iTeos Therapeutics(ITOS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details the company's unaudited financial statements, management's analysis, market risks, and internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $207,820 | $142,131 | +$65,689 | | Short-term investments | $307,610 | $352,517 | -$44,907 | | Long-term investments | $74,614 | $160,354 | -$85,740 | | Total assets | $623,083 | $686,976 | -$63,893 | | Accrued clinical trial costs | $36,462 | $17,896 | +$18,566 | | Accrued personnel expenses | $23,774 | $10,132 | +$13,642 | | Total liabilities | $129,282 | $96,682 | +$32,600 | | Accumulated deficit | $(123,123) | $(9,781) | -$113,342 | | Total stockholders' equity | $493,801 | $590,294 | -$96,493 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance over specific periods, showing revenues, expenses, and net loss Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | License and collaboration revenue | $— | $35,000 | $— | $35,000 | | Research and development expenses | $57,275 | $36,709 | $86,314 | $71,238 | | General and administrative expenses | $10,181 | $12,457 | $21,162 | $25,160 | | Restructuring costs | $16,335 | $— | $16,335 | $— | | Total operating expenses | $83,791 | $49,166 | $123,811 | $96,398 | | Loss from operations | $(83,791) | $(14,166) | $(123,811) | $(61,398) | | Net loss | $(78,729) | $(7,128) | $(113,341) | $(45,344) | | Basic net loss per common share | $(1.81) | $(0.18) | $(2.61) | $(1.20) | - The company reported a significant increase in net loss for both the three and six months ended June 30, 2025, primarily due to the absence of license and collaboration revenue (which was $35.0 million in 2024) and a substantial increase in research and development expenses, including restructuring costs[16] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity over time, reflecting net income/loss and stock transactions Condensed Consolidated Statements of Stockholders' Equity | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Total stockholders' equity | $590,294 | $493,801 | | Accumulated deficit | $(9,781) | $(123,123) | - Total stockholders' equity decreased by $96.5 million from December 31, 2024, to June 30, 2025, primarily due to a net loss of $78.7 million in Q2 2025 and $113.3 million for the six months ended June 30, 2025[19] Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(76,210) | $(66,327) | | Net cash provided by (used in) investing activities | $134,646 | $(53,278) | | Net cash provided by financing activities | $4,525 | $122,398 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $65,709 | $(50) | - Net cash used in operating activities increased by $9.9 million YoY, while investing activities shifted from using $53.3 million cash to providing $134.6 million cash, primarily due to investment maturities. Financing activities decreased significantly by $117.9 million YoY due to the absence of large common stock and pre-funded warrant issuances[22] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Nature of Business and Basis of Presentation The company terminated its belrestotug program and GSK collaboration, plans to wind down operations by Q3 2025, and faces going concern doubts - The company and GSK decided to terminate the belrestotug development program and end their collaboration on May 13, 2025, following interim analysis results from GALAXIES Lung-201 and H&N-202 trials that did not meet established criteria for clinically meaningful improvements[28][30][31] - On May 28, 2025, the company announced its intention to wind down clinical and operational activities, expecting substantial completion in the third quarter of 2025, as part of a review of strategic alternatives[34][35] - As of August 6, 2025, there is substantial doubt about the company's ability to continue as a going concern for at least 12 months, given the lack of an operational plan of business continuity if the proposed merger is not consummated[35][36] Net Loss and Accumulated Deficit | Metric | June 30, 2025 (in millions) | June 30, 2024 (in millions) | | :---------------- | :-------------------------- | :-------------------------- | | Net loss (6 months) | $(113.3) | $(45.3) | | Accumulated deficit | $(123.1) | N/A | Note 2. Summary of significant accounting policies The company's accounting policies remain consistent with its 2024 Annual Report, with new pronouncements expected to have disclosure-only impacts - No material changes to significant accounting policies have occurred since the audited consolidated financial statements for the year ended December 31, 2024[42] - ASU No. 2023-09 (Income Taxes) will be effective for the company in the year ending December 31, 2025, and is expected to have a disclosure-only impact[44] - ASU No. 2024-03 (Expense Disaggregation) will be effective for the company in the year ending December 31, 2027, and is expected to have a disclosure-only impact[45] Note 3. Investment securities and fair value measurements The company's fair value investments, primarily money market and government bonds, decreased to $554.1 million by June 30, 2025, with most maturing within one year Investment Securities Fair Value | Investment Type (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :----------------------------- | :------------------------- | :----------------------------- | | Money market funds | $171,909 | $116,694 | | U.S. government agency bonds | $52,940 | $47,994 | | U.S. treasury bonds | $309,425 | $375,138 | | Corporate debt securities | $19,859 | $89,739 | | Totals | $554,133 | $629,565 | Investment Maturity Grouping | Maturity Grouping (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------------------- | :------------------------- | :----------------------------- | | Due in one year or less | $307,610 | $352,517 | | Due after one year through five years | $74,614 | $160,354 | | Total | $382,224 | $512,871 | Interest Income and Accretion | Interest Income (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :----------------------------- | :----------------------------- | | Interest income | $8,900 | $9,600 | | Accretion on available-for-sale debt securities | $4,400 | $5,600 | Note 4. Supplemental balance sheet information Property and equipment, net, increased slightly to $5.175 million as of June 30, 2025, with no impairment recorded Property & Equipment, Net | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Property & equipment, net | $5,175 | $4,895 | - Depreciation and amortization expense was $0.6 million for both the six months ended June 30, 2025, and 2024[51] - No impairment of property and equipment has been recorded as of June 30, 2025[51] Note 5. License and collaboration agreements The GSK Collaboration Agreement for belrestotug was terminated, requiring a $32.0 million settlement from iTeos Belgium, while the Adimab Agreement will survive the merger - GSK provided written notice on May 13, 2025, to terminate the GSK Collaboration Agreement for convenience, effective six months from the notice date, following unfavorable topline interim results from GALAXIES Lung-201 and H&N-202 trials[28][30][62] - On July 18, 2025, iTeos Belgium and GSK entered into a Mutual Termination Agreement, requiring iTeos Belgium to pay a $32.0 million settlement to GSK to close out remaining clinical activity costs[62][63] R&D Expense Related to GSK Cost-Sharing | Metric (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------- | :------------------------------- | :----------------------------- | | R&D expense related to GSK cost-sharing | $35,200 | $43,200 | - The company did not recognize any revenue from the GSK Collaboration Agreement during the three or six months ended June 30, 2025, compared to $35.0 million recognized in the prior year periods[67] - The Adimab Agreement, under which the company paid $1.0 million in the three and six months ended June 30, 2025, will survive the Merger[56][58] Note 6. Government grant funding and potential repayment commitments under recoverable cash advance grants (RCAs) The Walloon Region cancelled RCA arrangements in July 2025, absolving the company from most repayable grants, except for $0.2 million reimbursement and $1.5 million advance payment Grant Funding and Repayable Grants | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Cash received (Other Grants) | $900 | $777 | | Grant income | $591 | $1,472 | | Grants repayable at period end | $7,033 | $6,238 | - In July 2025, the Walloon Region cancelled the RCA arrangements, relieving the company from repaying the substantial majority of the grants repayable balance[81][139] - The company will still be required to pay $0.2 million relating to the current liability portion of grants repayable and reimburse $1.5 million in advance payments received from the Walloon Region[81][139] Note 7. Stockholders' equity The company's common stock outstanding is 44,167,466 shares as of June 30, 2025, with RA Capital fully exercising its pre-funded warrants for 6,613,442 shares Common Stock Outstanding | Metric | June 30, 2025 | | :-------------------- | :------------ | | Common stock outstanding | 44,167,466 | - In the six months ended June 30, 2025, RA Capital exercised its pre-funded warrants in full for 6,613,442 shares through cashless exercises[87][119] - In May 2024, the company received $120.0 million in total proceeds from the sale of a pre-funded warrant to RA Capital and common stock to Boxer Capital[83] Note 8. Stock-based compensation Total stock-based compensation expense decreased to $5.88 million for Q2 2025 and $12.52 million for 6M 2025, with accelerated vesting expected for certain employees prior to the Merger Stock-Based Compensation Expense | Expense Category (in thousands) | 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 | $2,316 | $2,478 | $4,837 | $4,280 | | General and administrative | $3,564 | $5,584 | $7,679 | $11,045 | | Total stock-based compensation expense | $5,880 | $8,062 | $12,516 | $15,325 | - As of June 30, 2025, there was $34.7 million of unrecognized compensation costs related to non-vested stock option awards, expected to be recognized over a weighted average period of 2.4 years[98] - As of June 30, 2025, there was $7.1 million of unrecognized stock-based compensation expense related to restricted stock units, expected to vest over a weighted-average period of 2.8 years[100] - The vesting of certain stock options and restricted stock units will accelerate immediately prior to the closing of the Merger Agreement[98][100][134] - The 2020 Employee Stock Purchase Plan (ESPP) was terminated on July 18, 2025, in connection with the Merger Agreement, and all amounts in participant accounts will be refunded[95][136] Note 9. Income taxes The company reported negative effective tax rates due to interest on unrecognized tax benefits and taxable investment income, with an uncertain tax position related to GSK revenue allocation Income Tax Metrics | 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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Loss before income taxes | $(77,059) | $(4,867) | $(110,569) | $(40,869) | | Income tax expense | $(1,670) | $(2,261) | $(2,772) | $(4,475) | | Effective tax rate | (2.2)% | (46.4)% | (2.5)% | (10.9)% | - Income tax expense, despite a loss before income taxes, resulted primarily from additional interest accrued on the unrecognized tax benefits liability and taxable investment income generated by a subsidiary that could not be offset by net operating losses[101][102] - The unrecognized tax benefits liability increased by $2.1 million during the six months ended June 30, 2025, related to the accrual of interest expense, with total accrued interest and penalties of $10.3 million as of June 30, 2025[104][196] - The company's uncertain tax position relates to the allocation of revenue between the U.S. and Belgium under the GSK Agreement[103][195] Note 10. Commitments and contingencies The company has contractual arrangements and operating leases, with $2.4 million in remaining lease obligations expected due to July 2025 terminations, and the WuXi Agreement surviving the Merger - The WuXi Agreement, governing biologics development and manufacturing services, has no minimum commitments or royalties/milestones payable as of June 30, 2025, and will survive the Merger[106] - In July 2025, the company provided notice of termination for its Belgium leases (April 2016 and July 2023) and expects to provide notice for its Watertown, Massachusetts lease in Q3 2025[110] - The total expected cost for these terminated leases is $2.4 million, representing remaining obligations after termination notices[114][138] Lease Liability | Lease Liability (in thousands) | June 30, 2025 | | :----------------------------- | :------------ | | Total lease liability | $5,128 | | Lease liabilities, current | $1,516 | | Lease liabilities, net of current portion | $3,612 | Note 11. Related party transactions No royalties were owed under the Royalty Transfer Agreement, and Boxer Capital and RA Capital were related parties during a $120.0 million securities purchase in May 2024 - No royalties were owed to charitable foundations under the Royalty Transfer Agreement as of June 30, 2025, due to the absence of product sales[116] - Boxer Capital and RA Capital were considered related parties at the time of their $120.0 million securities purchase in May 2024[117][118] - RA Capital's beneficial ownership fell below the 10% principal owner threshold after an exchange agreement on May 14, 2024[118] Note 12. Net loss per share attributable to common stock Basic and diluted net loss per common share were $(1.81) for Q2 2025 and $(2.61) for 6M 2025, with common stock equivalents excluded due to anti-dilutive effects Net Loss Per Common Share | 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 net loss per common share | $(1.81) | $(0.18) | $(2.61) | $(1.20) | | Diluted net loss per common share | $(1.81) | $(0.18) | $(2.61) | $(1.20) | - Common stock equivalents (stock options and restricted stock units) were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect[120][121] Note 13. Segments The company operates as a single immuno-oncology segment, with the CEO evaluating performance based on consolidated net income/loss, and no revenue from GSK in 2025 - The company conducts operations as a single operating segment, managed as one consolidated entity with departments and executive committee members from both U.S. and Belgium locations[123] - The Chief Executive Officer, as the Chief Operating Decision Maker (CODM), evaluates performance and allocates resources based on consolidated net income/loss[124][125] - No revenue was earned from the collaboration with GSK for the three or six months ended June 30, 2025[124] Segment Expenses | Segment Expense (in thousands) | Six Months Ended June 30, 2025 | | :----------------------------- | :----------------------------- | | Belrestotug expense | $(40,464) | | Inupadenant expense | $(3,545) | | EOS-984 expense | $(6,182) | | EOS-215 expense | $(5,909) | | R&D payroll | $(15,874) | | Restructuring costs | $(16,335) | Note 14. Subsequent events The company entered a Merger Agreement with Concentra Biosciences for $10.047 cash per share plus a CVR, terminated the GSK agreement with a $32.0 million settlement, and initiated employee and lease terminations - On July 18, 2025, the company entered into a Merger Agreement with Concentra Biosciences, LLC, for an acquisition via a tender offer[128] - The Offer Price is $10.047 in cash per share plus one Contingent Value Right (CVR)[128] - The CVR entitles holders to 100% of Closing Net Cash exceeding $475 million and 80% of Net Proceeds from dispositions of CVR Products (EOS-984, EOS-215, preclinical obesity program, PTPNI1/2 program, and related IP) within six months post-merger[129] - On July 18, 2025, iTeos Belgium and GSK entered into a Mutual Termination Agreement, requiring iTeos Belgium to pay a $32.0 million settlement to GSK[135] - The 2020 ESPP was terminated on July 18, 2025, with all participant amounts to be refunded[136] - Employee terminations were initiated in July 2025 for both Belgium and U.S. employees, with $16.3 million in termination benefits recognized in Q2 2025 and an additional $8.2 million to be recorded in July 2025[137] - Belgium leases were terminated in July 2025, resulting in an expected remaining obligation of $2.4 million[138] - The Walloon Region relieved the substantial majority of the repayable grant liability in July 2025, with $0.2 million and $1.5 million still due for current liability and advance payments, respectively[139] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results, highlighting the strategic shift to winding down activities and the pending merger Overview The company decided to wind down operations by Q3 2025 after terminating its belrestotug program and GSK collaboration, facing going concern doubts pending a merger or dissolution - The company historically focused on discovering and developing immuno-oncology therapeutics, with lead candidate belrestotug targeting the TIGIT/CD226 pathway[141][142][143] - The belrestotug development program and GSK collaboration were terminated on May 13, 2025, due to GALAXIES Lung-201 and H&N-202 trial results not meeting clinically meaningful improvement criteria[145][147][148] - On May 28, 2025, the company announced its intention to wind down clinical and operational activities, expected to be substantially complete in Q3 2025, as part of a strategic alternatives review[151] - A Merger Agreement was entered into with Concentra Biosciences, LLC, on July 18, 2025, for an acquisition at $10.047 cash plus one CVR per share[156] - As of June 30, 2025, the company had $207.8 million in cash and cash equivalents and $382.2 million in available-for-sale securities[152][198] - The company faces substantial doubt about its ability to continue as a going concern if the Merger is not consummated, potentially leading to dissolution and liquidation[152] Components of our results of operations Revenue historically from GSK collaboration is now absent, R&D expenses are expensed as incurred, and grant income, tax credits, and interest income contribute to funding - Revenue has historically been derived from the upfront payment and a milestone payment from the GSK Collaboration Agreement; no revenue was recognized in Q2 or 6M 2025[160] - Research and development expenses are expensed as incurred and include costs for intellectual property licenses, employee-related expenses, CROs, CMOs, lab supplies, consulting fees, and facility costs[161][164] - Grant income is recognized from government agencies for eligible R&D expenditures, with certain grants having repayment provisions[169] - Research and development tax credits are cash-based credits from the Belgian government on eligible R&D expenses[172] - Interest income is earned on available-for-sale securities, money market funds, and bank sweep accounts[173] Results of operations The company experienced a substantial increase in net loss for both Q2 and 6M 2025, primarily due to absent license revenue, higher R&D expenses, and restructuring costs Comparison of the three months ended June 30, 2025 and 2024 Net loss significantly increased to $78.7 million in Q2 2025 from $7.1 million in Q2 2024, primarily due to absent $35.0 million license revenue, increased R&D expenses, and $16.3 million restructuring costs Three Months Ended June 30, 2025 vs 2024 | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Period to period change | | :-------------------------------- | :------------------------------- | :------------------------------- | :---------------------- | | License and collaboration revenue | $— | $35,000 | $(35,000) | | Research and development expenses | $57,275 | $36,709 | $20,566 | | General and administrative expenses | $10,181 | $12,457 | $(2,276) | | Restructuring costs | $16,335 | $— | $16,335 | | Net loss | $(78,729) | $(7,128) | $(71,601) | - The $20.5 million increase in R&D expenses was primarily due to a $21.7 million increase in clinical and related expenses, largely driven by the termination payment owed to GSK[179] - Interest income decreased by $1.4 million due to decreased interest rates and a smaller investment base[183] - Other (expense) income, net, decreased by $0.6 million due to increased foreign currency exchange losses as the U.S. Dollar weakened against the Euro[184] Comparison of the six months ended June 30, 2025 and 2024 Net loss for the six months ended June 30, 2025, surged to $113.3 million from $45.3 million in the prior year, primarily due to absent $35.0 million license revenue, increased R&D expenses, and $16.3 million restructuring costs Six Months Ended June 30, 2025 vs 2024 | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Period to period change | | :-------------------------------- | :----------------------------- | :----------------------------- | :---------------------- | | License and collaboration revenue | $— | $35,000 | $(35,000) | | Research and development expenses | $86,314 | $71,238 | $15,076 | | General and administrative expenses | $21,162 | $25,160 | $(3,998) | | Restructuring costs | $16,335 | $— | $16,335 | | Net loss | $(113,341) | $(45,344) | $(67,997) | - The $15.1 million increase in R&D expenses was primarily due to a $14.7 million increase in clinical and related expenses, mainly driven by the termination payment owed to GSK[188] - General and administrative expenses decreased by $4.0 million, primarily due to lower stock-based compensation and payroll costs[189] - Other (expense) income, net, decreased by $4.1 million due to increased foreign currency exchange losses as the U.S. Dollar significantly weakened against the Euro[193] Liquidity and capital resources The company's liquidity as of June 30, 2025, included $207.8 million in cash and $382.2 million in investments, with funding contingent on the Merger or an alternative strategic transaction Cash and Available-for-Sale Securities | Metric (in millions) | June 30, 2025 | | :------------------- | :------------ | | Cash and cash equivalents | $207.8 | | Available-for-sale securities | $382.2 | - The company expects to make additional payments post-June 30, 2025, including a $32.0 million settlement payment to GSK and $24.5 million of severance costs[197][202][209] - Existing cash and investments are believed to fund operating expenses and capital expenditure requirements through 2027, but this projection is subject to uncertainty regarding the Merger and potential wind-down[209][210] - Net cash used in operating activities increased by $9.9 million to $76.2 million for the six months ended June 30, 2025, driven by increased net loss and accrued clinical/personnel expenses[204] - Net cash provided by investing activities shifted to $134.6 million for the six months ended June 30, 2025, from cash used in the prior year, primarily due to proceeds from maturities of investments[205] - Net cash provided by financing activities decreased significantly to $4.5 million for the six months ended June 30, 2025, due to the absence of the $120.0 million proceeds from common stock and pre-funded warrant issuance in the prior year[206] Critical accounting policies and significant judgments and estimates The company's financial statements rely on critical accounting policies and significant judgments in revenue recognition, R&D expenses, stock-based compensation, government grants, and income taxes, with no significant changes since 2024 - No significant changes to existing critical accounting policies were noted since the Annual Report on Form 10-K for the year ended December 31, 2024[214] - Key areas requiring significant judgment include revenue recognition (applying the five-step model, identifying performance obligations, determining transaction price), collaborative arrangements (distinguishing joint activities from customer relationships), estimating accrued research and development expenses, valuing stock-based compensation (using Black-Scholes model assumptions), accounting for government grants (repayment provisions), and income taxes (deferred tax assets, valuation allowances, and uncertain tax positions)[214][217][220][221][223][225] - The company's uncertain tax position relates to the allocation of revenue between the U.S. and Belgium under the GSK Agreement[195][228] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency and interest rate risks, but immediate 5% or 10% changes are not expected to materially impact financial position due to short-term investments - The company is subject to foreign currency exchange rate fluctuations, specifically with respect to the Euro, but an immediate 5% change is not expected to have a material effect on results of operations[229] - The company is exposed to interest rate sensitivity risk, but an immediate 10% change in interest rates would not materially impact the fair market value of its investment portfolio or financial position due to the short-term nature of its instruments[230] - As of June 30, 2025, the company held $207.8 million in cash and cash equivalents and $382.2 million in available-for-sale fixed income securities, with the majority maturing within one and a half years[230] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[234] - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2025[235] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings, and management believes no pending claims would have a material adverse effect - The company is not currently a party to any material legal proceedings[238] - Management believes there are no claims or actions pending that could have a material adverse effect on the company's results of operations or financial condition[238] Item 1A. Risk Factors The company faces significant risks related to the pending merger with Concentra, including non-completion, a $8.4 million termination fee, limited stockholder upside via CVRs, and restrictions on alternative transactions - The company may not complete the pending transaction with Concentra within the anticipated timeframe or at all, which could adversely affect its business and financial results[240] - If the Merger Agreement is terminated under certain circumstances, the company could be required to pay Concentra a termination fee of $8.4 million[132][241] - The pendency of the transaction could cause substantial disruptions and uncertainty for the company's wind-down activities[242] - Stockholders' participation in any financial upside post-merger is limited to the Contingent Value Rights (CVRs), and there is no assurance that any CVR Consideration will be received[244] - The U.S. federal income tax treatment of the CVRs is unclear, potentially leading to adverse tax consequences for holders[245] - The Merger Agreement limits the company's ability to pursue alternative transactions, potentially deterring competing acquirers[247][249] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period Item 5. Other Information No officer or director adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No officer or director adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[254] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including the Merger Agreement, CVR Agreement, and various certifications - Key exhibits include the Agreement and Plan of Merger (Exhibit 2.1), the Form of Contingent Value Rights Agreement (Exhibit 10.4), and certifications by the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)[255] Signatures The Quarterly Report on Form 10-Q was duly signed by the President and CEO, Michel Detheux, and CFO, Matthew Gall, on August 6, 2025 - The report was signed by Michel Detheux, President and Chief Executive Officer, and Matthew Gall, Chief Financial Officer, on August 6, 2025[259]