[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Myomo's Q2 2025 revenue exceeded expectations, driven by increased units and ASP, despite concerns over lead quality and pipeline conversion impacting gross margin and cost per pipeline add [Second Quarter 2025 Financial and Operating Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20and%20Operating%20Highlights) Myomo reported strong revenue growth in Q2 2025, exceeding expectations, driven by increased revenue units and a higher average selling price, though forward-looking operating metrics like lead quality and pipeline conversion were not as anticipated, leading to a decrease in gross margin and an increase in cost per direct billing pipeline add Q2 2025 Financial and Operating Highlights (YoY Comparison) | Metric | Q2 2025 Value | Change vs. Q2 2024 | Source Chunk | | :-------------------------------- | :---------------- | :------------------- | :----------- | | Revenue ($) | $9.7 million | +28% | 5 | | Revenue units (units) | 178 | +13% | 5 | | Orders and insurance authorizations (units) | 207 units | -3% | 5 | | Backlog (units, as of June 30, 2025) | 230 units | -18% | 5 | | New candidates added to pipeline (count) | 816 | +49% | 5 | | Total MyoPro candidates in pipeline (count, as of June 30, 2025) | 1,611 | +37% | 5 | | Gross margin (%) | 62.7% | -810 basis points | 5 | | Cost per direct billing pipeline add ($) | $2,926 | +89% | 5 | [Management Commentary & Strategic Actions](index=1&type=section&id=Management%20Commentary%20%26%20Strategic%20Actions) CEO Paul R. Gudonis highlighted that Q2 revenues surpassed expectations due to improved conversion of current quarter authorizations, but noted concerns regarding lead quality and pipeline conversion, prompting a shift in advertising focus to television, engagement of clinical teams, and enhancement of the provider ecosystem - Second quarter revenues exceeded expectations with **28% growth**, strengthening the ability to convert current quarter authorizations and orders into revenue[2](index=2&type=chunk) - Forward-looking operating metrics were not as strong as anticipated due to factors affecting lead quality and pipeline conversion[2](index=2&type=chunk) - Strategic actions include shifting advertising focus from digital to television for higher quality leads and using clinical teams to engage therapists and physicians to expand MyoPro understanding and secure referrals[3](index=3&type=chunk) [Financial Performance Analysis](index=1&type=section&id=Financial%20Performance%20Analysis) This section analyzes Myomo's Q2 2025 financial results, detailing revenue growth, gross profit changes, increased operating expenses, and the resulting net loss and Adjusted EBITDA [Revenue and Gross Profit](index=1&type=section&id=Revenue%20and%20Gross%20Profit) Myomo's revenue for Q2 2025 increased by 28% to $9.7 million, driven by a 13% increase in revenue units and a 14% rise in average selling price (ASP), with year-to-date revenue seeing a substantial 73% increase, though gross margin decreased to 62.7% primarily due to higher material and overhead spending Revenue and Gross Profit (Q2 and YTD 2025 vs. 2024) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | YTD 2025 | YTD 2024 | Change ($) | Change (%) | | :---------------- | :---------- | :---------- | :--------- | :--------- | :----------- | :----------- | :--------- | :--------- | | Revenue | $9,652,234 | $7,520,767 | $2,131,467 | 28% | $19,484,048 | $11,275,156 | $8,208,892 | 73% | | Cost of revenue | $3,600,061 | $2,195,255 | $1,404,806 | 64% | $6,822,246 | $3,650,601 | $3,171,645 | 87% | | Gross profit | $6,052,173 | $5,325,512 | $726,661 | 14% | $12,661,802 | $7,624,555 | $5,037,247 | 66% | | Gross margin % | 62.7% | 70.8% | -8.1% | -8.1% | 65.0% | 67.6% | -2.7% | -2.7% | - Revenue units for Q2 2025 were **178**, up **13% YoY**[6](index=6&type=chunk) - Average Selling Price (ASP) was approximately **$54,200**, up **14%** versus the prior year[6](index=6&type=chunk) - Medicare Part B patients represented **56%** of second quarter 2025 revenue[6](index=6&type=chunk) [Operating Expenses](index=2&type=section&id=Operating%20Expenses) Operating expenses for Q2 2025 surged by 65% to $10.6 million, primarily due to increased payroll, R&D spending, and advertising, leading to an 89% rise in cost per direct billing pipeline add despite workforce reductions Operating Expenses (Q2 and YTD 2025 vs. 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | YTD 2025 | YTD 2024 | Change (%) | | :-------------------- | :---------- | :---------- | :--------- | :----------- | :----------- | :--------- | | Operating expenses | $10.6 million | $6.4 million | 65% | $20.8 million | $12.6 million | 64% | | Advertising costs | $2.2 million | - | 162% | - | - | - | | Cost per direct billing pipeline add | $2,926 | - | 89% | - | - | - | - The increase in operating expenses was primarily due to higher payroll expense (reflecting higher headcount for direct billing channel support), increased engineering activity and headcount (resulting in higher R&D spending), and higher advertising expenditures[8](index=8&type=chunk) - Workforce reduced by approximately **8%** in July, and certain spending on outside services eliminated, expected to reduce cash expenditures by at least **$2 million** over the next 12 months[8](index=8&type=chunk) [Net Loss and Adjusted EBITDA](index=2&type=section&id=Net%20Loss%20and%20Adjusted%20EBITDA) Myomo reported a significant increase in operating loss and net loss for Q2 2025 and year-to-date, reflecting the higher operating expenses, with net loss per share also increasing and Adjusted EBITDA showing a larger negative value compared to the prior year Operating Loss, Net Loss, and Adjusted EBITDA (Q2 and YTD 2025 vs. 2024) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :---------- | :---------- | :----------- | :----------- | | Operating loss | $(4.6) million | $(1.1) million | $(8.1) million | $(5.0) million | | Net loss | $(4.6) million | $(1.1) million | $(8.1) million | $(5.0) million | | Net loss per share | $(0.11) | $(0.03) | $(0.20) | $(0.13) | | Adjusted EBITDA | $(4.0) million | $(1.2) million | $(6.8) million | $(4.7) million | - Operating loss for Q2 2025 was **$4.6 million**, compared with **$1.1 million** for Q2 2024[9](index=9&type=chunk) - Net loss for Q2 2025 was **$4.6 million**, or **$0.11 per share**, compared with **$1.1 million**, or **$0.03 per share**, for Q2 2024[9](index=9&type=chunk) [Operational Performance](index=2&type=section&id=Operational%20Performance) This section examines Myomo's MyoPro pipeline growth, order trends, and the key factors influencing operating metrics, including lead quality, conversion rates, and advertising cycle time [MyoPro Pipeline and Orders](index=2&type=section&id=MyoPro%20Pipeline%20and%20Orders) The MyoPro patient pipeline grew significantly by 37% to 1,611 patients as of June 30, 2025, with 816 new medically-qualified patients added in Q2 2025, a 49% increase, though authorizations and orders decreased by 3% to 207 units, and the ending backlog fell by 18% to 230 patients due to slower authorizations and higher revenue velocity MyoPro Pipeline and Order Metrics (Q2 2025 vs. 2024) | Metric | Q2 2025 Value | Change vs. Q2 2024 | Source Chunk | | :-------------------------------- | :---------------- | :------------------- | :----------- | | MyoPro pipeline (as of June 30, 2025) | 1,611 patients | +37% | 11 | | Medically-qualified patients added to pipeline (Q2 2025) | 816 | +49% | 11 | | MyoPro authorizations and orders (Q2 2025) | 207 | -3% | 11 | | Backlog (as of June 30, 2025) | 230 patients | -18% | 12 | [Factors Impacting Operating Metrics](index=3&type=section&id=Factors%20Impacting%20Operating%20Metrics) Management identified three key factors impacting operating metrics: the quality of leads generated post-digital advertising changes, lower conversion rates due to patient response and stricter clinical eligibility, and a cycle time effect where a significant portion of current advertising spending will yield pipeline additions in future years - Lead quality issues after changes to digital advertising in response to an algorithm change[13](index=13&type=chunk) - Lower conversion rates to both pipeline adds and authorizations and orders, driven by patient response and enhanced outcome focus of the clinical team disqualifying more patients[13](index=13&type=chunk) - A cycle time effect where **40-50%** of pipeline adds in a given quarter come from leads generated a year or more ago, implying current advertising spending will impact future pipeline adds[13](index=13&type=chunk) [Financial Position](index=3&type=section&id=Financial%20Position) This section details Myomo's cash and liquidity position, highlighting the $15.5 million cash balance, increased cash used in operating activities, and the company's assessment of sufficient funding for the next 12 months [Cash Position and Liquidity](index=3&type=section&id=Cash%20Position%20and%20Liquidity) As of June 30, 2025, Myomo's cash, cash equivalents, and short-term investments stood at $15.5 million, bolstered by $4.0 million in borrowings, with cash used in operating activities significantly increasing to $8.9 million in Q2 2025, attributed to higher operating loss, capital expenditures, working capital needs, and specific payment issues, though the company expects a normalized cash burn of $4.9 million in Q2 and believes its current cash position is sufficient for the next 12 months Cash Position and Usage (Q2 2025) | Metric | Value | Source Chunk | | :------------------------------------------ | :---------- | :----------- | | Cash, cash equivalents and short-term investments (June 30, 2025) | $15.5 million | 14 | | Borrowings against line of credit and term loan (Q2) | $4.0 million | 14 | | Cash used in operating activities (Q2 2025) | $8.9 million | 14 | | Normalized cash burn (Q2 2025) | $4.9 million | 16 | - Elevated cash use was due to higher operating loss, capital expenditures for software development, manufacturing facility improvements, demo units, and increased working capital requirements, including 2024 incentive compensation payment, a payment hold by a DME MAC, increased days sales outstanding, and an insurance payer repayment[15](index=15&type=chunk) - The company believes its cash, cash equivalents, and short-term investments are sufficient to fund operations for the next 12 months[16](index=16&type=chunk) [Business Outlook](index=3&type=section&id=Business%20Outlook) This section outlines Myomo's revised 2025 full-year revenue guidance, which has been reduced to $40 million to $42 million, while still projecting a significant increase over 2024 [2025 Revenue Guidance Update](index=3&type=section&id=2025%20Revenue%20Guidance%20Update) Myomo has updated its 2025 full-year revenue guidance to a range of $40 million to $42 million, a reduction from the previous guidance of $50 million to $53 million, though this revised guidance still represents a 23% to 29% increase over 2024, with Q3 2025 revenue expected to be between $9.5 million and $10.0 million 2025 Revenue Guidance Update | Metric | Previous Guidance | Updated Guidance | Change | | :-------------------------- | :------------------ | :----------------- | :----- | | Full-year 2025 Revenue ($) | $50 million - $53 million | $40 million - $42 million | Downward revision | | Q3 2025 Revenue Expectation ($) | - | $9.5 million - $10.0 million | - | - The updated 2025 revenue guidance represents an increase of **23% to 29%** versus 2024[17](index=17&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) This section provides an overview of Myomo, Inc., its MyoPro product line, non-GAAP financial measures, and important forward-looking statements and risk factors [About Myomo](index=4&type=section&id=About%20Myomo) Myomo, Inc. is a wearable medical robotics company specializing in the MyoPro product line, which offers improved arm and hand function for individuals with neurological disorders and upper-limb paralysis, utilizing EMG signals to restore daily living activities and enable patients to regain independence - Myomo, Inc. is a wearable medical robotics company that offers improved arm and hand function for those suffering from neurological disorders and upper-limb paralysis[22](index=22&type=chunk) - The MyoPro product line is a powered upper-limb orthosis designed to support the arm and restore function to weakened or paralyzed arms of patients with conditions like CVA stroke, brachial plexus injury, traumatic brain or spinal cord injury, or other neuromuscular diseases[22](index=22&type=chunk) - MyoPro is currently the only marketed device in the U.S. that senses a patient's own EMG signals through non-invasive sensors to restore the ability to perform activities of daily living[22](index=22&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) Myomo provides financial information, including Adjusted EBITDA, that is not prepared in accordance with GAAP, using this non-GAAP measure to offer supplementary information for investors to evaluate operating performance and compare Myomo's financial measures with other companies in its industry, defined as EBITDA adjusted for stock-based compensation expense - Myomo provides financial information, including Adjusted EBITDA, that has not been prepared in accordance with GAAP[21](index=21&type=chunk) - Adjusted EBITDA is a non-GAAP financial measure used to provide supplementary information for investors to evaluate operating performance and compare Myomo's financial measures with other companies[21](index=21&type=chunk) - Adjusted EBITDA is defined as EBITDA adjusted for stock-based compensation expense[21](index=21&type=chunk) [Forward-Looking Statements & Risk Factors](index=4&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) This press release contains forward-looking statements regarding Myomo's future business expectations, including revenue guidance, which are subject to various factors that could cause actual results to differ materially, such as challenges related to reimbursement, financing, scaling operations, revenue concentration, supply chain disruptions, marketing effectiveness, strategic collaborations, internal controls, product development, market acceptance, clinical research, intellectual property, regulatory approvals, competition, and general market conditions - The press release contains forward-looking statements regarding future business expectations, including revenue for Q3 and full year 2025, subject to safe harbor provisions[23](index=23&type=chunk) - Factors that could cause actual results to differ materially include: ability to obtain sufficient reimbursement, dependence on external financing, ability to achieve positive cash flow, revenue concentration with Medicare and specific payers, supply chain disruption, marketing efforts, strategic collaborations, remediation of material weakness in internal control, product development, market acceptance, clinical research, intellectual property protection, regulatory approvals, competition, and general market factors[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents Myomo's detailed condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows, for the specified periods [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the detailed income statement for Myomo, Inc. for the three and six months ended June 30, 2025, and 2024, outlining revenue, cost of revenue, gross profit, operating expenses (research and development, selling, clinical and marketing, general and administrative), loss from operations, other income/expense, income tax expense, and net loss, along with weighted average shares and net loss per share Condensed Consolidated Statements of Operations | | For the Three Months ended | | For the Six Months Ended | | :------------------------------------------ | :---------- | :---------- | :----------- | :----------- | | | June 30, 2025 | June 30, 2024 | June 30, 2025 | June 30, 2024 | | Revenue | $9,652,234 | $7,520,767 | $19,484,048 | $11,275,156 | | Cost of revenue | 3,600,061 | 2,195,255 | 6,822,246 | 3,650,601 | | Gross profit | 6,052,173 | 5,325,512 | 12,661,802 | 7,624,555 | | Operating expenses: | | | | | | Research and development | 2,001,331 | 1,007,224 | 3,791,355 | 1,963,438 | | Selling, clinical and marketing | 5,233,885 | 2,777,135 | 9,629,689 | 5,138,980 | | General and administrative | 3,407,277 | 2,656,217 | 7,351,332 | 5,525,968 | | Total Operating Expenses | 10,642,493 | 6,440,576 | 20,772,376 | 12,628,386 | | Loss from operations | (4,590,320) | (1,115,064) | (8,110,574) | (5,003,831) | | Interest (income), net | (106,549) | (107,242) | (298,540) | (242,535) | | Loss before income taxes | (4,483,771) | (1,007,822) | (7,812,034) | (4,761,296) | | Income tax expense | 148,201 | 113,785 | 284,996 | 195,943 | | Net loss | $(4,631,972) | $(1,121,607) | $(8,097,030) | $(4,957,239) | | Weighted average common shares outstanding (Basic and diluted) | 41,582,737 | 37,368,488 | 41,518,959 | 37,060,543 | | Net loss per share (Basic and diluted) | $(0.11) | $(0.03) | $(0.20) | $(0.13) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides Myomo, Inc.'s condensed consolidated balance sheets as of June 30, 2025 (unaudited) and December 31, 2024, detailing current and non-current assets, liabilities, and stockholders' equity, with key changes including a decrease in total current assets and total stockholders' equity, alongside an increase in total liabilities Condensed Consolidated Balance Sheets | | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :---------- | :---------------- | | **ASSETS** | | | | Cash and cash equivalents | $14,240,432 | $24,372,373 | | Short-term investments | 1,241,515 | 492,990 | | Accounts receivable, net | 7,054,545 | 3,825,291 | | Inventories | 4,125,597 | 3,165,965 | | Prepaid expenses and other current assets | 1,381,721 | 933,377 | | Total Current Assets | 28,043,810 | 32,789,996 | | Restricted Cash | 375,000 | 375,000 | | Operating lease assets with right of use | 7,058,063 | 7,584,663 | | Equipment, net | 2,908,804 | 1,330,008 | | Other assets | 286,670 | 164,412 | | **Total Assets** | **$38,672,347** | **$42,244,079** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable and accrued expenses | $8,313,862 | $9,021,817 | | Current operating lease liability | 460,351 | 748,021 | | Income taxes payable | 204,110 | 318,885 | | Deferred revenue | 108,780 | 83,115 | | Current portion long-term debt | 166,667 | — | | Revolving credit line | 2,500,000 | — | | Total Current Liabilities | 11,753,770 | 10,171,838 | | Non-current operating lease liability | 7,970,116 | 7,358,184 | | Long-term debt | 1,333,333 | — | | **Total Liabilities** | **21,057,219** | **17,530,022** | | **Stockholders' Equity:** | | | | Common stock | 3,778 | 3,439 | | Additional paid-in capital | 128,781,048 | 127,846,026 | | Accumulated other comprehensive income (loss) | 48,334 | (14,406) | | Accumulated deficit | (111,211,568) | (103,114,538) | | Treasury stock, at cost | (6,464) | (6,464) | | **Total Stockholders' Equity** | **17,615,128** | **24,714,057** | | **Total Liabilities and Stockholders' Equity** | **$38,672,347** | **$42,244,079** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details Myomo, Inc.'s condensed consolidated statements of cash flows for the six months ended June 30, 2025, and 2024, showing a significant increase in net cash used in operating activities, higher cash used in investing activities, and a decrease in cash provided by financing activities compared to the prior year, resulting in a substantial net decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows | For the Six Months Ended June 30, | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | **CASH FLOWS FROM OPERATING ACTIVITIES** | | | | Net loss | $(8,097,030) | $(4,957,239) | | Adjustments to reconcile net loss to net cash used in operations: | | | | Depreciation | 349,240 | 65,663 | | Stock-based compensation | 935,093 | 228,395 | | Accretion of discount on short-term investments | (108,999) | — | | Credit losses | 51,643 | 5,257 | | Amortization of deferred offering costs | 60,045 | — | | Amortization of right-of-use assets | 526,600 | 124,057 | | Other non-cash charges | (91,984) | 44,631 | | Changes in operating assets and liabilities: | | | | Accounts receivable | (2,975,272) | (102,234) | | Inventories | (1,204,740) | (816,055) | | Prepaid expenses and other current assets | (615,940) | (363,375) | | Other assets | (130,801) | (214,937) | | Accounts payable and accrued expenses | (531,182) | 990,973 | | Income taxes payable | (144,392) | 176,235 | | Operating lease liabilities | 140,536 | (237,365) | | Deferred revenue | 25,666 | 3,505 | | Tenant improvement allowance | 183,726 | — | | **Net cash used in operating activities** | **$(11,542,175)** | **$(5,161,488)** | | **CASH USED IN INVESTING ACTIVITIES** | **$(2,653,446)** | **$(1,211,930)** | | **CASH PROVIDED BY FINANCING ACTIVITIES** | **$3,963,494** | **$5,361,909** | | Effect of foreign exchange rate changes on cash | 100,186 | (13,697) | | Net (decrease) increase in cash and cash equivalents | $(10,131,941) | $(1,025,206) | | Cash and cash equivalents, beginning of period | 24,747,373 | 6,871,306 | | Cash and cash equivalents, end of period | **$14,615,432** | **$5,846,100** | [Reconciliation of GAAP Net Loss to Adjusted EBITDA](index=9&type=section&id=Reconciliation%20of%20GAAP%20Net%20Loss%20to%20Adjusted%20EBITDA) This section provides a reconciliation of Myomo, Inc.'s GAAP net loss to Adjusted EBITDA for the three and six months ended June 30, 2025, and 2024, adjusting net loss for interest income, depreciation expense, stock-based compensation, and income tax expense to arrive at the non-GAAP Adjusted EBITDA Reconciliation of GAAP Net Loss to Adjusted EBITDA | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | | :------------------------------------------ | :---------- | :---------- | :----------- | :----------- | | | 2025 | 2024 | 2025 | 2024 | | GAAP net loss | $(4,631,972) | $(1,121,607) | $(8,097,030) | $(4,957,239) | | Adjustments to reconcile to Adjusted EBITDA: | | | | | | Interest income | (106,549) | (107,242) | (298,540) | (242,535) | | Depreciation expense | 190,798 | 35,979 | 349,240 | 65,663 | | Stock-based compensation | 394,889 | (91,893) | 935,093 | 228,395 | | Income tax expense | 148,201 | 113,785 | 284,996 | 195,943 | | **Adjusted EBITDA** | **$(4,004,633)** | **$(1,170,978)** | **$(6,826,241)** | **$(4,709,773)** | [Conference Call & Contacts](index=3&type=section&id=Conference%20Call%20%26%20Contacts) This section provides details for Myomo's Q2 2025 conference call and webcast, along with contact information for investor relations inquiries [Conference Call and Webcast Details](index=3&type=section&id=Conference%20Call%20and%20Webcast%20Details) Myomo hosted a conference call and webcast on August 11, 2025, at 4:30 p.m. Eastern time to discuss the Q2 2025 results, with pre-registration and dial-in options available, and a webcast and dial-in replay provided for those unable to attend live - Conference call held on August 11, 2025, at **4:30 p.m. Eastern time**[18](index=18&type=chunk) - Participants could pre-register for a passcode and PIN or dial **844-707-6932** (U.S.) or **412-317-9250** (International)[18](index=18&type=chunk) - A webcast of the call and a replay were available on Myomo's Investor Relations page at http://ir.myomo.com/[18](index=18&type=chunk)[20](index=20&type=chunk) [Contacts](index=5&type=section&id=Contacts) This section provides contact information for Myomo's Investor Relations and Alliance Advisors IR for further inquiries - Myomo Investor Relations contact: ir@myomo.com[26](index=26&type=chunk) - Alliance Advisors IR contact: Tirth T. Patel, tpatel@allianceadvisors.com, **212-201-6614**[26](index=26&type=chunk)

Exhibit 99.1 Nephros, Inc. 380 Lackawanna Place South Orange NJ 07079 Call: 201 343 5202 nephros.com Nephros Announces Strong Second Quarter Financial Results Second-Quarter Net Revenue of $4.4 million; Robust Growth Drives 36% Increase in Net Revenue with Third Consecutive Quarter of Profitability SOUTH ORANGE, NJ, August 7, 2025 – Nephros, Inc. (Nasdaq: NEPH), a leading water technology company providing filtration solutions to the medical and commercial markets, today announced financial results for the ...

[Overview and Highlights](index=1&type=section&id=Enanta%20Pharmaceuticals%20Reports%20Financial%20Results%20for%20its%20Fiscal%20Third%20Quarter%20Ended%20June%2030%2C%202025) [Management Commentary and Key Achievements](index=1&type=section&id=Management%20Commentary%20and%20Key%20Achievements) Enanta Pharmaceuticals reported steady pipeline progress in Q3 FY2025, completing zelicapavir's RSVHR trial enrollment and advancing immunology programs, backed by **$204.1 million** in cash - Completed enrollment in the RSVHR trial of zelicapavir, with topline data expected in **September 2025**[2](index=2&type=chunk)[5](index=5&type=chunk) - Advancing immunology programs with IND-enabling studies for oral KIT inhibitor EPS-1421 and expecting to select a lead candidate for the oral STAT6 inhibitor program in **H2 2025**[2](index=2&type=chunk)[5](index=5&type=chunk) - The company plans to announce a third immunology program later in **2025** to expand its inflammatory disease pipeline[2](index=2&type=chunk) - Operations are supported by cash and marketable securities totaling **$204.1 million** as of June 30, 2025, alongside ongoing retained royalties[5](index=5&type=chunk)[11](index=11&type=chunk) [Fiscal Third Quarter 2025 Financial Results](index=1&type=section&id=Fiscal%20Third%20Quarter%20Ended%20June%2030%2C%202025%20Financial%20Results) [Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) Enanta reported Q3 FY2025 total revenue of **$18.3 million**, a slight increase, with reduced R&D and G&A expenses leading to a narrowed net loss of **$18.3 million** Q3 FY2025 vs Q3 FY2024 Financial Performance (in millions, except per share data) | Metric | Q3 2025 | Q3 2024 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $18.3 | $18.0 | +1.7% | | **R&D Expenses** | $27.2 | $28.7 | -5.2% | | **G&A Expenses** | $10.0 | $13.4 | -25.4% | | **Net Loss** | $(18.3) | $(22.7) | Narrowed | | **Loss Per Share** | $(0.85) | $(1.07) | Narrowed | - Revenue primarily consisted of royalties from worldwide net sales of AbbVie's HCV regimen MAVYRET®/MAVIRET®[3](index=3&type=chunk) - The decrease in R&D expenses was primarily due to the timing of clinical trials in the RSV programs[6](index=6&type=chunk) - The decrease in G&A expenses was mainly due to lower legal expenses related to the patent infringement lawsuit against Pfizer[7](index=7&type=chunk) [Financial Position and Outlook](index=2&type=section&id=Financial%20Position%20and%20Outlook) As of June 30, 2025, Enanta held **$204.1 million** in cash and marketable securities, projected to fund operations into fiscal year 2028 with future royalties - Cash, cash equivalents, and short-term marketable securities totaled **$204.1 million** at June 30, 2025[11](index=11&type=chunk) - The company expects its current cash position and future royalties to be sufficient to meet anticipated cash requirements into **fiscal year 2028**[11](index=11&type=chunk) - The company received a federal income tax refund of **$33.8 million** in **April 2025**[9](index=9&type=chunk) [Pipeline and Corporate Updates](index=2&type=section&id=Pipeline%20and%20Corporate%20Updates) [Virology Program](index=2&type=section&id=Virology%20Program) Enanta's virology pipeline focuses on oral antiviral treatments for RSV, including zelicapavir and EDP-323, with key progress in clinical trials and partnership evaluations [Zelicapavir (N-protein inhibitor)](index=2&type=section&id=Zelicapavir%20%28N-protein%20inhibitor%29) - Enrollment is complete with **186 patients** in the RSVHR Phase 2b study in high-risk adults[12](index=12&type=chunk) - Topline data from the RSVHR study is on track to be reported in **September 2025**[12](index=12&type=chunk) - Positive Phase 2 data in pediatric patients were presented at the ESPID 2025 Conference, highlighting shortened time to viral load negativity[12](index=12&type=chunk)[13](index=13&type=chunk) [EDP-323 (L-protein inhibitor)](index=3&type=section&id=EDP-323%20%28L-protein%20inhibitor%29) - EDP-323 is a potent, oral RSV L-protein inhibitor, suitable for monotherapy or combination use with agents like zelicapavir[16](index=16&type=chunk) - New data from a Phase 2a study were presented at the ESCMID Global 2025 Conference, highlighting reduced respiratory mucus production[16](index=16&type=chunk) [Immunology Program](index=3&type=section&id=Immunology%20Program) Enanta's immunology pipeline focuses on oral inhibitors for inflammatory diseases, with IND-enabling studies for EPS-1421 and a STAT6 inhibitor candidate selection planned for **H2 2025** [EPS-1421 (KIT inhibitor)](index=3&type=section&id=EPS-1421%20%28KIT%20inhibitor%29) - IND-enabling studies and scale-up activities are ongoing for EPS-1421, a novel oral KIT inhibitor[16](index=16&type=chunk) - EPS-1421 is being developed for chronic spontaneous urticaria and other mast cell-driven diseases[16](index=16&type=chunk) [STAT6 Inhibitor Program](index=3&type=section&id=STAT6%20Inhibitor%20Program) - Enanta is on track to select a STAT6 inhibitor development candidate in **H2 2025**[16](index=16&type=chunk) - Preclinical data show prototype oral STAT6 inhibitors exhibit potent nanomolar activity and high selectivity[16](index=16&type=chunk) [Pipeline Expansion](index=3&type=section&id=Pipeline%20Expansion) - Enanta plans to expand its immunology pipeline by introducing a third program in **2025**[16](index=16&type=chunk) [Corporate Developments](index=3&type=section&id=Corporate%20Developments) Corporate updates include AbbVie's FDA approval for an expanded MAVYRET® indication and Enanta's plan to issue Q4 and year-end results on **November 17, 2025** - Partner AbbVie received FDA approval for an expanded indication for MAVYRET® to treat acute HCV[16](index=16&type=chunk) - Enanta plans to issue its fiscal fourth quarter and year-end financial results on **November 17, 2025**[16](index=16&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statement details financial performance for the three and nine months ended June 30, 2025, showing **$18.3 million** revenue and **$18.3 million** net loss for the quarter Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended June 30, | Nine Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **Revenue** | $18,314 | $17,971 | $50,199 | $53,028 | | **Total operating expenses** | $37,207 | $42,156 | $117,162 | $144,865 | | **Loss from operations** | $(18,893) | $(24,185) | $(66,963) | $(91,837) | | **Net loss** | $(18,255) | $(22,658) | $(63,189) | $(87,222) | | **Net loss per share, Basic & Diluted** | $(0.85) | $(1.07) | $(2.96) | $(4.12) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet presents Enanta's financial position as of June 30, 2025, with total assets at **$301.0 million** and total stockholders' equity at **$79.3 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Cash, cash equivalents & marketable securities** | $204,111 | $248,186 | | **Total current assets** | $222,708 | $299,852 | | **Total assets** | $301,029 | $376,652 | | **Total current liabilities** | $44,549 | $57,535 | | **Total liabilities** | $221,750 | $247,838 | | **Total stockholders' equity** | $79,279 | $128,814 |

[Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to risks, and actual results may differ materially - The report contains forward-looking statements related to expectations, beliefs, projections, future plans, and strategies, which are **not historical facts**[6](index=6&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as actual results could **differ materially** due to various factors, including the company's ability to achieve reimbursement, secure financing, scale operations, manage revenue concentration, and maintain intellectual property and regulatory approvals[7](index=7&type=chunk)[9](index=9&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's analysis of financial condition and results [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements%20(interim%20periods%20unaudited)) This section presents the unaudited condensed consolidated financial statements and detailed notes on business, liquidity, and accounting policies [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific interim dates | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | Total Assets | $38,672,347 | $42,244,079 | | Total Liabilities | $21,057,219 | $17,530,022 | | Total Stockholders' Equity | $17,615,128 | $24,714,057 | | Cash and cash equivalents | $14,240,432 | $24,372,373 | | Accounts receivable, net | $7,054,545 | $3,825,291 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table outlines the company's financial performance over interim periods, showing revenue, gross profit, operating loss, and net loss | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $9,652,234 | $7,520,767 | $19,484,048 | $11,275,156 | | Gross profit | $6,052,173 | $5,325,512 | $12,661,802 | $7,624,555 | | Loss from operations | $(4,590,320) | $(1,115,064) | $(8,110,574) | $(5,003,831) | | Net loss | $(4,631,972) | $(1,121,607) | $(8,097,030) | $(4,957,239) | | Basic and diluted EPS | $(0.11) | $(0.03) | $(0.20) | $(0.13) | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This table presents the company's comprehensive loss, including net loss and other comprehensive income/loss items like foreign currency adjustments | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(4,631,972) | $(1,121,607) | $(8,097,030) | $(4,957,239) | | Foreign currency translation adjustments | $164,878 | $(8,623) | $62,739 | $55,219 | | Comprehensive loss | $(4,467,094) | $(1,130,230) | $(8,034,291) | $(4,902,020) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This table details changes in the company's stockholders' equity, including net loss, stock-based compensation, and common stock issuances | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :------------------ | :-------------- | | Total Stockholders' Equity | $24,714,057 | $17,615,128 | | Stock-based compensation (6M) | N/A | $935,093 | | Net loss (6M) | N/A | $(8,097,030) | | Common stock issued upon vesting of restricted stock units (6M) | N/A | 703,180 shares | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the company's cash inflows and outflows from operating, investing, and financing activities over interim periods | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(11,542,175) | $(5,161,488) | | Net cash used in investing activities | $(2,653,446) | $(1,211,930) | | Net cash provided by financing activities | $3,963,494 | $5,361,909 | | Net (decrease) increase in cash and cash equivalents | $(10,131,941) | $(1,025,206) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [Note 1 — Description of Business](index=10&type=section&id=Note%201%20%E2%80%94%20Description%20of%20Business) This note describes Myomo Inc.'s core business of developing and marketing MyoPro® myoelectric upper limb orthotics for neuromuscular disorders - Myomo Inc. develops, designs, and produces **MyoPro®** myoelectric upper limb orthotics for people with neuromuscular disorders, registered as a U.S. FDA Class II medical device[24](index=24&type=chunk) - The company sells its products directly to patients, Orthotics and Prosthetics (O&P) providers, the Veterans Health Administration, and distributors in Europe and Australia[24](index=24&type=chunk) [Note 2 — Liquidity](index=10&type=section&id=Note%202%20%E2%80%94%20Liquidity) This note discusses the company's financial resources, historical funding, debt agreements, and management's outlook on future liquidity | Metric | June 30, 2025 | | :-------------------------------- | :-------------- | | Cash, cash equivalents and short-term investments | $15,482,000 | | Net losses (6M) | $8,097,000 | | Cash used in operating activities (6M) | $11,542,200 | - The company has historically funded operations through equity and debt, including a **$15.8 million** public offering in December 2024 and a **$5.4 million** registered direct offering in January 2024[26](index=26&type=chunk) - A Loan and Security Agreement with Silicon Valley Bank provides a revolving line of credit up to **$4.0 million** and a **$3.0 million** term loan facility (amended February 2025)[26](index=26&type=chunk) - Management believes current cash, cash equivalents, and short-term investments will fund operations for at least the next **twelve months**[27](index=27&type=chunk) [Note 3 — Summary of Significant Accounting Policies](index=10&type=section&id=Note%203%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the accounting principles and significant estimates used in preparing the interim financial statements, including revenue recognition and advertising expenses - Interim financial statements are prepared in accordance with U.S. GAAP for interim information and include all adjustments considered necessary for fair presentation[28](index=28&type=chunk) - The company's significant estimates include deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations, and reserves for slow-moving inventory[33](index=33&type=chunk) | Revenue Source | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Direct to patient | $7,420,904 | $5,829,407 | $15,228,681 | $8,059,833 | | Clinical/Medical providers | $2,231,330 | $1,691,360 | $4,255,367 | $3,215,323 | | Total revenue | $9,652,234 | $7,520,767 | $19,484,048 | $11,275,156 | - For the six months ended June 30, 2025, **86%** of total revenues were from the United States and **14%** from Germany[49](index=49&type=chunk) | Advertising Expense | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Advertising expense | $2,229,900 | $849,600 | $3,839,600 | $1,636,900 | [Note 4 — Inventories](index=17&type=section&id=Note%204%20%E2%80%94%20Inventories) This note provides a breakdown of the company's inventory categories, including finished goods, work in process, and parts and subassemblies | Inventory Category | June 30, 2025 | December 31, 2024 | | :----------------- | :-------------- | :------------------ | | Finished goods | $1,334,290 | $1,289,368 | | Work in process | $121,836 | $60,731 | | Parts and subassemblies | $2,669,471 | $1,815,866 | | Inventories, net | $4,125,597 | $3,165,965 | [Note 5 — Fair Value of Financial Instruments](index=17&type=section&id=Note%205%20%E2%80%94%20Fair%20Value%20of%20Financial%20Instruments) This note explains the company's methodology for measuring fair value using a three-level hierarchy for financial instruments - The company measures fair value using ASC 820, which establishes a three-level hierarchy for inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[60](index=60&type=chunk)[62](index=62&type=chunk) | Asset Category | June 30, 2025 (Level 1) | June 30, 2025 (Level 2) | December 31, 2024 (Level 1) | December 31, 2024 (Level 2) | | :-------------------------- | :------------------------ | :------------------------ | :-------------------------- | :-------------------------- | | Money market funds | $12,698,545 | $0 | $23,334,374 | $0 | | US government agency debt securities | $0 | $497,605 | $0 | $492,990 | | US Treasury bills | $0 | $743,910 | $0 | $0 | [Note 6 - Accounts Payable and Other Accrued Expenses](index=19&type=section&id=Note%206%20-%20Accounts%20Payable%20and%20Other%20Accrued%20Expenses) This note details the composition of the company's accounts payable and other accrued expenses, including trade payables and compensation | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :------------------ | | Trade payables | $2,514,945 | $1,169,901 | | Accrued compensation and benefits | $2,970,257 | $5,009,385 | | Customer deposits | $2,020,985 | $2,194,804 | | Total | $8,313,862 | $9,021,817 | [Note 7 — Common Stock and Warrants](index=19&type=section&id=Note%207%20%E2%80%94%20Common%20Stock%20and%20Warrants) This note describes the company's equity offerings, including public and registered direct sales of common stock and warrant exercises - The company completed a public equity offering in December 2024, selling **3,450,000 shares** for **$15.8 million** net proceeds[65](index=65&type=chunk) - A registered direct equity offering in January 2024 sold **1,354,218 shares** and **224,730 pre-funded warrants** for **$5.4 million** net proceeds[66](index=66&type=chunk) - During the three months ended June 30, 2025, **2,698,105 pre-funded warrants** were exercised, compared to **774,730** in the same period of 2024[68](index=68&type=chunk) - **668,250 investor warrants** expired unexercised during the six months ended June 30, 2025[69](index=69&type=chunk) [Note 8 —Debt](index=21&type=section&id=Note%208%20%E2%80%94Debt) This note details the company's debt agreements, including a revolving line of credit and a term loan facility with Silicon Valley Bank - The company entered into a Loan and Security Agreement with Silicon Valley Bank in July 2024, providing a revolving line of credit up to **$4.0 million** (potentially **$5.5 million**)[71](index=71&type=chunk)[72](index=72&type=chunk) - An amendment in February 2025 added a term loan facility of up to **$3.0 million**, available until February 28, 2026[74](index=74&type=chunk) - During the three months ended June 30, 2025, the company borrowed **$2.5 million** under the Revolving Line and **$1.5 million** under the Term Loan facility[78](index=78&type=chunk) - The company was in compliance with all loan covenants as of June 30, 2025[76](index=76&type=chunk) [Note 9 — Stock Award Plans and Stock-Based Compensation](index=23&type=section&id=Note%209%20%E2%80%94%20Stock%20Award%20Plans%20and%20Stock-Based%20Compensation) This note outlines the company's stock award plans, available shares for issuance, and the impact of stock-based compensation on expenses - As of June 30, 2025, there were **636,974 shares** available for issuance under the 2018 Stock Option and Incentive Plan, which cumulatively increases by **4%** annually[79](index=79&type=chunk) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $28,005 | $(10,591) | $69,723 | $12,796 | | Research and development | $43,942 | $8,719 | $122,097 | $32,964 | | Selling, clinical and marketing | $101,657 | $7,190 | $193,149 | $53,251 | | General and administrative | $221,285 | $(97,211) | $550,124 | $129,384 | | Total | $394,889 | $(91,893) | $935,093 | $228,395 | - Unrecognized compensation cost for unvested restricted stock units was approximately **$4,972,300** as of June 30, 2025, expected to be recognized over a weighted-average period of **2.65 years**[83](index=83&type=chunk) [Note 9 — Commitments and Contingencies](index=23&type=section&id=Note%209%20%E2%80%94%20Commitments%20and%20Contingencies) This note addresses the company's legal status, lease obligations for its headquarters, and other financial commitments - There are no material claims, assessments, or litigation against the company as of June 30, 2025[84](index=84&type=chunk) - The company entered into a new lease agreement for its corporate headquarters and manufacturing facility in Burlington, Massachusetts, with a term of **88 months** starting May 11, 2025[85](index=85&type=chunk)[87](index=87&type=chunk) | Metric | June 30, 2025 | | :-------------------------- | :-------------- | | Total operating lease liabilities | $8,430,467 | | Current operating lease liabilities | $460,351 | | Non-current operating lease liabilities | $7,970,116 | | Lease Expense | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total lease expense | $348,348 | $89,443 | $751,879 | $178,939 | - Supplier finance obligations for the D&O insurance policy had a balance of **$453,588** as of June 30, 2025[90](index=90&type=chunk) [Note 11 — Segment Reporting and Major Customers](index=26&type=section&id=Note%2011%20%E2%80%94%20Segment%20Reporting%20and%20Major%20Customers) This note clarifies the company's single operating segment and identifies major customers, including CMS and Medicare Advantage plans - The company operates in one operating segment, selling versions of the MyoPro product line[91](index=91&type=chunk) | Customer | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | CMS (revenue) | 56% | 47% | 58% | 35% | | Medicare Advantage insurance plans (revenue) | 20% | 26% | 19% | 30% | - As of June 30, 2025, CMS accounted for approximately **67%** of accounts receivable, and a U.S. commercial insurer and its affiliates accounted for approximately **9%**[94](index=94&type=chunk) [Note 12 — Subsequent Events](index=28&type=section&id=Note%2012%20%E2%80%94%20Subsequent%20Events) This note confirms that no subsequent events requiring recognition or disclosure were identified through the financial statement issuance date - The company evaluated subsequent events through the financial statement issuance date and determined no events required recognition or disclosure[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, covering business overview, equity offerings, operating results, and liquidity [Overview](index=29&type=section&id=Overview) This section introduces Myomo Inc. as a wearable medical robotics company, its MyoPro product line, sales channels, and key regulatory milestones - Myomo Inc. is a wearable medical robotics company that develops and markets the MyoPro product line, myoelectric-controlled upper limb braces for individuals with neuromuscular disorders[98](index=98&type=chunk) - The company utilizes direct-to-consumer advertising, telehealth, and O&P providers for patient evaluation, custom fabrication, and direct billing to insurance companies or Medicare[99](index=99&type=chunk) - Key milestones include the introduction of MyoPro (2012), MyoPro Motion W/G (2015), IPO (2017), CE Mark (2017), CMS HCPCS codes (2018), transition to direct provider (2019), Medicare provider accreditation (2021), MyoPro 2+ (2022), and MyoPro 2X (April 2025)[101](index=101&type=chunk)[102](index=102&type=chunk)[109](index=109&type=chunk) - CMS reclassified MyoPro to a brace benefit (effective January 1, 2024) and published final payment determinations for L8701 (**$34,300**) and L8702 (**$67,500**), effective January 1, 2025[109](index=109&type=chunk) [Equity Offerings](index=31&type=section&id=Equity%20Offerings) This section details the company's recent public and registered direct equity offerings and the intended use of the net proceeds - In December 2024, the company completed a public offering, selling **3,450,000 shares** of common stock for approximately **$15.8 million** in net proceeds[103](index=103&type=chunk) - In January 2024, a registered direct equity offering generated approximately **$5.4 million** in net proceeds from the sale of common stock and pre-funded warrants[103](index=103&type=chunk) - Proceeds are intended to grow direct billing, increase R&D spending, support the O&P channel, and fund working capital and general corporate purposes[103](index=103&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenues, cost of revenue, gross margin, operating expenses, and other income/expense [Revenues](index=31&type=section&id=Revenues) This section analyzes the company's revenue growth, driven by increased unit sales and average sales price, particularly in the direct bill channel | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Revenue | $9,652,234 | $7,520,767 | $2,131,467 | 28% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Revenue | $19,484,048 | $11,275,156 | $8,208,892 | 73% | - Revenue increases were driven by a higher number of revenue units and a higher average sales price, particularly in the direct bill channel, which accounted for **77%** and **78%** of revenues for the three and six months ended June 30, 2025, respectively[107](index=107&type=chunk) [Cost of Revenue and Gross Margin](index=31&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin) This section examines the changes in cost of revenue and gross margin, attributing decreases primarily to higher material and manufacturing overhead costs | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :--------- | | Gross margin | 62.7% | 70.8% | -8.1% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :--------- | | Gross margin | 65.0% | 67.6% | -2.7% | - The decrease in gross margin was primarily due to higher material costs and increased manufacturing overhead spending, including payroll and lease costs for the new headquarters and manufacturing facility, partially offset by a higher average selling price[111](index=111&type=chunk) [Operating Expenses](index=33&type=section&id=Operating%20Expenses) This section analyzes the changes in the company's operating expenses, including research and development, selling, clinical, marketing, and general and administrative costs [Research and development](index=33&type=section&id=Research%20and%20development) This section details the increase in R&D expenses, primarily due to higher payroll and outside engineering services for product development | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | R&D expenses | $2,001,331 | $1,007,224 | $994,107 | 99% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | R&D expenses | $3,791,355 | $1,963,438 | $1,827,917 | 93% | - Increases were primarily due to higher costs for payroll and outside engineering services as the company adds headcount to accelerate sustaining engineering and product development efforts[115](index=115&type=chunk) [Selling, clinical and marketing](index=33&type=section&id=Selling%2C%20clinical%20and%20marketing) This section explains the rise in selling, clinical, and marketing expenses, driven by increased headcount and higher advertising costs for lead generation | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | SC&M expenses | $5,233,885 | $2,777,135 | $2,456,750 | 88% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | SC&M expenses | $9,629,689 | $5,138,980 | $4,490,709 | 87% | - Increases were primarily due to higher payroll costs from increased headcount in clinical functions to support expected sales volume and increased advertising expense to address lead generation challenges[117](index=117&type=chunk) [General and administrative](index=33&type=section&id=General%20and%20administrative) This section attributes the increase in general and administrative expenses to higher payroll costs in reimbursement functions and stock-based compensation | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | G&A expenses | $3,407,277 | $2,656,217 | $751,060 | 28% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | G&A expenses | $7,351,332 | $5,525,968 | $1,825,364 | 33% | - Increases were primarily due to increased payroll costs from higher headcount in reimbursement functions and higher stock-based compensation expense[119](index=119&type=chunk) [Other (income), net](index=35&type=section&id=Other%20(income)%2C%20net) This section discusses the changes in other income, net, primarily driven by fluctuations in interest income from investment balances | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Interest income, net | $(106,549) | $(107,242) | $693 | (1)% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Interest income, net | $(298,540) | $(242,535) | $(56,005) | 23% | - The increase in other (income), net for the six months ended June 30, 2025, was primarily due to higher interest income resulting from a higher average investment balance[121](index=121&type=chunk) [Income tax expense](index=35&type=section&id=Income%20tax%20expense) This section explains the increase in income tax expense, primarily due to higher taxable income from the company's German subsidiary | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Income tax expense | $148,201 | $113,785 | $34,416 | 30% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Income tax expense | $284,996 | $195,943 | $89,053 | 45% | - Income tax expense increased due to higher taxable income from the company's wholly-owned subsidiary, Myomo Europe GmbH[122](index=122&type=chunk) [Adjusted EBITDA](index=35&type=section&id=Adjusted%20EBITDA) This section defines Adjusted EBITDA as a non-GAAP measure and presents its values for evaluating operating performance - Adjusted EBITDA is a non-GAAP financial measure used to evaluate operating performance, defined as earnings before interest, taxes, depreciation, and amortization, adjusted for stock-based compensation and other unusual items[123](index=123&type=chunk)[124](index=124&type=chunk) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Adjusted EBITDA | $(4,004,633) | $(1,170,978) | $(2,833,655) | 242% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :----------- | :--------- | | Adjusted EBITDA | $(6,826,241) | $(4,709,773) | $(2,116,468) | 45% | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial liquidity, capital resources, cash flow activities, and critical accounting policies [Liquidity](index=37&type=section&id=Liquidity) This section provides an overview of the company's cash, investments, working capital, and recent financing activities to support operations | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :------------------ | | Cash and cash equivalents | $14,240,432 | $24,372,373 | | Short-term investments | $1,241,515 | $492,990 | | Total | $15,481,947 | $24,865,363 | | Working capital | $16,290,040 | $22,618,158 | - The company used approximately **$11.5 million** in cash for operating activities during the six months ended June 30, 2025, partly due to a **$1.5 million** payment hold from a Medicare contractor[129](index=129&type=chunk) - Recent financing activities include a **$15.8 million** public equity offering (Dec 2024), a **$5.4 million** registered direct equity offering (Jan 2024), and borrowings of **$2.5 million** under a line of credit and **$1.5 million** under a term loan facility (3M 2025)[130](index=130&type=chunk) - Management believes existing cash, cash equivalents, and short-term investments are sufficient to fund operations for the next **12 months**[129](index=129&type=chunk) [Cash Flows](index=37&type=section&id=Cash%20Flows) This section analyzes the company's cash flows from operating, investing, and financing activities for the interim periods | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(11,542,175) | $(5,161,488) | | Net cash used in investing activities | $(2,653,446) | $(1,211,930) | | Net cash provided by financing activities | $3,963,494 | $5,361,909 | - Cash used in operating activities for the six months ended June 30, 2025, was primarily due to a net loss of **$8.1 million** and **$5.3 million** used by changes in operating assets and liabilities (increases in accounts receivable, inventory, prepaid expenses, and a decrease in accounts payable)[133](index=133&type=chunk) - Cash used in investing activities for the six months ended June 30, 2025, was mainly for purchases of short-term investments and equipment, including improvements to the new headquarters and MARK2 demo units[135](index=135&type=chunk) - Cash generated from financing activities for the six months ended June 30, 2025, resulted from borrowings under the line of credit and term loan facility[136](index=136&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant accounting estimates and assumptions made in preparing the financial statements, such as deferred tax valuation and stock-based compensation - The preparation of financial statements requires management to make estimates and assumptions, which are reviewed on an ongoing basis[137](index=137&type=chunk) - Significant estimates include deferred tax valuation allowances, valuation of stock-based compensation, warranty obligations, and reserves for credit losses and slow-moving inventory[137](index=137&type=chunk) - There have been no material changes to critical accounting policies from those described in the Annual Report on Form 10-K for the year ended December 31, 2024[138](index=138&type=chunk) [Other](index=38&type=section&id=Other) This section confirms no material changes to critical accounting policies since the prior annual report - No material changes to critical accounting policies from those described in the Annual Report on Form 10-K for the year ended December 31, 2024[138](index=138&type=chunk) [Recent Accounting Standards](index=38&type=section&id=Recent%20Accounting%20Standards) This section refers to Note 3 for information regarding newly adopted accounting standards - Information regarding new accounting standards is included in Note 3 to the unaudited condensed consolidated financial statements[139](index=139&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to the company as it qualifies as a smaller reporting company - This item is not applicable to the company as it is a smaller reporting company[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective due to a material weakness in IT general controls, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2025[143](index=143&type=chunk) - A **material weakness** was identified related to the lack of design and maintenance of effective information technology general controls, including privileged access rights, user provisioning, periodic user access review, and change management for the financial reporting system[145](index=145&type=chunk) - Despite the material weakness, management concluded that the condensed consolidated financial statements fairly present the company's financial condition, results of operations, and cash flows[146](index=146&type=chunk) - Remediation efforts include formalizing processes for user provisioning, assigning access rights to an individual outside finance, formalizing change management, and reviewing key third-party service provider SOC reports[148](index=148&type=chunk) - New and modified controls around access rights and change management processes have been implemented as of June 30, 2025, with ongoing refinement[149](index=149&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, claims, or assessments requiring disclosure - There is no material litigation against the company at this time that is required to be disclosed[157](index=157&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section updates the company's risk factors, highlighting operating losses, reimbursement challenges, advertising algorithm impacts, and capital needs - The company has a history of operating losses, with net losses of **$4.6 million** (3M 2025) and **$8.1 million** (6M 2025), and an accumulated deficit of approximately **$111.2 million** as of June 30, 2025[159](index=159&type=chunk) - Revenues from Medicare Advantage insurance plans have been negatively impacted by reduced authorizations since the second half of 2024, representing **20%** of revenues for the three months ended June 30, 2025[161](index=161&type=chunk) - Changes in direct-to-consumer advertising algorithms, such as those experienced in Q1 2025, can adversely affect lead generation and increase advertising cost per pipeline addition[162](index=162&type=chunk)[164](index=164&type=chunk) - The company's ability to grow and achieve cash flow breakeven is dependent on generating sufficient cash flows or raising additional capital, with existing cash and investments believed to be sufficient for the next **12 months**[160](index=160&type=chunk)[168](index=168&type=chunk) - CMS reclassified MyoPro to the brace benefit category (effective Jan 1, 2024) and published final payment determinations for L8701 (**$34,300**) and L8702 (**$67,500**), effective Jan 1, 2025, but claims can still be reviewed on a case-by-case basis[173](index=173&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%20from%20Registered%20Securities) There were no unregistered sales of equity securities or use of proceeds from registered securities to report for the period - None to report for unregistered sales of equity securities and use of proceeds from registered securities[175](index=175&type=chunk) [Item 5 Other Information](index=46&type=section&id=Item%205%20Other%20Information) No other information is required to be reported for the period - None to report for other information[176](index=176&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate governance documents and certifications - Exhibits include corporate governance documents (e.g., Certificate of Incorporation, Bylaws), certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Sarbanes-Oxley Act), and Inline XBRL documents[178](index=178&type=chunk) [Signatures](index=48&type=section&id=Signatures) The report was officially signed on behalf of Myomo, Inc. by David A. Henry, Chief Financial Officer, on August 11, 2025 - The report was signed by David A. Henry, Chief Financial Officer, on August 11, 2025[182](index=182&type=chunk)

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements for Arcturus Therapeutics, including balance sheets, statements of operations, and cash flows, along with detailed notes [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Arcturus Therapeutics as of June 30, 2025, and for the three and six-month periods then ended [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to **$309.3 million** from **$344.1 million** at December 31, 2024, primarily due to reduced cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $196,467 | $237,028 | | Total current assets | $274,503 | $305,979 | | **Total assets** | **$309,270** | **$344,069** | | **Liabilities & Equity** | | | | Total current liabilities | $46,515 | $65,489 | | **Total liabilities** | **$78,217** | **$103,091** | | **Total stockholders' equity** | **$231,053** | **$240,978** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For Q2 2025, total revenues were **$28.3 million** with a net loss of **$9.2 million**, a reduction from the prior year's **$49.9 million** revenue and **$17.2 million** net loss Q2 2025 vs Q2 2024 Statement of Operations (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenue | $28,301 | $49,859 | | Total operating expenses | $39,917 | $70,985 | | Loss from operations | $(11,616) | $(21,126) | | **Net loss** | **$(9,180)** | **$(17,216)** | | Net loss per share | $(0.34) | $(0.64) | Six Months Ended June 30, 2025 vs 2024 Statement of Operations (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Total revenue | $57,683 | $87,871 | | Total operating expenses | $86,125 | $139,409 | | Loss from operations | $(28,442) | $(51,538) | | **Net loss** | **$(23,256)** | **$(44,033)** | | Net loss per share | $(0.86) | $(1.64) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$40.9 million** for the six months ended June 30, 2025, resulting in a **$40.6 million** net decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(40,893) | $(35,699) | | Net cash used in investing activities | $(137) | $(568) | | Net cash provided by financing activities | $469 | $4,591 | | **Net decrease in cash, cash equivalents and restricted cash** | **$(40,561)** | **$(31,676)** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, revenue recognition, balance sheet components, and the impact of new tax laws, including a **$20.0 million** milestone from CSL Seqirus - The company's COVID-19 vaccine, KOSTAIVE® (ARCT-154), received marketing authorization in Japan in 2023 and became commercially available in September 2024, marking it as the world's first approved self-amplifying RNA (sa-mRNA) vaccine[24](index=24&type=chunk) - During Q2 2025, the company achieved **$20.0 million** in development milestones related to the CSL Collaboration Agreement[38](index=38&type=chunk) Revenue Breakdown by Source (in thousands) | Revenue Source | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | CSL Seqirus | $24,427 | $45,911 | $49,900 | $78,292 | | BARDA | $3,791 | $3,883 | $7,696 | $9,297 | | **Total Collaboration Revenue** | **$24,510** | **$45,976** | **$49,987** | **$78,574** | | **Total Grant Revenue** | **$3,791** | **$3,883** | **$7,696** | **$9,297** | - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is expected to impact the company's effective tax rate and deferred tax liability, with changes to be reflected starting in Q3 2025[67](index=67&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's transition to a commercial-stage entity following the Japanese launch of KOSTAIVE®, detailing business updates, financial results, liquidity, and future funding requirements [Business Updates](index=23&type=section&id=Business%20Updates) The company highlights significant progress across its vaccine and therapeutic programs, including European marketing authorization for KOSTAIVE® and advancements in influenza, OTC, and cystic fibrosis pipelines - KOSTAIVE® (ARCT-154) received marketing authorization from the European Commission in February 2025, valid in all 27 EU member states and 3 EEA countries[89](index=89&type=chunk) - CSL Seqirus submitted a marketing authorization application for KOSTAIVE® to the UK's MHRA in June 2025[90](index=90&type=chunk) - The pandemic avian influenza (H5N1) vaccine candidate, ARCT-2304, was granted Fast Track Designation by the U.S. FDA in April 2025[104](index=104&type=chunk) - Positive multiple-dosing data from two Phase 2 studies of ARCT-810 for OTC deficiency were announced on June 30, 2025, showing a significant decrease in glutamine levels and an increase in ureagenesis function[111](index=111&type=chunk)[112](index=112&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Revenue decreased by **43%** in Q2 2025 and **34%** for the first six months, primarily due to reduced CSL collaboration revenue, while total operating expenses fell significantly due to lower R&D and G&A costs Revenue Comparison (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $28,301 | $49,859 | $(21,558) | -43% | | Six Months Ended June 30 | $57,683 | $87,871 | $(30,188) | -34% | Operating Expense Comparison (in thousands) | Period | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Q2** | Research & Development, net | $29,579 | $58,669 | $(29,090) | -50% | | | General & Administrative | $10,338 | $12,316 | $(1,978) | -16% | | **H1** | Research & Development, net | $64,471 | $112,242 | $(47,771) | -43% | | | General & Administrative | $21,654 | $27,167 | $(5,513) | -20% | - The decrease in R&D expenses was primarily driven by lower manufacturing and clinical costs for the LUNAR-COVID program, reflecting its transition from development to commercial phase[122](index=122&type=chunk)[123](index=123&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company held **$253.4 million** in cash, cash equivalents, and restricted cash, with management expecting current funds to cover operations for at least the next twelve months, though additional capital will be required for long-term plans - The company's cash, cash equivalents, and restricted cash balance was **$253.4 million** as of June 30, 2025[132](index=132&type=chunk) - The company has achieved a total of approximately **$509.7 million** in upfront payments and milestones from CSL Seqirus through Q2 2025[132](index=132&type=chunk) - Management expects current cash to be sufficient for at least the next twelve months, but will need to raise additional capital to fund long-term development[151](index=151&type=chunk) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash used in Operating activities | $(40,893) | $(35,699) | | Cash used in Investing activities | $(137) | $(568) | | Cash provided by Financing activities | $469 | $4,591 | | **Net decrease in cash** | **$(40,561)** | **$(31,676)** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its cash and cash equivalents, which management considers not material - The company's main market risk is interest rate changes affecting interest income on its cash and cash equivalents, which is not considered a material risk[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting related to information technology general controls (ITGCs) - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[157](index=157&type=chunk) - The material weakness relates to information technology general controls (ITGCs), including deficiencies in user access controls, program change management, and monitoring of critical IT operations[161](index=161&type=chunk) - A remediation plan is in progress, involving enhancing IT policies, limiting system access, improving user access reviews, and hiring an internal audit manager, with completion expected in fiscal year 2025[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, other information, and exhibits [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company initiated arbitration against CSL Seqirus on May 30, 2025, to seek a milestone payment related to KOSTAIVE®'s European marketing authorization, which CSL Seqirus disputes - On May 30, 2025, Arcturus initiated an arbitration against CSL Seqirus to seek payment of a milestone under their collaboration agreement following the European marketing authorization of KOSTAIVE®[168](index=168&type=chunk) - CSL Seqirus submitted an Answer on July 25, 2025, contending it does not have a current obligation to pay the milestone, and the arbitration is ongoing[168](index=168&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes have occurred from the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2024[170](index=170&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&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 - None[171](index=171&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) During the three months ended June 30, 2025, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025[174](index=174&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with or incorporated by reference into this Quarterly Report on Form 10-Q, including sales agreements, corporate governance documents, material contracts, and officer certifications

Part I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Viavi Solutions Inc. provides network testing, monitoring, and optical technologies through its NSE and OSP segments, focusing on core leadership and growth - Effective March 30, 2025, the company realigned its reporting structure, combining NE and SE segments into a single **Network and Service Enablement (NSE) segment**[16](index=16&type=chunk) - The corporate strategy focuses on defending leadership in core segments, investing in secular growth trends like fiber and wireless, and extending technologies into adjacent markets such as aerospace and defense[18](index=18&type=chunk) - As of June 28, 2025, the company employed approximately **3,600 people** across 31 countries[68](index=68&type=chunk) [Business Segments](index=6&type=section&id=Business%20Segments) The company operates two segments: Network and Service Enablement (NSE) for network solutions and Optical Security and Performance Products (OSP) for optical technologies - The NSE segment provides solutions for lab, production, network management, and AIOps, serving major customers including AT&T, Cisco, and Verizon[21](index=21&type=chunk)[22](index=22&type=chunk)[27](index=27&type=chunk) - The OSP segment's technologies include **Optical Variable Pigment (OVP®)** for anti-counterfeiting on banknotes in over **100 countries** and optical filters for 3D sensing[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - A key strategic alliance for the OSP segment is with **SICPA Holding SA Company** for global marketing and sales of OVP and OVMP products for banknote anti-counterfeiting[40](index=40&type=chunk) [Research and Development](index=9&type=section&id=Research%20and%20Development) Viavi invests substantially in R&D for new products and technologies, securing a **$21.7 million** grant for ORAN testing - In fiscal 2024, the company received approval for a grant of approximately **$21.7 million** over three years from the Public Wireless Supply Chain Innovation Fund to support Open Radio Access Network (ORAN) automated testing[54](index=54&type=chunk) [Seasonality](index=10&type=section&id=Seasonality) The company's business experiences seasonality, with NSE revenue peaking in Q2/Q4 and OSP revenue highest in Q1/Q2 due to market cycles - NSE revenue is typically highest in **Q2 and Q4** and weakest in **Q3**, influenced by customer calendar year spending and budget cycles[66](index=66&type=chunk) - OSP revenue is seasonally higher in **Q1 and Q2** due to smartphone market exposure, with demand declining in Q3 and Q4[67](index=67&type=chunk) [Human Capital Management](index=11&type=section&id=Human%20Capital%20Management) Viavi manages human capital for **3,600 employees** across 31 countries, focusing on culture, talent, and rewards, with a best-in-class safety record - The company's safety program achieved a best-in-class **Total Recordable Injury Rate (TRIR) of 0.08 injuries per 100 full-time workers** per year[80](index=80&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including geopolitical, technological, customer concentration, operational, cybersecurity, regulatory, environmental, and financial leverage - Global risks, including geopolitical tensions in Ukraine, the Middle East, and U.S.-China relations, could cause market instability, supply chain pressure, and increased costs[83](index=83&type=chunk) - Reliance on a limited number of customers, including a strategic alliance with **SICPA** for OVP and OVMP products, creates vulnerability to order reductions or loss of key relationships[93](index=93&type=chunk)[94](index=94&type=chunk) - Risks associated with the **Inertial Labs acquisition** and proposed **Spirent acquisition** include failure to realize anticipated benefits and integration challenges[97](index=97&type=chunk)[98](index=98&type=chunk) - Outstanding debt, including **Senior Convertible Notes due 2026** and **Senior Notes due 2029**, increases leverage, potentially limiting operational flexibility and future financing access[128](index=128&type=chunk)[130](index=130&type=chunk) [Item 1B. Unresolved Staff Comments](index=28&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[146](index=146&type=chunk) [Item 1C. Cybersecurity](index=28&type=section&id=Item%201C.%20Cybersecurity) Viavi maintains a comprehensive cybersecurity risk management strategy, overseen by the Audit Committee, with no material security breaches in the last three fiscal years - The company's cybersecurity approach utilizes **NIST and ISO frameworks** and includes an Incident Response Plan[148](index=148&type=chunk)[149](index=149&type=chunk) - Cybersecurity oversight is delegated to the **Audit Committee**, which formed a Cybersecurity Steering Committee including independent directors and key management[153](index=153&type=chunk) - The company has not experienced any material information security breach incidents in the **last three fiscal years**, with immaterial related expenses[151](index=151&type=chunk) [Item 2. Properties](index=29&type=section&id=Item%202.%20Properties) This item is not applicable [Item 3. Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 18, 'Commitments and Contingencies,' in the financial statements - Information for this section is located in **Note 18** of the financial statements[160](index=160&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under VIAV, with **1,392 holders**, no cash dividends, and **$198.4 million** authorized for repurchases - The company has not paid cash dividends on its common stock and does not anticipate paying them in the foreseeable future[163](index=163&type=chunk) - No shares were repurchased in Q4 FY2025, leaving **$198.4 million** authorized under the September 2022 stock repurchase plan[164](index=164&type=chunk) [Item 6. [Reserved]](index=31&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal 2025, Viavi's net revenue grew **8.4% to $1.08 billion**, with improved operating margins and **$89.8 million** in operating cash flow, driven by strategic acquisitions Fiscal 2025 Financial Highlights (Year-over-Year) | Metric | Fiscal 2025 | Change vs. FY2024 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $1.08 billion | +$83.9 million | +8.4% | | GAAP Operating Margin | 5.3% | +320 bps | N/A | | Non-GAAP Operating Margin | 14.2% | +270 bps | N/A | | GAAP Diluted EPS | $0.15 | +$0.27 | +225.0% | | Non-GAAP Diluted EPS | $0.47 | +$0.14 | +42.4% | - The company agreed to acquire **Spirent Communications plc's** high-speed ethernet, network security, and channel emulation testing businesses for **$425 million**, expected to close by September 2025[177](index=177&type=chunk) - In fiscal 2025, the company generated **$89.8 million** in operating cash flow, used **$121.7 million** for the **Inertial Labs acquisition**, and repurchased **$16.4 million** of common stock[182](index=182&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Fiscal 2025 net revenue increased **8.4% to $1,084.3 million**, driven by NSE growth, with gross margin slightly down and income from operations significantly up to **$57.5 million** Consolidated Statement of Operations Summary (FY2025 vs. FY2024) | Metric (in millions) | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net Revenue** | **$1,084.3** | **$1,000.4** | **$83.9** | **8.4%** | | Gross Profit | $621.1 | $575.9 | $45.2 | 7.8% | | *Gross Margin* | *57.3%* | *57.6%* | *-0.3 p.p.* | *N/A* | | R&D Expense | $208.7 | $201.9 | $6.8 | 3.4% | | SG&A Expense | $349.4 | $333.3 | $16.1 | 4.8% | | Restructuring Charges | $0.7 | $13.6 | ($12.9) | (94.9)% | | **Income from Operations** | **$57.5** | **$20.8** | **$36.7** | **176.4%** | - Net revenue growth was primarily driven by the data center ecosystem and aerospace and defense products, including a **$25.2 million contribution** from the **Inertial Labs acquisition**, partially offset by declines in wireless and cable spending[199](index=199&type=chunk) [Operating Segment Information](index=42&type=section&id=Operating%20Segment%20Information) In fiscal 2025, NSE revenue grew **10.6% to $776.6 million** with expanded margin, while OSP revenue increased **3.1% to $307.7 million** with slight margin improvement Segment Performance (FY2025 vs. FY2024) | Segment | Metric (in millions) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | | **NSE** | Net Revenue | $776.6 | $702.0 | 10.6% | | | Operating Income | $41.6 | $8.0 | 420.0% | | | *Operating Margin* | *5.4%* | *1.1%* | *+4.3 p.p.* | | **OSP** | Net Revenue | $307.7 | $298.4 | 3.1% | | | Operating Income | $112.3 | $107.0 | 5.0% | | | *Operating Margin* | *36.5%* | *35.9%* | *+0.6 p.p.* | - NSE revenue growth was driven by higher volume in Lab and Production and Aerospace and Defense, including a **$25.2 million contribution** from the **Inertial Labs acquisition**[228](index=228&type=chunk) - OSP revenue growth was primarily driven by higher Anti-Counterfeiting and Other revenues, partially offset by a decrease in 3D sensing revenue[230](index=230&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 28, 2025, cash decreased by **$49.7 million to $432.1 million**, with **$89.8 million** from operations, **$128.4 million** used in investing, and **$23.6 million** in financing Cash Flow Summary (Fiscal Year 2025) | Cash Flow Activity | Amount (in millions) | | :--- | :--- | | Net cash provided by operating activities | $89.8 | | Net cash used in investing activities | ($128.4) | | Net cash used in financing activities | ($23.6) | | **Net decrease in cash** | **($49.7)** | - The company secured commitments for a **$600 million 7-year Term Loan B facility** to fund the pending **Spirent acquisition** and for general corporate purposes, closing concurrently with the acquisition[239](index=239&type=chunk) Material Contractual Obligations as of June 28, 2025 | Obligation Type | Total (in millions) | Due in < 1 year | Due in 1-3 years | Due in 3-5 years | Due > 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt (Principal & Interest) | $722.6 | $269.7 | $30.4 | $422.5 | $0 | | Purchase obligations | $160.7 | $141.7 | $18.5 | $0.4 | $0.1 | | Operating lease obligations | $41.2 | $10.6 | $16.6 | $6.0 | $8.0 | | **Total** | **$1,008.9** | **$432.9** | **$85.8** | **$447.8** | **$42.4** | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency, investments, and debt, managing foreign exchange with forward contracts totaling **$60.4 million** to purchase and **$24.1 million** to sell - The company uses foreign exchange forward contracts to hedge currency risk, with notional amounts of **$60.4 million** to purchase and **$24.1 million** to sell foreign currencies as of June 28, 2025[256](index=256&type=chunk)[258](index=258&type=chunk) Fair Value of Debt as of June 28, 2025 | Debt Instrument | Carrying Value (in millions) | Fair Value (in millions) | | :--- | :--- | :--- | | 1.625% Senior Convertible Notes due 2026 | $246.2 | $252.0 | | 3.75% Senior Notes due 2029 | $396.3 | $373.6 | [Item 8. Financial Statements and Supplementary Data](index=48&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2023-2025, including the auditor's report, core statements, and detailed notes [Report of Independent Registered Public Accounting Firm](index=48&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion on financial statements and internal controls, identifying **NSE revenue recognition** and **Inertial Labs acquisition valuation** as Critical Audit Matters - The auditor, **PricewaterhouseCoopers LLP**, issued an unqualified opinion on the financial statements and internal controls[268](index=268&type=chunk) - Critical Audit Matters included **NSE segment revenue recognition** and the **valuation of contingent consideration and developed technology** from the **Inertial Labs acquisition**[275](index=275&type=chunk)[277](index=277&type=chunk)[281](index=281&type=chunk) [Consolidated Financial Statements](index=51&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show fiscal 2025 net revenue of **$1,084.3 million**, income from operations of **$57.5 million**, and total assets of **$1,993.8 million** Key Financial Statement Data (Fiscal Year 2025) | Metric (in millions) | Amount | | :--- | :--- | | **Statement of Operations** | | | Total Net Revenue | $1,084.3 | | Gross Profit | $621.1 | | Income from Operations | $57.5 | | Net Income | $34.8 | | **Balance Sheet (as of June 28, 2025)** | | | Total Assets | $1,993.8 | | Total Liabilities | $1,213.6 | | Total Stockholders' Equity | $780.2 | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed accounting policies and financial data, including acquisitions (Note 5), debt (Note 11), and segment realignment (Note 19) - **Note 5**: On January 28, 2025, the company acquired **Inertial Labs** for approximately **$134.4 million** in cash and up to **$175.0 million** in contingent consideration, resulting in **$130.3 million** of goodwill[395](index=395&type=chunk)[396](index=396&type=chunk)[399](index=399&type=chunk) - **Note 11**: As of June 28, 2025, total debt carrying value was **$642.5 million**, comprising **$246.2 million** in short-term debt (2026 Notes) and **$396.3 million** in long-term debt (2029 Notes)[459](index=459&type=chunk) - **Note 19**: The company realigned segments into **Network and Service Enablement (NSE)** and **Optical Security and Performance Products (OSP)**, with FY2025 revenues of **$776.6 million** for NSE and **$307.7 million** for OSP[585](index=585&type=chunk)[589](index=589&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=110&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[600](index=600&type=chunk) [Item 9A. Controls and Procedures](index=110&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of **June 28, 2025**, excluding the recently acquired **Inertial Labs** - The CEO and CFO concluded that disclosure controls and procedures were effective as of **June 28, 2025**[601](index=601&type=chunk) - Management concluded that internal control over financial reporting was effective as of **June 28, 2025**, excluding the recently acquired **Inertial Labs** (2.3% of consolidated revenue, 2.1% of total assets)[602](index=602&type=chunk)[603](index=603&type=chunk) [Item 9B. Other Information](index=111&type=section&id=Item%209B.%20Other%20Information) No directors or Section 16 officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during Q4 fiscal 2025 - No directors or Section 16 officers adopted, modified, or terminated a **Rule 10b5-1 trading plan** in the fourth fiscal quarter of 2025[607](index=607&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=111&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=112&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2025 Definitive Proxy Statement [Item 11. Executive Compensation](index=113&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation, including Compensation Discussion and Analysis, is incorporated by reference from the company's 2025 Proxy Statement [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=113&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners, management, and equity compensation plans is incorporated by reference from the company's 2025 Proxy Statement [Item 13. Certain Relationships and Related Transactions and Director Independence](index=113&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information on related person transactions and director independence is incorporated by reference from the company's 2025 Proxy Statement [Item 14. Principal Accounting Fees and Services](index=113&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the company's 2025 Proxy Statement Part IV [Item 15. Exhibits, Financial Statement Schedules](index=114&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, including corporate documents and certifications [Item 16. 10-K Summary](index=116&type=section&id=Item%2016.%2010-K%20Summary) The company reports no 10-K summary - None[628](index=628&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34620 IRONWOOD PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) (617) 621-7722 (Re ...

[PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, detailing balance sheets, operations, equity, cash flows, and notes on accounting policies and liquidity [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows significant reductions in cash, total assets, and equity, with liabilities decreasing due to loan repayment Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $14,280 | $30,268 | | Total current assets | $15,103 | $31,474 | | Total assets | $24,484 | $41,488 | | **Liabilities & Equity** | | | | Total current liabilities | $7,141 | $14,220 | | Total liabilities | $14,701 | $22,362 | | Total stockholders' equity | $9,783 | $19,126 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 net loss decreased to $7.9 million, while H1 2025 net loss increased to $18.7 million, driven by higher R&D expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,871 | $5,837 | $11,498 | $10,177 | | General and administrative | $4,095 | $3,745 | $7,404 | $7,379 | | Loss from operations | $(7,966) | $(9,582) | $(18,902) | $(17,556) | | Net loss | $(7,870) | $(9,570) | $(18,730) | $(17,474) | | Net loss per share | $(2.07) | $(5.52) | $(5.17) | $(10.15) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity declined from $19.1 million to $9.8 million, driven by a $18.7 million net loss, partially offset by stock issuances - During the first six months of 2025, the company issued common stock and pre-funded warrants, raising cash to partially offset the net loss and fund operations[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased to $16.5 million, with financing providing $0.5 million, leading to a $16.0 million net cash decrease for H1 2025 Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(16,467) | $(12,696) | | Cash used in investing activities | $0 | $(417) | | Cash provided by financing activities | $479 | $5,007 | | **Net decrease in cash** | **$(15,988)** | **$(8,106)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail clinical-stage status, 1-for-13 reverse stock split, going concern doubt, strategic review, cost reductions, and financing activities - The company's financial statements were prepared on a going concern basis, but management has substantial doubt about its ability to continue operating for the next 12 months due to recurring losses and limited cash of **$14.3 million** as of June 30, 2025[32](index=32&type=chunk)[33](index=33&type=chunk) - In April 2025, the company reduced its workforce by **21 of 26** full-time employees and transitioned its CEO, CMO, and CFO to consulting arrangements to reduce costs while exploring strategic alternatives[32](index=32&type=chunk) - On April 8, 2025, the company effected a **1-for-13** reverse stock split, with all share and per-share data in the financial statements retrospectively adjusted[29](index=29&type=chunk)[30](index=30&type=chunk) - In June 2025, the company raised approximately **$4.1 million** in net proceeds from a registered direct offering of common stock and pre-funded warrants[37](index=37&type=chunk) - The company fully repaid its loan with Oxford Finance LLC in April 2025 with a payment of **$3.5 million**, which included a **$0.6 million** exit fee, terminating the agreement and releasing all liens[55](index=55&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses clinical programs, strategic review, going concern issues, operational results, and recent financing activities, highlighting financial condition [Overview and Clinical Programs](index=19&type=section&id=Overview%20and%20Clinical%20Programs) Tempest, a clinical-stage biotech, advances amezalpat for Phase 3 HCC and TPST-1495 for Phase 2 FAP, both with key regulatory designations - The lead program, amezalpat, is poised to begin a pivotal Phase 3 study for first-line hepatocellular carcinoma (HCC) after receiving positive feedback from the FDA and NMPA (China)[87](index=87&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - The second clinical program, TPST-1495, is set to begin a Phase 2 trial in patients with Familial Adenomatous Polyposis (FAP) in 2025, with the trial being funded by the National Cancer Institute (NCI)[95](index=95&type=chunk) [Going Concern and Strategic Review](index=20&type=section&id=Going%20Concern%20and%20Strategic%20Review) Substantial doubt exists about the company's going concern ability, with $14.3 million cash for less than 12 months, prompting a strategic review and workforce reduction - The company's existing cash of **$14.3 million** is projected to fund operations for less than 12 months, raising substantial doubt about its ability to continue as a going concern[97](index=97&type=chunk)[101](index=101&type=chunk) - In April 2025, the company began exploring a full range of strategic alternatives and retained MTS Health Partners as a financial advisor[98](index=98&type=chunk) - To extend capital, the company implemented a Reduction in Force (RIF), cutting its workforce from **26 to 5** full-time employees, with key executives transitioning to consulting roles[100](index=100&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q2 2025 R&D decreased by 34% to $3.9 million, while H1 2025 R&D increased by 13% to $11.5 million, with Q2 G&A rising due to separation costs Comparison of Operating Expenses (in thousands) | Expense | Q2 2025 | Q2 2024 | Change | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research & Development | $3,871 | $5,837 | -34% | $11,498 | $10,177 | +13% | | General & Administrative | $4,095 | $3,745 | +9% | $7,404 | $7,379 | 0% | - The decrease in Q2 2025 R&D spending was primarily due to pausing clinical activities while exploring strategic alternatives, while the increase in H1 2025 R&D was driven by costs for contract research and manufacturing in preparation for the amezalpat pivotal trial[112](index=112&type=chunk)[119](index=119&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds $14.3 million cash with a $225.8 million deficit, raised $6.9 million in H1 2025, repaid a loan, and faces substantial doubt about its going concern ability - The company's operations have been financed by sales of common stock, convertible preferred stock, and debt, with cash and cash equivalents at **$14.3 million** as of June 30, 2025[123](index=123&type=chunk) - In H1 2025, the company raised **$2.8 million** from its ATM Program and approximately **$4.1 million** net from a Registered Direct Offering (RDO)[127](index=127&type=chunk)[129](index=129&type=chunk) - The company repaid its **$3.5 million** loan with Oxford Finance in full in April 2025, terminating the agreement[125](index=125&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) This disclosure is not required as the company qualifies as a smaller reporting company - Disclosure is not required for smaller reporting companies[145](index=145&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[147](index=147&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[148](index=148&type=chunk) [PART II — OTHER INFORMATION](index=29&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is not currently involved in any material legal proceedings that would have a material adverse effect on its business or financial condition[150](index=150&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks including going concern doubt, strategic review uncertainty, operating losses, clinical setbacks, regulatory hurdles, and stock price volatility [Risks Related to Our Financial Position and Capital Needs](index=30&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Capital%20Needs) Critical financial risks include substantial doubt about going concern, need for additional funding, uncertain strategic review outcomes, and a history of operating losses - There is substantial doubt about the company's ability to continue as a going concern, as its cash of **$14.3 million** as of June 30, 2025, is expected to fund operations for less than 12 months[155](index=155&type=chunk) - The process of evaluating strategic alternatives may not result in any transaction, and failure to complete one could cause a decline in the stock price[159](index=159&type=chunk)[160](index=160&type=chunk) - The company has a history of operating losses, with an accumulated deficit of **$225.8 million** as of June 30, 2025, and expects to continue incurring losses[169](index=169&type=chunk) [Risks Related to Our Business and Strategy](index=34&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Strategy) Strategic risks include retaining skilled employees, potential disruptions from acquisitions, and limitations on utilizing net operating loss carryforwards due to ownership changes - The company's success is highly dependent on retaining senior management, and it faces intense competition for qualified personnel in the biotechnology field[172](index=172&type=chunk)[173](index=173&type=chunk) - The company's ability to use its net operating loss (NOL) carryforwards to offset future taxable income may be limited under Section 382 of the Code due to past and potential future ownership changes[177](index=177&type=chunk) [Risks Related to Product Development and Regulatory Approval](index=35&type=section&id=Risks%20Related%20to%20Product%20Development%20and%20Regulatory%20Approval) Business success depends on development and regulatory approval of TPST-1495 and amezalpat, facing risks like trial replication, patient enrollment, side effects, and uncertain FDA approval - The company's ability to generate revenue depends heavily on the successful development and commercialization of its lead product candidates, TPST-1495 and amezalpat, which is uncertain[178](index=178&type=chunk) - Positive results in early-stage clinical trials may not be replicated in later, larger trials, which is a common risk in the biotechnology industry[184](index=184&type=chunk)[186](index=186&type=chunk) - Potential difficulties in enrolling patients for clinical trials could cause delays and increase costs, potentially jeopardizing development programs[187](index=187&type=chunk)[189](index=189&type=chunk) [Risks Related to Commercialization and Manufacturing](index=43&type=section&id=Risks%20Related%20to%20Commercialization%20and%20Manufacturing) Commercial success is not guaranteed, facing risks from market acceptance, pricing uncertainty, reliance on third-party manufacturers, intense competition, and lack of sales infrastructure - Commercial success depends on market acceptance by providers, patients, and third-party payors, which is uncertain[217](index=217&type=chunk) - The company relies on third-party contract manufacturing organizations (CMOs) for its clinical supplies, which exposes it to risks of production delays, quality issues, and supply disruptions[226](index=226&type=chunk)[233](index=233&type=chunk) - The biopharmaceutical industry is intensely competitive, and competitors may have greater financial and technical resources, potentially developing more effective therapies or achieving regulatory approval sooner[228](index=228&type=chunk)[231](index=231&type=chunk) [Risks Related to Government Regulation](index=49&type=section&id=Risks%20Related%20to%20Government%20Regulation) Operating in a highly regulated environment, the company faces risks from lengthy FDA approval, healthcare legislation impacts, evolving data privacy laws, and anti-kickback regulations - The FDA regulatory approval process is lengthy, time-consuming, and unpredictable, with a high potential for delays or failure[250](index=250&type=chunk) - Recent and future healthcare legislation, such as the Inflation Reduction Act (IRA), may increase pricing pressure and the difficulty of commercializing products[269](index=269&type=chunk)[273](index=273&type=chunk) - The company is subject to numerous evolving data privacy and security laws in the U.S. and abroad (e.g., HIPAA, CCPA, GDPR), and non-compliance could lead to significant fines and reputational harm[281](index=281&type=chunk)[282](index=282&type=chunk)[286](index=286&type=chunk) [Risks Related to Our Intellectual Property](index=62&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Success depends on obtaining and protecting intellectual property, facing risks from costly patenting, potential challenges, reliance on third-party licenses, infringement claims, and global IP enforcement - The company's commercial success depends on obtaining and maintaining strong patent protection, but the patenting process is expensive, time-consuming, and uncertain[316](index=316&type=chunk) - The company depends on intellectual property licensed from third parties, such as the Regents of the University of California, and could lose significant rights if these licenses are terminated or if disputes arise[318](index=318&type=chunk)[319](index=319&type=chunk) - The company may face third-party claims of intellectual property infringement, which could be expensive to defend and could block the commercialization of its product candidates[339](index=339&type=chunk)[341](index=341&type=chunk) [Risks Related to Ownership of Our Common Stock and Other General Matters](index=74&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock%20and%20Other%20General%20Matters) Stockholders face risks from high stock price volatility, reduced liquidity post-reverse split, thin trading, reduced disclosure as a smaller reporting company, and anti-takeover provisions - The market price of the company's common stock has been and is likely to continue to be highly volatile[371](index=371&type=chunk) - The **1-for-13** reverse stock split effective April 8, 2025, may reduce trading liquidity and there is no assurance it will maintain a higher stock price[376](index=376&type=chunk) - The company has a stockholder rights plan (a 'poison pill') and other anti-takeover provisions that could discourage or prevent an acquisition[392](index=392&type=chunk)[395](index=395&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=81&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 - None[402](index=402&type=chunk) [Item 3. Defaults Upon Senior Securities](index=81&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable - Not applicable[403](index=403&type=chunk) [Item 4. Mine Safety Disclosures](index=81&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - Not applicable[404](index=404&type=chunk) [Item 5. Other Information](index=81&type=section&id=Item%205.%20Other%20Information) The company entered into success bonus agreements with key executives, contingent on a change in control before January 31, 2026, and amended the Corporate Controller's offer letter - The company entered into success bonus agreements with key executives, totaling **$725,000** in aggregate, contingent upon a change in control occurring before January 31, 2026[84](index=84&type=chunk)[405](index=405&type=chunk) [Item 6. Exhibits](index=82&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with or incorporated by reference into the Form 10-Q, including corporate governance documents, material agreements, and certifications

[General Information](index=1&type=section&id=General%20Information) This section provides an overview of Armada Acquisition Corp. II's company status and a cautionary note regarding forward-looking statements [Company Information](index=1&type=section&id=Company%20Information) Armada Acquisition Corp. II is a Cayman Islands exempted shell company, classified as a non-accelerated filer, smaller reporting company, and emerging growth company - Registrant is a **Non-accelerated filer**, **Smaller reporting company**, and **Emerging growth company**[5](index=5&type=chunk) - Registrant is a **shell company**[6](index=6&type=chunk) Outstanding Shares as of August 8, 2025 | Share Class | Number of Shares | | :---------- | :--------------- | | Class A Ordinary Shares | 23,710,000 | | Class B Ordinary Shares | 7,880,000 | [Cautionary Note Regarding Forward-Looking Statements](index=5&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section provides a standard cautionary note on forward-looking statements, emphasizing inherent risks and uncertainties that may cause actual results to differ - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and assumptions that may cause actual results to differ materially[9](index=9&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed financial statements and management's discussion and analysis of the company's financial condition and operations [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed financial statements, including the Balance Sheet, Statements of Operations, Changes in Stockholders' Deficit, and Cash Flows, along with detailed explanatory notes [Unaudited Condensed Balance Sheet](index=6&type=section&id=Unaudited%20Condensed%20Balance%20Sheet) This section presents the unaudited condensed balance sheet as of June 30, 2025, detailing assets, liabilities, and equity Unaudited Condensed Balance Sheet as of June 30, 2025 | ASSETS/LIABILITIES & EQUITY | Amount ($) | | :-------------------------- | :--------- | | **TOTAL ASSETS** | 232,905,857| | Cash | 479,526 | | Cash and marketable securities held in Trust Account | 232,132,945| | **TOTAL LIABILITIES** | 9,353,587 | | Deferred underwriting fee payable | 9,200,000 | | Class A ordinary shares subject to possible redemption | 232,132,945| | Total Shareholders' Deficit | (8,580,675)| [Unaudited Condensed Statements of Operations](index=7&type=section&id=Unaudited%20Condensed%20Statements%20of%20Operations) This section presents the unaudited condensed statements of operations for the periods ended June 30, 2025, detailing revenues and expenses Unaudited Condensed Statements of Operations | Metric | Three Months Ended June 30, 2025 ($) | Period from Oct 3, 2024 (Inception) Through June 30, 2025 ($) | | :--------------------------------------- | :----------------------------------- | :---------------------------------------------------------------- | | General and administrative costs | 95,799 | 142,289 | | Loss from operations | (95,799) | (142,289) | | Interest earned on cash and marketable securities held in Trust Account | 982,945 | 982,945 | | Net income | 887,146 | 840,656 | | Basic net income per ordinary share, Class A ordinary shares subject to redemption | 0.05 | 0.08 | | Diluted net income per ordinary share, Class A ordinary shares subject to redemption | 0.05 | 0.07 | [Unaudited Condensed Statement of Changes in Stockholders' Deficit](index=8&type=section&id=Unaudited%20Condensed%20Statement%20of%20Changes%20in%20Stockholders'%20Deficit) This section presents the unaudited condensed statement of changes in stockholders' deficit from inception through June 30, 2025 Changes in Shareholders' Deficit (Oct 3, 2024 - June 30, 2025) | Item | Amount ($) | | :------------------------------------------------ | :--------- | | Balance – October 3, 2024 (Inception) | — | | Issuance of Class B ordinary shares | 25,000 | | Net loss (Oct 3, 2024 - Dec 31, 2024) | (45,784) | | Balance – December 31, 2024 | (20,784) | | Net loss (Jan 1, 2025 - Mar 31, 2025) | (706) | | Balance – March 31, 2025 | (21,490) | | Accretion of Class A ordinary shares to redemption amount | (19,869,840)| | Capital contribution by Sponsor | 4,621,895 | | Cost of raising capital | (4,621,895)| | Sale of Private Placement Units | 7,100,000 | | Fair Value of Public Warrants at issuance | 3,565,000 | | Allocated value of transaction costs | (241,491) | | Net income (Apr 1, 2025 - June 30, 2025) | 887,146 | | Balance – June 30, 2025 | (8,580,675)| [Unaudited Condensed Statement of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Statement%20of%20Cash%20Flows) This section presents the unaudited condensed statement of cash flows from inception through June 30, 2025, categorizing operating, investing, and financing activities Unaudited Condensed Statement of Cash Flows (Oct 3, 2024 - June 30, 2025) | Cash Flow Activity | Amount ($) | | :------------------------------------ | :--------- | | Net cash used in operating activities | (282,830) | | Net cash used in investing activities | (231,150,000)| | Net cash provided by financing activities | 231,912,356| | Net Change in Cash | 479,526 | | Cash – End of period | 479,526 | - Non-Cash investing and financing activities include **$126,826** in accrued offering costs, **$9,840** in deferred offering costs paid via promissory note, **$19,869,840** accretion of Class A ordinary shares to redemption value, **$9,200,000** deferred underwriting fee payable, and **$100,600** deferred offering costs applied to prepaid expenses[22](index=22&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) This section provides detailed notes explaining the company's organization, significant accounting policies, IPO, private placement, commitments, and fair value measurements [NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS](index=10&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) This note describes the company's formation as a blank check company, its IPO, private placement, and the purpose of the Trust Account - The Company was incorporated on **October 3, 2024**, as a blank check company (SPAC) to effect a business combination[25](index=25&type=chunk) - Target industries for business combinations include FinTech, SaaS, or AI[25](index=25&type=chunk) - The Initial Public Offering of **23,000,000 units** at **$10.00 per unit** closed on **May 22, 2025**, generating **$230,000,000 gross proceeds**, including the full exercise of the over-allotment option[27](index=27&type=chunk) - Simultaneously, **710,000 private placement units** were sold at **$10.00 per unit**, generating **$7,100,000 gross proceeds**[27](index=27&type=chunk) - Transaction costs totaled **$14,413,386**, comprising **$4,600,000 cash underwriting fee**, **$9,200,000 deferred underwriting fee**, and **$613,386 other offering costs**[28](index=28&type=chunk) - A total of **$231,150,000** from the IPO and private placement proceeds is held in a Trust Account, invested in U.S. government treasury obligations or money market funds[29](index=29&type=chunk) - The Company has **18 months** from the IPO closing to complete a Business Combination; otherwise, public shares will be redeemed[34](index=34&type=chunk) [NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the significant accounting policies, including GAAP compliance, emerging growth company status, and treatment of trust assets and equity - Financial statements are prepared in accordance with GAAP for interim financial information, with certain disclosures condensed or omitted per SEC rules[36](index=36&type=chunk) - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new or revised financial accounting standards[38](index=38&type=chunk)[39](index=39&type=chunk) - Cash and marketable securities held in the Trust Account (**$232,132,945** as of June 30, 2025) are primarily invested in U.S. Treasury bills maturing September 16, 2025[41](index=41&type=chunk) - Offering costs are allocated between Class A ordinary shares (charged to temporary equity) and warrants (charged to shareholders' deficit)[45](index=45&type=chunk) - The Company is an exempted Cayman Islands company and is not subject to income taxes in the Cayman Islands or the United States for the period presented[48](index=48&type=chunk) - Class A ordinary shares subject to possible redemption are classified as temporary equity and adjusted to redemption value at each reporting period[49](index=49&type=chunk) - Public and Private Placement Warrants are classified under equity treatment at their assigned values[50](index=50&type=chunk) Net Income Per Ordinary Share (June 30, 2025) | Metric | Three Months Ended June 30, 2025 | Period from Oct 3, 2024 (Inception) Through June 30, 2025 | | :------------------------------------------------ | :------------------------------- | :---------------------------------------------------------------- | | Basic net income per ordinary share (Class A - Redeemable) | $0.05 | $0.08 | | Basic net income per ordinary share (Class A & B - Non-redeemable) | $0.05 | $0.08 | | Diluted net income per ordinary share (Class A - Redeemable) | $0.05 | $0.07 | | Diluted net income per ordinary share (Class A & B - Non-redeemable) | $0.05 | $0.07 | - The Company adopted ASU 2023-07 (Segment Reporting) on **October 3, 2024**, its date of incorporation[54](index=54&type=chunk) [Note 3 — Initial Public Offering](index=14&type=section&id=Note%203%20%E2%80%94%20Initial%20Public%20Offering) This note details the Initial Public Offering, including units sold, warrant terms, and redemption conditions - On **June 30, 2025**, the Company sold **23,000,000 units** at **$10.00 per unit**, including the full exercise of the underwriters' overallotment option[56](index=56&type=chunk) - Each unit consists of one Class A ordinary share and one-half of one redeemable warrant, exercisable for whole shares at **$11.50 per share**[56](index=56&type=chunk)[57](index=57&type=chunk) Warrants Outstanding as of June 30, 2025 | Warrant Type | Number Outstanding | | :----------- | :----------------- | | Public Warrants | 11,500,000 | | Private Placement Warrants | 355,000 | - Warrants expire on the fifth anniversary of the Business Combination completion or earlier upon redemption[57](index=57&type=chunk) - The Company may redeem outstanding warrants at **$0.01 per warrant** if the Class A ordinary share price equals or exceeds **$18.00** for **20 trading days** within a **30-trading day period**[62](index=62&type=chunk)[65](index=65&type=chunk) [Note 4 — Private Placement](index=16&type=section&id=Note%204%20%E2%80%94%20Private%20Placement) This note describes the private placement of shares and units to the Sponsor and underwriters, including related party transactions - The Sponsor purchased **7,880,000 Class B ordinary shares** for **$25,000** on **November 7, 2024**; these shares are no longer subject to forfeiture after the underwriters' over-allotment option was fully exercised[66](index=66&type=chunk) - The Sponsor purchased **400,000 private placement units** for **$4,000,000**, and underwriters purchased **310,000 private placement units** for **$3,100,000**[67](index=67&type=chunk) - Non-managing investors purchased **300,000 Private Placement Units** and were allocated interests in **2.4 million founder shares**, valued at **$4,621,895** (**$1.93 per share**) as an offering cost[69](index=69&type=chunk)[70](index=70&type=chunk) - A promissory note from the Sponsor for up to **$300,000** was repaid on **May 22, 2025**, with an outstanding balance of **$143,079**[72](index=72&type=chunk) - The Company owes related parties **$808** for expenses as of **June 30, 2025**[73](index=73&type=chunk) - The Company pays the Sponsor **$12,000 per month** for administrative services, with payments deferred until new financing occurs[74](index=74&type=chunk) [Note 5 — Commitments and Contingencies](index=17&type=section&id=Note%205%20%E2%80%94%20Commitments%20and%20Contingencies) This note outlines the company's commitments and contingencies, including registration rights, deferred underwriting fees, and advisor fees - Initial shareholders and non-managing investors have registration rights for Founder Shares, Private Placement Shares, Warrants, and underlying securities[77](index=77&type=chunk) - The Company paid a **$4,600,000 cash underwriting discount** and has a deferred underwriting fee of **$9,200,000**, payable upon completion of a Business Combination[79](index=79&type=chunk) - Northland Securities, Inc. is entitled to a **1.0% Finder Fee** upon closing of a Business Combination and up to **$20,000** in reimbursed expenses[80](index=80&type=chunk) - Bishop IR is engaged as an investor relations advisor for a monthly fee of **$8,500** and a **$100,000 success fee**, both payable upon closing of a Business Combination[81](index=81&type=chunk) [Note 6 — Shareholders' Deficit](index=17&type=section&id=Note%206%20%E2%80%94%20Shareholders'%20Deficit) This note details the authorized and outstanding share capital, including preferred, Class A, and Class B ordinary shares - The Company is authorized to issue **1,000,000 preferred shares**, with none issued or outstanding as of **June 30, 2025**[82](index=82&type=chunk) - As of **June 30, 2025**, there were **710,000 Class A ordinary shares** issued and outstanding (excluding **23,000,000** subject to redemption) and **7,880,000 Class B ordinary shares** issued and outstanding[83](index=83&type=chunk)[84](index=84&type=chunk) [Note 7 — Segment Information](index=18&type=section&id=Note%207%20%E2%80%94%20Segment%20Information) This note confirms the company operates as a single segment and lists key financial metrics reviewed by management - The Company operates as a **single segment**, with the Chief Financial Officer (CODM) assessing performance and allocating resources[85](index=85&type=chunk) Key Metrics Reviewed by CODM | Metric | June 30, 2025 ($) | | :------------------------------------ | :---------------- | | Cash | 479,526 | | Cash and marketable securities held in Trust Account | 232,132,945 | | Metric | For the Three Months Ended June 30, 2025 ($) | For period from Oct 3, 2024 (Inception) through June 30, 2025 ($) | | :------------------------------------ | :------------------------------------------- | :---------------------------------------------------------------- | | General administrative costs | 95,799 | 142,289 | | Interest earned on cash and marketable securities held in Trust Account | 982,945 | 982,945 | [Note 8 — Fair Value Measurements](index=18&type=section&id=Note%208%20%E2%80%94%20Fair%20Value%20Measurements) This note explains the fair value hierarchy and provides valuations for assets, public warrants, and founder share interests using specific models and assumptions - Fair value hierarchy prioritizes inputs: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[87](index=87&type=chunk)[88](index=88&type=chunk) Fair Value of Assets as of June 30, 2025 | Assets | Level | Amount ($) | | :------------------------------------ | :---- | :--------- | | Cash and marketable securities held in Trust Account | 1 | 232,132,945| - The fair value of Public Warrants is **$3,565,000** (**$0.31 per warrant**), determined using a Monte Carlo Simulation Model[89](index=89&type=chunk) Market Assumptions for Public Warrants Valuation (May 22, 2025) | Metric | Value | | :----------- | :------ | | Volatility | 6.4% | | Risk free rate | 3.99% | | Stock price | $9.845 | | Weighted term (Yrs) | 2.99 | - The fair value of **2,400,000 interests in founder shares** allocated to non-managing members was **$4,621,895** (**$1.93 per share**), also determined using a Monte Carlo Simulation Model[89](index=89&type=chunk) Market Assumptions for Founder Shares Interests Valuation (May 22, 2025) | Metric | Value | | :----------- | :------ | | Volatility | 6.40% | | Risk free rate | 4.09% | | Stock price | $9.845 | | Weighted term (Yrs) | 1.34 | [Note 9 — Subsequent Events](index=19&type=section&id=Note%209%20%E2%80%94%20Subsequent%20Events) This note confirms no subsequent events requiring adjustment or disclosure were identified through the financial statement issuance date - No subsequent events requiring adjustment or disclosure were identified through the date the financial statements were issued[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, liquidity, and capital resources, detailing its SPAC status and IPO proceeds [Overview](index=21&type=section&id=Overview) This overview reiterates the company's formation as a blank check company, details the IPO and private placement proceeds, and the Trust Account's purpose - Armada Acquisition Corp. II is a blank check company formed on **October 3, 2024**, to effect a business combination[95](index=95&type=chunk) - The Initial Public Offering closed on **May 22, 2025**, raising **$230,000,000 gross proceeds** from **23,000,000 units**[96](index=96&type=chunk) - A private placement of **710,000 units** simultaneously generated **$7,100,000 gross proceeds**[97](index=97&type=chunk) - Transaction costs amounted to **$14,413,386**, including **$9,200,000** in deferred underwriting fees[98](index=98&type=chunk) - **$231,150,000** of net proceeds were placed in a Trust Account, invested in U.S. government securities or money market funds[99](index=99&type=chunk) - The Company must complete a Business Combination within **18 months** from the IPO closing (by **November 22, 2026**) or redeem public shares and liquidate[100](index=100&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section details the company's financial performance, noting no operating revenues and income primarily from Trust Account interest - The Company has not engaged in operations or generated revenues to date, with activities focused on formation and the IPO[102](index=102&type=chunk) - Non-operating income is generated from interest on marketable securities in the Trust Account[102](index=102&type=chunk) Net Income Summary | Period | Net Income ($) | Interest Income ($) | General & Administrative Costs ($) | | :------------------------------------ | :------------- | :------------------ | :--------------------------------- | | Three months ended June 30, 2025 | 887,146 | 982,945 | 95,799 | | Oct 3, 2024 (inception) - June 30, 2025 | 840,656 | 982,945 | 142,289 | [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity and capital resources, including IPO proceeds, Trust Account holdings, and cash outside the Trust Account - The IPO and Private Placement generated gross proceeds of **$230,000,000** and **$7,100,000**, respectively[104](index=104&type=chunk) - A total of **$231,150,000** was placed in the Trust Account, with transaction costs of **$14,413,386**[105](index=105&type=chunk) - Cash used in operating activities from inception through **June 30, 2025**, was **$282,830**[106](index=106&type=chunk) - As of **June 30, 2025**, the Trust Account held **$232,132,945** (including **$982,945 interest income**), primarily in U.S. Treasury Bills[107](index=107&type=chunk) - The Company had **$479,526** in cash outside the Trust Account as of **June 30, 2025**, intended for identifying and evaluating target businesses[108](index=108&type=chunk) - The Sponsor or affiliates may provide Working Capital Loans, repayable upon Business Combination completion or from working capital outside the Trust Account if no combination occurs[109](index=109&type=chunk) - The Company does not anticipate needing additional funds for operations but may require financing for a Business Combination or significant share redemptions[110](index=110&type=chunk) [Off-Balance Sheet Arrangements](index=23&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements as of June 30, 2025 - The Company has no off-balance sheet arrangements as of **June 30, 2025**[111](index=111&type=chunk) [Contractual Obligations](index=23&type=section&id=Contractual%20Obligations) This section outlines the company's contractual obligations, including administrative service fees, deferred underwriting commissions, and advisor fees - The Company has an agreement to pay the Sponsor **$12,000 per month** for administrative services, ceasing upon Business Combination or liquidation[112](index=112&type=chunk) - Underwriters are entitled to a deferred underwriting commission of **$9,200,000**, payable upon completion of an initial Business Combination[114](index=114&type=chunk) - Northland Securities, Inc. is eligible for a **1.0% transaction fee** and up to **$20,000** in reimbursed expenses upon closing of a Business Combination[115](index=115&type=chunk) - Bishop IR is engaged for investor relations, with a monthly fee of **$8,500** and a **$100,000 success fee**, both contingent on Business Combination closing[116](index=116&type=chunk) [Critical Accounting Estimates](index=23&type=section&id=Critical%20Accounting%20Estimates) This section states that the company did not have any critical accounting estimates to disclose as of June 30, 2025 - As of **June 30, 2025**, the Company did not have any critical accounting estimates to disclose[117](index=117&type=chunk) [Recent Accounting Pronouncements](index=23&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the adoption of ASU 2023-07 and management's assessment of other recent accounting pronouncements - The Company adopted ASU 2023-07, 'Segment Reporting,' on **October 3, 2024**, its date of incorporation[118](index=118&type=chunk)[119](index=119&type=chunk) - Management believes no other recently issued, but not yet effective, accounting pronouncements would materially affect the condensed financial statements[120](index=120&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Armada Acquisition Corp. II is exempt from providing quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide disclosures about market risk[121](index=121&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed **effective** as of **June 30, 2025**[122](index=122&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended **June 30, 2025**[124](index=124&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers other information including legal proceedings, risk factors, unregistered sales of equity, and exhibits [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) Armada Acquisition Corp. II reports no legal proceedings - There are no legal proceedings[126](index=126&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Armada Acquisition Corp. II is not required to provide specific risk factor disclosures - The Company is a smaller reporting company and is not required to provide risk factor information[127](index=127&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered sales of equity securities, including Founder Shares and Private Placement Units, and confirms the consistent use of IPO and Private Placement proceeds - **7,880,000 Founder Shares** were issued on **November 7, 2024**, for a **$25,000 capital contribution**, exempt under Section 4(a)(2) of the Securities Act[128](index=128&type=chunk) - **710,000 Private Placement Units** were purchased by the Sponsor, Cohen, and Northland on **May 22, 2025**, also exempt under Section 4(a)(2)[129](index=129&type=chunk) - The Initial Public Offering generated **$230,000,000 gross proceeds** from **23,000,000 units**[131](index=131&type=chunk) - Offering costs totaled approximately **$14.4 million**, with **$231,150,000** of net proceeds placed in the Trust Account[132](index=132&type=chunk) - There has been no material change in the planned use of proceeds from the IPO and Private Placement[133](index=133&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Armada Acquisition Corp. II reports no defaults upon senior securities - There are no defaults upon senior securities[134](index=134&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to Armada Acquisition Corp. II - Mine Safety Disclosures are not applicable[135](index=135&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) Armada Acquisition Corp. II reports no other information under this item - There is no other information to report[136](index=136&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q - Exhibits include Amended and Restated Memorandum and Articles of Association, Warrant Agreement, Private Placement Unit Subscription Agreements, Investment Management Trust Agreement, Registration Rights Agreement, Administrative Services Agreement, Letter Agreement, Form of Indemnity Agreement, and various XBRL documents[138](index=138&type=chunk) [SIGNATURES](index=28&type=section&id=SIGNATURES) The report was signed on August 11, 2025, by the Chief Executive Officer and the President (Principal Accounting and Financial Officer) - The report was signed on **August 11, 2025**, by Stephen P. Herbert (CEO) and Douglas M. Lurio (President, Principal Accounting and Financial Officer)[142](index=142&type=chunk)

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Life360, Inc.'s unaudited condensed consolidated financial statements and accompanying notes are presented for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets significantly increased due to higher cash and convertible notes, mirroring a substantial rise in total liabilities from new convertible note issuances | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :---------------------------- | :------------------------------ | :------------------- | :------- | | **Assets** | | | | | | Cash and cash equivalents | $432.7 | $159.2 | $273.5 | 171.7% | | Total current assets | $521.2 | $241.0 | $280.2 | 116.3% | | Total Assets | $753.6 | $441.6 | $312.0 | 70.7% | | **Liabilities** | | | | | | Total current liabilities | $73.0 | $77.3 | $(4.4) | (5.7)% | | Convertible notes, net, noncurrent | $309.3 | — | $309.3 | N/A | | Total Liabilities | $386.9 | $83.0 | $303.9 | 366.0% | | **Stockholders' Equity** | | | | | | Total stockholders' equity | $366.7 | $358.5 | $8.1 | 2.3% | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The company transitioned from a net loss to net income for Q2 and H1 2025, driven by strong revenue growth across all segments and favorable changes in other income/expense | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------------------ | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Subscription revenue | $88.6 | $65.7 | 35% | $170.5 | $127.3 | 34% | | Hardware revenue | $12.3 | $11.9 | 3% | $21.2 | $22.1 | (4)% | | Other revenue | $14.5 | $7.3 | 100% | $27.4 | $13.7 | 99% | | **Total revenue** | **$115.4** | **$84.9** | **36%** | **$219.0** | **$163.1** | **34%** | | Gross profit | $90.5 | $63.6 | 42% | $174.1 | $123.6 | 41% | | Income (loss) from operations | $2.0 | $(2.4) | 184% | $4.2 | $(8.7) | 148% | | Total other income (expense), net | $4.6 | $(3.1) | 248% | $6.6 | $(5.1) | 229% | | Income (loss) before income taxes | $6.6 | $(5.5) | 221% | $10.8 | $(13.9) | 178% | | Provision for (benefit from) income taxes | $(0.4) | $5.5 | (107)% | $(0.6) | $6.9 | (109)% | | **Net income (loss)** | **$7.0** | **$(11.0)** | **164%** | **$11.4** | **$(20.7)** | **155%** | | Net income (loss) per share, basic | $0.09 | $(0.15) | | $0.15 | $(0.30) | | | Net income (loss) per share, diluted | $0.08 | $(0.15) | | $0.14 | $(0.30) | | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total equity increased, primarily from net income and stock-based compensation, partially offset by capped call purchases and taxes on equity award settlements | Metric (in millions) | Balance at December 31, 2024 | Balance at June 30, 2025 | | :------------------------------------ | :--------------------------- | :----------------------- | | Total Stockholders' Equity | $358.5 | $366.7 | | Net income | N/A | $11.4 | | Stock-based compensation expense | N/A | $25.8 | | Purchase of capped calls | N/A | $(33.7) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash significantly increased, primarily from financing activities, including convertible note issuance, which offset cash used in investing activities | Cash Flow Activity (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $25.4 | $13.9 | | Net cash used in investing activities | $(32.1) | $(2.3) | | Net cash provided by financing activities | $280.5 | $79.7 | | **Net Increase in Cash, Cash Equivalents, and Restricted Cash** | **$273.8** | **$91.3** | | Cash, Cash Equivalents and Restricted Cash at the End of the Period | $434.2 | $162.0 | - Proceeds from issuance of convertible senior notes in 2025 amounted to **$320.0 million**, significantly boosting financing cash flow[30](index=30&type=chunk) - Investing activities in 2025 included a **$25.0 million** convertible note investment and **$2.8 million** cash paid for an acquisition[30](index=30&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering significant accounting policies, financial components, and related transactions [Note 1. Nature of Business](index=11&type=section&id=Note%201.%20Nature%20of%20Business) Life360, Inc. operates a leading technology platform focused on family connectivity and safety, offering a 'freemium' mobile application with features like location sharing and driving safety, alongside hardware tracking devices (Tile and Jiobit), and completed its U.S. IPO on June 6, 2024 - Life360's core offering is a 'freemium' mobile application with subscription options, complemented by hardware tracking devices (Tile, Jiobit)[35](index=35&type=chunk)[36](index=36&type=chunk) - The company completed its U.S. IPO on June 6, 2024, issuing 3,703,704 shares of common stock and receiving net proceeds of **$93.0 million**[38](index=38&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for the unaudited condensed consolidated financial statements, emphasizing conformity with GAAP and SEC requirements for interim reporting, detailing the use of estimates, discussing recent accounting pronouncements, and highlighting concentrations of risk - The financial statements are prepared in conformity with GAAP for interim periods and SEC requirements, with certain footnotes condensed or omitted[41](index=41&type=chunk) - Significant estimates and judgments are made for revenue recognition, credit losses, inventory valuation, stock-based awards, legal contingencies, and fair value measurements[45](index=45&type=chunk)[50](index=50&type=chunk) **Major Customer Revenue Concentration:** | Channel Partner | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Apple | 54% | 55% | 55% | 56% | | Google | 19% | 18% | 19% | 18% | **Major Customer Accounts Receivable Concentration:** | Channel Partner | As of June 30, 2025 | As of December 31, 2024 | | :-------------- | :------------------ | :---------------------- | | Apple | 57% | * | | Google | 12% | 49% | | Data Partner A | 10% | 11% | | Retail Partner A| 12% | 17% | - The company outsources hardware manufacturing to a sole contract manufacturer, but believes alternative suppliers are available[52](index=52&type=chunk) [Note 3. Segment and Geographic Revenue](index=13&type=section&id=Note%203.%20Segment%20and%20Geographic%20Revenue) Life360 operates as a single operating segment, with financial performance evaluated on a consolidated basis, and the majority of its revenue is generated from North America, particularly the United States - The Company operates as one operating segment, with the CEO evaluating financial information and resources on a consolidated basis[55](index=55&type=chunk) **Revenue by Geographic Region (in millions):** | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $100.1 | $74.9 | $191.5 | $145.2 | | Europe, Middle East and Africa | $8.8 | $6.3 | $15.4 | $10.9 | | Other international regions | $6.4 | $3.6 | $12.1 | $6.9 | | **Total revenue** | **$115.4** | **$84.9** | **$219.0** | **$163.1** | **U.S. Revenue as Percentage of Total Revenue:** | Period | 2025 | 2024 | | :--------------------------- | :--- | :--- | | Three months ended June 30 | 85% | 87% | | Six months ended June 30 | 85% | 87% | [Note 4. Deferred Revenue](index=14&type=section&id=Note%204.%20Deferred%20Revenue) Deferred revenue primarily consists of advance payments for subscription services, recognized over the contractual term, with a significant portion of prior year's deferred revenue recognized in current periods and substantial remaining performance obligations - Deferred revenue primarily arises from advance payments for subscription services, recognized ratably over the contract term[57](index=57&type=chunk) **Revenue Recognized from Prior Deferred Revenue (in millions):** | Period | 2025 | 2024 | | :--------------------------- | :--- | :--- | | Three months ended June 30 | $8.6 | $7.8 | | Six months ended June 30 | $31.6| $26.2| - Remaining performance obligations totaled **$234.6 million** as of June 30, 2025, with **38%** expected to be recognized within the next twelve months[59](index=59&type=chunk) [Note 5. Fair Value Measurements](index=14&type=section&id=Note%205.%20Fair%20Value%20Measurements) The company measures certain assets and liabilities at fair value using a three-level hierarchy, with significant changes including a new $25.0 million Convertible Note Investment in Aura and the conversion of a Related Party SAFE to an investment, resulting in a $0.9 million gain - Fair value measurements are categorized into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[61](index=61&type=chunk)[62](index=62&type=chunk) **Recurring Fair Value Measurements (in millions):** | Asset | As of June 30, 2025 (Level 1) | As of June 30, 2025 (Level 3) | As of June 30, 2025 (Total) | As of December 31, 2024 (Level 1) | As of December 31, 2024 (Total) | | :-------------------------- | :---------------------------- | :---------------------------- | :-------------------------- | :-------------------------------- | :------------------------------ | | Money market funds | $384.7 | — | $384.7 | $134.0 | $134.0 | | Convertible Note Investment | — | $25.4 | $25.4 | — | — | | **Total assets** | **$384.7** | **$25.4** | **$410.1** | **$134.0** | **$134.0** | - A **$25.0 million** Convertible Note Investment in Aura was made in May 2025, measured at fair value using a scenario-based, probability-weighted option pricing model (Level 3)[64](index=64&type=chunk)[65](index=65&type=chunk) - The conversion of a Related Party SAFE to a Related Party Investment in April 2025 resulted in a **$0.9 million** gain on change in fair value[67](index=67&type=chunk)[68](index=68&type=chunk) [Note 6. Business Combinations](index=16&type=section&id=Note%206.%20Business%20Combinations) On February 27, 2025, Life360 acquired certain assets of Fantix, Inc. for $4.5 million, consisting of cash and common stock, resulting in the recognition of $3.6 million in intangible assets and $0.9 million in goodwill - Life360 acquired assets from Fantix, Inc. for **$4.5 million** (**$3.5 million** cash, **$1.0 million** common stock) on February 27, 2025[69](index=69&type=chunk) - The acquisition resulted in **$3.6 million** in intangible assets and **$0.9 million** in goodwill, reflecting anticipated synergies and growth opportunities[70](index=70&type=chunk) [Note 7. Balance Sheet Components](index=16&type=section&id=Note%207.%20Balance%20Sheet%20Components) This note provides a detailed breakdown of various balance sheet components, including accounts receivable, inventory, prepaid expenses, property and equipment, noncurrent assets, leases, goodwill, and intangible assets, highlighting changes and related expenses **Accounts Receivable, Net (in millions):** | Metric | As of June 30, 2025 | As of December 31, 2024 | | :---------------------- | :------------------ | :---------------------- | | Accounts receivable | $58.9 | $58.4 | | Allowance for credit losses | $(0.1) | $(0.4) | | **Total accounts receivable, net** | **$58.9** | **$58.0** | **Inventory (in thousands):** | Metric | As of June 30, 2025 | As of December 31, 2024 | | :-------------- | :------------------ | :---------------------- | | Raw materials | $50 | $24 | | Finished goods | $9,623 | $8,033 | | **Total inventory** | **$9,673** | **$8,057** | **Prepaid Expenses and Other Current Assets (in millions):** | Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :------------------ | :---------------------- | | Prepaid expenses | $14.9 | $11.1 | | Other receivables | $3.8 | $3.5 | | **Total prepaid expenses and other current assets** | **$18.7** | **$14.6** | **Property and Equipment, Net (in millions):** | Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :------------------ | :---------------------- | | Total property and equipment, gross | $4.3 | $2.8 | | Less: accumulated depreciation | $(1.2) | $(1.0) | | **Total property and equipment, net** | **$3.0** | **$1.8** | - Depreciation expense for property and equipment increased from **$49 thousand** (Q2 2024) to **$95 thousand** (Q2 2025) and from **$95 thousand** (H1 2024) to **$190 thousand** (H1 2025)[76](index=76&type=chunk) **Prepaid Expenses and Other Assets, Noncurrent (in millions):** | Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :------------------ | :---------------------- | | Prepaid expenses, noncurrent | $3.2 | $1.8 | | Convertible Note Investment | $25.4 | — | | Data Revenue Partner Warrant | $10.9 | $10.9 | | Related Party Investment | $5.9 | — | | Related Party Warrant | $3.9 | $3.9 | | Related Party SAFE | — | $5.0 | | **Total prepaid expenses and other assets, noncurrent** | **$49.2** | **$21.6** | **Goodwill and Intangible Assets, Net (in millions):** | Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :------------------ | :---------------------- | | Total Intangible assets, net | $42.5 | $40.6 | | Goodwill | $134.6 | $133.7 | - Amortization expense for intangible assets increased from **$2.3 million** (Q2 2024) to **$2.9 million** (Q2 2025) and from **$4.6 million** (H1 2024) to **$5.7 million** (H1 2025)[87](index=87&type=chunk) - Goodwill increased by **$0.9 million** due to the Fantix, Inc. acquisition[90](index=90&type=chunk) [Note 8. Convertible Notes](index=20&type=section&id=Note%208.%20Convertible%20Notes) In June 2025, Life360 issued $320.0 million in 0.00% convertible senior notes due 2030, which are senior unsecured obligations, and entered into capped call transactions to mitigate dilution, recorded as a reduction to additional paid-in capital - Issued **$320.0 million** aggregate principal amount of 0.00% convertible senior notes due June 1, 2030, in June 2025[92](index=92&type=chunk) - The notes are convertible into common stock under specific conditions, with an initial conversion price of approximately **$80.97 per share**[92](index=92&type=chunk)[93](index=93&type=chunk) - The net carrying amount of the June 2025 Convertible Notes was **$309.3 million** as of June 30, 2025, with an effective interest rate of **0.68%**[98](index=98&type=chunk) - Entered into capped call transactions for **$33.7 million** to reduce potential dilution, recorded as a reduction to additional paid-in capital[101](index=101&type=chunk)[102](index=102&type=chunk) [Note 9. Commitments and Contingencies](index=22&type=section&id=Note%209.%20Commitments%20and%20Contingencies) Life360 has non-cancellable purchase commitments with its cloud platform provider and contract manufacturer totaling $74.0 million through 2027 and is involved in various legal proceedings, including a settled patent infringement claim and a pending class action lawsuit, but currently has no material litigation reserves **Future Non-Cancellable Purchase Commitments (in millions):** | Year | Amount | | :---------------- | :----- | | Remainder of 2025 | $22.5 | | 2026 | $25.5 | | 2027 | $26.0 | | **Total** | **$74.0**| - A patent infringement claim against Tile was settled at no cost on August 5, 2025, following a summary judgment of non-infringement and statutory disclaimer of the patent[107](index=107&type=chunk) - A putative class action lawsuit alleging misuse of Tile trackers is pending, but a loss is not probable or estimable, and no legal accrual has been recorded[108](index=108&type=chunk) [Note 10. Common Stock](index=23&type=section&id=Note%2010.%20Common%20Stock) The company has reserved a significant number of common stock shares for issuance under its stock incentive plan, stock options, and restricted stock units, totaling over 25 million shares as of June 30, 2025 **Common Stock Reserved for Issuance:** | Category | As of June 30, 2025 | As of December 31, 2024 | | :---------------------------------------- | :------------------ | :---------------------- | | Issuances under stock incentive plan, stock options | 4,816,119 | 5,673,947 | | Issuances upon exercise of common stock warrants | 7,761 | 7,761 | | Issuances upon vesting of restricted stock units | 5,216,444 | 5,091,601 | | Shares reserved for shares available to be granted but not granted yet | 15,324,977 | 12,815,029 | | **Total** | **25,365,301** | **23,588,338** | [Note 11. Warrants](index=23&type=section&id=Note%2011.%20Warrants) As of June 30, 2025, Life360 had 7,761 outstanding warrants to purchase common stock at an exercise price of $6.44, expiring in September 2025, with automatic exercise if not prior to expiration - **7,761** warrants to purchase common stock were outstanding as of June 30, 2025, with an exercise price of **$6.44** and a September 2025 expiry date[112](index=112&type=chunk) [Note 12. Equity Incentive Plan](index=24&type=section&id=Note%2012.%20Equity%20Incentive%20Plan) The company's equity incentive plan allows for grants of RSUs and stock options, with significant unrecognized compensation costs for both, and stock-based compensation expense increased significantly across all functional areas - Unrecognized compensation cost for outstanding RSUs was **$120.9 million** as of June 30, 2025, to be recognized over approximately **2.9 years**[116](index=116&type=chunk) - Unrecognized compensation cost for outstanding stock options was **$1.1 million** as of June 30, 2025, to be recognized over approximately **0.5 years**[118](index=118&type=chunk) **Stock-based Compensation Expense (in millions):** | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------ | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Cost of revenue | $1.2 | $0.4 | 170% | $1.6 | $0.8 | 101% | | Research and development | $7.8 | $6.5 | 20% | $13.5 | $11.8 | 14% | | Sales and marketing | $2.0 | $0.8 | 164% | $3.4 | $1.4 | 140% | | General and administrative| $4.2 | $3.1 | 36% | $6.7 | $5.1 | 32% | | **Total** | **$15.2** | **$10.8** | **41%** | **$25.1** | **$19.0** | **32%** | [Note 13. Income Taxes](index=25&type=section&id=Note%2013.%20Income%20Taxes) Life360 recorded a benefit from income taxes for the three and six months ended June 30, 2025, a shift from a provision in the prior year, primarily due to estimated growth in the annual effective tax rate in the U.S., while maintaining a full valuation allowance on deferred tax assets **Income Tax Provision (Benefit) (in millions):** | Period | 2025 | 2024 | | :--------------------------- | :---- | :--- | | Three months ended June 30 | $(0.4) | $5.5 | | Six months ended June 30 | $(0.6) | $6.9 | - The shift from a tax provision to a tax benefit is due to estimated growth in the U.S. annual effective tax rate[120](index=120&type=chunk)[121](index=121&type=chunk) - A full valuation allowance is maintained on federal and state deferred tax assets, as their realization is not considered more likely than not[120](index=120&type=chunk) [Note 14. Related-Party Transactions](index=26&type=section&id=Note%2014.%20Related-Party%20Transactions) Life360 entered into a strategic partnership with Hubble Network, Inc., involving a technology exclusivity and revenue share agreement, a Related Party SAFE (which converted to an investment), and a Related Party Warrant, and paid $5.5 million in U.S. IPO expenses on behalf of selling securityholders - Strategic partnership with Hubble Network, Inc. includes a technology exclusivity and revenue share agreement, a Related Party SAFE, and a Related Party Warrant[122](index=122&type=chunk) - The Related Party SAFE converted to a **$5.9 million** Related Party Investment in April 2025, resulting in a **$0.9 million** gain[125](index=125&type=chunk) - The Related Party Warrant, valued at **$3.9 million**, generated **$0.2 million** and **$0.5 million** in other revenue for the three and six months ended June 30, 2025, respectively[124](index=124&type=chunk) - Life360 paid **$5.5 million** in U.S. IPO expenses on behalf of selling securityholders, including executive officers and board members, recorded as Other income (expense), net[129](index=129&type=chunk)[130](index=130&type=chunk) [Note 15. Net Income (Loss) Per Share](index=27&type=section&id=Note%2015.%20Net%20Income%20(Loss)%20Per%20Share) The company calculates basic and diluted net income (loss) per share, with diluted EPS at $0.08 (three months) and $0.14 (six months) for the periods ended June 30, 2025, reflecting the dilutive effect of options, RSUs, and warrants, but not the June 2025 Convertible Notes **Net Income (Loss) Per Share:** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $7.0 million | $(11.0) million | $11.4 million | $(20.7) million | | Weighted-average shares outstanding: Basic | 76,797,385 | 70,760,080 | 76,254,119 | 69,647,853 | | Diluted | 84,476,048 | 70,760,080 | 83,980,695 | 69,647,853 | | Net income (loss) per share: Basic | $0.09 | $(0.15) | $0.15 | $(0.30) | | Net income (loss) per share: Diluted | $0.08 | $(0.15) | $0.14 | $(0.30) | - The June 2025 Convertible Notes were not dilutive for the three and six months ended June 30, 2025, as the average stock price did not exceed the conversion price[133](index=133&type=chunk) [Note 16. Subsequent Events](index=28&type=section&id=Note%2016.%20Subsequent%20Events) Subsequent events include the enactment of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which may impact future tax rates, and a change in executive leadership effective August 11, 2025, with Lauren Antonoff appointed CEO and Chris Hulls becoming Executive Chairman - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, with potential future impacts on financial statements and disclosures due to changes in tax provisions[135](index=135&type=chunk) - Lauren Antonoff was appointed CEO and Chris Hulls became Executive Chairman of the Board, effective August 11, 2025[136](index=136&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Life360's financial condition and operational results, highlighting key factors affecting performance, detailed revenue and expense analysis, and key performance indicators, while also discussing liquidity, capital resources, and critical accounting policies [Overview](index=29&type=section&id=Overview) Life360 is a leading technology platform for family connectivity and safety, offering a 'freemium' mobile application with subscription options and hardware tracking devices (Jiobit and Tile), aiming to provide a vertically integrated, cross-platform solution - Life360 is a leading technology platform for family connectivity and safety, offering a 'freemium' mobile application and hardware tracking devices (Jiobit and Tile)[138](index=138&type=chunk) [Key Factors Affecting Our Performance](index=29&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) Key factors influencing Life360's performance include maintaining brand trust, attracting and retaining members, efficient member acquisition, growth in hardware sales, expanding platform offerings, talent acquisition, seasonality, and international expansion - Performance is affected by brand trust, member attraction/retention, efficient acquisition, hardware sales growth, platform expansion, talent, seasonality, and international expansion[139](index=139&type=chunk) [Key Components of Our Results of Operations](index=29&type=section&id=Key%20Components%20of%20Our%20Results%20of%20Operations) This section details the various revenue streams (subscription, hardware, other) and cost components (cost of revenue, operating expenses, other income/expense) that constitute Life360's financial results, explaining how each component is generated, recognized, and influenced by trends - Revenue is categorized into direct (subscription, hardware) and indirect (data, partnership, advertising)[141](index=141&type=chunk) - Subscription revenue is recognized ratably over the contractual term, while hardware revenue is recognized upon product delivery[142](index=142&type=chunk)[143](index=143&type=chunk) - Other revenue includes data and partnership revenue, such as location-based analytics and advertising, and revenue from the Related Party Warrant[144](index=144&type=chunk) - Operating expenses comprise research and development, sales and marketing, and general and administrative costs, with continued investment planned for growth[150](index=150&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - Other income (expense) includes fair value adjustments for convertible notes and derivatives (historical), gains on investments, and interest income/expense[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Life360 achieved significant financial improvements for the three and six months ended June 30, 2025, transitioning from a net loss to net income, driven by strong revenue growth across all segments, particularly subscription and other revenue, and improved gross margins, with operating expenses increasing in absolute dollars but decreasing as a percentage of revenue | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------------------ | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Total revenue | $115.4 | $84.9 | 36% | $219.0 | $163.1 | 34% | | Gross profit | $90.5 | $63.6 | 42% | $174.1 | $123.6 | 41% | | Income (loss) from operations | $2.0 | $(2.4) | 184% | $4.2 | $(8.7) | 148% | | Net income (loss) | $7.0 | $(11.0) | 164% | $11.4 | $(20.7) | 155% | **Results of Operations as a Percentage of Total Revenue:** | 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 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | 78% | 75% | 79% | 76% | | Total operating expenses | 77% | 78% | 78% | 81% | | Income (loss) from operations | 2% | (3)% | 2% | (5)% | | Net income (loss) | 6% | (13)% | 5% | (13)% | [Revenue](index=35&type=section&id=Revenue) Total revenue increased significantly, driven by strong subscription revenue growth (35% for Q2, 34% for H1) due to increased Paying Circles and price increases, while other revenue doubled, and hardware revenue saw modest Q2 growth but a slight H1 decline due to increased discounts and bundled offerings **Revenue (in millions):** | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :---------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Subscription revenue | $88.6 | $65.7 | 35% | $170.5 | $127.3 | 34% | | Hardware revenue | $12.3 | $11.9 | 3% | $21.2 | $22.1 | (4)% | | Other revenue | $14.5 | $7.3 | 100% | $27.4 | $13.7 | 99% | | **Total revenue** | **$115.4** | **$84.9** | **36%** | **$219.0** | **$163.1** | **34%** | - Subscription revenue growth was primarily due to **25% growth in Paying Circles** and **18% growth in total subscriptions**, along with price increases for Life360 subscriptions[168](index=168&type=chunk)[171](index=171&type=chunk) - Other revenue increased due to a **$4.9 million** (Q2) / **$9.4 million** (H1) increase in partnership revenue (including advertising) and a **$2.3 million** (Q2) / **$4.2 million** (H1) increase in data revenue from the Placer.ai agreement[170](index=170&type=chunk)[173](index=173&type=chunk) [Cost of Revenue, Gross Profit, and Gross Margin](index=36&type=section&id=Cost%20of%20Revenue,%20Gross%20Profit,%20and%20Gross%20Margin) Gross profit increased significantly, with subscription gross margin improving due to price increases, while hardware gross margin decreased in H1 2025 due to increased discounts and tariff costs, despite flat Q2 performance, and other gross margin improved as revenue growth outpaced cost increases **Cost of Revenue and Gross Profit (in millions):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :---------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Cost of subscription revenue | $13.0 | $10.4 | 26% | $23.2 | $19.7 | 18% | | Cost of hardware revenue| $10.2 | $9.9 | 3% | $18.8 | $17.9 | 5% | | Cost of other revenue | $1.6 | $0.9 | 78% | $3.0 | $1.8 | 64% | | **Total cost of revenue** | **$24.9** | **$21.2** | **17%** | **$45.0** | **$39.5** | **14%** | | **Gross profit** | **$90.5** | **$63.6** | **42%** | **$174.1** | **$123.6** | **41%** | **Gross Margin:** | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Subscription | 85% | 84% | 86% | 85% | | Hardware | 17% | 17% | 11% | 19% | | Other | 89% | 87% | 89% | 87% | - Subscription cost of revenue increased due to higher personnel-related costs, stock-based compensation, and technology expenses, as well as amortization of internally developed software[177](index=177&type=chunk)[183](index=183&type=chunk) - Hardware gross margin decline in H1 2025 was primarily due to a **$2.2 million** increase in discounts, increased freight costs, and higher tariff costs[186](index=186&type=chunk) [Research and Development](index=37&type=section&id=Research%20and%20Development) Research and development expenses increased by 19% for Q2 and 15% for H1 2025, primarily driven by higher personnel-related and stock-based compensation costs, and increased technology expenses, reflecting continued investment in platform development **Research and Development Expenses (in millions):** | Period | 2025 | 2024 | % Change | | :--------------------------- | :---- | :---- | :------- | | Three months ended June 30 | $32.3 | $27.0 | 19% | | Six months ended June 30 | $62.7 | $54.3 | 15% | - Increases were mainly due to **$4.3 million** (Q2) / **$6.9 million** (H1) in personnel-related and stock-based compensation costs and **$1.1 million** (Q2) / **$2.1 million** (H1) in technology and other costs[189](index=189&type=chunk)[190](index=190&type=chunk) [Sales and Marketing](index=37&type=section&id=Sales%20and%20Marketing) Sales and marketing expenses increased substantially (60% for Q2, 51% for H1 2025), primarily due to increased growth media spend and higher commissions paid to Channel Partners, aligning with the growth in subscription revenue **Sales and Marketing Expenses (in millions):** | Period | 2025 | 2024 | % Change | | :--------------------------- | :---- | :---- | :------- | | Three months ended June 30 | $38.9 | $24.4 | 60% | | Six months ended June 30 | $74.2 | $49.1 | 51% | - Key drivers were increases in growth media spend (**$5.2 million** Q2 / **$8.6 million** H1) and commissions to Channel Partners (**$4.2 million** Q2 / **$8.0 million** H1)[191](index=191&type=chunk)[192](index=192&type=chunk) [General and Administrative](index=38&type=section&id=General%20and%20Administrative) General and administrative expenses increased by 19% for Q2 and 14% for H1 2025, mainly due to higher personnel-related and stock-based compensation costs and increased technology expenses, partially offset by lower professional and outside services spend **General and Administrative Expenses (in millions):** | Period | 2025 | 2024 | % Change | | :--------------------------- | :---- | :---- | :------- | | Three months ended June 30 | $17.4 | $14.6 | 19% | | Six months ended June 30 | $33.0 | $29.0 | 14% | - Increases were primarily due to **$3.3 million** (Q2) / **$4.9 million** (H1) in personnel-related and stock-based compensation costs and **$0.5 million** (Q2) / **$1.3 million** (H1) in technology and other expenses[193](index=193&type=chunk)[194](index=194&type=chunk) - Partially offset by a **$0.9 million** (Q2) / **$1.9 million** (H1) decrease in professional and outside services, mainly due to lower Sarbanes-Oxley compliance costs[193](index=193&type=chunk)[194](index=194&type=chunk) [Convertible Notes Fair Value Adjustment](index=38&type=section&id=Convertible%20Notes%20Fair%20Value%20Adjustment) No gain or loss was recorded for convertible notes fair value adjustment in Q2 and H1 2025, as the September 2021 and July 2021 Convertible Notes were converted to common stock in 2024 - No convertible notes fair value adjustment was recorded in Q2 and H1 2025 due to the conversion of prior convertible notes in 2024[195](index=195&type=chunk) [Derivative Liability Fair Value Adjustment](index=38&type=section&id=Derivative%20Liability%20Fair%20Value%20Adjustment) No gain or loss was recorded for derivative liability fair value adjustment in Q2 and H1 2025, as the embedded derivative liability related to the July 2021 Convertible Notes was settled in June 2024 - No derivative liability fair value adjustment was recorded in Q2 and H1 2025 due to the settlement of the embedded derivative liability in June 2024[196](index=196&type=chunk) [Loss on Settlement of Convertible Notes](index=38&type=section&id=Loss%20on%20Settlement%20of%20Convertible%20Notes) No gain or loss was recorded on the settlement of convertible notes in Q2 and H1 2025, as the September 2021 and July 2021 Convertible Notes were converted to common stock in 2024 - No loss on settlement of convertible notes was recorded in Q2 and H1 2025 due to the conversion of prior convertible notes in 2024[197](index=197&type=chunk) [Gain on Settlement of Derivative Liability](index=39&type=section&id=Gain%20on%20Settlement%20of%20Derivative%20Liability) No gain or loss was recorded on the settlement of derivative liability in Q2 and H1 2025, as the derivative liability related to the July 2021 Convertible Notes was settled in June 2024 - No gain on settlement of derivative liability was recorded in Q2 and H1 2025 due to the settlement of the derivative liability in June 2024[198](index=198&type=chunk) [Gain on Change in Fair Value of Investments](index=39&type=section&id=Gain%20on%20Change%20in%20Fair%20Value%20of%20Investments) Life360 recorded a total gain of $1.3 million for Q2 and H1 2025 from changes in fair value of investments, including a $0.9 million gain from the conversion of a Related Party SAFE and a $0.4 million gain from the Convertible Note Investment in Aura - A **$0.9 million** gain was recorded for Q2 and H1 2025 from the conversion of the Related Party SAFE to a Related Party Investment[199](index=199&type=chunk) - An additional **$0.4 million** gain was recorded for Q2 and H1 2025 from the change in fair value of the Convertible Note Investment in Aura[200](index=200&type=chunk) [Other Income (Expense), Net](index=39&type=section&id=Other%20Income%20(Expense),%20Net) Other income (expense), net, significantly increased by $8.0 million (Q2) and $9.6 million (H1) in 2025, primarily due to a decrease in U.S. IPO transaction costs, an increase in dividend and interest income from higher cash balances, and a favorable change in currency revaluation - Other income (expense), net, increased by **$8.0 million** (**173%**) for Q2 2025 and **$9.6 million** (**224%**) for H1 2025[202](index=202&type=chunk)[203](index=203&type=chunk) - Key drivers include a **$5.6 million** decrease in U.S. IPO transaction costs and a **$1.4 million** (Q2) / **$2.4 million** (H1) increase in dividend and interest income[202](index=202&type=chunk)[203](index=203&type=chunk) - A favorable **$1.2 million** (Q2) / **$1.6 million** (H1) change in currency revaluation also contributed to the increase[202](index=202&type=chunk)[203](index=203&type=chunk) [Provision for (benefit from) Income Taxes](index=39&type=section&id=Provision%20for%20(benefit%20from)%20Income%20Taxes) Life360 recorded a benefit from income taxes in Q2 and H1 2025, a significant improvement from a provision in the prior year, driven by estimated growth in the U.S. annual effective tax rate, while continuing to maintain a full valuation allowance on its deferred tax assets - Benefit from income taxes increased by **$5.9 million** (Q2) and **$7.5 million** (H1) in 2025, compared to a provision in 2024[204](index=204&type=chunk) - This change is attributed to estimated growth in the U.S. annual effective tax rate[204](index=204&type=chunk) - A full valuation allowance is maintained on federal and state deferred tax assets[204](index=204&type=chunk) [Key Performance Indicators](index=40&type=section&id=Key%20Performance%20Indicators) Life360 demonstrated strong growth across its key performance indicators, including Annualized Monthly Revenue (AMR), Monthly Active Users (MAUs), Paying Circles, and Average Revenue per Paying Circle (ARPPC), with subscriptions and Net Hardware Units Shipped also increasing, while Net Average Sales Price (ASP) saw a slight decrease **Key Operating Metrics (in millions, except ARPPC, ARPPS and ASP):** | Metric | As of and for the Three Months Ended June 30, 2025 | As of and for the Three Months Ended June 30, 2024 | % Change | As of and for the Six Months Ended June 30, 2025 | As of and for the Six Months Ended June 30, 2024 | % Change | | :------------------------ | :------------------------------------------------- | :------------------------------------------------- | :------- | :------------------------------------------------ | :------------------------------------------------ | :------- | | AMR | $416.1 | $304.8 | 36% | $416.1 | $304.8 | 36% | | MAUs | 88.0 | 70.6 | 25% | 88.0 | 70.6 | 25% | | Paying Circles | 2.5 | 2.0 | 25% | 2.5 | 2.0 | 25% | | ARPPC | $135.42 | $125.96 | 8% | $134.49 | $124.41 | 8% | | Subscriptions | 3.1 | 2.7 | 18% | 3.1 | 2.7 | 18% | | ARPPS | $116.06 | $104.00 | 12% | $114.57 | $102.60 | 12% | | Net hardware units shipped| 0.8 | 0.7 | 21% | 1.3 | 1.2 | 8% | | ASP | $14.81 | $15.92 | (7)% | $15.64 | $16.18 | (3)% | [Annualized Monthly Revenue](index=40&type=section&id=Annualized%20Monthly%20Revenue) Annualized Monthly Revenue (AMR) increased by 36% year-over-year to $416.1 million as of June 30, 2025, primarily driven by continued subscriber growth - AMR increased **36%** year-over-year to **$416.1 million** as of June 30, 2025, driven by subscriber growth[209](index=209&type=chunk) [Monthly Active Users](index=40&type=section&id=Monthly%20Active%20Users) Monthly Active Users (MAUs) on the Life360 platform grew by 25% year-over-year to 88.0 million as of June 30, 2025, reflecting strong new member growth and retention - MAUs increased **25%** year-over-year to **88.0 million** as of June 30, 2025, due to strong new member growth and retention[210](index=210&type=chunk) [Paying Circles](index=40&type=section&id=Paying%20Circles) Paying Circles increased by 25% year-over-year to 2.5 million as of June 30, 2025, driven by converting free members to subscribers and retaining them with high-quality services - Paying Circles increased **25%** year-over-year to **2.5 million** as of June 30, 2025[212](index=212&type=chunk) [Average Revenue per Paying Circle](index=41&type=section&id=Average%20Revenue%20per%20Paying%20Circle) Average Revenue per Paying Circle (ARPPC) increased by 8% year-over-year to $135.42 for Q2 2025 and $134.49 for H1 2025, benefiting from price increases for new and existing subscribers and a shift towards higher-priced product mixes in both U.S. and international markets - ARPPC increased **8%** year-over-year to **$135.42** (Q2 2025) and **$134.49** (H1 2025)[214](index=214&type=chunk) - Growth was driven by price increases for new and existing Life360 subscriptions and a shift to higher-priced product mixes in U.S. and international markets[215](index=215&type=chunk) [Subscriptions](index=41&type=section&id=Subscriptions) Total paid subscriptions across Life360, Tile, and Jiobit brands increased by 18% year-over-year to 3.1 million as of June 30, 2025, driven by hardware sales and conversion/retention of free members - Total paid subscriptions increased **18%** year-over-year to **3.1 million** as of June 30, 2025[216](index=216&type=chunk) [Average Revenue per Paying Subscription](index=41&type=section&id=Average%20Revenue%20per%20Paying%20Subscription) Average Revenue per Paying Subscription (ARPPS) increased by 12% year-over-year to $116.06 for Q2 2025 and $114.57 for H1 2025, primarily due to price increases for U.S. annual subscribers and a shift towards higher-priced product tiers - ARPPS increased **12%** year-over-year to **$116.06** (Q2 2025) and **$114.57** (H1 2025)[219](index=219&type=chunk) - This increase was a result of price increases for new and existing annual U.S. subscribers and a shift towards higher-priced products and tiers in international markets[220](index=220&type=chunk) [Net Hardware Units Shipped](index=41&type=section&id=Net%20Hardware%20Units%20Shipped) Net hardware units shipped increased by 21% for Q2 and 8% for H1 2025, driven by an increase in online retail sales - Net hardware units shipped increased **21%** (Q2) and **8%** (H1) year-over-year, primarily due to increased online retail sales[222](index=222&type=chunk) [Net Average Sales Price (ASP)](index=42&type=section&id=Net%20Average%20Sales%20Price%20(ASP)) Net Average Sales Price (ASP) per unit decreased by 7% for Q2 and 3% for H1 2025, primarily due to a shift in channel mix and an increase in promotional discounts - Net ASP per unit decreased **7%** (Q2) and **3%** (H1) year-over-year, mainly due to a shift in channel mix and increased promotional discounts[224](index=224&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Life360's cash and cash equivalents significantly increased to $432.7 million as of June 30, 2025, from $159.2 million at December 31, 2024, with the company believing its current liquidity is sufficient for the next 12 months, driven by a substantial net increase in cash from financing activities, particularly the issuance of convertible notes **Cash and Cash Equivalents (in millions):** | Metric | As of June 30, 2025 | As of December 31, 2024 | | :---------------------- | :------------------ | :---------------------- | | Cash and cash equivalents | $432.7 | $159.2 | | Restricted cash | $1.5 | $1.2 | - Existing cash and cash equivalents are believed to be sufficient for working capital and capital expenditures for at least the next **12 months**[226](index=226&type=chunk) - Net cash provided by financing activities was **$280.5 million** for H1 2025, primarily from **$320.0 million** in convertible notes proceeds[234](index=234&type=chunk) [Cash Flows](index=42&type=section&id=Cash%20Flows) Operating activities provided $25.4 million in cash for H1 2025, driven by net income and non-cash adjustments, despite cash used by changes in operating assets and liabilities, while investing activities used $32.1 million, mainly for a convertible note investment and software capitalization, and financing activities provided $280.5 million, primarily from convertible note issuance **Cash Flow Activities (in millions):** | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $25.4 | $13.9 | | Net cash used in investing activities | $(32.1) | $(2.3) | | Net cash provided by financing activities | $280.5 | $79.7 | | **Net Increase in Cash, Cash Equivalents, and Restricted Cash** | **$273.8** | **$91.3** | - Operating cash flow for H1 2025 was positively impacted by net income of **$11.4 million** and **$30.4 million** in non-cash adjustments[230](index=230&type=chunk) - Investing cash flow for H1 2025 included a **$25.0 million** Convertible Note Investment and **$3.5 million** in internally developed software capitalization[232](index=232&type=chunk) - Financing cash flow for H1 2025 was primarily driven by **$320.0 million** from convertible senior notes issuance, offset by **$9.6 million** in debt issuance costs and **$33.7 million** for capped calls[234](index=234&type=chunk) [Obligations and Other Commitments](index=43&type=section&id=Obligations%20and%20Other%20Commitments) Life360's principal commitments include operating leases for office space and non-cancellable purchase commitments with its cloud platform provider and contract manufacturer, as detailed in the financial statement notes - Principal commitments include operating leases and non-cancellable purchase commitments with cloud platform and contract manufacturers[236](index=236&type=chunk) [Critical Accounting Policies and Significant Management Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Management%20Estimates) The preparation of financial statements requires significant estimates and assumptions, which could materially differ from actual results, and no significant changes were made to these policies during the six months ended June 30, 2025 - Financial statements rely on estimates and assumptions, which may differ from actual results[237](index=237&type=chunk) - No significant changes to critical accounting policies occurred during the six months ended June 30, 2025[237](index=237&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Life360 is exposed to market risks primarily from fluctuations in interest rates and foreign currency exchange rates, but does not believe a hypothetical 10% change in interest rates or a 1,000 basis-point change in foreign exchange rates would materially impact its financial statements, and it does not currently engage in active hedging - Market risk exposure primarily stems from interest rate and foreign currency exchange rate fluctuations[238](index=238&type=chunk) - A hypothetical **10%** change in interest rates or a **1,000 basis-point** change in foreign currency exchange rates is not expected to have a material impact[239](index=239&type=chunk)[240](index=240&type=chunk) - The company does not currently use active hedging arrangements for foreign currency risk[240](index=240&type=chunk) - Inflation has not had a material effect on the business, but significant inflationary pressures could pose future risks[241](index=241&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that Life360's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter, while acknowledging inherent limitations in control systems - Disclosure controls and procedures were effective as of June 30, 2025[242](index=242&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[243](index=243&type=chunk) - Control systems have inherent limitations and can only provide reasonable, not absolute, assurance against errors and fraud[244](index=244&type=chunk) [Part II - Other Information](index=46&type=section&id=Part%20II%20-%20Other%20Information) [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) Life360 is involved in various legal proceedings, including regulatory inquiries related to data protection and consumer rights, and claims such as patent infringement and class action lawsuits, which the company vigorously defends, and for which no material litigation reserve has been recorded - The company is subject to legal proceedings, claims, and government investigations, including those related to data protection and consumer rights[246](index=246&type=chunk) - A patent infringement claim against Tile was settled at no cost, and a class action lawsuit is pending, but no material litigation reserve has been recorded[247](index=247&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section updates previously disclosed risk factors, focusing on new risks related to legal and regulatory changes concerning subscription renewals and taxation in multiple jurisdictions, as well as risks associated with the company's indebtedness, particularly the June 2025 Convertible Notes and related capped call transactions [Risks Related to Legal Matters and Our Regulatory Environment](index=46&type=section&id=Risks%20Related%20to%20Legal%20Matters%20and%20Our%20Regulatory%20Environment) New risks include potential adverse impacts from evolving laws regulating subscription and auto-payment renewals, and taxation risks in multiple jurisdictions due to changing global tax laws (e.g., digital services taxes, Pillar II global minimum tax, OBBBA in the U.S.) - Changes in laws regulating subscription and auto-payment renewals could adversely affect the business, reputation, financial condition, and results of operations[249](index=249&type=chunk) - The company is subject to taxation risks in multiple U.S. and foreign jurisdictions, with potential challenges from tax authorities and impacts from new laws like digital services taxes, Pillar II global minimum tax, and the U.S. OBBBA[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) [Risks Related to Our Indebtedness](index=47&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) Risks related to indebtedness include the significant cash required to service $320.0 million in June 2025 Convertible Notes, potential inability to repurchase notes upon a fundamental change or maturity, and the impact of capped call transactions on common stock value, which could limit cash flow, restrict operations, and dilute existing stockholders - Servicing **$320.0 million** in June 2025 Convertible Notes requires significant cash flow, potentially limiting funds for operations and exposing the company to adverse economic conditions[254](index=254&type=chunk)[255](index=255&type=chunk) - The company may be unable to raise funds to repurchase convertible notes following a fundamental change or pay cash amounts due upon maturity or conversion, which could lead to default[258](index=258&type=chunk) - Capped call transactions,