[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Immix Biopharma, Inc. as of June 30, 2025, and for the three and six months ended June 30, 2025 and 2024, detail the company's financial position, operational results, changes in equity, and cash flows, reflecting increased net losses and a decrease in cash reserves, primarily driven by escalating research and development expenses for its clinical programs [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20%28Unaudited%29%20and%20December%2031%2C%202024) The balance sheet as of June 30, 2025, shows a significant decrease in cash and cash equivalents to **$11.6 million** from **$17.7 million** at year-end 2024, with total assets declining to **$15.6 million** from **$22.9 million**, while total liabilities increased to **$11.0 million**, and total stockholders' equity fell sharply to **$4.7 million** from **$13.3 million**, reflecting the company's net loss and cash burn Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $11,637,945 | $17,681,954 | | Total current assets | $12,325,460 | $20,197,834 | | Total assets | $15,635,104 | $22,947,872 | | Total current liabilities | $10,009,738 | $8,687,118 | | Total liabilities | $10,982,073 | $9,696,669 | | Total stockholders' equity | $4,653,031 | $13,251,203 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20Three%20and%20Six%20Months%20ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) The company reported a net loss of **$6.6 million** for the three months ended June 30, 2025, a **50% increase** from the **$4.4 million** loss in the same period of 2024, and for the six-month period, the net loss was **$11.2 million** in 2025 compared to **$9.7 million** in 2024, with widening losses primarily due to a substantial increase in research and development expenses Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,972,458 | $2,224,139 | $5,947,532 | $5,472,808 | | General and administrative | $2,745,247 | $2,478,357 | $5,453,098 | $4,819,821 | | Loss from operations | ($6,717,705) | ($4,702,496) | ($11,400,630) | ($10,292,629) | | Net loss | ($6,622,563) | ($4,405,850) | ($11,165,091) | ($9,736,914) | | Loss per common share | ($0.22) | ($0.15) | ($0.37) | ($0.36) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from **$13.3 million** at the end of 2024 to **$4.7 million** as of June 30, 2025, primarily driven by the net loss of **$11.2 million** for the six-month period, partially offset by capital raised from stock issuances under the At-The-Market (ATM) facility - For the six months ended June 30, 2025, the company's total stockholders' equity decreased by approximately **$8.6 million**, from **$13,251,203** to **$4,653,031**[19](index=19&type=chunk) - The decrease in equity was primarily due to a net loss of **$11,165,091**, which was partially offset by proceeds from stock issuances, including **$1,094,399** net from the ATM facility[16](index=16&type=chunk)[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities was **$7.0 million**, with **$1.1 million** generated from financing activities, primarily through its ATM offering, resulting in a net decrease in cash and cash equivalents of **$6.0 million**, leaving an ending balance of **$11.6 million** Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,994,921) | ($9,082,817) | | Net cash used in investing activities | ($195,343) | ($398,987) | | Net cash provided by financing activities | $1,110,116 | $15,948,567 | | Net change in cash and cash equivalents | ($6,044,009) | $6,465,307 | | Cash and cash equivalents – end of period | $11,637,945 | $23,975,098 | [Notes to the Condensed Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) The notes provide critical context to the financial statements, highlighting the company's clinical-stage nature, significant accounting policies, and major financial events, including details on financing activities, such as the ATM agreement and a CIRM grant, license agreements with ongoing payment obligations, and a 'going concern' warning due to recurring losses and insufficient capital to fund operations for the next twelve months - The company is a clinical-stage biopharmaceutical firm focused on developing cell therapies for AL Amyloidosis and other diseases[25](index=25&type=chunk) - Management has concluded there is substantial doubt about the Company's ability to continue as a going concern, as it does not have sufficient capital to sustain operations for at least the next twelve months from the filing date[39](index=39&type=chunk) - In June 2025, the company initiated an At The Market (ATM) offering agreement to sell up to **$50 million** of its common stock, and as of June 30, 2025, it had raised net proceeds of **$1.1 million** under this agreement[38](index=38&type=chunk) - The company was awarded an **$8 million** grant from CIRM in July 2024 and has received **$3.6 million** in reimbursements as of June 30, 2025, with the remaining **$4.4 million** contingent on achieving milestones[37](index=37&type=chunk)[87](index=87&type=chunk) - The company has significant financial commitments under a license agreement with HADASIT and BIRAD, including quarterly payments totaling approximately **$13.0 million** due through September 2026, plus potential royalties and milestone payments[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's focus on its lead CAR-T candidate, NXC-201, for AL Amyloidosis, highlighting recent positive clinical data and regulatory designations like RMAT, with the analysis of financial results showing widening net losses due to increased R&D spending on clinical trials, and the liquidity section underscoring a 'going concern' issue, stating that current cash is insufficient for the next year and detailing plans to raise additional capital through its ATM facility and other means [Overview](index=26&type=section&id=Overview) Immix Biopharma is a clinical-stage company focused on developing its lead CAR-T cell therapy candidate, NXC-201, for AL Amyloidosis and other serious diseases, with NXC-201 having received FDA RMAT and ODD designations, and recent clinical data from ongoing trials presented at major conferences (ASH, ASCO) showing high overall and complete response rates in relapsed/refractory AL Amyloidosis patients - The company's lead candidate, NXC-201, is a CAR-T therapy for AL Amyloidosis that has received FDA Regenerative Medicine Advanced Therapy (RMAT) and Orphan Drug Designation (ODD)[106](index=106&type=chunk)[107](index=107&type=chunk) - Clinical data presented at ASCO 2025 for 10 patients showed a **70% complete response (CR) rate**, with all patients normalizing pathological disease markers and no relapses recorded[123](index=123&type=chunk) - The company is conducting two clinical trials for NXC-201 in AL Amyloidosis: the U.S.-based Phase 1b/2 NEXICART-2 and the ex-U.S. Phase 1b/2a NEXICART-1[116](index=116&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Comparing the periods ended June 30, 2025, and 2024, the company's net loss increased for both the three-month and six-month periods, primarily driven by a significant rise in Research and Development expenses, which grew from **$2.2 million** to **$4.0 million** for the second quarter, due to costs associated with the ongoing CAR-T clinical trials, while General and Administrative expenses also saw a moderate increase Comparison of Operating Expenses (Three Months Ended June 30) | Expense Category | 2025 (USD) | 2024 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | General and administrative | $2,745,247 | $2,478,357 | +$266,890 | | Research and development | $3,972,458 | $2,224,139 | +$1,748,319 | - The increase in R&D expense was primarily driven by costs for the ongoing Phase 1b/2a CAR-T clinical trial, including patient treatment, site onboarding, and license fees[136](index=136&type=chunk) - Net loss for Q2 2025 was **$6.6 million**, compared to **$4.4 million** in Q2 2024, mainly due to the increase in R&D expenses[139](index=139&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had **$11.6 million** in cash and cash equivalents, but management states these funds are not sufficient to support planned operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern, with the company relying on its June 2025 ATM agreement, which allows for sales of up to **$50 million** in stock, and remaining CIRM grant funds to finance future operations, though additional capital will be necessary - The company had approximately **$11.6 million** in cash and cash equivalents as of June 30, 2025[152](index=152&type=chunk) - Management believes that current cash and cash equivalents will not be sufficient to fund planned operations over the next twelve months, and there is substantial doubt about the company's ability to continue as a going concern[152](index=152&type=chunk)[176](index=176&type=chunk) - The company is funding operations through its June 2025 ATM agreement (raised **$2.4 million** as of Aug 6, 2025), and an **$8 million** CIRM grant (**$4.4 million** remaining to be disbursed upon milestone achievement)[150](index=150&type=chunk)[151](index=151&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is a "smaller reporting company" as defined by the Exchange Act and is therefore not required to provide the information for this item - As a 'smaller reporting company,' the company is not required to provide quantitative and qualitative disclosures about market risk[166](index=166&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were not effective due to a previously identified material weakness in internal control over financial reporting, stemming from the company's small size and lack of adequate segregation of duties, with a remediation plan ongoing - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025[167](index=167&type=chunk) - The ineffectiveness is due to a material weakness in internal control over financial reporting related to the company's small size and limited personnel, which prevents adequate segregation of duties[168](index=168&type=chunk) - The company is working to remediate the material weakness by establishing additional points of segregation of duties and upgrading IT controls[170](index=170&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently aware of any pending legal proceedings that would have a material adverse effect on its business, financial condition, or operating results - The company is not currently a party to any material legal proceedings[174](index=174&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company states there have been no material changes to its risk factors from its 2024 Annual Report, with the exception of highlighting the risk related to its ability to continue as a 'going concern', which arises from recurring losses and the need to raise additional capital to fund future operations - The company's ability to continue as a going concern is identified as a key risk, as existing cash is not expected to fund operations into the third quarter of 2026, creating substantial doubt about its viability within one year[176](index=176&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the six months ended June 30, 2025, the company issued a total of **183,531 shares** of restricted common stock, valued at a combined **$0.3 million**, for investor relations services under various marketing agreements, with these issuances exempt from registration under the Securities Act - The company issued shares of restricted common stock for investor relations services in three separate transactions during the first six months of 2025[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) [Other Information](index=37&type=section&id=Item%205.%20Other%20Information) During the quarter ended June 30, 2025, none of the company's directors or officers adopted or terminated any Rule 10b5-1 trading plans for the purchase or sale of company securities - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2025[183](index=183&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the At The Market Offering Agreement, officer certifications (pursuant to Sarbanes-Oxley Act Sections 302 and 906), and Inline XBRL data files - Exhibits filed include the At The Market Offering Agreement with Citizens JMP Securities, LLC, and required certifications by the Principal Executive Officer and Principal Financial Officer[185](index=185&type=chunk)

[PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Financial Statements](index=5&type=section&id=Item%201%20Financial%20Statements) This section presents MPT's unaudited condensed consolidated financial statements for Q2 and H1 2025, detailing financial position, performance, and cash flows, alongside notes on tenant bankruptcies, debt, and asset sales MPT Inc. Financial Position Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $15,150,428 | $14,294,594 | +$855,834 | | Debt, net | $9,649,035 | $8,848,112 | +$800,923 | | Total Equity | $4,833,810 | $4,833,783 | +$27 | MPT Inc. Statement of Net Income Summary (in thousands) | Period | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $240,359 | $266,560 | $464,158 | $537,876 | | Net Loss Attributable to MPT | $(98,357) | $(320,635) | $(216,632) | $(1,196,260) | | Diluted EPS | $(0.16) | $(0.54) | $(0.36) | $(1.99) | MPT Inc. Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $52,131 | $109,601 | | Net Cash (used for)/provided by Investing Activities | $(161,734) | $1,082,853 | | Net Cash provided by/(used for) Financing Activities | $271,523 | $(831,442) | [Note 3: Real Estate and Other Activities](index=19&type=section&id=Note%203.%20Real%20Estate%20and%20Other%20Activities) This note details significant operational events, including financial impacts from Steward and Prospect bankruptcies, asset sales like the $1.2 billion Utah hospital portfolio, and increased credit loss reserves - Steward Health Care System filed for Chapter 11 bankruptcy, leading to a global settlement where MPT terminated its master lease, gained control of **23 properties** for re-tenanting, and released its claims. MPT had already recorded significant impairment charges in 2024 related to its Steward investments[64](index=64&type=chunk)[66](index=66&type=chunk) - Prospect Medical Holdings filed for Chapter 11 bankruptcy in January 2025. MPT recorded over **$400 million** in impairment charges in Q4 2024 and additional charges in 2025. The ultimate recovery of the remaining **~$660 million** investment is uncertain[72](index=72&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) - In April 2024, MPT sold its interest in five Utah hospitals in a joint venture transaction valued at **$1.2 billion**, recognizing a gain of approximately **$380 million** and generating **$1.1 billion** in cash[51](index=51&type=chunk) Credit Loss Reserve Activity (in thousands) | Period | Beginning Balance | Provision for Credit Loss, net | Ending Balance | | :--- | :--- | :--- | :--- | | **H1 2025** | $511,473 | $53,323 | $564,796 | | **H1 2024** | $96,001 | $442,533 | $538,534 | [Note 4: Debt](index=32&type=section&id=Note%204.%20Debt) This note details MPT's debt, which increased to $9.8 billion by June 2025, highlighting the February 2025 refinancing of $1.5 billion USD and €1.0 billion Euro secured notes, and the amendment of its credit facility - In February 2025, MPT issued **$1.5 billion** in USD Senior Secured Notes at **8.500%** and **€1.0 billion** in Euro Senior Secured Notes at **7.000%**, both maturing in 2032[105](index=105&type=chunk) - Net proceeds from the new notes were used to redeem senior unsecured notes due in 2025 and 2026, and to pay down the revolving credit facility[106](index=106&type=chunk) - The company's credit facility was amended to be secured, with the interest rate reset to **SOFR + 225 bps** and maturity extended to 2027[103](index=103&type=chunk) [Note 9: Contingencies](index=42&type=section&id=Note%209.%20Contingencies) This note details MPT's involvement in federal securities class action and shareholder derivative lawsuits concerning disclosures about tenant financial health, particularly Steward and Prospect, with the company believing claims are without merit - MPT and its executives are defendants in federal securities class action lawsuits in Alabama and New York concerning disclosures about tenant financial health (Steward and Prospect)[134](index=134&type=chunk)[136](index=136&type=chunk) - Related shareholder derivative lawsuits have also been filed. Most cases have been stayed pending developments in the primary securities lawsuits[135](index=135&type=chunk)[137](index=137&type=chunk) - The company believes the claims are without merit but cannot predict the outcome or potential financial impact[138](index=138&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant decrease in H1 2025 net loss due to lower impairment charges, a 42% decline in Q2 NFFO from asset sales and higher interest, and outlines liquidity strategies including asset sales and dividend management [Results of Operations](index=51&type=section&id=Results%20of%20Operations) Q2 2025 total revenues decreased 9.8% to $240.4 million due to lower financing lease income and asset sales, while interest expense rose; H1 2025 net loss significantly improved due to lower impairment charges Revenue Comparison - Q2 2025 vs Q2 2024 (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Rent billed | $177,860 | $183,764 | (3.2)% | | Income from financing leases | $9,923 | $27,641 | (64.1)% | | **Total revenues** | **$240,359** | **$266,560** | **(9.8)%** | - The decrease in net loss for H1 2025 was primarily driven by significantly lower impairment charges (**$77.5 million** in H1 2025 vs. **$830.5 million** in H1 2024)[172](index=172&type=chunk)[180](index=180&type=chunk) - Interest expense increased in Q2 and H1 2025 due to debt refinancing activities in February 2025 at higher interest rates. The weighted-average interest rate was **5.3%** in Q2 2025, up from **4.1%** in Q2 2024[156](index=156&type=chunk)[175](index=175&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=60&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP Net Loss to FFO and NFFO, showing Q2 2025 NFFO at $81.4 million ($0.14 per share), a 42% decrease from Q2 2024, primarily due to lower revenues and higher interest costs FFO and Normalized FFO Reconciliation (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to MPT | $(98,357) | $(320,635) | $(216,632) | $(1,196,260) | | Funds from operations (FFO) | $(40,176) | $(89,550) | $(24,053) | $(869,509) | | **Normalized FFO (NFFO)** | **$81,362** | **$139,367** | **$162,464** | **$281,152** | | **NFFO per diluted share** | **$0.14** | **$0.23** | **$0.27** | **$0.47** | - The **42%** decrease in quarterly Normalized FFO is primarily attributed to lower revenues from property disposals and higher interest expense following recent refinancing activities[153](index=153&type=chunk)[172](index=172&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) MPT's liquidity strategy leverages operating cash flow and asset sales, with total liquidity at $1.2 billion as of August 2025, supported by recent debt refinancing and a new S-3 shelf registration for future capital access - As of August 5, 2025, the company has liquidity of **$1.2 billion**, including cash on hand and availability under its **$1.28 billion** revolving credit facility[199](index=199&type=chunk) - On June 2, 2025, MPT filed a new shelf registration statement on Form S-3, regaining the ability to raise capital in the public markets[192](index=192&type=chunk)[207](index=207&type=chunk) - The quarterly dividend was reduced to **$0.08 per share** in August 2024 to preserve liquidity[206](index=206&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) MPT's primary market risks are interest rate and foreign currency fluctuations, with most debt fixed-rate; a 10% variable rate increase would raise interest expense by $5.1 million, and a 10% currency change would impact net loss by $1.9 million - At June 30, 2025, the company had **$9.8 billion** in total debt, of which **$0.8 billion** was variable rate[211](index=211&type=chunk) - A **10%** increase in variable interest rates would result in a **$5.1 million** annual increase in interest expense[212](index=212&type=chunk) - A **10%** adverse change in foreign currency exchange rates would impact net loss by approximately **$1.9 million**[213](index=213&type=chunk) [Controls and Procedures](index=67&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 June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective in providing reasonable assurance for timely and accurate reporting[215](index=215&type=chunk) - No material changes were made to the internal control over financial reporting during the most recent fiscal quarter[216](index=216&type=chunk) [PART II — OTHER INFORMATION](index=70&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=70&type=section&id=Item%201%20Legal%20Proceedings) The company is involved in various lawsuits, including securities class action and shareholder derivative suits related to tenant financial health disclosures, which management believes are without merit - The company is party to various lawsuits as described in Note 9, 'Contingencies'[219](index=219&type=chunk) - Management believes the resolution of pending legal matters will not have a material adverse effect, but acknowledges the inherent uncertainty of litigation[220](index=220&type=chunk) [Risk Factors](index=70&type=section&id=Item%201A%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes to the Risk Factors presented in the 2024 Form 10-K have occurred[221](index=221&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, the company repurchased **87,000** common shares at **$5.24** each to satisfy employee tax withholding obligations from restricted stock awards, not as part of a public buyback program Common Stock Repurchases - Q2 2025 | Period | Total Shares Purchased (thousands) | Average Price per Share | | :--- | :--- | :--- | | April 1-April 30, 2025 | 87 | $5.24 | - The shares were purchased from employees to satisfy tax withholding obligations from vesting of restricted stock awards[222](index=222&type=chunk) [Other Information](index=70&type=section&id=Item%205%20Other%20Information) No company directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading plan during the three months ended June 30, 2025[225](index=225&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section presents Cathay General Bancorp's unaudited consolidated financial statements, including balance sheets, income statements, equity changes, and cash flows, with notes on accounting policies [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $23.72 billion from $23.05 billion at year-end 2024, driven by growth in loans, with total liabilities rising to $20.84 billion and total stockholders' equity increasing to $2.89 billion Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$23,723,847** | **$23,054,681** | | Loans held for investment, net | $19,597,337 | $19,203,649 | | Securities available-for-sale | $1,648,433 | $1,547,128 | | **Total Liabilities** | **$20,837,552** | **$20,208,977** | | Total deposits | $20,006,330 | $19,686,199 | | Advances from FHLB | $412,000 | $60,000 | | **Total Stockholders' Equity** | **$2,886,295** | **$2,845,704** | [Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Net income for Q2 2025 rose to $77.5 million ($1.10 diluted EPS) from $66.8 million in Q2 2024, driven by higher net interest income and lower non-interest expense, with six-month net income reaching $147.0 million Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $181,221 | $165,316 | | Provision for Credit Losses | $11,200 | $6,600 | | Non-Interest Income | $15,391 | $13,215 | | Non-Interest Expense | $89,134 | $99,352 | | **Net Income** | **$77,450** | **$66,829** | | **Diluted EPS** | **$1.10** | **$0.92** | Six Months 2025 vs 2024 Performance (in thousands, except per share data) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net Interest Income | $357,860 | $333,888 | | Provision for Credit Losses | $26,700 | $8,500 | | Non-Interest Income | $26,595 | $19,826 | | Non-Interest Expense | $174,790 | $192,591 | | **Net Income** | **$146,956** | **$138,264** | | **Diluted EPS** | **$2.09** | **$1.90** | [Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased to $2.89 billion by June 30, 2025, from $2.85 billion at year-end 2024, primarily due to net income and other comprehensive income, partially offset by treasury stock purchases and cash dividends Reconciliation of Stockholders' Equity (Six Months Ended June 30, 2025, in thousands) | Description | Amount | | :--- | :--- | | Balance at Dec 31, 2024 | $2,845,704 | | Net Income | $146,956 | | Other Comprehensive Income | $16,385 | | Purchases of Treasury Stock | $(77,338) | | Cash Dividends | $(47,701) | | Other (Stock Comp, DRIP, etc.) | $(2,001) | | **Balance at June 30, 2025** | **$2,886,295** | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $162.9 million for the first half of 2025, while investing activities used $501.1 million and financing activities provided $545.6 million, resulting in a $207.5 million net increase in cash and cash equivalents Cash Flow Summary (Six Months Ended June 30, 2025, in thousands) | Activity | Amount | | :--- | :--- | | Net Cash from Operating Activities | $162,911 | | Net Cash from Investing Activities | $(501,088) | | Net Cash from Financing Activities | $545,632 | | **Net Increase in Cash** | **$207,455** | [Notes to Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures supporting the primary financial statements, covering business operations, accounting policies, investment securities, loan portfolio, credit losses, borrowed funds, fair value, derivatives, and equity activities [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=50&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition and results for Q2 and H1 2025, analyzing net interest income, credit losses, non-interest items, and balance sheet components including loans, non-performing assets, deposits, capital, and liquidity, alongside critical accounting policies like CECL [Highlights](index=51&type=section&id=Highlights) The company reported strong Q2 2025 performance with net income of $77.5 million ($1.10 diluted EPS), a 16.0% increase year-over-year, alongside an improved net interest margin, and growth in total loans and deposits Q2 2025 Key Performance Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (millions) | $77.5 | $66.8 | | Diluted EPS | $1.10 | $0.92 | | Return on Average Assets | 1.33% | 1.15% | | Return on Average Equity | 10.72% | 9.63% | | Efficiency Ratio | 45.34% | 55.65% | - Net interest margin expanded to **3.27%** in Q2 2025 from 3.01% in Q2 2024[171](index=171&type=chunk) - Total loans grew **2.11%** to **$19.78 billion** and total deposits grew **1.6%** to **$20.01 billion** since December 31, 2024[171](index=171&type=chunk) [Quarterly Statement of Operations Review](index=51&type=section&id=Quarterly%20Statement%20of%20Operations%20Review) Q2 2025 net interest income increased 9.6% year-over-year to $181.2 million due to lower cost of funds, while provision for credit losses rose, non-interest income increased, and non-interest expense decreased primarily from reduced amortization of tax credit investments - The increase in net interest income was primarily due to a decrease in interest expense from deposits, which more than offset a decrease in interest income from loans and securities[168](index=168&type=chunk) - The provision for credit losses increased to **$11.2 million** in Q2 2025 from $6.6 million in Q2 2024[175](index=175&type=chunk) - Non-interest expense decreased mainly due to a **$12.2 million** reduction in amortization expense from investments in low-income housing and alternative energy partnerships[179](index=179&type=chunk) [Balance Sheet Review](index=57&type=section&id=Balance%20Sheet%20Review) The balance sheet review details changes from year-end 2024 to June 30, 2025, showing total asset growth to $23.72 billion driven by a 2.1% increase in gross loans to $19.78 billion, stable non-performing assets, 1.6% deposit growth, and an increased allowance for credit losses [Loans](index=59&type=section&id=Loans) Gross loans held for investment increased by **$408.7 million** (2.1%) to **$19.78 billion** by June 30, 2025, primarily driven by commercial real estate and commercial loans, with commercial real estate comprising **52.4%** of the portfolio Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2025 | Dec 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Commercial loans | $3,194,724 | $3,098,004 | 3.1% | | Construction loans | $301,125 | $319,649 | (5.8)% | | Commercial real estate loans | $10,363,109 | $10,033,830 | 3.3% | | Residential mortgage & equity lines | $5,922,143 | $5,919,092 | 0.1% | | **Gross loans held for investment** | **$19,784,702** | **$19,375,955** | **2.1%** | [Non-performing Assets](index=59&type=section&id=Non-performing%20Assets) Total non-performing assets increased slightly to **$199.5 million** by June 30, 2025, maintaining a stable 0.84% ratio to total assets, with non-accrual loans rising to **$174.2 million** primarily due to commercial real estate Non-Performing Assets (in thousands) | Category | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Accruing loans past due 90+ days | $6,389 | $4,050 | | Non-accrual loans | $174,153 | $169,161 | | Other real estate owned (OREO) | $18,990 | $23,071 | | **Total Non-Performing Assets** | **$199,532** | **$196,282** | | **NPA / Total Assets** | **0.84%** | **0.85%** | [Allowance for Credit Losses](index=66&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses increased to **$183.4 million** by June 30, 2025, representing **0.93%** of gross loans, driven by a **$26.7 million** provision, with the CECL methodology incorporating an 8-quarter forecast period sensitive to macroeconomic factors like unemployment Allowance for Credit Losses Ratios | Ratio | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | ACL to Gross Loans | 0.93% | 0.88% | | ACL to Non-Performing Loans | 101.60% | 98.98% | - The CECL model uses a blended scenario approach with an 8-quarter reasonable and supportable forecast period and a 4-quarter reversion period. The baseline scenario projects unemployment peaking at **4.8%** in Q4 2026, while the downside scenario contemplates a recession with unemployment peaking at **8.3%**[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - A sensitivity analysis indicates that applying a 100% weighting to the downside scenario would have increased the ACL by approximately **$111.9 million** as of June 30, 2025[235](index=235&type=chunk) [Deposits](index=72&type=section&id=Deposits) Total deposits increased by **$320.1 million** (1.6%) to **$20.01 billion** by June 30, 2025, maintaining a stable mix with time deposits at **48.5%**, and available liquidity sources exceeding the **$9.48 billion** in uninsured deposits Deposit Composition (in thousands) | Deposit Type | June 30, 2025 | % of Total | | :--- | :--- | :--- | | Non-interest-bearing | $3,381,407 | 16.9% | | Interest-bearing | $16,624,923 | 83.1% | | *Time deposits* | *$9,702,651* | *48.5%* | | **Total Deposits** | **$20,006,330** | **100.0%** | - Total uninsured deposits were **$9.48 billion**. Excluding **$824.0 million** in collateralized deposits, uninsured and uncollateralized deposits were **$8.66 billion**, representing **43.3%** of total deposits[244](index=244&type=chunk) - The company has recognized **$13.3 million** cumulatively as of June 30, 2025, related to the FDIC special assessment to recover losses from the Deposit Insurance Fund (DIF)[246](index=246&type=chunk) [Capital Resources](index=74&type=section&id=Capital%20Resources) Total equity increased to **$2.89 billion** in H1 2025, with the company remaining well-capitalized as evidenced by a **13.35%** CET1 ratio and **14.92%** Total Capital ratio, while maintaining a **$0.34** quarterly cash dividend per share Bancorp Capital Ratios | Ratio | June 30, 2025 | Required (incl. buffer) | | :--- | :--- | :--- | | CET1 Capital Ratio | 13.35% | 7.00% | | Tier 1 Capital Ratio | 13.35% | 8.50% | | Total Capital Ratio | 14.92% | 10.50% | | Leverage Ratio | 11.09% | 4.00% | - The company declared a cash dividend of **$0.34** per share in Q2 2025, continuing the rate set in Q4 2021[256](index=256&type=chunk)[258](index=258&type=chunk) [Liquidity](index=78&type=section&id=Liquidity) The company maintains a strong liquidity position, with principal sources including deposit growth, securities cash flows, and FHLB advances, holding an **$8.12 billion** approved FHLB credit line with **$7.00 billion** unused capacity, deemed adequate for the next twelve months - The average monthly liquidity ratio was **13.9%** as of June 30, 2025[259](index=259&type=chunk) - At June 30, 2025, the Bank had an approved FHLB credit line of **$8.12 billion**, with **$412.0 million** in advances outstanding and **$930.0 million** in standby letters of credit issued[260](index=260&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company manages interest rate risk using a net interest income simulation model, projecting that a +200 basis point shock would increase NII by **13.0%** and decrease market value of equity by **8.4%**, while a -200 basis point shock would decrease NII by **4.2%** and increase market value of equity by **5.2%** Interest Rate Sensitivity Analysis (as of June 30, 2025) | Change in Interest Rate (bps) | % Change in Net Interest Income (12 mo.) | % Change in Market Value of Equity | | :--- | :--- | :--- | | +200 | 13.0% | -8.4% | | +100 | 6.5% | -3.7% | | -100 | -2.3% | 3.2% | | -200 | -4.2% | 5.2% | - The company has established policy tolerance levels to limit NII volatility to **+/- 5%** and the loss in net economic value to zero for a **+/- 200 basis point** rate shock[266](index=266&type=chunk) [Controls and Procedures](index=80&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of Q2 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures are effective as of the end of the period covered by the report[270](index=270&type=chunk) - No changes in internal control over financial reporting occurred during Q2 2025 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[271](index=271&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=80&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) The company is involved in ordinary course litigation, but management believes any resulting liability would not materially adversely impact its financial condition, results of operations, or liquidity - Management believes that the outcomes of current legal proceedings are not expected to have a material adverse impact on the Company's consolidated financial condition[273](index=273&type=chunk) [Risk Factors](index=80&type=section&id=Item%201A.%20RISK%20FACTORS) The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the risk factors disclosed in the Company's 2024 Form 10-K[274](index=274&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=80&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased **804,179** shares in June 2025 at an average price of **$44.22** as part of a new **$150.0 million** stock repurchase program, with approximately **$114.4 million** remaining available as of June 30, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Value Remaining in Program | | :--- | :--- | :--- | :--- | | April 2025 | 0 | $0.00 | - | | May 2025 | 0 | $0.00 | - | | June 2025 | 804,179 | $44.22 | $114,438,105 | - A new stock repurchase program of up to **$150.0 million** was announced on June 4, 2025, after the completion of the previous **$125.0 million** program[159](index=159&type=chunk) [Other Information](index=81&type=section&id=Item%205.%20OTHER%20INFORMATION) President and CEO Chang M. Liu entered into a Rule 10b5-1 trading agreement on May 1, 2025, for the sale of vested net shares to cover estimated tax liabilities from equity compensation - President and CEO Chang M. Liu entered into a Rule 10b5-1 trading agreement on May 1, 2025, to sell shares to cover tax liabilities associated with equity awards[280](index=280&type=chunk) [Exhibits](index=81&type=section&id=Item%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - Exhibits filed include CEO and CFO certifications (Rule 302 and 906) and Inline XBRL documents[281](index=281&type=chunk)[282](index=282&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited condensed consolidated financial statements as of June 30, 2025, show decreased total assets and equity, a narrowed net loss, and a shift to net cash outflow from operations, with increased Payor revenue Condensed Consolidated Balance Sheets Summary (Thousands of USD) | Assets/Liabilities | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and Cash Equivalents | $54,342 | $76,692 | | Marketable Securities | $48,427 | $41,118 | | Total Current Assets | $120,667 | $130,182 | | **Total Assets** | **$132,786** | **$138,677** | | **Liabilities and Stockholders' Equity** | | | | Total Current Liabilities | $18,540 | $19,023 | | **Total Liabilities** | **$19,845** | **$21,282** | | **Total Stockholders' Equity** | **$112,941** | **$117,395** | Condensed Consolidated Statements of Operations Summary (Thousands of USD) | Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $54,310 | $46,058 | $106,492 | $91,474 | | Operating Loss | $(1,790) | $(3,486) | $(2,875) | $(5,165) | | Net Loss | $(541) | $(474) | $(223) | $(1,940) | | Net Loss Per Share | $(0.00) | $(0.00) | $(0.00) | $(0.01) | Condensed Consolidated Statements of Cash Flows Summary (Thousands of USD) | Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Cash (Used in)/Provided by Operating Activities | $(1,590) | $1,418 | | Net Cash Used in Investing Activities | $(11,386) | $(2,150) | | Net Cash Used in Financing Activities | $(9,374) | $(8,263) | | Net Decrease in Cash and Cash Equivalents | $(22,350) | $(8,995) | Revenue by Source (Thousands of USD) | Revenue Source | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Payor | $40,501 | $29,945 | $78,343 | $58,453 | | Direct-to-Enterprise (DTE) | $9,403 | $9,628 | $18,986 | $19,541 | | Consumer | $4,406 | $6,485 | $9,163 | $13,480 | | **Total Revenue** | **$54,310** | **$46,058** | **$106,492** | **$91,474** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights a strategic shift to Payor business, driving significant revenue growth and improved profitability, with Adjusted EBITDA more than doubling, alongside active share repurchases - The company strategically shifted its marketing focus to attract Payor members, resulting in significant Payor revenue growth and a corresponding decrease in Consumer revenue[95](index=95&type=chunk)[96](index=96&type=chunk) Key Business Metrics | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Payor Completed Sessions (Thousands) | 735.1 | 582.8 | | Health Plan Clients (Period End) | 31 | 24 | | Enterprise Clients (Period End) | 165 | 187 | | Active Consumer Members (Thousands, Period End) | 6.6 | 10.7 | Summary of Operating Results and Year-over-Year Changes (Thousands of USD) | Item | H1 2025 | H1 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$106,492** | **$91,474** | **$15,018** | **16.4%** | | Payor Revenue | $78,343 | $58,453 | $19,890 | 34.0% | | Consumer Revenue | $9,163 | $13,480 | $(4,317) | (32.0)% | | Total Costs and Operating Expenses | $109,367 | $96,639 | $12,728 | 13.2% | | Operating Loss | $(2,875) | $(5,165) | $2,290 | 44.3% | | Net Loss | $(223) | $(1,940) | $1,717 | 88.5% | Reconciliation of Adjusted EBITDA to Net Loss (Thousands of USD) | Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Loss | $(223) | $(1,940) | | Add: Depreciation and Amortization | 1,368 | 421 | | Add: Stock-Based Compensation Expense | 4,688 | 5,359 | | Add: Net Interest Income | (2,851) | (3,422) | | Add: Income Tax Expense | 199 | 197 | | Add: Non-Recurring Expenses | 1,057 | 1,338 | | **Adjusted EBITDA** | **$4,238** | **$1,953** | - The company expanded its share repurchase program on August 1, 2024, increasing the total authorized repurchase amount to **$40 million**[114](index=114&type=chunk) - As of June 30, 2025, **$20.6 million** remained available for repurchase under the plan[115](index=115&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risk disclosures for the six months ended June 30, 2025, compared to its 2024 Annual Report on Form 10-K - Market risk information has not materially changed compared to the 2024 fiscal year annual report[136](index=136&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting during Q2 2025 - Management assessed that the company's disclosure controls and procedures were effective as of June 30, 2025[137](index=137&type=chunk) - No material changes occurred in internal control over financial reporting during Q2 2025[138](index=138&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the company has no material pending legal proceedings - As of June 30, 2025, the company has no material pending legal proceedings, claims, or litigation[141](index=141&type=chunk)[49](index=49&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred in the company's risk factors for the six months ended June 30, 2025, compared to the 2024 Annual Report on Form 10-K - Risk factors have not materially changed compared to those discussed in the 2024 10-K report[142](index=142&type=chunk) [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 the company's share repurchase activities for the three months ended June 30, 2025, including the repurchase of 541,268 shares in April 2025 Summary of Share Repurchases for Q2 2025 | Period | Total Shares Repurchased | Average Price Paid | Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Plan (Thousands of USD) | | :--- | :--- | :--- | :--- | | April 1 - 30 | 541,268 | $2.62 | $20,632 | | May 1 - 31 | — | — | — | | June 1 - 30 | — | — | — | | **Total** | **541,268** | | | [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities occurred[145](index=145&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[146](index=146&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted, modified, or terminated 10b5-1 trading arrangements during Q2 2025[147](index=147&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the 10-Q report, including executive certifications and XBRL data files - Report exhibits include certifications by the Chief Executive Officer and Chief Financial Officer under Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350, along with Inline XBRL documents[150](index=150&type=chunk)

PART I [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited H1 2025 financial statements show increased revenue, reduced net loss, and decreased cash from investing and financing activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $132.8 million by June 30, 2025, driven by reduced cash, with liabilities and equity also declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $54,342 | $76,692 | | Marketable securities | $48,427 | $41,118 | | Accounts receivable, net | $15,422 | $9,643 | | Total current assets | $120,667 | $130,182 | | **Total assets** | **$132,786** | **$138,677** | | **Liabilities & Equity** | | | | Total current liabilities | $18,540 | $19,023 | | **Total liabilities** | **$19,845** | **$21,282** | | **Total stockholders' equity** | **$112,941** | **$117,395** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported increased revenue for Q2 and H1 2025, alongside a significantly reduced net loss for the six-month period Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $54,310 | $46,058 | $106,492 | $91,474 | | Loss from operations | $(1,790) | $(3,486) | $(2,875) | $(5,165) | | Net loss | $(541) | $(474) | $(223) | $(1,940) | | Net loss per share (Basic & Diluted) | $(0.00) | $(0.00) | $(0.00) | $(0.01) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 saw net cash used in operating activities, increased usage in investing and financing, resulting in a $22.4 million net decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,590) | $1,418 | | Net cash used in investing activities | $(11,386) | $(2,150) | | Net cash used in financing activities | $(9,374) | $(8,263) | | **Net decrease in cash and cash equivalents** | **$(22,350)** | **$(8,995)** | | **Cash and cash equivalents at end of period** | **$54,342** | **$114,913** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business operations, revenue sources by channel (Payor, DTE, Consumer), capital management including share repurchases, and consolidation of VIEs - The company operates as a **single reportable segment**, providing **virtual behavioral healthcare services**. The CEO, as the chief operating decision maker, reviews consolidated results to assess performance and allocate resources[30](index=30&type=chunk)[31](index=31&type=chunk) Revenue by Source for Six Months Ended June 30 (in thousands) | Revenue Source | 2025 | 2024 | | :--- | :--- | :--- | | Payor | $78,343 | $58,453 | | DTE | $18,986 | $19,541 | | Consumer | $9,163 | $13,480 | | **Total revenue** | **$106,492** | **$91,474** | - The Board of Directors authorized a share repurchase program, initially for **$15.0 million** and later increased by an additional **$25.0 million**. In the first six months of 2025, the company repurchased **3,060,438 shares** for **$8.4 million**[53](index=53&type=chunk)[54](index=54&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes H1 2025 revenue growth to the Payor segment, leading to a narrowed operating loss and improved Adjusted EBITDA, while maintaining strong liquidity Key Business Metrics | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Number of completed Payor sessions (thousands) | 735.1 | 582.8 | | Number of health plan customers | 31 | 24 | | Number of enterprise customers | 165 | 187 | | Number of Consumer active members (thousands) | 6.6 | 10.7 | - The increase in revenue for the first six months of 2025 was primarily due to a **$19.8 million (34.0%)** increase in Payor revenue, driven by more completed sessions. This was partially offset by a **$4.3 million (32.0%)** decrease in Consumer revenue, reflecting a strategic shift in marketing focus towards Payor members[96](index=96&type=chunk) - General and administrative expenses decreased by **$1.6 million (12.8%)** for the six months ended June 30, 2025, mainly due to lower severance payments compared to 2024 when certain key executives departed[101](index=101&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Line Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net loss | $(223) | $(1,940) | | Depreciation and amortization | 1,368 | 421 | | Stock-based compensation | 4,688 | 5,359 | | Financial income, net | (2,851) | (3,422) | | Income tax expense | 199 | 197 | | Non-recurring expenses | 1,057 | 1,338 | | **Adjusted EBITDA** | **$4,238** | **$1,953** | [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in market risk disclosures during the six months ended June 30, 2025, compared to the prior annual report - There were **no material changes** to the information regarding quantitative and qualitative disclosures about market risk during the six months ended June 30, 2025[136](index=136&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[137](index=137&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the second quarter of 2025[138](index=138&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the company reports no material pending legal proceedings, consistent with financial statement notes - The Company has **no material pending legal proceedings** as of June 30, 2025[141](index=141&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2024 - During the six months ended June 30, 2025, there were **no material changes** to the risk factors detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[142](index=142&type=chunk) [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 share repurchase activity for Q2 2025, with all repurchases in April, leaving $20.6 million available under the program Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | April 1 - 30 | 541,268 | $2.62 | $20,632 | | May 1 - 31 | — | — | — | | June 1 - 30 | — | — | — | | **Total** | **541,268** | **$2.62** | **$20,632** | [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[145](index=145&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[146](index=146&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - **No directors or officers adopted, modified, or terminated** a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[147](index=147&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) The report includes various exhibits, notably CEO and CFO certifications and Inline XBRL data files - Exhibits filed with the report include **CEO and CFO certifications** (31.1, 31.2, 32.1, 32.2) and **Inline XBRL documents** (101.INS, 101.SCH, 104)[150](index=150&type=chunk)

Part I. Financial Information [Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed financial statements for the period ended June 30, 2025, reflect the company's financial position as a special purpose acquisition company (SPAC) following its Initial Public Offering (IPO) Key activities include the company's formation, the IPO in May 2025 which raised $253 million in gross proceeds, and the placement of these funds into a trust account The company has not commenced operations and its financial activity is limited to formation costs, operating expenses, and interest income from the trust account Publicly held Class A Ordinary Shares are classified as temporary equity due to their redemption features - The company is a **special purpose acquisition company (SPAC)** incorporated on **October 9, 2024**, with the objective of effecting a business combination[24](index=24&type=chunk) - On **May 23, 2025**, the company completed its Initial Public Offering (IPO) of **25,300,000 units** at **$10.00** per unit, generating gross proceeds of **$253,000,000**[26](index=26&type=chunk) - Simultaneously with the IPO, the company sold **708,000** Private Placement Units at **$10.00** each, raising an additional **$7,080,000**[27](index=27&type=chunk) - Following the IPO, **$253,000,000** was placed into a trust account, which can only be invested in U.S. government treasury obligations or specific money market funds[30](index=30&type=chunk) [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2025, the company's balance sheet shows total assets of $255.3 million, primarily consisting of $254.0 million in investments held in the trust account Total liabilities were $9.0 million, and Class A Ordinary Shares subject to possible redemption were valued at $254.0 million, resulting in a total shareholders' deficit of $7.6 million Condensed Balance Sheet Data (Unaudited) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $1,075,364 | $0 | | Investments held in Trust Account | $253,970,067 | $0 | | **Total Assets** | **$255,300,758** | **$145,359** | | **Liabilities & Equity** | | | | Total Liabilities | $8,954,889 | $167,803 | | Class A Ordinary Shares subject to possible redemption | $253,970,067 | $0 | | Total Shareholders' Deficit | ($7,624,198) | ($22,444) | [Condensed Statements of Operations](index=9&type=section&id=Condensed%20Statements%20of%20Operations) For the three and six months ended June 30, 2025, the company reported net income of $843,353 and $818,253, respectively This income was primarily driven by $970,067 in interest earned on investments held in the trust account, offset by formation, general, and administrative costs Statement of Operations Highlights (Unaudited) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Interest earned on investments held in Trust Account | $970,067 | $970,067 | | Formation, general and administrative costs | $126,714 | $151,814 | | **Net Income** | **$843,353** | **$818,253** | | Basic and diluted net income per share, Class A | $0.04 | $0.06 | [Condensed Statements of Changes in Shareholders' Deficit](index=10&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Shareholders%27%20Deficit) The shareholders' deficit increased from $22,444 at the end of 2024 to $7.6 million as of June 30, 2025 The change was primarily due to the accretion for Class A Ordinary Shares to their redemption amount, which totaled $19.0 million, partially offset by proceeds from the sale of private placement units and net income - The accretion of Class A Ordinary Shares to their redemption value resulted in a **$19,012,872** reduction in shareholders' equity[17](index=17&type=chunk) [Condensed Statement of Cash Flows](index=11&type=section&id=Condensed%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by financing activities was $254.4 million, primarily from the IPO and private placement proceeds Net cash used in investing activities was $253.0 million for the investment of cash into the trust account Operating activities used $357,152 The company ended the period with $1,075,364 in cash Cash Flow Summary for Six Months Ended June 30, 2025 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($357,152) | | Net cash used in investing activities | ($253,000,000) | | Net cash provided by financing activities | $254,432,516 | | **Net change in cash** | **$1,075,364** | [Notes to Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial activities Key disclosures include the terms of the IPO and private placement, related-party transactions with the Sponsor, commitments such as registration rights and deferred underwriting fees, and the structure of the company's share capital The company operates as a single segment and has identified no material subsequent events requiring adjustment - The company has a **24-month period** from the IPO closing (until **May 23, 2027**) to complete an initial Business Combination[7](index=7&type=chunk)[31](index=31&type=chunk) - The Sponsor provided an IPO Promissory Note of up to **$300,000** for offering expenses, which was fully repaid at the IPO closing[77](index=77&type=chunk) - The company has an Administrative Services Agreement to pay a Sponsor affiliate **$10,000** per month for office space and administrative support[78](index=78&type=chunk) - On **July 8, 2025**, the company announced that holders of units could elect to separately trade the included Class A Ordinary Shares and Rights, commencing **July 11, 2025**[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's status as a blank check company with no current operations, focusing on its plan to effect a business combination For the six months ended June 30, 2025, the company had a net income of $818,253, derived from interest on trust account investments As of June 30, 2025, the company had $1,075,364 in cash for working capital and $254.0 million in the trust account The primary contractual obligations are a monthly administrative fee and a significant deferred underwriting fee payable upon a business combination Results of Operations Summary | Period | Net Income | Interest Income | Operating Costs | | :--- | :--- | :--- | :--- | | Three months ended June 30, 2025 | $843,353 | $970,067 | $126,714 | | Six months ended June 30, 2025 | $818,253 | $970,067 | $151,814 | - As of June 30, 2025, the company had **$1,075,364** in cash and a working capital of **$1,122,729** to fund its search for a business combination target[38](index=38&type=chunk)[121](index=121&type=chunk) - The company has a deferred underwriting discount of **$8,855,000** payable upon the completion of an initial Business Combination[126](index=126&type=chunk) - The Sponsor may provide Working Capital Loans up to **$1,500,000**, which can be converted into units at **$10.00** per unit upon a business combination[122](index=122&type=chunk) [Quantitative and Qualitative Disclosures Regarding Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20Regarding%20Market%20Risk) The company is a smaller reporting company and, as permitted, has omitted the information required under this item The primary market risk is related to interest rate fluctuations on the investments held in the Trust Account - As a smaller reporting company, the registrant is **not required** to provide the information for this item[133](index=133&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of June 30, 2025 There were no changes in the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the fiscal quarter ended June 30, 2025[135](index=135&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter[138](index=138&type=chunk) Part II. Other Information [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that there is no material litigation currently pending or contemplated against it, its officers, or its directors - To the knowledge of management, there is **no material litigation** currently pending or contemplated against the company[140](index=140&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the company is not required to include risk factors in its quarterly report It directs investors to the 'Risk Factors' section of its IPO Registration Statement for this information - The company is a smaller reporting company and is **not required** to include risk factors in the Form 10-Q[141](index=141&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the use of proceeds from the May 23, 2025 IPO and the simultaneous private placement of units The IPO generated $253 million in gross proceeds, and the private placement to the Sponsor and BTIG generated $7.08 million An aggregate of $253 million was deposited into the trust account Use of Proceeds from Offerings | Offering | Gross Proceeds | | :--- | :--- | | Initial Public Offering | $253,000,000 | | Private Placement Units | $7,080,000 | | **Total Offering Costs** | **$14,529,940** | | *Cash Underwriting Fee* | *$5,060,000* | | *Deferred Underwriting Fee* | *$8,855,000* | | *Other Offering Costs* | *$614,940* | - The private placement of **708,000 units** was conducted under the exemption from registration provided by **Section 4(a)(2)** of the Securities Act[143](index=143&type=chunk) [Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities - **None**[147](index=147&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - **Not applicable**[148](index=148&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The company confirms that none of its directors or officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - During the quarterly period, none of the company's directors or officers adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement'[149](index=149&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key legal and financial agreements such as the Underwriting Agreement, Investment Management Trust Agreement, and Registration Rights Agreement, which are incorporated by reference from a previous Form 8-K filing - The report lists key agreements filed as exhibits, including the Underwriting Agreement, Amended and Restated Memorandum and Articles of Association, and various Private Placement and service agreements[153](index=153&type=chunk)

Part I. Financial Information [Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) As a special purpose acquisition company (SPAC) that completed its IPO in May 2025, the company's financial statements reflect its pre-business combination status. As of June 30, 2025, total assets were $255.3 million, primarily consisting of $254.0 million in investments held in a trust account. Total liabilities were $9.0 million, mainly deferred underwriting fees. For the six months ended June 30, 2025, the company reported a net income of $818,253, derived entirely from interest earned on the trust account, as there were no operating revenues. The company maintains sufficient liquidity for its operational needs while searching for a business combination target [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $1,075,364 | $0 | | Investments held in Trust Account | $253,970,067 | $0 | | **Total Assets** | **$255,300,758** | **$145,359** | | **Liabilities & Equity** | | | | Total Liabilities | $8,954,889 | $167,803 | | Class A Ordinary Shares subject to possible redemption | $253,970,067 | $0 | | Total Shareholders' Deficit | ($7,624,198) | ($22,444) | [Condensed Statement of Operations](index=9&type=section&id=Condensed%20Statement%20of%20Operations) Statement of Operations Summary (Unaudited) | Period | Loss from operations | Interest earned on Trust Account | Net Income | Basic and Diluted Net Income per Share | | :--- | :--- | :--- | :--- | :--- | | **Three Months Ended June 30, 2025** | ($126,714) | $970,067 | $843,353 | $0.04 | | **Six Months Ended June 30, 2025** | ($151,814) | $970,067 | $818,253 | $0.06 | [Condensed Statements of Changes in Shareholders' Deficit](index=10&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Shareholders%27%20Deficit) - The total shareholders' deficit increased from **($22,444)** at December 31, 2024, to **($7,624,198)** at June 30, 2025. This change was primarily driven by a significant accretion for Class A Ordinary Shares to their redemption amount, partially offset by proceeds from the sale of Private Placement Units and net income[17](index=17&type=chunk) [Condensed Statement of Cash Flows](index=11&type=section&id=Condensed%20Statement%20of%20Cash%20Flows) Cash Flow Summary for the Six Months Ended June 30, 2025 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($357,152) | | Net cash used in investing activities | ($253,000,000) | | Net cash provided by financing activities | $254,432,516 | | **Net change in cash** | **$1,075,364** | | **Cash and cash equivalents, end of the period** | **$1,075,364** | [Note 1: Description of Organization and Business Operations](index=12&type=section&id=Note%201.%20DESCRIPTION%20OF%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) - Oyster Enterprises II Acquisition Corp is a special purpose acquisition company (SPAC) incorporated on October 9, 2024, to effect a business combination. As of June 30, 2025, it had not selected a target[24](index=24&type=chunk)[25](index=25&type=chunk) - On May 23, 2025, the company consummated its Initial Public Offering (IPO) of 25,300,000 units at **$10.00 per unit**, generating gross proceeds of **$253 million**. This included the full exercise of the underwriters' over-allotment option[26](index=26&type=chunk) - Simultaneously with the IPO, the company sold 708,000 Private Placement Units at **$10.00 each**, raising an additional **$7.08 million**[27](index=27&type=chunk) - Following the IPO, **$253 million** was placed in a U.S.-based trust account, which can only be invested in U.S. government treasury obligations or specific money market funds[30](index=30&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=16&type=section&id=Note%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The financial statements are prepared in accordance with U.S. GAAP for interim financial information[43](index=43&type=chunk) - The company is an "emerging growth company" and has elected to use the extended transition period for new accounting standards, which may make financial statement comparisons with other public companies difficult[45](index=45&type=chunk)[46](index=46&type=chunk) - Public Shares with redemption features are classified as temporary equity outside of the shareholders' deficit, in accordance with ASC 480-10-S99[64](index=64&type=chunk) [Note 5: Related Party Transactions](index=21&type=section&id=Note%205.%20RELATED%20PARTY%20TRANSACTIONS) - The Sponsor initially purchased 7,187,500 Founder Shares (Class B Ordinary Shares) for a capital contribution of **$25,000**. After a share capitalization, the Sponsor holds 7,906,250 Founder Shares[72](index=72&type=chunk) - The company entered into an Administrative Services Agreement with the Sponsor's affiliate for office space and administrative support at a cost of **$10,000 per month**[78](index=78&type=chunk) - The Sponsor had provided a non-interest bearing loan of up to **$300,000** for IPO expenses, of which **$239,487** was borrowed and fully repaid at the IPO closing[77](index=77&type=chunk) - The Sponsor or its affiliates may provide up to **$1.5 million** in Working Capital Loans, which can be converted into units at **$10.00 per unit** post-business combination. No such loans were outstanding as of June 30, 2025[80](index=80&type=chunk) [Note 6: Commitments](index=24&type=section&id=Note%206.%20COMMITMENTS) - The underwriters are entitled to a deferred underwriting discount of **3.5%** of the gross IPO proceeds, amounting to **$8,855,000**, payable upon completion of an initial business combination[85](index=85&type=chunk) - Holders of Founder Shares and Private Placement Units have registration rights, including up to three demand registrations and piggyback registration rights[83](index=83&type=chunk) [Note 10: Subsequent Events](index=29&type=section&id=Note%2010.%20SUBSEQUENT%20EVENTS) - On July 8, 2025, the company announced that commencing July 11, 2025, holders of its IPO units could elect to separately trade the included Class A Ordinary Shares (OYSE) and Share Rights (OYSER)[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company is a pre-business combination SPAC with no revenue-generating operations. For the six months ended June 30, 2025, it reported a net income of $818,253, primarily from interest on its Trust Account. Liquidity is strong, with $253.97 million in the Trust Account and $1.08 million in cash for operational needs. The company's primary activities involve identifying a suitable business combination target. Management confirms that current funds are sufficient for operating the business, but additional financing might be needed for a business combination - The company is a blank check company incorporated on October 9, 2024, with its activities to date limited to organizational tasks, the IPO, and searching for a business combination target[109](index=109&type=chunk)[112](index=112&type=chunk) Results of Operations (For the periods ended June 30, 2025) | Period | Net Income | Key Components | | :--- | :--- | :--- | | **Three Months** | $843,353 | $970,067 interest income offset by $126,714 operating costs | | **Six Months** | $818,253 | $970,067 interest income offset by $151,814 operating costs | - As of June 30, 2025, the company had **$1,075,364** in cash held outside the Trust Account for working capital and **$253,970,067** in marketable securities held in the Trust Account[119](index=119&type=chunk)[121](index=121&type=chunk) - The company has no off-balance sheet arrangements. Contractual obligations include a **$10,000 monthly fee** for administrative services and a deferred underwriting fee of **$8,855,000** payable upon business combination[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20Regarding%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide the information for this item - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required under this Item[133](index=133&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures as of June 30, 2025. They concluded that these controls were effective at a reasonable assurance level, ensuring that information required for SEC reports is recorded, processed, and reported in a timely manner - Based on an evaluation as of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[135](index=135&type=chunk) Part II. Other Information [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that there is no material litigation currently pending or contemplated against the company, its officers, or directors - To the knowledge of management, there is no material litigation currently pending or contemplated against the company or its officers and directors[140](index=140&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the registrant is not required to include risk factors in its Form 10-Q. The company refers to the 'Risk Factors' section of its IPO Registration Statement for relevant risk disclosures - As a smaller reporting company, risk factors are not required in this report. For relevant risks, the company refers to its IPO Registration Statement[141](index=141&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On May 23, 2025, the company completed its IPO, raising $253 million in gross proceeds. Concurrently, it sold 708,000 Private Placement Units in an unregistered sale, generating an additional $7.08 million. Of the total gross proceeds, $253 million was placed into the trust account. Total offering costs amounted to $14.53 million, including a deferred underwriting fee of $8.86 million - On May 23, 2025, the company consummated its IPO of 25,300,000 Units at **$10.00 per unit**, generating gross proceeds of **$253,000,000**[142](index=142&type=chunk) - Simultaneously, the company sold 708,000 Private Placement Units at **$10.00 per unit** to its Sponsor and BTIG, LLC, raising gross proceeds of **$7,080,000** through an unregistered sale exempt under Section 4(a)(2) of the Securities Act[143](index=143&type=chunk) - Total offering costs were **$14,529,940**, comprising a **$5,060,000** cash underwriting fee, an **$8,855,000** deferred underwriting fee, and **$614,940** of other costs[145](index=145&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The company states that during the quarterly period ended June 30, 2025, none of its directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - During the quarter ended June 30, 2025, no directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[149](index=149&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report, including the Underwriting Agreement, Amended and Restated Memorandum and Articles of Association, and various other agreements and certifications - The report includes a list of exhibits filed, such as the Underwriting Agreement, Registration Rights Agreement, and officer certifications[153](index=153&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Rayonier Inc. and Rayonier, L.P., highlighting the significant gain from the sale of New Zealand operations and its impact on financial position [Rayonier Inc. Financial Statements](index=5&type=section&id=Rayonier%20Inc.%20Financial%20Statements) Rayonier Inc.'s Q2 2025 performance was significantly boosted by a **$404.5 million** gain from the New Zealand operations sale, leading to strong net income and a strengthened balance sheet Rayonier Inc. Consolidated Statement of Income Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Sales | $106,538 | $99,639 | +6.9% | | Operating Income | $14,545 | $4,547 | +219.9% | | Gain on sale of discontinued operations | $404,463 | $0 | N/A | | Net Income Attributable to Rayonier Inc. | $408,708 | $1,903 | +21,377.0% | | Diluted EPS | $2.63 | $0.01 | +26,200.0% | Rayonier Inc. Consolidated Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $892,256 | $303,065 | +194.4% | | Total Assets | $3,514,250 | $3,474,419 | +1.1% | | Total Long-Term Debt, Net | $844,905 | $1,044,410 | -19.1% | | Total Shareholders' Equity | $2,302,217 | $1,780,533 | +29.3% | Rayonier Inc. Consolidated Statement of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $88,687 | $107,627 | -17.6% | | Net cash provided by (used for) investing activities | $658,265 | ($47,445) | N/A | | Net cash used for financing activities | ($198,609) | ($125,078) | +58.8% | - The significant increase in cash from investing activities was driven by **$687.6 million** in net proceeds from the sale of discontinued operations (the New Zealand joint venture)[27](index=27&type=chunk) [Rayonier, L.P. Financial Statements](index=12&type=section&id=Rayonier%2C%20L.P.%20Financial%20Statements) Rayonier, L.P.'s financial statements largely mirror Rayonier Inc.'s due to consolidation, reflecting the same operational results and the significant gain from the New Zealand divestiture, with differences primarily in capital structure - The Operating Partnership's Consolidated Statements of Income and Cash Flows are substantively identical to Rayonier Inc.'s, as Rayonier Inc. operates as an UPREIT and consolidates Rayonier, L.P. for financial reporting[10](index=10&type=chunk)[35](index=35&type=chunk)[45](index=45&type=chunk) Rayonier, L.P. Net Income Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Sales | $106,538 | $99,639 | | Operating Income | $14,545 | $4,547 | | Net Income | $413,607 | $3,035 | | Net Income Attributable to Rayonier, L.P. Unitholders | $414,184 | $1,929 | Rayonier, L.P. Capital Structure (as of June 30, 2025) | Capital Component | June 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | | :--- | :--- | :--- | | Redeemable Operating Partnership Units | $53,353 | $51,843 | | General partners' capital | $22,690 | $17,772 | | Limited partners' capital | $2,246,297 | $1,759,405 | | Total Capital | $2,302,217 | $1,780,533 | [Notes to Consolidated Financial Statements](index=19&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the **$698.6 million** New Zealand operations sale, segment performance with strong Real Estate offsetting Southern Timber weakness, debt compliance, and interest rate swap usage - On June 30, 2025, the company completed the sale of its 77% interest in its New Zealand operations for a purchase price of **$710 million**, receiving net proceeds of **$698.6 million** and recognizing a gain of **$404.5 million**. These operations are now reported as discontinued[56](index=56&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) Segment Adjusted EBITDA (Six Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Southern Timber | $55,433 | $78,652 | -29.5% | | Pacific Northwest Timber | $13,304 | $10,637 | +25.1% | | Real Estate | $20,576 | $9,090 | +126.3% | | Trading | ($560) | $28 | N/A | | **Total Adjusted EBITDA** | **$71,946** | **$77,971** | **-7.7%** | Total Principal Debt Outstanding (as of June 30, 2025) | Debt Instrument | Principal Amount (in thousands) | | :--- | :--- | | Senior Notes due 2031 (2.75%) | $450,000 | | 2015 Term Loan (Variable) | $200,000 | | 2016 Incremental Term Loan (Variable) | $200,000 | | 2021 Incremental Term Loan (Variable) | $200,000 | | **Total Principal Debt** | **$1,050,000** | - The company uses interest rate swaps with a notional amount of **$600 million** to hedge its exposure on its variable-rate term loans, effectively converting them to fixed-rate obligations[132](index=132&type=chunk)[137](index=137&type=chunk) - The company repurchased approximately **1.5 million** common shares for **$34.9 million** during the second quarter of 2025[258](index=258&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=56&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights the **$404.4 million** gain from the New Zealand sale, improved liquidity, strong Real Estate performance offsetting Southern Timber weakness, and an optimistic outlook for timber and real estate markets [Consolidated Results and Segment Performance](index=61&type=section&id=Consolidated%20Results%20and%20Segment%20Performance) Consolidated net income surged due to the **$404.4 million** New Zealand sale gain, with Real Estate driving Adjusted EBITDA growth from continuing operations, offsetting Southern Timber's decline - Southern Timber performance declined in Q2 2025, with a **5% decrease** in harvest volume and a **14% drop** in weighted-average net stumpage realizations, driven by softer mill demand and competing supply from salvage timber[238](index=238&type=chunk) - Pacific Northwest Timber operating income improved to **$1.6 million** from a loss of **$1.5 million** in the prior year, benefiting from a **6% increase** in domestic sawtimber prices and better cost management, despite a **15% volume decrease**[240](index=240&type=chunk) - The Real Estate segment had a strong quarter, with sales increasing to **$29.4 million** from **$15.5 million** YoY. This was driven by significant Improved Development sales in the Heartwood and Wildlight projects and a large Unimproved Development sale in Florida[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - The company recognized a **$404.4 million** gain on the sale of its New Zealand joint venture, which is reported under discontinued operations[256](index=256&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly strengthened to **$892.3 million** cash due to the New Zealand asset sale, improving the debt-to-capital ratio to **31%**, with sufficient funding for the next 12 months Key Liquidity Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $892.3 million | $303.1 million | | Total debt (principal) | $1,050.0 million | $1,050.0 million | | Debt to capital ratio | 31% | 36% | | Net debt to enterprise value | 4% | 16% | - Cash provided by investing activities for the first six months of 2025 was **$658.3 million**, mainly due to **$687.6 million** in net proceeds from the sale of the New Zealand joint venture[268](index=268&type=chunk) - During Q2 2025, the company repurchased **1.5 million** shares for **$34.9 million**. Year-to-date, repurchases totaled **1.6 million** shares for **$37.6 million**[258](index=258&type=chunk)[259](index=259&type=chunk) - The company expects 2025 capital expenditures to be between **$52 million** and **$56 million**, and real estate development investments to be between **$23 million** and **$27 million**[275](index=275&type=chunk)[276](index=276&type=chunk) [Outlook](index=72&type=section&id=Outlook) Management anticipates improved second-half 2025 performance, with modestly higher harvest volumes and prices in Southern and Pacific Northwest Timber, and significant Real Estate closing activity - Southern Timber: Expects materially higher volumes and modestly higher pine net stumpage realizations in the second half of 2025 compared to the first half[260](index=260&type=chunk) - Pacific Northwest Timber: Expects weighted-average log pricing to be modestly higher in the second half of the year[261](index=261&type=chunk) - Real Estate: Remains encouraged by the transaction pipeline and expects significant closing activity over the balance of the year[261](index=261&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk on its **$600 million** variable-rate debt via swaps, effectively converting it to fixed-rate, and discloses fair value sensitivity of its **$450 million** fixed-rate debt - The company has **$600 million** of variable-rate debt, which is fully hedged by an equal notional amount of interest rate swaps, mitigating exposure to interest rate fluctuations[298](index=298&type=chunk)[299](index=299&type=chunk) - A hypothetical one-percentage point increase or decrease in interest rates would result in no change to interest payments on the company's variable-rate debt over a 12-month period due to the hedges in place[299](index=299&type=chunk) - The fair value of the company's **$450 million** of fixed-rate debt was estimated at **$398.3 million** as of June 30, 2025. A hypothetical **1% increase** in interest rates would decrease its fair value by approximately **$20 million**[300](index=300&type=chunk) [Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures for both Rayonier Inc. and Rayonier, L.P. were effective as of June 30, 2025, with no material changes in internal control - For both Rayonier Inc. and Rayonier, L.P., management concluded that disclosure controls and procedures were effective as of June 30, 2025[306](index=306&type=chunk)[310](index=310&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[307](index=307&type=chunk)[311](index=311&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits and claims arising in the normal course of business, none of which are expected to have a material adverse effect on its financial position - The company is a defendant in various lawsuits and claims arising in the normal course of business, which are not expected to have a material adverse effect on its financial position, results of operations, or cash flow[149](index=149&type=chunk)[312](index=312&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Rayonier repurchased **1.5 million** common shares for **$34.9 million** in Q2 2025, with **$262.4 million** remaining under its share repurchase program, and issued shares for Operating Partnership units Q2 2025 Share Repurchases | Metric | Value | | :--- | :--- | | Total Shares Purchased (Public Program) | 1,472,928 | | Average Price Paid per Share | ~$23.71 | | Total Cost | ~$34.9 million | | Remaining Authorization (as of June 30, 2025) | $262.4 million | - The company issued **9,519** common shares in exchange for an equal number of Operating Partnership units during the quarter[313](index=313&type=chunk) [Other Information](index=83&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025[319](index=319&type=chunk) [Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications for both entities and financial statements in iXBRL format - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer for both Rayonier Inc. and Rayonier, L.P. (Exhibits 31.1, 31.2, 31.3, 31.4, 32.1, 32.2)[320](index=320&type=chunk) - Financial statements and notes are filed in Inline Extensible Business Reporting Language (iXBRL) format (Exhibit 101)[320](index=320&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the quarter ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $36.1 million while the stockholders' deficit improved to $(1.3) million as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,006 | $5,343 | | Total current assets | $27,123 | $32,165 | | **Total assets** | **$36,078** | **$39,739** | | Total current liabilities | $35,662 | $43,740 | | **Total liabilities** | **$37,412** | **$45,439** | | **Total stockholders' equity (deficit)** | **$(1,334)** | **$(5,700)** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a Q2 net loss of $7.5 million, while the H1 net loss narrowed to $7.0 million from the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net revenues | $11,190 | $11,516 | $27,911 | $28,292 | | Gross profit | $845 | $2,969 | $9,201 | $5,871 | | Loss from operations | $(6,732) | $(6,470) | $(6,087) | $(9,159) | | **Net loss** | **$(7,475)** | **$(6,616)** | **$(7,017)** | **$(9,522)** | | **Net loss per share (basic & diluted)** | **$(0.79)** | **$(1.41)** | **$(0.91)** | **$(2.09)** | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) The stockholders' deficit improved significantly due to capital raising activities offsetting the period's net loss - For the six months ended June 30, 2025, the company's stockholders' deficit decreased from **$(5,700) thousand to $(1,334) thousand**[21](index=21&type=chunk) - Key drivers were **$8,952 thousand in net proceeds from common stock issuance** and **$2,431 thousand in stock-based compensation**, partially offset by a **$7,017 thousand net loss**[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased to $14.5 million, funded by $11.2 million from financing activities Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,488) | $(3,560) | | Net cash used in investing activities | $0 | $(69) | | Net cash provided by financing activities | $11,151 | $3,832 | | **Net decrease in cash** | **$(3,337)** | **$203** | | **Cash at end of period** | **$2,006** | **$9,600** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the pending asset sale to Social Mobile, a planned RTO, and significant revenue recognition items - On July 17, 2025, the Company entered into an Asset Purchase Agreement to sell substantially all assets to Social Mobile for **$15 million in cash** plus a potential **$5 million earn-out**[30](index=30&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - The company is pursuing a potential **reverse takeover (RTO) transaction** in conjunction with the asset sale to maximize stockholder value[31](index=31&type=chunk)[116](index=116&type=chunk) - Management believes it has **sufficient liquidity to continue as a going concern** for the next twelve months based on current and subsequent funding[36](index=36&type=chunk) - For H1 2025, the Company recognized **$5.49 million in revenue** from the release of previously accrued customer allowances[51](index=51&type=chunk) - Subsequent to quarter end, the company raised **$4.8 million from a public offering** and **$2.5 million from a promissory note**[121](index=121&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, the pending asset sale, and liquidity for the reporting period [Company Overview and Strategic Initiatives](index=31&type=section&id=Company%20Overview%20and%20Strategic%20Initiatives) The company is focused on rugged 5G solutions and is pursuing a sale of its core business to Social Mobile - The company launched new products including the **Sonim H500 hotspot**, **XP Pro 5G smartphone**, and **XP3plus 5G flip phone**[141](index=141&type=chunk)[144](index=144&type=chunk) - Sonim entered an agreement to sell substantially all assets for **$15 million in cash** plus a potential **$5 million earn-out**[149](index=149&type=chunk)[150](index=150&type=chunk) - In parallel with the asset sale, the company is pursuing a **reverse merger (RTO)** to allow the public entity to continue with a new business[152](index=152&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) H1 2025 gross profit improved significantly due to a large customer allowance release, despite a slight revenue dip Comparison of Results of Operations (in thousands) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total net revenues | $27,911 | $28,292 | (1)% | | Gross profit | $9,201 | $5,871 | 57% | | Loss from operations | $(6,087) | $(9,159) | (34)% | | Net loss | $(7,017) | $(9,522) | (26)% | - H1 2025 gross profit increased by $3.3 million, primarily due to a **$5.5 million revenue recognition** from expired customer allowance agreements[177](index=177&type=chunk) - Q2 2025 gross profit decreased by $2.1 million, impacted by a **$1.1 million impairment of contract fulfillment assets** and tariff costs[175](index=175&type=chunk) - R&D expenses for H1 2025 increased by **$1.5 million YoY** due to new product development[179](index=179&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Recent financing activities provide sufficient capital to fund operations for at least the next twelve months - As of June 30, 2025, the company had **$2.0 million in cash and cash equivalents**[184](index=184&type=chunk) - Subsequent to the quarter end, the company raised net proceeds of approximately **$4.8 million from a public offering** and **$2.3 million from a promissory note**[184](index=184&type=chunk) - The company has access to a domestic receivables financing facility of up to **$2.5 million** and an international facility of up to **€3.0 million**[184](index=184&type=chunk) - Management expects existing cash and subsequent funding to be **sufficient to meet all obligations for at least one year** from the report's release date[184](index=184&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Sonim is not required to provide information regarding market risk - The company is a **smaller reporting company** as defined by Rule 12b-2 of the Exchange Act and is not required to provide this information[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that the company's **disclosure controls and procedures were effective** as of the end of the reporting period[195](index=195&type=chunk) - There were **no material changes** in the company's internal control over financial reporting during the quarter[197](index=197&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) A complaint filed by AJP Holding Company and Orbic North America in April 2025 was dismissed in June 2025 - A complaint filed by AJP Holding Company, LLC and Orbic North America, LLC on April 24, 2025, was **dismissed without prejudice on June 2, 2025**[98](index=98&type=chunk)[101](index=101&type=chunk)[199](index=199&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section adds new risks related to the proposed asset sale and RTO initiative and updates existing risk factors - A new group of risk factors, **"Risks Related to the Proposed Asset Purchase Agreement and Announced Strategic Initiatives,"** has been added[217](index=217&type=chunk) - Key new risks include potential failure to close the asset sale, business disruptions, and the risk of becoming a **'shell company'** if an RTO is not completed[217](index=217&type=chunk)[219](index=219&type=chunk)[223](index=223&type=chunk) - The U.S. trade policy risk was updated to note the imposition of a **145% tariff on imports from China**, though an exemption exists for smartphones[202](index=202&type=chunk) - The stockholder activism risk was amended to mention the recent campaign by **Orbic North America** to acquire Sonim[206](index=206&type-chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the reporting period - None[230](index=230&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[231](index=231&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business operations - Not applicable[232](index=232&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No directors or officers adopted or terminated a **Rule 10b5-1 trading arrangement** during the quarter[233](index=233&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including the Asset Purchase Agreement and financing documents - Exhibit 2.1 is the **Asset Purchase Agreement** dated July 17, 2025[235](index=235&type=chunk) - Exhibits include various financing and corporate governance documents, such as a **promissory note (4.1)**, a **Rights Agreement (4.2)**, and **officer certifications (31.1, 31.2, 32.1, 32.2)**[235](index=235&type=chunk)[237](index=237&type=chunk)

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=9&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited condensed consolidated financial statements and accompanying notes for the period ended June 30, 2025 [Condensed Consolidated Financial Statements](index=9&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Total assets grew to $27.3 billion, with Q2 2025 revenues reaching $1.35 billion and net income of $111.8 million Condensed Consolidated Statements of Financial Condition (in thousands) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$27,264,941** | **$24,884,308** | | Goodwill | $3,436,192 | $1,162,636 | | Intangible assets, net | $2,220,065 | $975,828 | | **Total Liabilities** | **$18,425,558** | **$17,485,922** | | Debt obligations | $3,675,154 | $2,558,914 | | **Total Equity** | **$8,257,198** | **$6,824,190** | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$1,350,128** | **$788,682** | **$2,438,933** | **$1,496,045** | | Management fees | $900,622 | $721,681 | $1,717,609 | $1,409,373 | | Carried interest allocation | $323,901 | $(51,167) | $483,909 | $(83,645) | | **Total Expenses** | **$1,137,578** | **$564,544** | **$2,151,906** | **$1,103,037** | | **Net Income** | **$225,980** | **$276,251** | **$349,481** | **$480,066** | | Net income attributable to common stockholders | $111,750 | $94,938 | $133,607 | $167,965 | | **Diluted EPS** | **$0.46** | **$0.43** | **$0.48** | **$0.76** | Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,409,904 | $1,142,217 | | Net cash used in investing activities | $(1,767,608) | $(63,309) | | Net cash used in financing activities | $(1,744,928) | $(1,125,531) | | **Net change in cash and cash equivalents** | **$(998,320)** | **$(63,829)** | [Notes to the Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the $3.9 billion GCP acquisition, an upsized credit facility, and subsequent dividend declarations - On March 1, 2025, the Company completed the acquisition of GCP International for a total consideration of **$3.9 billion**, consisting of **$1.79 billion in cash**, **$1.66 billion in equity**, and **$465 million in contingent consideration**[49](index=49&type=chunk)[50](index=50&type=chunk) GCP Acquisition Purchase Price Allocation (in thousands) | Assets Acquired / Liabilities Assumed | Fair Value | | :--- | :--- | | Total identifiable assets acquired | $1,844,322 | | Accounts payable, accrued expenses and other liabilities | $203,969 | | **Net identifiable assets acquired** | **$1,640,353** | | **Goodwill** | **$2,270,422** | | **Net assets acquired** | **$3,910,775** | - In April 2025, the company amended its revolving Credit Facility, extending the maturity to April 2030 and increasing commitments to **$1.84 billion** from $1.40 billion[93](index=93&type=chunk) - The company has contingent liabilities related to the GCP acquisition, including an earnout for the data center business (up to **$1.0 billion**) and the Japan business (up to **$0.5 billion**)[112](index=112&type=chunk) - Subsequent to the quarter end, in July 2025, the board declared a quarterly dividend of **$1.12 per share** for Class A and non-voting common stock and **$0.84375 per share** for Series B preferred stock[207](index=207&type=chunk)[208](index=208&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 performance, the GCP acquisition's impact, AUM growth, and segment results [Trends Affecting Our Business](index=56&type=section&id=Trends%20Affecting%20Our%20Business) Global markets performed well in Q2 2025 despite volatility, with the company's portfolio well-positioned - Global equity and debt markets experienced volatility but largely performed well during Q2 2025, supported by positive trade developments and resilient macroeconomic indicators[213](index=213&type=chunk) - Commercial real estate markets showed mixed performance; European markets began to recover due to interest rate cuts, while U.S. markets saw a slight decline[214](index=214&type=chunk)[215](index=215&type=chunk) - Private equity transaction volume slowed during the quarter due to macroeconomic and global trade uncertainty, leading to a heightened focus on disciplined underwriting[216](index=216&type=chunk) - As of June 30, 2025, approximately **85% of the company's debt assets** and **52% of its total assets** were floating rate instruments, positioning the portfolio for a fluctuating interest rate environment[217](index=217&type=chunk) [Managing Business Performance](index=57&type=section&id=Managing%20Business%20Performance) Key operating metrics show significant growth, with total AUM reaching $572.4 billion and FPAUM at $349.6 billion AUM and FPAUM Growth (in billions) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total AUM | $572.4 | $447.2 | | Fee Paying AUM (FPAUM) | $349.6 | $275.8 | - As of June 30, 2025, AUM not yet paying fees was **$86.8 billion**, which could generate approximately **$822.7 million** in potential incremental annual management fees[238](index=238&type=chunk) - Incentive Eligible AUM (IEAUM) was **$421.9 billion** and Incentive Generating AUM (IGAUM) was **$229.9 billion** as of June 30, 2025[240](index=240&type=chunk) [Consolidated Results of Operations](index=67&type=section&id=Consolidated%20Results%20of%20Operations) Q2 2025 revenues grew 71% to $1.35 billion, while expenses rose 102%, driven by the GCP acquisition Consolidated Revenue Breakdown (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Management fees | $900,622 | $721,681 | 25% | | Carried interest allocation | $323,901 | $(51,167) | NM | | Administrative, transaction and other fees | $91,563 | $40,973 | 123% | | **Total revenues** | **$1,350,128** | **$788,682** | **71%** | Consolidated Expense Breakdown (in thousands) | Expense Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $643,709 | $419,858 | 53% | | Performance related compensation | $234,706 | $(28,985) | NM | | General, administrative and other expenses | $232,156 | $169,432 | 37% | | **Total expenses** | **$1,137,578** | **$564,544** | **102%** | - The increase in Compensation and Benefits for Q2 2025 was significantly impacted by the GCP acquisition, which included **$40.8 million in equity-based compensation** and **$20.8 million in other cash compensation costs**[279](index=279&type=chunk) - The increase in General, Administrative and Other Expenses was also driven by the GCP acquisition, which contributed **$54.7 million** in Q2 2025[285](index=285&type=chunk) [Segment Analysis](index=76&type=section&id=Segment%20Analysis) Segment performance varied, with strong FRE growth in Real Assets and Credit, leading to a 26% overall FRE increase Fee Related Earnings (FRE) by Segment - Q2 2025 vs Q2 2024 (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Credit Group | $426,310 | $368,281 | 16% | | Real Assets Group | $113,645 | $51,643 | 120% | | Private Equity Group | $9,846 | $14,454 | (32)% | | Secondaries Group | $50,537 | $33,641 | 50% | | **Total FRE** | **$409,111** | **$324,516** | **26%** | Realized Income (RI) by Segment - Q2 2025 vs Q2 2024 (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Credit Group | $435,494 | $408,205 | 7% | | Real Assets Group | $97,648 | $41,069 | 138% | | Private Equity Group | $12,858 | $11,392 | 13% | | Secondaries Group | $48,715 | $26,544 | 84% | | **Total RI** | **$397,814** | **$363,158** | **10%** | [Liquidity and Capital Resources](index=109&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is sufficient with $509.7 million in cash and $725.0 million available under the credit facility - As of June 30, 2025, the company had **$509.7 million in cash** and cash equivalents and **$725.0 million available** under its Credit Facility, with management believing these sources are sufficient[432](index=432&type=chunk) Company Cash Flow Summary (in thousands) | Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,164,527 | $879,653 | | Net cash used in investing activities | $(1,767,608) | $(63,309) | | Net cash used in financing activities | $(173,078) | $(878,127) | - The Tax Receivable Agreement (TRA) liability balance was **$508.6 million** as of June 30, 2025, with payments of **$8.1 million** for the first six months of 2025[453](index=453&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=113&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in market risk exposures are reported for the six months ended June 30, 2025 - There have been **no material changes** in the company's market risks for the six months ended June 30, 2025[458](index=458&type=chunk)[459](index=459&type=chunk) [Item 4. Controls and Procedures](index=113&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were **effective at a reasonable assurance level**[461](index=461&type=chunk) - There were **no changes in internal control** over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[462](index=462&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=114&type=section&id=Item%201.%20Legal%20Proceedings) The company is not subject to any legal proceedings expected to have a material adverse effect - The company and its affiliates are subject to legal proceedings and regulatory investigations from time to time, but management does not expect any current matters to have a **material impact** on its financial results[463](index=463&type=chunk) [Item 1A. Risk Factors](index=114&type=section&id=Item%201A.%20Risk%20Factors) The report refers to the risk factors detailed in the company's 2024 Annual Report on Form 10-K - The report directs investors to the risk factors detailed in the company's **Annual Report on Form 10-K for the year ended December 31, 2024**, for a comprehensive understanding of potential risks[464](index=464&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=114&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were conducted during the reporting period - **No unregistered sales of equity securities** occurred during the period covered by this report[465](index=465&type=chunk) [Item 5. Other Information](index=115&type=section&id=Item%205.%20Other%20Information) Certain executives and directors entered into Rule 10b5-1 trading plans during the second quarter of 2025 Rule 10b5-1 Trading Plans Adopted in Q2 2025 | Name and Title | Plan Date | Maximum Shares That May Be Sold | Plan Expiration Date | | :--- | :--- | :--- | :--- | | Antony Ressler, Executive Chairman & Co-Founder | May 21, 2025 | 2,000,000 | February 13, 2026 | | Naseem Sagati Aghili, General Counsel and Corporate Secretary | June 11, 2025 | 42,000 plus shares from vested RSUs | March 1, 2026 | [Item 6. Exhibits](index=116&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key agreement amendments and certifications - Key exhibits filed with this report include **Amendment No. 13 to the Credit Agreement**, the Sixth Amended and Restated Exchange Agreement, and the Sixth Amended and Restated Limited Partnership Agreement of Ares Holdings L.P[475](index=475&type=chunk)