&type=chunk) [5. Other assets](index=17&type=section&id=5.%20Other%20assets) Other assets primarily consist of Mexican IVA taxes receivable, net, which increased to $53.9 million as of July 31, 2025 | Asset Type | July 31, 2025 | October 31, 2024 | Change | | :-------------------------------------- | :------------ | :--------------- | :----- | | Mexican IVA taxes receivable, net | $53,854 | $48,739 | +$5,115 | | Infrastructure advances | — | $467 | -$467 | | Other | $581 | $710 | -$129 | | Total | $54,435 | $49,916 | +$4,519 | [6. Other events](index=17&type=section&id=6.%20Other%20events) This note details significant events including quarterly dividends, an FDA detention hold, FCPA inquiry closure, new tax law, ongoing Mexican tax litigation, and a lease contingency - Calavo paid quarterly dividends of **$0.20 per share** on January 31, April 29, and July 28, 2025, each totaling **$3.6 million**, with another $0.20 dividend declared for October 31, 2025[37](index=37&type=chunk) - In July 2025, the FDA placed Calavo de México (CDM) on a Red List Detention Hold due to trace levels of Imazalil, resulting in approximately **$4.2 million in incremental costs** (inspection, logistics, inventory write-downs), which was resolved in September 2025[38](index=38&type=chunk) - The U.S. Department of Justice closed its **Foreign Corrupt Practices Act (FCPA) inquiry** related to Mexican operations on September 2, 2025[43](index=43&type=chunk) - The **One Big Beautiful Bill Act (OBBBA)** was enacted in July 2025, affecting corporate taxation, but its impacts did not materially affect the tax rate for the three and nine months ended July 31, 2025[44](index=44&type=chunk) - Calavo is appealing a 2013 Mexican tax assessment totaling approximately **$160 million USD** (including inflation and fines) and a **$6.3 million employee profit-sharing liability**, with a provision of **$11 million** recorded in Q3 fiscal 2021 for this matter[47](index=47&type=chunk)[52](index=52&type=chunk) - As a guarantor for assigned leases from the Fresh Cut business sale, Calavo has a maximum exposure of **$32.0 million** in undiscounted future minimum lease payments, plus **$13.3 million** in potential additional payments[54](index=54&type=chunk)[58](index=58&type=chunk) [7. Noncontrolling interest](index=22&type=section&id=7.%20Noncontrolling%20interest) Noncontrolling interest, primarily related to Avocados de Jalisco, increased to $1.576 million by July 31, 2025, reflecting net income attribution | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :---------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Noncontrolling interest, beginning | $1,554 | $1,439 | $1,444 | $1,392 | | Net income (loss) attributable to noncontrolling interest | $22 | $(30) | $132 | $17 | | Noncontrolling interest, ending | $1,576 | $1,409 | $1,576 | $1,409 | [8. Earnings per share](index=22&type=section&id=8.%20Earnings%20per%20share) Basic and diluted EPS from continuing operations for the nine months ended July 31, 2025, increased significantly to $0.90 from $0.52 | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income from continuing operations attributable to Calavo Growers, Inc. (Numerator) | $4,714 | $5,395 | $15,979 | $9,281 | | Weighted average shares - Basic (Denominator) | 17,853 | 17,801 | 17,842 | 17,800 | | Effect on dilutive securities – Restricted stock/units/options | 46 | 41 | 51 | 48 | | Basic EPS (Continuing Operations) | $0.26 | $0.30 | $0.90 | $0.52 | | Diluted EPS (Continuing Operations) | $0.26 | $0.30 | $0.89 | $0.52 | | Basic EPS (Net income (loss)) | $0.26 | $(0.04) | $0.90 | $(0.05) | | Diluted EPS (Net income (loss)) | $0.26 | $(0.04) | $0.89 | $(0.05) | [9. Mexican IVA taxes receivable](index=24&type=section&id=9.%20Mexican%20IVA%20taxes%20receivable) Mexican IVA taxes receivable, net, increased to $53.9 million, with ongoing efforts to recover VAT amounts and a recent favorable court ruling under appeal - CDM VAT receivables, net of provision, totaled **$53.9 million (1.0 billion Mexican pesos)** as of July 31, 2025, up from $48.7 million (976.0 million Mexican pesos) at October 31, 2024[64](index=64&type=chunk) - In Q2 fiscal 2025, the SAT refunded **36.7 million Mexican pesos (approx. $1.9 million USD)** in VAT relating to claims for March, April, and November 2019, secured directly from the tax authority[68](index=68&type=chunk) - In August 2025, the Fifth Collegiate Circuit Court ruled in favor of CDM, recognizing it as a maquila and directing the SAT to refund IVA balances for January-June 2013, though the SAT has appealed this to the Mexican Supreme Court[69](index=69&type=chunk) [10. Assets Held for Sale and Discontinued Operations](index=26&type=section&id=10.%20Assets%20Held%20for%20Sale%20and%20Discontinued%20Operations) The Fresh Cut business was sold in August 2024 for $83 million, resulting in a goodwill impairment charge and a net loss from discontinued operations - The **Fresh Cut business was sold in August 2024 for $83 million** and was classified as discontinued operations[70](index=70&type=chunk)[75](index=75&type=chunk) - A **$9.3 million goodwill impairment charge** was recorded in Q3 fiscal 2024 in connection with the sale[71](index=71&type=chunk) Discontinued Operations Financial Summary | Metric | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | | Net sales | $88,586 | $258,958 | | Gross profit | $7,362 | $12,003 | | Operating loss | $(6,111) | $(10,173) | | Net loss from discontinued operations | $(6,127) | $(10,218) | [11. Sale of Fresh Cut Business](index=28&type=section&id=11.%20Sale%20of%20Fresh%20Cut%20Business) The Fresh Cut business was sold for $83 million in August 2024, leading to an amendment of the company's credit agreement - The Fresh Cut business and related real estate were sold for a total transaction value of **$83 million** on August 15, 2024[75](index=75&type=chunk) - The sale included **$52.0 million for business assets** and **$31.0 million for real estate**[76](index=76&type=chunk) - The credit agreement was amended to reduce revolving commitments from **$90.0 million to $75.0 million**, aligning with the asset base excluding the Fresh Cut business[77](index=77&type=chunk) [12. Subsequent Events](index=28&type=section&id=12.%20Subsequent%20Events) Subsequent events include a favorable court ruling on IVA refunds (under appeal) and the declaration of a $0.20 per share quarterly cash dividend - In August 2025, the Fifth Collegiate Circuit Court ruled recognizing CDM as a maquila and directing the SAT to refund IVA balances for January-June 2013, though the SAT appealed this decision[78](index=78&type=chunk) - A quarterly cash dividend of **$0.20 per share** was declared, payable on October 31, 2025, to shareholders of record on September 30, 2025[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, liquidity, and capital resources, highlighting recent developments, market trends, and operational results [Recent Developments](index=30&type=section&id=Recent%20Developments) Recent developments include quarterly dividends, closure of the FCPA inquiry, and positive progress in Mexican tax matters with a VAT refund and favorable court ruling - A quarterly cash dividend of **$0.20 per share** was paid on July 28, 2025, and another declared for October 31, 2025[81](index=81&type=chunk) - The U.S. Department of Justice closed its **Foreign Corrupt Practices Act (FCPA) inquiry** related to Calavo's Mexican operations on September 2, 2025[82](index=82&type=chunk) - Calavo received a **$1.9 million VAT refund** from the SAT in Q2 fiscal 2025 and a favorable August 2025 court ruling recognizing CDM as a maquila for IVA refunds, which the SAT has appealed[83](index=83&type=chunk)[84](index=84&type=chunk) [Market Trends and Uncertainties](index=30&type=section&id=Market%20Trends%20and%20Uncertainties) Calavo faces macroeconomic challenges, a temporary FDA detention hold, ongoing U.S.-Mexico trade policy uncertainty, and supply chain disruption risks - Macroeconomic challenges, including **inflationary pressures and shifts in trade policies**, continue to affect operations, driving cost fluctuations in fruit, labor, packaging, and operating expenses[85](index=85&type=chunk)[86](index=86&type=chunk) - A temporary **FDA detention hold on Calavo de México (CDM)** in July 2025, due to trace Imazalil, resulted in approximately **$4.2 million in incremental costs** (inspection, logistics, inventory write-downs), though the hold was lifted in September 2025[87](index=87&type=chunk) - Ongoing uncertainty in U.S. trade policy with Mexico, including potential tariffs (e.g., **25% on imports, briefly in effect March 2025**) and the termination of the U.S.–Mexico Tomato Suspension Agreement (imposing a **17% anti-dumping duty**), could raise input costs and disrupt supply chains[89](index=89&type=chunk)[90](index=90&type=chunk)[92](index=92&type=chunk) - A temporary pause in operations at a Mexican packinghouse in Q1 fiscal 2025 due to **avocado weevils**, though resolved, highlights ongoing supply chain disruption risks from pests or phytosanitary issues[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) [Critical Accounting Estimates](index=34&type=section&id=Critical%20Accounting%20Estimates) No material changes occurred in Calavo's critical accounting estimates during the three and nine months ended July 31, 2025 - No material changes in critical accounting estimates for the three and nine months ended July 31, 2025[99](index=99&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Calavo's nine-month results show increased net sales and gross profit, driven by higher avocado pricing and Prepared segment growth, alongside reduced SG&A expenses [Net Sales](index=34&type=section&id=Net%20Sales) For the nine months, net sales grew 7% to $523.8 million, driven by higher avocado pricing in Fresh and increased volumes in Prepared, despite a slight decline in the three-month period Net Sales by Segment | Segment | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Fresh | $155,851 | $163,218 | -4.5% | $470,307 | $442,999 | +6.2% | | Prepared | $22,971 | $16,378 | +40.2% | $53,446 | $48,586 | +10.0% | | Total | $178,822 | $179,596 | -0.4% | $523,753 | $491,585 | +6.5% | - For the three months, Fresh avocado sales decreased **3%** due to a **5% volume decline**, partially offset by a **2% price increase**, while tomato sales decreased **40%** due to a **27% volume decline** and **18% price decrease**, impacted by the termination of the Tomato Suspension Agreement[107](index=107&type=chunk) - For the nine months, Fresh avocado sales increased **12%** due to a **22% price increase**, partially offset by a **9% volume decline**, while tomato sales decreased **37%** due to a **34% volume decline** and **6% price decrease**, impacted by adverse weather and abundant domestic supply[107](index=107&type=chunk) - Prepared segment sales increased **40% (3 months) and 10% (9 months)** primarily due to increased pounds sold (**35% and 11% respectively**), expanded sales to existing customers, and new customer wins[107](index=107&type=chunk)[110](index=110&type=chunk) [Gross Profit](index=38&type=section&id=Gross%20Profit) Consolidated gross profit decreased 9% for the three months due to FDA detention costs, but increased 1% for the nine months, driven by Prepared segment growth Gross Profit by Segment | Segment | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Fresh | $12,427 | $18,175 | -31.6% | $38,617 | $40,958 | -5.7% | | Prepared | $5,771 | $1,918 | +200.9% | $13,398 | $10,556 | +26.9% | | Total | $18,198 | $20,093 | -9.4% | $52,015 | $51,514 | +1.0% | - The **$4.2 million in discrete costs** associated with the FDA detention hold on Mexican avocados significantly impacted Q3 2025 gross profit, recorded in cost of sales[113](index=113&type=chunk) - Fresh segment gross profit decreased due to **lower avocado and tomato volumes** and **regulatory costs** (FDA detention, temporary tariff event)[115](index=115&type=chunk)[116](index=116&type=chunk)[119](index=119&type=chunk) - Prepared segment gross profit increased due to **higher sales volumes, lower fruit input costs, and improved operating efficiencies**[114](index=114&type=chunk)[117](index=117&type=chunk) [Selling, General and Administrative](index=40&type=section&id=Selling%2C%20General%20and%20Administrative) SG&A expenses decreased by 12% for the three months and 19% for the nine months, primarily due to reduced professional, consulting, and compensation expenses Selling, General and Administrative Expenses | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :-------------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Selling, general and administrative | $9,232 | $10,510 | -12.2% | $29,822 | $36,993 | -19.4% | | Percentage of net sales | 5% | 6% | -1% | 6% | 8% | -2% | - The decrease in SG&A was driven by a **$2.0 million reduction in professional and consulting fees** (including lower FCPA-related legal expenses) for the three months, and a **$5.1 million reduction** for the nine months, along with lower compensation and stock-based compensation expenses[120](index=120&type=chunk)[121](index=121&type=chunk) [Foreign currency loss](index=42&type=section&id=Foreign%20currency%20loss) Foreign currency remeasurement losses decreased by 41% for the three months and 11% for the nine months, reflecting Mexican peso exchange rate fluctuations Foreign Currency Loss | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Foreign currency loss | $(2,483) | $(4,203) | -41.0% | $(2,488) | $(2,799) | -11.1% | [Income (loss) from unconsolidated entities](index=42&type=section&id=Income%20%28loss%29%20from%20unconsolidated%20entities) Income from unconsolidated entities improved significantly, moving from a loss to income for the nine months ended July 31, 2025 Income (Loss) from Unconsolidated Entities | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :-------------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Income (loss) from unconsolidated entities | $(402) | $(579) | -30.6% | $178 | $(374) | +147.6% | [Income tax benefit (expense)](index=42&type=section&id=Income%20tax%20benefit%20%28expense%29) The company recorded an income tax expense of $1.8 million for the three months and $5.6 million for the nine months, with an effective tax rate of 26% Income Tax Benefit (Expense) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change (YoY) | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | Change (YoY) | | :---------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Income tax benefit (expense) | $(1,807) | $1,441 | -225.4% | $(5,598) | $478 | -1271.1% | | Effective tax rate | 26% | -37% | N/A | 26% | -5% | N/A | - The effective tax rate for both periods in 2025 was **26%**, differing from the U.S. federal statutory rate of 21% due to U.S. state tax and foreign tax rate differentials in Mexico[125](index=125&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Cash provided by operating activities increased to $19.2 million, with strong liquidity maintained through cash and cash equivalents, an amended credit facility, and a stock repurchase program - Cash provided by operating activities was **$19.2 million** for the nine months ended July 31, 2025, up from $13.6 million in the prior year[127](index=127&type=chunk) - Cash and cash equivalents totaled **$63.8 million** as of July 31, 2025, and working capital was **$89.9 million**, up from $57.0 million and $85.4 million, respectively, at October 31, 2024[132](index=132&type=chunk) - The revolving credit facility was amended to **$75.0 million** (from $90.0 million) in August 2024, with approximately **$50.5 million available for borrowing** as of July 31, 2025, at a weighted-average interest rate of **8.0%**[135](index=135&type=chunk)[139](index=139&type=chunk) - A stock repurchase program of up to **$25 million** was authorized in March 2025, though no shares have been repurchased to date[140](index=140&type=chunk) [Contractual Commitments](index=46&type=section&id=Contractual%20Commitments) No material changes have occurred in Calavo's contractual commitments since the prior fiscal year's Annual Report on Form 10-K - No material changes to contractual commitments since the last Annual Report on Form 10-K[141](index=141&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures have occurred since the Annual Report on Form 10-K for the year ended October 31, 2024 - No material changes in market risk disclosures[142](index=142&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.Controls%20and%20Procedures) Calavo's disclosure controls and procedures were effective as of July 31, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were **effective** as of July 31, 2025[143](index=143&type=chunk) - No material changes in internal control over financial reporting during the quarter ended July 31, 2025[144](index=144&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.Legal%20Proceedings) Information regarding legal proceedings is referenced in Note 6 to the unaudited condensed consolidated financial statements - Legal proceedings information is detailed in **Note 6** of the financial statements[146](index=146&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%20Risk%20Factors%201A.) No material changes to the risk factors have been disclosed since the Annual Report on Form 10-K for fiscal year ended October 31, 2024 - No material changes to risk factors from previous filings[148](index=148&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.Other%20Information) This section confirms no new Rule 10b5-1 trading arrangements and provides an update on cybersecurity governance and program enhancements [Trading Plans](index=49&type=section&id=Trading%20Plans) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended July 31, 2025 - No new Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers[150](index=150&type=chunk) [Supplemental Cybersecurity Governance and Program Update](index=49&type=section&id=Supplemental%20Cybersecurity%20Governance%20and%20Program%20Update) The Board of Directors provides direct oversight of cybersecurity risk, with an ongoing NIST Framework evaluation and systematic program enhancement initiative - The Board of Directors provides **direct oversight of cybersecurity risk**, supported by directors with relevant experience[151](index=151&type=chunk) - An ongoing evaluation against the **NIST Cybersecurity Framework 2.0** is expected to be completed in Q4 2025, indicating the residual risk profile is within acceptable parameters[152](index=152&type=chunk) - A twelve-month systematic program enhancement initiative has been launched to **elevate cybersecurity program maturity** through structured documentation, policy refinement, and capability advancement[153](index=153&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents for financial data - Includes certifications from the **CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002**[154](index=154&type=chunk) - Contains **Inline XBRL documents** for the consolidated financial statements and other financial information[156](index=156&type=chunk)[157](index=157&type=chunk) [Signatures](index=51&type=section&id=Signatures) The report is duly signed on behalf of Calavo Growers, Inc. by the Chief Executive Officer and Chief Financial Officer on September 9, 2025 - The report was signed by **Lecil E. Cole (CEO)** and **James Snyder (CFO)** on September 9, 2025[160](index=160&type=chunk)

Table of Contents 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 August 1, 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: 001-09769 Lands' End, Inc. (Exact name of registrant as specified in its charter) Delaware 36-2512786 (State or other ju ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________ FORM 10-K _______________________________________________ (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2025 or o 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: 001-40159 InnovA ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 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: 001-42570 AELUMA, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation) ...

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Management Commentary](index=1&type=section&id=Management%20Commentary) Aeluma's CEO highlighted significant FY2025 momentum and strategic positioning for substantial FY2026 progress - Aeluma built momentum in **FY2025** with increased manufacturing readiness, commercialization traction, and elevated market visibility after its **Nasdaq uplist**[2](index=2&type=chunk) - The company's semiconductor technology addresses critical needs in **AI infrastructure, defense and aerospace, mobile and consumer electronics, and quantum computing**[2](index=2&type=chunk) - **Fiscal 2026** is expected to be a year of significant progress in executing go-to-market strategy and creating long-term value[2](index=2&type=chunk) [Recent Company Highlights](index=1&type=section&id=Recent%20Company%20Highlights) Aeluma achieved key FY2025 milestones, including R&D contract wins, a manufacturing breakthrough, and a strong financial position - Secured **six R&D contracts** in **fiscal year 2025**, including two in the fourth quarter[3](index=3&type=chunk) - Key contract wins include **NASA** for quantum computing, **U.S. Navy** for submarine imaging sensors and optical interconnects, and **Department of Energy** for photodetector sensors[3](index=3&type=chunk) - Unveiled a **manufacturing breakthrough** in collaboration with Thorlabs, applicable to quantum computing and communication systems[3](index=3&type=chunk) - Closed FY2025 with a strong financial position: **$15.7 million in cash** and **no debt**[3](index=3&type=chunk) - Added to the **Russell 3000 Index** (effective June 30, 2025) and the **MSCI Global Micro Cap Index** (effective August 26, 2025)[3](index=3&type=chunk) - Appointed **Christopher Stewart as CFO**, effective August 4, 2025, bringing over 20 years of financial leadership experience[3](index=3&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) [Fiscal Q4 2025 Financial Results](index=2&type=section&id=Fiscal%20Q4%202025%20Financial%20Results) Aeluma reported significant Q4 2025 revenue growth from R&D contracts, with improved GAAP net loss and Adjusted EBITDA loss | Metric | Q4 2025 (in thousands) | Q4 2024 (in thousands) | Q3 2025 (in thousands) | | :------------------- | :--------------------- | :--------------------- | :--------------------- | | Revenue | $1,300 | $279 | $1,300 | | GAAP Net Loss | $859 | $988 | ($1,500 income) | | Adjusted EBITDA Loss | $113 | $718 | ($109 gain) | - Revenue in **Q4 2025** was primarily from **R&D contracts**[7](index=7&type=chunk) - GAAP net income decreased from the prior quarter primarily due to a **$2.6 million non-cash gain** in fair value of derivative liabilities recorded in **Q3 2025**[7](index=7&type=chunk) [Full Fiscal Year 2025 Financial Results](index=2&type=section&id=Full%20Fiscal%20Year%202025%20Financial%20Results) Aeluma achieved substantial FY2025 revenue growth, improved GAAP net loss and Adjusted EBITDA, and ended with strong cash | Metric | FY 2025 (in thousands) | FY 2024 (in thousands) | | :------------------- | :--------------------- | :--------------------- | | Full Year Revenue | $4,700 | $919 | | GAAP Net Loss | $3,000 | $4,600 | | Adjusted EBITDA | $186 | ($3,500 loss) | - **2025 revenue** was primarily from **R&D contracts**[7](index=7&type=chunk) - **GAAP and non-GAAP net loss**, and **adjusted EBITDA** all improved year over year primarily due to **increased revenue from R&D contracts**[7](index=7&type=chunk) - Cash and cash equivalents totaled **$15.7 million** at **June 30, 2025**, compared to **$1.3 million** as of **June 30, 2024**[7](index=7&type=chunk) [Outlook and Strategic Priorities](index=2&type=section&id=Outlook%20and%20Strategic%20Priorities) [Fiscal Year 2026 Guidance](index=2&type=section&id=Fiscal%20Year%202026%20Guidance) Aeluma provided its revenue guidance for fiscal year 2026, projecting continued growth - Aeluma expects revenue for the full fiscal year 2026 to be in the range of **$4.0 million to $6.0 million**[6](index=6&type=chunk) [Strategic Priorities for FY2026](index=2&type=section&id=Strategic%20Priorities%20for%20FY2026) Aeluma's FY2026 strategic priorities focus on new contracts, team expansion, manufacturing, and go-to-market traction - New Contract Wins: Target **three to seven new development contracts** to provide non-dilutive funding for R&D and grow partnership opportunities[7](index=7&type=chunk) - Team Expansion: Addition of **business development and go-to-market teams**, expanded **technical leadership and staff**, and an expansion of **operations team**[7](index=7&type=chunk) - Enhanced Manufacturing Readiness: Focus on higher levels of **outsourced wafer manufacturing productivity**, expanded **test and validation capabilities**, **technology qualification** for targeted industries, and expanded **supply chain partnerships**[7](index=7&type=chunk) - Go-to-Market Traction: Continued progress on opportunities in **targeted commercial markets** and increasing the number of **customer engagements** in the pipeline[7](index=7&type=chunk) [Note about Non-GAAP Financial Measures](index=3&type=section&id=Note%20about%20Non-GAAP%20Financial%20Measures) [Non-GAAP Financial Measures Explanation](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) This section clarifies non-GAAP financial measures for supplemental investor insight into performance and core operations - Non-GAAP financial measures are presented as **supplemental information** to management and investors, **not as a substitute for GAAP**[8](index=8&type=chunk) - Non-GAAP net income (loss) excludes **stock-based compensation, amortization of discount on convertible notes, and changes in fair value of derivative liabilities**[12](index=12&type=chunk) - Adjusted EBITDA is defined as **non-GAAP net income (loss) plus depreciation and amortization expenses, less interest income**[12](index=12&type=chunk) - A **reconciliation** between GAAP and non-GAAP financial results is provided in the financial statements portion of the press release[9](index=9&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) [About Aeluma, Inc.](index=3&type=section&id=About%20Aeluma%2C%20Inc.) Aeluma, Inc. is a transformative semiconductor company specializing in high-performance photonic and electronic technologies - Aeluma is a **transformative semiconductor company** specializing in **high-performance photonic and electronic technologies** that scale[11](index=11&type=chunk) - The company's **proprietary platform** combines **compound semiconductors** with **scalable manufacturing** for mass market microelectronics, enabling **volume production** and **large-scale integration**[11](index=11&type=chunk) - Applications for Aeluma's technology include **mobile, AI, defense and aerospace, robotics, automotive, AR/VR, and quantum**[11](index=11&type=chunk) - Headquartered in **Goleta, California**, Aeluma operates state-of-the-art **R&D and manufacturing capabilities** and partners with **production-scale fabrication foundries**[11](index=11&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section cautions that non-historical statements are forward-looking, subject to risks, and actual results may differ - All statements not historical are **forward-looking**, based on current expectations, estimates, and projections[10](index=10&type=chunk) - Forward-looking statements involve **known and unknown risks, uncertainties, and assumptions** that are difficult or impossible to predict[10](index=10&type=chunk) - **Actual results may differ materially** from those in forward-looking statements due to various factors, including those described in SEC filings[10](index=10&type=chunk) - The Company undertakes **no obligation to revise or update** information in this release to reflect future events or circumstances[10](index=10&type=chunk) [Contact Information](index=3&type=section&id=Contact%20Information) This section provides contact details for Aeluma, Inc. and its investor relations team - Company Contact: **Aeluma, Inc.**, **(805) 351-2707**, **info@aeluma.com**[12](index=12&type=chunk) - Investor Contact: **Financial Profiles, Inc.**, **Tony Rossi (310) 622-8221**, **Jeff Haas (310) 622-8240**, **ir@aeluma.com**[12](index=12&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show Aeluma's FY2025 financial position, with significant increases in total assets and equity | ($ in thousands) | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------ | | Cash and cash equivalents | $3,628 | $1,291 | | Certificate of deposit | $12,112 | - | | Total current assets | $17,335 | $1,393 | | Total assets | $19,406 | $3,844 | | Total liabilities | $1,508 | $1,568 | | Total stockholders' equity | $17,898 | $2,276 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show Aeluma's financial performance for Q4 and FY2025, with substantial revenue growth and reduced net loss | ($ in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $1,317 | $279 | $4,665 | $919 | | Loss from operations | $(969) | $(989) | $(2,142) | $(4,563) | | Net income (loss) | $(859) | $(988) | $(3,022) | $(4,562) | | Net income (loss) per share: Basic | $(0.05) | $(0.08) | $(0.23) | $(0.37) | [Reconciliation of GAAP and Non-GAAP Financial Measures](index=6&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Financial%20Measures) This reconciliation details adjustments from GAAP net income (loss) to Non-GAAP net income (loss) and Adjusted EBITDA | ($ in thousands, except per share data) | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | GAAP net income (loss) | $(3,022) | $(4,562) | | Total adjustments to GAAP net income (loss) | $2,906 | $765 | | Non-GAAP net income (loss) | $(116) | $(3,797) | | Adjusted EBITDA | $186 | $(3,487) | - Key non-GAAP adjustments include **stock-based compensation, amortization of discount on convertible notes, and changes in fair value of derivative liabilities**[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows show a significant FY2025 increase in cash, driven by financing activities | ($ in thousands) | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(1,148) | $(3,455) | | Net cash used in investing activities | $(161) | $(322) | | Net cash provided by (used in) financing activities | $15,758 | $(4) | | Net change in cash and cash equivalents, and certificate of deposit | $14,449 | $(3,781) | | Cash and cash equivalents, and certificate of deposit, end of period | $15,740 | $1,291 | - Financing activities provided significant cash, including **$3,145 thousand from convertible notes issuance** and **$12,588 thousand from a public offering**[22](index=22&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 (Exact name of registrant as specified in its charter) Connecticut 06-0854886 ☐ 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 0-15451 PHOTRONICS, INC. For the quarterly period ended August 3, 2025 OR (State or other jurisdi ...