[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Trio Petroleum Corp [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, reflecting the company's financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets provide a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheet Highlights | Metric | July 31, 2025 (Unaudited) | October 31, 2024 | | :--------------------------------- | :-------------------------- | :----------------- | | **ASSETS** | | | | Cash | $584,365 | $285,945 | | Total current assets | $876,550 | $565,219 | | Oil and gas properties - not subject to amortization | $12,155,186 | $11,119,119 | | Total assets | $13,031,736 | $11,684,338 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total current liabilities | $1,556,279 | $2,590,699 | | Total liabilities | $1,609,454 | $2,641,790 | | Total stockholders' equity | $11,422,282 | $9,042,548 | | Total liabilities and stockholders' equity | $13,031,736 | $11,684,338 | - Cash increased by **$298,420** from October 31, 2024, to July 31, 2025, reflecting improved liquidity[10](index=10&type=chunk) - Total current liabilities decreased significantly by **$1,034,420**, improving the company's short-term financial position[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations detail the company's revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations Highlights | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $192,395 | $63,052 | $226,485 | $135,975 | | Cost of goods sold | $98,489 | $- | $107,751 | $- | | Gross profit | $93,906 | $63,052 | $118,734 | $135,975 | | Total operating expenses | $768,932 | $1,573,242 | $2,879,196 | $5,045,353 | | Loss from operations | $(675,026) | $(1,510,190) | $(2,760,462) | $(4,909,378) | | Total other expenses | $711,697 | $668,381 | $1,805,538 | $3,017,176 | | Net loss | $(1,386,723) | $(2,178,571) | $(4,566,000) | $(7,926,554) | | Basic and Diluted Net Loss per Common Share | $(0.17) | $(0.87) | $(0.69) | $(3.84) | - Revenues for the three months ended July 31, 2025, increased by **205.1% to $192,395**, primarily due to sales from newly acquired Saskatchewan assets, offsetting the termination of McCool Ranch operations[12](index=12&type=chunk)[208](index=208&type=chunk) - Net loss significantly decreased by **36.3%** for the three months and **42.4%** for the nine months ended July 31, 2025, compared to the prior year, driven by reduced operating and other expenses[12](index=12&type=chunk)[207](index=207&type=chunk)[215](index=215&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines the changes in the company's equity accounts over the reporting period, reflecting share issuances and accumulated deficit Stockholders' Equity Changes (Nine Months Ended July 31, 2025) | Metric | October 31, 2024 | July 31, 2025 | | :--------------------------------- | :--------------- | :-------------- | | Common Stock Shares Outstanding | 3,203,068 | 8,399,839 | | Common Stock Amount | $320 | $840 | | Additional Paid-in Capital | $29,125,917 | $36,040,611 | | Accumulated Deficit | $(20,073,679) | $(24,639,679) | | Total Stockholders' Equity | $9,042,548 | $11,422,282 | - Total stockholders' equity increased by **$2,379,734** from October 31, 2024, to July 31, 2025, primarily due to significant issuances of common shares[13](index=13&type=chunk)[14](index=14&type=chunk) - Common shares outstanding increased from **3,203,068 to 8,399,839**, driven by issuances for ATM agreements, asset acquisitions, and debt conversions[13](index=13&type=chunk)[14](index=14&type=chunk)[33](index=33&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statements categorize cash movements into operating, investing, and financing activities, showing changes in liquidity Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended July 31) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :----------- | :----------- | | Net cash (used in)/provided by operating activities | $(2,015,896) | $118,642 | | Net cash used in investing activities | $(966,555) | $(1,138,561) | | Net cash provided by/(used in) financing activities | $3,250,351 | $(248,898) | | Net change in cash | $298,420 | $(1,268,817) | | Cash - End of period | $584,365 | $293,107 | - Operating activities used **$2,015,896** in cash for the nine months ended July 31, 2025, a significant shift from **$118,642** provided in the prior year, primarily due to the net loss[16](index=16&type=chunk)[225](index=225&type=chunk) - Financing activities provided **$3,250,351** in cash for the nine months ended July 31, 2025, mainly from common stock issuances via an ATM agreement and convertible debt, reversing a cash outflow in the prior year[16](index=16&type=chunk)[227](index=227&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential details and explanations supporting the financial statements, clarifying accounting policies and significant transactions [NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS](index=10&type=section&id=NOTE%201%20%E2%80%93%20NATURE%20OF%20THE%20ORGANIZATION%20AND%20BUSINESS) This note describes Trio Petroleum Corp's core business, operational locations, and key asset acquisitions - Trio Petroleum Corp, a Delaware-incorporated oil and gas exploration and development company, is headquartered in Malibu, CA, with operations in California, Utah, and Saskatchewan, Canada[18](index=18&type=chunk)[19](index=19&type=chunk) - The company commenced revenue-generating operations in February 2024 at McCool Ranch (now discontinued) and recognized initial revenues from Saskatchewan assets in Q2 2025, which have since improved[20](index=20&type=chunk) - Key acquisitions include an **85.775%** working interest in the South Salinas Project, interests in the Asphalt Ridge Project, and oil and gas assets in the Lloydminster, Saskatchewan heavy oil region via its wholly-owned subsidiary, Trio Petroleum Canada, Corp[19](index=19&type=chunk)[21](index=21&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) [NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%202%20%E2%80%93SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the critical accounting principles and methods used in preparing the financial statements, ensuring transparency and consistency - The company's condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include its wholly-owned Canadian subsidiary, Trio Canada, with all significant intercompany transactions eliminated[27](index=27&type=chunk)[28](index=28&type=chunk) - Trio Petroleum applies the successful efforts method for oil and natural gas properties, capitalizing acquisition and successful drilling costs while expensing exploratory costs as incurred[42](index=42&type=chunk)[43](index=43&type=chunk) - Asset Retirement Obligations (ARO) are recorded at fair value for future plugging and abandonment expenses, with accretion expense recognized over time[50](index=50&type=chunk)[52](index=52&type=chunk) - Revenue from oil sales is recognized when control transfers to the customer at delivery, measured based on contract price, including adjustments for market differentials and downstream costs[55](index=55&type=chunk)[56](index=56&type=chunk) [NOTE 3 – GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS](index=20&type=section&id=NOTE%203%20%E2%80%93%20GOING%20CONCERN%20AND%20MANAGEMENT'S%20LIQUIDITY%20PLANS) This note addresses the company's ability to continue operations, highlighting financial challenges and management's strategies to ensure liquidity - As of July 31, 2025, the company had a working capital deficit of **$679,729** and an accumulated deficit of **$24,639,679**, raising substantial doubt about its ability to continue as a going concern[76](index=76&type=chunk)[79](index=79&type=chunk) - The company has historically funded operations through equity and debt financings, including a recent **$1,020,000** convertible debt financing in August 2025[77](index=77&type=chunk)[78](index=78&type=chunk)[81](index=81&type=chunk) - Management plans to address liquidity by seeking additional capital through equity, debt, or strategic arrangements, but there is no assurance of future financing availability on acceptable terms[78](index=78&type=chunk) [NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=20&type=section&id=NOTE%204%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) This note details the company's revenue recognition policies and sources, primarily from oil sales, and factors influencing these revenues Revenue from Oil Sales | Period | July 31, 2025 (3 Months) | July 31, 2024 (3 Months) | July 31, 2025 (9 Months) | July 31, 2024 (9 Months) | | :----------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Oil sales | $192,395 | $63,052 | $226,485 | $135,975 | - Revenue for the three months ended July 31, 2025, increased by **205.1%** year-over-year, primarily from oil sales in Saskatchewan, Canada[80](index=80&type=chunk)[208](index=208&type=chunk) - The company's revenue is concentrated in oil and gas sales from California, United States, and Saskatchewan, Canada, making it susceptible to regional regulations, market conditions, and commodity price fluctuations[82](index=82&type=chunk) [NOTE 5 – OIL AND NATURAL GAS PROPERTIES](index=21&type=section&id=NOTE%205%20%E2%80%93%20OIL%20AND%20NATURAL%20GAS%20PROPERTIES) This note provides information on the company's oil and natural gas assets, including acquisitions, abandonments, and related capitalized costs Oil and Gas Properties (Not Subject to Amortization) | Date | Balance | | :----------------------- | :-------------- | | July 31, 2025 | $12,155,186 | | October 31, 2024 | $11,119,119 | - Exploration costs for the three months ended July 31, 2025, showed a credit balance of **$(266)** due to the reversal of previously accrued costs for the abandoned McCool Ranch property[84](index=84&type=chunk)[209](index=209&type=chunk) - The company abandoned additional South Salinas Project leases and McCool Ranch Oil Field leases in fiscal 2025, expensing associated capitalized costs totaling **$111,149** and **$500,614**, respectively[87](index=87&type=chunk)[89](index=89&type=chunk) - Trio Canada acquired Novacor assets in Saskatchewan for **US$650,000** cash and **526,536** common shares, resulting in a total capitalized cost of **$1,406,081**[95](index=95&type=chunk)[96](index=96&type=chunk) - The option to acquire an additional **17.75%** interest in Asphalt Ridge leases expired unexercised, but the company retains its existing **2.25%** interest[93](index=93&type=chunk) [NOTE 6 – RELATED PARTY TRANSACTIONS](index=24&type=section&id=NOTE%206%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note details transactions between the company and its related parties, including joint ventures, debt, and stock-based compensation - Trio LLC operates the South Salinas Project, with the company holding an **85.775%** working interest and Trio LLC holding **3.8%**; the 'Due to Operators' balance decreased from **$103,146 to $29,740**[100](index=100&type=chunk) - The McCool Ranch Oil Field leases, previously acquired from Trio LLC, were terminated on May 27, 2025, resulting in a **$500,614** write-off of capitalized costs[101](index=101&type=chunk)[102](index=102&type=chunk) - Stock-based compensation for directors and executives includes RSUs and restricted shares, with significant awards to CEO Robin Ross (**100,000 RSUs**) and CFO Greg Overholtzer (**10,000 RSUs**) in fiscal 2025[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - The **$125,000** promissory note from former CEO Michael L. Peterson was fully paid off on November 25, 2024, for **$143,516**[110](index=110&type=chunk)[111](index=111&type=chunk) - The company provided a **$1,131,000** loan to its wholly-owned subsidiary, Trio Canada, with **$700,665** used for the Novacor acquisition and the remainder for operating costs[113](index=113&type=chunk)[114](index=114&type=chunk) [NOTE 7 – COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=NOTE%207%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's contractual obligations, lease agreements, and potential legal or financial liabilities - The company is not currently subject to any material legal proceedings[116](index=116&type=chunk) - Unproved property leases in the South Salinas Project include an **8,417-acre** lease maintained by ongoing operations at the HV-3A well and a **160-acre** lease held by annual delay rental payments[117](index=117&type=chunk)[119](index=119&type=chunk) - All additional unproved leases in the South Salinas Project and all McCool Ranch leases were strategically terminated in fiscal 2025 due to economic viability concerns, with associated costs expensed[117](index=117&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk) - The option to acquire additional interest in Asphalt Ridge leases expired unexercised, but the company retains its existing **2.25%** interest[123](index=123&type=chunk) - The company acquired oil and gas lease rights for four proved properties totaling **320 net acres** in Saskatchewan, Canada, in April 2025, all held by production[124](index=124&type=chunk) - Non-employee directors receive an annual cash retainer of **$50,000** plus **$10,000** per committee, with total director compensation expense of **$80,007** and **$241,682** for the three and nine months ended July 31, 2025, respectively[125](index=125&type=chunk)[126](index=126&type=chunk) [NOTE 8 – NOTES PAYABLE](index=29&type=section&id=NOTE%208%20%E2%80%93%20NOTES%20PAYABLE) This note details the company's outstanding debt obligations, including promissory notes and convertible debt, and their settlement activities Notes Payable Summary | Note Type | July 31, 2025 | October 31, 2024 | | :-------------------------- | :------------ | :--------------- | | Promissory notes, net | $- | $742,852 | | Payable – related party | $- | $115,666 | | Convertible note, net | $865 | $- | | Note Payable, related party | $- | $135,000 | | Total Notes payable | $865 | $993,518 | - The March 2024 Investor Note (**$211,500** principal) was fully satisfied by November 30, 2024, through cash payments[131](index=131&type=chunk)[132](index=132&type=chunk) - The Peterson Note (**$125,000** principal) was paid off on November 25, 2024, for **$143,516**, including accrued interest[133](index=133&type=chunk)[135](index=135&type=chunk) - The June 2024 Convertible Debt (**$800,000** aggregate principal) was fully satisfied by January 7, 2025, through a combination of cash payments and common share conversions, resulting in recognized losses[136](index=136&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - The August 6, 2024 Financing note (**$255,225** principal) was extinguished on February 10, 2025, by exchanging **230,992** common shares, resulting in a **$141,534** loss on extinguishment[145](index=145&type=chunk)[147](index=147&type=chunk) - The April 2025 Convertible Note (**$712,941** aggregate principal) had an outstanding balance of **$865** as of July 31, 2025, after issuing **877,340** common shares for principal payments, leading to a **$528,054** recognized loss[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [NOTE 9 – STOCKHOLDERS' EQUITY](index=33&type=section&id=NOTE%209%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note provides details on changes in stockholders' equity, including common stock issuances, warrant activity, and amendments to authorized shares - The company issued **20,000** common shares for investor communications services (**$28,000** value) on January 1, 2025[154](index=154&type=chunk) - In February 2025, **230,992** common shares were issued to an investor to exchange an outstanding debt balance of **$285,852**, resulting in a **$141,534** loss on debt extinguishment[155](index=155&type=chunk) - **526,536** common shares were issued for **$747,681** in connection with the Novacor asset acquisition on April 11, 2025[156](index=156&type=chunk) - Between June 11 and June 23, 2025, **877,340** common shares were issued to an investor for convertible debt principal payments, resulting in a **$528,054** recognized loss[158](index=158&type=chunk) - Stockholders approved an amendment on July 30, 2025, to reduce authorized shares to **160,000,000** (**150,000,000** common, **10,000,000** preferred)[160](index=160&type=chunk) Warrant Activity (Nine Months Ended July 31, 2025) | Metric | Number of Warrants | Weighted Average Exercise Price | | :-------------------------- | :----------------- | :------------------------------ | | Outstanding, Nov 1, 2024 | 191,994 | $15.24 | | Expired | (20,000) | $30.00 | | Outstanding, July 31, 2025 | 171,994 | $13.52 | [NOTE 10 – SUBSEQUENT EVENTS](index=36&type=section&id=NOTE%2010%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued, impacting future financial position - Stanford Eschner resigned as Vice Chairman and director on August 1, 2025, and was engaged as a consultant, receiving **$4,267/month** and **15,000** common shares[169](index=169&type=chunk)[170](index=170&type=chunk) - CEO Robin Ross's annual base salary increased to **$400,000**, and he received a one-time award of **625,000** common shares and a **$150,000** cash bonus on August 1, 2025[171](index=171&type=chunk)[172](index=172&type=chunk) - CFO Gregory Overholtzer received a one-time award of **62,500** common shares on August 1, 2025[173](index=173&type=chunk) - Four non-employee board members received an aggregate of **850,000** common shares on August 1, 2025[174](index=174&type=chunk) - On August 15, 2025, the company completed a private placement of three unsecured convertible promissory notes for **$1,020,000** aggregate principal, with net proceeds of **$928,600** for working capital[175](index=175&type=chunk)[176](index=176&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three and nine months ended July 31, 2025, compared to the prior year [Overview](index=39&type=section&id=Overview) This overview introduces Trio Petroleum's business, strategic shifts, and current operational focus across its various projects - Trio Petroleum is an oil and gas exploration and development company with operations in California, Utah, and Saskatchewan, Canada[184](index=184&type=chunk) - The company has shifted its strategic focus from California to more economically viable opportunities in Canada and Utah due to rising drilling costs and negative profitability impacts in California[188](index=188&type=chunk) - Current focus is on aggressively growing Canadian assets through workovers and acquiring projects that generate immediate cash flow or offer transformative growth potential, such as the PR Spring option in Utah[186](index=186&type=chunk)[203](index=203&type=chunk) [South Salinas Project](index=40&type=section&id=South%20Salinas%20Project) This section details the progress and challenges at the South Salinas Project, including permitting, production testing, and new initiatives - Efforts are progressing to obtain conditional use permits and a full field development permit from Monterey County, and a water disposal project permit from CalGEM and California Water Boards[190](index=190&type=chunk)[203](index=203&type=chunk) - Production testing at the HV-3A discovery well in Presidents Field was restarted on March 22, 2024, but is currently idled pending assessment of increasing gross production rate and joint venture discussions[190](index=190&type=chunk)[203](index=203&type=chunk) - The company is taking initial steps to launch a Carbon Capture and Storage (CCS) project at the South Salinas Project, utilizing deep geologic zones and existing wells for CO2 injection[197](index=197&type=chunk) [McCool Ranch Oil Field](index=40&type=section&id=McCool%20Ranch%20Oil%20Field) This section explains the termination of operations at McCool Ranch due to economic unfeasibility and the resulting write-off of capitalized costs - Operations at the McCool Ranch Oil Field were terminated on May 27, 2025, and all related leases abandoned due to high natural gas prices and water disposal costs making cyclic-steam operations economically unfeasible[192](index=192&type=chunk) - Capitalized costs totaling **$500,614** related to the McCool Ranch acquisition, refurbishment, and production restart were written off and expensed in the statement of operations[192](index=192&type=chunk) [Asphalt Ridge Option Agreement and the Lafayette Energy Leasehold Acquisition and Development Option Agreement](index=40&type=section&id=Asphalt%20Ridge%20Option%20Agreement%20and%20the%20Lafayette%20Energy%20Leasehold%20Acquisition%20and%20Development%20Option%20Agreement) This section discusses the company's interest in the Asphalt Ridge leases, including the initial acquisition and the expiration of an additional option - The company acquired an initial **2.25%** working interest in the Asphalt Ridge leases for **$225,000**, with funds designated for infrastructure development[193](index=193&type=chunk)[194](index=194&type=chunk) - The option to acquire an additional **17.75%** working interest in the Asphalt Ridge leases expired unexercised, but the company retains its existing **2.25%** interest[194](index=194&type=chunk) [Novacor Asset Purchase Agreement](index=41&type=section&id=Novacor%20Asset%20Purchase%20Agreement) This section details the acquisition of oil and gas assets in Saskatchewan, Canada, and plans for increasing production from these new properties - On April 4, 2025, Trio Canada acquired oil and gas assets in the Lloydminster, Saskatchewan heavy oil region from Novacor for **US$650,000** cash and **526,536** common shares[195](index=195&type=chunk) - All five of the company's currently active wells are located in the newly acquired Novacor property, with plans to potentially double production through workovers[186](index=186&type=chunk)[195](index=195&type=chunk) [P.R. Spring Letter of Intent and Option](index=41&type=section&id=P.R.%20Spring%20Letter%20of%20Intent%20and%20Option) This section describes the non-binding letter of intent for a potential acquisition in Utah and the associated production conditions - The company entered a non-binding LOI on May 15, 2025, for the potential acquisition of **2,000 acres** at P.R. Spring, Utah, for **1,492,272** restricted shares and **$850,000** cash, subject to definitive agreements[196](index=196&type=chunk) - The LOI includes a condition requiring a minimum sustained production rate of **40 barrels per day** for **30 continuous days** from two wells at Asphalt Ridge by May 15, 2026[196](index=196&type=chunk) [Carbon Capture and Storage Project as part of Company's South Salinas Project](index=41&type=section&id=Carbon%20Capture%20and%20Storage%20Project%20as%20part%20of%20Company's%20South%20Salinas%20Project) This section outlines the company's initiative to develop a Carbon Capture and Storage (CCS) project at its South Salinas Project - The company is initiating a Carbon Capture and Storage (CCS) project at the South Salinas Project, leveraging deep geologic zones and existing wells for CO2 injection[197](index=197&type=chunk) - The project aims to reduce the company's carbon footprint and potentially establish a CO2 storage or Direct Air Capture (DAC) hub, with discussions ongoing with third parties[197](index=197&type=chunk) [Going Concern Considerations](index=41&type=section&id=Going%20Concern%20Considerations) This section addresses the company's financial viability, highlighting recurring losses and the need for additional capital to sustain operations - The company's recurring losses, accumulated deficit of **$24,639,679**, and working capital deficit of **$679,729** as of July 31, 2025, raise substantial doubt about its ability to continue as a going concern[198](index=198&type=chunk)[199](index=199&type=chunk) - Net losses for the three and nine months ended July 31, 2025, were **$1,386,723** and **$4,566,000**, respectively, with **$2,015,896** cash used in operating activities[198](index=198&type=chunk) - Future operations and development activities are dependent on securing additional capital through equity or debt financings, with no assurance of availability on favorable terms[199](index=199&type=chunk)[200](index=200&type=chunk) [Factors and Trends Affecting Our Business and Results of Operations](index=42&type=section&id=Factors%20and%20Trends%20Affecting%20Our%20Business%20and%20Results%20of%20Operations) This section discusses external and internal factors influencing the company's performance and outlines its primary business strategies - Global economic trends, commodity price fluctuations, political considerations, and tariffs can impact cash flow and profitability, though the company benefits from relatively low lift costs and cost management[202](index=202&type=chunk) - Primary business strategies include aggressive growth of Canadian assets, acquiring cash-flow-generating projects, and pursuing transformative growth opportunities like the PR Spring option in Utah[203](index=203&type=chunk) - At the South Salinas Project, the strategy is to seek a joint venture partner, secure water disposal permits to reduce operating costs, and pursue full field development permits[203](index=203&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, comparing revenues, expenses, and net loss across reporting periods Key Financial Results (Three Months Ended July 31) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :--------- | | Revenues | $192,395 | $63,052 | $129,343 | 205.1% | | Cost of goods sold | $98,489 | $- | $98,489 | 100.0% | | Gross profit | $93,906 | $63,052 | $30,854 | 48.9% | | Total operating expenses | $768,932 | $1,573,242 | $(804,310) | (51.1)% | | Loss from Operations | $(675,026) | $(1,510,190) | $835,164 | (55.3)% | | Net loss | $(1,386,723) | $(2,178,571) | $791,848 | (36.3)% | Key Financial Results (Nine Months Ended July 31) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :--------- | | Revenues | $226,485 | $135,975 | $90,510 | 66.6% | | Cost of goods sold | $107,751 | $- | $107,751 | 100.0% | | Gross profit | $118,734 | $135,975 | $(17,241) | (12.7)% | | Total operating expenses | $2,879,196 | $5,045,353 | $(2,166,157) | (42.9)% | | Loss from Operations | $(2,760,462) | $(4,909,378) | $2,148,916 | (43.8)% | | Net loss | $(4,566,000) | $(7,926,554) | $3,360,554 | (42.4)% | - Revenues for the three months ended July 31, 2025, increased by **$129,343 (205.1%)** due to sales from newly acquired Saskatchewan assets, while nine-month revenues increased by **$90,510 (66.6%)** from the same source[208](index=208&type=chunk)[216](index=216&type=chunk) - General and administrative expenses decreased by approximately **$0.7 million** for the three months and **$1.6 million** for the nine months ended July 31, 2025, driven by reductions in consulting, legal, professional fees, and salaries[211](index=211&type=chunk)[219](index=219&type=chunk) - Other expenses, net, for the three months increased slightly due to losses on common share issuances for debt payments and oil and gas property abandonment, partially offset by reduced non-cash interest expense[214](index=214&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to meet its short-term and long-term financial obligations, including working capital and cash flow Working Capital (Deficiency) | Metric | July 31, 2025 | October 31, 2024 | | :-------------------------- | :------------ | :--------------- | | Current assets | $876,550 | $565,219 | | Current liabilities | $1,556,279 | $2,590,699 | | Working capital (deficiency) | $(679,729) | $(2,025,480) | - Working capital deficiency improved significantly from **$(2,025,480)** to **$(679,729)**, primarily due to a **$3.4 million** increase in cash from ATM offerings and a reduction in promissory notes and related party payables[223](index=223&type=chunk) Cash Flows (Nine Months Ended July 31) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :----------- | :----------- | | Net cash (used in) provided by operating activities | $(2,015,896) | $118,642 | | Net cash used in investing activities | $(966,555) | $(1,138,561) | | Net cash provided by (used in) financing activities | $3,250,351 | $(248,898) | | Net change in cash | $298,420 | $(1,268,817) | - Operating activities used **$2.0 million** in cash in 2025, compared to **$0.1 million** provided in 2024, mainly due to the net loss[225](index=225&type=chunk) - Financing activities provided **$3.3 million** in cash in 2025, primarily from ATM common share issuances and convertible debt, a reversal from **$0.2 million** used in 2024[227](index=227&type=chunk) - The company believes existing cash and cash flow will be sufficient for not more than six months and will require additional capital through equity or debt financing to fund future activities[228](index=228&type=chunk) [Contractual Obligations and Commitments](index=47&type=section&id=Contractual%20Obligations%20and%20Commitments) This section details the company's ongoing contractual responsibilities, including lease agreements and director compensation - The company holds unproved property leases in the South Salinas Project, including an **8,417-acre** lease maintained by HV-3A well operations and a **160-acre** lease with annual delay rental payments[229](index=229&type=chunk) - All additional unproved leases in the South Salinas Project and all McCool Ranch leases were terminated in fiscal 2025 due to economic viability concerns[230](index=230&type=chunk)[231](index=231&type=chunk) - The option for additional interest in Asphalt Ridge leases expired unexercised, but the company retains its **2.25%** working interest[234](index=234&type=chunk) - The company acquired oil and gas lease rights for four proved properties in Saskatchewan, Canada, in April 2025, all held by production[235](index=235&type=chunk) - Non-employee directors receive an annual cash retainer of **$50,000** plus **$10,000** per committee, with compensation payments commencing after the April 2023 IPO[236](index=236&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section describes the key accounting policies and significant management judgments that materially impact the financial statements - The company applies the successful efforts method for oil and natural gas properties, capitalizing acquisition and successful drilling costs while expensing exploratory costs as incurred[242](index=242&type=chunk)[243](index=243&type=chunk) - Unproved oil and natural gas properties are capitalized and assessed periodically for impairment based on lease terms, drilling results, or future development plans[245](index=245&type=chunk)[246](index=246&type=chunk) - Asset Retirement Obligations (ARO) are recorded at fair value for future plugging and abandonment expenses, with accretion expense recognized over time[250](index=250&type=chunk) - Fair value measurements for non-recurring items like asset acquisitions and impairment assessments use Level 3 inputs, relying on significant management judgments and estimates for reserves, commodity prices, and costs[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Trio Petroleum Corp is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[259](index=259&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the company's disclosure controls and procedures, concluding they were effective as of July 31, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were deemed effective as of July 31, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[260](index=260&type=chunk) - No material changes in internal control over financial reporting occurred during the third fiscal quarter ended July 31, 2025[261](index=261&type=chunk) [PART II. OTHER INFORMATION](index=53&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers additional information not included in the financial statements, such as legal proceedings, risk factors, equity sales, and corporate governance matters [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) Trio Petroleum Corp is not currently subject to any legal proceedings - The company is not currently involved in any legal proceedings[263](index=263&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Amendment No. 3 to its Annual Report on Form 10-K/A for the year ended October 31, 2024 - No material changes to the risk factors were identified from those set forth in the 2024 Annual Report on Form 10-K/A[264](index=264&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds occurred during the quarterly period, except as previously reported in Current Reports on Form 8-K - No unregistered sales of equity securities or use of proceeds occurred during the quarter, other than those reported in Current Reports on Form 8-K[265](index=265&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Trio Petroleum Corp reported no defaults upon senior securities during the period - There were no defaults upon senior securities[266](index=266&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to Trio Petroleum Corp - Mine safety disclosures are not applicable to the company[267](index=267&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) At the Annual Meeting of Stockholders on July 30, 2025, all proposals were approved, and no directors or officers adopted or terminated Rule 10b5-1 trading arrangements - Stockholders approved all proposals at the Annual Meeting on July 30, 2025, including director elections, amendments to the Certificate of Incorporation and the 2022 Plan, and auditor ratification[268](index=268&type=chunk) - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended July 31, 2025[269](index=269&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications - The report includes various exhibits such as the Certificate of Amendment of Amended and Restated Certificate of Incorporation, CEO and CFO certifications (Sarbanes-Oxley Act), and Inline XBRL documents[270](index=270&type=chunk)

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

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

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

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

PART I. FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements and detailed notes on business activities, accounting policies, and recent acquisitions [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20July%2031%2C%202025%20and%20October%2031%2C%202024) Total assets and liabilities significantly increased from October 2024 to July 2025, driven by higher current assets and liabilities, while stockholders' equity saw a modest rise Unaudited Condensed Consolidated Balance Sheets as of July 31, 2025 and October 31, 2024 | Metric | July 31, 2025 (in USD) | October 31, 2024 (in USD) | Change | | :-------------------------------- | :------------ | :--------------- | :----- | | Total Current Assets | $38,025,548 | $28,373,050 | +34.0% | | Total Assets | $45,879,967 | $34,010,688 | +34.9% | | Total Current Liabilities | $17,046,019 | $6,846,067 | +149.0% | | Total Liabilities | $19,110,502 | $7,833,121 | +144.0% | | Total Stockholders' Equity | $26,769,465 | $26,177,567 | +2.3% | - Significant increase in inventories from **$15,705,984** (Oct 2024) to **$21,685,412** (Jul 2025), and 'Due from broker' from **$1,466,059** to **$4,444,179**[11](index=11&type=chunk) - Introduction of a **$6,250,000** line of credit balance as of July 31, 2025, compared to zero in October 2024[11](index=11&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20nine%20months%20ended%20July%2031%2C%202025%20and%202024) The company reported a net loss for the three months ended July 31, 2025, due to higher cost of sales and operating expenses, and a decrease in net income for the nine months despite higher net sales Three Months Ended July 31 (YoY Comparison) | Metric | 2025 (in USD) | 2024 (in USD) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Net Sales | $23,910,514 | $18,813,162 | +27.1% | | Cost of Sales | $20,997,777 | $14,887,098 | +41.0% | | Gross Profit | $2,912,737 | $3,926,064 | -25.9% | | Operating Expenses | $4,007,888 | $3,206,201 | +25.0% | | Income (Loss) from Operations | $(1,095,151) | $719,863 | -252.1% | | Net Income (Loss) | $(1,205,413) | $626,796 | -292.5% | | Basic and Diluted EPS | $(0.21) | $0.11 | -290.9% | Nine Months Ended July 31 (YoY Comparison) | Metric | 2025 (in USD) | 2024 (in USD) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Net Sales | $68,535,860 | $57,349,477 | +19.5% | | Cost of Sales | $55,253,979 | $46,239,134 | +19.5% | | Gross Profit | $13,281,881 | $11,110,343 | +19.5% | | Operating Expenses | $11,897,386 | $9,840,219 | +20.9% | | Income (Loss) from Operations | $1,384,495 | $1,270,124 | +9.0% | | Net Income (Loss) | $591,898 | $955,979 | -38.1% | | Basic and Diluted EPS | $0.10 | $0.17 | -41.2% | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20for%20the%20three%20and%20nine%20months%20ended%20July%2031%2C%202025%20and%202024) Stockholders' equity increased slightly from October 2024 to July 2025, primarily due to net income in the first two quarters of fiscal 2025, partially offset by a third-quarter net loss - Total Stockholders' Equity increased from **$26,177,567** at October 31, 2024, to **$26,769,465** at July 31, 2025[15](index=15&type=chunk) - Retained earnings increased by **$591,898** from October 31, 2024, to July 31, 2025, reflecting the net income for the nine-month period[15](index=15&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20nine%20months%20ended%20July%2031%2C%202025%20and%202024) Operating activities shifted from cash provided to cash used, investing activities used cash due to an acquisition, and financing activities provided substantial cash from increased line of credit borrowings Nine Months Ended July 31 - Cash Flow Summary | Cash Flow Activity | 2025 (in USD) | 2024 (in USD) | | :-------------------------------- | :----------- | :----------- | | Net cash (used in) provided by operating activities | $(5,396,716) | $5,209,235 | | Net cash (used in) provided by investing activities | $(1,254,535) | $2,879,320 | | Net cash provided by (used in) financing activities | $6,250,000 | $(7,724,374) | | Net change in cash and cash equivalents | $(401,251) | $364,181 | | Cash and cash equivalents, end of period | $979,772 | $3,098,158 | - Operating cash flow decreased significantly, primarily due to a **$5,711,012** increase in inventories in 2025 compared to a **$4,480,524** decrease in 2024[18](index=18&type=chunk) - Investing activities in 2025 included an **$800,000** acquisition of Empire Coffee Company and **$375,286** for leasehold improvements[18](index=18&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the financial statements, covering business activities, accounting policies, recent acquisitions, and other financial details - The interim financial statements are unaudited and prepared consistently with the annual statements, with no changes to significant accounting policies during the nine months ended July 31, 2025[26](index=26&type=chunk)[28](index=28&type=chunk) - Revenue is recognized according to ASC 606, evaluating the transfer of promised goods or services when the customer obtains control[29](index=29&type=chunk) Revenues by Product Line (Nine Months Ended July 31) | Product Line | 2025 (in USD) | 2024 (in USD) | Change (%) | | :----------- | :----------- | :----------- | :--------- | | Green | $28,731,856 | $25,505,606 | +12.6% | | Packaged | $39,804,004 | $31,843,871 | +25.0% | | Totals | $68,535,860 | $57,349,477 | +19.5% | Revenues by Product Line (Three Months Ended July 31) | Product Line | 2025 (in USD) | 2024 (in USD) | Change (%) | | :----------- | :----------- | :----------- | :--------- | | Green | $10,474,908 | $10,795,701 | -3.0% | | Packaged | $13,435,606 | $8,017,461 | +67.6% | | Totals | $23,910,514 | $18,813,162 | +27.1% | [Note 1 - Business Activities](index=8&type=section&id=Note%201%20-%20Business%20Activities) Coffee Holding Co., Inc. operates as a wholesale coffee roaster and dealer, manufacturing, marketing, and distributing roasted and blended coffees under private labels and its own brands, and selling green coffee - The Company's core business involves wholesale coffee operations, including manufacturing, roasting, packaging, marketing, and distributing roasted and blended coffees for private labels and its own brands, as well as selling green coffee and coffee roasters[20](index=20&type=chunk) - The company's product lines (Wholesale Green Coffee, Private Label Coffee, Branded Coffee) are considered a single reporting segment due to shared customers, manufacturing resources, sales channels, and marketing support[22](index=22&type=chunk) - The company maintains compliance with financial covenants for its line of credit and does not believe there is substantial doubt about its ability to continue as a going concern, reporting net income of **$591,898** and a net working capital surplus of **$20,979,529** for the nine months ended July 31, 2025[23](index=23&type=chunk) [Note 2 – Basis of Presentation and Significant Accounting Policy](index=9&type=section&id=Note%202%20%E2%80%93%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policy) The interim condensed consolidated financial statements are unaudited and prepared consistently with annual statements, with no changes to significant accounting policies during the nine months ended July 31, 2025 [Recent Accounting Pronouncements – Adopted](index=10&type=section&id=Recent%20Accounting%20Pronouncements%20%E2%80%93%20Adopted) The Company adopted ASU 2016-13 (Credit Losses) and ASU 2023-07 (Segment Reporting) during the period, with no material financial statement impact from either - Adoption of ASU 2016-13 (Credit Losses) on November 1, 2023, had no material impact on consolidated financial statements[32](index=32&type=chunk) - Adoption of ASU 2023-07 (Segment Reporting) for fiscal years beginning after December 15, 2023, resulted in enhanced disclosures but no material impact on consolidated financial statements[33](index=33&type=chunk) [Recent Accounting Pronouncements – Not Yet Adopted](index=10&type=section&id=Recent%20Accounting%20Pronouncements%20%E2%80%93%20Not%20Yet%20Adopted) The Company is evaluating the impact of ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures), with no material impact expected from ASU 2023-06 - The Company does not expect ASU 2023-06 (Disclosure Improvements) to have a material impact[34](index=34&type=chunk) - The Company is currently evaluating the impact of ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures)[35](index=35&type=chunk)[37](index=37&type=chunk) [Note 3 – Business Combination](index=11&type=section&id=Note%203%20%E2%80%93%20Business%20Combination) On November 6, 2024, the Company acquired the remaining assets of Empire Coffee Company for **$800,000** through its wholly-owned subsidiary, Second Empire, contributing **$3,238,704** in revenues and a loss of **$694,130** to the Company's results - On November 6, 2024, the Company acquired Empire Coffee Company's remaining assets for **$800,000** via a UCC Chapter 9 sale, through its subsidiary Second Empire[38](index=38&type=chunk) - The acquisition contributed **$3,238,704** in revenues and a loss of **$694,130** to the Company's results from November 6, 2024, to July 31, 2025[39](index=39&type=chunk) Fair Values of Assets Acquired | Asset | Fair Value (in USD) | | :------------------ | :--------- | | Accounts Receivable | $531,585 | | Inventory | $268,415 | | Total Purchase Price | $800,000 | [Note 4 - Inventories](index=11&type=section&id=Note%204%20-%20Inventories) Inventories significantly increased from October 31, 2024, to July 31, 2025, primarily driven by a substantial rise in green coffee and packed coffee Inventories | Inventory Type | July 31, 2025 (in USD) | October 31, 2024 (in USD) | Change | | :------------- | :------------ | :--------------- | :----- | | Packed coffee | $3,851,853 | $2,025,335 | +90.2% | | Green coffee | $15,674,822 | $11,525,118 | +36.0% | | Total Inventories | $21,685,412 | $15,705,984 | +38.1% | [Note 5 - Commodities Held by Broker](index=12&type=section&id=Note%205%20-%20Commodities%20Held%20by%20Broker) The Company uses short-term coffee futures and options contracts to partially hedge against green coffee price fluctuations, but recent periods have seen significant losses, increasing cost of sales and decreasing profitability - The Company uses short-term coffee futures and options contracts for partial hedging of green coffee prices and to reduce cost of sales, classifying them as trading securities[43](index=43&type=chunk)[45](index=45&type=chunk) - Realized and unrealized gains/losses on these contracts are included in cost of sales, impacting earnings volatility[45](index=45&type=chunk) Realized and Unrealized Gains/Losses on Commodity Contracts | Metric | Three Months Ended July 31, 2025 (in USD) | Three Months Ended July 31, 2024 (in USD) | Nine Months Ended July 31, 2025 (in USD) | Nine Months Ended July 31, 2024 (in USD) | | :---------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Gross realized gains | $1,660,346 | $405,608 | $3,773,790 | $1,187,382 | | Gross realized losses | $(373,788) | $(133,392) | $(608,780) | $(903,162) | | Unrealized (losses) gains | $(2,056,404) | $464,272 | $(2,478,142) | $934,974 | | Total | $(769,846) | $736,488 | $686,868 | $1,219,194 | [Note 6 - Line of Credit](index=12&type=section&id=Note%206%20-%20Line%20of%20Credit) The Company's line of credit with Webster Financial Corp. was amended, extending the maturity date to June 28, 2026, and increasing the maximum facility to **$10,000,000**, with an outstanding balance of **$6,250,000** as of July 31, 2025 - The line of credit maturity date was extended to June 28, 2026, and the maximum facility amount increased to **$10,000,000**[47](index=47&type=chunk)[48](index=48&type=chunk) - The outstanding balance on the line of credit was **$6,250,000** as of July 31, 2025, compared to **$0** as of October 31, 2024[50](index=50&type=chunk) - The Company was in compliance with all financial covenants as of July 31, 2025[23](index=23&type=chunk)[50](index=50&type=chunk) [Note 7 – Income Taxes](index=13&type=section&id=Note%207%20%E2%80%93%20Income%20Taxes) The Company recorded income tax expense of **$17,584** for the three months and **$650,749** for the nine months ended July 31, 2025, primarily due to the tax impact of unrealized losses from coffee futures and options contracts, and is assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) Income Tax Expense | Period | 2025 (in USD) | 2024 (in USD) | | :---------------------- | :--------- | :--------- | | Three months ended July 31 | $17,584 | $259,249 | | Nine months ended July 31 | $650,749 | $323,954 | - The income tax expense for the three months ended July 31, 2025, was mainly due to the tax impact of unrealized losses from coffee futures and options contracts[54](index=54&type=chunk) - The Company is currently assessing the impact of the One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, which includes permanent extension of certain tax provisions and modifications to the international tax framework[55](index=55&type=chunk) [Note 8 – Earnings (Loss) Per Share](index=13&type=section&id=Note%208%20%E2%80%93%20Earnings%20%28Loss%29%20Per%20Share) For the three months ended July 31, 2025, the company reported a loss per share of **$(0.21)**, while for the nine months, it reported earnings per share of **$0.10** Basic and Diluted EPS | Period | 2025 (in USD) | 2024 (in USD) | | :---------------------- | :----- | :----- | | Three months ended July 31 | $(0.21) | $0.11 | | Nine months ended July 31 | $0.10 | $0.17 | - The weighted average common shares outstanding for both basic and diluted EPS remained constant at **5,708,599** for all periods presented[57](index=57&type=chunk) - **921,000** outstanding stock options were excluded from diluted EPS calculation as they were antidilutive[57](index=57&type=chunk) [Note 9 - Commitments and Contingencies](index=13&type=section&id=Note%209%20-%20Commitments%20and%20Contingencies) The Company and its subsidiaries are not involved in any pending legal proceedings that management believes would have a material effect on the business or financial condition - No material legal proceedings are pending against the Company or its subsidiaries[58](index=58&type=chunk) [Note 10 – Leases](index=14&type=section&id=Note%2010%20%E2%80%93%20Leases) The Company's right-of-use operating lease assets and total lease liabilities significantly increased from October 31, 2024, to July 31, 2025, primarily due to a new lease from the Second Empire Acquisition, while a May 2024 lease modification resulted in a gain on extinguishment Lease Assets and Liabilities | Metric | July 31, 2025 (in USD) | October 31, 2024 (in USD) | Change | | :-------------------------- | :------------ | :--------------- | :----- | | Right-of-use operating lease assets | $2,696,475 | $1,166,537 | +131.1% | | Total lease liability | $2,737,267 | $1,173,032 | +133.3% | - A new lease was recognized in November 2024 for **$2,113,581** in connection with the Second Empire Acquisition[65](index=65&type=chunk) - A lease modification in May 2024 resulted in a gain on extinguishment of lease of **$210,567**[64](index=64&type=chunk) [Note 11 – Related Party Transactions](index=15&type=section&id=Note%2011%20%E2%80%93%20Related%20Party%20Transactions) The Company maintains a Non-Qualified Deferred Compensation Plan for its CEO, with assets and corresponding liabilities of **$129,972** as of July 31, 2025 - The Company has a Non-Qualified Deferred Compensation Plan for its CEO, with a deferred compensation payable of **$129,972** as of July 31, 2025[66](index=66&type=chunk) [Note 12 - Stockholders' Equity](index=15&type=section&id=Note%2012%20-%20Stockholders%27%20Equity) The Company did not purchase any treasury shares or grant, forfeit, or expire any stock options during the three and nine months ended July 31, 2025, with all **921,000** outstanding stock options being exercisable and fully vested - No treasury shares were purchased during the three and nine months ended July 31, 2025[67](index=67&type=chunk) - No stock options were granted, forfeited, or expired during the three and nine months ended July 31, 2025[68](index=68&type=chunk) - As of July 31, 2025, **921,000** stock options were exercisable and fully vested, with no stock-based compensation expense recorded[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 13 – Segment Information](index=15&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information) The Company operates as a single reportable segment: coffee, with its CODM assessing performance and allocating resources based on consolidated operating income (loss), primarily deriving revenue from North America across wholesale green coffee, private label, and branded coffee sales - The Company has one reportable segment: coffee, managed on a consolidated basis, with Andrew Gordon serving as the Chief Operating Decision Maker (CODM)[71](index=71&type=chunk) - The coffee segment generates revenue from wholesale green coffee, private label coffee, and branded coffee, with revenue recognized upon shipment[72](index=72&type=chunk) - The CODM evaluates performance and allocates resources based on operating income (loss) and total consolidated assets[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 14 - Subsequent Events](index=16&type=section&id=Note%2014%20-%20Subsequent%20Events) The Company has evaluated all subsequent events through the date the financial statements were available and determined that no events require reporting - No subsequent events requiring disclosure were identified[74](index=74&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, highlighting factors affecting operations, critical accounting policies, and a detailed comparison of results for the three and nine months ended July 31, 2025, versus 2024, along with discussions on liquidity, capital resources, and going concern [Overview](index=17&type=section&id=Overview) The Company is an integrated wholesale coffee roaster and dealer, offering a broad range of coffee products, with operations affected by sales, marketing, volatile green coffee prices (generally passed through), and hedging policies, and recently acquired Empire Coffee Company - The Company is an integrated wholesale coffee roaster and dealer, offering diverse coffee products across various price points, aiming for increased profitability and resilience to price volatility[78](index=78&type=chunk) - Net sales are driven by sales and marketing efforts and customer retention/acquisition[80](index=80&type=chunk) - Green coffee prices are volatile but historically, increases have been passed to customers, leading to increased net sales[81](index=81&type=chunk) - The Company uses short-term coffee futures and options contracts for partial hedging, but acknowledges that no strategy eliminates all pricing risks and past losses have impacted profitability[82](index=82&type=chunk)[83](index=83&type=chunk) - On November 6, 2024, the Company's subsidiary, Second Empire, acquired equipment, accounts receivable, and inventory of Empire Coffee Company[84](index=84&type=chunk) [Three Months Ended July 31, 2025 Compared to the Three Months Ended July 31, 2024](index=20&type=section&id=Three%20Months%20Ended%20July%2031%2C%202025%20Compared%20to%20the%20Three%20Months%20Ended%20July%2031%2C%202024) Net sales increased by **27%** due to higher sales of private label and branded coffees, but gross profit decreased by **26%** due to a **41%** increase in cost of sales, driven by higher tariffs and a net trading loss on coffee futures, leading to a net loss of **$1.2 million** compared to net income in the prior year Three Months Ended July 31 - Key Financials | Metric | 2025 (in USD) | 2024 (in USD) | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :--------- | | Net Sales | $23,910,514 | $18,813,162 | $5,097,352 | +27% | | Cost of Sales | $20,997,777 | $14,887,098 | $6,110,679 | +41% | | Gross Profit | $2,912,737 | $3,926,064 | $(1,013,327) | -26% | | Operating Expenses | $4,007,888 | $3,206,201 | $801,687 | +25% | | Net Income (Loss) | $(1,205,413) | $626,796 | $(1,832,209) | -292.5% | - The increase in cost of sales was driven by higher tariffs on imported coffee and a net trading loss of approximately **$770,000** on coffee futures and options contracts[88](index=88&type=chunk) - Operating expenses increased primarily due to the acquisition of Empire Coffee Company[90](index=90&type=chunk) [Nine Months Ended July 31, 2025, Compared to the Nine Months Ended July 31, 2024](index=21&type=section&id=Nine%20Months%20Ended%20July%2031%2C%202025%2C%20Compared%20to%20the%20Nine%20Months%20Ended%20July%2031%2C%202024) Net sales increased by **20%** due to higher sales across product lines, and gross profit also increased by **19.5%**, but operating expenses rose by **21%** due to the Second Empire Acquisition, leading to a **38%** decrease in net income Nine Months Ended July 31 - Key Financials | Metric | 2025 (in USD) | 2024 (in USD) | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :--------- | | Net Sales | $68,535,860 | $57,349,477 | $11,186,383 | +20% | | Cost of Sales | $55,253,979 | $46,239,134 | $9,014,845 | +19.5% | | Gross Profit | $13,281,881 | $11,110,343 | $2,171,538 | +19.5% | | Operating Expenses | $11,897,386 | $9,840,219 | $2,057,167 | +21% | | Net Income (Loss) | $591,898 | $955,979 | $(364,081) | -38% | - Operating expenses increased by approximately **$2.2 million** due to the Second Empire Acquisition[98](index=98&type=chunk) - Net income decreased primarily due to higher operating expenses, tariffs on imported coffee, and unrealized trading losses in the third quarter[101](index=101&type=chunk) [Liquidity, Capital Resources and Going Concern](index=21&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Going%20Concern) Working capital decreased by **$547,454** to **$20,979,529** as of July 31, 2025, with operating and investing activities using cash, while financing activities provided cash from increased line of credit borrowings, and the Company expects to fund operations through operating cash and its credit facility - Working capital decreased by **$547,454** to **$20,979,529** as of July 31, 2025, compared to October 31, 2024[102](index=102&type=chunk) - Operating activities used **$5,396,716** in cash for the nine months ended July 31, 2025, a significant change from **$5,209,235** provided in the prior year, mainly due to increased inventory[106](index=106&type=chunk) - Financing activities provided **$6,250,000** in cash for the nine months ended July 31, 2025, primarily from increased borrowings under the line of credit[108](index=108&type=chunk) - The Company expects to fund operations for at least the next twelve months through operating cash and its credit facility[109](index=109&type=chunk) [Off-Balance Sheet Arrangements](index=22&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company has no material off-balance sheet arrangements - The Company does not have any material off-balance sheet arrangements[110](index=110&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no applicable disclosures regarding quantitative and qualitative market risk - No applicable disclosures for quantitative and qualitative market risk[111](index=111&type=chunk) [ITEM 4. Controls and Procedures](index=23&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of July 31, 2025, due to several material weaknesses in internal control over financial reporting, for which a remediation plan is in progress [Evaluation of Disclosure Controls and Procedures](index=23&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were not effective as of July 31, 2025, due to material weaknesses in internal control over financial reporting - Disclosure controls and procedures were deemed not effective as of July 31, 2025, due to material weaknesses in internal control over financial reporting[112](index=112&type=chunk) [Material Weakness Over Financial Reporting](index=23&type=section&id=Material%20Weakness%20Over%20Financial%20Reporting) Several material weaknesses were identified, including inadequate controls over inventory quantities, system access, contract identification/accounting, physical custody of records, and journal entry/account reconciliation processes, along with inaccurate intercompany eliminations in prior financial statements - Inadequate controls to prevent and detect misstatements of inventory quantities at a subsidiary[113](index=113&type=chunk) - Inappropriate system access controls over the financial reporting system, lacking segregation of duties[114](index=114&type=chunk) - Lack of adequate controls for identifying and accounting for material contracts, specifically a material lease amendment[115](index=115&type=chunk) - Inadequate controls regarding physical custody of hardware, electronic, and hard copy records for Generations Coffee and Steep and Brew[116](index=116&type=chunk) - Lack of adequate controls for the preparation and review of journal entries and account reconciliations during the year-end financial statement closing process[117](index=117&type=chunk) - Inaccurate accounting for intercompany eliminations in fiscal year 2020, leading to an overstatement of net sales and cost of sales by approximately **$8.3 million** and requiring restatement[118](index=118&type=chunk) - Lack of adequate controls for recording year-end accruals for vendor liabilities and calculating required loan covenants[119](index=119&type=chunk) - Despite material weaknesses, management believes the financial information presented is materially correct and fairly presents the financial position and operating results[120](index=120&type=chunk) [Remediation Plan for the Material Weaknesses](index=24&type=section&id=Remediation%20Plan%20for%20the%20Material%20Weaknesses) The Company is implementing a remediation plan, including hiring third-party consultants, educating control owners, developing documentation, enhancing controls for financial reporting systems, redesigning access rights, performing cross-reference analysis, and implementing additional levels of internal review - Remediation efforts include hiring third-party consultants, educating control owners, developing documentation, enhancing financial reporting system controls, redesigning access rights, performing quarterly cross-reference analysis, and implementing additional internal review levels[121](index=121&type=chunk)[126](index=126&type=chunk) - Material weaknesses will not be considered remediated until efforts are fully implemented and controls are operating effectively[122](index=122&type=chunk) [Changes in Internal Control over Financial Reporting](index=24&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Other than the changes aimed at remediating the identified material weaknesses, there were no other material changes in internal control over financial reporting during the fiscal quarter ended July 31, 2025 - No material changes in internal control over financial reporting occurred during the quarter, other than those for remediation[125](index=125&type=chunk) PART II. OTHER INFORMATION [ITEM 1. Legal Proceedings](index=25&type=section&id=ITEM%201.%20Legal%20Proceedings) No legal proceedings are reported - No legal proceedings to report[127](index=127&type=chunk) [ITEM 1A. Risk Factors](index=25&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the Company's risk factors since the prior Form 10-Q filing for the quarter ending April 30, 2025 - No material changes to risk factors since the April 30, 2025, Form 10-Q[128](index=128&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds are reported - No unregistered sales of equity securities or use of proceeds[129](index=129&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=25&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities are reported - No defaults upon senior securities[130](index=130&type=chunk) [ITEM 4. Mine Safety Disclosures](index=25&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Not applicable - Mine safety disclosures are not applicable[131](index=131&type=chunk) [ITEM 5. Other Information](index=25&type=section&id=ITEM%205.%20Other%20Information) No other information requiring disclosure under this item, including Rule 10b5-1 trading arrangements, was reported for directors or officers during the quarter - No other information to report, including Rule 10b5-1 trading arrangements by directors or officers[132](index=132&type=chunk)[133](index=133&type=chunk) [ITEM 6. Exhibits](index=26&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - The report includes certifications (Section 302 and 906) and Inline XBRL documents as exhibits[135](index=135&type=chunk) SIGNATURES [SIGNATURES](index=27&type=section&id=SIGNATURES) The report is duly signed on behalf of Coffee Holding Co., Inc. by Andrew Gordon, President, Chief Executive Officer, and Chief Financial Officer, on September 12, 2025 - The report was signed by Andrew Gordon, President, CEO, and CFO, on September 12, 2025[138](index=138&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q For the transition period from to Commission File Number: 001-36212 VINCE HOLDING CORP. (Exact name of registrant as specified in its charter) Delaware 75-3264870 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 2, 2025 Or ☐ TRANSITION REPO ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 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 001-40017 CROWN PROPTECH ACQUISITIONS (Exact Name of Registrant as Specified in Its Charter) Cayman Islands N/A (S ...

Exhibit 99.1 Calavo Growers, Inc. Announces Third Quarter and Nine-Month Period Ended July 31, 2025 Financial Results SANTA PAULA, Calif., September 9, 2025 (GLOBE NEWSWIRE) -- Calavo Growers, Inc. (Nasdaq- GS: CVGW), a global leader in sourcing, packing and distribution of fresh avocados, tomatoes, papayas and processing of guacamole and other avocado products, today reported its financial results for the third fiscal quarter and nine-month period ended July 31, 2025. Third Quarter Financial Overview Adjus ...

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 August 2, 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: 001-35720 (Exact name of registrant as specified in its charter) Delaware 45-3052669 (State or other jurisdiction ...