UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from ________ to ________ Commission File Number: 01-41423 CONNEXA SPORTS TECHNOLOGIES INC. (Exact name of registrant as specified in its charter) Delaware 61-1789640 (State o ...

[Filing Information](index=1&type=section&id=Filing%20Information) This section details the company's Form 10-Q filing, including its corporate structure, Nasdaq listing, and filer classifications [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) This document is a Quarterly Report on Form 10-Q for Connexa Sports Technologies Inc., covering the period ended July 31, 2025 - The report is a Quarterly Report on Form 10-Q for the period ended **July 31, 2025**[2](index=2&type=chunk) - Connexa Sports Technologies Inc. is incorporated in Delaware[2](index=2&type=chunk) Company Classification and Trading Information | Attribute | Value | | :--- | :--- | | Trading Symbol | YYAI | | Exchange | Nasdaq Capital Market | | Filer Status | Non-accelerated filer, Smaller reporting company | [Shares Outstanding](index=2&type=section&id=Shares%20Outstanding) As of September 12, 2025, the company had 14,563,019 shares of common stock outstanding Common Stock Outstanding | Date | Shares Outstanding (count) | | :--- | :--- | | September 12, 2025 | 14,563,019 | [Cautionary Statement Regarding Forward-Looking Information](index=3&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD%20LOOKING%20INFORMATION) This section warns that the report contains forward-looking statements subject to risks and uncertainties, and actual results may differ [Forward-Looking Statements Disclosure](index=3&type=section&id=Forward-Looking%20Statements%20Disclosure) This report contains forward-looking statements subject to various business risks and uncertainties, which could cause actual results to differ materially from expectations - The report includes forward-looking statements identified by words like 'believe,' 'expect,' 'anticipate,' 'intend,' 'estimate,' 'may,' 'should,' 'could,' 'will,' 'plan,' 'future,' and 'continue'[6](index=6&type=chunk) - Actual results may differ materially due to inaccurate assumptions, business risks, and known/unknown uncertainties beyond the company's control[6](index=6&type=chunk) - The company does not undertake to update or revise any forward-looking statements, except as required by law[7](index=7&type=chunk) [Key Risk Factors](index=3&type=section&id=Key%20Risk%20Factors) Important factors that could cause actual results to differ from forward-looking statements include volatility, acquisition effects, litigation, and macroeconomic factors - Volatility related to the Company's relatively low public float - The effects of prior acquisitions and divestitures on current and future business operations - Strategic and operational uncertainties - Risks associated with potential litigation, financing transactions, or acquisitions - Macroeconomic, competitive, legal, regulatory, tax, and geopolitical factors - Other risks and uncertainties related to prospects, properties, and business strategy [PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for Connexa Sports Technologies Inc., along with detailed notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show the company's financial position as of July 31, 2025, and April 30, 2025, with total assets increasing by approximately $1.8 million Consolidated Balance Sheet Highlights | Metric | As of July 31, 2025 ($) | As of April 30, 2025 ($) | Change (Approx.) ($) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 52,693 | 54,744 | -2,051 | | Investment | 2,464,615 | 1,382,857 | +1,081,758 | | Accounts receivable | 18,388,701 | 15,388,701 | +3,000,000 | | Total Current Assets | 24,972,762 | 22,396,159 | +2,576,603 | | Intangible assets, net | 9,765,404 | 10,509,635 | -744,231 | | TOTAL ASSETS | 34,738,166 | 32,905,794 | +1,832,372 | | Total Current Liabilities | 7,058,612 | 6,487,171 | +571,441 | | Total Shareholders' Equity | 27,679,554 | 26,418,623 | +1,260,931 | [Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the three months ended July 31, 2025, the company experienced decreased revenue and gross profit, increased general and administrative expenses, and a substantial decline in net income Consolidated Statements of Operations Highlights (Three Months Ended July 31) | Metric | 2025 (unaudited) ($) | 2024 (unaudited) ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | REVENUE | 3,000,000 | 3,272,727 | (272,727) | -8% | | COST OF REVENUE | 744,231 | 744,231 | 0 | 0% | | GROSS PROFIT | 2,255,769 | 2,528,496 | (272,727) | -11% | | General and administrative expenses | 764,386 | 88,520 | 675,866 | 764% | | OPERATING INCOME | 1,491,383 | 2,439,976 | (948,593) | -39% | | NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | 882,652 | 2,051,025 | (1,168,373) | -57% | | Net income per share - basic | 0.06 | 0.18 | (0.12) | -67% | | Weighted average common shares outstanding - basic | 14,563,023 | 11,610,817 | 2,952,206 | 25% | [Consolidated Statement of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Shareholders'%20Equity) Total shareholders' equity increased from $26,418,623 to $27,679,554 between May 1 and July 31, 2025, primarily due to comprehensive income Shareholders' Equity Changes (May 1, 2025 to July 31, 2025) | Metric | As of May 1, 2025 ($) | Total Comprehensive Income ($) | As of July 31, 2025 ($) | | :--- | :--- | :--- | :--- | | Common Stock Amount | 14,563 | - | 14,563 | | Additional Paid-In Capital | 19,138,786 | - | 19,138,786 | | Retained Earnings | 6,123,114 | 882,652 | 7,005,766 | | Non-Controlling Interest | 1,142,160 | 378,279 | 1,520,439 | | Total Shareholders' Equity | 26,418,623 | 1,260,931 | 27,679,554 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended July 31, 2025, increased cash usage in operating activities was offset by financing activities, resulting in a slight net decrease in cash Consolidated Cash Flow Highlights (Three Months Ended July 31) | Metric | 2025 ($) | 2024 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Net income | 1,260,931 | 2,051,025 | (790,094) | | Net cash used in operating activities | (1,083,809) | (601,294) | (482,515) | | Net cash provided by financing activities | 1,081,758 | 606,803 | 474,955 | | NET INCREASE (DECREASE) IN CASH | (2,051) | 5,509 | (7,560) | | CASH AND CASH EQUIVALENTS - END OF PERIOD | 52,693 | 44,860 | 7,833 | [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures regarding the company's financial statements, covering organization, policies, and subsequent events [Note 1. Organization and Nature of Business](index=9&type=section&id=Note%201.%20Organization%20and%20Nature%20of%20Business) Connexa Sports Technologies Inc. transformed through a reverse acquisition of YYEM and divestiture of its Slinger Bag business, with YYEM now focusing on AI-powered matchmaking and social networking content - Connexa Sports Technologies Inc. (formerly Slinger Bag Inc.) acquired **70% of Yuanyu Enterprise Management Co., Limited (YYEM)** for **$56 million**, with **$16.5 million in cash** and the remainder in shares, closing on **November 21, 2024**[25](index=25&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The transaction was accounted for as a 'reverse acquisition' where YYEM was the accounting acquirer, and Connexa was the legal acquirer, resulting in YYEM shareholders owning approximately **75.3%** of the combined company[35](index=35&type=chunk)[36](index=36&type=chunk) - Following the acquisition, Connexa disposed of its Slinger Bag business, making YYEM its sole operating subsidiary[34](index=34&type=chunk)[38](index=38&type=chunk) - YYEM operates in the emerging love and marriage market sector, aiming to empower global connections through innovative matchmaking technology - YYEM owns advanced patents and proprietary technology, which it licenses out to partners worldwide to develop AI-powered matchmaking platforms - YYEM is also developing a social networking vertical to produce content for live-streaming or TikTok users in the Middle East and North Africa (MENA region), anticipating an independent revenue stream based on performance-based conversion metrics - YYEM's revenue model is currently based on licensing fees, generating **$12.8 million in royalties** for the financial year ended April 30, 2025 [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202%3A%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the significant accounting policies adopted by Connexa Sports Technologies Inc., including basis of presentation, consolidation, and revenue recognition - The financial statements are prepared in accordance with **U.S. GAAP** and **SEC rules**[45](index=45&type=chunk) - The company consolidates entities where it controls **more than 50% of voting power** or has the ability to govern financial and operating policies[46](index=46&type=chunk)[47](index=47&type=chunk) - Non-controlling interests are classified as a component of equity, reflecting the **30% portion of YYEM** not attributable to the Company[50](index=50&type=chunk) - Revenue is recognized based on a five-step model (**ASC 606**) when performance obligations are satisfied, primarily from royalty income for technology licensing[75](index=75&type=chunk)[78](index=78&type=chunk) - Cost of revenue primarily consists of amortization charges for intangible assets (technology rights)[79](index=79&type=chunk) - The company evaluates long-lived assets for impairment when events indicate carrying value may not be recoverable, but **no impairment charge** was recognized for the three months ended July 31, 2025 and 2024[64](index=64&type=chunk) - The company adopted **ASU 2016-13 (CECL model)** for credit losses, but recorded **no expected credit losses** for accounts receivable for the three months ended July 31, 2025 and 2024[59](index=59&type=chunk)[62](index=62&type=chunk) - Several new FASB ASUs (2024-03, 2024-04, 2025-01, 2025-02, 2025-03, 2025-04, 2025-05) have been issued, but the company does not expect their adoption to have a **material impact** on its financial position, results of operations, or cash flows[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) [Note 3. Concentrations of Risk](index=21&type=section&id=Note%203%3A%20CONCENTRATIONS%20OF%20RISK) The company faces significant customer and credit risk due to its reliance on three major customers, which collectively accounted for approximately 100% of total accounts receivable and revenue for the periods ended July 31, 2025 and 2024 - The company's accounts receivable and revenue are highly concentrated among three major customers (Customer A, D, E), accounting for approximately **100% of total accounts receivable and total revenue** for the three-month periods ended July 31, 2025 and 2024[112](index=112&type=chunk) Customer Concentration in Accounts Receivable | Customer | As of July 31, 2025 (%) | As of July 31, 2024 (%) | | :--- | :--- | :--- | | Customer A | 43% | 44% | | Customer D | 26% | 26% | | Customer E | 31% | 30% | - Cash and cash equivalents are held with major financial institutions believed to have high credit quality[111](index=111&type=chunk) [Note 4. Intangible Assets](index=21&type=section&id=Note%204%3A%20INTANGIBLE%20ASSETS) Intangible assets, primarily technology rights, are amortized on a straight-line basis over five years. The net value of these assets as of July 31, 2025, was $9,765,404, after accumulated amortization of $5,119,211 - Technology rights are amortized on a straight-line basis over an estimated useful life of **five years**[114](index=114&type=chunk) Intangible Assets - Technology Rights (as of July 31, 2025) | Metric | Amount ($) | | :--- | :--- | | Cost | 14,884,615 | | Accumulated amortization | (5,119,211) | | Net value | 9,765,404 | - Amortization expense for the three months ended July 31, 2025 and 2024, was approximately **$744,231**, included in cost of revenue[117](index=117&type=chunk) [Note 5. Revenue – Segment Reporting by Geographic Region](index=22&type=section&id=Note%205%3A%20REVENUE%20%E2%80%93%20SEGMENT%20REPORTING%20BY%20GEOGRAPHIC%20REGION) The company's revenue is segmented by geographic region, showing contributions from Hong Kong, the United States, and the United Kingdom. Total revenue decreased by 8% year-over-year for the three months ended July 31, 2025 Revenue by Geographic Region (Three Months Ended July 31) | Location | 2025 ($) | 2024 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Hong Kong | 1,250,000 | 1,363,636 | (113,636) | | United States of America | 750,000 | 818,182 | (68,182) | | United Kingdom | 1,000,000 | 1,090,909 | (90,909) | | Total | 3,000,000 | 3,272,727 | (272,727) | [Note 6. Accounts Receivable](index=22&type=section&id=Note%206%3A%20ACCOUNTS%20RECEIVABLE) Accounts receivable increased by $3.0 million to $18,388,701 as of July 31, 2025, from $15,388,701 as of April 30, 2025. All receivables were from third-party customers, and no provisions for credit losses were recorded Accounts Receivable | Metric | As of July 31, 2025 ($) | As of April 30, 2025 ($) | | :--- | :--- | :--- | | Accounts receivable | 18,388,701 | 15,388,701 | - All accounts receivable were due from third-party customers, and **no provisions for credit losses** were made as of July 31, 2025, and April 30, 2025[120](index=120&type=chunk) [Note 7. Investment](index=23&type=section&id=Note%207%3A%20INVESTMENT) The company holds a quoted investment in Brightstar Technology Group Co., Ltd., listed on the Hong Kong Stock Exchange. This investment is subject to a downside guarantee from the contributor, ensuring a minimum value, with compensation recognized as 'Shares guarantee income' if the fair value falls below the guaranteed amount - The company holds a quoted investment in Brightstar Technology Group Co., Ltd., a Hong Kong Stock Exchange-listed company[123](index=123&type=chunk) - A downside guarantee from the investment's contributor ensures a minimum value, with compensation for shortfalls recognized as 'Shares guarantee income'[123](index=123&type=chunk)[124](index=124&type=chunk) [Note 8. Amount Due From Related Party](index=23&type=section&id=Note%208%3A%20AMOUNT%20DUE%20FROM%20RELATED%20PARTY) Amounts due from a related party, Hongyu Zhou (shareholder and director), decreased to $1,745,770 as of July 31, 2025, from $2,827,528 as of April 30, 2025. This receivable relates to a downside guarantee on the Brightstar Technology Group Co., Ltd. investment, with management expecting full settlement Related Party Balances (Hongyu Zhou) | Metric | As of July 31, 2025 ($) | As of April 30, 2025 ($) | | :--- | :--- | :--- | | Amount due from related party | 1,745,770 | 2,827,528 | | Amount due to related party | 775,406 | 775,406 | - The amount due from Hongyu Zhou represents compensation under a downside guarantee for the investment in Brightstar Technology Group Co., Ltd., expected to be **fully settled**[125](index=125&type=chunk)[126](index=126&type=chunk) - The amount due to Hongyu Zhou represents expenses paid on behalf of the company[127](index=127&type=chunk) [Note 9. Accrued Expenses](index=24&type=section&id=Note%209%3A%20ACCRUED%20EXPENSES) Accrued expenses increased to $2,750,406 as of July 31, 2025, from $2,428,131 as of April 30, 2025, primarily due to an increase in accrued salaries and benefits for management Summary of Accrued Expenses | Accrued Expense Category | As of July 31, 2025 ($) | As of April 30, 2025 ($) | | :--- | :--- | :--- | | Accrued salaries and benefits – management | 797,387 | 477,500 | | Accrued signing bonus | 300,000 | 300,000 | | Accrued success fee | 1,000,000 | 1,000,000 | | Amount due from bank | 4,876 | 2,488 | | Accrued directors' fees | 150,000 | 150,000 | | Accrued professional fees | 498,143 | 498,143 | | Total | 2,750,406 | 2,428,131 | [Note 10. Shareholders' Equity](index=24&type=section&id=Note%2010%3A%20SHAREHOLDERS'%20EQUITY) The number of common shares issued and outstanding significantly increased to 14,563,019 as of July 31, 2025, from 1,828,541 as of July 31, 2024, primarily due to shares issued for the acquisition of YYEM and warrant exercises Common Stock Issued and Outstanding | Date | Shares Issued and Outstanding (count) | | :--- | :--- | | July 31, 2025 | 14,563,019 | | July 31, 2024 | 1,828,541 | - The company issued **8,127,572 shares** of common stock from November 1, 2024, through July 31, 2025, to complete the acquisition of YYEM[132](index=132&type=chunk) - From August 1, 2024, through October 31, 2024, **3,776,305 shares** were issued for warrant exercises[133](index=133&type=chunk) - From May 1, 2024, through July 31, 2024, **830,608 shares** were issued for various reasons including true-up shares, services rendered, warrant exercises, and fractional shares from a 1-for-20 reverse stock split[138](index=138&type=chunk) [Note 11. Commitments and Contingencies](index=25&type=section&id=Note%2011%3A%20COMMITMENTS%20AND%20CONTINGENCIES) As of July 31, 2025, the company was not subject to any material legal proceedings or litigation that could adversely impact its financial position, results of operations, or liquidity - The company had **no material legal claims or litigation** for the three months ended July 31, 2025, that could have a material adverse impact on its financial position, results of operations, or cash flows[85](index=85&type=chunk)[139](index=139&type=chunk) [Note 12. Subsequent Events](index=25&type=section&id=Note%2012%3A%20SUBSEQUENT%20EVENTS) Subsequent to the reporting period, the company closed a private placement generating $4.6 million, increased its ATM facility to $200 million, and entered into a joint venture agreement with JuCoin Capital Pte Ltd to establish a cryptocurrency exchange, with each party contributing $250 million - On August 19, 2025, the company closed a private placement of **20,000,000 units** (common stock + warrants), generating gross proceeds of **$4,600,000**[140](index=140&type=chunk) - On August 22, 2025, the company increased the amount it could raise through its 'at the market' (ATM) facility to **$200,000,000**[141](index=141&type=chunk) - On August 25, 2025, the company signed a JV Agreement with JuCoin Capital Pte Ltd to establish a cryptocurrency exchange, with each party contributing **$250,000,000** in cash or cryptocurrency. The company will hold **51%** of the JV's share capital[142](index=142&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended July 31, 2025, highlighting the business overview, fundraising activities, recent developments, and a detailed analysis of revenue, expenses, and liquidity [Overview](index=26&type=section&id=Overview) Connexa Sports Technologies Inc. operates through its Hong Kong-based subsidiary, YYEM, which focuses on AI-powered matchmaking technology and content development for TikTok in the MENA region. The company's revenue is primarily derived from licensing fees for its intellectual property - The company operates through Yuanyu Enterprise Management Co., Limited (YYEM), a Hong Kong-based subsidiary established in November 2021, engaged in the love and marriage market sector[145](index=145&type=chunk) - YYEM licenses advanced patents and proprietary technology to develop an AI-powered matchmaking platform for global partners[146](index=146&type=chunk) - YYEM generated **$3.0 million in royalties** from license agreements across Asia, Europe, and Africa for the three months ended July 31, 2025[147](index=147&type=chunk) - In February 2025, YYEM entered an agency agreement to develop content for TikTok in the MENA region, aiming to diversify revenue streams through performance-based conversion metrics[148](index=148&type=chunk) [Fundraising](index=26&type=section&id=Fundraising) The company completed a private placement in August 2025, raising $4.6 million, and increased its 'at the market' (ATM) facility to $200 million, providing strategic flexibility for future capital raising - On June 30, 2025, the company executed a securities purchase agreement for a private placement of **20,000,000 units** (common stock + warrants) targeting **$4.6 million in gross proceeds**[149](index=149&type=chunk) - The private placement closed on August 19, 2025, generating **$4,600,000 in gross proceeds**[149](index=149&type=chunk) - Under a prospectus supplement dated August 22, 2025, the company's ATM facility was increased to **$200 million**, offering strategic flexibility for future capital raising[150](index=150&type=chunk) [Recent Developments](index=27&type=section&id=Recent%20Developments) On August 25, 2025, the company entered into a joint venture agreement with JuCoin Capital Pte Ltd to establish a new cryptocurrency exchange, with each party contributing $250 million and the company holding a 51% stake - On August 25, 2025, the company and JuCoin Capital Pte Ltd signed a JV Agreement to establish a cryptocurrency exchange[151](index=151&type=chunk) - Each party will contribute **$250 million** in cash or cryptocurrency to the JV[151](index=151&type=chunk) - The company will receive **51%** of the JV's share capital and appoint three of the five board members[151](index=151&type=chunk) [Components of Results of Operations](index=27&type=section&id=Components%20of%20Results%20of%20Operations) This section defines the key components of the company's results of operations: revenue from technology license fees, cost of revenue primarily from intangible asset amortization, general and administrative expenses covering salaries, professional fees, and office costs, and gross profit as revenue less cost of revenue - Revenue is generated from license fees for the use of the company's technology - Cost of revenue primarily consists of amortization charges against intangible assets (technology rights) - General and administrative expenses include salaries, benefits, professional fees (legal, accounting, consulting), travel, and other office expenses - Gross profit is calculated as revenue minus cost of revenue [Results of Operations (Three months ended July 31, 2025, compared to July 31, 2024)](index=27&type=section&id=Results%20of%20Operations) For the three months ended July 31, 2025, revenue decreased by 8% due to minor timing differences in license agreements. Gross profit declined by 11%, while general and administrative expenses surged by 764% primarily due to costs associated with YYEM becoming a Nasdaq-listed company's operating subsidiary. This led to a 39% decrease in operating income Results of Operations (Three Months Ended July 31) | Metric | 2025 ($) | 2024 ($) | Change Amount ($) | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | 3,000,000 | 3,272,727 | (272,727) | -8% | | Cost of Revenue | 744,231 | 744,231 | - | -% | | Gross Profit | 2,255,769 | 2,528,496 | (272,727) | -11% | | General and Administrative Expenses | 764,386 | 88,520 | 675,866 | 764% | | Operating Income | 1,491,383 | 2,439,976 | (948,593) | -39% | - Revenue decreased by **$0.3 million (8%)** due to minor timing differences in license agreement signings[156](index=156&type=chunk) - Cost of revenue remained constant as it consists solely of intangible asset amortization[157](index=157&type=chunk) - General and administrative expenses increased by **$0.7 million (764%)** due to higher costs associated with YYEM becoming an operating subsidiary of a Nasdaq-listed company (audit fees, legal fees, insurance, D&O compensation)[158](index=158&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company's working capital increased by 13% to $17.9 million as of July 31, 2025. Net cash used in operating activities increased by 80% to $1.08 million, primarily due to higher general and administrative expenses. Cash and cash equivalents remained relatively steady, and the company believes existing cash and potential capital market fundraising will meet its needs for at least the next 12 months Cash Flow Summary (Three Months Ended July 31) | Metric | 2025 ($) | 2024 ($) | Change Amount ($) | Change % | | :--- | :--- | :--- | :--- | :--- | | Cash Flow Used in Operating Activities | (1,083,809) | (601,294) | (482,515) | 80% | | Cash Flow Provided by Financing Activities | 1,081,758 | 606,803 | 474,955 | 78% | | Cash and Cash Equivalents (End of Period) | 52,693 | 44,860 | 7,833 | 17% | - Working capital increased by approximately **$2.0 million (13%)** to **$17.9 million** as of July 31, 2025[159](index=159&type=chunk) - The increase in net cash used in operating activities was primarily driven by a **$0.7 million increase** in general and administrative expenses[161](index=161&type=chunk) - The company believes existing cash and potential capital market fundraising will be sufficient to meet anticipated operating needs for at least the **next 12 months**[163](index=163&type=chunk) [Off Balance Sheet Arrangements](index=28&type=section&id=Off%20Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements that are material or reasonably likely to have a material current or future effect on its financial condition, results of operations, liquidity, or capital resources - The company has **no material off-balance sheet arrangements**[164](index=164&type=chunk) [Significant Accounting Policies](index=28&type=section&id=Significant%20Accounting%20Policies) This section reiterates and elaborates on the company's significant accounting policies, including the use of estimates, allowance for credit losses, impairment of long-lived assets, fair value of financial instruments, revenue recognition, income taxes, share-based payment, and recent accounting pronouncements, emphasizing management's judgments and the impact of new standards [Use of Estimates](index=30&type=section&id=Use%20of%20Estimates) The preparation of financial statements requires management to make estimates and assumptions, particularly concerning long-lived assets and deferred income tax asset valuation allowances. Actual results may differ materially from these estimates - Management makes estimates and assumptions affecting reported asset/liability amounts and revenue/expense disclosures, particularly for long-lived assets and deferred income tax asset valuation allowances[167](index=167&type=chunk) - Actual results may differ materially from estimates, impacting future operations[167](index=167&type=chunk) [Allowance for Credit Losses](index=30&type=section&id=Allowance%20for%20Credit%20Losses) The company adopted ASC 326 (CECL model) for credit losses, which requires an expected loss methodology. However, as of July 31, 2025, and April 30, 2025, no reserves for credit losses were made - The company adopted **ASC 326 (CECL model)** on June 30, 2022, replacing the incurred loss methodology with an expected loss approach for credit losses[169](index=169&type=chunk) - **No reserves for credit losses** were made as of July 31, 2025, and April 30, 2025[170](index=170&type=chunk) [Impairment of Long-Lived Assets](index=30&type=section&id=Impairment%20of%20long-lived%20assets) Long-lived assets are evaluated for impairment when circumstances indicate that their carrying value may not be fully recoverable. No impairment charge was recognized for the three months ended July 31, 2025, and 2024 - Long-lived assets are evaluated for impairment when events or changes in circumstances indicate that the carrying value may not be fully recoverable or the useful life is shorter than estimated[171](index=171&type=chunk) - **No impairment charge** was recognized for the three months ended July 31, 2025, and 2024[171](index=171&type=chunk) [Fair Value of Financial Instruments](index=30&type=section&id=Fair%20value%20of%20financial%20instruments) Fair value is defined as the price for an orderly transaction between market participants. The company's financial instruments, such as cash and cash equivalents and accounts receivable, approximate fair value due to their short-term maturity - Fair value is the price received from selling an asset or paid to transfer a liability in an orderly transaction between market participants[172](index=172&type=chunk) - The carrying amount of cash and cash equivalents and accounts receivable approximates fair value due to their short-term maturity[71](index=71&type=chunk) [Revenue Recognition](index=30&type=section&id=Revenue%20Recognition) Revenue is recognized in accordance with ASC 606, following a five-step model, when performance obligations are satisfied by transferring control of goods or services. Royalty income from technology licensing is recognized over time as the technology rights are used by customers - Revenue is recognized net of VAT, following a five-step model under **ASC 606**, when performance obligations are satisfied by transferring control of goods or services to a customer[173](index=173&type=chunk)[174](index=174&type=chunk) - Royalty income from license fees for technology rights is recognized over time as the technology rights are used by customers[176](index=176&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) The company applies ASC 740 for income taxes, using the asset and liability method. Prior to the YYAI acquisition, YYEM's taxable income was allocated to members, so no federal income tax provision was included in its financial statements - The company adopted **ASC 740, Income Taxes**, using the asset and liability method[177](index=177&type=chunk) - Prior to the acquisition by YYAI, YYEM, as a limited liability company, allocated taxable income or loss to its members, thus **no provision or liability for federal income taxes** was included in its financial statements[178](index=178&type=chunk) [Share-Based Payment](index=31&type=section&id=Share-Based%20Payment) Share-based compensation is accounted for under ASC 718, with costs measured at grant date fair value and recognized as an expense on a straight-line basis over the vesting period - Share-based compensation is accounted for in accordance with **ASC 718**, with costs measured at grant date fair value and recognized as an expense on a straight-line basis over the vesting period[179](index=179&type=chunk) [Recent Accounting Pronouncements](index=31&type=section&id=Recent%20Accounting%20Pronouncements) The company has evaluated several recently issued FASB ASUs (2024-03, 2024-04, 2025-01, 2025-02, 2025-03, 2025-04, 2025-05) and does not anticipate that their adoption will have a material impact on its financial position, results of operations, or cash flows - The company is evaluating the impact of several new FASB ASUs (2024-03, 2024-04, 2025-01, 2025-02, 2025-03, 2025-04, 2025-05) but does not expect a **material impact** on its financial position, results of operations, or cash flows[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company - This section is **not applicable** to the company[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and principal financial officer, evaluated the effectiveness of the company's disclosure controls and procedures as of July 31, 2025, and concluded they were effective. There were no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed **effective** as of July 31, 2025[190](index=190&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter ended July 31, 2025[191](index=191&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part covers other information including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) As of the issuance date, the company was not involved in any pending or threatened legal proceedings that could materially affect its operations. No executive officers or directors have been involved in significant legal or bankruptcy proceedings - As of the issuance date, there were **no pending or threatened legal proceedings** that could reasonably be expected to have a material effect on the company's operations[194](index=194&type=chunk) - No executive officers or directors have been involved in any bankruptcy proceedings, criminal proceedings (other than minor offenses), or subject to orders limiting business involvement within the last five years[195](index=195&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Form 10-K for the period ended April 30, 2025 - **No material changes** to the risk factors previously disclosed in the Form 10-K for the period ended April 30, 2025[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company executed a private placement on June 30, 2025, which closed on August 19, 2025, involving the issuance of 20,000,000 units (common stock and warrants) to raise $4.6 million in gross proceeds - On June 30, 2025, the company executed securities purchase agreements for a private placement of **20,000,000 units** (each comprising one share of common stock and two five-year warrants with an exercise price of $0.89)[197](index=197&type=chunk) - The private placement targeted gross proceeds of **$4.6 million** and closed on August 19, 2025[197](index=197&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) The company reported no defaults upon senior securities - There were **no defaults upon senior securities**[198](index=198&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This section is not applicable to the company - This section is **not applicable** to the company[199](index=199&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20OTHER%20INFORMATION.) During the quarter ended July 31, 2025, no director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the quarter ended July 31, 2025[200](index=200&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including director service agreements, the joint venture agreement, certifications from executive officers, and XBRL-related documents - Director Service and Indemnity Agreement with Bini Zhu (August 15, 2025) - Joint Venture Agreement with JuCoin Capital Pte Ltd (August 25, 2025) - Certifications of Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a) and 18 U.S.C. 1350) - Inline XBRL Instance Document and Taxonomy Extension Documents [Signatures](index=36&type=section&id=SIGNATURES) This section contains the official signatures for the report, confirming its submission [Report Signatures](index=36&type=section&id=Report%20Signatures) The report was duly signed on September 15, 2025, by Thomas Tarala, Chief Executive Officer, and Guibao Ji, Chief Financial Officer and Principal Accounting Officer, on behalf of Connexa Sports Technologies Inc - The report was signed on **September 15, 2025**[206](index=206&type=chunk) - Signatories include Thomas Tarala, Chief Executive Officer, and Guibao Ji, Chief Financial Officer and Principal Accounting Officer[206](index=206&type=chunk)

Other Highlights "I am deeply honored to take the helm and collaborate with this talented team to drive innovation, growth, and the company's next chapter," said Tarun Lal, Chief Executive Officer. "We operate strong brands, with an exceptional business model across a unique national footprint. In my first several weeks, I've visited stores across the nation and witnessed firsthand the pride and dedication of our teams and how much our customers love us. My immediate focus is clear: reinforce our guest-firs ...

PART I [Cautionary Note on Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20on%20Forward-Looking%20Statements) The Annual Report contains forward-looking statements subject to significant risks and uncertainties, with actual results potentially differing materially - The report contains **forward-looking statements** regarding strategy, future operations, financial position, revenue, costs, and market growth, which are subject to known and unknown risks and uncertainties[22](index=22&type=chunk) - **Key areas** of forward-looking statements include goals and growth strategies, market acceptance, future business development, FDA review of products, manufacturing capabilities, supplier relationships, regulatory effects, competition, market trends, supply chain issues, and the development of cannabis vaping markets[23](index=23&type=chunk) - Actual results or events could **differ materially** from expectations due to various factors, many beyond the company's control, and the company does not undertake to publicly update these statements unless required by law[24](index=24&type=chunk)[25](index=25&type=chunk) [Summary Risk Factors](index=6&type=section&id=Summary%20Risk%20Factors) This section overviews material risks, including regulatory challenges, conflicts of interest, product defects, geopolitical events, and market volatility - Risks related to the business and industry include **adverse effects from existing and new regulations** on nicotine vaping, restrictions on cannabis vapor products, **conflicts of interest** due to the co-CEO's majority ownership in the company and its primary supplier, **difficulties in marketing nicotine products** in the U.S. without PMTA approvals, and **potential long-term health risks** associated with vaping[29](index=29&type=chunk) - Additional business risks involve **product defects**, **global political events and tariffs**, inherent industry uncertainties, misuse of products, **significant reliance on one customer**, and **cybersecurity incidents** or data protection failures[29](index=29&type=chunk) - Risks related to the common stock include **potential patent expirations or challenges**, **inability to manage growth**, **dependence on key personnel**, economic downturns, potential subjection to PRC laws, failure to collect accounts receivable, **delisting from Nasdaq**, and **stock price volatility**[31](index=31&type=chunk) [Business](index=8&type=section&id=Item%201.%20Business) Ispire designs, markets, and distributes vaping hardware for nicotine and cannabis globally, leveraging proprietary coil technologies and an ODM model, with manufacturing in Malaysia and a focus on age-gating innovation [Overview](index=8&type=section&id=Overview) Ispire develops superior vaping products for adult consumers in nicotine and cannabis sectors, utilizing proprietary coil technologies like BDC, BVC, DuCore™, and Ispire ONE™ for enhanced safety and experience - Ispire Technology Inc. focuses on delivering **superior vaping products** for adult consumers, emphasizing **risk reduction and R&D** in both nicotine and cannabis sectors[32](index=32&type=chunk)[33](index=33&type=chunk) - The company markets **nicotine products globally under the 'Aspire' brand** and is expanding internationally with 'Ispire' platform products via licensing. **Cannabis vaping hardware** is sold in the US, Canada, and South Africa under the 'Ispire' brand, primarily on an **Original Design Manufacturer (ODM) basis**[34](index=34&type=chunk)[35](index=35&type=chunk) - Key proprietary technologies include **BDC** (bottom dual coil) for enhanced flavor and vapor, **BVC** (bottom vertical coil) for uniform heating and coil longevity, Cleito tank for maximized airflow, and **DuCore™ (Dual Coil)** for cannabis vaporizers to prevent burning and leakage[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - In June 2023, Ispire introduced **Ispire ONE™ technology** to address manufacturing issues like capping, improve consistency, eliminate leaking/overheating, and **enhance consumer safety** through factory-sealed devices[40](index=40&type=chunk) [Acquisition of Our Business from a Related Party](index=9&type=section&id=Acquisition%20of%20Our%20Business%20from%20a%20Related%20Party) Ispire was formed in June 2022, acquiring key businesses from Aspire Global Inc. in a related-party restructuring, with co-CEO Tuanfang Liu holding majority ownership in both Ispire and its primary supplier, Shenzhen Yi Jia - Ispire Technology Inc. was **formed in June 2022** and **acquired Aspire North America LLC and Aspire Science and Technology Limited** from Aspire Global Inc. on July 29, 2022, as part of a restructuring[45](index=45&type=chunk) - Tuanfang Liu, co-CEO and chairman, and his wife, Jiangyan Zhu, beneficially own a majority of Ispire's common stock (**58.1%** and **4.4%** respectively) and Aspire Global's shares (**66.5%** and **5.0%** respectively), establishing a related-party relationship[47](index=47&type=chunk) - The company primarily purchases e-cigarette and cannabis vaping hardware from Shenzhen Yi Jia, which is **95% owned by Tuanfang Liu**, under agreements ensuring market prices no less favorable than those offered to other customers[48](index=48&type=chunk) - **Intellectual property for cannabis vaping products was transferred** to Aspire North America, while Aspire Science received a perpetual, royalty-free, **exclusive license for tobacco vaping product IP** worldwide (excluding PRC and Russia)[49](index=49&type=chunk)[50](index=50&type=chunk) [Matters Relating to PRC Laws](index=10&type=section&id=Matters%20Relating%20to%20PRC%20Laws) Ispire operates outside mainland China, but acknowledges the risk that PRC laws could extend to its Hong Kong subsidiary, potentially impacting its financial condition - Ispire's operations are in Hong Kong, the United States, and Malaysia, with **no employees, assets, or funds in mainland China**. The company does not believe it is **subject to PRC Laws** applicable to mainland Chinese companies[51](index=51&type=chunk) - There is a **risk that PRC laws and regulations could become applicable** to its Hong Kong subsidiary, potentially leading to **adverse impacts** on financial condition and operations[52](index=52&type=chunk) [Our Corporate Organization](index=10&type=section&id=Our%20Corporate%20Organization) Ispire Technology Inc., a Delaware corporation, operates through various subsidiaries globally, including Aspire North America, Aspire Science, and Ispire Malaysia, engaged in R&D, manufacturing, and sales - Ispire Technology Inc. is a **Delaware corporation**, incorporated on June 13, 2022, with **operating subsidiaries** including Aspire North America, Aspire Science, Ispire International, Ispire Malaysia Sdn Bhd, Ispire Global Products LLC, Aspire AME Electronic Cigarettes Trading LLC, Magellan Trading LLC, and Ispire Products UK LTD[53](index=53&type=chunk)[96](index=96&type=chunk) Company and Subsidiaries as of June 30, 2025 | Name of Entity | Date of Organization | Place of Organization | % of Ownership | Principal Activities | | :--- | :--- | :--- | :--- | :--- | | Ispire Technology Inc. | June 13, 2022 | Delaware | Parent Company | Holding Company | | Ispire International | July 6, 2022 | BVI | 100% | Holding Company | | Aspire North America | February 22, 2020 | California | 100% | Research and Development, Sales and Marketing | | Aspire Science | December 9, 2016 | Hong Kong | 100% | Sales and Marketing | | Ispire Malaysia | August 2, 2023 | Malaysia | 100% | Manufacturing, Sales and Marketing | | Ispire Global Products LLC | January 19, 2024 | Delaware | 100% | Sales and Marketing | | Aspire AME Electronic Cigarettes Trading LLC | July 19, 2024 | UAE | 100% | Sales and Marketing | | Magellan Trading LLC | October 1, 2024 | California | 100% | Operations and Logistics | | Ispire Products UK LTD | January 9, 2025 | England and Wales | 100% | Sales and Marketing | [Our Strategy](index=12&type=section&id=Our%20Strategy) Ispire's growth strategy focuses on expanding sales, continuous R&D in vaporizer technology, pursuing M&A, growing OEM/ODM business, and developing age-gating innovations to prevent youth usage - The company's **multi-prong growth strategy** includes increasing sales to existing customers, **expanding distributor networks** and regions for e-cigarettes, and **penetrating Canadian and European cannabis markets** as legalization progresses[57](index=57&type=chunk)[58](index=58&type=chunk) - Core to its strategy is **continuous R&D**, focusing on **technology leadership** in vaporizers, including medical and recreational cannabis products, and utilizing online forums for customer feedback[59](index=59&type=chunk)[60](index=60&type=chunk) - Ispire plans to **pursue M&A and strategic relationships** to enhance technological human resources and product portfolios, and to **develop manufacturing capabilities**, initially focusing on assembly[61](index=61&type=chunk)[62](index=62&type=chunk) - Expansion of OEM and ODM business for both cannabis and e-cigarette products is a key growth area, with OEM/ODM sales accounting for **40.2% of e-cigarette revenue in FY2025**, up from **25.9% in FY2024**[63](index=63&type=chunk) - The company is actively pursuing **technological innovations to prevent youth usage**, including its IKE Tech LLC joint venture for point-of-use age-gating technology for e-cigarettes[65](index=65&type=chunk) [Our Products](index=13&type=section&id=Our%20Products) Ispire develops and sells branded and OEM/ODM nicotine and cannabis vaping products, featuring proprietary technologies like BDC, BVC, DuCore™, Ispire ONE™, and G-Mesh for enhanced performance and safety - Ispire develops and sells **branded and OEM/ODM nicotine vaping systems** and components (cartridges, batteries) globally, excluding the US, PRC, and Russia, for adult users[66](index=66&type=chunk) - The product lines include **'open system' devices** (tanks, battery mods, refillable by consumers, e.g., Nautilus, Zestquest) and **'closed system' devices** (pre-filled cartridges, rechargeable/disposable, e.g., BRKFST), with **closed systems becoming dominant**[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - Proprietary technologies include **BDC** (bottom dual coil) for expanded heating and flavor, **BVC** (bottom vertical coil) for uniform heating and coil longevity, and **Cleito tank** for maximized airflow[70](index=70&type=chunk)[71](index=71&type=chunk) - Ispire's **cannabis vaping products**, introduced in December 2020, utilize **patented DuCore™ (Dual Coil) technology** for large vapor plumes without burning oil, best-in-class airflow/taste, and leakage elimination. These are hardware-only, designed for customers to fill with cannabis oil[74](index=74&type=chunk) - **Ispire ONE™ technology** (June 2023) aims to eliminate capping issues, increase consistency, prevent leaking/overheating, and **improve consumer safety** through factory-sealed devices[75](index=75&type=chunk) - New **G-Mesh technology**, marketed under 'Silica Series,' uses porous glass and interlocking mesh coils for **improved nicotine uptake, superior flavor**, and reduced ceramic dust risk[76](index=76&type=chunk) [Sales and Distribution](index=15&type=section&id=Sales%20and%20Distribution) Ispire distributes e-cigarettes globally through over 150 distributors and sells cannabis vapor products directly to brands on an ODM basis, with a significant portion of revenue from a single major distributor - Most e-cigarette revenue comes from sales to over **150 distributors in more than 30 countries**, primarily Europe and Asia Pacific (excluding PRC). OEM/ODM sales for e-cigarettes increased to **40.2% of revenue in FY2025** from **25.9% in FY2024**, with a major OEM contract secured in May 2024 expected to boost FY2026 revenue[42](index=42&type=chunk)[44](index=44&type=chunk)[77](index=77&type=chunk) - Cannabis vapor products are mainly sold directly to other cannabis vaping brands on an **ODM basis**, with Ispire's brand sometimes included. The company **does not sell cannabis or hemp oil**[77](index=77&type=chunk)[80](index=80&type=chunk) - The largest distributor, Your-Buyer International Limited (UK and France), accounted for **25.7% of revenue in FY2025** and **30.0% in FY2024**. No other single customer accounted for **10% or more of revenue**[81](index=81&type=chunk) - **Sales channels** include wholesalers, retail outlets (grocery, convenience, tobacco stores), and online platforms operated by distributors. Ispire supports **marketing through websites, social media, SEO, email campaigns, and influencer marketing**, targeting adult consumers[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) [Source of Supply](index=16&type=section&id=Source%20of%20Supply) Ispire primarily sources vaping products from related-party Shenzhen Yi Jia but is expanding its own manufacturing capabilities in Malaysia to diversify supply and enhance quality control - A **majority of e-cigarette and cannabis vaping products are purchased from Shenzhen Yi Jia**, a related party (**95% owned by co-CEO Tuanfang Liu**), under agreements ensuring market prices and warranty responsibility[88](index=88&type=chunk) - The company commenced manufacturing operations in Malaysia in February 2024 with **6 production lines**, focusing on component assembly. Plans include expanding to up to **70 new lines** at a second Malaysian facility within **12 months** to diversify supply[41](index=41&type=chunk)[89](index=89&type=chunk) - **Quality control is a crucial part** of the manufacturing process, involving supplier visits, annual inspections, and employing qualified personnel[90](index=90&type=chunk) [Warranties](index=16&type=section&id=Warranties) Ispire passes on 90-day manufacturer warranties from its supplier to customers, with immaterial claims to date, thus no warranty liability is recognized - Ispire **passes on warranties** from Shenzhen Yi Jia to its customers, covering repair or replacement for manufacturer defects. Warranty periods are generally **90 days**, with **six months** for the UK and France[91](index=91&type=chunk) - Customers are required to test hardware with their oils to minimize performance issues. Warranty claims have been **immaterial**, so **no warranty liability** has been deemed necessary[91](index=91&type=chunk) [Research and Development](index=17&type=section&id=Research%20and%20Development) Ispire has established its own R&D team, led by Chairman Tuanfang Liu, focusing on cannabis vaping products and developing patented dual-coil and self-sealing technologies - Historically, R&D was conducted by Shenzhen Yi Jia, but Ispire has **established its own R&D team**, primarily in Los Angeles, headed by Chairman Tuanfang Liu, **focusing on cannabis vaping products**[92](index=92&type=chunk)[93](index=93&type=chunk) - Recent R&D efforts include the Ispire cannabis vaping system, **patented dual-coil technology**, **self-sealing technology**, and a **closed system for e-cigarettes** designed to prevent oil leakage[93](index=93&type=chunk) [IKE Tech LLC Joint Venture](index=17&type=section&id=IKE%20Tech%20LLC%20Joint%20Venture) Aspire North America formed IKE Tech LLC in April 2024 to develop age-verification solutions for vapor devices, with IKE submitting a 'component' PMTA for its age-gating system accepted by the FDA in May 2025 - Aspire North America LLC entered a **joint venture, IKE Tech LLC**, in April 2024, focused on developing, licensing, owning, and operating an industry-standard **age-verification solution** for vapor devices[94](index=94&type=chunk) - IKE plans to submit **PMTA applications for age-gated e-cigarettes** with characterizing flavors, geo-fencing, blockchain technology for authentication, and biometric identity platforms[94](index=94&type=chunk) - IKE submitted a 'component' PMTA for its age-gating system in April 2025, which was **accepted by the FDA in May 2025**, and is actively pursuing age-gating mandates globally[95](index=95&type=chunk)[96](index=96&type=chunk) [Intellectual Property](index=18&type=section&id=Intellectual%20Property) Ispire holds over 200 patents, primarily utility patents for atomizer and heating coil technologies, with cannabis-related IP transferred to Aspire North America and tobacco-related IP exclusively licensed to Aspire Science - Ispire's intellectual property, primarily developed by Tuanfang Liu, includes over **200 patents** in various jurisdictions. **Cannabis-related IP has been transferred** to Aspire North America, while **tobacco-related IP is exclusively licensed** to Aspire Science worldwide (excluding PRC and Russia)[97](index=97&type=chunk)[100](index=100&type=chunk) - **Utility patents** form the core IP, focusing on atomizer, heating coil, and battery technologies for enhanced functionality and user experience. **Design patents** cover visual aspects of products[98](index=98&type=chunk)[99](index=99&type=chunk) - Patents began expiring in **2022**, with the last set to expire in **2045**. The company intends to seek further patent protection for new developments[100](index=100&type=chunk) - **Trademark registrations** for 'Ispire' and other product marks (e.g., CLEITO, NAUTILUS) are held by Shenzhen Yi Jia and have been assigned or exclusively licensed to Ispire's subsidiaries[102](index=102&type=chunk) [Competition](index=19&type=section&id=Competition) The e-cigarette market is highly competitive with over 50 companies, while the cannabis vapor market is developing, with Ispire's success dependent on continuous innovation and anticipating consumer demand - The e-cigarette market is **highly competitive with over 50 companies**, including major players like Smoore International Holdings Limited. The **cannabis vapor market is developing**, primarily in the US, with emerging markets in Canada and Europe[106](index=106&type=chunk)[108](index=108&type=chunk) - Competition is driven by **technological innovation, design, and evolving consumer preferences**. Ispire's success depends on its ability to **anticipate market demand and develop cutting-edge products**[107](index=107&type=chunk) [Seasonality](index=19&type=section&id=Seasonality) Seasonality does not materially affect the company's business or results of operations - Seasonality does **not materially affect** the company's business or results of operations[109](index=109&type=chunk) [Human Capital](index=19&type=section&id=Human%20Capital) As of September 4, 2025, Ispire had 81 employees across operations, management, sales, and R&D, maintaining good employee relations without labor unions - As of September 4, 2025, Ispire had **81 employees**: **21 in operations**, **46 in general management**, **9 in sales and marketing**, and **5 in R&D**. The company values talent management, health and safety, and fair employment practices[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - The company maintains **good employee relations**, with **no labor unions**, and uses labor contracts and IP agreements for key personnel[115](index=115&type=chunk) [Insurance](index=20&type=section&id=Insurance) Ispire's insurance coverage aligns with industry standards, though Aspire Science lacks product liability insurance - Ispire's insurance coverage is **consistent with industry standards**, though **Aspire Science lacks product liability insurance**[116](index=116&type=chunk) [Legal Proceedings](index=20&type=section&id=Legal%20Proceedings) The company is not currently involved in any legal or regulatory proceedings that would materially adversely affect its business or financial condition - The company is **not currently a party to any legal or regulatory proceedings**, investigations, or claims that management believes would have a **material adverse effect** on its business, financial condition, or results of operations[117](index=117&type=chunk) [Regulation](index=20&type=section&id=REGULATION) Ispire navigates complex and evolving regulations for ENDS and cannabis products in the US, Europe, and UK, including PMTA requirements, PACT Act restrictions, and age-gating initiatives, while also complying with Malaysian manufacturing laws and global data protection - In the United States, ENDS products require **Premarket Tobacco Product Applications (PMTAs)** for market authorization. Ispire filed a PMTA for its **Nautilus Prime products**, which are currently the only ones it can sell in the US. The **PACT Act**, amended in **2020**, applies to all vaping products (nicotine and cannabis), imposing restrictions on mailing and requiring reporting, making sales more difficult[119](index=119&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) - Ispire believes its **IKE age-gating technology** may enable approval for ENDS products with characterizing flavors, with a 'component' PMTA **accepted by the FDA in May 2025**[130](index=130&type=chunk) - Cannabis vaping products are governed by **varying state laws**; federal law still prohibits non-hemp cannabis. Ispire relies on exemptions by not selling into prohibition states and limiting sales to licensed cannabis businesses[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - **European regulations (TPD)** impose strict rules on e-cigarette product information, advertising, safety, and presentation. The sale of recreational cannabis vaping products is **largely illegal in the EU**, though a market is developing in some countries like Germany[135](index=135&type=chunk)[136](index=136&type=chunk) - The **UK's TRPR** sets minimum standards for e-cigarettes and e-liquids, restricting tank capacity, nicotine volume/strength, and requiring child-resistant packaging and MHRA notification. **Disposable e-cigarettes were banned on April 1, 2025**, and the **Tobacco and Vapes Bill proposes further restrictions**, including a vape advertisement ban[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - Ispire's **Malaysian manufacturing facility must comply** with local laws, including obtaining regulatory approvals and licenses for nicotine product export, with a **temporary license received in May 2025**[149](index=149&type=chunk) - The company is subject to **evolving privacy and data protection laws** (e.g., CCPA, GDPR) due to potential public interaction and internet sales, with **non-compliance risking enforcement actions, litigation, and reputational damage**[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks, including substantial financial losses, stringent regulations, conflicts of interest, product liability, intense competition, growth management, key personnel retention, and global economic and cybersecurity threats - The company sustained significant net losses of **$39.2 million in FY2025** and **$14.8 million in FY2024**, with no assurance of future profitability[162](index=162&type=chunk) - Existing and new regulations in the nicotine vaping industry, including PMTA requirements and flavor bans, have **materially and adversely affected business operations**, leading to the decision **not to market nicotine products in the US until PMTA approvals are secured**[163](index=163&type=chunk)[164](index=164&type=chunk)[176](index=176&type=chunk) - Cannabis vapor products face **complex state and federal regulations**, including the PACT Act's shipping restrictions and potential rescheduling of cannabis, which could **negatively impact sales and compliance obligations**[167](index=167&type=chunk)[168](index=168&type=chunk)[184](index=184&type=chunk) - A significant conflict of interest exists because co-CEO Tuanfang Liu and his wife beneficially own **62.5% of Ispire's common stock** and Mr. Liu owns **95% of Shenzhen Yi Jia**, the company's majority supplier, potentially influencing decisions to the detriment of minority shareholders[173](index=173&type=chunk)[175](index=175&type=chunk) - The company is exposed to **product liability claims and user complaints** due to potential long-term health risks of vaping, product defects, and the non-uniform quality of cannabis oil, which could lead to **significant costs, reputational damage, and business loss**[186](index=186&type=chunk)[188](index=188&type=chunk)[190](index=190&type=chunk)[193](index=193&type=chunk)[199](index=199&type=chunk) - **Intense competition** in both nicotine and cannabis vaping markets, coupled with the need for timely product innovation and effective growth management, poses **risks to market share and profitability**[207](index=207&type=chunk)[221](index=221&type=chunk)[235](index=235&type=chunk) - Reliance on a single major customer (**25.7% of FY2025 revenue**) and a related-party supplier (**91% of FY2025 purchases**) creates **concentration risks**. Failure to collect accounts receivable, particularly from US cannabis operators facing economic headwinds, could **adversely affect liquidity**[219](index=219&type=chunk)[249](index=249&type=chunk)[106](index=106&type=chunk) - Other risks include global economic volatility, tariffs (e.g., **30% on Chinese imports**, **19% on Malaysian imports**), **cybersecurity incidents**, potential infringement of intellectual property, and the **inability to retain key management and skilled employees**[220](index=220&type=chunk)[230](index=230&type=chunk)[232](index=232&type=chunk)[236](index=236&type=chunk) [Unresolved Staff Comments](index=49&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC [Cybersecurity](index=49&type=section&id=Item%201C.%20Cybersecurity) Ispire recognizes cybersecurity as a significant risk, with a dedicated committee and Audit Committee oversight, and no material threats reported to date - Cyberattacks pose a **significant threat** to Ispire's operations and confidential information, with potential for **business disruption, reputational damage, financial obligations, and regulatory penalties**[261](index=261&type=chunk)[262](index=262&type=chunk) - The company has a **Cybersecurity Committee** (CFO, CLO, Controller, Head of HR) for **day-to-day risk management**, incident response, vendor risk oversight, and policy compliance. Cybersecurity training is planned for all employees[264](index=264&type=chunk)[265](index=265&type=chunk) - The **Audit Committee oversees** the company's cybersecurity risk assessment and management, receiving **regular updates** from the Cybersecurity Committee[266](index=266&type=chunk) - As of the report date, Ispire is **not aware of any cybersecurity threats that have materially affected** or are reasonably likely to materially affect its business, strategy, results of operations, or financial condition[267](index=267&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Properties) Ispire leases approximately **205,391 square feet** for its headquarters, offices, manufacturing, and storage in Los Angeles, Hong Kong, and Malaysia - Ispire's headquarters, offices, manufacturing, and storage facilities are leased, totaling approximately **205,391 square feet** across Los Angeles, CA, Hong Kong, and Senai, Johor, Malaysia[268](index=268&type=chunk)[269](index=269&type=chunk) Leased Real Property Information | Location | Square Feet | Current Annual Rent ($) | Expiration Date | | :--- | :--- | :--- | :--- | | 1410 Abbot Kinney Blvd., PH 1, Venice, CA 90291 | 4,121 | 388,000 | June 30, 2026 | | 19700 Magellan Dr, Los Angeles, CA 90502 | 37,100 | 872,719 | July 31, 2027 | | 55 King Yip Street, King Palace Plaza, Floor 31, Suite J, Kwun Tong, Hong Kong | 1,850 | 81,323 | July 14, 2027 | | No. 16, Jalan I-Park SAC 3, Taman Perindustrian I-Park SAC, 81400 Senai, Johor, Malaysia | 31,000 | 127,076 | August 17, 2026 | | Lot 210, Jalan Seelong, 81400 Senai, Johor, Malaysia | 131,320 | 594,401 | March 16, 2030 | [Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any legal or regulatory proceedings that would materially adversely affect its business or financial condition - Ispire is **not a party to, nor aware of, any legal or regulatory proceedings**, investigations, or claims likely to have a **material adverse effect** on its business, financial condition, or results of operations[270](index=270&type=chunk) [Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Ispire Technology Inc. PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Ispire's Common Stock trades on Nasdaq under 'ISPR', with **16 holders of record** as of September 15, 2025, and no dividends paid, focusing on retaining earnings for growth - Ispire's Common Stock trades on the Nasdaq Stock Market under the symbol '**ISPR**'. As of September 15, 2025, there were approximately **16 holders of record**[273](index=273&type=chunk) - The company has **never declared or paid cash dividends** and plans to **retain all available funds** and future earnings to support operations and business growth[274](index=274&type=chunk) Securities Authorized for Issuance under Equity Compensation Plan (as of June 30, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 1,438,125 | 8.15 | 11,616,039 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 1,438,125 | 8.15 | 11,616,039 | - The board approved a share repurchase program on January 20, 2025, authorizing up to **$10 million** of common stock repurchases over **24 months**. No shares were repurchased during the three months ended June 30, 2025[278](index=278&type=chunk)[280](index=280&type=chunk) [Reserved](index=52&type=section&id=Item%206.%20%5BReserved%5D) This item is intentionally left blank [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews Ispire's financial performance, liquidity, and capital resources, noting decreased revenue, increased net loss, reduced working capital, and ongoing regulatory risks [Overview](index=52&type=section&id=Overview) Ispire focuses on R&D, design, and distribution of nicotine and cannabis vaping hardware, having raised **$36.3 million** through fundraising, while facing significant regulatory risks and increased credit loss expenses - Ispire focuses on **R&D, design, commercialization, sales, marketing, and distribution** of branded and non-branded vaping hardware for nicotine and cannabis markets, aiming to **reduce youth access** and provide adult consumers with desired products[282](index=282&type=chunk)[283](index=283&type=chunk) - The company sells '**Aspire' brand nicotine products** globally and '**Ispire' brand cannabis vaping hardware** in the US, Canada, and South Africa, with expansion plans for Europe and South America, primarily through an **ODM model**[284](index=284&type=chunk)[285](index=285&type=chunk) - Since its April 2023 IPO, Ispire completed three fundraising rounds, raising approximately **$18.3 million** (IPO), **$7.4 million** (private placement), and **$10.6 million** (public offering) for manufacturing, joint ventures, and working capital[286](index=286&type=chunk)[287](index=287&type=chunk) - **Regulatory risks**, including varying e-cigarette regulations and the legal status of cannabis products worldwide, pose **significant challenges** and can disrupt business operations[288](index=288&type=chunk)[289](index=289&type=chunk) - The allowance for credit losses increased significantly from **$5.9 million in FY2024** to **$18.0 million in FY2025**, reflecting longer collection times and higher estimated lifetime expected losses, partly due to economic conditions in the cannabis industry[290](index=290&type=chunk)[291](index=291&type=chunk) [Key Factors that Affect Our Results of Operations](index=54&type=section&id=Key%20Factors%20that%20Affect%20Our%20Results%20of%20Operations) Key factors impacting operations include evolving regulations for nicotine and cannabis vaping, product development to meet consumer tastes, competition, and international market expansion - Key factors affecting results include **legislation and regulations** for non-combustible nicotine and cannabis vaping products, the ability to obtain **regulatory approval** for US nicotine products, developing products to meet **changing consumer tastes**, **competition**, and the development of **international cannabis vaping markets**[294](index=294&type=chunk) [Results of Operations](index=54&type=section&id=Results%20of%20Operations) Ispire's revenue decreased by **16.1%** to **$127.5 million** in FY2025, leading to a **23.9%** drop in gross profit and a **38.5%** increase in operating expenses, resulting in a net loss of **$39.2 million** Consolidated Statements of Operations and Comprehensive Loss (Years Ended June 30, 2025 and 2024) | Metric | 2025 (in thousands) | % of Revenue (2025) | 2024 (in thousands) | % of Revenue (2024) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $127,494 | 100.0% | $151,909 | 100.0% | | Cost of revenue | (104,845) | (82.2)% | (122,126) | (80.4)% | | Gross profit | 22,649 | 17.8% | 29,783 | 19.6% | | Operating expenses | (60,499) | (47.5)% | (43,677) | (28.8)% | | Loss from operations | (37,850) | (29.7)% | (13,894) | (9.1)% | | Other (loss) income, net | (187) | (0.1)% | 409 | 0.3% | | Loss before income taxes | (38,037) | (29.8)% | (13,486) | (8.9)% | | Income taxes | (1,204) | (0.9)% | (1,282) | (0.8)% | | Net loss | $(39,241) | (30.8)% | $(14,768) | (9.7)% | | Other comprehensive (loss) income | (167) | (0.1)% | 221 | 0.1% | | Comprehensive loss | $(39,408) | (30.9)% | $(14,546) | (9.6)% | | Net loss per ordinary share (basic and diluted) | $(0.69) | - | $(0.27) | - | | Weighted ordinary shares outstanding | 56,853,552 | - | 54,812,900 | - | - Revenue decreased by **$24.4 million (16.1%)** from **$151.9 million in FY2024** to **$127.5 million in FY2025**, driven by decreases in North America (**$30.5 million**) and Asia Pacific (**$5.3 million**), partially offset by increases in Europe (**$8.8 million**) and other regions (**$2.5 million**)[296](index=296&type=chunk) - Cost of revenue decreased by **$17.3 million (14.2%)** in line with the sales decrease. Gross profit decreased by **$7.1 million (23.9%)**, and gross margin declined from **19.6% in FY2024** to **17.8% in FY2025**, primarily due to a less favorable product mix[297](index=297&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk) - Operating expenses increased by **$16.8 million (38.5%)** to **$60.5 million in FY2025**. This was mainly due to a **266.3% increase in credit loss expenses ($16.0 million)** and a **27.7% increase in sales and marketing expenses ($1.8 million)**, partially offset by a **3.3% decrease in general and administrative expenses ($1.0 million)**[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk) - Net loss increased by **$24.5 million**, from **$14.8 million ($0.27 per share) in FY2024** to **$39.2 million ($0.69 per share) in FY2025**[313](index=313&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) Ispire's working capital significantly decreased by **97.8%** to **$0.4 million** in FY2025, with net cash used in operating activities improving to **$7.4 million**, and future funding relying on cash flow and equity/borrowing Working Capital (in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Current Assets | $72,908 | $102,572 | $(29,664) | (28.9)% | | Current Liabilities | $72,540 | $85,991 | $(13,451) | (15.6)% | | Working Capital | $368 | $16,581 | $(16,213) | (97.8)% | Consolidated Cash Flow Data (in thousands) | Cash Flow Activity | 2025 | 2024 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(7,374) | $(18,302) | $10,928 | | Net cash (used in) provided by investing activities | $(5,199) | $2,990 | $(8,189) | | Net cash provided by financing activities | $1,853 | $10,083 | $(8,230) | | Net decrease in cash | $(10,720) | $(5,229) | $(5,491) | - Net cash used in operating activities decreased from **$18.3 million in FY2024** to **$7.4 million in FY2025**, primarily due to higher impairment of accounts receivable and stock-based compensation, offset by changes in accounts payable and contract liabilities[316](index=316&type=chunk)[317](index=317&type=chunk) - Net cash used in investing activities was **$5.2 million in FY2025**, reflecting repayment of acquisition payable, and purchases of property, plant, and equipment, and intangible assets[318](index=318&type=chunk) - Net cash provided by financing activities was **$1.9 million in FY2025**, mainly from borrowing proceeds, compared to **$10.1 million in FY2024** from equity offerings[320](index=320&type=chunk) - The company believes current cash, operating cash flows, and proceeds from equity offerings/borrowing will be sufficient for working capital needs for the next **12 months**, but additional financing may be required for adverse conditions or accelerated growth[321](index=321&type=chunk) [Contractual Obligations](index=59&type=section&id=Contractual%20Obligations) As of June 30, 2025, Ispire had **$4.9 million** in contract liabilities, **$5.1 million** in lease liabilities, **$2.0 million** in borrowing, and an unpaid **$5.8 million** joint venture investment - As of June 30, 2025, contract liabilities (advance deposits from customers) totaled **$4.9 million**, expected to be settled within **one year**[323](index=323&type=chunk) Maturities of Lease Liabilities (as of June 30, 2025) | Period | Amount ($) | | :--- | :--- | | July 1, 2025 to June 30, 2026 | 2,110,799 | | July 1, 2026 to June 30, 2027 | 1,583,109 | | July 1, 2027 to June 30, 2028 | 777,402 | | July 1, 2028 to June 30, 2029 | 696,727 | | July 1, 2029 to June 30, 2030 | 464,484 | | Total future lease payments | 5,632,521 | | Less: imputed interest | (526,184) | | Total lease liabilities | 5,106,337 | Maturities of Borrowing (as of June 30, 2025) | Period | Amount ($) | | :--- | :--- | | July 1, 2025 to June 30, 2026 | 1,146,766 | | July 1, 2026 to June 30, 2027 | 805,361 | | Total borrowing | 1,952,127 | - An unpaid **$5.8 million** consideration for a **$9 million** joint venture investment in IKE Tech LLC was recorded in accrued liabilities as of June 30, 2025[326](index=326&type=chunk) [Trend Information](index=61&type=section&id=Trend%20Information) The company is unaware of any material trends, uncertainties, demands, commitments, or events beyond those disclosed in the Form 10-K that would affect its financial performance - The company is **not aware of any trends**, uncertainties, demands, commitments, or events likely to **materially affect** its net revenues, income from operations, profitability, liquidity, or capital resources, other than those disclosed elsewhere in the Form 10-K[327](index=327&type=chunk) [Seasonality](index=61&type=section&id=Seasonality) Seasonality does not materially affect the company's business or results of operations - Seasonality does **not materially affect** the company's business or results of operations[328](index=328&type=chunk) [Off-Balance Sheet Arrangements](index=61&type=section&id=Off-Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements - The company **does not have any off-balance sheet arrangements**[329](index=329&type=chunk) [Critical Accounting Estimates](index=61&type=section&id=Critical%20Accounting%20Estimates) Key accounting estimates include revenue recognition with sales return reserves and allowance for credit losses, based on historical data, economic conditions, and management judgment - Key accounting estimates include **revenue recognition**, particularly for sales with a right of return, where a **sales return reserve** is recognized based on historical rates and management judgment[330](index=330&type=chunk) - **Allowance for credit losses** is estimated using a roll rate method or aggregation of risk characteristics, considering historical collection experience, aging of receivables, economic environment, and customer creditworthiness[331](index=331&type=chunk) [Recent Accounting Pronouncements](index=61&type=section&id=Recent%20Accounting%20Pronouncements) The discussion of recent accounting pronouncements is incorporated by reference from the notes to the consolidated financial statements - The discussion of recent accounting pronouncements is **incorporated by reference** from the notes to the consolidated financial statements[332](index=332&type=chunk) [Emerging Growth Company](index=61&type=section&id=Emerging%20Growth%20Company) As an 'emerging growth company,' Ispire benefits from reduced reporting requirements, potentially affecting comparability with other public companies - As an '**emerging growth company**' under the JOBS Act, Ispire takes advantage of **reduced reporting requirements**, including exemption from auditor attestation for internal controls and delayed adoption of new accounting standards, which **may affect comparability** with other public companies[333](index=333&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a 'smaller reporting company,' Ispire is not required to provide this information [Financial Statements and Supplementary Data](index=61&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item incorporates the company's financial statements and supplementary data, starting on page F-1 - The financial statements and related notes are **filed as part of this Annual Report**, starting on page F-1[335](index=335&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=62&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are **no changes in or disagreements** with accountants on accounting and financial disclosure to report[336](index=336&type=chunk) [Controls and Procedures](index=62&type=section&id=Item%209A.%20Controls%20and%20Procedures) Ispire's disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in internal control over financial reporting, including estimate evaluation, personnel, and IT general controls, with remediation efforts underway - As of June 30, 2025, Ispire's disclosure controls and procedures were deemed **ineffective** due to **material weaknesses** in internal controls over financial reporting[337](index=337&type=chunk)[340](index=340&type=chunk) - Material weaknesses identified include a **lack of controls for evaluating significant estimates** (inventory and credit loss reserves), **insufficient personnel** with appropriate accounting knowledge, and **inadequate IT general controls** regarding cybersecurity governance, logical access security, and service organization management[342](index=342&type=chunk)[349](index=349&type=chunk) - The **remediation plan involves** performing scoping and risk assessment, **recruiting additional finance and accounting employees** and consultants, and **strengthening the IT control environment** with third-party expertise[344](index=344&type=chunk)[350](index=350&type=chunk) - Remediation will **not be considered complete until controls operate for a sufficient period and are tested effectively**[345](index=345&type=chunk) [Other Information](index=63&type=section&id=Item%209B.%20Other%20Information) No director or Section 16 officer adopted or terminated a Rule 10b5-1(c) or 'non-Rule 10b5-1' trading arrangement during the three months ended June 30, 2025 - **No director or Section 16 officer adopted or terminated** a Rule 10b5-1(c) or 'non-Rule 10b5-1' trading arrangement during the three months ended June 30, 2025[347](index=347&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=63&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Ispire Technology Inc. PART III [Directors, Executive Officers and Corporate Governance](index=64&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details Ispire's leadership, corporate governance structure, including director independence, board committees, code of conduct, and risk oversight processes Directors and Executive Officers (as of September 15, 2025) | Name | Age | Position/Title | | :--- | :--- | :--- | | Tuanfang Liu | 53 | Co-Chief Executive Officer and Chairman | | Michael Wang | 62 | Co-Chief Executive Officer and President of Aspire North America | | Jie Yu | 41 | Chief Financial Officer | | Steven Przybyla | 40 | Chief Legal Officer and Secretary | | Jiangyan Zhu | 50 | Director | | Christopher Robert Burch | 58 | Independent Director | | Brent Cox | 43 | Independent Director | | John Fargis | 59 | Independent Director | - Tuanfang Liu (Co-CEO, Chairman) is responsible for daily operations and R&D, with over **14 years of experience**. Michael Wang (Co-CEO, President of Aspire North America) has extensive experience in internet technology and e-commerce, particularly in the cannabis industry. Jie Yu (CFO) has a background in public accounting and audit. Steven Przybyla (Chief Legal Officer) has over **10 years of experience** in regulated cannabis and nicotine/tobacco product regulation[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) - Tuanfang Liu and Jiangyan Zhu (director) are married. Three directors (Brent Cox, John Fargis, Christopher Robert Burch) are deemed '**independent**' under Nasdaq rules. The board has established Audit, Compensation, and Nominating and Corporate Governance Committees[363](index=363&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk) - The **Audit Committee** oversees financial reporting and related-party transactions, the **Compensation Committee** reviews executive and director compensation, and the **Nominating and Corporate Governance Committee** recommends director nominees and reviews corporate governance principles. Tuanfang Liu chairs the Nominating and Corporate Governance Committee as a controlled corporation[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk) - The board **actively oversees risk management**, receiving regular reports from senior management on strategic, operational, financial, legal, and regulatory risks[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) [Executive Compensation](index=71&type=section&id=Item%2011.%20Executive%20Compensation) This section details executive and director compensation for FY2025 and FY2024, including salaries, bonuses, equity awards, employment agreements, the 2022 Equity Incentive Plan, and the compensation recovery policy Summary Compensation Table (Years Ended June 30, 2025 and 2024) | Name and Principal Position | Fiscal Year Ending, June 30 | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Totals ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Tuanfang Liu, Co-CEO | 2025 | 246,476 | — | — | — | — | — | — | 246,476 | | | 2024 | 245,568 | — | — | — | — | — | — | 245,568 | | Michael Wang, Co-CEO | 2025 | 597,159 | 400,000 | 1,356,936 | (5,537,903) | — | — | — | (3,183,808) | | | 2024 | 350,000 | — | 2,760,001 | 5,537,903 | — | — | — | 8,647,904 | | Tirdad Rouhani, President | 2025 | 277,778 | 100,000 | 542,773 | — | — | — | 68,333 | 988,884 | | | 2024 | 297,500 | 300,000 | 1,134,509 | 1,661,371 | — | — | — | 3,393,380 | | Steven Przybyla, Chief Legal Officer and Secretary | 2025 | 398,637 | 250,000 | 2,650,547 | — | — | — | — | 3,299,184 | | | 2024 | 216,039 | 40,000 | — | 553,790 | — | — | — | 809,829 | | Daniel Machock (CFO) | 2025 | — | — | — | — | — | — | 125,000 | 125,000 | | | 2024 | 234,936 | 20,000 | — | — | — | — | — | 254,936 | | James McCormick (CFO) | 2025 | 339,508 | 24,000 | — | — | — | — | 96,000 | 459,508 | | | 2024 | 32,500 | — | — | 819,029 | — | — | — | 851,529 | | Jie Yu (CFO) | 2025 | 201,289 | — | — | — | — | — | — | 201,289 | | | 2024 | 167,123 | — | — | 547,272 | — | — | — | 714,395 | - Employment agreements detail compensation for Tuanfang Liu (annual rate of **1,920,000 HKD**), Michael Wang (annual rate of **$393,447**), Jie Yu (annual base salary of **$200,000**), and Steven Przybyla (annual base salary of **$400,000**)[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk) - The 2022 Equity Incentive Plan authorizes up to **15,000,000 shares** for equity awards to officers, directors, employees, and consultants. As of June 30, 2025, **1,438,125 options** and **404,970 RSUs** were outstanding[394](index=394&type=chunk)[395](index=395&type=chunk)[521](index=521&type=chunk) - A **compensation recovery ('clawback') policy** was adopted in November 2023 for erroneously awarded incentive compensation in case of accounting restatements[399](index=399&type=chunk) Director Compensation (Year Ended June 30, 2025) | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Nonequity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Jiangyan Zhu | $161,750 | - | - | - | - | - | $161,750 | | Christopher Robert Burch | $62,500 | $59,770 | - | - | - | - | $122,270 | | Brent Cox | $55,500 | $88,098 | - | - | - | - | $143,598 | | John Fargis | $49,500 | $88,025 | - | - | - | - | $137,525 | - An updated non-employee director compensation policy, effective October 1, 2024, provides an annual cash retainer of **$50,000** (plus committee fees) and fully vested common stock shares valued at **$165,000 per year** (plus committee fees)[409](index=409&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=80&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details beneficial ownership of Ispire's common stock as of September 15, 2025, with Tuanfang Liu and Jiangyan Zhu holding **62.4%**, granting them significant control - As of September 15, 2025, there were **57,277,874 shares** of Common Stock outstanding[16](index=16&type=chunk)[411](index=411&type=chunk) Beneficial Ownership of Common Stock (as of September 15, 2025) | Name of Beneficial Owner | Shares | % | | :--- | :--- | :--- | | Tuanfang Liu and Jiangyan Zhu | 35,750,000 | 62.4% | | Pride Worldwide Investment Limited | 33,250,000 | 58.1% | | Michael Wang | 1,453,882 | 2.5% | | Steven Przybyla | 416,710 | * | | Christopher Robert Burch | 41,658 | * | | Brent Cox | 50,782 | * | | John Fargis | 46,599 | * | | All current executive officers and directors as a group (ten individuals) | 37,759,631 | 65.9% | - Tuanfang Liu, co-CEO and chairman, holds **58.1% of shares** through Pride Worldwide Investment Limited, and his wife, Jiangyan Zhu, holds **4.4%** through Honor Epic International Limited, giving them combined control of **62.4% of the company's voting power**[412](index=412&type=chunk)[413](index=413&type=chunk)[414](index=414&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=81&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section details Ispire's significant related party transactions, primarily with Shenzhen Yi Jia, owned by co-CEO Tuanfang Liu, and its equity method investment in IKE Tech LLC - Key related parties include Tuanfang Liu (Co-CEO, Chairman, **95% owner of Shenzhen Yi Jia**), Jiangyan Zhu (Director, Liu's wife), Aspire Global (controlled by Liu), and Shenzhen Yi Jia (major supplier)[417](index=417&type=chunk)[424](index=424&type=chunk) - For FY2025 and FY2024, the majority of tobacco and cannabis vaping products were purchased from Shenzhen Yi Jia, totaling **$94.7 million** and **$91.3 million**, respectively. Accounts payable to Shenzhen Yi Jia were **$52.4 million in FY2025** and **$67.0 million in FY2024**[419](index=419&type=chunk) - A **$25 million** balance due to Shenzhen Yi Jia as of June 30, 2025, was reclassified from accounts payable to a non-current amount due to a related party, with repayment deferred for **twelve months** from September 30, 2025[420](index=420&type=chunk) - Ispire had accounts receivable of **$75,147** from IKE Tech LLC (a **40% owned joint venture**) in FY2025 and recorded **$109,349** in other income from IKE for administrative fees[421](index=421&type=chunk)[424](index=424&type=chunk) [Principal Accounting Fees and Services](index=81&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section details audit and audit-related fees paid to Ispire's independent accountants for FY2025 and FY2024, noting multiple auditor changes and Audit Committee pre-approval responsibilities - Ispire engaged **multiple independent accounting firms** during FY2024 and FY2025 due to changes: MSPC resigned in December 2023, Marcum was engaged, then CBIZ purchased Marcum's attest business, and finally Marcum Asia was appointed in February 2025[422](index=422&type=chunk) Audit Fees by Firm (Years Ended June 30, 2025 and 2024) | Firm | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Marcum Asia | 504,238 | 0 | | Marcum | 170,465 | 851,600 | | CBIZ | 87,550 | 0 | | MSPC | 0 | 0 | - Audit-related fees for MSPC were **$37,250 in FY2025** and **$60,010 in FY2024**. No tax fees or other fees were paid to any of the firms in either fiscal year[427](index=427&type=chunk)[428](index=428&type=chunk)[429](index=429&type=chunk) - The **Audit Committee is responsible for reviewing and pre-approving** all audit and permissible non-audit engagements with the independent registered public accounting firm[430](index=430&type=chunk) PART IV [Exhibits and Financial Statements Schedules](index=84&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statements%20Schedules) This section lists all consolidated financial statements, schedules, and exhibits filed as part of the Form 10-K, including auditor reports and corporate documents - The consolidated financial statements and notes are **filed as part of this Annual Report**, starting on page F-1[432](index=432&type=chunk) - All financial statement schedules are **omitted** as the required information is either not applicable, not material, or included in the consolidated financial statements and notes[433](index=433&type=chunk) - A **complete list of exhibits**, including corporate documents (Certificate of Incorporation, Bylaws), intellectual property agreements, employment agreements, equity incentive plans, distributorship agreements, supply agreements, and auditor consents, is provided[434](index=434&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk) [Form 10-K Summary](index=86&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item states that a Form 10-K Summary is not applicable Financial Statements [Report of Independent Registered Public Accounting Firm Marcum Asia CPAs LLP](index=89&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20Marcum%20Asia%20CPAs%20LLP) Marcum Asia CPAs LLP issued an unqualified opinion on Ispire's FY2025 consolidated financial statements, affirming fair presentation in conformity with U.S. GAAP - Marcum Asia CPAs LLP provided an **unqualified opinion** on Ispire's consolidated financial statements for the year ended June 30, 2025, stating they are presented fairly in all material respects in conformity with U.S. GAAP[448](index=448&type=chunk) - The audit was conducted in accordance with PCAOB standards, assessing risks of material misstatement, but **did not include an audit or opinion on the effectiveness of the company's internal control over financial reporting**[450](index=450&type=chunk) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Marcum LLP](index=90&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM%20Marcum%20LLP) Marcum LLP issued an unqualified opinion on Ispire's FY2024 consolidated financial statements, confirming fair presentation in accordance with U.S. GAAP - Marcum LLP issued an **unqualified opinion** on Ispire's consolidated financial statements for the year ended June 30, 2024, affirming fair presentation in all material respects in conformity with U.S. GAAP[455](index=455&type=chunk) - The audit was performed according to PCAOB standards, assessing risks of material misstatement, but **did not include an audit or opinion on the effectiveness of the company's internal control over financial reporting**[457](index=457&type=chunk) [Consolidated Balance Sheets](index=91&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Ispire's total assets decreased to **$102.2 million** in FY2025, liabilities increased to **$101.6 million**, and stockholders' equity significantly decreased to **$0.6 million** Consolidated Balance Sheets (as of June 30, 2025 and 2024) | Asset/Liability/Equity | June 30, 2025 ($) | June 30, 2024 ($) | | :--- | :--- | :--- | | **Assets:** | | | | Current assets | 72,908,385 | 102,571,605 | | Other assets | 29,308,746 | 20,069,361 | | **Total assets** | **102,217,131** | **122,640,966** | | **Liabilities:** | | | | Current liabilities | 72,539,554 | 85,990,532 | | Other liabilities | 29,072,883 | 2,194,094 | | **Total liabilities** | **101,612,437** | **88,184,626** | | **Stockholders' equity:** | | | | Common stock | 5,719 | 5,647 | | Treasury stock | (60,488) | - | | Additional paid-in capital | 48,833,601 | 43,217,391 | | Accumulated deficit | (48,065,267) | (8,825,041) | | Accumulated other comprehensive (loss)/income | (108,871) | 58,343 | | **Total stockholders' equity** | **604,694** | **34,456,340** | - Total assets decreased by **$20.4 million**, from **$122.6 million in FY2024** to **$102.2 million in FY2025**, primarily due to a **$29.7 million decrease** in current assets, offset by a **$9.2 million increase** in other assets[461](index=461&type=chunk) - Total liabilities increased by **$13.4 million**, from **$88.2 million in FY2024** to **$101.6 million in FY2025**, mainly driven by the reclassification of a **$25 million** related-party payable to a non-current liability[461](index=461&type=chunk) - Total stockholders' equity significantly decreased by **$33.8 million**, from **$34.5 million in FY2024** to **$0.6 million in FY2025**, largely due to the net loss incurred during the period[461](index=461&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=92&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) Ispire reported a net loss of **$39.2 million** in FY2025, up from **$14.8 million** in FY2024, driven by a **16.1% revenue decrease**, gross margin decline, and increased operating expenses Consolidated Statements of Operations and Comprehensive Loss (Years Ended June 30, 2025 and 2024) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Revenue | 127,494,304 | 151,908,691 | | Cost of revenue | 104,844,633 | 122,126,245 | | Gross profit | 22,649,671 | 29,782,446 | | Operating expenses | 60,499,530 | 43,676,585 | | Loss from operations | (37,849,859) | (13,894,139) | | Other income (expense), net | (186,663) | 408,363 | | Loss before income taxes | (38,036,522) | (13,485,776) | | Income taxes – current | (1,203,704) | (1,282,046) | | Net loss | (39,240,226) | (14,767,822) | | Other comprehensive (loss) income | (167,214) | 222,111 | | Comprehensive loss | (39,407,440) | (14,545,711) | | Net loss per share (basic and diluted) | (0.69) | (0.27) | | Weighted average shares outstanding (basic and diluted) | 56,853,552 | 54,812,900 | - Revenue decreased by **16.1%** from **$151.9 million in FY2024** to **$127.5 million in FY2025**[463](index=463&type=chunk) - Gross profit decreased by **23.9%** from **$29.8 million in FY2024** to **$22.6 million in FY2025**, with gross margin declining from **19.6% to 17.8%**[463](index=463&type=chunk) - Operating expenses increased by **38.5%** from **$43.7 million in FY2024** to **$60.5 million in FY2025**, leading to a significant increase in loss from operations[463](index=463&type=chunk) - Net loss more than doubled, from **$14.8 million in FY2024** to **$39.2 million in FY2025**, resulting in a basic and diluted net loss per share of **$0.69 in FY2025** compared to **$0.27 in FY2024**[463](index=463&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=93&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS%27%20EQUITY) Total stockholders' equity significantly decreased from **$34.5 million** in FY2024 to **$0.6 million** in FY2025, primarily due to a **$39.2 million** net loss Consolidated Statements of Changes in Stockholders' Equity (Years Ended June 30, 2025 and 2024) | Metric | Balance, July 1, 2023 ($) | Net loss ($) | Issuance of common stock for a secondary offering, net of insurance cost ($) | Issuance of common stock for equity incentives ($) | Stock based compensation expenses ($) | Issuance of warrants ($) | Foreign currency translation adjustment ($) | Balance, June 30, 2024 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock | 5,422 | - | 205 | 20 | - | - | - | 5,647 | | Additional Paid-in Capital | 25,685,475 | - | 10,785,701 | 1,183,976 | 5,196,286 | 365,953 | - | 43,217,391 | | Accumulated Deficit | 5,942,781 | (14,767,822) | - | - | - | - | - | (8,825,041) | | Accumulated Other Comprehensive (Loss)/Income | (163,768) | - | - | - | - | - | 222,111 | 58,343 | | **Total Stockholders' Equity** | **31,469,910** | **(14,767,822)** | **10,785,906** | **1,183,996** | **5,196,286** | **365,953** | **222,111** | **34,456,340** | | Metric | Balance, July 1, 2024 ($) | Net loss ($) | Issuance of common stock for equity incentives ($) | Stock based compensation expenses ($) | Common stock repurchase ($) | Foreign currency translation adjustment ($) | Balance, June 30, 2025 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock | 5,647 | - | 72 | - | - | - | 5,719 | | Treasury Stock | - | - | - | - | (60,488) | - | (60,488) | | Additional Paid-in Capital | 43,217,391 | - | 1,251,256 | 4,364,954 | - | - | 48,833,601 | | Accumulated Deficit | (8,825,041) | (39,240,226) | - | - | - | - | (48,065,267) | | Accumulated Other Comprehensive (Loss)/Income | 58,343 | - | - | - | -

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Hain Celestial is a global health and wellness company, streamlining its portfolio to focus on food and beverages - Hain Celestial is a global health and wellness company, founded in 1993, focused on better-for-you brands in snacks, baby/kids, beverages, and meal preparation, sold in over 70 countries[21](index=21&type=chunk) - The company is conducting a comprehensive review of its portfolio and exploring strategic alternatives for its personal care business to focus on food and beverages[24](index=24&type=chunk) Revenue Sources (Percentage of Total Revenue) | Metric | Fiscal 2025 (%) | Fiscal 2024 (%) | Fiscal 2023 (%) | | :----- | :---------- | :---------- | :---------- | | Revenue from owned facilities | 64% | 65% | 58% | | Revenue from co-packers | 36% | 35% | 42% | [Overview](index=4&type=section&id=Overview) Hain Celestial is a global health and wellness company marketing products in over 70 countries - Hain Celestial, founded in 1993, is a global health and wellness company headquartered in Hoboken, N.J., marketing products in over 70 countries[21](index=21&type=chunk) - Key brands include Garden Veggie Snacks™, Terra® chips, Earth's Best® Organic, Ella's Kitchen® baby foods, Celestial Seasonings® teas, Joya® and Natumi® plant-based beverages, and The Greek Gods® yogurt[22](index=22&type=chunk) [Our Strategy](index=4&type=section&id=Our%20Strategy) The company's strategy focuses on portfolio streamlining, brand innovation, price increases, productivity, and digital capabilities - The company's strategy focuses on five actions: portfolio streamlining, brand renovation/innovation, price increases/revenue growth management, productivity/working capital efficiency, and digital capabilities enhancement (including e-commerce)[23](index=23&type=chunk) - A comprehensive portfolio review is underway, and strategic alternatives for the personal care business are being explored to concentrate on better-for-you food and beverages[24](index=24&type=chunk) [Human Capital Resources](index=4&type=section&id=Human%20Capital%20Resources) Hain Celestial had approximately 2,600 employees as of June 30, 2025, with a focus on inspiring healthier living - As of June 30, 2025, Hain Celestial had approximately **2,600 employees**, with **43% in North America** and **57% internationally**, primarily full-time permanent staff[25](index=25&type=chunk) - The company's purpose is to inspire healthier living through better-for-you brands, guided by values of curiosity, inclusion, ownership, and teamwork[28](index=28&type=chunk) - Employee benefits vary by region but generally include medical, dental, vision, retirement savings, commuter benefits, wellness initiatives, tuition reimbursement, and paid parental leave[36](index=36&type=chunk) [Impact](index=5&type=section&id=Impact) The Impact strategy emphasizes environmentally sound practices, better-for-you products, stakeholder initiatives, and sustainable manufacturing - The Impact strategy focuses on environmentally sound business practices, creating better-for-you products, stakeholder/community initiatives, and sustainable manufacturing[33](index=33&type=chunk) [Products](index=5&type=section&id=Products) The brand portfolio focuses on growing global brands, with continuous evaluation and discontinuation of underperforming products - The brand portfolio focuses on growing global brands, with continuous evaluation for quality, taste, nutritional value, and cost, discontinuing underperforming products[35](index=35&type=chunk) [Seasonality](index=6&type=section&id=Seasonality) Sales for certain product lines fluctuate seasonally, with the first fiscal quarter typically having the lowest net sales - Certain product lines, like hot tea and soup, have stronger sales in colder months, while snack foods perform better in warmer months. The first fiscal quarter typically has the lowest net sales and profitability[37](index=37&type=chunk) [Segments](index=6&type=section&id=Segments) The company operates under two geographic reportable segments: North America and International - The company operates under two geographic reportable segments: North America and International, which are also its operating segments[38](index=38&type=chunk) - North America brands include Garden Veggie Snacks™, Terra® chips, Celestial Seasonings® teas, Earth's Best® baby foods, The Greek Gods® yogurt, and personal care brands like Alba Botanica®[43](index=43&type=chunk) - International brands include Ella's Kitchen® baby foods, New Covent Garden Soup Co.®, Linda McCartney's® plant-based meals, Hartley's® jams, and plant-based beverages under Joya® and Natumi®[46](index=46&type=chunk)[48](index=48&type=chunk) [Customers](index=8&type=section&id=Customers) Walmart Inc. and its affiliates are a significant customer, accounting for approximately 18% of consolidated sales in fiscal 2025 - Walmart Inc. and its affiliates accounted for approximately **18% of consolidated sales in fiscal 2025** and 2024, and 16% in fiscal 2023, across both North America and International segments[50](index=50&type=chunk) [Foreign Operations](index=8&type=section&id=Foreign%20Operations) Sales outside the U.S. represented approximately 50% of consolidated net sales in fiscal 2025 - Sales outside the U.S. represented approximately **50%**, 46%, and 43% of consolidated net sales in fiscal 2025, 2024, and 2023, respectively[51](index=51&type=chunk) [Marketing](index=8&type=section&id=Marketing) Marketing efforts utilize digital and omnichannel ecosystems, including advertising, social media, and influencer collaborations - Marketing efforts span digital and omnichannel ecosystems, utilizing trade and consumer advertising, paid social/digital advertising, retailer media, public relations, and influencer collaborations to build brand awareness and drive sales[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) [New Product Initiatives Through Research and Development](index=9&type=section&id=New%20Product%20Initiatives%20Through%20Research%20and%20Development) Innovation and new product development are key growth strategies, with a team developing better-for-you alternatives and partnering with contract manufacturers - Innovation and new product development are key growth strategies, with a team of professionals developing products to meet consumer demand for better-for-you alternatives. The company also partners with contract manufacturers for market introduction[55](index=55&type=chunk) [Production](index=9&type=section&id=Production) The company's revenue is derived from both owned manufacturing facilities and third-party co-packers Revenue from Production Facilities | Metric | Fiscal 2025 | Fiscal 2024 | Fiscal 2023 | | :----- | :---------- | :---------- | :---------- | | Revenue from owned facilities | 64% | 65% | 58% | | Revenue from co-packers | 36% | 35% | 42% | - North America manufacturing facilities include Boulder, CO (teas), Mountville, PA (snacks), Lancaster, PA (snacks), and Mississauga, ON (personal care). The Vancouver, BC plant (Yves Veggie Cuisine®) is expected to close in fiscal 2026[56](index=56&type=chunk)[59](index=59&type=chunk) - International manufacturing facilities are located in Histon, England (ambient grocery), Grimsby, England (chilled soups), Clitheroe, England (desserts), Fakenham, England (meat-free frozen/chilled), Troisdorf, Germany (plant-based beverages), Oberwart, Austria (plant-based foods/beverages), and Schwerin, Germany (plant-based foods/beverages)[57](index=57&type=chunk)[59](index=59&type=chunk) [Suppliers of Ingredients and Packaging](index=11&type=section&id=Suppliers%20of%20Ingredients%20and%20Packaging) Principal inputs include agricultural commodities and plant-based materials, with price volatility mitigated through various strategies - Principal inputs include agricultural commodities (vegetables, fruits, oils, grains, nuts, tea, spices, dairy) and plant-based surfactants, glycerin, and alcohols for personal care products. Packaging includes cartons, pouches, film, paper, and jars[62](index=62&type=chunk) - The company mitigates input price volatility through price increases, purchasing strategies, cost savings, and operating efficiencies[64](index=64&type=chunk) [Competition](index=11&type=section&id=Competition) Hain Celestial operates in a highly competitive environment, competing with large conventional and natural/organic brands, as well as private labels - Hain Celestial operates in a highly competitive environment, competing with large conventional packaged goods companies (e.g., Campbell Soup, Nestle, PepsiCo) and natural/organic brands, as well as private labels[65](index=65&type=chunk) - Competitive factors include product quality, taste, brand awareness, price, variety, packaging, reputation, advertising, promotion, and nutritional claims[66](index=66&type=chunk) [Trademarks](index=11&type=section&id=Trademarks) Brand awareness is crucial, with the company registering trademarks globally and marketing products under licensed brands - Brand awareness is crucial; the company registers trademarks globally and monitors for infringement. It also markets products under licensed brands like Linda McCartney's® and Rose's®[67](index=67&type=chunk)[68](index=68&type=chunk) [Government Regulation](index=11&type=section&id=Government%20Regulation) The company is subject to extensive regulations in the U.S. and internationally regarding product quality, safety, labeling, and advertising - The company is subject to extensive regulations in the U.S. (FTC, FDA, USDA, EPA, OSHA) and internationally (Canadian Food Inspection Agency, Health Canada, Food Standards Agency in the UK, European Food Safety Authority) regarding product quality, safety, labeling, and advertising[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Quality Control](index=13&type=section&id=Quality%20Control) A comprehensive product safety and quality management program is in place, including strict manufacturing procedures and auditing - A comprehensive product safety and quality management program is in place, including strict manufacturing procedures, expert technical knowledge, employee training, and internal/independent auditing[73](index=73&type=chunk) - All food manufacturing facilities have Food Safety Plans (FSP) compliant with FSMA, and contract manufacturers are audited for allergen control, specifications, and sanitation[74](index=74&type=chunk)[75](index=75&type=chunk) [Independent Certifications](index=13&type=section&id=Independent%20Certifications) Most manufacturing sites are certified against GFSI standards or ISO, with organic products USDA certified and many products kosher - Most company-owned manufacturing sites and many contract manufacturers are certified against GFSI standards (SQF, BRC) or ISO 9001/22716. Organic products are USDA certified, and many products are kosher[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) [Company Website and Available Information](index=13&type=section&id=Company%20Website%20and%20Available%20Information) Annual, quarterly, and current reports, along with corporate governance policies, are available on the investor relations website - Annual, quarterly, and current reports, corporate governance policies, and committee charters are available on the investor relations website (ir.hain.com)[80](index=80&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces market competition, consumer shifts, strategy execution, supply chain, financial, and legal risks - The company operates in highly competitive markets, facing challenges from multinational corporations, other organic/natural brands, and private labels, which could impact sales, margins, and market share[85](index=85&type=chunk)[86](index=86&type=chunk) - Growth depends on consumer preferences for better-for-you products, which can change due to economic downturns, diet trends, and e-commerce shifts, requiring continuous innovation[87](index=87&type=chunk)[88](index=88&type=chunk) - Significant risks include supply chain disruptions, input cost inflation (e.g., tariffs, commodity volatility), reliance on independent contract manufacturers (**36% of sales in FY2025**), and customer concentration (Walmart Inc. accounted for **18% of sales in FY2025**)[92](index=92&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) - International operations (**50% of sales in FY2025**) are exposed to tariffs, foreign currency fluctuations, complex foreign laws, geopolitical conflicts, and difficulties in managing a global enterprise[102](index=102&type=chunk)[104](index=104&type=chunk)[107](index=107&type=chunk) - The company is subject to various litigations, including consumer class actions and personal injury lawsuits related to Earth's Best® baby food products, alleging unsafe heavy metal levels[124](index=124&type=chunk)[126](index=126&type=chunk)[483](index=483&type=chunk)[486](index=486&type=chunk) [Risks Related to Our Business, Operations and Industry](index=16&type=section&id=Risks%20Related%20to%20Our%20Business,%20Operations%20and%20Industry) The company faces intense competition, evolving consumer preferences, and challenges in executing its business strategy - The company faces intense competition from large conventional and natural/organic packaged goods companies, as well as private labels, potentially leading to increased marketing spend or price pressure[85](index=85&type=chunk)[86](index=86&type=chunk) - Consumer preferences for better-for-you products are critical; shifts due to economic downturns, diet trends (e.g., weight loss drugs), or e-commerce growth could harm the business if innovation fails to meet demand[87](index=87&type=chunk)[88](index=88&type=chunk) - Ineffective execution of the business strategy, including portfolio review and potential dispositions (like the personal care business), could adversely affect financial performance[89](index=89&type=chunk)[91](index=91&type=chunk) - Supply chain risks include difficulty sourcing natural/organic ingredients at competitive prices due to climate conditions, high demand, and global unrest, as well as disruptions from third-party manufacturers and distributors[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Input cost inflation from volatile commodity costs, tariffs, and increased transportation/logistics expenses may not be fully offset by price increases or cost savings, impacting financial results[96](index=96&type=chunk)[97](index=97&type=chunk) - Reliance on independent contract manufacturers (**36% of sales in FY2025**) and a small number of customers (Walmart Inc. **18% of sales in FY2025**) creates vulnerability to disruptions or loss of relationships[98](index=98&type=chunk)[100](index=100&type=chunk) - International sales (**50% of consolidated net sales in FY2025**) are subject to risks like tariffs, foreign currency fluctuations, complex foreign laws, geopolitical conflicts, and difficulties in managing a global enterprise[102](index=102&type=chunk)[104](index=104&type=chunk)[107](index=107&type=chunk) - Outsourcing certain functions (supply chain, accounting, IT) introduces risks of service failures, data loss, compliance issues, and increased costs[103](index=103&type=chunk) - Loss of independent certifications (e.g., 'organic', 'Non-GMO', 'kosher') could adversely affect market position[105](index=105&type=chunk) - Inability to attract and retain skilled personnel, including key executives, could negatively impact business and financial results[106](index=106&type=chunk) [Risks Related to Financial and Economic Considerations](index=22&type=section&id=Risks%20Related%20to%20Financial%20and%20Economic%20Considerations) The company faces risks from credit agreement defaults, refinancing challenges, and currency exchange rate fluctuations - Defaulting on the credit agreement or inability to refinance indebtedness (maturing December 2026) could have significant consequences, as covenants restrict business activities and require specific financial ratios[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - Currency exchange rate fluctuations can adversely impact consolidated financial results, asset/liability balances, and cash flows, especially with **50% of net sales from outside the U.S.**[112](index=112&type=chunk) - Disruptions in the worldwide economy (inflation, recession, unemployment) can decrease demand for products, particularly higher-priced better-for-you items, and lead to conservative purchasing by distributors/retailers[113](index=113&type=chunk)[114](index=114&type=chunk) [Risks Related to Our Reputation, Brands, Intangible Assets and Intellectual Property](index=24&type=section&id=Risks%20Related%20to%20Our%20Reputation,%20Brands,%20Intangible%20Assets%20and%20Intellectual%20Property) The company is vulnerable to impairment charges on goodwill and intangible assets, reputation erosion, and intellectual property issues - Goodwill (**$501.0 million**) and other intangible assets (**$210.9 million**) represented **44.4% of total assets** as of June 30, 2025, making the company vulnerable to impairment charges if fair values decline[115](index=115&type=chunk) Impairment Charges (Millions) | Impairment Type | Fiscal 2025 (Millions) | Fiscal 2024 (Millions) | Fiscal 2023 (Millions) | | :---------------- | :--------------------- | :--------------------- | :--------------------- | | Goodwill impairment | $357.7 | $0 | $0 | | Intangible asset impairment | $37.8 | $44.6 | $174.9 | - Erosion of company or brand reputation due to product quality/safety issues or negative social media could materially impact the business[117](index=117&type=chunk) - Inability to use or protect trademarks, or to enforce/renew licensing agreements, could adversely affect marketing and sales[118](index=118&type=chunk)[119](index=119&type=chunk) [Risks Related to Cybersecurity and Technology](index=26&type=section&id=Risks%20Related%20to%20Cybersecurity%20and%20Technology) Dependence on information systems and technology creates cybersecurity risks, including system disruption and data theft - Dependence on information systems and technology (including cloud services, mobile devices, AI) creates cybersecurity risks such as system disruption, data theft, and ransomware, potentially leading to reputational damage, litigation, and increased costs[121](index=121&type=chunk)[122](index=122&type=chunk) - Failure of IT systems to perform adequately could disrupt business operations, leading to transaction errors, processing inefficiencies, and loss of sales/customers[123](index=123&type=chunk) [Risks Related to Litigation, Government Regulation and Compliance](index=26&type=section&id=Risks%20Related%20to%20Litigation,%20Government%20Regulation%20and%20Compliance) The company is involved in various lawsuits, including those related to baby food products, and faces extensive regulatory compliance risks - The company is involved in various lawsuits, including securities class actions, stockholder derivative complaints, and consumer class actions/personal injury lawsuits related to Earth's Best® baby food products, alleging unsafe heavy metal levels[124](index=124&type=chunk)[126](index=126&type=chunk) - Product liability risks exist if consumption of products causes illness or harm, potentially leading to recalls, increased costs, and reputational damage[126](index=126&type=chunk) - Operating in a highly regulated environment means changes in laws or enforcement could increase compliance costs or lead to civil/criminal penalties[127](index=127&type=chunk)[128](index=128&type=chunk) - A material weakness in internal control over financial reporting related to goodwill and indefinite-lived intangible asset impairment testing was identified as of June 30, 2025, which could impact financial reporting accuracy if not remediated[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - Compliance with evolving data privacy laws (e.g., GDPR, CCPA) may be costly, and non-compliance could result in significant penalties and liability[132](index=132&type=chunk) [Risks Related to Environmental Considerations](index=30&type=section&id=Risks%20Related%20to%20Environmental%20Considerations) Climate impacts and new environmental regulations could affect agricultural productivity, ingredient availability, and operational costs - Climate impacts (extreme weather, natural disasters) could negatively affect agricultural productivity, ingredient availability/pricing, and manufacturing operations[134](index=134&type=chunk) - Increased demand for sustainable products and new environmental laws/regulations (e.g., product packaging) could lead to higher costs, operational changes, and reputational risks[135](index=135&type=chunk)[138](index=138&type=chunk) [Risks Related to the Ownership of Our Securities](index=32&type=section&id=Risks%20Related%20to%20the%20Ownership%20of%20Our%20Securities) The Board's authority to issue preferred stock without stockholder approval could deter takeover attempts and affect common stock holders' rights - The Board's authority to issue preferred stock without stockholder approval could deter takeover attempts and adversely affect common stock holders' rights[139](index=139&type=chunk) [Item 1B. Unresolved Staff Comments](index=33&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments were reported[141](index=141&type=chunk) [Item 1C. Cybersecurity](index=34&type=section&id=Item%201C.%20Cybersecurity) Cybersecurity risk management is integrated into the enterprise framework, overseen by the Board, with no material business impact - Cybersecurity risk management is part of the enterprise risk framework, informed by NIST CSF, and includes a Cyber Security Incident Response Plan (CSIRP) to identify, contain, and track incidents[142](index=142&type=chunk)[143](index=143&type=chunk) - The Audit Committee of the Board of Directors oversees cybersecurity risk management, reviewing management's evaluations, mitigation steps, legislative developments, and incident response planning[146](index=146&type=chunk)[147](index=147&type=chunk) - The Chief Information Officer (CIO) is responsible for the cybersecurity program, possessing extensive experience in IT strategy and security, and reports directly to the interim CEO[149](index=149&type=chunk) - As of the Form 10-K filing date, the company does not believe any cybersecurity threats have materially affected or are reasonably likely to materially affect its business, strategy, results of operations, or financial condition[145](index=145&type=chunk) [Cybersecurity Risk Management and Strategy](index=34&type=section&id=Cybersecurity%20Risk%20Management%20and%20Strategy) The cybersecurity risk management program, informed by NIST CSF, focuses on assessing, identifying, and managing IT-related risks - The cybersecurity risk management program, informed by NIST CSF, focuses on assessing, identifying, and managing IT-related risks, including incidents and threats[142](index=142&type=chunk) - A Cyber Security Incident Response Plan (CSIRP) is in place, led by the CIO, to minimize incident impact and ensure timely reporting, supported by tabletop exercises and third-party assessments[143](index=143&type=chunk) - Employee training, phishing simulations, technology implementation, and 24x7 managed services are used to reduce vulnerabilities and monitor threats[144](index=144&type=chunk) [Cybersecurity Governance](index=34&type=section&id=Cybersecurity%20Governance) The Board of Directors, through the Audit Committee, holds risk oversight responsibility for cybersecurity - The Board of Directors, with assistance from the Audit Committee, holds risk oversight responsibility for cybersecurity, reviewing management's evaluations, mitigation steps, and incident response planning[146](index=146&type=chunk)[147](index=147&type=chunk) - The CIO, with over 15 years of experience in the consumer packaged goods industry, is primarily responsible for the cybersecurity program and provides regular briefings to the Executive Leadership Team and Audit Committee[149](index=149&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) The company operates leased global headquarters and various manufacturing and distribution centers globally, with some closures planned Principal Facilities (as of June 30, 2025) | Primary Use | Location | Approximate Square Feet | Expiration of Lease | | :------------------------------------------ | :----------------------- | :---------------------- | :------------------ | | Global Headquarters | Hoboken, NJ | 39,990 | 2034 | | Distribution - All brands | Allentown, PA | 497,000 | 2032 | | Manufacturing and distribution center (Snack products) | Mountville, PA | 161,000 | 2040 | | Manufacturing and offices (Tea) | Boulder, CO | 158,000 | Owned | | Manufacturing (Plant-based foods)* | Vancouver, BC, Canada | 76,000 | Owned | | Manufacturing and offices (Ambient grocery products) | Histon, England | 303,000 | Owned | | Manufacturing, distribution and offices (Plant-based beverages) | Troisdorf, Germany | 131,000 | 2037 | | Manufacturing (Plant-based frozen and chilled products) | Fakenham, England | 101,000 | Owned | | Manufacturing (Chilled soups) | Grimsby, England | 54,000 | 2029 | | Manufacturing and distribution (Plant-based foods and beverages) | Schwerin, Germany | 36,000 | Owned | * Property is planned to be closed in fiscal 2026. - The company also leases smaller offices and facilities globally and utilizes bonded public warehouses for deliveries[152](index=152&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 18, Commitments and Contingencies - Legal proceedings information is detailed in Note 18, Commitments and Contingencies, within the Consolidated Financial Statements[154](index=154&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[155](index=155&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock is listed on Nasdaq, with 90.3 million shares outstanding, no dividends, and no FY2025 share repurchases - Common stock is listed on The Nasdaq Stock Market LLC under 'HAIN'[158](index=158&type=chunk) - As of September 9, 2025, there were **219 holders of record** and **90,292,752 shares of common stock outstanding**[7](index=7&type=chunk)[159](index=159&type=chunk) - No cash dividends have been paid on common stock to date, with future payments at the Board's discretion based on earnings, operations, capital requirements, and contractual restrictions[160](index=160&type=chunk) - The company did not repurchase any shares under its **$200 million share repurchase program** in fiscal year ended June 30, 2025, leaving **$173.5 million of authorization remaining**[164](index=164&type=chunk) [Item 6. [Reserved]](index=38&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - Item 6 is reserved[168](index=168&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A reviews FY2025/2024 financial performance, highlighting net loss from impairments, decreased sales, and liquidity - Hain Celestial is a global health and wellness company focused on better-for-you brands, operating under North America and International segments[171](index=171&type=chunk) - The company is executing a multi-year growth, transformation, and restructuring program (Restructuring Program) to optimize its portfolio, improve profitability, and invest in growth, with expected completion by end of fiscal 2027[175](index=175&type=chunk)[176](index=176&type=chunk) Consolidated Financial Highlights (Fiscal Years Ended June 30) | Metric | Fiscal 2025 (in thousands) | Fiscal 2024 (in thousands) | Change (Dollars) | Change (%) | | :------------------------------------------ | :------------------------- | :------------------------- | :--------------- | :--------- | | Net sales | $1,559,780 | $1,736,286 | $(176,506) | (10.2)% | | Gross profit | $334,058 | $380,832 | $(46,774) | (12.3)% | | Operating loss | $(461,603) | $(18,948) | $(442,655) | ** | | Net loss | $(530,841) | $(75,042) | $(455,799) | ** | | Adjusted EBITDA | $113,789 | $154,522 | $(40,733) | (26.4)% | | Basic and diluted net loss per common share | $(5.89) | $(0.84) | $(5.05) | ** | ** Percentage is not meaningful due to significantly lower number or nil value in the comparative period. - Goodwill impairment charges totaled **$428.9 million in fiscal 2025** (**$357.7 million in North America**, **$71.2 million in International**), and intangibles and long-lived asset impairment charges were **$66.9 million in fiscal 2025**[185](index=185&type=chunk)[186](index=186&type=chunk) - The Credit Agreement was amended multiple times (Second, Third, Fourth Amendments) to adjust financial covenants (secured leverage ratio, interest coverage ratio, minimum Consolidated EBITDA) and interest rates, and reduced the Revolver size from **$800 million to $600 million**[213](index=213&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) [Overview](index=39&type=section&id=Overview) Hain Celestial is a global health and wellness company with products across snacks, baby/kids, beverages, and meal preparation - Hain Celestial is a global health and wellness company, founded in 1993, with products across snacks, baby/kids, beverages, and meal preparation sold in over 70 countries[171](index=171&type=chunk) - Leading brands include Garden Veggie Snacks™, Terra® chips, Earth's Best® Organic, Celestial Seasonings® teas, and Joya® plant-based beverages[172](index=172&type=chunk) [Strategic Review](index=39&type=section&id=Strategic%20Review) The company is focused on streamlining its portfolio, accelerating brand innovation, and enhancing digital capabilities - The company is focused on streamlining its portfolio, accelerating brand innovation, implementing price increases, driving productivity, and enhancing digital capabilities[173](index=173&type=chunk) - A comprehensive portfolio review is underway, and strategic alternatives for the personal care business are being explored to focus on better-for-you food and beverages[174](index=174&type=chunk) [Restructuring Program](index=39&type=section&id=Restructuring%20Program) A multi-year restructuring program aims to optimize the portfolio, improve profitability, and invest in growth, expected to complete by fiscal 2027 - A multi-year growth, transformation, and restructuring program was initiated in Q1 fiscal 2024, aiming to optimize the portfolio, improve profitability, and invest in growth[175](index=175&type=chunk) - The program is expected to be completed by the end of fiscal 2027, with cumulative pretax charges of **$100 million - $110 million** (up from previous estimates)[176](index=176&type=chunk) - Pretax charges incurred were **$26 million in fiscal 2025** and **$60 million in fiscal 2024**. Annualized pretax savings are expected to be **$130 million - $150 million**[176](index=176&type=chunk)[177](index=177&type=chunk) - Actions include selling non-core brands, exiting the Yves Veggie Cuisine® business, consolidating personal care manufacturing, simplifying U.S. distribution, and rationalizing product categories[177](index=177&type=chunk) [CEO Succession](index=40&type=section&id=CEO%20Succession) Ms. Davidson departed as President and CEO on May 6, 2025, with Alison E. Lewis appointed Interim President and CEO - Ms. Davidson departed as President and CEO on May 6, 2025. Alison E. Lewis, a Board member, was appointed Interim President and CEO[178](index=178&type=chunk) [Global Economic Environment](index=40&type=section&id=Global%20Economic%20Environment) The global economy faces challenges from inflation, changing consumer patterns, and geopolitical events, leading to increased costs and uncertainty - The global economy faces challenges from inflation, changing consumer patterns, and geopolitical events (e.g., Russia-Ukraine conflict), leading to increased supply chain expenses, input costs, and economic uncertainty[179](index=179&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) The company reported a significant net loss in fiscal 2025, primarily due to goodwill impairment charges and decreased net sales Consolidated Results of Operations (Fiscal Years Ended June 30, in thousands) | | 2025 (in thousands) | 2024 (in thousands) | Change (Dollars in thousands) | Change (%) | | :------------------------------------------ | :--------- | :--------- | :--------------- | :--------- | | Net sales | $1,559,780 | $1,736,286 | $(176,506) | (10.2)% | | Cost of sales | 1,225,722 | 1,355,454 | (129,732) | (9.6)% | | Gross profit | 334,058 | 380,832 | (46,774) | (12.3)% | | Selling, general and administrative expenses | 271,833 | 290,116 | (18,283) | (6.3)% | | Goodwill impairment | 428,882 | — | 428,882 | ** | | Intangibles and long-lived asset impairment | 66,940 | 76,143 | (9,203) | (12.1)% | | Productivity and transformation costs | 21,530 | 27,741 | (6,211) | (22.4)% | | Amortization of acquired intangible assets | 6,476 | 5,780 | 696 | 12.0% | | Operating loss | (461,603) | (18,948) | (442,655) | ** | | Interest and other financing expense, net | 51,253 | 57,213 | (5,960) | (10.4)% | | Other expense, net | 875 | 4,120 | (3,245) | (78.8)% | | Loss before income taxes and equity in net loss of equity-method investees | (513,731) | (80,281) | (433,450) | ** | | Provision (benefit) for income taxes | 15,297 | (7,820) | 23,117 | * | | Equity in net loss of equity-method investees | 1,813 | 2,581 | (768) | (29.8)% | | Net loss | $(530,841) | $(75,042) | $(455,799) | ** | | Adjusted EBITDA | $113,789 | $154,522 | $(40,733) | (26.4)% | | Basic and diluted net loss per common share | $(5.89) | $(0.84) | $(5.05) | ** | * Percentage is not meaningful due to one or more amounts being negative. ** Percentage is not meaningful due to significantly lower number or nil value in the comparative period. - Net sales decreased by **10.2% to $1.56 billion** in fiscal 2025, with organic net sales decreasing by **6.5%** due to a **4.9% decline in volume/mix** and a **1.6% decrease in price**[182](index=182&type=chunk) - Gross profit decreased by **12.3% to $334.1 million**, with gross profit margin at **21.4%** (down from 21.9%), primarily due to volume/mix softness, higher trade spend, and inflation[183](index=183&type=chunk) - Goodwill impairment charges of **$428.9 million** were recorded in fiscal 2025, primarily in North America (**$357.7 million**) and the U.K. (**$71.2 million**), driven by reduced performance and market capitalization decline[185](index=185&type=chunk) - Net loss for fiscal 2025 was **$530.8 million** (**$5.89 per diluted share**), significantly higher than **$75.0 million** (**$0.84 per diluted share**) in fiscal 2024, mainly due to impairment charges[200](index=200&type=chunk) - Adjusted EBITDA decreased by **26.4% to $113.8 million** in fiscal 2025 from **$154.5 million** in fiscal 2024[201](index=201&type=chunk) [Segment Results](index=43&type=section&id=Segment%20Results) Both North America and International segments experienced declines in net sales and Adjusted EBITDA in fiscal 2025 Segment Net Sales and Adjusted EBITDA (Fiscal Years Ended June 30, in thousands) | (Dollars in thousands) | North America 2025 | North America 2024 | International 2025 | International 2024 | Consolidated 2025 | Consolidated 2024 | | :--------------------- | :----------------- | :----------------- | :----------------- | :----------------- | :---------------- | :---------------- | | Net Sales | $888,626 | $1,055,527 | $671,154 | $680,759 | $1,559,780 | $1,736,286 | | % change | (15.8)% | | (1.4)% | | (10.2)% | | | Adjusted EBITDA | $65,470 | $98,728 | $86,000 | $94,974 | $113,789 | $154,522 | | % change | (33.7)% | | (9.4)% | | (26.4)% | | | Adjusted EBITDA margin | 7.4% | 9.4% | 12.8% | 14.0% | 7.3% | 8.9% | - North America net sales decreased by **15.8% to $888.6 million**, with organic net sales down **9.2%** due to softness in snacks (velocity challenges, distribution losses) and meal preparation (oils, nut butters). Adjusted EBITDA decreased by **33.7% to $65.5 million**[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - International net sales decreased by **1.4% to $671.2 million**, with organic net sales down **3.2%** due to lower sales in beverages and meal preparation (meat-free, private label spreads). Adjusted EBITDA decreased by **9.4% to $86.0 million**[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company manages liquidity through cash flows and a Credit Agreement, which was amended to adjust covenants and terms - The company finances operations and growth primarily through cash flows and borrowings under its Credit Agreement, which matures in December 2026[211](index=211&type=chunk)[212](index=212&type=chunk) - The Credit Agreement was amended multiple times, most recently on September 11, 2025 (Fourth Amendment), to adjust financial covenants (secured leverage ratio, interest coverage ratio, minimum Consolidated EBITDA) and increase interest rates[213](index=213&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - The Revolver size was reduced from **$800 million to $600 million**. As of June 30, 2025, **$450.5 million in Revolver loans** and **$255.6 million in Term Loans** were outstanding, with **$246.7 million available**[216](index=216&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk) - Weighted average interest rate on outstanding borrowings was **7.34%** (excluding hedges) and **6.41%** (including hedges) at June 30, 2025[220](index=220&type=chunk) Cash Flows (Fiscal Years Ended June 30, in thousands) | Activity | Fiscal 2025 (in thousands) | Fiscal 2024 (in thousands) | Change (Dollars in thousands) | | :------------------------------------------ | :---------- | :---------- | :--------------- | | Operating activities | $22,115 | $116,355 | $(94,240) | | Investing activities | $3,619 | $(23,922) | $27,541 | | Financing activities | $(43,886) | $(89,729) | $45,843 | | Net increase in cash and cash equivalents | $48 | $943 | $(895) | - Free Cash Flow was negative **$3.2 million** in fiscal 2025, a decrease of **$86.1 million** from fiscal 2024, primarily due to reduced cash flows from operating activities[228](index=228&type=chunk) [Reconciliation of Non-U.S. GAAP Financial Measures to U.S. GAAP Measures](index=48&type=section&id=Reconciliation%20of%20Non-U.S.%20GAAP%20Financial%20Measures%20to%20U.S.%20GAAP%20Measures) Non-U.S. GAAP measures like Organic Net Sales, Adjusted EBITDA, and Free Cash Flow provide additional insights into financial trends - Non-U.S. GAAP measures like Organic Net Sales, Adjusted EBITDA, and Free Cash Flow are provided to offer additional insights into financial and business trends, and are used by management for review and compensation[230](index=230&type=chunk)[231](index=231&type=chunk)[234](index=234&type=chunk)[237](index=237&type=chunk) Organic Net Sales Reconciliation (Twelve months ended June 30, in thousands) | (Dollars in thousands) | North America 2025 | North America 2024 | International 2025 | International 2024 | Consolidated 2025 | Consolidated 2024 | | :---------------------------------------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | :---------------- | :---------------- | | Net sales | $888,626 | $1,055,527 | $671,154 | $680,759 | $1,559,780 | $1,736,286 | | Less: Impact of divestitures, held for sale businesses, discontinued brands and exited product categories | 101,789 | 186,979 | 2,771 | 4,709 | 104,560 | 191,688 | | Less: Impact of foreign currency exchange | (2,074) | — | 13,691 | — | 11,617 | — | | Organic net sales | $788,911 | $868,548 | $654,692 | $676,050 | $1,443,603 | $1,544,598 | | Organic net sales decline | (9.2)% | | (3.2)% | | (6.5)% | | Adjusted EBITDA Reconciliation (Fiscal Years Ended June 30, in thousands) | (Amounts in thousands) | 2025 | 2024 | | :------------------------------------------ | :--------- | :--------- | | Net loss | $(530,841) | $(75,042) | | Depreciation and amortization | 44,259 | 44,665 | | Equity in net loss of equity-method investees | 1,813 | 2,581 | | Interest expense, net | 47,773 | 54,232 | | Provision (benefit) for income taxes | 15,297 | (7,820) | | Stock-based compensation, net | 8,149 | 12,704 | | Unrealized and certain realized currency losses | 3,823 | 17 | | Certain litigation expenses, net | 3,473 | 7,262 | | Productivity and transformation costs | 21,530 | 27,741 | | Plant closure related costs, net | 1,215 | 5,251 | | Warehouse/manufacturing consolidation and other costs, net | 384 | 995 | | CEO succession | 4,774 | — | | (Gain) loss on sale of assets | (3,194) | 4,384 | | Transaction and integration costs, net | (488) | (34) | | Goodwill impairment | 428,882 | — | | Intangibles and long-lived asset impairment | 66,940 | 76,143 | | Other | — | 1,443 | | Adjusted EBITDA | $113,789 | $154,522 | Free Cash Flow Reconciliation (Fiscal Years Ended June 30, in thousands) | (Amounts in thousands) | 2025 | 2024 | | :------------------------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $22,115 | $116,355 | | Purchases of property, plant and equipment | (25,284) | (33,461) | | Free Cash Flow | $(3,169) | $82,894 | [Contractual Obligations](index=50&type=section&id=Contractual%20Obligations) Contractual obligations primarily consist of long-term debt, related interest payments, and operating leases - Contractual obligations primarily consist of long-term debt, related interest payments, and operating leases, impacting short-term and long-term liquidity[238](index=238&type=chunk) [Critical Accounting Estimates](index=51&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include variable consideration, valuation of long-lived assets, goodwill, intangibles, and deferred tax assets - Critical accounting estimates include variable consideration for trade promotions, valuation of long-lived assets, goodwill, indefinite-lived intangible assets, stock-based compensation, and valuation allowances for deferred tax assets[239](index=239&type=chunk) - Goodwill is tested annually for impairment using a blended analysis of Discounted Cash Flow (DCF) and Guideline Public Company Method (GPCM), requiring significant judgment on growth rates, profitability, discount rates, and market multiples[242](index=242&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - In fiscal 2025, aggregate non-cash goodwill impairment charges of **$357.7 million** (North America) and **$71.2 million** (U.K.) were recorded due to reduced performance, cash flows, and market capitalization decline[248](index=248&type=chunk) - Indefinite-lived intangible assets (tradenames/trademarks) are tested annually for impairment using a 'relief from royalty payments' methodology, involving estimates of royalty rates, projected net sales, and discount rates[261](index=261&type=chunk)[262](index=262&type=chunk) - In fiscal 2025, a **$21.1 million non-cash impairment charge** was recorded for Sensible Portions® and Imagine® tradenames, and **$15.7 million** for personal care intangible assets (Avalon Organics®, JASON®, Live Clean®) and Belvedere™[263](index=263&type=chunk)[265](index=265&type=chunk) [Recent Accounting Pronouncements](index=57&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2023-07 (Segment Reporting) and is evaluating other future ASUs - The company adopted ASU 2023-07 (Segment Reporting) effective June 30, 2025, enhancing disclosures about significant segment expenses[354](index=354&type=chunk) - Future ASUs include 2025-05 (Financial Instruments — Credit Losses) and 2024-03 (Income Statement - Expense Disaggregation), which the company is currently evaluating[355](index=355&type=chunk)[356](index=356&type=chunk) [Seasonality](index=57&type=section&id=Seasonality) Product lines like hot tea and soup are stronger in colder months, while snack foods are stronger in warmer months - Product lines like hot tea and soup are stronger in colder months, while snack foods are stronger in warmer months, leading to seasonal fluctuations in results[270](index=270&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from interest rates, foreign currency, and ingredient prices via hedging and pricing strategies - Principal market risks include interest rates on debt and cash equivalents, foreign exchange rates (translation and transaction gains/losses), and ingredient input prices[277](index=277&type=chunk) - As of June 30, 2025, the company had **$706.1 million in variable rate debt**. Interest rate swaps hedge **$400 million** at a fixed rate of **6.12%**. A **1% increase** in average interest rates would result in **$3.5 million higher net interest expense**[271](index=271&type=chunk) - Foreign operations generated **50% of consolidated net sales in fiscal 2025**, exposing the company to currency fluctuations (British Pounds Sterling, Euros, Canadian Dollars). A **5% lower average foreign exchange rate** against the U.S. Dollar could decrease sales by **$38.7 million** and operating income by **$3.0 million**[273](index=273&type=chunk) - The company uses cross-currency swaps (**$128.8 million notional** at June 30, 2025) to manage foreign currency risk[275](index=275&type=chunk) - Ingredient input prices are subject to volatility. A hypothetical **10% increase in primary input costs** could increase cost of sales by approximately **$92 million**[276](index=276&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=59&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for FY2025-2023, including auditor's report and key financial statements - The consolidated financial statements for fiscal years ended June 30, 2025, 2024, and 2023 are presented, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows[278](index=278&type=chunk) - The Report of Independent Registered Public Accounting Firm (Ernst & Young LLP) expressed an adverse opinion on internal control over financial reporting as of June 30, 2025, due to a material weakness, but an unqualified opinion on the consolidated financial statements[282](index=282&type=chunk)[283](index=283&type=chunk)[290](index=290&type=chunk) Consolidated Balance Sheet Highlights (June 30, in thousands) | Asset/Liability | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------ | :--------- | :--------- | | Total current assets | $530,298 | $557,059 | | Property, plant and equipment, net | $264,730 | $261,730 | | Goodwill | $500,961 | $929,304 | | Trademarks and other intangible assets, net | $210,905 | $244,799 | | Total assets | $1,603,278 | $2,117,548 | | Total current liabilities | $277,373 | $281,503 | | Long-term debt, less current portion | $697,168 | $736,523 | | Total liabilities | $1,128,273 | $1,174,635 | | Total stockholders' equity | $475,005 | $942,913 | Consolidated Statements of Operations Highlights (Fiscal Years Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | 2023 (in thousands) | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net sales | $1,559,780 | $1,736,286 | $1,796,643 | | Gross profit | $334,058 | $380,832 | $396,414 | | Operating loss | $(461,603) | $(18,948) | $(85,620) | | Net loss | $(530,841) | $(75,042) | $(116,537) | | Basic and diluted net loss per common share | $(5.89) | $(0.84) | $(1.30) | Consolidated Statements of Cash Flows Highlights (Fiscal Years Ended June 30, in thousands) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | 2023 (in thousands) | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $22,115 | $116,355 | $66,819 | | Net cash provided by (used in) investing activities | $3,619 | $(23,922) | $(19,640) | | Net cash used in financing activities | $(43,886) | $(89,729) | $(63,060) | | Net increase (decrease) in cash and cash equivalents | $48 | $943 | $(12,148) | [Notes to Consolidated Financial Statements](index=69&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides extensive details on accounting policies, financial instruments, and segment information [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=121&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There are no changes in or disagreements with accountants on accounting and financial disclosure to report - No changes in or disagreements with accountants on accounting and financial disclosure were reported[511](index=511&type=chunk) [Item 9A. Controls and Procedures](index=121&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls were ineffective due to a material weakness in impairment testing; remediation efforts are ongoing - Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[512](index=512&type=chunk) - The material weakness relates to the design and operation of effective controls for timely and sufficiently detailed review of projected financial information, key assumptions, and calculations in goodwill and indefinite-lived intangible asset impairment tests[517](index=517&type=chunk) - Despite the material weakness, management believes the consolidated financial statements fairly present the financial condition, results of operations, and cash flows in accordance with U.S. GAAP[512](index=512&type=chunk)[518](index=518&type=chunk) - Remediation activities are ongoing, with oversight from the Audit Committee, to design and implement management review controls. The material weakness will be remediated once these controls operate effectively for a sufficient period[519](index=519&type=chunk)[520](index=520&type=chunk) - Ernst & Young LLP issued an adverse opinion on the effectiveness of the company's internal control over financial reporting as of June 30, 2025[521](index=521&type=chunk)[526](index=526&type=chunk) [Item 9B. Other Information](index=127&type=section&id=Item%209B.%20Other%20Information) Credit Agreement amended to adjust covenants and terms; Global Chief Supply Chain Officer position eliminated - On September 11, 2025, the company entered into the Fourth Amendment to its Credit Agreement, modifying interest rates, revolving commitment availability, and financial covenants[535](index=535&type=chunk)[537](index=537&type=chunk) - The Fourth Amendment increased the maximum consolidated secured leverage ratio to **5.00:1.00** for Q2 2025 and **5.50:1.00** thereafter, decreased the minimum consolidated interest coverage ratio to **2.00:1.00**, and added a minimum Consolidated EBITDA covenant[536](index=536&type=chunk) - The revolving credit facility was reduced from **$700 million to $600 million**[538](index=538&type=chunk) - The position of Global Chief Supply Chain Officer was eliminated as part of a restructuring, leading to Steven R. Golliher's departure effective November 3, 2025[539](index=539&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=127&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[542](index=542&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=128&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement[545](index=545&type=chunk) [Item 11. Executive Compensation](index=128&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2025 Proxy Statement - Executive compensation information is incorporated by reference from the 2025 Proxy Statement[546](index=546&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=128&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the 2025 Proxy Statement - Security ownership information is incorporated by reference from the 2025 Proxy Statement[547](index=547&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=128&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement[548](index=548&type=chunk) [Item 14. Principal Accountant Fees and Services](index=128&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Principal accountant fees and services information is incorporated by reference from the 2025 Proxy Statement[549](index=549&type=chunk) PART IV [Item 15. Exhibit and Financial Statement Schedules](index=129&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists consolidated financial statements and provides a schedule for Valuation and Qualifying Accounts, along with an Exhibit Index - The consolidated financial statements listed in Item 8 are filed as part of this report[551](index=551&type=chunk) Schedule II - Valuation and Qualifying Accounts (Fiscal Year Ended June 30, in thousands) | | Balance at beginning of period (in thousands) | Additions Charged to costs and expenses (ii) (in thousands) | Deductions - describe (i) (in thousands) | Balance at end of period (in thousands) | | :------------------------------------------ | :--------------------------- | :------------------------------------------- | :------------------------ | :----------------------- | | **Fiscal Year Ended June 30, 2025** | | | | | | Allowance for doubtful accounts | $1,517 | $78 | $(258) | $1,337 | | Valuation allowance for deferred tax assets | $67,626 | $30,706 | $(1,949) | $96,383 | | **Fiscal Year Ended June 30, 2024** | | | | | | Allowance for doubtful accounts | $2,750 | $1,066 | $(2,299) | $1,517 | | Valuation allowance for deferred tax assets | $52,551 | $18,998 | $(3,923) | $67,626 | | **Fiscal Year Ended June 30, 2023** | | | | | | Allowance for doubtful accounts | $1,731 | $1,450 | $(431) | $2,750 | | Valuation allowance for deferred tax assets | $36,891 | $23,212 | $(7,552) | $52,551 | (i) Amounts written off and changes in exchange rates. (ii) Includes item related to THWR purchase accounting (2025: nil; 2024: nil; 2023: $291). - An Exhibit Index lists various agreements, plans, and certifications, including credit agreements, stock award plans, and executive compensation documents[554](index=554&type=chunk)[558](index=558&type=chunk) [Item 16. Form 10-K Summary](index=131&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable and contains no summary - Item 16, Form 10-K Summary, is not applicable[556](index=556&type=chunk)

FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 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: 0-11306 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 VALUE LINE, INC. (Exact name of registrant as spe ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20Financial%20Information) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter - The financial statements are unaudited and prepared in conformity with U.S. GAAP, reflecting normal recurring adjustments, and should be read with the annual consolidated financial statements in the Company's Form 10-K for the fiscal year ended April 30, 2025[21](index=21&type=chunk) [Item 1. Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and related notes, prepared under U.S. GAAP [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Table: Condensed Consolidated Balance Sheets | Metric (in thousands) | July 31, 2025 | April 30, 2025 | | :-------------------- | :------------ | :------------- | | Total assets | $93,203 | $93,737 | | Total current assets | $52,343 | $53,106 | | Cash and cash equivalents | $4,512 | $4,720 | | Total liabilities | $36,884 | $38,117 | | Total stockholders' equity | $56,319 | $55,620 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income over specific periods Table: Condensed Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Revenues | $13,812 | $15,077 | | Gross margin | $5,082 | $6,698 | | Operating income | $364 | $2,365 | | Net income | $634 | $2,430 | | Basic and diluted income per share | $0.07 | $0.25 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities Table: Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $1,161 | $(1,458) | | Net cash used in investing activities | $(776) | $(327) | | Net cash used in financing activities | $(583) | $(62) | | Net decrease in cash and cash equivalents and restricted cash | $(198) | $(1,847) | | Cash and cash equivalents and restricted cash at end of period | $5,887 | $17,418 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section outlines changes in the company's equity accounts, including retained earnings and treasury stock Table: Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric (in thousands) | July 31, 2025 | April 30, 2025 | | :-------------------- | :------------ | :------------- | | Total stockholders' equity | $56,319 | $55,620 | | Retained earnings | $4,293 | $3,659 | | Treasury stock (at cost) | $(814) | $(231) | - Net income for the three months ended July 31, 2025, was **$634 thousand**, contributing to the increase in retained earnings[20](index=20&type=chunk) - The Company contributed **12,405 shares** of common stock to its 401(k) plan during the three months ended July 31, 2025, compared to **26,457 shares** in the prior year period[20](index=20&type=chunk)[27](index=27&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE A – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=8&type=section&id=NOTE%20A%20%E2%80%93%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This note describes the basis of presentation and accounting policies for the interim financial statements - The unaudited condensed consolidated interim financial statements reflect all normal recurring adjustments necessary for fair presentation and are prepared in conformity with U.S. GAAP, and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2025[21](index=21&type=chunk) - Certain prior year amounts have been reclassified for consistency, with no effect on previously reported net assets[22](index=22&type=chunk) [NOTE B – EARNINGS PER SHARE](index=8&type=section&id=NOTE%20B%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note details the calculation of basic and diluted earnings per share Table: Earnings Per Share Metrics | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Basic EPS shares outstanding (weighted average) | 9,723,165 | 9,538,339 | | Diluted EPS shares outstanding | 9,723,165 | 9,538,339 | - For the three months ended July 31, 2025, there were no shares excluded from the calculation of dilutive securities, while for the same period in 2024, **76,000 exercisable shares** were excluded as their inclusion would be antidilutive[23](index=23&type=chunk) - On July 22, 2024, the Board declared a special cash dividend of **$1.00 per share**, totaling approximately **$9.6 million**, paid on August 29, 2024[24](index=24&type=chunk) [NOTE C – CONTRACT ASSETS AND LIABILITIES](index=8&type=section&id=NOTE%20C%20%E2%80%93%20CONTRACT%20ASSETS%20AND%20LIABILITIES) This note explains the nature and recognition of contract assets and liabilities - Contract assets represent rights to consideration for work completed but not yet billed, while contract liabilities are advance payments for which revenue has not yet been recognized[25](index=25&type=chunk) - During the three months ended July 31, 2025, **$4.1 million** of contract liabilities from April 30, 2025, were recognized as revenue, compared to **$7.7 million** in the prior year period[25](index=25&type=chunk) [NOTE D – EMPLOYEE BENEFIT PLANS](index=9&type=section&id=NOTE%20D%20%E2%80%93%20EMPLOYEE%20BENEFIT%20PLANS) This note provides information on the company's 401(k) plan and deferred compensation arrangements - The Company contributed **12,405 shares** of common stock to its 401(k) plan during the three months ended July 31, 2025, a decrease from **26,457 shares** in the same period of 2024[27](index=27&type=chunk) - Deferred compensation expense was approximately **$133,000** (including **$23,000** interest) for the three months ended July 31, 2025, with payments of **$183,000**, compared to **$143,000** expense (including **$27,000** interest) and **$179,000** payments in the prior year[28](index=28&type=chunk) - Life insurance policies on deferred compensation participants are held in a Trust, amounting to **$7.0 million** at July 31, 2025 and April 30, 2025, with assets valued at Level 1 and Level 2 bases[29](index=29&type=chunk) [NOTE E – INVENTORIES](index=9&type=section&id=NOTE%20E%20%E2%80%93%20INVENTORIES) This note details the composition of the company's inventory at different stages of production Table: Inventory Composition | Inventory Category (in thousands) | July 31, 2025 | April 30, 2025 | | :-------------------------------- | :------------ | :------------- | | Raw materials and component parts | $14,765 | $14,668 | | Work in progress | $9,500 | $8,444 | | Finished goods | $507 | $375 | | Total Inventories | $24,772 | $23,487 | [NOTE F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES](index=9&type=section&id=NOTE%20F%20%E2%80%93%20RIGHT-OF-USE%20ASSETS%20AND%20LEASE%20LIABILITIES) This note provides information on the company's operating leases, including right-of-use assets and lease liabilities - The Company's operating leases primarily cover offices, warehouses, vehicles, manufacturing, and R&D facilities, expiring through 2030, with ROU assets and lease liabilities recorded based on the present value of future lease payments[31](index=31&type=chunk) Table: Lease Metrics | Lease Metric (in thousands) | July 31, 2025 | April 30, 2025 | | :-------------------------- | :------------ | :------------- | | Right-of-use assets - operating leases | $8,249 | $8,659 | | Total lease liabilities | $8,359 | $8,756 | - Total operating lease expense was **$0.6 million** for the three months ended July 31, 2025, up from **$0.5 million** in the prior year, with a weighted-average remaining lease term of **4.30 years** and a weighted average discount rate of **6.86%** at July 31, 2025[34](index=34&type=chunk)[36](index=36&type=chunk) [NOTE G – SEGMENT INFORMATION](index=11&type=section&id=NOTE%20G%20%E2%80%93%20SEGMENT%20INFORMATION) This note presents financial information for the company's two reportable operating segments - The Company operates in two reportable segments: FEI-NY (precision time and frequency control products for communication satellites, terrestrial telecom, U.S. military) and FEI-Zyfer (GPS technologies for secure communications and locator applications, including US5G products)[39](index=39&type=chunk) Table: Segment Performance | Segment Performance (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | FEI-NY Revenues | $10,354 | $10,975 | | FEI-Zyfer Revenues | $3,718 | $4,272 | | Consolidated Revenues | $13,812 | $15,077 | | FEI-NY Operating Income | $166 | $1,377 | | FEI-Zyfer Operating Income | $300 | $1,140 | | Consolidated Operating Income | $364 | $2,365 | Table: Revenue by Product Line | Revenue by Product Line (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Satellite revenue | $6,514 | $8,263 | | Government non-space revenue | $6,859 | $6,270 | | Other commercial & industrial revenue | $439 | $544 | | Consolidated revenues | $13,812 | $15,077 | [NOTE H – INVESTMENT IN MORION, INC.](index=14&type=section&id=NOTE%20H%20%E2%80%93%20INVESTMENT%20IN%20MORION%2C%20INC.) This note discusses the company's investment in Morion, Inc. and the impact of geopolitical events - The Company's **4.6% investment** in Morion, Inc., a Russian company, was entirely written off in fiscal year 2022 due to the Russia-Ukraine conflict and sanctions, resulting in a carrying value of **$0**[49](index=49&type=chunk) - Following Morion's designation as a Specially Designated National on October 30, 2024, the Company terminated all commercial relationships, including technology licensing and product purchases, and has established alternate supply sources and in-house crystal blank fabrication capabilities[51](index=51&type=chunk) [NOTE I – RESTRICTED CASH](index=14&type=section&id=NOTE%20I%20%E2%80%93%20RESTRICTED%20CASH) This note provides details on restricted cash balances and their purpose - Restricted cash was approximately **$1.4 million** at both July 31, 2025, and April 30, 2025, primarily related to a letter of credit for contractual restrictions[52](index=52&type=chunk) Table: Cash Reconciliation | Cash Reconciliation (in thousands) | July 31, 2025 | April 30, 2025 | | :--------------------------------- | :------------ | :------------- | | Cash and cash equivalents | $4,512 | $4,720 | | Restricted cash | $1,375 | $1,365 | | Total cash and cash equivalents and restricted cash | $5,887 | $6,085 | [NOTE J – RECENT ACCOUNTING PRONOUNCEMENTS](index=14&type=section&id=NOTE%20J%20%E2%80%93%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note outlines the impact of recently adopted accounting standards on the financial statements - The Company adopted ASU No. 2023-09, 'Improvements to Income Tax Disclosures,' as of July 31, 2025, with no material impact on the interim financial statements[54](index=54&type=chunk) [NOTE K – DEFERRED INCOME TAXES](index=15&type=section&id=NOTE%20K%20%E2%80%93%20DEFERRED%20INCOME%20TAXES) This note explains the components of deferred income taxes and the valuation allowance - Deferred income taxes arise from temporary differences between tax and financial statement amounts, and the Company maintains a valuation allowance of **$1.4 million** against certain deferred tax assets[56](index=56&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - The 'One Big Beautiful Bill Act' (OBBBA), signed into law on July 4, 2025, allows full deduction of domestic research expenditures, **100% bonus depreciation**, and restores EBITDA for interest deduction limitation calculation, but did not have a material impact on the provision or effective tax rate as of July 31, 2025[57](index=57&type=chunk)[58](index=58&type=chunk) [NOTE L – PRODUCT WARRANTIES](index=15&type=section&id=NOTE%20L%20%E2%80%93%20PRODUCT%20WARRANTIES) This note describes the company's product warranty policy and related accruals - The Company provides a one-year warranty and establishes reserves based on product history, repair costs, and sales levels[60](index=60&type=chunk) Table: Warranty Accrual | Warranty Accrual (in thousands) | July 31, 2025 | April 30, 2025 | | :------------------------------ | :------------ | :------------- | | Balance at beginning of year | $567 | $542 | | Warranty costs incurred | $(72) | $(253) | | Product warranty accrual | $68 | $278 | | Balance at end of year | $563 | $567 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three months ended July 31, 2025, compared to the prior year - Forward-looking statements are subject to risks and uncertainties, including integration challenges, customer actions, economic conditions, and technological changes, and should not be relied upon as predictions of actual results[62](index=62&type=chunk) [Critical Accounting Policies and Estimates](index=16&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the accounting policies and estimates that require significant judgment and can materially impact financial results - The most critical accounting policies are revenue recognition and costs on production contracts, and the valuation of inventory, both requiring significant estimates that can materially impact financial results[63](index=63&type=chunk) - The Company's significant accounting policies did not change during the three months ended July 31, 2025[63](index=63&type=chunk) [Revenue Recognition](index=16&type=section&id=Revenue%20Recognition) This section describes the company's methods for recognizing revenue from contracts - Revenues are predominantly recognized over time using the cost-to-cost method, based on the ratio of incurred costs to total estimated contract costs, with management continuously reviewing and adjusting estimates[64](index=64&type=chunk) - Provisions for anticipated contract losses are made in full when determinable[64](index=64&type=chunk) [Inventories](index=16&type=section&id=Inventories) This section explains the accounting for inventoried costs and write-downs - Inventoried costs include amounts for contracts with long production cycles, and write-downs are established for slow-moving or obsolete items based on usage and management's estimates for future business[66](index=66&type=chunk) [Income Taxes](index=17&type=section&id=Income%20Taxes) This section discusses the judgments involved in determining the provision for income taxes and deferred tax assets - Significant judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance, with the Company monitoring the realizability of deferred tax assets based on various factors[67](index=67&type=chunk) - Interim income tax provision/benefit is determined using an estimate of the annual effective tax rate, adjusted for discrete items, and updated quarterly[68](index=68&type=chunk) [RESULTS OF OPERATIONS](index=17&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance for the period [Revenues](index=17&type=section&id=Revenues) This section analyzes the company's revenue performance by segment and product line Table: Segment Revenues | Segment (in thousands) | 2025 | 2024 | Change | % Change | | :--------------------- | :---------- | :---------- | :---------- | :------- | | FEI-NY | $10,354 | $10,975 | $(621) | (5.7)% | | FEI-Zyfer | $3,718 | $4,272 | $(554) | (13.0)% | | Intersegment revenues | $(260) | $(170) | $(90) | 52.9% | | Total Revenues | $13,812 | $15,077 | $(1,265) | (8.4)% | - Consolidated revenues decreased by **8.4%** to **$13.8 million** for the three months ended July 31, 2025, primarily due to customer-imposed program delays expected to be realized in upcoming quarters[70](index=70&type=chunk)[71](index=71&type=chunk) - Revenues from commercial and U.S. Government communication satellite programs accounted for approximately **47%** of consolidated revenues (down from **55%** in prior year), while non-space U.S. Government/DOD customers accounted for approximately **50%** (up from **42%**)[70](index=70&type=chunk) [Gross Margin](index=19&type=section&id=Gross%20Margin) This section examines the company's gross margin and its contributing factors Table: Gross Margin Performance | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :------ | :------ | :-------- | :------- | | Gross Margin | $5,082 | $6,698 | $(1,616) | (24.1)% | | GM Rate | 36.8% | 44.4% | | | - Both gross margin and gross margin rate decreased due to lower revenue and quarterly fluctuations in the mix of business activity between higher and lower margin programs, including cumulative catch-up adjustments[72](index=72&type=chunk) [Selling, General, and Administrative Expenses](index=19&type=section&id=Selling%2C%20General%2C%20and%20Administrative%20Expenses) This section analyzes changes in selling, general, and administrative expenses Table: SG&A Expenses | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :------ | :------ | :----- | :------- | | SG&A Expenses | $3,585 | $2,845 | $740 | 26.0% | - SG&A expenses increased by **26.0%** to **$3.6 million**, representing **26%** of consolidated revenues (up from **19%** in prior year), driven by higher payroll-related expenses and investments in future growth[73](index=73&type=chunk) [Research and Development Expenses](index=19&type=section&id=Research%20and%20Development%20Expenses) This section discusses the company's investment in research and development Table: R&D Expenses | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :------ | :------ | :------ | :------- | | R&D Expenses | $1,133 | $1,488 | $(355) | (23.9)% | - R&D expenditures decreased by **23.9%** to **$1.1 million**, though the Company plans to continue investing in R&D to maintain product leadership in time and frequency technology[74](index=74&type=chunk) [Operating Income](index=19&type=section&id=Operating%20Income) This section analyzes the company's operating income and its drivers Table: Operating Income Performance | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :---- | :---- | :-------- | :------- | | Operating Income | $364 | $2,365 | $(2,001) | (84.6)% | - Operating income decreased significantly by **84.6%** to **$0.36 million**, primarily due to lower revenue, reduced gross margin, and increased SG&A expenses[76](index=76&type=chunk) [Other Income (Expense), net](index=20&type=section&id=Other%20Income%20%28Expense%29%2C%20net) This section details non-operating income and expenses, including investment income and interest expense Table: Other Income (Expense), net | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :---- | :---- | :----- | :------- | | Investment income, net | $218 | $224 | $(6) | (2.7)% | | Interest expense | $(23) | $(26) | $3 | (11.5)% | | Other expense, net | $(2) | $- | $(2) | -% | | Total | $193 | $198 | $(5) | (2.5)% | - Other income (expense), net, remained relatively stable at **$0.19 million**, with the majority of investment income derived from interest income and unrealized gains on assets held in the Deferred Compensation Trust[77](index=77&type=chunk) [(Benefit) Provision for Income Tax](index=20&type=section&id=%28Benefit%29%20Provision%20for%20Income%20Tax) This section discusses the company's income tax provision or benefit and effective tax rate Table: Income Tax Metrics | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :----- | :---- | :------- | :------- | | Income Tax | $(77) | $133 | $(210) | (157.9)% | | Effective tax rate | -13.9% | 5.2% | | | - The Company recorded an income tax benefit of **$77,270** for the three months ended July 31, 2025, including a discrete benefit of **$193,919** primarily from stock compensation windfall tax benefits, contrasting with an income tax provision of **$132,930** in the prior year[81](index=81&type=chunk) - The effective tax rate for the period was a benefit of **13.89%** on pretax income of **$0.6 million**, differing from the U.S. federal statutory rate of **21%** due to non-deductible expenses, state income taxes, R&D credits, and discrete items[82](index=82&type=chunk) - The estimated annual effective tax rate for fiscal year ending April 30, 2026, is **20.96%**[80](index=80&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=21&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses the company's ability to meet its financial obligations and fund operations - The Company maintains a strong working capital position of approximately **$29.6 million** at July 31, 2025, with a current ratio of **2.3 to 1**[83](index=83&type=chunk) Table: Cash Flow Activity | Cash Flow Activity (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $1,161 | $(1,458) | | Net cash used in investing activities | $(776) | $(327) | | Net cash used in financing activities | $(583) | $(62) | - The increase in net cash provided by operating activities was primarily due to the timing of billings and cash collections, while investing activities increased due to higher purchases of fixed assets, and financing activities increased due to higher treasury stock purchases[84](index=84&type=chunk)[85](index=85&type=chunk) - The Company repurchased **21,910 shares** of common stock for **$583 thousand** during the three months ended July 31, 2025, primarily for RSU tax withholdings, with approximately **$0.56 million** remaining under the **$5.0 million** share repurchase authorization[86](index=86&type=chunk)[99](index=99&type=chunk) - The consolidated funded backlog was approximately **$71 million** at July 31, 2025, with about **64%** expected to be realized in the next twelve months, and the Company believes its liquidity is adequate for short-term and foreseeable long-term needs[88](index=88&type=chunk)[89](index=89&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to smaller reporting companies - This section is not applicable to smaller reporting companies[91](index=91&type=chunk) [Item 4. Controls and Procedures](index=22&type=section&id=Item%204%20-%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=22&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of July 31, 2025[92](index=92&type=chunk) - The Company acknowledges inherent limitations in any system of disclosure controls, including human error and circumvention, meaning they can only provide reasonable assurance[93](index=93&type=chunk) [Changes in Internal Control Over Financial Reporting](index=22&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes to the company's internal control over financial reporting - There have been no changes in the Company's internal control over financial reporting during the fiscal quarter ended July 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[94](index=94&type=chunk) [PART II. OTHER INFORMATION](index=23&type=section&id=Part%20II.%20Other%20Information) This section provides additional information including risk factors, equity sales, and exhibit listings [Item 1A. Risk Factors](index=23&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) This section refers to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - There are no material updates or changes to the Company's risk factors since the filing of the Form 10-K[97](index=97&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's share repurchase activity for the quarter ended July 31, 2025 Table: Share Repurchase Activity | Period | Total number of shares purchased | Average price paid per share | | :---------------- | :------------------------------- | :--------------------------- | | May 1 - 31, 2025 | - | - | | June 1 - 30, 2025 | - | - | | July 1 - 31, 2025 | 21,910 | $26.60 | | Total | 21,910 | | - The shares purchased in July 2025 represent shares withheld for stock-based awards to satisfy required tax withholding obligations, and as of July 31, 2025, approximately **$555,912** worth of shares may yet be purchased under the authorized plan[99](index=99&type=chunk) [Item 5. Other Information](index=23&type=section&id=Item%205%20%E2%80%93%20Other%20Information) This section confirms that no Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended July 31, 2025[100](index=100&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL-formatted financial data - Exhibits include certifications by the CEO and CFO (31.1, 31.2, 32) and XBRL-formatted financial statements (101, 104)[101](index=101&type=chunk) [Signatures](index=24&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q - The report was signed on September 15, 2025, by Thomas McClelland, President and Chief Executive Officer, and Steven L. Bernstein, Chief Financial Officer, Secretary and Treasurer[104](index=104&type=chunk)[105](index=105&type=chunk)

Exhibit 99.1 COMPANY: Perma-Pipe International Holdings, Inc. CONTACT: Saleh Sagr, President and CEO Perma-Pipe Investor Relations (847) 929-1200 investor@permapipe.com Perma-Pipe International Holdings, Inc. Announces its Second Quarter Financial Results and Initiates Exploration of Strategic Alternatives to Maximize Shareholder Value SPRING, TX, September 15, 2025 - Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) announced today financial results for the second quarter and fiscal year-to-date perio ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 July 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File No. 001-32530 Perma-Pipe International Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware ...

PART I – Financial Information [Item 1: Financial Statements](index=4&type=section&id=Item%201%3A%20Financial%20Statements) This section presents unaudited consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with notes on accounting policies and captions for periods ended July 31, 2025, and October 31, 2024 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) | Metric | July 31, 2025 (Unaudited) | October 31, 2024 | | :-------------------------- | :------------------------ | :----------------------- | | Total Assets | $61,913,058 | $57,544,544 | | Cash and Cash Equivalents | $26,196,439 | $22,479,072 | | Accounts Receivable, net | $3,871,769 | $3,493,463 | | Unbilled Receivables | $2,723,141 | $1,657,827 | | Total Current Assets | $47,408,155 | $42,982,015 | | Total Liabilities | $4,641,312 | $4,416,021 | | Total Stockholders' Equity | $57,271,746 | $53,128,523 | [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Revenues | $7,064,795 | $5,476,544 | $19,291,969 | $15,260,913 | | Cost of Revenues | $2,241,039 | $1,428,006 | $6,542,462 | $4,387,205 | | Gross Profit | $4,823,756 | $4,048,538 | $12,749,507 | $10,873,708 | | Income From Operations | $1,379,979 | $1,390,774 | $3,129,685 | $3,296,541 | | Net Income | $1,282,985 | $1,274,658 | $3,104,722 | $3,319,784 | | Basic EPS | $0.11 | $0.11 | $0.28 | $0.30 | | Diluted EPS | $0.11 | $0.11 | $0.27 | $0.29 | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) | Metric | October 31, 2024 | July 31, 2025 | | :-------------------------- | :----------------------- | :----------------------- | | Total Stockholders' Equity | $53,128,523 | $57,271,746 | | Common Stock | $11,195 | $11,249 | | Additional Paid-in Capital | $63,096,583 | $63,292,685 | | Accumulated Other Comprehensive Loss | $(2,510,831) | $(1,668,486) | | Accumulated Deficit | $(7,406,491) | $(4,301,769) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Net Cash provided by (used in) Operating Activities | $4,307,865 | $458,013 | | Net Cash (used in) provided by Investing Activities | $(822,191) | $235,981 | | Net Cash Used in Financing Activities | $0 | $(15,633) | | Net Increase in Cash and Cash Equivalents | $3,717,367 | $769,124 | | Cash and Cash Equivalents at End of Period | $26,196,439 | $25,217,965 | [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [NOTE 1 – Accounting Policies and Supplemental Disclosures](index=10&type=section&id=NOTE%201%20%E2%80%93%20Accounting%20Policies%20and%20Supplemental%20Disclosures) - Financial statements are unaudited, prepared under SEC interim reporting rules, and 2025 operating results may not predict the full fiscal year due to seasonal factors[21](index=21&type=chunk) - Consolidated financial statements include Coda Octopus Group, Inc. and its wholly-owned subsidiaries, with all material intercompany transactions eliminated[22](index=22&type=chunk) - Management's significant estimates, such as the percentage of completion method for contracts, impact reported financial statement amounts[23](index=23&type=chunk) [NOTE 2 – Revenue Recognition](index=10&type=section&id=NOTE%202%20%E2%80%93%20Revenue%20Recognition) - Revenue recognition follows FASB Topic 606, employing a five-step process from contract identification to recognition upon obligation satisfaction[24](index=24&type=chunk)[25](index=25&type=chunk) - Marine Technology Business recognizes revenue for outright sales upon delivery, rentals daily, and services upon obligation fulfillment, with software licenses recognized upon delivery of installers and activation codes[26](index=26&type=chunk) - Marine Engineering Business recognizes revenue based on fixed hourly rates, reimbursable costs, or the percentage of completion method for fixed-price contracts, measured by costs incurred[36](index=36&type=chunk) [NOTE 3 – Cost of Goods Sold](index=13&type=section&id=NOTE%203%20%E2%80%93%20Cost%20of%20Goods%20Sold) - Cost of goods sold comprises materials, direct costs, and commissions paid to sales agents for RFP participation[43](index=43&type=chunk) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Commission Costs | $146,921 | $100,290 | $782,814 | $525,696 | [NOTE 4 – Fair Value of Financial Instruments](index=13&type=section&id=NOTE%204%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) - Fair values of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their carrying amounts due to their short-term nature[44](index=44&type=chunk) [NOTE 5 – Foreign Currency Translation](index=13&type=section&id=NOTE%205%20%E2%80%93%20Foreign%20Currency%20Translation) - Assets and liabilities are translated at balance sheet date exchange rates, revenues and expenses at weighted average rates, and stockholders' equity at historical rates[45](index=45&type=chunk) - Translation adjustments are recorded in accumulated other comprehensive income (loss), while foreign currency transaction gains and losses are included in consolidated statements of income[46](index=46&type=chunk) [NOTE 6 – Operating Leases](index=15&type=section&id=NOTE%206%20%E2%80%93%20Operating%20Leases) - The company has a non-cancellable operating lease for PAL, acquired October 29, 2024, with a remaining life of **7.67 years** expiring March 31, 2033[47](index=47&type=chunk) | Metric | July 31, 2025 | October 31, 2024 | | :-------------------------------- | :-------------------- | :-------------------- | | Lease Liability | $401,149 | $413,171 | | Future Minimum Lease Payments | $538,404 | $568,076 | | Remaining Lease Life (Years) | 7.67 | 8.42 | | Discount Rate | 6.75% | 6.75% | [NOTE 7 – Composition of Certain Financial Statement Captions](index=15&type=section&id=NOTE%207%20%E2%80%93%20Composition%20of%20Certain%20Financial%20Statement%20Captions) - Cash equivalents include certified deposit interest-bearing accounts with HSBC NA and HSBC UK, classified for short-term periods not exceeding **3 months**[49](index=49&type=chunk) | Metric | July 31, 2025 | October 31, 2024 | | :-------------------------- | :-------------------- | :-------------------- | | Inventory | $13,712,377 | $13,975,529 | | Raw materials and other sub-components | $10,560,839 | $10,368,350 | | Finished goods | $2,716,479 | $3,340,464 | | Total Property and Equipment, net | $7,175,397 | $6,822,990 | | Property and Equipment, net (USA) | $1,964,741 | $1,743,840 | | Property and Equipment, net (Europe) | $5,210,656 | $5,079,150 | | Total Accrued Expenses and Other Current Liabilities | $1,683,758 | $1,604,596 | | Commitment and Contingent Liability – PAL Earn Out | $158,872 | $0 | [NOTE 8 – Contracts in Progress](index=18&type=section&id=NOTE%208%20%E2%80%93%20Contracts%20in%20Progress) | Metric | July 31, 2025 | October 31, 2024 | | :------------------------------------------ | :-------------------- | :-------------------- | | Unbilled Receivables | $2,723,141 | $1,657,827 | | Deferred Revenue (Current) | $1,215,065 | $1,225,634 | | Deferred Revenue (Non-Current) | $75,064 | $56,121 | - Deferred revenue includes customer technical support (including TLS) and product warranty, amortized over **12-60 month** contract periods[57](index=57&type=chunk)[60](index=60&type=chunk) [NOTE 9 – Acquisitions](index=19&type=section&id=NOTE%209%20%E2%80%93%20Acquisitions) - Precision Acoustics Limited (PAL) was acquired on October 29, 2024, for **$6,538,569** in cash, with a net cash outlay of **$4,605,285**[61](index=61&type=chunk) - The PAL acquisition aims to leverage its acoustic and medical imaging expertise for the subsea market and expand capabilities for larger Defense contracts[62](index=62&type=chunk) | PAL Contribution | 3 Months Ended July 31, 2025 | 9 Months Ended July 31, 2025 | | :----------------------------- | :--------------------------- | :--------------------------- | | Revenues | $1,458,536 | $4,069,866 | | Net Income | $248,948 | $811,785 | - A contingent liability of **$158,872** (**75%** of year one Earn Out) was recorded for PAL, exceeding original financial expectations, with the remaining **25%** contingent on Q4 revenue targets[68](index=68&type=chunk) [NOTE 10 – Concentrations](index=21&type=section&id=NOTE%2010%20%E2%80%93%20Concentrations) - For the three months ended July 31, 2025, two customers generated **27.5%** of net revenues (**$1,942,295**) and accounted for **18.7%** of net receivables (**$723,585**)[75](index=75&type=chunk) - For the nine months ended July 31, 2025, no single customer generated sales exceeding **10%** of net revenues[76](index=76&type=chunk) [NOTE 11 – Recent Accounting Pronouncements](index=21&type=section&id=NOTE%2011%20%E2%80%93%20Recent%20Accounting%20Pronouncements) - ASU 2023-07 (Segment Reporting) will impact segment information reporting starting with the **FY2025 10-K**[78](index=78&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) enhances transparency for specific expense categories, effective for annual periods beginning after December 15, 2026 (**FY2028 10-K**)[79](index=79&type=chunk) - ASU 2023-09 (Improvements to Income Tax Disclosures) will enhance income tax transparency, effective for annual periods beginning after December 15, 2024 (**FY2026 10-K**), expected to materially impact disclosures but not financial condition[80](index=80&type=chunk) [NOTE 12 – Goodwill and Identified Intangible Assets](index=21&type=section&id=NOTE%2012%20%E2%80%93%20Goodwill%20and%20Identified%20Intangible%20Assets) | Metric | July 31, 2025 | October 31, 2024 | | :-------------------------- | :-------------------- | :-------------------- | | Total Intangible Assets, net | $3,302,087 | $3,687,034 | | Goodwill | $3,639,334 | $3,639,334 | | Amortization of Intangible Assets | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Amortization Expense | $136,259 | $13,020 | $394,566 | $46,887 | - Goodwill represents future economic benefits from acquired intangible assets not separately recognized, including an experienced workforce and expected synergies from integrating PAL's products[70](index=70&type=chunk) [NOTE 13 – Earnings Per Share](index=23&type=section&id=NOTE%2013%20%E2%80%93%20Earnings%20Per%20Share) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.11 | $0.11 | $0.28 | $0.30 | | Diluted EPS | $0.11 | $0.11 | $0.27 | $0.29 | | Basic Weighted Average Common Shares | 11,237,654 | 11,173,819 | 11,226,665 | 11,157,799 | | Diluted Outstanding Shares | 11,304,549 | 11,311,236 | 11,293,560 | 11,295,216 | [NOTE 14 – 2017 and 2021 Stock Incentive Plans](index=23&type=section&id=NOTE%2014%20%E2%80%93%202017%20and%202021%20Stock%20Incentive%20Plans) - The 2017 and 2021 Stock Incentive Plans (SIPs) aim to attract and retain qualified individuals through equity participation[86](index=86&type=chunk) - As of July 31, 2025, **1,376,848 shares** were available for future issuance under the 2017 and 2021 Plans[90](index=90&type=chunk) | Stock Compensation Expense | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Expense | $29,773 | $37,081 | $196,156 | $86,843 | [NOTE 15 – Segment Analysis](index=25&type=section&id=NOTE%2015%20%E2%80%93%20Segment%20Analysis) - The company operates three reportable segments: Marine Technology, Acoustic Sensors and Materials (PAL), and Marine Engineering, managed separately by operations, resource allocation, and markets[92](index=92&type=chunk) - The Marine Technology Business is the core, supplying real-time **3D volumetric imaging sonars (Echoscope)** and **DAVD** diving solutions to the underwater/subsea market[96](index=96&type=chunk) - PAL, acquired October 29, 2024, supplies acoustic sensors and materials to medical, subsea, defense, and research markets, also providing **ISO/IEC 17025** accredited calibration services[97](index=97&type=chunk) | Segment Net Revenues (3 Months Ended July 31) | 2025 | 2024 | | :-------------------------------------------- | :----------- | :----------- | | Marine Technology Business | $3,984,475 | $3,048,544 | | Acoustic Sensors and Materials Business (PAL) | $1,458,536 | N/A | | Marine Engineering Business | $1,621,784 | $2,428,000 | | **Total Net Revenues** | **$7,064,795** | **$5,476,544** | | Segment Net Revenues (9 Months Ended July 31) | 2025 | 2024 | | :-------------------------------------------- | :----------- | :----------- | | Marine Technology Business | $10,138,374 | $10,116,024 | | Acoustic Sensors and Materials Business (PAL) | $4,069,866 | N/A | | Marine Engineering Business | $5,083,729 | $5,144,889 | | **Total Net Revenues** | **$19,291,969** | **$15,260,913** | [NOTE 16 – Disaggregation of Revenue](index=30&type=section&id=NOTE%2016%20%E2%80%93%20Disaggregation%20of%20Revenue) - Net sales are attributed to geographic areas by customer location and disaggregated by major goods/service lines[108](index=108&type=chunk) | Revenue by Geography (3 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :---------------------------------- | :---------------- | :---------- | :----------------- | :---------- | | Americas | $1,696,334 | $299,861 | $583,940 | $2,580,135 | | Europe | $157,227 | $619,730 | $1,037,844 | $1,814,801 | | Australia/Asia | $1,079,902 | $501,892 | $0 | $1,581,794 | | Middle East/Africa | $1,051,012 | $37,053 | $0 | $1,088,065 | | **Total Revenues** | **$3,984,475** | **$1,458,536** | **$1,621,784** | **$7,064,795** | | Revenue by Goods/Service (3 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :------------------------------------ | :---------------- | :---------- | :----------------- | :---------- | | Equipment Sales | $2,746,255 | $1,169,611 | $269,036 | $4,184,902 | | Equipment Rentals | $304,617 | $3,084 | $0 | $307,701 | | Software Sales | $236,803 | $0 | $0 | $236,803 | | Engineering Parts | $0 | $0 | $1,100,991 | $1,100,991 | | Services | $696,800 | $285,841 | $251,757 | $1,234,398 | | **Total Revenues** | **$3,984,475** | **$1,458,536** | **$1,621,784** | **$7,064,795** | | Revenue by Geography (9 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :---------------------------------- | :---------------- | :---------- | :----------------- | :---------- | | Americas | $3,474,671 | $732,083 | $2,416,400 | $6,623,154 | | Europe | $734,877 | $1,816,858 | $2,667,329 | $5,219,064 | | Australia/Asia | $4,871,995 | $1,422,636 | $0 | $6,294,631 | | Middle East/Africa | $1,056,831 | $98,289 | $0 | $1,155,120 | | **Total Revenues** | **$10,138,374** | **$4,069,866** | **$5,083,729** | **$19,291,969** | | Revenue by Goods/Service (9 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :------------------------------------ | :---------------- | :---------- | :----------------- | :---------- | | Equipment Sales | $7,800,318 | $3,467,688 | $456,547 | $11,724,553 | | Equipment Rentals | $697,851 | $3,084 | $0 | $700,935 | | Software Sales | $585,651 | $59,600 | $0 | $645,251 | | Engineering Parts | $0 | $0 | $3,921,190 | $3,921,190 | | Services | $1,054,554 | $539,494 | $705,992 | $2,300,040 | | **Total Revenues** | **$10,138,374** | **$4,069,866** | **$5,083,729** | **$19,291,969** | [NOTE 17 – Income Taxes](index=33&type=section&id=NOTE%2017%20%E2%80%93%20Income%20Taxes) - Interim tax provision is estimated using the annual effective tax rate, adjusted for discrete items, and subject to variation from pre-tax income and jurisdictional mix[113](index=113&type=chunk)[114](index=114&type=chunk) - The **2025 Tax Act** reinstates **100%** accelerated depreciation and immediate expensing of domestic R&D costs, retroactive to January 20, 2025, and January 1, 2025, respectively, with no major changes to U.S. cash taxes anticipated for 2025[115](index=115&type=chunk) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Effective Tax Rate | 16.9% | 21.9% | 17.1% | 18.1% | | Income Tax Provision | $268,786 | $325,625 | $692,361 | $482,683 | | Deferred Tax Benefit (Expense) | $8,022 | $(30,963) | $52,864 | $(252,938) | [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and operations, highlighting performance factors, critical accounting policies, financial comparisons, liquidity, capital resources, and the impact of inflation and foreign currency fluctuations [General Overview](index=34&type=section&id=General%20Overview) - Consolidated net revenue in the Current Quarter was **$7,064,795**, with **63.5%** (**$4,484,660**) derived from outside the United States[122](index=122&type=chunk) - Weak demand for European rental solutions in the Current Quarter stemmed from changes in U.S. renewables policy, but new U.S. policy prioritizing domestic Oil & Gas and increased European defense spending are expected to be favorable[123](index=123&type=chunk) - The Marine Technology Business, featuring **Echoscope 3D sonar** and **DAVD** augmented reality diving solutions, is critical for growth, particularly in the evolving Defense market for underwater vehicles[125](index=125&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - The **DAVD** untethered solution is an early-stage commercial offering with **12+ US Navy commands** and is being evaluated by two foreign navies, targeting over **14,000 divers** in the USA alone[135](index=135&type=chunk)[136](index=136&type=chunk) - Inflation rates for the **12 months** preceding July 2025 were Denmark **2.3%**, UK **4.2%**, and USA **2.7%**[140](index=140&type=chunk)[145](index=145&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) - Financial statements are prepared under GAAP, requiring management estimates for assets, liabilities, revenue, and expenses, where actual results may materially differ[147](index=147&type=chunk) - Revenue recognition follows Topic 606, with specific methods for Marine Technology (sales/rentals), PAL (sensors/materials), and Marine Engineering (services)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Assets and liabilities from business acquisitions are recorded at fair value, with any excess purchase price recorded as goodwill, requiring management estimates for identifiable intangibles[153](index=153&type=chunk) - Inventory is valued at cost, with obsolescence adjustments based on estimates of future demand and sales prices to reflect the lower of cost or net realizable value[154](index=154&type=chunk) [Consolidated Results of Operations for the Current Quarter compared to the Previous Quarter](index=40&type=section&id=Consolidated%20Results%20of%20Operations%20for%20the%20Current%20Quarter%20compared%20to%20the%20Previous%20Quarter) | Metric | Current Quarter (July 31, 2025) | Previous Quarter (July 31, 2024) | Change | | :-------------------------------- | :------------------------------ | :------------------------------ | :------- | | Consolidated Net Revenues | $7,064,795 | $5,476,544 | +29.0% | | Gross Profit | $4,823,756 | $4,048,538 | +19.1% | | Gross Profit Margin | 68.3% | 73.9% | -5.6 pp | | Total Operating Expenses | $3,443,777 | $2,657,764 | +29.6% | | Income From Operations | $1,379,979 | $1,390,774 | -0.8% | | Pre-tax Income | $1,543,749 | $1,631,246 | -5.4% | | Net Income | $1,282,985 | $1,274,658 | +0.7% | - Foreign currency translation increased net revenue by **$264,175** and foreign subsidiary costs by **$224,023** in the Current Quarter due to USD weakening[158](index=158&type=chunk)[159](index=159&type=chunk) | Products Business Sales (3 Months Ended July 31) | 2025 | 2024 | Change | | :----------------------------------------------- | :----------- | :----------- | :------- | | Equipment Sales | $2,746,255 | $1,349,011 | +103.6% | | Equipment Rental | $304,617 | $805,259 | -62.2% | | Software Sales | $236,803 | $251,488 | -5.8% | | Services | $696,800 | $642,786 | +8.4% | | **Total Net Sales** | **$3,984,475** | **$3,048,544** | **+30.7%** | - Marine Engineering Business revenue decreased by **33.2%** due to delays in orders from prime defense contractors[163](index=163&type=chunk)[165](index=165&type=chunk) - SG&A expenses increased by **32.8%** to **$2,871,309**, driven by PAL's inclusion (**$451,588**), a **$158,872** contingent liability for PAL Earn Outs, and a significant increase in non-cash charges[176](index=176&type=chunk)[179](index=179&type=chunk) [Consolidated Results of Operations for the Current Nine Month Period compared to the Previous Nine Month Period](index=46&type=section&id=Consolidated%20Results%20of%20Operations%20for%20the%20Current%20Nine%20Month%20Period%20compared%20to%20the%20Previous%20Nine%20Month%20Period) | Metric | Current Nine Month Period (July 31, 2025) | Previous Nine Month Period (July 31, 2024) | Change | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------- | | Consolidated Net Revenues | $19,291,969 | $15,260,913 | +26.4% | | Gross Profit | $12,749,507 | $10,873,708 | +17.2% | | Gross Profit Margin | 66.1% | 71.3% | -5.2 pp | | Income From Operations | $3,129,685 | $3,296,541 | -5.1% | | Pre-tax Income | $3,744,219 | $4,055,405 | -7.7% | | Net Income | $3,104,722 | $3,319,784 | -6.5% | - The increase in consolidated net revenue is attributable to PAL's inclusion, contributing **$4,069,866**; without PAL, net revenue would have been lower by **0.3%**[190](index=190&type=chunk) - Marine Technology Business rental revenue decreased by **63.0%** due to weak demand from reduced offshore renewables project activities by major developers[191](index=191&type=chunk)[200](index=200&type=chunk) | Products Business Sales (9 Months Ended July 31) | 2025 | 2024 | Change | | :----------------------------------------------- | :----------- | :----------- | :------- | | Equipment Sales | $7,800,318 | $5,730,411 | +36.1% | | Equipment Rental | $697,851 | $1,885,732 | -63.0% | | Software Sales | $585,651 | $653,759 | -10.4% | | Services | $1,054,554 | $1,846,122 | -42.9% | | **Total Net Sales** | **$10,138,374** | **$10,116,024** | **+0.2%** | - SG&A expenses increased by **29.1%** to **$7,814,233**, driven by PAL's inclusion (**$1,298,765**), a **$158,872** contingent liability for PAL Earn Outs, and increased non-cash charges (amortization up **741.5%**, stock-based compensation up **125.9%**)[207](index=207&type=chunk)[210](index=210&type=chunk)[212](index=212&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric (as of July 31, 2025) | Amount | | :--------------------------- | :----------- | | Cash and Cash Equivalents | $26,196,439 | | Working Capital | $43,239,402 | | Stockholders' Equity | $57,271,746 | | Accumulated Deficit | $(4,301,769) | - Operating activities provided **$4,307,865** in cash for the nine months ended July 31, 2025[220](index=220&type=chunk) - The company holds a **$4,000,000** revolving line of credit with HSBC NA, with a **$0** outstanding balance as of July 31, 2025, expiring November 26, 2025[221](index=221&type=chunk) - Management believes current cash flow from operations, cash and cash equivalents, and the revolving line of credit are sufficient to meet anticipated cash needs for the next **twelve months**[222](index=222&type=chunk) [Inflation and Foreign Currency](index=52&type=section&id=Inflation%20and%20Foreign%20Currency) - The company's consolidated financial results are impacted by foreign exchange rate fluctuations due to operations in multiple currencies (USD, GBP, DKK, AUD, INR)[223](index=223&type=chunk)[224](index=224&type=chunk) - USD weakening against the British Pound and Danish Kroner in the Current Quarter resulted in higher translated foreign revenues and associated costs[155](index=155&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) | Impact of FX Changes (3 Months Ended July 31, 2025) | Total Effect (USD) | | :-------------------------------------------------- | :----------------- | | Net Revenues | +$264,175 | | Net Costs | +$224,023 | | Net Profit (Losses) from Operations | +$40,152 | | Assets | +$1,053,871 | | Liabilities | $(116,514) | | Net Assets | +$937,357 | | Impact of FX Changes (9 Months Ended July 31, 2025) | Total Effect (USD) | | :-------------------------------------------------- | :----------------- | | Net Revenues | +$247,038 | | Net Costs | +$250,847 | | Net Profit (Losses) from Operations | $(3,809) | | Assets | +$1,053,872 | | Liabilities | $(116,514) | | Net Assets | +$937,358 | [Off-Balance Sheet Arrangements](index=54&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company does not have any off-balance sheet arrangements[229](index=229&type=chunk) [Item 3: Quantitative and Qualitative Disclosures about Market Risks](index=54&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) Quantitative and qualitative disclosures about market risks are not required for smaller reporting companies - Not required for smaller reporting companies[230](index=230&type=chunk) [Item 4: Controls and Procedures](index=54&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management, including the CEO and Interim CFO, concluded that disclosure controls and procedures were effective as of July 31, 2025, with no material changes in internal controls over financial reporting during the period - As of July 31, 2025, the CEO and Interim CFO concluded the company's disclosure controls and procedures were effective[233](index=233&type=chunk) - No material changes occurred in internal controls over financial reporting during the reporting period[234](index=234&type=chunk) PART II – Other Information [Item 1: Legal Proceedings](index=56&type=section&id=Item%201%3A%20Legal%20Proceedings) The company is not involved in any legal proceedings expected to materially adversely affect its business, financial condition, or operating results - The company is not aware of any legal proceedings expected to materially adversely affect its business, financial condition, or operating results[236](index=236&type=chunk) [Item 1A: Risk Factors](index=56&type=section&id=Item%201A%3A%20Risk%20Factors) This item is not required for smaller reporting companies - Not required for smaller reporting companies[237](index=237&type=chunk) [Item 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities and use of proceeds to report[237](index=237&type=chunk) [Item 3: Default Upon Senior Securities](index=56&type=section&id=Item%203%3A%20Default%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities to report[237](index=237&type=chunk) [Item 4: Mine Safety Disclosures](index=56&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[238](index=238&type=chunk) [Item 5: Other Information](index=56&type=section&id=Item%205%3A%20Other%20Information) No other information was reported under this item - No other information was reported under this item[239](index=239&type=chunk) [Item 6: Exhibits](index=56&type=section&id=Item%206%3A%20Exhibits) This section lists exhibits filed with the 10-Q report, including CEO and CFO certifications and various Inline XBRL documents - The report includes CEO and CFO certifications, Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase), and the Cover Page Interactive Data File[239](index=239&type=chunk) [Signatures](index=57&type=section&id=Signatures) The report was officially signed on September 15, 2025, by Annmarie Gayle, CEO, and Gayle Jardine, Interim CFO - The report was signed by Annmarie Gayle (CEO) and Gayle Jardine (Interim CFO) on September 15, 2025[242](index=242&type=chunk)