[Executive Summary & Business Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Highlights) [Company Overview & Business Model](index=1&type=section&id=Company%20Overview%20%26%20Business%20Model) Intuitive Machines is a leading diversified space technology, infrastructure, and services company focused on fundamentally disrupting lunar access economics, having successfully soft-landed lunar landers in 2024 and 2025 - Intuitive Machines is a leading space technology and infrastructure services company[2](index=2&type=chunk) - The company is a diversified space technology, infrastructure, and services company focused on fundamentally disrupting lunar access economics[12](index=12&type=chunk) - Successfully soft-landed Nova-C class lunar landers on the Moon in 2024 and 2025, returning the United States to the lunar surface for the first time since 1972[12](index=12&type=chunk) - Products and services are focused through three pillars of space commercialization: Delivery Services, Data Transmission Services, and Infrastructure as a Service[12](index=12&type=chunk) [CEO Commentary & Strategic Vision](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Vision) CEO Steve Altemus highlighted decisive execution in Q2 2025, including bringing satellite manufacturing in-house and the strategic acquisition of KinetX, with plans for continued opportunistic M&A and internal investments to accelerate growth - Executed decisively in Q2, bringing satellite manufacturing in-house for performance, schedule clarity, and integration[3](index=3&type=chunk) - Moved to acquire KinetX, a company specializing in space navigation and flight dynamics software, crucial for future network operations[3](index=3&type=chunk)[5](index=5&type=chunk) - Will remain opportunistic on strategic M&A and evaluate internal investments to accelerate growth and drive long-term shareholder value[4](index=4&type=chunk) - Intends to remain aggressive in the marketplace, particularly in data services and National Security Space markets[4](index=4&type=chunk) [Second Quarter 2025 Operational & Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Operational%20%26%20Financial%20Highlights) Q2 2025 saw significant strategic moves including the acquisition of KinetX, investment in in-house satellite production, and expansion of production footprint, with revenue growing 21% year-over-year to $50.3 million and the company ending the quarter debt-free with $345 million cash - Signed purchase agreement to acquire KinetX, positioning Intuitive Machines for Earth Orbit, Moon, and Mars constellation management[5](index=5&type=chunk) - Strategically invested in in-house satellite production to support the Near Space Network Services (NSNS) contract, aligning Mission 3 for satellite deployment in H2 2026[5](index=5&type=chunk) - Expanded production footprint at Houston Spaceport by 140,000 square feet for satellite and spacecraft production, testing, and mission operations[5](index=5&type=chunk) Q2 2025 Revenue Performance (in millions of dollars) | Metric | Q2 2025 (Millions) | Q2 Prior Year (Millions) | Change (%) | | :----- | :----------------- | :----------------------- | :--------- | | Revenue | $50.3 | $41.6 | +21% | - Awarded **$9.8 million** for a phase two contract from a National Security customer to advance the Orbital Transfer Vehicle[5](index=5&type=chunk) - Partnered with Space Forge for space-based semiconductor manufacturing and Rhodium Scientific for in-space biopharmaceutical testing, supported by a **$10 million** Texas Space Commission award for the Earth Reentry Program[5](index=5&type=chunk) - Ended Q2 debt-free with **$345 million cash**, indicating continued balance sheet strength and ample liquidity[5](index=5&type=chunk) [Outlook](index=1&type=section&id=Outlook) The company projects full-year 2025 revenue near the low-end of prior outlook, with additional opportunities potentially supporting revenue near the prior mid-point of $275 million, and positive adjusted EBITDA still expected in 2026 - Full-year 2025 revenue is projected to be near the low-end of prior outlook, with additional opportunities potentially supporting revenue near the prior mid-point of **$275 million**[6](index=6&type=chunk) - Continues to expect positive adjusted EBITDA in 2026[6](index=6&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $475.6 million from $355.4 million at December 31, 2024, primarily driven by a significant increase in cash and cash equivalents, while total liabilities decreased substantially due to the elimination of earn-out liabilities and a reduction in warrant liabilities Condensed Consolidated Balance Sheets Highlights (in thousands of dollars) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :-------------- | :---------------- | :----- | | Cash and cash equivalents | $344,901 | $207,607 | +$137,294 | | Total current assets | $396,753 | $293,161 | +$103,592 | | Property and equipment, net | $40,607 | $23,364 | +$17,243 | | Total assets | $475,639 | $355,404 | +$120,235 | | Total current liabilities | $107,295 | $98,831 | +$8,464 | | Earn-out liabilities | $0 | $134,156 | -$134,156 | | Warrant liabilities | $38,809 | $68,778 | -$29,969 | | Total liabilities | $184,746 | $351,483 | -$166,737 | | Total shareholders' deficit | $(379,123) | $(1,008,034) | +$628,911 | - Significant increase in cash and cash equivalents, contributing to the overall rise in total assets[17](index=17&type=chunk) - Substantial reduction in total liabilities, primarily driven by the elimination of earn-out liabilities and a decrease in warrant liabilities[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, revenue increased 21% year-over-year to $50.3 million, but the company reported a net loss of $38.2 million, compared to a net income of $16.7 million in Q2 2024, largely influenced by changes in the fair value of warrant liabilities and the absence of earn-out liability changes Condensed Consolidated Statements of Operations Highlights (in thousands of dollars) | 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 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $50,313 | $41,641 | $112,837 | $114,860 | | Operating loss | $(28,640) | $(27,500) | $(38,717) | $(30,275) | | Change in fair value of earn-out liabilities | $0 | $22,109 | $(33,369) | $(488) | | Change in fair value of warrant liabilities | $(13,033) | $21,009 | $29,969 | $(2,955) | | Net income (loss) | $(38,206) | $16,655 | $(37,231) | $(101,376) | | Net income (loss) attributable to the Company | $(25,181) | $18,671 | $(36,577) | $(78,815) | - Q2 2025 revenue increased by **$8.672 million (20.8%)** year-over-year[19](index=19&type=chunk) - Reported a net loss of **$38.206 million** in Q2 2025, a significant decline from a net income of **$16.655 million** in Q2 2024[19](index=19&type=chunk) - The change in fair value of earn-out liabilities (zero in Q2 2025 vs. **$22.109 million** gain in Q2 2024) and warrant liabilities (loss of **$13.033 million** in Q2 2025 vs. gain of **$21.009 million** in Q2 2024) significantly impacted net income/loss[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was $0.156 million, a substantial improvement from net cash used of $37.702 million in the prior year period, largely due to positive changes in working capital and significantly increased net cash from financing activities due to warrant exercises Condensed Consolidated Statements of Cash Flows Highlights (in thousands of dollars) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $156 | $(37,702) | | Net cash used in investing activities | $(14,176) | $(3,793) | | Net cash provided by financing activities | $151,314 | $70,608 | | Net increase in cash, cash equivalents and restricted cash | $137,294 | $29,113 | | Cash and cash equivalents at end of the period | $344,901 | $31,631 | - Operating cash flow improved significantly, shifting from **$37.702 million** cash used in H1 2024 to **$0.156 million** cash provided in H1 2025[21](index=21&type=chunk) - Purchases of property and equipment increased to **$14.176 million** in H1 2025, up from **$3.793 million** in H1 2024[21](index=21&type=chunk) - Net cash provided by financing activities more than doubled to **$151.314 million** in H1 2025, primarily driven by **$176.620 million** from warrant exercises[21](index=21&type=chunk) [Non-GAAP Financial Measures & Key Metrics](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Key%20Metrics) [Adjusted EBITDA Reconciliation](index=3&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for Q2 2025 was a loss of $25.368 million, comparable to Q2 2024, while the six-month period saw an increased loss of $31.978 million compared to $23.543 million in the prior year - Adjusted EBITDA is a key performance measure used by management to assess operating performance, excluding non-operating sources like interest income/expense, share-based compensation, and fair value changes[10](index=10&type=chunk) Adjusted EBITDA (in thousands of dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $(38,206) | $16,655 | $(37,231) | $(101,376) | | Adjusted EBITDA | $(25,368) | $(25,108) | $(31,978) | $(23,543) | - Q2 2025 Adjusted EBITDA loss remained relatively stable year-over-year[24](index=24&type=chunk) - For the six-month period, Adjusted EBITDA loss increased from **$23.543 million** in 2024 to **$31.978 million** in 2025[24](index=24&type=chunk) [Free Cash Flow Reconciliation](index=3&type=section&id=Free%20Cash%20Flow%20Reconciliation) Free Cash Flow for the six months ended June 30, 2025, improved significantly to a negative $14.020 million, compared to a negative $41.495 million in the prior year period, driven by a positive shift in operating cash flow despite increased capital expenditures - Free cash flow is defined as net cash provided by (used in) operating activities less purchases of property and equipment, serving as a meaningful indicator of liquidity[11](index=11&type=chunk)[25](index=25&type=chunk) Free Cash Flow (in thousands of dollars) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $156 | $(37,702) | | Purchases of property and equipment | $(14,176) | $(3,793) | | Free cash flow | $(14,020) | $(41,495) | - Free cash flow improved by **$27.475 million** in H1 2025 compared to H1 2024[26](index=26&type=chunk) - Free Cash Flow is a non-GAAP measure with limitations, including potential incomparability to other companies and sensitivity to capital investments and working capital fluctuations[27](index=27&type=chunk) [Backlog](index=3&type=section&id=Backlog) Contracted backlog decreased by $71.4 million to $256.909 million as of June 30, 2025, from $328.345 million at December 31, 2024, primarily due to performance on existing contracts and IM-2 mission close-out adjustments, partially offset by new awards - Contracted backlog is defined as the total estimated future revenue from awarded contracts, less previously recognized revenue[11](index=11&type=chunk) Backlog (in thousands of dollars) | Metric | June 30, 2025 | December 31, 2024 | Change | | :------ | :-------------- | :---------------- | :----- | | Backlog | $256,909 | $328,345 | $(71,436) | - The decrease in backlog was primarily due to **$112.8 million** from performance on existing contracts and **$8.4 million** from IM-2 mission close-out adjustments[28](index=28&type=chunk) - The decrease was partially offset by **$49.8 million** in new awards, including **$18.0 million** for the NSN contract, **$10.0 million** for the TSC grant, and **$7.0 million** for the OMES III contract[28](index=28&type=chunk) [Additional Information](index=3&type=section&id=Additional%20Information) [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) Intuitive Machines hosted a conference call on August 7, 2025, at 8:30 am Eastern Time to discuss the Q2 2025 results, with a webcast replay available on the company's investor relations website - Conference call held on August 7, 2025, at 8:30 am Eastern Time to discuss financial results[7](index=7&type=chunk) - A live webcast and replay are available on the investors portion of the Intuitive Machines' website: https://investors.intuitivemachines.com[7](index=7&type=chunk)[8](index=8&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This press release includes forward-looking statements regarding future expectations, plans, financial performance, and industry outlook, which are subject to various risks and uncertainties and are not guarantees of future performance, with no obligation to update them unless required by applicable securities laws - The press release includes 'forward-looking statements' as defined by the Private Securities Litigation Reform Act of 1995, identified by words such as 'anticipate,' 'expect,' 'plan,' etc[13](index=13&type=chunk) - These statements cover expectations and plans related to business combinations, lunar missions, product demand, contract bids, revenue, operations, financial performance, and business strategy[13](index=13&type=chunk) - Actual results may differ materially due to various factors, including reliance on key personnel, limited operating history, competition, safety performance, cyber incidents, market failures, launch delays, customer concentration, and regulatory compliance[13](index=13&type=chunk) - Forward-looking statements are based on information available as of the presentation date, and the company does not undertake any obligation to update them, except as required by applicable securities laws[14](index=14&type=chunk) [Contacts](index=4&type=section&id=Contacts) Contact information for investor and media inquiries is provided - For investor inquiries: investors@intuitivemachines.com[15](index=15&type=chunk) - For media inquiries: press@intuitivemachines.com[15](index=15&type=chunk)

Exhibit 99.1 • Signed purchase agreement to acquire KinetX, an industry leading space navigation and flight dynamics software company, which positions Intuitive Machines for Earth Orbit, Moon, and Mars constellation management across commercial, civil, and national security customers • Strategically invested in in-house satellite production to control delivery of our satellites to support the Near Space Network Services (NSNS) contract, and aligned Mission 3 to support deployment and operation of our first ...

[Q2 2025 Executive Summary](index=1&type=section&id=Q2%202025%20Executive%20Summary) Altice USA reported improved broadband subscriber trends and year-over-year ARPU growth in Q2 2025, despite a revenue decline and a net loss, highlighting progress in fiber and mobile penetration, operational efficiencies, and a significant $1.0 billion asset-backed loan to enhance its capital structure - CEO Dennis Mathew emphasized continued momentum, citing **improved broadband subscriber trends**, **year-over-year broadband ARPU growth**, and the **lowest second-quarter churn in three years**, driven by targeted offers, better sales execution, and scaling of value-added services[2](index=2&type=chunk) Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $2.15 billion | $2.24 billion | -4.2% | | Net Income (Loss) | ($96.3) million | $15.4 million | N/A | | Diluted EPS | ($0.21) | $0.03 | N/A | | Adjusted EBITDA | $803.8 million | $867.2 million | -7.3% | | Net Cash from Operating Activities | $0.4 billion | $0.3 billion | +34.3% | | Free Cash Flow (Deficit) | $28.4 million | ($40.9) million | N/A | - The company successfully completed a first-of-its-kind **$1.0 billion asset-backed loan**, secured primarily by its HFC assets in the Bronx and Brooklyn service areas, maturing in January 2031[1](index=1&type=chunk)[8](index=8&type=chunk) [Key Operational Performance](index=1&type=section&id=Key%20Operational%20Performance) The company demonstrated operational improvements with reduced broadband net losses, accelerated growth in fiber and mobile subscribers, and enhanced customer service metrics, alongside strategic initiatives including new value-added services and AI integration for efficiency [Broadband and Customer Trends](index=1&type=section&id=Broadband%20and%20Customer%20Trends) Broadband net losses improved to -35k, a positive trend both year-over-year (from -51k) and sequentially (from -37k), attributed to targeted offers and better execution, with churn at a three-year low for the second quarter Broadband Subscriber Net Losses (in thousands) | Period | Net Losses | | :--- | :--- | | Q2 2025 | -35 | | Q1 2025 | -37 | | Q2 2024 | -51 | - The improvement in broadband trends was driven by **targeted localized offers**, **improved sales channel performance**, and **stronger go-to-market execution**[2](index=2&type=chunk) [Fiber Network Growth](index=1&type=section&id=Fiber%20Network%20Growth) Fiber customer base grew by 53% year-over-year, reaching 663k subscribers, with net additions accelerating to +56k and customer penetration on the fiber network increasing significantly to 21.9% from 15.3% a year ago - Fiber net additions accelerated to **+56k** in Q2 2025, compared to **+40k** in Q2 2024[5](index=5&type=chunk) Fiber Network Penetration | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Fiber Customers (in thousands) | 663 | 434 | | Total Fiber Passings (in millions) | 3.0 | 2.8 | | Customer Penetration | 21.9% | 15.3% | [Mobile Business Expansion](index=2&type=section&id=Mobile%20Business%20Expansion) The mobile segment showed strong growth, with a 42% year-over-year increase in lines to 546k, as mobile net additions accelerated compared to the prior year and penetration of the broadband customer base rose to 6.8% - Mobile line net additions accelerated to **+38k** in Q2 2025 from **+33k** in Q2 2024[9](index=9&type=chunk) Mobile Subscriber Growth | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Mobile Lines (in thousands) | 546 | 385 | | Mobile Penetration of Broadband Base | 6.8% | 4.7% | [Efficiency and Network Initiatives](index=2&type=section&id=Efficiency%20and%20Network%20Initiatives) Altice USA implemented a 5% workforce reduction and improved service call rates to drive efficiency, reinforcing its goal of approximately $3.4 billion in FY 2025 Adjusted EBITDA, while focusing on high-impact network investments including fiber builds and DOCSIS 3.1 upgrades - A workforce reduction of approximately **5%** was implemented, primarily in Q2 2025, to streamline the organization and align resources with key priorities[9](index=9&type=chunk) - Customer service metrics improved year-over-year, with the unique service call rate down by **~3%** and the unique service visit rate down by **~19%**[9](index=9&type=chunk) - The company is targeting approximately **$1.2 billion** in cash capital expenditures and **175k** new passings for FY 2025, with a focus on fiber new builds and DOCSIS 3.1 mid-split upgrades[9](index=9&type=chunk) [Financial Performance](index=5&type=section&id=Financial%20Performance) In Q2 2025, Altice USA generated $2.15 billion in revenue, a 4.2% decrease year-over-year, reporting a net loss of $96.3 million compared to a net income of $15.4 million in Q2 2024, with Adjusted EBITDA also declining by 7.3% to $803.8 million, though net cash from operating activities for the quarter increased significantly [Consolidated Operating Results (Income Statement)](index=5&type=section&id=Consolidated%20Operating%20Results%20(Income%20Statement)) The decline in total revenue was primarily driven by lower Residential revenue, particularly from the Video segment which fell to $660.5 million from $739.4 million year-over-year, with operating income falling to $311.1 million from $501.6 million due to lower revenue and higher restructuring costs, resulting in a net loss influenced by a substantial income tax benefit compared to the prior year's expense Q2 2025 Selected Income Statement Data (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenue | $2,147.2 | $2,240.8 | | Residential Revenue | $1,647.9 | $1,753.6 | | Operating Income | $311.1 | $501.6 | | Interest Expense, net | ($444.7) | ($443.0) | | Net Income (Loss) | ($88.0) | $21.7 | | Net Income (Loss) to Stockholders | ($96.3) | $15.4 | [Cash Flow Statement](index=6&type=section&id=Cash%20Flow%20Statement) For the six months ended June 30, 2025, net cash from operating activities decreased to $599.4 million from $706.5 million in the prior year period, impacted by a net loss and changes in working capital, while net cash used in investing activities increased to $745.6 million from $685.9 million due to higher capital expenditures Six Months Ended June 30 - Cash Flow Highlights (in millions) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $599.4 | $706.5 | | Capital Expenditures | ($739.6) | ($683.8) | | Net Cash Used in Investing Activities | ($745.6) | ($685.9) | | Net Cash Provided by Financing Activities | $136.0 | $40.3 | | Net (Decrease) in Cash | ($9.2) | $60.1 | [Customer Metrics](index=4&type=section&id=Customer%20Metrics) The company ended Q2 2025 with 4.46 million total unique customer relationships, a decline from the previous year, with net losses seen across residential broadband, video, and telephony services, though the rate of broadband loss has slowed, while mobile lines and FTTH customers continued to show strong growth [Overall Customer Metrics](index=4&type=section&id=Overall%20Customer%20Metrics) In Q2 2025, residential broadband net losses were -35.0k, an improvement from -51.0k in Q2 2024, while video and telephony services continued to experience significant subscriber declines, and mobile line net additions were strong at +37.8k Q2 2025 Key Customer Net Additions (in thousands) | Service | Q2 2025 Net Additions | Q2 2024 Net Additions | | :--- | :--- | :--- | | Total Customers | (43.6) | (54.5) | | Residential Broadband | (35.0) | (51.0) | | Video | (56.1) | (72.8) | | Mobile Lines | 37.8 | 33.0 | - Residential ARPU was **$133.68** in Q2 2025, a decrease from **$135.95** in Q2 2024, however, Broadband ARPU increased to **$74.77** from **$74.13** over the same period[13](index=13&type=chunk) [Fiber (FTTH) Customer Metrics](index=4&type=section&id=Fiber%20(FTTH)%20Customer%20Metrics) The FTTH business demonstrated robust growth, with total customer relationships reaching 663.0k, up from 434.1k in Q2 2024, as the company added 56.3k total FTTH customers in the quarter, driven primarily by residential additions FTTH Customer Growth (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | FTTH Total Passings | 3,023.4 | 2,842.0 | | FTTH Total Customers | 663.0 | 434.1 | | FTTH Total Net Additions | 56.3 | 39.5 | [Balance Sheet and Debt Profile](index=3&type=section&id=Balance%20Sheet%20and%20Debt%20Profile) As of June 30, 2025, Altice USA had consolidated net debt of $25.0 billion, with a consolidated net leverage ratio of 7.8x L2QA Adjusted EBITDA, a weighted average cost of debt of 6.8%, and an average life of 3.6 years, with a key financing activity being the completion of a $1.0 billion asset-backed loan Consolidated Net Debt and Leverage (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Consolidated Net Debt | $25.0 billion | | Consolidated Net Leverage (L2QA) | 7.8x | | Weighted Average Cost of Debt | 6.8% | | Weighted Average Life of Debt | 3.6 years | - The CSC Holdings, LLC Restricted Group held the majority of the debt, with **$23.6 billion** in net debt and a net leverage of **8.0x L2QA**[12](index=12&type=chunk) - On July 16, 2025, the company entered into a **$1.0 billion** Receivables Facility Loan secured by certain receivables and network assets, maturing in January 2031[8](index=8&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=7&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) The company provides reconciliations for Adjusted EBITDA and Free Cash Flow, with Q2 2025 Adjusted EBITDA at $803.8 million (down from $867.2 million in Q2 2024 and margin contracting to 37.4%), and Free Cash Flow improving to a positive $28.4 million from a deficit of $40.9 million in the prior-year quarter, driven by higher net cash from operations and managed capital expenditures - Adjusted EBITDA is defined as net income excluding items like taxes, interest, D&A, share-based compensation, and restructuring costs, and is used to evaluate operating performance[17](index=17&type=chunk)[18](index=18&type=chunk) - Free Cash Flow is defined as net cash flows from operating activities less cash capital expenditures and is used as a liquidity measure[20](index=20&type=chunk) Q2 Non-GAAP Reconciliation Summary (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | ($88.0) | $21.7 | | Adjusted EBITDA | $803.8 | $867.2 | | Adjusted EBITDA Margin | 37.4% | 38.7% | | Net Cash from Operating Activities | $412.0 | $306.8 | | Free Cash Flow (Deficit) | $28.4 | ($40.9) |

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File No. 001-38403 __________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or CRONOS GROUP INC. (Exact name of registrant as specified in its charter) ________________________ ...

[MACOM Fiscal Third Quarter 2025 Financial Results](index=1&type=section&id=MACOM%20Fiscal%20Third%20Quarter%202025%20Financial%20Results) MACOM's fiscal third quarter 2025 results present strong financial performance, a positive management outlook, and detailed financial statements [Financial Highlights](index=1&type=section&id=Financial%20Highlights) MACOM reported strong financial results for the third fiscal quarter of 2025, with significant year-over-year and sequential growth in revenue, and substantial increases in both GAAP and non-GAAP net income and earnings per share Q3 Fiscal 2025 GAAP Financial Highlights | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | Q2 FY2025 | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $252.1M | $190.5M | +32.3% | $235.9M | +6.9% | | Gross Margin | 55.3% | 53.2% | +210 bps | 55.2% | +10 bps | | Income from Operations | $37.7M | $19.7M | +91.4% | $34.9M | +8.0% | | Net Income | $36.5M | $19.9M | +83.4% | $31.7M | +15.1% | | Diluted EPS | $0.48 | $0.27 | +77.8% | $0.42 | +14.3% | Q3 Fiscal 2025 Adjusted Non-GAAP Financial Highlights | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | Q2 FY2025 | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted Gross Margin | 57.6% | 57.5% | +10 bps | 57.5% | +10 bps | | Adjusted Income from Operations | $63.5M | $45.6M | +39.3% | $59.8M | +6.2% | | Adjusted Net Income | $68.2M | $48.9M | +39.5% | $64.3M | +6.1% | | Adjusted Diluted EPS | $0.90 | $0.66 | +36.4% | $0.85 | +5.9% | [Management Commentary and Business Outlook](index=1&type=section&id=Management%20Commentary%20and%20Business%20Outlook) Management expressed confidence in the company's performance, attributing strong results to a competitive product portfolio and growing market momentum, while issuing a positive outlook for Q4 FY2025 - President and CEO Stephen G. Daly stated that the quarterly results demonstrate the growing competitiveness of MACOM's diverse product portfolio and increasing market momentum[4](index=4&type=chunk) Q4 Fiscal 2025 Business Outlook | Metric | Expected Range | | :--- | :--- | | Revenue | $256M - $264M | | Adjusted Gross Margin | 56.0% - 58.0% | | Adjusted Earnings per Diluted Share | $0.91 - $0.95 | [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) This section presents MACOM's unaudited consolidated financial statements, detailing the company's financial position, operational performance, and cash flow activities [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the third quarter ended July 4, 2025, MACOM generated $252.1 million in revenue, a 32.3% increase year-over-year, with net income reaching $36.5 million or $0.48 per diluted share Income Statement Summary | Line Item | Three Months Ended July 4, 2025 ($ thousands) | Three Months Ended June 28, 2024 ($ thousands) | | :--- | :--- | :--- | | Revenue | $252,079 | $190,486 | | Gross Profit | $139,436 | $101,409 | | Income from Operations | $37,660 | $19,716 | | Net Income | $36,534 | $19,939 | | Diluted EPS | $0.48 | $0.27 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of July 4, 2025, MACOM's total assets increased to $2.00 billion, driven by growth in current assets including cash, cash equivalents, and short-term investments, while total liabilities also rose Balance Sheet Summary | Line Item | July 4, 2025 ($ thousands) | September 27, 2024 ($ thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $125,466 | $146,806 | | Short-term investments | $609,760 | $435,082 | | Total current assets | $1,127,355 | $903,078 | | Total assets | $2,003,272 | $1,755,640 | | **Liabilities & Equity** | | | | Total current liabilities | $294,647 | $108,184 | | Total liabilities | $739,921 | $629,297 | | Total stockholders' equity | $1,263,351 | $1,126,343 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended July 4, 2025, net cash provided by operating activities significantly improved to $165.7 million, while the company used $246.1 million in investing activities and generated $58.8 million from financing activities Cash Flow Summary (Nine Months Ended) | Line Item | July 4, 2025 ($ thousands) | June 28, 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $165,732 | $100,311 | | Net cash used in investing activities | ($246,131) | ($148,615) | | Net cash provided by (used in) financing activities | $58,796 | ($8,434) | | Net change in cash and cash equivalents | ($21,340) | ($56,648) | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=2&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section explains MACOM's use of non-GAAP financial measures and provides a detailed reconciliation to comparable GAAP figures, showing an adjusted non-GAAP net income of $68.2 million for Q3 2025 - Management uses non-GAAP financial measures to evaluate ongoing operating performance by excluding items such as intangible amortization, share-based compensation, acquisition-related costs, and non-cash interest[10](index=10&type=chunk)[11](index=11&type=chunk) Q3 FY2025 GAAP to Non-GAAP Net Income Reconciliation | Description | Amount ($ thousands) | | :--- | :--- | | **Net income - GAAP** | **$36,534** | | Amortization expense | $4,967 | | Share-based compensation expense | $19,568 | | Non-cash interest, net | $381 | | Acquisition and integration related costs | $1,321 | | Tax effect of non-GAAP adjustments | $5,436 | | **Adjusted net income (Non-GAAP)** | **$68,207** | [About MACOM & Forward-Looking Statements](index=2&type=section&id=About%20MACOM%20%26%20Forward-Looking%20Statements) MACOM manufactures high-performance semiconductor products for Industrial and Defense, Data Center, and Telecommunications sectors, with this report containing forward-looking statements subject to inherent risks and uncertainties - MACOM designs and manufactures semiconductor products for the Industrial and Defense, Data Center, and Telecommunications industries, serving over **6,000 customers** annually[7](index=7&type=chunk) - The press release contains forward-looking statements about strategic plans, growth, and financial outlook, which are subject to risks and uncertainties that could cause actual results to differ materially[8](index=8&type=chunk)[9](index=9&type=chunk)

```markdown [Forward-Looking Statements](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines inherent risks and uncertainties, emphasizing that actual results may differ materially from projections - Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions, and actual results may differ materially. Key risk areas include profitability, funding, operating expenses, program success, genome-editing technology, clinical trials, regulatory approvals, competition, and intellectual property[11](index=11&type=chunk)[12](index=12&type=chunk)[16](index=16&type=chunk) [Risk Factor Summary](index=6&type=section&id=RISK%20FACTOR%20SUMMARY) The company faces significant operating losses, requires substantial funding, and its novel ARCUS technology presents unpredictable future success - The company has incurred significant operating losses and expects to continue to do so, requiring substantial additional funding. Its limited operating history and the novel ARCUS technology make future success difficult to predict. Key risks include the inability to assess product safety/efficacy, competition, adverse public perception of genome editing, and complex, uncertain regulatory landscape[18](index=18&type=chunk)[19](index=19&type=chunk) [PART I. FINANCIAL INFORMATION](index=8&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited financial statements and management's discussion and analysis of financial condition [Item 1. Financial Statements (unaudited)](index=8&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This item includes the company's unaudited condensed financial statements and detailed notes for the reported periods [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $85,899 | $62,242 | $(23,657) | | Total current assets | $94,989 | $70,259 | $(24,730) | | Total assets | $136,388 | $108,928 | $(27,460) | | Total current liabilities | $14,980 | $13,568 | $(1,412) | | Total liabilities | $79,995 | $74,874 | $(5,121) | | Total stockholders' equity | $56,393 | $34,054 | $(22,339) | [Condensed Statements of Operations](index=9&type=section&id=Condensed%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric (in thousands) | Q2 2025 | Q2 2024 | Change Q2 | H1 2025 | H1 2024 | Change H1 | | :-------------------- | :------ | :------ | :-------- | :------ | :------ | :-------- | | Revenue | $18 | $49,898 | $(49,880) | $47 | $67,482 | $(67,435) | | Operating expenses | $21,895 | $25,752 | $(3,857) | $44,036 | $47,523 | $(3,487) | | Operating (loss) income | $(21,877) | $24,146 | $(46,023) | $(43,989) | $19,959 | $(63,948) | | Net (loss) income | $(23,520) | $32,749 | $(56,269) | $(44,085) | $41,337 | $(85,422) | | Basic EPS | $(2.13) | $4.70 | $(6.83) | $(4.33) | $6.87 | $(11.20) | | Diluted EPS | $(2.13) | $4.67 | $(6.80) | $(4.33) | $6.81 | $(11.14) | [Condensed Statements of Changes in Stockholders' Equity](index=10&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines changes in the company's equity accounts, including accumulated deficit and additional paid-in capital | Metric (in thousands) | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Stockholders' Equity | $56,393 | $34,054 | $(22,339) | | Accumulated Deficit | $(482,464) | $(526,549) | $(44,085) | | Additional Paid-In Capital | $539,808 | $561,554 | $21,746 | [Condensed Statements of Cash Flows](index=11&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) This section reports cash generated and used by the company across operating, investing, and financing activities | Metric (in thousands) | H1 2025 | H1 2024 | Change | | :-------------------- | :------ | :------ | :----- | | Net cash used in operating activities | $(39,323) | $(33,850) | $(5,473) | | Net cash used in investing activities | $(326) | $(54) | $(272) | | Net cash provided by financing activities | $15,987 | $40,797 | $(24,810) | | Net (decrease) increase in cash and cash equivalents | $(23,662) | $6,893 | $(30,555) | | Cash, cash equivalents, and restricted cash — end of period | $84,806 | $123,571 | $(38,765) | [Notes to Condensed Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed financial statements [NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=NOTE%201%3A%20DESCRIPTION%20OF%20BUSINESS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's gene editing focus and outlines key accounting policies and operational dependencies - Precision BioSciences is a gene editing company focused on in vivo therapies using its ARCUS platform[29](index=29&type=chunk) - The company's success depends on its ability to raise capital, fund R&D, obtain regulatory approval, commercialize products, generate revenue, and achieve profitability[30](index=30&type=chunk) - The company strategically decided to operate as a single platform company focused on in vivo gene editing therapies, completing the sale of its CAR T infrastructure and licensing azer-cel to Imugene in August **2023**[33](index=33&type=chunk)[34](index=34&type=chunk) [NOTE 2: FAIR VALUE MEASUREMENTS](index=15&type=section&id=NOTE%202%3A%20FAIR%20VALUE%20MEASUREMENTS) This note details the fair value hierarchy and measurements for various assets and liabilities | Asset/Liability (in thousands) | Fair Value (Jun 30, 2025) | Level 1 | Level 2 | Level 3 | | :----------------------------- | :------------------------ | :------ | :------ | :------ | | Money market funds | $14,979 | $14,979 | $— | $— | | Investment in iECURE | $744 | $— | $— | $744 | | Assets held for sale | $140 | $— | $— | $140 | | Final payment fee | $200 | $— | $200 | $— | | Warrant liability | $2,847 | $— | $— | $2,847 | - The investment in iECURE decreased by **$2.5 million** in fair value during the six months ended June **30, 2025**[40](index=40&type=chunk) [NOTE 3: DEBT](index=17&type=section&id=NOTE%203%3A%20DEBT) This note provides details on the company's outstanding term loan and associated interest rates - As of June **30, 2025**, **$22.5 million** was outstanding under the **2024** Term Loan with Banc of California[43](index=43&type=chunk) - The stated interest rate on the **2024** Term Loan was **6.00%**, with an effective interest rate of **6.43%**[42](index=42&type=chunk) [NOTE 4: COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=NOTE%204%3A%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's accrued contingent liabilities and future minimum lease payment obligations - Contingent liabilities of **$10.0 million** are accrued for the Servier Program Purchase Agreement[47](index=47&type=chunk) | Future Minimum Lease Payments (in thousands) | Amount | | :------------------------------------------- | :----- | | 2025 (remainder of year) | $993 | | 2026 | $2,019 | | 2027 | $2,078 | | 2028 | $2,140 | | 2029 | $1,269 | | Total lease payments | $8,499 | - The company guarantees Imugene's MCAT Lease with a contingent liability of approximately **$3.5 million**[52](index=52&type=chunk) [NOTE 5: STOCKHOLDERS' EQUITY](index=21&type=section&id=NOTE%205%3A%20STOCKHOLDERS'%20EQUITY) This note details changes in stockholders' equity, including common stock issuance and warrant terms - In March **2024**, the company issued **2,500,000 shares** of common stock and warrants, generating approximately **$37.0 million** in net proceeds[56](index=56&type=chunk) - The warrants have a five-year term and an exercise price of **$20.00** per share[56](index=56&type=chunk) [NOTE 6: COLLABORATION AND LICENSE AGREEMENTS](index=21&type=section&id=NOTE%206%3A%20COLLABORATION%20AND%20LICENSE%20AGREEMENTS) This note describes revenue recognition and milestone payments from various collaboration and license agreements - Under the TG License Agreement, the company received an upfront cash payment of **$10.0 million** and is eligible for up to **$288.6 million** in additional milestone payments[58](index=58&type=chunk) | Agreement | Revenue (Q2 2025, in thousands) | Revenue (Q2 2024, in thousands) | Revenue (H1 2025, in thousands) | Revenue (H1 2024, in thousands) | | :-------- | :------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | | TG License | $0 | $900 | $0 | $8,000 | | Novartis | < $100 | $800 | < $100 | $5,300 | | Prevail | $0 | $48,200 | $0 | $52,700 | - The Prevail Agreement was terminated in the prior year, resulting in no revenue recognized in H1 **2025**[61](index=61&type=chunk) - The fair value of the iECURE equity investment decreased by **$2.5 million** during the three and six months ended June **30, 2025**[62](index=62&type=chunk) [NOTE 7: SHARE-BASED COMPENSATION](index=22&type=section&id=NOTE%207%3A%20SHARE-BASED%20COMPENSATION) This note details the company's share-based compensation expense and unrecognized compensation costs | Metric (in thousands) | H1 2025 | H1 2024 | | :-------------------- | :------ | :------ | | Total Share-based Compensation Expense | $5,758 | $5,834 | | R&D Share-based Compensation | $901 | $1,473 | | G&A Share-based Compensation | $4,857 | $4,361 | - As of June **30, 2025**, there was approximately **$10.0 million** of total unrecognized compensation cost related to unvested stock options and RSUs, expected to be recognized over a weighted-average period of **1.7 years**[69](index=69&type=chunk) [NOTE 8: DISCONTINUED OPERATIONS](index=23&type=section&id=NOTE%208%3A%20DISCONTINUED%20OPERATIONS) This note presents financial information related to the company's historical cell therapy operations as discontinued - The company's historical cell therapy operations are presented as discontinued operations following the August **2023** strategic decision[70](index=70&type=chunk)[71](index=71&type=chunk) | Metric (in thousands) | Jun 30, 2025 | Dec 31, 2024 | | :-------------------- | :----------- | :----------- | | Current liabilities of discontinued operations | $885 | $1,204 | [NOTE 9: ELO TRANSACTION](index=24&type=section&id=NOTE%209%3A%20ELO%20TRANSACTION) This note describes the company's equity ownership in Elo and the financial impact of its Series A-2 financing - The company owned approximately **22%** of Elo's voting shares as of June **30, 2025**, down from **26%** at December **31, 2024**[74](index=74&type=chunk) - A **$2.3 million** gain on dilution was recognized from Elo's Series A-2 financing during H1 **2025**, partially offset by a **$1.6 million** proportionate share of Elo's net loss[74](index=74&type=chunk) [NOTE 10: INCOME TAXES](index=24&type=section&id=NOTE%2010%3A%20INCOME%20TAXES) This note explains the company's estimated effective tax rate and the application of a full valuation allowance - The company estimates a **0% annual effective tax rate** for **2025** due to expected net losses[76](index=76&type=chunk) - A full valuation allowance is applied to net deferred tax assets due to the company's history of losses, indicating that realization of these assets is not probable[77](index=77&type=chunk) [NOTE 11: EARNINGS PER SHARE](index=24&type=section&id=NOTE%2011%3A%20EARNINGS%20PER%20SHARE) This note presents basic and diluted earnings per share, excluding anti-dilutive common stock equivalents | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----- | :------ | :------ | :------ | :------ | | Basic Net (Loss) Income Per Share | $(2.13) | $4.70 | $(4.33) | $6.87 | | Diluted Net (Loss) Income Per Share | $(2.13) | $4.67 | $(4.33) | $6.81 | - All outstanding common stock equivalents were excluded from diluted EPS calculations for Q2 and H1 **2025** because their inclusion would have been anti-dilutive[80](index=80&type=chunk) [NOTE 12: SEGMENT REPORTING](index=25&type=section&id=NOTE%2012%3A%20SEGMENT%20REPORTING) This note clarifies that the company operates as a single segment focused on its ARCUS platform - The company operates as a single operating segment focused on the discovery and development of therapies using its ARCUS platform[81](index=81&type=chunk) | Expense Category (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------ | :------ | :------ | :------ | :------ | | Total Research and Development | $12,768 | $17,225 | $26,356 | $30,568 | | Total General and Administrative | $9,127 | $8,527 | $17,680 | $16,955 | [NOTE 13: WARRANTS](index=27&type=section&id=NOTE%2013%3A%20WARRANTS) This note details the accounting treatment and fair value adjustments for warrants issued in the March 2024 Public Offering - Warrants issued in the March **2024** Public Offering are classified as a liability and remeasured at fair value each reporting period[87](index=87&type=chunk) | Metric (in thousands) | Dec 31, 2024 | Mar 31, 2025 | Jun 30, 2025 | | :-------------------- | :----------- | :----------- | :----------- | | Warrant liability | $2,796 | $3,600 | $2,848 | - The fair value adjustment for the three months ended June **30, 2025**, was a gain of **$0.8 million**, while for the six months ended June **30, 2025**, it was a loss of **$0.1 million**[24](index=24&type=chunk)[87](index=87&type=chunk) [NOTE 14: SUBSEQUENT EVENTS](index=29&type=section&id=NOTE%2014%3A%20SUBSEQUENT%20EVENTS) This note describes post-period events, including operating efficiencies and clinical trial advancements - The company initiated operating efficiencies in July **2025** to reduce annual operating expenses and extend its cash runway[90](index=90&type=chunk) - The ELIMINATE-B clinical trial is expanding to higher dose levels, and an IND/CTA filing for the PBGENE-DMD program is being prepared[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, results, ARCUS platform focus, clinical program progress, liquidity, and capital resources [Overview](index=30&type=section&id=Overview) This section summarizes the company's in vivo gene editing focus, key clinical programs, and recent operational efficiency initiatives - The company is a clinical-stage gene editing company focused on in vivo therapies using its ARCUS platform for genetic and infectious diseases[92](index=92&type=chunk)[93](index=93&type=chunk) - PBGENE-HBV, a wholly-owned in vivo gene editing program for chronic Hepatitis B, is in a global first-in-human clinical trial (ELIMINATE-B). Cohort **1** showed substantial HBsAg reduction (**56%**, **69%**, **47%**) and was well-tolerated. Cohort **2** also showed a favorable safety profile[94](index=94&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - PBGENE-DMD, targeting Duchenne Muscular Dystrophy, received Rare Pediatric Disease and Orphan Drug designations. Preclinical data showed significant, durable functional improvement in a humanized DMD mouse model. An IND/CTA filing is targeted by the end of **2025**[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - Development of PBGENE-3243 for m.**3243** associated mitochondrial disease has been paused to prioritize PBGENE-HBV and PBGENE-DMD[105](index=105&type=chunk) - The company initiated an operating efficiency program in July **2025**, including expense reductions, to extend its cash runway to the **second half of 2027**[104](index=104&type=chunk) [Components of Our Results of Operations](index=32&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section explains the primary drivers of the company's revenue, operating expenses, and other income/expense items - Revenue is primarily derived from collaboration and license agreements, with no product sales to date[108](index=108&type=chunk) - Research and development expenses are expensed as incurred and are expected to decrease in the short-term (**2026-2027**) due to cost reduction initiatives, but increase over the long term[109](index=109&type=chunk)[110](index=110&type=chunk) - General and administrative expenses include salaries, consulting fees, legal fees, and facility-related costs[115](index=115&type=chunk) - Other income/expense items include gains/losses from equity method investments (e.g., Elo), changes in fair value of assets/liabilities (e.g., iECURE investment, warrant liability), interest expense, interest income, and loss on disposal of assets[116](index=116&type=chunk)[117](index=117&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance over specific reporting periods, detailing changes in revenue and expenses [Comparison of the Three Months Ended June 30, 2025 and June 30, 2024](index=34&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section compares the company's financial results for the second quarter of 2025 against the same period in 2024 | Metric (in thousands) | Q2 2025 | Q2 2024 | Change | | :-------------------- | :------ | :------ | :----- | | Revenue | $18 | $49,898 | $(49,880) | | Total operating expenses | $21,895 | $25,752 | $(3,857) | | Net (loss) income | $(23,520) | $32,749 | $(56,269) | - The **$49.9 million** decrease in Q2 revenue was primarily due to the conclusion of the Prevail Therapeutics Agreement (**$48.2 million** in prior period), and decreases from TG License (**$0.9 million**) and Novartis (**$0.8 million**) agreements[124](index=124&type=chunk) - R&D expenses decreased by **$4.5 million**, driven by a **$7.3 million** decrease in PBGENE-HBV and PBGENE-3243 programs, partially offset by a **$4.0 million** increase in PBGENE-DMD[126](index=126&type=chunk)[127](index=127&type=chunk) - General and administrative expenses increased by **$0.6 million** due to higher employee-related costs[128](index=128&type=chunk) - Loss on changes in fair value was **$2.5 million** in Q2 **2025** (due to iECURE investment) compared to a gain of **$0.7 million** in Q2 **2024** (due to Imugene Convertible Note)[130](index=130&type=chunk) - Gain on change in fair value of warrant liability decreased from **$7.8 million** in Q2 **2024** to **$0.8 million** in Q2 **2025**[131](index=131&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and June 30, 2024](index=36&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section compares the company's financial results for the first half of 2025 against the same period in 2024 | Metric (in thousands) | H1 2025 | H1 2024 | Change | | :-------------------- | :------ | :------ | :----- | | Revenue | $47 | $67,482 | $(67,435) | | Total operating expenses | $44,036 | $47,523 | $(3,487) | | Net (loss) income | $(44,085) | $41,337 | $(85,422) | - The **$67.4 million** decrease in H1 revenue was primarily due to the conclusion of the Prevail Therapeutics Agreement (**$52.7 million** in prior period) and decreases from TG License and Novartis agreements (**$9.5 million** and **$5.3 million**, respectively)[136](index=136&type=chunk) - R&D expenses decreased by **$4.2 million**, driven by a **$7.8 million** decrease in PBGENE-HBV and a **$2.7 million** decrease in platform development, partially offset by a **$6.3 million** increase in PBGENE-DMD[137](index=137&type=chunk)[138](index=138&type=chunk) - General and administrative expenses increased by **$0.7 million** due to a **$1.1 million** increase in employee-related costs[139](index=139&type=chunk) - Gain from equity method investment was **$0.7 million** in H1 **2025** (driven by a **$2.3 million** gain on dilution from Elo's Series A-2 financing, offset by **$1.6 million** share of Elo's net loss)[140](index=140&type=chunk) - Loss on changes in fair value was **$2.4 million** in H1 **2025** (due to iECURE investment) compared to a gain of **$0.3 million** in H1 **2024** (due to Imugene Convertible Note)[141](index=141&type=chunk) - Loss on change in fair value of warrant liability was less than **$0.1 million** in H1 **2025** compared to a gain of **$18.2 million** in H1 **2024**[142](index=142&type=chunk) - Interest income decreased by **$1.1 million** due to lower interest rates and a lower cash balance[144](index=144&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, funding requirements, and ability to finance future operations - As of June **30, 2025**, the company had an accumulated deficit of **$526.5 million** and expects to incur significant operating losses for the foreseeable future[147](index=147&type=chunk)[148](index=148&type=chunk) - Total cash, cash equivalents, and restricted cash were **$84.8 million** as of June **30, 2025**, down from **$123.6 million** as of June **30, 2024**[149](index=149&type=chunk)[154](index=154&type=chunk) - The company believes existing cash and expected operational receipts will fund operations into the **second half of 2027**, sufficient for potential Phase **2** for PBGENE-HBV and pivotal study for PBGENE-DMD[165](index=165&type=chunk) - The company is subject to the "Baby Shelf Rule," limiting capital raised through primary public offerings via Form S-**3** (including ATM facility) to **one-third** of its public float until it exceeds **$75 million**[151](index=151&type=chunk)[152](index=152&type=chunk)[189](index=189&type=chunk) - Net cash used in operating activities increased by **$5.5 million** to **$39.3 million** for H1 **2025** compared to H1 **2024**[157](index=157&type=chunk) - Net cash provided by financing activities decreased by **$24.8 million** to **$16.0 million** for H1 **2025**, primarily due to the absence of a large underwritten offering seen in H1 **2024**[161](index=161&type=chunk) - The company has a **$22.5 million** term loan with Banc of California, requiring it to maintain an aggregate balance in a cash security account at least equal to the outstanding principal amount[149](index=149&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) [Critical Accounting Policies and Use of Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) This section confirms no significant changes to critical accounting policies from the prior annual report - No significant changes in critical accounting policies and estimates from the prior annual report[172](index=172&type=chunk) [Smaller Reporting Company Status](index=42&type=section&id=Smaller%20Reporting%20Company%20Status) This section explains the company's status as a smaller reporting company and its implications for disclosures and investor appeal - The company is a "smaller reporting company" and benefits from reduced disclosure requirements, including presenting two years of audited financial statements and reduced executive compensation disclosures[173](index=173&type=chunk) - This status may make the common stock less attractive to investors, potentially leading to a less active trading market or increased stock price volatility[174](index=174&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, with no material impact expected from a **10%** rate change - The company's primary market risk is interest rate sensitivity, related to its cash and cash equivalents[175](index=175&type=chunk) - A hypothetical **10%** change in interest rates is not expected to have a material impact on the financial statements as of June **30, 2025**[175](index=175&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective as of June **30, 2025**, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at a reasonable assurance level as of June **30, 2025**[177](index=177&type=chunk) - No material changes in internal control over financial reporting occurred during Q2 **2025**[178](index=178&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes legal proceedings, risk factors, equity sales, defaults, mine safety, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently party to any material legal proceedings, though subject to ordinary course claims - The company is not currently involved in any material legal proceedings[180](index=180&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section details significant investment risks across financial condition, product development, operations, and intellectual property [Risks Related to Our Financial Condition, Limited Operating History and Need for Additional Capital](index=43&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%2C%20Limited%20Operating%20History%20and%20Need%20for%20Additional%20Capital) Risks from operating losses, funding needs, and unpredictable success due to limited operating history are highlighted - The company has incurred significant operating losses since inception, with an accumulated deficit of **$526.5 million** as of June **30, 2025**, and does not expect to be profitable in the foreseeable future[182](index=182&type=chunk) - Substantial additional funding will be required to advance product candidates, and failure to raise capital on acceptable terms could force delays, reductions, or elimination of research programs[186](index=186&type=chunk) - The company's limited operating history and the novel nature of its genome editing platform make it difficult to predict future success or viability[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Resource allocation decisions may lead to expending limited resources on less successful programs or foregoing opportunities with greater commercial potential[201](index=201&type=chunk) [Risks Related to the Identification, Development and Commercialization of Our Product Candidates](index=48&type=section&id=Risks%20Related%20to%20the%20Identification%2C%20Development%20and%20Commercialization%20of%20Our%20Product%20Candidates) This section addresses risks in developing novel ARCUS technology, competition, public perception, and product liability - ARCUS is a novel technology, making it difficult to predict the time, cost, and potential success of product candidate development, with limited human safety and efficacy data available[202](index=202&type=chunk) - The genome editing field is rapidly evolving, and other existing or future technologies may offer significant advantages over ARCUS, potentially harming the company's business[203](index=203&type=chunk) - The company is heavily dependent on the successful development and commercialization of ARCUS-based product candidates, which is uncertain given their early stage of development[204](index=204&type=chunk) - Failure to achieve projected development milestones or commercialization in expected timeframes could delay product commercialization and harm the business[207](index=207&type=chunk) - Adverse public perception of genome editing technology could negatively impact developmental progress or commercial success, potentially leading to increased regulation or decreased demand[208](index=208&type=chunk)[209](index=209&type=chunk) - The company faces significant competition from major pharmaceutical and biotechnology companies with greater resources and expertise, which could lead to competitors achieving regulatory approval sooner or developing superior treatments[210](index=210&type=chunk)[212](index=212&type=chunk) - Commercialization in various global markets subjects the company to risks including complex regulatory compliance, reduced intellectual property protection, economic instability, and longer collection times[213](index=213&type=chunk)[214](index=214&type=chunk) - Product liability lawsuits, arising from clinical trials or commercial sales, could result in substantial liabilities, reputational damage, and limit commercialization efforts[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Additional Risks Related to the Identification, Development and Commercialization of Our Therapeutic Product Candidates](index=54&type=section&id=Additional%20Risks%20Related%20to%20the%20Identification%2C%20Development%20and%20Commercialization%20of%20Our%20Therapeutic%20Product%20Candidates) This section covers regulatory complexities, clinical trial challenges, potential product failures, and market acceptance issues - The regulatory landscape for gene editing therapeutic product candidates is rigorous, complex, uncertain, and subject to change, potentially causing delays, termination of development, or unexpected costs[221](index=221&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - The regulatory approval processes are lengthy, time-consuming, and inherently unpredictable, with no assurance of obtaining marketing approval for product candidates[229](index=229&type=chunk)[230](index=230&type=chunk) - Clinical trials are difficult to design, expensive, time-consuming, and involve uncertain outcomes, with potential for delays, suspensions, or terminations due to various factors including patient enrollment, safety concerns, or regulatory disagreements[233](index=233&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk) - Product candidates may not work as intended or could cause undesirable side effects, off-target editing, or other serious adverse events, potentially hindering regulatory approval or commercialization[263](index=263&type=chunk)[265](index=265&type=chunk) - The company is subject to extensive federal, state, and foreign healthcare laws and regulations (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, GDPR), and non-compliance could lead to substantial penalties, fines, and reputational harm[268](index=268&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk)[279](index=279&type=chunk) - Information technology system failures, cyberattacks, or cybersecurity deficiencies could disrupt operations, lead to data loss, intellectual property compromise, and incur significant costs and liabilities[280](index=280&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) - The company may seek orphan drug designation but may be unable to obtain or maintain its benefits, which could negatively impact development, regulatory approval, and revenue[287](index=287&type=chunk)[288](index=288&type=chunk)[291](index=291&type=chunk) - Regulatory approval in one jurisdiction does not guarantee approval in others, limiting market opportunities[292](index=292&type=chunk) - Current and future legislation (e.g., ACA, IRA) may increase the difficulty and cost of obtaining marketing approval and commercializing products, and adversely affect pricing[293](index=293&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) - Approved products will remain subject to ongoing regulatory requirements (e.g., manufacturing, labeling, post-market surveillance), resulting in significant additional expenses and potential enforcement actions for non-compliance[303](index=303&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk) - Disruptions at regulatory agencies (e.g., FDA) due to funding shortages or global health concerns could delay product development and approval[310](index=310&type=chunk)[312](index=312&type=chunk) - Even with regulatory approval, products may fail to achieve sufficient market acceptance by physicians, patients, and payors, limiting commercial success[313](index=313&type=chunk)[314](index=314&type=chunk) - Inability to establish effective sales and marketing capabilities or secure third-party agreements could hinder commercialization[315](index=315&type=chunk)[319](index=319&type=chunk) - Market opportunities for rare genetic diseases may be smaller than estimated, or patient identification difficult, adversely affecting revenues[320](index=320&type=chunk) - Failure to obtain or maintain adequate coverage, reimbursement levels, and favorable pricing policies from governmental authorities and health insurers could limit marketability and revenue generation[321](index=321&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk) - Biologic product candidates may face competition from biosimilar products sooner than anticipated, potentially shortening exclusivity periods and increasing competitive pressure[328](index=328&type=chunk)[329](index=329&type=chunk) [Risks Related to Our Organization, Structure and Operations](index=76&type=section&id=Risks%20Related%20to%20Our%20Organization%2C%20Structure%20and%20Operations) Operational risks include managing growth, personnel, public company compliance, insurance, environmental, fraud, and tax complexities - Difficulties in managing business needs, including attracting and retaining qualified personnel, could disrupt operations and limit the rate and success of product development[331](index=331&type=chunk)[332](index=332&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - Future transactions (acquisitions, investments, in-licenses) could disrupt business, cause stockholder dilution, reduce financial resources, and may not strengthen competitive position[333](index=333&type=chunk) - Operating as a public company incurs significant legal, accounting, and compliance costs, requiring substantial management time and resources, and failure to maintain effective internal controls could harm financial reporting and stock price[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - Insurance policies are expensive and may not adequately cover all business risks, leaving the company exposed to significant uninsured liabilities, especially for biological or hazardous waste[344](index=344&type=chunk)[346](index=346&type=chunk) - Failure to comply with environmental, health, and safety laws and regulations by the company or its third-party manufacturers/suppliers could result in fines, penalties, or significant costs[347](index=347&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) - The company is exposed to risks of fraud or misconduct by employees, consultants, and collaborators, which could lead to significant penalties, fines, and reputational harm[352](index=352&type=chunk)[353](index=353&type=chunk) - Complex tax rules and potential audits could result in additional tax liabilities, and the company may not be able to utilize all of its net operating loss (NOL) carryforwards due to ownership changes or changes in tax laws[354](index=354&type=chunk)[355](index=355&type=chunk)[357](index=357&type=chunk) [Risks Related to Our Reliance on Third Parties](index=82&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) This section outlines risks from dependence on third-party collaborators, CROs, and manufacturers for development and supply - The company relies on third-party collaborators for research, development, and commercialization, which involves risks such as limited control over resources, potential for disputes, and termination of agreements[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk) - Inability to establish collaborations on commercially reasonable terms could force alterations to research, development, and commercialization plans[361](index=361&type=chunk)[363](index=363&type=chunk) - Reliance on third parties (CROs, clinical investigators) to conduct clinical trials poses risks if they fail to carry out duties, comply with regulations, or perform satisfactorily, potentially delaying regulatory approval or commercialization[364](index=364&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk) - Dependence on third parties for raw materials and product manufacturing carries risks of supply reduction, interruptions, quality issues, or delays, which could harm the business[369](index=369&type=chunk)[370](index=370&type=chunk) [Risks Related to Intellectual Property](index=85&type=section&id=Risks%20Related%20to%20Intellectual%20Property) This section addresses challenges in obtaining, maintaining, and defending intellectual property rights, including patentability and infringement - Commercial success depends on obtaining, maintaining, and defending proprietary rights to intellectual property, including ARCUS and product candidates, which is uncertain due to factors like inventorship, patentability, and challenges by third parties[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk) - Failure to comply with obligations in intellectual property license agreements (e.g., Duke License, Cellectis License) could result in the loss of critical license rights[378](index=378&type=chunk)[384](index=384&type=chunk) - Some in-licensed intellectual property, discovered through government-funded research, may be subject to federal regulations like "march-in" rights and a preference for U.S.-based manufacturing, potentially limiting exclusive rights[386](index=386&type=chunk)[388](index=388&type=chunk) - Failure to obtain patent term extension in the U.S. (Hatch-Waxman Act) and foreign countries could shorten marketing exclusivity and harm the business[389](index=389&type=chunk) - Patents involve complex legal and factual questions, and their issuance, scope, validity, and enforceability are uncertain, potentially leading to challenges or circumvention[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) - Third parties may assert claims of patent infringement, or the company may need to defend/enforce its patents, leading to substantial costs, delays, or loss of productivity[395](index=395&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk) - Developments in patent law (e.g., AIA, Supreme Court rulings) and the complexity of international patent systems (e.g., EU's Unified Patent Court) could negatively impact the company's ability to obtain and enforce patents[400](index=400&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk) - Inability to protect the confidentiality of trade secrets and enforce intellectual property assignment agreements would harm the business and competitive position[404](index=404&type=chunk)[406](index=406&type=chunk) - The company may not be successful in obtaining or maintaining necessary rights to product components and processes for its development pipeline through acquisitions and in-licenses, potentially limiting growth[413](index=413&type=chunk)[415](index=415&type=chunk) - Inadequate protection of trademarks and trade names could hinder brand recognition and adversely affect the business[416](index=416&type=chunk) [Risks Related to Owning Our Common Stock](index=94&type=section&id=Risks%20Related%20to%20Owning%20Our%20Common%20Stock) This section covers risks for common stock owners, including litigation, lack of dividends, and anti-takeover provisions - The company could be subject to securities class action litigation, especially given stock price volatility common in biopharmaceutical companies[417](index=417&type=chunk) - The company does not intend to pay dividends on its common stock for the foreseeable future, meaning investment success depends on future stock price appreciation[418](index=418&type=chunk) - Provisions in the company's amended and restated certificate of incorporation and bylaws, along with Delaware law, could discourage, delay, or prevent a change in control or management, potentially depressing the stock price[419](index=419&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk) - Exclusive forum provisions in corporate documents may limit stockholders' ability to obtain a favorable judicial forum for disputes with the company or its directors/officers[422](index=422&type=chunk) [General Risk Factors](index=96&type=section&id=General%20Risk%20Factors) This section discusses broad risks such as disasters, economic instability, stock price volatility, delisting, and analyst opinions - Natural or man-made disasters, public health emergencies, and other catastrophic events could severely disrupt operations and materially adversely affect the business[425](index=425&type=chunk)[426](index=426&type=chunk) - Unstable market and economic conditions (e.g., credit market disruptions, inflation) may adversely affect the business, financial condition, and stock price, making debt or equity financing more difficult and costly[427](index=427&type=chunk)[429](index=429&type=chunk) - The market price of the common stock is likely to be highly volatile and fluctuate substantially due to numerous factors, including financial results, development progress, competition, and market conditions[430](index=430&type=chunk)[431](index=431&type=chunk)[434](index=434&type=chunk) - Failure to meet Nasdaq's continued listing requirements (e.g., Minimum Bid Price Requirement) could result in delisting, negatively impacting the stock price and stockholders' ability to trade shares[432](index=432&type=chunk)[437](index=437&type=chunk)[438](index=438&type=chunk) - Adverse or misleading opinions from securities or industry analysts, or failure to meet their expectations, could cause the stock price and trading volume to decline[439](index=439&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=99&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[440](index=440&type=chunk) [Item 3. Defaults Upon Senior Securities](index=99&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities to report for the period - No defaults upon senior securities to report[441](index=441&type=chunk) [Item 4. Mine Safety Disclosures](index=99&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[442](index=442&type=chunk) [Item 5. Other Information](index=100&type=section&id=Item%205.%20Other%20Information) No other information to report for the period - No other information to report[443](index=443&type=chunk) [Item 6. Exhibits](index=101&type=section&id=Item%206.%20Exhibits) The exhibits include corporate documents, incentive plans, certifications, and XBRL documents - The exhibits include corporate documents (Certificate of Incorporation, Bylaws), incentive award plans, certifications (CEO, CFO), and XBRL documents[444](index=444&type=chunk) [Signatures](index=102&type=section&id=Signatures) The report is signed by Michael Amoroso (President, CEO, Director) and John Alexander Kelly (CFO) on August **7, 2025** - The report is signed by Michael Amoroso (President, CEO, and Director) and John Alexander Kelly (CFO) on August **7, 2025**[449](index=449&type=chunk) ```

[The Merger](index=7&type=section&id=ARTICLE%20I%20THE%20MERGER) This article outlines the merger process, including transaction structure, closing, and effects on equity and operations [The Merger](index=7&type=section&id=Section%201.01%20The%20Merger) Merger Sub will merge into the Company, which will survive as a wholly owned subsidiary of Parent - Merger Sub will merge into the Company, with the Company surviving as a wholly owned subsidiary of Parent[18](index=18&type=chunk) [The Closing](index=7&type=section&id=Section%201.02%20The%20Closing) The merger closing will occur remotely on the second business day after all conditions are met or waived - The closing will take place remotely no later than the second business day after all conditions are satisfied or waived[19](index=19&type=chunk) [Effective Time](index=7&type=section&id=Section%201.03%20Effective%20Time) The merger becomes effective upon filing the Certificate of Merger with the Delaware Secretary of State - The merger's effective time is established by the filing of the Certificate of Merger with the Delaware Secretary of State[20](index=20&type=chunk) [Effects of Merger](index=7&type=section&id=Section%201.04%20Effects%20of%20Merger) The Surviving Company will assume all assets, rights, debts, and liabilities of both the Company and Merger Sub - Post-merger, the Surviving Company assumes all assets and liabilities of both the Company and Merger Sub[21](index=21&type=chunk) [Certificate of Formation and Operating Agreement](index=7&type=section&id=Section%201.05%20Certificate%20of%20Formation%20and%20Operating%20Agreement) The Surviving Company will adopt Merger Sub's operating agreement and an amended certificate of formation, named "Melinta Therapeutics, LLC" - The Surviving Company will adopt Merger Sub's operating agreement and an amended certificate of formation, and its name will be "Melinta Therapeutics, LLC"[22](index=22&type=chunk)[23](index=23&type=chunk) [Manager and Officers](index=8&type=section&id=Section%201.06%20Manager%20and%20Officers) Merger Sub's management team will become the manager and initial officers of the Surviving Company - Merger Sub's existing management team will assume leadership roles in the Surviving Company[24](index=24&type=chunk)[25](index=25&type=chunk) [Closing Deliveries](index=8&type=section&id=Section%201.07%20Closing%20Deliveries) This section details the specific documents and actions required from both Parent and the Company at or before the closing - Parent is required to deliver executed copies of the Escrow, Contingent Payment, and Registration Rights Agreements, along with evidence of Parent Share issuance[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company must deliver executed payoff letters for all Closing Debt, the executed Certificate of Merger, and Option Treatment Agreements covering at least 85% of underlying shares from options and promised equity grants[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Effect on Equity Interests and Company Options](index=10&type=section&id=Section%201.08%20Effect%20on%20Equity%20Interests%20and%20Company%20Options) This section specifies the treatment of all equity at the merger's effective time, including share conversion and option cancellation - Each Company Share converts into the right to receive a portion of the Merger Consideration as defined in the Allocation Schedule[34](index=34&type=chunk) - All outstanding Company Options will be canceled. Holders who sign an Option Treatment Agreement will receive their portion of the Closing Cash Consideration and potential future payments from milestones and net sales[35](index=35&type=chunk) - Unvested Company Options for current employees will be fully accelerated immediately prior to closing[35](index=35&type=chunk) - The Company Equity Plan will be terminated at the Effective Time[38](index=38&type=chunk) [Payment of Merger Consideration](index=11&type=section&id=Section%201.09%20Payment%20of%20Merger%20Consideration) This section details the payment mechanics at closing, including cash, share issuance, and escrow deposits - At closing, Parent will pay the Closing Cash Consideration to Equityholders and issue the Closing Share Consideration to Consenting Company Members[39](index=39&type=chunk) - Parent will deposit the **$4,000,000** Adjustment Escrow Amount with the Escrow Agent and the Members' Representative Reserve with the Members' Representative[40](index=40&type=chunk)[41](index=41&type=chunk)[319](index=319&type=chunk) - Payments to Company Optionholders that are considered compensation will be processed through payroll systems, subject to tax withholding[44](index=44&type=chunk) [Post-Closing Adjustment](index=13&type=section&id=Section%201.10%20Post-Closing%20Adjustment) This section outlines the process for a post-closing true-up of the merger consideration based on final financial calculations - Within 75 days post-closing, Parent will provide a Closing Statement with final calculations of key financial metrics[51](index=51&type=chunk) - The Members' Representative has a 30-day Objection Period to dispute the Closing Statement. Unresolved disputes are submitted to an Independent Expert for a final and binding decision[52](index=52&type=chunk)[53](index=53&type=chunk) - If the final Adjusted Closing Cash Consideration is higher than the estimate, Parent pays the excess; if lower, the shortfall is paid to Parent from the Adjustment Escrow Fund. Adjustments under **$50,000** are disregarded[55](index=55&type=chunk)[56](index=56&type=chunk) [Members' Representative](index=15&type=section&id=Section%201.13%20Members'%20Representative) Deerfield Private Design Fund IV, L.P. is appointed as the exclusive agent for all Equityholders with broad authority - Deerfield Private Design Fund IV, L.P. is appointed as the Members' Representative with exclusive authority to act on behalf of all Equityholders[61](index=61&type=chunk) - The representative is authorized to manage post-closing adjustments, tax matters, contingent payments, and any disputes[61](index=61&type=chunk) - The Members' Representative is indemnified by the Equityholders for costs and is not liable for actions taken in good faith. Expenses are paid from the Members' Representative Reserve[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) [Representations and Warranties of the Company](index=18&type=section&id=ARTICLE%20II%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20THE%20COMPANY) This article details the Company's assurances regarding its capital structure, financial health, contracts, and regulatory compliance [Capital Structure](index=18&type=section&id=Section%202.02%20Capital%20Structure) The Company represents its authorized and outstanding membership interests, including preferred shares and options Company Capital Structure (as of Agreement Date) | Security Type | Authorized | Issued and Outstanding | | :--- | :--- | :--- | | **Company Preferred Shares** | 50,000,000 | 50,000,000 | | **Company Common Shares** | 8,825,000 | 0 | | **- Reserved for Equity Plan** | 8,825,000 | N/A | | **- Options Outstanding** | N/A | 8,338,000 (underlying shares) | | **- Available for Future Grants** | N/A | 487,000 (underlying shares) | [Financial Statements; Undisclosed Liabilities](index=22&type=section&id=Section%202.06%20Financial%20Statements%3B%20Undisclosed%20Liabilities) The Company warrants its financial statements comply with GAAP and confirms no undisclosed liabilities exist - The Company has provided audited financial statements for the fiscal year ended December 31, 2024, and unaudited statements for the six-month period ended June 30, 2025[94](index=94&type=chunk) - The Company asserts it has no liabilities of any nature other than those reflected on its June 30, 2025 balance sheet, incurred in the ordinary course since that date, or related to the transaction[95](index=95&type=chunk) [Employee Benefits](index=27&type=section&id=Section%202.10%20Employee%20Benefits) The Company represents its employee benefit plans comply with laws and the merger will not trigger new benefits or parachute payments - All company benefit plans are listed and have been administered in material compliance with ERISA and the Code[125](index=125&type=chunk)[127](index=127&type=chunk) - The merger itself will not trigger any new compensation, accelerated vesting, or other benefits for any Company service provider[131](index=131&type=chunk) - The transaction will not result in any "excess parachute payments" as defined by Section 280G of the tax code[133](index=133&type=chunk) [Material Contracts](index=30&type=section&id=Section%202.12%20Material%20Contracts) The Company has provided a list of its material contracts, warranting their validity and absence of default - Material contracts include those with payments or receipts exceeding **$300,000** in 2024 or 2025[138](index=138&type=chunk) - Contracts with restrictive clauses, such as non-compete or "most favored nations" provisions, are also classified as material[138](index=138&type=chunk) - The Company represents that all listed Material Contracts are in full force and effect, and no party is in material default[141](index=141&type=chunk) [Regulatory Matters](index=33&type=section&id=Section%202.15%20Regulatory%20Matters) The Company represents compliance with Health Laws, proper clinical trials, and manufacturing practices, with a key trial completion date - The Company and its products are in material compliance with all applicable Health Laws, including those from the FDA[147](index=147&type=chunk) - All clinical trials have been conducted in compliance with Good Clinical Practices, and manufacturing adheres to Good Manufacturing Practices[149](index=149&type=chunk)[152](index=152&type=chunk) - Enrollment in the phase III trial of Rezzayo for prophylaxis of certain infections in transplant patients is expected to be complete on or before **October 31, 2025**[164](index=164&type=chunk) [Intellectual Property](index=38&type=section&id=Section%202.17%20Intellectual%20Property) The Company warrants sole ownership of its IP, non-infringement, and protection of trade secrets - The Company asserts sole ownership of all Company Owned IP, free and clear of liens (other than Permitted Liens)[171](index=171&type=chunk) - The Company's business does not infringe on third-party IP, and to its knowledge, no third party is infringing on the Company's material IP[172](index=172&type=chunk) - The merger will not result in the loss, impairment, or required transfer of any Company IP rights[181](index=181&type=chunk) [Top Customers; Top Suppliers](index=43&type=section&id=Section%202.27%20Top%20Customers%3B%20Top%20Suppliers) The Company has provided lists of top customers and suppliers, confirming stable relationships - A list of the top 20 customers and top 20 suppliers for the 12 months ended December 31, 2024, has been provided[196](index=196&type=chunk) - The Company represents that no top customer or supplier has terminated or indicated an intent to terminate their business relationship in the last 12 months[197](index=197&type=chunk) [Representations and Warranties of Parent and Merger Sub](index=44&type=section&id=ARTICLE%20III%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20PARENT%20AND%20MERGER%20SUB) This article details Parent's assurances regarding its capital structure, financial solvency, and SEC compliance [Capital Structure](index=44&type=section&id=Section%203.02%20Capital%20Structure) Parent represents its capital structure, including authorized and outstanding stock, and confirms valid issuance of merger shares Parent Capital Structure (as of August 5, 2025) | Security Type | Authorized | Issued and Outstanding | | :--- | :--- | :--- | | **Parent Common Shares** | 160,000,000 | 74,648,992 | | **Parent Preferred Stock** | 2,000,000 | 91,623 (Series C-3 and E) | - The Parent Shares to be issued as Closing Share Consideration are duly authorized and will be validly issued, fully paid, and non-assessable[203](index=203&type=chunk) [Solvency; Financing](index=46&type=section&id=Section%203.09%20Solvency%3B%20Financing) Parent warrants its solvency and confirms sufficient funds for the merger, with financing not a closing condition - Parent represents it is solvent and will remain so after the merger[212](index=212&type=chunk) - Parent has secured sufficient funds for the transaction through a **$150,000,000** convertible note offering and cash on hand[214](index=214&type=chunk) - The receipt of financing is not a condition precedent to Parent's obligations under the agreement[214](index=214&type=chunk) [SEC Filings](index=47&type=section&id=Section%203.11%20SEC%20Filings) Parent represents its SEC filings are timely, compliant, and free of material misstatements, and its shares are Nasdaq-listed - Parent's SEC reports filed since January 1, 2023, are materially compliant with SEC regulations and do not contain untrue statements of material fact[216](index=216&type=chunk) - Parent is in compliance with Nasdaq listing rules and is not aware of any pending action to delist its shares[216](index=216&type=chunk) [Covenants Relating to Conduct of Business](index=49&type=section&id=ARTICLE%20IV%20COVENANTS%20RELATING%20TO%20CONDUCT%20OF%20BUSINESS) This article outlines the Company's operational restrictions and non-solicitation obligations during the pre-closing period [Conduct of Business of the Company Group](index=49&type=section&id=Section%204.01%20Conduct%20of%20Business%20of%20the%20Company%20Group) The Company must conduct business in the ordinary course and is restricted from certain actions without Parent's consent - The Company must operate in the ordinary course of business between signing and closing[225](index=225&type=chunk) - Key restrictions on the Company without Parent's consent include: - Declaring dividends or repurchasing equity - Issuing new shares or options - Amending its Certificate of Formation or Operating Agreement - Making capital expenditures over **$100,000** - Granting significant increases in employee compensation or benefits[226](index=226&type=chunk)[227](index=227&type=chunk) [No Solicitation](index=54&type=section&id=Section%204.04%20No%20Solicitation) The Company agrees not to solicit or engage in discussions regarding alternative acquisition proposals - The Company is prohibited from soliciting or negotiating any alternative "Acquisition Proposal"[233](index=233&type=chunk) - The Company must immediately cease all existing discussions with other parties and terminate their access to any data rooms[233](index=233&type=chunk) [Additional Agreements](index=54&type=section&id=ARTICLE%20V%20ADDITIONAL%20AGREEMENTS) This article covers mutual efforts for regulatory approvals, employee matters, indemnification, and specific pre-closing distributions [Filings; Other Actions; Notification](index=55&type=section&id=Section%205.04%20Filings%3B%20Other%20Actions%3B%20Notification) Both parties will use best efforts for regulatory approvals, including HSR, and Parent may undertake divestitures - Both parties will use reasonable best efforts to obtain all necessary regulatory approvals, including under the HSR Act[239](index=239&type=chunk) - Parent agrees to undertake Remedy Actions, such as asset sales, to gain antitrust clearance, unless such actions would create a Burdensome Condition[240](index=240&type=chunk) [Employee Matters](index=57&type=section&id=Section%205.05%20Employee%20Matters) Parent commits to comparable employee compensation and benefits for one year post-closing, honoring severance and bonuses - For one year post-closing, Company employees will receive a base salary, bonus opportunities, and benefits no less favorable than what they had prior to the merger[252](index=252&type=chunk) - Parent will honor the Company Severance Plan and the Equity Value Recognition Bonus Plan[253](index=253&type=chunk) - If not paid prior to closing, 2025 annual bonuses will be paid by Parent no later than **March 15, 2026**[254](index=254&type=chunk) [Director and Officer Indemnification](index=60&type=section&id=Section%205.09%20Director%20and%20Officer%20Indemnification) The Surviving Company will assume existing indemnification rights, and the Company will purchase a six-year D&O tail policy - All rights to indemnification for the Company's directors and officers for pre-closing acts will survive the merger for a period of six years[263](index=263&type=chunk) - The Company will purchase a six-year "tail" D&O liability insurance policy, with the cost included as a Transaction Expense[264](index=264&type=chunk) [R&W Policy](index=65&type=section&id=Section%205.14%20R%26W%20Policy) Parent will maintain the R&W insurance policy as the sole recourse for breaches, waiving subrogation except for fraud - Parent will maintain the R&W Policy, which will be the sole recourse for breaches of the Company's representations and warranties post-closing[279](index=279&type=chunk)[311](index=311&type=chunk) - The R&W insurer will waive subrogation rights against Equityholders, except in the case of actual fraud[279](index=279&type=chunk) [Pre-Closing Distribution](index=65&type=section&id=Section%205.16%20Pre-Closing%20Distribution) The Company will distribute its rights to the Feptanbli Product and License Agreement to its members before closing - The Company will assign its rights to the Feptanbli Product and License Agreement to its members before the merger closes[281](index=281&type=chunk) [Conditions Precedent to the Merger](index=65&type=section&id=ARTICLE%20VI%20CONDITIONS%20PRECEDENT%20TO%20THE%20MERGER) This article outlines the mutual and individual conditions that must be satisfied for the merger to close [Conditions to Each Party's Obligation](index=65&type=section&id=Section%206.01%20Conditions%20to%20Each%20Party's%20Obligation) Mutual closing conditions include no legal restraints, Company Member Approval, and HSR Act waiting period expiration - Mutual closing conditions include: - No legal prohibitions on the merger - Company Member Approval has been obtained - HSR Act waiting period has expired or been terminated[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) [Additional Conditions to Obligations of the Company](index=66&type=section&id=Section%206.02%20Additional%20Conditions%20to%20Obligations%20of%20the%20Company) The Company's closing obligation depends on Parent's representations remaining true, covenant compliance, and no Parent Material Adverse Effect - The Company is not obligated to close if Parent has breached its representations or covenants in a material way[288](index=288&type=chunk) - A Parent Material Adverse Effect that is continuing would relieve the Company of its obligation to close[289](index=289&type=chunk) [Additional Conditions to the Obligations of Parent](index=66&type=section&id=Section%206.03%20Additional%20Conditions%20to%20the%20Obligations%20of%20Parent) Parent's closing obligation depends on the Company's representations, covenant compliance, Feptanbli distribution, and no Company Material Adverse Effect - Parent is not obligated to close if the Company has breached its representations or covenants in a material way[292](index=292&type=chunk) - The Pre-Closing Distribution of the Feptanbli asset must have occurred[294](index=294&type=chunk) - A Company Material Adverse Effect that is continuing would relieve Parent of its obligation to close[294](index=294&type=chunk) [Termination, Amendment and Waiver](index=67&type=section&id=ARTICLE%20VII%20TERMINATION%2C%20AMENDMENT%20AND%20WAIVER) This article details the conditions under which the merger agreement can be terminated by either party [Termination](index=67&type=section&id=Section%207.01%20Termination) The agreement can be terminated by mutual consent, if closing is delayed past the Outside Date, or due to material breach - The agreement can be terminated by either party if the merger does not close by the Outside Date of **November 3, 2025**[296](index=296&type=chunk) - Termination is also possible due to a final, non-appealable legal prohibition or an uncured material breach by the other party[297](index=297&type=chunk) - Parent may terminate if the Company fails to deliver the required member approval within 12 hours of signing[297](index=297&type=chunk) [Effect of Termination](index=68&type=section&id=Section%207.02%20Effect%20of%20Termination) Termination voids the agreement, but liability for fraud or willful material breach prior to termination survives - Upon termination, the agreement becomes void, but liability for fraud or a willful and material breach prior to termination survives[299](index=299&type=chunk) [General Provisions](index=69&type=section&id=ARTICLE%20VIII%20GENERAL%20PROVISIONS) This article covers the survival of covenants, governing law, and specific enforcement rights for the agreement [Survival; Non-Recourse](index=69&type=section&id=Section%208.01%20Survival%3B%20Non-Recourse) Representations and warranties do not survive closing, with the R&W policy as Parent's sole recourse for breaches - All representations and warranties made by both parties in the agreement do not survive the closing[304](index=304&type=chunk)[305](index=305&type=chunk) - Parent's sole recourse for any breach of the Company's representations and warranties after closing is limited to claims under the R&W Policy[311](index=311&type=chunk) [Governing Law](index=89&type=section&id=Section%208.08%20Governing%20Law) The agreement and related disputes will be governed by the laws of the State of Delaware - The governing law for the agreement is the State of Delaware[431](index=431&type=chunk) [Specific Enforcement; Jurisdiction](index=89&type=section&id=Section%208.10%20Specific%20Enforcement%3B%20Jurisdiction) Parties agree to seek specific performance and submit to the exclusive jurisdiction of Delaware courts for disputes - Parties are entitled to seek specific performance to enforce the terms of the agreement, as monetary damages are considered inadequate[433](index=433&type=chunk) - All legal proceedings related to the agreement must be brought exclusively in the courts of the State of Delaware[434](index=434&type=chunk) [Exhibits](index=95&type=section&id=Exhibits) This article contains supplementary documents detailing contingent payments, registration rights, and warrant terms [Exhibit E: Form of Contingent Payment Agreement](index=99&type=section&id=EXHIBIT%20E%20Form%20of%20Contingent%20Payment%20Agreement) This exhibit outlines terms for future milestone and net sales payments to former Company members for specific products Rezzayo Product Milestone Payments | Milestone Event | Payment Amount | | :--- | :--- | | FDA approval includes Candida | $20,000,000 | | FDA approval includes Aspergillus | $2,500,000 | | FDA approval includes Pneumocystis | $2,500,000 | - Net Sales Payments will be made quarterly based on a tiered percentage of U.S. Net Sales for the Rezzayo Product and a flat percentage for the Minocin Product[492](index=492&type=chunk) - Parent is obligated to use Commercially Reasonable Efforts to achieve the milestones and to commercialize, promote, and sell each Product[528](index=528&type=chunk)[531](index=531&type=chunk) [Exhibit F: Form of Registration Rights Agreement](index=126&type=section&id=EXHIBIT%20F%20Form%20of%20Registration%20Rights%20Agreement) This agreement grants registration rights for shares received in the merger and includes lock-up provisions - The Company must file a resale registration statement on Form S-3 covering all Registrable Securities[610](index=610&type=chunk) - A Lock-Up Period of up to **120 days** applies to certain "Restricted Shares," with releases scheduled at **60 days** and **120 days** post-closing[656](index=656&type=chunk) - The Company is responsible for all expenses related to the registration, including up to **$35,000** in fees for the Holders' legal counsel per registration[643](index=643&type=chunk) [Exhibit M: Form of Closing Share Warrants](index=156&type=section&id=EXHIBIT%20M%20Form%20of%20Closing%20Share%20Warrants) This exhibit provides the form for pre-funded warrants to purchase Parent's common stock, detailing exercise and limitations - The warrants are pre-funded with a remaining exercise price of only **$0.001** per share[707](index=707&type=chunk) - Warrants can be exercised on a cash or cashless basis at the holder's option[708](index=708&type=chunk)[709](index=709&type=chunk)[710](index=710&type=chunk) - An exercise limitation prevents the holder from beneficially owning more than a specified percentage (e.g., **4.9%**) of the Company's outstanding common stock[729](index=729&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of August 2025 Commission File No.: 000-30668 NOVA LTD. (Translation of registrant's name into English) 5 David Fikes Street, Rehovot, Israel (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒ Fo ...

[FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q%20Cover%20Page) This section provides the basic identification details for the quarterly report, including the registrant's name, filing period, stock symbol, and filer status [General Information](index=1&type=section&id=General%20Information) This section details the registrant's identification, filing type, period, stock information, and filer status for the quarterly report - Registrant: **NORTECH SYSTEMS INCORPORATED**[1](index=1&type=chunk) - Filing Type: **Quarterly Report on Form 10-Q**[1](index=1&type=chunk) - Period Ended: **June 30, 2025**[1](index=1&type=chunk) Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :----------------------------------------| | Common Stock, par value $.01 per share | NSYS | NASDAQ Capital Market | - Filer Status: **Non-accelerated Filer and Smaller Reporting Company**[3](index=3&type=chunk) - Common Stock Outstanding as of July 31, 2025: **2,786,134 shares**[3](index=3&type=chunk) [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) This section outlines the organizational structure of the Form 10-Q, detailing the main parts and items, along with their corresponding page numbers, to facilitate navigation through the financial and other information [Report Structure](index=3&type=section&id=Report%20Structure) This section details the Form 10-Q's two main parts, financial and other information, and their respective items for navigation - The report is divided into two main parts: **PART I – FINANCIAL INFORMATION** and **PART II – OTHER INFORMATION**[4](index=4&type=chunk) - PART I includes Financial Statements, Management's Discussion and Analysis, Quantitative and Qualitative Disclosures About Market Risk, and Controls and Procedures[4](index=4&type=chunk) - PART II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities, Defaults on Senior Securities, Mine Safety Disclosures, Other Information, and Exhibits[4](index=4&type=chunk) [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, management's discussion, market risk disclosures, and controls and procedures [Item 1 - Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including the statements of operations, balance sheets, cash flows, and shareholders' equity, along with comprehensive notes providing detailed explanations and disclosures [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) show a significant increase in net income for the three months ended June 30, 2025, compared to the prior year, while the six-month period reflects a net loss, primarily due to decreased net sales and higher operating expenses Net Sales and Profitability (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $30,675 | $33,891 | $57,570 | $68,106 | | Gross profit | $4,837 | $4,617 | $7,915 | $10,065 | | Income (loss) from operations | $742 | $344 | $(871) | $1,499 | | Net income (loss) | $313 | $157 | $(1,003) | $922 | | Basic EPS | $0.12 | $0.06 | $(0.36) | $0.34 | | Diluted EPS | $0.12 | $0.05 | $(0.36) | $0.32 | | Comprehensive income (loss), net of tax | $437 | $(18) | $(873) | $564 | - Net sales decreased by **9.5%** for the three months and **15.5%** for the six months ended June 30, 2025, compared to the prior year[6](index=6&type=chunk) - Net income for the three months ended June 30, 2025, more than doubled to **$313 thousand** from **$157 thousand** in the prior year, while the six-month period shifted from a net income of **$922 thousand** to a net loss of **$(1,003) thousand**[6](index=6&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets show an increase in total assets and total liabilities as of June 30, 2025, compared to December 31, 2024, while total shareholders' equity experienced a slight decrease Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Total assets | $74,825 | $72,435 | | Total liabilities | $41,437 | $38,430 | | Total shareholders' equity | $33,388 | $34,005 | | Cash | $652 | $916 | | Accounts receivable, net | $17,810 | $14,875 | | Inventories, net | $18,628 | $21,638 | | Long-term line of credit | $11,615 | $8,634 | - Total assets increased by **$2,390 thousand**, driven by higher accounts receivable and contract assets, partially offset by a decrease in inventories[9](index=9&type=chunk) - Total liabilities increased by **$3,007 thousand**, primarily due to an increase in the long-term line of credit[9](index=9&type=chunk) - Total shareholders' equity decreased by **$617 thousand**, mainly due to the net loss for the six months ended June 30, 2025[9](index=9&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows indicate increased cash usage in operating activities and decreased cash usage in investing activities for the six months ended June 30, 2025, compared to the prior year, with financing activities providing more cash Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(2,773) | $(1,458) | | Net cash used in investing activities | $(358) | $(1,011) | | Net cash provided by financing activities | $2,858 | $2,343 | | Net change in cash | $(264) | $(133) | - Cash used in operating activities increased by **$1,315 thousand**, primarily due to changes in accounts receivable and contract assets, partially offset by cash provided by inventory[11](index=11&type=chunk) - Cash used in investing activities decreased by **$653 thousand**, mainly due to lower purchases of property and equipment[11](index=11&type=chunk) - Cash provided by financing activities increased by **$515 thousand**, driven by higher net proceeds from the line of credit[11](index=11&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) The Condensed Consolidated Statements of Shareholders' Equity show a decrease in total shareholders' equity for the six months ended June 30, 2025, primarily due to a net loss, partially offset by foreign currency translation adjustments and stock-based compensation Shareholders' Equity Changes (in thousands) | Metric | Balance as of Dec 31, 2024 | Net Loss (6M 2025) | Foreign Currency Translation (6M 2025) | Stock Option Exercises (6M 2025) | Stock-Based Awards (6M 2025) | Balance as of June 30, 2025 | | :-------------------------------- | :------------------------- | :------------------- | :------------------------------------- | :------------------------------- | :----------------------------- | :-------------------------- | | Preferred Stock | $250 | - | - | - | - | $250 | | Common Stock | $28 | - | - | - | - | $28 | | Additional Paid-In Capital | $17,329 | - | - | $21 | $235 | $17,585 | | Accumulated Other Comprehensive Loss | $(977) | - | $130 | - | - | $(847) | | Retained Earnings | $17,375 | $(1,003) | - | - | - | $16,372 | | Total Shareholders' Equity | $34,005 | $(1,003) | $130 | $21 | $235 | $33,388 | - Total shareholders' equity decreased from **$34,005 thousand** at December 31, 2024, to **$33,388 thousand** at June 30, 2025[15](index=15&type=chunk) - The net loss of **$(1,003) thousand** for the six months ended June 30, 2025, was the primary driver of the decrease in retained earnings[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The Notes to Condensed Consolidated Financial Statements provide essential context and detailed breakdowns for the financial figures, covering accounting policies, credit risk, sales, financing, leases, stock awards, income taxes, segment information, restructuring, related party transactions, and subsequent events [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation, principles of consolidation, use of estimates, and recently issued accounting standards, emphasizing compliance with U.S. GAAP and the evaluation of new ASUs and tax legislation - Financial statements are prepared in accordance with **U.S. GAAP** for interim financial information and **SEC rules**[17](index=17&type=chunk) - The Company adopted **ASU 2023-07 (Segment Reporting)** in Q4 2024 and is evaluating **ASU 2023-09 (Income Taxes)** and **ASU 2024-03 (Expense Disaggregation Disclosures)** for future impact[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - The **One Big Beautiful Bill Act (OBBBA)**, enacted in July 2025, makes permanent key elements of the Tax Cuts and Jobs Act of 2017, and the Company is evaluating its potential effects[23](index=23&type=chunk) Inventories, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :-------------- | :---------------- | | Raw materials | $18,570 | $21,122 | | Work in process | $802 | $892 | | Finished goods | $1,053 | $1,070 | | Reserves | $(1,797) | $(1,446) | | **Inventories, net** | **$18,628** | **$21,638** | - The Blue Earth manufacturing facility and related land were classified as **held for sale** as of June 30, 2025, and the sale was completed in July 2025 for **$500 thousand**[28](index=28&type=chunk) [NOTE 2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS](index=10&type=section&id=NOTE%202.%20CONCENTRATION%20OF%20CREDIT%20RISK%20AND%20MAJOR%20CUSTOMERS) This note highlights the company's exposure to credit risk, particularly concerning cash balances held in foreign banks and significant customer concentrations in net sales, accounts receivable, and contract assets - As of June 30, 2025, **$573 thousand** of the **$652 thousand** cash balance was held at banks in China and **$5 thousand** in Mexico[30](index=30&type=chunk) Major Customers' Contribution to Net Sales | Customer | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Customer A | 31% | 26% | 31% | 25% | | Customer B | 10% | -% | 10% | -% | | **Total** | **41%** | **26%** | **41%** | **25%** | Major Customers' Contribution to Accounts Receivable and Contract Assets | Category | Customer | June 30, 2025 | December 31, 2024 | | :--------------- | :--------- | :-------------- | :---------------- | | Accounts Receivable | Customer A | 22% | 23% | | | Customer C | 10% | 13% | | | **Total** | **32%** | **36%** | | Contract Assets | Customer A | 30% | 33% | | | Customer D | 16% | 12% | | | **Total** | **46%** | **45%** | [NOTE 3. NET SALES](index=12&type=section&id=NOTE%203.%20NET%20SALES) This note details the company's revenue recognition, with contract manufacturing agreements recognized over time accounting for a significant portion of net sales, and provides a breakdown of net sales by market segment - Revenue recognized over time from contract manufacturing agreements accounted for **75%** of net sales for both the three and six months ended June 30, 2025[34](index=34&type=chunk) Net Sales by Market (in thousands) | Market | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Medical Device | $7,550 | $9,689 | $15,620 | $19,893 | | Medical Imaging | $9,664 | $8,182 | $18,252 | $17,083 | | Industrial | $8,516 | $9,385 | $15,461 | $18,977 | | Aerospace and Defense | $4,945 | $6,635 | $8,237 | $12,153 | | **Total net sales** | **$30,675** | **$33,891** | **$57,570** | **$68,106** | - Contract assets, representing unbilled amounts for revenue recognized over time, increased from **$13,792 thousand** at December 31, 2024, to **$14,984 thousand** at June 30, 2025[39](index=39&type=chunk) [NOTE 4. FINANCING ARRANGEMENTS](index=14&type=section&id=NOTE%204.%20FINANCING%20ARRANGEMENTS) This note details the company's $15,000 thousand Senior Secured Revolving Line of Credit, including multiple amendments made in 2025 to waive covenant non-compliance, adjust compliance thresholds, modify EBITDA requirements, and extend the expiration date - The Company has a **$15,000 thousand Senior Secured Revolving Line of Credit** with Bank of America, expiring on **August 31, 2026**, following the Third Amendment[40](index=40&type=chunk)[43](index=43&type=chunk) - The Revolver requires maintaining a leverage ratio of no more than **2.5 times** and a minimum fixed charges coverage ratio of at least **1.25 times**, with compliance deferred until Q4 2025[41](index=41&type=chunk)[42](index=42&type=chunk) - Minimum adjusted EBITDA requirements are set at **$1,000 thousand** for Q2 2025, **$1,300 thousand** for Q3 2025, and **$1,600 thousand** for Q4 2025 and thereafter[42](index=42&type=chunk) - The borrowing rate increased by **100 basis points** with the First Amendment and an additional **25 basis points** with the Second Amendment[41](index=41&type=chunk)[42](index=42&type=chunk) Revolver Borrowings and Availability (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :---------------- | | Outstanding borrowings | $11,615 | $8,695 | | Weighted-average interest rate | 7.8% | 7.7% | | Unused availability | $3,385 | N/A | [NOTE 5. LEASES](index=16&type=section&id=NOTE%205.%20LEASES) This note provides a breakdown of lease expenses, assets, and liabilities for both operating and finance leases, along with future payment obligations and weighted-average lease terms and discount rates Total Lease Cost (in thousands) | Lease Cost Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $564 | $581 | $1,129 | $1,177 | | Finance lease interest cost | $9 | $6 | $15 | $12 | | Finance lease amortization expense | $33 | $129 | $85 | $129 | | **Total lease cost** | **$606** | **$716** | **$1,229** | **$1,318** | Leased Assets and Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Finance lease assets | $878 | $411 | | Operating lease assets | $7,563 | $8,139 | | **Total leased assets** | **$8,441** | **$8,550** | | Current operating lease liabilities | $1,237 | $1,175 | | Current finance lease liabilities | $229 | $143 | | Long-term operating lease obligations | $7,145 | $7,773 | | Long-term finance lease obligations | $781 | $311 | | **Total lease liabilities** | **$9,392** | **$9,402** | Future Annual Lease Payments (in thousands) | Year | Operating Leases | Finance Leases | Total | | :---------------- | :--------------- | :------------- | :------ | | Remainder of 2025 | $925 | $144 | $1,069 | | 2026 | $1,864 | $320 | $2,184 | | 2027 | $1,571 | $212 | $1,783 | | 2028 | $1,569 | $212 | $1,781 | | 2029 | $986 | $197 | $1,183 | | Thereafter | $4,669 | $67 | $4,736 | | **Total lease payments** | **$11,584** | **$1,152** | **$12,736** | | Less: imputed interest | $(3,202) | $(142) | $(3,344) | | **Present value of lease liabilities** | **$8,382** | **$1,010** | **$9,392** | [NOTE 6. STOCK BASED AWARDS](index=18&type=section&id=NOTE%206.%20STOCK%20BASED%20AWARDS) This note details the stock-based compensation expense, stock option activity, and restricted stock unit (RSU) activity, including grants, exercises, forfeitures, and unrecognized compensation Stock-Based Compensation Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $117 | $126 | | Six months ended June 30 | $235 | $206 | - **43,382 service-based stock options** were granted during the six months ended June 30, 2025, with a weighted average grant date fair value of **$5.21**[51](index=51&type=chunk) - As of June 30, 2025, there was **$764 thousand** of unrecognized compensation related to stock options, to be recognized over **2.66 years**[51](index=51&type=chunk) - **43,664 RSUs** were granted during the six months ended June 30, 2025, at an average grant price of **$8.73**[53](index=53&type=chunk) - As of June 30, 2025, total unrecognized compensation expense related to RSUs was **$356 thousand**, vesting over **1.8 years**[53](index=53&type=chunk) [NOTE 7. NET INCOME (LOSS) PER SHARE DATA](index=20&type=section&id=NOTE%207.%20NET%20INCOME%20(LOSS)%20PER%20SHARE%20DATA) This note details the calculation of basic and diluted net income (loss) per common share, including the weighted-average number of shares outstanding and the impact of potential common stock equivalents Weighted Average Shares Outstanding | 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 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic weighted average shares outstanding | 2,773,598 | 2,760,052 | 2,767,263 | 2,751,330 | | Diluted weighted average shares outstanding | 2,954,765 | 2,935,671 | 2,767,263 | 2,922,113 | - For the six months ended June 30, 2025, **504,194 restricted stock units and stock options** were excluded from diluted EPS computation as their inclusion would be anti-dilutive due to the net loss[56](index=56&type=chunk) [NOTE 8. INCOME TAXES](index=20&type=section&id=NOTE%208.%20INCOME%20TAXES) This note discusses the company's effective tax rates for the three and six months ended June 30, 2025 and 2024, highlighting changes in pretax income (loss) and foreign entity taxes as primary drivers Effective Tax Rates | Period | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Three months ended | 35% | 12% | | Six months ended | 25% | 21% | - The primary drivers of the increase in effective tax rate were changes in pretax (loss) income and taxes on foreign entities[59](index=59&type=chunk) [NOTE 9. SEGMENT INFORMATION](index=21&type=section&id=NOTE%209.%20SEGMENT%20INFORMATION) This note clarifies that the company operates as a single operating and reporting segment, Contract Manufacturing, within the EMS industry, and provides a geographical breakdown of net sales and long-lived tangible assets - The Company operates as a **single operating and reporting segment: Contract Manufacturing** within the EMS industry[60](index=60&type=chunk) - Over **50% of net sales** come from medical-related markets (Medical Device and Medical Imaging)[60](index=60&type=chunk) Net Sales by Geography (in thousands) | Location | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $18,005 | $22,480 | $34,315 | $46,009 | | Mexico | $7,895 | $7,571 | $14,475 | $14,357 | | China | $4,775 | $3,840 | $8,780 | $7,740 | | **Total net sales** | **$30,675** | **$33,891** | **$57,570** | **$68,106** | Long-Lived Tangible Assets by Geography (in thousands) | Location | June 30, 2025 | December 31, 2024 | | :------------- | :-------------- | :---------------- | | United States | $9,326 | $10,429 | | Mexico | $2,195 | $2,445 | | China | $1,485 | $1,497 | | **Total** | **$13,006** | **$14,371** | [NOTE 10. RESTRUCTURING CHARGES](index=21&type=section&id=NOTE%2010.%20RESTRUCTURING%20CHARGES) This note details the restructuring charges incurred during the six months ended June 30, 2025, related to the closure and consolidation of the Blue Earth, Minnesota facility and additional staff reductions - The Company incurred **$266 thousand** in restructuring charges during the six months ended June 30, 2025, related to the Blue Earth facility and staff reductions[62](index=62&type=chunk) - No restructuring charges were recorded in the three months ended June 30, 2025[62](index=62&type=chunk) Restructuring Activity (Six Months Ended June 30, 2025, in thousands) | Category | Facility Consolidation | Workforce Reductions | Total | | :-------------------- | :--------------------- | :------------------- | :------ | | December 31, 2024 | $154 | - | $154 | | Charges | $31 | $235 | $266 | | Cash payments | $(185) | $(235) | $(420) | | **June 30, 2025** | **-** | **-** | **-** | [NOTE 11. RELATED PARTY TRANSACTIONS](index=22&type=section&id=NOTE%2011.%20RELATED%20PARTY%20TRANSACTIONS) This note describes transactions with related parties, including the write-off of receivables from Abilitech Medical and a grant collaboration with Marpe Technologies, where the Company will receive exclusive manufacturing rights - Accounts receivable related to Abilitech Medical, Inc (minority-owned by the Chairman) were written off in **2024** as Abilitech ceased operations[65](index=65&type=chunk) - The Company collaborated with Marpe Technologies (minority-owned by the Chairman) to secure a **$1,000 thousand BIRD Foundation grant**, with each party receiving **$500 thousand** and contributing a matching **$500 thousand**[66](index=66&type=chunk) - The Company's contribution to Marpe Technologies was through services at cost or no cost, in exchange for a **10-year exclusive right** to manufacture Marpe's products[66](index=66&type=chunk) [NOTE 12. SUBSEQUENT EVENTS](index=22&type=section&id=NOTE%2012.%20SUBSEQUENT%20EVENTS) This note reports two significant events that occurred after the reporting period: the sale of the Blue Earth facility and the Third Amendment to the Revolver line of credit agreement - On **July 24, 2025**, the Blue Earth facility was sold for **$500 thousand**[67](index=67&type=chunk) - On **July 29, 2025**, the Revolver line of credit agreement was amended (Third Amendment) to extend its expiration to **August 31, 2026**[67](index=67&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, including detailed analysis of sales, expenses, cash flows, and liquidity, along with forward-looking statements and associated risks [Overview](index=23&type=section&id=Overview) The company operates as a full-service global EMS contract manufacturer in Medical Device, Medical Imaging, Aerospace and Defense, and Industrial markets, focusing on complex electromedical and electromechanical products, with strategic investments aimed at growth and efficiency - Nortech Systems is a **Minnesota-based global EMS contract manufacturer** specializing in complex electromedical and electromechanical products[68](index=68&type=chunk) - Key markets include **Medical Device, Medical Imaging, Aerospace and Defense, and Industrial**[68](index=68&type=chunk) - Strategic focus areas include expanding and diversifying the customer base, lean manufacturing, quality improvements, and capitalizing on growth opportunities in medical markets[69](index=69&type=chunk)[70](index=70&type=chunk) [Restructuring Activities](index=23&type=section&id=Restructuring%20Activities) The company initiated a restructuring plan in fiscal year 2024, involving the closure of its Blue Earth, MN facility and staff reductions, incurring total charges of $837 thousand, with $266 thousand recorded in the first six months of 2025 - Restructuring plan initiated in **fiscal year 2024** related to the closure of the Blue Earth, MN facility[72](index=72&type=chunk) - Total restructuring charges amounted to **$837 thousand**, with **$266 thousand** incurred in the six months ended June 30, 2025[72](index=72&type=chunk) - No restructuring charges were recorded in the three months ended June 30, 2025[72](index=72&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) The company experienced a decline in net sales for both the three and six-month periods ended June 30, 2025, primarily due to customer approval delays, manufacturing inefficiencies, and inventory re-balancing, impacting overall profitability despite some gross margin improvements [Net Sales](index=23&type=section&id=Net%20Sales) Net sales decreased by 9.5% for the three months and 15.5% for the six months ended June 30, 2025, primarily due to delays in Aerospace and Defense customer approvals, manufacturing inefficiencies from plant consolidation, and inventory re-balancing in Medical Device Net Sales by Market (in thousands) | Market | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Medical Device | $7,550 | $9,689 | $(2,139) | (22.1)% | | Medical Imaging | $9,664 | $8,182 | $1,482 | 18.1% | | Industrial | $8,516 | $9,385 | $(869) | (9.3)% | | Aerospace and Defense | $4,945 | $6,635 | $(1,690) | (25.5)% | | **Total net sales** | **$30,675** | **$33,891** | **$(3,216) | (9.5)%** | Net Sales by Market (Six Months Ended June 30, in thousands) | Market | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Medical Device | $15,620 | $19,893 | $(4,273) | (21.5)% | | Medical Imaging | $18,252 | $17,083 | $1,169 | 6.8% | | Industrial | $15,461 | $18,977 | $(3,516) | (18.5)% | | Aerospace and Defense | $8,237 | $12,153 | $(3,916) | (32.2)% | | **Total net sales** | **$57,570** | **$68,106** | **$(10,536) | (15.5)%** | - Medical Device sales decreased due to **inventory re-balancing** and lower productivity from facility consolidation[78](index=78&type=chunk) - Medical Imaging sales increased due to **higher sales to existing customers**[78](index=78&type=chunk) - Aerospace and Defense sales decreased significantly due to **delays in customer approvals** following business consolidation into the Bemidji facility[78](index=78&type=chunk) [Backlog](index=24&type=section&id=Backlog) The 90-day shipment backlog slightly decreased, while the total order backlog increased by 14.7% from the beginning of the quarter and 6.9% year-over-year, primarily driven by large medical device orders - 90-day shipment backlog as of June 30, 2025, was **$26,592 thousand**, a **0.6% decrease** from the beginning of the quarter and an **11.6% decrease** from June 30, 2024[75](index=75&type=chunk) - Total order backlog as of June 30, 2025, was **$78,351 thousand**, a **14.7% increase** from the beginning of the quarter and a **6.9% increase** year-over-year, driven by large medical device orders[76](index=76&type=chunk) Backlog by Market (in thousands) | Market | 90 Day Backlog (June 30, 2025) | Total Backlog (June 30, 2025) | 90 Day Backlog (June 30, 2024) | Total Backlog (June 30, 2024) | | :-------------------- | :----------------------------- | :---------------------------- | :----------------------------- | :---------------------------- | | Medical Device | $7,897 | $32,222 | $8,130 | $23,497 | | Medical Imaging | $5,101 | $7,584 | $7,776 | $10,953 | | Industrial | $6,010 | $9,349 | $6,398 | $11,423 | | Aerospace and Defense | $7,584 | $29,196 | $7,791 | $27,423 | | **Total backlog** | **$26,592** | **$78,351** | **$30,095** | **$73,296** | [Operating Costs and Expenses](index=25&type=section&id=Operating%20Costs%20and%20Expenses) Operating costs and expenses showed mixed trends, with gross margin improving quarterly but declining year-to-date, selling expenses increasing due to realignment, and general and administrative expenses decreasing due to lower incentive compensation [Gross profit and gross margins](index=25&type=section&id=Gross%20profit%20and%20gross%20margins) Gross profit as a percentage of net sales increased for the three months ended June 30, 2025, due to improved plant utilization and favorable sales mix, but decreased for the six-month period due to lower net sales and reduced manufacturing efficiencies Gross Profit and Margin (in thousands) | 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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $4,837 | $4,617 | $7,915 | $10,065 | | Gross margin percentage | 15.8% | 13.6% | 13.7% | 14.8% | - Quarterly gross margin increased by **220 basis points**, while year-to-date gross margin decreased by **110 basis points**[80](index=80&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) [Selling expenses](index=26&type=section&id=Selling%20expenses) Selling expenses, as a percentage of net sales, increased for both the three and six-month periods ended June 30, 2025, primarily due to the realignment of customer-facing managers from operations to business development and the impact of fixed costs on a lower revenue base Selling Expenses (in thousands) | 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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling expenses | $1,204 | $909 | $2,388 | $1,714 | | % of Net sales | 3.9% | 2.7% | 4.1% | 2.5% | - Selling expenses increased by **$295 thousand (32.5%)** quarterly and **$674 thousand (39.3%)** year-to-date[80](index=80&type=chunk)[82](index=82&type=chunk) [General and administrative expenses](index=26&type=section&id=General%20and%20administrative%20expenses) General and administrative expenses decreased for both the three and six-month periods ended June 30, 2025, primarily due to lower incentive compensation accruals General and Administrative Expenses (in thousands) | 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 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $2,589 | $2,982 | $5,504 | $6,152 | | % of Net sales | 8.4% | 8.8% | 9.6% | 9.0% | - General and administrative expenses decreased by **$393 thousand (13.2%)** quarterly and **$648 thousand (10.5%)** year-to-date[80](index=80&type=chunk)[82](index=82&type=chunk) [Research and development](index=25&type=section&id=Research%20and%20development) Research and development expenses remained relatively stable for both the three and six-month periods ended June 30, 2025 Research and Development Expenses (in thousands) | 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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $302 | $291 | $628 | $609 | | % of Net sales | 1.0% | 0.9% | 1.1% | 0.9% | [Restructuring charges](index=26&type=section&id=Restructuring%20charges) Restructuring charges were $0 for the three months ended June 30, 2025, but $266 thousand for the six-month period, primarily due to severance charges for staff reductions and expenses related to the closed Blue Earth facility Restructuring Charges (in thousands) | 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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restructuring charges | $0 | $91 | $266 | $91 | | % of Net sales | 0.0% | 0.2% | 0.5% | 0.2% | - The six-month charges included **$235 thousand** for severance and **$31 thousand** for Blue Earth facility expenses[87](index=87&type=chunk) [Operating (loss) income](index=26&type=section&id=Operating%20(loss)%20income) Operating income increased for the three months ended June 30, 2025, driven by improved gross margin and lower incentive compensation, but the six-month period resulted in an operating loss due to decreased net sales and gross margin Operating (Loss) Income (in thousands) | 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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating (loss) income | $742 | $344 | $(871) | $1,499 | | % of Net sales | 2.4% | 1.0% | (1.5)% | 2.3% | - Quarterly operating income increased by **$398 thousand (115.7%)**, while year-to-date operating income shifted to a loss of **$(871) thousand** from a **$1,499 thousand** income[80](index=80&type=chunk)[82](index=82&type=chunk)[88](index=88&type=chunk) [Interest expense](index=26&type=section&id=Interest%20expense) Interest expense increased for both the three and six-month periods ended June 30, 2025, primarily due to higher borrowings under the line of credit arrangement Interest Expense (in thousands) | 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 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest expense | $257 | $165 | $471 | $332 | - Interest expense increased by **$92 thousand** quarterly and **$139 thousand** year-to-date[89](index=89&type=chunk) [Income taxes](index=26&type=section&id=Income%20taxes) The effective tax rate for the three and six months ended June 30, 2025, increased compared to the prior year, primarily driven by changes in pretax (loss) income and taxes on foreign entities Effective Tax Rates | Period | June 30, 2025 | June 30, 2024 | | :--------------- | :-------------- | :-------------- | | Three months ended | 35% | 12% | | Six months ended | 25% | 21% | - The **One Big Beautiful Bill Act (OBBBA)**, enacted in July 2025, makes permanent key elements of the Tax Cuts and Jobs Act of 2017, and the Company is evaluating its potential effects[91](index=91&type=chunk) [Cash Flow Operating Results](index=26&type=section&id=Cash%20Flow%20Operating%20Results) Cash used in operating activities increased significantly for the six months ended June 30, 2025, primarily due to changes in accounts receivable and contract assets, while investing activities used less cash and financing activities provided more cash from the line of credit Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(2,773) | $(1,458) | | Investing activities | $(358) | $(1,011) | | Financing activities | $2,858 | $2,343 | | Effect of exchange rates on changes in cash and cash equivalents | $9 | $(7) | | **Net change in cash and cash equivalents** | **$(264)** | **$(133)** | - Cash used in operating activities increased by **$1,315 thousand**, mainly due to **$4,034 thousand** cash used by accounts receivable and contract assets[92](index=92&type=chunk) - Cash provided by inventory was **$2,714 thousand** in 2025, compared to cash used of **$1,288 thousand** in 2024, reflecting inventory reduction efforts[92](index=92&type=chunk) - Cash used in investing activities decreased by **$653 thousand**, primarily due to lower capital expenditures[93](index=93&type=chunk) - Cash provided by financing activities increased by **$515 thousand**, driven by line of credit advances for working capital[93](index=93&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company believes its existing financing arrangements and anticipated cash flows will be sufficient for the next twelve months, despite past non-compliance with credit covenants that required multiple amendments to its revolving line of credit - Management believes existing financing, anticipated cash flows, and cash on hand will be sufficient for working capital, capital expenditures, and debt repayments for the next twelve months[94](index=94&type=chunk) - The **$15,000 thousand Senior Secured Revolving Line of Credit (Revolver)** was amended three times in 2025 to waive past covenant non-compliance, defer future compliance, adjust EBITDA requirements, and extend the expiration to **August 31, 2026**[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - As of June 30, 2025, outstanding borrowings on the Revolver were **$11,615 thousand** with **$3,385 thousand** unused availability, subject to a minimum liquidity requirement of **$2,500 thousand**[99](index=99&type=chunk)[97](index=97&type=chunk) - The company has implemented plant optimization activities and cost-cutting initiatives to address losses and reduce borrowings in the remainder of 2025[101](index=101&type=chunk) [Off-Balance Sheet Arrangements](index=28&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has not engaged in any off-balance sheet arrangements as defined by SEC regulations - The Company has not engaged in any off-balance sheet activities[102](index=102&type=chunk) [Forward-Looking Statements](index=28&type=section&id=Forward-Looking%20Statements) This section provides a cautionary statement regarding forward-looking statements, highlighting various unpredictable factors that could cause actual results to differ materially from expectations, and disclaims any obligation to update such statements - Statements in the report that are not historical facts are forward-looking statements made pursuant to the safe-harbor provisions of the **Private Securities Litigation Reform Act of 1995**[103](index=103&type=chunk) - Factors that could cause actual results to differ include market volatility, sufficiency of financing, supply chain disruptions, human resource availability, increased competition, facility reliability, raw material costs, regulatory compliance, and general economic conditions[103](index=103&type=chunk) - The Company undertakes no obligation to update publicly any forward-looking statement[104](index=104&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reporting period - This item is not applicable[106](index=106&type=chunk) [Item 4 - Controls and Procedures](index=29&type=section&id=Item%204%20-%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the most recently completed fiscal quarter [Evaluation of Disclosure Controls and Procedures](index=29&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period - Disclosure controls and procedures were evaluated by management, with **CEO and CFO participation**[107](index=107&type=chunk) - Conclusion: **Disclosure controls and procedures were effective**[107](index=107&type=chunk) [Changes in Internal Control Over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) There were no changes in the company's internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[108](index=108&type=chunk) [PART II – OTHER INFORMATION](index=30&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity security sales, defaults on senior securities, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings and claims that arise in the ordinary course of its business operations - The Company is subject to various legal proceedings and claims in the ordinary course of business[110](index=110&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, specifically highlighting the risks associated with non-compliance with credit agreement covenants, which required multiple amendments and waivers, and the potential for future impairment charges on long-lived assets - The Company was not in compliance with financial covenants related to Mexican operating expense contributions in **Q1 and Q2 2024**, and received a waiver[112](index=112&type=chunk) - Multiple amendments (First, Second, Third) to the Revolver were signed in **2025** to waive non-compliance with leverage and fixed charge ratios, modify EBITDA levels, and extend the Revolver's duration[113](index=113&type=chunk) - Failure to comply with future covenants could lead to inability to secure additional financing or acceleration of debt repayment[114](index=114&type=chunk) - As of June 30, 2025, no long-lived asset impairment was required, but future declines in fair value could lead to impairment losses[116](index=116&type=chunk) [Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds](index=30&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - None[117](index=117&type=chunk) [Item 3 - Defaults on Senior Securities](index=30&type=section&id=Item%203%20-%20Defaults%20on%20Senior%20Securities) This section indicates that there were no defaults on senior securities to report for the period - None[118](index=118&type=chunk) [Item 4 - Mine Safety Disclosures](index=30&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Not applicable[120](index=120&type=chunk) [Item 5 - Other Information](index=31&type=section&id=Item%205%20-%20Other%20Information) This section indicates that there is no other information to report for the period - None[121](index=121&type=chunk) [Item 6 - Exhibits](index=31&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and XBRL formatted financial statements - Exhibits include certifications of the **CEO and CFO (31.1, 31.2, 32)**[123](index=123&type=chunk) - Financial statements from the quarterly report are provided in **XBRL format (101, 104)**[123](index=123&type=chunk) [SIGNATURES](index=32&type=section&id=SIGNATURES) This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the submission of the quarterly report on behalf of Nortech Systems Incorporated [Report Signatures](index=32&type=section&id=Report%20Signatures) This section presents the official signatures of the CEO and CFO, certifying the quarterly report submission for Nortech Systems Incorporated - The report is signed by **Jay D. Miller, Chief Executive Officer and President**, and **Andrew D. C. LaFrence, Chief Financial Officer and Senior Vice President of Finance**[125](index=125&type=chunk) - Signatures are dated **August 7, 2025**[125](index=125&type=chunk)

Part I. Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This chapter presents the company's unaudited consolidated financial statements and related notes for periods ending June 30, 2025, and December 31, 2024, detailing financial position, operations, equity, cash flows, and key accounting policies [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (Unaudited) (US Dollars) | December 31, 2024 (US Dollars) | | :--- | :--- | :--- | | Net loans held for investment | $247,953,152 | $130,711,848 | | Cash and cash equivalents | $5,571,621 | $184,626,770 | | Total assets | $256,488,444 | $317,535,780 | | Credit line payable | $64,950,000 | $123,840,000 | | Related party credit line payable | — | $75,000,000 | | Total liabilities | $72,165,843 | $203,398,033 | | Total shareholders' equity | $184,322,601 | $114,137,747 | - As of June 30, 2025, the company's total assets were **$256.49 million**, a decrease from **$317.54 million** as of December 31, 2024, primarily due to a significant reduction in cash and cash equivalents, offset by a notable increase in net loans held for investment[11](index=11&type=chunk) - Total shareholders' equity increased from **$114.14 million** as of December 31, 2024, to **$184.32 million** as of June 30, 2025, reflecting a strengthened capital base[11](index=11&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended June 30, 2025 (US Dollars) | Three Months Ended June 30, 2024 (US Dollars) | Six Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2024 (US Dollars) | | :--- | :--- | :--- | :--- | :--- | | Interest income | $6,752,679 | $1,979,576 | $11,711,202 | $4,005,882 | | Interest expense | $(1,083,212) | — | $(1,419,371) | — | | Net interest income | $5,669,467 | $1,979,576 | $10,291,831 | $4,005,882 | | Total expenses | $1,842,660 | $393,979 | $3,247,939 | $657,940 | | Net income | $3,358,314 | $1,513,743 | $6,457,751 | $3,276,088 | | Basic earnings per share (US Dollars per Share) | $0.25 | $0.22 | $0.52 | $0.48 | | Diluted earnings per share (US Dollars per Share) | $0.25 | $0.22 | $0.52 | $0.48 | - Net income for the three months ended June 30, 2025, increased by **121.8%** year-over-year to **$3.36 million**, primarily driven by a significant increase in interest income[13](index=13&type=chunk) - Interest income for the six months ended June 30, 2025, grew by **192.4%** year-over-year to **$11.71 million**, reflecting the expansion of the company's loan portfolio[13](index=13&type=chunk) [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) | Metric | Three Months Ended June 30, 2025 (US Dollars) | Three Months Ended June 30, 2024 (US Dollars) | Six Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2024 (US Dollars) | | :--- | :--- | :--- | :--- | :--- | | Total shareholders' equity, end of period | $184,322,601 | $48,910,710 | $184,322,601 | $48,910,710 | | Net proceeds from common stock issuance (net of offering costs) | $(76,524) | — | $71,277,217 | — | | Net stock-based compensation (net of forfeitures) | $259,066 | — | $502,687 | — | | Common stock dividends declared | $(4,026,353) | — | $(8,052,801) | — | | Net income | $3,358,314 | $1,513,743 | $6,457,751 | $3,276,088 | - As of June 30, 2025, total shareholders' equity was **$184.32 million**, a substantial increase from **$114.14 million** as of December 31, 2024, primarily due to **$71.28 million** in net proceeds from common stock issuance[17](index=17&type=chunk) - The company declared **$8.05 million** in common stock dividends during the first half of 2025, at **$0.60 per share**[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activities | Six Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2024 (US Dollars) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,237,338) | $3,198,412 | | Net cash used in investing activities | $(108,873,779) | $(37,557,988) | | Net cash (used in) provided by financing activities | $(68,944,032) | $14,400,000 | | Net (decrease) increase in cash and cash equivalents | $(179,055,149) | $(19,959,576) | | Cash and cash equivalents, end of period | $5,571,621 | $11,285,046 | - Net cash used in operating activities was **$1.24 million** in the first half of 2025, compared to net cash provided of **$3.20 million** in the same period of 2024[19](index=19&type=chunk) - Net cash used in investing activities was **$109 million**, primarily for funding and originating loans, reflecting the active expansion of the company's loan portfolio[19](index=19&type=chunk) - Net cash used in financing activities was **$68.94 million**, primarily including **$240 million** in repayments on the revolving credit facility, partially offset by **$72.59 million** in proceeds from common stock sales[19](index=19&type=chunk) [Consolidated Notes to the Financial Statements](index=9&type=section&id=Consolidated%20Notes%20to%20the%20Financial%20Statements) [1. Organization](index=9&type=section&id=1.%20ORGANIZATION) - Sunrise Realty Trust, Inc. (SUNS) was formed on August 28, 2023, and converted from a Delaware limited liability company to a Maryland corporation in February 2024[21](index=21&type=chunk) - The company operates as an institutional lender focused on debt capital solutions in the Southern U.S. commercial real estate (CRE) market, primarily investing in senior mortgage loans, mezzanine loans, B-notes, commercial mortgage-backed securities (CMBS), and debt-like preferred equity securities[21](index=21&type=chunk) - The company plans to elect to be taxed as a REIT for U.S. federal income tax purposes, commencing with its taxable year ending December 31, 2024[23](index=23&type=chunk) - The company completed its spin-off and separation from Advanced Flower Capital Inc. (AFC) on July 9, 2024, becoming an independent public company[24](index=24&type=chunk) [2. Significant Accounting Policies](index=10&type=section&id=2.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The unaudited consolidated interim financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and SEC rules and regulations for interim financial information[28](index=28&type=chunk) - As an 'emerging growth company,' the company has elected to use the extended transition period provided by the JOBS Act for complying with new or revised accounting standards[32](index=32&type=chunk) - The adoption of ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2024-03/2025-01 (Disaggregation of Expense Disclosures in the Income Statement) is not expected to have a material impact on the company's consolidated financial statements[34](index=34&type=chunk)[35](index=35&type=chunk) [3. Loans Held for Investment at Carrying Value](index=11&type=section&id=3.%20LOANS%20HELD%20FOR%20INVESTMENT%20AT%20CARRYING%20VALUE) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Number of loans | 13 | 9 | | Total commitments (Millions of US Dollars) | $360.2 Million | $190.9 Million | | Outstanding principal (Millions of US Dollars) | $251.0 Million | $132.6 Million | | Floating-rate loans percentage (Percentage) | 86% | 79% | | Weighted average remaining term (Years) | 2.2 Years | 2.6 Years | - As of June 30, 2025, the company's loan portfolio comprised **13** loans held for investment at carrying value, with an aggregate outstanding principal of approximately **$251 million**, a significant increase from **$133 million** as of December 31, 2024[36](index=36&type=chunk) - During the first half of 2025, the company originated and funded approximately **$130 million** in new and additional principal on existing loans, and received approximately **$11.5 million** in principal repayments[36](index=36&type=chunk) [4. Current Expected Credit Losses](index=13&type=section&id=4.%20CURRENT%20EXPECTED%20CREDIT%20LOSSES) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total CECL allowance (US Dollars) | $626,321 | $40,180 | | Percentage of total loans (Percentage) | 0.25% | 0.03% | | Provision (reversal) (US Dollars) | $468,493 (Q2 2025) | $71,854 (Q2 2024) | | Provision (reversal) (US Dollars) | $586,141 (H1 2025) | $71,854 (H1 2024) | - As of June 30, 2025, the CECL allowance for loans held for investment at carrying value was approximately **$0.6 million**, representing **0.25%** of total loans, a significant increase from **$40,200** (**0.03%**) as of December 31, 2024[40](index=40&type=chunk) Risk Rating | Risk Rating | 2025 (US Dollars) | 2024 (US Dollars) | Total (US Dollars) | | :--- | :--- | :--- | :--- | | 1 (Very Low Risk) | $— | $— | $— | | 2 (Low Risk) | $78,908,742 | $142,824,032 | $221,732,774 | | 3 (Moderate Risk) | $— | $26,604,238 | $26,604,238 | | 4 (High Risk/Potential Loss) | $— | $— | $— | | 5 (Impaired/Probable Loss) | $— | $— | $— | | Total | $78,908,742 | $169,428,270 | $248,337,012 | [5. Interest Receivable](index=14&type=section&id=5.%20INTEREST%20RECEIVABLE) | Metric | June 30, 2025 (US Dollars) | December 31, 2024 (US Dollars) | | :--- | :--- | :--- | | Interest receivable | $2,096,376 | $1,118,927 | | Unused fee receivable | $8,909 | $11,821 | | PIK receivable | $2,891 | — | | Other fees receivable | $1,718 | $7,813 | | Total interest receivable | $2,109,894 | $1,138,561 | - As of June 30, 2025, total interest receivable was **$2.11 million**, an increase from **$1.14 million** as of December 31, 2024, primarily driven by growth in interest receivable[46](index=46&type=chunk) [6. Debt](index=14&type=section&id=6.%20DEBT) - The company entered into a revolving credit facility on November 6, 2024, with an initial commitment of **$50 million**, subsequently increased to **$140 million** through multiple amendments, and maturing on November 8, 2027[47](index=47&type=chunk)[48](index=48&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) Debt Outstanding and Available Borrowings | Debt Type | Outstanding Borrowings June 30, 2025 (Millions of US Dollars) | Outstanding Borrowings December 31, 2024 (Millions of US Dollars) | Available Borrowings June 30, 2025 (Millions of US Dollars) | Available Borrowings December 31, 2024 (Millions of US Dollars) | | :--- | :--- | :--- | :--- | :--- | | Revolving Credit Facility | $65.0 Million | $123.8 Million | $75.0 Million | $1.2 Million | | SRTF Credit Facility (Related Party) | — | $75.0 Million | $75.0 Million | — | - As of June 30, 2025, outstanding borrowings under the revolving credit facility were **$65 million**, with no outstanding borrowings under the SRTF Credit Facility (Related Party)[58](index=58&type=chunk)[62](index=62&type=chunk) Interest Expense by Type | Interest Expense Type | Three Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2025 (US Dollars) | | :--- | :--- | :--- | | Revolving Credit Facility Interest Expense | $937,773 | $1,183,278 | | SRTF Revolving Credit Facility Interest Expense | $17,645 | $40,249 | | Total Interest Expense | $1,083,212 | $1,419,371 | [7. Commitments and Contingencies](index=17&type=section&id=7.%20COMMITMENTS%20AND%20CONTINGENCIES) | Metric | June 30, 2025 (US Dollars) | December 31, 2024 (US Dollars) | | :--- | :--- | :--- | | Total loan commitments | $360,190,381 | $190,921,475 | | Commitments drawn | $(250,957,151) | $(132,556,289) | | Total undrawn commitments | $109,233,230 | $58,365,186 | - As of June 30, 2025, the company's total undrawn loan commitments were **$109 million**, a significant increase from **$58.37 million** as of December 31, 2024[64](index=64&type=chunk) - As of June 30, 2025, the company was not aware of any legal claims that could materially impact its business, financial condition, or results of operations[64](index=64&type=chunk) [8. Shareholders' Equity](index=17&type=section&id=8.%20SHAREHOLDERS'%20EQUITY) - The company completed its corporate conversion on February 20, 2024, transitioning from a Delaware limited liability company to a Maryland corporation[65](index=65&type=chunk) - As of June 30, 2025, the company had **13,421,176** shares of common stock issued and outstanding, a significant increase from **7,004,676** shares as of December 31, 2024[68](index=68&type=chunk) - The company completed a public offering of common stock in January 2025, selling **6,400,000** shares and generating approximately **$71.3 million** in net proceeds[69](index=69&type=chunk) Stock-Based Compensation Expense | Stock-Based Compensation Expense | Three Months Ended June 30, 2025 (US Dollars) | Three Months Ended June 30, 2024 (US Dollars) | Six Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2024 (US Dollars) | | :--- | :--- | :--- | :--- | :--- | | Stock-based compensation | $259,066 | — | $502,687 | — | - As of June 30, 2025, **132,144** restricted stock units have been granted under the 2024 Equity Incentive Plan, with **1,058,978** shares available for future issuance[76](index=76&type=chunk)[77](index=77&type=chunk) [9. Earnings Per Share](index=20&type=section&id=9.%20EARNINGS%20PER%20SHARE) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to common shareholders (US Dollars) | $3,302,613 | $1,513,743 | $6,316,570 | $3,276,088 | | Basic weighted average common shares outstanding (Shares) | 13,235,823 | 6,889,032 | 12,227,520 | 6,889,032 | | Diluted weighted average common shares outstanding (Shares) | 13,259,762 | 6,889,032 | 12,245,128 | 6,889,032 | | Basic earnings per share (US Dollars per Share) | $0.25 | $0.22 | $0.52 | $0.48 | | Diluted earnings per share (US Dollars per Share) | $0.25 | $0.22 | $0.52 | $0.48 | - For the six months ended June 30, 2025, basic earnings per share was **$0.52** and diluted earnings per share was **$0.52**, both higher than **$0.48** in the same period of 2024[82](index=82&type=chunk) - Due to the spin-off, **6,889,032** shares of common stock were outstanding on July 9, 2024, and this share count is used for calculating basic and diluted earnings per share for all presented periods prior to the spin-off[81](index=81&type=chunk) [10. Income Tax](index=20&type=section&id=10.%20INCOME%20TAX) - The company plans to elect to be taxed as a REIT for U.S. federal income tax purposes, commencing with its taxable year ending December 31, 2024[83](index=83&type=chunk) - For the three and six months ended June 30, 2025, the company's income tax expense was **zero**[84](index=84&type=chunk) - The company currently has no unrecognized tax benefits and does not anticipate any changes within the next 12 months[86](index=86&type=chunk) [11. Fair Value](index=21&type=section&id=11.%20FAIR%20VALUE) | Financial Instrument | Carrying Value (June 30, 2025) (US Dollars) | Fair Value (June 30, 2025) (US Dollars) | | :--- | :--- | :--- | | Cash and cash equivalents | $5,571,621 | $5,571,621 | | Loans held for investment at carrying value | $248,337,012 | $249,047,098 | - The carrying value of cash and cash equivalents approximates its fair value and is classified as a Level 1 fair value measurement[87](index=87&type=chunk) - Loans held for investment at carrying value are measured using unobservable inputs (Level 3 inputs)[87](index=87&type=chunk) [12. Related Party Transactions](index=21&type=section&id=12.%20RELATED%20PARTY%20TRANSACTIONS) - The company entered into a management agreement with Sunrise Manager LLC (the Manager), effective upon the completion of the spin-off on July 9, 2024[88](index=88&type=chunk) Related Party Costs | Related Party Costs | Three Months Ended June 30, 2025 (US Dollars) | Three Months Ended June 30, 2024 (US Dollars) | Six Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2024 (US Dollars) | | :--- | :--- | :--- | :--- | :--- | | Base management fee | $689,140 | — | $689,140 | — | | Incentive fee earned | — | — | — | — | | Reimbursable management expenses to Manager | $532,262 | — | $1,144,827 | — | | Reimbursable professional fees to Manager | $12,905 | — | $17,894 | — | | Total | $1,234,307 | — | $1,851,861 | — | - The Manager agreed to waive management fee calculations on the net proceeds from the January 2025 offering and an additional **$1 million** in fees, resulting in **$0.5761 million** in waived base management fees and **$0.4641 million** in waived incentive fees for the first half of 2025[95](index=95&type=chunk)[96](index=96&type=chunk) - As of June 30, 2025, the company co-invested in **13** loans with related parties[102](index=102&type=chunk) [13. Dividends and Distributions](index=23&type=section&id=13.%20DIVIDENDS%20AND%20DISTRIBUTIONS) | Dividend Type | Declaration Date | Record Date | Payment Date | Amount Per Share (US Dollars per Share) | Total Amount (US Dollars) | | :--- | :--- | :--- | :--- | :--- | :--- | | Common Cash Dividend | 2025/3/4 | 2025/3/31 | 2025/4/15 | $0.30 | $4,026,448 | | Common Cash Dividend | 2025/6/13 | 2025/6/30 | 2025/7/15 | $0.30 | $4,026,353 | | H1 2025 Subtotal | | | | $0.60 | $8,052,801 | - In the first half of 2025, the company declared total cash dividends of **$8.05 million**, or **$0.60 per share**[105](index=105&type=chunk) - No dividends were declared in the first half of 2024[104](index=104&type=chunk) [14. Reportable Segments](index=23&type=section&id=14.%20REPORTABLE%20SEGMENTS) - The company operates as a single reportable operating segment, focusing on institutional lending in the Southern U.S. commercial real estate market[107](index=107&type=chunk) - The Chief Operating Decision Maker (CEO) assesses performance and makes resource and operating decisions based on the company's consolidated net income[107](index=107&type=chunk)[108](index=108&type=chunk) - For the three months ended June 30, 2025, the company's interest income was concentrated among **six** borrowers, collectively accounting for **85%** of consolidated interest income[110](index=110&type=chunk) [15. Subsequent Events](index=24&type=section&id=15.%20SUBSEQUENT%20EVENTS) - As of the financial statement issuance date, no material subsequent events requiring disclosure have occurred[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This chapter provides management's discussion and analysis of the company's financial condition and operating results, highlighting significant loan portfolio expansion and net income growth in the first half of 2025, along with key financial metrics and accounting policies [Overview](index=26&type=section&id=Overview) - SUNS is a Maryland corporation formed on August 28, 2023, plans to elect to be taxed as a REIT for U.S. federal income tax purposes, and made its first investment in January 2024[118](index=118&type=chunk) - The company focuses on originating and investing in secured commercial real estate (CRE) loans, providing capital to high-quality borrowers and sponsors with transitional business plans[121](index=121&type=chunk) - Target investment size ranges from approximately **$15 million to $100 million**, with terms of approximately **2-5 years**, floating interest rates (e.g., SOFR plus a credit spread), and loan-to-value (LTV) ratios not exceeding **75%**[122](index=122&type=chunk) - The company targets a net internal rate of return (IRR) in the low double digits for its investment portfolio, expected to increase to the mid-double digits after accounting for gross interest and other income[122](index=122&type=chunk) [Developments During the Second Quarter June 30, 2025](index=27&type=section&id=Developments%20During%20the%20Second%20Quarter%20June%2030,%202025) - In June 2025, the company co-originated a **$14.25 million** senior loan for a residential property construction project in Park City, Utah, with the company committing **$9.25 million** alongside a related party[124](index=124&type=chunk) Dividend Declarations | Dividend Declaration Date | Record Date | Payment Date | Amount Per Share (US Dollars per Share) | Total Amount (US Dollars) | | :--- | :--- | :--- | :--- | :--- | | 2025年3月4日 | 2025年3月31日 | 2025年4月15日 | $0.30 | $4,026,448 | | 2025年6月13日 | 2025年6月30日 | 2025年7月15日 | $0.30 | $4,026,353 | | H1 2025 Subtotal | | | $0.60 | $8,052,801 | [Key Financial Measures and Indicators](index=28&type=section&id=Key%20Financial%20Measures%20and%20Indicators) - The company considers distributable earnings, book value per share, and dividends declared per share as key financial measures for its business[127](index=127&type=chunk) Book Value Per Share | Metric | June 30, 2025 (US Dollars per Share) | December 31, 2024 (US Dollars per Share) | | :--- | :--- | :--- | | Book value per share | $13.73 | $16.29 | [Non-GAAP Metrics - Distributable Earnings](index=28&type=section&id=Non-GAAP%20Metrics%20-%20Distributable%20Earnings) - Distributable earnings is a non-GAAP financial measure used to evaluate the company's performance, excluding certain non-cash and one-time GAAP adjustments[129](index=129&type=chunk)[130](index=130&type=chunk) Distributable Earnings Reconciliation | Metric | Three Months Ended June 30, 2025 (US Dollars) | Three Months Ended June 30, 2024 (US Dollars) | Six Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2024 (US Dollars) | | :--- | :--- | :--- | :--- | :--- | | Net income | $3,358,314 | $1,513,743 | $6,457,751 | $3,276,088 | | Stock-based compensation expense | $259,066 | — | $502,687 | — | | Provision (reversal) for current expected credit losses | $468,493 | $71,854 | $586,141 | $71,854 | | Distributable earnings | $4,085,873 | $1,585,597 | $7,546,579 | $3,347,942 | | Distributable earnings per basic weighted average share (US Dollars per Share) | $0.31 | $0.23 | $0.62 | $0.49 | - For the first half of 2025, distributable earnings were **$7.55 million**, or **$0.62 per basic weighted average share**, a significant increase from **$3.35 million** (**$0.49 per share**) in the same period of 2024[133](index=133&type=chunk) [Factors Impacting our Operating Results](index=29&type=section&id=Factors%20Impactin%20our%20Operating%20Results) - The company's operating results are primarily dependent on the level of net interest spread, the market value of its assets, and the market supply and demand for commercial real estate debt and other financial assets[134](index=134&type=chunk) - Net interest spread includes the accretion and amortization of original issue discount (OID) and is recognized based on contractual interest rates and outstanding loan principal[134](index=134&type=chunk) [Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024](index=30&type=section&id=Results%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030,%202025%20and%202024) | Metric | Three Months Ended June 30, 2025 (US Dollars) | Three Months Ended June 30, 2024 (US Dollars) | Six Months Ended June 30, 2025 (US Dollars) | Six Months Ended June 30, 2024 (US Dollars) | | :--- | :--- | :--- | :--- | :--- | | Net income | $3,358,314 | $1,513,743 | $6,457,751 | $3,276,088 | | Interest income | $6,752,679 | $1,979,576 | $11,711,202 | $4,005,882 | | Interest expense | $(1,083,212) | — | $(1,419,371) | — | | Management and incentive fees | $689,140 | — | $689,140 | — | | General and administrative expenses | $659,957 | $21,025 | $1,413,083 | $21,568 | | Stock-based compensation | $259,066 | — | $502,687 | — | | Professional fees | $234,497 | $372,954 | $643,029 | $636,372 | | Provision (reversal) for current expected credit losses | $(468,493) | $(71,854) | $(586,141) | $(71,854) | - For the three months ended June 30, 2025, interest income increased by **241.1%** to **$6.75 million**, primarily due to the expansion of the loan portfolio[136](index=136&type=chunk) - Interest expense increased by **$1.4 million** in the first half of 2025, primarily due to new credit facilities and related borrowings during the period[137](index=137&type=chunk) - The provision for current expected credit losses increased by **$0.5 million** in the first half of 2025, reflecting the growth of the loan portfolio[143](index=143&type=chunk) [Loan Portfolio](index=31&type=section&id=Loan%20Portfolio) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Number of loans | 13 | 9 | | Total commitments (Millions of US Dollars) | $360.2 Million | $190.9 Million | | Outstanding principal (Millions of US Dollars) | $251.0 Million | $132.6 Million | | Floating-rate loans percentage (Percentage) | 86% | 79% | | Weighted average remaining term (Years) | 2.2 Years | 2.6 Years | | Weighted average YTM (Percentage) | 12% | N/A | - As of June 30, 2025, the company's loan portfolio consisted of **13** loans with an aggregate outstanding principal of approximately **$251 million**, of which approximately **86%** were floating-rate loans[147](index=147&type=chunk) - During the first half of 2025, the company originated and funded approximately **$130 million** in new and additional principal on existing loans, and received approximately **$11.5 million** in principal repayments[147](index=147&type=chunk) [Collateral Overview](index=33&type=section&id=Collateral%20Overview) - The company's debt investments are primarily secured by real estate assets, which are expected to be diversified across various asset classes including residential, retail, office, hospitality, industrial, mixed-use, and special-purpose properties[153](index=153&type=chunk) - In the event of loan default, the company may seek to sell the loan to a third party, work with the borrower through an affiliate or third party to sell the collateral, or initiate foreclosure proceedings to sell the collateral to repay the loan[154](index=154&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | June 30, 2025 (Millions of US Dollars) | December 31, 2024 (Millions of US Dollars) | | :--- | :--- | :--- | | Cash and cash equivalents | $5.6 Million | $184.6 Million | | Revolving credit facility outstanding borrowings | $65.0 Million | $123.8 Million | | Revolving credit facility available capacity | $75.0 Million | $1.2 Million | | SRTF credit facility available capacity | $75.0 Million | — | - The company believes that its cash on hand, available capacity under the revolving credit facility and SRTF credit facility as of June 30, 2025, and cash flow from operations will be sufficient to meet its operating needs for the next twelve months[157](index=157&type=chunk) - In January 2025, the company generated approximately **$71.3 million** in net proceeds from a public offering of **6.4 million** shares of common stock[159](index=159&type=chunk) - In the first half of 2025, net cash used in operating activities was **$1.24 million**, net cash used in investing activities was **$109 million**, and net cash used in financing activities was **$68.94 million**[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) [Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements](index=35&type=section&id=Contractual%20Obligations,%20Other%20Commitments,%20and%20Off-Balance%20Sheet%20Arrangements) | Commitment Type | Less than 1 Year (US Dollars) | 1-3 Years (US Dollars) | 3-5 Years (US Dollars) | More than 5 Years (US Dollars) | Total (US Dollars) | | :--- | :--- | :--- | :--- | :--- | :--- | | Undrawn commitments | $— | $89,037,689 | $20,195,541 | $— | $109,233,230 | - As of June 30, 2025, the company's total undrawn loan commitments were **$109 million**, with all commitments fundable within four years[172](index=172&type=chunk) - The company may be subject to various indemnification obligations, where potential future payments could be unlimited[173](index=173&type=chunk) [Dividends](index=36&type=section&id=Dividends) - The company plans to elect to be taxed as a REIT for U.S. federal income tax purposes, commencing with its taxable year ending December 31, 2024, and intends to distribute at least **90%** of its REIT taxable income to shareholders annually[175](index=175&type=chunk) - If the company distributes less than the required amount, it may be subject to a **4%** non-deductible excise tax[175](index=175&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No significant changes have occurred in critical accounting policies and estimates since the disclosure in the company's annual report on Form 10-K[177](index=177&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This chapter details the company's market risks, including interest rate and credit risks, and outlines management strategies through rigorous investment processes and continuous monitoring, assessing impacts on net interest income and loan fair value [Risk Management](index=36&type=section&id=Risk%20Management) - The company's investment portfolio is designed to include high-quality residential, retail, office, hospitality, industrial, mixed-use, and special-purpose real estate[178](index=178&type=chunk) - The Manager employs a rigorous investment process to achieve value creation and implement significant downside protection measures[178](index=178&type=chunk) [Changes in Fair Value of Our Assets](index=37&type=section&id=Changes%20in%20Fair%20Value%20of%20Our%20Assets) - As of June 30, 2025, and December 31, 2024, none of the company's loans held for investment at carrying value were measured at fair value[180](index=180&type=chunk) - Fair value is determined by the Board of Directors through its independent Audit and Valuation Committee, with reference to opinions from independent third-party valuation firms, primarily using an income approach[181](index=181&type=chunk)[182](index=182&type=chunk) [Changes in Market Interest Rates and Effect on Net Interest Income](index=37&type=section&id=Changes%20in%20Market%20Interest%20Rates%20and%20Effect%20on%20Net%20Interest%20Income) - The company's operating results are highly dependent on the difference between the yields on its assets and the cost of its borrowings[185](index=185&type=chunk) - As of June 30, 2025, the company had **11** floating-rate loans, representing approximately **86%** of the total outstanding principal of its loan portfolio[186](index=186&type=chunk) - Assuming a **100 basis point** increase in floating benchmark rates, annual interest income is projected to increase by approximately **$2.2 million**; a **100 basis point** decrease is projected to reduce annual interest income by approximately **$0.4 million** (subject to benchmark floors)[186](index=186&type=chunk)[187](index=187&type=chunk) [Interest Rate Cap Risk](index=38&type=section&id=Interest%20Rate%20Cap%20Risk) - Floating-rate loans may be subject to periodic and lifetime interest rate caps and floors, which could limit the growth in asset yields during periods of rising interest rates, while borrowing costs may not be subject to similar limitations[188](index=188&type=chunk) [Interest Rate Mismatch Risk](index=38&type=section&id=Interest%20Rate%20Mismatch%20Risk) - The company may fund loans with borrowings based on different benchmarks, leading to interest rate mismatch risk where rising index rates could increase borrowing costs without a corresponding increase in fixed-rate yields[189](index=189&type=chunk) [Credit Risk](index=38&type=section&id=Credit%20Risk) - The company faces varying degrees of credit risk associated with its loans and interest receivable, which the Manager mitigates through comprehensive underwriting and selection processes and proactive monitoring[191](index=191&type=chunk) - As of June 30, 2025, the company's loan portfolio was concentrated among its **top three borrowers**, accounting for approximately **40.6%** of the total outstanding principal[195](index=195&type=chunk) [Real Estate Risk](index=39&type=section&id=Real%20Estate%20Risk) - Commercial real estate loans are affected by various factors, including national, regional, and local economic conditions, local real estate conditions, construction quality, demographic factors, and regulatory changes, all of which could adversely impact loan recovery[196](index=196&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, assessed the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they are effective, with no significant changes in internal financial reporting controls during the quarter - As of June 30, 2025, the effectiveness of the company's disclosure controls and procedures has been evaluated and determined to be effective[197](index=197&type=chunk) - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[198](index=198&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the company is not involved in any material pending legal proceedings - As of June 30, 2025, the company is not involved in any material pending legal proceedings[200](index=200&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors disclosed in its annual Form 10-K, beyond those in the quarterly report for the quarter ended March 31, 2025 - No material changes have occurred to the risk factors disclosed in the company's annual report on Form 10-K, other than those disclosed in the quarterly report for the quarter ended March 31, 2025[201](index=201&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no recent unregistered equity security sales and no common stock repurchases during the three months ended June 30, 2025 - There have been no recent unregistered sales of equity securities[202](index=202&type=chunk) - The company did not repurchase any common stock during the three months ended June 30, 2025[203](index=203&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - No defaults upon senior securities have occurred[204](index=204&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[205](index=205&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) The company reports no other information requiring disclosure - No other information[206](index=206&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This chapter lists exhibits filed with the quarterly report, including the separation and distribution agreement, articles of incorporation, loan amendments, and CEO/CFO certifications - Exhibits include the separation and distribution agreement, amended and restated articles of incorporation, amendments to the revolving credit facility, and Sarbanes-Oxley Act certifications from the Chief Executive Officer and Chief Financial Officer[207](index=207&type=chunk) [Signatures](index=42&type=section&id=Signatures) This quarterly report was signed by CEO Brian Sedrish and CFO Brandon Hetzel on August 7, 2025 - This report was signed by Chief Executive Officer Brian Sedrish and Chief Financial Officer Brandon Hetzel on August 7, 2025[210](index=210&type=chunk)