Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ________ to ________ Commission File Number: 001-08032 SAN JUAN BASIN ROYALTY TRUST (Exact name of registrant as specified in its charter) (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 (State or ...

FORM 10-Q Filing Information [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides basic identification, filing compliance, and classification details for National Bankshares, Inc - Registrant: **National Bankshares, Inc. (NKSH)**[2](index=2&type=chunk) - Filing Type: **Quarterly Report (Form 10-Q)** for the period ended June 30, 2025[2](index=2&type=chunk) - Filing Status: Complied with all Section 13 or 15(d) filing requirements and submitted all required Interactive Data Files[4](index=4&type=chunk) - Company Classification: **Non-accelerated filer** and **Smaller reporting company**[5](index=5&type=chunk) Registrant Details | Metric | Value | | :--- | :--- | | Common Stock Trading Symbol | NKSH | | Exchange Registered | Nasdaq Capital Market | | Outstanding Common Shares (as of Aug 13, 2025) | 6,366,001 | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) The table of contents outlines the structure of the Form 10-Q, dividing it into Part I and Part II - The report is structured into two main parts: **Part I – Financial Information** and **Part II – Other Information**[8](index=8&type=chunk) - Part I includes Financial Statements, Management's Discussion and Analysis, Quantitative and Qualitative Disclosures About Market Risk, and Controls and Procedures[8](index=8&type=chunk) - Part II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, Mine Safety Disclosures, Other Information, and Exhibits[8](index=8&type=chunk) Part I – Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and detailed notes for National Bankshares, Inc [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show a decrease in total assets and deposits, while loans and stockholders' equity increased Key Balance Sheet Metrics | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Total Assets | $1,806,610 | $1,811,635 | $(5,025) | | Total Loans, net | $1,000,275 | $977,688 | $22,587 | | Total Deposits | $1,627,675 | $1,644,752 | $(17,077) | | Total Stockholders' Equity | $168,736 | $156,409 | $12,327 | - Cash and cash equivalents decreased from **$108,117 thousand** at December 31, 2024, to **$92,849 thousand** at June 30, 2025[10](index=10&type=chunk) - Securities available for sale decreased from **$601,898 thousand** to **$590,021 thousand**[10](index=10&type=chunk) - Noninterest-bearing demand deposits increased by **$16,339 thousand**, while interest-bearing demand, savings, and time deposits all decreased[10](index=10&type=chunk) [Consolidated Statements of Income (Loss) (Three Months)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) For Q2 2025, the company reported a significant turnaround from a net loss, driven by increased net interest income Q2 Income Statement Highlights | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Total Interest Income | $18,537 | $17,095 | $1,442 | | Total Interest Expense | $7,546 | $8,418 | $(872) | | Net Interest Income | $10,991 | $8,677 | $2,314 | | Provision for Credit Losses | $36 | $1,302 | $(1,266) | | Total Noninterest Income | $2,279 | $2,267 | $12 | | Total Noninterest Expense | $10,583 | $10,127 | $456 | | Income (Loss) Before Income Tax | $2,651 | $(485) | $3,136 | | Net Income (Loss) | $2,289 | $(307) | $2,596 | | Basic Net Income (Loss) Per Common Share | $0.36 | $(0.05) | $0.41 | | Diluted Net Income (Loss) Per Common Share | $0.36 | $(0.05) | $0.41 | - Net interest income increased by **$2,314 thousand**, primarily due to higher interest and fees on loans and lower interest expense on deposits[12](index=12&type=chunk) - Provision for credit losses significantly decreased from **$1,302 thousand** in Q2 2024 to **$36 thousand** in Q2 2025[12](index=12&type=chunk) - Noninterest expense increased by **$456 thousand**, largely driven by conversion expenses offsetting the absence of merger-related expenses[12](index=12&type=chunk) [Consolidated Statements of Comprehensive Income (Loss) (Three Months)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income improved substantially, driven by net income and a significant unrealized gain on securities Q2 Comprehensive Income Highlights | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $2,289 | $(307) | $2,596 | | Unrealized holding gain (loss) on AFS securities, net of tax | $3,763 | $(150) | $3,913 | | Total Comprehensive Income (Loss) | $6,052 | $(457) | $6,509 | - The significant increase in total comprehensive income is largely attributable to a **positive unrealized holding gain** on available-for-sale securities in 2025[14](index=14&type=chunk) [Consolidated Statements of Income (Six Months)](index=7&type=section&id=Consolidated%20Statements%20of%20Income%20(Six%20Months)) For the six months ended June 30, 2025, net income increased substantially due to higher net interest income YTD Income Statement Highlights | Metric (in thousands, except per share) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Total Interest Income | $36,734 | $33,101 | $3,633 | | Total Interest Expense | $15,493 | $16,194 | $(701) | | Net Interest Income | $21,241 | $16,907 | $4,334 | | Provision for Credit Losses | $312 | $1,292 | $(980) | | Total Noninterest Income | $4,839 | $4,482 | $357 | | Total Noninterest Expense | $19,215 | $17,889 | $1,326 | | Income Before Income Tax Expense | $6,553 | $2,208 | $4,345 | | Net Income | $5,525 | $1,867 | $3,658 | | Basic Net Income Per Common Share | $0.87 | $0.31 | $0.56 | | Diluted Net Income Per Common Share | $0.87 | $0.31 | $0.56 | - Net interest income increased by **$4,334 thousand**, driven by higher interest on loans and a decrease in total interest expense[16](index=16&type=chunk) - Provision for credit losses decreased significantly by **$980 thousand**, contributing to the improved net income[16](index=16&type=chunk) - Noninterest expense increased by **$1,326 thousand**, primarily due to higher salaries, occupancy costs, and conversion expenses[16](index=16&type=chunk) [Consolidated Statements of Comprehensive Income (Loss) (Six Months)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Six%20Months)) Total comprehensive income saw a substantial positive shift due to increased net income and a large unrealized gain on securities YTD Comprehensive Income Highlights | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Net Income | $5,525 | $1,867 | $3,658 | | Unrealized holding gain (loss) on AFS securities, net of tax | $11,353 | $(3,488) | $14,841 | | Total Comprehensive Income (Loss) | $16,878 | $(1,621) | $18,499 | - The significant improvement in total comprehensive income is largely driven by a substantial **unrealized holding gain** on available-for-sale securities in 2025[18](index=18&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity (Three Months)](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Three%20Months)) Total stockholders' equity increased in Q2 2025, driven by net income and other comprehensive income Q2 Changes in Stockholders' Equity | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Balances at March 31 | $167,278 | $139,390 | | Net Income (Loss) | $2,289 | $(307) | | Cash Dividends ($0.73 per share) | $(4,645) | $(4,303) | | Other Comprehensive Income (Loss) | $3,763 | $(150) | | Stock Based Compensation | $51 | $33 | | Balances at June 30 | $168,736 | $148,962 | - Total stockholders' equity increased from **$167,278 thousand** at March 31, 2025, to **$168,736 thousand** at June 30, 2025[21](index=21&type=chunk) - The increase was driven by net income of **$2,289 thousand** and other comprehensive income of **$3,763 thousand**, partially offset by cash dividends[21](index=21&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity (Six Months)](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Six%20Months)) For the six months ended June 30, 2025, total stockholders' equity increased significantly due to net income and OCI YTD Changes in Stockholders' Equity | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Balances at December 31 | $156,409 | $140,522 | | Net Income | $5,525 | $1,867 | | Cash Dividends ($0.73 per share) | $(4,645) | $(4,303) | | Other Comprehensive Income (Loss) | $11,353 | $(3,488) | | Stock Based Compensation | $94 | $65 | | Balances at June 30 | $168,736 | $148,962 | - Total stockholders' equity increased from **$156,409 thousand** at December 31, 2024, to **$168,736 thousand** at June 30, 2025[23](index=23&type=chunk) - The increase was driven by net income of **$5,525 thousand** and a significant other comprehensive income of **$11,353 thousand**[23](index=23&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the Company experienced a net decrease in cash due to financing activities YTD Cash Flow Summary | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $4,633 | $882 | | Net Cash Provided by Investing Activities | $1,922 | $9,570 | | Net Cash (Used in) Provided by Financing Activities | $(21,823) | $1,829 | | Net Change in Cash and Cash Equivalents | $(15,268) | $12,281 | | Cash and Cash Equivalents at End of Period | $92,849 | $98,884 | - Operating activities generated **$4,633 thousand** in cash, a significant increase from the prior year[25](index=25&type=chunk) - Investing activities provided **$1,922 thousand**, a decrease from the prior year, mainly due to lower proceeds from securities[25](index=25&type=chunk) - Financing activities used **$21,823 thousand**, a reversal from the prior year, primarily due to a net change in time deposits and dividends paid[25](index=25&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) The Notes provide detailed explanations for the unaudited interim financial statements, covering key accounting policies and disclosures [Note 1: General and Summary of Significant Accounting Policies](index=12&type=section&id=Note%201:%20General%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's adherence to GAAP, use of estimates, key risks, and recently adopted accounting standards - The consolidated financial statements conform to **GAAP** and general practices within the banking industry, requiring management estimates[29](index=29&type=chunk)[30](index=30&type=chunk) - The Company is monitoring risks such as **inflation** and **U.S. monetary policy**, which could impact financial condition[32](index=32&type=chunk) - ASU 2023-09 (Income Taxes) was effective January 1, 2025, and is not expected to materially impact financial statements[33](index=33&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, 2026[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 2: Business Combination](index=14&type=section&id=Note%202:%20Business%20Combination) This note details the acquisition of Frontier Community Bank (FCB) on June 1, 2024, and its accounting treatment - On June 1, 2024, National Bankshares, Inc. **acquired Frontier Community Bank (FCB)**, expanding its market presence[36](index=36&type=chunk) - The acquisition was accounted for as a business combination using the **acquisition method**, recording assets and liabilities at fair value[37](index=37&type=chunk) - The Company issued **464,855 shares** of common stock and paid **$2,050 thousand** in cash consideration to former FCB shareholders[36](index=36&type=chunk)[40](index=40&type=chunk) Acquisition Summary | Metric (in thousands) | Value | | :--- | :--- | | Total Purchase Price Consideration | $16,349 | | Fair Value of Net Assets Acquired | $11,475 | | Goodwill Recognized | $4,874 | [Note 3: Loans and Allowance for Credit Losses](index=16&type=section&id=Note%203:%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note provides a comprehensive overview of the Company's loan portfolio, credit quality, and allowance for credit losses [Loans](index=16&type=section&id=Loans) The loan portfolio increased from December 31, 2024, to June 30, 2025, with growth in consumer and commercial real estate Loan Portfolio Composition | Loan Category (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Real estate construction | $44,529 | $50,798 | $(6,269) | | Consumer real estate | $317,949 | $307,855 | $10,094 | | Commercial real estate | $494,755 | $478,078 | $16,677 | | Commercial non real estate | $51,383 | $51,844 | $(461) | | Public sector and IDA | $56,347 | $57,171 | $(824) | | Consumer non real estate | $46,172 | $42,867 | $3,305 | | Gross loans | $1,011,135 | $988,613 | $22,522 | | Loans, net of deferred fees and costs | $1,010,697 | $987,950 | $22,747 | [Past Due and Nonaccrual Loans](index=16&type=section&id=Past%20Due%20and%20Nonaccrual%20Loans) Past due loans increased, while nonaccrual loans slightly decreased from December 31, 2024, to June 30, 2025 Delinquency Status | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accruing Loans 30 – 89 Days Past Due | $5,053 | $2,949 | | Accruing Loans 90 or More Days Past Due | $21 | $548 | | Nonaccrual Loans | $2,111 | $2,222 | | Total Loans | $1,011,135 | $988,613 | - Commercial real estate owner-occupied loans represent the largest portion of **nonaccrual loans**[45](index=45&type=chunk) [Allowance for Credit Losses on Loans ("ACLL")](index=18&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Loans%20(%22ACLL%22)) The Allowance for Credit Losses on Loans (ACLL) increased slightly from December 31, 2024, to June 30, 2025 ACLL Activity | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Balance, ACLL | $10,422 | $10,262 | | Charge-offs (Six Months) | $(253) | $(519) | | Recoveries (Six Months) | $91 | $270 | | Provision for Credit Losses (Six Months) | $322 | $1,242 | - As of June 30, 2025, **$141 thousand** of ACLL was individually evaluated, while **$10,281 thousand** was collectively evaluated[51](index=51&type=chunk) [Collateral Dependent Loans](index=20&type=section&id=Collateral%20Dependent%20Loans) As of June 30, 2025, the Company had three collateral-dependent loans totaling $8,906 thousand, all adequately collateralized - Three individually evaluated loans were collateral dependent as of June 30, 2025, and December 31, 2024[55](index=55&type=chunk) Collateral Dependent Loan Balances | Loan Category (in thousands) | June 30, 2025 Balance | December 31, 2024 Balance | | :--- | :--- | :--- | | Commercial Real Estate, owner occupied | $8,224 | $8,387 | | Commercial Real Estate, other | $682 | $872 | | Total Collateral Dependent Loans | $8,906 | $9,259 | - **No related allowance** was required for these collateral-dependent loans as they were adequately collateralized[55](index=55&type=chunk) [Credit Quality](index=20&type=section&id=Credit%20Quality) The majority of loans were rated 'Pass' as of June 30, 2025, with a small portion in 'Special Mention' or 'Classified' - Loans are categorized into **Pass, Special Mention, and Classified** based on credit quality and potential weaknesses[57](index=57&type=chunk) Credit Quality by Risk Rating | Loan Category (in thousands) | June 30, 2025 Pass | June 30, 2025 Special Mention | June 30, 2025 Classified | June 30, 2025 Total | | :--- | :--- | :--- | :--- | :--- | | Total Loans | $999,511 | $6,460 | $5,164 | $1,011,135 | - Gross charge-offs for the six months ended June 30, 2025, totaled **$253 thousand**, primarily from consumer non-real estate loans[58](index=58&type=chunk) [Loan Modifications to Borrowers Experiencing Financial Difficulty](index=23&type=section&id=Loan%20Modifications%20to%20Borrowers%20Experiencing%20Financial%20Difficulty) No loans were modified for borrowers experiencing financial difficulty during the first half of 2025 - **No loans were modified** for borrowers experiencing financial difficulty during the three and six months ended June 30, 2025[61](index=61&type=chunk) - During the six months ended June 30, 2024, two loans were modified for borrowers experiencing financial difficulty, totaling **$6,403 thousand**[61](index=61&type=chunk)[62](index=62&type=chunk) - As of June 30, 2024, these modified loans were in **current status** and individually evaluated, with no subsequent payment defaults[62](index=62&type=chunk) [Consumer Real Estate Loans In Process of Foreclosure](index=23&type=section&id=Consumer%20Real%20Estate%20Loans%20In%20Process%20of%20Foreclosure) As of June 30, 2025, the Company had no consumer real estate loans in the process of foreclosure - **No consumer real estate loans** were in the process of foreclosure as of June 30, 2025[63](index=63&type=chunk) - As of December 31, 2024, three consumer real estate loans totaling **$37 thousand** were in the process of foreclosure[63](index=63&type=chunk) [ACL for Unfunded Commitments](index=23&type=section&id=ACL%20for%20Unfunded%20Commitments) The Allowance for Credit Losses (ACL) on unfunded commitments slightly decreased from December 31, 2024 ACL on Unfunded Commitments | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Balance, ACL for Unfunded Commitments | $241 | $251 | | Recovery of Credit Losses (Six Months) | $(10) | $(15) | [Note 4: Securities](index=24&type=section&id=Note%204:%20Securities) This note details the securities portfolio, which saw a decrease in fair value but a reduction in net unrealized losses [Securities Available for Sale](index=24&type=section&id=Securities%20Available%20for%20Sale) The fair value of securities available for sale decreased, with a notable reduction in gross unrealized losses AFS Securities Summary | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Amortized Cost | $654,249 | $680,496 | | Gross Unrealized Gains | $26 | $24 | | Gross Unrealized Losses | $(64,254) | $(78,622) | | Fair Value | $590,021 | $601,898 | - As of June 30, 2025, the Company had 537 securities with a fair value of **$569,718 thousand** in an unrealized loss position[67](index=67&type=chunk) - The Company **does not intend to sell** these securities and expects fair value to recover as they approach maturity[67](index=67&type=chunk)[68](index=68&type=chunk) [Maturity of Securities Available for Sale](index=26&type=section&id=Maturity%20of%20Securities%20Available%20for%20Sale) The maturity schedule for securities available for sale shows a significant portion maturing after five years AFS Securities Maturity Schedule | Maturity Period | Amortized Cost (in thousands) | Fair Value (in thousands) | | :--- | :--- | :--- | | Due in one year or less | $28,007 | $27,804 | | Due after one year through five years | $223,195 | $211,373 | | Due after five years through ten years | $230,691 | $199,529 | | Due after ten years | $172,356 | $151,315 | | Total | $654,249 | $590,021 | [Realized Securities Gains and Losses](index=26&type=section&id=Realized%20Securities%20Gains%20and%20Losses) There were no sales of securities, and consequently, no realized gains or losses during the first half of 2025 or 2024 - **No sales of securities** occurred during the six months ended June 30, 2025, and 2024[72](index=72&type=chunk) [Restricted Stock](index=26&type=section&id=Restricted%20Stock) The Company held $1,848 thousand in restricted stock due to membership requirements in the Federal Reserve and FHLB - Restricted stock held was **$1,848 thousand** as of June 30, 2025, and December 31, 2024[73](index=73&type=chunk) - These investments are required for membership in the **Federal Reserve and FHLB**, providing borrowing eligibility[73](index=73&type=chunk)[74](index=74&type=chunk) - **No impairment** was determined for the FHLB stock as of June 30, 2025[74](index=74&type=chunk) [Note 5: Defined Benefit Plan](index=26&type=section&id=Note%205:%20Defined%20Benefit%20Plan) The Company's defined benefit plan generated net periodic benefit income for the first half of 2025 Net Periodic Benefit Income (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Service cost | $248 | $261 | | Interest cost | $324 | $302 | | Expected return on plan assets | $(692) | $(608) | | Net periodic benefit income | $(120) | $(12) | Net Periodic Benefit Income (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Service cost | $496 | $522 | | Interest cost | $648 | $604 | | Expected return on plan assets | $(1,385) | $(1,216) | | Net periodic benefit income | $(241) | $(24) | - Service cost is included in salaries and employee benefits, while other components are in other operating expense[76](index=76&type=chunk) [Note 6: Fair Value Measurements](index=27&type=section&id=Note%206:%20Fair%20Value%20Measurements) This note details the Company's fair value measurements, categorizing financial instruments into a three-level hierarchy [Financial Instruments Measured at Fair Value on a Recurring Basis](index=27&type=section&id=Financial%20Instruments%20Measured%20at%20Fair%20Value%20on%20a%20Recurring%20Basis) Securities available for sale are measured at fair value on a recurring basis, primarily using Level 2 inputs - Fair value measurements are categorized into **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[81](index=81&type=chunk) Recurring Fair Value Measurements | Asset (in thousands) | June 30, 2025 Balance | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | U.S. government agencies and corporations | $303,421 | $- | $303,421 | $- | | States and political subdivisions | $148,236 | $- | $148,236 | $- | | Mortgage-backed securities | $132,538 | $- | $132,538 | $- | | Corporate debt securities | $5,826 | $- | $5,826 | $- | | Total securities available for sale | $590,021 | $- | $590,021 | $- | - The Company's securities portfolio is valued using **Level 2 inputs**, relying on an independent third-party vendor[82](index=82&type=chunk) [Financial Instruments Measured at Fair Value on a Non-Recurring Basis](index=28&type=section&id=Financial%20Instruments%20Measured%20at%20Fair%20Value%20on%20a%20Non-Recurring%20Basis) Loans held for sale are carried at the lower of cost or fair value, while collateral-dependent loans are measured for ACLL - Loans held for sale are measured at the lower of cost or fair value, with fair value based on **Level 2** inputs[84](index=84&type=chunk) - Collateral-dependent loans are measured for ACLL based on the fair value of collateral, using appraisals (**Level 2**) or discounted appraisals (**Level 3**)[85](index=85&type=chunk)[86](index=86&type=chunk) - As of June 30, 2025, three commercial real estate loans totaling **$8,906 thousand** were collateral dependent, valued using Level 2 appraisals[88](index=88&type=chunk) [Fair Value Summary](index=28&type=section&id=Fair%20Value%20Summary) The fair value summary provides a comprehensive overview of the Company's financial instruments by level Fair Value of Financial Instruments | Financial Instrument (in thousands) | June 30, 2025 Carrying Amount | June 30, 2025 Estimated Fair Value (Level 1) | June 30, 2025 Estimated Fair Value (Level 2) | June 30, 2025 Estimated Fair Value (Level 3) | | :--- | :--- | :--- | :--- | :--- | | Cash and due from banks | $9,798 | $9,798 | $- | $- | | Interest-bearing deposits | $83,051 | $83,051 | $- | $- | | Securities available for sale | $590,021 | $- | $590,021 | $- | | Loans, net | $1,000,275 | $- | $- | $953,810 | | Deposits | $1,627,675 | $- | $1,299,117 | $327,378 | [Note 7: Components of Accumulated Other Comprehensive Loss](index=29&type=section&id=Note%207:%20Components%20of%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss improved significantly due to a substantial unrealized gain on securities Changes in AOCI | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net Unrealized Loss on Securities | $(50,740) | $(62,093) | | Adjustments Related to Pension Benefits | $328 | $328 | | Accumulated Other Comprehensive Loss | $(50,412) | $(61,765) | - The change reflects an **$11,353 thousand unrealized holding gain** on available-for-sale securities (net of tax) for the six months ended June 30, 2025[92](index=92&type=chunk) [Note 8: Revenue Recognition](index=30&type=section&id=Note%208:%20Revenue%20Recognition) This note details revenue recognition policies for noninterest income streams under ASC Topic 606 [Service Charges on Deposit Accounts](index=30&type=section&id=Service%20Charges%20on%20Deposit%20Accounts) Service charges on deposit accounts are recognized either over time for recurring services or at a point in time for transactions - Monthly service fees are recognized **over the period** service is provided[94](index=94&type=chunk) - Transactional fees (overdraft, ATM, wire transfer) are recognized **at a point in time** when the performance obligation is satisfied[94](index=94&type=chunk) [Other Service Charges and Fees](index=30&type=section&id=Other%20Service%20Charges%20and%20Fees) Other service charges are recognized either over time for recurring services or at a point in time for transactions - Safe deposit box rental fees are recognized **on an annual basis** upon receipt of payment[95](index=95&type=chunk) - Check ordering charges and ATM fees to other cardholders are transaction-based and recognized **at a point in time**[95](index=95&type=chunk) [Credit and Debit Card Fees](index=30&type=section&id=Credit%20and%20Debit%20Card%20Fees) Credit and debit card fees are recognized when services are rendered and are presented net of associated expenses - Interchange fees and merchant services income are recognized **when services are rendered** or upon completion[96](index=96&type=chunk) - Credit and debit card fee income is presented **net of associated expense**, in compliance with Topic 606[96](index=96&type=chunk) [Trust Income](index=30&type=section&id=Trust%20Income) Trust income is recognized over time based on assets under management, with estate fees recognized upon closure - Fees from trust management and administration are recognized **monthly**, based on month-end market value of assets[97](index=97&type=chunk) - Estate management fees are recognized partially during administration and the remainder **upon estate closure**[98](index=98&type=chunk) [Insurance and Investment](index=32&type=section&id=Insurance%20and%20Investment) Insurance commissions are recognized upon policy issuance, while investment commissions are recognized on trade date - Insurance commissions are recognized **upon the issuance** of the insurance policy[99](index=99&type=chunk) - Commissions from mutual funds, annuities, and other investments are recognized on **trade date**[100](index=100&type=chunk) - Periodic service fees (trailers) from mutual funds are recorded **over time**, usually monthly or quarterly[100](index=100&type=chunk) [Noninterest Income Segregation](index=32&type=section&id=Noninterest%20Income%20Segregation) Noninterest income is segregated into in-scope and out-of-scope categories for Topic 606, showing an overall increase Noninterest Income by Topic 606 Scope (Three Months) | Noninterest Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | In-scope of Topic 606 | $1,921 | $1,827 | | Out-of-scope of Topic 606 | $358 | $440 | | Total Noninterest Income | $2,279 | $2,267 | Noninterest Income by Topic 606 Scope (Six Months) | Noninterest Income (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | In-scope of Topic 606 | $4,053 | $3,725 | | Out-of-scope of Topic 606 | $786 | $757 | | Total Noninterest Income | $4,839 | $4,482 | [Note 9: Leases](index=33&type=section&id=Note%209:%20Leases) This note details the Company's lease accounting under ASC Topic 842, including capitalization and maturity schedules [Lease Accounting Policy](index=33&type=section&id=Lease%20Accounting%20Policy) The Company accounts for leases under ASC Topic 842, capitalizing operating and finance leases as right-of-use assets - Leases are categorized as short-term (not capitalized), operating, or finance leases[104](index=104&type=chunk) - Operating and finance leases are capitalized as **right-of-use assets** and **lease liabilities**[104](index=104&type=chunk) - The acquisition of FCB on June 1, 2024, added two long-term branch leases, increasing ROU assets and lease liabilities by **$548 thousand**[105](index=105&type=chunk) [Lease Payments](index=33&type=section&id=Lease%20Payments) Short-term lease payments are expensed, while operating and finance lease payments are incorporated into lease liability calculations - Short-term lease payments are recognized as lease expense on a **straight-line basis** or in the period incurred[106](index=106&type=chunk) - Fixed operating and finance lease payments are included in the cash flows for **lease liability determination**[106](index=106&type=chunk) [Options to Extend, Residual Value Guarantees, Restrictions and Covenants](index=33&type=section&id=Options%20to%20Extend,%20Residual%20Value%20Guarantees,%20Restrictions%20and%20Covenants) Lease extension options are included in liability calculations when reasonably certain, and agreements lack restrictive covenants - Lease extension options are included in lease liability calculations if **reasonably certain** of being exercised[107](index=107&type=chunk) - Lease agreements do not provide for residual value guarantees or contain **restrictions/covenants** impacting dividends[107](index=107&type=chunk) [Lease Information Tables](index=33&type=section&id=Lease%20Information%20Tables) Lease liabilities and right-of-use assets increased from December 31, 2024, to June 30, 2025 Lease Balance Sheet Information | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Lease liability | $1,676 | $1,523 | | Right-of-use asset | $1,471 | $1,305 | | Weighted average remaining lease term (years) | 4.57 | 4.76 | | Weighted average discount rate | 3.91% | 3.87% | Lease Expense (Three Months) | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating lease expense | $104 | $99 | | Short-term lease expense | $- | $6 | | Total lease expense | $104 | $105 | Lease Expense (Six Months) | Lease Expense (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating lease expense | $210 | $188 | | Short-term lease expense | $- | $11 | | Total lease expense | $210 | $199 | [Maturity Schedule of Undiscounted Cash Flows](index=35&type=section&id=Maturity%20Schedule%20of%20Undiscounted%20Cash%20Flows) The undiscounted cash flow maturity schedule indicates total future lease payments of $1,818 thousand Lease Liability Maturity | Period | Undiscounted Cash Flow (in thousands) | | :--- | :--- | | Twelve months ending June 30, 2026 | $431 | | Twelve months ending June 30, 2027 | $395 | | Twelve months ending June 30, 2028 | $381 | | Twelve months ending June 30, 2029 | $303 | | Twelve months ending June 30, 2030 | $180 | | Thereafter | $128 | | Total undiscounted cash flows | $1,818 | | Less: discount | $(142) | | Lease liability | $1,676 | [Note 10: Stock Based Compensation](index=35&type=section&id=Note%2010:%20Stock%20Based%20Compensation) This note describes the 2023 Stock Incentive Plan, under which RSAs and RSUs are granted to directors and executives [Restricted Stock Awards](index=35&type=section&id=Restricted%20Stock%20Awards) Restricted stock awards and units are granted under the 2023 Stock Incentive Plan, with expense recognized over one year - The **2023 Stock Incentive Plan** allows for grants of RSAs and RSUs, with a maximum of 120,000 shares available[110](index=110&type=chunk) - Stock-based compensation expense was **$51 thousand** for the three months and **$94 thousand** for the six months ended June 30, 2025[111](index=111&type=chunk) Nonvested Restricted Stock Activity | Metric | Shares | Weighted Average Grant-Date Fair Value | | :--- | :--- | :--- | | Nonvested at January 1, 2025 | 4,961 | $30.98 | | Granted | 2,630 | $26.59 | | Vested and released | (2,563) | $30.00 | | Nonvested at June 30, 2025 | 5,028 | $29.18 | [Note 11: Net Income (Loss) Per Common Share](index=35&type=section&id=Note%2011:%20Net%20Income%20(Loss)%20Per%20Common%20Share) This note presents the computation of basic and diluted net income (loss) per common share, showing a positive shift in 2025 EPS Calculation (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Basic Net Income (Loss) Per Common Share | $0.36 | $(0.05) | | Diluted Net Income (Loss) Per Common Share | $0.36 | $(0.05) | | Weighted Average Common Shares Outstanding, Basic | 6,358,917 | 6,028,220 | | Weighted Average Common Shares Outstanding, Diluted | 6,361,582 | 6,028,220 | EPS Calculation (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Basic Net Income Per Common Share | $0.87 | $0.31 | | Diluted Net Income Per Common Share | $0.87 | $0.31 | | Weighted Average Common Shares Outstanding, Basic | 6,358,665 | 5,958,953 | | Weighted Average Common Shares Outstanding, Diluted | 6,360,990 | 5,961,037 | - Dilutive shares are associated with RSAs; RSAs were **anti-dilutive** for the three months ended June 30, 2024[113](index=113&type=chunk) [Note 12: Goodwill and Other Intangibles](index=36&type=section&id=Note%2012:%20Goodwill%20and%20Other%20Intangibles) This note provides information on goodwill and core deposit intangible assets, which decreased due to amortization Goodwill and Intangible Assets | Intangible Asset (in thousands) | Beginning Balance | Additions | Period Adjustment | Accumulated Amortization | Ending Balance | | :--- | :--- | :--- | :--- | :--- | :--- | | Goodwill | $10,718 | $- | $- | $- | $10,718 | | Core deposit intangible | $1,863 | $- | $- | $(192) | $1,671 | - Core deposit intangible amortization expense was **$95 thousand** for the three months and **$192 thousand** for the six months ended June 30, 2025[114](index=114&type=chunk) Estimated Future Amortization Expense | Year Ending December 31 | Amortization Expense (in thousands) | | :--- | :--- | | 2025 | $181 | | 2026 | $331 | | 2027 | $290 | | 2028 | $248 | | 2029 | $207 | | 2030 | $165 | | Thereafter | $249 | | Total | $1,671 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and results of operations, highlighting key impacts and performance drivers [Cautionary Statement Regarding Forward-Looking Statements](index=37&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section warns readers about forward-looking statements, which are subject to significant risks and uncertainties - Forward-looking statements are based on management's views and assumptions and are subject to **significant risks and uncertainties**[117](index=117&type=chunk) - Key factors that could cause actual results to differ include **inflation, interest rate changes, liquidity, and economic conditions**[118](index=118&type=chunk)[119](index=119&type=chunk) - Readers are cautioned not to place undue reliance on these statements and should consider the 'Risk Factors' in the Company's 2024 Form 10-K[118](index=118&type=chunk) [Overview](index=38&type=section&id=Overview) National Bankshares, Inc. is a financial holding company whose primary revenue source is The National Bank of Blacksburg - NBI is a financial holding company, organized in 1986, listed on Nasdaq Capital Market under '**NKSH**'[120](index=120&type=chunk) - Wholly-owned subsidiaries are **The National Bank of Blacksburg (NBB)**, the primary revenue source, and National Bankshares Financial Services, Inc[120](index=120&type=chunk) - NBB operates **28 office locations** and one loan production office[120](index=120&type=chunk) [Critical Accounting Policies](index=38&type=section&id=Critical%20Accounting%20Policies) The Company's critical accounting policies involve significant management judgments, particularly for the allowance for credit losses - Financial statements are based on GAAP, requiring management's **difficult, subjective, and complex judgments**[121](index=121&type=chunk)[122](index=122&type=chunk) - Critical policies include the **allowance for credit losses, goodwill, pension plan, and acquired loans**[122](index=122&type=chunk) - These estimates are continuously evaluated and updated, with potential material impact if conditions differ from assumptions[122](index=122&type=chunk) [Acquisition of Frontier Community Bank](index=38&type=section&id=Acquisition%20of%20Frontier%20Community%20Bank) The acquisition of Frontier Community Bank (FCB) on June 1, 2024, significantly impacted the Company's consolidated results - The Company acquired **Frontier Community Bank (FCB)** on June 1, 2024[123](index=123&type=chunk) - FCB's balances and results of operations are included in the Company's consolidated results **starting from June 1, 2024**[123](index=123&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP measures, including Net Interest Margin (FTE) and Efficiency Ratio, to provide supplemental insights [Net Interest Margin](index=38&type=section&id=Net%20Interest%20Margin) The Net Interest Margin (FTE) improved for both the three and six months ended June 30, 2025, compared to the prior year - Net interest margin is calculated on a **fully taxable equivalent (FTE) basis** to measure profitability of interest-generating activities[125](index=125&type=chunk) Net Interest Margin (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income, FTE (non-GAAP) | $11,235 | $8,920 | | Net Interest Margin (non-GAAP) | 2.56% | 2.13% | Net Interest Margin (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income, FTE (non-GAAP) | $21,723 | $17,395 | | Net Interest Margin (non-GAAP) | 2.49% | 2.10% | [Efficiency Ratio](index=40&type=section&id=Efficiency%20Ratio) The efficiency ratio improved for both the three and six months ended June 30, 2025, indicating enhanced operational efficiency - The efficiency ratio measures operational efficiency by dividing **adjusted noninterest expense** by **adjusted total income**[128](index=128&type=chunk) Efficiency Ratio (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Noninterest Expense (non-GAAP) | $8,606 | $7,697 | | Total Income for Efficiency Ratio (non-GAAP) | $13,514 | $11,187 | | Efficiency Ratio (non-GAAP) | 63.68% | 68.80% | Efficiency Ratio (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Noninterest Expense (non-GAAP) | $17,192 | $14,975 | | Total Income for Efficiency Ratio (non-GAAP) | $26,562 | $21,877 | | Efficiency Ratio (non-GAAP) | 64.72% | 68.45% | [Adjusted Return on Average Assets and Adjusted Return on Average Equity](index=40&type=section&id=Adjusted%20Return%20on%20Average%20Assets%20and%20Adjusted%20Return%20on%20Average%20Equity) Adjusted return on average assets and equity significantly improved, reflecting enhanced profitability after exclusions - Adjusted return on average assets and equity are calculated by **annualizing net income** and dividing by average assets or equity[130](index=130&type=chunk) Adjusted Returns (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Net Income (non-GAAP) | $3,882 | $2,695 | | Adjusted Return on Average Assets (non-GAAP) | 0.77% | 0.46% | | Adjusted Return on Average Equity (non-GAAP) | 8.37% | 5.68% | Adjusted Returns (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Net Income (non-GAAP) | $6,957 | $5,219 | | Adjusted Return on Average Assets (non-GAAP) | 0.69% | 0.42% | | Adjusted Return on Average Equity (non-GAAP) | 7.69% | 5.22% | [Performance Summary](index=42&type=section&id=Performance%20Summary) The Company's performance significantly improved, driven by the FCB acquisition, favorable interest rates, and a system conversion - Key drivers include the **FCB acquisition**, a **favorable interest rate environment**, and a **system conversion** completed in Q2 2025[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) Key Performance Indicators (Three Months) | Key Performance Indicator | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $2,289 | $(307) | | Return on average assets | 0.51% | (0.07)% | | Adjusted return on average assets | 0.77% | 0.46% | | Net interest margin | 2.56% | 2.13% | | Efficiency ratio | 63.68% | 68.80% | Key Performance Indicators (Six Months) | Key Performance Indicator | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Income | $5,525 | $1,867 | | Return on average assets | 0.61% | 0.22% | | Adjusted return on average assets | 0.69% | 0.42% | | Net interest margin | 2.49% | 2.10% | | Efficiency ratio | 64.72% | 68.45% | [Net Interest Income](index=42&type=section&id=Net%20Interest%20Income) Net interest income increased significantly, driven by higher yields on earning assets and lower costs of liabilities Net Interest Income Analysis (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Interest Income | $18,781 | $17,338 | | Total Interest Expense | $7,546 | $8,418 | | Net Interest Income | $11,235 | $8,920 | | Net Interest Margin | 2.56% | 2.13% | Net Interest Income Analysis (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Interest Income | $37,216 | $33,589 | | Total Interest Expense | $15,493 | $16,194 | | Net Interest Income | $21,723 | $17,395 | | Net Interest Margin | 2.49% | 2.10% | - The **yield on earning assets increased**, and the **cost of interest-bearing liabilities decreased**, improving the net interest margin[145](index=145&type=chunk) - Federal Reserve interest rate cuts reduced deposit pricing pressure and allowed adjustable-rate loans to reprice higher[145](index=145&type=chunk) [Noninterest Income](index=45&type=section&id=Noninterest%20Income) Total noninterest income increased, driven by higher service charges, trust income, and BOLI income Noninterest Income Analysis (Three Months) | Noninterest Income Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Service charges on deposits | $735 | $678 | $57 | | Credit and debit card fees, net | $366 | $423 | $(57) | | Trust income | $578 | $513 | $65 | | BOLI income | $297 | $269 | $28 | | Total noninterest income | $2,279 | $2,267 | $12 | Noninterest Income Analysis (Six Months) | Noninterest Income Category (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Service charges on deposits | $1,433 | $1,311 | $122 | | Credit and debit card fees, net | $783 | $797 | $(14) | | Trust income | $1,157 | $1,016 | $141 | | BOLI income | $589 | $527 | $62 | | Other income | $642 | $580 | $62 | | Total noninterest income | $4,839 | $4,482 | $357 | - Service charges on deposit accounts increased due to **higher deposit levels**[146](index=146&type=chunk) - Trust income increased due to **higher assets under management**[147](index=147&type=chunk) - BOLI income increased due to **policies acquired from FCB**[147](index=147&type=chunk) [Noninterest Expense](index=46&type=section&id=Noninterest%20Expense) Total noninterest expense increased, driven by higher salaries, occupancy costs, and significant conversion expenses Noninterest Expense Analysis (Three Months) | Noninterest Expense Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $5,203 | $4,687 | $516 | | Occupancy, furniture and fixtures | $731 | $637 | $94 | | Data processing and ATM | $701 | $800 | $(99) | | Intangible asset amortization | $95 | $35 | $60 | | Professional services | $509 | $272 | $237 | | Merger-related expenses | $- | $2,257 | $(2,257) | | Conversion expenses | $1,977 | $173 | $1,804 | | Total noninterest expense | $10,583 | $10,127 | $456 | Noninterest Expense Analysis (Six Months) | Noninterest Expense Category (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $10,391 | $9,153 | $1,238 | | Occupancy, furniture and fixtures | $1,470 | $1,260 | $210 | | Data processing and ATM | $1,684 | $1,566 | $118 | | Intangible asset amortization | $192 | $35 | $157 | | Professional services | $808 | $512 | $296 | | Merger-related expenses | $- | $2,741 | $(2,741) | | Conversion expenses | $2,023 | $173 | $1,850 | | Total noninterest expense | $19,215 | $17,889 | $1,326 | - Salaries and employee benefits increased due to the **addition of FCB employees**[150](index=150&type=chunk) - **Conversion expenses** significantly increased due to payments to the former core system vendor and other related costs[154](index=154&type=chunk) - Cybersecurity expense decreased for the six months ended June 30, 2025, reflecting **renegotiation of contracts**[155](index=155&type=chunk) [Income Tax](index=48&type=section&id=Income%20Tax) The Company reported income tax expense, a significant change from an income tax benefit in the prior year's Q2 Income Tax Analysis (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Income Tax Expense (Benefit) | $362 | $(178) | Income Tax Analysis (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Income Tax Expense | $1,028 | $341 | | Effective Tax Rate | 15.69% | 15.44% | - The effective tax rate for 2024 was impacted by **non-tax deductible merger-related expenses**[156](index=156&type=chunk) [Asset Quality](index=48&type=section&id=Asset%20Quality) The Company's asset quality indicators show a stable to improving trend, with a decrease in nonaccrual loans [Asset Quality Indicators](index=48&type=section&id=Asset%20Quality%20Indicators) Key asset quality indicators show a decrease in nonaccrual loans and an improved ratio of ACLL to nonperforming loans Key Ratios | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Nonaccrual loans | $2,111 | $2,222 | | Loans past due 90 days or more, and still accruing | $21 | $548 | | ACLL to loans net of deferred fees and costs | 1.03% | 1.04% | | Net charge-off ratio | 0.03% | 0.03% | | Ratio of nonperforming loans to loans, net of deferred fees and costs | 0.21% | 0.22% | | Ratio of ACLL to nonperforming loans | 493.70% | 461.84% | [Individually Evaluated Loans](index=48&type=section&id=Individually%20Evaluated%20Loans) Individually evaluated loans totaled $10,849 thousand as of June 30, 2025, with a $141 thousand allocation for credit losses - Individually evaluated loans were **$10,849 thousand** as of June 30, 2025, resulting in an ACLL allocation of **$141 thousand**[160](index=160&type=chunk) - As of December 31, 2024, individually evaluated loans were **$10,521 thousand**, with an ACLL allocation of **$80 thousand**[161](index=161&type=chunk) - Three collateral-dependent loans were **adequately collateralized** and did not result in an individual allocation for either period[160](index=160&type=chunk)[161](index=161&type=chunk) [Collectively Evaluated Loans](index=48&type=section&id=Collectively%20Evaluated%20Loans) Collectively evaluated loans increased to $1,000,286 thousand with an ACLL of $10,281 thousand as of June 30, 2025 - Collectively evaluated loans totaled **$1,000,286 thousand** with an ACLL of **$10,281 thousand** as of June 30, 2025[162](index=162&type=chunk) - The ACLL for these loans is calculated using historical loss information, peer data, PD, and LGD, adjusted for forecasts and qualitative factors[163](index=163&type=chunk) [Reasonable and Supportable Forecast](index=48&type=section&id=Reasonable%20and%20Supportable%20Forecast) The Company uses national unemployment forecasts for a 12-month period, which decreased the required ACLL level - A **12-month period** is used for the reasonable and supportable forecast, reverting to historical losses on a straight-line basis[164](index=164&type=chunk) - The forecast for June 30, 2025, projects a slight increase in unemployment, leading to a **decreased required ACLL**[164](index=164&type=chunk) [Qualitative Factors: Economic](index=48&type=section&id=Qualitative%20Factors:%20Economic) Economic qualitative factors, including bankruptcy filings and housing inventory, influenced the ACLL - Business and personal bankruptcy filings **decreased**, indicating a beneficial impact on credit risk[166](index=166&type=chunk) - Residential vacancy rates **increased**, resulting in a higher ACLL allocation[167](index=167&type=chunk)[169](index=169&type=chunk) - Housing inventory also **increased**, leading to a higher ACLL allocation[169](index=169&type=chunk) [Qualitative Factors: Asset Quality Indicators](index=50&type=section&id=Qualitative%20Factors:%20Asset%20Quality%20Indicators) Accruing loans past due 30-89 days increased to 0.50% of total loans, primarily due to loans awaiting renewal - Accruing loans past due 30-89 days increased to **0.50%** of total loans as of June 30, 2025, from **0.30%** at December 31, 2024[170](index=170&type=chunk) - This increase is primarily attributed to certain loans **awaiting renewal**, which management expects to be approved[170](index=170&type=chunk) [Qualitative Factors: Other Considerations](index=50&type=section&id=Qualitative%20Factors:%20Other%20Considerations) Other qualitative factors include the interest rate environment, competition, and integration of FCB lenders - **No ACLL allocation** was included for interest rate changes as of June 30, 2025[172](index=172&type=chunk) - Competitive, legal, and regulatory environments remained **similar** to December 31, 2024[173](index=173&type=chunk) - An allocation was maintained to account for the **integration of FCB lenders**[174](index=174&type=chunk) - Total **high-risk loans increased** from December 31, 2024, impacting the required ACLL allocation[175](index=175&type=chunk) [Unallocated Surplus](index=50&type=section&id=Unallocated%20Surplus) The unallocated surplus in the ACLL decreased from $50 thousand at year-end to $10 thousand at June 30, 2025 - Unallocated surplus was **$10 thousand** (0.10% of calculated requirement) as of June 30, 2025[176](index=176&type=chunk) - This is a decrease from **$50 thousand** (0.49% of calculated requirement) at December 31, 2024[176](index=176&type=chunk) [Conclusion](index=50&type=section&id=Conclusion) Management believes the Allowance for Credit Losses on Loans (ACLL) is reasonable for the credit risk in the loan portfolio - Management believes the **ACLL is reasonable** for the credit risk in the loan portfolio as of June 30, 2025[177](index=177&type=chunk) - The conclusion is based on analysis of historical indicators, asset quality, and economic factors[177](index=177&type=chunk) [ACL on Unfunded Commitments](index=50&type=section&id=ACL%20on%20Unfunded%20Commitments) The Allowance for Credit Losses (ACL) on unfunded commitments decreased slightly to $241 thousand ACL on Unfunded Commitments | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ACL on Unfunded Commitments | $241 | $251 | | % of Unfunded Commitments | 0.14% | 0.14% | [Provision for (Recovery of) Credit Losses](index=50&type=section&id=Provision%20for%20(Recovery%20of)%20Credit%20Losses) The Company recorded a lower provision for credit losses on loans and a recovery on unfunded commitments for H1 2025 Provision for Credit Losses (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Provision for credit losses on loans | $322 | $1,307 | | Recovery of credit losses on unfunded commitments | $10 | $15 | Provision for Credit Losses (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Provision for credit losses on loans | $45 | $1,302 | | Recovery of credit losses on unfunded commitments | $9 | $- | - The Q2 2024 provision included **$1,290 thousand** for loans acquired on June 1, 2024[179](index=179&type=chunk) [Loan Modifications](index=50&type=section&id=Loan%20Modifications) The Company modified a significant number of loans for borrowers not experiencing financial difficulty during H1 2025 - The Company modified **173 loans** totaling **$17,750 thousand** during Q2 2025, and **368 loans** totaling **$41,855 thousand** during H1 2025[183](index=183&type=chunk) - These modifications were for borrowers **not experiencing financial difficulty**[183](index=183&type=chunk) - Loan modifications may include rate reductions, payment extensions, or changes in amortization terms[180](index=180&type=chunk) [Key Assets and Liabilities](index=52&type=section&id=Key%20Assets%20and%20Liabilities) This section analyzes changes in key assets and liabilities, highlighting the impact of organic growth and capital management [Average Balances](index=52&type=section&id=Average%20Balances) Year-to-date daily average balances show an increase in total assets, loans, and stockholders' equity YTD Average Balances | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Average Total Assets | $1,817,524 | $1,744,440 | $73,084 | | Average Interest-bearing deposits | $92,458 | $76,211 | $16,247 | | Average Securities available for sale, at fair value | $596,989 | $610,298 | $(13,309) | | Average Loans, net | $991,099 | $928,293 | $62,806 | | Average Total Deposits | $1,641,845 | $1,583,113 | $58,732 | | Average Stockholders' equity | $163,857 | $147,474 | $16,383 | [Securities](index=53&type=section&id=Securities) The fair value of securities decreased, but the net unrealized loss improved significantly, attributed to interest rate risk AFS Securities Summary | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Amortized cost | $654,249 | $680,496 | $(26,247) | | Unrealized loss, net | $(64,228) | $(78,598) | $14,370 | | Securities available for sale, at fair value | $590,021 | $601,898 | $(11,877) | - The unrealized loss is due to **interest rate risk, not credit risk**, and no ACL on securities was recorded[188](index=188&type=chunk) [Loans](index=53&type=section&id=Loans) Loans, net of deferred fees and costs, increased by 2.30% from year-end, driven by organic growth Loan Portfolio Composition | Loan Category (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Real estate construction | $44,529 | $50,798 | $(6,269) | | Consumer real estate | $317,949 | $307,855 | $10,094 | | Commercial real estate | $494,755 | $478,078 | $16,677 | | Commercial non real estate | $51,383 | $51,844 | $(461) | | Public sector and IDA | $56,347 | $57,171 | $(824) | | Consumer non real estate | $46,172 | $42,867 | $3,305 | | Loans, net of deferred fees and costs | $1,010,697 | $987,950 | $22,747 | - The increase in loans is a result of **organic growth**[189](index=189&type=chunk) [Deposits](index=53&type=section&id=Deposits) Total deposits decreased by 1.04% from year-end, primarily due to decreases in interest-bearing accounts Deposit Composition | Deposit Category (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Noninterest-bearing demand deposits | $306,427 | $290,088 | $16,339 | | Interest-bearing demand deposits | $852,405 | $864,753 | $(12,348) | | Savings deposits | $140,285 | $143,109 | $(2,824) | | Time deposits | $328,558 | $346,802 | $(18,244) | | Total deposits | $1,627,675 | $1,644,752 | $(17,077) | - The Company's depositors are diverse, with **no brokered deposits**[190](index=190&type=chunk) - Approximately **24% of non-municipal deposits are uninsured**, and municipal deposits have additional security from pledged bonds[190](index=190&type=chunk) [Capital Resources](index=53&type=section&id=Capital%20Resources) Total stockholders' equity increased by 7.88% from year-end, and NBB remains well-capitalized Stockholders' Equity | Capital Component (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Common stock and additional paid in capital | $21,925 | $21,831 | $94 | | Retained earnings | $197,223 | $196,343 | $880 | | Accumulated other comprehensive loss | $(50,412) | $(61,765) | $11,353 | | Total stockholders' equity | $168,736 | $156,409 | $12,327 | - The increase in equity reflects **improved unrealized losses** on securities and net income[192](index=192&type=chunk) Regulatory Capital Ratios | Regulatory Capital Ratio | June 30, 2025 | December 31, 2024 | Regulatory Capital Minimum Ratios with Capital Conservation Buffer | | :--- | :--- | :--- | :--- | | Common Equity Tier I Capital Ratio | 16.13% | 15.28% | 7.00% | | Tier I Capital Ratio | 16.13% | 15.28% | 8.50% | | Total Capital Ratio | 17.02% | 16.14% | 10.50% | | Leverage Ratio | 10.49% | 10.25% | 4.00% | - NBB is considered **well capitalized** and exceeds all regulatory capital minimums[194](index=194&type=chunk)[198](index=198&type=chunk) [Liquidity](index=55&type=section&id=Liquidity) The Company maintains sufficient liquidity through diverse sources and manages its loan-to-deposit ratio and investment strategy - Diverse liquidity sources include customer deposits, loan repayments, securities sales, and **FHLB advances**[195](index=195&type=chunk) - As of June 30, 2025, the Company had **$292,916 thousand** in FHLB borrowing capacity and **$173,226 thousand** in Federal Reserve discount window capacity[196](index=196&type=chunk) - The Company monitors liquidity needs, performs stress testing, and manages its **loan-to-deposit ratio (62.09%)**[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) [Off-Balance Sheet Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company extends lines of credit and sells mortgages on the secondary market, with mitigated risk - Off-balance sheet arrangements include **lines of credit** and **letters of credit** extended to customers[202](index=202&type=chunk) - The Company sells mortgages on the secondary market with recourse provisions, but considers the risk **not significant**[204](index=204&type=chunk) - In case of substantial draws, the Company can access lines of credit, raise deposits, or sell securities/loans[203](index=203&type=chunk)[204](index=204&type=chunk) [Contractual Obligations](index=57&type=section&id=Contractual%20Obligations) As of June 30, 2025, the Company had no finance lease, purchase obligations, or long-term debt - The Company had **no finance lease or purchase obligations** as of June 30, 2025[205](index=205&type=chunk) - The Company had **no long-term debt** as of June 30, 2025[205](index=205&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is marked as 'Not applicable,' indicating no material disclosures beyond what is already presented - This section is marked as '**Not applicable**' by the Company[206](index=206&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that the Company's disclosure controls and procedures were **effective** as of June 30, 2025[207](index=207&type=chunk) - **No material changes** in internal control over financial reporting occurred during the three months ended June 30, 2025[208](index=208&type=chunk) - The Company acknowledges that no control system can provide **absolute assurance** due to inherent limitations[209](index=209&type=chunk) Part II - OTHER INFORMATION [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) There are no pending or threatened legal proceedings that may materially impact the Company's financial condition - **No pending or threatened legal proceedings** are expected to materially impact the Company's financial condition[210](index=210&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the 'Risk Factors' previously disclosed in the Company's 2024 Form 10-K - Readers are referred to the '**Risk Factors**' in Item 1A of the 2024 Form 10-K[211](index=211&type=chunk) - Additional risk factors are discussed under '**Cautionary Statement Regarding Forward-Looking Statements**' in Part I, Item 2 of this Form 10-Q[211](index=211&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reports that there were no unregistered sales of equity securities and no use of proceeds - **No unregistered sales** of equity securities occurred[212](index=212&type=chunk) - **No use of proceeds** from such sales[212](index=212&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reports that there were no defaults upon senior securities during the period - **No defaults** upon senior securities occurred[213](index=213&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20D

```markdown Part I Financial Information [Item 1. Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section presents Stereotaxis, Inc.'s unaudited consolidated financial statements for the quarter ended June 30, 2025, including the balance sheets, statements of operations, statements of convertible preferred stock and stockholders' equity, and statements of cash flows [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section highlights key changes in assets, liabilities, and stockholders' equity, including a significant decrease in total equity Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Current Assets | $21,904 | $26,439 | | Total Assets | $41,173 | $46,724 | | Total Current Liabilities | $20,748 | $21,602 | | Total Liabilities | $34,421 | $35,292 | | Total Stockholders' Equity | $1,456 | $6,080 | - **Cash and cash equivalents decreased** from **$12,217 thousand** at **December 31, 2024**, to **$6,967 thousand** at **June 30, 2025**[12](index=12&type=chunk) - **Total stockholders' equity significantly decreased** from **$6,080 thousand** at **December 31, 2024**, to **$1,456 thousand** at **June 30, 2025**[12](index=12&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents the company's revenue, cost of revenue, gross margin, and net loss for the reported periods, showing improved operational efficiency Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $8,798 | $4,502 | $16,270 | $11,382 | | Total Cost of Revenue | $4,219 | $1,189 | $7,627 | $4,103 | | Gross Margin | $4,579 | $3,313 | $8,643 | $7,279 | | Operating Loss | $(3,977) | $(6,021) | $(9,906) | $(10,767) | | Net Loss | $(3,826) | $(5,833) | $(9,649) | $(10,340) | | Net Loss per Share (Basic & Diluted) | $(0.05) | $(0.07) | $(0.12) | $(0.13) | - **Total revenue increased** significantly by **95%** for the three months ended **June 30, 2025**, compared to the same period in **2024**, and by **43%** for the six months ended **June 30, 2025**, driven by **increased system sales** and post-acquisition **disposable device sales**[15](index=15&type=chunk) - **Net loss decreased** for both the three-month and six-month periods ended **June 30, 2025**, compared to the prior year, indicating improved operational efficiency despite **increased cost of revenue**[15](index=15&type=chunk) [Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity) This section details changes in the company's capital structure, including convertible preferred stock, common stock, and accumulated deficit Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2024 | Net Loss (6M 2025) | Stock-based Compensation (6M 2025) | Preferred Stock Conversion (6M 2025) | Balance at June 30, 2025 | | :-------------------------- | :---------------------- | :----------------- | :----------------------------------- | :----------------------------------- | :----------------------- | | Convertible Preferred Stock | $5,352 | - | - | $(56) | $5,296 | | Common Stock | $85 | - | - | $1 | $86 | | Additional Paid-In Capital | $567,926 | - | $4,902 | $56 | $572,950 | | Accumulated Deficit | $(561,725) | $(9,649) | - | - | $(571,374) | | Total Stockholders' Equity | $6,080 | $(9,649) | $4,902 | $57 | $1,456 | - The **accumulated deficit increased** to **$(571.4) million** as of **June 30, 2025**, from **$(561.7) million** at **December 31, 2024**, primarily due to the **net loss** incurred during the period[24](index=24&type=chunk) - **Stock-based compensation contributed $4,902 thousand** to additional paid-in capital for the six months ended **June 30, 2025**[24](index=24&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash flows from operating, investing, and financing activities, and the resulting net change in cash Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Used in Operating Activities | $(5,512) | $(5,434) | | Net Cash Used in Investing Activities | $(23) | $(22) | | Net Cash Provided by Financing Activities | $66 | $58 | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(5,469) | $(5,398) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $6,967 | $15,164 | - The company experienced a **net decrease** in cash, cash equivalents, and restricted cash of **$5,469 thousand** for the six months ended **June 30, 2025**, leading to an ending balance of **$6,967 thousand**[26](index=26&type=chunk) - **Operating activities** continued to be a net user of cash, with **$5,512 thousand** used in the first half of **2025**, a slight **increase** from **$5,434 thousand** in the prior year[26](index=26&type=chunk) [Notes to Financial Statements](index=9&type=section&id=Notes%20to%20Financial%20Statements) This section includes detailed notes explaining the company's business, significant accounting policies, recent acquisition of APT, and other financial instrument details - The company's interim financial statements are prepared in accordance with U.S. GAAP for interim information and Form 10-Q instructions, including normal recurring adjustments[45](index=45&type=chunk) - **Key risks and uncertainties** include the fluid **global tariff environment** (e.g., potential U.S.-China tariff expiration, proposed universal baseline tariff), ongoing supply chain disruptions, inflationary pressures, elevated interest rates, and geopolitical conflicts, which could impact **cost structure**, **gross margins**, and product launches[47](index=47&type=chunk)[48](index=48&type=chunk) - **Revenue is recognized** in accordance with ASC 606, distinguishing between initial capital sales of systems and recurring revenue from disposables, royalties, software updates, and service contracts, with allocation based on standalone selling prices[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [1. Description of Business](index=9&type=section&id=1.%20Description%20of%20Business) Stereotaxis designs, manufactures, and markets robotic systems, instruments, and information systems for interventional laboratories, primarily focusing on cardiac ablation procedures using its proprietary Robotic Magnetic Navigation technology - **Stereotaxis' core business** involves Robotic Magnetic Navigation (RMN) systems for endovascular interventions, with a primary clinical focus on cardiac ablation procedures[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - The company **acquired Access Point Technologies EP, Inc. (APT)** on **July 31, 2024**, to integrate in-house catheter development and manufacturing expertise, supporting innovation in interventional devices[41](index=41&type=chunk)[42](index=42&type=chunk) - **Key product developments and regulatory approvals** include CE Mark for GenesisX RMN System (Q3 2024), NMPA approval for Genesis RMN in China (Nov 2024), CE Mark for Stereotaxis MAGiC catheter in Europe (Q1 2025), and FDA 510(k) clearance for MAGiC Sweep™ catheter in the U.S. (July 2025)[43](index=43&type=chunk)[44](index=44&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's significant accounting policies, including the basis of presentation for unaudited interim financial statements, and details on risks and uncertainties such as global tariffs, supply chain disruptions, and macroeconomic factors [Risks and Uncertainties](index=12&type=section&id=Risks%20and%20Uncertainties) The global tariff environment, macroeconomic and geopolitical factors, and hospital customer pressures pose significant risks to the company's operations and liquidity - The **global tariff environment**, particularly U.S.-China tariffs and proposed universal baseline tariffs, could materially affect the company's **cost structure**, **gross margins**, and product launch timing[47](index=47&type=chunk) - **Macroeconomic and geopolitical factors**, including supply chain challenges, inflation, high interest rates, and conflicts (Russia-Ukraine, Middle East), continue to pose risks to operations and liquidity[48](index=48&type=chunk) - **Hospital customers face staffing and cost pressures**, and liquidity concerns from elevated interest rates, potentially causing delays or cancellations of purchase orders and reduced demand for disposable products[49](index=49&type=chunk) - The company has incurred **cumulative net losses** of approximately **$571.4 million** as of **June 30, 2025**, and expects further losses in **2025** due to continued product development, commercialization, R&D, and sales/marketing initiatives[53](index=53&type=chunk) [Cash and Cash Equivalents](index=14&type=section&id=Cash%20and%20Cash%20Equivalents) This section defines cash and cash equivalents and their composition as of the reporting dates - **Cash and cash equivalents** include cash on hand, money market instruments, and highly liquid investments with original maturities of three months or less[55](index=55&type=chunk) [Restricted Cash](index=14&type=section&id=Restricted%20Cash) This section reports the company's restricted cash balance, which was zero as of June 30, 2025 - The company had **no restricted cash** as of **June 30, 2025**, **decreased** from **$0.2 million** at **December 31, 2024**[56](index=56&type=chunk) [Investments](index=14&type=section&id=Investments) This section confirms the absence of short-term investments for the reported periods - As of **June 30, 2025**, and **December 31, 2024**, the Company had no short-term investments[57](index=57&type=chunk) [Fair Value Measurements](index=14&type=section&id=Fair%20Value%20Measurements) This section describes the fair value classification of financial assets and liabilities, including Level 2 money market funds and Level 3 contingent consideration - Financial assets classified as Level 2 (money market funds) and financial liabilities classified as Level 3 (**contingent consideration** from APT acquisition) are measured at fair value[63](index=63&type=chunk)[64](index=64&type=chunk) [Accounts Receivable, Contract Assets, and Allowance for Credit Losses](index=16&type=section&id=Accounts%20Receivable%2C%20Contract%20Assets%2C%20and%20Allowance%20for%20Credit%20Losses) This section explains the accounting policy for accounts receivable and contract assets, net of an allowance for expected credit losses - Accounts receivable and contract assets are reported net of an allowance for expected credit losses, assessed based on historical and expected net collections[65](index=65&type=chunk) [Revenue and Costs of Revenue](index=16&type=section&id=Revenue%20and%20Costs%20of%20Revenue) This section details the company's revenue recognition policies and sources, including systems, disposables, and recurring services - **Revenue is generated** from initial capital sales of systems, recurring sales of disposable devices, royalties, and other recurring revenue (software updates, service contracts)[67](index=67&type=chunk) Revenue Breakdown (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Systems | $3,038 | $240 | $5,002 | $2,852 | | Disposables, Service and Accessories | $5,760 | $4,262 | $11,268 | $8,530 | | Total Revenue | $8,798 | $4,502 | $16,270 | $11,382 | - **System revenue** represented **31%** and **25%** of **total revenue** for the six months ended **June 30, 2025**, and **2024**, respectively, while disposables, service, and accessories accounted for **34%** and **28%** respectively[72](index=72&type=chunk)[73](index=73&type=chunk) - **Other recurring revenue**, including product maintenance and software enhancements, represented **35%** and **47%** of revenue for the six months ended **June 30, 2025**, and **2024**, respectively[75](index=75&type=chunk) [Assets Recognized from the Costs to Obtain a Contract with a Customer](index=19&type=section&id=Assets%20Recognized%20from%20the%20Costs%20to%20Obtain%20a%20Contract%20with%20a%20Customer) This section outlines the capitalization of sales incentive programs as contract acquisition costs - **Sales incentive programs** for the sales team are capitalized as **contract acquisition costs**, totaling approximately **$0.1 million** as of **June 30, 2025**, and **December 31, 2024**[79](index=79&type=chunk) [Cost of Contracts](index=19&type=section&id=Cost%20of%20Contracts) This section describes the components of costs of systems and disposable revenue recognized at the time of sale - **Costs of systems revenue** include direct product costs, installation labor, warranty, and initial training, recognized at the time of sale[80](index=80&type=chunk) [Goodwill and Intangible Assets](index=19&type=section&id=Goodwill%20and%20Intangible%20Assets) This section explains the accounting treatment for goodwill and definite-lived intangible assets, including impairment testing and amortization - **Goodwill is not amortized** but evaluated for impairment annually; **definite-lived intangible assets are amortized** on a straight-line basis[81](index=81&type=chunk) [Contingent Liabilities- Earnout Consideration](index=19&type=section&id=Contingent%20Liabilities-%20Earnout%20Consideration) This section details the accounting for contingent consideration from the APT acquisition as a Level 3 financial liability - **Contingent consideration** from the APT acquisition is recognized as a Level 3 financial liability, remeasured to fair value at each reporting date, with changes recognized in General and Administrative expenses[82](index=82&type=chunk) [Leasing Arrangements](index=19&type=section&id=Leasing%20Arrangements) This section describes the recognition of operating lease agreements on the balance sheet as right-of-use assets and lease liabilities - **Operating lease agreements are recognized** on the balance sheet as right-of-use (ROU) assets and corresponding lease liabilities, with the discount rate based on the incremental borrowing rate[84](index=84&type=chunk)[86](index=86&type=chunk) [Stock-Based Compensation](index=20&type=section&id=Stock-Based%20Compensation) This section outlines the valuation and recognition methods for time-based and market-based stock awards - **Stock-based compensation** for time-based awards is valued using the Black-Scholes model and recognized over the vesting period (generally four years)[88](index=88&type=chunk) - **Market-based awards** are valued using Monte Carlo simulations, with expense recognized over the minimum service period regardless of market target achievement[89](index=89&type=chunk) [Net Loss per Common Share](index=20&type=section&id=Net%20Loss%20per%20Common%20Share) This section presents the basic and diluted net loss per common share and the factors influencing these metrics Net Loss per Common Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(3,826) | $(5,833) | $(9,649) | $(10,340) | | Net Loss Attributable to Common Stockholders | $(4,144) | $(6,158) | $(10,281) | $(10,996) | | Basic EPS | $(0.05) | $(0.07) | $(0.12) | $(0.13) | | Diluted EPS | $(0.05) | $(0.07) | $(0.12) | $(0.13) | - **Basic and diluted net loss per common share improved** to **$(0.05)** for the three months and **$(0.12)** for the six months ended **June 30, 2025**, compared to **$(0.07)** and **$(0.13)** respectively in the prior year[92](index=92&type=chunk) [Recently Issued Accounting Pronouncements](index=20&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section discusses recently issued accounting standards and their expected impact on the company's financial statements - **ASU 2023-09 (Income Taxes)** will be effective for the year ending **December 31, 2025**, requiring enhanced income tax disclosures, but is not expected to have a significant impact[95](index=95&type=chunk) - **ASU 2024-01 (Stock Compensation)** clarifies the scope application of profits interest and similar awards, effective for public business entities after **December 15, 2024**, with no material impact expected[96](index=96&type=chunk) [3. Acquisitions](index=22&type=section&id=3.%20Acquisitions) On July 31, 2024, Stereotaxis acquired Access Point Technologies EP, Inc. (APT) for an upfront stock payment and contingent payments based on regulatory and commercial milestones - The **acquisition of APT** on **July 31, 2024**, involved an upfront payment of **1,486,620 common shares** (**$3.0 million value**) and **contingent payments** up to **$24.0 million** based on milestones through **September 30, 2029**[99](index=99&type=chunk) APT Acquisition Fair Value Summary (in thousands) as of July 31, 2024 | Category | Amount | | :----------------------- | :----- | | Total Assets Acquired | $14,738 | | Total Liabilities Assumed | $1,772 | | Net Assets Acquired | $12,966 | | Goodwill | $3,764 | | Intangible Assets | $7,740 | - **APT contributed $2,562 thousand** in revenue and a **net loss** of **$1,395 thousand** to Stereotaxis' consolidated statement of earnings for the six months ended **June 30, 2025**[102](index=102&type=chunk)[103](index=103&type=chunk) - The **net loss** for the six months ended **June 30, 2025**, included a **$458 thousand expense** due to the revaluation of the **contingent consideration** related to the APT acquisition[102](index=102&type=chunk) [4. Financial Instruments](index=23&type=section&id=4.%20Financial%20Instruments) This section details the company's financial instruments, primarily cash and cash equivalents, and their fair value classifications Cash and Cash Equivalents by Fair Value Level (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Cash | $1,656 | $969 | | Level 2 Money Market Funds | $5,311 | $11,248 | | Total | $6,967 | $12,217 | - **Interest income from cash and investments was $0.3 million** for the six months ended **June 30, 2025**[105](index=105&type=chunk) - The **contingent consideration** from the APT acquisition is a Level 3 financial liability carried at fair value[106](index=106&type=chunk) [5. Inventories](index=24&type=section&id=5.%20Inventories) The company's inventories consist of raw materials, work in process, and finished goods, with a reserve for excess and obsolescence Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Raw Materials | $6,494 | $5,223 | | Work in Process | $1,508 | $1,103 | | Finished Goods | $4,263 | $4,382 | | Reserve for Excess and Obsolescence | $(2,657) | $(2,377) | | Total Inventory | $9,608 | $8,331 | - The **reserve for excess and obsolescence increased** to approximately **$2.7 million**, including slow-moving acquired inventory and Niobe Systems[108](index=108&type=chunk) [6. Prepaid Expenses and Other Assets](index=24&type=section&id=6.%20Prepaid%20Expenses%20and%20Other%20Assets) Prepaid expenses and other assets decreased from $1,955 thousand at December 31, 2024, to $1,054 thousand at June 30, 2025, primarily due to a reduction in deferred cost of revenue Prepaid Expenses and Other Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Prepaid Expenses | $336 | $405 | | Prepaid Commissions | $88 | $78 | | Deposits | $611 | $411 | | Deferred Cost of Revenue | $- | $1,025 | | Other Assets | $19 | $36 | | Total | $1,054 | $1,955 | - **Deferred cost of revenue**, representing costs for delivered but unrecognized system revenue, **decreased** from **$1,025 thousand** to zero[109](index=109&type=chunk) [7. Property and Equipment](index=24&type=section&id=7.%20Property%20and%20Equipment) Net property and equipment decreased slightly from $3,573 thousand at December 31, 2024, to $3,284 thousand at June 30, 2025, primarily due to accumulated depreciation Property and Equipment (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Equipment | $5,121 | $5,098 | | Leasehold Improvements | $2,916 | $2,916 | | Less: Accumulated Depreciation | $(4,753) | $(4,441) | | Net Property and Equipment | $3,284 | $3,573 | [8. Goodwill and Intangible Assets](index=25&type=section&id=8.%20Goodwill%20and%20Intangible%20Assets) Goodwill remained constant at $3,764 thousand, while net intangible assets decreased from $7,358 thousand at December 31, 2024, to $6,899 thousand at June 30, 2025, due to accumulated amortization Goodwill and Intangible Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Goodwill | $3,764 | $3,764 | | Total Intangibles | $7,740 | $7,740 | | Less: Accumulated Amortization | $(841) | $(382) | | Net Intangibles | $6,899 | $7,358 | [9. Leases](index=25&type=section&id=9.%20Leases) The company leases facilities under operating leases, including the Globe Lease (St. Louis) and the Talulla Lease (Rogers, Minnesota, acquired with APT) - The **company has two primary operating leases**: the Globe Lease for its principal executive and manufacturing facilities (10-year term from **2021**) and the Talulla Lease for APT's facilities (4-year term from **August 2024**)[112](index=112&type=chunk)[113](index=113&type=chunk) - As of **June 30, 2025**, the **weighted average discount rate** for operating leases was **9%**, and the **weighted average remaining lease term** was **6.59 years**[114](index=114&type=chunk) Future Minimum Operating Lease Payments (in thousands) as of June 30, 2025 | Year | Amount | | :---------------- | :----- | | 2025 | $539 | | 2026 | $1,097 | | 2027 | $1,122 | | 2028 | $1,147 | | 2029 | $1,173 | | 2030 and thereafter | $2,533 | | Total Lease Payments | $7,611 | | Less: Interest | $(1,884) | | Present Value of Lease Liabilities | $5,727 | [10. Accrued Liabilities](index=26&type=section&id=10.%20Accrued%20Liabilities) Total accrued liabilities decreased from $2,986 thousand at December 31, 2024, to $2,841 thousand at June 30, 2025, primarily due to a reduction in deferred contract obligations Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accrued Salaries, Bonus, and Benefits | $1,362 | $1,569 | | Accrued Warranties | $50 | $50 | | Accrued Professional Services | $211 | $170 | | Accrued Investigational Sites | $73 | $45 | | Deferred Contract Obligation | $- | $1,045 | | Other | $1,145 | $107 | | Total Accrued Liabilities | $2,841 | $2,986 | [11. Convertible Preferred Stock and Stockholders' Equity](index=26&type=section&id=11.%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity) This section details the company's capital structure, including common stock, Series A Convertible Preferred Stock, and various stock award plans - The **Series A Convertible Preferred Stock** has a stated value of **$1,000 per share**, is convertible at **$0.65 per share**, and bears a **6% cumulative annual dividend**[120](index=120&type=chunk) - The **2021 CEO Performance Award Unit Grant** consists of ten vesting tranches, totaling up to **13,000,000 shares**, tied to market capitalization milestones ranging from **$1.0 billion** to **$5.5 billion** and continued employment through **December 31, 2030**[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - As of **June 30, 2025**, none of the CEO Performance Award milestones have been achieved, and there was approximately **$26.3 million** of **unrecognized stock-based compensation expense** remaining[126](index=126&type=chunk) Stock Option and SAR Activity (Six Months Ended June 30, 2025) | Category | Number of Options/SARs | Weighted Average Exercise Price per Share | | :-------------------------- | :--------------------- | :-------------------------------------- | | Outstanding, Dec 31, 2024 | 3,858,360 | $3.79 | | Granted | 673,000 | $1.62 | | Exercised | (24,300) | $1.96 | | Forfeited | (135,720) | $3.06 | | Outstanding, June 30, 2025 | 4,371,340 | $3.49 | Restricted Stock Unit Activity (Six Months Ended June 30, 2025) | Category | Number of Restricted Stock Units | Weighted Average Grant Date Fair Value per Unit | | :-------------------------- | :------------------------------- | :---------------------------------------------- | | Outstanding, Dec 31, 2024 | 1,546,532 | $3.36 | | Granted | 954,093 | $1.67 | | Vested | (120,000) | $5.24 | | Outstanding, June 30, 2025 | 2,380,625 | $2.59 | [12. Product Warranty Provisions](index=29&type=section&id=12.%20Product%20Warranty%20Provisions) The company provides a one-year warranty for capital systems, with costs estimated based on historical experience and product performance Warranty Accrual (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Warranty Accrual, Beginning of Period | $50 | $107 | | Accrual Adjustment | $1 | $6 | | Payments Made | $(1) | $(63) | | Warranty Accrual, End of Period | $50 | $50 | [13. Commitments and Contingencies](index=29&type=section&id=13.%20Commitments%20and%20Contingencies) The company is involved in claims in the ordinary course of business, which management believes will not materially affect its financial position - A **letter of credit** for approximately **$1.8 million**, related to a lease agreement, was fully delivered and completed in **May 2025**[136](index=136&type=chunk) - The **company is contesting a vendor's UCC financing statements** filed in **February 2024** for approximately **$0.6 million**, believing them to be without merit[135](index=135&type=chunk) [14. Subsequent Events](index=29&type=section&id=14.%20Subsequent%20Events) Subsequent to the reporting period, Stereotaxis entered into a registered direct offering on July 17, 2025, to sell $12.5 million in common stock - On **July 17, 2025**, **Stereotaxis entered a registered direct offering** to sell **$12.5 million** in common stock at **$2.00 per share**[137](index=137&type=chunk) - An **initial closing** on **July 18, 2025**, resulted in the issuance of **4,250,000 shares** and **$8.5 million** in gross proceeds, with an additional **2,000,000 shares** and **$4.0 million** expected by **November 25, 2025**[137](index=137&type=chunk) - On **August 7, 2025**, **417,710 common shares** were issued as partial settlement of the APT acquisition earnout consideration[138](index=138&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Stereotaxis' financial condition and operational results for the periods ended June 30, 2025, covering business overview, corporate developments, and financial analysis [Overview](index=30&type=section&id=Overview) Stereotaxis specializes in robotic magnetic navigation (RMN) systems for endovascular interventions, primarily cardiac ablation, aiming to improve precision, stability, and safety - **Stereotaxis specializes in robotic magnetic navigation (RMN) systems** for endovascular interventions, primarily cardiac ablation, aiming to improve precision, stability, and safety[141](index=141&type=chunk)[143](index=143&type=chunk) - The **company's product portfolio includes** Genesis RMN, GenesisX RMN, and Odyssey Solution, with a strategy to expand into coronary, neuro, and peripheral interventions[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - **Business model involves upfront capital payments** for equipment and installation, and recurring payments for disposable costs, service, and software updates[149](index=149&type=chunk) [Corporate Developments](index=32&type=section&id=Corporate%20Developments) This section highlights recent corporate developments, including the APT acquisition and significant regulatory milestones - **Acquisition of Access Point Technologies EP, Inc. (APT)** on **July 31, 2024**, integrated in-house catheter development and manufacturing expertise[153](index=153&type=chunk)[154](index=154&type=chunk) - **Regulatory milestones include** CE Mark for GenesisX RMN System (Q3 2024), NMPA approval for Genesis RMN in China (Nov 2024), CE Mark for Stereotaxis MAGiC catheter in Europe (Q1 2025), and FDA 510(k) clearance for MAGiC Sweep™ catheter in the U.S. (July 2025)[155](index=155&type=chunk)[156](index=156&type=chunk) [Tariff and Trade Regulation Update](index=33&type=section&id=Tariff%20and%20Trade%20Regulation%20Update) This section provides an update on the global tariff environment and its potential impact on the company's cost structure and operations - The **global tariff environment** remains fluid, with potential impacts on **cost structure**, **gross margins**, and product launch timing[157](index=157&type=chunk) - U.S. tariffs on Mexican and Canadian imports (**25% to 35%**) have immaterial impact due to USMCA qualification of sub-assemblies[158](index=158&type=chunk) - A **10% universal 'baseline' tariff** on non-USMCA imports, effective **April 2, 2025**, is expected to **increase cost of revenues** and R&D expenses in H2 **2025**[159](index=159&type=chunk) - U.S.-China tariffs were reduced to a base rate of **~30%** (U.S. duties on Chinese goods) and **~10%** (China duties on U.S. goods) as of **May 12, 2025**, with a **less than 1% expense increase** anticipated for H2 **2025** if rates remain[162](index=162&type=chunk) - **Increased Section 232 tariffs** on steel and aluminum (**25% to 50%**, effective **June 4, 2025**) could lead to an effective rate of up to **60%** on certain specialty alloys, with long-term effects difficult to predict[163](index=163&type=chunk) [Other Risks and Uncertainties](index=33&type=section&id=Other%20Risks%20and%20Uncertainties) This section discusses ongoing macroeconomic and geopolitical factors, hospital customer pressures, and capital market disruptions that pose risks to the company - **Ongoing macroeconomic and geopolitical factors**, including supply chain disruptions, inflation, and conflicts, continue to impact sourcing, shipping, and manufacturing[165](index=165&type=chunk) - **Hospital customers face staffing and cost pressures**, and liquidity concerns from elevated interest rates, potentially delaying or canceling orders and reducing demand for disposable products[166](index=166&type=chunk) - **Disruptions to capital markets** could negatively impact the company's ability to raise capital and customers' ability to fund projects, leading to delayed spending and increased default risks[167](index=167&type=chunk) - The company has incurred **cumulative net losses** of approximately **$571.4 million** as of **June 30, 2025**, and expects further losses in **2025** as it continues product development and commercialization[170](index=170&type=chunk) - The company believes **existing cash and July 2025 equity raise proceeds** will be sufficient but cannot guarantee future funding availability on acceptable terms[171](index=171&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the company's critical accounting policies and estimates, which require significant judgment in the preparation of financial statements - The **preparation of consolidated financial statements requires significant estimates and judgments**, which are reviewed on an ongoing basis[172](index=172&type=chunk) [Revenue Recognition](index=35&type=section&id=Revenue%20Recognition) This section details the company's revenue recognition policies and sources, including systems, disposables, and recurring services - **Revenue is recognized** in accordance with ASC 606, based on legally enforceable contracts, identified rights, commercial substance, and probable collectability[174](index=174&type=chunk) - For contracts with **multiple performance obligations**, revenue is allocated based on relative standalone selling prices, which are estimated considering market conditions and entity-specific factors[176](index=176&type=chunk) - **System revenue is recognized** upon transfer of control (delivery/installation acceptance), while **disposable revenue is recognized** at shipment or delivery[177](index=177&type=chunk)[178](index=178&type=chunk) - **Other recurring revenue** (service, software enhancements) is deferred and amortized over the service or update period, typically one year[180](index=180&type=chunk) [Assets Recognized from the Costs to Obtain a Contract with a Customer](index=37&type=section&id=Assets%20Recognized%20from%20the%20Costs%20to%20Obtain%20a%20Contract%20with%20a%20Customer) This section outlines the capitalization of sales incentive programs as contract acquisition costs - **Sales incentive programs** for the sales team are capitalized as **contract acquisition costs**, totaling approximately **$0.1 million** as of **June 30, 2025**, and **December 31, 2024**[183](index=183&type=chunk) [Cost of Contracts](index=39&type=section&id=Cost%20of%20Contracts) This section describes the components of costs of systems and disposable revenue recognized at the time of sale - **Costs of systems revenue** include direct product costs, installation labor, warranty, and initial training, recognized at the time of sale[184](index=184&type=chunk) - **Costs of disposable revenue** include direct product costs and estimated warranty costs, recognized at the time of sale[184](index=184&type=chunk) [Stock-Based Compensation](index=39&type=section&id=Stock-Based%20Compensation) This section outlines the valuation and recognition methods for time-based and market-based stock awards - **Stock compensation expense** for time-based awards is determined using the Black-Scholes model and amortized straight-line over the vesting period (generally four years)[185](index=185&type=chunk) - **Market-based awards** are valued using Monte Carlo simulations, with expense recognized over the minimum service period regardless of market target achievement[186](index=186&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing revenue, cost of revenue, gross margin, and operating expenses for the reported periods [Comparison of the Three Months Ended June 30, 2025, and 2024](index=39&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%2C%20and%202024) This section compares the company's financial performance for the three months ended June 30, highlighting significant changes in revenue, costs, and operating expenses Revenue (Three Months Ended June 30, in millions) | Category | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Total Revenue | $8.8 | $4.5 | 95% | | Systems Revenue | $3.0 | $0.2 | 1400% | | Disposables, Service & Accessories | $5.8 | $4.3 | 35% | Cost of Revenue & Gross Margin (Three Months Ended June 30, in millions) | Category | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Total Cost of Revenue | $4.2 | $1.2 | 255% | | Overall Gross Margin (%) | 52% | 74% | -22 pp | | Disposables, Service & Accessories Gross Margin (%) | 68% | 76% | -8 pp | Operating Expenses (Three Months Ended June 30, in millions) | Category | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Research and Development | $1.8 | $2.3 | -22% | | Sales and Marketing | $3.3 | $3.3 | 0% | | General and Administrative | $4.0 | $3.8 | 6% | | Other Operating Expense | $(0.5) | $0.0 | N/A | [Comparison of the Six Months Ended June 30, 2025 and 2024](index=41&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section compares the company's financial performance for the six months ended June 30, detailing trends in revenue, costs, and operating expenses Revenue (Six Months Ended June 30, in millions) | Category | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Total Revenue | $16.3 | $11.4 | 43% | | Systems Revenue | $5.0 | $2.9 | 72% | | Disposables, Service & Accessories | $11.3 | $8.5 | 32% | Cost of Revenue & Gross Margin (Six Months Ended June 30, in millions) | Category | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Total Cost of Revenue | $7.6 | $4.1 | 86% | | Overall Gross Margin (%) | 53% | 64% | -11 pp | | Disposables, Service & Accessories Gross Margin (%) | 68% | 76% | -8 pp | Operating Expenses (Six Months Ended June 30, in millions) | Category | 2025 | 2024 | Change (%) | | :-------------------------- | :--- | :--- | :--------- | | Research and Development | $4.1 | $4.5 | -9% | | Sales and Marketing | $6.4 | $6.3 | 2% | | General and Administrative | $8.5 | $7.2 | 18% | | Other Operating Expense | $(0.5) | $0.0 | N/A | | Net Interest Income | $0.2 | $0.4 | -50% | [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial position, including cash, working capital, cash flows, and debt, and its ability to fund operations - As of **June 30, 2025**, the company had **$7.0 million** in cash and cash equivalents and working capital of **$1.2 million**, **decreased** from **$4.8 million** at **December 31, 2024**[200](index=200&type=chunk) Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Operating Activities | $(5,512) | $(5,434) | | Investing Activities | $(23) | $(22) | | Financing Activities | $66 | $58 | - **Net cash used in operating activities increased** slightly to **$5.5 million** in H1 **2025**, driven by changes in working capital[202](index=202&type=chunk) - The company had no debt as of **June 30, 2025**[205](index=205&type=chunk) [Off-Balance Sheet Arrangements](index=42&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of off-balance sheet arrangements or relationships with unconsolidated entities - The company does not have any off-balance sheet arrangements or relationships with unconsolidated entities, nor does it engage in trading activities involving non-exchange traded contracts[206](index=206&type=chunk) [Item 3. [Reserved]](index=29&type=section&id=Item%203.%20%5BReserved%5D) This item is reserved and contains no information [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective - The company's **disclosure controls and procedures** were deemed **effective** as of **June 30, 2025**[208](index=208&type=chunk) - **No material changes** in internal control over financial reporting occurred during the period[209](index=209&type=chunk) - The company is in the process of reviewing and integrating the internal control structure of the **acquired Access Point Technologies EP, Inc. business**[210](index=210&type=chunk) Part II Other Information [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This item states that there are no legal proceedings to report - **No legal proceedings are reported**[213](index=213&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This item states that there are no new risk factors to report - **No new risk factors are reported**[214](index=214&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item states that there are no unregistered sales of equity securities or use of proceeds to report - **No unregistered sales of equity securities or use of proceeds are reported**[215](index=215&type=chunk) [Item 3. Defaults upon Senior Securities](index=43&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This item states that there are no defaults upon senior securities to report - **No defaults upon senior securities are reported**[216](index=216&type=chunk) [Item 4. [Reserved]](index=43&type=section&id=Item%204.%20%5BReserved%5D) This item is reserved and contains no information - **This item is reserved**[217](index=217&type=chunk) [Item 5. Other Information](index=43&type=section&id=Item%205.%20Other%20Information) This item states that there is no other information to report - **No other information is reported**[218](index=218&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including organizational documents, certifications, and XBRL-related documents - Exhibits include Restated Articles of Incorporation, Certificate of Amendment, Certificate of Designations for Series A Preferred Stock, Restated Bylaws, and various certifications (Rule 13a-14(a)/15d-14(a), Section 1350)[219](index=219&type=chunk) - XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are also included[219](index=219&type=chunk)[220](index=220&type=chunk) [Signatures](index=45&type=section&id=Signatures) The report is duly signed on behalf of Stereotaxis, Inc. by its Chief Executive Officer, David L. Fischel, and Chief Financial Officer, Kimberly R. Peery, on August 13, 2025 - The **report was signed by David L. Fischel**, Chief Executive Officer, and Kimberly R. Peery, Chief Financial Officer, on **August 13, 2025**[223](index=223&type=chunk) ```

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2025 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 001-37437 XBIOTECH INC. (Exact name of registrant as specified in charter) (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 5217 W ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ to __________ COMMISSION FILE NUMBER 001-41719 60 DEGREES PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) | Delaware | 45-2406880 | | --- | --- | | (State or other jurisdiction of | (I.R.S. Employer | | incorporation or organization) | Identification No.) | Form 10-Q (Mark On ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This part presents the unaudited condensed financial statements and management's discussion and analysis for Columbus Acquisition Corp, along with disclosures on market risk and controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed financial statements for Columbus Acquisition Corp, including the balance sheets, statements of operations, changes in shareholders' equity (deficit), and cash flows, along with comprehensive notes detailing the company's organization, accounting policies, IPO, private placement, related party transactions, commitments, and equity structure [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Presents the company's financial position at specific dates, detailing assets, liabilities, and shareholders' equity Condensed Balance Sheet Highlights | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :------------------------------------------------ | :-------------------------- | :------------------ | | Cash | $761,463 | $— | | Total Current Assets | $818,109 | $— | | Demand deposit in Trust Account | $61,018,247 | $— | | Total Assets | $61,836,356 | $200,034 | | Total Current Liabilities | $98,192 | $252,128 | | Ordinary shares subject to possible redemption | $61,018,247 | $— | | Total Shareholders' Equity (Deficit) | $719,917 | $(52,094) | [Unaudited Condensed Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income or loss over specific periods Unaudited Condensed Statements of Operations Highlights | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Inception to June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------------- | | General and administrative expenses | $151,899 | $41,200 | $405,833 | $48,039 | | Interest earned on demand deposit in Trust Account | $614,514 | $— | $1,018,247 | $— | | Net income (loss) | $462,615 | $(41,200) | $612,414 | $(48,039) | | Basic and diluted net income (loss) per share, non-redeemable ordinary shares | $0.06 | $(0.03) | $0.09 | $(0.03) | [Unaudited Condensed Statements of Changes in Shareholders' Equity (Deficit)](index=6&type=section&id=Unaudited%20Condensed%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(Deficit)) Outlines the changes in the company's equity over time, including net income, share issuances, and redemptions - Shareholders' Equity (Deficit) increased from **$(52,094)** as of December 31, 2024, to **$719,917** as of June 30, 2025, primarily driven by the issuance of Private Placement Units (**$2,333,447**), Public Rights (**$1,280,440**), and Representative Shares (**$361,000**), along with net income, partially offset by accretion of carrying value to redemption value[14](index=14&type=chunk) - For the period from inception (January 18, 2024) through June 30, 2024, the company reported a net loss of **$48,039**, resulting in a total shareholder's deficit of **$(23,039)** as of June 30, 2024[15](index=15&type=chunk) [Unaudited Condensed Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Statements%20of%20Cash%20Flows) Reports the cash generated and used by the company across operating, investing, and financing activities Unaudited Condensed Statements of Cash Flows Highlights | Cash Flow Activity | Six Months Ended June 30, 2025 | Period from Inception to June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------------- | | Net Cash Used in Operating Activities | $(305,225) | $(43,618) | | Net Cash Used in Investing Activities | $(60,000,000) | $— | | Net Cash Provided by Financing Activities | $61,066,688 | $43,618 | | Net Change in Cash | $761,463 | $— | | Cash, End of Year | $761,463 | $— | - Financing activities for the six months ended June 30, 2025, included **$60,000,000** from the sale of public units and **$2,342,900** from private placement units, partially offset by payment of underwriter commissions and repayment of a related-party promissory note[18](index=18&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Provides critical context to the financial statements, detailing the company's organization, accounting policies, IPO, private placement, related party transactions, commitments, and equity structure - The notes provide critical context to the financial statements, detailing the company's organization as a blank check company, significant accounting policies, specifics of its Initial Public Offering and Private Placement, related party transactions, commitments, and the composition of shareholders' equity[19](index=19&type=chunk) - A key disclosure is the 'Going Concern Consideration,' which highlights substantial doubt about the company's ability to continue as a going concern if a business combination is not completed by January 22, 2026[36](index=36&type=chunk) [Note 1 — Organization, Business Operation and Going Concern Consideration](index=8&type=section&id=Note%201%20%E2%80%94%20Organization,%20Business%20Operation%20and%20Going%20Concern%20Consideration) Describes the company's formation as a blank check company, its IPO, and the going concern implications if a business combination is not completed - Columbus Acquisition Corp is a blank check company incorporated on January 18, 2024, for the purpose of effecting a business combination, with efforts not limited to a particular industry or geographic location, though significant ties to China may influence target selection[20](index=20&type=chunk) - The company consummated its IPO on January 24, 2025, selling **6,000,000 units** at **$10.00 per unit**, generating **$60,000,000** gross proceeds[24](index=24&type=chunk) - Simultaneously, a private placement of **234,290 units** to the Sponsor generated **$2,342,900**[25](index=25&type=chunk) - Substantially all net proceeds are held in a U.S.-based Trust Account, to be invested in U.S. government treasury bills or money market funds, and will not be released until the completion of a business combination or redemption[30](index=30&type=chunk) - The company must complete its initial Business Combination by January 22, 2026, or it will cease operations and redeem public shares, which raises substantial doubt about its ability to continue as a going concern[33](index=33&type=chunk)[36](index=36&type=chunk) [Note 2 — Significant accounting policies](index=11&type=section&id=Note%202%20%E2%80%94%20Significant%20accounting%20policies) Details the key accounting principles and methods applied in preparing the financial statements, including revenue recognition and fair value measurement - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[40](index=40&type=chunk)[41](index=41&type=chunk) - Interest earned on the demand deposit in the Trust Account amounted to **$614,514** for the three months ended June 30, 2025, and **$1,018,247** for the six months ended June 30, 2025[45](index=45&type=chunk) - Offering costs of **$1,587,534** were allocated, with **$1,538,521** charged to temporary equity for public shares and **$49,013** charged to shareholders' equity for public rights and Private Units[46](index=46&type=chunk) - Ordinary shares subject to possible redemption are classified as temporary equity and presented at redemption value, with changes in redemption value recognized immediately as a deemed dividend[53](index=53&type=chunk) - The company applies ASC 820 for fair value measurement, classifying assets and liabilities into Level 1, 2, or 3 based on observability of inputs[52](index=52&type=chunk) [Note 3 — Initial Public Offering](index=15&type=section&id=Note%203%20%E2%80%94%20Initial%20Public%20Offering) Provides specifics on the company's IPO, including units sold, proceeds, and associated offering costs - On January 24, 2025, the company sold **6,000,000 Units** at **$10.00 per Unit**, each consisting of one ordinary share and one right to receive one-seventh of one ordinary share upon business combination[62](index=62&type=chunk) - Total offering costs allocated to the IPO proceeds were **$1,538,521**[62](index=62&type=chunk) - The underwriters' 45-day over-allotment option for an additional **900,000 units** expired unexercised on March 10, 2025[62](index=62&type=chunk) [Note 4 — Private Placement](index=15&type=section&id=Note%204%20%E2%80%94%20Private%20Placement) Details the private placement of units to the Sponsor, including proceeds, allocated costs, and transfer restrictions - Simultaneously with the IPO, the Sponsor purchased **234,290 Private Placement Units** at **$10.00 per unit**, generating **$2,342,900**[63](index=63&type=chunk) - Offering costs allocated to the Private Placement Units were **$9,453**[63](index=63&type=chunk) - Private Placement Units are subject to transfer restrictions until the completion of the initial Business Combination[65](index=65&type=chunk) - There are no redemption rights or liquidating distributions from the Trust Account for private placement shares or rights[64](index=64&type=chunk) [Note 5 — Related Party Transactions](index=16&type=section&id=Note%205%20%E2%80%94%20Related%20Party%20Transactions) Describes transactions and arrangements with related parties, including Founder Shares, director compensation, and promissory notes - The Sponsor initially acquired **1,437,500 Founder Shares** for **$25,000**, which were later increased to **1,725,000 shares**, and subsequently forfeited **225,000 Founder Shares** on March 10, 2025, due to the unexercised over-allotment option[66](index=66&type=chunk) - **36,000 Founder Shares** were transferred to three independent directors for board service, resulting in a stock-based compensation expense of **$61,478**[67](index=67&type=chunk) - A Share Purchase Option for **12,000 Founder Shares** was issued to Mr. Cameron R. Johnson, with an estimated fair value of **$119,475**, to be recorded as compensation expense upon exercise[68](index=68&type=chunk) - The Sponsor loaned the company up to **$500,000** via a Promissory Note for IPO expenses, with **$249,712** outstanding as of December 31, 2024, which was repaid upon the IPO closing[71](index=71&type=chunk) - The Sponsor, officers, and directors waived their redemption rights for Founder Shares and private placement shares[69](index=69&type=chunk) [Note 6 — Commitments and Contingencies](index=18&type=section&id=Note%206%20%E2%80%94%20Commitments%20and%20Contingencies) Outlines the company's contractual obligations, registration rights, and underwriter compensation - Holders of Founder Shares, Representative Shares, Private Placement Units, and units from Working Capital Loans are entitled to registration rights[76](index=76&type=chunk) - The underwriter received a cash underwriting discount of **$900,000** (1.5% of gross IPO proceeds) and **210,000 Representative Shares** with a fair value of **$361,000**[78](index=78&type=chunk)[79](index=79&type=chunk) - The underwriters' over-allotment option for **900,000 units** expired unexercised on March 10, 2025[77](index=77&type=chunk) [Note 7 — Shareholders' Equity](index=19&type=section&id=Note%207%20%E2%80%94%20Shareholders'%20Equity) Details the authorized and outstanding share capital, including preferred shares, ordinary shares, and rights - The company is authorized to issue **10,000,000 preferred shares** and **500,000,000 ordinary shares**, with no preferred shares issued or outstanding as of June 30, 2025[80](index=80&type=chunk)[81](index=81&type=chunk) - As of June 30, 2025, there were **1,944,290 ordinary shares** issued and outstanding (excluding shares subject to possible redemption), reflecting the retroactive forfeiture of **225,000 ordinary shares**[81](index=81&type=chunk) - As of June 30, 2025, there were **6,000,000 Public Rights** and **234,290 Private Rights** outstanding, which can be converted into a total of **890,612 ordinary shares** upon consummation of an initial Business Combination[83](index=83&type=chunk) - Rights will expire worthless if the company fails to complete an initial Business Combination within the required timeframe[84](index=84&type=chunk) [Note 8 — Segment Information](index=20&type=section&id=Note%208%20%E2%80%94%20Segment%20Information) Explains that the company operates as a single segment, with the CEO reviewing overall operating results - The company operates as a single operating and reportable segment, with the Chief Executive Officer (CODM) reviewing overall operating results[86](index=86&type=chunk) - Key metrics reviewed by the CODM include general and administrative expenses and interest earned on the demand deposit in the Trust Account[87](index=87&type=chunk) [Note 9 — Subsequent Events](index=20&type=section&id=Note%209%20%E2%80%94%20Subsequent%20Events) Confirms no subsequent events requiring adjustment or disclosure were identified after the reporting period - No subsequent events requiring adjustment or disclosure were identified through the date the unaudited condensed financial statements were issued[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting its status as a blank check company, the impact of its IPO and private placement, and the challenges related to liquidity and the need to complete a business combination by January 22, 2026 [Overview](index=21&type=section&id=Overview) Provides a general description of Columbus Acquisition Corp as a blank check company formed for a business combination - Columbus Acquisition Corp is a blank check company incorporated on January 18, 2024, with the sole purpose of effecting a business combination, and has not yet identified a target business[91](index=91&type=chunk) [Initial Public Offering](index=21&type=section&id=Initial%20Public%20Of%20ering) Details the IPO and private placement, including proceeds, trust account funding, and share trading information - The company consummated its IPO on January 24, 2025, selling **6,000,000 units** at **$10.00 per unit**, generating **$60,000,000** gross proceeds[92](index=92&type=chunk) - A private placement of **234,290 units** to the Sponsor generated an additional **$2,342,900**[92](index=92&type=chunk) - Proceeds from the IPO and private placement, totaling **$60,000,000**, were placed in a Trust Account for the benefit of public shareholders[92](index=92&type=chunk)[94](index=94&type=chunk) - The company issued **210,000 Representative Shares** to the underwriter, subject to transfer restrictions and waiver of redemption/liquidation rights[93](index=93&type=chunk) - Ordinary Shares and Rights commenced separate trading on Nasdaq on March 17, 2025, under symbols 'COLA' and 'COLAR', respectively[97](index=97&type=chunk) [Results of Operations and Known Trends or Future Events](index=22&type=section&id=Results%20of%20Operations%20and%20Known%20Trends%20or%20Future%20Events) Discusses the company's financial performance, primarily non-operating income from the Trust Account and expected future expenses - The company has not generated any operating revenues to date, with activities limited to organizational efforts and the IPO[98](index=98&type=chunk) - Non-operating income is derived from interest earned on Trust Account proceeds[98](index=98&type=chunk) Net Income (Loss) and Key Drivers | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Inception to June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------------- | | Net income (loss) | $462,615 | $(41,200) | $612,414 | $(48,039) | | Interest income from Trust Account | $614,514 | $— | $1,018,247 | $— | | General and administrative expenses | $151,899 | $41,200 | $405,833 | $48,039 | - The company expects to incur increased expenses as a public company and for the search for target opportunities[98](index=98&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Analyzes the company's cash position, financing activities, and the need for additional capital to complete a business combination - As of June 30, 2025, the company had cash of **$761,463** and working capital of **$719,917**[102](index=102&type=chunk) - Cash provided by financing activities was **$61,066,688** for the six months ended June 30, 2025, primarily from IPO and private placement proceeds, offset by cash used in investing activities (**$60,000,000** deposit into Trust Account) and operating activities (**$305,225**)[102](index=102&type=chunk) - The company intends to use IPO proceeds to acquire a target business and for working capital, but may need additional financing if current funds are insufficient or if a significant number of public shares are redeemed[103](index=103&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - The company has until January 22, 2026, to complete an initial business combination, and the mandatory liquidation if unsuccessful raises substantial doubt about its ability to continue as a going concern[107](index=107&type=chunk) [Off-Balance Sheet Financing Arrangements](index=24&type=section&id=Off-Balance%20Sheet%20Financing%20Arrangements) Confirms the absence of any off-balance sheet arrangements as of the reporting date - The company has no obligations, assets, or liabilities considered off-balance sheet arrangements as of June 30, 2025[108](index=108&type=chunk) [Contractual Obligations](index=24&type=section&id=Contractual%20Obligations) States that the company has no long-term debt or lease obligations, but notes registration rights for certain shareholders - As of June 30, 2025, the company does not have any long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities[109](index=109&type=chunk) - Holders of Founder Shares, Private Units, and Working Capital Loans are entitled to registration rights[110](index=110&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) Indicates that management has not identified any critical accounting estimates with significant financial statement impact - Management has not identified any critical accounting estimates that would significantly impact the financial statements[112](index=112&type=chunk) [Recent Accounting Pronouncements](index=24&type=section&id=Recent%20Accounting%20Pronouncements) Assesses the impact of recently issued accounting pronouncements on the company's financial statements - Management does not believe that any recently issued, but not yet effective, accounting pronouncements would have a material effect on the financial statements if currently adopted[113](index=113&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Columbus Acquisition Corp is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from making disclosures under this item as it qualifies as a smaller reporting company[114](index=114&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, and reported no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial and accounting officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[116](index=116&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2025[117](index=117&type=chunk) [Part II. Other Information](index=26&type=section&id=Part%20II.%20Other%20Information) This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) Columbus Acquisition Corp is not currently involved in any material litigation or legal proceedings and is unaware of any significant legal exposure - The company is not a party to any material litigation or other legal proceedings and is unaware of any legal proceeding, investigation, or claim that could have a material adverse effect[119](index=119&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, this item is not applicable. The company refers to previously disclosed risk factors in its IPO prospectus and annual report, noting no material changes as of the current report date - This item is not applicable to a smaller reporting company[120](index=120&type=chunk) - There have been no material changes to the risk factors disclosed in the company's IPO prospectus and annual report for the fiscal year ended December 31, 2024[120](index=120&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities and use of proceeds to report[121](index=121&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period - No defaults upon senior securities to report[122](index=122&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Columbus Acquisition Corp - Mine Safety Disclosures are not applicable to the company[123](index=123&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No other information is required to be reported under this item - No other information to report[124](index=124&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, certifications, and XBRL data files - The exhibits include the First Amended and Restated Memorandum and Articles of Association, Rights Agreement, certifications from the CEO and CFO, and Inline XBRL documents[125](index=125&type=chunk) [Signatures](index=27&type=section&id=Signatures) This section provides the official signatures of the company's Chief Executive Officer and Chief Financial Officer, certifying the report - The report is signed by Fen 'Eric' Zhang, Chief Executive Officer, and Jie 'Janet' Hu, Chief Financial Officer, on August 13, 2025[130](index=130&type=chunk)

(Exact name of registrant as specified in its charter) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ 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: 001-42485 Columbus Acquisition Corp Cayman Islands N/A (State or other jurisdiction of (I.R ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 to________ ( State or other jurisdiction of incorporation or organization) Texas 75-6280532 (I.R.S. Employer Identification No.) Argent Trust Compan ...

[PART I. FINANCIAL INFORMATION (UNAUDITED)](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION%20(UNAUDITED)) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited statements show total assets of $713.6 million and a quarterly net loss of $1.2 million [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets decreased to $713.6 million, driven by lower deposits and loans, with equity falling to $28.5 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | **Total Assets** | **$713,624** | **$729,991** | | Total cash and cash equivalents | $43,835 | $50,315 | | Total loans receivable, net | $598,937 | $607,347 | | **Total Liabilities** | **$685,086** | **$700,413** | | Total deposits | $645,531 | $661,837 | | **Total Equity** | **$28,538** | **$29,578** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The quarterly net loss improved to $1.2 million from $2.2 million year-over-year due to a credit loss recovery Quarterly Operating Results (in thousands, except per share data) | Metric | Q1 2025 (3 mos ended Jun 30) | Q1 2024 (3 mos ended Jun 30) | | :--- | :--- | :--- | | Net Interest Income | $5,641 | $5,504 | | (Recovery of) provision for credit losses | $(26) | $260 | | Total Non-interest Income | $1,268 | $705 | | Total Non-interest Expense | $8,112 | $8,161 | | **Net Loss** | **$(1,177)** | **$(2,212)** | | **Loss per common share (Basic & Diluted)** | **$(0.22)** | **$(0.43)** | [Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive loss narrowed to $1.1 million from $2.5 million in the prior-year quarter Comprehensive Loss Summary (in thousands) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net loss | $(1,177) | $(2,212) | | Other comprehensive income (loss) | $124 | $(263) | | **Total comprehensive loss, net of tax** | **$(1,053)** | **$(2,475)** | [Consolidated Statement of Changes in Equity](index=8&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity declined by $1.04 million to $28.5 million, primarily due to the quarterly net loss - Equity declined by **$1.04 million** during the quarter, moving from **$29.58 million to $28.54 million**[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased by $6.5 million, mainly from a net decrease in deposits Cash Flow Summary (in thousands) | Activity | Three Months Ended June 30, 2025 | | :--- | :--- | | Net cash used in operating activities | $(230) | | Net cash provided by investing activities | $8,958 | | Net cash used in financing activities | $(15,208) | | **Net decrease in cash and cash equivalents** | **$(6,480)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures cover the OCC Formal Agreement, capital requirements, and details on loan and investment portfolios - On May 14, 2025, the Bank entered into a **Formal Agreement with the OCC**, requiring approval for key changes and mandating a **Tier 1 leverage ratio of 9%** and a **total risk-based capital ratio of 12%**[26](index=26&type=chunk) - The company **deferred the interest payment** due June 17, 2025, on its subordinated debt, with deferred interest totaling **$300 thousand** at quarter-end[24](index=24&type=chunk) - Total loans receivable decreased to **$605.3 million**, with an allowance for credit losses (ACL) of **$6.3 million**, or **1.04% of total loans**[56](index=56&type=chunk)[162](index=162&type=chunk) - Nonaccrual loans totaled **$24.5 million** as of June 30, 2025, a slight decrease from the prior quarter[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the improved quarterly net loss, decreased assets, and challenges from regulatory capital requirements [Overview](index=38&type=section&id=Overview) Carver Federal is a leading African-American operated bank with $713.6 million in assets serving New York City - Carver Federal is among the largest African-American operated banks in the United States, with assets of approximately **$713.6 million** as of June 30, 2025[108](index=108&type=chunk) - The bank received its seventh consecutive **"Outstanding" rating** from the OCC in its most recent Community Reinvestment Act (CRA) examination[108](index=108&type=chunk) [Critical Accounting Estimates](index=39&type=section&id=Critical%20Accounting%20Estimates) The Allowance for Credit Losses (ACL) is the most critical estimate, involving significant management judgment - The **Allowance for Credit Losses (ACL)** is considered the most critical accounting estimate, involving significant management judgment and susceptibility to economic changes[115](index=115&type=chunk)[116](index=116&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The bank's liquidity is adequate, but capital ratios failed to meet the OCC's minimum requirements - At June 30, 2025, the Bank's capital levels **did not meet its Individual Minimum Capital Ratio (IMCR) requirements**, with a Tier 1 leverage ratio of **8.82%** and a total risk-based capital ratio of **11.58%**[131](index=131&type=chunk)[132](index=132&type=chunk) - The company has an undrawn **$25.0 million** revolving loan facility to support green energy financing initiatives[126](index=126&type=chunk) - Total cash and cash equivalents decreased by **$6.5 million** during the quarter, primarily due to a **$16.3 million** net decrease in deposits[130](index=130&type=chunk) [Comparison of Financial Condition](index=45&type=section&id=Comparison%20of%20Financial%20Condition) Total assets decreased by $16.4 million (2.2%) due to declines in cash, loans, and deposits - Total assets decreased by **$16.4 million (2.2%)** to **$713.6 million** at June 30, 2025[141](index=141&type=chunk) - Gross portfolio loans decreased by **$8.4 million (1.4%)** as payoffs of $22.7 million exceeded new originations[143](index=143&type=chunk) - Deposits decreased by **$16.3 million (2.5%)**, primarily from reductions in certificates of deposit and business accounts[145](index=145&type=chunk) [Comparison of Operating Results](index=46&type=section&id=Comparison%20of%20Operating%20Results) The quarterly net loss improved to $1.2 million from $2.2 million year-over-year, driven by higher non-interest income Selected Operating Ratios | Ratio | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Return on average assets | (0.66)% | (1.18)% | | Return on average stockholders' equity | (15.80)% | (21.49)% | | Net interest margin | 3.22% | 3.01% | | Efficiency ratio | 117.41% | 131.44% | - Net interest income increased by **$0.1 million (1.8%)** to $5.6 million, primarily due to a decrease in interest expense[156](index=156&type=chunk) - The company recorded a **$26 thousand recovery of credit loss**, compared to a **$260 thousand provision** in the prior year quarter[162](index=162&type=chunk) - Non-interest income increased by **$0.6 million (85.7%)** to $1.3 million, driven by higher depository and loan fees[170](index=170&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company is a smaller reporting company - Disclosure about market risk is not required as the Company is a **smaller reporting company**[172](index=172&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of the quarter-end - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[174](index=174&type=chunk) - **No material changes** were made to the Company's internal control over financial reporting during the fiscal quarter[175](index=175&type=chunk) [PART II. OTHER INFORMATION](index=52&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings outside the ordinary course of business - The Company is not involved in any pending legal proceedings that management believes would be **material** to its financial condition or operations[177](index=177&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the last annual report - **No material changes** to risk factors have occurred since the Annual Report on Form 10-K for the year ended March 31, 2025[178](index=178&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) No unregistered sales, use of proceeds, or issuer purchases of equity securities occurred during the period - No such activities were reported for the period[179](index=179&type=chunk) [Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - No defaults were reported for the period[180](index=180&type=chunk) [Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[181](index=181&type=chunk) [Other Information](index=52&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No directors or executive officers adopted or terminated any **Rule 10b5-1 trading plans** during the quarter[182](index=182&type=chunk) [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the quarterly report, including certifications and XBRL data

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q 11325 Random Hills Road Suite 240 For the quarterly period ended June 30, 2025 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______ to _________ Commission File Number: 001-38647 FVCBankcorp, Inc. (Exact name of registrant as specified in its charter) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Ac ...