Revenue and Sales Performance - Revenue for the three-month period ended September 30, 2025, was $1,744,000, a significant increase from $127,000 for the same period in 2024, primarily due to the acquisition of SMCB[156] - Net sales increased by $1,617,000 to $1,744,000 for the three-month period ended September 30, 2025, compared to $127,000 for the same period in 2024, primarily due to the acquisition of SMCB[161] - Net sales increased by $2,891,000 to $3,018,000 for the nine-month period ended September 30, 2025, compared to $127,000 for the same period in 2024, driven by SMCB's contribution[169] Costs and Expenses - Gross loss for the three-month period ended September 30, 2025, was $351,000, or 20% of net sales, compared to a gross loss of $32,000, or 25% of net sales in the same period of 2024[156] - Cost of sales rose by $1,936,000 to $2,095,000 for the three-month period ended September 30, 2025, compared to $159,000 for the same period in 2024, mainly due to costs associated with SMCB[162] - Cost of sales increased by $3,557,000 to $3,716,000 for the nine-month period ended September 30, 2025, compared to $159,000 for the same period in 2024, primarily due to SMCB[170] - Operating expenses decreased to $1,214,000 for the three-month period ended September 30, 2025, down from $1,791,000 in the same period of 2024[157] - General and administrative expenses decreased by $580,000 to $1,211,000 for the three-month period ended September 30, 2025, compared to $1,791,000 for the same period in 2024[166] - General and administrative expenses increased by $354,000 to $3,184,000 for the nine-month period ended September 30, 2025, compared to $2,830,000 for the same period in 2024[173] - Selling expenses were $3,000 for the three-month period ended September 30, 2025, with no selling expenses incurred in the same period in 2024[164] Net Loss and Financial Position - Net loss from continuing operations for the three-month period ended September 30, 2025, was $1,882,000, compared to $2,106,000 for the same period in 2024[157] - Net loss available to common shareholders for the three-month period ended September 30, 2025, was $2,962,000, or $1.15 per share, compared to a net gain of $1,195,000, or $0.13 per share, for the same period in 2024[158] - Net loss attributable to non-controlling interest was $20,000 for the three-month period ended September 30, 2025, down from $221,000 for the same period in 2024[168] Cash Flow and Financing - Net cash used by operating activities was $4,343,000 during the nine-month period ended September 30, 2025, compared to $3,770,000 for the same period in 2024[177] - Net cash provided by financing activities was $4,115,000 during the nine-month period ended September 30, 2025, compared to $1,103,000 for the same period in 2024, reflecting increased proceeds from promissory notes[180] Future Outlook - The company expects substantial increases in net sales from the SemiCab business over the next 12 months, particularly from the growing customer base in India[159] - Anticipated gross loss is expected to decrease as net sales from the SemiCab business increase, outpacing the rise in cost of sales[159] - The company plans to invest in the growth and development of the SemiCab business, which may lead to increased operating expenses due to legal and accounting costs[159] - Future acquisitions of complementary businesses may significantly impact the company's financial results, either positively or negatively[160] Assets - Total assets decreased from $18,302,000 at December 31, 2024, to $10,845,000 at September 30, 2025[158]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-41405 ALGORHYTHM HOLDINGS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdict ...

Financial Performance - Total net revenues for Q3 2025 reached $1,356,609, an increase of 7.8% compared to $1,258,929 in Q3 2024[18] - Net loss for Q3 2025 was $3,449,693, compared to a net loss of $719,748 in Q3 2024, representing a significant increase in losses[18] - Operating costs and expenses for Q3 2025 totaled $4,404,520, up from $1,983,627 in Q3 2024, indicating a rise of 121.1%[18] - Net revenues for the three-month period ended September 30, 2025, were approximately $1.4 million, an increase of 7.8% compared to $1.3 million in 2024, primarily driven by licensing revenue[125] - Total operating costs and expenses for the three-month period were approximately $4.4 million, a significant increase of 122.0% from $2.0 million in the prior year[125] - Net loss for the three-month period was $(3.4) million, a 379.3% increase compared to a net loss of $(719.7) thousand in 2024[125] - For the nine-month period ended September 30, 2025, total net revenues were approximately $4.9 million, an increase of 17.7% from $4.1 million in 2024, driven by license income[131] Cash Flow and Liquidity - Cash and cash equivalents decreased to $44,045 as of September 30, 2025, down from $158,215 as of December 31, 2024[16] - Net cash used in operating activities was $4,794,712 for the nine months ended September 30, 2025, an increase from $3,319,670 in the prior year[27] - The company reported a net cash provided by financing activities of $4,491,041, compared to $3,902,291 in the previous year[27] - Cash and cash equivalents at the end of the period were $44,045, down from $105,863 at the end of the same period in 2024[27] - Net cash provided by financing activities for the nine-month period ended September 30, 2025, was $4.5 million, primarily from loan payables of $4.2 million, offset by debt amortization of $2.9 million[144] Assets and Liabilities - Total assets decreased to $6,198,248 as of September 30, 2025, from $7,789,123 as of December 31, 2024[16] - Total liabilities increased to $9,620,143 as of September 30, 2025, compared to $5,186,381 as of December 31, 2024[16] - The accumulated deficit increased to $(32,543,761) as of September 30, 2025, from $(21,562,872) as of December 31, 2024[16] - Total loans payable to financial institutions as of September 30, 2025, were $132,164, up from $111,300 as of December 31, 2024, representing an increase of approximately 18.7%[61] - Total loan payable to others increased to $449,027 as of September 30, 2025, compared to $427,073 as of December 31, 2024, marking a rise of about 5.1%[62] Stock and Equity - The company issued 100,000 common shares during Q3 2025, contributing to the increase in total stockholders' equity[21] - The weighted average number of common shares outstanding for Q3 2025 was 5,068,011, compared to 2,420,628 in Q3 2024[18] - The Company issued Debentures totaling $3,750,000 to Arena Investors, sold for a purchase price of $4,166,665, reflecting a 10% original issue discount[72] - The Company issued 1,041,667 Warrants in connection with the Debentures issued to Arena Investors[72] Revenue Sources - As of September 30, 2025, retail store revenue accounted for approximately 94.5% of the Company's total revenue for the nine months ended, while wholesale and online revenue made up about 3.5%[119][120] - The Company recognized $100,000 in licensing revenue for the nine months ended September 30, 2025, which constituted approximately 2.0% of total revenue[121] - The retail coffee market in the U.S. is projected to reach $74.3 billion in 2025, driven by a shift towards premium coffee products[117] Operational Developments - The company has established new subsidiaries in Korea and Malaysia, each with one retail coffee store under the Reborn Coffee brand[31] - The Company has 12 retail locations in California and two international locations in South Korea and Malaysia[111][122] - The Company has a focus on continuous Research and Development to innovate coffee processing methods and enhance product offerings[116] - The Company aims to capture a growing portion of the coffee market as consumer awareness of its brand increases[117] Internal Controls and Compliance - Management identified control deficiencies due to inadequate accounting resources and lack of segregation of duties, which may affect the internal control environment[156] - As of September 30, 2025, the company’s disclosure controls and procedures were deemed ineffective, impacting the assurance of timely and accurate reporting[155] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2025, that materially affected the internal control[159] - The company is not currently involved in any litigation that is expected to have a materially adverse effect on its financial condition or results of operations[162] Future Outlook - The company plans to raise additional operating funds through equity and/or debt offerings, although there is no assurance of success[28] - The Company has substantial doubt about its ability to continue as a going concern due to uncertainties regarding revenue generation and financing[30]

Financial Instruments and Debt - The Company reported a principal amount of $6,625,000 for a junior secured convertible promissory note issued to J.J. Astor & Co., receiving $5,000,000 net of fees[141]. - The Lender converted $4.05 million of outstanding principal into approximately 34.5 million shares of the Company's common stock at discounted prices[142]. - The Outstanding Principal Amount of the Initial Note was $2,259,319.89, and the Outstanding Principal Balance on the Second Note was $5,685,805.13 as of the Forbearance Agreement Effective Date[145]. - The Company agreed to a default interest rate of 19% on the Initial Note and Second Note, with all amounts due by November 30, 2025[145]. - The Company received $1,152,000 from the Third Note after legal and origination fees, with a principal amount of $1,620,000[146]. - The Company issued a convertible promissory note for a principal amount of $647,500, receiving $550,000 in exchange and issuing 82,500 shares of common stock as an incentive[147]. - On October 16, 2025, the Company raised approximately $5 million through a registered direct offering of 8,417,645 shares at $0.2164 per share and 14,689,851 pre-funded warrants at $0.2154[148]. - A second offering on October 30, 2025, raised approximately $2.55 million by issuing 10,600,000 shares at $0.18 per share and 3,566,666 pre-funded warrants at $0.179[156]. - The Company entered into a Physical Commodity Intermediation Agreement with a wholesaler, providing up to $40 million in credit support for commodity trading activities[154]. Business Operations and Acquisitions - The Company acquired Endeavor Crude, LLC and other entities on October 1, 2024, enhancing its operations in the midstream oil and gas industry[139]. - The Company is focused on building an integrated midstream and environmental services platform to enhance operational efficiency and market access[138]. - The Company is developing Remediation Processing Centers, with the first facility under construction in Texas, expected to process oilfield solid wastes into valuable byproducts[137]. - The Company has revised its segment structure to report three operating segments: transportation and logistics, terminaling and storage services, and supply and trading[133]. - The Company revised its segment reporting structure to include three operating segments: transportation and logistics, terminaling and storage services, and supply and trading, reflecting the expansion of its business activities[166]. Financial Performance - For the three months ended September 30, 2025, the Company reported revenues of $16,981,385, an increase of $1,064,962 or 6.7% compared to $15,916,423 in the same period of 2024[170]. - The cost of revenues decreased to $12,261,886 for the three months ended September 30, 2025, down $1,928,187 or 13.59% from $14,190,073 in 2024[172]. - Gross profit for the three months ended September 30, 2025, was $4,719,499, representing an increase of $2,993,149 or 173% compared to $1,726,350 in 2024[173]. - Operating expenses increased to $13,750,500 for the three months ended September 30, 2025, an increase of $10,065,513 or 273% from $3,684,987 in 2024, primarily due to costs from the acquired Endeavor Entities[174]. - Total interest expense for the three months ended September 30, 2025, was $14,439,961, an increase of $13,798,717 or 2,152% compared to $641,244 in 2024, driven by refinancing and forbearance arrangements[175]. - For the nine months ended September 30, 2025, total revenues increased by 221.79% to $83.4 million, attributed to higher activity in transportation and logistics and terminaling and storage services from the Endeavor Entities acquisition[184]. - The cost of revenues for the nine months ended September 30, 2025, was $69.4 million, representing an increase of 177.24% compared to the prior year, driven by the operations of the newly acquired Endeavor Entities[186]. - Gross profit for the nine months ended September 30, 2025, was $14.1 million, an increase of 588.08% from $3.9 million in 2024, reflecting the growth in revenue and cost of revenue activities[187]. - Operating expenses for the nine months ended September 30, 2025, rose to $36.3 million, a 704.87% increase, primarily due to costs from the Endeavor Entities and a $5.0 million legal reserve[188]. - Interest expense for the nine months ended September 30, 2025, totaled $20.0 million, a significant increase of 2,876.07% compared to the prior year, driven by refinancing and forbearance arrangements[189]. - A loss on conversion of debt of $9.8 million was recognized during the nine months ended September 30, 2025, compared to $0 in the prior year, due to the conversion of convertible debt into common stock[190]. - Unrealized losses on marketable securities for the nine months ended September 30, 2025, amounted to $249,080, a decrease of 120.14% from an unrealized gain of $743,739 in 2024[191]. - For the nine months ended September 30, 2025, the company reported net cash provided by operating activities of $4,311,676, a significant increase from $165,359 in the same period of 2024[199]. - The company experienced a net loss of $54,358,617 for the nine months ended September 30, 2025, compared to a net loss of $6,983,978 in 2024[202]. Cash Flow and Financial Position - As of September 30, 2025, the company had an accumulated deficit of approximately $148.1 million and a working capital deficit of approximately $62.3 million[200]. - Cash and cash equivalents decreased from $3,676,992 as of December 31, 2024, to $1,191,766 as of September 30, 2025, with $892,124 classified as restricted cash[201]. - Net cash used in financing activities totaled $8,494,343 for the nine months ended September 30, 2025, reflecting substantial payments on notes payable and finance lease obligations[204]. - The company anticipates approximately $1.5 million of additional expenditures related to the continued development of its Texas remediation and wash plant facilities[205]. - The company had no capitalized interest during the nine months ended September 30, 2025, compared to $1.0 million in the same period in 2024[205]. - As of September 30, 2025, the company had finance lease obligations totaling $8,929,265[207]. Going Concern and Risks - The company faces substantial doubt about its ability to continue as a going concern due to historical net losses and negative cash flows from operations[200]. - The company is exposed to interest rate risk due to financing arrangements with variable interest rates based on the prime rate[209].

Financial Condition - As of December 31, 2024, the company had cash and cash equivalents of approximately $15,000, a working capital deficit of approximately $3,170,000, and an accumulated deficit of approximately $58,255,000[66]. - The company's auditors expressed substantial doubt regarding its ability to continue as a going concern due to a lack of financial liquidity[67]. - The company has incurred substantial losses from operations to date and may never achieve profitability, which could adversely affect the market value of its common stock[76]. - The company requires additional funding to support its operations, and any new equity financing could have a substantial dilutive effect on existing stockholders[66]. - The company's convertible debt could lead to dilution of existing shareholders if additional shares are issued upon conversion[103]. Internal Controls and Compliance - The company is currently facing material weaknesses in its internal control over financial reporting, which could result in material misstatements in its financial statements[78]. - The company is subject to various federal, state, and foreign consumer protection laws, and failure to comply could have a material adverse effect on its business and financial condition[89]. - The company is subject to increased federal regulations, including the CARD Act and FinCEN's Prepaid Access Rule, which may raise operational costs and impact revenues[90]. - Compliance with Money Transmitter Licenses is mandatory in several states, and failure to maintain these licenses could adversely affect the company's operations and financial condition[91]. - The company collects and stores personally identifiable information, making it subject to various privacy regulations, and any data breaches could lead to significant liabilities and reputational damage[92]. - The company is currently out of compliance with SEC filings but expects to resolve this issue shortly, which is crucial for maintaining investor confidence[102]. Operational Risks - The company is involved in various litigation matters that could harm its business and financial condition if resolved adversely[82]. - The company relies on a small number of key personnel, and the loss of any of these individuals could materially and adversely affect its operations[86]. - The company is subject to evolving anti-money laundering regulations, which may increase operational costs and disrupt business[88]. - Cuentas Mobile relies on third-party network operators for service delivery, making its performance dependent on the reliability of these providers[97]. - The company has an operating history of almost three years in the mobile phone business, and failure to attract and retain subscribers could significantly impact its financial results[99]. Market Competition and Stock Performance - The company faces competition from larger, well-financed competitors, which may hinder its ability to compete effectively in the market[95]. - The company's stock is subject to penny stock rules, which may reduce trading activity and make it difficult for shareholders to sell their shares[106]. - The company does not expect to pay dividends for the foreseeable future, which may deter potential investors seeking current income[110]. - The company's ability to achieve and maintain profitability is dependent on generating revenues and managing development costs effectively[73].

Financial Performance - Total net revenues for Q3 2025 were $56.9 million, a 5.1% increase from $54.1 million in Q3 2024[26] - Net income for Q3 2025 was $29.7 million, compared to $27.6 million in Q3 2024, resulting in earnings per share of $4.27 and $4.25 for basic and diluted shares, respectively[14][36] - Adjusted EBITDA for Q3 2025 was $38.8 million, up from $36.1 million in Q3 2024[24][35] - For the first nine months of 2025, the Company reported total net revenues of $170.5 million, a 6.8% increase from $159.6 million in the same period of 2024[39] - Net income for the first nine months of 2025 was $96.5 million, compared to $88.4 million for the same period in 2024[39] - Adjusted EBITDA for the first nine months of 2025 was $115.2 million, compared to $102.9 million for the same period in 2024[50] - Net income for the nine months ended September 30, 2025, was $96.47 million, up from $88.38 million in the same period of 2024, reflecting a year-over-year increase of 9.4%[81] - Adjusted net income for the nine months ended September 30, 2025, was $84.99 million, an increase from $80.24 million in 2024, which is a rise of 5.5%[83] Revenue and Earnings - Time charter revenue for Q3 2025 was $58,547,672, an increase of 3.2% compared to $55,375,268 in Q3 2024[74] - Average time charter equivalent rate for the first nine months of 2025 was $28,735 per day, up from $28,624 per day in the same period of 2024[39] - Basic and diluted earnings per share for the first nine months of 2025 were $13.90 and $13.84, respectively, compared to $12.75 and $12.66 for the same period in 2024[51] - Earnings per share (basic) for Q3 2025 was $4.27, compared to $3.97 in Q3 2024, indicating a 7.6% increase[76] - Adjusted earnings per share (basic) increased from $11.57 in the nine months ended September 30, 2024, to $12.25 in 2025, reflecting a growth of 5.9%[83] Expenses and Costs - Vessel operating expenses for the nine-month period of 2025 amounted to $35.2 million, an increase from $34.3 million in the same period of 2024[41] - Total interest and other financing costs for the first nine months of 2025 were $11.7 million, compared to $10.7 million for the same period in 2024[48] - The company reported interest and other financing costs of $9.54 million for the nine months ended September 30, 2025, compared to $5.53 million in the same period of 2024, indicating a significant increase of 72.5%[81] - General and administrative expenses increased to $4.4 million for the nine-month period ended September 30, 2025, compared to $3.7 million for the same period in 2024[44] Dividends and Shareholder Returns - The company declared a quarterly dividend of $0.70 per share, representing a yield of about 5%[20] - The company paid dividends totaling $14,000,695 in the nine months ended September 30, 2025, up from $12,533,010 in the same period of 2024[78] Assets and Liabilities - As of September 30, 2025, the company had outstanding debt of $224.0 million against cash reserves of $112.4 million[25] - Total current assets increased significantly from $84,706,760 as of December 31, 2024, to $160,029,953 as of September 30, 2025[77] - Cash and cash equivalents rose from $73,739,504 at the end of 2024 to $100,210,876 by September 30, 2025, marking a growth of 35.8%[77] - Total liabilities increased from $228,269,125 at the end of 2024 to $246,691,048 by September 30, 2025[77] Fleet and Operations - The average number of vessels operated in Q3 2025 was 22.0, compared to 23.0 in the same period last year[23] - The company operates a fleet of 21 vessels, with plans to expand to 25 vessels by 2028, increasing total carrying capacity from 61,144 TEU to 79,080 TEU[88] - The company has secured multi-year forward charters for five vessels, expected to generate a minimum of $183 million in EBITDA during the charter period[17] - The company anticipates further vessel acquisitions and entering into additional time charters as part of its growth strategy[89] Gains and Losses - The company recorded a gain of approximately $9.3 million from the sale of M/V Marcos V, which was sold for about $50.0 million[15] - The Company recognized a $10.2 million gain on the sale of M/V "Diamantis" in January 2025, compared to a $5.7 million gain on the sale of M/V "EM Astoria" in June 2024[47] - The unrealized loss on derivatives for the nine months ended September 30, 2025, was $380,832, compared to a gain of $247,867 in the same period of 2024[83] Non-GAAP Measures - The company emphasizes that Adjusted EBITDA and Adjusted net income are non-GAAP measures that provide insight into financial performance and liquidity[82]

Company Operations - The company operates through four segments: bromine, crude salt, chemical products, and natural gas[158]. - The company is one of the largest bromine producers in China, with significant applications in various industries including agriculture and pharmaceuticals[159]. - In June 2024, the company entered into acquisition agreements for crude salt fields totaling approximately 4,000,000 square meters, with total transfer prices ranging from RMB20,790,000 to RMB129,472,000[173][174][175][176][177]. - The company resumed bromine production in February 2023 after a temporary closure due to government regulations[167]. - The company is awaiting governmental approval for factories No. 2 and No. 10, which may require modifications to current wells and aqueducts[168]. - The company has secured land use rights for its new chemical plant at Bohai Marine Fine Chemical Industrial Park, with construction expected to take approximately one year[169]. - The company plans to proceed with applications for natural gas and brine project approvals following governmental planning finalization in Sichuan Province[170]. Financial Performance - Net revenue for the three-month period ended September 30, 2025, was $9,044,581, representing a 303% increase compared to $2,242,365 for the same period in 2024[194]. - The bromine segment generated net revenue of $8,052,331, a 412% increase from $1,571,313 in the prior year, driven by a 238% increase in tonnes sold[196]. - The crude salt segment reported net revenue of $992,250, up 52% from $654,039, primarily due to a 58% increase in tonnes sold[197]. - The total cost of net revenue for the three-month period was $7,996,785, a 96% increase from $4,071,616 in the same period last year[200]. - Gross profit for the three-month period was $1,047,796, or 12% of net revenue, compared to a gross loss of $1,829,251, or 82%, in the same period in 2024[206]. - Loss from operations decreased to $333,928, a 93% improvement from a loss of $4,581,609 in the prior year[194]. - The company incurred a net loss of $35,664,512 for the three-month period, a 921% increase from a net loss of $3,492,883 in the same period in 2024[194]. - The average selling price of bromine increased to $3,637 per tonne in Q3 2025, compared to $2,396 per tonne in Q3 2024[196]. - The net revenue for the nine-month period ended September 30, 2025, was $18,992,813, a 220% increase from $5,932,596 in the same period in 2024[222]. - The bromine segment's net revenue increased to $17,210,574 for the nine-month period ended September 30, 2025, compared to $4,576,744 in 2024, reflecting a 276% increase[224]. - The company incurred a net loss of $35,664,512 for the three-month period ended September 30, 2025, compared to a net loss of $3,492,883 in the same period in 2024[220]. - Gross profit for the nine-month period ended September 30, 2025, was $2,044,628, representing a margin of 10.8%, compared to a gross loss of $5,370,923, or 91%, for the same period in 2024[233]. - The bromine segment achieved a gross profit margin of 5.8% for the nine-month period ended September 30, 2025, a significant improvement from a gross loss margin of 132% in the same period of 2024, driven by an increase in the average selling price of bromine to $3,751 per ton[235]. - The crude salt segment reported a gross profit margin of 58.9% for the nine-month period ended September 30, 2025, up from 45% in the same period of 2024[236][237]. - The chemical products segment had a gross profit margin of 0% for the nine-month period ended September 30, 2025, due to the closure of the chemical products plant[238]. - Net loss for the nine-month period ended September 30, 2025, was $41,067,789, compared to a net loss of $40,582,933 in the same period in 2024[249]. Expenses and Costs - General and administrative expenses decreased to $785,533 for the three-month period ended September 30, 2025, down from $1,002,529 in 2024, representing a reduction of $216,966[212]. - The cost of net revenue for the nine-month period ended September 30, 2025, was $16,948,185, a 50% increase from $11,303,519 in the same period in 2024, primarily due to increased sales volume[228]. - General and administrative expenses increased by $759,864 (or 32%) to $3,169,821 for the nine-month period ended September 30, 2025, primarily due to higher depreciation costs[241]. - The company incurred direct labor and factory overhead costs of $4,533,760 for the nine-month period ended September 30, 2025, related to plants that have not resumed production[240]. Compliance and Stock Information - The company has received a second 180-calendar day grace period until November 3, 2025, to regain compliance with Nasdaq's bid price requirement after transferring to The Nasdaq Capital Market[188]. - The company plans to effect a reverse stock split if necessary to cure the deficiency during the Second Compliance Period[187]. - The company completed a 1-for-5 reverse stock split in January 2020 and a 1-for-10 reverse stock split in October 2025[171][172]. Cash Flow and Investments - Cash and cash equivalents decreased to $5,820,083 as of September 30, 2025, down from $10,075,162 as of December 31, 2024[250]. - The overall accounts receivable balance increased by $2,858,041 as of September 30, 2025, compared to December 31, 2024, with cash collections significantly impacting liquidity[254]. - The company used $8,673,384 in investing activities during the nine-month period ended September 30, 2025, primarily for updates and renovations[259]. Accounting Policies - The company prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States, requiring management to make estimates and assumptions that affect reported amounts of assets and liabilities[265]. - Key critical accounting policies include accounts receivable, inventory allowances, and revenue recognition, as detailed in the Company's Form 10-Q for the nine months ended September 30, 2025[266]. - The company is classified as a "smaller reporting company" and is not required to provide certain market risk disclosures[267].

Revenue Performance - Revenue for Q3 2025 was $6.8 million, a 78% increase sequentially and a 76% increase year-over-year compared to Q3 2024's $3.9 million[5] - Total revenue for the three months ended September 30, 2025, was $6,783 million, a significant increase from $3,860 million in the same period of 2024, representing a growth of 76.5%[21] - Product revenue reached $2,195 million for the three months ended September 30, 2025, compared to $1,958 million in 2024, marking an increase of 12.1%[21] - Service revenue surged to $4,588 million for the three months ended September 30, 2025, up from $1,902 million in 2024, reflecting a growth of 141.5%[21] Profitability and Loss - Gross profit for Q3 2025 was $3.9 million, reflecting an increase from $2.3 million in Q3 2024, while gross margin declined to 58% from 60% year-over-year[5] - Gross profit for the three months ended September 30, 2025, was $3,937 million, compared to $2,334 million in 2024, indicating an increase of 68.8%[21] - The operating loss for Q3 2025 increased to $4.7 million from $2.6 million in Q3 2024[5] - Operating loss for the three months ended September 30, 2025, was $(4,734) million, widening from $(2,645) million in the same period of 2024[21] - Net loss for the three months ended September 30, 2025, was $(5,400) million, compared to $(2,616) million in 2024, representing an increase in loss of 106.8%[21] - Net loss per share (basic and diluted) for the three months ended September 30, 2025, was $(0.49), compared to $(0.40) in 2024[21] Expenses and Financial Position - Operating expenses for Q3 2025 were $8.7 million, a 74% increase from $5.0 million in Q3 2024, primarily due to increased headcount and depreciation expenses related to the SCN acquisition[5] - Total operating expenses for the three months ended September 30, 2025, were $8,671 million, up from $4,979 million in 2024, reflecting a rise of 74.5%[21] - Cash and cash equivalents decreased to $3.1 million as of September 30, 2025, down from $6.3 million at the end of 2024[5] - Stockholders' equity was $2.5 million as of September 30, 2025, compared to $8.0 million at the end of 2024[5] Strategic Initiatives - The acquisition of The Sleep Center of Nevada contributed $2.2 million in diagnostic sleep testing revenue and $1.3 million in treatment center revenue during Q3 2025[5] - Vivos plans to expand its model into additional major markets beyond Las Vegas through acquisitions or contractual alliances with sleep medical practices[3] - The company is actively working to add new sleep optimization teams in 2026 to reduce cash burn and create potential for profitable operations[4] - Vivos has entered into a management agreement with MISleep Solutions LLC to provide its treatments and services in Auburn Hills, Michigan, with patient services expected to begin in early December 2025[7] Shareholder Information - The weighted average number of shares outstanding (basic and diluted) increased to 10,963,590 for the three months ended September 30, 2025, from 6,615,320 in 2024[21] - Non-operating income (expense) included other expense of $(679) million for the three months ended September 30, 2025, compared to $(18) million in 2024[21]

Financial Performance - Net sales for the three months ended September 30, 2025, were $1,273,000, a decrease from $4,914,000 in the same period of 2024, representing a decline of approximately 74%[15] - Gross profit for the three months ended September 30, 2025, was a loss of $2,260,000 compared to a profit of $1,424,000 in the same period of 2024[15] - The net loss for the three months ended September 30, 2025, was $4,085,000, compared to a net income of $13,000 in the same period of 2024[15] - For the nine months ended September 30, 2025, the company recorded a net loss of $5,621,000 compared to a net loss of $1,628,000 for the same period in 2024[25] - Revenue for the nine months ended September 30, 2025, was $5,704 million, a decrease from $11,348 million in 2024, representing a decline of approximately 50.3%[89] - The net loss for the nine months ended September 30, 2025, was $5,621 million, compared to a net loss of $1,628 million in 2024, indicating a significant increase in losses[89] Assets and Liabilities - Total current assets decreased to $11,822,000 as of September 30, 2025, down from $15,597,000 as of December 31, 2024, reflecting a decline of about 24%[13] - Total liabilities increased to $9,447,000 as of September 30, 2025, compared to $9,034,000 as of December 31, 2024, indicating a rise of approximately 5%[13] - Cash and cash equivalents were reported at $4,000 as of September 30, 2025, a significant decrease from $498,000 as of December 31, 2024[13] - The accumulated deficit as of September 30, 2025, was $35,957,000, up from $30,336,000 as of December 31, 2024[13] Operating Expenses - Operating expenses for the three months ended September 30, 2025, totaled $1,617,000, an increase from $1,384,000 in the same period of 2024[15] - Interest paid for the nine months ended September 30, 2025, was $606,000, compared to $598,000 for the same period in 2024[25] - Total interest expense, fees, and financing costs for the nine months ended September 30, 2025, were $497, down from $588 for the same period in 2024[75] Inventory and Impairments - The company reported an inventory write-down of $1,967,000 and an impairment of right-of-use assets and lease deposits totaling $455,000[25] - The Company recorded total impairment charges of $455 for the three and nine months ended September 30, 2025, including $347 related to right-of-use assets[79] - As of September 30, 2025, total inventories were $10,892 million, down from $12,893 million as of December 31, 2024[46] Customer and Sales Information - The largest customer accounted for 68% of total revenues for the nine months ended September 30, 2025, compared to 44% for the two largest customers in the same period of 2024[59] - For the three months ended September 30, 2025, sales to telecommunications customers accounted for 92% of total revenues[58] - International sales for the three months ended September 30, 2025, totaled $6 million, a significant drop from $470 million in 2024[42] - DC power systems sales for the three months ended September 30, 2025, were $898 million, a decline of 79% from $4,340 million in 2024[40] Future Outlook and Plans - The company anticipates an increase in tariffs on imported products, which may impact profitability and global sales[33] - The company is currently negotiating a payment plan for delinquent rent with its landlords, with a proposed settlement to pay the overdue rent by February 28, 2026[28] - The Company expects to receive $325 in purchase orders by December 15, 2025, which is critical for meeting its financial obligations[69] - The company has a backlog of $5,283 million, with 53% from telecommunications customers, 13% from military customers, 1% from marine customers, and 33% from EV mobile charger customers[93] - The company expects the majority of its backlog orders to ship within the next twelve months[93] Shareholder and Financing Activities - The company entered into an ATM sales agreement on October 6, 2025, allowing for the sale of shares up to an aggregate offering price of $2,382 million[90] - As of November 19, 2025, the company sold 147,144 shares at an average price of approximately $5.00, resulting in net proceeds of approximately $714 million after commissions[91] - The company received a purchase order for $1,700 million for fifty Mobile EV Chargers, scheduled for delivery in 2026 over a 12-month period[92] - In October 2025, the company received a $674 million contract from a military customer for compact, lightweight DC generators[91] Delinquencies and Financial Obligations - The Company is currently delinquent in $398 of past due rents as of September 30, 2025[80] - The Company has a delinquent balance of $29 related to unsecured property taxes as of September 30, 2025[69]

Revenue Performance - Revenue for the third quarter of fiscal year 2026 was $57.0 billion, representing a 62% increase year-over-year and a 22% increase sequentially [126]. - Data Center revenue reached $51.2 billion, up 66% year-over-year and 25% sequentially, driven by accelerated computing and AI solutions [127]. - Data Center compute revenue was $43.0 billion, reflecting a 56% increase year-over-year and a 27% increase sequentially [128]. - Networking revenue surged to $8.2 billion, a 162% increase year-over-year, attributed to the growth of NVLink compute fabric [128]. - Gaming revenue increased by 30% year-over-year but decreased by 1% sequentially, as channel inventories normalized [129]. - Professional Visualization revenue rose 56% year-over-year and 26% sequentially, driven by the launch of the new DGX Spark [130]. - Compute & Networking revenue increased by 62% year-over-year to $35,721 million for the third quarter of fiscal year 2026, driven by demand for the Blackwell computing platform [138]. - Data Center computing revenue grew 59% year-on-year compared to the first nine months of fiscal year 2025, while Data Center networking revenue surged 105% year-on-year in the same period [138]. Operating Expenses and Margins - Operating expenses increased by 36% year-over-year and 8% sequentially, primarily due to higher compute and infrastructure costs [132]. - The gross margin for the third quarter was 73.4%, a decrease of 1.2 percentage points year-over-year but an increase of 1.0 percentage point sequentially [126]. - Gross margin decreased to 73.4% for the third quarter of fiscal year 2026, down from 74.6% in the same quarter of fiscal year 2025, impacted by a $4.5 billion charge related to excess inventory [148]. - Total operating expenses rose by 36% year-over-year to $5,839 million for the third quarter of fiscal year 2026, primarily due to a 39% increase in research and development expenses [151]. Financial Position and Cash Flow - Cash and cash equivalents increased to $11,486 million as of October 26, 2025, up from $8,589 million at the beginning of the year [162]. - Net cash provided by operating activities for the first nine months of fiscal year 2026 was $66,530 million, an increase from $47,460 million in the same period of fiscal year 2025 [163]. - As of October 26, 2025, the company had $60.6 billion in cash, cash equivalents, and marketable securities, ensuring sufficient liquidity for at least the next twelve months [166]. - The company repurchased 70 million shares for $12.6 billion in Q3 and 262 million shares for $36.7 billion in the first nine months of fiscal year 2026 [169]. - Cash dividends paid to shareholders amounted to $243 million in Q3 and $732 million in the first nine months of fiscal year 2026 [171]. Tax and Regulatory Matters - Income tax expense for the third quarter of fiscal year 2026 was $6.0 billion, with an effective tax rate of 15.9%, compared to $3.0 billion and 13.5% for the same quarter of fiscal year 2025 [156]. - Unrecognized tax benefits totaled $3.2 billion as of October 26, 2025, including related interest and penalties [175]. Strategic Investments and Commitments - The company committed to invest $5 billion in Intel Corporation and up to $10 billion in Anthropic, subject to regulatory approval and closing conditions [176]. - An additional $60.0 billion in share repurchase authorization was approved by the Board of Directors on August 26, 2025, bringing the total authorized repurchase amount to $62.2 billion [169]. Inventory and Supply Chain - The company incurred a $4.5 billion charge in Q1 FY 2026 due to diminished demand for the H20 product following new export regulations [119]. - Provisions for inventory and excess inventory purchase obligations totaled $410 million for the third quarter of fiscal year 2026, including $4.5 billion associated with excess inventory [149]. - The company is increasing U.S.-based manufacturing to strengthen its supply chain and meet growing demand for AI infrastructure [123]. Customer Concentration and Geographic Revenue - The company generated significant revenue from a limited number of direct customers, with four customers representing 61% of total revenue in the third quarter of fiscal year 2026 [142]. - Revenue from customers headquartered outside the United States accounted for 31% of total revenue for the third quarter of fiscal year 2026, down from 44% in the same quarter of fiscal year 2025 [146]. Debt and Financial Instruments - Aggregate debt maturities as of October 26, 2025, total $8.467 billion, with $1 billion due in one year and $2.75 billion due in one to five years [173]. - The company has a $575 million commercial paper program, with no commercial paper outstanding as of October 26, 2025 [173]. - A hypothetical 10% decrease in publicly-held equity securities would decrease their fair value by $387 million as of October 26, 2025 [181]. Sustainability and Regulatory Impact - There has been no material impact from global sustainability regulations or climate-related business trends on the company's operations [178].