United States Securities and Exchange Commission Washington, D.C. 20549 RCI HOSPITALITY HOLDINGS, INC. FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 (Exact Name of Registrant as Specified in Its Charter) Texas 001-13992 76-0458229 (State or Other Jurisdiction of Incorporation) Date of Report (Date of earliest event reported): October 9, 2025 (Commission File Number) (IRS Employer Identification No.) 10737 Cutten Road Houston, Texas 77066 (Address of Principal ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ______________________________________________________________________ FORM 10-Q ______________________________________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 2025 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements, including balance sheets, results of operations, cash flows, and detailed notes on accounting policies, debt, and acquisitions [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Summarizes the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates | (In thousands) | August 30, 2025 | March 1, 2025 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $460,106 | $442,104 | | Property, plant and equipment, net | $259,177 | $268,139 | | Goodwill | $236,653 | $235,775 | | Intangible assets, net | $116,485 | $128,417 | | Total assets | $1,154,683 | $1,175,269 | | **Liabilities and Shareholders' Equity** | | | | Total current liabilities | $261,892 | $285,456 | | Long-term debt | $270,000 | $285,000 | | Total shareholders' equity | $500,215 | $487,898 | | Total liabilities and shareholders' equity | $1,154,683 | $1,175,269 | - Total assets decreased by **$20.59 million** from March 1, 2025, to August 30, 2025, primarily due to decreases in property, plant and equipment, intangible assets, and other non-current assets, partially offset by increases in receivables and inventories[8](index=8&type=chunk) - Total current liabilities decreased by **$23.56 million**, while total shareholders' equity increased by **$12.32 million** during the same period[8](index=8&type=chunk) [Consolidated Results of Operations](index=4&type=section&id=Consolidated%20Results%20of%20Operations) Details the company's revenues, expenses, and net earnings over specific reporting periods | (In thousands, except per share data) | Three Months Ended August 30, 2025 | Three Months Ended August 31, 2024 | Change (YoY) | Six Months Ended August 30, 2025 | Six Months Ended August 31, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $358,194 | $342,440 | +4.6% | $704,816 | $673,956 | +4.6% | | Gross profit | $82,607 | $97,321 | -15.1% | $157,732 | $196,176 | -19.6% | | Operating income | $26,888 | $41,965 | -35.9% | $33,819 | $83,346 | -59.4% | | Net earnings | $23,649 | $30,566 | -22.6% | $20,962 | $61,577 | -65.9% | | Basic earnings per share | $1.10 | $1.40 | -21.4% | $0.98 | $2.83 | -65.3% | | Diluted earnings per share | $1.10 | $1.40 | -21.4% | $0.97 | $2.80 | -65.4% | - Net sales increased by **4.6%** for both the three and six months ended August 30, 2025, compared to the prior year periods[9](index=9&type=chunk) - Gross profit, operating income, and net earnings significantly decreased for both periods, indicating pressure on profitability despite sales growth[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Earnings](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Earnings) Reports net earnings and other comprehensive income (loss) to arrive at total comprehensive earnings for the period | (In thousands) | Three Months Ended August 30, 2025 | Three Months Ended August 31, 2024 | Six Months Ended August 30, 2025 | Six Months Ended August 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $23,649 | $30,566 | $20,962 | $61,577 | | Other comprehensive earnings (loss) | $84 | $(1,224) | $2,692 | $(703) | | Total comprehensive earnings | $23,733 | $29,342 | $23,654 | $60,874 | - Total comprehensive earnings for the three months ended August 30, 2025, decreased by **19.1%** year-over-year, while for the six months, it decreased by **61.1%**[11](index=11&type=chunk) - Other comprehensive earnings shifted from a loss of **$1,224 thousand** in the prior three-month period to a gain of **$84 thousand** in the current period, primarily due to foreign currency translation adjustments[11](index=11&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Presents the cash inflows and outflows from operating, investing, and financing activities | (In thousands) | Six Months Ended August 30, 2025 | Six Months Ended August 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,280 | $64,132 | | Net cash used in investing activities | $(10,883) | $(15,450) | | Net cash used in financing activities | $(29,130) | $(34,633) | | Decrease in cash, cash equivalents and restricted cash | $(1,922) | $13,808 | | Cash and cash equivalents at end of period | $39,526 | $51,024 | - Net cash provided by operating activities decreased by **$26.85 million** for the six months ended August 30, 2025, compared to the prior year, primarily due to lower net earnings and increased cash used for working capital[12](index=12&type=chunk)[149](index=149&type=chunk) - Net cash used in investing activities decreased by **$4.57 million**, mainly due to lower capital expenditures[12](index=12&type=chunk)[150](index=150&type=chunk) - Net cash used in financing activities decreased by **$5.5 million**, driven by a reduction in common stock repurchases[12](index=12&type=chunk)[151](index=151&type=chunk) [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Outlines changes in the company's equity accounts, including common stock, retained earnings, and comprehensive income | (In thousands) | Balance at March 1, 2025 | Balance at August 30, 2025 | Change | | :--- | :--- | :--- | :--- | | Common Shares Outstanding (in thousands) | 21,418 | 21,515 | +97 | | Common Stock at Par Value | $7,139 | $7,172 | +$33 | | Additional Paid-In Capital | $156,075 | $158,065 | +$1,990 | | Retained Earnings | $359,976 | $367,578 | +$7,602 | | Accumulated Other Comprehensive (Loss) Income | $(35,292) | $(32,600) | +$2,692 | | Total Shareholders' Equity | $487,898 | $500,215 | +$12,317 | - Total shareholders' equity increased by **$12.3 million** from March 1, 2025, to August 30, 2025, primarily driven by net earnings and other comprehensive income, partially offset by cash dividends and share retirements[13](index=13&type=chunk) - Cash dividends of **$0.26 per share** were paid in both the first and second quarters of fiscal 2026[13](index=13&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and supplementary information for the consolidated financial statements [1. Summary of Significant Accounting Policies](index=9&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) Describes the key accounting principles and methods used in preparing the financial statements - The Company adopted **ASU 2023-07**, 'Improvements to Reportable Segment Disclosures,' in the fourth quarter of fiscal 2025 for annual requirements and in the first quarter of fiscal 2026 for interim requirements, expanding segment expense and other item disclosures[18](index=18&type=chunk) - **ASU 2023-09**, 'Improvements to Income Tax Disclosures,' is effective for fiscal 2026 annual and fiscal 2027 interim financial statements, requiring disaggregation of tax reconciliation items and income taxes paid by jurisdiction[19](index=19&type=chunk) - **ASU 2024-03**, 'Disaggregation of Income Statement Expenses,' effective for annual periods after December 15, 2026, will require more detailed expense information but is not expected to impact financial position or results of operations[20](index=20&type=chunk) [2. Revenue

[Company Overview & Q3 FY2025 Highlights](index=1&type=section&id=Company%20Overview%20%26%20Q3%202025%20Highlights) Nurix Therapeutics reports Q3 FY2025 financial results and clinical program advancements, preparing for bexobrutideg pivotal trials and showcasing strong preclinical data for GS-6791 [Q3 FY2025 Key Updates](index=1&type=section&id=Q3%202025%20Key%20Updates) Nurix Therapeutics announced Q3 FY2025 financial results, highlighting significant progress in clinical programs and strategic collaborations - Nurix Therapeutics is preparing to initiate pivotal trials for bexobrutideg in relapsed/refractory CLL patients in H2 2025, including a single-arm study for potential accelerated approval and a confirmatory randomized controlled Phase 3 study for full approval[1](index=1&type=chunk)[3](index=3&type=chunk) - Preclinical data for the IRAK4 degrader GS-6791 (NX-0479), in collaboration with Gilead, demonstrated potent pathway inhibition and efficacy in dermatitis models[1](index=1&type=chunk)[4](index=4&type=chunk) - As of August 31, 2025, the company held **$428.8 million** in cash and marketable securities, indicating a strong capital position[1](index=1&type=chunk)[13](index=13&type=chunk) [Recent Business and Clinical Development Highlights](index=1&type=section&id=Recent%20Business%20and%20Clinical%20Development%20Highlights) Nurix provides updates on bexobrutideg clinical development plans, including pivotal trials for CLL, and preclinical data for the IRAK4 degrader GS-6791 [Bexobrutideg Clinical Development Plans](index=1&type=section&id=Bexobrutideg%20Clinical%20Development%20Plans) Nurix outlined pivotal trial plans for bexobrutideg in relapsed/refractory CLL, including single-arm and randomized Phase 3 studies, with Phase 1a data showing high ORR and good tolerability - Nurix plans to initiate a single-arm study for bexobrutideg in relapsed/refractory CLL patients in H2 2025, aiming for accelerated approval[4](index=4&type=chunk) - The company also described the design of a randomized controlled Phase 3 trial comparing bexobrutideg to investigator's choice comparators, including bendamustine and rituximab, idelalisib and rituximab, or pirtobrutinib[4](index=4&type=chunk) [Bexobrutideg in Relapsed/Refractory CLL](index=1&type=section&id=Bexobrutideg%20in%20Relapsed%2FRefractory%20CLL) Phase 1a data for bexobrutideg in CLL patients showed an 80.9% objective response rate, rapid and durable responses, and good tolerability - Phase 1a data for bexobrutideg, presented at SOHO 2025, showed an **objective response rate (ORR) of 80.9%** in 47 evaluable patients, including one complete response[4](index=4&type=chunk) - Responses were rapid, with a median time to first response of **1.9 months**, deepening with continued treatment, and durable activity was observed in high-risk subgroups including TP53, PLCG2, and BTK mutations, and CNS involvement[4](index=4&type=chunk) - Bexobrutideg was well-tolerated, with no dose-limiting toxicities and no new onset atrial fibrillation or flutter[4](index=4&type=chunk) [Bexobrutideg in Waldenström Macroglobulinemia (WM)](index=1&type=section&id=Bexobrutideg%20in%20Waldenstr%C3%B6m%20Macroglobulinemia%20%28WM%29) Phase 1 data for bexobrutideg in WM patients demonstrated an 84.2% objective response rate, rapid and durable responses, and good tolerability - Phase 1 data for bexobrutideg, presented at SOHO 2025, showed an **objective response rate (ORR) of 84.2%** in 19 evaluable patients, with responses observed in both MYD88 and CXCR4 mutated patients[4](index=4&type=chunk) - Responses were rapid, durable, and associated with deep reductions in serum IgM levels[4](index=4&type=chunk) - Bexobrutideg was well-tolerated, with a safety profile consistent with previous reports, no dose-limiting toxicities, and no atrial fibrillation[4](index=4&type=chunk) [GS-6791 (IRAK4 Degrader) Preclinical Data](index=1&type=section&id=GS-6791%20%28IRAK4%20Degrader%29%20Preclinical%20Data) Nurix and Gilead presented preclinical data for GS-6791, a novel oral IRAK4 degrader, showing potent degradation, pathway inhibition, and efficacy in dermatitis models - At EADV 2025, Nurix and Gilead presented preclinical findings for GS-6791, a novel, selective oral IRAK4 degrader[4](index=4&type=chunk) - Data showed GS-6791 effectively degraded IRAK4 in immune and epithelial cells, blocking IL-1 and IL-36 signaling pathways associated with autoimmune and inflammatory diseases[4](index=4&type=chunk) - In vivo studies demonstrated GS-6791 inhibited cytokine production and improved disease metrics in a mouse dermatitis model[4](index=4&type=chunk) [Upcoming Program Milestones](index=2&type=section&id=Upcoming%20Program%20Milestones) Nurix outlines future development plans for bexobrutideg, zelebrudomide, NX-1607, and strategic collaboration pipeline advancements [Bexobrutideg Future Development](index=2&type=section&id=Bexobrutideg%20Future%20Development) Nurix plans to initiate pivotal trials for bexobrutideg in CLL in H2 2025, recruit Phase 1b cohorts for CLL and autoimmune hemolytic anemia, and conduct healthy volunteer studies for a potential 2026 autoimmune IND - Nurix expects to provide additional clinical updates for bexobrutideg and remains on track to initiate pivotal trials for bexobrutideg in CLL in H2 2025[5](index=5&type=chunk) - To support future development of bexobrutideg in autoimmune and inflammatory diseases, Nurix is recruiting Phase 1b cohorts for patients with CLL and autoimmune hemolytic anemia[5](index=5&type=chunk) - The company is conducting necessary Phase 1 healthy volunteer studies to support a potential autoimmune IND application in 2026[5](index=5&type=chunk) [Zelebrudomide Development](index=2&type=section&id=Zelebrudomide%20Development) Zelebrudomide, an oral BTK and cereblon new substrate degrader, is in Phase 1a/1b clinical trials for relapsed or refractory B-cell malignancies, with ongoing dose-escalation studies - Zelebrudomide is an orally bioavailable degrader of BTK and cereblon new substrates IKZF1 (Ikaros) and IKZF3 (Aiolos), designed to treat relapsed or refractory B-cell malignancies[6](index=6&type=chunk) - Nurix is conducting a Phase 1a/1b clinical trial, including a Phase 1b expansion cohort focused on patients with diffuse large B-cell lymphoma and mantle cell lymphoma[6](index=6&type=chunk) - The company is enrolling patients in dose-escalation studies using chirally controlled drug product in the current Phase 1a/1b trial[6](index=6&type=chunk) [NX-1607 Development](index=2&type=section&id=NX-1607%20Development) NX-1607, an oral CBL-B E3 ligase inhibitor, is in Phase 1 trials for immuno-oncology indications, including solid tumors and lymphomas, to fully investigate dosing and regimens - NX-1607 is an oral inhibitor of CBL-B E3 ligase, being developed for immuno-oncology indications, including various solid tumors and lymphomas[7](index=7&type=chunk) - Nurix is conducting an ongoing adult Phase 1 trial for NX-1607, which includes a comprehensive investigation of dosing and regimens in the Phase 1a portion[7](index=7&type=chunk) [Strategic Collaborations Pipeline Advancement](index=2&type=section&id=Strategic%20Collaborations%20Pipeline%20Advancement) Nurix and Sanofi continue IND-enabling studies for STAT6 degrader NX-3911, expecting ongoing research collaboration milestones with Gilead, Sanofi, and Pfizer - Nurix and Sanofi continue to advance IND-enabling studies for the STAT6 degrader NX-3911, with updates expected in the future[8](index=8&type=chunk) - Nurix anticipates achieving ongoing significant research collaboration milestones under its agreements with Gilead, Sanofi, and Pfizer[8](index=8&type=chunk) [Fiscal Third Quarter 2025 Financial Results](index=2&type=section&id=Fiscal%20Third%20Quarter%202025%20Financial%20Results) Nurix Therapeutics reports its financial performance for Q3 FY2025, detailing revenue, operating expenses, net loss, and cash position [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Q3 FY2025 revenue decreased to $7.9 million from $12.6 million in the prior year, primarily due to the conclusion of a Sanofi collaboration, partially offset by increased Pfizer collaboration completion Revenue Overview | Metric | Three Months Ended August 31, 2025 (million USD) | Three Months Ended August 31, 2024 (million USD) | | :--- | :---: | :---: | | Collaboration revenue | 7.9 | 12.6 | | **Total Revenue** | **7.9** | **12.6** | - Revenue decreased due to the conclusion of a research term with Sanofi[10](index=10&type=chunk) - The decrease in revenue was partially offset by a higher percentage of completion for performance obligations under the collaboration with Pfizer[10](index=10&type=chunk) [Operating Expenses Analysis](index=2&type=section&id=Operating%20Expenses%20Analysis) Total operating expenses for Q3 FY2025 significantly increased to $99.2 million from $67.2 million in the prior year, driven by higher R&D and G&A expenses Operating Expenses Summary | Metric | Three Months Ended August 31, 2025 (million USD) | Three Months Ended August 31, 2024 (million USD) | | :--- | :---: | :---: | | Research and development | 86.1 | 55.5 | | General and administrative | 13.2 | 11.7 | | **Total Operating Expenses** | **99.3** | **67.2** | [Research and Development Expenses](index=2&type=section&id=Research%20and%20Development%20Expenses) R&D expenses increased to $86.1 million, primarily due to higher clinical, contract manufacturing, and consulting costs as Nurix accelerates trial enrollment and prepares for pivotal studies R&D Expenses | Metric | Three Months Ended August 31, 2025 (million USD) | Three Months Ended August 31, 2024 (million USD) | | :--- | :---: | :---: | | Research and development expenses | 86.1 | 55.5 | | **Year-over-year growth** | **55.1%** | | - The increase in R&D expenses was primarily related to clinical, contract manufacturing, and consulting costs as Nurix continues to accelerate patient enrollment in ongoing bexobrutideg trials and prepares for pivotal trial initiation[11](index=11&type=chunk) [General and Administrative Expenses](index=2&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses increased to $13.2 million, mainly due to higher compensation and related personnel costs G&A Expenses | Metric | Three Months Ended August 31, 2025 (million USD) | Three Months Ended August 31, 2024 (million USD) | | :--- | :---: | :---: | | General and administrative expenses | 13.2 | 11.7 | | **Year-over-year growth** | **12.8%** | | - The increase in G&A expenses was primarily due to higher compensation and related personnel costs[12](index=12&type=chunk) [Net Loss and EPS](index=2&type=section&id=Net%20Loss%20and%20EPS) Net loss for Q3 FY2025 expanded to $86.4 million, or $1.03 per share, compared to a net loss of $49.0 million, or $0.67 per share, in the prior year Net Loss and EPS Summary | Metric | Three Months Ended August 31, 2025 (million USD) | Three Months Ended August 31, 2024 (million USD) | | :--- | :---: | :---: | | Net loss | (86.4) | (49.0) | | Net loss per share | (1.03) | (0.67) | [Cash Position](index=2&type=section&id=Cash%20Position) Cash, cash equivalents, and marketable securities totaled $428.8 million as of August 31, 2025, down from $609.6 million as of November 30, 2024 Cash, Cash Equivalents, and Marketable Securities | Metric | August 31, 2025 (million USD) | November 30, 2024 (million USD) | | :--- | :---: | :---: | | Cash, cash equivalents, and marketable securities | 428.8 | 609.6 | [About Nurix Therapeutics, Inc.](index=3&type=section&id=About%20Nurix%20Therapeutics%2C%20Inc.) Nurix Therapeutics is a clinical-stage biopharmaceutical company focused on targeted protein degradation for cancer and inflammatory diseases, leveraging its AI-integrated discovery engine and E3 ligase expertise [Company Profile](index=3&type=section&id=Company%20Profile) Nurix Therapeutics is a clinical-stage biopharmaceutical company dedicated to discovering, developing, and commercializing targeted protein degradation drugs to improve treatment options for cancer and inflammatory diseases - Nurix Therapeutics is a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of targeted protein degradation drugs to improve treatment options for patients with cancer and inflammatory diseases[14](index=14&type=chunk) - The company has an internal clinical-stage pipeline, including BTK degraders and CBL-B inhibitors, and strategic collaborations with Gilead, Sanofi, and Pfizer for preclinical and clinical-stage degrader programs[14](index=14&type=chunk) - Nurix leverages its fully AI-integrated discovery engine and E3 ligase expertise to translate targeted protein degradation science into clinical advancements, aiming to make degrader therapies a forefront of patient care[14](index=14&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents Nurix Therapeutics' condensed statements of operations and balance sheets for the specified periods [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) This section provides Nurix Therapeutics' condensed statements of operations for the three and nine months ended August 31, 2025, detailing key financial metrics like revenue, operating expenses, net loss, and EPS Condensed Statements of Operations | | Three Months Ended | | Nine Months Ended | | | :--- | :---: | :---: | :---: | :---: | | | August 31, 2025 (thousand USD) | August 31, 2024 (thousand USD) | August 31, 2025 (thousand USD) | August 31, 2024 (thousand USD) | | **Revenue:** | | | | | | Collaboration revenue | $ 7,894 | $ 12,588 | $ 40,403 | $ 41,265 | | License revenue | — | — | 30,000 | — | | **Total revenue** | **7,894** | **12,588** | **70,403** | **41,265** | | **Operating expenses:** | | | | | | Research and development | 86,120 | 55,481 | 233,879 | 154,408 | | General and administrative | 13,159 | 11,718 | 39,095 | 35,227 | | **Total operating expenses** | **99,279** | **67,199** | **272,974** | **189,635** | | **Loss from operations** | **(91,385)** | **(54,611)** | **(202,571)** | **(148,370)** | | Interest and other income, net | 4,964 | 5,737 | 17,095 | 13,612 | | Loss before income taxes | (86,421) | (48,874) | (185,476) | (134,758) | | Provision for income taxes | — | 82 | 760 | 262 | | **Net loss** | **$ (86,421)** | **$ (48,956)** | **$ (186,236)** | **$ (135,020)** | | **Net loss per share, basic and diluted** | **$ (1.03)** | **$ (0.67)** | **$ (2.22)** | **$ (2.13)** | | Weighted-average number of shares outstanding, basic and diluted | 84,159,336 | 72,779,381 | 83,869,469 | 63,384,174 | [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets) This section presents Nurix Therapeutics' condensed balance sheets as of August 31, 2025, and November 30, 2024, outlining assets, liabilities, and stockholders' equity Condensed Balance Sheets | | | August 31, 2025 (thousand USD) | | November 30, 2024 (thousand USD) | | :--- | :--- | :---: | :--- | :---: | | **Assets** | | | | | | Current assets: | | | | | | Cash and cash equivalents | $ | 78,438 | $ | 109,997 | | Marketable securities | | 350,391 | | 499,586 | | Prepaid expenses and other current assets | | 11,774 | | 9,804 | | **Total current assets** | | **440,603** | | **619,387** | | Operating lease right-of-use assets | | 53,028 | | 28,139 | | Property and equipment, net | | 20,498 | | 17,757 | | Restricted cash | | 968 | | 901 | | Other assets | | 7,375 | | 3,159 | | **Total assets** | **$** | **522,472** | **$** | **669,343** | | **Liabilities and stockholders' equity** | | | | | | Current liabilities: | | | | | | Accounts payable | $ | 8,609 | $ | 11,482 | | Accrued expenses and other current liabilities | | 43,957 | | 37,994 | | Operating lease liabilities, current | | 3,791 | | 8,014 | | Deferred revenue, current | | 25,993 | | 38,364 | | **Total current liabilities** | | **82,350** | | **95,854** | | Operating lease liabilities, net of current portion | | 52,695 | | 20,289 | | Deferred revenue, net of current portion | | 15,175 | | 26,207 | | **Total liabilities** | | **150,220** | | **142,350** | | **Stockholders' equity:** | | | | | | Common stock | | 77 | | 76 | | Additional paid-in-capital | | 1,297,061 | | 1,265,536 | | Accumulated other comprehensive income | | 119 | | 150 | | Accumulated deficit | | (925,005) | | (738,769) | | **Total stockholders' equity** | | **372,252** | | **526,993** | | **Total liabilities and stockholders' equity** | **$** | **522,472** | **$** | **669,343** | [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements regarding future events and expectations, subject to risks and uncertainties that may cause actual results to differ materially [Disclaimer](index=3&type=section&id=Disclaimer) This press release contains forward-looking statements subject to risks and uncertainties, and Nurix disclaims any obligation to publicly update them unless required by law - This press release contains forward-looking statements regarding future events and expectations, subject to the Private Securities Litigation Reform Act of 1995[15](index=15&type=chunk) - Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and changes in circumstances that may cause actual activities and results to differ from those expressed in any forward-looking statement[15](index=15&type=chunk) - Nurix disclaims any obligation to publicly update any forward-looking statements unless required by applicable law[15](index=15&type=chunk) [Contacts](index=3&type=section&id=Contacts) This section provides investor relations and media contact information for Nurix Therapeutics [Investor and Media Contacts](index=3&type=section&id=Investor%20and%20Media%20Contacts) This section provides investor relations and media contact information for Nurix Therapeutics - Investor Contacts: Kris Fortner, Nurix Therapeutics, Inc., ir@nurixtx.com; Elizabeth Wolffe, Ph.D., Wheelhouse Life Science Advisors, lwolffe@wheelhouselsa.com[16](index=16&type=chunk)[17](index=17&type=chunk) - Media Contact: Aljanae Reynolds, Wheelhouse Life Science Advisors, areynolds@wheelhouselsa.com[17](index=17&type=chunk)

[Filing Information](index=1&type=section&id=Filing%20Information) This section details the registrant's identification, securities, and company status [Registrant and Filing Details](index=1&type=section&id=Registrant%20and%20Filing%20Details) This section details the registrant's identification, jurisdiction, commission file number, and the report date - Registrant: **Educational Development Corporation**[2](index=2&type=chunk) - Date of Report: **October 9, 2025**[2](index=2&type=chunk) - Jurisdiction of Incorporation: **Delaware**[2](index=2&type=chunk) - Commission File Number: **000-04957**[2](index=2&type=chunk) [Securities and Company Status](index=1&type=section&id=Securities%20and%20Company%20Status) This section outlines the securities registered under Section 12(b) of the Act and confirms the registrant's status regarding emerging growth company provisions Securities Registered Under Section 12(b) | Title of Class | Trading Symbol | Exchange | | :------------- | :------------- | :------- | | Common Stock, $.20 par value | EDUC | NASDAQ | - The registrant is **not an emerging growth company**[4](index=4&type=chunk) [Current Report Disclosures](index=2&type=section&id=Current%20Report%20Disclosures) This section outlines the specific disclosures made in the 8-K, including financial results and exhibits [General Disclosure Information](index=2&type=section&id=General%20Disclosure%20Information) This section clarifies that the information disclosed in Items 2.02, 7.01, and 9.01 is furnished, not filed, and therefore not subject to certain liabilities or automatic incorporation by reference - Information in Items 2.02, 7.01, and 9.01 is **furnished**, not deemed 'filed' under Section 18 of the Exchange Act[5](index=5&type=chunk) - The furnished information is **not subject to liabilities** under Section 18 and is not automatically incorporated by reference into other filings[5](index=5&type=chunk) [ITEM 2.02 Results of Operations and Financial Condition](index=2&type=section&id=ITEM%202.02%20Results%20of%20Operations%20and%20Financial%20Condition) Educational Development Corporation announced its fiscal 2026 second quarter financial results via a press release on October 9, 2025, which is furnished as Exhibit 99.1 - Announcement of **fiscal 2026 second quarter financial results** on October 9, 2025[6](index=6&type=chunk) - Results were announced via press release, furnished as **Exhibit 99.1**[6](index=6&type=chunk) [ITEM 7.01 Regulation FD Disclosure](index=2&type=section&id=ITEM%207.01%20Regulation%20FD%20Disclosure) This item reiterates the announcement of fiscal 2026 second quarter financial results through a press release and provides details for the upcoming earnings call - Fiscal 2026 second quarter financial results announced on **October 9, 2025**, via press release (Exhibit 99.1)[7](index=7&type=chunk) - Earnings call scheduled for **Thursday, October 9, 2025, at 3:30 PM CT (4:30 PM ET)**[7](index=7&type=chunk) [ITEM 9.01 Financial Statements and Exhibits](index=2&type=section&id=ITEM%209.01%20Financial%20Statements%20and%20Exhibits) This section lists the exhibits accompanying the 8-K filing, including the press release detailing the financial results and the interactive data file Exhibits Filed | Exhibit Number | Description | | :------------- | :---------- | | 99.1 | Press Release dated as of October 9, 2025 | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL) | [Signature](index=3&type=section&id=Signature) This section confirms the authorized signatory for the report [Authorized Signatory](index=3&type=section&id=Authorized%20Signatory) The report was duly signed on behalf of Educational Development Corporation by its President and Chief Executive Officer, Craig M. White, on October 9, 2025 - Signed by **Craig M. White**, President and Chief Executive Officer[11](index=11&type=chunk) - Signature date: **October 9, 2025**[11](index=11&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Interim Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Interim%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents Neogen Corporation's unaudited condensed consolidated financial statements for the three months ended August 31, 2025, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes explaining business operations, accounting policies, segment information, and other financial disclosures [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%E2%80%93%20August%2031%2C%202025%20and%20May%2031%2C%202025) Presents the company's financial position, detailing assets, liabilities, and equity, at specific reporting dates Condensed Consolidated Balance Sheets (August 31, 2025 vs. May 31, 2025) | Metric (in thousands) | August 31, 2025 | May 31, 2025 | Change | % Change | | :-------------------- | :-------------- | :----------- | :----- | :------- | | Total Current Assets | $524,060 | $576,937 | $(52,877) | -9.16% | | Total Assets | $3,378,156 | $3,443,836 | $(65,680) | -1.91% | | Total Current Liabilities | $146,205 | $174,011 | $(27,806) | -15.98% | | Total Liabilities | $1,259,507 | $1,372,582 | $(113,075) | -8.24% | | Total Stockholders' Equity | $2,118,649 | $2,071,254 | $47,395 | 2.29% | - Assets held for sale decreased from **$50,402 thousand** to **$0**, indicating the completion of the divestiture[11](index=11&type=chunk) - Current portion of debt decreased from **$19,301 thousand** to **$0**, reflecting debt repayments[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%E2%80%93%20three%20months%20ended%20August%2031%2C%202025%20and%20August%2031%2C%202024) Details the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands, except EPS) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------------------- | :-------------- | :-------------- | :----- | :------- | | Total Revenues | $209,189 | $216,964 | $(7,775) | -3.58% | | Gross Profit | $94,970 | $104,926 | $(9,956) | -9.49% | | Operating (Loss) Income | $(16,091) | $2,257 | $(18,348) | -812.94% | | Gain on sale of business | $76,390 | $0 | $76,390 | N/A | | Net Income (Loss) | $36,338 | $(12,609) | $48,947 | 388.20% | | Basic Net Income (Loss) Per Share | $0.17 | $(0.06) | $0.23 | 383.33% | | Diluted Net Income (Loss) Per Share | $0.17 | $(0.06) | $0.23 | 383.33% | - Net Income significantly improved from a loss of **$12.6 million** in Q1 2024 to a gain of **$36.3 million** in Q1 2025, primarily driven by a **$76.4 million** gain on the sale of a business[14](index=14&type=chunk) [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20%E2%80%93%20three%20months%20ended%20August%2031%2C%202025%20and%20August%2031%2C%202024) Reports net income and other comprehensive income or loss components, reflecting total changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive (Loss) Income (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Net income (loss) | $36,338 | $(12,609) | $48,947 | 388.20% | | Foreign currency translation gain | $5,817 | $2,459 | $3,358 | 136.56% | | Unrealized loss on derivative instruments | $(404) | $(3,859) | $3,455 | -89.53% | | Total comprehensive income (loss) | $41,751 | $(14,009) | $55,760 | 398.03% | [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity%20%E2%80%93%20three%20months%20ended%20August%2031%2C%202025%20and%20August%2031%2C%202024) Outlines changes in stockholders' equity, including common stock, retained earnings, and other comprehensive income, over time Condensed Consolidated Statements of Equity (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands, except shares) | August 31, 2025 | May 31, 2025 | August 31, 2024 | May 31, 2024 | | :----------------------------------- | :-------------- | :----------- | :-------------- | :----------- | | Common Stock Shares | 217,298,626 | 217,044,498 | 216,698,138 | 216,614,407 | | Common Stock Amount | $34,768 | $34,728 | $34,672 | $34,658 | | Additional Paid-in Capital | $2,607,452 | $2,601,848 | $2,588,930 | $2,583,885 | | Accumulated Other Comprehensive Loss | $(23,485) | $(28,898) | $(31,421) | $(30,021) | | Accumulated Deficit (Retained Earnings) | $(500,086) | $(536,424) | $543,011 | $555,620 | | Total Stockholders' Equity | $2,118,649 | $2,071,254 | $3,135,192 | $3,144,142 | - Total Stockholders' Equity increased by **$47.4 million** from May 31, 2025, to August 31, 2025, primarily due to net income and other comprehensive income[22](index=22&type=chunk) - Accumulated deficit improved by **$36.3 million**, moving from **$(536,424) thousand** to **$(500,086) thousand**, reflecting the net income for the period[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%93%20Three%20months%20ended%20August%2031%2C%202025%20and%20August%2031%2C%202024) Summarizes cash inflows and outflows from operating, investing, and financing activities for the reporting period Condensed Consolidated Statements of Cash Flows (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Net Cash from Operating Activities | $10,853 | $(17,914) | $28,767 | 160.58% | | Net Cash from Investing Activities | $97,725 | $(33,662) | $131,387 | 390.33% | | Net Cash from Financing Activities | $(99,393) | $979 | $(100,372) | -10252.50% | | Net Increase (Decrease) in Cash | $9,879 | $(50,134) | $60,013 | 119.70% | | Cash and Cash Equivalents, End of Year | $138,883 | $120,477 | $18,406 | 15.28% | - Net cash provided by investing activities significantly increased to **$97.7 million** in Q1 2025, primarily due to **$121.7 million** in proceeds from the sale of the Cleaners & Disinfectants business[25](index=25&type=chunk)[38](index=38&type=chunk) - Cash used for financing activities increased substantially to **$(99.4) million** in Q1 2025, driven by debt repayments using divestiture proceeds[25](index=25&type=chunk)[110](index=110&type=chunk) [Notes to Interim Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Interim%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20August%2031%2C%202025) Provides detailed explanations and disclosures supporting the interim condensed consolidated financial statements [1. Description of Business and Basis of Presentation](index=9&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) Describes Neogen's business segments and the accounting principles used in financial statement preparation - Neogen operates in two segments: Food Safety (diagnostic test kits, genomics-based tech, software for food/animal feed safety) and Animal Safety (veterinary instruments, pharmaceuticals, vaccines, diagnostics, biosecurity, genomics testing for animal health)[27](index=27&type=chunk)[28](index=28&type=chunk) - The company adopted new accounting pronouncements for Segment Reporting (ASU 2023-07) and Income Taxes (ASU 2023-09) effective June 1, 2025, modifying disclosure requirements[31](index=31&type=chunk)[32](index=32&type=chunk) [2. Revenue Recognition](index=10&type=section&id=2.%20REVENUE%20RECOGNITION) Explains the company's policies and disaggregated data for recognizing revenue from contracts with customers Disaggregated Revenue by Major Product and Service Categories (Three months ended August 31, 2025 vs. 2024) | Category (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :---------------------- | :-------------- | :-------------- | :----- | :------- | | **Food Safety** | | | | | | Natural Toxins & Allergens | $19,962 | $20,376 | $(414) | -2.03% | | Bacterial & General Sanitation | $41,649 | $39,899 | $1,750 | 4.39% | | Indicator Testing, Culture Media & Other | $79,085 | $81,703 | $(2,618) | -3.20% | | Biosecurity Products | $5,799 | $11,779 | $(5,980) | -50.77% | | Genomics Services | $5,555 | $5,588 | $(33) | -0.59% | | Total Food Safety | $152,050 | $159,345 | $(7,295) | -4.58% | | **Animal Safety** | | | | | | Life Sciences | $1,859 | $1,733 | $126 | 7.27% | | Veterinary Instruments & Disposables | $11,908 | $12,523 | $(615) | -4.91% | | Animal Care & Other | $7,578 | $6,679 | $899 | 13.46% | | Biosecurity Products | $19,229 | $20,806 | $(1,577) | -7.58% | | Genomics Services | $16,565 | $15,878 | $687 | 4.33% | | Total Animal Safety | $57,139 | $57,619 | $(480) | -0.83% | | **Total Revenues** | $209,189 | $216,964 | $(7,775) | -3.58% | Contract Liabilities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | | :-------------------- | :-------------- | :-------------- | | Beginning balance | $5,558 | $4,632 | | Additions | $3,206 | $3,078 | | Amounts recognized into revenue | $(2,940) | $(2,075) | | Ending balance | $5,824 | $5,635 | [3. Divestiture](index=11&type=section&id=3.%20DIVESTITURE) Details the sale of a business segment, including proceeds, gain recognized, and classification impact - Neogen completed the sale of its Cleaners and Disinfectants (C&D) business to Kersia Group on July 17, 2025, receiving **$121.7 million** in cash at closing, plus contingent consideration up to **$3.5 million**[38](index=38&type=chunk) - A gain of **$76.39 million** on the sale of the C&D business was recognized during the three months ended August 31, 2025[38](index=38&type=chunk) - The divestiture did not meet the criteria for classification as a discontinued operation[37](index=37&type=chunk) [4. Net Income (Loss) Per Share](index=11&type=section&id=4.%20NET%20INCOME%20(LOSS)%20PER%20SHARE) Presents the calculation of basic and diluted earnings per share, including adjustments for anti-dilutive securities Net Income (Loss) Per Share Calculation (Three months ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 | August 31, 2024 | | :----- | :-------------- | :-------------- | | Net income (loss) attributable to Neogen | $36,338 | $(12,609) | | Weighted average shares (Basic) | 217,217,836 | 216,695,348 | | Weighted average shares (Diluted) | 217,334,926 | 216,695,348 | | Basic EPS | $0.17 | $(0.06) | | Diluted EPS | $0.17 | $(0.06) | - For Q1 2025, **661,000 shares** were excluded from diluted EPS calculation as they were anti-dilutive. For Q1 2024, all stock options and RSUs were anti-dilutive due to the net loss[41](index=41&type=chunk) [5. Segment Information and Geographic Data](index=12&type=section&id=5.%20SEGMENT%20INFORMATION%20AND%20GEOGRAPHIC%20DATA) Provides financial data broken down by operating segments and geographic regions Segment Performance (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | Food Safety 2025 | Animal Safety 2025 | Corporate 2025 | Total 2025 | Food Safety 2024 | Animal Safety 2024 | Corporate 2024 | Total 2024 | | :-------------------- | :--------------- | :----------------- | :------------- | :--------- | :--------------- | :----------------- | :------------- | :--------- | | Net Revenue | $152,050 | $57,139 | — | $209,189 | $159,345 | $57,619 | — | $216,964 | | Operating Income (Loss) | $7,091 | $4,472 | $(27,654) | $(16,091) | $17,905 | $2,589 | $(18,237) | $2,257 | | Total Assets | $2,947,343 | $291,929 | $138,884 | $3,378,156 | $4,056,444 | $342,077 | $104,652 | $4,503,173 | Revenue by Geographic Location (Three months ended August 31, 2025 vs. 2024) | Geographic Location (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :--------------------------------- | :-------------- | :-------------- | :----- | :------- | | Domestic | $102,074 | $104,383 | $(2,309) | -2.21% | | International | $107,115 | $112,581 | $(5,466) | -4.86% | | Total revenue | $209,189 | $216,964 | $(7,775) | -3.58% | - Food Safety segment operating income decreased by **60%** YoY, while Animal Safety operating income increased by **73%** YoY[43](index=43&type=chunk) [6. Restructuring](index=13&type=section&id=6.%20RESTRUCTURING) Outlines charges and activities related to the company's restructuring initiatives by segment Restructuring Charges by Segment (Three months ended August 31, 2025 vs. 2024) | Segment (in thousands) | August 31, 2025 | August 31, 2024 | | :--------------------- | :-------------- | :-------------- | | Food Safety | $407 | $132 | | Animal Safety | $52 | — | | Corporate | $(127) | $238 | | Total | $332 | $370 | - Total restructuring charges decreased slightly to **$332 thousand** in Q1 2025 from **$370 thousand** in Q1 2024, primarily related to employee separation costs and other exit costs[46](index=46&type=chunk) [7. Long-Term Debt](index=13&type=section&id=7.%20LONG-TERM%20DEBT) Details the composition of the company's long-term debt, including changes and related transactions Long-Term Debt Composition (August 31, 2025 vs. May 31, 2025) | Debt Type (in thousands) | August 31, 2025 | May 31, 2025 | Change | % Change | | :----------------------- | :-------------- | :----------- | :----- | :------- | | Term Loan | $405,000 | $450,000 | $(45,000) | -10.00% | | Senior Notes | $346,500 | $350,000 | $(3,500) | -1.00% | | Revolver Facility | $48,500 | $100,000 | $(51,500) | -51.50% | | Finance Lease | — | $2,426 | $(2,426) | -100.00% | | Total debt and finance lease | $800,000 | $902,426 | $(102,426) | -11.35% | - Neogen repaid **$100 million** of outstanding debt in Q1 2026 using proceeds from the C&D divestiture, including **$51.5 million** on the Revolving Facility, **$45 million** on the Term Loan, and **$3.5 million** of Senior Notes[48](index=48&type=chunk)[103](index=103&type=chunk) - Debt prepayments resulted in extinguishment losses of **$393 thousand** for the Term Loan and **$41 thousand** for Senior Notes[48](index=48&type=chunk) [8. Income Taxes](index=14&type=section&id=8.%20INCOME%20TAXES) Explains the company's income tax expense or benefit, effective tax rate, and unrecognized tax benefits Income Tax Expense (Benefit) (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Income Tax Expense (Benefit) | $7,470 | $(3,000) | $10,470 | - The shift from an income tax benefit to an expense is primarily due to pre-tax income from the gain on the sale of the Cleaners and Disinfectants business[49](index=49&type=chunk) - Unrecognized tax benefits increased from **$3,849 thousand** to **$4,732 thousand**, mainly associated with the acquired 3M Food Safety Division (FSD) for transfer pricing and R&D credits[51](index=51&type=chunk) [9. Commitments and Contingencies](index=15&type=section&id=9.%20COMMITMENTS%20AND%20CONTINGENCIES) Discloses potential future obligations and legal matters that could impact the company's financial position - Neogen has an estimated environmental remediation liability of **$916 thousand** as of August 31, 2025, for its Randolph, Wisconsin facility, with **$100 thousand** as current liability[53](index=53&type=chunk) - The company is facing two putative class action lawsuits filed in July and August 2025, alleging false and misleading statements related to the integration of the 3M business and the 2022 acquisition offering materials[54](index=54&type=chunk)[55](index=55&type=chunk) - Stockholder litigation demands were received in August 2025, leading the Board to establish a litigation committee to investigate[56](index=56&type=chunk) [10. Derivatives and Fair Value](index=16&type=section&id=10.%20DERIVATIVES%20AND%20FAIR%20VALUE) Describes the company's use of derivative instruments and their fair value measurements - Neogen uses non-designated foreign currency forward contracts to manage balance sheet risk, with a net fair value of **$123 thousand** as of August 31, 2025 (compared to **$(407) thousand** on May 31, 2025)[60](index=60&type=chunk)[61](index=61&type=chunk) - A cash flow hedge interest rate swap with a notional value of **$200 million** (decreased from **$250 million**) fixes a portion of variable interest on the term loan at **4.215%** plus margin[62](index=62&type=chunk) Fair Value of Derivatives Designated as Hedging Instruments (August 31, 2025 vs. May 31, 2025) | Instrument (in thousands) | August 31, 2025 | May 31, 2025 | | :------------------------ | :-------------- | :----------- | | Interest rate swap – current | $(764) | $(369) | | Interest rate swap – non-current | $(1,426) | $(1,290) | [11. Accumulated Other Comprehensive Loss](index=17&type=section&id=11.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Details changes in components of accumulated other comprehensive loss, such as foreign currency translation adjustments Changes in Accumulated Other Comprehensive Loss (Three months ended August 31, 2025 vs. 2024) | Component (in thousands) | August 31, 2025 | August 31, 2024 | | :----------------------- | :-------------- | :-------------- | | Beginning balance | $(28,898) | $(30,021) | | Foreign currency translation adjustment (end balance) | $(21,820) | $(29,426) | | Fair value of derivatives change (end balance) | $(1,665) | $(1,995) | | Ending balance | $(23,485) | $(31,421) | - Accumulated other comprehensive loss improved from **$(28.9) million** at May 31, 2025, to **$(23.5) million** at August 31, 2025, driven by foreign currency translation gains and a smaller unrealized loss on derivative instruments[67](index=67&type=chunk) [12. Subsequent Events](index=17&type=section&id=12.%20SUBSEQUENT%20EVENTS) Reports significant events that occurred after the balance sheet date but before the financial statements were issued - In September 2025, management approved a plan to reduce headcount by approximately **10%** as part of an organizational restructuring, with expected employee separation benefits of **$6.75 million** - **$7.25 million**[68](index=68&type=chunk)[106](index=106&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Neogen's financial performance and condition for the three months ended August 31, 2025, discussing key trends, operational results, segment performance, liquidity, and cash flows, highlighting the impact of divestitures, economic headwinds, and strategic initiatives [Safe Harbor and Forward-Looking Statements](index=18&type=section&id=Safe%20Harbor%20and%20Forward-Looking%20Statements) Provides cautionary statements regarding forward-looking information and associated risks and uncertainties - The report contains forward-looking statements, which are subject to risks and uncertainties, including the integration of the 3M food safety business, competition, and regulatory changes[70](index=70&type=chunk) - Neogen disclaims any obligation to update forward-looking statements beyond the filing date, except as legally required[71](index=71&type=chunk) [Trends and Uncertainties](index=18&type=section&id=Trends%20and%20Uncertainties) Discusses key economic, operational, and market factors influencing the company's financial performance and outlook - Neogen continues to face economic headwinds including softening consumer demand, elevated interest rates, and geopolitical tensions, despite easing inflation[72](index=72&type=chunk) - Order fulfillment issues from a new ERP system implementation and 3M transition service agreement exit in fiscal year 2024 led to lost market share in Food Safety, continuing into fiscal year 2025[74](index=74&type=chunk) - The company experienced elevated inventory write-offs and production inefficiencies in its sample collection product line, which are expected to continue impacting fiscal year 2026[74](index=74&type=chunk)[75](index=75&type=chunk) - Economic policy shifts towards increasing tariffs could raise costs on imported materials and negatively impact international sales[76](index=76&type=chunk) [Executive Overview](index=19&type=section&id=Executive%20Overview) Summarizes the company's overall financial performance and key highlights for the reporting period Executive Overview of Financial Performance (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase/ (Decrease) | | :-------------------- | :-------------- | :-------------- | :------------------- | | Total Revenues | $209,189 | $216,964 | $(7,775) | | Gross Profit | $94,970 | $104,926 | $(9,956) | | Operating (Loss) Income | $(16,091) | $2,257 | $(18,348) | | Net Income (Loss) | $36,338 | $(12,609) | $48,947 | - Net income significantly improved due to a **$76.4 million** gain on the sale of a business, despite a decline in total revenues and operating income[80](index=80&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) This section covers results of operations [Revenues](index=19&type=section&id=Revenues) Analyzes the drivers of changes in total revenue, including impacts from divestitures and foreign exchange - Total revenue decreased by **$7.8 million** (**3.6%**) YoY, primarily due to a **$9.6 million** unfavorable impact from divestitures (Cleaners & Disinfectants business) and discontinued product lines[81](index=81&type=chunk) - The decrease was partially offset by a **$1.1 million** favorable foreign exchange rate impact and **$0.7 million** growth in the business, driven by insect control, genomics services, pathogen detection, and sample collection products[81](index=81&type=chunk) - Lower Petrifilm sales were attributed to channel inventory rebalancing in Asia and normalization of buying patterns in the U.S[82](index=82&type=chunk) [Service Revenue](index=20&type=section&id=Service%20Revenue) Focuses on revenue generated from services, primarily genomics, and its year-over-year changes Service Revenue (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Service revenues | $25,051 | $24,446 | $605 | 2.47% | - Service revenue, primarily from genomics services, increased by **$0.6 million** (**2.5%**) YoY[83](index=83&type=chunk) [International Revenue](index=20&type=section&id=International%20Revenue) Examines revenue generated from international sales, including currency and divestiture impacts International Revenue (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :--------------------------------- | :-------------- | :-------------- | :----- | :------- | | International sales | $107,115 | $112,581 | $(5,466) | -4.86% | - International sales decreased by **$5.5 million** (**4.9%**) YoY, mainly due to the divestiture of the Cleaners & Disinfectants business, partially offset by a **$1.1 million** favorable foreign exchange rate impact[84](index=84&type=chunk) [Gross Margin](index=20&type=section&id=Gross%20Margin) Analyzes the company's gross profit margin and factors influencing its changes Gross Margin (Three months ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 | August 31, 2024 | Change (bps) | | :----- | :-------------- | :-------------- | :----------- | | Gross Margin | 45.4% | 48.4% | -300 | - Gross margin decreased by **300 basis points** YoY, primarily due to lower sales volume, higher tariff costs, increased manufacturing costs for sample collection products, inventory write-offs, and duplicative costs for internal Petrifilm manufacturing[85](index=85&type=chunk) [Operating Expenses](index=20&type=section&id=Operating%20Expenses) Discusses trends and changes in the company's sales and marketing, general and administrative, and research and development expenses [Sales and Marketing](index=20&type=section&id=Sales%20and%20Marketing) Details changes in sales and marketing expenditures and their underlying causes Sales and Marketing Expenses (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Sales and marketing | $45,048 | $45,799 | $(751) | -1.64% | - Sales and marketing expenses decreased by **$0.8 million** (**1.6%**) YoY, mainly due to lower outbound shipping costs and reduced costs from the divested C&D business, partially offset by headcount costs[86](index=86&type=chunk) [General and Administrative](index=20&type=section&id=General%20and%20Administrative) Explains fluctuations in general and administrative expenses, including corporate and transaction costs General and Administrative Expenses (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | General and administrative | $60,888 | $51,671 | $9,217 | 17.84% | - General and administrative expenses increased by **$9.2 million** (**17.8%**) YoY, driven by higher corporate expenses related to transformation initiatives and transaction costs[87](index=87&type=chunk) - Amortization expense for definite-lived intangible assets was **$23.0 million** in Q1 2025, with estimated annual expenses of **$89 million** to **$94 million** for fiscal years 2026-2030[88](index=88&type=chunk) [Research and Development](index=20&type=section&id=Research%20and%20Development) Analyzes research and development spending and its impact on product innovation Research and Development Expenses (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Research and development | $5,125 | $5,199 | $(74) | -1.42% | - Research and development expense slightly decreased by **$0.07 million** (**1.4%**) YoY, primarily due to lower contracted services and employee costs[89](index=89&type=chunk) [Other Income/Expense](index=20&type=section&id=Other%20Income%2FExpense) Reports non-operating income and expenses, such as gains on asset sales and interest expenses Other Income (Expense) (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Total Other Income (Expense) | $59,899 | $(17,866) | $77,765 | - Other income significantly increased to **$59.9 million** in Q1 2025 from an expense of **$17.9 million** in Q1 2024, primarily driven by a **$76.4 million** gain on the sale of the Cleaners & Disinfectants business[90](index=90&type=chunk) - Interest expense decreased by **$2.2 million** YoY due to lower interest costs resulting from the Term Loan refinancing in April 2025[91](index=91&type=chunk) [Provision for Income Taxes](index=21&type=section&id=Provision%20for%20Income%20Taxes) Discusses the company's income tax provision or benefit and factors affecting the effective tax rate Income Tax Expense (Benefit) (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Income Tax Expense (Benefit) | $7,470 | $(3,000) | $10,470 | - Income tax expense of **$7.5 million** in Q1 2025 (compared to a **$3.0 million** benefit in Q1 2024) is primarily related to pre-tax income from the gain on the C&D business sale[92](index=92&type=chunk) - The One Big Beautiful Bill Act (OBBBA) enacted in July 2025 did not have a significant impact on income tax expense or effective tax rate for Q1 2025[93](index=93&type=chunk) [Segment Results of Operations](index=21&type=section&id=Segment%20Results%20of%20Operations) Provides a detailed breakdown of financial performance by the company's operating segments [Revenues](index=21&type=section&id=Revenues%20(Segment)) Analyzes revenue performance for each operating segment, highlighting key drivers and impacts Segment Revenues (Three months ended August 31, 2025 vs. 2024) | Segment (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | % Change | | :--------------------- | :-------------- | :-------------- | :-------------------- | :------- | | Food Safety Revenue | $152,050 | $159,345 | $(7,295) | (5)% | | Animal Safety Revenue | $57,139 | $57,619 | $(480) | (1)% | | Total Revenues | $209,189 | $216,964 | $(7,775) | (4)% | - Food Safety revenue decreased by **$7.3 million** (**5%**) YoY, primarily due to **$5.9 million** from discontinued products and the C&D divestiture, and a **$2.7 million** business decline, partially offset by favorable currency impact[95](index=95&type=chunk) - Animal Safety revenue decreased by **$0.5 million** (**1%**) YoY, impacted by **$3.7 million** from discontinued products/divestiture and negative FX, but offset by **$3.3 million** growth in insect control, genomics, and animal care products[96](index=96&type=chunk) [Operating Income](index=22&type=section&id=Operating%20Income%20(Segment)) Examines operating income for each segment, explaining changes due to sales, costs, and strategic actions Segment Operating Income (Three months ended August 31, 2025 vs. 2024) | Segment (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | % Change | | :--------------------- | :-------------- | :-------------- | :-------------------- | :------- | | Food Safety Operating Income | $7,091 | $17,905 | $(10,814) | (60)% | | Animal Safety Operating Income | $4,472 | $2,589 | $1,883 | 73% | | Segment Operating Income | $11,563 | $20,494 | $(8,931) | (44)% | | Corporate | $(27,654) | $(18,237) | $(9,417) | 52% | - Food Safety operating income declined by **$10.8 million** (**60%**) YoY due to the C&D divestiture and increased expenses from production inefficiencies and duplicative costs for Petrifilm manufacturing[97](index=97&type=chunk) - Animal Safety operating income increased by **$1.9 million** (**73%**) YoY, driven by favorable product mix and lower costs from fiscal year 2025 restructuring actions in the genomics business[98](index=98&type=chunk) - Corporate expenses increased due to headcount, equity-based compensation, one-time transaction costs, and corporate development initiatives[99](index=99&type=chunk) [Financial Condition and Liquidity](index=22&type=section&id=Financial%20Condition%20and%20Liquidity) Assesses the company's financial health, including cash position, debt, and ability to meet short-term obligations - Primary liquidity sources are cash, operating cash flows, and available borrowing capacity under the Revolving Facility[100](index=100&type=chunk) - As of August 31, 2025, Neogen had **$138.9 million** in cash and cash equivalents and **$201.5 million** available under its revolving line of credit[102](index=102&type=chunk) - Net proceeds from the C&D divestiture (**$121.7 million**) were primarily used to repay **$100 million** of debt in Q1 2026[103](index=103&type=chunk) - The company is in compliance with all financial covenants under its Credit Facilities and estimates **$50 million** in capital expenditures for fiscal 2026, including **$35 million** for 3M FSD integration and a new manufacturing facility[104](index=104&type=chunk)[105](index=105&type=chunk) [Cash Flows](index=23&type=section&id=Cash%20Flows) Summarizes the sources and uses of cash across operating, investing, and financing activities [Net Cash provided by (used for) Operating Activities](index=23&type=section&id=Net%20Cash%20provided%20by%20(used%20for)%20Operating%20Activities) Analyzes cash generated or used by core business operations, excluding non-cash items Net Cash from Operating Activities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Cash from Operating Activities | $10,853 | $(17,914) | $28,767 | - Net cash provided by operating activities increased by **$28.8 million** YoY, driven by improvements in working capital (accounts receivable and accounts payable), despite a decline in operating income[108](index=108&type=chunk) [Net Cash provided by (used for) Investing Activities](index=23&type=section&id=Net%20Cash%20provided%20by%20(used%20for)%20Investing%20Activities) Examines cash flows related to asset acquisitions, sales, and other investment activities Net Cash from Investing Activities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Cash from Investing Activities | $97,725 | $(33,662) | $131,387 | - Cash provided by investing activities increased by **$131.4 million** YoY, primarily due to cash proceeds from the sale of the Cleaners & Disinfectants business and decreased capital expenditures as the new Lansing production facility nears completion[109](index=109&type=chunk) [Net Cash (used for) provided by Financing Activities](index=23&type=section&id=Net%20Cash%20(used%20for)%20provided%20by%20Financing%20Activities) Details cash flows from debt, equity, and dividend transactions, reflecting capital structure changes Net Cash from Financing Activities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Cash from Financing Activities | $(99,393) | $979 | $(100,372) | - Cash used for financing activities increased by **$100.4 million** YoY, primarily due to debt repayment made with proceeds from the sale of the Cleaners and Disinfectants business[110](index=110&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Neogen Corporation continuously evaluates its exposure to currency exchange and interest rate risk, reporting no meaningful changes in these exposures compared to its previous Form 10-K filing - There have been no meaningful changes in the company's exposure to foreign currency exchange rates and interest rates related to variable-rate borrowings since the last Form 10-K[112](index=112&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details Neogen's disclosure controls and procedures, acknowledging material weaknesses in internal control over financial reporting as of August 31, 2025, and outlining ongoing remediation efforts to address these deficiencies - Neogen's disclosure controls and procedures were not effective as of August 31, 2025, due to material weaknesses in internal control over financial reporting[116](index=116&type=chunk) - Material weaknesses were identified in control activities and information and communication components, as discussed in the 2025 Annual Report on Form 10-K[115](index=115&type=chunk) - Remediation efforts include enhancing existing controls, developing new controls, improving documentation, expanding entity-level controls, providing training, and hiring qualified personnel[118](index=118&type=chunk)[120](index=120&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 9, 'Commitments and Contingencies,' for a detailed description of Neogen's material pending legal proceedings, including shareholder litigation - Material pending legal proceedings are described in Note 9, 'Commitments and Contingencies,' of the interim condensed consolidated financial statements[122](index=122&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) Neogen states that there have been no material changes to the risk factors previously described in its Annual Report on Form 10-K for the year ended May 31, 2025 - No material changes in risk factors have occurred since the Annual Report on Form 10-K for the year ended May 31, 2025[123](index=123&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) This section details equity grants made to the new CEO, Mikhael Nassif, as inducement awards and long-term incentives, and confirms no share repurchase activity during the quarter - On August 15, 2025, Mikhael Nassif, the new CEO, received equity grants including options to purchase **473,352 shares**, **184,162 restricted stock units**, options to purchase **1,065,042 shares**, and **414,365 performance share units**[124](index=124&type=chunk) - These equity awards were inducement grants for his appointment as CEO and fiscal year 2026 long-term incentive awards, granted under Section 4(2) of the Securities Act of 1933[124](index=124&type=chunk) - No shares were repurchased under the authorized program during the quarter ended August 31, 2025, with **5,900,000 shares** remaining available for repurchase[125](index=125&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) This section states that no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarterly period ended August 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[126](index=126&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various equity award agreements, certifications, and Inline XBRL documents - The exhibits include various equity award agreements for the CEO, certifications from the Principal Executive Officer and Chief Financial Officer, and Inline XBRL documents[127](index=127&type=chunk) [SIGNATURES](index=28&type=section&id=SIGNATURES) Formal declaration by authorized officers confirming the accuracy and completeness of the financial report - The report is signed by Mikhael Nassif, President & Chief Executive Officer, and David H. Naemura, Chief Financial & Operating Officer, on October 9, 2025[129](index=129&type=chunk)

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This section presents the company's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reporting period [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Richardson Electronics, Ltd., including the Balance Sheets, Statements of Comprehensive Income, Statements of Cash Flows, and Statements of Stockholders' Equity, along with detailed notes explaining the company's accounting policies, segment information, and other financial disclosures [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time - Total Assets **increased from $195.8 million to $200.1 million** between May 31, 2025, and August 30, 2025[12](index=12&type=chunk) - Total Liabilities **increased from $39.2 million to $40.7 million** between May 31, 2025, and August 30, 2025[12](index=12&type=chunk) - Total Stockholders' Equity **increased from $156.7 million to $159.4 million** between May 31, 2025, and August 30, 2025[12](index=12&type=chunk) Key Balance Sheet Data (in millions) | Metric | August 30, 2025 | May 31, 2025 | Change | | :-------------------------------- | :-------------- | :------------- | :----- | | Cash and cash equivalents | $35.7 | $35.9 | -$0.2 | | Accounts receivable, net | $27.0 | $24.1 | +$2.9 | | Inventories, net | $104.6 | $102.8 | +$1.8 | | Total current assets | $170.3 | $165.9 | +$4.4 | | Total assets | $200.1 | $195.8 | +$4.2 | | Accounts payable | $23.2 | $21.3 | +$1.8 | | Total current liabilities | $38.7 | $36.8 | +$1.9 | | Total liabilities | $40.7 | $39.2 | +$1.5 | | Total stockholders' equity | $159.4 | $156.7 | +$2.7 | [Unaudited Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details the company's financial performance, including net sales, gross profit, operating income, and net income, over a specific reporting period - Net Sales **increased by 1.6% to $54.6 million** for the three months ended August 30, 2025, from $53.7 million in the prior year period[14](index=14&type=chunk) - Net Income **significantly increased to $1.9 million** for the three months ended August 30, 2025, compared to $0.6 million for the same period in the prior year[14](index=14&type=chunk) - Diluted EPS (Common Stock) **rose to $0.13** for the three months ended August 30, 2025, from $0.04 in the prior year period[14](index=14&type=chunk) Key Income Statement Data (in millions, except per share amounts) | Metric | Three Months Ended August 30, 2025 | Three Months Ended August 31, 2024 | Change (YoY) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | :----------- | | Net sales | $54.6 | $53.7 | +$0.9 | | Cost of sales | $37.7 | $37.3 | +$0.4 | | Gross profit | $16.9 | $16.4 | +$0.5 | | Operating income | $1.0 | $0.3 | +$0.7 | | Income before income taxes | $2.3 | $0.6 | +$1.7 | | Income tax provision | $0.4 | $0.1 | +$0.4 | | Net income | $1.9 | $0.6 | +$1.3 | | Comprehensive income | $3.0 | $1.2 | +$1.7 | | Common stock - Diluted EPS | $0.13 | $0.04 | +$0.09 | [Unaudited Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by the company across its operating, investing, and financing activities over a specific period - Net Cash Provided by Operating Activities **increased significantly to $1.4 million** for the three months ended August 30, 2025, from $0.4 million in the prior year period[17](index=17&type=chunk) - Net Cash Used in Investing Activities **increased slightly to $1.0 million** for the three months ended August 30, 2025, from $0.9 million in the prior year period, primarily due to capital expenditures[17](index=17&type=chunk) - Net Cash Used in Financing Activities **remained relatively stable at $0.9 million** for the three months ended August 30, 2025, compared to $0.9 million in the prior year period, mainly due to dividend payments[17](index=17&type=chunk) Key Cash Flow Data (in millions) | Metric | Three Months Ended August 30, 2025 | Three Months Ended August 31, 2024 | Change (YoY) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | :----------- | | Net cash provided by operating activities | $1.4 | $0.4 | +$1.0 | | Net cash used in investing activities | ($1.0) | ($0.9) | -$0.1 | | Net cash used in financing activities | ($0.9) | ($0.9) | -$0.0 | | Decrease in cash and cash equivalents | ($0.2) | ($1.2) | +$1.0 | | Cash and cash equivalents at end of period | $35.7 | $23.0 | +$12.6 | [Unaudited Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines the changes in the company's equity accounts, including common stock, retained earnings, and comprehensive income, over a specific period - Total Stockholders' Equity **increased to $159.4 million** as of August 30, 2025, from $156.7 million as of May 31, 2025[20](index=20&type=chunk) - Net income **contributed $1.9 million** to equity for the three months ended August 30, 2025[20](index=20&type=chunk) - Dividends paid totaled **$0.7 million for common stock** and **$0.1 million for Class B common stock** during the three months ended August 30, 2025[20](index=20&type=chunk) Key Stockholders' Equity Data (in millions) | Metric | August 30, 2025 | May 31, 2025 | Change | | :-------------------------------- | :-------------- | :------------- | :----- | | Common Stock (shares) | 12,444 | 12,362 | +82 | | Class B Common Stock (shares) | 2,049 | 2,049 | 0 | | Additional Paid-In Capital | $75.0 | $74.4 | +$0.6 | | Retained Earnings | $80.4 | $79.3 | +$1.1 | | Accumulated Other Comprehensive Income | $3.2 | $2.2 | +$1.1 | | Total Stockholders' Equity | $159.4 | $156.7 | +$2.7 | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements, covering company description, basis of presentation, new accounting pronouncements, summary of accounting policies, revolving credit facility, lease obligations, income taxes, earnings per share, segment information, and risks and uncertainties [1. Description of the Company](index=8&type=section&id=1.%20DESCRIPTION%20OF%20THE%20COMPANY) This note provides an overview of Richardson Electronics, Ltd.'s business, its global operations, and recent strategic realignments - Richardson Electronics, Ltd. is a global manufacturer of engineered solutions, green energy products, power grid and microwave tubes, and related consumables[23](index=23&type=chunk) - The company serves customers across diverse markets including alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor[24](index=24&type=chunk) - On January 24, 2025, the company sold a substantial portion of its Healthcare business assets to DirectMed Imaging, LLC and entered into an exclusive 10-year global supply agreement for repaired Siemens CT X-ray tubes[25](index=25&type=chunk) - As of June 1, 2025, the company realigned its operating segments from four (Power and Microwave Technologies, Green Energy Solutions, Canvys, and Healthcare) to three (PMT, GES, and Canvys), integrating Healthcare into PMT[26](index=26&type=chunk) [2. Basis of Presentation](index=8&type=section&id=2.%20BASIS%20OF%20PRESENTATION) This note explains the accounting principles and reporting standards used in preparing the interim consolidated financial statements - The Unaudited Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions[28](index=28&type=chunk) - Both the first quarter of fiscal 2026 and fiscal 2025 contained 13 weeks[29](index=29&type=chunk) - The company reports financial performance based on three operating and reportable segments, with prior period information retrospectively recast[30](index=30&type=chunk) [3. New Accounting Pronouncements - Not Yet Adopted](index=9&type=section&id=3.%20NEW%20ACCOUNTING%20PRONOUNCEMENTS%20-%20NOT%20YET%20ADOPTED) This note identifies recently issued accounting standards that have not yet been adopted and their potential impact on the company's financial statements - ASU 2023-09 (Income Taxes) expands income tax disclosures, effective for fiscal years beginning after December 15, 2024; the company is evaluating its impact[31](index=31&type=chunk) - ASU 2024-03 (Income Statement) requires disaggregated expense disclosures, effective for annual periods after December 15, 2026, and interim periods after December 15, 2027; the company is evaluating its potential impact[32](index=32&type=chunk) [4. Summary of Accounting Policies](index=9&type=section&id=4.%20SUMMARY%20OF%20ACCOUNTING%20POLICIES) This note details the significant accounting policies used in preparing the financial statements, including those for inventories, intangible assets, and revenue recognition - Net inventories were **$104.6 million** as of August 30, 2025, up from $102.8 million at May 31, 2025. Inventory reserves were approximately **$7.7 million** as of August 30, 2025[33](index=33&type=chunk)[34](index=34&type=chunk) - Net intangible assets were **$0.3 million** as of August 30, 2025, down from $0.3 million at May 31, 2025, with a weighted average remaining amortization period of 6.6 years[35](index=35&type=chunk)[36](index=36&type=chunk) - Revenue is primarily derived from product sales, with performance obligations satisfied upon shipment or delivery. Services revenue consistently accounts for **less than 5% of total revenues**[41](index=41&type=chunk)[42](index=42&type=chunk) - Contract liabilities **increased to $4.7 million** as of August 30, 2025, from $4.5 million at May 31, 2025. The company recognized **$1.6 million of revenue** from contract liabilities during the three months ended August 30, 2025[47](index=47&type=chunk) [5. Revolving Credit Facility](index=14&type=section&id=5.%20REVOLVING%20CREDIT%20FACILITY) This note describes the company's revolving credit facility, including its terms, borrowing limits, and compliance with financial covenants - The company has a three-year Revolving Credit Facility with PNC Bank N.A., maturing March 20, 2026, with a maximum borrowing of **$30 million**[50](index=50&type=chunk)[51](index=51&type=chunk) - On October 7, 2025, the company executed a three-year extension to the Credit Agreement, with a maximum borrowing limit of **$20 million**[52](index=52&type=chunk) - The company was in compliance with financial covenants as of August 30, 2025, and **no amounts were outstanding** under the facility[51](index=51&type=chunk)[53](index=53&type=chunk) [6. Lease Obligations](index=15&type=section&id=6.%20LEASE%20OBLIGATIONS) This note details the company's lease assets and liabilities, including operating lease expenses and weighted average lease terms - Right of use lease assets were **$2.0 million** and total lease liabilities were **$2.0 million** ($1.2 million current, $0.9 million non-current) as of August 30, 2025[57](index=57&type=chunk) - Consolidated operating lease expense was **$0.4 million** for the three months ended August 30, 2025, compared to $0.4 million in the prior year period[57](index=57&type=chunk) - The weighted average remaining lease term was **2.2 years** as of August 30, 2025, with a weighted average interest rate of **5.3%**[57](index=57&type=chunk) [7. Income Taxes](index=16&type=section&id=7.%20INCOME%20TAXES) This note provides information on the company's income tax provision, effective tax rate, valuation allowances, and the impact of recent tax law modifications - The income tax provision was **$0.4 million** for Q1 fiscal 2026, up from $0.1 million for Q1 fiscal 2025[58](index=58&type=chunk) - The effective tax rate **increased to 18.1%** for Q1 fiscal 2026 from 9.0% for Q1 fiscal 2025, reflecting changes in geographical distribution of income/loss[58](index=58&type=chunk) - The valuation allowance was **$2.9 million** as of August 30, 2025, primarily related to state NOLs and deferred tax assets in foreign jurisdictions[62](index=62&type=chunk) - The 'One Big Beautiful Bill Act' (OBBBA) introduced significant tax law modifications, including permanent 100% bonus depreciation and domestic research cost expensing, which are being evaluated for future impact[63](index=63&type=chunk) [8. Earnings Per Share](index=17&type=section&id=8.%20EARNINGS%20PER%20SHARE) This note explains the calculation of basic and diluted earnings per share for common and Class B common stock, using the two-class method - Earnings per share are computed using the **two-class method** due to Class B common stock being a participating convertible security[65](index=65&type=chunk) - Common stock diluted EPS was **$0.13** for Q1 fiscal 2026, up from $0.04 for Q1 fiscal 2025[67](index=67&type=chunk) - Class B common stock diluted EPS was **$0.12** for Q1 fiscal 2026, up from $0.04 for Q1 fiscal 2025[67](index=67&type=chunk) Undistributed Earnings (Loss) (in millions) | Metric | Three Months Ended August 30, 2025 | Three Months Ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net income | $1.9 | $0.6 | | Less dividends: Common stock | $0.7 | $0.7 | | Less dividends: Class B common stock | $0.1 | $0.1 | | Undistributed earnings (loss) | $1.1 | ($0.3) | [9. Segment Information](index=18&type=section&id=9.%20SEGMENT%20INFORMATION) This note provides financial data by operating segment, including sales and gross profit, reflecting the company's recent segment realignment - Effective June 2025, the company realigned its operating segments from four to three: Power and Microwave Technologies (PMT), Green Energy Solutions (GES), and Canvys, integrating the Healthcare segment into PMT[69](index=69&type=chunk)[70](index=70&type=chunk) - PMT sales **increased 2.8% YoY**, GES sales **decreased 10.2% YoY**, and Canvys sales **increased 8.3% YoY** for the three months ended August 30, 2025[75](index=75&type=chunk) Segment Sales and Gross Profit (in millions) | Segment | Sales (Aug 30, 2025) | Sales (Aug 31, 2024) | % Change | Gross Profit (Aug 30, 2025) | Gross Profit (Aug 31, 2024) | Gross Margin (Aug 30, 2025) | Gross Margin (Aug 31, 2024) | | :------ | :------------------- | :------------------- | :------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | PMT | $39.1 | $38.0 | 2.8% | $12.2 | $11.4 | 31.3% | 30.1% | | GES | $7.3 | $8.1 | -10.2% | $2.2 | $2.4 | 29.6% | 29.4% | | Canvys | $8.3 | $7.6 | 8.3% | $2.6 | $2.6 | 30.9% | 34.3% | | Total | $54.6 | $53.7 | 1.6% | $16.9 | $16.4 | 31.0% | 30.6% | [10. Risks and Uncertainties](index=20&type=section&id=10.%20RISKS%20AND%20UNCERTAINTIES) This note highlights the various economic, geopolitical, and operational risks that could potentially impact the company's business and financial performance - The business is exposed to risks and uncertainties from economic pressures (inflation, rising interest rates, recession), geopolitical and public health issues, and tightening labor markets[76](index=76&type=chunk) - These factors could disrupt operations and materially adversely affect the company's business, results of operations, cash flows, and financial condition[76](index=76&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) This section provides management's perspective on the company's financial performance, condition, and significant developments, including a business overview, detailed analysis of results of operations for the first quarter of fiscal 2026 compared to fiscal 2025, and a discussion of liquidity, financial position, and capital resources [Introduction](index=21&type=section&id=INTRODUCTION) This introductory section outlines the purpose of the MD&A, which is to provide insights into the company's financial performance and future outlook - The MD&A aims to help readers understand the company's business, results of operations, financial condition, and significant developments[79](index=79&type=chunk) - The report contains forward-looking statements that involve risks, uncertainties, and assumptions, and the company does not undertake to update them[77](index=77&type=chunk) [Business Overview](index=21&type=section&id=Business%20Overview) This section provides a general description of Richardson Electronics, Ltd.'s global operations, product offerings, and segment structure - Richardson Electronics, Ltd. is a global manufacturer of engineered solutions, green energy products, power grid and microwave tubes, and customized display solutions, with **over 55% of products manufactured in-house or by partners**[80](index=80&type=chunk) - The company's operations are subject to tariffs and trade protection measures; while recent modifications did not materially impact Q1 FY26, future changes could negatively affect sales and gross margins[81](index=81&type=chunk)[84](index=84&type=chunk) - The company operates with three reportable segments: Power and Microwave Technologies (PMT), Green Energy Solutions (GES), and Canvys[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [Results of Operations](index=23&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's consolidated and segment-specific financial performance for the three months ended August 30, 2025, compared to the same period in the prior fiscal year, covering net sales, gross profit, operating expenses, and net income [Financial Summary – Three Months Ended August 30, 2025](index=23&type=section&id=Financial%20Summary%20%E2%80%93%20Three%20Months%20Ended%20August%2030,%202025) This summary highlights key financial performance indicators for the first quarter of fiscal year 2026, including sales, gross margin, operating income, and net income - Net sales **increased 1.6% to $54.6 million** for Q1 FY26 compared to $53.7 million for Q1 FY25[93](index=93&type=chunk) - Gross margin **increased to 31.0%** for Q1 FY26 from 30.6% for Q1 FY25[93](index=93&type=chunk) - Operating income **increased to $1.0 million** for Q1 FY26 compared to $0.3 million for Q1 FY25[93](index=93&type=chunk) - Net income **increased to $1.9 million** for Q1 FY26 compared to $0.6 million for Q1 FY25[93](index=93&type=chunk) [Net Sales and Gross Profit Analysis](index=23&type=section&id=Net%20Sales%20and%20Gross%20Profit%20Analysis) This analysis examines the drivers behind changes in consolidated net sales and gross profit, including segment contributions and margin factors - Consolidated net sales **increased 1.6% YoY to $54.6 million**, driven by PMT and Canvys, partially offset by a decrease in GES[90](index=90&type=chunk) - Consolidated gross profit **increased to $16.9 million** (Q1 FY26) from $16.4 million (Q1 FY25), with gross margin improving to **31.0% from 30.6%**[92](index=92&type=chunk) - Gross margin increase was mainly due to favorable product mix and improved manufacturing absorption in PMT and favorable product mix in GES, partially offset by unfavorable product mix and higher freight costs in Canvys[92](index=92&type=chunk) Segment Sales Performance (in millions) | Segment | August 30, 2025 | August 31, 2024 | % Change | | :------ | :-------------- | :-------------- | :------- | | PMT | $39.1 | $38.0 | 2.8% | | GES | $7.3 | $8.1 | -10.2% | | Canvys | $8.3 | $7.6 | 8.3% | | Total | $54.6 | $53.7 | 1.6% | [Power and Microwave Technologies (PMT)](index=24&type=section&id=Power%20and%20Microwave%20Technologies) This section analyzes the sales and gross margin performance of the Power and Microwave Technologies segment, highlighting key growth drivers and offsetting factors - PMT net sales **increased 2.8% to $39.1 million** during Q1 FY26, primarily due to increased sales of engineered solutions for the semiconductor wafer fabrication market and higher sales of electron tubes[94](index=94&type=chunk) - The decline in healthcare sales (CT tubes) due to the asset sale to DirectMed partially offset the sales growth[94](index=94&type=chunk) - Gross margin as a percentage of net sales **increased to 31.3%** during Q1 FY26 from 30.1% due to product mix and improved manufacturing absorption[94](index=94&type=chunk) [Green Energy Solutions (GES)](index=24&type=section&id=Green%20Energy%20Solutions) This section reviews the sales and gross margin performance of the Green Energy Solutions segment, identifying factors contributing to its changes - GES net sales **decreased 10.2% to $7.2 million** during Q1 FY26, mainly due to the non-recurrence of a large EV Locomotive order from the prior year quarter[95](index=95&type=chunk) - Gross margin as a percentage of net sales **increased to 29.6%** during Q1 FY26 from 29.4% due to product mix[95](index=95&type=chunk) [Canvys](index=24&type=section&id=Canvys) This section examines the sales and gross margin performance of the Canvys segment, detailing the drivers of its revenue growth and margin fluctuations - Canvys net sales **increased 8.3% to $8.3 million** during Q1 FY26, driven by higher sales in the European markets[96](index=96&type=chunk) - Gross margin as a percentage of net sales **decreased to 30.9%** during Q1 FY26 from 34.3% primarily due to product mix and higher freight costs[96](index=96&type=chunk) [Selling, General and Administrative Expenses (SG&A)](index=24&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section analyzes the changes in selling, general, and administrative expenses, including their impact on overall operating efficiency - SG&A expenses **decreased slightly to $16.0 million** for Q1 FY26 from $16.1 million for Q1 FY25, a decrease of less than 1%[97](index=97&type=chunk) - The decrease mainly reflected lower travel costs[97](index=97&type=chunk) - Expressed as a percentage of net sales, SG&A was **29.2%** for Q1 FY26 compared to 30.0% in Q1 FY25[97](index=97&type=chunk) [Other Income/Expense](index=24&type=section&id=Other%20Income/Expense) This section details the components of other income and expense, explaining significant changes such as non-recurring gains and foreign exchange impacts - Total other income **increased significantly to $1.4 million** for Q1 FY26 compared to $0.3 million for Q1 FY25[99](index=99&type=chunk) - The increase was mainly due to a **non-recurring gain of $0.9 million**[99](index=99&type=chunk) - Other income includes interest income, foreign exchange gains, and foreign exchange losses, primarily from U.S. dollars held in non-U.S. entities[98](index=98&type=chunk) [Income Tax Provision](index=24&type=section&id=Income%20Tax%20Provision) This section discusses the company's income tax provision, effective tax rate, valuation allowance, and the potential effects of new tax legislation - The income tax provision was **$0.4 million** for Q1 fiscal 2026, up from $0.1 million for Q1 fiscal 2025[100](index=100&type=chunk) - The effective income tax rate **increased to 18.1%** for Q1 fiscal 2026 from 9.0% for Q1 fiscal 2025, reflecting changes in geographical distribution of income/loss and utilization of the U.S. research and development credit[100](index=100&type=chunk) - The company maintains a valuation allowance of **$2.9 million** as of August 30, 2025, primarily related to state NOLs and deferred tax assets in foreign jurisdictions[102](index=102&type=chunk) - The 'One Big Beautiful Bill Act' (OBBBA) introduced significant tax law modifications, including permanent 100% bonus depreciation and domestic research cost expensing, which are being evaluated for future impact on financial position, operations, and cash flows[103](index=103&type=chunk) [Net Income and Per Share Data](index=26&type=section&id=Net%20Income%20and%20Per%20Share%20Data) This section presents the company's net income and earnings per share for both common and Class B common stock, highlighting period-over-period changes - Net income for Q1 fiscal 2026 was **$1.9 million**, significantly up from $0.6 million for Q1 fiscal 2025[104](index=104&type=chunk) - Diluted common stock EPS was **$0.13** for Q1 fiscal 2026, compared to $0.04 for Q1 fiscal 2025[104](index=104&type=chunk) - Diluted Class B common stock EPS was **$0.12** for Q1 fiscal 2026, compared to $0.04 for Q1 fiscal 2025[104](index=104&type=chunk) [Liquidity, Financial Position and Capital Resources](index=27&type=section&id=LIQUIDITY,%20FINANCIAL%20POSITION%20AND%20CAPITAL%20RESOURCES) This section discusses the company's sources and uses of cash, its financial position, and capital resources, highlighting cash balances, liquidity requirements, and cash flow activities from operations, investing, and financing - Cash and cash equivalents were **$35.7 million** at August 30, 2025, with $16.5 million in North America, $10.1 million in Europe, $1.0 million in Latin America, and $8.1 million in Asia/Pacific[107](index=107&type=chunk) - The company believes existing liquidity sources and operating cash flows will be sufficient to meet capital requirements and working capital needs for the next twelve months[110](index=110&type=chunk) - On October 7, 2025, the company extended its Revolving Credit Facility for three years with a maximum borrowing limit of **$20 million**; no amounts were outstanding as of August 30, 2025[112](index=112&type=chunk)[111](index=111&type=chunk) [Cash Flows from Operating Activities](index=27&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section analyzes the cash generated or used by the company's core business operations, detailing adjustments for non-cash items and changes in working capital - Operating activities **generated $1.4 million of cash** during Q1 fiscal 2026, compared to $0.4 million in Q1 fiscal 2025[114](index=114&type=chunk)[115](index=115&type=chunk) - Q1 FY26 net income of **$1.9 million** was adjusted for non-cash items including $0.6 million share-based compensation, $0.1 million inventory provisions, $0.5 million unrealized foreign exchange gain, and $1.0 million depreciation and amortization[114](index=114&type=chunk) - Changes in operating assets and liabilities utilized **$1.8 million in cash** during Q1 FY26, primarily due to a $2.7 million increase in accounts receivable and a $0.6 million increase in inventories, partially offset by a $1.5 million increase in accounts payable and accrued liabilities[114](index=114&type=chunk) [Cash Flows from Investing Activities](index=28&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section details the cash used or provided by the company's investing activities, primarily focusing on capital expenditures - Cash used in investing activities was **$1.0 million** during Q1 fiscal 2026, compared to $0.9 million in Q1 fiscal 2025[116](index=116&type=chunk)[117](index=117&type=chunk) - The primary use of cash was for capital expenditures related to IT systems and LaFox manufacturing and facilities, supporting the PMT and GES segments[116](index=116&type=chunk)[117](index=117&type=chunk) [Cash Flows from Financing Activities](index=28&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This section outlines the cash flows related to the company's financing activities, including dividend payments and stock issuances - Cash used in financing activities was **$0.9 million** during Q1 fiscal 2026, similar to $0.9 million in Q1 fiscal 2025[119](index=119&type=chunk) - This primarily resulted from **$0.9 million of dividend payments** to stockholders, partially offset by $0.1 million of proceeds from stock issuance[119](index=119&type=chunk) - Future dividend payments are at the discretion of the Board of Directors, dependent on earnings, capital requirements, and operating conditions[118](index=118&type=chunk) [Critical Accounting Estimates](index=28&type=section&id=Critical%20Accounting%20Estimates) This section confirms that there have been no material changes to the company's critical accounting estimates from its previous annual report - There have been no material changes in critical accounting estimates from those disclosed in the Annual Report on Form 10-K for the year ended May 31, 2025[121](index=121&type=chunk) - Assumptions, judgments, and estimates are regularly evaluated and discussed with the Audit Committee of the Board of Directors[120](index=120&type=chunk) [Impact of New Accounting Standards](index=28&type=section&id=Impact%20of%20New%20Accounting%20Standards) This section refers to Note 3 for details on recently issued accounting pronouncements and their potential effects on the company - Information about recently issued accounting pronouncements is provided in Note 3, 'New Accounting Pronouncements - Not Yet Adopted'[122](index=122&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to market risks, primarily foreign currency exchange risk, and how these risks are managed through normal operating and financing activities [Risk Management and Market Sensitive Financial Instruments](index=29&type=section&id=Risk%20Management%20and%20Market%20Sensitive%20Financial%20Instruments) This section describes the company's approach to managing financial risks, particularly foreign currency exchange risk, without using derivative instruments - The primary financial risk is **foreign currency exchange**, as certain operations, assets, and liabilities are denominated in foreign currencies[123](index=123&type=chunk) - These risks are managed through normal operating and financing activities; the company does not currently utilize derivative instruments for foreign currency exposure[98](index=98&type=chunk)[123](index=123&type=chunk) - Additional market risk disclosures are set forth in Part I, Item 1A, 'Risk Factors' of the Annual Report on Form 10-K[124](index=124&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [(a) Evaluation of Disclosure Controls and Procedures](index=29&type=section&id=(a)%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of August 30, 2025[125](index=125&type=chunk) - It was concluded that the company's disclosure controls and procedures were **effective** as of the end of the reporting period[126](index=126&type=chunk) [(b) Changes in Internal Control over Financial Reporting](index=29&type=section&id=(b)%20Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms that no material changes occurred in the company's internal control over financial reporting during the first fiscal quarter - No changes in internal control over financial reporting occurred during Q1 fiscal 2026 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[127](index=127&type=chunk) [Part II. Other Information](index=30&type=section&id=Part%20II.%20Other%20Information) This section provides additional disclosures not covered in Part I, including legal proceedings, risk factors, equity sales, and other miscellaneous information [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) This section reports on any legal proceedings involving the company - The company reported **no legal proceedings**[130](index=130&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the company's annual report - There have been **no material changes** to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended May 31, 2025[130](index=130&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on any unregistered sales of equity securities and the use of proceeds - **No unregistered sales of equity securities or use of proceeds were reported**[131](index=131&type=chunk) [Item 3. Defaults Upon Senior Securities](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports on any defaults upon senior securities - This item is **not applicable** to the company[132](index=132&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section reports on mine safety disclosures - This item is **not applicable** to the company[133](index=133&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) This section provides other information not covered elsewhere, including Form 8-K disclosures related to the annual meeting of stockholders [a) Form 8-K disclosures for the quarter covered by this Form 10-Q](index=30&type=section&id=a)%20Form%208-K%20disclosures%20for%20the%20quarter%20covered%20by%20this%20Form%2010-Q) This section summarizes the key disclosures from Form 8-K filings during the quarter, including outcomes of the annual stockholders' meeting - The company held its annual meeting of stockholders on October 7, 2025[135](index=135&type=chunk) - Stockholders elected directors, ratified BDO USA, P.C. as independent auditor, approved executive compensation (advisory), approved an amendment to the 2011 Long-Term Incentive Plan, and approved an increase in authorized common stock shares[135](index=135&type=chunk) Voting Results for Director Election | Nominee | For | Against/Withhold | Broker Non-Votes | | :------------------- | :--------- | :--------------- | :--------------- | | Edward J. Richardson | 26,534,988 | 1,846,598 | 1,560,278 | | Wendy S. Diddell | 28,108,887 | 272,699 | 1,560,278 | | Jacques Belin | 25,234,034 | 3,147,552 | 1,560,278 | | James Benham | 25,218,445 | 3,163,141 | 1,560,278 | | Kenneth Halverson | 25,235,834 | 3,145,752 | 1,560,278 | | Robert H. Kluge | 26,413,163 | 1,968,423 | 1,560,278 | | Paul J. Plante | 23,996,877 | 4,384,709 | 1,560,278 | - The proposal to increase the number of authorized shares of common stock was approved with **29,613,049 combined votes 'FOR'** from Common and Class B stock[139](index=139&type=chunk) [c) 10b5-1 trading arrangements](index=31&type=section&id=c)%2010b5-1%20trading%20arrangements) This section reports on any 10b5-1 trading arrangements in place during the reporting period - **No 10b5-1 trading arrangements were reported**[140](index=140&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents, credit agreements, certifications, and XBRL financial information - Key exhibits include the Second Amended and Restated Certificate of Incorporation, Second Amendment to the Credit Agreement, Section 302 and 906 certifications, and Inline XBRL financial information[142](index=142&type=chunk) [Signatures](index=33&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q filing - The report was signed by Robert J. Ben, Chief Financial Officer and Chief Accounting Officer, on behalf of Richardson Electronics, Ltd. on October 9, 2025[147](index=147&type=chunk)

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward%20Looking%20Statements) This report contains **forward-looking statements** subject to risks and uncertainties that could cause actual results to differ materially from expectations - **Key risks** include significant reliance on top customers, potential uncollectible accounts receivable, fines from the Chinese government, challenges in maintaining product quality, intense competition, need for additional financing, risks related to new facility construction, potential revocation of tax treatments, supply chain disruptions, raw material cost fluctuations, and reliance on key executives[10](index=10&type=chunk) - **Additional risks** involve the absence of long-term supplier contracts, failure to adopt new technologies, lack of business liability insurance, adverse regulatory developments in Mainland China, potential delisting under the HFCAA, and uncertainties in China's economic, political, social, and legal systems, as well as exchange rate fluctuations[13](index=13&type=chunk) [PART I FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including Balance Sheets, Income Statements, Equity Changes, and Cash Flows, along with detailed accounting policy notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets show an increase in total assets and stockholders' equity as of June 30, 2025, compared to December 31, 2024, driven primarily by an increase in cash and accounts receivable Condensed Consolidated Balance Sheet Highlights (in US$) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | **ASSETS** | | | | Cash | $110,452,470 | $103,760,324 | | Accounts receivable, net | $10,736,898 | $7,504,630 | | Total Current Assets | $123,159,576 | $114,139,861 | | Total Assets | $137,024,190 | $128,019,463 | | **LIABILITIES & EQUITY** | | | | Total Current Liabilities | $5,014,548 | $2,951,192 | | Total Liabilities | $5,219,006 | $3,433,798 | | Total Stockholders' Equity | $131,805,184 | $124,585,665 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Revenues slightly increased for Q2 2025, but gross profit and net income decreased, while for H1 2025, revenues, gross profit, and net income all increased Condensed Consolidated Statements of Income and Comprehensive Income Highlights (in US$) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $12,419,455 | $12,234,575 | $27,709,033 | $27,111,834 | | Gross Profit | $4,111,511 | $4,860,818 | $9,753,142 | $8,198,776 | | Income from Operations | $3,082,904 | $3,725,228 | $7,055,638 | $6,030,303 | | Net Income | $2,241,828 | $2,701,694 | $4,804,550 | $3,260,564 | | Basic EPS | $0.19 | $0.23 | $0.40 | $0.29 | | Diluted EPS | $0.19 | $0.23 | $0.40 | $0.29 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased from December 31, 2024, to June 30, 2025, driven by net income and positive foreign currency translation adjustments Stockholders' Equity Changes (in US$) | Metric | Balance as of Dec 31, 2024 | Net Income (Q1 2025) | FX Adjustment (Q1 2025) | Balance as of Mar 31, 2025 | Net Income (Q2 2025) | FX Adjustment (Q2 2025) | Balance as of Jun 30, 2025 | | :-------------------------- | :------------------------- | :------------------- | :---------------------- | :------------------------- | :------------------- | :---------------------- | :------------------------- | | Total Stockholders' Equity | $124,585,665 | $2,562,722 | $732,380 | $127,880,767 | $2,241,828 | $1,682,589 | $131,805,184 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated positive operating cash flow for H1 2025, with minimal investing and financing activities, resulting in a net increase in cash Condensed Consolidated Statements of Cash Flows Highlights (in US$) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by (used in) operating activities | $4,676,400 | $(5,335,907) | | Net cash used in investing activity | $- | $(114,762) | | Net cash provided by financing activities | $- | $7,852,960 | | Effect of changes of foreign exchange rates on cash | $2,015,746 | $(2,068,543) | | Net increase in cash | $6,692,146 | $333,748 | | Cash, end of period | $110,452,470 | $98,374,302 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of financial statement figures, covering business, accounting policies, asset/liability accounts, related party transactions, income taxes, equity, and risks [NOTE 1 — BUSINESS DESCRIPTION](index=10&type=section&id=NOTE%201%20%E2%80%94%20BUSINESS%20DESCRIPTION) Wetouch Technology Inc., a Nevada holding company, operates through its PRC subsidiary Sichuan Vtouch, focusing on touchscreen display R&D, manufacturing, and distribution - Wetouch Technology Inc. (formerly Gulf West Investment Properties, Inc.) was incorporated in August 1992 in Nevada[24](index=24&type=chunk) - On **October 9, 2020**, the Company completed a reverse merger with BVI Wetouch, making BVI Wetouch a wholly-owned subsidiary[25](index=25&type=chunk) - Sichuan Wetouch (now Sichuan Vtouch) is **primarily engaged** in the R&D, manufacture, and distribution of touchscreen displays for financial terminals, automotive, POS, gaming, lottery, medical, HMI, and other specialized industries[26](index=26&type=chunk) - In March 2021, Sichuan Wetouch was under a government-directed relocation order, and Sichuan Vtouch took over its operating business. Sichuan Wetouch was deconsolidated on **March 30, 2023**[32](index=32&type=chunk)[33](index=33&type=chunk) [NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%202%20%E2%80%94%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation, consolidation principles, use of estimates, significant accounting policies, and recent accounting pronouncements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with certain information condensed or omitted as permitted by SEC rules[37](index=37&type=chunk) - Sichuan Wetouch was deconsolidated on **March 30, 2023**, as the Company no longer operated or controlled it, resulting in nil gain or loss from deconsolidation[39](index=39&type=chunk)[40](index=40&type=chunk) - The Company adopted **ASU No. 2016-02**, Leases (Topic 842), recognizing right-of-use assets and lease liabilities on the balance sheet, and elected certain practical expedients for transition[43](index=43&type=chunk)[45](index=45&type=chunk) - The Company's Chief Executive Officer (CEO) is the CODM, who reviews consolidated results. The Company has only **one reporting segment**: the touchscreen business, as all assets are in the PRC[46](index=46&type=chunk)[47](index=47&type=chunk) - Recent accounting pronouncements, ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), **did not have a material impact** on the Company's consolidated financial statements[48](index=48&type=chunk)[49](index=49&type=chunk) [NOTE 3 — ACCOUNTS RECEIVABLE](index=14&type=section&id=NOTE%203%20%E2%80%94%20ACCOUNTS%20RECEIVABLE) Accounts receivable, net, significantly increased from December 31, 2024, to June 30, 2025, particularly in current and 1-3 months past due categories Accounts Receivable, Net (in US$) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :---------------------- | :------------------------ | :------------------ | | Accounts receivable, net | $10,736,898 | $7,504,630 | Aging of Accounts Receivable (in US$) | Aging Category | June 30, 2025 (Unaudited) | December 31, 2024 | | :--------------- | :------------------------ | :------------------ | | Current | $5,997,500 | $3,726,124 | | 1-3 months past due | $4,739,398 | $2,536,815 | | 4-6 months past due | $- | $1,241,691 | | Total | $10,736,898 | $7,504,630 | [NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=15&type=section&id=NOTE%204%20%E2%80%94%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid expenses and other current assets decreased due to the full amortization of prepaid consulting service fees by June 30, 2025 Prepaid Expenses and Other Current Assets (in US$) | Item | June 30, 2025 (Unaudited) | December 31, 2024 | | :---------------------------------- | :------------------------ | :------------------ | | Advance to suppliers | $213,551 | $252,618 | | Prepayment for land use right | $547,941 | $537,755 | | Security deposit | $54,861 | $53,840 | | Prepaid consulting service fees | $- | $884,687 | | Prepaid market research fees | $955,000 | $955,000 | | Others receivable | $53,191 | $78,680 | | Total Prepaid expenses and other current assets | $1,824,544 | $2,762,580 | - Prepaid consulting service fees of **$884,687** as of December 31, 2024, have been **fully amortized** by June 30, 2025[55](index=55&type=chunk)[56](index=56&type=chunk) - The Company has a prepayment for land use rights (**$547,941**) for a new facility, expected to be reclassified to intangible assets by H2 2026, and a security deposit (**$54,861**) for a construction license, expected to be refunded by H2 2025[56](index=56&type=chunk) [NOTE 5 — PROPERTY, PLANT AND EQUIPMENT, NET](index=16&type=section&id=NOTE%205%20%E2%80%94%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT%2C%20NET) Net property, plant, and equipment increased slightly, primarily due to ongoing construction in progress for the new facility Property, Plant and Equipment, Net (in US$) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Buildings | $12,022 | $11,798 | | Machinery and equipment | $7,817 | $7,672 | | Vehicles | $40,875 | $40,114 | | Construction in progress | $12,997,423 | $12,755,791 | | Subtotal | $13,058,137 | $12,815,375 | | Less: accumulated depreciation | $(38,010) | $(32,378) | | Property, plant and equipment, net | $13,020,127 | $12,782,997 | - Depreciation expense for the six months ended June 30, 2025, was **$4,957**, up from **$4,798** in the prior year[57](index=57&type=chunk) - As of June 30, 2025, the Company had a commitment of **$0.7 million** for construction in progress of its new facility[58](index=58&type=chunk) [NOTE 6 — OPERATING LEASE](index=16&type=section&id=NOTE%206%20%E2%80%94%20OPERATING%20LEASE) The Company continues to lease property due to new facility construction delays, recognizing operating lease expenses and liabilities per ASU 2016-02 - The Company is under a government-directed relocation order and is constructing a new facility, with completion rescheduled to end of **December 31, 2025**, and production commencing in **Q2 2026**[59](index=59&type=chunk)[61](index=61&type=chunk) - The lease for the current property has been renewed multiple times, with the latest extension to **October 31, 2025**, at a monthly rent of **RMB 400,000 ($55,837)**[60](index=60&type=chunk) Lease Expense and Liabilities (in US$) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease expense | $156,869 | $- | $308,244 | $- | | Short-term lease expense | $- | $146,643 | $- | $294,372 | | Total lease expense | $156,869 | $146,643 | $308,244 | $294,372 | | Operating lease right-of-use assets (June 30, 2025) | $813,516 | | | | | Operating lease right-of-use assets (Dec 31, 2024) | | | | $1,055,208 | | Total operating lease liabilities (June 30, 2025) | $813,517 | | | | | Total operating lease liabilities (Dec 31, 2024) | | | | $1,054,145 | [NOTE 7 — RELATED PARTY TRANSACTIONS](index=18&type=section&id=NOTE%207%20%E2%80%94%20RELATED%20PARTY%20TRANSACTIONS) Amounts due to related party Chengdu Wetouch Intelligent Optoelectronics Co., Ltd. significantly increased from December 31, 2024, to June 30, 2025 Amounts Due to Related Party (in US$) | Related Party | Relationship | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------------------------------------------ | :------------ | :---------------- | | Chengdu Wetouch Intelligent Optoelectronics Co., Ltd. | An affiliate of Ms. Jiaying Cai, director of the Company | $642,634 | $149,211 | [NOTE 8 — INCOME TAXES](index=18&type=section&id=NOTE%208%20%E2%80%94%20INCOME%20TAXES) Company subsidiaries are subject to varying income tax rates across jurisdictions, with a **32.8%** effective tax rate for H1 2025 - Wetouch is subject to a **21%** U.S. federal income tax rate, BVI Wetouch is not subject to income tax, and HK Wetouch is subject to a **16.5%** profit tax in Hong Kong[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - PRC subsidiaries (Sichuan Wetouch and Sichuan Vtouch) are generally subject to a **25%** CIT rate, though Sichuan Wetouch previously qualified for a **15% HNTE rate** until October 20, 2023[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) Income Tax Provision (in US$) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | PRC income tax provision | $860,267 | $1,099,331 | $2,336,755 | $1,761,179 | | Deferred income tax expenses | $16,455 | $- | $11,073 | $- | | Total Income tax provision | $876,722 | $1,099,331 | $2,347,828 | $1,761,179 | Effective Tax Rate Reconciliation | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | PRC statutory income tax rate | 25.0% | 25.0% | 25.0% | 25.0% | | Income tax computed at PRC statutory corporate income tax rate of 25% | 28.0% | 28.9% | 30.0% | 35.3% | | Effective tax rate | 28.1% | 28.9% | 32.8% | 35.1% | Deferred Tax Assets, Net (in US$) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total gross deferred tax assets | $231,474 | $305,199 | | Deferred tax liabilities | $(200,883) | $(263,802) | | Deferred tax assets, net | $30,591 | $41,397 | [NOTE 9 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=21&type=section&id=NOTE%209%20%E2%80%94%20ACCURRED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses and other current liabilities significantly increased, driven by higher other payables to third parties and other tax payables Accrued Expenses and Other Current Liabilities (in US$) | Item | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Advance from customers | $- | $166,535 | | Accrued payroll and employee benefits | $82,340 | $81,837 | | Accrued legal compensation charges | $- | $35,356 | | Accrued professional fees | $148,199 | $57,173 | | Accrued director fees | $58,417 | $66,734 | | Other payable to third parties | $629,694 | $147,102 | | Other tax payables | $344,175 | $162,888 | | Others | $145,245 | $248,836 | | Total Accrued expenses and other current liabilities | $1,408,070 | $966,461 | [NOTE 10 — CONVERTIBLE PROMISSORY NOTES PAYABLE](index=21&type=section&id=NOTE%2010%20%E2%80%94%20CONVERTIBLE%20PROMISSORY%20NOTES%20PAYABLE) Convertible promissory notes issued in 2021 were fully repaid by February 2024, and most associated warrants expired or were exercised by June 2024 - In 2021, the Company issued **seven convertible promissory notes totaling $2.25 million**, bearing **8.0% interest**, with a default rate of **16%**[78](index=78&type=chunk)[79](index=79&type=chunk) - The notes were convertible into common stock at a price based on an Uplist Offering or **$15.0 per share**[80](index=80&type=chunk) - On February 23, 2024, the Company made a **full payment of $2,586,960** for the remaining five outstanding promissory notes, including principal and accrued interest/default charges[87](index=87&type=chunk) - The Company also issued three-year warrants to purchase **90,000 shares** of common stock to lenders, with an exercise price of **$25 per share** (subject to adjustment)[89](index=89&type=chunk)[90](index=90&type=chunk) - During the six months ended June 30, 2024, one lender exercised warrants for **2,725 shares**, and the remaining **38,430 Note Warrants expired**[95](index=95&type=chunk) [NOTE 11 — STOCKHOLDERS' EQUITY](index=23&type=section&id=NOTE%2011%20%E2%80%94%20STOCKHOLDERS'%20EQUITY) This note details common stock changes, including issuances, reverse stock splits, the 2024 Public Offering, and statutory reserve requirements - As of June 30, 2025, there were **11,931,534 shares** of common stock issued and outstanding, with a par value of **$0.001**[101](index=101&type=chunk) - The Company effected a **1-for-20 reverse stock split** on **September 12, 2023**, retrospectively adjusting all share information[103](index=103&type=chunk) - On February 23, 2024, the Company closed a public offering of **2,160,000 shares at $5.00 per share**, generating **$10.8 million** gross proceeds, with **$1,810,246** in issuance costs charged to additional paid-in capital[104](index=104&type=chunk)[105](index=105&type=chunk) - Under PRC rules, companies must appropriate **10% of net income** to a statutory surplus reserve until it reaches **50% of registered capital**; this reserve is non-distributable as cash dividends[106](index=106&type=chunk)[107](index=107&type=chunk) [NOTE 12 — SHARE BASED COMPENSATION](index=24&type=section&id=NOTE%2012%20%E2%80%94%20SHARE%20BASED%20COMPENSATION) Share-based compensation is accounted for using ASC 718, with warrants for services exercised or expired by June 30, 2024 - The Company uses the Black-Scholes model to estimate the fair value of share-based compensation awards[109](index=109&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) - Warrants for **35,861 shares** related to consulting services were exercised during the six months ended June 30, 2024, with no remaining warrants related to services as of that date[114](index=114&type=chunk) [NOTE 13 — WEIGHTED AVERAGE NUMBER OF SHARES](index=26&type=section&id=NOTE%2013%20%E2%80%94%20WEIGHTED%20AVERAGE%20NUMBER%20OF%20SHARES) Weighted-average shares outstanding are computed per ASC 260, with retrospective adjustments for the reverse merger - The weighted-average number of shares outstanding is computed based on ASC 260, adjusting for the reverse merger by using the legal acquiree's shares multiplied by the exchange ratio for the pre-acquisition period[115](index=115&type=chunk) [NOTE 14 — RISKS AND UNCERTAINTIES](index=26&type=section&id=NOTE%2014%20%E2%80%94%20RISKS%20AND%20UNCERTAINTIES) The Company faces financial risks including credit, interest rate, currency, and significant customer and supplier concentration - The Company's cash is primarily held in PRC state-owned banks, which are insured up to **RMB500,000**[117](index=117&type=chunk) - A majority of the Company's revenue and expenses are denominated in RMB, which is not freely convertible, exposing the Company to currency risk[119](index=119&type=chunk) Customer Concentration (Revenue) | Period | Top 5 Customers (% of Revenue) | Top 10 Customers (% of Revenue) | | :--------------------------- | :----------------------------- | :------------------------------ | | 3 Months Ended June 30, 2025 | 22.0%, 16.2%, 15.7%, 14.5%, 12.0% | 99.6% | | 3 Months Ended June 30, 2024 | 21.2%, 19.5%, 16.0%, 14.5%, 12.1% | 100.0% | | 6 Months Ended June 30, 2025 | 21.5%, 16.6%, 15.8%, 14.9%, 12.2% | 99.4% | | 6 Months Ended June 30, 2024 | 21.9%, 20.0%, 15.2%, 13.9%, 11.6% | 99.3% | Supplier Concentration (Raw Material Purchases) | Period | Top Suppliers (% of Total Purchases) | | :--------------------------- | :----------------------------------- | | 3 Months Ended June 30, 2025 | 50.1% (four suppliers) | | 3 Months Ended June 30, 2024 | 27.1% (two suppliers) | | 6 Months Ended June 30, 2025 | 49.6% (four suppliers) | | 6 Months Ended June 30, 2024 | 40.3% (three suppliers) | [NOTE 15 — COMMITMENTS AND CONTINGENCIES](index=26&type=section&id=NOTE%2015%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) The Company has no material legal proceedings but a capital expenditure commitment for new facility construction - As of the report date, the Company is not aware of any material, active, pending, or threatened legal or administrative proceedings[125](index=125&type=chunk) - As of June 30, 2025, the Company had a capital expenditure commitment of **RMB5.0 million (equivalent to $0.7 million)** for construction in progress[126](index=126&type=chunk) [NOTE 16 — SEGMENT REPORTING](index=28&type=section&id=NOTE%2016%20%E2%80%94%20SEGMENT%20REPORTING) The Company operates a single touchscreen business segment with all long-lived assets in the PRC, generating revenue from both domestic and overseas markets - The Company's Chief Executive Officer (CEO) is the chief operating decision maker (CODM), and the Company operates in one operating segment: the touchscreen business[127](index=127&type=chunk) - All of the Company's long-lived assets are located in the People's Republic of China (PRC)[128](index=128&type=chunk) Geographical Revenue Information (in US$) | Region | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sales in PRC | $8,414,927 | $7,867,625 | $18,715,995 | $17,242,097 | | Sales in Overseas | $4,004,528 | $4,366,950 | $8,993,038 | $9,869,737 | | Total Revenue | $12,419,455 | $12,234,575 | $27,709,033 | $27,111,834 | [NOTE 17 — SUBSEQUENT EVENTS](index=28&type=section&id=NOTE%2017%20%E2%80%94%20SUBSEQUENT%20EVENTS) No subsequent events requiring accrual or disclosure were identified through the financial statement issuance date - No subsequent events occurred that require accrual or disclosure after the balance sheet date through the date the consolidated financial statements were issued[129](index=129&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews the Company's business, financial condition, and operating results for the three and six months ended June 30, 2025, including liquidity and critical accounting policies [Overview](index=29&type=section&id=Overview) Wetouch Technology Inc. operates its touchscreen business through its PRC subsidiary, Sichuan Vtouch, facing regulatory risks and funding new facility construction with existing cash - Wetouch is a Nevada holding company with operations primarily in mainland China through its subsidiary, Sichuan Vtouch, engaged in R&D, manufacturing, sales, and servicing of medium- to large-sized projected capacitive touchscreens[131](index=131&type=chunk)[132](index=132&type=chunk) - The Company faces complex and evolving PRC laws and regulations, including restrictions on capital flows, dividend payments, currency conversion, cybersecurity, and data privacy[132](index=132&type=chunk) - As of June 30, 2025, the Company contributed **RMB 348.0 million (US$47.7 million)** to its PRC subsidiary, with no dividends distributed to date[132](index=132&type=chunk) - Domestic sales accounted for **67.7%** and **66.7%** of revenues for the three and six months ended June 30, 2025, respectively, with international sales covering Taiwan, South Korea, and Germany[133](index=133&type=chunk) - Construction of a new facility in Chengdu is expected to be completed by the **end of 2025**, with production commencing in **Q2 2026**, funded by existing cash and operating cash flows[135](index=135&type=chunk)[136](index=136&type=chunk) [Results of Operations - Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=30&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) Q2 2025 saw slight revenue growth but decreased gross profit and net income, primarily due to higher cost of revenues and general and administrative expenses Key Financial Highlights (Three Months Ended June 30) (in US$ millions) | Metric | 2025 (in US$ millions) | 2024 (in US$ millions) | Change % | | :-------------------------- | :--------------------- | :--------------------- | :------- | | Revenues | $12.4 | $12.2 | 1.6% | | Cost of revenues | $(8.3) | $(7.4) | 12.2% | | Gross profit | $4.1 | $4.8 | (14.5)% | | Total operating expenses | $(1.0) | $(1.1) | (9.1)% | | Operating income | $3.1 | $3.7 | (16.2)% | | Net income | $2.2 | $2.7 | (18.5)% | - Revenues increased by **1.6% to $12.4 million**, driven by a **5.1% increase** in sales volume and a **0.2% positive exchange rate impact**, partially offset by a **3.6% decrease** in average selling price[140](index=140&type=chunk) - Gross profit decreased by **14.5% to $4.1 million**, with gross profit margin falling to **33.1%** from **39.7%**, primarily due to a **12.8% increase** in cost of goods sold (**13.5%** in raw materials, **3.3%** in labor cost)[147](index=147&type=chunk) - Selling expenses decreased by **66.7% to $0.1 million** due to reduced traveling expenses, while **General and administrative expenses increased by 12.5% to $0.9 million** due to higher professional fees[148](index=148&type=chunk)[149](index=149&type=chunk) - Research and development expenses were **nil** in Q2 2025, down from **$43,211** in Q2 2024[150](index=150&type=chunk) - Net income decreased by **18.5% to $2.2 million**, and the effective income tax rate was **28.1%** (vs. **28.9%** in Q2 2024)[153](index=153&type=chunk)[154](index=154&type=chunk) [Results of Operations - Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=34&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) H1 2025 revenues, gross profit, and net income increased, driven by higher sales volume and improved gross margin, despite increased general and administrative expenses Key Financial Highlights (Six Months Ended June 30) (in US$ millions) | Metric | 2025 (in US$ millions) | 2024 (in US$ millions) | Change % | | :-------------------------- | :--------------------- | :--------------------- | :------- | | Revenues | $27.7 | $27.1 | 2.2% | | Cost of revenues | $(18.0) | $(18.9) | (4.8)% | | Gross profit | $9.7 | $8.2 | 18.3% | | Total operating expenses | $(2.7) | $(2.2) | 22.7% | | Operating income | $7.0 | $6.0 | 16.7% | | Net income | $4.8 | $3.3 | 45.5% | - Revenues increased by **2.2% to $27.7 million**, primarily due to an **8.9% increase** in total units sold, partially offset by a decrease in average RMB selling price and negative exchange rate impact[156](index=156&type=chunk) - Gross profit increased by **18.3% to $9.7 million**, with gross profit margin rising to **35.2%** from **30.2%**, mainly due to increased revenues from high-end products[162](index=162&type=chunk) - Selling expenses decreased by **71.4% to $0.2 million** due to reduced traveling expenses. **General and administrative expenses increased by 92.3% to $2.5 million**, driven by higher professional fees and amortization of prepaid marketing research fees[163](index=163&type=chunk)[164](index=164&type=chunk) - Research and development expenses were **nil** in H1 2025, down from **$85,949** in H1 2024[165](index=165&type=chunk) - Net income increased by **45.5% to $4.8 million**, and the effective income tax rate was **32.8%** (vs. **35.1%** in H1 2024)[169](index=169&type=chunk)[170](index=170&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The Company maintains strong liquidity with significant cash, generating positive operating cash flow in H1 2025, with minimal investing and financing activities - As of June 30, 2025, current assets were **$123.2 million** (including **$110.5 million** in cash), and current liabilities were **$5.0 million**[173](index=173&type=chunk) Cash Flow Summary (Six Months Ended June 30) (in US$ millions) | Cash Flow Activity | 2025 (in US$ millions) | 2024 (in US$ millions) | | :--------------------------------------- | :--------------------- | :--------------------- | | Net cash provided by (used in) operating activities | $4.7 | $(5.3) | | Net cash used in investing activities | $(0.0) | $(0.1) | | Net cash provided by financing activities | $0.0 | $7.8 | | Effect of foreign currency exchange rate changes on cash | $2.0 | $(2.1) | | Net increase in cash and cash equivalents | $6.7 | $0.4 | | Cash and cash equivalents at the end of period | $110.5 | $98.4 | - Net cash provided by operating activities was **$4.7 million** in H1 2025, a significant improvement from net cash used of **$5.3 million** in H1 2024[175](index=175&type=chunk) - The positive operating cash flow in H1 2025 was driven by net income, amortization of operating right-of-use assets, decreased prepaid expenses, and increased accounts payable and accrued liabilities, partially offset by increased accounts receivable[176](index=176&type=chunk) - Days Sales Outstanding (DSO) increased to **89 days** for the six months ended June 30, 2025, from **64 days** for the year ended December 31, 2024[180](index=180&type=chunk) - The Company expects existing cash, operating cash flows, and bank borrowings to meet liquidity requirements for **at least the next 12 months**[182](index=182&type=chunk)[184](index=184&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) No material changes to critical accounting estimates have occurred since the 2024 Form 10-K, as detailed in Note 2 of the financial statements - The Company's critical accounting policies involve judgments, assumptions, and estimates affecting reported amounts, as detailed in Note 2 of the financial statements[189](index=189&type=chunk) - No material changes to critical accounting estimates have occurred since the 2024 Form 10-K[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable for smaller reporting companies - This section is not applicable for smaller reporting companies[190](index=190&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in financial reporting personnel and risk assessment, with ongoing remediation efforts - As of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were **not effective** due to identified material weaknesses[191](index=191&type=chunk) - Despite the material weakness, management believes the unaudited condensed consolidated financial statements fairly represent the Company's financial condition, results of operations, and cash flows[192](index=192&type=chunk) - **Material weaknesses** identified include a lack of competent financial reporting and accounting personnel with U.S. GAAP understanding and a lack of risk assessment procedures on internal controls[195](index=195&type=chunk)[196](index=196&type=chunk) - Management is implementing measures to remediate these weaknesses, including identifying skill gaps, cooperating with operation teams for control environment, and establishing SOX compliance procedures[198](index=198&type=chunk)[202](index=202&type=chunk) - Remediation efforts are **ongoing**, and the Company cannot assure that internal control over financial reporting will be effective as a result of these efforts[199](index=199&type=chunk) [PART II OTHER INFORMATION](index=42&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently involved in any material legal or administrative claims or proceedings - As of the date of this Quarterly Report, the Company is not aware of any material, active, pending, or threatened legal proceedings[205](index=205&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or common stock repurchases occurred during the three and six months ended June 30, 2025 - No unregistered sales of equity securities occurred during the three and six months ended June 30, 2025[205](index=205&type=chunk) - The Company did not repurchase any shares of its common stock during the three and six months ended June 30, 2025[206](index=206&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[207](index=207&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This section is not applicable[208](index=208&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information is applicable[209](index=209&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report, including organizational documents, stock certificates, warrants, and certifications - The exhibits include Amended and Restated Articles of Incorporation, Bylaws, Specimen Common Stock Certificate, Underwriter's Warrants, Common Stock Purchase Warrants, and various **certifications (e.g., 302 and 906 certifications)** and XBRL documents[210](index=210&type=chunk) [SIGNATURES](index=44&type=section&id=SIGNATURES) The Quarterly Report was signed by CEO Zongyi Lian and CFO Xing Tang on **October 9, 2025** - The Quarterly Report was signed on **October 9, 2025**, by Zongyi Lian (CEO and President) and Xing Tang (CFO)[213](index=213&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=2&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive income, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's accounting policies, operations, and financial instrument risks [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows the company's financial position, with total assets increasing to **$78,562 thousand** and total stockholders' equity rising to **$63,143 thousand** as of August 31, 2025, compared to November 30, 2024 | Metric | August 31, 2025 (thousands) | November 30, 2024 (thousands) | | :-------------------------------- | :---------------------------- | :---------------------------- | | **ASSETS** | | | | Cash and cash equivalents | $6,495 | $16,829 | | Accounts receivable, net | $8,872 | $2,630 | | Inventory, net | $34,106 | $19,972 | | Marketable debt securities | $2,501 | $8,904 | | Total current assets | $57,376 | $50,958 | | Property and equipment, net | $6,780 | $3,408 | | Total assets | $78,562 | $71,922 | | **LIABILITIES** | | | | Total current liabilities | $13,619 | $15,438 | | Total liabilities | $15,419 | $17,553 | | **STOCKHOLDERS' EQUITY** | | | | Total Stockholders' Equity | $63,143 | $54,369 | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The company reported significant growth in net revenue and net income for both the three and nine months ended August 31, 2025, driven by increased sales and improved operational efficiency | Metric | Three Months Ended Aug 31, 2025 (thousands) | Three Months Ended Aug 31, 2024 (thousands) | Nine Months Ended Aug 31, 2025 (thousands) | Nine Months Ended Aug 31, 2024 (thousands) | | :----------------------------------- | :---------------------------------------- | :---------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net revenue | $28,179 | $20,854 | $82,874 | $57,777 | | Cost of goods sold | $11,257 | $7,842 | $32,464 | $22,566 | | Gross profit | $16,922 | $13,012 | $50,410 | $35,211 | | Income from operations | $2,863 | $828 | $7,885 | $2,578 | | Net income | $2,235 | $1,025 | $6,324 | $3,120 | | Basic net income per share | $0.10 | $0.05 | $0.28 | $0.14 | | Diluted net income per share | $0.09 | $0.04 | $0.26 | $0.14 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended August 31, 2025, the company experienced a net decrease in cash and cash equivalents, primarily due to cash used in operating activities, despite positive cash flow from investing and financing activities | Cash Flow Activity | Nine Months Ended Aug 31, 2025 (thousands) | Nine Months Ended Aug 31, 2024 (thousands) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Net cash (used in) provided by operating activities | $(11,503) | $4,479 | | Net cash provided by (used in) investing activities | $583 | $(1,382) | | Net cash provided by (used in) financing activities | $99 | $(3,924) | | Net (decrease) increase in cash and cash equivalents | $(10,334) | $(421) | | Cash and cash equivalents, end of period | $6,495 | $20,077 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased from **$54,369 thousand** at November 30, 2024, to **$63,143 thousand** at August 31, 2025, primarily driven by net income and stock-based compensation, partially offset by treasury stock repurchases | Metric | November 30, 2024 (thousands) | August 31, 2025 (thousands) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Total Stockholders' Equity | $54,369 | $63,143 | | Net income (9 months) | N/A | $6,324 | | Stock-based compensation (9 months) | N/A | $2,297 | | Repurchase of common stock (9 months) | N/A | $(55) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's business operations, significant accounting policies, recent accounting guidance, and specific financial statement line items, offering context for the reported financial performance and position [1. Nature of Operations](index=8&type=section&id=1.%20Nature%20of%20Operations) Byrna Technologies Inc. specializes in non-lethal self-defense products, selling primarily to consumers in the U.S. through e-commerce, Amazon, brick-and-mortar stores, and retailers, with manufacturing facilities in Indiana and a recently ceased operation in South Africa - Byrna Technologies Inc. focuses on next-generation alternatives to traditional firearms for self-defense and personal security, usable by consumers in **all 50 states** without a firearms license[14](index=14&type=chunk) - Sales channels include the company's e-commerce site, Amazon storefront, **four company-owned brick-and-mortar locations**, and other retailers, also serving private and public security officers[14](index=14&type=chunk) - The company operates manufacturing facilities in Fort Wayne, Indiana (**30,000 sq ft** and **10,000 sq ft**), and a **20,000 sq ft** facility in Pretoria, South Africa, which ceased manufacturing operations in **Q3 2025**[14](index=14&type=chunk) [2. Operations and Management Plans](index=8&type=section&id=2.%20Operations%20and%20Management%20Plans) As of August 31, 2025, the company has an accumulated deficit of approximately **$50.5 million** but generated **$6.3 million** in net income for the nine months ended August 31, 2025, with future success dependent on continued capital generation or sufficient revenue to cover expenses and market products - As of August 31, 2025, the Company incurred an accumulated deficit of approximately **$50.5 million**[15](index=15&type=chunk) - The Company generated net income of **$6.3 million** for the nine months ended August 31, 2025[15](index=15&type=chunk) - Future success relies on the ability to raise sufficient capital or generate adequate revenues to cover ongoing operating expenses and profitably market products[15](index=15&type=chunk) [3. Basis of Presentation](index=8&type=section&id=3.%20Basis%20of%20Presentation) The unaudited condensed consolidated financial statements are prepared in accordance with Form 10-Q instructions and GAAP, reflecting normal recurring adjustments, but are not necessarily indicative of full-year results - The financial statements are unaudited and prepared in accordance with **Form 10-Q** and **GAAP**, including normal recurring adjustments[16](index=16&type=chunk) - All significant intercompany accounts and transactions have been eliminated in consolidation[16](index=16&type=chunk) - The interim results are not necessarily indicative of results to be expected for the full year[17](index=17&type=chunk) [4. Use of Estimates](index=9&type=section&id=4.%20Use%20of%20Estimates) The preparation of financial statements requires management to make significant estimates and assumptions, such as for stock-based compensation, deferred tax assets, lease rates, asset useful lives, inventory reserves, and credit losses, which could differ from actual results - Management makes estimates and assumptions affecting reported asset/liability amounts and revenue/expenses[18](index=18&type=chunk) - Significant estimates include stock-based compensation expense, valuation for deferred tax assets, incremental borrowing rate on leases, useful life of long-lived assets, inventory reserves, and allowance for credit losses[18](index=18&type=chunk) - Actual results could differ materially from these estimates[18](index=18&type=chunk) [5. Recent Accounting Guidance](index=9&type=section&id=5.%20Recent%20Accounting%20Guidance) The company is evaluating several new Accounting Standards Updates (ASUs) related to segment reporting, income tax disclosures, expense disaggregation, and credit loss measurement, anticipating additional disclosures but no material impact on financial position or results of operations - ASU 2023-07 (Segment Reporting) requires expanded annual and interim disclosures for significant segment expenses, effective for fiscal years beginning after **December 15, 2023**, with no material impact expected other than expanded disclosures[20](index=20&type=chunk) - ASU 2023-09 (Income Taxes) standardizes effective tax rate reconciliation categories and requires disaggregation of income taxes, effective for fiscal years beginning after **December 15, 2024** (year ended **November 30, 2026** for the Company)[21](index=21&type=chunk) - ASU 2024-03 (Expense Disaggregation) requires more detailed disclosures about significant expense categories, effective for annual periods beginning after **December 15, 2026**, with no material impact on financial position or results of operations expected[22](index=22&type=chunk) - ASU 2025-05 (Credit Losses) introduces a practical expedient for measuring credit losses on accounts receivable, effective for annual periods beginning after **December 15, 2025**, with no material impact on financial position or results of operations expected[23](index=23&type=chunk) [6. Goodwill](index=10&type=section&id=6.%20Goodwill) Goodwill is not amortized but is reviewed for impairment annually or more frequently if circumstances change, with the assessment performed at the company level as a single reporting unit - Goodwill is not amortized but is reviewed for impairment annually or more frequently if circumstances suggest a reduction in fair value[24](index=24&type=chunk) - The company has the option to perform a qualitative or quantitative assessment for goodwill impairment[24](index=24&type=chunk) - The company's operations constitute a single reporting unit, and goodwill is assessed for impairment at the company level[25](index=25&type=chunk) [7. Marketable Debt Securities](index=10&type=section&id=7.%20Marketable%20Debt%20Securities) Marketable debt securities, consisting of U.S. Treasury Securities and Corporate Bonds, are classified as available-for-sale and recorded at fair value, with unrealized gains and losses in other comprehensive income. As of August 31, 2025, total marketable securities were **$2,501 thousand** - Marketable debt securities are classified as available-for-sale and recorded at fair value, with unrealized gains and losses included in accumulated other comprehensive income[26](index=26&type=chunk) | Security Type | August 31, 2025 (thousands) | November 30, 2024 (thousands) | | :-------------------- | :---------------------------- | :---------------------------- | | Corporate bonds | $1,495 | $2,968 | | U.S. Treasury securities | $1,006 | $5,936 | | Total Fair Value | $2,501 | $8,904 | - Fair value measurements are based on a three-tier hierarchy, with all marketable debt securities classified as **Level 2** (observable inputs other than quoted prices) as of August 31, 2025[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [8. Investment in Joint Venture](index=12&type=section&id=8.%20Investment%20in%20Joint%20Venture) The company sold its **51%** ownership in Byrna LATAM S.A. for **$1** on **August 19, 2024**, and entered into an exclusive distribution, manufacturing, and licensing agreement, generating **$1.1 million** in royalty revenue for the nine months ended August 31, 2025 - In **January 2023**, the Company acquired a **51%** ownership interest in Byrna LATAM S.A. for **$0.5 million**, accounted for using the equity method[31](index=31&type=chunk) - On **August 19, 2024**, the Company sold its **51%** ownership interest to Fusady S.A. for **$1** and entered into an exclusive distribution, manufacturing, and licensing agreement with Byrna LATAM[32](index=32&type=chunk) - Royalty revenue earned from the LATAM Licensing Agreement was **$0.3 million** for the three months and **$1.1 million** for the nine months ended August 31, 2025[32](index=32&type=chunk) [9. Advertising Costs](index=12&type=section&id=9.%20Advertising%20Costs) Advertising costs, expensed as incurred, increased to **$4,000 thousand** for the three months and **$11,900 thousand** for the nine months ended August 31, 2025, reflecting increased marketing efforts | Period | Advertising Costs (thousands) | | :-------------------------------- | :---------------------------- | | Three Months Ended August 31, 2025 | $4,000 | | Three Months Ended August 31, 2024 | $3,200 | | Nine Months Ended August 31, 2025 | $11,900 | | Nine Months Ended August 31, 2024 | $8,600 | [10. Revenue, Deferred Revenue and Accounts Receivable](index=12&type=section&id=10.%20Revenue,%20Deferred%20Revenue%20and%20Accounts%20Receivable) Revenue is recognized upon transfer of control, net of returns and discounts. The company offers standard and extended warranties, with extended warranties recognized as deferred revenue. Accounts receivable increased significantly, while the allowance for credit losses decreased. Royalty revenue from the LATAM agreement also contributed to total revenue - Revenue is recognized when control of goods transfers to the customer, typically when goods are loaded into the carrier's trailer (**EXW terms**)[35](index=35&type=chunk) - Extended warranties (**3-year** and **5-year**) are classified as service obligations, with revenue recognized on a straight-line basis over the warranty period and recorded as deferred revenue[36](index=36&type=chunk)[37](index=37&type=chunk) | Metric | August 31, 2025 (thousands) | November 30, 2024 (thousands) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Accounts receivable, net | $8,900 | $2,600 | | Allowance for credit losses | < $100 | $300 | | Deferred revenue balance, end of period | $289 | $1,808 | Revenue Disaggregation by Distribution Channel (thousands) | Distribution Channel | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 31, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Wholesale (dealer/distributors) | $11,530 | $4,781 | $29,653 | $13,512 | | E-commerce (direct to consumers) | $16,335 | $16,073 | $52,096 | $44,265 | | Royalties | $314 | — | $1,125 | — | | Total | $28,179 | $20,854 | $82,874 | $57,777 | [11. Inventory](index=15&type=section&id=11.%20Inventory) Total inventory increased significantly to **$34,106 thousand** as of August 31, 2025, from **$19,972 thousand** at November 30, 2024, with increases across raw materials, work in process, and finished goods | Inventory Component | August 31, 2025 (thousands) | November 30, 2024 (thousands) | | :------------------ | :---------------------------- | :---------------------------- | | Raw materials | $17,970 | $10,307 | | Work in process | $5,186 | $3,433 | | Finished goods | $10,950 | $6,232 | | Total | $34,106 | $19,972 | [12. Property and Equipment](index=15&type=section&id=12.%20Property%20and%20Equipment) Net property and equipment increased to **$6,780 thousand** as of August 31, 2025, from **$3,408 thousand** at November 30, 2024, reflecting significant investments in machinery and equipment, and leasehold improvements. Depreciation expense also increased | Category | August 31, 2025 (thousands) | November 30, 2024 (thousands) | | :-------------------------- | :---------------------------- | :---------------------------- | | Computer equipment and software | $787 | $791 | | Furniture and fixtures | $628 | $276 | | Leasehold improvements | $1,907 | $1,048 | | Machinery and equipment | $7,503 | $4,095 | | Less: accumulated depreciation | $(4,045) | $(2,802) | | Total | $6,780 | $3,408 | | Period | Depreciation Expense (thousands) | | :-------------------------------- | :------------------------------- | | Nine Months Ended August 31, 2025 | $1,400 | | Nine Months Ended August 31, 2024 | $900 | | Three Months Ended August 31, 2025 | $600 | | Three Months Ended August 31, 2024 | $400 | - Deposits for equipment, primarily for machinery (molds), were **$2,600 thousand** as of August 31, 2025[51](index=51&type=chunk) [13. Intangible Assets](index=17&type=section&id=13.%20Intangible%20Assets) Net intangible assets decreased slightly to **$3,151 thousand** as of August 31, 2025, from **$3,337 thousand** at November 30, 2024, primarily due to amortization of patents, partially offset by the acquisition of a Federal Firearms License | Intangible Asset | August 31, 2025 (thousands) | November 30, 2024 (thousands) | | :----------------- | :---------------------------- | :---------------------------- | | Patents | $2,785 | $2,977 | | Trademarks | $360 | $360 | | Customer List | — | — | | Federal Firearms License | $6 | — | | Total Net Carrying Amount | $3,151 | $3,337 | | Period | Amortization Expense (thousands) | | :-------------------------------- | :------------------------------- | | Nine Months Ended August 31, 2025 | $200 | | Nine Months Ended August 31, 2024 | $100 | | Three Months Ended August 31, 2025 | < $100 | | Three Months Ended August 31, 2024 | < $100 | | Fiscal Year Ending November 30, | Estimated Future Amortization Expense (thousands) | | :-------------------------------- | :------------------------------------------------ | | 2025 (remaining three months) | $65 | | 2026 | $259 | | 2027 | $259 | | 2028 | $259 | | 2029 | $259 | | Thereafter | $1,690 | | Total | $2,791 | [14. Accounts Payable and Accrued Liabilities](index=17&type=section&id=14.%20Accounts%20Payable%20and%20Accrued%20Liabilities) Total accounts payable and accrued liabilities decreased to **$12,698 thousand** as of August 31, 2025, from **$13,108 thousand** at November 30, 2024, primarily due to a decrease in accrued personnel costs | Category | August 31, 2025 (thousands) | November 30, 2024 (thousands) | | :-------------------------- | :---------------------------- | :---------------------------- | | Trade payables | $8,540 | $7,715 | | Accrued sales, use and income tax | $556 | $570 | | Accrued personnel costs | $3,216 | $4,193 | | Accrued professional fees | $135 | $124 | | Other accrued liabilities | $251 | $506 | | Total | $12,698 | $13,108 | [15. Stockholders' Equity](index=18&type=section&id=15.%20Stockholders'%20Equity) The company's Board of Directors approved a **$10 million** stock buyback program on **July 31, 2024**, to return capital and minimize dilution. As of August 31, 2025, **$3.8 million** has been used to repurchase **353,157 shares** - On **July 31, 2024**, the Board approved a Stock Buyback Program of up to **$10 million** worth of common stock[60](index=60&type=chunk) - The program aims to return capital to shareholders and minimize the dilutive impact of stock options and share-based awards, expiring on the sooner of two years or reaching the **$10 million** limit[60](index=60&type=chunk) | Metric | As of August 31, 2025 | | :-------------------------------- | :-------------------- | | Total shares repurchased | 353,157 | | Total cost of repurchased shares | $3,807,931 | | Average cost per share | $10.8 | | Repurchases during nine months ended Aug 31, 2025 | 3,927 shares for $50 thousand | [16. Stock-Based Compensation](index=19&type=section&id=16.%20Stock-Based%20Compensation) The 2020 Equity Incentive Plan governs stock-based awards, with total compensation expense decreasing slightly for the nine months ended August 31, 2025. The company granted performance-based and time-based RSUs and recognized related compensation expense, with **$3,900 thousand** of unrecognized cost remaining for RSUs and **$400 thousand** for stock options - The **2020 Equity Incentive Plan** authorizes **3,800,000 shares** for options, SARs, RSUs, and restricted/unrestricted common stock awards to employees, officers, directors, consultants, and advisors[62](index=62&type=chunk) | Period | Total Stock-Based Compensation Expense (thousands) | | :-------------------------------- | :----------------------------------------------- | | Nine Months Ended August 31, 2025 | $2,300 | | Nine Months Ended August 31, 2024 | $2,600 | | Three Months Ended August 31, 2025 | $700 | | Three Months Ended August 31, 2024 | $800 | - During the nine months ended August 31, 2025, the Company granted **120,830 RSUs** (**88,344 time-based** and **32,486 performance-based PSUs**)[66](index=66&type=chunk) - As of August 31, 2025, there was **$3,900 thousand** of unrecognized stock-based compensation cost related to unvested RSUs (expected to be recognized over **1.1 years**) and **$400 thousand** for unvested stock options (expected over **1.2 years**)[67](index=67&type=chunk)[69](index=69&type=chunk) [17. Earnings Per Share](index=21&type=section&id=17.%20Earnings%20Per%20Share) Basic and diluted net income per share increased for both the three and nine months ended August 31, 2025, reflecting higher net income. The calculation includes dilutive stock options and RSUs, while anti-dilutive shares are excluded | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 31, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income per share - basic | $0.10 | $0.05 | $0.28 | $0.14 | | Net income per share - diluted | $0.09 | $0.04 | $0.26 | $0.14 | | Weighted-average common shares outstanding - diluted | 24,103,760 | 23,410,159 | 24,147,430 | 23,072,498 | | Potential Common Shares Excluded (Anti-Dilutive) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 31, 2024 | | :----------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Options | — | 437,666 | — | 437,666 | | RSUs | 20,919 | 16,513 | 41,944 | 41,513 | | Total | 20,919 | 454,179 | 41,944 | 479,179 | [18. Related Party Transactions](index=21&type=section&id=18.%20Related%20Party%20Transactions) Related party transactions include a nominal sublease payment from a CEO-owned corporation. Fusady S.A. is no longer considered a related party following the divestiture of the Byrna LATAM joint venture in **August 2024** - The Company subleases office premises to a corporation owned and controlled by the CEO, with nominal payments received[74](index=74&type=chunk) - Fusady S.A. is no longer considered a related party after the divestiture of the Byrna LATAM joint venture in **August 2024**[75](index=75&type=chunk) [19. Leases](index=23&type=section&id=19.%20Leases) The company holds various operating leases for real estate in the U.S. and South Africa, with several new leases commenced in **2024** and **2025** for retail and office spaces. Total lease cost increased for the nine months ended August 31, 2025, and future lease payments extend through **2029** and thereafter - The Company has operating leases for real estate in the United States (Andover, Fort Wayne, Las Vegas, Salem, Scottsdale, Franklin) and South Africa[76](index=76&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) | Lease Metric | Nine Months Ended Aug 31, 2025 (thousands) | Nine Months Ended Aug 31, 2024 (thousands) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $565 | $459 | | Short-term lease cost | $60 | — | | Total lease cost | $625 | $459 | | Cash paid for operating lease liabilities | $395 | $504 | | Weighted-average remaining lease term | 4.1 years | 4.6 years | | Weighted-average discount rate | 7.9% | 8.3% | | Fiscal Year Ending November 30, | Future Lease Payments (thousands) | | :-------------------------------- | :-------------------------------- | | 2025 (remaining three months) | $206 | | 2026 | $840 | | 2027 | $738 | | 2028 | $386 | | 2029 | $266 | | Thereafter | $387 | | Total lease payments | $2,823 | | Present value of operating lease liabilities | $2,432 | [20. Income Taxes](index=25&type=section&id=20.%20Income%20Taxes) The company recorded income tax expenses of **$600 thousand** for the three months and **$1,700 thousand** for the nine months ended August 31, 2025, with effective tax rates of **20.6%** and **18.3%**, respectively. The recently enacted One Big Beautiful Bill Act (OBBBA) is being evaluated for its impact | Period | Income Tax Expense (thousands) | Effective Tax Rate | | :-------------------------------- | :----------------------------- | :----------------- | | Three Months Ended August 31, 2025 | $600 | 20.6% | | Three Months Ended August 31, 2024 | Nominal | 0.1% | | Nine Months Ended August 31, 2025 | $1,700 | 18.3% | | Nine Months Ended August 31, 2024 | $100 (benefit) | 0.2% | - The effective tax rate differs from the statutory rate of **21.0%** due to state taxes, foreign tax rate differential (Byrna South Africa), and permanent non-deductible expenses[88](index=88&type=chunk) - The company is evaluating the impact of the recently enacted **One Big Beautiful Bill Act (OBBBA)** on its financial statements and has included estimated impacts for the current tax period[89](index=89&type=chunk) [21. Commitments and Contingencies](index=25&type=section&id=21.%20Commitments%20and%20Contingencies) The company is involved in various legal actions and claims in the ordinary course of business, but management does not anticipate a material loss from these contingencies - The Company may be involved in various legal actions and claims, including product liability, consumer, commercial, tax, and governmental matters[90](index=90&type=chunk) - Management's opinion is that there is not a reasonable possibility of incurring a material loss from current loss contingencies for asserted legal and other claims[90](index=90&type=chunk) - Legal actions inherently carry uncertainties, and an unfavorable ruling could potentially impact the company's business, financial position, results of operations, or cash flows[90](index=90&type=chunk) [22. Segment and Geographical Disclosures](index=25&type=section&id=22.%20Segment%20and%20Geographical%20Disclosures) The company operates as a single reportable segment, with revenue disaggregated by geographic region, showing significant growth across all regions for the nine months ended August 31, 2025 - The CEO, as Chief Operating Decision Maker, evaluates the entire business as a single entity, resulting in a single operating and reportable segment[91](index=91&type=chunk) Revenue by Geographic Region (thousands) | Geographic Region | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 31, 2024 | | :------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | U.S./Mexico | $25,240 | $19,264 | $74,395 | $53,462 | | South Africa | $998 | $53 | $1,379 | $157 | | Europe/South America/Asia | $1,475 | $812 | $5,730 | $2,344 | | Canada | $466 | $725 | $1,370 | $1,814 | | Total | $28,179 | $20,854 | $82,874 | $57,777 | [23. Financial Instruments](index=26&type=section&id=23.%20Financial%20Instruments) The company is exposed to currency risk, primarily from fluctuations in the South African rand, and credit risk related to cash, marketable securities, accounts receivable, and a loan to Byrna LATAM, with customer concentration noted in accounts receivable - The company is exposed to currency risk due to operations in South Africa, where revenues, costs, and assets are denominated in South African rand, leading to volatility in U.S. dollar translated earnings[93](index=93&type=chunk)[95](index=95&type=chunk) - Credit risk arises from cash and cash equivalents, marketable securities, accounts receivable, and a **$1,600 thousand** loan receivable from Byrna LATAM[95](index=95&type=chunk)[97](index=97&type=chunk) - As of August 31, 2025, **two customers** accounted for approximately **32%** of total accounts receivable, indicating customer concentration risk[96](index=96&type=chunk) - The company's investment policy limits credit risk exposure by requiring marketable debt securities to be at least **AA-/Aa3 rated**[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&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, liquidity, and capital resources for the three and nine months ended August 31, 2025, highlighting revenue growth, changes in profitability, and cash flow dynamics, along with an overview of business strategy and non-GAAP financial measures [Overview](index=27&type=section&id=OVERVIEW) Byrna Technologies designs and distributes non-lethal security solutions, aiming to be a consumer lifestyle brand. Its strategy focuses on meeting demand in law enforcement, security, and civilian markets for less-lethal products, and expanding its product line. The company also detailed the divestiture of its Byrna LATAM joint venture and the initiation of a stock buyback program - Byrna Technologies is a designer, manufacturer, retailer, and distributor of innovative technological solutions for non-lethal security situations, with a core mission to empower individuals for self-defense[102](index=102&type=chunk) - The business strategy is twofold: (1) fulfill growing demand for less-lethal products in law enforcement, correctional services, and private security markets, and (2) provide civilians with effective, non-lethal self-protection[103](index=103&type=chunk) - On **August 19, 2024**, the company sold its **51%** ownership in Byrna LATAM for **$1** and entered into an exclusive distribution, manufacturing, and licensing agreement[105](index=105&type=chunk) - On **July 31, 2024**, the Board of Directors approved a Stock Buyback Program of up to **$10 million** to return capital to shareholders and minimize dilution[106](index=106&type=chunk) [Results of Operations](index=28&type=section&id=RESULTS%20OF%20OPERATIONS) The company achieved substantial revenue growth for both the three and nine months ended August 31, 2025, driven by a new marketing strategy and increased sales across wholesale, e-commerce, and international channels. Gross profit increased, but gross margin slightly decreased due to a shift towards lower-margin wholesale sales. Operating expenses rose due to increased marketing, variable expenses, and employee compensation, yet net income significantly improved Key Financial Highlights (Three Months Ended August 31) | Metric | 2025 (thousands) | 2024 (thousands) | Change ($) | Change (%) | | :-------------------- | :--------------- | :--------------- | :--------- | :--------- | | Net Revenue | $28,179 | $20,854 | $7,325 | 35.1% | | Cost of Goods Sold | $11,257 | $7,842 | $3,415 | 43.5% | | Gross Profit | $16,922 | $13,012 | $3,910 | 30.0% | | Gross Margin | 60.1% | 62.4% | -2.3% | | | Operating Expenses | $14,059 | $12,184 | $1,875 | 15.4% | | Net Income | $2,235 | $1,025 | $1,210 | 118.0% | Key Financial Highlights (Nine Months Ended August 31) | Metric | 2025 (thousands) | 2024 (thousands) | Change ($) | Change (%) | | :-------------------- | :--------------- | :--------------- | :--------- | :--------- | | Net Revenue | $82,874 | $57,777 | $25,097 | 43.4% | | Cost of Goods Sold | $32,464 | $22,566 | $9,898 | 43.9% | | Gross Profit | $50,410 | $35,211 | $15,199 | 43.2% | | Gross Margin | 60.8% | 60.9% | -0.1% | | | Operating Expenses | $42,525 | $32,633 | $9,892 | 30.3% | | Net Income | $6,324 | $3,120 | $3,204 | 102.7% | - Revenue increase attributed to a new marketing strategy implemented in **September 2023**, shifting advertising efforts towards celebrity endorsers[107](index=107&type=chunk)[119](index=119&type=chunk) Adjusted EBITDA Reconciliation (thousands) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 31, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $2,235 | $1,025 | $6,324 | $3,120 | | Interest income | $(97) | $(281) | $(400) | $(883) | | Income tax expense (benefit) | $628 | $(78) | $1,666 | $(75) | | Depreciation and amortization | $259 | $263 | $696 | $1,113 | | Stock-based compensation expense | $734 | $819 | $2,297 | $2,615 | | Severance/Officer recruiting/Separation | $(36) | $196 | $210 | $431 | | Non-GAAP adjusted EBITDA | $3,723 | $1,944 | $10,793 | $6,321 | [Liquidity and Capital Resources](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Cash and cash equivalents decreased by **$10,300 thousand** to **$6,500 thousand** as of August 31, 2025, primarily due to cash used in operating activities, driven by increases in inventory and accounts receivable. Investing activities provided cash, while financing activities provided a small amount of cash, a significant change from the prior year's cash usage - Cash and cash equivalents totaled **$6,500 thousand** as of August 31, 2025, a decrease of **$10,300 thousand** from **$16,800 thousand** as of November 30, 2024[130](index=130&type=chunk) Cash Flow Summary (Nine Months Ended August 31) | Cash Flow Activity | 2025 (thousands) | 2024 (thousands) | | :------------------------------------------ | :--------------- | :--------------- | | Net cash (used in) provided by operating activities | $(11,503) | $4,479 | | Net cash provided by (used in) investing activities | $583 | $(1,382) | | Net cash provided by (used in) financing activities | $99 | $(3,924) | - Operating cash outflow was primarily driven by increases in inventory (**$14,100 thousand**) and accounts receivable (**$6,200 thousand**)[132](index=132&type=chunk) - Investing activities provided cash mainly from proceeds from the sale of marketable debt securities (**$6,352 thousand**), partially offset by purchases of property and equipment (**$5,830 thousand**)[133](index=133&type=chunk) - The company intends to fund operations primarily from operating funds but may pursue secondary equity offerings or debt financings, with no assurance of availability or terms[135](index=135&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements that are material or reasonably likely to have a material effect on its financial condition or results of operations - The Company does not have any off-balance sheet arrangements that are material or reasonably likely to have a material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources[136](index=136&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) Refer to Note 5 in the condensed consolidated financial statements for a discussion of recently issued and adopted accounting standards - Refer to **Note 5**, 'Recent Accounting Guidance,' in the Notes to unaudited condensed consolidated financial statements for a discussion of recently issued and adopted accounting standards[137](index=137&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) There were no significant changes to the company's critical accounting policies and estimates during the three and nine months ended August 31, 2025, from those described in its **2024 Form 10-K** - There were no significant changes to the company's critical accounting policies from those described in its **2024 Form 10-K** during the three and nine months ended August 31, 2025[138](index=138&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not applicable for the current reporting period - This item is not applicable[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 31, 2025, with no material changes to internal controls over financial reporting during the third quarter of 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of **August 31, 2025**[140](index=140&type=chunk) - Disclosure controls and procedures are designed to ensure material information is recorded, processed, summarized, and reported timely[140](index=140&type=chunk) - There were no changes during the **third quarter of 2025** that materially affected or are reasonably likely to materially affect internal control over financial reporting[141](index=141&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the normal course of business, but management believes any liability from these would not have a material adverse effect on its business or financial condition - The Company occasionally becomes involved in various legal proceedings in the normal course of business[142](index=142&type=chunk) - Management's opinion is that any liability from such proceedings would not have a material adverse effect on the company's business or financial condition[142](index=142&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section references the risk factors from the company's **2024 Form 10-K** and highlights new material changes related to tariffs, sanctions, and other trade barriers, particularly impacting international sales and supply chain costs in emerging markets - Factors that could cause actual results to differ materially are detailed in the 'Risk Factors' section of the Annual Report on **Form 10-K** for the fiscal year ended **November 30, 2024**[143](index=143&type=chunk) - New material changes include risks from tariffs, sanctions, restrictions on imports, or other trade barriers between the United States and various countries, which may impact revenue and results of operations[144](index=144&type=chunk) - The company does business in emerging market jurisdictions like South Africa and South America, where economic, political, and legal risks are heightened[144](index=144&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) The company's Board of Directors approved a **$10 million** stock buyback program on **July 31, 2024**, but no shares of common stock were repurchased during the three months ended August 31, 2025 - On **July 31, 2024**, the Board of Directors approved a program to buy back up to **$10 million** worth of common stock over **two years**[145](index=145&type=chunk) - The Stock Buyback Program aims to return capital to shareholders and minimize the dilutive impact of stock options and other share-based awards[145](index=145&type=chunk) - No shares of common stock were repurchased during the three months ended **August 31, 2025**[145](index=145&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[146](index=146&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[147](index=147&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) This section discloses insider trading arrangements, specifically a Rule 10b5-1 trading arrangement adopted by Luan Pham for the sale of up to **142,661 shares** of common stock Insider Trading Arrangement | Name & Title | Date Adopted | Character of Trading Arrangement | Shares of Common Stock to be Purchased or Sold | Duration | | :------------- | :----------- | :------------------------------- | :------------------------------------------- | :------- | | Luan Pham | July 14, 2025 | Rule 10b5-1 Trading Arrangement | Up to 142,661 shares to be sold | January 5, 2026 through December 21, 2026 | [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This item lists all exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q, including certifications, agreements, and XBRL documents - The exhibits include certifications (e.g., **31.1, 31.2, 32.1**), the Amended and Restated **2020 Equity Incentive Plan**, Separation and Consulting Agreements, and various Inline XBRL documents[153](index=153&type=chunk) SIGNATURES The report is duly signed on behalf of Byrna Technologies Inc. by its President and Chief Executive Officer, Bryan Ganz, and its Chief Financial Officer, Laurilee Kearnes - The report is signed by **Bryan Ganz**, President and Chief Executive Officer, and **Laurilee Kearnes**, Chief Financial Officer, on **October 9, 2025**[155](index=155&type=chunk)[157](index=157&type=chunk)

[Executive Summary & CEO Commentary](index=1&type=section&id=Executive%20Summary%20%26%20CEO%20Commentary) Neogen's CEO outlined a strategy for commercial excellence, innovation, and cost reduction to drive margin growth, while Q1 FY26 saw a 3.6% revenue decrease but improved net income due to a divestiture [CEO's Strategic Vision & Challenges](index=1&type=section&id=CEO's%20Strategic%20Vision%20%26%20Challenges) Neogen's CEO, Mike Nassif, outlined a strategy to leverage the company's leadership in food and animal safety by addressing recent execution challenges. The plan includes a sharpened focus on commercial excellence, renewed innovation, and a leaner cost structure through company-wide cost initiatives and headcount reduction, aiming for margin growth, strategic reinvestment, and sustainable shareholder value - Neogen's CEO, Mike Nassif, identifies **tremendous opportunity** in food and animal safety, despite recent performance hampered by execution challenges[3](index=3&type=chunk) - **Strategic initiatives** include a **sharpened emphasis** on commercial excellence, renewed innovation, and a **leaner cost structure**, including headcount reduction, to fuel **margin growth** and enable **strategic reinvestment**[3](index=3&type=chunk) [First Quarter Financial & Business Highlights](index=1&type=section&id=First%20Quarter%20Financial%20%26%20Business%20Highlights) Neogen reported first-quarter fiscal 2026 revenues of $209.2 million, a 3.6% decrease year-over-year, though core revenue increased by 0.3%. Net income significantly improved to $36.3 million from a prior-year loss, primarily due to a non-cash gain on the sale of the Cleaners and Disinfectants business. Adjusted Net Income and Adjusted EBITDA declined due to lower operating income and gross margin pressures | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :--------------------- | :----------------- | :----------------- | :--------- | | Revenues | $209.2 | $217.0 | -3.6% | | Core Revenue Growth | 0.3% | N/A | N/A | | Net Income | $36.3 | $(12.6) | N/A | | Net Income Per Diluted Share | $0.17 | $(0.06) | N/A | | Adjusted Net Income | $9.4 | $14.4 | -34.6% | | Adjusted Net Income Per Diluted Share | $0.04 | $0.07 | -42.9% | | Gross Margin | 45.4% | 48.4% | -3.0 pp | | Adjusted EBITDA | $35.5 | $43.7 | -18.8% | | Adjusted EBITDA Margin | 17.0% | 20.1% | -3.1 pp | - Net income in the current period was **higher** compared to the prior year due to a **non-cash gain** on the sale of the Company's global Cleaners and Disinfectants business[5](index=5&type=chunk) - **Key business actions** include the **completion** of the Cleaners & Disinfectants business divestiture, **repayment** of **$100.0 million** of debt, appointment of Mike Nassif as CEO, and **restructuring actions** to **right-size the cost base**, while **reaffirming the full-year outlook**[8](index=8&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) Neogen's Food Safety segment revenue declined by 4.6% due to Petrifilm sales, while Animal Safety core revenue grew 5.8%, and Genomics returned to mid-single-digit core growth [Food Safety Segment](index=2&type=section&id=Food%20Safety%20Segment) The Food Safety segment's revenue decreased by 4.6% to $152.1 million, with a core revenue decline of 1.7%. Growth in Bacterial & General Sanitation (pathogen detection) and food quality/nutritional analysis was offset by a decline in Petrifilm sales due to channel inventory rebalancing and distributor changes | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :----------------- | :----------------- | :----------------- | :--------- | | Revenue | $152.1 | $159.3 | -4.6% | | Core Revenue Growth | -1.7% | N/A | N/A | | Divestitures/Discontinued Products Impact | -3.7% | N/A | N/A | | Foreign Currency Impact | 0.8% | N/A | N/A | - **Strongest core revenue growth** in Bacterial & General Sanitation, benefiting from **higher sales** in pathogen detection products[9](index=9&type=chunk) - **Decline** in Petrifilm sales largely due to **channel inventory rebalancing** related to switching distributors in Asia and normalization of buying patterns in the U.S[9](index=9&type=chunk) [Animal Safety Segment](index=2&type=section&id=Animal%20Safety%20Segment) The Animal Safety segment's revenue saw a slight decrease of 0.8% to $57.1 million, but achieved a strong 5.8% core revenue increase. This growth was driven by Animal Care & Other (biologics, wound care), Life Sciences (substrates, reagents), and Biosecurity (insect control), partially offset by lower sales in Veterinary Instruments & Disposables | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :----------------- | :----------------- | :----------------- | :--------- | | Revenue | $57.1 | $57.6 | -0.8% | | Core Revenue Growth | 5.8% | N/A | N/A | | Divestitures/Discontinued Products Impact | -6.4% | N/A | N/A | | Foreign Currency Impact | -0.2% | N/A | N/A | - **Core revenue growth** led by Animal Care & Other (biologics, wound care), Life Sciences (substrates, reagents), and Biosecurity (insect control products)[10](index=10&type=chunk) - **Lower revenue** in Veterinary Instruments & Disposables, primarily driven by a **decline** in sales of needles and syringes[10](index=10&type=chunk) [Genomics Business](index=2&type=section&id=Genomics%20Business) Neogen's Genomics business returned to positive mid-single-digit core revenue growth globally in the first quarter, driven by solid performance in bovine and other markets, despite a decline in the companion animal market - The Company's Genomics business **returned to positive core revenue growth** in the **mid-single-digit range** in the first quarter[11](index=11&type=chunk) - **Solid growth** in bovine and other markets was partially offset by a **decline** in the companion animal market[11](index=11&type=chunk) [Financial Position & Outlook](index=2&type=section&id=Financial%20Position%20%26%20Outlook) Neogen maintained $138.9 million in cash and $800.0 million in debt, repaying $100 million, and reaffirmed its FY26 revenue outlook of $820-840 million and Adjusted EBITDA of $165-175 million [Liquidity and Capital Resources](index=2&type=section&id=Liquidity%20and%20Capital%20Resources) As of August 31, 2025, Neogen held $138.9 million in cash and cash equivalents and had total outstanding debt of $800.0 million. The company utilized net proceeds from the Cleaners & Disinfectants divestiture to repay $100 million of debt during the quarter | Metric | As of August 31, 2025 (Millions) | | :---------------------- | :----------------------------- | | Cash and cash equivalents | $138.9 | | Total outstanding debt | $800.0 | | Committed borrowing headroom | $201.5 | - The Company used **net proceeds** from the July closing of the Cleaners & Disinfectants divestiture to **repay** **$100 million** of outstanding debt in the first quarter[12](index=12&type=chunk) [Fiscal Year 2026 Outlook](index=2&type=section&id=Fiscal%20Year%202026%20Outlook) Neogen reaffirmed its full-year fiscal 2026 outlook, anticipating revenues between $820 million and $840 million, and Adjusted EBITDA in the range of $165 million to $175 million. Capital expenditures are projected to be approximately $50 million | Metric | FY26 Outlook (Millions) | | :----------------- | :---------------------- | | Revenue | $820 - $840 | | Adjusted EBITDA | $165 - $175 | | Capital Expenditures | ~$50 | - The Company is **reaffirming its full-year outlook** for fiscal year 2026[13](index=13&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) This section provides details on Neogen's Q1 FY26 conference call, an overview of the company's global food security mission, and a cautionary note on forward-looking statements [Conference Call and Webcast Details](index=3&type=section&id=Conference%20Call%20and%20Webcast%20Details) Neogen Corporation hosted a conference call on October 9, 2025, to discuss its financial results. Details for accessing the live webcast, conference call, and replay were provided for investors and interested parties - Neogen Corporation **hosted** a conference call on October 9, 2025, at 8:00 a.m. Eastern Time to discuss financial results[14](index=14&type=chunk) - **Access to the live webcast**, accompanying presentation materials, and a replay is available through Neogen's investor relations website[14](index=14&type=chunk) [About Neogen](index=3&type=section&id=About%20Neogen) Neogen Corporation is a global leader dedicated to enhancing food security through advancements in human and animal well-being. The company develops comprehensive solutions across Food Safety, Livestock, and Pet Health & Wellness markets, operating in over 140 countries with a network of scientists and technical experts - Neogen Corporation is **committed to fueling global food security** through human and animal well-being[15](index=15&type=chunk) - The company offers **comprehensive solutions** in Food Safety, Livestock, and Pet Health & Wellness markets, with a **presence in over 140 countries**[15](index=15&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This news release contains forward-looking statements subject to risks and uncertainties. Actual future results may differ materially from expectations due to various factors detailed in the company's most recently filed Form 10-K - Certain portions of this news release constitute **forward-looking statements**, **subject to risks and uncertainties**[16](index=16&type=chunk) - Actual future results and trends may **differ materially** from historical results or expectations due to **factors detailed** in the company's most recently filed Form 10-K[16](index=16&type=chunk) [Consolidated Financial Statements (GAAP)](index=4&type=section&id=Consolidated%20Financial%20Statements%20(GAAP)) This section presents Neogen's unaudited GAAP financial statements for Q1 FY26, including the statement of operations, balance sheet, and cash flows, reflecting the impact of a business divestiture [Unaudited Consolidated Statement of Operations](index=4&type=section&id=Unaudited%20Consolidated%20Statement%20of%20Operations) The unaudited consolidated statement of operations shows Neogen's financial performance for the three months ended August 31, 2025, highlighting total revenue, gross profit, operating expenses, and a significant shift from a net loss to net income year-over-year, largely influenced by a gain on the sale of a business | (In thousands, except share amounts) | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Total revenue | $209,189 | $216,964 | | Cost of revenues | $114,219 | $112,038 | | Gross profit | $94,970 | $104,926 | | Total operating expenses | $111,061 | $102,669 | | Operating loss (income) | $(16,091) | $2,257 | | Gain on sale of business | $76,390 | — | | Net Income (Loss) | $36,338 | $(12,609) | | Net Earnings (Loss) Per Diluted Share | $0.17 | $(0.06) | [Unaudited Consolidated Balance Sheet](index=5&type=section&id=Unaudited%20Consolidated%20Balance%20Sheet) The unaudited consolidated balance sheet as of August 31, 2025, indicates a decrease in total assets and liabilities compared to May 31, 2025. Key changes include a reduction in current assets due to the divestiture of assets held for sale and a decrease in total liabilities, particularly current portion of debt and non-current debt | (In thousands, except share amounts) | August 31, 2025 | May 31, 2025 | | :----------------------------------- | :-------------- | :----------- | | Cash and cash equivalents | $138,883 | $129,004 | | Total Current Assets | $524,060 | $576,937 | | Total Assets | $3,378,156 | $3,443,836 | | Total Current Liabilities | $146,205 | $174,011 | | Non-current debt | $792,530 | $874,810 | | Total Liabilities | $1,259,507 | $1,372,582 | | Total Stockholders' Equity | $2,118,649 | $2,071,254 | [Unaudited Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) The unaudited consolidated statements of cash flows show a significant increase in net cash provided by operating activities to $10.85 million in Q1 FY26 from a net use in Q1 FY25. Investing activities generated substantial cash due to proceeds from the sale of a business, while financing activities saw a net use primarily from debt repayment | (In thousands) | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net Cash provided by (used for) Operating Activities | $10,853 | $(17,914) | | Net Cash provided by (used for) Investing Activities | $97,725 | $(33,662) | | Net Cash (used for) provided by Financing Activities | $(99,393) | $979 | | Net Increase (Decrease) in Cash and Cash Equivalents | $9,879 | $(50,134) | | Cash and Cash Equivalents, End of Year | $138,883 | $120,477 | - **Proceeds from the sale of business**, net of cash divested, **contributed** **$121.7 million** to investing activities[22](index=22&type=chunk) - **Repayment** of outstanding debt of **$100.0 million** was the **primary driver** of cash used in financing activities[22](index=22&type=chunk) [Non-GAAP Financial Measures & Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) This section explains Neogen's non-GAAP measures like Adjusted EBITDA and Adjusted Net Income, providing reconciliations from GAAP figures to offer clearer insights into operational performance [Explanation of Non-GAAP Measures](index=7&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Neogen utilizes non-GAAP financial measures such as Adjusted EBITDA, Adjusted Net Income, and Core Revenue Growth to provide investors with a clearer understanding of business performance by excluding certain items that impact period-over-period comparisons or comparability with other businesses. These measures are supplemental to GAAP figures - **Adjusted EBITDA** is used as a **key profitability measure**, representing EBITDA before certain items impacting performance comparisons[23](index=23&type=chunk) - **Adjusted Net Income** is an **additional profitability measure**, excluding certain items that impact business performance comparisons[24](index=24&type=chunk) - **Core revenue growth excludes effects** of foreign currency translation rates, acquisitions, and discontinued product lines for **meaningful year-over-year performance comparison**[25](index=25&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) The reconciliation details the adjustments made to GAAP Net Income (Loss) to arrive at Adjusted EBITDA. For Q1 FY26, Net Income of $36.3 million was adjusted for items like income tax, depreciation, interest, and significant non-recurring costs (e.g., gain on sale of business, transformation initiatives, sample collection transition costs) to yield an Adjusted EBITDA of $35.5 million | (In thousands) | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net income (loss) | $36,338 | $(12,609) | | EBITDA | $88,387 | $31,813 | | Share-based compensation | $4,962 | $3,982 | | Gain on sale of business | $(76,390) | — | | Transformation initiatives and related costs | $5,902 | $310 | | Adjusted EBITDA | $35,469 | $43,714 | | Adjusted EBITDA margin (% of sales) | 17.0% | 20.1% | [Reconciliation of Net Income to Adjusted Net Income](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income) This reconciliation shows the adjustments from GAAP Net Income (Loss) to Adjusted Net Income. For Q1 FY26, after accounting for amortization of acquisition-related intangibles, share-based compensation, the gain on sale of business, and various integration/transformation costs, Adjusted Net Income was $9.4 million, down from $14.4 million in the prior year | (In thousands) | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net income (loss) | $36,338 | $(12,609) | | Amortization of acquisition-related intangibles | $22,486 | $23,138 | | Share-based compensation | $4,962 | $3,982 | | Gain on sale of business | $(76,390) | — | | Transformation initiatives and related costs | $5,902 | $310 | | Estimated tax effect of above adjustments | $3,541 | $(8,052) | | Adjusted Net Income | $9,447 | $14,378 | | Adjusted Earnings Per Share | $0.04 | $0.07 | [Reconciliation of Growth to Core Growth](index=10&type=section&id=Reconciliation%20of%20Growth%20to%20Core%20Growth) This reconciliation breaks down total revenue growth into its components: reported growth, foreign currency impact, and the impact of acquisitions/divestitures, to derive core revenue growth. For Q1 FY26, total Neogen revenue declined by 3.6%, but core revenue increased by 0.3%, indicating underlying operational growth despite negative impacts from divestitures | Segment | Q1 FY26 (Thousands) | Q1 FY25 (Thousands) | Growth | Foreign Currency | Acquisitions / Divestitures | Core Revenue Growth | | :-------------- | :------------------ | :------------------ | :----- | :--------------- | :-------------------------- | :------------------ | | Food Safety | $152,050 | $159,345 | (4.6%) | 0.8% | (3.7%) | (1.7%) | | Animal Safety | $57,139 | $57,619 | (0.8%) | (0.2%) | (6.4%) | 5.8% | | Total Neogen | $209,189 | $216,964 | (3.6%) | 0.5% | (4.4%) | 0.3% |