Profound(PROF) - 2025 Q2 - Quarterly Report

Report Information Filing Details Profound Medical Corp. filed its Form 10-Q quarterly report for the period ended June 30, 2025, identifying as a non-accelerated filer and smaller reporting company with 30,053,142 common shares outstanding - Profound Medical Corp. submitted its Form 10-Q quarterly report for the period ended June 30, 2025[2] Filing Details Status | Metric | Status | | :--- | :--- | | Filing Type | Quarterly Report (Form 10-Q) | | Quarter End Date | June 30, 2025 | | Commission File Number | 001-39032 | | Jurisdiction of Incorporation | Ontario, Canada | | Trading Symbol | PROF | | Registered Exchange | Nasdaq Stock Market LLC | | Accelerated Filer Status | Non-accelerated filer | | Company Size | Smaller reporting company | | Common Shares Outstanding (as of August 14, 2025) | 30,053,142 shares | Explanatory Note The company, as a "foreign private issuer," is exempt from Form 10-Q filing but voluntarily submitted this report - Profound Medical Corp. qualifies as a "foreign private issuer" and is exempt from filing Form 10-Q quarterly reports under Rules 13a-13 and 15d-13 of the Securities Exchange Act[7] - The company voluntarily chose to file this quarterly report for the period ended June 30, 2025[7] PART I. Financial Information Item 1. Condensed Consolidated Financial Statements This section presents Profound Medical Corp.'s unaudited condensed consolidated financial statements for the period ended June 30, 2025, including balance sheets, statements of operations and comprehensive loss, shareholders' equity, and cash flows, along with related notes detailing business operations, accounting policies, and changes in assets, liabilities, and equity Condensed Consolidated Balance Sheets (Unaudited) As of June 30, 2025, total assets decreased to $49,668 thousand from $70,234 thousand at December 31, 2024, primarily due to reduced cash and receivables, while total liabilities slightly increased and shareholders' equity significantly declined Condensed Consolidated Balance Sheets Key Data (USD in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Cash | 35,195 | 54,912 | (19,717) | -35.9% | | Trade and Other Receivables, Net | 4,898 | 7,045 | (2,147) | -30.5% | | Inventory | 8,353 | 5,801 | 2,552 | 44.0% | | Total Current Assets | 48,811 | 69,065 | (20,254) | -29.3% | | Total Assets | 49,668 | 70,234 | (20,566) | -29.3% | | Total Current Liabilities | 5,724 | 6,565 | (841) | -12.8% | | Total Liabilities | 10,409 | 9,812 | 597 | 6.1% | | Shareholders' Equity | 39,259 | 60,422 | (21,163) | -35.0% | Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the three and six months ended June 30, 2025, the company experienced a significant increase in net loss, driven by higher R&D and SG&A expenses despite some revenue growth and improved gross profit margins Condensed Consolidated Statements of Operations and Comprehensive Loss Key Data (USD in thousands) | Metric | June 30, 2025 (3 months) | June 30, 2024 (3 months) | Change (%) | June 30, 2025 (6 months) | June 30, 2024 (6 months) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 2,211 | 2,233 | -1% | 4,832 | 3,672 | 32% | | Cost of Sales | 593 | 812 | -27% | 1,361 | 1,385 | -2% | | Gross Profit | 1,618 | 1,421 | 14% | 3,471 | 2,287 | 52% | | Research and Development Expenses | 6,098 | 4,205 | 45% | 10,906 | 8,150 | 34% | | Selling, General and Administrative Expenses | 9,326 | 5,058 | 84% | 17,537 | 9,856 | 78% | | Operating Loss | 13,806 | 7,842 | 76% | 24,972 | 15,719 | 59% | | Net Loss | 15,695 | 6,919 | 127% | 26,419 | 13,504 | 96% | | Basic and Diluted Loss Per Share | 0.52 | 0.28 | 86% | 0.88 | 0.55 | 60% | Condensed Consolidated Statements of Shareholders' Equity (Unaudited) As of June 30, 2025, total shareholders' equity significantly decreased to $39,259 thousand from $60,422 thousand at December 31, 2024, primarily due to accumulated net losses, despite increases from share-based compensation and accumulated other comprehensive income Shareholders' Equity Changes (USD in thousands) | Metric | December 31, 2024 Balance | March 31, 2025 Balance | June 30, 2025 Balance | | :--- | :--- | :--- | :--- | | Number of Common Shares | 30,039,809 | 30,053,142 | 30,053,142 | | Common Shares Amount | 281,552 | 281,641 | 281,641 | | Additional Paid-in Capital | 21,298 | 22,198 | 23,649 | | Accumulated Other Comprehensive Income (Loss) | 2,742 | 2,845 | 5,558 | | Accumulated Deficit | (245,170) | (255,894) | (271,589) | | Total Shareholders' Equity | 60,422 | 50,790 | 39,259 | Key Changes (December 31, 2024 to June 30, 2025): * Net Loss: (10,724) + (15,695) = (26,419) * Share-based Compensation: 989 + 1,451 = 2,440 * Accumulated Translation Adjustment: 103 + 2,713 = 2,816 Condensed Consolidated Statements of Cash Flows (Unaudited) For the six months ended June 30, 2025, the company reported a net cash outflow of $22,027 thousand from operating activities and $290 thousand from financing activities, resulting in an ending cash balance of $35,195 thousand, a decrease compared to the prior year's period which saw net cash inflow from financing activities Condensed Consolidated Statements of Cash Flows Key Data (USD in thousands) | Metric | June 30, 2025 (6 months) | June 30, 2024 (6 months) | Change Amount | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | (22,027) | (10,748) | (11,279) | | Net Cash from Financing Activities | (290) | 19,853 | (20,143) | | Effect of Exchange Rate Changes | 2,600 | (1,239) | 3,839 | | Net Increase (Decrease) in Cash | (22,317) | 9,105 | (31,422) | | Cash, End of Period | 35,195 | 34,079 | 1,116 | Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering the company's business description, liquidity risk, significant accounting policies, composition and changes in various assets, liabilities, and equity, as well as detailed information on revenue, loss per share, and segment reporting 1 Description of business and liquidity risk Profound Medical Corp. is a commercial-stage medical device company focused on developing and selling incision-free treatment systems for ablating diseased tissue, with $35,195 thousand in cash as of June 30, 2025, and an anticipated need for additional financing by Q3 2026 - Profound Medical Corp. is a commercial-stage medical device company focused on developing and selling incision-free treatment systems that utilize platform technology for ablating diseased tissue[19] Cash Balance (USD in thousands) | Date | Cash Balance | | :--- | :--- | | June 30, 2025 | 35,195 | | December 31, 2024 | 54,912 | - The company anticipates that existing cash and product sales will meet operating and capital expenditure needs for the next 12 months, but achieving all future strategic plans by Q3 2026 remains dependent on securing additional financing or executing other strategic alternatives[22] 2 Summary of significant accounting policies The company prepares its condensed consolidated financial statements in accordance with US GAAP, utilizing estimates and assumptions, and is currently evaluating the disclosure impact of recent accounting standard updates (ASU 2024-03 and ASU 2025-01) - The company prepares its condensed consolidated financial statements in accordance with US Generally Accepted Accounting Principles (US GAAP) and includes all necessary adjustments[23][25] - The financial statements involve management's estimates and assumptions regarding assets, liabilities, revenue, and expenses, and actual results may differ from these estimates[26] - The FASB issued ASU 2024-03 and ASU 2025-01, requiring improved expense disclosures in the income statement, and the company is evaluating their impact on disclosures, with the standards effective for fiscal years beginning after December 15, 2026[27] 3 Trade and other receivables, net As of June 30, 2025, trade and other receivables, net, decreased to $4,898 thousand from $7,045 thousand at December 31, 2024, primarily due to reductions in gross trade receivables and contract assets, while the allowance for expected credit losses increased Trade and Other Receivables, Net (USD in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Gross Trade Receivables | 4,114 | 5,245 | (1,131) | -21.6% | | Gross Contract Assets | 596 | 1,340 | (744) | -55.5% | | Trade Receivables and Contract Assets | 4,710 | 6,585 | (1,875) | -28.5% | | Allowance for Expected Credit Losses | (531) | (158) | (373) | 236.1% | | Trade Receivables, Net | 4,179 | 6,427 | (2,248) | -35.0% | | Tax Receivables | 557 | 308 | 249 | 80.8% | | Other Receivables | 162 | 310 | (148) | -47.7% | | Total Trade and Other Receivables, Net | 4,898 | 7,045 | (2,147) | -30.5% | Allowance for Expected Credit Losses Changes (USD in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Beginning Balance | 158 | 76 | | Provision for Expected Credit Losses | 373 | 82 | | Ending Balance | 531 | 158 | 4 Inventory As of June 30, 2025, total inventory increased to $8,353 thousand from $5,801 thousand at December 31, 2024, primarily driven by growth in finished goods and raw materials, while inventory charged to cost of sales decreased during the reporting period Inventory Composition (USD in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Finished Goods | 5,621 | 3,837 | 1,784 | 46.5% | | Raw Materials | 2,732 | 1,964 | 768 | 39.1% | | Total Inventory | 8,353 | 5,801 | 2,552 | 44.0% | Inventory Charged to Cost of Sales (USD in thousands) | Period | June 30, 2025 (3 months) | June 30, 2024 (3 months) | June 30, 2025 (6 months) | June 30, 2024 (6 months) | | :--- | :--- | :--- | :--- | :--- | | Inventory Charged to Cost of Sales | 496 | 751 | 1,156 | 1,188 | 5 Property and equipment, net As of June 30, 2025, property and equipment, net, decreased to $278 thousand from $425 thousand at December 31, 2024, mainly due to equipment depreciation and sales to customers, with depreciation expense also decreasing during the period Property and Equipment, Net Composition (USD in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Leasehold Improvements | 542 | 542 | 0 | 0.0% | | Operating Lease Equipment | 1,640 | 2,273 | (633) | -27.9% | | Total | 2,182 | 2,815 | (633) | -22.5% | | Accumulated Depreciation | (1,904) | (2,390) | 486 | -20.3% | | Property and Equipment, Net | 278 | 425 | (147) | -34.6% | Depreciation Expense and Equipment Sales (USD in thousands) | Period | June 30, 2025 (3 months) | June 30, 2024 (3 months) | June 30, 2025 (6 months) | June 30, 2024 (6 months) | | :--- | :--- | :--- | :--- | :--- | | Depreciation Expense | 102 | 184 | 218 | 383 | | Sales of Operating Lease Equipment | 135 | — | 213 | — | 6 Intangible assets As of June 30, 2025, net intangible assets decreased to $175 thousand from $261 thousand at December 31, 2024, primarily comprising an exclusive license agreement and software, with the company holding an exclusive license for MRI-guided transurethral ultrasound therapy technology Intangible Assets Composition (USD in thousands) | Metric | June 30, 2025 (Net) | December 31, 2024 (Net) | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Exclusive License Agreement | 83 | 89 | (6) | -6.7% | | Software | 92 | 172 | (80) | -46.5% | | Total Intangible Assets, Net | 175 | 261 | (86) | -32.9% | - The company has an exclusive license agreement with Sunnybrook Health Sciences Centre for MRI-guided transurethral ultrasound therapy technology[31] 7 Accrued expenses and other current liabilities As of June 30, 2025, total accrued expenses and other current liabilities increased to $3,802 thousand from $2,835 thousand at December 31, 2024, mainly driven by significant growth in accrued employee compensation and clinical trial expenses Accrued Expenses and Other Current Liabilities Composition (USD in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Accrued Employee Compensation | 2,000 | 706 | 1,294 | 183.3% | | Clinical Trials | 1,293 | 325 | 968 | 297.8% | | Other General Accruals | 509 | 1,804 | (1,295) | -71.8% | | Total Accrued Expenses and Other Current Liabilities | 3,802 | 2,835 | 967 | 34.1% | 8 Long-term debt The company entered into an amended and restated credit agreement with CIBC on March 3, 2025, converting existing long-term debt into a new revolving credit facility with financial covenants, and anticipates a potential covenant breach by December 31, 2025, regarding unrestricted cash levels - The company entered into an amended and restated credit agreement with CIBC on March 3, 2025, converting existing long-term debt into a new revolving credit facility maturing on March 3, 2027[33] - The credit agreement includes financial covenants requiring unrestricted cash to always exceed EBITDA for the most recent nine-month period and 12-month revenue to grow by 15% over the prior year's comparable period[33] - The company anticipates a breach of one covenant by December 31, 2025, where unrestricted cash will no longer exceed the required liquidity amount, but management believes sufficient unrestricted cash exists to repay all outstanding debt if it becomes due, even without a waiver[34] Long-term Debt Changes (USD in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Beginning Balance | 4,661 | 7,104 | | Interest Expense | 190 | 600 | | Interest Paid | (139) | (582) | | Foreign Exchange Impact | 40 | (483) | | Repayments | (290) | (1,978) | | Ending Balance | 4,462 | 4,661 | | Less: Current Portion | — | 1,737 | | Long-term Portion | 4,462 | 2,924 | 9 Share capital The company is authorized to issue an unlimited number of common shares, with 30,053,142 shares outstanding as of June 30, 2025, totaling $281,641 thousand, granting holders full voting rights and entitlements to dividends and assets upon liquidation - The company is authorized to issue an unlimited number of common shares[36] Common Shares Issued and Outstanding (USD in thousands) | Date | Number of Shares | Amount | | :--- | :--- | :--- | | June 30, 2025 | 30,053,142 | 281,641 | | December 31, 2024 | 30,039,809 | 281,552 | - Common shareholders possess all voting rights, with one vote per share, and are entitled to dividends declared by the Board of Directors and an equal per-share amount of company assets upon liquidation[38][39][40] 10 Share-based payments The company's share-based payment activities, including stock options, RSUs, and DSUs, resulted in a significant increase in share-based compensation expense during the reporting period ended June 30, 2025 Stock Option Activity Summary | Metric | December 31, 2024 Balance | Granted | Forfeited/Expired | June 30, 2025 Balance | | :--- | :--- | :--- | :--- | :--- | | Number of Options | 2,291,152 | 54,100 | (197,684) | 2,147,568 | | Weighted Average Exercise Price (C$) | 14.13 | 6.87 | 17.77 | 13.61 | RSUs Activity Summary | Metric | December 31, 2024 Balance | Granted | Vested | Forfeited | June 30, 2025 Balance | | :--- | :--- | :--- | :--- | :--- | :--- | | Number of RSUs | 324,621 | 801,000 | (13,333) | (36,834) | 1,075,454 | | Weighted Average Grant Date Fair Value (C$) | 11.18 | 9.26 | 11.27 | 9.83 | 9.80 | Share-based Compensation Expense (USD in thousands) | Period | June 30, 2025 (3 months) | June 30, 2024 (3 months) | June 30, 2025 (6 months) | June 30, 2024 (6 months) | | :--- | :--- | :--- | :--- | :--- | | Stock Options | 125 | 129 | 758 | 298 | | RSUs | 627 | 528 | 869 | 1,017 | | DSUs | 699 | 111 | 813 | 220 | | Total Share-based Compensation | 1,451 | 768 | 2,440 | 1,535 | 11 Revenue For the three months ended June 30, 2025, total revenue slightly decreased due to lower capital sales, offset by recurring revenue growth, while for the six months, total revenue significantly increased, driven by higher US recurring revenue and international capital sales Revenue by Product and Service Type (USD in thousands) | Period | Recurring Non-Capital Revenue (2025 3 months) | Capital Equipment Revenue (2025 3 months) | Total Revenue (2025 3 months) | Recurring Non-Capital Revenue (2024 3 months) | Capital Equipment Revenue (2024 3 months) | Total Revenue (2024 3 months) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,561 | 650 | 2,211 | 1,460 | 773 | 2,233 | | Period | Recurring Non-Capital Revenue (2025 6 months) | Capital Equipment Revenue (2025 6 months) | Total Revenue (2025 6 months) | Recurring Non-Capital Revenue (2024 6 months) | Capital Equipment Revenue (2024 6 months) | Total Revenue (2024 6 months) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 3,362 | 1,470 | 4,832 | 2,899 | 773 | 3,672 | 12 Loss per share For the three and six months ended June 30, 2025, basic and diluted loss per share both increased to $0.52 and $0.88, respectively, with diluted loss per share equaling basic loss per share due to the anti-dilutive effect of share-based awards Basic and Diluted Loss Per Share (USD) | Metric | June 30, 2025 (3 months) | June 30, 2024 (3 months) | June 30, 2025 (6 months) | June 30, 2024 (6 months) | | :--- | :--- | :--- | :--- | :--- | | Net Loss | 15,695 | 6,919 | 26,419 | 13,504 | | Weighted Average Common Shares Outstanding | 30,053,142 | 24,440,444 | 30,055,047 | 24,373,869 | | Basic and Diluted Loss Per Share | 0.52 | 0.28 | 0.88 | 0.55 | - Diluted loss per share is equal to basic loss per share due to the anti-dilutive effect of stock options, RSUs, and DSUs[52] 13 Segment reporting The company operates as a single medical technology segment, with the United States being the primary source of revenue, followed by Canada and Germany, and total assets predominantly located in Canada - The company's operations are classified as a single medical technology segment, focusing on MRI-guided ablation therapy[53] Revenue by Geographic Area (USD in thousands) | Period | Canada (2025 3 months) | United States (2025 3 months) | Germany (2025 3 months) | Total (2025 3 months) | Canada (2024 3 months) | United States (2024 3 months) | Germany (2024 3 months) | Total (2024 3 months) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Recurring Non-Capital Revenue | 94 | 1,327 | 140 | 1,561 | 99 | 1,101 | 260 | 1,460 | | Capital Equipment Revenue | — | 650 | — | 650 | 773 | — | — | 773 | | Total Revenue | 94 | 1,977 | 140 | 2,211 | 872 | 1,101 | 260 | 2,233 | | Period | Canada (2025 6 months) | United States (2025 6 months) | Germany (2025 6 months) | Total (2025 6 months) | Canada (2024 6 months) | United States (2024 6 months) | Germany (2024 6 months) | Total (2024 6 months) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Recurring Non-Capital Revenue | 376 | 2,620 | 366 | 3,362 | 203 | 2,259 | 437 | 2,899 | | Capital Equipment Revenue | 570 | 900 | — | 1,470 | 773 | — | — | 773 | | Total Revenue | 946 | 3,520 | 366 | 4,832 | 976 | 2,259 | 437 | 3,672 | Total Assets by Geographic Area (USD in thousands) | Geographic Area | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Canada | 38,180 | 58,743 | | United States | 6,802 | 6,351 | | Germany | 1,502 | 1,661 | | China | 60 | 92 | | Finland | 3,124 | 3,387 | | Total Assets | 49,668 | 70,234 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Profound Medical Corp.'s financial condition and operating results for the period ended June 30, 2025, highlighting its business overview, operational performance, key financial components, liquidity and capital resources, and critical accounting policies Overview Profound Medical Corp. is a commercial-stage medical device company developing and selling incision-free treatment systems for image-guided tissue ablation, utilizing its TULSA-PRO system for prostate tissue ablation and Sonalleve platform for uterine fibroids and bone metastases, with a hybrid revenue model in the US and capital sales internationally - The company is a commercial-stage medical device company focused on developing and selling incision-free treatment systems for image-guided ablation of diseased tissue[56] - Its primary product, the TULSA-PRO system, combines real-time MRI, robotically driven transurethral thermal ultrasound, and closed-loop temperature feedback control for prostate tissue ablation, holding CE Mark, Health Canada approval, and FDA 510(k) clearance[56][57] - The Sonalleve platform has CE Mark for uterine fibroids and palliative pain treatment of bone metastases, FDA Humanitarian Device Exemption approval for osteoid osteoma, and approval in China for non-invasive treatment of uterine fibroids[58] - The company employs a hybrid recurring revenue business model in the United States (one-time equipment, system usage, Genius service, or capital sale plus per-patient fee) and primarily a capital sales model outside North America[59][60][64] Results of Operations For the three months ended June 30, 2025, revenue slightly decreased by 1%, but gross profit increased by 14% with a 73% gross margin; however, significant increases in R&D and SG&A expenses led to a 127% rise in net loss, while for the six months, revenue grew by 32% and gross profit by 52% with a 72% gross margin, but increased operating expenses and foreign exchange losses resulted in a 96% surge in net loss Results of Operations Summary (USD in thousands) | Metric | June 30, 2025 (3 months) | June 30, 2024 (3 months) | Change (%) | June 30, 2025 (6 months) | June 30, 2024 (6 months) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 2,211 | 2,233 | -1% | 4,832 | 3,672 | 32% | | Cost of Sales | 593 | 812 | -27% | 1,361 | 1,385 | -2% | | Gross Profit | 1,618 | 1,421 | 14% | 3,471 | 2,287 | 52% | | Gross Margin | 73% | 64% | +9pp | 72% | 62% | +10pp | | Research and Development Expenses | 6,098 | 4,205 | 45% | 10,906 | 8,150 | 34% | | Selling, General and Administrative Expenses | 9,326 | 5,058 | 84% | 17,537 | 9,856 | 78% | | Operating Loss | 13,806 | 7,842 | 76% | 24,972 | 15,719 | 59% | | Net Loss | 15,695 | 6,919 | 127% | 26,419 | 13,504 | 96% | | Basic and Diluted Loss Per Share | 0.52 | 0.28 | 86% | 0.88 | 0.55 | 60% | Key Components of Our Results of Operations This section analyzes changes in the company's revenue, cost of sales, operating expenses (R&D, SG&A), and finance income/expense, highlighting revenue composition from recurring non-capital and capital equipment sales, improved gross margins due to efficiency, increased operating expenses from commercialization and R&D investments, and decreased net finance income due to lower cash interest Revenue_MDA For the three months ended June 30, 2025, total revenue was $2,211 thousand, a 1% year-over-year decrease primarily due to reduced capital sales, partially offset by growth in US recurring revenue, while for the six months, total revenue was $4,832 thousand, a 32% year-over-year increase driven by higher US recurring revenue and international capital sales Revenue Composition and Changes (USD in thousands) | Period | Recurring Non-Capital Revenue (2025) | Capital Equipment Revenue (2025) | Total Revenue (2025) | Recurring Non-Capital Revenue (2024) | Capital Equipment Revenue (2024) | Total Revenue (2024) | Total Revenue Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 3 months | 1,561 | 650 | 2,211 | 1,460 | 773 | 2,233 | -1% | | 6 months | 3,362 | 1,470 | 4,832 | 2,899 | 773 | 3,672 | 32% | - The three-month revenue decrease was primarily driven by reduced capital sales, partially offset by growth in US recurring revenue[65] - The six-month revenue increase was primarily due to higher US recurring revenue and international capital sales[66] Cost of Sales_MDA For the three months ended June 30, 2025, cost of sales decreased by 27% to $593 thousand, improving gross margin to 73%, while for the six months, cost of sales decreased by 2% to $1,361 thousand, improving gross margin to 72%, with gross profit growth attributed to manufacturing efficiencies and a favorable sales mix of high-margin capital equipment Cost of Sales, Gross Profit, and Gross Margin (USD in thousands) | Period | Cost of Sales (2025) | Gross Profit (2025) | Gross Margin (2025) | Cost of Sales (2024) | Gross Profit (2024) | Gross Margin (2024) | Cost of Sales Change (%) | Gross Profit Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 3 months | 593 | 1,618 | 73% | 812 | 1,421 | 64% | -27% | 14% | | 6 months | 1,361 | 3,471 | 72% | 1,385 | 2,287 | 62% | -2% | 52% | - The decrease in cost of sales and increase in gross profit are primarily attributable to existing customers purchasing capital equipment (which has higher margins) and improved manufacturing efficiencies[68][69] Operating Expenses_MDA Operating expenses, comprising R&D and SG&A, significantly increased during the reporting period due to higher personnel costs, increased clinical trial investments, expanded commercialization activities, and elevated marketing expenses R&D Expenses For the three months ended June 30, 2025, R&D expenses increased by 45% to $6,098 thousand, primarily due to increased personnel, higher recruitment and treatment activities for the CAPTAIN trial, and rising travel expenses, with the six-month increase of 34% to $10,906 thousand also including higher material expenditures for MRI compatibility and cost reduction efforts Research and Development Expenses and Changes (USD in thousands) | Period | 2025 | 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | 3 months | 6,098 | 4,205 | 1,893 | 45% | | 6 months | 10,906 | 8,150 | 2,756 | 34% | - The increase in R&D expenses is primarily attributable to: * Increased personnel * Higher recruitment and treatment activities for the CAPTAIN trial * Rising travel expenses * Increased material expenditures to improve MRI scanner compatibility, reduce design costs, and enhance efficiency (for the six-month period)[72][73] SG&A expenses For the three months ended June 30, 2025, SG&A expenses increased by 84% to $9,326 thousand, mainly due to sales team expansion, higher commission payments, and increased travel and infrastructure costs, with the six-month increase of 78% to $17,537 thousand also including costs for educational events like Pro-Talk Live Selling, General and Administrative Expenses and Changes (USD in thousands) | Period | 2025 | 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | 3 months | 9,326 | 5,058 | 4,268 | 84% | | 6 months | 17,537 | 9,856 | 7,681 | 78% | - The increase in selling, general and administrative expenses is primarily attributable to: * Expansion of the sales team * Higher commission payments * Increased travel and infrastructure costs * Costs associated with hosting educational events like Pro-Talk Live (for the six-month period)[77][78] Net finance (income) expense For the three and six months ended June 30, 2025, net finance (income) expense decreased, primarily due to a reduction in cash interest income Net Finance (Income) Expense and Changes (USD in thousands) | Period | 2025 | 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | 3 months | (343) | (422) | 79 | -19% | | 6 months | (788) | (884) | 96 | -11% | - The decrease in net finance (income) expense is primarily due to lower cash interest income[80] Liquidity and Capital Resources As of June 30, 2025, the company's cash balance was $35,195 thousand, a decrease from December 31, 2024, with existing cash and product sales expected to support operations for the next 12 months, but additional financing will be required by Q3 2026 to achieve all future strategic plans Cash Balance (USD in thousands) | Date | Cash Balance | | :--- | :--- | | June 30, 2025 | 35,195 | | December 31, 2024 | 54,912 | - The company anticipates that existing cash and product sales will meet operating and capital expenditure needs for the next 12 months, but achieving all future strategic plans by Q3 2026 remains dependent on securing additional financing or executing other strategic alternatives[82] Use of Proceeds The company detailed the use of proceeds from its 2024 public offering, primarily for commercialization and development of TULSA-PRO and Sonalleve systems, as well as working capital and general corporate purposes, and outlined the terms, financial covenants, and potential default risks of its amended CIBC credit agreement 2024 Public Offering Proceeds Usage (as of June 30, 2025, USD in thousands) | Purpose | Amount Expended | | :--- | :--- | | TULSA-PRO Commercialization | 18,277 | | Sonalleve Development and Commercialization | 6,092 | | Working Capital and General Corporate Purposes | 4,826 | | Total | 29,195 | - The company entered into an amended and restated credit agreement with CIBC on March 3, 2025, converting existing long-term debt into a new revolving credit facility up to $15,000 thousand, which includes financial covenants[87] Cash Flows_MDA For the six months ended June 30, 2025, the company experienced a net cash outflow of $22,027 thousand from operating activities, primarily due to net loss and increased expenses from commercialization, and a net cash outflow of $290 thousand from financing activities, mainly for long-term debt repayments, while foreign exchange rate changes positively impacted cash by $2,600 thousand Cash Flows Summary (USD in thousands) | Metric | June 30, 2025 (6 months) | June 30, 2024 (6 months) | Change Amount | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | (22,027) | (10,748) | (11,279) | | Net Cash from Financing Activities | (290) | 19,853 | (20,143) | | Effect of Exchange Rate Changes | 2,600 | (1,239) | 3,839 | | Net Increase (Decrease) in Cash | (19,717) | 7,866 | (27,583) | Operating Activities For the six months ended June 30, 2025, net cash outflow from operating activities was $22,027 thousand, primarily driven by a net loss of $26,419 thousand and increased expenses related to commercialization and product expansion, including personnel, travel, clinical trial, and marketing costs - Net cash outflow from operating activities for the first half of 2025 was $22,027 thousand, primarily due to a net loss of $26,419 thousand and increased expenses from commercialization and product expansion[89] - Increased expenses include personnel, travel, clinical trial costs, and marketing expenses[89] Financing Activities For the six months ended June 30, 2025, net cash outflow from financing activities was $290 thousand, primarily for long-term debt principal repayments, contrasting with a net cash inflow of $19,853 thousand in the prior year's comparable period, mainly from common share issuance proceeds - Net cash outflow from financing activities for the first half of 2025 was $290 thousand, primarily used for long-term debt principal repayments[91] - Net cash inflow from financing activities for the first half of 2024 was $19,853 thousand, mainly from $21,079 thousand in common share issuance proceeds, partially offset by $1,227 thousand in long-term debt repayments[91] Foreign Exchange on Cash Exchange rate fluctuations impacted the company's foreign currency-denominated cash, resulting in a $2,600 thousand increase in cash holdings - Exchange rate fluctuations impacted the company's foreign currency-denominated cash, resulting in a $2,600 thousand increase in cash holdings[17][88][92] Funding Requirements The company anticipates existing cash and product sales will cover operations and capital expenditures for the next 12 months, but additional capital may be needed for R&D and operational expansion, with potential funding sources including equity/debt financing, development agreements, or strategic collaborations, and failure to secure such funding could lead to operational adjustments or delays - The company anticipates that existing cash and product sales will meet operating and capital expenditure needs for the next 12 months, but expects increased expenses primarily due to the ongoing commercialization of TULSA-PRO and Sonalleve[93] - The company may require additional capital to fund research and development activities and any significant operational expansion[95] - Potential funding sources include equity and/or debt financing, development or marketing agreements, revenue from future commercialization activities, and/or new strategic collaboration agreements[95] - Failure to obtain additional funding could lead to operational adjustments, delays in clinical trials, hindered product development programs, or an inability to pursue market approvals in a timely manner[95] Critical Accounting Policies and Estimates There have been no significant changes to the company's critical accounting policies since December 31, 2024, with detailed information available in the 2024 annual report - There have been no significant changes to the company's critical accounting policies since December 31, 2024[96] - For a detailed description of critical accounting policies, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the company's 2024 Annual Report filed on March 7, 2025[96] Recent Accounting Pronouncements_MDA For detailed information on recent accounting pronouncements, please refer to Note 2 of the condensed consolidated financial statements in Part I, Item 1 of this quarterly report - For detailed information on recent accounting pronouncements, please refer to Note 2 of the condensed consolidated financial statements in Part I, Item 1 of this quarterly report[97] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable - This section is not applicable[98] Item 4. Controls and Procedures This section assesses the effectiveness of the company's disclosure controls and procedures and discloses a material weakness in internal control over financial reporting, along with ongoing remediation efforts Evaluation of Disclosure Controls and Procedures As of June 30, 2025, the company's management, including the Chief Executive Officer and Chief Financial Officer, assessed and determined that its disclosure controls and procedures were effective in ensuring timely recording, processing, summarizing, and reporting of required information - As of June 30, 2025, the company's management, including the Chief Executive Officer and Chief Financial Officer, assessed and determined that its disclosure controls and procedures were effective[100] - Disclosure controls and procedures are designed to ensure that required information is recorded, processed, summarized, and reported within SEC-prescribed timeframes and communicated to management for disclosure decisions[99] Changes in Internal Control Over Financial Reporting For the three months ended June 30, 2025, there were no significant changes in internal control over financial reporting, apart from ongoing remediation activities for a previously identified material weakness in revenue recognition controls as of December 31, 2024, which is expected to be completed in 2025 through financial team expansion and third-party consultant engagement - For the three months ended June 30, 2025, there were no significant changes in internal control over financial reporting, apart from ongoing remediation activities for a previously identified material weakness[101] - As of December 31, 2024, the company's internal control over financial reporting had a material weakness, specifically that controls over the review of contract terms and customer arrangements for revenue recognition (ASC 606) were not operating effectively, leading to audit adjustments[102][104] - The company is implementing a remediation plan, including expanding its finance team with CPAs possessing US GAAP expertise and engaging third-party consultants to assist in evaluating complex revenue contracts, with completion expected in 2025[105] PART II. Other Information Item 1. Legal Proceedings The company is not currently involved in or aware of any legal proceedings that would have a material adverse effect on its business, financial condition, or results of operations - The company is not currently involved in or aware of any legal proceedings that would have a material adverse effect on its business, financial condition, or results of operations[107] - Regardless of the outcome, litigation could adversely affect the company due to defense and settlement costs, diversion of management resources, and other factors[107] Item 1A. Risk Factors There have been no material changes to the company's risk factors since the disclosure in its 2024 annual report - There have been no material changes to the company's risk factors since the disclosure in its 2024 annual report[108] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds during this reporting period - There were no unregistered sales of equity securities or use of proceeds during this reporting period[109] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during this reporting period - There were no defaults upon senior securities during this reporting period[110] Item 4. Mine Safety Disclosures There were no mine safety disclosures during this reporting period - There were no mine safety disclosures during this reporting period[111] Item 5. Other Information This section discloses that no Rule 10b5-1(c) trading plans were adopted, modified, or terminated by the company's directors or officers during the reporting period Rule 10b5-1 Trading Plans For the three months ended June 30, 2025, no contracts, instructions, or written plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) for buying or selling securities were adopted, modified, or terminated by the company's directors or officers - For the three months ended June 30, 2025, no contracts, instructions, or written plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) for buying or selling securities were adopted, modified, or terminated by the company's directors or officers[112] Item 6. Exhibits This section lists the exhibits filed with this quarterly report, including articles of incorporation, bylaws, and certifications from the Chief Executive Officer and Chief Financial Officer Exhibit List | Exhibit Number | Exhibit Description | Filed with this Report | | :--- | :--- | :--- | | 3.1 | Articles of Incorporation | No | | 3.2 | Amendments | No | | 3.3 | Amalgamated Articles | No | | 3.4 | By-laws | No | | 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Yes | | 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Yes | | 32† | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Yes | | 101.INC | Inline XBRL Instance Document | Yes | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Yes | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Yes | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Yes | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Yes | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Yes | | 104 | Cover Page Interactive Data File | Yes | - The certification document for Exhibit 32 is not deemed filed with the Securities and Exchange Commission and shall not be incorporated by reference into any filing by the company under the Securities Act of 1933 or the Securities Exchange Act of 1934[114] Signatures Signature Details This report was duly signed by Arun Menawat, Chief Executive Officer, and Rashed Dewan, Chief Financial Officer, of Profound Medical Corp. on August 14, 2025 - This report was signed by Arun Menawat, Chief Executive Officer, and Rashed Dewan, Chief Financial Officer, of Profound Medical Corp. on August 14, 2025[118]