Part I [Business](index=4&type=section&id=Item%201.%20Business) Carpenter Technology manufactures specialty metals through SAO and PEP segments, serving diverse markets like aerospace and defense - The company is organized into two reportable business segments: Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP)[13](index=13&type=chunk) - SAO comprises the company's major premium alloy and stainless steel manufacturing operations, managed in an integrated manner for efficiency[15](index=15&type=chunk) - PEP consists of differentiated operations, including the Dynamet titanium business, Carpenter Additive, and distribution businesses, managed with an entrepreneurial structure to respond quickly to market dynamics[16](index=16&type=chunk) - The business depends on critical raw materials such as nickel, cobalt, and titanium, with the company using pricing surcharges, indexing, and forward contracts to mitigate price volatility[17](index=17&type=chunk)[18](index=18&type=chunk) - As of June 30, 2025, the company had approximately **4,500 employees**, with collective bargaining agreements covering employees in Washington, PA (expiring Aug 2025) and Latrobe, PA (expiring July 2027)[35](index=35&type=chunk) Research & Development and Environmental Expenditures (FY2023-2025) | Expense Category | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | **R&D Expenditures** | $26.1M | $25.6M | $24.4M | | **Environmental Control Operating Costs** | $18.0M | $17.4M | $15.7M | | **Environmental Control Capital Expenditures** | $1.1M | $0.7M | $0.3M | International Operations Data (FY2023-2025) | Metric | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | **Sales Outside U.S.** | $1,177.2M | $1,136.7M | $994.1M | | **Long-Lived Assets Outside U.S. (Year-End)** | $5.0M | $5.2M | N/A | [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from cyclical markets, raw material volatility, environmental regulations, operational disruptions, and cybersecurity threats - Demand in end-use markets is cyclical, particularly in commercial aerospace, defense, and energy, which can significantly affect financial results[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - The company relies on third parties for critical raw materials like nickel, cobalt, and titanium, making it vulnerable to price volatility and supply disruptions[46](index=46&type=chunk)[47](index=47&type=chunk) - Extensive environmental, health, and safety regulations create potential for significant liabilities from cleanup costs, fines, and third-party claims[51](index=51&type=chunk)[52](index=52&type=chunk) - Manufacturing processes are complex and depend on critical, high-cost equipment, with significant production facilities concentrated in Pennsylvania and Alabama, increasing exposure to geographic-specific disruptions[58](index=58&type=chunk)[59](index=59&type=chunk) - International operations expose the company to risks from tariffs, political instability, and currency fluctuations, alongside potential changes to U.S. trade policies[64](index=64&type=chunk)[65](index=65&type=chunk) - The company is a regular target of cybersecurity threats, and a breach could lead to operational disruptions, theft of confidential data, and financial losses[68](index=68&type=chunk)[69](index=69&type=chunk) [Unresolved Staff Comments](index=14&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[72](index=72&type=chunk) [Cybersecurity](index=14&type=section&id=Item%201C.%20Cybersecurity) The company's cybersecurity program, aligned with NIST frameworks and overseen by the Audit/Finance Committee, has not materially impacted its business - The company's cybersecurity program is aligned with NIST standards and focuses on imperatives such as rapid response, identity management, and supply chain risk management[74](index=74&type=chunk)[76](index=76&type=chunk) - The Audit/Finance Committee of the Board of Directors oversees cybersecurity risk, which is integrated into the company's Enterprise Risk Management (ERM) process[80](index=80&type=chunk) - A dedicated Chief Information Security Officer (CISO) with over 15 years of experience is responsible for the overall cybersecurity program[81](index=81&type=chunk) - As of the report date, the company is not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition[79](index=79&type=chunk) [Properties](index=16&type=section&id=Item%202.%20Properties) The company owns principal manufacturing mills in PA and AL, with PEP facilities in PA, FL, and AL, and leases corporate offices - The principal locations of the SAO segment's integrated mills are in Reading, PA, Latrobe, PA, and Athens, AL, and these facilities are owned[83](index=83&type=chunk)[84](index=84&type=chunk) - The PEP segment's main locations include facilities in Washington, PA, Clearwater, FL, and Athens, AL[83](index=83&type=chunk) - Corporate offices are leased and located in Philadelphia, Pennsylvania, and Raleigh, North Carolina[85](index=85&type=chunk) [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal proceedings, including environmental remediation, not expected to materially impact its long-term financial position - The company has environmental remediation liabilities and has been designated as a Potentially Responsible Party (PRP) for certain Superfund and other waste disposal sites[87](index=87&type=chunk) - Based on current information, management does not expect the ultimate resolution of known contingencies to have a material adverse effect on the company's long-term financial position, cash flows, or results of operations[88](index=88&type=chunk) [Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[90](index=90&type=chunk) [Executive Officers of the Registrant](index=16&type=section&id=Item%204A.%20Executive%20Officers%20of%20the%20Registrant) This section provides a list of the company's corporate executive officers, including their positions and tenure Executive Officers | Name | Age | Position | Assumed Present Position | | :--- | :--- | :--- | :--- | | Tony R. Thene | 64 | President and Chief Executive Officer | July 2015 | | Timothy Lain | 53 | Senior Vice President and Chief Financial Officer | August 2020 | | Brian J. Malloy | 58 | Senior Vice President and Chief Operating Officer | December 2023 | | James D. Dee | 68 | Senior Vice President, General Counsel and Secretary | August 2020 | | Marshall D. Akins | 42 | Vice President - Chief Commercial Officer | February 2022 | Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Carpenter Technology's common stock trades on NYSE, pays quarterly dividends, and has an active share repurchase program with **$298.1 million** remaining Quarterly Common Stock Price Range (NYSE) | Period Ended | Fiscal Year 2025 High | Fiscal Year 2025 Low | Fiscal Year 2024 High | Fiscal Year 2024 Low | | :--- | :--- | :--- | :--- | :--- | | September 30 | $166.51 | $103.37 | $71.19 | $51.94 | | December 31 | $198.24 | $144.76 | $74.06 | $60.38 | | March 31 | $213.66 | $165.14 | $71.65 | $58.87 | | June 30 | $279.51 | $138.61 | $112.75 | $70.19 | - The company paid a quarterly cash dividend of **$0.20 per share** of common stock during each quarter of fiscal years 2025 and 2024[99](index=99&type=chunk) - A share repurchase program of up to **$400.0 million** was authorized in July 2024, with **$298.1 million** remaining available for future purchases as of June 30, 2025[101](index=101&type=chunk) Share Repurchases for Quarter Ended June 30, 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1-31, 2025 | 50,000 | $233.11 | | June 1-30, 2025 | 50,000 | $248.32 | | **Total** | **100,000** | **$240.72** | [Reserved](index=22&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - Item 6 is reserved[108](index=108&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2025 was a record year with **$521.8 million** operating income and **$2.9 billion** net sales, driven by SAO performance and strong market demand [Business Trends](index=23&type=section&id=Business%20Trends) Financial performance shows strong growth, with Aerospace and Defense sales increasing to **62%** of total net sales in fiscal 2025 Selected Financial Results (FY2023-2025) | ($ in millions, except per share data) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net sales | $2,877.1 | $2,759.7 | $2,550.3 | | Operating income | $521.8 | $323.1 | $133.1 | | Net income | $376.0 | $186.5 | $56.4 | | Diluted earnings per share | $7.42 | $3.70 | $1.14 | | Adjusted free cash flow | $287.5 | $179.0 | $(67.6) | Net Sales by End-Use Market (% of Total) | End-Use Market | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Aerospace and Defense | 62% | 56% | 51% | | Medical | 12% | 14% | 12% | | Energy | 7% | 7% | 6% | | Transportation | 4% | 5% | 7% | | Industrial and Consumer | 12% | 15% | 19% | | Distribution | 3% | 3% | 5% | [Results of Operations — Fiscal Year 2025 Compared to Fiscal Year 2024](index=26&type=section&id=Results%20of%20Operations%20%E2%80%94%20Fiscal%20Year%202025%20Compared%20to%20Fiscal%20Year%202024) Fiscal 2025 net income more than doubled to **$376.0 million** on **4%** net sales growth, driven by strong market performance and improved margins FY2025 vs. FY2024 Performance Summary | Metric | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net Income | $376.0M | $186.5M | | Diluted EPS | $7.42 | $3.70 | | Net Sales | $2,877.1M | $2,759.7M | | Operating Income | $521.8M | $323.1M | - Sales to the Aerospace and Defense market increased by **15%** to **$1,768.6 million**, and sales to the Energy market increased by **8%** to **$200.3 million**[133](index=133&type=chunk) - Gross profit increased to **$768.6 million**, or **26.7%** of net sales, compared to **$584.3 million**, or **21.2%** of net sales, in the prior year[138](index=138&type=chunk) - The effective tax rate for fiscal year 2025 was **19.5%**, compared to **11.9%** for fiscal year 2024[151](index=151&type=chunk) [Business Segment Results (FY2025 vs. FY2024)](index=31&type=section&id=Business%20Segment%20Results) SAO segment operating income increased **44%** to **$588.6 million** on **5%** sales growth, while PEP segment performance remained flat Segment Operating Income (FY2025 vs. FY2024) | Segment | FY2025 Operating Income | FY2024 Operating Income | % Change | | :--- | :--- | :--- | :--- | | Specialty Alloys Operations (SAO) | $588.6M | $408.5M | +44.1% | | Performance Engineered Products (PEP) | $37.0M | $36.0M | +2.8% | - SAO's net sales increased **5%** to **$2,563.6 million**, while its operating margin expanded significantly to **23.0%** from **16.7%** in the prior year[159](index=159&type=chunk)[160](index=160&type=chunk) - PEP's net sales decreased **1%** to **$405.4 million**, with operating income remaining nearly flat compared to fiscal 2024[161](index=161&type=chunk)[162](index=162&type=chunk) [Results of Operations — Fiscal Year 2024 Compared to Fiscal Year 2023](index=33&type=section&id=Results%20of%20Operations%20%E2%80%94%20Fiscal%20Year%202024%20Compared%20to%20Fiscal%20Year%202023) Fiscal 2024 net income surged to **$186.5 million** on **8%** net sales growth, driven by strong market demand and operational efficiencies FY2024 vs. FY2023 Performance Summary | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Income | $186.5M | $56.4M | | Diluted EPS | $3.70 | $1.14 | | Net Sales | $2,759.7M | $2,550.3M | | Operating Income | $323.1M | $133.1M | - Sales growth was strong in key markets: Aerospace and Defense (**+19%**), Medical (**+25%**), and Energy (**+14%**)[167](index=167&type=chunk) - Gross profit margin improved to **21.2%** in FY2024 from **13.2%** in FY2023[173](index=173&type=chunk) - Special items in FY2024 included a **$14.1M** goodwill impairment charge, **$16.9M** in restructuring charges, and a **$51.9M** noncash pension settlement charge[164](index=164&type=chunk) [Liquidity and Financial Resources](index=40&type=section&id=Liquidity%20and%20Financial%20Resources) Fiscal 2025 saw improved liquidity with **$440.4 million** cash from operations and **$664.4 million** total liquidity, with capital expenditures projected to increase in fiscal 2026 Cash Flow and Liquidity Summary | ($ in millions) | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Cash from Operating Activities | $440.4 | $274.9 | | Adjusted Free Cash Flow | $287.5 | $179.0 | | Capital Expenditures | $154.3 | $96.6 | | Total Liquidity (at year-end) | $664.4 | N/A | - Capital expenditures are expected to be in the range of **$280.0 million** to **$300.0 million** in fiscal year 2026[199](index=199&type=chunk) - During fiscal year 2025, the company repurchased **575,000 shares** of common stock for **$101.9 million** and paid dividends of **$40.3 million**[200](index=200&type=chunk) - As of June 30, 2025, the company was in compliance with all financial covenants under its Credit Facility, with a consolidated interest coverage ratio of **14.37 to 1.00** (minimum **3.00**) and a net leverage ratio of **0.86 to 1.00** (maximum **4.00**)[208](index=208&type=chunk)[209](index=209&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=51&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages market risks from commodity prices, energy costs, and currency fluctuations using non-speculative derivative financial instruments - The company uses commodity forward contracts to reduce the risk of profit margin fluctuations on firm price sales arrangements due to volatile raw material prices[250](index=250&type=chunk) - Foreign currency forward contracts are used to hedge certain foreign exchange risks associated with international operations and customer transactions[252](index=252&type=chunk) - All hedging strategies are reviewed and approved by senior financial management, and the use of speculative or leveraged derivatives is prohibited[254](index=254&type=chunk) [Financial Statements and Supplementary Data](index=52&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides the company's audited consolidated financial statements, including statements of operations, balance sheets, and cash flows, with accompanying notes and auditor reports Consolidated Statement of Operations Highlights (FY2025) | ($ in millions) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net sales | $2,877.1 | $2,759.7 | $2,550.3 | | Gross profit | $768.6 | $584.3 | $337.3 | | Operating income | $521.8 | $323.1 | $133.1 | | Net income | $376.0 | $186.5 | $56.4 | Consolidated Balance Sheet Highlights (June 30, 2025) | ($ in millions) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,764.7 | $1,591.2 | | Total Assets | $3,486.8 | $3,291.7 | | Total Current Liabilities | $483.7 | $466.3 | | Total Liabilities | $1,599.8 | $1,662.9 | | Total Stockholders' Equity | $1,887.0 | $1,628.8 | Consolidated Statement of Cash Flows Highlights (FY2025) | ($ in millions) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net cash provided from operating activities | $440.4 | $274.9 | $14.7 | | Net cash used for investing activities | $(152.9) | $(95.9) | $(82.3) | | Net cash used for financing activities | $(167.1) | $(23.3) | $(40.1) | | Increase (Decrease) in Cash | $116.4 | $154.6 | $(109.7) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=100&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[476](index=476&type=chunk) [Controls and Procedures](index=101&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2025, with no material changes - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[477](index=477&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[479](index=479&type=chunk) [Other Information](index=101&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the fourth quarter of fiscal 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[480](index=480&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=101&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[482](index=482&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=102&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on executive officers, directors, and corporate governance is incorporated by reference from the fiscal year 2025 Proxy Statement - Required information for this item is incorporated by reference from the Company's fiscal year 2025 definitive Proxy Statement[483](index=483&type=chunk) [Executive Compensation](index=102&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information, including discussion and analysis, is incorporated by reference from the fiscal year 2025 Proxy Statement - Required information for this item is incorporated by reference from the Company's fiscal year 2025 definitive Proxy Statement[484](index=484&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference, with **3,283,169** securities available for future issuance under equity compensation plans Equity Compensation Plan Information as of June 30, 2025 | Plan Category | Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 273,991 | $44.76 | 3,283,169 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **273,991** | **$44.76** | **3,283,169** | [Certain Relationships, Related Transactions and Director Independence](index=103&type=section&id=Item%2013.%20Certain%20Relationships%2C%20Related%20Transactions%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the fiscal year 2025 Proxy Statement - Required information for this item is incorporated by reference from the Company's fiscal year 2025 definitive Proxy Statement[486](index=486&type=chunk) [Principal Accounting Fees and Services](index=103&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the fiscal year 2025 Proxy Statement - Required information for this item is incorporated by reference from the Company's fiscal year 2025 definitive Proxy Statement[486](index=486&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, including consolidated financial statements and Schedule II - The consolidated financial statements are included in Item 8 of the report[487](index=487&type=chunk) - Schedule II — Valuation and Qualifying Accounts is included and should be read with the consolidated financial statements[487](index=487&type=chunk) [Form 10-K Summary](index=108&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided under this item - None[494](index=494&type=chunk)

PART I. Financial Information (Unaudited) [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements detail the company's financial position, operational results, and cash flows with explanatory notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $372,133 thousand as of June 30, 2025, primarily due to lower cash and marketable securities balances | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $84,940 | $99,120 | | Marketable securities | $209,788 | $259,172 | | Total current assets | $324,440 | $395,884 | | Total assets | $372,133 | $441,073 | | Total liabilities | $32,680 | $39,436 | | Redeemable noncontrolling interest | $1,341,953 | $1,396,591 | | Total stockholders' deficit | $(1,002,500) | $(994,954) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net loss available to Class A common stockholders increased to $(16,552) thousand for Q2 2025 despite new revenue generation | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | $221 | $– | $451 | $– | | Research and development | $25,882 | $29,404 | $53,145 | $56,637 | | General and administrative | $14,048 | $13,652 | $28,403 | $26,495 | | Operating loss | $(39,709) | $(43,056) | $(81,097) | $(83,132) | | Net loss before income taxes | $(36,117) | $(38,522) | $(73,478) | $(73,757) | | Net loss available to Class A common stockholders | $(16,552) | $(12,506) | $(33,286) | $(21,998) | | Basic and diluted EPS | $(0.13) | $(0.16) | $(0.26) | $(0.32) | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Total comprehensive loss for Class A common stockholders increased to $(16,597) thousand in Q2 2025 due to net loss and investment losses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss including noncontrolling interest | $(36,965) | $(38,466) | $(74,917) | $(73,799) | | Unrealized income (loss) on marketable securities | $(100) | $132 | $(224) | $(515) | | Total comprehensive loss attributable to Class A common stockholders | $(16,597) | $(12,468) | $(33,386) | $(22,134) | [Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Stockholders' Deficit](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Redeemable%20Noncontrolling%20Interest%20and%20Stockholders'%20Deficit) This statement details changes in redeemable noncontrolling interest and an increasing accumulated deficit for the six months ended June 30, 2025 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Redeemable noncontrolling interest | $1,341,953 | $1,396,591 | | Additional paid-in capital | $231,576 | $205,736 | | Accumulated deficit | $(1,234,135) | $(1,200,849) | | Total stockholders' deficit | $(1,002,500) | $(994,954) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations decreased while cash from investing activities also decreased significantly for the six months ended June 30, 2025 | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash flows used in operating activities | $(61,008) | $(72,939) | | Net cash flows provided by investing activities | $46,854 | $86,969 | | Net cash flows (used in) provided by financing activities | $(26) | $139,829 | | Net change in cash and cash equivalents | $(14,180) | $153,859 | | Cash, end of period | $84,940 | $214,508 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide crucial context for the financial statements, detailing business operations, accounting policies, and specific financial items [Note 1: Description of Business and Basis of Presentation](index=12&type=section&id=Note%201%3A%20Description%20of%20Business%20and%20Basis%20of%20Presentation) The company is a clinical-stage biotech developing rilparencel for chronic kidney disease and recently domesticated to Delaware - ProKidney Corp is focused on the development of rilparencel to preserve kidney function in patients with chronic kidney disease[34](index=34&type=chunk) - The company operates under an umbrella partnership corporation ("Up-C") structure, with PKLP considered the accounting acquiror and predecessor entity[32](index=32&type=chunk)[33](index=33&type=chunk) - As of June 30, 2025, various holders own a **54.4% economic interest** in PKLP, representing a redeemable noncontrolling interest[36](index=36&type=chunk) - The company completed a domestication process effective July 1, 2025, changing its jurisdiction of incorporation from the Cayman Islands to the State of Delaware[35](index=35&type=chunk) [Note 2: Significant Accounting Policies](index=12&type=section&id=Note%202%3A%20Significant%20Accounting%20Policies) This note details key accounting policies, including the use of estimates, marketable securities classification, and R&D cost treatment - Unaudited interim financial statements are prepared in accordance with GAAP and SEC rules, with estimates made for R&D expenses, equity-based compensation, and income taxes[38](index=38&type=chunk)[39](index=39&type=chunk)[42](index=42&type=chunk) - Marketable debt securities are classified as **available-for-sale and short-term**[44](index=44&type=chunk) - Research and development costs are **expensed as incurred**, including salaries, benefits, third-party fees, and clinical trial expenses[48](index=48&type=chunk) - The company uses the liability method for income taxes and applies a **full valuation allowance** to offset net deferred tax assets[56](index=56&type=chunk) - Leases are recognized on the balance sheet, with short-term leases (12 months or less) excluded[61](index=61&type=chunk) - Equity-based compensation expense is based on the fair value of awards at the grant date and recognized over the service period[64](index=64&type=chunk) - The company operates in a single segment and is evaluating new FASB ASUs on income tax disclosures (ASU 2023-09) and expense disaggregation (ASU 2024-03)[66](index=66&type=chunk)[67](index=67&type=chunk)[70](index=70&type=chunk) [Note 3: Investments](index=20&type=section&id=Note%203%3A%20Investments) The fair value of cash equivalents and marketable securities, measured at Level 2, decreased to $236,788 thousand by June 30, 2025 - All cash equivalents and marketable securities are measured at fair value within **Level 2** of the fair value hierarchy[71](index=71&type=chunk) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------ | :----------------------------- | :------------------------------- | | Money market funds | $2,256 | $5,979 | | Time deposits | $2,082 | $6,737 | | Commercial paper | $14,902 | $34,894 | | Asset backed securities | $5,506 | $6,935 | | Government bonds | $63,740 | $80,571 | | Corporate debt securities | $148,302 | $180,030 | | **Total Fair Value** | **$236,788** | **$315,146** | - As of June 30, 2025, **$228,162 thousand** of investments are due in one year or less[73](index=73&type=chunk) - Total gross unrealized losses on marketable securities were **$(27) thousand** as of June 30, 2025[74](index=74&type=chunk) [Note 4: Income Taxes](index=21&type=section&id=Note%204%3A%20Income%20Taxes) The company is exempt from Cayman Islands taxes but its US subsidiary is subject to US taxes, with a full valuation allowance on deferred tax assets - ProKidney Corp (Cayman Islands) is exempt from income taxes, while its US subsidiary (ProKidney-US) is subject to US federal and state income taxes[75](index=75&type=chunk)[76](index=76&type=chunk) - A **full valuation allowance** is recorded to offset net deferred tax assets due to uncertainty of realization[56](index=56&type=chunk)[79](index=79&type=chunk) - The company is assessing the impact of the 'One Big Beautiful Bill Act,' signed July 4, 2025, on its consolidated financial statements[81](index=81&type=chunk) - The domestication to Delaware, effective July 1, 2025, is **not expected to adversely impact** the company's tax positions[82](index=82&type=chunk) [Note 5: Leases](index=22&type=section&id=Note%205%3A%20Leases) The company holds operating and finance leases, incurring rent expense while also generating leasing revenue from subleased properties | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | | Rent expense | $298 | $513 | | Leasing revenue | $221 | $– | | Lease Type | June 30, 2025 (in thousands) | | :------------------------ | :----------------------------- | | Operating lease liabilities, current | $896 | | Operating lease liabilities, noncurrent | $3,446 | | Finance lease liabilities, current | $7 | | Finance lease liabilities, noncurrent | $69 | - The weighted average remaining lease term for operating leases is **4.3 years**, and for finance leases, it is **4.5 years**[85](index=85&type=chunk) [Note 6: Related Party Transactions](index=23&type=section&id=Note%206%3A%20Related%20Party%20Transactions) The company maintains several agreements with related parties governing stock exchanges, tax savings, and consulting services - The Exchange Agreement allows holders of Post-Combination ProKidney Common Units and Class B common stock to exchange them for Class A common stock or cash[88](index=88&type=chunk) - The Lock-Up Agreement imposes transfer restrictions on certain shares, with 50% of shares held by Closing ProKidney Unitholders (excluding Earnout Shares) having expired in January 2023[89](index=89&type=chunk)[90](index=90&type=chunk) - The Tax Receivable Agreement obligates the company to pay Closing ProKidney Unitholders **85% of certain tax savings** resulting from increases in tax basis due to unit exchanges[91](index=91&type=chunk) - Earnout Rights, totaling **17.5 million units**, vest in three equal tranches if the Class A common stock's VWAP reaches $15.00, $20.00, and $25.00 per share within five years post-closing[92](index=92&type=chunk) - ProKidney-KY and ProKidney-US each pay Nefro Health, an entity controlled by a company director, **$25,000 per quarter** for consulting services related to research and development[93](index=93&type=chunk)[94](index=94&type=chunk) [Note 7: Redeemable Noncontrolling Interest](index=27&type=section&id=Note%207%3A%20Redeemable%20Noncontrolling%20Interest) The redeemable noncontrolling interest, representing a 54.4% economic stake in PKLP, is recognized at the greater of fair value or redemption value - The redeemable noncontrolling interest represents a **54.4% economic interest** in PKLP[95](index=95&type=chunk) - The noncontrolling interest is recognized at the **higher of its initial fair value** plus accumulated earnings/losses or its redemption value[96](index=96&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss attributable to noncontrolling interest | $(20,413) | $(25,960) | $(41,631) | $(51,801) | [Note 8: Stockholders' Equity](index=27&type=section&id=Note%208%3A%20Stockholders'%20Equity) The company established a new $200 million at-the-market offering in July 2025 after raising $136.6 million from offerings in June 2024 - On July 14, 2025, the company entered into a new Open Market Sales Agreement with Jefferies LLC, allowing it to offer and sell up to **$200 million** of Class A common stock[99](index=99&type=chunk) - **No shares were sold** under the 2024 Sales Agreement during the three and six months ended June 30, 2025[101](index=101&type=chunk) - Subsequent to June 30, 2025, the company sold 1,490,748 shares of Class A common stock for net proceeds of **$5,669,000** under the 2025 Sales Agreement[101](index=101&type=chunk) - In June 2024, the company sold 46,886,452 shares in a public offering and 11,030,574 shares in a concurrent registered direct offering, generating approximately **$136,618,000 in net proceeds**[102](index=102&type=chunk) [Note 9: Net Loss per Share](index=29&type=section&id=Note%209%3A%20Net%20Loss%20per%20Share) Basic and diluted net loss per share are identical as potential shares are anti-dilutive, with Q2 2025 EPS improving to $(0.13) | 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 per share attributable to Class A common stock | $(0.13) | $(0.16) | $(0.26) | $(0.32) | - Outstanding anti-dilutive securities as of June 30, 2025, include **159,288,931 Class B common stock**, 742,684 unvested Restricted Stock Rights, 17,500,000 Earnout Rights, and 30,504,248 stock options[104](index=104&type=chunk) [Note 10: Equity-Based Compensation](index=29&type=section&id=Note%2010%3A%20Equity-Based%20Compensation) Equity-based compensation expense decreased to $6,540 thousand in Q2 2025 under the company's 2022 Incentive Equity Plan - The 2022 Incentive Equity Plan provides for various equity awards to employees, non-employee directors, consultants, and other service providers[105](index=105&type=chunk) - As of June 30, 2025, there were **29,110,498 time-vested stock options** outstanding with a weighted average exercise price of $3.83, and $37,836 thousand in unrecognized compensation expense[108](index=108&type=chunk) - As of June 30, 2025, there were **1,393,750 performance-based stock options** outstanding with a weighted average exercise price of $1.57, with no remaining unrecognized compensation expense[111](index=111&type=chunk) - As of June 30, 2025, there were **742,684 unvested Legacy Profits Interests** outstanding, with $3,042 thousand in unrecognized compensation expense[116](index=116&type=chunk)[117](index=117&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total equity-based compensation expense | $6,540 | $7,808 | $12,957 | $15,489 | [Note 11: Segment Information](index=34&type=section&id=Note%2011%3A%20Segment%20Information) The company operates as a single business segment and currently generates revenue only from leasing activities, not product sales - The company manages its business as a **single operating segment**[119](index=119&type=chunk) - No revenue has been generated from product sales; revenue is recognized from leasing activities related to facilities[120](index=120&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net loss before noncontrolling interest | $(36,965) | $(38,466) | | Rental income | $221 | $– | | Depreciation and amortization | $1,491 | $964 | | Equity-based compensation | $6,540 | $7,808 | | Income tax (benefit) expense | $848 | $(56) | | Interest expense | $(1) | $(3) | | Interest income | $3,593 | $4,537 | [Note 12: Subsequent Events](index=35&type=section&id=Note%2012%3A%20Subsequent%20Events) Effective July 1, 2025, the company completed its domestication to Delaware, restructuring its corporate organization and related agreements - The company completed its domestication from the Cayman Islands to the State of Delaware, effective **July 1, 2025**[123](index=123&type=chunk) - As part of the restructuring, PKLP contributed substantially all its assets to ProKidney Holdings, LLC, and subsequently commenced winding-up[123](index=123&type=chunk) - Key agreements, including the Tax Receivable Agreement, Lock-Up Agreement, and Exchange Agreement, were **amended and restated** to reflect the updated corporate structure[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses clinical trial progress, financial performance, and future capital needs through mid-2027 [Overview](index=36&type=section&id=Overview) ProKidney is a clinical-stage biotech developing rilparencel, an autologous cell therapy for chronic kidney disease, which has RMAT designation - ProKidney is a clinical-stage biotechnology company focused on cell therapy to treat chronic kidney disease (CKD) by preserving kidney function[126](index=126&type=chunk) - Rilparencel (REACT®), the lead product candidate, is a patented autologous cell therapy in an ongoing **Phase 3 REGEN-006 (PROACT 1) trial**[127](index=127&type=chunk) - Rilparencel received **Regenerative Medicine Advanced Therapy ("RMAT") designation** from the United States Food & Drug Administration ("FDA")[127](index=127&type=chunk) - The company has **not generated any revenue from product sales** since its inception[128](index=128&type=chunk) [Recent Developments](index=36&type=section&id=Recent%20Developments) The FDA confirmed eGFR slope as a surrogate endpoint for accelerated approval, with topline data for the PROACT 1 trial expected in Q2 2027 - The FDA confirmed that the **eGFR slope** in patients from the ongoing Phase 3 PROACT 1 study can serve as the surrogate endpoint for a Biologics License Application (BLA) submission under the accelerated approval pathway[130](index=130&type=chunk) - Topline data readout of eGFR slope to support accelerated approval is anticipated in the **second quarter of 2027**[130](index=130&type=chunk) - In the completed Phase 2 REGEN-007 trial, Group 1 (n=24) showed a statistically significant (p<0.001) **78% improvement in annual eGFR slope**, from -5.8 to -1.3 mL/min/1.73m2, after receiving rilparencel[135](index=135&type=chunk) - **No rilparencel-related serious adverse events** were observed across all 49 patients who received at least one injection in the REGEN-007 study, with a safety profile consistent with previous results[137](index=137&type=chunk) - Effective July 1, 2025, the company completed its domestication process, changing its jurisdiction of incorporation from the Cayman Islands to the State of Delaware[138](index=138&type=chunk) [Financial Operations Overview](index=40&type=section&id=Financial%20Operations%20Overview) The company expects to incur increasing R&D and G&A expenses as it advances clinical trials, with revenue currently limited to leasing activities - The company has not generated any revenue from product sales since its inception and does not expect to in the near future[142](index=142&type=chunk) - Revenue is currently recognized from leasing activities associated with acquired buildings in Winston-Salem, North Carolina, where manufacturing operations are also conducted[143](index=143&type=chunk) - Research and development expenses are **expected to increase significantly** as rilparencel moves into later stages of clinical development[148](index=148&type=chunk) - General and administrative expenses are **expected to increase** as the business expands and additional personnel are hired[153](index=153&type=chunk) - Other income primarily consists of interest income earned on cash, cash equivalents, and marketable securities[154](index=154&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) For Q2 2025, R&D expenses decreased by $3.5 million while G&A expenses rose slightly, resulting in a net loss of $(16.5) million | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | | Revenue | $221 | $– | $221 | | Research and development | $25,882 | $29,404 | $(3,522) | | General and administrative | $14,048 | $13,652 | $396 | | Net loss available to Class A common stockholders | $(16,552) | $(12,506) | $(4,046) | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Revenue | $451 | $– | $451 | | Research and development | $53,145 | $56,637 | $(3,492) | | General and administrative | $28,403 | $26,495 | $1,908 | | Net loss available to Class A common stockholders | $(33,286) | $(21,998) | $(11,288) | - The decrease in R&D expenses was primarily due to a **$7.4 million decrease in clinical study costs** from completed/terminated trials and a $1.1 million decrease in professional fees, partially offset by a $4.3 million increase in costs for the ongoing Phase 3 PROACT 1 trial and a $1.5 million increase in cash-based compensation[157](index=157&type=chunk) - The increase in G&A expenses was mainly driven by an **$0.8 million increase in cash-based compensation** and a $0.4 million increase in other operational expenses, partially offset by a $0.7 million decrease in equity-based compensation[157](index=157&type=chunk) - Interest income decreased by approximately **$0.9 million** for the three months and **$1.8 million** for the six months, primarily due to lower investment balances and interest rates[158](index=158&type=chunk)[161](index=161&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) Existing cash is expected to fund operations into mid-2027, but substantial additional funding will be required thereafter - The company has funded operations primarily through capital contributions, proceeds from the Business Combination, and public equity offerings[164](index=164&type=chunk) - As of June 30, 2025, the company had sold **$7.9 million** worth of Class A common stock under the 2024 Sales Agreement, generating $7.7 million in net proceeds[165](index=165&type=chunk) - In July 2025, a new Open Market Sale Agreement was entered into, allowing for the sale of up to **$200 million** of Class A common stock[166](index=166&type=chunk) - In June 2024, the company raised approximately **$136.7 million in net proceeds** from public and direct offerings of Class A common stock[167](index=167&type=chunk) - Existing cash, cash equivalents, and marketable securities are expected to fund operating expenses and capital expenditure requirements **into mid-2027**[168](index=168&type=chunk) - **Substantial additional funding will be required**, likely through public or private equity sales, debt financings, or collaborations, which may result in stockholder dilution or restrictive covenants[169](index=169&type=chunk)[171](index=171&type=chunk) [Cash Flows](index=49&type=section&id=Cash%20Flows) For the first half of 2025, cash used in operations decreased by $11.8 million, while cash from investing also decreased significantly | Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash flows used in operating activities | $(61,008) | $(72,939) | | Net cash flows provided by investing activities | $46,854 | $86,969 | | Net cash flows (used in) provided by financing activities | $(26) | $139,829 | | Net change in cash and cash equivalents | $(14,180) | $153,859 | - The **$11.8 million decrease in cash used in operating activities** for the six months ended June 30, 2025, was primarily driven by the timing of payments to vendors and receipt of interest due[175](index=175&type=chunk) - Net cash provided by investing activities decreased from $87.0 million in 2024 to **$46.9 million in 2025**, mainly due to the timing of investment conversions[176](index=176&type=chunk) - Net cash used in financing activities was insignificant in 2025, compared to **$139.8 million provided in 2024** from the sale of Class A common stock[177](index=177&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Financial statement preparation requires management to make significant estimates, particularly for R&D expenses and equity-based compensation - Management makes estimates and judgments that affect reported amounts of assets, liabilities, costs, and expenses, particularly for **research and development expenses, equity-based compensation, and income taxes**[179](index=179&type=chunk) - The company's significant accounting policies are detailed in Note 2 to the unaudited condensed consolidated financial statements[180](index=180&type=chunk) [JOBS Act Accounting Election](index=51&type=section&id=JOBS%20Act%20Accounting%20Election) As an emerging growth company, ProKidney uses the extended transition period for new accounting standards under the JOBS Act - ProKidney is an emerging growth company and has elected to use the **extended transition period** for complying with new or revised accounting standards[182](index=182&type=chunk) - This election may result in the company's consolidated financial statements **not being comparable** to those of companies that comply with earlier effective dates for new accounting standards[182](index=182&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, ProKidney is not required to provide detailed disclosures about market risk - ProKidney Corp is a smaller reporting company and is therefore **not required to provide** quantitative and qualitative disclosures about market risk[183](index=183&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective as of June 30, 2025**[184](index=184&type=chunk) - **No material changes** in internal control over financial reporting occurred during the most recent fiscal quarter[187](index=187&type=chunk) - Management acknowledges that control systems provide only **reasonable assurance** and can be subject to inherent limitations, including errors, collusion, or management override[185](index=185&type=chunk)[186](index=186&type=chunk) PART II. Other Information [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) ProKidney Corp is not currently involved in any material legal proceedings - The company is **not currently a party** to any material legal proceedings[190](index=190&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K and Q1 2025 Form 10-Q - **No material changes** to the risk factors described in the 2024 Annual Report on Form 10-K and the 1Q Form 10-Q[191](index=191&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity securities were sold during the three months ended June 30, 2025 - **No sales of unregistered equity securities** occurred during the three months ended June 30, 2025[192](index=192&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - This item is **not applicable**[193](index=193&type=chunk) [Item 4. Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - This item is **not applicable**[194](index=194&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the second quarter of 2025 - **No Rule 10b5-1 trading arrangements** were adopted or terminated by directors or officers during the quarter ended June 30, 2025[195](index=195&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance and employment-related documents - Exhibits include corporate documents (e.g., Certificate of Incorporation, Bylaws), amended agreements (e.g., Tax Receivable Agreement, Lock-Up Agreement, Exchange Agreement) reflecting the domestication, employment agreements, and certifications (e.g., Principal Executive Officer and Financial Officer certifications)[196](index=196&type=chunk)[198](index=198&type=chunk) [Signatures](index=55&type=section&id=Signatures) The report was duly signed by the Chief Executive Officer and Chief Financial Officer on August 12, 2025 - The report was signed by Bruce Culleton, Chief Executive Officer, and James Coulston, Chief Financial Officer, on **August 12, 2025**[201](index=201&type=chunk)

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Financial%20Statements) This section presents the unaudited condensed financial statements for the three and six months ended June 30, 2025, and 2024, covering balance sheets, operations, equity, and cash flows [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) Total assets increased to **$23,066 thousand** by June 30, 2025, from **$20,933 thousand** at year-end 2024, driven by higher cash and deferred revenue, with stockholders' equity reaching **$18,005 thousand** Condensed Balance Sheets (in thousands) | | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $8,573 | $4,666 | | Accounts receivable, net | $2,676 | $4,675 | | Total current assets | $12,143 | $9,912 | | Total assets | $23,066 | $20,933 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Deferred revenue | $3,038 | $1,001 | | Total current liabilities | $5,061 | $3,186 | | Total liabilities | $5,061 | $3,186 | | Total stockholders' equity | $18,005 | $17,747 | | Total liabilities and stockholders' equity | $23,066 | $20,933 | [Unaudited Condensed Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Statements%20of%20Operations) Q2 2025 revenues grew 9.6% year-over-year to **$5,123 thousand**, but increased operating expenses led to a wider net loss of **$251 thousand**, while H1 net loss remained flat at **$569 thousand** Condensed Statements of Operations (in thousands) | | Three months ended June 30, | Six months ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **REVENUES** | $5,123 | $4,672 | $10,017 | $9,352 | | Gross profit | $4,600 | $4,228 | $8,992 | $8,473 | | Total operating expenses | $4,898 | $4,443 | $9,638 | $9,197 | | Loss from operations | $(298) | $(215) | $(646) | $(724) | | **Net loss** | $(251) | $(127) | $(569) | $(569) | | **Loss per common share - Basic/Diluted** | $(0.01) | $(0.01) | $(0.03) | $(0.03) | [Unaudited Condensed Statements of Stockholders' Equity](index=5&type=section&id=Unaudited%20Condensed%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased from **$17,747 thousand** at the end of 2024 to **$18,005 thousand** as of June 30, 2025, driven by stock-based compensation and option exercises, partially offset by net loss - For the six months ended June 30, 2025, stockholders' equity increased by **$258 thousand**, from **$17,747 thousand** to **$18,005 thousand**. This change was influenced by **$381 thousand** in stock-based compensation and **$446 thousand** from stock option exercises, offset by a net loss of **$569 thousand**[15](index=15&type=chunk) [Unaudited Condensed Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Statements%20of%20Cash%20Flows) Operating cash flow significantly improved to **$3,884 thousand** for H1 2025, from **$312 thousand** used in H1 2024, increasing cash and cash equivalents to **$8,573 thousand** Condensed Statements of Cash Flows (in thousands) | | Six months ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | | Net cash provided by (used in) operating activities | $3,884 | $(312) | | Net cash (used in) provided by investing activities | $(232) | $3,592 | | Net cash provided by financing activities | $255 | $— | | **Net increase in cash** | **$3,907** | **$3,280** | | **CASH, end of period** | **$8,573** | **$7,260** | [Notes to Unaudited Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Notes detail the company's identity verification business, confirm 12-month liquidity, outline key accounting policies, and highlight SaaS revenue dominance and customer concentration - The company develops, integrates, and markets identity verification solutions for fraud prevention in commercial retail and banking[21](index=21&type=chunk) - Management expects existing cash and future revenues to satisfy working capital requirements for at least the **next 12 months** from the filing date[22](index=22&type=chunk) Disaggregation of Revenue (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **SaaS** | $5,080 | $4,627 | $9,948 | $9,236 | | Equipment | $— | $40 | $6 | $95 | | Other | $43 | $5 | $63 | $21 | | **Total** | **$5,123** | **$4,672** | **$10,017** | **$9,352** | - For the six months ended June 30, 2025, **three customers** accounted for approximately **58% of total revenues** (**31%**, **18%**, and **9%**, respectively)[65](index=65&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q2 2025 revenue grew 10% to **$5,123 thousand**, but increased operating expenses led to a wider net loss of **$251 thousand**, while H1 net loss remained flat and liquidity improved significantly with cash from operations at **$3,884 thousand** - **Q2 2025 vs Q2 2024 Performance:** - Revenues increased by **10%** (**$451 thousand**) to **$5,123 thousand**, primarily from higher SaaS revenue - Gross profit rose by **9%** (**$372 thousand**), with the gross margin slightly decreasing from **91%** to **90%** - Operating expenses increased by **10%** (**$455 thousand**), mainly due to less capitalization of R&D costs - Net loss widened to **$(251) thousand** from **$(127) thousand**[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) - **Six Months 2025 vs Six Months 2024 Performance:** - Revenues increased by **7%** (**$665 thousand**) to **$10,017 thousand**, driven by higher SaaS transaction volumes - Gross profit grew by **6%** (**$519 thousand**), with the gross margin slightly decreasing from **91%** to **90%** - Net loss remained unchanged at **$(569) thousand**[115](index=115&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk) - As of June 30, 2025, the company had cash and cash equivalents of **$8,573 thousand** and working capital of **$7,082 thousand**. Cash from operations for the first six months of 2025 was **$3,884 thousand**, a significant improvement from a **$312 thousand** use of cash in the prior-year period[119](index=119&type=chunk)[120](index=120&type=chunk) Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA (in thousands) | | Three Months Ended June 30 | Six Months Ended June 30 | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **Net loss** | **$(251)** | **$(127)** | **$(569)** | **$(569)** | | Reconciling items | $420 | $145 | $627 | $395 | | **Adjusted EBITDA** | **$75** | **$(70)** | **$58** | **$(174)** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This disclosure is not applicable as the company qualifies as a smaller reporting company - Disclosure is **not applicable** to smaller reporting companies[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Based on an evaluation as of June 30, 2025, management, including the CEO and CFO, concluded that the company's internal control over financial reporting was **effective**[135](index=135&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[137](index=137&type=chunk) [Part II – OTHER INFORMATION](index=29&type=section&id=Part%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in material legal proceedings, and management expects no adverse financial impact from pending or threatened matters - The company is not currently involved in any **material legal proceedings**, and management does not expect pending matters to have a **material adverse effect**[139](index=139&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There have been **no material changes** to the risk factors described in the company's 2024 Annual Report on Form 10-K[141](index=141&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - **None reported** for the period[142](index=142&type=chunk) [Item 3. Defaults Upon Senior Securities](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - **None reported**[142](index=142&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[142](index=142&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during Q2 2025 - During the three months ended June 30, 2025, **no directors or officers** informed the company of the adoption, modification, or termination of a Rule 10b5-1 trading arrangement[143](index=143&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with this report include CEO and CFO certifications and XBRL interactive data files[144](index=144&type=chunk) [Signatures](index=32&type=section&id=Signatures) The report was signed and authorized on August 12, 2025, by the President and CEO, Bryan Lewis, and the CFO, Adam Sragovicz - The report was signed on **August 12, 2025**, by Bryan Lewis (President and CEO) and Adam Sragovicz (CFO)[148](index=148&type=chunk)[149](index=149&type=chunk)

Exhibit 99.1 Spero Therapeutics Announces Second Quarter 2025 Operating Results and Provides a Business Update CAMBRIDGE, Mass., Aug 12, 2025 — Spero Therapeutics, Inc. (Nasdaq: SPRO), a clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and multi-drug resistant (MDR) bacterial infections, today announced financial results for the second quarter ended June 30, 2025, and provided a business update. "During the second quarter, we announced that th ...

QuickLogic Fiscal Second Quarter 2025 Earnings Release [Recent Highlights & Business Update](index=1&type=section&id=Recent%20Highlights%20%26%20Business%20Update) QuickLogic accelerates Australis 2.0 deployment and secures new eFPGA licenses, enhancing its IP and chiplet solutions for advanced fabrication nodes - The company is accelerating the introduction of its **Australis 2.0 IP Generation tool** to **Q4** in response to increasing customer interest in high-density designs for advanced fabrication nodes like **12nm** and **Intel 18A**[3](index=3&type=chunk) - Key strategic and operational achievements during the quarter include: - Signing a new, revenue-generating **eFPGA Hard IP License** contract for a customer's **Intel 18A** test chip[10](index=10&type=chunk) - Launching the **Aurora PRO FPGA User Tool**, which integrates Synopsis Synplify® to deliver **50% better resource utilization** and **up to 35% faster frequency**[10](index=10&type=chunk) - Joining the **Intel Foundry Chiplet Alliance** to target the **Intel 18A** process[10](index=10&type=chunk) [Q2 2025 Financial Performance Summary](index=1&type=section&id=Q2%202025%20Financial%20Performance%20Summary) QuickLogic's Q2 2025 financial performance saw a 10.0% year-over-year revenue decrease, significant gross margin contraction, and wider GAAP and non-GAAP net losses Q2 2025 Key Financial Metrics (Continuing Operations) | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Q1 2025 ($M) | YoY Change (%) | QoQ Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $3.7M | $4.1M | $4.3M | -10.0% | -14.8% | | **GAAP Gross Margin** | 25.9% | 54.7% | 43.4% | -28.8 p.p. | -17.5 p.p. | | **Non-GAAP Gross Margin** | 31.0% | 58.2% | 47.1% | -27.2 p.p. | -16.1 p.p. | | **GAAP Net Loss** | ($2.7M) | ($1.6M) | ($2.2M) | +68.8% | +22.7% | | **GAAP EPS** | ($0.17) | ($0.11) | ($0.14) | - | - | | **Non-GAAP Net Loss** | ($1.5M) | ($0.7M) | ($1.1M) | +114.3% | +36.4% | | **Non-GAAP EPS** | ($0.09) | ($0.05) | ($0.07) | - | - | Q2 2025 Revenue Breakdown (Continuing Operations) | Revenue Type | Q2 2025 ($M) | Q2 2024 ($M) | Q1 2025 ($M) | YoY Change (%) | QoQ Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | **New Product Revenue** | $2.9M | $3.0M | $3.7M | -3.6% | -22.1% | | **Mature Product Revenue** | $0.8M | $1.1M | $0.6M | -27.3% | +33.3% | [Financial Statements](index=5&type=section&id=Financial%20Statements) Detailed financial statements show declining revenue and gross profit, leading to increased operating and net losses, while the balance sheet reflects reduced cash and liabilities [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 saw revenue decline to $3.7 million, gross profit fall to $0.95 million, and operating and net losses widen significantly year-over-year Statement of Operations Summary (in thousands) | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenue | $3,687 | $4,096 | | Gross Profit | $954 | $2,242 | | Total Operating Expense | $3,476 | $3,442 | | Operating Loss | ($2,522) | ($1,200) | | Net Loss from Continuing Operations | ($2,661) | ($1,229) | | Net Loss per Share (Basic & Diluted) | ($0.17) | ($0.11) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 29, 2025, total assets decreased to $50.2 million, cash was $19.2 million, total liabilities fell to $22.6 million, and stockholders' equity rose to $27.7 million Balance Sheet Summary (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash, cash equivalents and restricted cash | $19,191 | $21,859 | | Total current assets | $27,389 | $29,604 | | **TOTAL ASSETS** | **$50,214** | **$51,933** | | **Liabilities & Equity** | | | | Revolving line of credit | $15,000 | $18,000 | | Total current liabilities | $21,525 | $25,397 | | **Total liabilities** | **$22,557** | **$27,046** | | **Total stockholders' equity** | **$27,657** | **$24,887** | [Supplemental Information](index=7&type=section&id=Supplemental%20Information) This section details GAAP to non-GAAP reconciliation, adjusting for non-cash items, and provides revenue breakdowns by product type and dominant geographical market [Reconciliation of GAAP to Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Q2 2025 non-GAAP net loss was ($1.5 million) versus GAAP net loss of ($2.7 million), with adjustments primarily for stock-based compensation, impairment, and restructuring costs Q2 2025 GAAP to Non-GAAP Reconciliation (Continuing Operations, in thousands) | Description | Amount | | :--- | :--- | | US GAAP net loss from continuing operations | ($2,661) | | Adjustment for stock-based compensation | $843 | | Adjustment for impairment charges | $300 | | Adjustment for restructuring costs | $21 | | **Non-GAAP net loss from continuing operations** | **($1,497)** | [Supplemental Revenue Data](index=9&type=section&id=Supplemental%20Revenue%20Data) Q2 2025 new product revenue decreased 4% year-over-year, comprising 79% of total, while North America remained dominant at 80% despite an 18% decline Revenue Composition by Product (Q2 2025) | Product Type | Percentage of Revenue (%) | YoY Change (%) | | :--- | :--- | :--- | | New products | 79% | -4% | | Mature products | 21% | -28% | Revenue Composition by Geography (Q2 2025) | Geography | Percentage of Revenue (%) | YoY Change (%) | | :--- | :--- | :--- | | North America | 80% | -18% | | Asia Pacific | 17% | +57% | | Europe | 3% | -6% | [Company Information and Disclosures](index=3&type=section&id=Company%20Information%20and%20Disclosures) This section describes QuickLogic's fabless semiconductor business, explains the use of non-GAAP measures, and includes a forward-looking statements disclaimer - QuickLogic is a **fabless semiconductor company** that specializes in **embedded FPGA (eFPGA) Hard IP**, **discrete FPGAs**, and **endpoint AI solutions** for various markets including aerospace, defense, industrial, and consumer[12](index=12&type=chunk) - The company reports **non-GAAP financial measures**, excluding items like **stock-based compensation** and **restructuring costs**, to help investors evaluate its operating results in a manner similar to management's internal analysis[14](index=14&type=chunk)[15](index=15&type=chunk) - The press release contains **forward-looking statements** that are based on management's current expectations and are subject to **risks and uncertainties** detailed in the company's SEC filings[17](index=17&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, operations, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) Details the company's assets, liabilities, and stockholders' equity at the end of the reporting periods Key Balance Sheet Data | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $120,251 | $132,460 | | Cash and Cash Equivalents | $106,349 | $118,038 | | Total Liabilities | $15,764 | $17,598 | | Total Stockholders' Equity | $104,487 | $114,862 | | Accumulated Deficit | $(426,463) | $(390,500) | - Total assets **decreased by $12,209 thousand** from December 31, 2024, to June 30, 2025, primarily due to a reduction in cash and cash equivalents[13](index=13&type=chunk) - Total stockholders' equity **decreased by $10,375 thousand**, largely influenced by the accumulated deficit increasing by $35,963 thousand[13](index=13&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20Three-%20and%20Six-Month%20Periods%20Ended%20June%2030%2C%202025%20and%202024) Summarizes revenues, expenses, and net loss for the three- and six-month periods Key Operational Results | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $— | $— | $— | $— | | Research and Development | $12,088 | $7,230 | $22,401 | $13,971 | | General and Administrative | $8,187 | $4,496 | $15,918 | $8,370 | | Total Cost and Expenses | $20,275 | $11,726 | $38,319 | $22,341 | | Net Loss | $(19,168) | $(11,383) | $(35,963) | $(21,520) | | Basic and Diluted Net Loss Per Share | $(0.28) | $(0.20) | $(0.54) | $(0.38) | - **Net loss increased significantly** for both the three-month period (from $(11,383) thousand in 2024 to $(19,168) thousand in 2025) and the six-month period (from $(21,520) thousand in 2024 to $(35,963) thousand in 2025)[15](index=15&type=chunk) - Research and development expenses **rose by $8,430 thousand** for the six-month period, and general and administrative expenses increased by $7,548 thousand, contributing to the higher net loss[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six-Month%20Periods%20Ended%20June%2030%2C%202025%20and%202024) Outlines the sources and uses of cash from operating, investing, and financing activities Cash Flow Summary | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net Cash Used in Operating Activities | $(26,328) | $(18,175) | | Net Cash Used in Investing Activities | $(168) | $(34) | | Net Cash Provided by Financing Activities | $14,807 | $40 | | Net Decrease in Cash and Cash Equivalents | $(11,689) | $(18,169) | | Cash and Cash Equivalents at End of Period | $106,349 | $26,196 | - Net cash used in operating activities **increased by $8,153 thousand**, reflecting higher operational expenditures[18](index=18&type=chunk) - Net cash provided by financing activities saw a **substantial increase of $14,767 thousand**, primarily driven by proceeds from the exercise of warrants[18](index=18&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20Three-%20and%20Six-Month%20Periods%20Ended%20June%2030%2C%202025%20and%202024) Details the changes in the company's equity accounts over the reporting periods Stockholders' Equity Changes | Metric (in thousands) | Balance, December 31, 2024 | Balance, June 30, 2025 | | :-------------------- | :------------------------- | :--------------------- | | Common Stock Amount | $66 | $67 | | Additional Paid-in Capital | $505,296 | $530,883 | | Accumulated Deficit | $(390,500) | $(426,463) | | Total Stockholders' Equity | $114,862 | $104,487 | - Total stockholders' equity **decreased by $10,375 thousand** from December 31, 2024, to June 30, 2025, primarily due to the net loss incurred during the period[21](index=21&type=chunk) - Additional paid-in capital **increased by $25,587 thousand**, largely from stock-based compensation expense ($10,870 thousand) and proceeds from warrant exercises ($13,973 thousand)[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides supplementary information and disclosures related to the financial statements [1. Description of the Business](index=9&type=section&id=1.%20Description%20of%20the%20Business) Pulse Biosciences is a novel ablation company focused on Nano-pulse Stimulation technology - In 2022, the company **shifted its primary focus from dermatology to atrial fibrillation ("AF")** and surgical soft tissue ablation, leveraging its CellFX System[25](index=25&type=chunk) - The company **currently generates no revenue** and requires additional capital to finance its operations, with no assurance of obtaining necessary financing on acceptable terms[27](index=27&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting principles and estimates used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared consistent with the December 31, 2024, audited statements, omitting certain U.S. GAAP footnote disclosures[28](index=28&type=chunk) - Key estimates include **stock-based compensation valuation**, equity-classified subscription rights, inventory valuation, income taxes, and useful lives of long-lived assets[31](index=31&type=chunk) - The company **began capitalizing inventory in the first six months of 2025** in preparation for early pilot commercialization of percutaneous electrodes for its nsPFA Percutaneous Electrode System[39](index=39&type=chunk) [3. Fair Value of Financial Instruments](index=12&type=section&id=3.%20Fair%20Value%20of%20Financial%20Instruments) Discloses the fair value hierarchy for financial assets and liabilities Fair Value of Financial Instruments | Asset (in thousands) | Classification | Level 1 | Level 2 | Level 3 | Total | | :------------------- | :---------------------- | :----------- | :------ | :------ | :----------- | | **June 30, 2025** | | | | | | | Money market funds | Cash and cash equivalents | $103,606 | $— | $— | $103,606 | | **December 31, 2024**| | | | | | | Money market funds | Cash and cash equivalents | $113,776 | $— | $— | $113,776 | - All financial instruments measured at fair value on a recurring basis are **classified as Level 1**, consisting solely of money market funds[50](index=50&type=chunk) [4. Balance Sheet Components](index=13&type=section&id=4.%20Balance%20Sheet%20Components) Provides detailed breakdowns of specific balance sheet accounts Selected Balance Sheet Components | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Property and equipment, net | $1,109 | $1,160 | | Intangible assets, net | $907 | $1,220 | | Accrued expenses | $4,777 | $7,027 | - Intangible assets, net, **decreased by $313 thousand** due to accumulated amortization, with $332 thousand remaining for amortization in the latter half of 2025[53](index=53&type=chunk) - Accrued expenses **decreased by $2,250 thousand**, primarily due to the resolution of a legal settlement and severance expenses by December 31, 2024[54](index=54&type=chunk) [5. Goodwill](index=14&type=section&id=5.%20Goodwill) Details the carrying amount of goodwill and the results of impairment testing - Goodwill of **$2.8 million** was recorded in connection with 2014 acquisitions[55](index=55&type=chunk) - As of June 30, 2025, the company reviewed goodwill for impairment and determined that **no impairment existed**[56](index=56&type=chunk) [6. Stockholders' Equity and Stock-Based Compensation](index=15&type=section&id=6.%20Stockholders'%20Equity%20and%20Stock-Based%20Compensation) Describes equity transactions and the accounting for stock-based compensation - The 2024 Rights Offering closed on July 3, 2024, generating **$60 million in gross proceeds**, with Robert W. Duggan, the majority stockholder, purchasing approximately 88% of the units[58](index=58&type=chunk) - During the six months ended June 30, 2025, the company received **$14.0 million in gross proceeds** from exercises of the 2024 Rights Offering Warrants[59](index=59&type=chunk) - Total stock-based compensation expense **increased significantly to $10,870 thousand** for the six months ended June 30, 2025, from $3,811 thousand in the prior year, primarily driven by time-based and market-based options[81](index=81&type=chunk)[82](index=82&type=chunk) - **No expense was recognized for performance-based and market and performance-based options** during the three-month and six-month periods ended June 30, 2025, as their performance conditions were not deemed probable of achievement[76](index=76&type=chunk)[81](index=81&type=chunk) Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | 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 Stock-Based Compensation Expense | $5,189 | $2,052 | $10,870 | $3,811 | | Time-based options | $3,579 | $1,315 | $7,686 | $2,478 | | Market-based options | $1,535 | $683 | $3,004 | $1,190 | | Performance-based options | $— | $14 | $— | $22 | [7. Commitments and Contingencies](index=23&type=section&id=7.%20Commitments%20and%20Contingencies) Discloses contractual obligations, lease liabilities, and potential legal contingencies - The company is not currently a party to any legal proceedings that management believes could have a **material adverse effect** on its results of operations or financial condition[87](index=87&type=chunk) Operating Lease Liabilities | Metric (in thousands) | June 30, 2025 | | :-------------------- | :------------ | | Total Lease Liabilities | $8,245 | | Current Operating Lease Liabilities | $1,459 | | Non-Current Operating Lease Liabilities | $6,786 | Future Lease Payments | Year Ending December 31 (in thousands) | Lease Payments | | :------------------------------------- | :------------- | | 2025 (remaining 6 months) | $1,083 | | 2026 | $2,225 | | 2027 | $2,302 | | 2028 | $2,381 | | 2029 | $2,080 | | Thereafter | $73 | | Total Lease Payments | $10,144 | [8. Segment Reporting](index=25&type=section&id=8.%20Segment%20Reporting) Confirms the company operates as a single reportable segment - The company operates as a **single operating and reportable segment** focused on the research and development of its NPS technology[88](index=88&type=chunk) - The Chief Operating Decision-Maker (CODM) reviews consolidated net loss and detailed expense categories to monitor performance and allocate resources[88](index=88&type=chunk)[94](index=94&type=chunk) - All of the company's long-lived assets are located in the **United States** as of June 30, 2025[92](index=92&type=chunk) [9. Related Party Transactions](index=25&type=section&id=9.%20Related%20Party%20Transactions) Details transactions with the company's majority stockholder - Robert W. Duggan, the company's majority stockholder and Co-Chairman, purchased approximately **88% of the units offered through the 2024 Rights Offering**, contributing significantly to the $60 million gross proceeds[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial performance, liquidity, capital resources, and operational results for the reporting period [Overview](index=27&type=section&id=Overview) Provides an overview of the company's business, technology, and strategic focus [CellFX nsPFA Percutaneous Electrode System](index=27&type=section&id=CellFX%20nsPFA%20Percutaneous%20Electrode%20System) Details the progress and commercialization plans for the soft tissue ablation system - The company received **FDA 510(k) clearance** in March 2024 for its nsPFA Percutaneous Electrode System for soft tissue ablation, with a second size cleared in August 2024[103](index=103&type=chunk) - The CellFX System is in **early pilot commercialization**, with nine sites in the U.S. performing over 140 patient procedures under evaluation agreements[104](index=104&type=chunk) - A clinical trial is expected to commence in **Q3 2025** to support planned commercialization of the system for benign thyroid nodules in H2 2025[104](index=104&type=chunk) [Our Cardiac Surgical Program](index=29&type=section&id=Our%20Cardiac%20Surgical%20Program) Describes the development of nsPFA technology for treating Atrial Fibrillation - The program focuses on treating Atrial Fibrillation (AF) using nsPFA technology, which offers advantages over thermal ablation, such as **faster ablations and sparing of acellular tissue**[106](index=106&type=chunk)[109](index=109&type=chunk) - The CellFX nsPFA Cardiac Clamp received **FDA Breakthrough Device Designation** and is enrolled in the TPLC Advisory Program, with a pivotal clinical trial for AF expected to begin in the next few months[110](index=110&type=chunk)[111](index=111&type=chunk) - The CellFX nsPFA Cardiac Catheter, designed for circumferential ablation, has shown **promising acute and remapping data** from clinical studies in Prague and Rome, with a U.S. IDE pivotal clinical study anticipated soon[112](index=112&type=chunk)[114](index=114&type=chunk) [The CellFX Console](index=31&type=section&id=The%20CellFX%20Console) Explains the role of the core platform technology - The CellFX Console is a **tunable, software-enabled platform** designed to accommodate various disposable applicators across clinical applications[116](index=116&type=chunk) - The company **ceased commercial sales and marketing operations in dermatology** in September 2022 to focus on cardiology and soft tissue ablation, while continuing to support existing commercial users[116](index=116&type=chunk) [Financing Our Business](index=31&type=section&id=Financing%20Our%20Business) Discusses historical funding sources and future capital requirements - The company has historically funded its business through equity securities and debt, with **significant investments from Robert Duggan**, its majority stockholder and Co-Chairman[118](index=118&type=chunk) - The 2024 Rights Offering raised **$60.0 million**, with Mr. Duggan purchasing approximately 88% of the units[118](index=118&type=chunk) - The company has incurred **substantial operating losses** and will need to raise additional capital, with no assurance that financing will be available on acceptable terms, potentially leading to curtailed operations or product development[119](index=119&type=chunk)[120](index=120&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Highlights significant judgments and estimates affecting the financial statements - The preparation of financial statements requires significant estimates and judgments, particularly concerning the **valuation and recognition of stock-based compensation**[121](index=121&type=chunk) - Fair value of market-based and performance-based stock options is estimated using a **Monte Carlo simulation model**, requiring assumptions about expected volatility, risk-free interest rate, cost of equity, and expected term[122](index=122&type=chunk)[124](index=124&type=chunk) - As of June 30, 2025, **no stock-based compensation expense was recognized** for market and performance-based options because the achievement of performance conditions was not deemed probable[76](index=76&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Compares operating results for the three- and six-month periods ended June 30, 2025 and 2024 [Comparison of the three-month periods ended June 30, 2025 and 2024](index=33&type=section&id=Comparison%20of%20the%20three-month%20periods%20ended%20June%2030%2C%202025%20and%202024) Analyzes the changes in revenues, expenses, and net loss for the second quarter Q2 2025 vs Q2 2024 Performance | Metric (in thousands) | Q2 2025 | Q2 2024 | $ Change | | :-------------------- | :----------- | :----------- | :----------- | | Revenues | $— | $— | $— | | Net Loss | $(19,168) | $(11,383) | $(7,785) | | Research and Development | $12,088 | $7,230 | $4,858 | | General and Administrative | $8,187 | $4,496 | $3,691 | | Interest Income, net | $1,107 | $343 | $764 | - **Net loss increased by $7.8 million**, primarily due to a $4.9 million increase in R&D expenses and a $3.7 million increase in G&A expenses, partially offset by a $0.8 million rise in interest income[127](index=127&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Comparison of the six-month periods ended June 30, 2025 and 2024](index=34&type=section&id=Comparison%20of%20the%20six-month%20periods%20ended%20June%2030%2C%202025%20and%202024) Analyzes the changes in revenues, expenses, and net loss for the first half of the year H1 2025 vs H1 2024 Performance | Metric (in thousands) | H1 2025 | H1 2024 | $ Change | | :-------------------- | :----------- | :----------- | :----------- | | Revenues | $— | $— | $— | | Net Loss | $(35,963) | $(21,520) | $(14,443) | | Research and Development | $22,401 | $13,971 | $8,430 | | General and Administrative | $15,918 | $8,370 | $7,548 | | Interest Income, net | $2,356 | $821 | $1,535 | - **Net loss increased by $14.4 million**, driven by an $8.4 million increase in R&D expenses and a $7.5 million increase in G&A expenses, partially offset by a $1.5 million rise in interest income[132](index=132&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's ability to meet its short-term and long-term obligations - As of June 30, 2025, the company had **$106.3 million in cash and cash equivalents**, which is believed to be sufficient to fund projected operating requirements for at least the next twelve months[139](index=139&type=chunk) - The company will need to **raise additional capital in the future** through equity offerings, debt financings, or collaborations, with no assurance of availability on acceptable terms[139](index=139&type=chunk)[140](index=140&type=chunk) - Proceeds from the exercise of warrants contributed **$14.1 million to financing activities** during the six months ended June 30, 2025[145](index=145&type=chunk) Cash Flow Activity Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Cash Used in Operating Activities | $(26,328) | $(18,175) | | Net Cash Provided by Financing Activities | $14,807 | $40 | [Contractual Obligations](index=37&type=section&id=Contractual%20Obligations) Confirms no material changes to contractual obligations - There have been **no material changes** to the company's contractual obligations outside the ordinary course of business since the Annual Report on Form 10-K for the year ended December 31, 2024[147](index=147&type=chunk) [Off-Balance-Sheet Arrangements](index=37&type=section&id=Off-Balance-Sheet%20Arrangements) States the company has no off-balance-sheet arrangements - As of June 30, 2025, the company **did not have any transactions, obligations, or relationships** that constitute off-balance sheet arrangements[148](index=148&type=chunk) - The company enters into standard indemnification arrangements with third parties, directors, and officers, but the maximum potential amount of future payments is **not determinable**[149](index=149&type=chunk)[150](index=150&type=chunk) [Trends, Events and Uncertainties](index=37&type=section&id=Trends%2C%20Events%20and%20Uncertainties) Discusses key factors that could impact future results - Research and development of new technologies are **inherently unpredictable**, and there is no assurance that financing will be sufficient to generate future sales or sustain operations[151](index=151&type=chunk) - The company **cannot assure investors that its technology will be adopted** or that it will achieve sustainable revenues, profitability, or positive operating cash flows[153](index=153&type=chunk) - **Insufficient funds could lead to delays**, scaling back activities, headcount reductions, discontinuing clinical trials, stopping manufacturing, deferring capital expenditures, or licensing technologies on unfavorable terms, potentially curtailing or discontinuing operations entirely[153](index=153&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discloses the company's exposure to market risks, primarily interest rate fluctuations - There have been **no material changes in market risk** from the information provided in the Annual Report on Form 10-K for the year ended December 31, 2024[156](index=156&type=chunk) - The company's primary market risk exposure is a result of **fluctuations in interest rates**[156](index=156&type=chunk) - The company **does not hold financial instruments for trading purposes**[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures and notes no material changes in internal controls [Evaluation of Disclosure Controls and Procedures](index=39&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective - Management, under the supervision of the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of June 30, 2025[157](index=157&type=chunk) [Changes in Internal Control Over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting were identified - **No changes in internal control over financial reporting** occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[158](index=158&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=39&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Acknowledges that control systems provide reasonable, not absolute, assurance - Management acknowledges that disclosure controls and internal control over financial reporting can only provide **reasonable, not absolute, assurance** against errors and fraud[159](index=159&type=chunk) - Inherent limitations include **faulty judgments, simple errors, circumvention by individuals or collusion, and management override**[159](index=159&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not presently a party to any legal proceedings that, in management's opinion, could have a **material adverse effect** on its results of operations or financial condition[161](index=161&type=chunk) - Any litigation, regardless of outcome, could adversely impact the company due to **defense and settlement costs, diversion of management resources, negative publicity, and reputational harm**[161](index=161&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) Outlines the significant risks and uncertainties associated with the company's business and stock [Summary](index=40&type=section&id=Summary) Summarizes key risks related to financial position, product development, IP, and corporate governance - The company faces risks related to its **financial position and need for additional capital**, including dependence on NPS technology success, limited commercialization experience, and potential for further dilution or debt[165](index=165&type=chunk) - Product development and commercialization risks include the **complex, expensive, and high-failure-rate process**, uncertainty of regulatory approval for AF treatments, limited sales/marketing experience, and intense competition[165](index=165&type=chunk) - Intellectual property, cybersecurity, and data privacy risks involve **reliance on patents, potential infringement claims**, inability to protect IP globally, and vulnerability to cyber threats and data breaches[168](index=168&type=chunk)[170](index=170&type=chunk) - Corporate governance and common stock risks include dependence on key personnel, **concentrated ownership by the Co-Chairman (72% voting power)** limiting other investors' influence, and stock price volatility[169](index=169&type=chunk)[170](index=170&type=chunk) [Risks Relating to Our Business, Industry and Financial Condition](index=42&type=section&id=Risks%20Relating%20to%20Our%20Business%2C%20Industry%20and%20Financial%20Condition) Details risks from limited operating history, lack of revenue, and need for capital - The company has a **limited operating history and no significant revenue**, making future business evaluation difficult and anticipating continued operating losses for several years[172](index=172&type=chunk)[173](index=173&type=chunk) - **Insufficient funding could lead to curtailment of operations**, delays in R&D, discontinuation of clinical trials, or cessation of business, as additional financing may not be available on commercially reasonable terms[175](index=175&type=chunk)[176](index=176&type=chunk)[181](index=181&type=chunk) - Future profitability is **entirely dependent on the CellFX System and Nano-pulse Stimulation platform**, making the business vulnerable to product obsolescence or lack of market adoption[184](index=184&type=chunk)[185](index=185&type=chunk) - Operating results may **fluctuate significantly** due to factors like R&D timing, regulatory approvals, clinical trial enrollment, reimbursement policies, manufacturing costs, and litigation, making future results difficult to predict[188](index=188&type=chunk)[191](index=191&type=chunk) - The company faces **intense competition** from well-established medical technology manufacturers with greater financial, technical, and marketing resources[192](index=192&type=chunk) [Risks Related to Product Development and Product-Related Risks](index=54&type=section&id=Risks%20Related%20to%20Product%20Development%20and%20Product-Related%20Risks) Highlights uncertainties in clinical development, regulatory approval, and product safety - The CellFX System or future products may cause **serious adverse side effects**, potentially delaying or preventing regulatory approval, limiting commercial desirability, or resulting in negative consequences[221](index=221&type=chunk)[222](index=222&type=chunk) - **Clinical development is lengthy, expensive, and uncertain**; early study results may not predict future trial outcomes, and limited human experience in AF and thyroid nodules exists[223](index=223&type=chunk) - Long-term growth depends on developing marketable products for AF, tumors, and nodules, but **rapid technological changes** in the medical device industry could render products obsolete[225](index=225&type=chunk) - Failure to maintain or obtain necessary **regulatory clearances or approvals** for products or new indications could significantly harm commercial prospects[229](index=229&type=chunk)[233](index=233&type=chunk) - The exact **mechanism of action of NPS technology is not fully understood**, which could make obtaining regulatory approvals or partnerships more challenging[236](index=236&type=chunk) - **Difficulties in enrolling sufficient eligible patients** in clinical trials could delay or prevent product development[237](index=237&type=chunk) - The safety and effectiveness of products may depend on the **user's technique**, and laboratory results may not be replicable in commercial or field conditions[238](index=238&type=chunk)[240](index=240&type=chunk) - Issues with proprietary firmware and software, including **malfunctions or security vulnerabilities**, could negatively affect device function, harm patients, or lead to unauthorized data release[241](index=241&type=chunk) [Risks Related to Intellectual Property, Cybersecurity, Data Privacy, & Litigation](index=59&type=section&id=Risks%20Related%20to%20Intellectual%20Property%2C%20Cybersecurity%2C%20Data%20Privacy%2C%20%26%20Litigation) Covers risks of protecting IP, infringement claims, data breaches, and product liability - **Inability to protect intellectual property** (patents, trade secrets) could adversely affect the company's financial condition, results of operations, and competitive position, as patents may be challenged, invalidated, or circumvented[242](index=242&type=chunk)[245](index=245&type=chunk) - Litigation or third-party claims of **intellectual property infringement** could result in substantial expenses, diversion of resources, or prevent the development, regulatory approval, or commercialization of product candidates[243](index=243&type=chunk) - Failure to protect confidential proprietary information and know-how could **enable competitors to duplicate technological achievements**, eroding the company's competitive position[248](index=248&type=chunk) - The company's intellectual property rights **may not be protected throughout the world**, as filing patents globally is expensive and foreign laws may offer less extensive protection[250](index=250&type=chunk) - **Compromised information technology systems or data**, or those of third parties, could lead to regulatory investigations, litigation, fines, business disruptions (including clinical trials), reputational harm, and financial losses[251](index=251&type=chunk)[255](index=255&type=chunk) - **Product liability lawsuits** could cause substantial liabilities and limit commercialization, even if claims are successfully defended, due to defense costs, reputational harm, and potential regulatory actions[257](index=257&type=chunk)[258](index=258&type=chunk) [Risks Related to Government Regulation](index=64&type=section&id=Risks%20Related%20to%20Government%20Regulation) Discusses risks from extensive regulation, healthcare policy changes, and compliance failures - The company is subject to **extensive and rigorous domestic and foreign regulation** (e.g., FDA), which governs device development, testing, manufacturing, labeling, marketing, and safety, and can be costly, lengthy, and unpredictable[261](index=261&type=chunk)[263](index=263&type=chunk) - **Changes in healthcare policy**, such as those related to the Affordable Care Act or cost-reduction proposals, could increase costs, decrease revenues, and impact product sales and reimbursement[264](index=264&type=chunk) - **Disruptions at government agencies** (e.g., FDA) due to funding shortages, government shutdowns, or global health concerns could hinder timely review and approval of new product candidates[265](index=265&type=chunk)[267](index=267&type=chunk) - Dependence on strong working relationships with physicians for product development and marketing exposes the company to scrutiny by government agencies (OIG, DOJ) regarding **compliance with laws governing these relationships**[272](index=272&type=chunk) - The company is subject to various federal and state healthcare laws and regulations, including **anti-kickback, false claims, HIPAA, Sunshine Act, and consumer privacy laws**, with non-compliance potentially leading to substantial penalties[273](index=273&type=chunk) - Even if cleared or approved, products may only receive **narrow indications**, limiting commercial viability and making it difficult to achieve desired revenues[279](index=279&type=chunk) - Ongoing compliance with **quality system regulations** and other requirements is strictly enforced, and failure to comply could result in sanctions, product recalls, or withdrawal of approvals[280](index=280&type=chunk) - The company is exposed to the risk of **fraud or misconduct by employees and collaborators**, violating regulatory standards or healthcare fraud laws, which could lead to significant fines or sanctions[281](index=281&type=chunk) - Compliance with **environmental regulations and anti-corruption laws** (e.g., FCPA) is required, and violations could lead to significant liabilities, criminal/civil penalties, and reputational harm[285](index=285&type=chunk)[287](index=287&type=chunk)[289](index=289&type=chunk) [Risks Related to Owning Our Common Stock](index=70&type=section&id=Risks%20Related%20to%20Owning%20Our%20Common%20Stock) Addresses stock price volatility, concentrated ownership, and corporate governance issues - The price of the company's common stock has been, and is expected to remain, **highly volatile** due to factors such as clinical trial results, regulatory actions, financial fluctuations, competition, IP disputes, financing efforts, and general market conditions[290](index=290&type=chunk)[291](index=291&type=chunk) - Sales or purchases of common stock by the company or its stockholders, particularly **Robert W. Duggan (majority stockholder)**, may adversely affect the market price[293](index=293&type=chunk) - An **active, liquid, and orderly trading market** for common stock may not exist, making it difficult for investors to sell shares quickly or at a desired price[294](index=294&type=chunk) - Robert W. Duggan's **controlling ownership (approximately 72% of voting power)** limits the ability of other stockholders to influence corporate actions and creates potential for conflicts of interest[295](index=295&type=chunk)[296](index=296&type=chunk) - As a **"controlled company"** under Nasdaq rules, the company may elect not to comply with certain corporate governance requirements, potentially reducing protections for other stockholders[297](index=297&type=chunk)[299](index=299&type=chunk) - **Anti-takeover provisions** in charter documents and Delaware law could delay or prevent a change of control or management, which may be beneficial to stockholders[309](index=309&type=chunk)[310](index=310&type=chunk) [General Risk Factors](index=76&type=section&id=General%20Risk%20Factors) Covers broad risks from economic conditions, internal controls, and natural disasters - **Unfavorable global economic or political conditions**, including armed conflicts, health epidemics, and trade tariffs, could adversely affect the company's business, financial condition, or results of operations[312](index=312&type=chunk)[314](index=314&type=chunk) - Future **material weaknesses in internal control over financial reporting** could adversely affect investor confidence in financial data and the value of common stock[315](index=315&type=chunk) - **Incorrect interpretations, estimates, or judgments** used in preparing financial statements could lead to a loss of investor confidence and a decline in stock price[317](index=317&type=chunk) - Involvement in litigation (securities, product liability, patent infringement, etc.) can be **time-consuming, costly, and divert management's attention**, potentially having a material adverse effect[318](index=318&type=chunk) - The company's facilities in Hayward, California, are located near known earthquake faults, making them **vulnerable to damage from natural disasters**, which could seriously impair business operations[319](index=319&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Confirms no unregistered sales of equity securities occurred during the period - The company completed **no unregistered sales of its securities** during the three-month period ended June 30, 2025[321](index=321&type=chunk) [Item 3. Default Upon Senior Securities](index=78&type=section&id=Item%203.%20Default%20Upon%20Senior%20Securities) The company reported no default upon senior securities during the period - The company reported **no default upon senior securities**[322](index=322&type=chunk) [Item 4. Mine Safety Disclosures](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are **not applicable** to the company[323](index=323&type=chunk) [Item 5. Other Information](index=78&type=section&id=Item%205.%20Other%20Information) Reports no adoption or termination of Rule 10b5-1 trading arrangements by directors or officers - None of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three-month period ended June 30, 2025[324](index=324&type=chunk) [Item 6. Exhibits](index=78&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - The exhibits include certifications of the Chief Executive Officer and Chief Financial Officer pursuant to **Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002**[325](index=325&type=chunk) - **Inline XBRL Instance Document** and Taxonomy Extension documents are provided for financial data[325](index=325&type=chunk) - The certifications under Section 906 (Exhibit 32.1 and 32.2) are deemed **furnished and not filed** with the SEC[325](index=325&type=chunk) [Signatures](index=79&type=section&id=Signatures) The report is duly signed on behalf of the company by its President and CEO - The report was signed by **Paul A. LaViolette, President and Chief Executive Officer** (Principal Executive Officer)[330](index=330&type=chunk) - The signing date of the report is **August 12, 2025**[330](index=330&type=chunk)

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) Presents the unaudited financial statements and management's analysis of Travelzoo's financial condition and operations [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Travelzoo's unaudited financial statements show revenue growth but declining net income and diluted EPS, with negative net working capital [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of Travelzoo's financial position, highlighting changes in assets, liabilities, and equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------------------ | | Cash and cash equivalents | $10,441 | $17,064 | $(6,623) | -38.8% | | Total current assets | $24,160 | $31,773 | $(7,613) | -23.9% | | Total assets | $46,735 | $54,722 | $(7,987) | -14.6% | | Total current liabilities | $35,168 | $36,496 | $(1,328) | -3.6% | | Total liabilities | $48,816 | $50,369 | $(1,553) | -3.1% | | Total stockholders' equity (deficit) | $(2,081) | $4,353 | $(6,434) | -147.8% | - The company's total stockholders' equity shifted from a positive balance of **$4,353 thousand** at December 31, 2024, to a deficit of **$(2,081) thousand** at June 30, 2025, indicating a significant decline in shareholder value[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details Travelzoo's revenues, expenses, and profitability for the reporting periods, showing key performance trends Key Financial Highlights (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenues | $23,906 | $21,141 | $2,765 | 13.1% | | Cost of revenues | $5,163 | $2,520 | $2,643 | 104.9% | | Gross profit | $18,743 | $18,621 | $122 | 0.7% | | Operating income | $2,060 | $4,011 | $(1,951) | -48.6% | | Net income attributable to Travelzoo | $1,402 | $2,927 | $(1,525) | -52.1% | | Net income per share—diluted | $0.12 | $0.23 | $(0.11) | -47.8% | Key Financial Highlights (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Revenues | $47,046 | $43,126 | $3,920 | 9.1% | | Cost of revenues | $9,335 | $5,160 | $4,175 | 80.9% | | Gross profit | $37,711 | $37,966 | $(255) | -0.7% | | Operating income | $5,864 | $9,602 | $(3,738) | -38.9% | | Net income attributable to Travelzoo | $4,570 | $7,163 | $(2,593) | -36.2% | | Net income per share—diluted | $0.38 | $0.54 | $(0.16) | -29.6% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Presents Travelzoo's total comprehensive income, including net income and other comprehensive income components like currency adjustments Total Comprehensive Income (in thousands) | Period | 2025 | 2024 | YoY Change | | :-------------------- | :----- | :----- | :--------- | | Three Months Ended June 30 | $1,352 | $2,830 | -52.2% | | Six Months Ended June 30 | $4,493 | $6,801 | -33.9% | - Foreign currency translation adjustments contributed to other comprehensive loss, with a **$(129) thousand** impact for the three months ended June 30, 2025, and a **$(249) thousand** impact for the six months ended June 30, 2025[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes Travelzoo's cash inflows and outflows from operating, investing, and financing activities for the period Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :------------------------------------------------- | :----- | :----- | :------- | | Net cash provided by operating activities | $4,582 | $7,927 | $(3,345) | | Net cash used in investing activities | $(34) | $(83) | $49 | | Net cash used in financing activities | $(11,522) | $(10,679) | $(843) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $432 | $(311) | $743 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(6,542) | $(3,146) | $(3,396) | - The significant decrease in cash, cash equivalents, and restricted cash was primarily driven by **$11.4 million** used for common stock repurchases during the six months ended June 30, 2025[19](index=19&type=chunk)[193](index=193&type=chunk)[199](index=199&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(Deficit)) Outlines changes in Travelzoo's stockholders' equity, including common stock, retained earnings, and comprehensive loss Stockholders' Equity (Deficit) Changes (June 30, 2025 vs. December 31, 2024, in thousands) | Item | December 31, 2024 | June 30, 2025 | Change | | :-------------------------------- | :---------------- | :------------ | :----- | | Common Stock (Amount) | $118 | $111 | $(7) | | Retained Earnings | $14,284 | $7,934 | $(6,350) | | Accumulated Other Comprehensive Loss | $(5,327) | $(5,576) | $(249) | | Total Travelzoo Stockholders' Equity (Deficit) | $(462) | $(7,068) | $(6,606) | | Total Stockholders' Equity (Deficit) | $4,353 | $(2,081) | $(6,434) | - The company repurchased **763,000 shares** of common stock, leading to a **$7 thousand** reduction in common stock amount and a significant decrease in retained earnings and total stockholders' equity[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1: Summary of Significant Accounting Policies](index=13&type=section&id=Note%201%3A%20Summary%20of%20Significant%20Accounting%20Policies) Details Travelzoo's business, revenue recognition, key accounting policies, and liquidity, noting negative net working capital - Travelzoo operates as a global Internet media company, offering travel, entertainment, and lifestyle experiences through Travelzoo® and exceptional airfares via Jack's Flight Club®[28](index=28&type=chunk)[130](index=130&type=chunk) - The company's revenue is derived from advertising and commerce, membership fees (including a new **$40 annual fee** for new Travelzoo members since January 1, 2024), and other sources like licensing and Metaverse Travel Experiences (MTE)[30](index=30&type=chunk)[41](index=41&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - As of June 30, 2025, deferred revenue was **$8.5 million**, with **$2.4 million** for Jack's Flight Club and **$6 million** for Travelzoo North America and Travelzoo Europe[54](index=54&type=chunk) - The company had a refund reserve of **$215,000** for **$3.1 million** of unredeemed vouchers as of June 30, 2025[56](index=56&type=chunk)[138](index=138&type=chunk) - Travelzoo reported negative net working capital of **$11.0 million** as of June 30, 2025, primarily due to classifying **$12.4 million** in merchant payables as current liabilities, but management projects sufficient cash on hand for working capital needs for at least the next twelve months[65](index=65&type=chunk)[194](index=194&type=chunk) Cash, Cash Equivalents and Restricted Cash (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $10,441 | $17,064 | | Restricted cash | $757 | $676 | | Total cash, cash equivalents and restricted cash (Statements of Cash Flows) | $11,198 | $17,740 | [Note 2: Net Income Per Share](index=21&type=section&id=Note%202%3A%20Net%20Income%20Per%20Share) Net income per share, both basic and diluted, decreased significantly for the three and six months ended June 30, 2025, compared to the same periods in 2024, reflecting the overall decline in net income attributable to Travelzoo Net Income Per Share (Three Months Ended June 30) | Metric | 2025 | 2024 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Net income per share—basic | $0.13 | $0.23 | -43.5% | | Net income per share—diluted | $0.12 | $0.23 | -47.8% | Net Income Per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | YoY Change | | :-------------------------- | :--- | :--- | :--------- | | Net income per share—basic | $0.39 | $0.54 | -27.8% | | Net income per share—diluted | $0.38 | $0.54 | -29.6% | - Options to purchase **25,000 shares** of common stock for the three months ended June 30, 2025, were anti-dilutive and thus excluded from diluted EPS calculation, a significant decrease from **850,000** anti-dilutive options in the prior year period[70](index=70&type=chunk) [Note 3: Acquisitions](index=21&type=section&id=Note%203%3A%20Acquisitions) This note discusses the MTE acquisition, identifiable intangible assets, and goodwill, noting no impairment during the period - The acquisition of Metaverse Travel Experiences, LLC (MTE) in December 2022 involved a private placement of **3.4 million shares** to Azzurro Capital Inc., the company's largest shareholder[71](index=71&type=chunk)[126](index=126&type=chunk) Intangible Assets from Acquisitions (in thousands) | Asset Category | Fair Value | Estimated Life (Years) | | :-------------------------------- | :--------- | :--------------------- | | Customer relationships (Jack's Flight Club) | $3,500 | 5.0 | | Trade name (Jack's Flight Club) | $2,460 | indefinite | | Secret Escapes Spain member database | $445 | 3.0 | - Goodwill remained at **$10,944 thousand**, with no impairment charge identified during the annual impairment test as of October 31, 2024, or for the six months ended June 30, 2025[12](index=12&type=chunk)[60](index=60&type=chunk)[76](index=76&type=chunk) Amortization Expense of Acquired Intangible Assets (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $16 | $87 | [Note 4: Commitments and Contingencies](index=24&type=section&id=Note%204%3A%20Commitments%20and%20Contingencies) The company faces various claims and legal proceedings in the ordinary course of business, for which accruals were not material. It also has operating leases for office space in multiple countries and purchase commitments totaling $1.0 million as of June 30, 2025 - Accruals for legal contingencies were not material as of June 30, 2025, and December 31, 2024, with management believing the likelihood of a material adverse impact from pending claims is remote[80](index=80&type=chunk) Rent Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $734 | $686 | - The company had purchase commitments aggregating approximately **$1.0 million** as of June 30, 2025, representing minimum obligations under agreements with third-party service providers[83](index=83&type=chunk) [Note 5: Income Taxes](index=24&type=section&id=Note%205%3A%20Income%20Taxes) Travelzoo's effective income tax rate increased for both the three and six months ended June 30, 2025, primarily due to higher interest expense related to uncertain tax positions. The company maintains a significant reserve for unrecognized tax benefits and is assessing the impact of new U.S. federal tax legislation Effective Income Tax Rate | Period | 2025 | 2024 | Change | | :-------------------------- | :--- | :--- | :----- | | Three Months Ended June 30 | 33% | 30% | +3% | | Six Months Ended June 30 | 29% | 28% | +1% | - The increase in the effective tax rate for the three months ended June 30, 2025, was primarily due to a provision for higher interest expense related to uncertain tax positions[85](index=85&type=chunk)[179](index=179&type=chunk) - As of June 30, 2025, the company had approximately **$23.9 million** in total unrecognized tax benefits, of which up to **$16.6 million** would favorably affect reported income if recognized[87](index=87&type=chunk)[205](index=205&type=chunk) - Accrued interest related to uncertain tax positions increased to **$1.3 million** as of June 30, 2025, from **$1.1 million** as of December 31, 2024[88](index=88&type=chunk) - The company is assessing the impact of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, with expected reflection in the financial statements for the three months ended September 30, 2025[90](index=90&type=chunk)[92](index=92&type=chunk) [Note 6: Accumulated Other Comprehensive Loss](index=26&type=section&id=Note%206%3A%20Accumulated%20Other%20Comprehensive%20Loss) The accumulated other comprehensive loss increased for both the three and six months ended June 30, 2025, primarily due to negative foreign currency translation adjustments Accumulated Other Comprehensive Loss (in thousands) | Period | Beginning Balance (2025) | Ending Balance (2025) | Foreign Currency Translation Adjustment (2025) | | :-------------------------- | :----------------------- | :-------------------- | :--------------------------------------------- | | Three Months Ended June 30 | $(5,447) | $(5,576) | $(129) | | Six Months Ended June 30 | $(5,327) | $(5,576) | $(249) | - The accumulated other comprehensive loss primarily consists of foreign currency translation adjustments[93](index=93&type=chunk) [Note 7: Stock-Based Compensation and Stock Options](index=26&type=section&id=Note%207%3A%20Stock-Based%20Compensation%20and%20Stock%20Options) Stock-based compensation expense decreased for the three months ended June 30, 2025, compared to 2024, as some prior grants were fully expensed. However, significant unrecognized compensation expense remains for outstanding options, expected to be recognized over the next 0.3 to 1.5 years - Total stock-based compensation related to the March 2024 CEO option grant was **$305,000** for the three months ended June 30, 2025, compared to **$609,000** in the prior year, with **$609,000** of unrecognized expense remaining as of June 30, 2025, to be recognized over **0.5 years**[99](index=99&type=chunk) - For the June 2022 employee option grant, **$60,000** of unrecognized stock-based compensation expense remains, expected to be recognized over **0.3 years**[97](index=97&type=chunk) - For the March 2023 General Counsel option grant, **$209,000** of unrecognized stock-based compensation expense remains, expected to be recognized over **1.5 years**[98](index=98&type=chunk) [Note 8: Stock Repurchase Program](index=27&type=section&id=Note%208%3A%20Stock%20Repurchase%20Program) Travelzoo continued its stock repurchase program, buying back 172,088 shares for $2.5 million during the three months ended June 30, 2025. As of that date, 148,602 shares remained authorized for repurchase under the current program Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Shares Purchased | Average Price Paid per Share | | :-------------------------- | :--------------- | :--------------------------- | | April 1, 2025 – April 30, 2025 | 54,620 | $15.09 | | May 1, 2025 – May 31, 2025 | 117,468 | $14.26 | | June 1, 2025 – June 30, 2025 | — | — | | **Total** | **172,088** | | - The company repurchased **172,088 shares** of common stock for an aggregate purchase price of **$2.5 million** during the three months ended June 30, 2025[105](index=105&type=chunk)[218](index=218&type=chunk) - As of June 30, 2025, **148,602 shares** remained to be repurchased under the program authorized on October 23, 2024[105](index=105&type=chunk)[218](index=218&type=chunk) [Note 9: Segment Reporting and Significant Customer Information](index=29&type=section&id=Note%209%3A%20Segment%20Reporting%20and%20Significant%20Customer%20Information) Travelzoo operates through four reportable segments: Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives. North America remains the largest revenue contributor, while Europe shifted to an operating loss. Membership fees showed significant growth across segments, indicating a successful transition to a paid membership model - The company's four reportable operating segments are Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives[106](index=106&type=chunk)[133](index=133&type=chunk) Revenues by Segment (Three Months Ended June 30, 2025, in thousands) | Segment | Revenues from unaffiliated customers | Percentage of Total Revenues | | :-------------------- | :--------------------------------- | :--------------------------- | | Travelzoo North America | $15,737 | 67% | | Travelzoo Europe | $6,740 | 27% | | Jack's Flight Club | $1,410 | 6% | | New Initiatives | $19 | <1% | | **Consolidated** | **$23,906** | **100%** | Operating Profit (Loss) by Segment (Three Months Ended June 30, 2025, in thousands) | Segment | Operating Profit (Loss) | | :-------------------- | :---------------------- | | Travelzoo North America | $2,818 | | Travelzoo Europe | $(883) | | Jack's Flight Club | $156 | | New Initiatives | $(31) | | **Consolidated** | **$2,060** | Revenues by Category (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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Advertising and Commerce | $20,874 | $19,957 | $41,554 | $40,807 | | Membership Fees | $3,013 | $1,161 | $5,456 | $2,265 | | Other | $19 | $23 | $36 | $54 | | **Total revenues** | **$23,906** | **$21,141** | **$47,046** | **$43,126** | Revenues by Country (in thousands) | Country | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $15,129 | $13,577 | $29,455 | $27,178 | | United Kingdom | $4,875 | $4,076 | $9,726 | $8,761 | | Rest of the world | $3,902 | $3,488 | $7,865 | $7,187 | | **Total revenues** | **$23,906** | **$21,141** | **$47,046** | **$43,126** | [Note 10: Leases](index=31&type=section&id=Note%2010%3A%20Leases) The company maintains operating leases for office space and equipment across several countries. Total lease costs increased for both the three and six months ended June 30, 2025, with a weighted average remaining lease term of 3.97 years Lease Expense (in thousands) | Lease Cost Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $577 | $529 | $1,130 | $1,061 | | Short-term lease cost | $138 | $134 | $278 | $271 | | Variable lease cost | $116 | $96 | $230 | $216 | | **Total lease cost** | **$831** | **$759** | **$1,638** | **$1,548** | Operating Lease Balances (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $5,204 | $5,655 | | Total operating lease liabilities | $7,420 | $8,118 | | Weighted average remaining lease term (years) | 3.97 | 4.43 | | Weighted average discount rate | 4.7% | 4.8% | [Note 11: Non-Controlling Interest](index=32&type=section&id=Note%2011%3A%20Non-Controlling%20Interest) The non-controlling interest, primarily related to the 40% equity in Jack's Flight Club not owned by Travelzoo, increased to $4,987 thousand as of June 30, 2025, reflecting the attributable net income - Travelzoo owns **60%** of Jack's Flight Club, with the remaining **40%** representing the non-controlling interest[124](index=124&type=chunk) Non-Controlling Interest (in thousands) | Period | Balance | | :-------------------------- | :------ | | December 31, 2024 | $4,815 | | Net income attributable to non-controlling interest (3M ended June 30, 2025) | $79 | | June 30, 2025 | $4,987 | [Note 12: Related Party Transactions](index=33&type=section&id=Note%2012%3A%20Related%20Party%20Transactions) Related party transactions include Azzurro Capital Inc. as the largest shareholder, a stock repurchase agreement with the Global CEO, and a consulting agreement with founder Ralph Bartel for strategic advisory services, particularly for Travelzoo META - Azzurro Capital Inc., controlled by Travelzoo founder Ralph Bartel, is the company's largest shareholder, holding approximately **36.7%** of outstanding shares as of June 30, 2025[31](index=31&type=chunk)[126](index=126&type=chunk)[128](index=128&type=chunk) - In June 2024, the company repurchased **200,000 shares** of common stock from its Global Chief Executive Officer, Holger Bartel, for **$1.5 million**[103](index=103&type=chunk)[127](index=127&type=chunk) - Ralph Bartel provides strategic advisory services for Travelzoo META, talent search, IT, brand strategy, and public relations under a consulting agreement, with fees totaling **$73,000** for the three months ended June 30, 2025[128](index=128&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes Travelzoo's financial condition, revenue drivers, cost impacts, business trends, and liquidity, noting negative net working capital [Overview](index=34&type=section&id=Overview) Provides a high-level summary of Travelzoo's business, its global operations, and new initiatives like Travelzoo META - Travelzoo is a global Internet media company operating Travelzoo® and Jack's Flight Club®, reaching **30 million travelers** worldwide[130](index=130&type=chunk) - The company is actively developing Travelzoo META, a subscription service for Metaverse travel experiences[132](index=132&type=chunk) - Revenues are generated from advertising and commerce, membership fees, and other sources[132](index=132&type=chunk) [Reportable Segments](index=34&type=section&id=Reportable%20Segments) Outlines Travelzoo's four operating segments and the key metrics used by management to evaluate their performance - Travelzoo has four reportable operating segments: Travelzoo North America, Travelzoo Europe, Jack's Flight Club, and New Initiatives[133](index=133&type=chunk) - Management evaluates segment performance primarily using operating income (loss) and focuses on indicators like member growth, operating margin, and revenue per member/employee[107](index=107&type=chunk)[134](index=134&type=chunk) [How We Generate Revenues](index=34&type=section&id=How%20We%20Generate%20Revenues) Explains Travelzoo's diverse revenue streams, including advertising, commerce, and various membership fees - Advertising and Commerce revenue includes fees for publishing offers, commissions from Getaways vouchers and hotel bookings, and fees from local businesses and entertainment offers[135](index=135&type=chunk)[137](index=137&type=chunk) - Membership Fees are generated from subscriptions for Travelzoo Club Members (with a new **$40 annual fee** for new members since January 1, 2024) and Jack's Flight Club Premium members[141](index=141&type=chunk) - Other revenue sources include licensing fees and sales from the retail business acquired with MTE[142](index=142&type=chunk) [Trends in Our Business](index=36&type=section&id=Trends%20in%20Our%20Business) Discusses key business trends, including declining local revenues, evolving member acquisition strategies, and cost fluctuations - Revenues from local businesses are expected to continue declining due to market conditions and decreased consumer demand, returning to pre-pandemic patterns[143](index=143&type=chunk) - The company is adjusting member acquisition strategies and increasing expenditures to grow its paid membership and engagement, expecting a greater proportion of revenue to be driven by membership fees[144](index=144&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk) - Cost of revenues and sales and marketing expenses are expected to fluctuate significantly due to factors like third-party partner terms, refund trends, member acquisition costs, and increased spending for new paying members[148](index=148&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - Increased investment in product development is anticipated to build and refine the Travelzoo membership value proposition, potentially leading to higher expenses[152](index=152&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Presents a detailed analysis of Travelzoo's consolidated financial performance, highlighting revenue and expense changes Consolidated Results as Percentage of Total Revenues | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of revenues | 21.6% | 11.9% | 19.8% | 12.0% | | Gross profit | 78.4% | 88.1% | 80.2% | 88.0% | | Sales and marketing | 48.1% | 44.4% | 46.1% | 41.7% | | Operating income | 8.6% | 19.0% | 12.5% | 22.3% | | Net income attributable to Travelzoo | 5.9% | 13.8% | 9.7% | 16.6% | - Advertising and Commerce revenue increased by **$917,000** (3M YoY) and **$747,000** (6M YoY), primarily driven by Getaways vouchers, partially offset by a decrease in hotel platform and other commission revenue[160](index=160&type=chunk)[161](index=161&type=chunk) - Membership Fees revenue significantly increased by **$1.9 million** (3M YoY) and **$3.2 million** (6M YoY) due to higher subscription fees from Travelzoo and Jack's Flight Club members[162](index=162&type=chunk)[164](index=164&type=chunk) - Cost of revenues increased by **$2.7 million** (3M YoY) and **$4.1 million** (6M YoY), mainly due to increased costs recognized upon the sale of pre-purchased vouchers[167](index=167&type=chunk) - Sales and marketing expenses rose by **$2.1 million** (3M YoY) and **$3.7 million** (6M YoY), primarily due to increased member acquisition costs[169](index=169&type=chunk) - General and administrative expenses decreased by **$119,000** (3M YoY) and **$404,000** (6M YoY), mainly due to lower stock compensation and professional services expenses, respectively[174](index=174&type=chunk)[175](index=175&type=chunk) - Other income, net, increased by **$475,000** (6M YoY) due to the release of Jack's Flight Club VAT liabilities and German federal government funding for COVID-19 pandemic relief[178](index=178&type=chunk) [Segment Results](index=45&type=section&id=Segment%20Results) Provides a detailed breakdown of financial performance for each of Travelzoo's reportable operating segments Travelzoo North America Performance (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $16,132 | $14,134 | $31,260 | $28,362 | | Operating profit | $2,818 | $3,717 | $6,412 | $8,155 | | Operating profit as a % of revenue | 17.5% | 26.3% | 20.5% | 28.8% | - Travelzoo North America revenues increased by **$2.0 million** (3M YoY) and **$2.9 million** (6M YoY), driven by paid membership fees and Getaway vouchers, but operating profit declined due to increased cost of revenue and member acquisition costs[182](index=182&type=chunk)[183](index=183&type=chunk) Travelzoo Europe Performance (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $6,385 | $5,951 | $13,097 | $12,613 | | Operating profit (loss) | $(883) | $512 | $(655) | $1,894 | | Operating profit (loss) as a % of revenue | (13.8)% | 8.6% | (5.0)% | 15.0% | - Travelzoo Europe revenues increased by **$434,000** (3M YoY) and **$484,000** (6M YoY) due to paid membership fees, but the segment shifted to an operating loss due to increased member acquisition costs, pre-purchased vouchers, and salary expenses[184](index=184&type=chunk)[185](index=185&type=chunk) Jack's Flight Club Performance (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $1,370 | $1,033 | $2,653 | $2,096 | | Operating profit (loss) | $156 | $(34) | $168 | $(133) | | Operating profit (loss) as a % of revenue | 11.4% | (3.3)% | 6.3% | (6.3)% | - Jack's Flight Club revenues increased by **$337,000** (3M YoY) and **$557,000** (6M YoY) due to higher subscription fees, leading to a shift from an operating loss to a profit[188](index=188&type=chunk)[189](index=189&type=chunk) New Initiatives Performance (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $19 | $23 | $36 | $55 | | Operating loss | $(31) | $(184) | $(61) | $(314) | - New Initiatives revenues decreased by **$4,000** (3M YoY) and **$19,000** (6M YoY) due to a decline in the retail and fashion business, but the operating loss significantly narrowed[190](index=190&type=chunk)[191](index=191&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses Travelzoo's cash position, cash flow activities, and working capital, affirming sufficient liquidity for the near term - As of June 30, 2025, Travelzoo had **$10.4 million** in cash and cash equivalents, with **$7.9 million** held outside the U.S[192](index=192&type=chunk) - Cash, cash equivalents, and restricted cash decreased by **$6.5 million** from December 31, 2024, to June 30, 2025, primarily due to **$11.4 million** used for common stock repurchases, partially offset by **$4.6 million** from operating activities[193](index=193&type=chunk) - The company reported negative net working capital of **$11.0 million** as of June 30, 2025, due to **$12.4 million** in current merchant payables, but expects sufficient cash for working capital needs for at least the next twelve months[194](index=194&type=chunk) Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :------------------------------------------------- | :----- | :----- | :------- | | Net cash provided by operating activities | $4,582 | $7,927 | $(3,345) | | Net cash used in investing activities | $(34) | $(83) | $49 | | Net cash used in financing activities | $(11,522) | $(10,679) | $(843) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $432 | $(311) | $743 | | Net decrease in cash, cash equivalents and restricted cash | $(6,542) | $(3,146) | $(3,396) | [Critical Accounting Policies and Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Highlights the significant judgments and estimates involved in preparing Travelzoo's financial statements - The preparation of financial statements requires significant judgment and estimates, particularly concerning income taxes, revenue recognition, refund liability, and stock-based compensation[34](index=34&type=chunk)[206](index=206&type=chunk)[208](index=208&type=chunk) [Recent Accounting Pronouncements](index=51&type=section&id=Recent%20Accounting%20Pronouncements) Discusses the potential impact of recently issued accounting standards on Travelzoo's financial reporting - The company is evaluating the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for fiscal years beginning after December 15, 2024, and ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective for annual reporting periods beginning after December 15, 2026[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Travelzoo is not required to provide quantitative and qualitative disclosures about market risk - Travelzoo is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that Travelzoo's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting. No material changes to internal control over financial reporting occurred during the quarter - Management assessed the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they are effective[211](index=211&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[212](index=212&type=chunk) [PART II—OTHER INFORMATION](index=53&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) Contains additional information not included in the financial statements, such as legal proceedings and risk factors [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 4 of the condensed consolidated financial statements, indicating that accruals for legal contingencies were not material - Information on legal proceedings is incorporated by reference from Note 4, which states that accruals for legal contingencies were not material as of June 30, 2025, and December 31, 2024[80](index=80&type=chunk)[215](index=215&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) The company refers readers to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, for a comprehensive discussion of risk factors that could materially affect its business - Readers should consider risk factors discussed in the Annual Report on Form 10-K for FY2024 and the Quarterly Report on Form 10-Q for Q1 2025, which are incorporated by reference[216](index=216&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Travelzoo repurchased 172,088 shares of common stock for $2.5 million during the three months ended June 30, 2025, as part of its publicly announced program. As of the end of the period, 148,602 shares remained authorized for repurchase Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Shares Purchased | Average Price Paid per Share | | :-------------------------- | :--------------- | :--------------------------- | | April 1, 2025 – April 30, 2025 | 54,620 | $15.09 | | May 1, 2025 – May 31, 2025 | 117,468 | $14.26 | | June 1, 2025 – June 30, 2025 | — | — | | **Total** | **172,088** | | - The company repurchased **172,088 shares** of common stock for an aggregate purchase price of **$2.5 million** during the three months ended June 30, 2025[217](index=217&type=chunk)[218](index=218&type=chunk) - As of June 30, 2025, **148,602 shares** remained authorized for repurchase under the program announced on October 23, 2024[218](index=218&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Travelzoo reported no defaults upon senior securities during the period - There were no defaults upon senior securities[219](index=219&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Travelzoo reported no mine safety disclosures - There were no mine safety disclosures[219](index=219&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) Travelzoo reported no other information required to be disclosed under this item - No other information was reported[220](index=220&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, indemnification agreements, and certifications required by the Sarbanes-Oxley Act - The exhibits include the Certificate of Incorporation, Amended and Restated By-laws, Director and Officer Indemnification Agreement, and certifications from the CEO and Principal Financial Officer[221](index=221&type=chunk)

[Risk Factor Summary](index=4&type=section&id=RISK%20FACTOR%20SUMMARY) [Risk Factor Summary](index=4&type=section&id=RISK%20FACTOR%20SUMMARY) This section provides a high-level overview of the material factors that make an investment in Nkarta's common stock speculative or risky, highlighting key challenges including a limited operating history, significant financial losses, and dependence on its CAR NK-cell technology platform - The company has a limited operating history, has incurred significant losses since inception, and has no products approved for sale[13](index=13&type=chunk) - Business success is highly dependent on the clinical success of its CAR NK-cell technology platform, particularly the NKX019 product candidate[13](index=13&type=chunk) - The manufacturing process is novel and complex, with reliance on third parties and sole suppliers for certain materials, posing risks of production difficulties and delays[13](index=13&type=chunk) - The company faces risks related to intellectual property, including the potential loss of key licenses and insufficient patent protection, which could allow competitors to develop similar products[14](index=14&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed financial statements for the period ended June 30, 2025, show a decrease in total assets and an increase in accumulated deficit, with ongoing net losses driven by research and development expenses [Condensed Balance Sheets](index=7&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2025, total assets decreased to $448.3 million from $501.2 million, while the accumulated deficit grew to $599.2 million, reflecting ongoing net losses Condensed Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $53,414 | $27,873 | | Total current assets | $296,571 | $273,338 | | Total assets | $448,312 | $501,203 | | Total liabilities | $90,644 | $93,227 | | Accumulated deficit | $(599,184) | $(544,224) | | Total stockholders' equity | $357,668 | $407,976 | [Condensed Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For Q2 2025, the net loss was $23.0 million, and for H1 2025, it was $55.0 million, with changes driven by fluctuations in operating expenses, particularly R&D costs Statement of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $20,778 | $23,130 | $44,950 | $48,367 | | General and administrative | $6,408 | $7,585 | $18,800 | $15,110 | | Loss from operations | $(27,186) | $(30,715) | $(63,750) | $(63,477) | | Net loss | $(22,977) | $(24,993) | $(54,960) | $(54,511) | | Net loss per share | $(0.31) | $(0.34) | $(0.74) | $(0.88) | [Condensed Statements of Cash Flows](index=11&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For H1 2025, net cash used in operating activities was $48.4 million, offset by $73.8 million from investing activities, resulting in a $25.5 million net increase in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,365) | $(50,400) | | Net cash provided by (used in) investing activities | $73,829 | $(86,140) | | Net cash provided by financing activities | $77 | $225,898 | | Net increase in cash and cash equivalents | $25,541 | $89,358 | [Notes to Unaudited Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) The notes detail the company's business, liquidity, accounting policies, and specific financial items, including a workforce reduction and deprioritized programs - The company is a biopharmaceutical firm developing engineered natural killer (NK) cell therapies for autoimmune diseases and believes its current cash of **$334.0 million** is sufficient to meet obligations for at least twelve months from the report's filing date[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - In March 2025, the company initiated a reduction in force, cutting **53 positions (34% of its workforce)** to decrease costs, resulting in severance and benefit costs of approximately **$5.4 million**[79](index=79&type=chunk)[80](index=80&type=chunk) - The collaboration with CRISPR Therapeutics to co-develop NKX070 and NK+T product candidates has been deprioritized[61](index=61&type=chunk) - In March 2024, the company raised **$240.1 million** in gross proceeds through an underwritten public offering of common stock and pre-funded warrants[71](index=71&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's focus on developing NKX019 for autoimmune diseases, recent clinical trial updates, and the financial impact of a March 2025 workforce reduction, noting strong liquidity [Overview](index=25&type=section&id=Overview) Nkarta is a clinical-stage biopharmaceutical company focused on developing allogeneic, off-the-shelf engineered NK cell therapies, with its lead program NKX019 targeting autoimmune diseases, alongside recent trial modifications and a workforce reduction - The company's lead program is **NKX019**, a CAR NK product candidate for treating autoimmune diseases like lupus nephritis (LN) and primary membranous nephropathy (pMN)[83](index=83&type=chunk)[86](index=86&type=chunk) - In May 2025, the company modified the lymphodepleting conditioning (LD) for its Ntrust-1 and Ntrust-2 trials to use a combination of fludarabine (Flu) and cyclophosphamide (Cy)[86](index=86&type=chunk) - A reduction in workforce was approved in March 2025 to decrease costs and streamline the organization to support its reprioritized product pipeline[85](index=85&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) R&D expenses decreased for Q2 and H1 2025 due to lower personnel costs, while G&A expenses increased for H1 2025 primarily due to **$5.1 million** in severance costs from the workforce reduction Comparison of Operating Expenses (in thousands) | Expense Category | Q2 2025 | Q2 2024 | Change | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development | $20,778 | $23,130 | $(2,352) | $44,950 | $48,367 | $(3,417) | | General and administrative | $6,408 | $7,585 | $(1,177) | $18,800 | $15,110 | $3,690 | - The decrease in R&D expenses for Q2 2025 was primarily due to a **$3.1 million** reduction in personnel costs resulting from lower headcount after the March 2025 reduction in force[102](index=102&type=chunk)[104](index=104&type=chunk) - The increase in G&A expenses for H1 2025 was primarily due to **$5.1 million** in severance expenses from the reduction in force, partially offset by a **$2.0 million** decrease in other personnel and facilities expenses[102](index=102&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had **$334.0 million** in cash and investments, with management believing this capital is sufficient for at least the next 12 months, though substantial additional funding will be required long-term - The company had cash, cash equivalents, restricted cash and investments of **$334.0 million** as of June 30, 2025[105](index=105&type=chunk) - In March 2024, the company raised **$225.1 million** in net proceeds from an underwritten public offering of common stock and pre-funded warrants[105](index=105&type=chunk)[107](index=107&type=chunk) - Management believes that current cash and investments are sufficient to meet cash needs for at least 12 months following the date of this report[110](index=110&type=chunk)[117](index=117&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," Nkarta is not required to provide the information for this item - The company is not required to provide this information as it qualifies as a "smaller reporting company"[129](index=129&type=chunk) [Controls and Procedures](index=38&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, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[130](index=130&type=chunk) - No material changes to the internal control over financial reporting were identified during the quarter ended June 30, 2025[131](index=131&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no pending claims or actions likely to have a material adverse effect on its business, financial condition, or growth prospects - As of the report date, there are no material legal proceedings pending against the company[134](index=134&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section details numerous risks associated with an investment in Nkarta, categorized into financial position, business and industry, manufacturing, intellectual property, commercialization, and common stock [Risks Related to our Financial Position](index=39&type=section&id=Risks%20Related%20to%20our%20Financial%20Position) The company faces significant financial risks due to its limited operating history, lack of approved products, and a history of substantial net losses, with an accumulated deficit of **$599.2 million** as of June 30, 2025 - The company has incurred significant operating losses since its 2015 inception, with an accumulated deficit of **$599.2 million** as of June 30, 2025, and expects losses to continue for the foreseeable future[138](index=138&type=chunk) - Nkarta will require substantial additional capital to advance its product candidates, particularly NKX019, into pivotal trials, and failure to raise capital may cause dilution or force curtailment of operations[145](index=145&type=chunk) [Risks Related to Our Business and Industry](index=43&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company's success is highly dependent on its novel CAR NK-cell technology platform and lead candidate NKX019, facing significant development, regulatory, and competitive challenges due to the newness of the approach - The business is highly dependent on the success of its CAR NK-cell platform and its lead candidate, **NKX019**, for autoimmune diseases, having deprioritized its hematologic malignancy programs[149](index=149&type=chunk)[156](index=156&type=chunk) - Utilizing CAR NK cells for autoimmune diseases is a novel approach with limited clinical data, and regulatory agencies may lack precedents for evaluation, potentially causing delays and additional costs[150](index=150&type=chunk)[172](index=172&type=chunk) - The company has experienced and may continue to face significant challenges in enrolling patients for its Ntrust-1 and Ntrust-2 clinical trials due to competition and the novelty of the therapy in autoimmune indications[174](index=174&type=chunk)[177](index=177&type=chunk) [Risks Related to Manufacturing](index=76&type=section&id=Risks%20Related%20to%20Manufacturing) Nkarta's novel and complex manufacturing process is susceptible to product loss and contamination, with reliance on third parties and sole suppliers for critical materials, posing risks of delays and disruptions - The manufacturing process for genetically engineered human cells is complex, highly regulated, and subject to risks of product loss, failure, and contamination, which could delay clinical trials[252](index=252&type=chunk)[254](index=254&type=chunk) - The company is reliant on Miltenyi as a sole supplier for the CliniMACS® Plus system and related reagents, creating a significant supply chain risk[266](index=266&type=chunk) - Delays in commissioning and receiving regulatory approvals for its new commercial-scale manufacturing facility could limit the ability to develop product candidates and generate revenue[269](index=269&type=chunk) [Risks Related to Our Intellectual Property](index=82&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's intellectual property position is critical but uncertain, relying on a potentially terminable exclusive license and facing risks that its patents may not be robust or could be challenged, allowing competitors to enter the market - The company's rights to key NK-cell engineering technology depend on a license agreement with the National University of Singapore and St. Jude Children's Research Hospital; termination of this agreement would severely impact its product candidates, including **NKX019**[276](index=276&type=chunk) - The patent position of biotechnology companies is uncertain, and the company's pending applications may not result in issued patents that provide meaningful protection against competitors[278](index=278&type=chunk)[279](index=279&type=chunk) - The company may face costly litigation if accused of infringing on third-party intellectual property rights, which could delay or prevent the commercialization of its product candidates[282](index=282&type=chunk) [Risks Related to Commercialization](index=94&type=section&id=Risks%20Related%20to%20Commercialization) Commercial success is not guaranteed even if products are approved, as the company lacks sales capabilities, market acceptance is uncertain, and securing adequate reimbursement from third-party payors will be critical and challenging - The company has limited sales, marketing, or distribution expertise and will need to build these capabilities or partner with third parties to commercialize any approved products[325](index=325&type=chunk) - Commercial success depends on market acceptance by physicians, patients, and payors, which is uncertain and relies on factors like perceived efficacy, safety, cost-effectiveness, and advantages over alternative treatments[332](index=332&type=chunk) - Failure to obtain and maintain adequate coverage and reimbursement from government and private payors for potentially high-cost cell therapies could significantly limit the ability to market products and generate revenue[335](index=335&type=chunk) [Risks Related to Our Common Stock](index=107&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The market price of Nkarta's common stock is likely to be highly volatile, with significant ownership concentration among insiders, and the company's status as an "emerging growth company" may affect investor attractiveness - The trading price of the company's common stock is likely to be highly volatile due to factors such as clinical trial results, regulatory decisions, and broader market conditions[363](index=363&type=chunk) - As of August 8, 2025, directors, executive officers, and principal stockholders beneficially own **58%** of the common stock, enabling them to control or significantly influence all matters requiring stockholder approval[367](index=367&type=chunk) - The company qualifies as an "emerging growth company" and a "smaller reporting company," allowing it to rely on exemptions from certain disclosure and governance requirements, which may result in less information available to investors[371](index=371&type=chunk)[373](index=373&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=120&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period covered by this report - There were no unregistered sales of equity securities during the quarter[408](index=408&type=chunk) [Other Information](index=120&type=section&id=Item%205.%20Other%20Information) During the quarter ended June 30, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[412](index=412&type=chunk)

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited financial statements, reporting a net loss of $15.4 million for the six months ended June 30, 2025, and a subsequent capital raise of $29.9 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | 4,109 | 3,025 | | Marketable securities | 25,929 | 41,122 | | Total current assets | 31,079 | 44,610 | | **Total Assets** | **31,470** | **46,345** | | **Current Liabilities** | | | | Accounts payable | 1,261 | 940 | | Accrued liabilities | 2,747 | 4,347 | | Total current liabilities | 4,116 | 5,390 | | **Total Shareholders' Equity** | **27,170** | **40,718** | Condensed Consolidated Statements of Operations (Unaudited) | Metric ($ in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | 5,822 | 3,928 | 11,478 | 7,604 | | General and administrative | 2,185 | 1,710 | 4,673 | 3,775 | | **Operating loss** | **(8,007)** | **(5,638)** | **(16,151)** | **(11,379)** | | **Net loss** | **(7,699)** | **(5,119)** | **(15,406)** | **(10,270)** | | **Net loss per share** | **(0.18)** | **(0.13)** | **(0.36)** | **(0.27)** | - The company is a clinical-stage biopharmaceutical firm focused on developing its lead candidate, DM199, a recombinant form of human tissue kallikrein-1 (KLK1), for treating preeclampsia (PE) and acute ischemic stroke (AIS)[20](index=20&type=chunk) - The company's ReMEDy2 trial for AIS is experiencing **slower than expected site activations and enrollment** due to factors like hospital staffing shortages, protocol criteria, and competition from other trials[23](index=23&type=chunk) - As of June 30, 2025, the company had an accumulated deficit of **$155.4 million**, but management expects current cash to be **sufficient to fund operations for at least the next 12 months**[25](index=25&type=chunk)[26](index=26&type=chunk) - In July 2025, the company completed a private placement, selling 8,606,425 common shares at $3.50 per share, resulting in gross proceeds of $30.1 million and **net proceeds of approximately $29.9 million**[59](index=59&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses clinical program progress, financial performance, and capital resources, confirming sufficient funding for the next 12 months post-fundraising [Business Overview](index=20&type=section&id=Business%20Overview) DiaMedica is a clinical-stage biopharmaceutical company developing DM199 for Preeclampsia and Acute Ischemic Stroke, leveraging an established therapeutic approach in Asia - The company's lead candidate, DM199, is the first pharmaceutically active recombinant form of the human tissue kallikrein-1 (KLK1) protein being clinically studied for Preeclampsia (PE) and Acute Ischemic Stroke (AIS)[64](index=64&type=chunk) - DM199 has been granted **Fast Track designation by the FDA** for the treatment of AIS, based on the naturally occurring KLK1 protein approved in Asia for decades[65](index=65&type=chunk) - The proposed mechanism of action for DM199 involves enhancing blood flow and tissue perfusion by increasing production of nitric oxide (NO) and other vasodilators[66](index=66&type=chunk) [Clinical Programs](index=21&type=section&id=Clinical%20Programs) The Preeclampsia program shows promising interim results, while the Acute Ischemic Stroke trial faces enrollment delays that are being actively addressed - Interim results from the Phase 2 PE study showed DM199 was safe, well-tolerated, and produced **rapid, statistically significant reductions in blood pressure**[70](index=70&type=chunk) - Based on positive interim PE data, DiaMedica plans to submit an Investigational New Drug (IND) application in the United States in the **second half of 2025**[71](index=71&type=chunk) - The Phase 2/3 ReMEDy2 trial for AIS is experiencing **slower than expected enrollment**, which the company is mitigating by expanding its clinical team and the trial globally[72](index=72&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Operating expenses increased year-over-year due to expanded clinical trial activities and higher personnel costs, while other income declined Comparison of Operating Results ($ in thousands) | Expense Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Research and development expenses | 11,478 | 7,604 | | General and administrative expenses | 4,673 | 3,775 | | Other income, net | (757) | (1,123) | - The increase in R&D expenses was primarily driven by costs associated with the **continuation and global expansion of the ReMEDy2 clinical trial**[81](index=81&type=chunk) - The increase in G&A expenses was mainly due to **higher non-cash share-based compensation** and increased personnel costs from team expansion[82](index=82&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds $30.0 million in cash and securities, with a recent $29.9 million capital raise ensuring sufficient funds for operations for at least the next year Liquidity and Capital Resources Summary ($ in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and marketable securities | 30,038 | 44,147 | | Working capital | 26,963 | 39,220 | - Net cash used in operating activities increased to **$14.7 million** for the six months ended June 30, 2025, compared to $11.2 million for the same period in 2024[86](index=86&type=chunk) - The company expects its current cash resources, including the **$29.9 million net proceeds** from the July 2025 private placement, will be **sufficient to fund planned operations for at least the next 12 months**[90](index=90&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, disclosure for this item is not required - As a smaller reporting company, DiaMedica is not required to provide disclosure pursuant to this item[95](index=95&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the company's **disclosure controls and procedures were effective**[96](index=96&type=chunk) - There were **no changes in the company's internal control over financial reporting** during the six months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[97](index=97&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) Following a court ruling in favor of ICON/PRA Netherlands, the company has decided to discontinue its pursuit of the legal matter - The company was involved in litigation with Pharmaceutical Research Associates Group B.V. (ICON/PRA Netherlands) regarding clinical study documents and data[99](index=99&type=chunk) - On June 24, 2025, a Netherlands Commercial Court (NCC) ruling found that **ICON/PRA Netherlands was not in default** under the agreement[101](index=101&type=chunk) - Following the court's ruling, DiaMedica has decided to **discontinue its pursuit of this legal matter**[101](index=101&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) New risks include the potential non-replication of promising interim data and delays from changes in FDA funding or staffing - A new risk factor was disclosed: Promising interim data from the ongoing investigator-sponsored Phase 2 study of DM199 for preeclampsia **may not be replicated in future studies or trials**[104](index=104&type=chunk) - Success in early-stage clinical trials **does not ensure success in later trials**, and failure to replicate promising results could prevent regulatory approval[105](index=105&type=chunk)[106](index=106&type=chunk) - A new risk factor was disclosed regarding potential changes in funding and staffing for the FDA and other government agencies, which could **delay product review and approval processes**[107](index=107&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity securities were sold during the quarter ended June 30, 2025 - The company did not sell any unregistered equity securities during the quarterly period ended June 30, 2025[108](index=108&type=chunk) [Item 3. Defaults Upon Senior Securities](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable - Not applicable[109](index=109&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - Not applicable[110](index=110&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - During the quarterly period ended June 30, 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement[111](index=111&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including corporate articles, certifications, and financial statements in Inline XBRL format - The report includes several exhibits, such as the Notice of Articles, certifications from the CEO and CFO pursuant to Sarbanes-Oxley Sections 302 and 906, and financial statements in Inline XBRL format[112](index=112&type=chunk)

Exhibit 99.1 Iridex Reports Second Quarter 2025 Financial Results MOUNTAIN VIEW, Calif., August 12, 2025 (GLOBE NEWSWIRE) -- Iridex Corporation (Nasdaq: IRIX), a worldwide leader providing innovative and versatile laser-based medical systems, delivery devices, and procedure probes for the treatment of glaucoma and retinal diseases, today reported financial results for the second quarter ended June 28, 2025. Second Quarter 2025 Financial Highlights "Our second quarter results represent the transformational p ...