[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section outlines SurgePays, Inc.'s Form 10-Q filing details, including its Nasdaq listing, outstanding shares, and regulatory classifications [Registrant Information](index=1&type=section&id=Registrant%20Information) SurgePays, Inc. filed its Form 10-Q, detailing its Nevada incorporation, Nasdaq listing under SURG, **20.43 million** outstanding shares, and non-accelerated filer status - SurgePays, Inc. is a non-accelerated filer and a smaller reporting company[3](index=3&type=chunk) Consolidated Balance Sheet Highlights | Metric | Value | | :------------------------------------------------ | :------------------- | | Shares of Common Stock Outstanding (as of Aug 13, 2025) | 20,431,549 shares | | Trading Symbol | SURG | | Exchange | The Nasdaq Stock Market LLC | [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) This section presents SurgePays, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$15.22 million** by June 30, 2025, driven by reduced cash, while total liabilities increased to **$15.15 million** due to new convertible notes, significantly impacting stockholders' equity Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | Cash and cash equivalents | $4,404,449 | $11,790,389 | | Total Current Assets | $9,694,382 | $17,870,323 | | Total Assets | $15,215,409 | $23,976,005 | | Total Current Liabilities | $8,702,069 | $6,059,476 | | Total Long Term Liabilities | $6,451,948 | $2,654,916 | | Total Liabilities | $15,154,017 | $8,714,392 | | Total Stockholders' Equity | $61,392 | $15,261,613 | - Cash and cash equivalents decreased by approximately **$7.39 million** from December 31, 2024, to June 30, 2025[7](index=7&type=chunk) - Convertible note payable (net) increased significantly from **$0** at December 31, 2024, to **$1,430,267** (current) and **$4,833,979** (long-term) at June 30, 2025[7](index=7&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2025, net loss increased to **$14.72 million** on a **52.5% revenue decline** to **$22.10 million**, primarily due to the ACP cessation, widening the loss from operations Consolidated Statements of Operations Highlights | Metric | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Revenues | $11,518,166 | $15,085,699 | $22,095,596 | $46,514,834 | | Total costs and expenses | $18,328,675 | $25,961,752 | $36,486,008 | $55,639,026 | | Loss from operations | $(6,810,509) | $(10,876,053) | $(14,390,412) | $(9,124,192) | | Net loss available to common stockholders | $(7,082,598) | $(12,865,765) | $(14,717,682) | $(11,641,170) | | Basic EPS | $(0.36) | $(0.66) | $(0.74) | $(0.63) | - Revenues for the six months ended June 30, 2025, decreased by **52.5%** compared to the same period in 2024[9](index=9&type=chunk) - Net loss available to common stockholders for the six months ended June 30, 2025, increased by **26.4%** year-over-year[9](index=9&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity significantly decreased to **$0.06 million** by June 30, 2025, primarily due to a **$14.72 million net loss** and **$1.00 million treasury stock reacquisition** Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Metric | December 31, 2024 | June 30, 2025 | | :----------------------------------- | :------------------ | :-------------- | | Total Stockholders' Equity | $15,261,613 | $61,392 | | Net loss | - | $(14,717,682) | | Additional paid-in capital (increase) | $76,842,878 | $77,360,756 | | Treasury stock (increase) | $(631,967) | $(1,631,966) | - The company reacquired **333,333 shares** of treasury stock for **$999,999** in connection with convertible debt financing during the six months ended June 30, 2025[11](index=11&type=chunk) - Recognition of stock-based compensation for unvested shares (related parties) contributed **$310,238** to additional paid-in capital during the six months ended June 30, 2025[11](index=11&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash, cash equivalents, and restricted cash decreased by **$8.39 million** to **$4.40 million** by June 30, 2025, driven by **$13.08 million** in operating cash outflows, partially offset by financing activities Consolidated Statements of Cash Flows Highlights | Metric | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------------- | :------------------------------------- | | Net cash used in operating activities | $(13,082,419) | $(90,112) | | Net cash used in investing activities | $(18,590) | $- | | Net cash provided by financing activities | $4,715,069 | $23,902,632 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(8,385,940) | $23,812,520 | | Cash, cash equivalents and restricted cash - end of period | $4,404,449 | $38,434,580 | - Operating cash outflows significantly increased from **$90,112** in H1 2024 to **$13,082,419** in H1 2025, primarily due to the net loss[15](index=15&type=chunk)[406](index=406&type=chunk) - Financing activities in H1 2025 included **$6,000,000** from the issuance of a convertible note payable, partially offset by **$595,000** in direct offering costs and **$684,419** in repayments of related party loans[15](index=15&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements, covering accounting policies, debt, equity, and segment information [Note 1 - Organization and Nature of Operations](index=10&type=section&id=Note%201%20-%20Organization%20and%20Nature%20of%20Operations) SurgePays operates in telecom and fintech for underserved communities, discontinued its LogicsIQ segment, faces significant liquidity challenges with a **$14.72 million net loss**, and plans strategic initiatives to address going concern doubts - SurgePays operates in three primary business segments: MVNO wireless brands, MVNE enablement platform (HERO), and point-of-sale (POS) and fintech services[19](index=19&type=chunk) - The lead generation segment (LogicsIQ) was abandoned effective December 31, 2024, as it contributed **0%** of total consolidated revenue and less than **1%** of total assets, not qualifying as a discontinued operation under ASC 205-20[24](index=24&type=chunk)[26](index=26&type=chunk) Key Financial Indicators (Six Months Ended June 30, 2025) | Metric | Amount | | :----------------------------------- | :------------- | | Net loss available to common stockholders | $(14,717,682) | | Net cash used in operations | $(13,082,419) | | Accumulated deficit | $(75,633,109) | | Stockholders' equity | $61,392 | | Working capital | $992,313 | - The Affordable Connectivity Program (ACP) ceased funding on June 1, 2024, impacting the company's MVNO segment[42](index=42&type=chunk) - Management's strategic plans include * Enhance market visibility and customer reach for SurgePays' direct MVNO, Linkup Mobile * Diversify Lifeline revenue streams by expanding into California and other states * Sustain platform growth to bolster baseline revenue * Investigate specialized marketing strategies and customer engagement initiatives through the Clearline product offering[45](index=45&type=chunk) [Discontinued Operations – LogicsIQ Segment](index=11&type=section&id=Discontinued%20Operations%20%E2%80%93%20LogicsIQ%20Segment) [Segment Reporting (ASC 280) Considerations](index=12&type=section&id=Segment%20Reporting%20%28ASC%20280%29%20Considerations) [Future Business Operations](index=13&type=section&id=Future%20Business%20Operations) [Basis of Presentation](index=13&type=section&id=Basis%20of%20Presentation) [Liquidity and Management's Plans](index=14&type=section&id=Liquidity%20and%20Management%27s%20Plans) [Note 2 - Summary of Significant Accounting Policies](index=15&type=section&id=Note%202%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines SurgePays' critical accounting policies, covering consolidation, business combinations like ClearLine Mobile, revenue recognition (ASC 606), asset valuation, impairment, software development costs, stock-based compensation, and recent accounting standard adoptions - The acquisition of ClearLine Mobile, Inc. on January 5, 2024, for **$2,500,000** was accounted for as a business combination, resulting in **$2,500,000** in goodwill[58](index=58&type=chunk)[62](index=62&type=chunk)[67](index=67&type=chunk) - The Mobile Virtual Network Operator (MVNO) segment's revenue share decreased significantly from **89%** in H1 2024 to **20.64%** in H1 2025, while Point-of-Sale and Prepaid Services revenue share increased from **10.98%** to **79.36%** over the same period[154](index=154&type=chunk) Disaggregation of Revenues (Six Months Ended June 30) | Revenue Segment | 2025 Revenue | % of Revenues (2025) | 2024 Revenue | % of Revenues (2024) | | :--------------------------------- | :------------- | :------------------- | :------------- | :------------------- | | Mobile Virtual Network Operators | $4,559,530 | 20.64% | $41,396,096 | 89.00% | | Point-of-Sale and Prepaid Services | $17,536,066 | 79.36% | $5,107,409 | 10.98% | | Other Corporate Overhead | $- | 0.00% | $11,329 | 0.02% | | Total Revenues | $22,095,596 | 100.00% | $46,514,834 | 100.00% | - The company recorded a full valuation allowance on its deferred tax assets as of June 30, 2025, due to being in a three-year cumulative historic loss position[160](index=160&type=chunk)[161](index=161&type=chunk) - The investment in CenterCom was impaired and written down to **$0** as of December 31, 2024, due to a change in ownership and a large reduction in human capital, leading to the discontinuation of BPO services[168](index=168&type=chunk)[169](index=169&type=chunk) [Principles of Consolidation and Non-Controlling Interest](index=15&type=section&id=Principles%20of%20Consolidation%20and%20Non-Controlling%20Interest) [Business Combinations and Asset Acquisitions](index=15&type=section&id=Business%20Combinations%20and%20Asset%20Acquisitions) [Acquisition of ClearLine Mobile, Inc](index=16&type=section&id=Acquisition%20of%20ClearLine%20Mobile%2C%20Inc) [Note Receivable (Sale of Former Subsidiary)](index=18&type=section&id=Note%20Receivable%20%28Sale%20of%20Former%20Subsidiary%29) [Business Segments and Concentrations](index=18&type=section&id=Business%20Segments%20and%20Concentrations) [Use of Estimates](index=19&type=section&id=Use%20of%20Estimates) [Risks and Uncertainties](index=19&type=section&id=Risks%20and%20Uncertainties) [Fair Value of Financial Instruments](index=20&type=section&id=Fair%20Value%20of%20Financial%20Instruments) [Cash and Cash Equivalents, Restricted Cash and Concentration of Credit Risk](index=21&type=section&id=Cash%20and%20Cash%20Equivalents%2C%20Restricted%20Cash%20and%20Concentration%20of%20Credit%20Risk) [Marketable Securities - Classification and Valuation](index=21&type=section&id=Marketable%20Securities%20-%20Classification%20and%20Valuation) [Impairment of Marketable Securities](index=22&type=section&id=Impairment%20of%20Marketable%20Securities) [Accounts Receivable](index=23&type=section&id=Accounts%20Receivable) [Inventory](index=23&type=section&id=Inventory) [Impairment of Long-lived Assets](index=23&type=section&id=Impairment%20of%20Long-lived%20Assets) [Property and Equipment](index=24&type=section&id=Property%20and%20Equipment) [Internal Use Software Development Costs](index=24&type=section&id=Internal%20Use%20Software%20Development%20Costs) [Right of Use Assets and Lease Obligations](index=25&type=section&id=Right%20of%20Use%20Assets%20and%20Lease%20Obligations) [Revenue Recognition](index=26&type=section&id=Revenue%20Recognition) [Cost of Revenues](index=30&type=section&id=Cost%20of%20Revenues) [Income Taxes](index=30&type=section&id=Income%20Taxes) [Investment](index=31&type=section&id=Investment) [Advertising Costs](index=32&type=section&id=Advertising%20Costs) [Stock-Based Compensation](index=32&type=section&id=Stock-Based%20Compensation) [Stock Warrants](index=33&type=section&id=Stock%20Warrants) [Basic and Diluted Earnings (Loss) per Share](index=33&type=section&id=Basic%20and%20Diluted%20Earnings%20%28Loss%29%20per%20Share) [Treasury Stock](index=34&type=section&id=Treasury%20Stock) [Related Parties](index=35&type=section&id=Related%20Parties) [Recent Accounting Standards](index=36&type=section&id=Recent%20Accounting%20Standards) [Reclassifications](index=37&type=section&id=Reclassifications) [Note 3 – Property and Equipment](index=37&type=section&id=Note%203%20%E2%80%93%20Property%20and%20Equipment) As of June 30, 2025, SurgePays' net property and equipment totaled **$457,195**, a decrease from **$591,088** at December 31, 2024, reflecting **$152,483** in depreciation and amortization for the six months ended June 30, 2025 Property and Equipment - Net | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Computer equipment and software | $1,135,178 | $1,135,178 | | Leasehold improvements | $324,901 | $306,311 | | Furniture and fixtures | $165,738 | $165,738 | | Less: accumulated depreciation/amortization | $(1,168,622) | $(1,016,139) | | Property and equipment - net | $457,195 | $591,088 | Depreciation and Amortization Expense | Period | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | Three months ended June 30 | $66,365 | $70,383 | | Six months ended June 30 | $152,483 | $140,766 | [Note 4 – Intangibles](index=38&type=section&id=Note%204%20%E2%80%93%20Intangibles) Net intangible assets decreased to **$1.15 million** at June 30, 2025, from **$1.47 million** at December 31, 2024, primarily due to ongoing amortization, with proprietary software as the largest component Intangible Assets - Net | Type | June 30, 2025 | December 31, 2024 | Estimated Useful Lives (Years) | | :------------------------ | :-------------- | :------------------ | :----------------------------- | | Proprietary Software | $4,286,402 | $4,286,402 | 7 | | Tradenames/trademarks | $617,474 | $617,474 | 15 | | ECS membership agreement | $465,000 | $465,000 | 1 | | Noncompetition agreement | $201,389 | $201,389 | 2 | | Customer Relationships | $183,255 | $183,255 | 5 | | Less: accumulated amortization | $(4,607,764) | $(4,280,558) | | | Intangibles - net | $1,145,756 | $1,472,962 | | Amortization Expense for Intangibles | Period | 2025 | 2024 | | :-------------------- | :------- | :------- | | Three Months Ended June 30 | $163,452 | $163,377 | | Six Months Ended June 30 | $327,206 | $326,754 | - Estimated amortization expense for the remaining six months of 2025 is **$326,754**, and for 2026 is **$653,508**[206](index=206&type=chunk) [Note 5 – Internal Use Software Development Costs](index=39&type=section&id=Note%205%20%E2%80%93%20Internal%20Use%20Software%20Development%20Costs) Net internal use software development costs were **$0** at June 30, 2025, following a **$316,594** impairment loss recorded at December 31, 2024, due to no future use Internal Use Software Development Costs - Net | Type | December 31, 2024 | | :------------------------------------ | :------------------ | | Internal use software development costs | $668,484 | | Less: accumulated amortization | $(351,890) | | Less: impairment loss | $(316,594) | | Internal Use Software Development Costs - net | $- | - An impairment loss of **$316,594** was recorded at December 31, 2024, due to the determination of no future use for capitalized internal use software development costs[209](index=209&type=chunk) Amortization of Internal Software Development Costs (2024) | Period | Amount | | :------------------------------------ | :------- | | Three months ended June 30, 2024 | $55,707 | | Six months ended June 30, 2024 | $111,414 | [Note 6 – Debt](index=39&type=section&id=Note%206%20%E2%80%93%20Debt) Total debt, net of unamortized discount, increased to **$9.60 million** at June 30, 2025, from **$3.56 million** at December 31, 2024, primarily due to a new **$7.00 million** Senior Secured Convertible Note Summary of Debt Balances | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Notes Payable – SBA government | $463,884 | $469,396 | | Notes Payable – Related Parties | $2,871,236 | $3,555,655 | | Convertible Note Payable - net | $6,264,246 | $- | | Total Debt - net | $9,599,366 | $4,025,051 | - On May 12, 2025, the company issued a Senior Secured Convertible Note for **$6,999,999**, resulting in net cash proceeds of **$6,000,000**. This note accrues interest at **1.25%** per month (**15%** per annum) and is convertible at **$4.00** per share[221](index=221&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - In connection with the convertible note, warrants to purchase **700,000 shares** at **$6/share** were issued, and a total debt discount of **$802,640** (including **$207,640** for warrants and **$595,000** for direct offering costs) is being amortized[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - The related party note with the CEO was consolidated on March 12, 2024, into a single **$5,083,554** note bearing **10%** interest, with monthly payments of **$164,039**[218](index=218&type=chunk) [Notes Payable – SBA government](index=39&type=section&id=Notes%20Payable%20%E2%80%93%20SBA%20government) [Notes Payable – Related Parties](index=40&type=section&id=Notes%20Payable%20%E2%80%93%20Related%20Parties) [Senior Secured Convertible Note and Warrants](index=41&type=section&id=Senior%20Secured%20Convertible%20Note%20and%20Warrants) [Debt Maturities](index=43&type=section&id=Debt%20Maturities) [Note 7 – Fair Value of Financial Instruments](index=44&type=section&id=Note%207%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) SurgePays did not have financial assets or liabilities measured at fair value on a recurring basis as of June 30, 2025, with carrying values approximating fair values due to their short-term nature - The company did not have any financial assets and liabilities measured at fair value on a recurring basis at June 30, 2025, and December 31, 2024[236](index=236&type=chunk) [Note 8 – Commitments and Contingencies](index=44&type=section&id=Note%208%20%E2%80%93%20Commitments%20and%20Contingencies) SurgePays has operating lease commitments with a **1.84-year** weighted-average remaining term, details employment agreements for its CEO and CFO, and is involved in ongoing legal matters, with no current contingent liabilities requiring accrual Operating Lease Assets and Liabilities | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :------------------ | | Operating lease - right-of-use asset - non-current | $441,225 | $564,781 | | Operating lease liability | $446,249 | $567,301 | | Weighted-average remaining lease term (years) | 1.84 | 2.29 | | Weighted-average discount rate | 8% | 8% | Future Minimum Lease Payments (Undiscounted) | Year Ended December 31, | Amount | | :------------------------ | :------- | | 2025 (6 months) | $141,831 | | 2026 | $236,078 | | 2027 | $100,563 | | Total undiscounted cash flows | $478,472 | - CEO's employment agreement extends through December 31, 2028, with a base salary of **$750,000** (2023) increasing by **3%** annually, an annual cash bonus of **$870,000**, and a long-term equity program for up to **2,500,000 shares**[260](index=260&type=chunk)[264](index=264&type=chunk) - CFO's employment agreement includes a base salary of **$503,928** for 2025, an annual cash bonus of at least **$510,000** (2024), and a restricted stock award of **600,000 shares** (granted Nov 2023) vesting over specific periods[257](index=257&type=chunk) - The legal case 'Juno Financial v. AATAC and Surge Holdings Inc.' was dismissed with agreement of the parties on September 12, 2024[272](index=272&type=chunk) - In 'Blue Skies Connections, LLC, and True Wireless, Inc. v. SurgePays, Inc., et. al.', the Oklahoma Supreme Court denied Plaintiffs' petition for certiorari on March 10, 2025, and the case will proceed in district court on remaining claims[273](index=273&type=chunk) [Operating Leases](index=44&type=section&id=Operating%20Leases) [Employment Agreements (Chief Executive Officer and Chief Financial Officer)](index=48&type=section&id=Employment%20Agreements%20%28Chief%20Executive%20Officer%20and%20Chief%20Financial%20Officer%29) [Contingencies – Legal Matters](index=51&type=section&id=Contingencies%20%E2%80%93%20Legal%20Matters) [Note 9 – Stockholders' Equity](index=53&type=section&id=Note%209%20%E2%80%93%20Stockholders%27%20Equity) SurgePays' stockholders' equity section details common stock, preferred stock, and the 2022 Securities and Incentive Plan, with key H1 2025 transactions including the repurchase of **333,333 treasury shares** for **$999,999** and **$310,238** in stock-based compensation expense - The 2022 Securities and Incentive Plan authorized **3,500,000** common shares initially, with annual increases of **10%** of outstanding common stock. As of January 1, 2025, total authorized shares under the plan approximated **6,907,000**[284](index=284&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) - For the six months ended June 30, 2025, the company repurchased **333,333 shares** of treasury stock for **$999,999** (**$3/share**) in connection with a convertible debt financing[289](index=289&type=chunk) Total Stock Compensation Expense (Vesting) | Period | 2025 | 2024 | | :-------------------- | :------- | :------- | | Three months ended June 30 | $155,119 | $2,981,577 | | Six months ended June 30 | $310,238 | $4,478,994 | Outstanding Potentially Dilutive Equity Securities | Security Type | June 30, 2025 | June 30, 2024 | | :-------------- | :-------------- | :-------------- | | Warrants | 703,000 | 3,619,278 | | Stock options | 1,166,081 | 121,276 | | Total | 1,869,081 | 3,740,554 | [Common Stock](index=53&type=section&id=Common%20Stock) [Series A, Convertible Preferred Stock](index=53&type=section&id=Series%20A%2C%20Convertible%20Preferred%20Stock) [Series C, Convertible Preferred Stock](index=53&type=section&id=Series%20C%2C%20Convertible%20Preferred%20Stock) [Securities and Incentive Plan](index=53&type=section&id=Securities%20and%20Incentive%20Plan) [Equity Transactions for the Six Months Ended June 30, 2025](index=54&type=section&id=Equity%20Transactions%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025) [Equity Transactions for the Years Ended December 31, 2024](index=54&type=section&id=Equity%20Transactions%20for%20the%20Years%20Ended%20December%2031%2C%202024) [Non-Vested Shares – Related Parties (Officer and Directors) – and related Vesting](index=56&type=section&id=Non-Vested%20Shares%20%E2%80%93%20Related%20Parties%20%28Officer%20and%20Directors%29%20%E2%80%93%20and%20related%20Vesting) [Stock Options](index=59&type=section&id=Stock%20Options) [Warrants](index=61&type=section&id=Warrants) [Note 10 – Segment Information](index=61&type=section&id=Note%2010%20%E2%80%93%20Segment%20Information) For H1 2025, MVNO segment revenue significantly decreased to **$4.56 million** with a **$5.90 million** operating loss, while Point-of-Sale and Prepaid Services revenue grew to **$17.54 million** but still reported a **$2.15 million** operating loss Segment Revenues (Six Months Ended June 30) | Segment | 2025 Revenue | 2024 Revenue | | :--------------------------------- | :------------- | :------------- | | Mobile Virtual Network Operators | $4,559,530 | $41,396,096 | | Point-of-Sale and Prepaid Services | $17,536,066 | $5,107,409 | | Other Corporate Overhead | $- | $11,329 | | Total | $22,095,596 | $46,514,834 | Segment Income (Loss) from Operations (Six Months Ended June 30) | Segment | 2025 Income (Loss) | 2024 Income (Loss) | | :--------------------------------- | :----------------- | :----------------- | | Mobile Virtual Network Operators | $(5,895,378) | $4,552,821 | | Point-of-Sale and Prepaid Services | $(2,148,108) | $(1,382,103) | | Other Corporate Overhead | $(6,346,926) | $(12,294,910) | | Total | $(14,390,412) | $(9,124,192) | Segment Total Liabilities | Segment | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Mobile Virtual Network Operators | $1,835,032 | $1,505,400 | | Point-of-Sale and Prepaid Services | $696,235 | $103,612 | | Other Corporate Overhead | $12,622,750 | $7,105,380 | | Total | $15,154,017 | $8,714,392 | [Note 11 – Subsequent Event](index=62&type=section&id=Note%2011%20%E2%80%93%20Subsequent%20Event) In August 2025, SurgePays entered an At The Market Offering Agreement (ATM Agreement) to sell up to **$15,000,000** of common stock to fund working capital needs - In August 2025, SurgePays entered into an At The Market Offering Agreement (ATM Agreement) to sell up to **$15,000,000** of common stock[335](index=335&type=chunk)[336](index=336&type=chunk) - The ATM Agreement is intended to fund working capital needs on an ongoing basis[336](index=336&type=chunk) [ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=64&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 SurgePays' financial condition, operational results, business segments, growth strategies, and critical accounting policies [About SurgePays, Inc.](index=64&type=section&id=About%20SurgePays%2C%20Inc.) SurgePays, Inc., incorporated in Nevada in 2006, has evolved into a financial technology and telecom company providing essential services to the underbanked through MVNO wireless and Point-of-Sale services - SurgePays, Inc. was incorporated in Nevada on August 18, 2006, and has evolved from an oil and natural gas company to a financial technology and telecom company[338](index=338&type=chunk) - The company operates in two business segments: SurgePhone Wireless, LLC, SurgePays Fintech, Inc., ECS Prepaid, LLC, and Torch Wireless[339](index=339&type=chunk) [Our Business Segments](index=65&type=section&id=Our%20Business%20Segments) SurgePays operates two primary segments: MVNO Wireless Services (LinkUp Mobile and Torch Wireless) and Point-of-Sale and Prepaid Services, having launched its high-margin HERO MVNE platform in late 2024 and discontinued its Lead Generation segment - MVNO Wireless Services include LinkUp Mobile (prepaid wireless) and Torch Wireless (subsidized Lifeline program)[343](index=343&type=chunk)[344](index=344&type=chunk) - Point-of-Sale and Prepaid Services offer prepaid wireless top-ups and ClearLine POS Technology for in-store marketing and loyalty[349](index=349&type=chunk)[350](index=350&type=chunk) - In late 2024, SurgePays launched its HERO platform, a Mobile Virtual Network Enabler (MVNE) system, providing SIM provisioning, billing, CRM, and other services to independent MVNOs through a strategic agreement with AT&T[341](index=341&type=chunk)[346](index=346&type=chunk)[348](index=348&type=chunk) - The Lead Generation segment was discontinued in 2024[342](index=342&type=chunk) [Growth Strategies](index=66&type=section&id=Growth%20Strategies) SurgePays' growth strategy focuses on scaling Lifeline enrollments, expanding prepaid retail distribution, enabling wireless services via its HERO platform, and increasing ClearLine deployments and POS feature upsells - Current growth initiatives include * Scaling Lifeline enrollments in California and other high-subsidy states * Expanding prepaid retail distribution across rural and multicultural markets * Enabling wireless service launches for non-telecom brands through HERO * Increasing ClearLine deployments and upselling POS features to merchants[354](index=354&type=chunk) [Synergy Across Business Units](index=67&type=section&id=Synergy%20Across%20Business%20Units) SurgePays achieves synergy through technology integration across POS platforms, data-driven engagement from fintech transactions, and strategic market expansion targeting underserved and rural communities - Synergy is built on * **Technology Integration:** POS platforms unify transactions across prepaid wireless, financial products, and merchant services * **Data-Driven Engagement:** Data analytics from ACH banking and fintech transactions enhance customer engagement * **Strategic Market Expansion:** Focus on underserved and rural markets to capture untapped potential[359](index=359&type=chunk) [COMPARISON OF THREE MONTHS ENDED June 30, 2025 AND 2024](index=67&type=section&id=COMPARISON%20OF%20THREE%20MONTHS%20ENDED%20June%2030%2C%202025%20AND%202024) For Q2 2025, total revenue decreased by **23.7%** to **$11.52 million** due to an **81.8%** MVNO decline, while POS and Prepaid Services revenues surged by **258.8%**, resulting in a gross loss and widened operating loss Revenue Comparison (Three Months Ended June 30) | Segment | 2025 Revenue | 2024 Revenue | Change ($) | Change (%) | | :--------------------------------- | :------------- | :------------- | :----------- | :--------- | | Mobile Virtual Network Operator | $2,273,706 | $12,503,507 | $(10,229,801) | (81.8%) | | Point-of-Sale and Prepaid Services | $9,244,460 | $2,576,820 | $6,667,640 | 258.8% | | Other Corporate Overhead | $- | $5,372 | $(5,372) | (100.0%) | | Total | $11,518,166 | $15,085,699 | $(3,567,533) | (23.7%) | Gross Profit (Loss) and Margin (Three Months Ended June 30) | Segment | 2025 Gross Profit (Loss) | 2024 Gross Profit (Loss) | 2025 Gross Margin (%) | 2024 Gross Margin (%) | | :--------------------------------- | :----------------------- | :----------------------- | :-------------------- | :-------------------- | | Mobile Virtual Network Operator | $(2,109,831) | $(3,510,190) | (92.8%) | (28.1%) | | Point-of-Sale and Prepaid Services | $(544,835) | $67,704 | (5.9%) | 2.6% | | Other Corporate Overhead | $- | $(589) | - | (24.9%) | | Total | $(2,654,666) | $(3,443,075) | (23.0%) | (22.8%) | - General and administrative costs decreased by **$3,217,484** (**45.0%**) due to reductions in contractors and consultants, professional services (legal fees), and compensation (stock compensation)[369](index=369&type=chunk)[370](index=370&type=chunk) - Interest expense increased to **$212,419** in Q2 2025 from **$116,722** in Q2 2024, partly due to amortization of debt discount from the convertible note[371](index=371&type=chunk)[372](index=372&type=chunk) [Revenues](index=67&type=section&id=Revenues) [Cost of Revenue, Gross Profit and Gross Margin](index=69&type=section&id=Cost%20of%20Revenue%2C%20Gross%20Profit%20and%20Gross%20Margin) [General and administrative](index=69&type=section&id=General%20and%20administrative) [Other (expense) income](index=71&type=section&id=Other%20%28expense%29%20income) [Provision for income tax benefit (expense)](index=71&type=section&id=Provision%20for%20income%20tax%20benefit%20%28expense%29) [COMPARISON OF SIX MONTHS ENDED June 30, 2025 AND 2024](index=72&type=section&id=COMPARISON%20OF%20SIX%20MONTHS%20ENDED%20June%2030%2C%202025%20AND%202024) For H1 2025, total revenue decreased by **52.5%** to **$22.10 million** due to an **89.0%** MVNO decline, while POS and Prepaid Services revenues increased by **243.3%**, leading to a gross loss and widened operating loss Revenue Comparison (Six Months Ended June 30) | Segment | 2025 Revenue | 2024 Revenue | Change ($) | Change (%) | | :--------------------------------- | :------------- | :------------- | :----------- | :--------- | | Mobile Virtual Network Operator | $4,559,530 | $41,396,096 | $(36,836,567) | (89.0%) | | Point-of-Sale and Prepaid Services | $17,536,066 | $5,107,409 | $12,428,657 | 243.3% | | Other Corporate Overhead | $- | $11,329 | $(11,329) | (100.0%) | | Total | $22,095,596 | $46,514,834 | $(24,419,238) | (52.5%) | Gross Profit (Loss) and Margin (Six Months Ended June 30) | Segment | 2025 Gross Profit (Loss) | 2024 Gross Profit (Loss) | 2025 Gross Margin (%) | 2024 Gross Margin (%) | | :--------------------------------- | :----------------------- | :----------------------- | :-------------------- | :-------------------- | | Mobile Virtual Network Operator | $(5,013,626) | $4,622,200 | (110.0%) | 11.2% | | Point-of-Sale and Prepaid Services | $(583,385) | $116,487 | (3.3%) | 2.3% | | Other Corporate Overhead | $- | $904 | - | 39.2% | | Total | $(5,597,011) | $4,739,591 | (25.3%) | 10.2% | - Selling, general and administrative costs decreased by **$4,970,838** (**37.4%**), driven by reductions in contractors and consultants, professional services (legal fees), and compensation (stock compensation)[385](index=385&type=chunk)[386](index=386&type=chunk) - Interest expense increased to **$331,853** in H1 2025 from **$249,305** in H1 2024, partly due to amortization of debt discount from the convertible note[387](index=387&type=chunk)[388](index=388&type=chunk) [Revenues](index=72&type=section&id=Revenues) [Cost of Revenue, Gross Profit and Gross Margin](index=73&type=section&id=Cost%20of%20Revenue%2C%20Gross%20Profit%20and%20Gross%20Margin) [General and administrative](index=73&type=section&id=General%20and%20administrative) [Other (expense) income](index=75&type=section&id=Other%20%28expense%29%20income) [Provision for income tax benefit (expense)](index=75&type=section&id=Provision%20for%20income%20tax%20benefit%20%28expense%29) [Equity Transactions for the Six Months Ended June 30, 2025](index=75&type=section&id=Equity%20Transactions%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025) [Segment Information](index=75&type=section&id=Segment%20Information) [LIQUIDITY AND CAPITAL RESOURCES](index=77&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Working capital significantly decreased to **$0.99 million** by June 30, 2025, with total assets down and liabilities up due to new debt, resulting in **$13.08 million** net cash outflow from operations, prompting management to plan ATM usage and other initiatives Liquidity and Capital Resources Summary | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :------------------ | | Current assets | $9,694,382 | $17,870,323 | | Current liabilities | $8,702,069 | $6,059,476 | | Working capital | $992,313 | $11,810,847 | | Total assets | $15,215,409 | $23,976,005 | | Total liabilities | $15,154,017 | $8,714,392 | | Stockholders' equity | $61,392 | $15,261,613 | - Net cash used in operating activities for the six months ended June 30, 2025, was **$13,082,419**[406](index=406&type=chunk) - Management plans to fund operations by * Selectively using the At The Market (ATM) agreement for up to **$15,000,000** * Suspending monthly payments on the related party note * Launching LinkUp Mobile SIM cards and 'phone in a box' programs * Expanding Torch Wireless Lifeline subscriber base in California * Leveraging MVNE solutions for other wireless companies[403](index=403&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk) [Critical Accounting Policies and Estimates](index=79&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section details SurgePays' critical accounting policies and estimates, requiring significant management judgment for allowances, inventory, loss contingencies, stock-based compensation, and fair value measurements, adhering to ASC 606 and ASC 718 - Significant estimates include * Allowance for doubtful accounts and other receivables * Inventory reserves and classifications * Valuation of loss contingencies and derivative liabilities * Valuation of stock-based compensation * Estimated useful lives for intangible assets, internal-use software, and property and equipment * Implicit interest rate in right-of-use operating leases * Uncertain tax positions and valuation allowance on deferred tax assets[419](index=419&type=chunk) - The company accounts for revenue under ASC 606, applying a five-step process to recognize revenue when performance obligations are satisfied[428](index=428&type=chunk)[432](index=432&type=chunk) - Stock-based compensation is accounted for under ASC 718 using the fair value-based method, with the Black-Scholes model used for valuing stock options and warrants[429](index=429&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk) [ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=83&type=section&id=ITEM%203%3A%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section addresses market risk disclosures, stating that there are no applicable quantitative and qualitative disclosures for the reporting period [Market Risk Disclosures](index=83&type=section&id=Market%20Risk%20Disclosures) SurgePays, Inc. reports no applicable quantitative and qualitative disclosures regarding market risk for the current period - Not applicable[435](index=435&type=chunk) [ITEM 4: CONTROLS AND PROCEDURES](index=83&type=section&id=ITEM%204%3A%20CONTROLS%20AND%20PROCEDURES) This section covers the evaluation of SurgePays' disclosure controls and procedures and any changes in internal control over financial reporting [Evaluation of disclosure controls and procedures](index=83&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) As of June 30, 2025, SurgePays' management determined its disclosure controls and procedures are effective, despite acknowledging a common lack of segregation of duties for a company of its size - As of June 30, 2025, the company's disclosure controls are effective[437](index=437&type=chunk) - The company lacks segregation of duties, similar to other companies of its size[437](index=437&type=chunk) [Changes in Internal Control over Financial Reporting](index=83&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in SurgePays' internal controls over financial reporting were identified during the period ended June 30, 2025 - No material changes in internal control over financial reporting were identified during the period ended June 30, 2025[438](index=438&type=chunk) [PART II - OTHER INFORMATION](index=83&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, unregistered sales of equity, defaults, mine safety, and other disclosures [ITEM 1: LEGAL PROCEEDINGS](index=83&type=section&id=ITEM%201%3A%20LEGAL%20PROCEEDINGS) SurgePays is involved in several legal proceedings, including a dismissed case, an ongoing district court case after an Oklahoma Supreme Court denial, and an appeal filed by SurgePays against dismissal and summary judgment rulings - The 'Juno Financial v. AATAC and Surge Holdings Inc.' case was dismissed with the agreement of the parties on September 12, 2024[440](index=440&type=chunk) - In 'Blue Skies Connections, LLC, and True Wireless, Inc. v. SurgePays, Inc., et. al.', the Oklahoma Supreme Court denied Plaintiffs' Petition for Certiorari on March 10, 2025, and the case will proceed in the district court on remaining claims[442](index=442&type=chunk) - In 'SurgePays, Inc. et al. v. Fina et al.', SurgePays has filed an appeal of the Court's dismissal and summary judgment rulings against its claims[441](index=441&type=chunk)[442](index=442&type=chunk) [ITEM 1A: RISK FACTORS](index=85&type=section&id=ITEM%201A%3A%20RISK%20FACTORS) SurgePays, Inc. reports no applicable risk factors for the current reporting period - Not applicable[443](index=443&type=chunk) [ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=85&type=section&id=ITEM%202%3A%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) On May 12, 2025, SurgePays issued a **$6,999,999** Senior Secured Convertible Note to Funicular Funds, LP, yielding **$5,925,000** in net cash proceeds, convertible at **$4.00** per share - On May 12, 2025, the company issued a Senior Secured Convertible Note for **$6,999,999** to Funicular Funds, LP, with net cash proceeds of **$5,925,000**[444](index=444&type=chunk) - The convertible note allows conversion into common stock at an initial price of **$4.00** per share, subject to down-round adjustment[444](index=444&type=chunk) [ITEM 3: DEFAULTS UPON SENIOR SECURITIES](index=85&type=section&id=ITEM%203%3A%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) SurgePays, Inc. reported no defaults on senior securities for the current period - None[445](index=445&type=chunk) [ITEM 4: MINE SAFETY DISCLOSURES](index=85&type=section&id=ITEM%204%3A%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to SurgePays, Inc.'s operations - Not applicable[445](index=445&type=chunk) [ITEM 5: OTHER INFORMATION](index=85&type=section&id=ITEM%205%3A%20OTHER%20INFORMATION) For H1 2025, no Rule 10b5-1 trading arrangements were adopted or modified, and the company repurchased **333,333 common shares** for **$999,999** while terminating its share repurchase program - No Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or executive officers during the six months ended June 30, 2025[445](index=445&type=chunk) - On May 12, 2025, the company repurchased **333,333 shares** of common stock for **$999,999** (**$3/share**) from a convertible note payable holder[446](index=446&type=chunk) - The share repurchase program was terminated on October 1, 2024, after reacquiring **81,850 shares** for **$146,836**[447](index=447&type=chunk) [ITEM 6: EXHIBITS](index=85&type=section&id=ITEM%206%3A%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including Sarbanes-Oxley Act certifications from the CEO and CFO, and Inline XBRL documents - Exhibits include * Certifications pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 from the CEO and CFO * Certifications pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 from the CEO and CFO * Inline XBRL Instance Document and Taxonomy Extension Documents[448](index=448&type=chunk) [SIGNATURES](index=86&type=section&id=SIGNATURES) This section confirms the official signing of the Form 10-Q report by SurgePays, Inc.'s principal executive and financial officers [Signatures](index=86&type=section&id=Signatures) The Form 10-Q report was officially signed on August 13, 2025, by Kevin Brian Cox, CEO, and Anthony Evers, CFO, on behalf of SurgePays, Inc - The report was signed by Kevin Brian Cox, Chief Executive Officer, and Anthony Evers, Chief Financial Officer, on August 13, 2025[452](index=452&type=chunk)

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 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 000-24085 AXT, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-3031310 (State or other jurisdiction of Incorp ...

[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements about future operations, financial conditions, clinical trial timing, regulatory approvals, and market opportunities, subject to risks and uncertainties - This report contains forward-looking statements concerning future operations, financial conditions, clinical trial timing, regulatory approvals, and market opportunities, based on current expectations and subject to risks and uncertainties[8](index=8&type=chunk)[9](index=9&type=chunk) - Key areas covered include clinical trial progress for ACR-368 and ACR-2316, regulatory submission timing, commercialization ability, capital requirements, and intellectual property protection[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for the period ended June 30, 2025, show decreased total assets and stockholders' equity due to an increased net loss, with cash and investments totaling $147.6 million [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to $158.6 million from $196.6 million, primarily due to reduced short-term investments, leading to a decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $41,895 | $39,818 | | Short-term investments | $95,528 | $139,662 | | **Total current assets** | **$138,412** | **$181,629** | | **Total assets** | **$158,583** | **$196,588** | | **Liabilities & Equity** | | | | Total current liabilities | $13,431 | $17,214 | | **Total liabilities** | **$15,546** | **$19,802** | | **Total stockholders' equity** | **$143,037** | **$176,786** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net losses increased for both the three and six months ended June 30, 2025, driven by higher research and development expenses, with the six-month net loss reaching $40.7 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $16,182 | $15,025 | $31,596 | $26,498 | | General and administrative | $6,467 | $6,412 | $12,715 | $12,607 | | **Loss from operations** | **$(22,649)** | **$(21,437)** | **$(44,311)** | **$(39,105)** | | **Net loss** | **$(21,006)** | **$(18,798)** | **$(40,686)** | **$(35,284)** | | Net loss per share | $(0.55) | $(0.52) | $(1.06) | $(1.20) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to $36.1 million for the six months ended June 30, 2025, while investing activities provided $38.7 million, a significant shift from the prior year Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(36,145) | $(30,986) | | Net cash provided by (used in) investing activities | $38,665 | $(82,194) | | Net cash (used in) provided by financing activities | $(440) | $123,178 | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's oncology focus, cash runway into Q2 2027, $123.8 million PIPE financing, and potential milestone payments up to $168.0 million to Lilly - The company is a clinical-stage biotech focused on oncology, advancing its lead candidates ACR-368 (Phase 2 for endometrial cancer) and ACR-2316 (Phase 1 for solid tumors)[31](index=31&type=chunk) - Existing cash, cash equivalents, and investments of **$147.6 million** as of June 30, 2025, are expected to fund operations into the **second quarter of 2027**[39](index=39&type=chunk)[114](index=114&type=chunk) - In April 2024, the company closed a PIPE financing, raising aggregate net proceeds of **$123.8 million** through the sale of common stock and pre-funded warrants[38](index=38&type=chunk)[64](index=64&type=chunk) - The company has potential future milestone payment obligations of up to **$168.0 million** to Eli Lilly and up to **$20.3 million** to Akoya Biosciences for its companion diagnostic test[88](index=88&type=chunk)[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's precision oncology focus, clinical updates for ACR-368 and ACR-2316, increased R&D expenses, and a cash runway extending into the second quarter of 2027 [Overview](index=28&type=section&id=Overview) Acrivon, a clinical-stage biotech, uses its AP3 platform to develop precision oncology drugs, with lead candidate ACR-368 in Phase 2 for endometrial cancer and ACR-2316 showing initial clinical activity - The company's lead drug, ACR-368, is in a Phase 2 trial for endometrial cancer, with interim data showing a **35% confirmed overall response rate (ORR)** and **80% tumor shrinkage** in OncoSignature-positive (BM+) patients[100](index=100&type=chunk)[105](index=105&type=chunk) - The second clinical asset, ACR-2316, a WEE1/PKMYT1 inhibitor, has shown initial clinical activity in its Phase 1 trial, including an ongoing confirmed partial response in an endometrial cancer patient[107](index=107&type=chunk) - The company's proprietary AP3 platform is used for drug design, identifying rational drug combinations, and creating drug-specific companion diagnostics (OncoSignature tests)[99](index=99&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Operating expenses increased for both the three and six-month periods ended June 30, 2025, primarily due to a **$5.1 million** rise in R&D costs, driven by the ACR-2316 program and personnel expenses Research & Development Expenses Breakdown (Six Months Ended June 30, in thousands) | Program | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | ACR-368 | $13,660 | $13,000 | $660 | | ACR-2316 | $2,930 | $— | $2,930 | | Other drug discovery programs | $1,208 | $3,122 | $(1,914) | | Personnel related | $11,152 | $8,520 | $2,632 | | Facilities, supplies and other | $2,646 | $1,856 | $790 | | **Total R&D Expenses** | **$31,596** | **$26,498** | **$5,098** | - The **$5.1 million** increase in six-month R&D expenses was primarily due to a **$2.9 million** increase in costs for the ACR-2316 clinical program and a **$2.6 million** increase in personnel-related costs from higher headcount[142](index=142&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company held **$147.6 million** in cash and investments, sufficient to fund operations into the second quarter of 2027, with net cash used in operations at **$36.1 million** - The company had **$147.6 million** in cash, cash equivalents, and investments as of June 30, 2025[141](index=141&type=chunk)[149](index=149&type=chunk) - The current cash position is expected to fund operations into the **second quarter of 2027**[141](index=141&type=chunk)[149](index=149&type=chunk) - Net cash used in operating activities increased to **$36.1 million** for the six months ended June 30, 2025, from **$31.0 million** in the prior-year period, reflecting higher net loss[143](index=143&type=chunk)[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," Acrivon Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk - The company is exempt from providing market risk disclosures as it qualifies as a "smaller reporting company" under SEC rules[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%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 the company's disclosure controls and procedures were effective as of June 30, 2025[163](index=163&type=chunk) - No material changes were made to the company's internal control over financial reporting during the second quarter of 2025[165](index=165&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, other disclosures, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) As of the filing date, the company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[168](index=168&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks including a history of significant losses, the need for substantial additional funding, and potential stock price volatility from future sales of restricted shares - The company has a history of significant losses, with an accumulated deficit of **$237.7 million** as of June 30, 2025, and expects to incur further losses[170](index=170&type=chunk) - Substantial additional funding will be required to support operations and pursue business objectives, with failure to raise capital potentially forcing curtailment of plans[175](index=175&type=chunk) - A significant portion of outstanding shares are restricted but may be sold in the near future, which could cause the market price of the common stock to drop[178](index=178&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the quarter, and the planned use of IPO proceeds remains consistent - The company did not conduct any sales of unregistered securities in the three months ended June 30, 2025[181](index=181&type=chunk) - The planned use of proceeds from the company's IPO remains consistent with the description in its final prospectus[182](index=182&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) The company disclosed that its Chief Medical Officer terminated a Rule 10b5-1 trading plan on May 2, 2025 - A Rule 10b5-1 trading plan for the Chief Medical Officer was terminated on May 2, 2025[188](index=188&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including CEO and CFO certifications and XBRL data files - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002[191](index=191&type=chunk)

Table of Contents 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 Marchex, Inc. 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 000-50658 (Exact name of Registrant as specified in its charter) Delaware 35-2194038 (State or ot ...

[PART I – FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Silo Pharma, Inc. and its subsidiary, including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Changes in Stockholders' Equity, and Statements of Cash Flows, along with detailed condensed notes explaining the company's organization, significant accounting policies, fair value measurements, intangible assets, stockholders' equity, concentrations, commitments, contingencies, and subsequent events [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20(Unaudited)%20and%20December%2031%2C%202024) Consolidated Balance Sheets | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------------- | :-------------------------- | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $4,333,672 | $3,905,799 | | Short-term investments | $1,926,297 | $3,174,724 | | Total Current Assets | $6,373,031 | $7,111,480 | | Total Assets | $6,652,507 | $7,411,840 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total Current Liabilities | $1,049,897 | $1,655,997 | | Total Liabilities | $1,735,424 | $2,377,575 | | Total Stockholders' Equity | $4,917,083 | $5,034,265 | | Total Liabilities and Stockholders' Equity | $6,652,507 | $7,411,840 | [Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) Consolidated Statements of Operations and Comprehensive Loss | 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 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | License Fee Revenue | $18,025 | $18,025 | $36,051 | $36,051 | | Gross Profit | $16,566 | $16,566 | $33,132 | $33,132 | | Total Operating Expenses | $1,265,117 | $1,019,340 | $2,375,804 | $1,915,419 | | Loss From Operations | $(1,248,551) | $(1,002,774) | $(2,342,672) | $(1,882,287) | | Total Other Income, Net | $44,258 | $70,995 | $106,942 | $148,841 | | Net Loss | $(1,204,293) | $(931,779) | $(2,235,730) | $(1,733,446) | | Basic and Diluted Net Loss Per Common Share | $(0.19) | $(0.31) | $(0.41) | $(0.59) | [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) - Total Stockholders' Equity decreased from **$5,034,265** as of December 31, 2024, to **$4,917,083** as of June 30, 2025, primarily due to net losses, partially offset by proceeds from common stock and warrant sales[20](index=20&type=chunk) - Common stock shares issued and outstanding increased significantly from **4,484,456** at December 31, 2024, to **8,651,128** at June 30, 2025, driven by sales of common stock and exercise of warrants[17](index=17&type=chunk)[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) 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 | $(2,925,568) | $(1,569,982) | | Net Cash Provided by Investing Activities | $1,259,483 | $1,051,868 | | Net Cash Provided by Financing Activities | $2,093,958 | $1,500,106 | | Net Increase in Cash and Cash Equivalents | $427,873 | $981,992 | | Cash and Cash Equivalents - End of Period | $4,333,672 | $4,506,300 | [Condensed Notes to Consolidated Financial Statements](index=12&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [NOTE 1 – ORGANIZATION AND BUSINESS](index=12&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20BUSINESS) Silo Pharma, Inc. is a diversified developmental-stage biopharmaceutical and cryptocurrency treasury company, incorporated in Nevada. Its therapeutic focus is on developing novel treatments for underserved conditions like PTSD, anxiety, fibromyalgia, and CNS diseases, including specific drug candidates SPC-15, SP-26, SPC-14, and SPU-16 - The Company is a diversified developmental-stage biopharmaceutical and cryptocurrency treasury company[29](index=29&type=chunk) - Therapeutic focus includes developing novel therapeutics for PTSD, stress-induced anxiety disorders, fibromyalgia, and central nervous system (CNS) diseases[29](index=29&type=chunk) - Key drug candidates in development are SPC-15 (intranasal for PTSD/anxiety), SP-26 (time-release ketamine implant for fibromyalgia), SPC-14 (intranasal for Alzheimer's), and SPU-16 (CNS-homing peptide for multiple sclerosis)[29](index=29&type=chunk) [NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the significant accounting policies used in preparing the unaudited consolidated financial statements, including the basis of presentation, principles of consolidation, liquidity assessment, use of estimates, and specific policies for cash, investments, intangible assets, revenue recognition, stock-based compensation, income taxes, R&D, leases, and net loss per share. It also notes the company's single operating segment and recent accounting pronouncements - The Company operates as a single operating segment, focusing on clinical-stage biopharmaceutical development[56](index=56&type=chunk) - Research and development costs are expensed as incurred, totaling **$1,311,209** for the six months ended June 30, 2025, an increase from **$774,889** in the prior year[50](index=50&type=chunk) - The Company had positive working capital of **$5,323,134** as of June 30, 2025, mitigating going concern doubts and providing sufficient cash for at least twelve months[32](index=32&type=chunk)[33](index=33&type=chunk) [NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS](index=18&type=section&id=NOTE%203%20%E2%80%93%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS%20AND%20FAIR%20VALUE%20MEASUREMENTS) This note details the Company's fair value measurements, classifying financial assets and liabilities into a three-level hierarchy. Short-term investments, primarily exchange-traded funds, are categorized as Level 1 measurements based on their redemption value. The note also summarizes the activity in short-term investments, showing a decrease in balance from the beginning of the period - Short-term investments, consisting of exchange-traded funds, are classified as Level 1 fair value measurements[67](index=67&type=chunk) Short-term Investments Activity | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Balance, beginning of period | $3,174,724 | $4,140,880 | | Purchases of short-term investments | $56,170 | $97,452 | | Sales at original cost | $(1,315,653) | $(1,149,320) | | Net realized gain (loss) on short-term investments | $3,911 | $(1,025) | | Unrealized gain | $7,145 | $14,253 | | Balance, end of period | $1,926,297 | $3,102,240 | [NOTE 4 – INTANGIBLE ASSETS](index=20&type=section&id=NOTE%204%20%E2%80%93%20INTANGIBLE%20ASSETS) This note details the Company's intangible assets, primarily an exclusive license agreement with Columbia University for $235,000, which was revised down from $247,400. The asset is amortized over 20 years, with amortization expense of $5,565 for the six months ended June 30, 2025 - Intangible assets primarily consist of an exclusive license agreement with Columbia University, initially costing **$247,400**, later revised to **$235,000**[69](index=69&type=chunk)[73](index=73&type=chunk) - The license is amortized over an estimated useful life of **20 years**[42](index=42&type=chunk)[73](index=73&type=chunk) Intangible Assets Summary | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | License Cost | $235,000 | $247,400 | | Less: Accumulated Amortization | $(11,750) | $(6,185) | | Net Intangible Assets | $223,250 | $241,215 | | Amortization Expense (Six Months) | $5,565 | $0 | [NOTE 5 – STOCKHOLDERS' EQUITY](index=22&type=section&id=NOTE%205%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note details changes in stockholders' equity, including the Company's authorized shares, various common stock and warrant offerings in June and July 2024, and May 2025, which significantly increased outstanding shares and capital. It also covers the stock repurchase plan, stock option grants to executives and board members, and warrant activities - The Company's authorized shares consist of **100,000,000** common stock and **5,000,000** preferred stock[75](index=75&type=chunk) - Multiple offerings (June 2024, July 2024, May 2025) of common stock and warrants resulted in significant capital raises and an increase in outstanding common shares[76](index=76&type=chunk)[85](index=85&type=chunk)[95](index=95&type=chunk) - In May 2025, **400,000** incentive stock options were granted to executive officers and board members, valued at **$167,566**, vesting over one year[110](index=110&type=chunk) Stockholders' Equity Summary | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :-------------- | :---------------- | | Common Stock Shares Outstanding | 8,651,128 | 4,484,456 | | Additional Paid-in Capital | $22,407,075 | $20,296,088 | | Accumulated Deficit | $(17,500,421) | $(15,264,691) | | Total Stockholders' Equity | $4,917,083 | $5,034,265 | [NOTE 6 – CONCENTRATIONS](index=31&type=section&id=NOTE%206%20%E2%80%93%20CONCENTRATIONS) This note highlights the Company's significant customer and vendor concentrations, with one licensee accounting for 100% of total revenues and one licensor accounting for 100% of vendor license agreements for both the six months ended June 30, 2025 and 2024 - One licensee accounted for **100%** of total revenues from customer license fees for the six months ended June 30, 2025 and 2024[121](index=121&type=chunk) - One licensor accounted for **100%** of the Company's vendor license agreements related to biopharmaceutical operations for the six months ended June 30, 2025 and 2024[122](index=122&type=chunk) [NOTE 7 – COMMITMENTS AND CONTINGENCIES](index=32&type=section&id=NOTE%207%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note details the Company's commitments and contingencies, including employment agreements with key executives (Eric Weisblum, Daniel Ryweck, Dr. James Kuo) outlining salaries, bonuses, and severance terms. It also covers significant license agreements with the University of Maryland, Baltimore (UMB) and Columbia University, and customer license/sublicense agreements with Aikido Pharma Inc., specifying fees, royalties, and milestone payments. Future research and development commitments are also disclosed - Employment agreements with Eric Weisblum (CEO), Daniel Ryweck (CFO), and Dr. James Kuo (VP R&D) detail base salaries, potential bonuses, and severance provisions[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - The Company has a Master License Agreement with UMB for CNS-homing peptides, involving license fees, milestone payments (up to **$1,900,000**), and tiered royalty payments[128](index=128&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk) - An exclusive license agreement with Columbia University grants rights to patents for stress-induced affective disorders, requiring an initial license fee, annual fees, and royalties[140](index=140&type=chunk) - Customer license and sublicense agreements with Aikido Pharma Inc. generated **$34,375** in license fee revenues for the six months ended June 30, 2025, with deferred revenue balances of **$68,750** (current) and **$653,125** (long-term)[149](index=149&type=chunk)[152](index=152&type=chunk) Future Amounts Due Under Sponsored Study and Research Agreements | Year ended June 30, | Amount | | :------------------ | :------------- | | 2026 | $1,245,000 | | Total | $1,245,000 | [NOTE 8 – SUBSEQUENT EVENTS](index=40&type=section&id=NOTE%208%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note describes subsequent events after June 30, 2025, including the termination of the Master License Agreement with UMB and the granting of an exclusive option for a new commercial license for CNS-homing peptides. Additionally, the Company entered into an asset purchase agreement with MAVS Holdings LLC to acquire web-based application software and domain names for $518,250, paid in common stock - On July 8, 2025, the Master License Agreement with UMB was terminated, and the Company received an exclusive option for a new commercial license for CNS-homing peptides, expiring March 31, 2026[154](index=154&type=chunk)[156](index=156&type=chunk) - On July 29, 2025, the Company acquired software and domain names from MAVS Holdings LLC for **$518,250**, paid by issuing **750,000** shares of common stock[157](index=157&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Silo Pharma's business as a developmental-stage biopharmaceutical and cryptocurrency treasury company. It details the company's therapeutic product candidates, including SPC-15 for PTSD, SP-26 for fibromyalgia, SPC-14 for Alzheimer's, and SPU-16 for CNS disorders. The discussion also covers the company's recent entry into a cryptocurrency treasury strategy, a comparison of financial results for the three and six months ended June 30, 2025 and 2024, and an analysis of liquidity and capital resources [Overview](index=43&type=section&id=Overview) - Silo Pharma, Inc. is a diversified developmental-stage biopharmaceutical and cryptocurrency treasury company[160](index=160&type=chunk) - The company's therapeutic focus is on developing novel treatments for PTSD, stress-induced anxiety disorders, fibromyalgia, and CNS diseases[160](index=160&type=chunk) - Lead programs include SPC-15 (intranasal for PTSD/anxiety), SP-26 (ketamine implant for fibromyalgia), SPC-14 (intranasal for Alzheimer's), and SPU-16 (CNS-homing peptide for MS)[160](index=160&type=chunk) [Therapeutics](index=43&type=section&id=Therapeutics) - The Company seeks to acquire and develop intellectual property for rare diseases, including the use of psychedelic drugs like psilocybin and ketamine for depression, mental health, and neurological disorders[161](index=161&type=chunk) - Psilocybin therapy has shown promising results in academic studies for rapid reductions in depression symptoms[163](index=163&type=chunk) - The Company has license agreements with the University of Maryland, Baltimore, and Columbia University for various therapeutic developments[165](index=165&type=chunk) [Product Candidates](index=45&type=section&id=Product%20Candidates) - The Company is focusing on four product candidates: SPC-15, SP-26, SPC-14, and SPU-16[175](index=175&type=chunk) [SPC-15: Intranasal Treatment for PTSD and Anxiety Disorders](index=45&type=section&id=SPC-15%3A%20Intranasal%20Treatment%20for%20PTSD%20and%20Anxiety%20Disorders) SPC-15 is an intranasal serotonin 4 receptor agonist for PTSD and anxiety, with exclusive global development rights from Columbia University. It utilizes Medspray Pharma's nasal spray technology and is pursuing the FDA's 505(b)(2) pathway, with IND submission aimed for 2025 after preclinical studies - SPC-15 is an intranasal serotonin 4 (5-HT4) receptor agonist targeting PTSD and anxiety disorders[167](index=167&type=chunk) - The Company holds exclusive global rights from Columbia University for SPC-15 and uses Medspray Pharma BV's soft mist nasal spray technology for delivery[167](index=167&type=chunk)[168](index=168&type=chunk) - A pre-IND meeting with the FDA was held in September 2024, and an IND submission is targeted for 2025 following GLP-compliant studies[168](index=168&type=chunk)[169](index=169&type=chunk) [SP-26: Ketamine Implant for Fibromyalgia](index=45&type=section&id=SP-26%3A%20Ketamine%20Implant%20for%20Fibromyalgia) SP-26 is a novel ketamine-based injectable dissolvable polymer implant for chronic pain and fibromyalgia, currently in preclinical research. It aims to provide sustained relief with optimized dosage control, pursuing the FDA's 505(b)(2) regulatory pathway as a non-opioid alternative - SP-26 is a ketamine-based injectable dissolvable polymer implant for chronic pain and fibromyalgia, currently in preclinical research[171](index=171&type=chunk) - The Company filed a provisional patent application for SP-26 in March 2023 and intends to develop it via the FDA's 505(b)(2) regulatory pathway[172](index=172&type=chunk) - SP-26 aims to be a non-opioid alternative, improving dosage control compared to intravenous delivery for fibromyalgia, which affects approximately **4 million U.S. adults**[173](index=173&type=chunk) [SPC-14: Treatment for Alzheimer's Disease](index=45&type=section&id=SPC-14%3A%20Treatment%20for%20Alzheimer's%20Disease) SPC-14 targets glutamate receptor NDMAR and serotonin 5-HT4 for cognitive and neuropsychiatric symptoms in Alzheimer's disease, developed under a sponsored research agreement with Columbia University. The Company holds exclusive global rights and has extended research into its mechanism of action, showing efficacy against luteinizing hormone (LH) in attenuating learned helplessness and anxiety - SPC-14 targets glutamate receptor NDMAR and serotonin 5-HT4 for cognitive and neuropsychiatric symptoms in Alzheimer's disease[174](index=174&type=chunk) - Developed under a sponsored research agreement with Columbia University, the Company has exclusive global rights to develop and commercialize SPC-14[174](index=174&type=chunk) - SPC-14 has shown efficacy against luteinizing hormone (LH) in attenuating learned helplessness, preservative behavior, and hyponeophagia[176](index=176&type=chunk) [SPU-16: Treatment for CNS Disorders, Initial Indication for Multiple Sclerosis](index=47&type=section&id=SPU-16%3A%20Treatment%20for%20CNS%20Disorders%2C%20Initial%20Indication%20for%20Multiple%20Sclerosis) SPU-16 is a candidate for CNS disorders, initially targeting multiple sclerosis, based on intellectual property from the University of Maryland, Baltimore (UMB). The original Master License Agreement with UMB was terminated on July 8, 2025, and the Company now holds an exclusive option for a new commercial license for the related CNS-homing peptides, aiming to reduce toxicity and enhance therapeutic delivery - SPU-16 targets central nervous system (CNS) disorders, with an initial indication for multiple sclerosis[177](index=177&type=chunk) - The Master License Agreement with UMB for SPU-16 was terminated on July 8, 2025, replaced by an exclusive option for a new commercial license for the underlying intellectual property[179](index=179&type=chunk)[180](index=180&type=chunk) - SPU-16 is believed to offer a competitive advantage by using homing peptides to reduce toxicity and enhance therapeutic payload delivery[181](index=181&type=chunk) [Cryptocurrency Treasury Strategy](index=47&type=section&id=Cryptocurrency%20Treasury%20Strategy) - The Company's strategy changed in August 2025 to include a cryptocurrency treasury strategy focused on acquiring leading digital assets[182](index=182&type=chunk) [Recent Developments](index=47&type=section&id=Recent%20Developments) - On August 4, 2025, the Board approved the establishment of a cryptocurrency advisory board, appointing Corwin Yu as the initial member[183](index=183&type=chunk) - On August 5, 2025, the Company announced the launch of its cryptocurrency treasury strategy, focusing on leading digital assets like Bitcoin, Ethereum, and Solana[183](index=183&type=chunk)[184](index=184&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) [Revenues](index=49&type=section&id=Revenues) The Company generated minimal and consistent revenues of $18,025 for the three months and $36,051 for the six months ended June 30, 2025 and 2024, primarily from the Aikido License and Sublicense Agreement, recognized over a 15-year term Revenues | 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 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $18,025 | $18,025 | $36,051 | $36,051 | - Revenues are derived from the Aikido License and Sublicense Agreement, recognized over an estimated **15-year term**[187](index=187&type=chunk) [Cost of Revenues](index=49&type=section&id=Cost%20of%20Revenues) Cost of revenues remained consistent at $1,459 for the three months and $2,919 for the six months ended June 30, 2025 and 2024, consisting of amortized license fees related to the UMB License and Sublicense Agreement Cost of Revenues | 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 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of Revenues | $1,459 | $1,459 | $2,919 | $2,919 | - Cost of revenues primarily consists of amortized license fees from the UMB License and Sublicense Agreement[188](index=188&type=chunk) [Operating Expenses](index=49&type=section&id=Operating%20Expenses) Total operating expenses increased by 24.5% for both the three and six months ended June 30, 2025, primarily driven by a significant increase in research and development costs, partially offset by decreases in professional fees and other selling, general and administrative expenses Total Operating Expenses | 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 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Expenses | $1,265,117 | $1,019,340 | $2,375,804 | $1,915,419 | - Total operating expenses increased by **$245,777 (24.5%)** for the three months and **$460,385 (24.5%)** for the six months ended June 30, 2025[198](index=198&type=chunk) [Compensation Expense](index=49&type=section&id=Compensation%20Expense) Compensation expense increased by 16.0% for the three months and 9.4% for the six months ended June 30, 2025, primarily due to increases in stock-based compensation and payroll expenses Compensation Expense | 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 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Compensation Expense | $195,305 | $168,381 | $373,774 | $341,727 | - Increase in compensation expense was primarily due to a **$17,445** increase in stock-based compensation and higher payroll expenses[190](index=190&type=chunk)[191](index=191&type=chunk) [Professional Fees](index=49&type=section&id=Professional%20Fees) Professional fees decreased by 22.5% for the three months and 10.6% for the six months ended June 30, 2025, mainly due to reductions in investor relations and consulting fees, partially offset by increases in legal, accounting, and auditing fees Professional Fees | 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 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Professional Fees | $299,592 | $386,465 | $573,416 | $641,067 | - Decrease in professional fees was primarily driven by a reduction in investor relations (**$92,460** for three months, **$45,215** for six months) and consulting fees (**$34,200** for three months, **$47,949** for six months)[191](index=191&type=chunk)[192](index=192&type=chunk) [Research and Development](index=49&type=section&id=Research%20and%20Development) Research and development expenses significantly increased by 82.6% for the three months and 69.2% for the six months ended June 30, 2025, reflecting increased costs associated with Investigator-sponsored Study Agreements and other research projects Research and Development | 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 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and Development | $717,247 | $392,824 | $1,311,209 | $774,889 | - The increase in R&D expenses was due to higher costs related to Investigator-sponsored Study Agreements and other research projects with third-party vendors and universities[193](index=193&type=chunk) [Other Selling, General and Administrative Expenses](index=51&type=section&id=Other%20Selling%2C%20General%20and%20Administrative%20Expenses) Other selling, general and administrative expenses decreased by 26.1% for the three months and 25.6% for the six months ended June 30, 2025, primarily due to reduced advertising and promotion, proxy meeting fees, and filing fees Other Selling, General and Administrative Expenses | 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 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Other Selling, General and Administrative Expenses | $52,973 | $71,670 | $117,405 | $157,736 | - The decrease was mainly attributed to a reduction in advertising and promotion (**$19,386** for three months, **$16,320** for six months), proxy meeting fees (**$19,000** for six months), and filing fees (**$9,891** for six months)[196](index=196&type=chunk)[197](index=197&type=chunk) [Loss from Operations](index=51&type=section&id=Loss%20from%20Operations) Loss from operations increased by 24.5% for both the three and six months ended June 30, 2025, primarily due to the overall increase in operating expenses, particularly research and development Loss from Operations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Loss from Operations | $(1,248,551) | $(1,002,774) | $(2,342,672) | $(1,882,287) | - The increase in loss from operations was a direct result of the changes in operating expenses, particularly the rise in research and development costs[198](index=198&type=chunk) [Other Income](index=51&type=section&id=Other%20Income) Other income, net, decreased by 37.7% for the three months and 28.2% for the six months ended June 30, 2025, primarily due to a significant decrease in interest and dividend income, partially offset by an increase in net realized gain on short-term investments and reduced foreign currency transaction losses Other Income, Net | 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 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Other Income, Net | $44,258 | $70,995 | $106,942 | $148,841 | - The decrease in other income was primarily due to a **$32,125** (three months) and **$58,474** (six months) decrease in interest and dividend income[199](index=199&type=chunk)[200](index=200&type=chunk) - This was partially offset by an increase in net realized gain on short-term investments (**$2,248** for three months, **$4,936** for six months) and a decrease in foreign currency transaction loss[199](index=199&type=chunk)[200](index=200&type=chunk) [Net Loss](index=51&type=section&id=Net%20Loss) Net loss increased by 29.2% for the three months and 29.0% for the six months ended June 30, 2025, reaching $1,204,293 and $2,235,730 respectively, primarily driven by the changes in operating expenses and other income Net Loss | 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 | $(1,204,293) | $(931,779) | $(2,235,730) | $(1,733,446) | | Net Loss Per Common Share (Basic and Diluted) | $(0.19) | $(0.31) | $(0.41) | $(0.59) | - The increase in net loss was primarily a result of the changes in operating expenses and other income discussed previously[202](index=202&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company had working capital of **$5,323,134**, short-term investments of **$1,926,297**, and cash and cash equivalents of **$4,333,672** as of June 30, 2025[203](index=203&type=chunk) - Working capital decreased by **$132,349 (2%)** from December 31, 2024, primarily due to a decrease in short-term investments, partially offset by an increase in cash and a decrease in current liabilities[204](index=204&type=chunk)[207](index=207&type=chunk) - The Company believes it has sufficient cash and liquid short-term investments to meet its obligations for a minimum of **twelve months** from the filing date[212](index=212&type=chunk)[216](index=216&type=chunk) [Cash Flows](index=53&type=section&id=Cash%20Flows) Cash flows from operating activities showed a significant increase in usage, while investing activities provided more cash, and financing activities also provided more cash, leading to a net increase in cash and cash equivalents for the six months ended June 30, 2025 Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net Cash Used in Operating Activities | $(2,925,568) | $(1,569,982) | | Net Cash Provided by Investing Activities | $1,259,483 | $1,051,868 | | Net Cash Provided by Financing Activities | $2,093,958 | $1,500,106 | | Net Increase in Cash and Cash Equivalents | $427,873 | $981,992 | [Net Cash Used in Operating Activities](index=53&type=section&id=Net%20Cash%20Used%20in%20Operating%20Activities) Net cash used in operating activities increased by 86.3% to $2,925,568 for the six months ended June 30, 2025, primarily due to a higher net loss and decreases in accounts payable and deferred revenue - Net cash used in operating activities increased by **$1,355,586 (86.3%)** to **$2,925,568** for the six months ended June 30, 2025[209](index=209&type=chunk) - This was primarily driven by a net loss of **$2,235,730**, a decrease in accounts payable and accrued expenses of **$593,700**, and a decrease in deferred revenue of **$36,051**[213](index=213&type=chunk) [Net Cash Provided by Investing Activities](index=53&type=section&id=Net%20Cash%20Provided%20by%20Investing%20Activities) Net cash provided by investing activities increased by 19.7% to $1,259,483 for the six months ended June 30, 2025, mainly from proceeds from the sale of short-term debt investments, partially offset by purchases - Net cash provided by investing activities increased by **$207,615 (19.7%)** to **$1,259,483** for the six months ended June 30, 2025[210](index=210&type=chunk) - This was primarily from proceeds of **$1,315,653** from the sale of short-term debt investments, offset by **$56,170** in purchases[213](index=213&type=chunk) [Net cash Provided by Financing Activities](index=53&type=section&id=Net%20cash%20Provided%20by%20Financing%20Activities) Net cash provided by financing activities increased by 39.6% to $2,093,958 for the six months ended June 30, 2025, driven by net proceeds from common stock and pre-funded warrant sales, and proceeds from warrant exercises - Net cash provided by financing activities increased by **$593,852 (39.6%)** to **$2,093,958** for the six months ended June 30, 2025[211](index=211&type=chunk) - This was due to **$1,593,897** from the sale of common stock and pre-funded warrants, and **$500,061** from the exercise of warrants[213](index=213&type=chunk) [Cash Requirements](index=53&type=section&id=Cash%20Requirements) The Company anticipates sufficient cash and cash equivalents, along with short-term investments, to meet its obligations for at least the next twelve months, with no other material capital expenditure commitments beyond research and development agreements - The Company believes its current cash, cash equivalents, and short-term investments are sufficient to meet obligations for a minimum of **twelve months**[212](index=212&type=chunk) - There are no other material commitments for capital expenditures beyond those for research and development agreements[214](index=214&type=chunk) [Liquidity](index=54&type=section&id=Liquidity) Despite a net loss of $2,235,730 and cash used in operations of $2,925,568 for the six months ended June 30, 2025, the Company maintains positive working capital of $5,323,134, with $4,333,672 in cash and cash equivalents, which mitigates going concern doubts and ensures sufficient liquidity for the next twelve months - The Company reported a net loss of **$2,235,730** and used **$2,925,568** in cash from operations for the six months ended June 30, 2025[215](index=215&type=chunk) - As of June 30, 2025, the Company had positive working capital of **$5,323,134** and cash and cash equivalents of **$4,333,672**[215](index=215&type=chunk) - This positive working capital mitigates substantial doubt about the Company's ability to continue as a going concern and provides sufficient cash for at least **twelve months**[216](index=216&type=chunk) [Off-Balance Sheet Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company has no off-balance sheet arrangements[217](index=217&type=chunk) [Critical Accounting Estimates](index=55&type=section&id=Critical%20Accounting%20Estimates) [Stock-Based Compensation](index=55&type=section&id=Stock-Based%20Compensation) Stock-based compensation is recognized in financial statements based on ASC 718, measuring the grant-date fair value of equity awards over the vesting period, with forfeitures recognized as they occur - Stock-based compensation is accounted for under ASC 718, requiring recognition of the cost of services received in exchange for equity instruments over the vesting period[218](index=218&type=chunk) - The cost is measured based on the grant-date fair value of the award, and forfeitures are recognized as they occur[218](index=218&type=chunk) [Research and Development](index=55&type=section&id=Research%20and%20Development) Research and development costs are expensed as incurred in accordance with ASC 730-10, with significant estimates made regarding the percentage of completion for certain projects - Research and development costs are expensed when incurred, following ASC 730-10[219](index=219&type=chunk) - Significant estimates are made regarding the percentage of completion of certain research and development projects[219](index=219&type=chunk) [Recent Accounting Pronouncements](index=55&type=section&id=Recent%20Accounting%20Pronouncements) The FASB issued ASU 2024-03, effective for fiscal years beginning after December 15, 2026, requiring more detailed disaggregation of expenses in the income statement. The Company does not expect this or other recent pronouncements to materially impact its consolidated financial statements - ASU 2024-03, effective for fiscal years beginning after December 15, 2026, requires more detailed disaggregation of expenses in the income statement[220](index=220&type=chunk) - The Company does not expect the adoption of this new guidance or any other recently issued pronouncements to have a material impact on its consolidated financial statements[220](index=220&type=chunk)[221](index=221&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Silo Pharma, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it is a 'smaller reporting company'[222](index=222&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures and changes in internal control over financial reporting. The CEO and CFO determined that disclosure controls and procedures were effective as of June 30, 2025. Ongoing remediation efforts are being implemented to address previously identified material weaknesses, including enhancements to segregation of duties, monitoring controls, and bank reconciliation processes [Evaluation of Disclosure Controls and Procedures](index=55&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO and CFO evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and determined they were effective[223](index=223&type=chunk) - Disclosure controls are designed to ensure timely recording, processing, summarizing, and reporting of information required by the Exchange Act[223](index=223&type=chunk) [Changes in Internal Control Over Financial Reporting](index=56&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - During the six months ended June 30, 2025, the Company continued implementing remedial actions to address previously identified material weaknesses[224](index=224&type=chunk) - Remedial actions include enhancements to segregation of duties, monitoring controls, and bank reconciliation processes, along with reviewing and enhancing business policies[224](index=224&type=chunk) - Other than these ongoing remediation efforts, there were no material changes in internal control over financial reporting[224](index=224&type=chunk) [PART II – OTHER INFORMATION](index=57&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) Silo Pharma, Inc. is not currently a party to any material legal proceedings and is unaware of any pending or threatened legal actions that could significantly impact its business, operating results, cash flows, or financial condition - The Company is not currently involved in any material legal proceedings[226](index=226&type=chunk) - There are no known pending or threatened legal proceedings that are expected to have a material adverse effect on the Company's business or financial condition[226](index=226&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the Annual Report, primarily focusing on new risks associated with the Company's cryptocurrency treasury strategy. Key risks include potential adverse impacts from central bank digital currencies, the classification of digital assets as securities, the possibility of being deemed an investment company, regulatory developments in crypto markets, liquidity issues with digital assets, and security breaches or cyberattacks - New risk factors primarily relate to the Company's cryptocurrency treasury strategy[228](index=228&type=chunk) - Risks include potential adverse impact from central bank digital currencies (CBDCs) and the possibility of digital assets being classified as 'securities' by regulators[229](index=229&type=chunk)[230](index=230&type=chunk) - There is a risk of being deemed an 'investment company' under the 1940 Act, which could significantly impact business operations[233](index=233&type=chunk)[237](index=237&type=chunk) - Digital assets are less liquid than cash and cash equivalents, posing risks during market instability or security breaches[240](index=240&type=chunk)[242](index=242&type=chunk) [Risks Relating to Investing in Digital Securities](index=57&type=section&id=Risks%20Relating%20to%20Investing%20in%20Digital%20Securities) - The launch of central bank digital currencies (CBDCs) could reduce demand for private-sector cryptocurrencies[229](index=229&type=chunk) - Any digital asset acquired by the Company may be classified as a 'security,' subjecting the Company to additional regulation and potential enforcement actions[230](index=230&type=chunk)[232](index=232&type=chunk) - If deemed an investment company under the 1940 Act, restrictions could make it impractical to continue current business segments[233](index=233&type=chunk)[237](index=237&type=chunk) - The Company faces risks from regulatory developments in crypto asset markets, which could adversely affect digital asset prices and the Company's common stock[238](index=238&type=chunk)[239](index=239&type=chunk) - Digital assets are less liquid than cash, and security breaches or cyberattacks could lead to partial or total loss of digital assets[240](index=240&type=chunk)[242](index=242&type=chunk) - The Company has limited history in generating staking revenues from digital assets and faces competition from other companies in this area[246](index=246&type=chunk)[249](index=249&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that the Company had no unregistered sales of equity securities during the quarter ended June 30, 2025, and did not repurchase any common stock during the same period - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025[252](index=252&type=chunk) - The Company did not repurchase any common stock during the quarterly period ended June 30, 2025[253](index=253&type=chunk) [Item 3. Defaults Upon Senior Securities](index=62&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Silo Pharma, Inc. reported no defaults upon senior securities during the period - The Company reported no defaults upon senior securities[254](index=254&type=chunk) [Item 4. Mine Safety Disclosures](index=62&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Silo Pharma, Inc - Mine Safety Disclosures are not applicable to the Company[255](index=255&type=chunk) [Item 5. Other Information](index=62&type=section&id=Item%205.%20Other%20Information) This section details other significant information, including the establishment of a cryptocurrency advisory board and the launch of a cryptocurrency treasury strategy in August 2025. It also notes that no directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading arrangements, and the Company received a Nasdaq deficiency notice for not meeting the minimum bid price requirement [Announcement of Cryptocurrency Treasury Strategy and Formation of Cypto Advisory Board](index=62&type=section&id=Announcement%20of%20Cryptocurrency%20Treasury%20Strategy%20and%20Formation%20of%20Cypto%20Advisory%20Board) - On August 4, 2025, the Board approved the establishment of a cryptocurrency advisory board, appointing Corwin Yu as the initial member[256](index=256&type=chunk) - On August 5, 2025, the Company announced the launch of a cryptocurrency treasury strategy focused on leading digital assets like Bitcoin, Ethereum, and Solana[256](index=256&type=chunk)[257](index=257&type=chunk) [Director and Officer Trading Arrangements](index=62&type=section&id=Director%20and%20Officer%20Trading%20Arrangements) - No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[258](index=258&type=chunk) [Nasdaq Minimum Bid Price Deficiency Notice](index=62&type=section&id=Nasdaq%20Minimum%20Bid%20Price%20Deficiency%20Notice) - On June 27, 2025, the Company received a Nasdaq notice for non-compliance with the **$1.00** minimum bid price requirement[259](index=259&type=chunk) - The Company has **180 calendar days**, until December 24, 2025, to regain compliance and may consider options like a reverse stock split[259](index=259&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various warrant forms, a stock purchase agreement, a lockup agreement, certifications from the Principal Executive and Financial Officers, and Inline XBRL documents - Exhibits include forms for Prefunded Warrants, Series A-1 and A-2 Warrants, and Placement Agent Warrants[260](index=260&type=chunk) - A Stock Purchase Agreement and Lockup Agreement are also filed[260](index=260&type=chunk) - Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act are included[260](index=260&type=chunk) - Inline XBRL documents for the financial statements are provided[260](index=260&type=chunk) [SIGNATURES](index=64&type=section&id=SIGNATURES) - The report is signed by Eric Weisblum, Chairman and Chief Executive Officer, and Daniel Ryweck, Chief Financial Officer, on August 13, 2025[266](index=266&type=chunk)

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 Registrant's telephone number, including area code: 650-414-3530 (Former name or former address, if changed since last report) For the transition period from ___________ to _________ Commission ...

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: 001-41094 ROADZEN INC. (Exact Name of Registrant as Specified in Its Charter) British Virgin Islands 98-1600102 ( ...

[DEFINITIONS](index=3&type=section&id=DEFINITIONS) This section defines key terms used throughout the Form 10-Q, covering financial instruments, company agreements, and industry-specific terminology - The report provides definitions for **key terms** used throughout the Form 10-Q, including **financial instruments**, **company agreements**, and **industry-specific terminology** related to graphite and critical minerals[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk) [PART I — FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and equity, with notes on accounting policies and liquidity [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time, reflecting its financial position | ASSETS (thousands of dollars) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $6,704 | $4,272 | | Total Current Assets | $7,324 | $4,863 | | Net property, plant and equipment | $139,225 | $137,868 | | Total Assets | $150,498 | $146,357 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total Current Liabilities | $14,331 | $11,762 | | Total Liabilities | $15,728 | $13,235 | | Total Stockholders' Equity | $134,770 | $133,122 | | Total Liabilities and Stockholders' Equity | $150,498 | $146,357 | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net loss over specific periods, illustrating its operational performance | Operating Expenses (thousands of dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product development expenses | $(275) | $(281) | $(457) | $(596) | | General and administrative expenses | $(3,133) | $(2,489) | $(5,427) | $(5,094) | | Total operating expenses | $(3,575) | $(2,838) | $(6,210) | $(5,831) | | Other expense, net | $(294) | $(981) | $(335) | $(886) | | Net Loss | $(3,869) | $(3,819) | $(6,545) | $(6,717) | | BASIC AND DILUTED LOSS PER SHARE | $(0.05) | $(0.07) | $(0.09) | $(0.12) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by the company across operating, investing, and financing activities over specific periods | Cash Flow Activities (thousands of dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Used In Operating Activities | $(4,673) | $(5,181) | | Net Cash Used In Investing Activities | $(4,800) | $(3,222) | | Net Cash Provided By Financing Activities | $11,905 | $715 | | Net increase (decrease) in Cash and Cash Equivalents | $2,432 | $(7,688) | | Cash and Cash Equivalents, End of Period | $6,704 | $3,164 | [Condensed Consolidated Statements of Stockholders' Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in the company's equity accounts, including common stock, paid-in capital, and accumulated deficit, over specific periods Stockholders' Equity (thousands of dollars) | Stockholders' Equity (thousands of dollars) | Balances, December 31, 2024 | Balances, June 30, 2025 | | :---------------------------------------- | :-------------------------- | :---------------------- | | Common Stock (Shares) | 64,830,081 | 78,439,226 | | Common Stock (Amount) | $65 | $78 | | Paid-In Capital | $507,001 | $515,181 | | Accumulated Deficit | $(373,686) | $(380,231) | | Total Stockholders' Equity | $133,122 | $134,770 | Stockholders' Equity (thousands of dollars) | Stockholders' Equity (thousands of dollars) | Balances, December 31, 2023 | Balances, June 30, 2024 | | :---------------------------------------- | :-------------------------- | :---------------------- | | Common Stock (Shares) | 55,387,794 | 57,842,023 | | Common Stock (Amount) | $55 | $58 | | Paid-In Capital | $501,675 | $502,863 | | Accumulated Deficit | $(361,029) | $(367,746) | | Total Stockholders' Equity | $140,443 | $134,917 | [1. BASIS OF PRESENTATION](index=13&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This section details the accounting principles and standards used in preparing the interim financial statements, including recent ASU adoptions and evaluations - The interim financial statements are prepared in accordance with **U.S. GAAP** for interim information and Form 10-Q instructions, and should be read with the annual report. Management considers all necessary adjustments for fair presentation to be included[23](index=23&type=chunk) - The Series A-1 Convertible Notes are classified as a **liability** and measured at **fair value** using the Fair Value Option, with changes in fair value recognized in the Condensed Consolidated Statement of Operations or Other Comprehensive Income[24](index=24&type=chunk)[25](index=25&type=chunk) - The Company adopted **ASU 2023-07 (Segment Reporting)** retrospectively, resulting in expanded segment disclosures. **ASU 2024-02 (Codification Improvements)** and **ASU 2024-01 (Stock Compensation)** did not materially impact the interim financial statements[27](index=27&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk) - The Company is currently evaluating the potential impact of recently issued ASUs, including **2025-01 (Expense Disaggregation)**, **2024-04 (Convertible Debt)**, **2024-03 (Expense Disaggregation)**, **2023-09 (Income Tax Disclosures)**, and **2023-06 (Disclosure Improvements)**[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [2. LIQUIDITY AND GOING CONCERN](index=17&type=section&id=2.%20LIQUIDITY%20AND%20GOING%20CONCERN) This section addresses the company's ability to meet its financial obligations, highlighting substantial doubt about its going concern status and reliance on external financing - The Company's financial statements are prepared on a **'going concern' basis**, but events and conditions raise substantial doubt about its ability to continue within one year due to current liabilities exceeding current assets and ongoing cash losses from construction activities[36](index=36&type=chunk)[37](index=37&type=chunk)[43](index=43&type=chunk) - The Company has relied on **equity financings**, **debt financings**, and **asset sales** to fund operations since 2009. Construction activities at the Kellyton Graphite Plant have been significantly reduced due to insufficient funding[37](index=37&type=chunk)[38](index=38&type=chunk) Liquidity Metrics | Metric | Value (as of June 30, 2025) | | :----- | :-------------------------- | | Cash Balance | $6.7 million | | ATM Sales Agreement (6 months ended June 30, 2025) | 7.1 million shares sold for $4.4 million net proceeds | | 2024 Lincoln Park PA (6 months ended June 30, 2025) | 5.1 million shares sold for $3.2 million net proceeds | | Remaining ATM Sales Agreement availability | ~$47.3 million | | Remaining 2024 Lincoln Park PA availability | ~$26.3 million | - The Company issued Series A-1 Convertible Notes for **$5.0 million** on June 13, 2025. However, there is no assurance that additional financing will be available on acceptable terms, with market volatility, interest rates, and geopolitical conditions posing significant risks[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) [3. PREPAID AND OTHER CURRENT ASSETS](index=19&type=section&id=3.%20PREPAID%20AND%20OTHER%20CURRENT%20ASSETS) This section details the composition of the company's prepaid expenses and other current assets, including inventory held for future sales or sample production Prepaid and Other Current Assets (thousands of dollars) | Prepaid and other current assets (thousands of dollars) | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------- | :------------ | :---------------- | | Prepaid insurance | $307 | $90 | | Graphite flake inventory | $206 | $460 | | Other current assets | $107 | $41 | | Total prepaid and other current assets | $620 | $591 | - As of June 30, 2025, inventory represents raw material under contract for sale or for product sample production within the next twelve months[45](index=45&type=chunk) [4. INVENTORY](index=19&type=section&id=4.%20INVENTORY) This section describes the valuation and composition of the company's raw material inventory, noting no write-downs in the current period Inventory (raw material of natural flake graphite concentrate) | Inventory (raw material of natural flake graphite concentrate) | June 30, 2025 | December 31, 2024 | | :----------------------------------------------------------- | :------------ | :---------------- | | Value (thousands of dollars) | $200 | $500 | - Inventory is valued at the lower of cost or net realizable value. No write-downs were recognized for the three and six months ended June 30, 2025, compared to a **$0.7 million** write-down in the prior comparable periods of 2024[47](index=47&type=chunk) [5. PROPERTY, PLANT AND EQUIPMENT](index=20&type=section&id=5.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT) This section details the company's long-lived assets, including mineral rights, buildings, and construction in progress for the Kellyton Graphite Plant Net Book Value of Property, Plant and Equipment (thousands of dollars) | Net Book Value of Property, Plant and Equipment (thousands of dollars) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------------------- | :------------ | :---------------- | | Mineral rights and properties | $8,972 | $8,972 | | Buildings | $3,183 | $3,243 | | Other property, plant and equipment | $3,995 | $2,377 | | Construction in progress | $123,075 | $123,276 | | Total | $139,225 | $137,868 | - Construction in progress primarily relates to the **Kellyton Graphite Plant**. The Company received **$0.3 million** and **$0.8 million** from asset sales during the six months ended June 30, 2025 and 2024, respectively, as part of design optimization[49](index=49&type=chunk)[50](index=50&type=chunk) - No impairment was deemed necessary for long-lived assets for the six months ended June 30, 2025. However, potential abandonment or alteration of Kellyton Graphite Plant plans could trigger an impairment evaluation[51](index=51&type=chunk) [6. SERIES A-1 CONVERTIBLE NOTES](index=20&type=section&id=6.%20SERIES%20A-1%20CONVERTIBLE%20NOTES) This section outlines the terms and accounting treatment of the Series A-1 Convertible Notes, including conversion features, interest rates, and beneficial ownership caps - On June 13, 2025, the Company issued Series A-1 Convertible Notes for an aggregate principal amount of **$5.0 million**, convertible into Common Stock, subject to a **9.99% Beneficial Ownership Cap**[52](index=52&type=chunk)[54](index=54&type=chunk) - The notes do not bear interest unless an event of default occurs, in which case the rate becomes **18% per annum**. They mature on the twenty-four month anniversary of issuance and require a minimum cash balance of **$2.25 million**[56](index=56&type=chunk) - The conversion price is **$0.63**, or the lower of **$0.63** or **92%** of the lowest VWAP during the five trading days prior to an Installment Date. As of June 30, 2025, approximately **$1.0 million** of notes were due but deferred[57](index=57&type=chunk) - The Company elected the **Fair Value Option** for these notes and will seek stockholder approval for conversion shares exceeding **19.99%** of outstanding Common Stock[59](index=59&type=chunk)[60](index=60&type=chunk) - Assuming conversion at **$0.63**, the Series A-1 Convertible Notes were convertible into approximately **9,126,984 shares** of Common Stock as of June 30, 2025, using the if-converted method[61](index=61&type=chunk) [7. FAIR VALUE MEASUREMENTS](index=22&type=section&id=7.%20FAIR%20VALUE%20MEASUREMENTS) This section explains the company's fair value measurement methodology and the classification of financial instruments within the fair value hierarchy - The Company follows **ASC 820** for fair value measurements, which defines fair value as an exit price and establishes a three-level hierarchy based on input observability[62](index=62&type=chunk)[68](index=68&type=chunk) Fair Value Measurements (thousands of dollars) | Fair Value Measurements (thousands of dollars) | Level 1 | Level 2 | Level 3 | Total | | :--------------------------------------------- | :------ | :------ | :------ | :---- | | Series A-1 Convertible Notes (June 30, 2025) | $— | $— | $(5,000)| $(5,000)| - The fair value of the Series A-1 Convertible Notes is classified as **Level 3** due to the use of unobservable inputs related to the probability of contingent redemption features. The change in fair value from inception to June 30, 2025, was immaterial[65](index=65&type=chunk)[67](index=67&type=chunk) [8. ACCRUED LIABILITIES](index=26&type=section&id=8.%20ACCRUED%20LIABILITIES) This section provides a breakdown of the company's accrued liabilities, including compensation, insurance, and legal fees Accrued Liabilities (thousands of dollars) | Accrued Liabilities (thousands of dollars) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Accrued compensation | $1,331 | $1,329 | | Liabilities related to Company insurance | $174 | $50 | | Accrued legal fees | $47 | $387 | | Other accrued liabilities | $383 | $339 | | Total accrued liabilities | $1,935 | $2,105 | [9. COMMON STOCK](index=26&type=section&id=9.%20COMMON%20STOCK) This section details the company's common stock activities, including sales under ATM agreements and the Lincoln Park Purchase Agreement, and related stockholder approvals - Under the ATM Sales Agreement with H.C. Wainwright, the Company sold **4.6 million shares** for **$2.4 million** net proceeds in Q2 2025, and **7.1 million shares** for **$4.4 million** net proceeds in H1 2025. Approximately **$47.3 million** remains available for future sales[71](index=71&type=chunk)[73](index=73&type=chunk) - The previous ATM Offering Agreement with Cantor Fitzgerald & Co. was terminated on August 29, 2024. Prior to termination, the Company sold **0.5 million shares** for **$0.2 million** net proceeds in Q2 2024, and **1.8 million shares** for **$0.8 million** net proceeds in H1 2024[75](index=75&type=chunk)[76](index=76&type=chunk) - Under the 2024 Lincoln Park PA, Lincoln Park committed to purchase up to **$30.0 million** of Common Stock. The Company sold **1.3 million shares** for **$0.6 million** net proceeds in Q2 2025, and **5.1 million shares** for **$3.2 million** net proceeds in H1 2025. Approximately **$26.3 million** remains available[77](index=77&type=chunk)[78](index=78&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - Stockholder approval was obtained on May 27, 2025, for the issuance of more than **19.99%** of outstanding Common Stock under the 2024 Lincoln Park PA[80](index=80&type=chunk) [10. STOCK-BASED COMPENSATION](index=30&type=section&id=10.%20STOCK-BASED%20COMPENSATION) This section reports the company's stock-based compensation expense, equity incentive plans, and activity related to stock options and restricted stock units Stock-Based Compensation Expense (thousands of dollars) | Stock-Based Compensation Expense (thousands of dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Expense | $0.8 | $0.3 | $0.9 | $0.5 | - The Company's equity incentive plans include the **2013 Plan** and the **Inducement Plan**. As of June 30, 2025, **48,281 shares** were available under the 2013 Plan and **114,429 shares** under the Inducement Plan[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) Stock Options Activity (6 months ended June 30) | Stock Options Activity (6 months ended June 30) | 2025 (Number of Stock Options) | 2025 (Weighted Average Exercise Price) | 2024 (Number of Stock Options) | 2024 (Weighted Average Exercise Price) | | :---------------------------------------------- | :----------------------------- | :------------------------------------- | :----------------------------- | :------------------------------------- | | Outstanding at beginning of period | 649,345 | $1.91 | 424,826 | $2.66 | | Granted | 16,390 | $0.48 | 224,519 | $0.49 | | Outstanding at end of period | 665,735 | $1.88 | 649,345 | $1.91 | | Exercisable at end of period | 665,735 | $1.88 | 424,826 | $2.66 | RSU Activity (6 months ended June 30) | RSU Activity (6 months ended June 30) | 2025 (Number of RSUs) | 2025 (Weighted-Average Grant Date Fair Value) | 2024 (Number of RSUs) | 2024 (Weighted-Average Grant Date Fair Value) | | :------------------------------------ | :-------------------- | :-------------------------------------------- | :-------------------- | :-------------------------------------------- | | Unvested RSUs at beginning of period | 4,090,639 | $0.60 | 1,773,058 | $1.03 | | Granted | 20,101,991 | $0.48 | 3,235,731 | $0.49 | | Forfeited/Expired | (142,139) | $0.92 | (6,784) | $3.93 | | Vested | (1,826,582) | $0.51 | (884,817) | $1.03 | | Unvested RSUs at end of period | 22,223,909 | $0.49 | 4,117,188 | $0.60 | - As of June 30, 2025, the Company had **$6.1 million** of unrecognized compensation costs related to non-vested RSUs, to be recognized over approximately **2.5 years**[93](index=93&type=chunk) [11. OTHER EXPENSE, NET](index=32&type=section&id=11.%20OTHER%20EXPENSE,%20NET) This section details the components of other expense, net, including inventory sales, write-downs, interest income, and convertible note issuance costs Other Expense, Net (thousands of dollars) | Other Expense, Net (thousands of dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales of raw material inventory | $28 | $982 | $266 | $1,124 | | Costs related to sales of raw material inventory | $(28) | $(1,336) | $(266) | $(1,506) | | Write-down of raw material inventory | $— | $(694) | $— | $(694) | | Interest income | $27 | $65 | $70 | $191 | | Other (expense) income | $(316) | $3 | $(401) | $2 | | Total other expense, net | $(294) | $(981) | $(335) | $(886) | - The Company recognized **$0.3 million** in issuance costs for the Series A-1 Convertible Notes, included in 'Other (expense) income' for the three and six months ended June 30, 2025[98](index=98&type=chunk) [12. EARNINGS PER SHARE](index=34&type=section&id=12.%20EARNINGS%20PER%20SHARE) This section explains the calculation of basic and diluted loss per share, noting the exclusion of anti-dilutive securities due to net loss - Basic and diluted loss per common share are calculated based on weighted-average shares outstanding. Potentially dilutive shares (unvested RSUs, stock options, convertible notes) totaling **32,016,628** were excluded as their effect would be anti-dilutive due to the net loss[99](index=99&type=chunk) [13. COMMITMENTS AND CONTINGENCIES](index=34&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) This section outlines the company's environmental compliance, legal proceedings, and future lease obligations for plant equipment - The Company believes its operations are materially compliant with current environmental regulations and does not expect material effects from legal proceedings. It has future lease obligations of approximately **$1.2 million** for Kellyton Graphite Plant equipment[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) [14. SEGMENT REPORTING](index=34&type=section&id=14.%20SEGMENT%20REPORTING) This section details the company's single operating segment, the battery-grade graphite business, including its Kellyton Graphite Plant and Coosa Graphite Deposit - The Company operates with one reporting segment: the **'battery-grade graphite business,'** which includes the Kellyton Graphite Plant and the Coosa Graphite Deposit, both in a pre-revenue stage[103](index=103&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - The Kellyton Graphite Plant will process natural graphite concentrate using a proprietary purification process (caustic bake, acid leach, thermal treatment) to produce CSPG, with a patent application approved. The Coosa Graphite Deposit is being evaluated for future mining to provide in-house feedstock[105](index=105&type=chunk)[106](index=106&type=chunk) Segment Assets (thousands of dollars) | Segment Assets (thousands of dollars) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Battery-grade graphite business segment assets | $142,934 | $141,470 | | Corporate and other assets | $7,564 | $4,887 | | Consolidated total assets | $150,498 | $146,357 | Segment Expenditures (thousands of dollars) | Segment Expenditures (thousands of dollars) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :----------------------------- | | Battery-grade graphite business segment assets | $2,200 | $5,100 | Segment Net Loss (thousands of dollars) | Segment Net Loss (thousands of dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Battery-grade Graphite Segment | $(1,034) | $(1,873) | $(2,135) | $(2,906) | | Corporate and Other | $(2,835) | $(1,946) | $(4,410) | $(3,811) | | Consolidated Net Loss | $(3,869) | $(3,819) | $(6,545) | $(6,717) | [15. SUBSEQUENT EVENT](index=39&type=section&id=15.%20SUBSEQUENT%20EVENT) This section discloses the issuance of Series B-1 Convertible Notes after the reporting period, outlining their principal amount and conversion terms - On August 7, 2025, the Company issued Series B-1 Convertible Notes for an aggregate principal amount of **$5.0 million**, with similar terms to Series A-1 notes but a conversion price of **$0.83**[113](index=113&type=chunk)[114](index=114&type=chunk) - Stockholder approval will be sought for conversion shares from both Series A-1 and B-1 notes if they exceed **19.99%** of outstanding Common Stock[115](index=115&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=39&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, condition, and operational developments, focusing on the Kellyton Graphite Plant, financing efforts, and critical minerals projects [INTRODUCTION](index=39&type=section&id=INTRODUCTION) This introduction outlines Westwater Resources' focus as an energy technology and critical minerals company developing battery-grade natural graphite materials - Westwater Resources is an **energy technology** and **critical minerals company** focused on developing **battery-grade natural graphite materials** through its Kellyton Graphite Plant and Coosa Graphite Deposit in Alabama[117](index=117&type=chunk) - The Kellyton Graphite Plant is expected to produce **12,500 metric tons per year** of CSPG in Phase I for lithium-ion batteries, with the Coosa Graphite Deposit anticipated to provide natural graphite flake concentrate[117](index=117&type=chunk) [RECENT DEVELOPMENTS](index=39&type=section&id=RECENT%20DEVELOPMENTS) This section highlights recent progress at the Kellyton Graphite Plant, customer interest, financing efforts, and the strategic implications of domestic graphite production - Westwater is experiencing increased customer interest in Phase II production due to tariffs and the desire for domestic CSPG supply, with samples meeting initial specifications for major battery suppliers and vehicle manufacturers[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - Total expected costs for Phase I of the Kellyton Graphite Plant remain at **$245 million**, with approximately **$124.4 million** incurred to date. Construction activities have been at a measured pace, awaiting additional funding[121](index=121&type=chunk)[122](index=122&type=chunk) - The qualification line at the Kellyton Graphite Plant produced over **1 metric ton** of CSPG samples for customer trials and is being optimized for cycle times and graphite flow rates. Commissioning of micronizer and shaping mills has begun[123](index=123&type=chunk)[124](index=124&type=chunk) - The Company is progressing with syndication of a **$150 million** secured debt facility for Phase I completion and has submitted a loan application to EXIM under the 'Make More in America Initiative' and 'China and Transformational Exports Program'[125](index=125&type=chunk)[129](index=129&type=chunk) - A strategic financing review for the Coosa Graphite Deposit is underway, seeking investment sources and partners, with further advancement expected after Kellyton Graphite Plant Phase I financing closes[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - The U.S. is nearly **100% dependent** on graphite imports, primarily from China. New executive orders, tariffs, and anti-dumping duties (**93.5%** proposed on Chinese graphite-based anode materials) highlight supply chain risks and potential opportunities for Westwater's domestic production[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) [Equity Financings](index=45&type=section&id=Equity%20Financings) This section summarizes the company's equity financing activities, including shares sold and net proceeds from ATM sales agreements and the Lincoln Park Purchase Agreement Equity Financing Source | Equity Financing Source | Period | Shares Sold (millions) | Net Proceeds (millions of dollars) | | :---------------------- | :----- | :--------------------- | :--------------------------------- | | ATM Sales Agreement | Q2 2025 | 4.6 | $2.4 | | ATM Sales Agreement | H1 2025 | 7.1 | $4.4 | | 2024 Lincoln Park PA | Q2 2025 | 1.3 | $0.6 | | 2024 Lincoln Park PA | H1 2025 | 5.1 | $3.2 | [RESULTS OF OPERATIONS](index=47&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's net loss and loss per share, attributing changes to stock compensation, financing costs, depreciation, and inventory-related expenses Net Loss and Loss Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(3.9) million | $(3.8) million | $(6.5) million | $(6.7) million | | Loss Per Share | $(0.05) | $(0.07) | $(0.09) | $(0.12) | - The increase in net loss for the three months ended June 30, 2025, was primarily due to increased stock compensation expense, Series A-1 Convertible Notes issuance costs, and higher depreciation, partially offset by lower prior-period inventory-related expenses[142](index=142&type=chunk) - The decrease in net loss for the six months ended June 30, 2025, was mainly due to lower prior-period inventory-related expenses and reduced product development expenses, partially offset by increased stock compensation, convertible note issuance costs, depreciation, and lower interest income[143](index=143&type=chunk) - General and administrative expenses increased by **$0.6 million** (QoQ) and **$0.3 million** (YoY) primarily due to higher stock compensation and reduced capitalized payroll costs, partially offset by cost-saving initiatives[146](index=146&type=chunk) - Other expense, net, decreased significantly due to prior-period losses on sales and write-downs of raw material inventory, partially offset by current period issuance costs for Series A-1 Convertible Notes[147](index=147&type=chunk) [FINANCIAL POSITION](index=48&type=section&id=FINANCIAL%20POSITION) This section reviews the company's cash flow activities, highlighting changes in operating, investing, and financing cash flows Cash Flow Activity (millions of dollars) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :----------------------------- | :----------------------------- | | Net Cash Used In Operating Activities | $(4.7) million | $(5.2) million | | Net Cash Used In Investing Activities | $(4.8) million | $(3.2) million | | Net Cash Provided By Financing Activities | $11.2 million increase | $0.7 million | | Net increase (decrease) in Cash and Cash Equivalents | $2.4 million | $(7.7) million | | Cash and Cash Equivalents, End of Period | $6.7 million | $3.2 million | - The increase in cash provided by financing activities was primarily driven by net cash proceeds from Series A-1 Convertible Notes and increased Common Stock sales under the ATM Sales Agreement and 2024 Lincoln Park PA[150](index=150&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=48&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's liquidity challenges, going concern risk, and reliance on external financing, detailing available funds and market risks - The Company faces significant liquidity challenges and going concern risk due to ongoing cash losses, current liabilities exceeding current assets, and reliance on external financing to fund the Kellyton Graphite Plant construction[151](index=151&type=chunk)[152](index=152&type=chunk) Liquidity and Capital Resources Metrics | Metric | Value | | :----- | :---- | | Cash balance (June 30, 2025) | $6.7 million | | Cash balance (August 11, 2025) | $12.5 million | | Net proceeds from ATM Sales Agreement (H1 2025) | $4.4 million | | Net proceeds from 2024 Lincoln Park PA (H1 2025) | $3.2 million | | Remaining ATM Sales Agreement availability | ~$47.3 million | | Remaining 2024 Lincoln Park PA availability | ~$26.3 million | | Series A-1 Convertible Notes (June 13, 2025) | $5.0 million | | Series B-1 Convertible Notes (August 7, 2025) | $5.0 million | - The Company's ability to raise additional funds is subject to market volatility, interest rates, inflation, EV production rates, economic conditions, and geopolitical factors, which could significantly impact access to necessary funding[156](index=156&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=50&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section confirms the absence of any off-balance sheet arrangements for the company - The Company has no off-balance sheet arrangements[157](index=157&type=chunk) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=50&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section advises on the inherent risks and uncertainties associated with forward-looking statements, including funding, economic conditions, and regulatory changes - The report contains forward-looking statements subject to risks and uncertainties, including funding adequacy, liquidity, access to capital, economic conditions, development costs, and regulatory changes[158](index=158&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) - Factors that could cause actual results to differ materially include graphite and vanadium prices, competition, customer contracts, cost control, supply chain disruptions, interest rates, and geopolitical conditions[158](index=158&type=chunk)[161](index=161&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=52&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Westwater Resources is exempt from providing quantitative and qualitative disclosures about market risk in its quarterly reports - The Company is not required to provide quantitative and qualitative disclosures about market risk in its Quarterly Reports as it is a smaller reporting company[160](index=160&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=54&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management confirmed the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes to internal control over financial reporting - The Company's disclosure controls and procedures were evaluated and concluded to be effective at a reasonable assurance level as of June 30, 2025[162](index=162&type=chunk)[163](index=163&type=chunk) - There were no changes in internal control over financial reporting during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[164](index=164&type=chunk) [PART II - OTHER INFORMATION](index=54&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits [ITEM 1. LEGAL PROCEEDINGS](index=54&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) There have been no material changes to the legal proceedings previously disclosed in the Company's Annual Report - No material changes to legal proceedings previously disclosed in the Annual Report[165](index=165&type=chunk) [ITEM 1A. RISK FACTORS](index=54&type=section&id=ITEM%201A.%20RISK%20FACTORS) Investors are directed to the 'Risk Factors' section in the Annual Report for a comprehensive discussion of investment risks - Investors should refer to the **'Risk Factors'** section in the Annual Report for a comprehensive understanding of investment risks[166](index=166&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=54&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES,%20USE%20OF%20PROCEEDS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The Company reports no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the period - None reported for unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities[167](index=167&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=54&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The Company reports no defaults upon senior securities during the period - None reported for defaults upon senior securities[168](index=168&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=54&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[169](index=169&type=chunk) [ITEM 5. OTHER INFORMATION](index=54&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The Company reports no other information required to be disclosed - No other information required to be disclosed[170](index=170&type=chunk) [ITEM 6. EXHIBITS](index=56&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, securities agreements, and certifications - The exhibits include the **Restated Certificate of Incorporation**, **Certificate of Amendment**, **Amended and Restated Bylaws**, **Securities Purchase Agreement**, **Form of Series A-1 Convertible Note**, **Form of Voting Agreement**, and various certifications (CEO, CFO) under Sarbanes-Oxley Act[171](index=171&type=chunk) [SIGNATURES](index=58&type=section&id=SIGNATURES) This section confirms the official signing of the report by the company's President, CEO, CFO, and Senior Vice President of Finance - The report is duly signed on behalf of Westwater Resources, Inc. by **Frank Bakker, President and Chief Executive Officer**, and **Steven M. Cates, Chief Financial Officer and Senior Vice President - Finance**, as of August 13, 2025[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 28, 2025 (Exact name of registrant as specified in its charter) | Delaware 43-1983182 | | | | | | --- | --- | --- | --- | --- | | (State or other jurisdiction of (IRS Employer | | | | | | incorporation or organization) Identification No.) | | | | | | 12500 West Creek Parkway | | | | | | Richmond, Vir ...

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total current assets | $7,406,739 | $9,827,668 | $(2,420,929) | -24.6% | | Total assets | $8,138,046 | $9,930,275 | $(1,792,229) | -18.0% | | Total current liabilities | $3,661,552 | $2,448,017 | $1,213,535 | 49.6% | | Total liabilities | $8,667,747 | $7,459,985 | $1,207,762 | 16.2% | | Total stockholders' equity | $(529,701) | $2,470,290 | $(3,009,991) | -121.9% | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric (3 Months) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------ | :------- | :------- | :--------- | :--------- | | Total revenue | 966,630 | 385,896 | 580,734 | 150.5% | | Total costs & expenses | 2,695,698 | 2,428,487 | 267,211 | 11.0% | | Loss from operations | (1,729,068) | (2,042,591) | 313,523 | -15.3% | | Net loss | (1,793,774) | (2,045,223) | 251,449 | -12.3% | | Basic & diluted net loss per share | (0.06) | (0.07) | 0.01 | -14.3% | Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric (6 Months) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------ | :------- | :------- | :--------- | :--------- | | Total revenue | 1,360,202 | 720,513 | 639,689 | 88.8% | | Total costs & expenses | 5,091,745 | 4,888,662 | 203,083 | 4.2% | | Loss from operations | (3,731,543) | (4,168,149) | 436,606 | -10.5% | | Net loss | (3,821,353) | (4,054,819) | 233,466 | -5.8% | | Basic & diluted net loss per share | (0.13) | (0.14) | 0.01 | -7.1% | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) - Total stockholders' equity **decreased from $2,470,290** as of January 1, 2025, to **$(529,701)** as of June 30, 2025, primarily due to a net loss of $3,821,353, partially offset by stock-based compensation and common stock issuances[16](index=16&type=chunk) - Common stock shares outstanding increased from **29,835,799** as of December 31, 2024, to **30,135,798** as of June 30, 2025[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------- | :------- | :------- | :--------- | :--------- | | Operating activities | (2,079,746) | (3,077,354) | 997,608 | -32.4% | | Investing activities | (479,516) | (3,127,551) | 2,648,035 | -84.7% | | Financing activities | 24,249 | 5,824,326 | (5,799,077) | -99.6% | | Net decrease in cash, cash equivalents, and restricted cash | (2,532,320) | (381,630) | (2,150,690) | 563.5% | | Cash, cash equivalents, and restricted cash at end of period | 3,974,430 | 6,133,398 | (2,158,968) | -35.2% | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - Dyadic International, Inc. is a global biotechnology platform company focused on developing and commercializing scalable, non-animal protein production platforms (Dapibus™ and C1) for life sciences, food and nutrition, and bio-industrial markets[19](index=19&type=chunk)[20](index=20&type=chunk) - Effective August 1, 2025, the company rebranded to Dyadic Applied BioSolutions, signaling a strategic transition from a research-driven organization to a commercially focused enterprise, emphasizing applied biotechnology solutions and revenue-focused bioprocessing protein platforms[21](index=21&type=chunk)[22](index=22&type=chunk) - The company expects to incur losses and negative net cash flows from operating activities as it continues to develop its platforms and products. Its success depends on technology development, regulatory approval, commercialization, sublicensing, and ability to raise capital[24](index=24&type=chunk) - As of June 30, 2025, the company's existing cash, cash equivalents, restricted cash, and short-term investment securities totaled approximately **$6.9 million**. With an additional **$5.3 million** from a public offering closed on August 1, 2025, the company expects to meet its liquidity requirements for at least the next 12 months[34](index=34&type=chunk) [Note 1: Organization and Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%3A%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Overview of Dyadic's business, strategic shift, financial health, and significant accounting policies [Description of Business](index=9&type=section&id=Description%20of%20Business) - Dyadic International, Inc. is a global biotechnology platform company based in Jupiter, Florida, with operations in the U.S. and the Netherlands, focused on developing and commercializing scalable, non-animal protein production platforms[19](index=19&type=chunk) - The company's proprietary Dapibus™ and C1 platforms are designed for rapid, cost-effective, and flexible production of high-value proteins for life sciences, food and nutrition, and bio-industrial markets, with a primary focus on non-therapeutic applications[20](index=20&type=chunk) [DBA Name Change Update](index=9&type=section&id=DBA%20Name%20Change%20Update) - Effective August 1, 2025, the company will operate as Dyadic Applied BioSolutions, reflecting a strategic shift towards a commercially focused enterprise delivering applied biotechnology solutions through its C1 and Dapibus™ platforms[21](index=21&type=chunk) - This rebranding emphasizes commercializing high-value, non-therapeutic proteins in life sciences, food, nutrition, and industrial bioprocessing, aiming for faster time to revenue and broader market reach by avoiding the regulatory complexities of therapeutic biologics[22](index=22&type=chunk) [Liquidity and Capital Resources](index=9&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company expects to incur losses and negative net cash flows from operating activities as it develops its C1 and Dapibus platforms and expands R&D[24](index=24&type=chunk) - On March 8, 2024, the Company issued **$6.0 million** in 8.0% Senior Secured Convertible Promissory Notes, with net proceeds of **$5,824,326**, for working capital and general corporate purposes[25](index=25&type=chunk) - On July 30, 2025, the Company entered into an underwriting agreement for the sale of **6,052,000 shares** of common stock at **$0.95 per share**, generating approximately **$5.3 million** in net proceeds, which closed on August 1, 2025[33](index=33&type=chunk) - The Company expects its existing cash, cash equivalents, restricted cash, and short-term investment securities (approx. **$6.9 million** as of June 30, 2025), combined with the **$5.3 million** from the recent offering, to be sufficient for at least the next 12 months[34](index=34&type=chunk) [Summary of Significant Accounting Policies](index=11&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial reporting, with all significant intra-entity transactions eliminated[35](index=35&type=chunk) [Segment Information](index=12&type=section&id=Segment%20Information) - The Company operates as a single operating segment, focused on developing and commercializing recombinant protein products using its C1 and Dapibus™ microbial platforms[37](index=37&type=chunk) [Use of Estimates](index=12&type=section&id=Use%20of%20Estimates) - The preparation of financial statements requires management to make estimates and judgments, including those related to revenue recognition, accrued expenses, stock-based compensation, and income taxes, which are based on historical experience and market assumptions[38](index=38&type=chunk) [Concentrations and Credit Risk](index=12&type=section&id=Concentrations%20and%20Credit%20Risk) - For the three months ended June 30, 2025, three significant customers accounted for **58.4% of revenue**, and for the six months, four significant customers accounted for **80.9% of revenue**, indicating high customer concentration[40](index=40&type=chunk) - As of June 30, 2025, four customers accounted for **92.0% of total accounts receivable**, and two CROs accounted for **86.5% of accounts payable**, highlighting significant concentration risks[41](index=41&type=chunk)[44](index=44&type=chunk) [Cash and Cash Equivalents](index=13&type=section&id=Cash%20and%20Cash%20Equivalents) - Highly liquid investments with original maturities of three months or less are treated as cash equivalents, including money market funds[45](index=45&type=chunk) [Investment Securities](index=13&type=section&id=Investment%20Securities) - The Company classifies debt securities as held-to-maturity, recorded at amortized cost, and money market funds as available-for-sale securities, presented as cash equivalents[47](index=47&type=chunk)[50](index=50&type=chunk) [Restricted Cash and Cash Equivalents](index=14&type=section&id=Restricted%20Cash%20and%20Cash%20Equivalents) - Restricted cash and cash equivalents are funds subject to restrictions under agreements, such as with the Gates Foundation, and are limited to specified uses[52](index=52&type=chunk) [Accounts Receivable](index=14&type=section&id=Accounts%20Receivable) Accounts Receivable Breakdown | Type | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------- | :---------------- | :-------------------- | | Billed receivable | 455,152 | 173,993 | | Unbilled receivable | 260,165 | 63,034 | | Total | 715,317 | 237,027 | - Accounts receivable increased significantly from **$237,027** at December 31, 2024, to **$715,317** at June 30, 2025, with unbilled receivables showing a notable increase[55](index=55&type=chunk) [Accounts Payable](index=14&type=section&id=Accounts%20Payable) Accounts Payable Breakdown | Type | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------ | :---------------- | :-------------------- | | Research and development expenses | 654,571 | 340,698 | | Legal expenses | — | 68,420 | | Other | 84,223 | 73,202 | | Total | 738,794 | 482,320 | - Accounts payable increased from **$482,320** at December 31, 2024, to **$738,794** at June 30, 2025, primarily driven by a rise in research and development expenses[56](index=56&type=chunk) [Accrued Expenses](index=14&type=section&id=Accrued%20Expenses) Accrued Expenses Breakdown | Type | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------ | :---------------- | :-------------------- | | Employee wages and benefits | 349,187 | 496,906 | | Research and development expenses | 452,970 | 437,196 | | Legal expenses | 110,833 | 25,000 | | Other | 16,860 | 11,360 | | Total | 929,850 | 970,462 | - Accrued expenses slightly decreased from **$970,462** at December 31, 2024, to **$929,850** at June 30, 2025, with a notable increase in legal expenses offset by a decrease in employee wages and benefits[57](index=57&type=chunk) [Deferred Financing Costs](index=15&type=section&id=Deferred%20Financing%20Costs) - Deferred financing costs related to debt issuance are amortized over the term of the instrument using the effective interest method and presented as an offset against the related debt[58](index=58&type=chunk) [Revenue Recognition](index=15&type=section&id=Revenue%20Recognition) - All revenue is from research collaborations, grants, and sublicensing agreements, recognized over time using the cost-based input method[59](index=59&type=chunk)[60](index=60&type=chunk) - Revenue from research collaborations is recognized over time using the cost-based input method, based on actual costs incurred relative to budgeted costs[62](index=62&type=chunk) - Grant revenue is presented on a gross basis and is primarily earmarked for third parties to advance research, including preclinical and clinical trials[64](index=64&type=chunk) [Research and Development Costs](index=16&type=section&id=Research%20and%20Development%20Costs) - R&D costs are expensed as incurred and include personnel, facilities, overhead, and services from independent contract research organizations[70](index=70&type=chunk) Research and Development Costs (Three and Six Months Ended June 30) | R&D Cost Category | 3 Months 2025 ($) | 3 Months 2024 ($) | 6 Months 2025 ($) | 6 Months 2024 ($) | | :------------------ | :---------------- | :---------------- | :---------------- | :---------------- | | Outside contracted services | 486,585 | 395,188 | 842,841 | 783,434 | | Personnel related costs | 124,669 | 106,889 | 246,385 | 213,216 | | Facilities, overhead and other | 18,125 | 13,552 | 35,132 | 41,702 | | Total | 629,379 | 515,629 | 1,124,358 | 1,038,352 | [Foreign Currency Transaction Gain or Loss](index=17&type=section&id=Foreign%20Currency%20Transaction%20Gain%20or%20Loss) - The Company uses the U.S. dollar as its functional currency, re-measuring foreign currency denominated monetary assets and liabilities at period-end exchange rates[72](index=72&type=chunk) [Fair Value Measurements](index=17&type=section&id=Fair%20Value%20Measurements) - Fair value is defined as the price received from selling an asset or paid to transfer a liability in an orderly transaction, categorized into a three-level hierarchy based on input observability[73](index=73&type=chunk)[80](index=80&type=chunk) [Income Taxes](index=17&type=section&id=Income%20Taxes) - No provision for income taxes or unrecognized tax benefits was recorded for the six months ended June 30, 2025. A **100% valuation allowance** is maintained against deferred tax assets due to a history of operating losses[74](index=74&type=chunk) [Stock-Based Compensation](index=17&type=section&id=Stock-Based%20Compensation) - Share-based payments to employees, consultants, and the Board of Directors are recognized as non-cash compensation expense based on grant date fair values and expected vesting[75](index=75&type=chunk) [Net Loss Per Share](index=17&type=section&id=Net%20Loss%20Per%20Share) - Basic net loss per share is calculated by dividing net loss by the weighted average common shares outstanding. Diluted net loss per share adjusts for potential dilution from common stock equivalents, which were anti-dilutive for the periods presented[77](index=77&type=chunk)[78](index=78&type=chunk) [New Accounting Pronouncements as of June 30, 2025](index=17&type=section&id=New%20Accounting%20Pronouncements%20as%20of%20June%2030%2C%202025) - ASU 2023-09 (Income Taxes) will be effective for annual disclosures for fiscal year ending December 31, 2025, and is not expected to materially impact financial position or results[81](index=81&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027; the Company is evaluating its impact[82](index=82&type=chunk) - The U.S. government enacted the One Big Beautiful Bill Act (OBBBA) of 2025 on July 4, 2025, with certain provisions effective January 19, 2025, including changes to corporate income tax and immediate expensing of R&D; the Company is evaluating its impact[83](index=83&type=chunk) [Note 2: Cash, Cash Equivalents, and Investments](index=19&type=section&id=Note%202%3A%20Cash%2C%20Cash%20Equivalents%2C%20and%20Investments) Details the Company's cash, cash equivalents, and investment securities by type and fair value hierarchy Cash, Available-for-Sale Securities, and Investment Securities (June 30, 2025) | Asset Type | Level | Fair Value ($) | Adjusted Cost ($) | | :-------------------------------- | :---- | :------------- | :---------------- | | Cash deposit | 1 | 1,878,460 | 1,878,460 | | Money market funds | 1 | 2,095,970 | 2,095,970 | | Short-term investment in corporate bonds | 2 | 2,841,103 | 2,842,419 | | Long-term investment in corporate bonds | 2 | 410,323 | 409,670 | | Total financial assets | | 6,815,533 | 7,226,519 | Cash, Available-for-Sale Securities, and Investment Securities (December 31, 2024) | Asset Type | Level | Fair Value ($) | Adjusted Cost ($) | | :-------------------------------- | :---- | :------------- | :---------------- | | Cash deposit | 1 | 926,287 | 926,287 | | Money market funds | 1 | 5,580,463 | 5,580,463 | | Short-term investment in corporate bonds | 2 | 2,756,428 | 2,756,577 | | Total financial assets | | 9,263,178 | 9,263,327 | - The Company's total financial assets decreased from **$9,263,178** (fair value) at December 31, 2024, to **$6,815,533** at June 30, 2025, primarily due to a reduction in money market funds[86](index=86&type=chunk) [Note 3: Research and Collaboration Agreements, Sublicense Agreements, and Investments in Privately Held Companies](index=19&type=section&id=Note%203%3A%20Research%20and%20Collaboration%20Agreements%2C%20Sublicense%20Agreements%2C%20and%20Investments%20in%20Privately%20Held%20Companies) Details key research, collaboration, and sublicense agreements, including grants and investment status [Gates Foundation Grant](index=19&type=section&id=Gates%20Foundation%20Grant) - In November 2024, Dyadic was awarded a **$3,092,136 grant** from the Gates Foundation for C1-platform cell line development of monoclonal antibodies targeting RSV and malaria[88](index=88&type=chunk) - As of June 30, 2025, the Company received approximately **$2.3 million** of the grant, with the remaining **$0.7 million** expected in 2026[89](index=89&type=chunk) - For the three and six months ended June 30, 2025, the Company recognized grant revenue of **$361,759** and **$538,107**, respectively, and incurred corresponding costs of grant revenue[92](index=92&type=chunk) - As of June 30, 2025, restricted cash and cash equivalents (current and noncurrent) totaled **$1,833,531**, and deferred research and development obligations related to the grant were **$1,833,531**[93](index=93&type=chunk) [Coalition for Epidemic Preparedness Innovations (CEPI) Grant](index=20&type=section&id=Coalition%20for%20Epidemic%20Preparedness%20Innovations%20%28CEPI%29%20Grant) - On March 20, 2025, Dyadic received a funding award from CEPI, a **$4.5 million grant** through FBS, to advance its C1 platform for recombinant protein vaccine development, with Dyadic as a subcontractor receiving up to **$2.4 million**[94](index=94&type=chunk) - For the three and six months ended June 30, 2025, the Company recognized grant revenue of **$141,422** and **$175,545**, respectively, in connection with the CEPI Grant[95](index=95&type=chunk) [Proliant](index=21&type=section&id=Proliant) - On June 27, 2024, Dyadic entered a License and Development Agreement with Proliant Biologicals, LLC for the production of recombinant serum albumin using Dyadic's platforms[97](index=97&type=chunk) - Dyadic received an initial upfront payment of **$500,000** and a second payment of **$500,000** in 2024, with a final **$500,000** payment expected in Q3 2025 upon meeting a productivity threshold[97](index=97&type=chunk) - The Company will receive royalties based on a percentage of gross margin from commercial sales of animal-free recombinant serum albumin products[97](index=97&type=chunk) [Inzymes ApS](index=21&type=section&id=Inzymes%20ApS) - In September 2023, Dyadic signed a Development and Exclusive License Agreement with Inzymes ApS to develop and commercialize non-animal dairy enzymes using the Dapibus™ platform, receiving a **$0.6 million** upfront payment[98](index=98&type=chunk) - The agreement was amended in October 2024 to adjust the scope of R&D services, success fees, milestone payments, and royalties[99](index=99&type=chunk) - For the three and six months ended June 30, 2025, the Company recognized **$250,000** in milestone revenue upon achieving a commercially viable target yield related to the Inzymes Agreement[101](index=101&type=chunk) [Alphazyme](index=21&type=section&id=Alphazyme) - In 2023, Dyadic sold its equity interest in Alphazyme, LLC, receiving **$1.3 million** in cash payments in 2024, including a **$60,977 gain on sale** in Q1 2024[104](index=104&type=chunk)[106](index=106&type=chunk) - The sublicense agreement with Alphazyme remains in effect, entitling Dyadic to potential milestone and royalty payments upon commercialization of Alphazyme products using the C1-cell platform[105](index=105&type=chunk) [Note 4: Convertible Notes](index=22&type=section&id=Note%204%3A%20Convertible%20Notes) Details the Company's 8.0% Senior Secured Convertible Promissory Notes, including issuance, terms, and conversion - On March 8, 2024, the Company issued **$6.0 million** in 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027, with **$2.0 million** sold to related parties[107](index=107&type=chunk) - The notes are senior, secured obligations with **8% annual interest** payable quarterly in cash, and are convertible into common stock at the holders' option[108](index=108&type=chunk)[26](index=26&type=chunk) - Amendments on October 4, 2024, and May 1, 2025, adjusted the conversion price to **$1.40 per share** and the Redemption Date to December 1, 2026, respectively[113](index=113&type=chunk)[114](index=114&type=chunk) - During 2024, **$910,000** of the Convertible Notes were converted into **556,623 shares** of common stock[118](index=118&type=chunk) Convertible Notes Outstanding as of June 30, 2025 | Holder Type | Principal Outstanding ($) | Unamortized Debt Issuance Costs ($) | Net Carrying Amount ($) | | :-------------------------- | :------------------------ | :---------------------------------- | :---------------------- | | Related Party | 1,090,000 | (19,029) | 1,070,971 | | Third Party | 4,000,000 | (69,830) | 3,930,170 | | Total | 5,090,000 | (88,859) | 5,001,141 | [Note 5: Commitments and Contingencies](index=25&type=section&id=Note%205%3A%20Commitments%20and%20Contingencies) Addresses legal proceedings and contractual commitments, including a research contract, with no material adverse litigation expected - The Company is not currently involved in any litigation expected to have a materially adverse effect on its financial condition or results of operations[120](index=120&type=chunk) - On July 1, 2025, the Company extended its contract with VTT Technical Research Centre of Finland Ltd. to September 30, 2025, for developing its C1 fungal expression system, with a payment of approximately **EUR104,000**[121](index=121&type=chunk) [Note 6: Share-Based Compensation](index=25&type=section&id=Note%206%3A%20Share-Based%20Compensation) Outlines equity incentive plans, detailing activity and valuation assumptions for stock options and restricted stock units [Description of Equity Plans](index=25&type=section&id=Description%20of%20Equity%20Plans) - The 2021 Equity Incentive Award Plan, adopted in April 2021, is the successor to the 2011 Plan and provides for various share-based compensation awards[122](index=122&type=chunk) - As of June 30, 2025, the Company had **5,999,597 stock options** outstanding, **64,656 unvested restricted stock units**, and **1,571,382 shares** available for grant under the 2021 Plan[123](index=123&type=chunk) [Stock Options](index=25&type=section&id=Stock%20Options) - Stock options are granted at fair value on the grant date, with vesting determined by the Board of Directors and a typical term of ten years[124](index=124&type=chunk) - The grant-date fair value is estimated using the Black-Scholes option pricing model, with assumptions including a risk-free interest rate of **4.1%-4.4%**, zero expected dividend yield, and **65.1-65.4% expected stock price volatility** for the six months ended June 30, 2025[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) Stock Option Activity (Six Months Ended June 30, 2025) | Activity | Shares | Weighted Average Exercise Price ($) | | :------------------------ | :------- | :-------------------------------- | | Outstanding at Dec 31, 2024 | 5,788,597 | 2.97 | | Granted | 698,500 | 1.71 | | Exercised | (55,000) | 1.17 | | Canceled | (432,500) | 3.13 | | Outstanding at Jun 30, 2025 | 5,999,597 | 2.83 | | Exercisable at Jun 30, 2025 | 4,768,372 | 3.09 | [Restricted Stock Units](index=26&type=section&id=Restricted%20Stock%20Units) - Restricted stock units (RSUs) are granted with vesting conditions determined by the Board of Directors, and their fair market value is based on the closing market price on the grant date[130](index=130&type=chunk) Restricted Stock Unit Activity (Six Months Ended June 30, 2025) | Activity | Shares | Weighted-Average Grant Date Fair Value ($) | | :------------------------ | :------- | :----------------------------------------- | | Outstanding at Dec 31, 2024 | 117,925 | 1.59 | | Granted | 230,023 | 1.74 | | Vested | (272,516) | 1.67 | | Forfeited | (10,776) | 1.74 | | Outstanding at Jun 30, 2025 | 64,656 | 1.74 | [Compensation Expenses](index=28&type=section&id=Compensation%20Expenses) - Total non-cash share-based compensation expense for the six months ended June 30, 2025, was **$565,492**, a decrease from **$604,081** in the prior year[136](index=136&type=chunk) Share-Based Compensation Expense Allocation (Six Months Ended June 30) | Expense Category | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------- | :------- | :------- | :--------- | :--------- | | General and administrative | 531,317 | 579,406 | (48,089) | -8.3% | | Research and development | 34,175 | 24,675 | 9,500 | 38.5% | | Total | 565,492 | 604,081 | (38,589) | -6.4% | Share-Based Compensation Expense by Type (Six Months Ended June 30) | Compensation Type | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------ | :------- | :------- | :--------- | :--------- | | Stock option | 482,155 | 433,807 | 48,348 | 11.1% | | Restricted stock units | 83,337 | 170,274 | (86,937) | -51.1% | | Total | 565,492 | 604,081 | (38,589) | -6.4% | [Note 7: Shareholders' Equity](index=28&type=section&id=Note%207%3A%20Shareholders%27%20Equity) Details changes in shareholders' equity, including common stock issuance from RSU vesting, stock option exercises, and treasury stock [Issuances of Common Stock](index=28&type=section&id=Issuances%20of%20Common%20Stock) - For the six months ended June 30, 2025, **272,516 shares** were issued from RSU vesting (weighted average issue price **$1.68**) and **55,000 shares** from stock option exercises[137](index=137&type=chunk) - For the six months ended June 30, 2024, **666,578 shares** were issued (weighted average issue price **$1.61**), including conversions of Convertible Notes, RSU vesting, and stock option exercises[137](index=137&type=chunk) [Treasury Stock](index=28&type=section&id=Treasury%20Stock) - As of June 30, 2025, the Company held **12,253,502 shares** of common stock in treasury at a cost of **$18.9 million**[138](index=138&type=chunk) [Note 8: Segment](index=29&type=section&id=Note%208%3A%20Segment) Confirms the Company operates as a single segment, focusing on developing and commercializing synthetic protein products using microbial platforms - The Company operates as one reportable and operating segment, focused on developing and commercializing synthetic protein products using its C1 and Dapibus microbial platforms[139](index=139&type=chunk) Segment Revenue and Expenses (Three and Six Months Ended June 30) | Metric | 3 Months 2025 ($) | 3 Months 2024 ($) | 6 Months 2025 ($) | 6 Months 2024 ($) | | :-------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Total revenues | 966,630 | 385,896 | 1,360,202 | 720,513 | | Total cost of revenues | 613,591 | 301,956 | 911,249 | 445,911 | | Research and development expenses | 612,238 | 513,398 | 1,090,183 | 1,043,677 | | General and administrative expenses | 1,436,630 | 1,607,756 | 3,032,968 | 3,396,350 | | Net loss | 1,793,774 | 2,045,223 | 3,821,353 | 4,055,069 | [Note 9: Subsequent Event](index=29&type=section&id=Note%209%3A%20Subsequent%20Event) Discloses a significant subsequent event: a public offering of common stock after the balance sheet date - On July 30, 2025, the Company entered into an Underwriting Agreement, which closed on August 1, 2025, for net proceeds of **$5.3 million**[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) Management discusses the Company's financial condition, operational results, business overview, platform capabilities, strategic focus, and critical accounting estimates [Overview](index=30&type=section&id=Overview) Describes Dyadic's core business as a biotechnology platform, highlighting Dapibus™ and C1 platforms for scalable protein production - Dyadic International, Inc. is a global biotechnology platform company focused on developing and commercializing scalable, non-animal protein production platforms (Dapibus™ and C1) for life sciences, food and nutrition, and bio-industrial markets[146](index=146&type=chunk)[147](index=147&type=chunk) - The Dapibus™ platform is designed for rapid, cost-effective production of high-value, non-animal proteins and enzymes for non-pharmaceutical markets, with commercialization of multiple products expected to begin in 2025[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - The C1 platform is a patented, thermophilic fungal expression system engineered for cost-effective, large-scale protein production for both biopharmaceutical and non-pharmaceutical applications, retaining co-exclusive rights for human and animal pharmaceutical use[153](index=153&type=chunk)[154](index=154&type=chunk) - Key developments include a dairy enzyme program with expected commercial launch in late 2025, improved recombinant bovine alpha-lactalbumin, and ongoing development of recombinant human alpha-lactalbumin, lactoferrin, and casein proteins for food and nutrition[155](index=155&type=chunk) - In life sciences, Dyadic is advancing recombinant serum albumin (with Proliant, anticipating a **$500,000 milestone** in Q3 2025), transferrin, and fibroblast growth factor (FGF) for cell culture media and diagnostics[159](index=159&type=chunk) - Fully funded global health collaborations include grants from the Gates Foundation (for RSV and malaria mAbs) and CEPI (up to **$2.4 million** for recombinant vaccine development), validating the C1 platform's biopharmaceutical potential[164](index=164&type=chunk)[166](index=166&type=chunk) [Other Recent Developments](index=36&type=section&id=Other%20Recent%20Developments) Highlights recent corporate developments, including rebranding and Nasdaq deficiency notices for MVLS and minimum bid price - Effective August 1, 2025, the Company rebranded to Dyadic Applied BioSolutions, signifying a strategic shift towards a commercially focused enterprise[174](index=174&type=chunk) - The Company received Nasdaq deficiency notices on June 23, 2025, for not maintaining a minimum Market Value of Listed Securities (MVLS) of **$35 million**, and on July 17, 2025, for not maintaining a minimum bid price of **$1.00 per share**[175](index=175&type=chunk) - The Company has **180 calendar days** (until December 20, 2025, for MVLS and January 13, 2026, for bid price) to regain compliance with Nasdaq listing requirements[175](index=175&type=chunk) [Critical Accounting Estimates](index=36&type=section&id=Critical%20Accounting%20Estimates) Outlines critical accounting estimates requiring significant management judgment that can materially impact financial results - Critical accounting estimates involve significant judgments and uncertainties, potentially leading to materially different results under varying assumptions[177](index=177&type=chunk) [Revenue Recognition](index=37&type=section&id=Revenue%20Recognition) - All revenue is from research collaborations, grants, and sublicensing agreements, recognized over time using the cost-based input method[178](index=178&type=chunk) - Revenue from research collaborations is recognized over time using the cost-based input method, requiring management to estimate costs to complete performance obligations[180](index=180&type=chunk)[182](index=182&type=chunk) - Grant revenue is presented on a gross basis and is primarily earmarked for third parties to advance research[183](index=183&type=chunk) [Accrued Research and Development Expenses](index=38&type=section&id=Accrued%20Research%20and%20Development%20Expenses) - Accrued R&D expenses are estimated based on open contracts, purchase orders, and communication for services rendered[190](index=190&type=chunk) [Stock-Based Compensation](index=38&type=section&id=Stock-Based%20Compensation) - Fair value of stock option awards is estimated using the Black-Scholes model, involving uncertainties and management judgment[191](index=191&type=chunk)[193](index=193&type=chunk) [Accounting for Income Taxes](index=40&type=section&id=Accounting%20for%20Income%20Taxes) - Income taxes are accounted for under the asset and liability method, requiring judgment for tax exposure and deferred tax assets/liabilities[194](index=194&type=chunk)[195](index=195&type=chunk) - A **100% valuation allowance** is provided against deferred tax assets due to the Company's history of operating losses and uncertainty regarding future taxable income[195](index=195&type=chunk) [Off-Balance Sheet Arrangements](index=40&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company does not have any off-balance sheet arrangements[198](index=198&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) - Information about recent accounting pronouncements is provided in Note 1 to the Consolidated Financial Statements[199](index=199&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Analyzes the Company's financial performance for the three and six months ended June 30, 2025, detailing changes in revenue, costs, and net loss [Revenue and Cost of Revenue](index=40&type=section&id=Revenue%20and%20Cost%20of%20Revenue) Revenue and Cost of Revenue (Three Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Research and development revenue | 213,449 | 385,896 | (172,447) | -44.7% | | Grant revenue | 503,181 | — | 503,181 | N/A | | License and milestone revenue | 250,000 | — | 250,000 | N/A | | Total revenue | 966,630 | 385,896 | 580,734 | 150.5% | | Costs of research and development revenue | 148,457 | 301,956 | (153,499) | -50.8% | | Cost of grant revenue | 465,134 | — | 465,134 | N/A | Revenue and Cost of Revenue (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Research and development revenue | 396,549 | 720,513 | (323,964) | -45.0% | | Grant revenue | 713,653 | — | 713,653 | N/A | | License and milestone revenue | 250,000 | — | 250,000 | N/A | | Total revenue | 1,360,202 | 720,513 | 639,689 | 88.8% | | Costs of research and development revenue | 274,937 | 445,911 | (170,974) | -38.3% | | Cost of grant revenue | 636,312 | — | 636,312 | N/A | - Total revenue increased significantly for both the three-month (**150.5%**) and six-month (**88.8%**) periods ended June 30, 2025, primarily due to new grant revenue (Gates Foundation and CEPI) and license/milestone revenue (Inzymes Agreement), offsetting a reduction in traditional R&D revenue[200](index=200&type=chunk)[202](index=202&type=chunk) [Research and Development Expenses](index=41&type=section&id=Research%20and%20Development%20Expenses) - R&D expenses increased by **$113,000 (21.9%)** to **$629,000** for the three months ended June 30, 2025, and by **$86,000 (8.3%)** to **$1,124,000** for the six months, driven by a rise in active internal research initiatives[203](index=203&type=chunk)[204](index=204&type=chunk) [General and Administrative Expenses](index=42&type=section&id=General%20and%20Administrative%20Expenses) - G&A expenses decreased by **10.6%** to **$1,437,000** for the three months ended June 30, 2025, and by **10.7%** to **$3,033,000** for the six months, primarily due to reductions in business development, investor relations, accounting, legal, and management incentives[206](index=206&type=chunk)[207](index=207&type=chunk) [Loss from Operations](index=42&type=section&id=Loss%20from%20Operations) - Loss from operations decreased by **$314,000 (15.3%)** to **$1,729,000** for the three months ended June 30, 2025, and by **$436,000 (10.5%)** to **$3,732,000** for the six months, mainly due to increased total revenue and reduced G&A expenses, partially offset by higher cost of revenue and R&D expenses[208](index=208&type=chunk)[209](index=209&type=chunk) [Other Income (Expenses), Net](index=42&type=section&id=Other%20Income%20%28Expenses%29%2C%20Net) - For the three months ended June 30, 2025, other income (expenses), net, was an expense of **$65,000**, a decrease from an income of **$3,000** in the prior year, primarily due to reduced interest income[210](index=210&type=chunk) - For the six months ended June 30, 2025, other income (expenses), net, was an expense of **$90,000**, a decrease from an income of **$113,000** in the prior year, mainly due to a **$61,000 gain on sale** of Alphazyme in 2024, reduced interest income, and increased interest expenses[211](index=211&type=chunk) [Net Loss](index=42&type=section&id=Net%20Loss) - Net loss decreased by **$251,000 (12.3%)** to **$1,794,000** for the three months ended June 30, 2025, and by **$233,000 (5.8%)** to **$3,821,000** for the six months, reflecting improvements in operating loss partially offset by changes in other income/expenses[212](index=212&type=chunk)[213](index=213&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the Company's ability to meet financial obligations, highlighting reliance on capital raising to fund R&D and commercialization - The Company anticipates continued losses and negative operating cash flows, requiring capital to fund technology development, regulatory approval, commercialization, and sublicensing efforts[214](index=214&type=chunk) - In March 2024, the Company issued **$6.0 million** in 8.0% Senior Secured Convertible Promissory Notes, generating **$5,824,000** in net proceeds for working capital and general corporate purposes[215](index=215&type=chunk) - A public offering closed on August 1, 2025, generated approximately **$5.3 million** in net proceeds, intended for working capital, product development, sales, and marketing[220](index=220&type=chunk)[221](index=221&type=chunk) - As of June 30, 2025, cash, cash equivalents, and restricted cash were **$4.0 million** (down from **$6.5 million** at Dec 31, 2024). Including the **$5.3 million** from the August 2025 offering, the Company expects sufficient liquidity for the next 12 months[222](index=222&type=chunk)[221](index=221&type=chunk) - Net cash used in operating activities decreased to **$2.1 million** for the six months ended June 30, 2025, from **$3.1 million** in the prior year, primarily due to a lower net loss and changes in operating assets/liabilities[222](index=222&type=chunk)[223](index=223&type=chunk) - Net cash provided by financing activities was **$24,000** for the six months ended June 30, 2025, a significant decrease from **$5.8 million** in the prior year, which included proceeds from convertible notes[225](index=225&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Dyadic International, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[226](index=226&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Details the evaluation of the Company's disclosure controls and procedures, confirming effectiveness and noting no material changes [Evaluation of Disclosure Controls and Procedures](index=44&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management evaluated and concluded the disclosure controls and procedures were effective as of June 30, 2025[228](index=228&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=45&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[229](index=229&type=chunk) [Inherent Limitation on Effectiveness of Controls](index=45&type=section&id=Inherent%20Limitation%20on%20Effectiveness%20of%20Controls) - Control systems provide only reasonable assurance due to inherent limitations like faulty judgments, errors, circumvention, and management override[230](index=230&type=chunk) [PART II OTHER INFORMATION](index=46&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently involved in any litigation expected to have a materially adverse effect on its financial condition or results of operations - The Company is not currently involved in any litigation that is believed to have a materially adverse effect on its financial condition or results of operations[233](index=233&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, focusing on Nasdaq deficiency notices for MVLS and minimum bid price, and potential delisting consequences - The Company received Nasdaq deficiency notices for not maintaining a minimum Market Value of Listed Securities (MVLS) of **$35 million** and a minimum bid price of **$1.00 per share**[236](index=236&type=chunk) - Failure to regain compliance by the respective deadlines (December 20, 2025, for MVLS and January 13, 2026, for bid price) could lead to delisting from Nasdaq[236](index=236&type=chunk)[237](index=237&type=chunk) - Delisting could adversely affect the liquidity and market price of the common stock, impair the ability to raise capital, and negatively impact business operations and employee morale[239](index=239&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) States there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities and use of proceeds to report[241](index=241&type=chunk) [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Indicates there are no defaults upon senior securities to report - Not applicable; there are no defaults upon senior securities[242](index=242&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that mine safety disclosures are not applicable to the Company - Not applicable; mine safety disclosures are not relevant to the Company's operations[243](index=243&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) Confirms no other material information to disclose, specifically no Rule 10b5-1 trading arrangements by directors or officers - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" for the quarter ended June 30, 2025[244](index=244&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed as part of the report, including corporate governance documents, convertible note amendments, and certifications - The report includes various exhibits such as the Restated Certificate of Incorporation, Amended and Restated Bylaws, Second Amendment to Form of Senior Secured Convertible Promissory Note, and certifications from the Principal Executive and Financial Officers[246](index=246&type=chunk) [Signatures](index=49&type=section&id=Signatures) Contains the required signatures of the Company's CEO and CFO, certifying the report's submission - The report is signed by Mark A. Emalfarb, Chief Executive Officer, and Ping W. Rawson, Chief Financial Officer, on August 13, 2025[250](index=250&type=chunk)