PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited financial statements for Q2 2025 reveal decreased revenue, a net loss, and reduced assets, with negative operating cash flow [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $51.8 million by June 30, 2025, driven by reduced cash and a significant drop in shareholders' equity Key Balance Sheet Items (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $14,255 | $23,647 | | **Total current assets** | $25,575 | $34,852 | | **Total assets** | $51,804 | $64,072 | | **Total current liabilities** | $9,141 | $8,346 | | **Total liabilities** | $23,453 | $24,194 | | **Total shareholders' equity** | $432 | $12,482 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenue slightly decreased, while the net loss narrowed; H1 2025 saw a significant revenue drop but a slightly improved net loss Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue, net** | $8,250 | $8,535 | $15,344 | $24,589 | | **Gross profit** | $3,779 | $4,326 | $7,231 | $12,440 | | **Loss from operations** | $(7,301) | $(10,742) | $(15,397) | $(16,235) | | **Net loss attributable to Pixelworks, Inc.** | $(6,707) | $(10,149) | $(14,468) | $(15,215) | | **Net loss per share - basic and diluted** | $(1.27) | $(2.09) | $(2.80) | $(3.16) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 saw increased cash used in operations ($11.3 million), partially offset by investing and financing activities, leading to a $9.4 million cash decrease Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(11,268) | $(6,392) | | **Net cash provided by (used in) investing activities** | $514 | $(2,866) | | **Net cash provided by (used in) financing activities** | $1,362 | $(462) | | **Net decrease in cash and cash equivalents** | $(9,392) | $(9,720) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business operations, accounting policies, PWSH strategic review, restructuring, revenue decline in Mobile, and redemption obligations - The company initiated a formal review for its Pixelworks Shanghai (PWSH) subsidiary, receiving non-binding term sheets from three potential buyers, with a strategic direction expected by **end of Q3 2025**[32](index=32&type=chunk) - Restructuring plans in May and February 2025 led to workforce reductions of approximately **4% and 6%**, primarily in R&D and operations[50](index=50&type=chunk)[51](index=51&type=chunk) IC Sales by End Market for Six Months Ended June 30 (in thousands) | End Market | 2025 | 2024 | | :--- | :--- | :--- | | **Home & Enterprise** | $12,732 | $12,577 | | **Mobile** | $2,359 | $11,226 | - An investor requested PWSH share redemption; if a sale or extension is not achieved, the company may be required to repurchase shares, materially impacting its **cash position**[90](index=90&type=chunk)[94](index=94&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 38% H1 2025 revenue decrease, driven by a Mobile market decline, reduced gross margin, and lower operating expenses, with a PWSH strategic review ongoing [Results of Operations](index=30&type=section&id=Results%20of%20Operations) H1 2025 revenue fell 38% due to a 78% drop in Mobile sales, gross margin declined, and operating expenses decreased due to cost-cutting Revenue Change | Period | 2025 Revenue | 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | **Three Months Ended June 30** | $8,250 | $8,535 | (3)% | | **Six Months Ended June 30** | $15,344 | $24,589 | (38)% | - Revenue decrease primarily driven by a **78% drop in Mobile market sales** in H1 2025, due to delayed product transition[118](index=118&type=chunk) Gross Profit Margin | Period | 2025 Gross Margin | 2024 Gross Margin | | :--- | :--- | :--- | | **Three Months Ended June 30** | 46% | 51% | | **Six Months Ended June 30** | 47% | 51% | - Operating expenses significantly decreased in H1 2025, with **R&D down 22%** and **SG&A down 19%**, reflecting headcount reductions and cost controls[124](index=124&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased by $9.3 million to $14.3 million, despite capital raises, though management expects sufficient working capital for the next twelve months - Total cash and cash equivalents decreased by **$9.3 million** to **$14.3 million** by June 30, 2025[133](index=133&type=chunk) - Capital was raised through an ATM program (net proceeds **$0.5 million**) and a registered direct offering (net proceeds **$1.3 million**) in H1 2025[138](index=138&type=chunk)[139](index=139&type=chunk) - Management anticipates existing working capital will be **adequate for at least the next twelve months**[143](index=143&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company has indicated that this item is not applicable for this reporting period - Not applicable[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including CEO and CFO, concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were **effective as of June 30, 2025**[149](index=149&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[150](index=150&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is engaged in legal proceedings from time to time in the ordinary course of business, but none are currently considered to have a material impact on its financial position or results of operations - No legal proceedings are expected to have a **material impact** on financial condition or operations[153](index=153&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Key risks include potential PWSH share repurchase obligations, China operations uncertainties, customer concentration, intense competition, and Nasdaq delisting risk - Significant risk of being required to repurchase PWSH shares, materially impacting the **company's cash position**, if a transaction is not closed or rights are not waived[237](index=237&type=chunk) - Substantial risks arise from concentrated operations and customers in China, including political, economic, and legal uncertainties, and U.S.-China relations[232](index=232&type=chunk)[234](index=234&type=chunk) - Dependence on a limited number of customers and distributors, with the **top five end customers accounting for 94% of H1 2025 revenue**[167](index=167&type=chunk) - Risk of non-compliance with Nasdaq Listing Rules and potential delisting, despite a **one-for-twelve reverse stock split** on June 6, 2025, to meet minimum bid price[250](index=250&type=chunk)[252](index=252&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) Shareholders approved a stock incentive plan amendment, and the CEO entered a bonus agreement tied to the PWSH subsidiary sale proceeds - A Transaction Bonus Agreement with CEO Todd A. DeBonis links a cash bonus to the successful sale of the **PWSH subsidiary by December 31, 2025**[257](index=257&type=chunk) - The bonus is contingent on net cash proceeds between **$40 million and $70 million** from the PWSH transaction, with a **maximum bonus of $600,000**[257](index=257&type=chunk) [Item 6. Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to articles of incorporation, bylaws, stock purchase agreements, the amended stock incentive plan, the CEO's transaction bonus agreement, and required certifications

PART I-FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Epsilon Energy reported significant financial growth for the six months ended June 30, 2025, with total revenues rising 82% to $27.8 million and net income increasing 140% to $5.6 million [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $123.6 million, with shareholders' equity rising to $100.2 million from $96.7 million at year-end 2024 Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $9,907.7 | $6,519.8 | | Total current assets | $16,533.3 | $14,131.5 | | Total property and equipment, net | $106,037.5 | $104,526.0 | | **Total assets** | **$123,613.7** | **$120,454.8** | | **Liabilities & Equity** | | | | Total current liabilities | $7,403.4 | $6,980.0 | | Total liabilities | $23,423.4 | $23,726.7 | | Total shareholders' equity | $100,190.3 | $96,728.1 | | **Total liabilities and shareholders' equity** | **$123,613.7** | **$120,454.8** | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For Q2 2025, revenue increased 59% to $11.6 million and net income nearly doubled to $1.6 million, while six-month revenue surged 82% to $27.8 million and net income jumped 140% to $5.6 million Statement of Operations Summary (in thousands USD) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $11,624.7 | $7,307.8 | $27,787.9 | $15,294.6 | | Operating Income | $828.8 | $1,167.8 | $7,996.6 | $2,572.5 | | Net Income | $1,551.5 | $815.7 | $5,567.5 | $2,322.6 | | Diluted EPS | $0.07 | $0.04 | $0.25 | $0.11 | - A notable event in Q2 2025 was a **$2.7 million impairment expense**, which impacted operating income for the quarter, however, a **$2.6 million gain on derivative contracts** offset this, contributing to strong net income[19](index=19&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities increased 87% to $16.9 million, while cash used in investing and financing activities totaled $10.7 million and $2.8 million respectively Cash Flow Summary (Six Months Ended June 30, in thousands USD) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,930.8 | $9,075.5 | | Net cash used in investing activities | ($10,665.9) | ($9,544.2) | | Net cash used in financing activities | ($2,751.4) | ($3,946.1) | | **Increase (Decrease) in cash** | **$3,387.9** | **($4,392.1)** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, a **$2.7 million** impairment, the undrawn **$45 million** credit facility, shareholder equity activities, and the subsequent acquisition of Peak Exploration and Production LLC - During Q2 2025, Epsilon recorded a **$2.7 million impairment charge** for two wells in Alberta, Canada, due to lower than expected production, cost overruns, and lower forward commodity prices[45](index=45&type=chunk) - The company maintains a senior secured revolving credit facility with a borrowing base of **$45 million**, which remained undrawn as of June 30, 2025[47](index=47&type=chunk)[50](index=50&type=chunk) - The Board declared quarterly dividends of **$0.0625 per share**, totaling approximately **$2.8 million** paid during the first six months of 2025[62](index=62&type=chunk) - Subsequent to the quarter end, on August 11, 2025, Epsilon signed a definitive agreement to acquire Peak Exploration and Production LLC, with consideration including **6 million Epsilon common shares** and the assumption of approximately **$49 million in debt**[119](index=119&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes the 82% revenue growth to increased natural gas revenue, with Adjusted EBITDA more than doubling to **$18.0 million**, supported by strong liquidity and disciplined capital allocation - The company's business strategy is focused on disciplined capital allocation, shareholder returns (dividends and buybacks), and maintaining a strong balance sheet to fund investments in existing areas (Marcellus) and new projects (Permian, Canada)[125](index=125&type=chunk)[126](index=126&type=chunk) Adjusted EBITDA Reconciliation (in thousands USD) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net Income | $5,567.5 | $2,322.6 | | Adjustments | $12,437.5 | $6,176.0 | | **Adjusted EBITDA** | **$18,005.0** | **$8,498.6** | - For the six months ended June 30, 2025, revenues increased **82%** to **$27.8 million**, primarily due to a **$12.6 million (256%)** increase in upstream natural gas revenue from higher prices and volumes[140](index=140&type=chunk)[141](index=141&type=chunk) - The company's liquidity is strong, with a working capital surplus of **$9.1 million** as of June 30, 2025, and an undrawn **$45 million** revolving credit facility[164](index=164&type=chunk)[168](index=168&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces significant commodity price risk for natural gas and oil, which it mitigates using derivative contracts, and also has exposure to interest rate risk - The company's primary market risk is the fluctuation in commodity prices for natural gas and oil[178](index=178&type=chunk) - Epsilon utilizes a hedging strategy with derivative financial instruments to manage commodity price risk and stabilize cash flows[182](index=182&type=chunk) [Controls and Procedures](index=34&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[183](index=183&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[184](index=184&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reported no legal proceedings during the period - None[187](index=187&type=chunk) [Risk Factors](index=35&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[188](index=188&type=chunk) [Unregistered Sale of Equity Securities and Use of Proceeds](index=35&type=section&id=ITEM%202.%20UNREGISTERED%20SALE%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company did not repurchase any of its equity securities during the six months ended June 30, 2025 - For the six months ended June 30, 2025, no shares were repurchased[190](index=190&type=chunk) [Defaults Upon Senior Securities](index=35&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) Not applicable [Mine Safety Disclosures](index=35&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Not applicable [Other Information](index=35&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Not applicable [Exhibits](index=36&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data files

[Part I - Financial Information](index=4&type=section&id=PART%20I-FINANCIAL%20INFORMATION) [Condensed Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Unaudited%20Financial%20Statements) The company reported total assets of **$6.0 million** and total liabilities of **$1.8 million** as of June 30, 2025, incurring a net loss of **$10.5 million** and using **$7.9 million** in operating cash flow, raising substantial doubt about its going concern ability Condensed Balance Sheet Data (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,256 | $2,377 | | Total Current Assets | $5,361 | $2,770 | | **Total Assets** | **$5,981** | **$3,276** | | Total Current Liabilities | $1,799 | $1,622 | | **Total Liabilities** | **$1,799** | **$1,622** | | **Total Stockholders' Equity** | **$4,182** | **$1,654** | Condensed Statement of Operations Data (in thousands, except per share data) | | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Research and development | $6,818 | $5,272 | | General and administrative | $3,720 | $4,602 | | Loss from operations | $(10,538) | $(9,874) | | **Net Loss** | **$(10,458)** | **$(9,562)** | | Net loss per share, basic and diluted | $(0.32) | $(0.36) | Condensed Statement of Cash Flows Data (in thousands) | | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,922) | $(7,013) | | Net cash used in investing activities | $(1,899) | $(98) | | Net cash provided by financing activities | $10,700 | $84 | | **Net increase (decrease) in cash** | **$879** | **$(7,027)** | - The company has incurred losses and negative cash flows from operations each year since inception. As of June 30, 2025, cash, equivalents, and short-term investments were approximately **$5.1 million**[29](index=29&type=chunk) - Management believes existing liquidity is insufficient to fund operations for the next twelve months, which raises substantial doubt about the company's ability to continue as a going concern[30](index=30&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) HeartBeam, a pre-commercial medical technology company, received FDA clearance for its HeartBeam System and filed for 12L ECG synthesis software, but faces going concern doubts due to recurring losses and insufficient liquidity - The HeartBeam System received FDA clearance on December 13, 2024. A subsequent 510(k) application for software to synthesize a 12L ECG was filed in January 2025[60](index=60&type=chunk)[61](index=61&type=chunk) - The VALID-ECG pivotal study successfully met its clinical endpoints, showing a **93.4%** overall diagnostic agreement between HeartBeam's synthesized 12L ECG and a standard 12L ECG for arrhythmia assessment[63](index=63&type=chunk) - In April 2025, HeartBeam announced a strategic collaboration with AccurKardia to integrate its FDA-cleared automated ECG interpretation platform, aiming to expedite product development and reduce costs[66](index=66&type=chunk)[77](index=77&type=chunk) - The company has an At-the-Market (ATM) sales agreement to sell up to **$17.0 million** in common stock. As of the report date, approximately **$15.6 million** remained available for issuance under this agreement[31](index=31&type=chunk)[76](index=76&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Total operating expenses increased by **7%** to **$10.5 million** for the six months ended June 30, 2025, driven by a **29%** rise in R&D expenses, partially offset by a **19%** decrease in G&A costs Comparison of Operating Expenses (in thousands) | Expense Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $3,720 | $4,602 | $(882) | (19)% | | Research and development | $6,818 | $5,272 | $1,546 | 29% | | **Total operating expenses** | **$10,538** | **$9,874** | **$664** | **7%** | - The decrease in G&A expenses for the six months ended June 30, 2025, was primarily due to a **$0.8 million** reduction in non-cash stock-based compensation and a **$0.2 million** decrease in consultant costs[81](index=81&type=chunk) - The increase in R&D expenses for the six months ended June 30, 2025, was mainly driven by a **$1.0 million** increase in product development, a **$1.1 million** increase in headcount costs, and a **$0.8 million** increase in stock-based compensation[83](index=83&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company's **$5.1 million** in cash and investments are insufficient for future operations, necessitating additional capital to address going concern doubts - The company's existing cash and short-term investments of approximately **$5.1 million** as of June 30, 2025, are insufficient to fund operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern[86](index=86&type=chunk) - Continued operations depend on raising additional capital, as the company expects no material commercial revenue in 2025[87](index=87&type=chunk) Cash Flow Summary (in thousands) | | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,922) | $(7,013) | | Net cash used in investing activities | $(1,899) | $(98) | | Net cash provided by financing activities | $10,700 | $84 | - In February 2025, the company raised approximately **$10.3 million** in net proceeds from a public offering of common stock[45](index=45&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company does not hold derivative financial instruments nor engage in hedging activities - The company does not hold derivative instruments or engage in hedging activities[95](index=95&type=chunk) [Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[97](index=97&type=chunk) - No material changes to internal control over financial reporting were identified during the fiscal quarter ended June 30, 2025[99](index=99&type=chunk) [Part II - Other Information](index=22&type=section&id=PART%20II-OTHER%20INFORMATION) [Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any pending or threatened legal proceedings that could materially adversely affect its business or financial condition - There are no pending or threatened legal actions against the company that could have a material adverse effect[101](index=101&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) This section is not applicable as HeartBeam, Inc. is classified as a smaller reporting company - Not applicable as the company is a smaller reporting company[102](index=102&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity securities were sold during the period covered by this report - No equity securities were sold during the period that were not registered under the Securities Act[103](index=103&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including corporate governance documents, equity incentive plan amendments, and CEO/CFO certifications - Filed exhibits include the Third Amendment to the 2022 Equity Incentive Plan and Sarbanes-Oxley Act certifications from the CEO and CFO[109](index=109&type=chunk)

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20--%20FINANCIAL%20INFORMATION) This section presents Interlink Electronics, Inc.'s unaudited condensed consolidated financial statements and detailed notes on accounting policies, financial components, and related disclosures [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Presents Interlink Electronics, Inc.'s unaudited condensed consolidated financial statements and comprehensive notes for the reporting period [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $12,510 | $13,116 | | Total liabilities | $2,471 | $2,623 | | Total stockholders' equity | $10,039 | $10,493 | - Total assets **decreased by $606,000** from December 31, 2024, to June 30, 2025, primarily due to a decrease in cash and cash equivalents and inventories[9](index=9&type=chunk) - Total liabilities **decreased by $152,000**, while total stockholders' equity **decreased by $454,000** over the same period[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Presents the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Revenue | $3,414 | $2,898 | $6,078 | $6,022 | | Gross profit | $1,538 | $1,305 | $2,487 | $2,558 | | Income (loss) from operations | $66 | $(313) | $(783) | $(1,064) | | Net income (loss) | $100 | $(307) | $(705) | $(1,048) | | Earnings (loss) per common share – basic and diluted | $0.00 | $(0.04) | $(0.09) | $(0.13) | - For the three months ended June 30, 2025, revenue **increased by 17.8%** year-over-year, leading to a net income of **$100,000** compared to a net loss of $307,000 in the prior year[11](index=11&type=chunk) - For the six months ended June 30, 2025, revenue saw a slight increase of **0.9%** year-over-year, but the company reported a net loss of **$705,000**, an improvement from the $1,048,000 net loss in the same period last year[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Details net income or loss and other comprehensive income items, such as foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income (loss) | $100 | $(307) | $(705) | $(1,048) | | Foreign currency translation adjustments | $267 | $(9) | $437 | $(116) | | Comprehensive income (loss) | $367 | $(316) | $(268) | $(1,164) | - Comprehensive income for the three months ended June 30, 2025, was **$367,000**, a significant improvement from a loss of $316,000 in the prior year, largely driven by positive foreign currency translation adjustments[14](index=14&type=chunk) - For the six months ended June 30, 2025, comprehensive loss **decreased to $268,000** from $1,164,000 in the prior year, also benefiting from favorable foreign currency translation[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in equity components, including net income, dividends, and other comprehensive income Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Stockholders' Equity | $10,039 | $10,493 | | Accumulated Deficit | $(52,752) | $(51,847) | | Accumulated Other Comprehensive Income | $452 | $15 | - Total stockholders' equity **decreased from $10,493,000** at December 31, 2024, to **$10,039,000** at June 30, 2025, primarily due to net loss and preferred stock dividends, partially offset by foreign currency translation adjustments[17](index=17&type=chunk) - Accumulated other comprehensive income significantly **increased from $15,000 to $452,000**, driven by foreign currency translation adjustments[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash (used in) operating activities | $(409) | $(76) | | Net cash (used in) investing activities | $(34) | $(20) | | Net cash (used in) financing activities | $(200) | $(200) | | Net (decrease) in cash and cash equivalents | $(621) | $(344) | | Cash and cash equivalents, end of period | $2,329 | $3,960 | - Net cash used in operating activities **increased to $409,000** for the six months ended June 30, 2025, compared to $76,000 in the prior year, primarily due to changes in operating assets and liabilities[19](index=19&type=chunk)[129](index=129&type=chunk) - Cash and cash equivalents **decreased by $621,000** during the six months ended June 30, 2025, resulting in an ending balance of **$2,329,000**[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1 – The Company and its Significant Accounting Policies](index=9&type=section&id=Note%201%20%E2%80%93%20The%20Company%20and%20its%20Significant%20Accounting%20Policies) Describes Interlink Electronics, Inc.'s business, global operations, and significant accounting policies, including revenue recognition and R&D costs - Interlink Electronics, Inc. specializes in sensors and printed electronics for Human-Machine Interface (HMI) and Internet-of-Things (IoT) solutions, serving medical, industrial, automotive, wearables, and other specialty markets globally[20](index=20&type=chunk) - The company's revenue recognition policy follows ASC 606, distinguishing between revenue recognized at a point in time (primarily product sales) and over time (engineering services)[27](index=27&type=chunk)[31](index=31&type=chunk) Revenue by Type (in thousands) | Revenue Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Point in time | $3,078 | $2,701 | $5,581 | $5,657 | | Over time | $336 | $197 | $497 | $365 | | Total revenue | $3,414 | $2,898 | $6,078 | $6,022 | - R&D costs are expensed as incurred, and stock-based compensation is recognized on a straight-line basis over the service period[33](index=33&type=chunk)[36](index=36&type=chunk) [Note 2 – Details of Certain Financial Statement Components](index=16&type=section&id=Note%202%20%E2%80%93%20Details%20of%20Certain%20Financial%20Statement%20Components) This note provides a breakdown of key financial statement components, including inventories, property, plant and equipment, intangible assets, goodwill, and accrued liabilities, detailing their values and changes between December 31, 2024, and June 30, 2025 Inventories (in thousands) | Inventories (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Raw materials | $1,232 | $1,608 | | Work-in-process | $198 | $179 | | Finished goods | $221 | $222 | | Total inventories | $1,651 | $2,009 | - Total inventories **decreased by $358,000** from December 31, 2024, to June 30, 2025, primarily due to a reduction in raw materials[53](index=53&type=chunk) Intangible Assets, Net (in thousands) | Intangible Assets, Net (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Patents, tradenames, and trademarks | $951 | $931 | | Developed technology | $663 | $536 | | Customer relationships | $1,549 | $1,427 | | Non-compete agreements | $998 | $916 | | Order backlog | $0 | $22 | | In-process research and development | $0 | $29 | | Total intangible assets, net | $1,723 | $1,874 | - Goodwill **decreased from $2,658,000** at January 1, 2025, to **$2,626,000** at June 30, 2025, due to an acquisition price allocation adjustment for Conductive Transfers and foreign currency exchange rate changes[56](index=56&type=chunk) [Note 3 – Acquisition of Conductive Transfers](index=18&type=section&id=Note%203%20%E2%80%93%20Acquisition%20of%20Conductive%20Transfers) Interlink Electronics acquired Conductive Transfers Limited and its affiliate Global Print Solutions Limited on December 20, 2024, for GB£250,000 (approximately $314,000) in cash. This acquisition enhances Interlink's capabilities in wearables, smart textiles, conductive ink, and printed electronics - Acquired Conductive Transfers Limited and Global Print Solutions Limited on December 20, 2024, for approximately **$314,000**[58](index=58&type=chunk) - The acquisition expands Interlink's offerings in wearables, smart textiles, conductive ink, and printed electronics[58](index=58&type=chunk) Acquired Assets (in thousands) | Acquired Assets (in thousands) | Fair Value | | :-------------------------- | :--------- | | Inventories | $21 | | Property and equipment | $238 | | Net identifiable tangible assets acquired | $259 | | Developed technology | $55 | | Net assets acquired | $314 | [Note 4 – Earnings Per Share](index=18&type=section&id=Note%204%20%E2%80%93%20Earnings%20Per%20Share) This note details the computation of basic and diluted earnings per share, highlighting that preferred stock and restricted stock units were excluded from diluted EPS calculations due to their anti-dilutive effect Earnings Per Share Data (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) applicable to common stockholders (in thousands) | $0 | $(407) | $(905) | $(1,248) | | Weighted average common shares outstanding – basic and diluted (in thousands) | 9,864 | 9,860 | 9,864 | 9,860 | | Earnings (loss) per common share, basic and diluted | $0.00 | $(0.04) | $(0.09) | $(0.13) | - **200,000 shares** of Series A Convertible Preferred Stock (convertible into 600,000 common shares) and **31,250 restricted stock units** were excluded from diluted EPS calculations for all periods due to their anti-dilutive effect[63](index=63&type=chunk) [Note 5 – Restricted Stock Units](index=19&type=section&id=Note%205%20%E2%80%93%20Restricted%20Stock%20Units) The company recognized $7,000 and $14,000 in stock-based compensation expense for restricted stock units during the three and six months ended June 30, 2025, respectively. As of June 30, 2025, there was $102,000 of unrecognized compensation cost related to 31,250 nonvested restricted stock units, expected to be recognized over 3.6 years Stock-Based Compensation Expense (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :------------------------------------------ | | Stock-based compensation expense | $7 | $14 | - As of June 30, 2025, **31,250 nonvested restricted stock units** remained outstanding with a weighted average grant-date fair value of **$4.35 per share**[64](index=64&type=chunk) - Unrecognized compensation cost for nonvested restricted stock units totaled approximately **$102,000**, with an expected recognition period of **3.6 years**[64](index=64&type=chunk) [Note 6 – Significant Customers, Concentrations of Credit Risk, and Geographic Information](index=20&type=section&id=Note%206%20%E2%80%93%20Significant%20Customers%2C%20Concentrations%20of%20Credit%20Risk%2C%20and%20Geographic%20Information) Interlink operates as a single segment and reports revenue concentrations from key customers and geographic regions. Customer A and B represented significant portions of revenue, while the United States, Asia, and Europe were the primary geographic markets. The company monitors credit risk and maintains an allowance for credit losses Revenue Concentration by Customer (% of total revenues) | Customer | Three Months Ended June 30, 2025 (% of total revenues) | Three Months Ended June 30, 2024 (% of total revenues) | Six Months Ended June 30, 2025 (% of total revenues) | Six Months Ended June 30, 2024 (% of total revenues) | | :--------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Customer A | 17% | 16% | 19% | 15% | | Customer B | 13% | 24% | 10% | 20% | Revenue by Geographic Area (in thousands) | Geographic Area (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $1,728 | $1,403 | $2,830 | $2,848 | | Asia and Middle East | $424 | $478 | $793 | $1,207 | | Europe and other | $1,262 | $1,017 | $2,455 | $1,967 | | Total Revenue | $3,414 | $2,898 | $6,078 | $6,022 | - At June 30, 2025, three customers accounted for **22%, 21%, and 10%** of total accounts receivable, with an allowance for credit losses of approximately **$46,000**[67](index=67&type=chunk) [Note 7 – Related Party Transactions](index=21&type=section&id=Note%207%20%E2%80%93%20Related%20Party%20Transactions) Interlink engages in related party transactions with Qualstar Corporation and BKF Capital Group, Inc., both controlled by Steven N. Bronson. These transactions involve mutual facilities sharing, consulting services, and expense reimbursements, with balances due to and from these entities fluctuating quarterly - Steven N. Bronson, CEO of Interlink, also controls Qualstar Corporation and BKF Capital Group, Inc., leading to related party transactions[69](index=69&type=chunk)[70](index=70&type=chunk) - Transactions include mutual facilities sharing agreements, consulting services, and expense reimbursements[69](index=69&type=chunk)[70](index=70&type=chunk) Related Party Balances (in thousands) | Related Party | Balance at June 30, 2025 (Due from, in thousands) | Balance at June 30, 2025 (Due to, in thousands) | | :-------------- | :---------------------------------------------- | :-------------------------------------------- | | Qualstar | $17 | $18 | | BKF Capital | $0 | $0 | [Note 8 – Income Taxes](index=22&type=section&id=Note%208%20%E2%80%93%20Income%20Taxes) Interlink's income tax expense and effective tax rate are influenced by the mix of domestic and foreign pre-tax earnings/losses, permanent differences, and the ability to utilize net operating loss (NOL) carryforwards. The company maintains a valuation allowance against federal, state, and certain foreign deferred tax assets due to uncertainty of recovery - Income taxes were **9.9%** of pre-tax income for Q2 2025 (vs. 3.4% of pre-tax loss in Q2 2024) and **6.4%** of pre-tax loss for H1 2025 (vs. 3.1% in H1 2024)[71](index=71&type=chunk) - The effective tax rate varies from the U.S. statutory rate of **21%** due to the mix of domestic and foreign earnings/losses and valuation allowances on domestic and certain foreign deferred tax assets[71](index=71&type=chunk)[72](index=72&type=chunk) - Of the **$2.3 million** cash at June 30, 2025, **$1.5 million** was held by foreign subsidiaries, with methods available for repatriation without significant tax effects[74](index=74&type=chunk) [Note 9 – Commitments and Contingencies](index=24&type=section&id=Note%209%20%E2%80%93%20Commitments%20and%20Contingencies) This note details the company's lease agreements for various facilities globally, outlining lease terms, payments, and related assets/liabilities. It also covers the company's policies on litigation, product warranties, intellectual property indemnities, and director/officer indemnities, noting that historically, these have not had a material negative effect on the business - Interlink leases facilities under non-cancellable operating leases expiring through 2029, with a weighted average incremental borrowing rate of **9.5%** for capitalized ROU assets and lease liabilities[75](index=75&type=chunk)[76](index=76&type=chunk) Lease Liabilities and Right-of-Use Assets (in thousands) | Lease Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Current lease liabilities | $353 | $352 | | Long-term lease liabilities | $641 | $777 | | Right-of-use assets | $931 | $1,064 | | Weighted average remaining lease term | 2.0 years | 2.2 years | - Operating lease costs for the three months ended June 30, 2025, were approximately **$136,000**, with $76,000 in cost of revenue and $60,000 in operating expenses[87](index=87&type=chunk) - The company is not party to any legal proceedings as of June 30, 2025, and historically, warranty returns and indemnification claims have not been material[89](index=89&type=chunk)[90](index=90&type=chunk)[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Interlink's financial condition and operational results, analyzing revenues, expenses, liquidity, and cash flows for the reporting periods [Overview](index=29&type=section&id=Overview) Interlink Electronics, Inc. is a global leader in HMI and IoT sensors, expanding its technology and market reach through strategic acquisitions - Interlink is a leading provider of sensors and printed electronics for HMI and IoT solutions, with products including force/touch sensors and gas/environmental sensors[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - The company serves global blue-chip customers across medical, industrial, automotive, wearables, IoT, and other specialty markets[98](index=98&type=chunk)[101](index=101&type=chunk) - Strategic acquisitions (Calman in 2023, Conductive Transfers in 2024) have expanded HMI design, manufacturing expertise, and innovative printed electronic technologies, including functional e-textiles and wearable tech[99](index=99&type=chunk)[102](index=102&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company prepares its financial statements in accordance with GAAP, requiring management to make estimates and assumptions that affect reported amounts. There have been no material changes to the critical accounting policies and estimates described in the Annual Report on Form 10-K filed on March 27, 2025 - Financial statements are prepared under GAAP, involving significant management estimates and assumptions[103](index=103&type=chunk) - No material changes to critical accounting policies and estimates since the Annual Report on Form 10-K filed on March 27, 2025[104](index=104&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=31&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) The company has reviewed all recently issued accounting pronouncements and concluded that they are either not applicable or not expected to have a material impact on its financial statements - Recently issued accounting pronouncements are not applicable or not expected to be material to the financial statements[105](index=105&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the three and six months ended June 30, 2025, compared to the prior year. It details changes in revenue by market, gross profit, operating expenses (R&D, SG&A), other income/expense, and income taxes, highlighting key drivers for these fluctuations [Comparison of Three Months Ended June 30, 2025 and 2024](index=32&type=section&id=Comparison%20of%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Compares the company's financial performance, including revenue, gross profit, and expenses, for the second quarter of 2025 and 2024 Quarterly Financial Performance (in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Revenue | $3,414 | $2,898 | $516 | 17.8% | | Gross profit | $1,538 | $1,305 | $233 | 17.9% | | Engineering, research and development | $363 | $510 | $(147) | (28.8)% | | Selling, general and administrative | $1,109 | $1,108 | $1 | 0.1% | | Other income (expense), net | $25 | $16 | $9 | 56.3% | | Net income (loss) | $100 | $(307) | $407 | 132.6% | - Revenue **increased by 17.8%** due to higher demand in industrial (up **87.0%**) and automotive (up **130.8%**) markets, and standard products (up **10.6%**), offsetting a decrease in medical market revenue (down **22.2%**)[108](index=108&type=chunk)[109](index=109&type=chunk) - Gross profit **increased by 17.9% to $1,538,000**, with gross margin percentage remaining flat at **45.0%**[107](index=107&type=chunk)[110](index=110&type=chunk) - Engineering and R&D expenses **decreased by 28.8%** due to lower employee and consultant compensation costs[111](index=111&type=chunk) [Comparison of Six Months Ended June 30, 2025 and 2024](index=35&type=section&id=Comparison%20of%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Compares the company's financial performance, including revenue, gross profit, and expenses, for the first half of 2025 and 2024 Half-Year Financial Performance (in thousands) | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Revenue | $6,078 | $6,022 | $56 | 0.9% | | Gross profit | $2,487 | $2,558 | $(71) | (2.8)% | | Engineering, research and development | $797 | $1,086 | $(289) | (26.6)% | | Selling, general and administrative | $2,473 | $2,536 | $(63) | (2.5)% | | Other income (expense), net | $30 | $48 | $(18) | (37.5)% | | Net income (loss) | $(705) | $(1,048) | $343 | 32.7% | - Revenue **increased slightly by 0.9%**, driven by growth in industrial (up **44.2%**) and automotive (up **165.9%**) markets, while medical revenue decreased by **30.0%** and standard products by **2.2%**[117](index=117&type=chunk) - Gross profit **decreased by 2.8% to $2,487,000**, with gross margin percentage declining from **42.5% to 40.9%** due to changes in product and customer mix[107](index=107&type=chunk)[118](index=118&type=chunk) - Engineering and R&D costs **decreased by 26.6%** due to lower compensation costs, and SG&A costs **decreased by 2.5%** due to lower compensation expenses, partially offset by higher consultant fees[119](index=119&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses Interlink's cash position, working capital, and potential future capital needs, including implications of equity or debt financing Liquidity and Capital Resources Summary (in millions) | Metric | June 30, 2025 (in millions) | | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $2.3 | | Working capital | $5.0 | | Indebtedness | $0 | | Foreign subsidiaries cash | $1.5 | - The company has **200,000 shares** of **8.0% Series A Convertible Preferred Stock** outstanding, with an aggregate liquidation preference of **$5.0 million**, paying monthly cash dividends[126](index=126&type=chunk) - Management believes existing cash is sufficient for current operations but may raise additional capital through equity or debt, potentially leading to stockholder dilution or restrictive covenants[127](index=127&type=chunk) [Cash Flow Analysis](index=39&type=section&id=Cash%20Flow%20Analysis) This section provides a summary of cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024. It details the drivers behind the net cash used in each category, including net loss, non-cash adjustments, changes in working capital, capital expenditures, and preferred stock dividends Cash Flow Activities (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash (used in) operating activities | $(409) | $(76) | | Net cash (used in) investing activities | $(34) | $(20) | | Net cash (used in) financing activities | $(200) | $(200) | - Net cash used in operating activities **increased to $409,000** in H1 2025 (from $76,000 in H1 2024), primarily due to a net loss of $705,000 and changes in operating assets and liabilities[129](index=129&type=chunk) - Accounts receivable **increased from $1.6 million to $2.1 million**, while inventories **decreased from $2.0 million to $1.7 million**, impacting operating cash flows[130](index=130&type=chunk) - Investing activities primarily consisted of property, plant, and equipment purchases, and financing activities were solely for preferred stock dividend payments[131](index=131&type=chunk)[132](index=132&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) Interlink Electronics, Inc. does not have any off-balance sheet arrangements - The company has no off-balance sheet arrangements[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there are no applicable quantitative and qualitative disclosures about market risk for Interlink Electronics, Inc. in this report - The company has no applicable quantitative and qualitative disclosures about market risk[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Details the evaluation of Interlink's disclosure controls and internal controls over financial reporting, concluding their effectiveness with no material changes [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level - As of June 30, 2025, management, with CEO and CFO participation, concluded that disclosure controls and procedures were designed at a reasonable assurance level and were effective[136](index=136&type=chunk) [Changes in Internal Controls over Financial Reporting](index=40&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[137](index=137&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=40&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) Management acknowledges that control systems provide reasonable, not absolute, assurance and are subject to inherent limitations - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to human diligence, judgment lapses, and potential breakdowns[139](index=139&type=chunk) [PART II – OTHER INFORMATION](index=41&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section includes other required information such as risk factors, other disclosures, exhibits, and signatures [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors outlined in the company's Annual Report on Form 10-K filed on March 27, 2025. No material changes to these risk factors occurred during the three months ended June 30, 2025 - No material changes to risk factors occurred during the three months ended June 30, 2025, as referenced in the Annual Report on Form 10-K[141](index=141&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) During the three months ended June 30, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[142](index=142&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications (302 and 906), XBRL documents, and the iXBRL cover page - The report includes various exhibits such as Articles of Incorporation, Bylaws, certifications (31.1, 31.2, 32.1), and XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[144](index=144&type=chunk) [Signatures](index=43&type=section&id=Signatures) The report is duly signed on behalf of Interlink Electronics, Inc. by Ryan J. Hoffman, Chief Financial Officer, on August 13, 2025 - The report was signed by Ryan J. Hoffman, Chief Financial Officer, on August 13, 2025[146](index=146&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended 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: 001-36210 LiqTech International, Inc. (Exact name of registrant as specified in its charter) Nevada 20-1431677 (St ...

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 June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from ________ to ________ Commission File Number: 001-41792 Inspire Veterinary Partners, Inc. (Exact name of registrant as specified in its charter) | Nevada | 85-4359258 | | --- | --- | ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents flyExclusive, Inc.'s unaudited consolidated financial statements and management's financial analysis [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents flyExclusive, Inc.'s unaudited consolidated financial statements, including balance sheets, income, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Total assets decreased to **$443.4 million**, liabilities to **$496.0 million**, and stockholders' deficit worsened to **$(254.9) million** Condensed Consolidated Balance Sheets (Unaudited) | Metric | Dec 31, 2024 (Revised, in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------- | :--------------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $31,694 | $15,819 | $(15,875) | | Investments in securities | $65,541 | $0 | $(65,541) | | Total current assets | $143,969 | $65,508 | $(78,461) | | Total assets | $538,290 | $443,443 | $(94,847) | | Total current liabilities | $294,753 | $260,169 | $(34,584) | | Total liabilities | $549,962 | $496,036 | $(53,926) | | Total stockholders' (deficit) / equity | $(210,058) | $(254,904) | $(44,846) | [Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20(Unaudited)) Net loss improved to **$(39.2) million** for the six months ended June 30, 2025, with revenue up **12.9%** to **$179.5 million**, aided by warrant fair value changes Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - Six Months Ended June 30 | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenue | $179,457 | $158,985 | $20,472 | 12.9% | | Total costs and expenses | $206,553 | $208,252 | $(1,699) | (0.8)% | | Loss from operations | $(27,096) | $(49,267) | $22,171 | (45.0)% | | Net loss | $(39,176) | $(60,844) | $21,668 | (35.6)% | | Net loss attributable to flyExclusive, Inc. | $(10,213) | $(10,994) | $781 | (7.1)% | | Basic and Diluted EPS | $(0.55) | $(0.67) | $0.12 | (17.9)% | Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - Three Months Ended June 30 | Metric (Three Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenue | $91,332 | $79,013 | $12,319 | 15.6% | | Total costs and expenses | $103,692 | $100,855 | $2,837 | 2.8% | | Loss from operations | $(12,360) | $(21,842) | $9,482 | (43.4)% | | Net loss | $(16,129) | $(27,854) | $11,725 | (42.1)% | | Net loss attributable to flyExclusive, Inc. | $(4,764) | $(5,153) | $389 | (7.5)% | | Basic and Diluted EPS | $(0.26) | $(0.32) | $0.06 | (18.8)% | [Condensed Consolidated Statements of Stockholders' Equity (Deficit) / Members' Equity (Deficit) and Temporary Equity (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)%20%2F%20Members'%20Equity%20(Deficit)%20and%20Temporary%20Equity%20(Unaudited)) Accumulated deficit increased to **$(287.0) million**, with temporary equity from redeemable noncontrolling interest and preferred stock showing changes Condensed Consolidated Statements of Stockholders' Equity (Deficit) / Members' Equity (Deficit) and Temporary Equity (Unaudited) | Metric | Dec 31, 2024 (Revised, in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :------------------------------------------ | :--------------------------------- | :-------------------------- | :-------------------- | | Redeemable noncontrolling interest | $159,514 | $155,122 | $(4,392) | | Series A preferred stock | $23,799 | $25,838 | $2,039 | | Series B preferred stock | $15,073 | $21,351 | $6,278 | | Additional paid-in capital | $0 | $25,599 | $25,599 | | Accumulated deficit | $(233,441) | $(286,958) | $(53,517) | | Total flyExclusive stockholders' (deficit) / equity | $(233,489) | $(261,351) | $(27,862) | | Noncontrolling interests | $23,431 | $6,447 | $(16,984) | | Total stockholders' (deficit) / equity | $(210,058) | $(254,904) | $(44,846) | - The company corrected an error in prior period financial statements related to the allocation of redeemable non-controlling interest accretion, which had no impact on previously reported loss from operations, net loss, loss per share, temporary equity, or permanent equity[36](index=36&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Net cash decreased by **$15.9 million**, primarily from **$87.7 million** used in financing and **$10.1 million** in operations, offset by **$81.9 million** from investing Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :-------------------------------------------- | :------------------ | :------------------ | :-------------------- | | Net cash flows from operating activities | $(10,101) | $(42,170) | $32,069 | | Net cash flows from investing activities | $81,949 | $3,451 | $78,498 | | Net cash flows from financing activities | $(87,723) | $36,432 | $(124,155) | | Net increase (decrease) in cash and cash equivalents | $(15,875) | $(2,287) | $(13,588) | | Cash and cash equivalents at end of period | $15,819 | $9,339 | $6,480 | - Cash used in operating activities significantly decreased from **$42.17 million** in 2024 to **$10.10 million** in 2025, primarily due to a lower net loss and favorable changes in certain non-cash adjustments[241](index=241&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk) - Investing activities provided substantial cash in 2025 (**$81.95 million**) compared to 2024 (**$3.45 million**), driven by higher proceeds from sales of property and equipment and investments[241](index=241&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk) - Financing activities shifted from providing cash in 2024 (**$36.43 million**) to using significant cash in 2025 (**$87.72 million**), mainly due to higher debt repayments and net cash distributions to non-controlling interests[27](index=27&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section details accounting policies and financial line items, covering organization, EPS, segments, fair value, VIEs, revenue, and asset/liability accounts [1. Organization and Operations](index=14&type=section&id=1.%20Organization%20and%20Operations) flyExclusive operates a private jet charter and MRO business; despite deficits, management expects sufficient liquidity for 12 months post-December 2023 merger - flyExclusive is a premier owner/operator of jet aircraft and aircraft sales, focusing on private jet charter, with offerings including ad hoc flights, jet club, partnership, and fractional programs[30](index=30&type=chunk) - The company launched its MRO operations in 2021, providing maintenance and refurbishment services to third parties and its own fleet[31](index=31&type=chunk) - On December 27, 2023, EG Acquisition Corp. and LGM consummated a business combination (Merger), with EGA changing its name to flyExclusive, Inc[32](index=32&type=chunk) - As of June 30, 2025, the Company had an accumulated deficit of **$286.96 million** and a working capital deficit of **$194.66 million**; net losses were **$39.18 million** for the six months ended June 30, 2025[42](index=42&type=chunk) - Management believes current cash, operating cash flows, and fractional program proceeds will fund operations for at least 12 months, but additional capital may be needed for growth[45](index=45&type=chunk) [2. Summary of Significant Accounting Policies](index=16&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Key accounting policies include estimates, single operating segment, warrant classification, noncontrolling interests, aircraft sales, and recent accounting pronouncements - The company operates and manages its business as one operating segment: private aviation services, with all ancillary revenue sources supporting this core service[47](index=47&type=chunk) - Public Warrants, Private Placement Warrants, and Series A Penny Warrants are classified as derivative liabilities and measured at fair value, with changes recognized in the income statement[50](index=50&type=chunk)[51](index=51&type=chunk) - Series B Penny Warrants are classified as permanent equity because they are indexed to the Company's own stock and settled in a fixed number of Class A Common Stock shares[50](index=50&type=chunk) - Redeemable noncontrolling interest is classified as temporary equity because redemption for cash is not solely within the company's control, and changes in redemption value are accreted using the interest method[63](index=63&type=chunk)[64](index=64&type=chunk) - Aircraft held for sale are recorded at the lower of carrying value and fair value less costs to sell, with depreciation discontinued[69](index=69&type=chunk) - The company adopted ASU 2023-07 (Segment Reporting) in Q4 2024, expanding segment disclosures, and is evaluating ASU 2024-03 (Expense Disaggregation) for future impact[75](index=75&type=chunk)[77](index=77&type=chunk) [3. Earnings (Loss) Per Share](index=22&type=section&id=3.%20Earnings%20(Loss)%20Per%20Share) Basic and diluted EPS improved to **$(0.55)** from **$(0.67)** for the six months ended June 30, 2025, based on net loss and weighted average shares Earnings (Loss) Per Share | Metric (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Basic Net loss attributable to common stockholders (in thousands) | $(14,549) | $(12,251) | | Weighted Average Common Shares Outstanding (Basic & Diluted) | 26,471,721 | 18,237,732 | | Basic and Diluted Earnings (Loss) Per Share | $(0.55) | $(0.67) | - Weighted average shares issuable under Series A and Series B Penny Warrants are included in the denominator for basic and diluted EPS calculations[78](index=78&type=chunk)[79](index=79&type=chunk) - Potentially dilutive securities, including Public Warrants, Private Placement Warrants, Series A Penny Warrants, and Class B Common Stock, were excluded from diluted EPS calculation because their effect would have been anti-dilutive[79](index=79&type=chunk) [4. Segment Information](index=22&type=section&id=4.%20Segment%20Information) flyExclusive operates as a single reportable segment, private aviation services, encompassing charters, fractional ownership, MRO, and aircraft management - The company has one reportable segment, private aviation services, managed on a consolidated basis by the CEO[80](index=80&type=chunk) - The private aviation services segment encompasses charters, aircraft partnerships, jet club memberships, fractional ownership shares, MRO, and aircraft management services[81](index=81&type=chunk) Segment Information | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Total Revenue | $179,457 | $158,985 | | Cost of revenue | $154,434 | $146,989 | | Selling, general and administrative | $41,288 | $46,673 | | Depreciation and amortization | $12,021 | $13,173 | | Net Loss | $(39,176) | $(60,844) | [5. Fair Value Measurements](index=23&type=section&id=5.%20Fair%20Value%20Measurements) Assets and liabilities are measured at fair value, classified into Level 1 (cash equivalents), Level 2 (Private Placement Warrants), and Level 3 (Series A Penny Warrants) Fair Value Measurements at June 30, 2025 | Fair Value Measurements at June 30, 2025 (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------------- | :------ | :------ | :------ | :---- | | Cash equivalents: Money market mutual funds | $5,156 | — | — | $5,156 | | Warrant liability - public warrants | $277 | — | — | $277 | | Warrant liability - private placement warrants | — | $476 | — | $476 | | Warrant liability - Series A penny warrants | — | — | $1,480 | $1,480 | | Total Liabilities | $277 | $476 | $1,480 | $2,233 | Fair Value Measurements at December 31, 2024 | Fair Value Measurements at December 31, 2024 (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------ | :------ | :------ | :------ | :---- | | Cash equivalents: Money market mutual funds | $2,710 | — | — | $2,710 | | Investments in Securities | $849 | $64,692 | — | $65,541 | | Total Assets | $3,559 | $64,692 | — | $68,251 | | Warrant liability - public warrants | $454 | — | — | $454 | | Warrant liability - private placement warrants | — | $780 | — | $780 | | Warrant liability - Series A penny warrants | — | — | $1,780 | $1,780 | | Total Liabilities | $454 | $780 | $1,780 | $3,014 | - The fair value of Series A Penny Warrants is determined using a Monte Carlo simulation with unobservable inputs for volatility, classifying it as a Level 3 measurement[88](index=88&type=chunk) [6. Variable Interest Entities](index=25&type=section&id=6.%20Variable%20Interest%20Entities) The company consolidates Variable Interest Entities (VIEs), including single-asset LLCs and a paint facility, as the primary beneficiary - flyExclusive has variable interests in single-asset LLCs (SAEs) holding aircraft and a Paint Entity, which are classified as VIEs[92](index=92&type=chunk)[94](index=94&type=chunk) - The company is the primary beneficiary of these VIEs, consolidating their financial statements, due to its control over their activities and exposure to their economic performance[95](index=95&type=chunk)[96](index=96&type=chunk) VIE Assets and Liabilities | VIE Assets and Liabilities (in thousands) | June 30, 2025 | Dec 31, 2024 | | :-------------------------------------- | :------------ | :----------- | | Cash | $655 | $737 | | Property and equipment, net | $55,685 | $61,769 | | Long-term notes payable, current portion | $7,565 | $7,690 | | Long-term notes payable, non-current portion | $26,244 | $29,619 | - The company provided financial contributions to VIEs of **$633 thousand** and **$260 thousand** during the six months ended June 30, 2025 and 2024, respectively[98](index=98&type=chunk) [7. Revenue](index=27&type=section&id=7.%20Revenue) Revenue is disaggregated by service type, with flights as the largest component; deferred revenue decreased from **$149.5 million** to **$144.4 million** Revenue by Service Type | Revenue by Service Type (Six Months Ended June 30, in thousands) | 2025 | 2024 | | :------------------------------------------------- | :-------- | :-------- | | Flights | $168,516 | $150,504 | | Aircraft Management Services | $1,317 | — | | Memberships | $1,323 | $2,806 | | MRO | $4,633 | $3,734 | | Fractional ownership purchase price | $3,668 | $1,941 | | Total Revenue | $179,457 | $158,985 | Deferred Revenue Rollforward | Deferred Revenue Rollforward (Six Months Ended June 30, 2025, in thousands) | Amount | | :-------------------------------------------------------- | :-------- | | Balance as of December 31, 2024 | $149,517 | | Revenue recognized | $(160,006) | | Revenue deferred | $154,852 | | Balance as of June 30, 2025 | $144,363 | - Revenue streams include membership fees and flight charges for Jet Club and Charter, time and materials for MRO, allocated purchase price and flight charges for Fractional Ownership, and fixed monthly fees for Aircraft Management Services[102](index=102&type=chunk) [8. Other Receivables](index=27&type=section&id=8.%20Other%20Receivables) Other receivables, primarily federal excise tax and rebate receivables, increased from **$7.1 million** to **$7.9 million** Other Receivables | Other Receivables (in thousands) | June 30, 2025 | Dec 31, 2024 | | :----------------------------- | :------------ | :----------- | | Rebate receivables | $1,256 | $1,117 | | Federal excise tax receivable | $6,121 | $5,414 | | Insurance settlement in process | $15 | — | | Income tax receivable | $460 | $460 | | Other | $44 | $149 | | Total | $7,896 | $7,140 | [9. Parts and Supplies Inventory](index=28&type=section&id=9.%20Parts%20and%20Supplies%20Inventory) Parts and supplies inventory, net of reserve, increased from **$5.7 million** to **$6.3 million** due to higher materials Parts and Supplies Inventory | Parts and Supplies Inventory (in thousands) | June 30, 2025 | Dec 31, 2024 | | :---------------------------------------- | :------------ | :----------- | | Aircraft parts | $5,206 | $5,101 | | Materials and supplies | $1,325 | $753 | | Less: parts and supplies inventory reserve | $(206) | $(196) | | Total | $6,325 | $5,658 | [10. Prepaid Expenses and Other Current Assets](index=28&type=section&id=10.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid expenses and other current assets increased from **$7.8 million** to **$9.4 million**, driven by higher prepaid insurance Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets (in thousands) | June 30, 2025 | Dec 31, 2024 | | :----------------------------------------------------- | :------------ | :----------- | | Prepaid vendor expenses | $3,109 | $3,239 | | Prepaid insurance | $3,133 | $690 | | Prepaid directors and officers insurance | $1,097 | $2,032 | | Prepaid maintenance | $391 | $154 | | Prepaid non-aircraft subscriptions | $187 | $407 | | MRO revenue in excess of billings | $672 | $326 | | Deferred commission | $854 | $923 | | Total | $9,443 | $7,771 | [11. Investments in Securities](index=28&type=section&id=11.%20Investments%20in%20Securities) The company held no investments in securities as of June 30, 2025, a significant change from **$65.5 million** in bonds at December 31, 2024 - The company had no investments in securities as of June 30, 2025[106](index=106&type=chunk) Investments in Securities at December 31, 2024 | Investments in Securities at December 31, 2024 (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :---------------------------------------------------------- | :------------- | :--------------------- | :---------------------- | :--------- | | U.S. Treasury bills | $55,009 | $190 | — | $55,199 | | Municipal bonds | $9,631 | $38 | $(351) | $9,318 | | Corporate/government bonds | $479 | $33 | — | $512 | | Other bonds | $478 | $34 | — | $512 | | Total | $65,597 | $295 | $(351) | $65,541 | [12. Property and Equipment, Net](index=29&type=section&id=12.%20Property%20and%20Equipment,%20Net) Property and equipment, net, decreased from **$259.9 million** to **$232.8 million**, due to reduced transportation equipment and increased depreciation Property and Equipment, Net | Property and Equipment, Net (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--------------------------------------- | :------------ | :----------- | | Transportation equipment | $303,458 | $329,416 | | Deposits on transportation equipment | $17,269 | $14,165 | | Less: Accumulated depreciation | $(93,805) | $(89,487) | | Property and equipment, net | $232,781 | $259,874 | - Depreciation expense for property and equipment was **$10.97 million** for the six months ended June 30, 2025, compared to **$12.52 million** for the same period in 2024[108](index=108&type=chunk) [13. Intangible Assets](index=29&type=section&id=13.%20Intangible%20Assets) Intangible assets, net, decreased from **$1.6 million** to **$1.3 million** due to software amortization; the FAA certificate remains at **$0.7 million** Intangible Assets, Net | Intangible Assets, Net (in thousands) | June 30, 2025 | Dec 31, 2024 | | :------------------------------------ | :------------ | :----------- | | Software - in service | $676 | $950 | | FAA certificate | $650 | $650 | | Total acquired intangible assets | $1,326 | $1,600 | - Amortization of intangible assets was **$297 thousand** for the six months ended June 30, 2025, compared to **$602 thousand** for the same period in 2024[110](index=110&type=chunk) Estimated Amortization Expense | Estimated Amortization Expense | Amount (in thousands) | | :----------------------------- | :-------------------- | | Remainder of 2025 | $256 | | 2026 | $332 | | 2027 | $87 | | 2028 | $1 | | 2029 | — | | Thereafter | — | | Total | $676 | [14. Other Current Liabilities](index=30&type=section&id=14.%20Other%20Current%20Liabilities) Other current liabilities remained stable at **$30.2 million**, with **$9.0 million** in ERC payments classified as a liability due to eligibility uncertainty Other Current Liabilities | Other Current Liabilities (in thousands) | June 30, 2025 | Dec 31, 2024 | | :------------------------------------- | :------------ | :----------- | | Accrued vendor payments | $6,322 | $6,528 | | Accrued ERC payments | $9,044 | $9,044 | | Accrued directors and officers insurance | $1,780 | $1,780 | | Accrued employee-related expenses | $9,595 | $10,239 | | Accrued engine expenses | $932 | $713 | | Accrued tax expenses | $1,496 | $1,072 | | Accrued interest | $920 | $472 | | Other | $96 | $96 | | Total | $30,185 | $29,944 | - The company has received **$9.04 million** in Employee Retention Credit (ERC) payments but has classified this amount as a current liability due to uncertainty regarding eligibility[115](index=115&type=chunk) [15. Other Non-Current Liabilities](index=31&type=section&id=15.%20Other%20Non-Current%20Liabilities) Other non-current liabilities, primarily fractional ownership deposits, increased from **$30.3 million** to **$36.7 million** Other Non-Current Liabilities | Other Non-Current Liabilities (in thousands) | June 30, 2025 | Dec 31, 2024 | | :----------------------------------------- | :------------ | :----------- | | Fractional ownership deposits | $36,716 | $30,342 | | Other | — | — | | Total | $36,716 | $30,342 | [16. Debt](index=31&type=section&id=16.%20Debt) Total long-term notes payable decreased from **$189.1 million** to **$111.7 million** due to repayments and a closed revolving line of credit Short-term notes payable | Short-term notes payable (in thousands) | June 30, 2025 | Dec 31, 2024 | | :------------------------------------ | :------------ | :----------- | | Bank 1 | $3,160 | — | | Bank 2 | $5,155 | $5,962 | | Total short-term notes payable | $8,315 | $5,962 | Long-term notes payable | Long-term notes payable (in thousands) | June 30, 2025 | Dec 31, 2024 | | :------------------------------------- | :------------ | :----------- | | Total Long-term notes payable | $111,733 | $189,143 | | Less: Unamortized debt issuance costs and debt discount | $(180) | $(233) | | Less: current portion | $(19,552) | $(84,883) | | Long-term notes payable, non-current portion | $92,001 | $104,027 | - The company closed its **$60 million** revolving line of credit in March 2025, with the full **$59.54 million** balance paid[146](index=146&type=chunk) - The company was not in compliance with certain financial covenants as of December 31, 2024, but obtained waiver letters from lenders; as of June 30, 2025, the aggregate balance of debt with waivers was **$0**[147](index=147&type=chunk)[149](index=149&type=chunk) - New long-term promissory notes were issued in February, March, April, and May 2024, totaling approximately **$38.5 million**, with varying interest rates and maturity dates[151](index=151&type=chunk)[152](index=152&type=chunk) - A Senior Secured Note of up to **$25.77 million** was entered into in January 2024 to finance aircraft for the fractional ownership program, with an interest rate of **13.00%** for withdrawn amounts[195](index=195&type=chunk)[197](index=197&type=chunk) [17. Leases](index=33&type=section&id=17.%20Leases) The company has various operating and finance lease arrangements for real estate and aircraft, with lease costs totaling **$13.7 million** and significant future obligations - The company leases real estate and **35** aircraft (as of June 30, 2025) under non-cancellable operating leases, and **2** aircraft under finance leases[153](index=153&type=chunk) Lease Costs | Lease Costs (Six Months Ended June 30, in thousands) | 2025 | 2024 | | :------------------------------------------------- | :-------- | :-------- | | Operating lease cost | $11,244 | $10,787 | | Short-term lease cost | $905 | $727 | | Finance lease cost: Amortization of right-of-use assets | $695 | — | | Finance lease cost: Interest on lease liabilities | $819 | — | | Total lease costs | $13,663 | $11,514 | Future Operating Lease Payments as of June 30, 2025 | Future Operating Lease Payments as of June 30, 2025 (in thousands) | Amount | | :--------------------------------------------------------------- | :-------- | | Remainder of 2025 | $10,681 | | 2026 | $19,775 | | 2027 | $15,210 | | 2028 | $7,896 | | 2029 | $5,395 | | Thereafter | $40,524 | | Total undiscounted cash flows | $99,481 | | Present value of lease liabilities | $69,690 | Future Finance Lease Payments as of June 30, 2025 | Future Finance Lease Payments as of June 30, 2025 (in thousands) | Amount | | :--------------------------------------------------------------- | :-------- | | Remainder of 2025 | $3,972 | | 2026 | $6,736 | | 2027 | $5,445 | | 2028 | $4,411 | | 2029 | $3,121 | | Thereafter | $790 | | Total undiscounted cash flows | $24,475 | | Present value of lease liabilities | $20,737 | Future Repurchase Contingencies as of June 30, 2025 | Future Repurchase Contingencies as of June 30, 2025 (in thousands) | Amount | | :--------------------------------------------------------------- | :-------- | | Remainder of 2025 | $2,400 | | 2026 | $21,562 | | 2027 | $23,486 | | 2028 | $5,037 | | 2029 | $5,556 | | Thereafter | $1,642 | | Total | $59,683 | [18. Warrant Liabilities](index=37&type=section&id=18.%20Warrant%20Liabilities) Public, Private Placement, and Series A Penny Warrants are derivative liabilities; Series B Penny Warrants are equity; a **$0.8 million** gain on warrant fair value was recorded - Public Warrants, Private Placement Warrants, and Series A Penny Warrants are classified as derivative liabilities and remeasured at fair value each reporting period[163](index=163&type=chunk) - As of June 30, 2025, there were **4,333,333** Private Placement Warrants and **2,519,869** Public Warrants outstanding, in addition to Penny Warrants[166](index=166&type=chunk) - For the six months ended June 30, 2025, the company recorded a gain of **$781 thousand** on the change in fair value of warrants, compared to a loss of **$3.68 million** for the same period in 2024[168](index=168&type=chunk) Warrant Liabilities | Warrant Liabilities (in thousands) | June 30, 2025 | Dec 31, 2024 | | :------------------------------- | :------------ | :----------- | | Total Warrant Liabilities | $2,233 | $3,014 | [19. Employee Benefits](index=39&type=section&id=19.%20Employee%20Benefits) The company offers a 401(k) plan with a **50%** match on the first **8%** of compensation, vesting after **2 years**, with **$0.9 million** in contributions - The company matches **50%** of the first **8%** of employee contributions to its 401(k) plan, with **100%** vesting after **2 years** of service[169](index=169&type=chunk) - Company contributions to the 401(k) plan were **$905 thousand** for the six months ended June 30, 2025, compared to **$839 thousand** for the same period in 2024[170](index=170&type=chunk) [20. Stock-based Compensation](index=39&type=section&id=20.%20Stock-based%20Compensation) The 2023 Equity Incentive Plan has **6 million** shares reserved, with **$7.9 million** unrecognized compensation expense; the ESPP has **1.5 million** shares reserved but no purchases - The 2023 Equity Incentive Plan has **6,000,000** shares of Class A Common Stock reserved for future issuance, with **1,200,000** shares available as of June 30, 2025[172](index=172&type=chunk) - Unrecognized compensation expense associated with outstanding stock options was **$7.94 million** at June 30, 2025[172](index=172&type=chunk) - The Employee Stock Purchase Plan (ESPP) has **1,500,000** shares of Class A Common Stock reserved, but no shares have been purchased by employees as of June 30, 2025[175](index=175&type=chunk) [21. Income Taxes](index=40&type=section&id=21.%20Income%20Taxes) The effective tax rate was **0%** due to losses allocated to non-controlling interest, with a full valuation allowance against deferred tax assets - The company's effective tax rate was **0%** for the three and six months ended June 30, 2025, differing from the statutory rate of **21%** due to losses allocated to non-controlling interest[177](index=177&type=chunk) - A full valuation allowance has been recorded against deferred tax assets as of June 30, 2025, and will be maintained until sufficient evidence supports its reversal[178](index=178&type=chunk) - Tax years from 2021 to present generally remain open to examination by relevant taxing jurisdictions[179](index=179&type=chunk) [22. Related Party Transactions](index=40&type=section&id=22.%20Related%20Party%20Transactions) The company engages in regular related party transactions, including fuel purchases, leases, and charter revenue, with its majority owner's entities, reporting related receivables, payables, and notes - The company purchased **$706 thousand** in fuel from LGMV subsidiaries for the six months ended June 30, 2025, representing approximately **2%** of total fuel purchases[182](index=182&type=chunk) - Rent expense to LGMV subsidiaries totaled **$2.07 million** for the six months ended June 30, 2025[183](index=183&type=chunk) - Charter flight revenue from owners of subsidiaries and Lessor VIEs was **$7.29 million** for the six months ended June 30, 2025[185](index=185&type=chunk) - Short-term accounts receivable from related parties totaled **$1.23 million** as of June 30, 2025[187](index=187&type=chunk) - A senior secured note of **$15.87 million** was issued to the Sponsor in December 2023, with a **14%** interest rate and maturity extended to January 1, 2027[189](index=189&type=chunk) - An additional promissory note with the EGA Sponsor for **$3.95 million** was cancelled on March 21, 2025, in exchange for Series B Preferred Stock and warrants[191](index=191&type=chunk)[193](index=193&type=chunk) [23. Commitments and Contingencies](index=43&type=section&id=23.%20Commitments%20and%20Contingencies) The company faces a legal dispute with Wheels Up, a Tax Receivable Agreement with potential **$7 million** payment, and **$59.7 million** in future leased aircraft repurchase contingencies - flyExclusive is involved in a lawsuit with Wheels Up Partners, LLC (WUP) following the termination of their Fleet Guaranteed Revenue Program Agreement, with WUP alleging breach of contract and seeking unspecified compensatory damages[203](index=203&type=chunk)[204](index=204&type=chunk) - The company has a Tax Receivable Agreement (TRA) with existing equity holders, potentially requiring a lump sum payment of up to **$7 million** upon an Early Termination Event[207](index=207&type=chunk)[209](index=209&type=chunk) Future Repurchase Contingencies as of June 30, 2025 | Future Repurchase Contingencies as of June 30, 2025 (in thousands) | Amount | | :--------------------------------------------------------------- | :-------- | | Remainder of 2025 | $2,400 | | 2026 | $21,562 | | 2027 | $23,486 | | 2028 | $5,037 | | 2029 | $5,556 | | Thereafter | $1,642 | | Total | $59,683 | [24. Stockholders' Equity / Members' Deficit and Noncontrolling Interests](index=45&type=section&id=24.%20Stockholders'%20Equity%20%2F%20Members'%20Deficit%20and%20Noncontrolling%20Interests) Authorized stock includes preferred and common shares; Series A and B Preferred Stock are temporary equity, and redeemable noncontrolling interest was **$155.1 million** - The company is authorized to issue **325,000,000** shares, including **25,000,000** preferred, **200,000,000** Class A Common, and **100,000,000** Class B Common shares[213](index=213&type=chunk) - **25,000** shares of Series A Preferred Stock were issued in March 2024, accruing dividends annually and subject to redemption by the company or holder after certain anniversaries[214](index=214&type=chunk)[216](index=216&type=chunk)[220](index=220&type=chunk) - **29,737** shares of Series B Preferred Stock were issued in August 2024 and March 2025, accruing dividends quarterly and automatically converting to Class A Common Stock by December 31, 2025, or upon a Subsequent Capital Raise[225](index=225&type=chunk)[226](index=226&type=chunk)[228](index=228&type=chunk)[233](index=233&type=chunk) - Both Series A and Series B Preferred Stock are classified as temporary equity due to redemption rights outside the company's control[223](index=223&type=chunk)[232](index=232&type=chunk) - The redeemable noncontrolling interest, related to **59,930,000** LGM Common Units, was **$155.12 million** at June 30, 2025[237](index=237&type=chunk)[239](index=239&type=chunk) - Noncontrolling interests in consolidated entities are comprised of varying ownership percentages across **11** entities, with net income/loss allocated proportionally[247](index=247&type=chunk)[248](index=248&type=chunk) [25. Subsequent Events](index=50&type=section&id=25.%20Subsequent%20Events) On July 25, 2025, a lock-up restriction on **5.6 million** Class A common shares and warrants was waived for EG Sponsor LLC, aiming for a Russell 2000 Index listing - On July 25, 2025, the company waived a lock-up restriction on **5,625,000** Class A common shares and warrants owned by EG Sponsor LLC to facilitate a potential Russell 2000 Index listing[249](index=249&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section overviews flyExclusive's vertically integrated private aviation business, discussing key operational factors, non-GAAP measures, operating metrics, financial results, liquidity, and critical accounting policies - flyExclusive aims to be the world's most vertically integrated private aviation company, focusing on capital-efficient growth, industry-leading pricing, optimal dispatch availability, in-house training, and a controlled premium customer experience[251](index=251&type=chunk) - The company's business model is diversified, generating charter revenue through jet club, fractional, and MRO programs, and operates as one reportable segment: private aviation services[252](index=252&type=chunk) - Key factors affecting results include economic conditions, competition, pilot availability, the termination of the Wheels Up agreement, and fleet modernization efforts[260](index=260&type=chunk)[261](index=261&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[266](index=266&type=chunk) - The company uses non-GAAP measures like Adjusted EBITDA and Adjusted EBITDAR to assess operating performance and adjust for non-cash and non-core expenses[275](index=275&type=chunk)[276](index=276&type=chunk) [Overview of Our Business](index=51&type=section&id=Overview%20of%20Our%20Business) flyExclusive is a vertically integrated private aviation company with over **100** aircraft, offering jet club, fractional ownership, MRO, and new aircraft management services - flyExclusive operates a fleet of over **100** owned and leased aircraft, including various Citation and Challenger models, and aims for vertical integration in private aviation[251](index=251&type=chunk) - The company's diversified business model includes jet club membership, fractional ownership, and MRO programs, all contributing to charter revenue[252](index=252&type=chunk) - In September 2024, flyExclusive entered an Aircraft Management Services Agreement with Volato Group, Inc., becoming the exclusive provider of such services to Volato, with an option to merge with Volato[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) [Key Factors Affecting Results of Operations](index=52&type=section&id=Key%20Factors%20Affecting%20Results%20of%20Operations) Key factors include economic conditions, competition, pilot availability, Wheels Up agreement termination, fleet modernization, and **$23.6 million** CARES Act support, with **$9.0 million** ERC received - Economic downturns could reduce demand for private aviation services, as customers may view it as a luxury, impacting jet club growth and program interest[260](index=260&type=chunk) - The private aviation market is highly competitive, with factors like price, reliability, safety, and aircraft availability influencing market share[262](index=262&type=chunk) - Volatility in pilot attrition due to training delays and wage increases in the industry poses a risk to operations and financial results[263](index=263&type=chunk) - The termination of the GRP Agreement with Wheels Up in June 2023 had a material impact on revenue, with **$59.0 million** in billed but unrecorded amounts through June 30, 2025[264](index=264&type=chunk) - The company is modernizing its fleet by selling older aircraft and replacing them with newer models to improve availability and operating efficiency, expecting this to continue through fiscal 2025[266](index=266&type=chunk) - The company received **$23.6 million** in grants under the CARES Act's Payroll Support Program and has applied for **$9.5 million** in Employee Retention Credits, receiving **$9.0 million**, though eligibility is still uncertain[268](index=268&type=chunk)[271](index=271&type=chunk) [Non-GAAP Financial Measures](index=54&type=section&id=Non-GAAP%20Financial%20Measures) flyExclusive uses non-GAAP measures, Adjusted EBITDA and Adjusted EBITDAR, to supplement GAAP results, adjusting net loss for interest, taxes, D&A, non-recurring items, and aircraft lease costs - Adjusted EBITDA and Adjusted EBITDAR are non-GAAP measures used to assess operating performance and provide supplemental information to investors[273](index=273&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) - Adjusted EBITDA is calculated by adjusting net loss for interest, income tax, depreciation and amortization, litigation costs, acquisition costs, equity-based compensation, non-cash loss on assets held for sale, realized losses on aircraft sold, loss on extinguishment of debt, change in fair value of warrant liabilities, and SOX control remediation[275](index=275&type=chunk) - Adjusted EBITDAR further adjusts Adjusted EBITDA for aircraft lease costs, offering an alternative view that accounts for different aircraft acquisition methods (outright purchase, finance lease, operating lease)[276](index=276&type=chunk) Adjusted EBITDA and Adjusted EBITDAR Reconciliation | Adjusted EBITDA and Adjusted EBITDAR Reconciliation (Six Months Ended June 30, in thousands) | 2025 | 2024 | | :--------------------------------------------------------------------------------------- | :-------- | :-------- | | Net loss | $(39,176) | $(60,844) | | Interest income | $(939) | $(2,440) | | Interest expense | $9,817 | $10,321 | | Depreciation and amortization | $12,021 | $13,173 | | Loss on extinguishment of debt | $4,161 | — | | Change in fair value of warrant liabilities | $(781) | $3,679 | | Adjusted EBITDA | $(11,598) | $(35,485) | | Aircraft lease costs | $10,290 | $10,167 | | Adjusted EBITDAR | $(1,307) | $(25,318) | [Key Operating Metrics](index=56&type=section&id=Key%20Operating%20Metrics) Key operating metrics, including members contributing to revenues (up **32%** YoY) and total flight hours (up **9.7%** YoY), are monitored for business performance Key Operating Metrics | Key Operating Metrics | June 30, 2025 | June 30, 2024 | Change (%) | | :-------------------- | :------------ | :------------ | :--------- | | Ending aircraft on certificate | 93 | 93 | 0.0% | | Total aircraft operated | 93 | 93 | 0.0% | | Members contributing to revenues* | 1,077 | 816 | 32.0% | | Active members | 984 | 723 | 36.1% | | Average aircraft on certificate | 96 | 98 | (2.0)% | | Aircraft contributing to revenues | 86 | 91 | (5.5)% | | Total flight hours | 35,947 | 32,770 | 9.7% | | Total hours per aircraft | 374.8 | 333.5 | 12.4% | | Members per aircraft* | 12.5 | 9.7 | 28.9% | - Members contributing to revenues increased by **32.0%** for the six months ended June 30, 2025, reflecting growth in contractual retail members[281](index=281&type=chunk)[282](index=282&type=chunk) - Total flight hours increased by **9.7%** for the six months ended June 30, 2025, indicating increased usage of programs and fleet scale[281](index=281&type=chunk)[287](index=287&type=chunk) - Total hours per aircraft increased by **12.4%** to **374.8**, suggesting improved operational efficiency and aircraft utilization[281](index=281&type=chunk)[288](index=288&type=chunk) - **97.1%** of customers were fulfilled on the company's fleet without reliance on third parties for the six months ended June 30, 2025[289](index=289&type=chunk) [Components of Results of Our Operations](index=57&type=section&id=Components%20of%20Results%20of%20Our%20Operations) This section details revenue components (charter, MRO, aircraft management) and expense components (cost of revenue, SG&A, D&A, aircraft sales gains/losses, other income/expense) - Revenue sources include charter flights (jet club, fractional, wholesale, retail), MRO services, and aircraft management fees[290](index=290&type=chunk) - Jet club revenue and membership fees are recognized monthly as the company stands ready to provide flight services[291](index=291&type=chunk) - Fractional revenue from ownership interests is recognized over the contract term on a straight-line basis, with variable flight service consideration recognized in the period of performance[293](index=293&type=chunk) - MRO revenue is recognized over time based on the cost of parts and supplies consumed and labor hours worked[294](index=294&type=chunk) - Cost of revenue includes aircraft lease costs, fuel, payroll, crew travel, insurance, maintenance, subscriptions, and third-party flight costs[296](index=296&type=chunk) - Selling, general and administrative expenses cover non-flight related employee compensation, professional fees, corporate travel, advertising, and corporate lease expenses[297](index=297&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of flyExclusive's financial performance for the six and three months ended June 30, 2025, detailing changes in revenue, costs, and other items [Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024](index=58&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030,%202024) For the six months ended June 30, 2025, revenue increased **12.9%** to **$179.5 million**, and net loss improved **35.6%** to **$(39.2) million** due to lower SG&A and favorable warrant fair value changes Financial Performance - Six Months Ended June 30 | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenue | $179,457 | $158,985 | $20,472 | 12.9% | | Cost of revenue | $154,434 | $146,989 | $7,445 | 5.1% | | Selling, general and administrative | $41,288 | $46,673 | $(5,385) | (11.5)% | | Loss from operations | $(27,096) | $(49,267) | $22,171 | (45.0)% | | Net loss | $(39,176) | $(60,844) | $21,668 | (35.6)% | Revenue by Type - Six Months Ended June 30 | Revenue by Type (Six Months Ended June 30, in thousands) | 2025 | 2024 | Change (in thousands) | Change (%) | | :------------------------------------------------------- | :-------- | :-------- | :-------------------- | :--------- | | Jet club and charter | $156,452 | $146,917 | $9,535 | 6.5% | | Fractional ownership | $17,055 | $8,334 | $8,721 | 104.6% | | Maintenance, repair, and overhaul | $4,633 | $3,734 | $899 | 24.1% | | Aircraft management services | $1,317 | — | $1,317 | 100.0% | - Cost of revenue increased by **$7.4 million** (**5.1%**), primarily due to increases in overhaul program expense, affiliate lift expense, and salaries/wages, partially offset by a decrease in fuel expenses[309](index=309&type=chunk)[311](index=311&type=chunk) - Selling, general and administrative expenses decreased by **$5.4 million** (**11.5%**), mainly due to lower professional fees, advertising, marketing, and bad debt expense, reflecting cost optimization efforts[310](index=310&type=chunk)[312](index=312&type=chunk) - The change in fair value of warrant liabilities resulted in a **$4.5 million** positive impact, shifting from a loss in 2024 to a gain in 2025[305](index=305&type=chunk)[317](index=317&type=chunk) [Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024](index=61&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202024) For the three months ended June 30, 2025, revenue increased **15.6%** to **$91.3 million**, and net loss improved **42.1%** to **$(16.1) million** due to lower SG&A and interest expense Financial Performance - Three Months Ended June 30 | Metric (Three Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenue | $91,332 | $79,013 | $12,319 | 15.6% | | Cost of revenue | $77,609 | $72,755 | $4,854 | 6.7% | | Selling, general and administrative | $20,298 | $21,490 | $(1,192) | (5.5)% | | Loss from operations | $(12,360) | $(21,842) | $9,482 | (43.4)% | | Net loss | $(16,129) | $(27,854) | $11,725 | (42.1)% | Revenue by Type - Three Months Ended June 30 | Revenue by Type (Three Months Ended June 30, in thousands) | 2025 | 2024 | Change (in thousands) | Change (%) | | :------------------------------------------------------- | :-------- | :-------- | :-------------------- | :--------- | | Jet club and charter | $79,454 | $72,493 | $6,961 | 9.6% | | Fractional ownership | $8,454 | $4,276 | $4,178 | 97.7% | | Maintenance, repair, and overhaul | $2,872 | $2,244 | $628 | 28.0% | | Aircraft management services | $552 | — | $552 | 100.0% | - Cost of revenue increased by **$4.9 million** (**7%**), primarily due to increases in overhaul program expense, affiliate lift expense, and salaries/wages, partially offset by a decrease in aircraft repair and maintenance[322](index=322&type=chunk)[329](index=329&type=chunk) - Selling, general and administrative expenses decreased by **$1.2 million** (**6%**), mainly due to lower professional fees, advertising, and marketing costs[323](index=323&type=chunk) - Interest expense decreased by **$1.2 million** (**21.8%**) due to decreased debt[326](index=326&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity primarily from financing and operating cash flows, with **$15.8 million** in cash; management expects sufficient funds for 12 months despite a working capital deficit - Principal liquidity sources are financing activities (equity, convertible debt, Merger proceeds) and operating cash flows, primarily from deferred revenue[330](index=330&type=chunk) - As of June 30, 2025, the company had **$15.8 million** in cash and cash equivalents and **$12.2 million** available borrowing capacity under the term loan[330](index=330&type=chunk) - The company consistently maintains a working capital deficit, common in the private aviation industry, largely due to prepaid flights classified as deferred revenue[331](index=331&type=chunk) - Management believes existing cash, operating cash flows, and available borrowings will be sufficient for the next 12 months, but additional capital may be sought for growth[333](index=333&type=chunk) - Material cash requirements include debt service, lease and purchase obligations, capital expenditures, and general corporate purposes[331](index=331&type=chunk)[334](index=334&type=chunk) - Short-term expenditures for the next 12 months are anticipated to be approximately **$137.4 million**, which the company plans to refinance or settle with cash from operations, investment sales, or incremental borrowing[355](index=355&type=chunk) [Critical Accounting Policies and Estimates](index=68&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section reiterates critical accounting policies for warrant classification, temporary equity for preferred stock, and accounting for aircraft sales and assets held for sale - Public Warrants, Private Placement Warrants, and Series A Penny Warrants are classified as derivative liabilities and measured at fair value[372](index=372&type=chunk) - Series B Penny Warrants are classified as permanent equity because they are indexed to the company's own stock and settled in Class A Common Stock[371](index=371&type=chunk) - Series A and Series B Preferred Stock are classified as temporary equity due to redemption rights outside the company's control[373](index=373&type=chunk) - Gains or losses on aircraft sales are recognized upon completion, and aircraft held for sale are recorded at the lower of carrying value and fair value less costs to sell, with depreciation discontinued[374](index=374&type=chunk)[375](index=375&type=chunk) [Recently Issued/Adopted Accounting Standards](index=70&type=section&id=Recently%20Issued%2FAdopted%20Accounting%20Standards) This section refers to Note 2 for details on recently adopted accounting pronouncements, including ASU 2023-07 (Segment Reporting) and ASU 2024-03 (Expense Disaggregation) - The company adopted ASU 2023-07, "Segment Reporting," in the fourth quarter of 2024, expanding segment disclosures[75](index=75&type=chunk)[377](index=377&type=chunk) - The company is currently evaluating the impact of ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures," which is effective for annual periods beginning after December 15, 2026[77](index=77&type=chunk)[377](index=377&type=chunk) [JOBS Act Accounting Election](index=70&type=section&id=JOBS%20Act%20Accounting%20Election) As an "emerging growth company" under the JOBS Act, flyExclusive uses the extended transition period for new accounting standards and benefits from reduced reporting requirements - flyExclusive has elected to use the extended transition period for complying with new or revised accounting standards as an "emerging growth company" under the JOBS Act[378](index=378&type=chunk) - The company benefits from reduced reporting requirements, such as not being required to provide an auditor's attestation report on internal control over financial reporting (Section 404 of SOX)[379](index=379&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rates and aircraft fuel costs, with no material changes reported compared to the 2024 Annual Report on Form 10-K - The company's principal market risks are related to interest rates and aircraft fuel costs[381](index=381&type=chunk) - There have been no material changes to the market risks disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[381](index=381&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting, as previously reported - As of June 30, 2025, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[383](index=383&type=chunk) - These material weaknesses were previously reported in the Annual Report on Form 10-K for the year ended December 31, 2024[383](index=383&type=chunk) - No other material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, apart from ongoing remediation efforts[384](index=384&type=chunk) [PART II. OTHER INFORMATION](index=72&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits [Item 1. Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings, including the Wheels Up Partners, LLC lawsuit, are described in Note 23 "Commitments and Contingencies" of the financial statements - Legal proceedings are described in Note 23 "Commitments and Contingencies" of the condensed consolidated financial statements[386](index=386&type=chunk) [Item 1A. Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported compared to previous Annual Report on Form 10-K and Quarterly Report on Form 10-Q filings - No material changes to the company's risk factors were reported compared to previous filings[387](index=387&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported, nor were any common stock purchases made during the three months ended June 30, 2025 - No unregistered sales of equity securities or use of proceeds occurred[388](index=388&type=chunk) - The company did not make any purchases of its common stock during the three months ended June 30, 2025[389](index=389&type=chunk) [Item 3. Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[390](index=390&type=chunk) [Item 4. Mine Safety Disclosures](index=72&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported - No mine safety disclosures were reported[391](index=391&type=chunk) [Item 5. Other Information](index=72&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter ended June 30, 2025[392](index=392&type=chunk) [Item 6. Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including merger agreements, a waiver letter, Sarbanes-Oxley Act certifications, and Inline XBRL financial statements - Exhibits include merger agreements (Amended and Restated Agreement and Plan of Merger and Reorganization, Amendment No. 1), a Waiver Letter, and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[394](index=394&type=chunk) - The financial statements (Balance Sheets, Statements of Operations, Stockholders' Equity, Cash Flows, and Notes) are formatted in Inline XBRL[394](index=394&type=chunk) [SIGNATURES](index=74&type=section&id=SIGNATURES) This section contains the duly signed attestations from the company's CEO, CFO, and Chief Accounting Officer [SIGNATURES](index=74&type=section&id=SIGNATURES) The report is duly signed by flyExclusive, Inc.'s CEO, CFO, and Chief Accounting Officer on August 13, 2025 - The report is signed by Thomas James Segrave, Jr. (CEO and Chairman), Brad G. Garner (CFO), and Zachary M. Nichols (Chief Accounting Officer) on August 13, 2025[398](index=398&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period 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 001-40444 flyExclusive, Inc. | (Exact name of registrant as specified in its charter) | | --- | | Delaware | 86-1740 ...

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 June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 001-40700 ABVC BioPharma, Inc. (Exact name of Registrant as specified in its charter) State or jurisdiction of incorporat ...

PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents Lulu's unaudited condensed consolidated financial statements, reflecting net losses and liquidity challenges [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows decreased total assets and stockholders' equity, with slightly increased liabilities, driven by accumulated deficits Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $51,596 | $51,501 | | **Total Assets** | $100,960 | $108,198 | | **Total Current Liabilities** | $82,729 | $74,325 | | **Total Liabilities** | $96,707 | $94,830 | | **Total Stockholders' Equity** | $4,253 | $13,368 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The statements show a net loss of $3.0 million for the thirteen weeks and $11.0 million for the twenty-six weeks ended June 29, 2025 Statement of Operations Summary (in thousands) | Metric | Thirteen Weeks Ended June 29, 2025 | Thirteen Weeks Ended June 30, 2024 | Twenty-Six Weeks Ended June 29, 2025 | Twenty-Six Weeks Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $81,520 | $91,966 | $145,675 | $169,225 | | Gross profit | $36,932 | $41,883 | $62,773 | $74,529 | | Loss from operations | $(2,623) | $(4,467) | $(10,741) | $(10,625) | | Net loss | $(2,995) | $(10,796) | $(10,993) | $(16,532) | | Diluted loss per share | $(3.92) | $(3.94) | $(6.02) | $(1.08) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity declined from $13.4 million to $4.3 million, primarily due to a net loss and common stock repurchases - For the twenty-six weeks ended June 29, 2025, total stockholders' equity decreased by **$9.1 million**, from **$13.4 million** to **$4.3 million**[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $7.0 million, leading to a $2.9 million decrease in cash and cash equivalents to $1.5 million Cash Flow Summary (in thousands) | Cash Flow Activity | Twenty-Six Weeks Ended June 29, 2025 | Twenty-Six Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,966 | $10,637 | | Net cash used in investing activities | $(1,053) | $(1,623) | | Net cash used in financing activities | $(8,839) | $(9,739) | | **Net decrease in cash** | **$(2,926)** | **$(725)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail liquidity issues, going concern uncertainty, significant accounting policies, and the amended credit facility - The company incurred net losses of **$3.0 million** and **$11.0 million** for the thirteen and twenty-six weeks ended June 29, 2025, respectively, and had only **$1.5 million** in cash and cash equivalents at period end[38](index=38&type=chunk) - Management's plans to seek alternative debt financing do not alleviate substantial doubt about the Company's ability to continue as a going concern, as the ability to raise financing is outside of management's control[39](index=39&type=chunk) - A **1-for-15 reverse stock split** of the company's common stock became effective on July 7, 2025. All share and per-share amounts in the financial statements have been retroactively adjusted[62](index=62&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, revenue decline, corporate actions, and significant liquidity challenges raising substantial doubt about going concern [Recent Developments and Liquidity](index=40&type=section&id=Recent%20Developments%20and%20Liquidity) Recent developments include a CFO change, a reverse stock split for Nasdaq compliance, and severe liquidity constraints raising going concern doubt - CFO Tiffany R. Smith resigned effective **June 30, 2025**, with CEO Crystal Landsem appointed as Interim CFO[139](index=139&type=chunk) - A **1-for-15 reverse stock split** was effective **July 7, 2025**, which helped the company regain compliance with Nasdaq's minimum bid price requirement[141](index=141&type=chunk)[143](index=143&type=chunk) - The company is actively seeking alternative debt financing, but its ability to secure it is uncertain, leading to substantial doubt about its ability to continue as a going concern[149](index=149&type=chunk) [Key Operating and Financial Metrics](index=44&type=section&id=Key%20Operating%20and%20Financial%20Metrics) Key metrics for Q2 2025 include a 45.3% Gross Margin, positive Adjusted EBITDA, and a decline in Active Customers Key Metrics Comparison (Q2 2025 vs Q2 2024) | Metric | Thirteen Weeks Ended June 29, 2025 | Thirteen Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Gross Margin | 45.3% | 45.5% | | Net loss | $(2,995) thousand | $(10,796) thousand | | Adjusted EBITDA | $482 thousand | $(207) thousand | | Active Customers | 2,460 thousand | 2,670 thousand | | Average Order Value | $145 | $143 | [Results of Operations](index=53&type=section&id=Results%20of%20Operations) Q2 2025 net revenue fell 11% due to decreased orders, but cost management reduced expenses, leading to a reduced net loss - Net revenue for Q2 2025 decreased by **$10.4 million (11%)** compared to Q2 2024, driven by a **16% decrease** in Total Orders Placed[180](index=180&type=chunk) - Selling and marketing expenses decreased by **$2.9 million (12%)** in Q2 2025 due to lower online marketing costs[183](index=183&type=chunk) - General and administrative expenses decreased by **$3.9 million (18%)** in Q2 2025, primarily due to reduced headcount, lower equity-based compensation, and decreased D&O insurance costs[184](index=184&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is severely constrained, relying on cash from operations with no further borrowing capacity under the amended credit facility maturing August 22, 2025 - The company has no further access to borrowings under its **2021 Credit Agreement** and is reliant on cash from operations[200](index=200&type=chunk)[206](index=206&type=chunk) - The company entered into a **Forbearance Agreement** on **June 23, 2025**, due to defaults on refinancing milestones. The agreement and the credit facility's maturity date were subsequently extended to **August 22, 2025**[207](index=207&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - As of **June 29, 2025**, the company had **$1.5 million** in cash and cash equivalents and **$5.8 million** outstanding on its credit facility[209](index=209&type=chunk)[212](index=212&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure have occurred since the disclosures in the 2024 Annual Report on Form 10-K - There has been no material change in the company's exposure to market risk from that discussed in the **2024 10-K**[229](index=229&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that as of **June 29, 2025**, the company's disclosure controls and procedures were effective[231](index=231&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[232](index=232&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not presently a party to any legal proceedings that are expected to have a material adverse effect on its business[234](index=234&type=chunk) [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) Critical risks include the potential inability to refinance the 2021 Credit Agreement before maturity and the ongoing risk of Nasdaq delisting - The company may not be able to refinance its **2021 Credit Agreement** before its maturity on **August 22, 2025**. Failure to do so would result in an event of default, allowing lenders to declare all outstanding amounts immediately due and payable[236](index=236&type=chunk) - Despite recently regaining compliance, the company must continue to meet **Nasdaq Capital Market's** listing requirements to avoid the risk of delisting, which could negatively affect its stock price and ability to raise capital[238](index=238&type=chunk)[241](index=241&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during Q2 2025 under its publicly announced stock repurchase program Common Stock Repurchases (Q2 2025) | Period | Total Shares Purchased | Weighted-Average Price Paid Per Share | | :--- | :--- | :--- | | March 31 - May 4, 2025 | 42,943 | $7.00 | | May 5 - June 1, 2025 | 15,431 | $6.59 | | June 2 - June 29, 2025 | 14,959 | $6.75 | [Other Information](index=70&type=section&id=Item%205.%20Other%20Information) The company amended its Forbearance Agreement, extending the 2021 Credit Agreement maturity to August 22, 2025, with no Rule 10b5-1 trading plan changes - On **August 11, 2025**, the company amended its **Forbearance Agreement** and **2021 Credit Agreement**, extending the maturity date from **August 15, 2025**, to **August 22, 2025**[246](index=246&type=chunk) - During the thirteen weeks ended **June 29, 2025**, none of the company's directors or officers adopted, modified, or terminated a **Rule 10b5-1** trading arrangement[247](index=247&type=chunk) [Exhibits](index=72&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate amendments, the Forbearance Agreement, officer certifications, and XBRL data