[Executive Summary & Outlook](index=1&type=section&id=Executive%20Summary%20%26%20Outlook) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Drilling Tools International Corp. (DTI) reported its second quarter 2025 financial results, highlighting consolidated revenue, net loss, and key adjusted performance metrics | Metric | Q2 2025 | | :--- | :--- | | Total Revenue | $39.4 million | | Tool Rental Revenue | $32.8 million | | Product Sales Revenue | $6.7 million | | Net Loss | ($2.4 million) | | Adjusted Net Loss | ($0.7 million) | | Diluted EPS | ($0.07) | | Adjusted Diluted EPS | ($0.02) | | Adjusted EBITDA | $9.3 million | | Adjusted Free Cash Flow | $1.8 million | | Net Debt (as of June 30, 2025) | $55.8 million | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlights Q2 2025 performance exceeding forecasts despite market headwinds, driven by diversified geographic growth and ongoing cost-cutting initiatives - Q2 performance was solid despite lower commodity prices and rig count reductions in the US, exceeding internal forecasts and marking the first positive Adjusted Free Cash Flow for a second quarter since going public[4](index=4&type=chunk) - Recent acquisitions have diversified the company's geographic footprint, with the Eastern Hemisphere segment's revenue growing **46% quarter-over-quarter**, now contributing approximately **14% of total revenue**[5](index=5&type=chunk) - Despite market softness, consolidated Revenue and Adjusted EBITDA grew by **5%** and **4% year-over-year**, respectively[5](index=5&type=chunk) - The company is implementing a program to cut expenses by approximately **$6 million** in 2025 to align with customer activity levels and is on track to meet or exceed this goal[6](index=6&type=chunk) [Full Year 2025 Outlook](index=1&type=section&id=Full%20Year%202025%20Outlook) DTI maintains its full-year 2025 guidance, projecting revenue and Adjusted EBITDA ranges amidst anticipated market uncertainty and pricing pressures | Metric | Low Range | High Range | | :--- | :--- | :--- | | Revenue | $145 million | $165 million | | Adjusted EBITDA | $32 million | $42 million | | Adjusted EBITDA Margin | 22% | 25% | | Adjusted Free Cash Flow | $14 million | $19 million | [Financial Statements](index=3&type=section&id=Financial%20Statements) [Consolidated Statements of Comprehensive Income (Loss)](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company's comprehensive income statements show Q2 2025 revenue growth driven by tool rentals, alongside a net loss due to increased costs and a goodwill impairment charge year-to-date Q2 Performance (Three Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $39,421 | $37,533 | +5.0% | | Tool Rental Revenue | $32,756 | $28,328 | +15.6% | | Product Sale Revenue | $6,665 | $9,205 | -27.6% | | Net Income (Loss) | $(2,407) | $365 | N/A | | Diluted EPS | $(0.07) | $0.01 | N/A | YTD Performance (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $82,301 | $74,507 | +10.5% | | Goodwill Impairment | $1,901 | $0 | N/A | | Net Income (Loss) | $(4,076) | $3,492 | N/A | | Diluted EPS | $(0.11) | $0.12 | N/A | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, DTI's balance sheet shows a slight increase in total assets, a significant decrease in cash, and a rise in total liabilities primarily from increased revolving credit | Balance Sheet Item (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash | $1,145 | $6,185 | | Total Current Assets | $66,134 | $68,076 | | Total Assets | $230,279 | $222,431 | | Revolving line of credit | $33,140 | $27,142 | | Total Liabilities | $107,757 | $102,472 | | Total Shareholders' Equity | $122,522 | $119,959 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, DTI generated positive operating cash flow, but significant investing activities, including acquisitions and capital expenditures, led to a net decrease in cash Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $4,626 | $4,393 | | Net cash from investing activities | $(12,141) | $(26,728) | | Net cash from financing activities | $2,448 | $23,495 | | Net change in cash | $(5,040) | $783 | | Cash at end of period | $1,145 | $6,786 | [Non-GAAP Financial Measures and Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) [Definitions of Non-GAAP Measures](index=7&type=section&id=Definitions%20of%20Non-GAAP%20Measures) The company defines its non-GAAP financial measures, including Adjusted EBITDA, Adjusted Free Cash Flow, Net Debt, and Adjusted Net Income (Loss), which are used to provide supplemental insights into ongoing operational performance - Adjusted EBITDA is defined as net earnings (loss) before interest, taxes, depreciation, and amortization, further adjusted for items like goodwill impairment, stock-based compensation, and transaction costs[22](index=22&type=chunk) - Adjusted Free Cash Flow is defined as Adjusted EBITDA less Gross Capital Expenditures[8](index=8&type=chunk)[24](index=24&type=chunk) - Adjusted Net Income (Loss) excludes items such as goodwill impairment, restructuring charges, and transaction costs to better reflect ongoing performance[26](index=26&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) DTI provides detailed reconciliations from GAAP to non-GAAP measures, including Adjusted EBITDA, Adjusted Net Income (Loss), and full-year outlook projections [Reconciliation to Adjusted EBITDA and Adjusted Free Cash Flow](index=8&type=section&id=Reconciliation%20to%20Adjusted%20EBITDA%20and%20Adjusted%20Free%20Cash%20Flow) Q2 2025 saw Adjusted EBITDA increase and Adjusted Free Cash Flow significantly improve, primarily due to reduced capital expenditures, with year-to-date figures also provided Q2 Reconciliation Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $(2,407) | $365 | | Adjusted EBITDA | $9,332 | $8,965 | | Adjusted Free Cash Flow | $1,781 | $(1,119) | [Reconciliation to Adjusted Net Income (Loss)](index=10&type=section&id=Reconciliation%20to%20Adjusted%20Net%20Income%20%28Loss%29) Q2 2025 Adjusted Net Loss was **$0.7 million** or **($0.02) per diluted share**, after accounting for various adjustments, compared to an Adjusted Net Income in the prior year Q2 Adjusted Net Income (Loss) (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $(2,407) | $365 | | Adjusted Net Income (Loss) | $(726) | $2,968 | | Adjusted Diluted EPS | $(0.02) | $0.10 | [Reconciliation of Full Year 2025 Outlook](index=11&type=section&id=Reconciliation%20of%20Full%20Year%202025%20Outlook) The full-year 2025 outlook reconciles the projected Net Loss to the Adjusted EBITDA and Adjusted Free Cash Flow guidance, detailing key adjustments FY 2025 Outlook Reconciliation (in thousands) | Metric | Low Range | High Range | | :--- | :--- | :--- | | Estimated Net Loss | $(8,500) | $(3,000) | | Adjusted EBITDA | $32,000 | $42,000 | | Adjusted Free Cash Flow | $14,000 | $19,000 |

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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-42513 AARDVARK THERAPEUTICS, INC. (Exact name of Registrant as specified in its Charter) | Delaware | 82-1606367 | | --- | --- | ...

Part I: Financial Information [Financial Statements](index=4&type=section&id=Item%201%E2%80%94%20Financial%20Statements%3A) This section presents the unaudited condensed consolidated financial statements for Q2 2025 and 2024, showing increased revenue, reduced net loss, and improved cash and equity from financing activities Condensed Consolidated Balance Sheets | Financial Metric | June 30, 2025 (Unaudited) ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | **Assets** | | | | Total Current Assets | $4,035,230 | $1,886,958 | | Total Assets | $10,516,551 | $8,615,560 | | **Liabilities & Equity** | | | | Total Current Liabilities | $3,531,910 | $4,553,536 | | Total Liabilities | $3,664,374 | $4,843,529 | | Total Stockholders' Equity | $6,852,177 | $3,772,031 | Condensed Consolidated Statements of Operations | Metric (Q2) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Total Revenues | $1,696,907 | $1,141,286 | | Gross Profit | $1,232,727 | $879,014 | | Operating Loss | $(1,083,850) | $(1,654,086) | | Net Loss | $(1,167,396) | $(1,666,950) | | Basic and Diluted Loss per Share | $(0.20) | $(1.00) | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,715,324) | $(1,123,533) | | Net cash used in investing activities | $(6,048) | $(1,869) | | Net cash provided in financing activities | $3,493,505 | $1,912,408 | | **Net Increase in Cash** | **$1,837,741** | **$748,951** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide critical context, including a 'Going Concern' warning, disaggregated revenue showing strong EMESA hardware sales, significant customer concentration, and details on financing activities - The company's history of significant losses, negative cash flow from operations, and dependence on obtaining additional financing raises **substantial doubt** about its ability to continue as a going concern[29](index=29&type=chunk)[30](index=30&type=chunk) - In Q2 2025, revenue from the EMESA region (Europe, Middle East, South America) grew significantly to **$969,437** from **$235,987** in Q2 2024, primarily driven by hardware sales[31](index=31&type=chunk) - The company has significant customer concentration, with two customers accounting for **47%** of Q2 2025 revenue and **49%** of current accounts receivable at June 30, 2025[68](index=68&type=chunk) - In January 2025, the company raised approximately **$3.8 million** in gross proceeds through a warrant exercise agreement with an institutional investor[64](index=64&type=chunk) [Management's Discussion and Analysis (MD&A)](index=23&type=section&id=Item%202%E2%80%94Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Q2 2025 performance, highlighting a 49% revenue increase driven by hardware sales, narrowed operating loss, and reiterates the 'going concern' risk due to ongoing financing needs - The company's strategic outlook focuses on expanding its role in the **Identity Access Management (IAM)** market, particularly within government, financial services, higher education, and healthcare[82](index=82&type=chunk)[83](index=83&type=chunk) - The company requires approximately **$812,000** per month for operations and expects to need additional financing within the next twelve months unless it can generate sufficient positive cash flow[117](index=117&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section details Q2 2025 results, showing a 49% revenue increase driven by hardware sales, and a smaller operating loss due to decreased expenses Revenue (Q2 2025 vs Q2 2024) | Revenue (Q2 2025 vs Q2 2024) | $ Change ($) | % Change | | :--- | :--- | :--- | | Service | $38,427 | 14% | | License | $31,862 | 4% | | Hardware | $485,332 | 581% | | **Total Revenue** | **$555,621** | **49%** | - Selling, general and administrative (SG&A) expenses for Q2 2025 decreased by **13%** to **$1.68M** from **$1.94M** in Q2 2024, due to reductions in administration, sales personnel costs, and professional services fees[95](index=95&type=chunk) Revenue (H1 2025 vs H1 2024) | Revenue (H1 2025 vs H1 2024) | $ Change ($) | % Change | | :--- | :--- | :--- | | Service | $97,904 | 20% | | License | $(819,814) | -30% | | Hardware | $703,487 | 696% | | **Total Revenue** | **$(18,423)** | **-1%** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved due to warrant exercises, but ongoing operational cash burn and insufficient resources necessitate additional financing for the next twelve months - Net cash provided by financing activities was **$3.5M** for the six months ended June 30, 2025, primarily from **$3.8M** in proceeds from the exercise of warrants[109](index=109&type=chunk) - The company has approximately **$3.1 million** of fully reserved inventory purchased for delayed projects in Nigeria and is exploring other markets to sell the product and generate cash[117](index=117&type=chunk) - The company's long-term viability depends on the successful commercialization of its technologies and its ability to obtain adequate financing, as current resources are insufficient to fund operations for the next twelve months[118](index=118&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203%E2%80%94Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) As a smaller reporting company, BIO-key is not required to provide disclosures regarding market risk - The company is not required to provide information regarding market risk as it qualifies as a smaller reporting company[119](index=119&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204%E2%80%94Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[120](index=120&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[121](index=121&type=chunk) Part II: Other Information [Legal Proceedings](index=35&type=section&id=Item%201%E2%80%94Legal%20Proceedings.) As of the report date, the company is not a party to any pending lawsuits - The company is not currently a party to any pending lawsuits[123](index=123&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202%E2%80%94Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During Q2 2025, the company issued common stock in two transactions to an accredited investor, exchanging shares for $400,000 in promissory notes - On May 30, 2025, the company issued 259,403 shares of common stock in exchange for a **$200,000** promissory note[125](index=125&type=chunk) - On June 9, 2025, the company issued 239,034 shares of common stock in exchange for a **$200,000** promissory note[126](index=126&type=chunk) [Other Items (1A, 3, 4, 5, 6)](index=35&type=section&id=Other%20Items) This section confirms that as a smaller reporting company, Risk Factors are not required, and reports no defaults on senior securities or changes in Rule 10b5-1 trading plans - As a smaller reporting company, BIO-key is not required to provide Risk Factors in its 10-Q[124](index=124&type=chunk) - The company reports no defaults upon senior securities[127](index=127&type=chunk)

```markdown PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents SeaStar Medical Holding Corporation's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and financial activities for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased from **$4.66 million** to **$8.38 million**, with stockholders' equity improving from a **$2.18 million deficit** to **$3.34 million positive** due to decreased liabilities **Condensed Consolidated Balance Sheets (in thousands)** | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--------------------------------- | :------------------------ | :---------------- | | Cash | $6,302 | $1,819 | | Total current assets | $7,647 | $3,766 | | Total assets | $8,383 | $4,658 | | Total current liabilities | $5,042 | $6,841 | | Total liabilities | $5,042 | $6,841 | | Total stockholders' equity/(deficit) | $3,341 | $(2,183) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2025, net revenue was **$631 thousand** and gross profit **$604 thousand**, with net loss significantly decreasing to **$5.77 million** from **$15.93 million** due to reduced operating and other expenses **Condensed Consolidated Statements of Operations (in thousands)** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $338 | $0 | $631 | $0 | | Gross profit | $311 | $0 | $604 | $0 | | Research and development | $1,037 | $2,334 | $3,468 | $4,031 | | General and administrative | $1,030 | $2,335 | $2,716 | $4,588 | | Total operating expenses | $2,067 | $4,669 | $6,184 | $8,619 | | Loss from operations | $(1,756) | $(4,669) | $(5,580) | $(8,619) | | Total other income (expense), net | $(246) | $1,436 | $(191) | $(7,311) | | Net loss | $(2,002) | $(3,236) | $(5,774) | $(15,933) | | Net loss per share (basic and diluted) | $(0.18) | $(1.03) | $(0.58) | $(5.36) | [Condensed Consolidated Statements of Changes in Stockholders' Equity/(Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%2F%28Deficit%29) Total stockholders' equity improved from a **$2.18 million deficit** to a **$3.34 million positive** by June 30, 2025, primarily driven by over **$10 million** in capital raises from equity offerings and warrant exercises **Changes in Stockholders' Equity/(Deficit) (in thousands)** | Metric | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :---------------- | :---------------- | | Balance, Stockholders' Equity/(Deficit) | $(2,183) | $3,341 | | Issuance of shares - exercise of warrants | $0 | $2 | | Issuance of shares - equity offering (net) | $0 | $10,734 | | Issuance of shares - SEPA commitment fee | $0 | $298 | | Stock-based compensation | $0 | $264 | | Net loss | $(3,772) (Q1 2025) | $(2,002) (Q2 2025) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities decreased to **$5.66 million**, while financing activities provided **$10.14 million**, leading to a **$4.48 million** net cash increase and a **$6.30 million** ending cash balance **Condensed Consolidated Statements of Cash Flows (in thousands)** | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,661) | $(6,312) | | Net cash provided by financing activities | $10,144 | $7,315 | | Net increase in cash | $4,483 | $1,003 | | Cash, beginning of period | $1,819 | $176 | | Cash, end of period | $6,302 | $1,179 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) These notes detail **SeaStar Medical's** business, accounting policies, financial instruments, equity, and contingencies, covering **QUELIMMUNE's** commercial launch, financing, legal proceedings, and **going concern** status [Note 1. Description of Business](index=7&type=section&id=Note%201.%20Description%20of%20Business) The company develops and commercializes the **Selective Cytopheretic Device (SCD)** for inflammation, with its pediatric version, **QUELIMMUNE**, receiving **FDA approval** and commercial launch in 2024, despite an **accumulated deficit of $145.3 million** and **going concern** doubts - **SeaStar Medical** is engaged in the research, development, and commercialization of a platform medical device technology (**Selective Cytopheretic Device, SCD**) designed to modulate inflammation[19](index=19&type=chunk) - The company received **FDA HDE approval** for its pediatric **SCD therapy (QUELIMMUNE)** on February 21, 2024, and shipped its first commercial **units** in July 2024[20](index=20&type=chunk) - The company has an **accumulated deficit of $145.3 million** as of June 30, 2025, and **cash of $6.3 million**, leading to **substantial doubt** about its ability to continue as a **going concern** for at least 12 months[29](index=29&type=chunk) - The company effected a **1-for-25 reverse stock split** on June 7, 2024, which proportionally adjusted most stock **options** and **warrants**, except for certain "**Unadjusted Warrants**" that retained an **$11.50 exercise price** and require **25 warrants per share**[24](index=24&type=chunk)[26](index=26&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) The company recognizes revenue based on **FOB Destination** for **QUELIMMUNE** sales, expenses pre-July 2024 inventory as **R&D**, accounts for **contract research services** as **reimbursed expense**, and uses the **extended transition period** as an **emerging growth company** - The company recognizes revenue when a customer obtains control of promised goods or services, primarily based on a **freight-on-board destination ("FOB Destination")** requirement for **QUELIMMUNE** sales[41](index=41&type=chunk)[44](index=44&type=chunk) - Inventory purchased prior to July 2024 for research/clinical trials was expensed as **R&D**; **units** sold after this period now recognize **cost of goods sold**[46](index=46&type=chunk)[47](index=47&type=chunk) - The company accounts for funds received from an agreement to provide **contract research services** as a **reimbursed expense**, offsetting **research and development expense**[48](index=48&type=chunk) - As an "**emerging growth company**," **SeaStar Medical** has elected to use the **extended transition period** for complying with new or revised accounting standards[49](index=49&type=chunk) [Note 3. Revenues and Contract Obligations](index=12&type=section&id=Note%203.%20Revenues%20and%20Contract%20Obligations) The company's sales are exclusively within the **United States**, with **contract liabilities** at **$0** for the six months ended June 30, 2025 **Revenues and Contract Liabilities (in thousands)** | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Contract liabilities, beginning of period | $0 | $100 | | Consideration received | $0 | $450 | | Consideration refunded | $0 | $(550) | | Revenue | $0 | $0 | | Contract liabilities, end of period | $0 | $0 | - All of the Company's sales are located within the **United States**[54](index=54&type=chunk) [Note 4. Accounts Receivable, net](index=12&type=section&id=Note%204.%20Accounts%20Receivable%2C%20net) **Accounts Receivable, Net** increased to **$217 thousand** by June 30, 2025, after accounting for **$8 thousand** in **expected credit losses** **Accounts Receivable, net (in thousands)** | Metric | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :---------------- | :---------------- | | Accounts Receivable, Gross | $112 | $225 | | Expected Credit Losses | $0 | $(8) | | Accounts Receivable, Net | $112 | $217 | [Note 5. Accrued Expenses](index=12&type=section&id=Note%205.%20Accrued%20Expenses) **Total accrued expenses** decreased to **$1.883 million** by June 30, 2025, from **$3.188 million** at December 31, 2024, driven by reductions in **accrued bonus** and **director compensation** **Accrued Expenses (in thousands)** | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :---------------- | :---------------- | | Accrued bonus | $625 | $1,391 | | Accrued director compensation | $146 | $391 | | Accrued research and development | $871 | $1,023 | | Other | $241 | $383 | | Total accrued expenses | $1,883 | $3,188 | [Note 6. Notes Payable](index=13&type=section&id=Note%206.%20Notes%20Payable) The company fully paid its **$0.7 million insurance financing arrangement** by June 30, 2025 - The Company paid the entire balance of its **$0.7 million insurance financing arrangement** by June 30, 2025[59](index=59&type=chunk) [Note 7. Equity Transactions](index=13&type=section&id=Note%207.%20Equity%20Transactions) The company raised approximately **$4.0 million** in gross proceeds from a **public offering** in June 2025, entered a **SEPA** for up to **$15.0 million** in common stock, and raised **$6.0 million** from a **registered direct offering** in February 2025 - In June 2025, the Company completed a **public offering**, issuing common stock and various **warrants**, raising approximately **$4.0 million** in gross proceeds[60](index=60&type=chunk)[61](index=61&type=chunk) - On April 25, 2025, the Company entered into a **Standby Equity Purchase Agreement (SEPA)** with **Lincoln Park Capital Fund, LLC**, allowing it to sell up to **$15.0 million** in common stock, with a commitment fee of **236,406 shares**. No capital has been raised from the **SEPA** yet[65](index=65&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk) - In February 2025, the Company completed a **registered direct offering** and concurrent **private placement**, issuing common stock and **warrants**, raising approximately **$6.0 million** in gross proceeds[72](index=72&type=chunk)[73](index=73&type=chunk) - Through June 30, 2025, the Company raised approximately **$6.8 million** since inception of the **ATM** in August 2024, with **$2.1 million** net raised during the six months ended June 30, 2025[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 8. Warrants](index=15&type=section&id=Note%208.%20Warrants) **Equity classified warrants** significantly increased to **18,624,781** by June 30, 2025, and the company recognized a **$32 thousand gain** from **mark-to-market adjustment** for **liability classified warrants** for the six months ended June 30, 2025 **Warrants Outstanding** | Type | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :---------------- | :---------------- | | Liability Classified Warrants | 249,520 | 249,520 | | Equity Classified Warrants | 18,624,781 | 2,110,305 | | Grand Total | 18,874,301 | 2,359,825 | **Warrant Activity (Six Months Ended June 30, 2025)** | Warrant Type | Issuance | Exercised | Outstanding as of June 30, 2025 | | :--------------------------------- | :---------------- | :---------------- | :-------------------------------- | | June 2025 Warrants | 12,738,463 | 0 | 12,738,463 | | June 2025 Pre-Funded Warrants | 1,218,462 | (1,218,462) | 0 | | February 2025 Warrants | 3,776,471 | 0 | 3,776,471 | | February 2025 Pre-Funded Warrants | 2,816,412 | (2,816,412) | 0 | - The Company incurred a gain of approximately **$16 thousand** and **$32 thousand** from the **mark-to-market adjustment** for all remaining **liability classified warrants** for the three and six months ended June 30, 2025, respectively[85](index=85&type=chunk) [Note 9. Stock-Based Compensation Awards](index=16&type=section&id=Note%209.%20Stock-Based%20Compensation%20Awards) **Total stock-based compensation** was **$264 thousand** for the six months ended June 30, 2025, with **320,205 RSUs** and **11,198 options** outstanding under the **2022 Omnibus Incentive Plan** **Total Stock-Based Compensation Cost (in thousands)** | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $23 | $(7) | $46 | $112 | | General and administrative | $74 | $48 | $218 | $363 | | Total stock-based compensation | $97 | $41 | $264 | $475 | **Stock Options and RSUs Outstanding (June 30, 2025)** | Plan | Options Outstanding | RSUs Outstanding | | :--------------------------------- | :------------------ | :----------------- | | 2022 Omnibus Incentive Plan | 11,198 | 320,205 | | 2019 Stock Incentive Plan | 7,837 | 0 | [Note 10. Commitments and Contingencies](index=20&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) The company is a defendant in a **2024 Securities Class Action Lawsuit** and a **Shareholder Derivative Action**, both alleging **material misstatements**, but has not recognized a **contingent liability** for the Class Action under **ASC 450, Contingencies** - The Company is a defendant in a **putative class action lawsuit** (**Wells v. SeaStar Medical Holding Corporation et al.**, filed July 5, 2024) alleging **material misstatements** regarding **FDA approval timing** and **financial instrument recognition**[98](index=98&type=chunk)[100](index=100&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) - The Company has not recognized a **contingent liability** for the **Class Action** as it does not qualify for recognition criteria under **ASC 450, Contingencies**[100](index=100&type=chunk) [Note 11. Fair Value Measurements](index=21&type=section&id=Note%2011.%20Fair%20Value%20Measurements) The **fair value of liability classified warrants** is categorized as **Level 3**, decreasing from **$33 thousand** at December 31, 2024, to **$1 thousand** at June 30, 2025, due to a **$32 thousand change in fair value** - The **fair value of liability classified warrants** is classified as **Level 3** in the **fair value hierarchy**, using significant unobservable inputs[102](index=102&type=chunk) **Fair Value Measurements of Liability Classified Warrants (in thousands)** | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :---------------- | :---------------- | | Liability classified warrants | $1 | $33 | **Level 3 Roll Forward - Liability Classified Warrants (in thousands)** | Metric | Amount | | :--------------------------------- | :---------------- | | Balance December 31, 2024 | $33 | | Changes in fair value | $(32) | | Balance June 30, 2025 | $1 | [Note 12. Income Taxes](index=22&type=section&id=Note%2012.%20Income%20Taxes) The company has a full **valuation allowance** against its **net deferred tax assets** due to uncertain future profitability, recognizing only a **$3 thousand provision** for **minimum state taxes** - The Company has recorded a full **valuation allowance** against its **net deferred tax assets** due to the uncertainty of future profitable operations[110](index=110&type=chunk) - An insignificant provision for certain **minimum state taxes** of approximately **$3 thousand** was recognized as of June 30, 2025[110](index=110&type=chunk) [Note 13. Net Loss Per Share](index=22&type=section&id=Note%2013.%20Net%20Loss%20Per%20Share) For the six months ended June 30, 2025, **net loss per share** was **$(0.58)** on **9,981,215 weighted-average shares outstanding**, with **19,213,446 potentially dilutive securities** excluded from diluted EPS **Net Loss Per Share (in thousands, except per share amounts)** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(2,002) | $(3,236) | $(5,774) | $(15,933) | | Weighted-average shares outstanding | 11,329,517 | 3,154,782 | 9,981,215 | 2,975,248 | | Basic and diluted net loss per share | $(0.18) | $(1.03) | $(0.58) | $(5.36) | **Potentially Dilutive Securities Excluded from Diluted EPS (as of June 30)** | Security Type | 2025 | 2024 | | :--------------------------------- | :---------------- | :---------------- | | Liability classified warrants | 249,520 | 249,520 | | Equity classified warrants | 18,624,781 | 1,096,085 | | Employee based options | 18,940 | 22,653 | | Unvested restricted stock units | 320,205 | 40,068 | | Total | 19,213,446 | 1,408,326 | [Note 14. Segment Reporting](index=23&type=section&id=Note%2014.%20Segment%20Reporting) The company operates as a **single reportable segment**, the **Device Segment**, focused on **SCDs**, with all sales located within the **United States**, reporting **$631 thousand** in **net revenue** for the six months ended June 30, 2025 - The Company operates as a **single reportable segment**, the **Device Segment**, focused on **SCDs**[115](index=115&type=chunk) - All of the Company's sales are located within the **United States**[117](index=117&type=chunk) **Segment Operating Results (in thousands)** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Revenue | $338 | $0 | $631 | $0 | | Cost of goods sold | $27 | $0 | $27 | $0 | | Gross profit | $311 | $0 | $604 | $0 | | Research and development | $1,037 | $2,334 | $3,468 | $4,031 | | General and administrative | $1,030 | $2,335 | $2,716 | $4,588 | | Total operating expenses | $2,067 | $4,669 | $6,184 | $8,619 | | Loss from operations | $(1,756) | $(4,669) | $(5,580) | $(8,619) | [Note 15. Subsequent Events](index=24&type=section&id=Note%2015.%20Subsequent%20Events) Subsequent events include **public offerings** of common stock and warrants in July 2025, an increase in authorized shares for the **2022 Omnibus Equity Incentive Plan**, and a **Nasdaq notice of non-compliance** with the **$1.00 minimum bid price requirement** - On July 10, 2025, the Company entered into a **Securities Purchase Agreement** for a **public offering** of common stock and **warrants**[120](index=120&type=chunk) - On July 31, 2025, the Company entered into a **Securities Purchase Agreement** for a **registered direct offering** of common stock and **warrants**, which closed August 1, 2025[127](index=127&type=chunk) - On July 3, 2025, shareholders approved an amendment to the **2022 Omnibus Equity Incentive Plan**, increasing authorized **shares** from **570,457** to **2,070,457**[129](index=129&type=chunk) - On July 31, 2025, the Company received a **Nasdaq notice of non-compliance** with the **$1.00 minimum bid price requirement**, with **180 calendar days** to regain compliance[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on **SeaStar Medical's** financial condition and operational results, highlighting the company's strategic focus on its **SCD technology**, recent commercialization efforts, and ongoing financial challenges, including **substantial doubt** about its ability to continue as a **going concern** [Overview](index=26&type=section&id=Overview) **SeaStar Medical** is a **commercial-stage healthcare company** focused on its **Selective Cytopheretic Device (SCD)** to modulate inflammation in critically ill patients, with **QUELIMMUNE** receiving **FDA HDE approval** and commencing commercial shipments in July 2024, despite an **accumulated deficit of $145.3 million** and **going concern** doubts - **SeaStar Medical** is a **commercial-stage healthcare company** focused on its **Selective Cytopheretic Device (SCD)** to modulate inflammation in critically ill patients[135](index=135&type=chunk) - The pediatric **SCD (QUELIMMUNE)** received **FDA HDE approval** in February 2024 and commenced commercial shipments in July 2024[136](index=136&type=chunk) - The company has incurred **net losses** since inception, with an **accumulated deficit of $145.3 million** as of June 30, 2025, and **cash of $6.3 million**, indicating **substantial doubt** about its **going concern** ability[146](index=146&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk) [Key Components of Results of Operations](index=28&type=section&id=Key%20Components%20of%20Results%20of%20Operations) This section outlines the drivers of **SeaStar Medical's** financial performance, including **revenue generation** from **QUELIMMUNE**, expected increases in **research and development expenses**, reductions in **general and administrative expenses**, and the impact of **other income (expense)** from financial instruments - **Revenue generation** commenced in July 2024 with the commercial launch of **QUELIMMUNE**, and future revenue is expected to fluctuate[152](index=152&type=chunk)[153](index=153&type=chunk) - **Research and development expenses** are expected to increase as the company continues clinical trials and develops next-generation **SCDs**[154](index=154&type=chunk) - **General and administrative expenses** are being reduced through efficiency measures, including declines in audit/accounting fees, director compensation, and personnel costs[157](index=157&type=chunk) - **Other income (expense), net**, includes interest income/expense and changes in the **fair value of warrants liability** and **convertible notes**[159](index=159&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024](index=29&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202024) For the three months ended June 30, 2025, **net revenue** was **$338 thousand**, **loss from operations** improved by **$2.940 million** (**63%**), and **net loss** decreased by **$1.261 million** (**39%**), primarily due to reduced **R&D** and **G&A expenses** **Three Months Ended June 30 (in thousands)** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------------- | :----- | :----- | :--------- | :--------- | | Revenue | $338 | $0 | $338 | * | | Gross profit | $311 | $0 | $311 | * | | Research and development | $1,037 | $2,334 | $(1,297) | (56)% | | General and administrative | $1,030 | $2,335 | $(1,305) | (56)% | | Total operating expenses | $2,067 | $4,669 | $(2,602) | (56)% | | Loss from operations | $(1,756) | $(4,669) | $2,940 | (63)% | | Total other income (expense) | $(246) | $1,436 | $(1,682) | (117)% | | Net loss | $(2,002) | $(3,236) | $1,261 | (39)% | - The decline in **R&D expenses** was primarily due to a **$0.7 million** decline in clinical trial expenses (partially offset by third-party services), a **$0.3 million** decline in external services, and a **$0.3 million** net reduction in personnel costs[165](index=165&type=chunk) - The decrease in **G&A expenses** was driven by a **$0.3 million** decline in audit/accounting fees, a **$0.5 million** decline in Directors' compensation, a **$0.1 million** reduction in SEC fees, a **$0.2 million** decrease in personnel costs, and a **$0.2 million** reduction in consultant expenditures[166](index=166&type=chunk) - **Other income (net)** reversed from a **$1.4 million gain** in 2024 to a **$0.3 million loss** in 2025, mainly due to a smaller favorable gain from **liability classified warrants** and the absence of **convertible notes** activity in 2025[167](index=167&type=chunk) [Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024](index=31&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202024) For the six months ended June 30, 2025, **net revenue** was **$631 thousand**, **loss from operations** improved by **$3.066 million** (**36%**), and **net loss** decreased by **$10.186 million** (**64%**), driven by reduced operating and other expenses **Six Months Ended June 30 (in thousands)** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------------- | :----- | :----- | :--------- | :--------- | | Revenue | $631 | $0 | $631 | * | | Gross profit | $604 | $0 | $604 | * | | Research and development | $3,468 | $4,031 | $(563) | (14)% | | General and administrative | $2,716 | $4,588 | $(1,872) | (41)% | | Total operating expenses | $6,184 | $8,619 | $(2,435) | (28)% | | Loss from operations | $(5,580) | $(8,619) | $3,066 | (36)% | | Total other expense | $(191) | $(7,311) | $7,120 | (97)% | | Net loss | $(5,774) | $(15,933) | $10,186 | (64)% | - The decline in **R&D expenses** was primarily due to a **$0.1 million** net reduction in personnel costs, a **$0.3 million** decline in consulting services, and a **$0.4 million** decline in pre-clinical related services, partially offset by a **$0.3 million** increase in clinical trial site costs[172](index=172&type=chunk) - The decrease in **G&A expenses** was driven by a **$0.2 million** decline in personnel costs, a **$0.5 million** decline in accounting fees, a **$0.3 million** decline in legal fees, and a **$0.5 million** decline in Directors' compensation[174](index=174&type=chunk) - **Other expenses (net)** decreased by **$7.1 million (97%)** due to the absence of a **$6.1 million loss** from changes in **fair value of convertible notes** in 2025, a gain on **liability classified warrants** in 2025 versus a loss in 2024, and reduced interest expense from lower debt obligations[175](index=175&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company has financed operations primarily through **equity and convertible debt**, incurring **significant operating losses** and **negative cash flows** since inception, leading to **substantial doubt** about its **going concern** ability without further financing - The Company has financed operations primarily through **equity and convertible debt**, incurring **significant operating losses** and **negative cash flows** since inception[178](index=178&type=chunk) **Liquidity Metrics (in thousands)** | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :---------------- | :---------------- | | Shareholders' equity | $3,300 | $(2,183) | | Accumulated deficit | $(145,300) | $(139,600) | | Cash | $6,300 | $1,800 | - **Cash on hand** is insufficient to fund operations for at least **12 months**, raising **substantial doubt** about the company's ability to continue as a **going concern**[179](index=179&type=chunk) - The company relies on **future equity or debt financing**, **collaborations**, or **grants**, but there is no assurance of obtaining additional capital on acceptable terms[180](index=180&type=chunk)[181](index=181&type=chunk) - Proceeds from **warrant exercises** are not included in short-term or long-term liquidity projections due to their dependency on the common stock's trading price and the uncertainty of exercise[182](index=182&type=chunk)[183](index=183&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights **SeaStar Medical's** critical accounting policies and estimates, including those for **unbilled clinical trial costs** and **stock-based compensation expense**, noting no material changes from prior annual reports - Significant estimates include **unbilled clinical trial costs** and **stock-based compensation expense**[35](index=35&type=chunk) - No **material changes** from the policies or methods disclosed in the **Annual Report to Form 10-K** filed March 27, 2025, and as amended by **Form 10-K/A** filed April 23, 2025, for the year-ended December 31, 2025[190](index=190&type=chunk) [Emerging Growth Company Status](index=35&type=section&id=Emerging%20Growth%20Company%20Status) As an **Emerging Growth Company (EGC)**, **SeaStar Medical** utilizes an **extended transition period** for new accounting standards and benefits from **reduced reporting requirements**, including exemptions from **auditor attestation** on internal controls and certain **executive compensation disclosures** - As an "**emerging growth company**" (**EGC**), **SeaStar Medical** has elected to use the **extended transition period** for complying with new or revised accounting standards[192](index=192&type=chunk) - **EGC status** allows for **reduced reporting requirements**, including exemption from **auditor attestation** on internal controls (**Section 404(b) of Sarbanes-Oxley Act**) and certain **executive compensation disclosures**[193](index=193&type=chunk) - The company will remain an **EGC** until the earliest of (i) the last day of its first fiscal year following the fifth anniversary of the Business Combination, (ii) reaching **$1.235 billion** in annual gross revenue, (iii) becoming a "**large-accelerated filer**," or (iv) issuing over **$1.0 billion** in **non-convertible debt**[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a **smaller reporting company**, **SeaStar Medical** is not required to provide **quantitative and qualitative disclosures about market risk** - As a **smaller reporting company**, **SeaStar Medical** is not required to provide **quantitative and qualitative disclosures about market risk**[195](index=195&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, **disclosure controls and procedures** were effective, with no **material changes** in **internal control over financial reporting** during the three months ended June 30, 2025 - As of June 30, 2025, the company's **disclosure controls and procedures** were effective[197](index=197&type=chunk) - There were no **material changes** in **internal control over financial reporting** during the three months ended June 30, 2025[198](index=198&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) **SeaStar Medical** is involved in a **putative class action lawsuit** and a **shareholder derivative action**, both alleging **material misstatements** regarding **FDA approval timing** and **financial instrument recognition**, seeking **compensatory damages** and **injunctive relief**, with the derivative action currently stayed - The Company is a defendant in a **putative class action lawsuit** (**Wells v. SeaStar Medical Holding Corporation et al.**, filed July 5, 2024) alleging **material misstatements** regarding **FDA approval timing** and **financial instrument recognition**[200](index=200&type=chunk) - The Company is also a defendant in a **putative shareholder derivative action** (**Lazo v. Schlorff, et. al.**, filed December 13, 2024) with factual allegations substantially similar to the **class action**, asserting claims against officers and directors for **breach of fiduciary duty** and seeking **damages** and **injunctive relief**[201](index=201&type=chunk) - The **derivative action** is stayed pending the court's resolution of the **motion to dismiss** filed in the **class action**[201](index=201&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company reiterates **substantial doubt** about its ability to continue as a **going concern** due to recurring **operating losses** and **negative cash flows**, requiring **additional financing** that may not be available, and highlights risks from **proposed U.S. tax legislation** and **Nasdaq delisting** threats due to **non-compliance** with listing requirements - There is **substantial doubt** about the company's ability to continue as a **going concern**, requiring **additional financing** that may not be available on acceptable terms[203](index=203&type=chunk)[204](index=204&type=chunk) - Inability to raise **additional capital** could force delays, reductions, or cessation of **development and commercialization efforts**, potentially leading to a **restructuring or reorganization under bankruptcy laws**[206](index=206&type=chunk)[207](index=207&type=chunk) - **Proposed U.S. tax legislation**, including new **Section 899 to the Code**, may adversely impact the company and the value of its securities, particularly for **non-U.S. investors**[208](index=208&type=chunk)[210](index=210&type=chunk) - The company faces risks of **delisting from Nasdaq** due to **non-compliance** with listing requirements, including the **$1.00 per share minimum bid price requirement** (notified July 31, 2025) and previous issues with the **Minimum Stockholders' Equity Requirement**[211](index=211&type=chunk)[214](index=214&type=chunk)[217](index=217&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No **unregistered sales of equity securities** not previously included in a **Current Report on Form 8-K** occurred during the three months ended June 30, 2025 - No **unregistered sales of equity securities** not previously included in a **Current Report on Form 8-K** occurred during the three months ended June 30, 2025[221](index=221&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[222](index=222&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[222](index=222&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) 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 June 30, 2025 - 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 June 30, 2025[222](index=222&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the **Form 10-Q**, including forms of various **warrants**, **securities purchase agreements**, **engagement agreements**, the amended **2022 Omnibus Incentive Plan**, and **certifications** from executive officers - The **exhibit index** includes forms of various **warrants** (Pre-Funded, Series A, Series B, Placement Agent), **Securities Purchase Agreements**, **Engagement Agreements**, the **Amended and Restated 2022 Omnibus Incentive Plan**, and **certifications** from the **Principal Executive Officer** and **Principal Financial Officer**[225](index=225&type=chunk) [Signatures](index=41&type=section&id=Signatures) The report was signed by **Eric Schlorff**, **Chief Executive Officer**, and **David Green**, **Chief Financial Officer**, on August 13, 2025 - The report was signed by **Eric Schlorff**, **Chief Executive Officer**, and **David Green**, **Chief Financial Officer**, on August 13, 2025[228](index=228&type=chunk) ```

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 June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number: 1-32001 APTOSE BIOSCIENCES INC. (Exact Name of Registrant as Specified in Its Charter) Canada (State or other jurisdiction of incorporation or ...

PART I - FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, cash flows, and stockholders' equity, along with detailed notes explaining significant accounting policies, revenue recognition, business combinations, intangible assets, equity, debt, income taxes, leases, concentrations, segment reporting, and subsequent events [Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) Consolidated Balance Sheets (Unaudited) (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Cash and cash equivalents | $6,067 | $2,823 | +$3,244 | | Accounts receivable, net | $1,100 | $2,636 | -$1,536 | | Total Current Assets | $7,867 | $6,362 | +$1,505 | | Total Assets | $17,166 | $16,067 | +$1,099 | | Term note, current | $- | $500 | -$500 | | Accounts payable | $1,559 | $2,971 | -$1,412 | | Total Current Liabilities | $1,937 | $4,239 | -$2,302 | | Total Liabilities | $2,730 | $5,853 | -$3,123 | | Total Stockholders' Equity | $14,436 | $10,214 | +$4,222 | [Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) Consolidated Statements of Operations (Unaudited) (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Net Revenue | $4,520 | $5,352 | -15.5% | $8,975 | $11,111 | -19.3% | | Cost of Revenue | $2,929 | $3,262 | -10.2% | $5,894 | $6,761 | -12.8% | | Gross Profit | $1,591 | $2,090 | -23.9% | $3,081 | $4,350 | -29.2% | | Total Operating Expenses | $1,913 | $2,626 | -27.2% | $3,996 | $5,533 | -27.8% | | Net Loss | $(291) | $(346) | -15.9% | $(862) | $(899) | -4.1% | | Basic/Diluted EPS | $(0.02) | $(0.03) | -33.3% | $(0.07) | $(0.09) | -22.2% | [Consolidated Statements of Comprehensive Loss (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss%20(Unaudited)) Consolidated Statements of Comprehensive Loss (Unaudited) (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Loss | $(291) | $(346) | $(862) | $(899) | | Change in fair value of interest rate, Swap | $- | $2 | $(12) | $5 | | Foreign currency translation adjustments | $- | $18 | $- | $(49) | | Total Comprehensive Loss | $(291) | $(326) | $(874) | $(943) | [Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Consolidated Statements of Cash Flows (Unaudited) (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $306 | $312 | | Net cash used in investing activities | $(332) | $(191) | | Net cash provided by (used in) financing activities | $3,270 | $(313) | | Net increase (decrease) in cash and cash equivalents | $3,244 | $(195) | | Cash and cash equivalents, end of period | $6,067 | $2,900 | - Proceeds from Warrants Exercise contributed **$4,348 thousand** to financing activities in the six months ended June 30, 2025[22](index=22&type=chunk) - Repayment of debt and line of credit amounted to **$875 thousand** in the six months ended June 30, 2025[22](index=22&type=chunk) [Consolidated Statements of Stockholders' Equity (Unaudited)](index=10&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(Unaudited)) Consolidated Statements of Stockholders' Equity (Unaudited) (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Common stock | $13 | $11 | | Additional paid in capital | $101,392 | $96,344 | | Treasury stock | $(434) | $(480) | | Accumulated deficit | $(86,535) | $(85,673) | | Total Stockholders' Equity | $14,436 | $10,214 | - Warrants exercise contributed **$4,348 thousand** to additional paid-in capital[27](index=27&type=chunk) - Convertible note conversion added **$360 thousand** to total equity[27](index=27&type=chunk) - The company repurchased **201,486 shares** for **$153 thousand** during the six months ended June 30, 2025[26](index=26&type=chunk)[27](index=27&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%201%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - VerifyMe, Inc. is a logistics company specializing in time and temperature sensitive products and brand protection solutions, operating through Precision Logistics and Authentication segments[31](index=31&type=chunk)[150](index=150&type=chunk) - Precision Logistics, through its subsidiary PeriShip Global, accounts for nearly all of VerifyMe's revenue[31](index=31&type=chunk)[150](index=150&type=chunk) - The Company is evaluating the potential effects of new accounting standards ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods beginning **January 1, 2025**, and **December 15, 2026**, respectively[36](index=36&type=chunk)[38](index=38&type=chunk) [NOTE 2 – REVENUE](index=15&type=section&id=NOTE%202%20%E2%80%93%20REVENUE) Revenue (in thousands) | Revenue (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :--------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Precision Logistics | $4,493 | $5,244 | -14.3% | $8,922 | $10,858 | -17.8% | | Proactive services | $3,829 | $3,945 | -2.9% | $7,523 | $8,170 | -7.9% | | Premium services | $664 | $1,299 | -48.9% | $1,399 | $2,688 | -47.9% | | Authentication | $27 | $108 | -75.0% | $53 | $253 | -79.0% | | Total Revenue | $4,520 | $5,352 | -15.5% | $8,975 | $11,111 | -19.3% | - The decrease in Authentication segment revenue is primarily due to the divestiture of the Trust Codes Global business in **December 2024**[169](index=169&type=chunk)[178](index=178&type=chunk) - Unbilled revenue (contract assets) decreased from **$733 thousand** at January 1, 2025, to **$324 thousand** at June 30, 2025[63](index=63&type=chunk) [NOTE 3 – BUSINESS COMBINATIONS](index=16&type=section&id=NOTE%203%20%E2%80%93%20BUSINESS%20COMBINATIONS) - VerifyMe divested its Trust Codes Global business (Authentication segment) on **December 8, 2024**, for **$1 NZD**, resulting in a **$0.1 million loss**[64](index=64&type=chunk) [NOTE 4 – INTANGIBLE ASSETS AND GOODWILL](index=16&type=section&id=NOTE%204%20%E2%80%93%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) Intangible Assets and Goodwill (in thousands) | Asset Category (in thousands) | June 30, 2025 (Net Carrying Amount) | December 31, 2024 (Net Carrying Amount) | | :---------------------------- | :---------------------------------- | :-------------------------------------- | | Goodwill | $3,988 | $3,988 | | Patents and Trademarks | $839 | $882 | | Customer Relationships | $1,252 | $1,344 | | Developed Technology | $1,470 | $1,732 | | Internally Used Software | $1,411 | $1,211 | | Non-Compete Agreement | $69 | $88 | | Deferred Implementation | $101 | $108 | | Total Intangible Assets, Net | $5,142 | $5,365 | - Amortization expense for intangible assets was **$548 thousand** for the six months ended June 30, 2025[75](index=75&type=chunk) - The Company expects to record **$567 thousand** in amortization expense for the remaining six months of 2025[77](index=77&type=chunk) [NOTE 5 – STOCKHOLDERS' EQUITY](index=18&type=section&id=NOTE%205%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) - The Company expensed **$96 thousand** for restricted stock awards and **$410 thousand** for restricted stock units for the six months ended June 30, 2025[78](index=78&type=chunk)[79](index=79&type=chunk) - **$350 thousand** of convertible notes were converted into **313,520 shares** of common stock as of January 21, 2025[80](index=80&type=chunk) - The Company repurchased **201,486 shares** for **$153 thousand** under its share repurchase program during the six months ended June 30, 2025[88](index=88&type=chunk)[214](index=214&type=chunk) - As of June 30, 2025, **410,757 shares** were held in treasury, valued at approximately **$434 thousand**[87](index=87&type=chunk) [NOTE 6 – STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS](index=19&type=section&id=NOTE%206%20%E2%80%93%20STOCK%20OPTIONS%2C%20RESTRICTED%20STOCK%20AND%20WARRANTS) Equity Instrument Details | Equity Instrument | June 30, 2025 (Number of Shares/Units) | Weighted-Average Exercise Price / Grant Date Fair Value | Unrecognized Compensation Cost (in thousands) | | :---------------- | :------------------------------------- | :------------------------------------------------------ | :-------------------------------------------- | | Stock Options Outstanding | 140,000 | $3.50 | $0 | | Unvested Restricted Stock Awards | 0 | $- | $0 | | Unvested Time-Based Restricted Stock Units | 224,471 | $1.41 | $259 | | Unvested Performance-Based Restricted Stock Units | 1,321,591 | $1.15 | $513 | | Warrants Outstanding | 1,555,207 | $3.95 | N/A | - On January 13, 2025, the Company entered into a warrant inducement agreement, resulting in **$4.3 million** net proceeds from warrant exercises and the issuance of new warrants to purchase **1,461,896 shares** at **$4.00 per share**[109](index=109&type=chunk)[110](index=110&type=chunk) - The fair value of the new warrants was estimated at **$3,971 thousand** and recorded in additional paid-in capital[110](index=110&type=chunk) - The Company entered into an At-The-Market Sales Agreement (ATM) on **March 6, 2025**, to sell up to **$15.8 million** of common stock, but no shares have been sold through the ATM as of June 30, 2025[113](index=113&type=chunk)[115](index=115&type=chunk) [NOTE 7—DEBT](index=23&type=section&id=NOTE%207%E2%80%94DEBT) - The Term Note balance of **$875 thousand** was paid in full on **January 21, 2025**[119](index=119&type=chunk) - The revolving line of credit (RLOC) had **$0 outstanding** as of June 30, 2025[120](index=120&type=chunk) - The interest rate swap agreement was terminated on **January 21, 2025**, with **$12 thousand** reclassified from accumulated other comprehensive loss[121](index=121&type=chunk) - Convertible debt outstanding was **$750 thousand** as of June 30, 2025, including **$450 thousand** held by related parties[122](index=122&type=chunk) [NOTE 8—INCOME TAXES](index=24&type=section&id=NOTE%208%E2%80%94INCOME%20TAXES) - No taxes payable as of June 30, 2025, or December 31, 2024[123](index=123&type=chunk) - No tax benefit recognized for the six months ended June 30, 2025, due to uncertainty of realizing deferred tax assets, with a valuation allowance in place[124](index=124&type=chunk)[126](index=126&type=chunk) - Utilization of net operating loss (NOL) carryforwards may be limited by Section 382 of the IRC due to potential ownership changes[125](index=125&type=chunk) [NOTE 9– LEASES](index=24&type=section&id=NOTE%209%E2%80%93%20LEASES) Lease Metrics (in thousands) | Lease Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Operating Lease right-of-use asset | $89 | $236 | | Total operating lease liabilities | $94 | $247 | | Cash paid for operating lease liabilities | $39 | $126 | | Weighted-average remaining lease term (years) | 1.8 | 2.3 | | Weighted average discount rate | 7.4% | 6.0% | - Total lease costs for the six months ended June 30, 2025, were **$47 thousand**, compared to **$104 thousand** in the prior year[130](index=130&type=chunk) [NOTE 10– CONCENTRATIONS](index=26&type=section&id=NOTE%2010%E2%80%93%20CONCENTRATIONS) - One customer accounted for **13% of revenues** for the six months ended June 30, 2025[132](index=132&type=chunk) - One vendor accounted for **99% of transportation costs** in the Precision Logistics segment for the three and six months ended June 30, 2025[132](index=132&type=chunk) - Two customers comprised **26% of accounts receivable, net**, as of June 30, 2025[133](index=133&type=chunk) [NOTE 11 – SEGMENT REPORTING](index=26&type=section&id=NOTE%2011%20%E2%80%93%20SEGMENT%20REPORTING) Segment Reporting (in thousands) | Metric (in thousands) | Precision Logistics (6 Months Ended June 30, 2025) | Authentication (6 Months Ended June 30, 2025) | Precision Logistics (6 Months Ended June 30, 2024) | Authentication (6 Months Ended June 30, 2024) | | :-------------------- | :------------------------------------------------- | :-------------------------------------------- | :------------------------------------------------- | :-------------------------------------------- | | Net Revenue | $8,922 | $53 | $10,858 | $253 | | Cost of Revenue | $5,881 | $13 | $6,732 | $29 | | Gross Profit | $3,041 | $40 | $4,126 | $224 | | Total Segment Expenses | $2,474 | $(50) | $2,583 | $935 | | Segment Income | $567 | $90 | $1,543 | $(711) | - Precision Logistics segment offers value-added services for time and temperature sensitive parcel management, utilizing a proprietary IT platform for predictive analytics and real-time visibility[135](index=135&type=chunk)[150](index=150&type=chunk) - Authentication segment specializes in anti-counterfeit and brand protection[136](index=136&type=chunk)[153](index=153&type=chunk) [NOTE 12 – SUBSEQUENT EVENTS](index=29&type=section&id=NOTE%2012%20%E2%80%93%20SUBSEQUENT%20EVENTS) - On **August 8, 2025**, VerifyMe entered a loan agreement with ZenCredit Ventures, LLC, to loan up to **$2 million** at **16% annual interest**[144](index=144&type=chunk) - An initial loan of **$2 million** was disbursed to ZenCredit on **August 11, 2025**[144](index=144&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews VerifyMe's business, market opportunities, financial performance, liquidity, and capital resources for the periods ended June 30, 2025 [Overview](index=30&type=section&id=Overview) - VerifyMe operates two segments: Precision Logistics (majority revenue, sensitive parcel management with predictive analytics) and Authentication (anti-counterfeit and brand protection)[150](index=150&type=chunk) - Precision Logistics offers "ProActive Service" (carrier service + proactive logistics) and "Premium Service" (white-glove monitoring, predictive analytics, web portal, service center)[152](index=152&type=chunk) - The PeriTrack® customer dashboard provides real-time data, in-depth shipping activity insights, and tools for perishable goods shippers[151](index=151&type=chunk)[157](index=157&type=chunk) [Opportunities](index=31&type=section&id=Opportunities) - Proprietary "Predictive Analytics" technology, integrating real-time meteorology, traffic, and power grid data, provides a competitive advantage by predicting and mitigating shipping issues[154](index=154&type=chunk) - Significant growth opportunities exist in small and medium-sized agriculture, food and beverage companies, and the pharmaceutical and healthcare industries[154](index=154&type=chunk) - The current economic environment may encourage companies to outsource precision logistics services, benefiting VerifyMe's cost-competitive offerings[155](index=155&type=chunk) [Partnerships](index=31&type=section&id=Partnerships) - Precision Logistics has a direct partnership with a major global carrier, providing data feeds for its proprietary logistics optimization software[156](index=156&type=chunk) - The strategic partner is shifting to offer its own solutions, potentially impacting VerifyMe's "Premium service" but not "Proactive services," where direct customer focus is expected to drive growth[156](index=156&type=chunk) - The Authentication segment has a contract with HP Indigo and a strategic partnership with INX for anti-counterfeit solutions[159](index=159&type=chunk) [Current Economic Environment](index=33&type=section&id=Current%20Economic%20Environment) - Softening demand for high-end perishable items is observed due to reduced discretionary spending[161](index=161&type=chunk) - Cost-cutting measures by major global carriers could benefit outsourced service providers, creating growth opportunities for VerifyMe's Precision Logistics segment, particularly with small and medium-sized businesses[161](index=161&type=chunk) - Changes in U.S. or international trade policy, including tariffs, could further weaken business conditions[161](index=161&type=chunk) [Seasonality](index=33&type=section&id=Seasonality) - Net revenues from the Precision Logistics segment are generally higher in the **fourth quarter** due to increased holiday shipments[162](index=162&type=chunk) [Recent Developments](index=33&type=section&id=Recent%20Developments) - PeriShip Global signed agreements with UPS on **July 29, 2025**, for digital channel program access and API integration, offering promotional rates for time-sensitive and perishable shipments[163](index=163&type=chunk) - On **August 11, 2025**, VerifyMe loaned **$2 million** to ZenCredit Ventures, LLC, under a Master Loan Agreement with a **16% annual interest rate**[164](index=164&type=chunk) - The Company received a Nasdaq deficiency notice on **April 3, 2025**, for failing to meet the **$1 minimum bid price rule**, with a compliance period until **September 30, 2025**[165](index=165&type=chunk) - The Company's Uplist Warrants (VRMEW) expired on **June 23, 2025**, and Nasdaq formalized their suspension[167](index=167&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) [Comparison of the three months ended June 30, 2025, and 2024](index=34&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202025%2C%20and%202024) Financial Performance (Q2 2025 vs Q2 2024, in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Total Revenue | $4,520 | $5,352 | $(832) | -15.5% | | Gross Profit | $1,591 | $2,090 | $(499) | -23.9% | | Gross Margin | 35% | 39% | -4% pts | | | Segment Management and Technology Expenses | $920 | $1,517 | $(597) | -39.4% | | General and Administrative Expenses | $716 | $894 | $(178) | -19.9% | | Sales and Marketing Expenses | $272 | $210 | $62 | +29.5% | | Interest Income (Expense), net | $32 | $(42) | $74 | N/A | | Net Loss | $(291) | $(346) | $55 | -15.9% | | Basic/Diluted EPS | $(0.02) | $(0.03) | $0.01 | -33.3% | - Revenue decrease attributed to **$585 thousand** from a discontinued Premium services contract and **$495 thousand** from two discontinued Proactive services customers[169](index=169&type=chunk) - Gross profit decrease is linked to lower Premium services revenue (higher margins) and the divestiture of Trust Codes Global[170](index=170&type=chunk) [Comparison of the six months ended June 30, 2025, and 2024](index=35&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202025%2C%20and%202024) Financial Performance (H1 2025 vs H1 2024, in thousands) | Metric (in thousands) | H1 2025 | H1 2024 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Total Revenue | $8,975 | $11,111 | $(2,136) | -19.2% | | Gross Profit | $3,081 | $4,350 | $(1,269) | -29.2% | | Gross Margin | 34% | 39% | -5% pts | | | Segment Management and Technology Expenses | $1,846 | $2,860 | $(1,014) | -35.5% | | General and Administrative Expenses | $1,572 | $2,015 | $(443) | -22.0% | | Sales and Marketing Expenses | $568 | $598 | $(30) | -5.0% | | Interest Income (Expense), net | $54 | $(80) | $134 | N/A | | Net Loss | $(862) | $(899) | $37 | -4.1% | | Basic/Diluted EPS | $(0.07) | $(0.09) | $0.02 | -22.2% | - Revenue decrease attributed to decreased demand in Proactive services, a customer's shift to their own cold chain strategy, and a discontinued Premium services contract[178](index=178&type=chunk) - Gross profit decrease is linked to lower Premium services revenue (higher margins) and the divestiture of Trust Codes Global[179](index=179&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - Net cash provided by operating activities was **$306 thousand** for the six months ended June 30, 2025[186](index=186&type=chunk) - Net cash used in investing activities increased to **$332 thousand**, mainly due to increased capitalized software costs[186](index=186&type=chunk) - Net cash provided by financing activities was **$3,270 thousand**, primarily from **$4.7 million** in gross proceeds from warrant exercises, partially offset by share repurchases and debt repayment[187](index=187&type=chunk)[188](index=188&type=chunk) - The Company believes its cash and cash equivalents will fund operations beyond the next **12 months** and may pursue additional debt or equity for organic growth and acquisitions[195](index=195&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company has no off-balance sheet arrangements[196](index=196&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No critical accounting policies and estimates were discussed in this section[197](index=197&type=chunk) [Recently Adopted Accounting Pronouncements](index=37&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) - Recently adopted accounting pronouncements are detailed in Note 1 – Summary of Significant Accounting Policies[198](index=198&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that it is "Not Applicable," indicating no material market risk disclosures for the period - The Company has no material quantitative and qualitative disclosures about market risk for the period[199](index=199&type=chunk) [ITEM 4. Controls and Procedures](index=38&type=section&id=ITEM%204.%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=38&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that disclosure controls and procedures were effective as of **June 30, 2025**[200](index=200&type=chunk) [Changes in Internal Control over Financial Reporting](index=38&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[201](index=201&type=chunk) PART II - OTHER INFORMATION [ITEM 1. Legal Proceedings](index=39&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company reported no legal proceedings for the period - There are no legal proceedings to report[204](index=204&type=chunk) [ITEM 1A. Risk Factors](index=39&type=section&id=ITEM%201A.%20Risk%20Factors) The Company disclosed a new risk factor related to its non-compliance with Nasdaq's minimum bid price rule, which could lead to delisting and negatively impact its stock and ability to raise capital - The Company is not in compliance with Nasdaq's Minimum Bid Price Rule (**$1 per share**) as of **April 3, 2025**, risking delisting[206](index=206&type=chunk) - Potential delisting could negatively impact common stock market price and liquidity, reduce capital raising ability, and lead to loss of business partner confidence and institutional investor interest[207](index=207&type=chunk)[208](index=208&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the issuance of common stock for consulting services under an unregistered exemption and details the Company's share repurchase program activities during the quarter - On **June 30, 2025**, **60,000 common shares** were issued for consulting services under a Section 4(a)(2) exemption[207](index=207&type=chunk) Share Repurchase Program (in thousands) | Period | Total Shares Purchased | Average Price Paid per Share | Total Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :----- | :--------------------- | :--------------------------- | :------------------------------------------------------------------- | :---------------------------------------------------------------------------------------------------- | | 04/01/2025-04/30/2025 | - | - | - | $483 | | 05/01/2025-05/31/2025 | 89,992 | $0.74 | 89,992 | $417 | | 06/01/2025-06/30/2025 | 111,494 | $0.78 | 111,494 | $330 | | Total | 201,486 | $0.76 | 201,486 | $330 | - The share repurchase program, extended through **December 31, 2025**, allows for repurchases up to **$0.5 million** at prices not exceeding **$1.00 per share**[214](index=214&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=40&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[210](index=210&type=chunk) [ITEM 4. Mine Safety Disclosures](index=40&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable to the Company[211](index=211&type=chunk) [ITEM 5. Other Information](index=40&type=section&id=ITEM%205.%20Other%20Information) No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the three months ended June 30, 2025 - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2025[212](index=212&type=chunk) [ITEM 6. Exhibits](index=40&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the 10-Q report, including amended bylaws, certifications, and XBRL documents - The exhibits include amended bylaws, CEO/CFO certifications (Sarbanes-Oxley Act), and XBRL instance and taxonomy documents[213](index=213&type=chunk) SIGNATURES - The report was signed by Adam Stedham, CEO and President, and Jennifer Cola, CFO, on **August 13, 2025**[217](index=217&type=chunk)

Exhibit 99.2 B. Riley Financial Shares Preliminary Fourth Quarter and Full Year 2024 Results and Financial Estimates and Business Update for First Half 2025 First Half 2025 Net Income Available to Common Shareholders Expected to be in the Range of $125.0 Million to $145.0 Million, or $4.08 to $4.74 Diluted Net Income per Common Share First Half 2025 Highlights www.brileyfin.com | NASDAQ: RILY 1 ● Executed B. Riley Securities ("BRS") carve out in March 2025, aligning capital and management to serve clients. ...

B. Riley Financial Shares Preliminary Fourth Quarter and Full Year 2024 Results and Financial Estimates and Business Update for First Half 2025 Exhibit 99.2 First Half 2025 Net Income Available to Common Shareholders Expected to be in the Range of $125.0 Million to $145.0 Million, or $4.08 to $4.74 Diluted Net Income per Common Share As of June 30, 2025, Estimated Cash of $268 Million, Total Debt of $1.46 Billion, and Net Debt in the Range of $809 Million to $839 Million; Total Debt Estimated to Have Decrea ...

[Executive Summary and Outlook](index=1&type=section&id=Executive%20Summary%20and%20Outlook) The company projects significant H1 2025 profitability and a substantial reduction in its debt profile [First Half 2025 Outlook](index=1&type=section&id=First%20Half%202025%20Outlook) The company projects H1 2025 net income of $125.0M-$145.0M and a significant debt reduction of approximately $600M H1 2025 Financial Projections | Metric | Estimated Range (H1 2025) | | :--- | :--- | | Net Income to Common Shareholders | $125.0M - $145.0M | | Diluted EPS | $4.08 - $4.74 | | Cash (as of June 30, 2025) | $268M | | Total Debt (as of June 30, 2025) | $1.46B | | Net Debt (as of June 30, 2025) | $809M - $839M | Projected Debt Reduction | Debt Reduction (Sept 30, 2024 to June 30, 2025) | Estimated Decrease | | :--- | :--- | | Total Debt | $600M | | Net Debt | $544M - $574M | [Management Commentary](index=2&type=section&id=Management%20Commentary) Management is focused on rightsizing the balance sheet while investing in core financial services, with regulatory filings expected shortly - Management's strategic focus is on **rightsizing the balance sheet** while continuing to invest in and grow the **core financial services businesses**, supported by cash flows from its Telecom segment[4](index=4&type=chunk) - The company is in the final stages of its complex 2024 audit and will file the 10-K shortly, with plans to file the **Q1 and Q2 2025 10-Qs within 30-45 days** after the 10-K[6](index=6&type=chunk) [Financial and Business Performance](index=1&type=section&id=Financial%20and%20Business%20Performance) The company's performance reflects significant strategic actions in H1 2025 and major write-downs impacting FY 2024 results [First Half 2025 Business Update & Financial Estimates](index=1&type=section&id=First%20Half%202025%20Business%20Update%20%26%20Financial%20Estimates) The company executed key strategic initiatives in H1 2025, including asset sales and debt reduction, projecting revenues of $405.0M-$425.0M - Key operational achievements in H1 2025 include: - Executed B. Riley Securities ("BRS") carve out in March 2025 - Reduced total company debt by an estimated **$600 million** from Sept 30, 2024 to June 30, 2025 - Realized approximately **$187 million in cash proceeds** from the sales of GlassRatner and Atlantic Coast Recycling - Achieved approximately **$126 million of debt reduction** through five bond exchanges[3](index=3&type=chunk) - Expected net income for H1 2025 includes estimated gains of **$53 million** from the sale of Atlantic Coast Recycling, **$66 million** from GlassRatner, and **$55 million** on senior note exchanges[9](index=9&type=chunk) H1 2025 Preliminary Unaudited Estimates | H1 2025 Preliminary Unaudited Estimates | Low Range | High Range | | :--- | :--- | :--- | | Revenue | $405.0M | $425.0M | | Net Income | $125.0M | $145.0M | | Net Income from Continuing Operations | $52.4M | $72.4M | | Operating Adj. EBITDA (Continuing Ops) | $20.0M | $26.0M | | Basic EPS | $4.10 | $4.75 | | Diluted EPS | $4.08 | $4.74 | [Preliminary Full Year 2024 Results](index=1&type=section&id=Preliminary%20Full%20Year%202024%20Results) The company reported a preliminary 2024 net loss of $772.3M, driven by significant write-downs and a decrease in total revenues - The 2024 net loss was primarily caused by write-downs of **$510.0 million** related to the equity investment in Freedom VCM Holdings LLC and a loan receivable from Vintage Capital Management, plus a **$105.4 million** impairment of goodwill and other intangible assets[11](index=11&type=chunk) - Total investments decreased by **67.3%** to **$432.6 million** at year-end 2024 from $1.32 billion at year-end 2023[12](index=12&type=chunk) FY 2024 Preliminary Results | Metric (Full Year Ended Dec 31) | 2024 (Preliminary) | 2023 | | :--- | :--- | :--- | | Total Revenues | $838.6M | $1,465.8M | | Net Loss to Common Shareholders | $(772.3)M | $(108.0)M | | Diluted Loss per Common Share | $(25.46) | $(3.69) | | Operating Adjusted EBITDA | $126.4M | $274.6M | [Preliminary Fourth Quarter 2024 Results](index=3&type=section&id=Preliminary%20Fourth%20Quarter%202024%20Results) The company reported preliminary Q4 2024 net income of $0.9M, a significant turnaround from the prior year's loss, despite a decline in Operating Adjusted EBITDA Q4 2024 Preliminary Results | Metric (Q4 Ended Dec 31) | 2024 (Preliminary) | 2023 | | :--- | :--- | :--- | | Net Income (Loss) to Common Shareholders | $0.9M | $(91.6)M | | Operating Adjusted EBITDA (Continuing Ops) | $21.5M | $59.1M | [Additional Updates](index=4&type=section&id=Additional%20Updates) The company has secured amended financing terms to enhance operational flexibility [Oaktree Capital Management Financing](index=4&type=section&id=Oaktree%20Capital%20Management%20Financing) The company amended its credit agreement with Oaktree to enhance financial flexibility through new and upsized investment baskets - The amended credit agreement with Oaktree provides incremental flexibility through several key provisions[13](index=13&type=chunk) - - A new **$100 million** investment basket for balance sheet transactions - An upsized parent company investment basket, increased from $20 million to **$30 million** - The ability to use up to **$25 million** of cash to repurchase the Company's unsecured notes[16](index=16&type=chunk) [Appendix: Preliminary Financial Statements and Reconciliations](index=7&type=section&id=Appendix%3A%20Preliminary%20Financial%20Statements%20and%20Reconciliations) This appendix provides detailed preliminary financial statements and non-GAAP reconciliations for fiscal year 2024 and H1 2025 estimates [Preliminary Condensed Consolidated Balance Sheets](index=7&type=section&id=Preliminary%20Condensed%20Consolidated%20Balance%20Sheets) The company's balance sheet shows a significant decrease in total assets and liabilities as of year-end 2024, resulting in a total equity deficit Balance Sheet Summary | Balance Sheet Item (in thousands) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$1,783,263** | **$6,080,604** | | Cash and cash equivalents | $154,877 | $222,690 | | Securities and other investments owned | $282,325 | $809,049 | | Loans receivable, at fair value | $90,103 | $532,419 | | **Total Liabilities** | **$2,239,279** | **$5,721,038** | | Senior notes payable, net | $1,530,561 | $1,668,021 | | **Total Equity (Deficit)** | **$(456,016)** | **$359,566** | [Preliminary Consolidated Statement of Operations](index=9&type=section&id=Preliminary%20Consolidated%20Statement%20of%20Operations) The company's 2024 operating statement reflects a significant revenue decrease and a widened net loss available to common shareholders Income Statement Summary | Income Statement (Twelve Months Ended Dec 31) | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $838,597 | $1,465,777 | | Operating (Loss) Income | $(475,738) | $96,051 | | Loss from Continuing Operations | $(900,854) | $(160,161) | | Net Loss Available to Common Shareholders | $(772,334) | $(107,967) | | Diluted Loss per Common Share | $(25.46) | $(3.69) | [Non-GAAP Reconciliations](index=11&type=section&id=Non-GAAP%20Reconciliations) This section reconciles GAAP net loss to non-GAAP metrics, showing a 2024 Operating Adjusted EBITDA of $126.4M and projecting $20.0M-$26.0M for H1 2025 FY 2024 Non-GAAP Reconciliation | Reconciliation (Twelve Months Ended Dec 31) | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Loss from continuing operations | $(900,854) | $(160,161) | | Adjusted EBITDA | $(542,797) | $123,870 | | Operating Adjusted EBITDA | $126,399 | $274,576 | H1 2025 Estimated Non-GAAP Reconciliation | Estimated Reconciliation (Six Months Ended June 30, 2025) | Low Range (in thousands) | High Range (in thousands) | | :--- | :--- | :--- | | Net income from continuing operations | $52,400 | $72,400 | | Adjusted EBITDA | $5,400 | $40,400 | | Operating Adjusted EBITDA | $20,000 | $26,000 | [Total Investments and Net Debt](index=13&type=section&id=Total%20Investments%20and%20Net%20Debt) The company's total investments and debt levels saw significant changes in 2024, with further debt reduction projected for H1 2025 Historical Investments and Net Debt | Metric (in thousands) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Investments | $432,616 | $1,323,969 | | Total Debt | $1,774,340 | $2,356,364 | | Net Debt | $1,055,659 | $756,496 | Estimated H1 2025 Investments and Net Debt | Estimated Metric (in thousands) | June 30, 2025 (Low) | June 30, 2025 (High) | | :--- | :--- | :--- | | Total Investments | $310,000 | $340,000 | | Total Debt | $1,463,000 | $1,463,000 | | Net Debt | $839,000 | $809,000 |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-37649 FIEE, INC. (Exact Name of Registrant as Specified in its Charter) | Delaware | 04-2621506 | | --- | --- | | ...