[Corporate and Pipeline Highlights](index=1&type=section&id=Corporate%20and%20Pipeline%20Highlights) Arcturus is advancing its mRNA pipeline, with key progress in its Cystic Fibrosis (ARCT-032) and OTC Deficiency (ARCT-810) programs, announcing positive interim data for ARCT-810 and expecting Phase 2 data for ARCT-032 in September 2025, while progressing regulatory filings for KOSTAIVE® globally and reporting positive Phase 1 results for its seasonal flu vaccine (ARCT-2138) with Phase 1 results for its pandemic flu vaccine (ARCT-2304) expected in 2025 [Cystic Fibrosis (CF) Program (ARCT-032)](index=1&type=section&id=Cystic%20Fibrosis%20(CF)%20Program%20(ARCT-032)) The Phase 2 trial for ARCT-032 is advancing, with enrollment expected to be complete by year-end 2025, interim data from the first nine participants will be presented in September 2025, and the company plans to meet with regulatory agencies in H1 2026 to discuss pivotal trial plans * Phase 2 interim data from the first nine participants (N=3 @ 5 mg; N=6 @ 10 mg) is scheduled to be presented in **September 2025**[1](index=1&type=chunk)[3](index=3&type=chunk) * The Phase 2 trial is expected to complete enrollment by the **end of 2025**[1](index=1&type=chunk)[3](index=3&type=chunk) * Meetings with the FDA and other regulatory agencies to discuss Phase 3 plans are anticipated in the **first half of 2026**, with Phase 3 initiation planned for **2026**[3](index=3&type=chunk) [OTC Deficiency Program (ARCT-810)](index=1&type=section&id=OTC%20Deficiency%20Program%20(ARCT-810)) Positive interim data from two Phase 2 studies showed that ARCT-810 led to decreases in glutamine levels to within the normal range and maintained stable ammonia levels in participants, with the treatment generally safe and well-tolerated across 40 participants to date, and the company expects to align with regulatory agencies on the Phase 3 trial design in the first half of 2026 * Positive interim Phase 2 data showed decreases in glutamine to normal range and stable ammonia levels in participants on standard of care therapy[3](index=3&type=chunk) * Data from a newly developed assay suggested improvement of urea cycle function in all three participants in the Phase 2 U.S. study[3](index=3&type=chunk) * The company plans to align with regulators on the Phase 3 trial design and pediatric studies in **H1 2026**[1](index=1&type=chunk)[5](index=5&type=chunk) [KOSTAIVE® (COVID-19 Vaccine) Regulatory Updates](index=2&type=section&id=KOSTAIVE%C2%AE%20(COVID-19%20Vaccine)%20Regulatory%20Updates) Regulatory submissions for KOSTAIVE® are progressing in the UK, Japan, and the U.S., with approval in the UK expected by September 2025, Japanese approvals anticipated in Q3/Q4 2025, and a U.S. BLA filing on track for Q3 2025 * UK (MHRA) approval is expected by **September 2025**[5](index=5&type=chunk) * Japan (PMDA) approvals for the lyophilized vaccine and the 2025-2026 variant update are anticipated in **Q3/Q4 2025**[5](index=5&type=chunk) * U.S. (FDA) BLA filing remains on track for **Q3 2025**, with an approval decision expected in **2026**[5](index=5&type=chunk) [Influenza Vaccine Programs (ARCT-2138 & ARCT-2304)](index=1&type=section&id=Influenza%20Vaccine%20Programs%20(ARCT-2138%20%26%20ARCT-2304)) The seasonal flu vaccine (ARCT-2138) showed positive Phase 1 results, demonstrating immunogenicity against all four strains in both young and older adults with a good safety profile, while the pandemic flu vaccine (ARCT-2304), supported by BARDA, has received FDA Fast Track Designation, and Phase 1 immunogenicity results are expected in Q4 2025 * Seasonal flu vaccine (ARCT-2138) Phase 1 study showed immunogenicity against all four influenza strains at doses as low as **2 μg** and was well-tolerated[5](index=5&type=chunk) * Pandemic flu vaccine (ARCT-2304) received U.S. FDA Fast Track Designation[5](index=5&type=chunk) * Phase 1 immunogenicity results for the pandemic flu vaccine (ARCT-2304) are expected in **Q4 2025**, with no safety concerns raised from available data[5](index=5&type=chunk) [Financial Results (Q2 2025)](index=3&type=section&id=Financial%20Results%20for%20the%20three%20months%20ended%20June%2030%2C%202025) For Q2 2025, Arcturus reported revenues of **$28.3 million** and a net loss of **$9.2 million**, or **($0.34)** per share, representing a decrease in revenue but a smaller net loss compared to Q2 2024, primarily due to reduced R&D spending as key programs mature, with the company's cash position remaining strong at **$253.4 million** and a projected cash runway into 2028 [Statement of Operations Analysis](index=3&type=section&id=Statement%20of%20Operations%20Analysis) Revenue for Q2 2025 was **$28.3 million**, a decrease from **$49.9 million** in Q2 2024, primarily due to lower revenue from the CSL collaboration as KOSTAIVE® progresses towards commercialization, while operating expenses also decreased significantly to **$39.9 million** from **$71.0 million** year-over-year, driven by lower R&D costs, resulting in a reduced net loss of **$9.2 million** compared to **$17.2 million** in the prior year's quarter Statement of Operations (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$28,301** | **$49,859** | **$57,683** | **$87,871** | | R&D Expenses | $29,579 | $58,669 | $64,471 | $112,242 | | G&A Expenses | $10,338 | $12,316 | $21,654 | $27,167 | | **Net Loss** | **$(9,180)** | **$(17,216)** | **$(23,256)** | **$(44,033)** | | Net Loss per Share | $(0.34) | $(0.64) | $(0.86) | $(1.64) | * The decrease in revenue was primarily driven by reduced activity and lower amortization from the CSL collaboration as KOSTAIVE® nears commercialization[6](index=6&type=chunk) * The decrease in R&D expenses was mainly due to lower manufacturing and clinical costs for the KOSTAIVE and LUNAR-FLU programs, partially offset by higher clinical costs for the cystic fibrosis Phase 2 trials[8](index=8&type=chunk)[9](index=9&type=chunk) [Balance Sheet and Cash Position](index=4&type=section&id=Balance%20Sheet%20and%20Cash%20Position) As of June 30, 2025, Arcturus had **$253.4 million** in cash, cash equivalents, and restricted cash, down from **$293.9 million** at year-end 2024, with total assets at **$309.3 million** and total liabilities at **$78.2 million**, and the company projects its current cash runway extends into 2028 Balance Sheet (in thousands) | Metric (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents & restricted cash | $253,352 | $293,913 | | Total Assets | $309,270 | $344,069 | | Total Liabilities | $78,217 | $103,091 | | Total Stockholders' Equity | $231,053 | $240,978 | * The company's cash runway is expected to extend into **2028** based on the current pipeline and programs[12](index=12&type=chunk) [Company Overview and Forward-Looking Statements](index=4&type=section&id=Company%20Overview%20and%20Forward-Looking%20Statements) Arcturus Therapeutics, founded in 2013 and based in San Diego, is a commercial mRNA medicines company with proprietary LUNAR® delivery and STARR® mRNA technologies, having developed KOSTAIVE®, the first approved sa-mRNA COVID vaccine, and maintaining a pipeline focused on rare diseases like OTC deficiency and cystic fibrosis, as well as infectious disease vaccines, while the press release contains forward-looking statements regarding clinical trial timelines, regulatory approvals, and financial projections, which are subject to substantial risks and uncertainties * Arcturus is a commercial mRNA company with key technologies including LUNAR® lipid-mediated delivery and STARR® self-amplifying mRNA[13](index=13&type=chunk) * The company's pipeline includes RNA therapeutic candidates for OTC deficiency and cystic fibrosis, along with partnered mRNA vaccine programs for COVID-19 and influenza[13](index=13&type=chunk) * The report includes forward-looking statements concerning clinical trial timelines, regulatory approvals, and financial performance, which are subject to significant risks as detailed in SEC filings[14](index=14&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 001-41705 Azitra, Inc. (Exact name of registrant as specified in its charter) Delaware 46-4478536 (State or other jurisdict ...

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 ACT OF 1934 For the transition period from ________ to ________ Commission file number: 000-22873 Oruka Therapeutics, Inc. (Exact name of registrant as specified in its charter) | Delaware | 36-3855489 | | --- | ...

[PART I. Financial Information](index=2&type=section&id=PART%20I.%20Financial%20Information) This part presents the company's unaudited financial statements, management's analysis, and disclosures on market risk and internal controls [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the periods ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $357,418 | $396,019 | | Total Current Assets | $332,012 | $376,869 | | Cash and cash equivalents | $65,396 | $61,575 | | Marketable securities, current | $263,010 | $314,073 | | Total Liabilities | $13,776 | $13,798 | | Total Stockholders' Equity | $343,642 | $382,221 | - Total assets decreased by **$38.6 million** from December 31, 2024, to June 30, 2025, primarily driven by a reduction in current marketable securities[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $24,087 | $18,673 | $44,012 | $23,866 | | General and administrative | $4,342 | $2,820 | $9,503 | $4,490 | | Total operating expenses | $28,429 | $21,493 | $53,515 | $28,356 | | Loss from operations | $(28,429) | $(21,493) | $(53,515) | $(28,356) | | Interest income | $3,857 | — | $7,949 | — | | Interest expense | — | $(750) | — | $(964) | | Net loss | $(24,574) | $(22,243) | $(45,573) | $(29,320) | | Comprehensive loss | $(24,595) | $(22,243) | $(45,559) | $(29,320) | | Net loss per share (basic and diluted) | $(0.46) | $(6.96) | $(0.85) | $(9.17) | - Net loss increased by **10% to $24.6 million** for the three months ended June 30, 2025, compared to $22.2 million in the prior year, primarily due to increased operating expenses partially offset by interest income[10](index=10&type=chunk)[130](index=130&type=chunk) - Research and development expenses increased by **29% to $24.1 million** for the three months ended June 30, 2025, driven by higher personnel-related and stock-based compensation expenses[10](index=10&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk) [Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) | Metric (in thousands) | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $382,221 | $364,725 | $343,642 | | Accumulated Deficit | $(83,724) | $(104,723) | $(129,297) | | Additional Paid-In Capital | $463,018 | $466,486 | $469,998 | - Total stockholders' equity decreased from **$382.2 million** at December 31, 2024, to **$343.6 million** at June 30, 2025, primarily due to net losses incurred during the period[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(44,014) | $(11,201) | | Net cash provided by investing activities | $47,726 | — | | Net cash provided by financing activities | $109 | $26,322 | | Net increase in cash and cash equivalents | $3,821 | $15,121 | | Cash and cash equivalents at end of period | $65,396 | $15,121 | - Net cash used in operating activities increased significantly to **$44.0 million** for the six months ended June 30, 2025, from $11.2 million in the prior year period, reflecting increased net loss and changes in operating assets and liabilities[13](index=13&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - Investing activities provided **$47.7 million in cash** for the six months ended June 30, 2025, primarily from maturities of marketable securities offsetting purchases[13](index=13&type=chunk)[159](index=159&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Nature of the Business and Basis of Presentation](index=8&type=section&id=1.%20Nature%20of%20the%20Business%20and%20Basis%20of%20Presentation) - Oruka Therapeutics, Inc is a clinical-stage biopharmaceutical company focused on developing biologics for psoriasis and other inflammatory and immunology indications, formed through a reverse recapitalization of ARCA biopharma, Inc on August 29, 2024[15](index=15&type=chunk)[19](index=19&type=chunk) - The company completed a Pre-Closing Financing of approximately **$275.0 million** and a PIPE Financing of approximately **$188.7 million** in 2024 to fund operations[20](index=20&type=chunk)[24](index=24&type=chunk) - The company has incurred significant operating losses and negative cash flows since inception, with net losses of **$24.6 million** and **$45.6 million** for the three and six months ended June 30, 2025, respectively; existing cash, cash equivalents, and marketable securities of **$351.5 million** are expected to fund operations for at least twelve months[26](index=26&type=chunk)[27](index=27&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The company's accounting policies remain consistent with its Annual Report, with no material changes during the six months ended June 30, 2025[28](index=28&type=chunk) - New accounting pronouncements include ASU 2023-09 (Income Taxes) effective for fiscal year 2025 and ASU 2024-03 (Expense Disaggregation Disclosures) effective for fiscal years beginning after December 15, 2026, both of which the company is currently evaluating for impact[30](index=30&type=chunk)[31](index=31&type=chunk) [3. Fair Value Measurements](index=11&type=section&id=3.%20Fair%20Value%20Measurements) | Asset Type (in thousands) | June 30, 2025 (Total Fair Value) | December 31, 2024 (Total Fair Value) | | :--- | :--- | :--- | | Cash equivalents | $63,288 | $52,175 | | Marketable securities, current | $263,010 | $314,073 | | Marketable securities, long-term | $23,053 | $18,069 | | Total | $349,351 | $384,317 | - The majority of cash equivalents and marketable securities are classified as **Level 2**, indicating fair value is determined using observable inputs other than quoted prices[32](index=32&type=chunk)[33](index=33&type=chunk) [4. Cash Equivalents and Marketable Securities](index=12&type=section&id=4.%20Cash%20Equivalents%20and%20Marketable%20Securities) | Security Type (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | Money market funds | $20,931 | $6,350 | | U.S. treasury securities | $229,366 | $224,069 | | U.S. government agency securities | $18,628 | $17,454 | | Commercial papers | $40,796 | $56,988 | | Corporate debt securities | $39,630 | $75,504 | | Total | $349,351 | $384,317 | - The company holds available-for-sale securities, with total fair value decreasing from **$384.3 million to $349.4 million**; unrealized losses were **$72 thousand** as of June 30, 2025, primarily due to market conditions, but no credit losses were recorded[34](index=34&type=chunk)[35](index=35&type=chunk) | Maturity (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Due in one year or less | $263,010 | $314,073 | | Due in 1-2 years | $23,053 | $18,069 | | Total | $286,063 | $332,142 | [5. Accrued Expenses and Other Current Liabilities](index=14&type=section&id=5.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) | Category (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued research and development | $1,756 | $1,084 | | Accrued employee compensation and benefits | $1,684 | $2,041 | | Accrued professional and consulting | $138 | $221 | | Total | $3,578 | $3,346 | - Accrued research and development increased by **$0.7 million**, while accrued employee compensation and benefits decreased by **$0.4 million**[37](index=37&type=chunk) [6. Note Payable with Related Party](index=14&type=section&id=6.%20Note%20Payable%20with%20Related%20Party) - Pre-Merger Oruka issued a **$25.0 million convertible note** to Fairmount Healthcare Fund II, L.P. in March 2024, accruing **12.0% interest per annum**; this note, including $1.5 million in accrued interest, converted into Pre-Merger Oruka Common Stock prior to the Merger in August 2024[38](index=38&type=chunk) - The Convertible Note was not outstanding as of December 31, 2024, and June 30, 2025, having been fully converted[40](index=40&type=chunk) [7. Convertible Preferred Stock and Stockholders' Equity](index=14&type=section&id=7.%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity) - As of June 30, 2025, **6,202,207 pre-funded warrants** were outstanding, exercisable for Company Common Stock at nominal prices, recorded as additional paid-in capital[41](index=41&type=chunk)[42](index=42&type=chunk) - **137,138 shares of Company Series B Preferred Stock** were outstanding as of June 30, 2025, convertible into 11,428,149 shares of Common Stock at a ratio of approximately 83.3332:1[45](index=45&type=chunk)[47](index=47&type=chunk) - As of June 30, 2025, **37,450,745 shares of Company Common Stock** were issued and outstanding, with **30,850,274 shares reserved** for future issuance under various plans and warrants[49](index=49&type=chunk)[50](index=50&type=chunk) [8. Stock-Based Compensation](index=16&type=section&id=8.%20Stock-Based%20Compensation) | Expense Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,368 | $468 | $6,371 | $538 | | General and administrative | $1,709 | $215 | $3,589 | $230 | | Total | $5,077 | $683 | $9,960 | $768 | - Total stock-based compensation expense increased significantly to **$5.1 million** for the three months ended June 30, 2025, from $0.7 million in the prior year, and to **$10.0 million** for the six months ended June 30, 2025, from $0.8 million in the prior year period[65](index=65&type=chunk) | Award Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Paruka Warrant Obligation | $1,674 | $362 | $3,089 | $430 | | Employee warrants | $1,238 | — | $2,789 | — | | Stock options | $2,130 | $321 | $4,019 | $338 | | Employee stock purchase plan | $35 | — | $63 | — | | Total | $5,077 | $683 | $9,960 | $768 | - Unrecognized compensation cost for unvested stock options, RSAs, and employee warrants totaled **$28.5 million**, less than **$0.1 million**, and **$13.5 million**, respectively, as of June 30, 2025, to be recognized over weighted average periods of 3.2, 2.6, and 2.8 years[65](index=65&type=chunk)[66](index=66&type=chunk) [9. Segment Disclosures](index=19&type=section&id=9.%20Segment%20Disclosures) - The company operates as a **single reportable segment**, with its Chief Executive Officer reviewing total operating expenses and consolidated net loss to allocate resources[68](index=68&type=chunk) - All long-lived assets were located in the **U.S.** as of June 30, 2025, and December 31, 2024[69](index=69&type=chunk) [10. Option Agreements and License Agreements](index=20&type=section&id=10.%20Option%20Agreements%20and%20License%20Agreements) - The company entered into Option Agreements with Paragon Therapeutics, Inc and Paruka Holding LLC in March 2024 for antibody discovery, with exclusive options to license intellectual property for targets like IL-23 (ORKA-001) and IL-17A/F (ORKA-002)[71](index=71&type=chunk) - License Agreements for ORKA-001 and ORKA-002 were executed in December 2024 and February 2025, respectively, granting exclusive worldwide licenses for development and commercialization, with milestone payments up to **$22.0 million per agreement** and low single-digit royalties[73](index=73&type=chunk)[75](index=75&type=chunk) - As of June 30, 2025, **$4.0 million in milestone payments** were incurred and expensed for each License Agreement; an additional **$3.0 million milestone payment** for ORKA-001 was accrued in Q3 2025 after dosing the first patient in a Phase 2a clinical trial[75](index=75&type=chunk)[120](index=120&type=chunk) - Research and development expenses related to Paragon and Paruka services were **$4.2 million** and **$5.7 million** for the three and six months ended June 30, 2025, respectively, a decrease from $15.4 million and $20.4 million in the prior year periods[81](index=81&type=chunk) [11. Commitments and Contingencies](index=22&type=section&id=11.%20Commitments%20and%20Contingencies) - The company has operating lease agreements for headquarters in Menlo Park, California (commenced June 2024, 27 months remaining) and an office in Waltham, Massachusetts (commenced April 2025, 51 months remaining)[85](index=85&type=chunk)[86](index=86&type=chunk) | Year ending December 31, | Amount (in thousands) | | :--- | :--- | | 2025 (remainder) | $527 | | 2026 | $822 | | 2027 | $768 | | 2028 | $397 | | 2029 | $304 | | Total undiscounted lease payments | $2,818 | - A non-exclusive, worldwide license agreement with WuXi Biologics Ireland Limited for cell line technology was entered in March 2024, with a non-refundable license fee of **$150,000** and potential low single-digit royalty payments if manufacturing is done by a third party[88](index=88&type=chunk)[89](index=89&type=chunk) [12. Net Loss per Share](index=23&type=section&id=12.%20Net%20Loss%20per%20Share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss per share attributable to common stockholders, basic and diluted | $(0.46) | $(6.96) | $(0.85) | $(9.17) | | Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 42,095,951 | 3,197,975 | 41,888,906 | 3,197,975 | - The weighted-average shares outstanding for common stockholders increased significantly in 2025 due to the reverse recapitalization and subsequent financings[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - Potential common stock shares from convertible preferred stock, warrants, and options were excluded from diluted EPS computation due to their **anti-dilutive effect**[95](index=95&type=chunk) [13. Related Party Transactions](index=24&type=section&id=13.%20Related%20Party%20Transactions) - Fairmount beneficially owns more than **5%** of the company's capital stock and has a representative on the Board, also owning more than 5% of Paragon[96](index=96&type=chunk) | Related Party Liability (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Paragon reimbursable Option Agreements' fees | — | $1,482 | | Paragon milestone payments for License Agreement | — | $4,000 | | Paragon reimbursable other research expenses | $107 | $515 | | Paragon reimbursable patent expenses | $12 | $25 | | Total | $119 | $6,022 | - Related party accounts payable and other current liabilities significantly decreased from **$6.0 million** at December 31, 2024, to **$0.1 million** at June 30, 2025[97](index=97&type=chunk) [14. Income Taxes](index=24&type=section&id=14.%20Income%20Taxes) - The company is evaluating the impact of the recently signed One Big Beautiful Bill Act (July 4, 2025), which makes permanent key elements of the Tax Cuts and Jobs Act, including **100% bonus depreciation** and domestic research cost expensing[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&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, operating results, liquidity, and capital resources [Overview](index=25&type=section&id=Overview) - Oruka Therapeutics is a clinical-stage biopharmaceutical company focused on developing novel monoclonal antibody therapeutics for psoriasis (PsO) and other inflammatory and immunology (I&I) indications[100](index=100&type=chunk) - The company's strategy involves applying antibody engineering and format innovations to validated modes of action to improve efficacy and dosing regimens[100](index=100&type=chunk) - Since inception in February 2024, the company has incurred significant losses and negative cash flows, with net losses of **$24.6 million** and **$45.6 million** for the three and six months ended June 30, 2025, respectively[103](index=103&type=chunk) - As of June 30, 2025, the company had **$351.5 million** in cash, cash equivalents, and marketable securities, expected to fund operating plans for at least twelve months[104](index=104&type=chunk) [ORKA-001](index=26&type=section&id=ORKA-001) - ORKA-001 is a high-affinity, extended half-life monoclonal antibody targeting IL-23p19 for the treatment of PsO, engineered with YTE half-life extension technology for potential **once or twice per year** subcutaneous injection[105](index=105&type=chunk)[106](index=106&type=chunk) - A Phase 1 trial in healthy volunteers was initiated in Q4 2024, with interim data expected in September 2025; a Phase 2a trial in moderate-to-severe PsO (EVERLAST-A) commenced in Q3 2025, following FDA IND and Health Canada CTA clearance[107](index=107&type=chunk)[108](index=108&type=chunk) [ORKA-002](index=26&type=section&id=ORKA-002) - ORKA-002 is a high-affinity, extended half-life monoclonal antibody targeting IL-17A and IL-17F for PsO, psoriatic arthritis (PsA), and other I&I conditions, designed for convenient dosing intervals[109](index=109&type=chunk) - A Phase 1 trial in healthy volunteers was initiated in Q2 2025, with interim data expected around year-end 2025[109](index=109&type=chunk) - The company plans to pursue a sequential combination regimen of ORKA-002 followed by ORKA-001 (ORKA-021) to combine rapid response with ideal maintenance[110](index=110&type=chunk) [Additional Pipeline Program](index=26&type=section&id=Additional%20Pipeline%20Program) - ORKA-003 is a third mAb program targeting an undisclosed pathway, providing potential for indication expansion beyond PsO and combination opportunities with more advanced programs[111](index=111&type=chunk) [Recent Developments](index=27&type=section&id=Recent%20Developments) - On August 29, 2024, the company completed the acquisition of Pre-Merger Oruka via a reverse recapitalization, changed its name to Oruka Therapeutics, Inc, and effected a **1-for-12 reverse stock split**[113](index=113&type=chunk) - Pre-Closing Financing generated approximately **$275.0 million** in gross proceeds, and a PIPE Financing on September 13, 2024, generated approximately **$188.7 million** in net proceeds[114](index=114&type=chunk)[116](index=116&type=chunk) - License Agreements with Paragon Therapeutics for ORKA-001 and ORKA-002 were entered into in December 2024 and February 2025, respectively, involving milestone payments and royalties[117](index=117&type=chunk)[119](index=119&type=chunk) - As of June 30, 2025, **$4.0 million** in milestone payments were expensed for each program, with an additional **$3.0 million** accrued for ORKA-001 in Q3 2025[120](index=120&type=chunk) [Components of Results of Operations](index=28&type=section&id=Components%20of%20Results%20of%20Operations) - The company has not generated any revenue from product sales to date and does not expect to in the foreseeable future, relying on successful development and commercialization of product candidates[121](index=121&type=chunk) - Research and development expenses, expensed as incurred, include costs for third-party research, milestone payments, CROs/CMOs, personnel, and allocated facility costs, and are expected to **increase substantially**[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - General and administrative expenses, including personnel, legal, professional fees, and allocated facility costs, are also expected to increase due to expanding operations and public company costs[126](index=126&type=chunk)[127](index=127&type=chunk) - Other income (expense), net, includes interest income from cash/marketable securities and interest expense from a related party convertible note (now converted)[128](index=128&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Comparison of Three Months Ended June 30, 2025 and 2024 (in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $24,087 | $18,673 | $5,414 | 29% | | General and administrative | $4,342 | $2,820 | $1,522 | 54% | | Total operating expenses | $28,429 | $21,493 | $6,936 | 32% | | Loss from operations | $(28,429) | $(21,493) | $(6,936) | 32% | | Interest income | $3,857 | — | $3,857 | 100% | | Interest expense | — | $(750) | $750 | (100)% | | Net loss | $(24,574) | $(22,243) | $(2,331) | 10% | - Research and development expenses increased by **$5.4 million (29%)** for the three months ended June 30, 2025, driven by higher personnel-related and stock-based compensation, partially offset by decreased external research expenses[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - General and administrative expenses increased by **$1.5 million (54%)** for the three months ended June 30, 2025, due to increased personnel and stock-based compensation, partially offset by lower professional and consulting services[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) Comparison of Six Months Ended June 30, 2025, and Period from Inception to June 30, 2024 (in thousands) | Metric | June 30, 2025 | Inception to June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $44,012 | $23,866 | $20,146 | 84% | | General and administrative | $9,503 | $4,490 | $5,013 | 112% | | Total operating expenses | $53,515 | $28,356 | $25,159 | 89% | | Loss from operations | $(53,515) | $(28,356) | $(25,159) | 89% | | Interest income | $7,949 | — | $7,949 | 100% | | Interest expense | — | $(964) | $964 | (100)% | | Net loss | $(45,573) | $(29,320) | $(16,253) | 55% | - Research and development expenses increased by **$20.1 million (84%)** for the six months ended June 30, 2025, primarily due to increased CMO product development, CRO expenses, personnel, and stock-based compensation[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - General and administrative expenses increased by **$5.0 million (112%)** for the six months ended June 30, 2025, driven by continued hiring of executives and administrative employees, and higher stock-based compensation[148](index=148&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had **$351.5 million** in cash, cash equivalents, and marketable securities[153](index=153&type=chunk) - Operations have been funded by convertible preferred stock, common stock, a convertible note, pre-funded warrants, and proceeds from the reverse recapitalization and PIPE Financing, totaling approximately **$444.6 million in net proceeds** from March to September 2024[154](index=154&type=chunk) - The company expects existing capital to fund operations for at least twelve months but will require **additional financing** for future research, development, and potential commercialization[155](index=155&type=chunk) [Cash Flows](index=36&type=section&id=Cash%20Flows) Summary of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(44,014) | $(11,201) | | Net cash provided by investing activities | $47,726 | — | | Net cash provided by financing activities | $109 | $26,322 | | Net increase in cash and cash equivalents | $3,821 | $15,121 | - Operating activities used **$44.0 million in cash** for the six months ended June 30, 2025, primarily due to a net loss of $45.6 million and a $5.3 million decrease in operating assets and liabilities, partially offset by $6.9 million in non-cash charges[157](index=157&type=chunk) - Investing activities provided **$47.7 million in cash** for the six months ended June 30, 2025, mainly from proceeds from marketable securities maturities ($200.1 million) exceeding purchases ($152.3 million)[159](index=159&type=chunk) - Financing activities provided **$0.1 million in cash** for the six months ended June 30, 2025, from common stock issuance under the employee stock purchase plan, a significant decrease from $26.3 million in the prior year period which included proceeds from preferred stock and convertible notes[161](index=161&type=chunk)[162](index=162&type=chunk) [Contractual Obligations and Commitments](index=37&type=section&id=Contractual%20Obligations%20and%20Commitments) - The company enters into cancelable contracts with CROs, CMOs, and other vendors for research, clinical trials, and manufacturing, with no non-cancellable obligations as of June 30, 2025, beyond lease and license agreements[163](index=163&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) - No changes were made to critical accounting policies and significant judgments and estimates during the three months ended June 30, 2025, as disclosed in the Annual Report on Form 10-K[165](index=165&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) - As of June 30, 2025, the company did not have any off-balance sheet arrangements[166](index=166&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) As a smaller reporting company, Oruka Therapeutics, Inc is not required to provide these disclosures - The company is a **smaller reporting company** and is not required to provide quantitative and qualitative disclosures about market risk[167](index=167&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and reports no material changes to internal control over financial reporting [Management's Evaluation of Disclosure Controls and Procedures](index=38&type=section&id=Management's%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were **effective** at a reasonable assurance level as of June 30, 2025[169](index=169&type=chunk) [Changes in Internal Control over Financial Reporting](index=38&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were **no changes** in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect it[170](index=170&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=38&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) - Management acknowledges that control systems provide **reasonable, not absolute, assurance** and are subject to inherent limitations, including faulty judgments, simple errors, circumvention by individuals, or management override[171](index=171&type=chunk) [PART II. Other Information](index=39&type=section&id=PART%20II.%20Other%20Information) This part covers legal proceedings, risk factors, securities sales, and other required corporate disclosures [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not currently party to any **material legal proceedings**[172](index=172&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks spanning financial condition, clinical development, regulations, and intellectual property [RISK FACTOR SUMMARY](index=39&type=section&id=RISK%20FACTOR%20SUMMARY) - The company is subject to numerous risks that could harm its business, including those related to clinical development, regulatory approval, intellectual property, and reliance on third parties[174](index=174&type=chunk) - Key risks include **limited operating history**, historical and anticipated losses, no product revenue, potential inability to raise sufficient capital, and dilution from future equity sales[179](index=179&type=chunk) - Drug development is costly, time-consuming, and uncertain, with substantial dependence on the success of **ORKA-001 and ORKA-002**, facing competition and potential delays in regulatory approval[179](index=179&type=chunk) [Risks Related to Our Financial Condition and Capital Requirements](index=41&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Capital%20Requirements) - The company is a clinical-stage biopharmaceutical company with a **limited operating history**, no products approved for sale, and has incurred significant losses, expecting to continue doing so for the foreseeable future[184](index=184&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk) - **Substantial additional capital** will be required to fund future operations, and there is no assurance that it will be available on reasonable terms, or at all, potentially leading to curtailment or cessation of product development[185](index=185&type=chunk)[186](index=186&type=chunk)[189](index=189&type=chunk) - Raising additional capital through equity or convertible debt will **dilute existing stockholders**, and debt financing may impose restrictive covenants[191](index=191&type=chunk) [Risks Related to Clinical Development, Regulatory Approval and Commercialization](index=42&type=section&id=Risks%20Related%20to%20Clinical%20Development,%20Regulatory%20Approval%20and%20Commercialization) - The company faces **intense competition** from biopharmaceutical companies with greater resources and expertise, which could hinder market penetration for its product candidates[193](index=193&type=chunk) - Clinical testing is **expensive, lengthy, and uncertain**; preclinical and early clinical trial results may not predict later-stage success, and unforeseen events can delay the product development timeline[196](index=196&type=chunk)[197](index=197&type=chunk) - The company is substantially dependent on the success of **ORKA-001 and ORKA-002**, particularly on observing an extended half-life in humans, which is not guaranteed and could significantly affect commercial potential[200](index=200&type=chunk) - Preliminary or interim clinical data are **subject to change and audit**, and negative or inconclusive results could require additional trials or halt development[212](index=212&type=chunk)[214](index=214&type=chunk) - Clinical trials may reveal **significant adverse events** or undesirable side effects, potentially halting development, inhibiting regulatory approval, or limiting market acceptance[215](index=215&type=chunk)[216](index=216&type=chunk) [Risks Related to Government Regulations](index=49&type=section&id=Risks%20Related%20to%20Government%20Regulations) - Regulatory approval processes (FDA and foreign) are **lengthy, unpredictable, and expensive**; failure or delays in obtaining approval would materially impair revenue generation[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - The company must meet stringent **chemistry, manufacturing, and control (CMC)** requirements for its drug products and delivery devices to gain regulatory approval[228](index=228&type=chunk) - Approved biologics may face competition sooner than anticipated due to **biosimilar pathways**, potentially shortening exclusivity periods[229](index=229&type=chunk)[230](index=230&type=chunk) - **Ongoing regulatory obligations** post-approval, including safety monitoring and cGMP compliance, can be costly, and non-compliance may lead to penalties or product withdrawal[231](index=231&type=chunk)[232](index=232&type=chunk) - Disruptions at government agencies (e.g., FDA, SEC) due to funding shortages or policy changes (e.g., Trump administration actions) could **delay regulatory reviews and approvals**[233](index=233&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - Legislative or regulatory reforms, such as price controls or cost-containment measures (e.g., IRA), could adversely affect **pharmaceutical pricing and profitability**[238](index=238&type=chunk)[239](index=239&type=chunk) - Business operations are subject to healthcare regulatory laws (fraud, abuse, data privacy), and non-compliance could result in **significant penalties, fines, and reputational harm**[240](index=240&type=chunk)[242](index=242&type=chunk) [Risks Related to Our Intellectual Property](index=54&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - The company's ability to obtain and protect patents and other proprietary rights is **uncertain**, and failure to do so could lead to loss of competitive advantage, especially in foreign jurisdictions[247](index=247&type=chunk)[248](index=248&type=chunk) - Reliance on trade secrets carries risks of **disclosure or misappropriation**, which could erode competitive position, and enforcement of trade secret claims is challenging[249](index=249&type=chunk) - Failure to obtain or maintain necessary third-party intellectual property rights through acquisitions or in-licenses could force the company to **abandon development programs**[251](index=251&type=chunk)[253](index=253&type=chunk) - The company may face **patent infringement claims** or need to file claims to protect its IP, leading to substantial costs, liability, and potential inability to commercialize products[255](index=255&type=chunk) - Changes in patent laws (e.g., U.S. Supreme Court rulings, European UPC) could **diminish the value of patents** and impair the ability to protect products[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk) - Non-compliance with procedural and fee requirements for patent agencies could lead to **abandonment or lapse of patent rights**[266](index=266&type=chunk) [Risks Related to Our Reliance on Third Parties](index=58&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) - The company relies on licensing arrangements with Paragon for a substantial portion of its in-licenses (ORKA-001, ORKA-002); failure to maintain these or if they are unsuccessful could **negatively impact the business**[273](index=273&type=chunk)[274](index=274&type=chunk) - Reliance on third parties (investigators, CROs, CMOs) to conduct preclinical studies and clinical trials means **less direct control**, and their failure to perform could delay or terminate development[277](index=277&type=chunk)[278](index=278&type=chunk) - The company relies on CMOs for manufacturing product candidates and has a **sole source for ORKA-001 and ORKA-002**; disruptions or non-compliance could adversely affect clinical development and commercialization[279](index=279&type=chunk)[280](index=280&type=chunk) - Reliance on foreign CROs and CMOs (e.g., WuXi Biologics) exposes the company to U.S. legislation (e.g., BIOSECURE Act), trade restrictions, and foreign regulatory requirements, potentially **increasing costs or reducing supply**[281](index=281&type=chunk)[282](index=282&type=chunk) [Risks Related to Employee Matters, Managing Growth, Other Risks Related to Our Business, and Risks Related to Owning Our Common Stock](index=61&type=section&id=Risks%20Related%20to%20Employee%20Matters,%20Managing%20Growth,%20Other%20Risks%20Related%20to%20Our%20Business,%20and%20Risks%20Related%20to%20Owning%20Our%20Common%20Stock) - **Significant growth** in employees and operations is expected, which may be difficult to manage effectively due to limited financial resources and management experience[283](index=283&type=chunk) - The company is **highly dependent on key personnel**, and the inability to attract and retain qualified individuals could impede research, development, and commercialization objectives[284](index=284&type=chunk)[285](index=285&type=chunk) - Employees, contractors, and other third parties may engage in **misconduct**, leading to noncompliance with regulatory standards and potential governmental investigations or lawsuits[288](index=288&type=chunk) - Internal IT systems or those of third-party providers are vulnerable to **security breaches**, which could result in costs, revenue loss, liabilities, and disruption of operations[289](index=289&type=chunk)[290](index=290&type=chunk) - The market price of common stock has been and is likely to remain **highly volatile**, influenced by clinical trial results, financial projections, regulatory actions, and macroeconomic conditions[306](index=306&type=chunk)[308](index=308&type=chunk) - The company **does not anticipate paying cash dividends** in the foreseeable future, meaning capital appreciation will be the sole source of gain for stockholders[315](index=315&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds to report[318](index=318&type=chunk) [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities[319](index=319&type=chunk) [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[320](index=320&type=chunk) [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[321](index=321&type=chunk) [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q - The report includes various exhibits such as the Agreement and Plan of Merger and Reorganization, Amended and Restated Certificate of Incorporation and Bylaws, Certificates of Designation for Preferred Stock, Forms of Pre-Funded Warrants, Paruka Warrant, and certifications by executive officers[323](index=323&type=chunk) [Signatures](index=70&type=section&id=Signatures) This section contains the required signatures of the registrant's authorized officers - The report is signed by Lawrence Klein, President and Chief Executive Officer (Principal Executive Officer), and Arjun Agarwal, Senior Vice President, Finance and Treasurer (Principal Financial Officer and Principal Accounting Officer), on August 11, 2025[329](index=329&type=chunk)

Exhibit 99.1 Gyre Therapeutics Reports Second Quarter 2025 and Year-to-Date Financial Results and Provides Business and Leadership Update Net income of $1.6 million and $5.3 million for the three and six months ended June 30, 2025, respectively; reaffirms full-year revenue guidance of $118-128 million Ping Zhang, Executive Chairman, appointed interim CEO as Dr. Han Ying transitions to scientific leadership role SAN DIEGO, August 11, 2025 (GLOBE NEWSWIRE) – Gyre Therapeutics ("Gyre") (Nasdaq: GYRE), an innov ...

[Executive Summary & Business Update](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Update) [Leadership Transition](index=1&type=section&id=Leadership%20Transition) Gyre Therapeutics appointed Ping Zhang as interim CEO, with Dr. Han Ying transitioning to Senior VP of Science for R&D - Ping Zhang (Executive Chairman) was appointed interim CEO, responsible for daily operations and global strategic expansion[1](index=1&type=chunk)[3](index=3&type=chunk) - Dr. Han Ying resigned as CEO, transitioning to Senior Vice President of Science, responsible for research and discovery activities to support the company's fibrosis pipeline[1](index=1&type=chunk)[3](index=3&type=chunk) [Q2 2025 & Year-to-Date Highlights](index=1&type=section&id=Q2%202025%20%26%20YTD%20Highlights) Q2 and H1 2025 highlights include net income growth, reaffirmed guidance, positive Hydronidone Phase III results, and successful new product launches Financial Highlights | Metric | Q2 2025 | H1 2025 | | :--- | :--- | :--- | | Net Income | $1.6 million | $5.3 million | | Revenue | $26.8 million | $48.8 million | | GAAP Basic EPS | $0.00 | $0.04 | - Reaffirmed **full-year 2025 revenue guidance of $118-$128 million**[1](index=1&type=chunk) - Hydronidone (F351) showed statistically significant fibrosis reversal after 52 weeks of treatment in a Phase III clinical trial for CHB-related liver fibrosis[4](index=4&type=chunk) - Etorel (nintedanib ethanesulfonate soft capsules) successfully launched in China for SSc-ILD and PF-ILD[4](index=4&type=chunk) - First subject dosed in Phase I clinical trial of F230 for PAH[4](index=4&type=chunk) [CEO Outlook & Strategic Priorities](index=2&type=section&id=CEO%20Outlook%20%26%20Strategic%20Priorities) Interim CEO Ping Zhang outlined strategic priorities for commercial expansion, fibrosis pipeline advancement, and Hydronidone's NDA submission - Plan to initiate a Phase II trial for Hydronidone in MASH-related liver fibrosis in the US in **H2 2025**[5](index=5&type=chunk) - Expect to initiate a Phase II/III trial for pirfenidone in tumor-related lung complications in **H2 2025**[5](index=5&type=chunk) - Plan to submit a New Drug Application (NDA) for Hydronidone to the NMPA in **Q3 2025**[5](index=5&type=chunk) [Business Highlights & Upcoming Milestones](index=2&type=section&id=Business%20Highlights%20%26%20Upcoming%20Milestones) [Commercial Portfolio Expansion](index=2&type=section&id=Commercial%20Portfolio%20Expansion) Q2 2025 commercial portfolio expanded with successful Etorel and Contiva launches, offsetting a slight ETUARY® sales decline Product Sales | Product | Q2 2025 Sales (million USD) | Q2 2024 Sales (million USD) | Change (million USD) | | :--- | :--- | :--- | :--- | | ETUARY® (pirfenidone) | $23.5 | $25.1 | ↓ $1.6 | | Etorel (nintedanib ethanesulfonate) | $1.6 | N/A | New Launch | | Contiva (avatrombopag maleate) | $1.5 | N/A | New Launch | - Etorel launched in China in **June 2025** for SSc-ILD and PF-ILD[6](index=6&type=chunk) - Contiva began commercialization in China in **March 2025** for thrombocytopenia in adults with chronic liver disease and immune thrombocytopenia[7](index=7&type=chunk) [Pipeline Development Updates](index=2&type=section&id=Pipeline%20Development%20Updates) The company's pipeline advanced with positive Hydronidone Phase III results, planned US MASH trials, and new clinical stages for ETUARY® and F230 [Hydronidone](index=2&type=section&id=Hydronidone) - In **May 2025**, Hydronidone achieved positive results in a pivotal Phase III clinical trial for chronic hepatitis B (CHB)-related liver fibrosis, showing statistically significant fibrosis reversal after 52 weeks[8](index=8&type=chunk) - Hydronidone also met key secondary endpoints at 52 weeks, demonstrating inflammation improvement without fibrosis progression[8](index=8&type=chunk) - Plan to submit a New Drug Application (NDA) to the NMPA in **Q3 2025**[8](index=8&type=chunk) - Internal review is ongoing to determine if a new IND is required for the US Phase II trial in MASH-related liver fibrosis, expected to start in **H2 2025**[9](index=9&type=chunk) [ETUARY® (Pirfenidone)](index=3&type=section&id=ETUARY%C2%AE%20(Pirfenidone)) - Plan to initiate an adaptive Phase II/III trial for pirfenidone in radiation-induced lung injury (RILI) in China in **H2 2025**[10](index=10&type=chunk) [F573](index=3&type=section&id=F573) - F573, a caspase inhibitor for acute/acute-on-chronic liver failure (ALF/ACLF), is expected to complete its Phase II clinical trial by **end of 2026**[11](index=11&type=chunk) [F230](index=3&type=section&id=F230) - In **June 2025**, the first subject was successfully dosed in China for the Phase I clinical trial of F230, a novel endothelin A receptor agonist, for pulmonary arterial hypertension (PAH)[12](index=12&type=chunk) [F528](index=3&type=section&id=F528) - F528, a novel anti-inflammatory agent, is undergoing preclinical studies for COPD, with an IND application planned for **2026**[13](index=13&type=chunk) [Corporate Updates](index=3&type=section&id=Corporate%20Updates) [Corporate Updates](index=3&type=section&id=Corporate%20Updates) Gyre Therapeutics completed leadership transition, appointed interim CEO, raised $23 million, and increased Gyre Pharmaceuticals ownership - In **August 2025**, Ping Zhang was appointed interim CEO, and Dr. Han Ying transitioned to a scientific leadership role[14](index=14&type=chunk) - In **May 2025**, completed an underwritten public offering, raising approximately **$23 million** in gross proceeds[14](index=14&type=chunk) - In **Q3 2025**, the company's indirect ownership in Gyre Pharmaceuticals increased from **65.2% to 69.7%**[14](index=14&type=chunk) [Financial Results](index=4&type=section&id=Financial%20Results) [Cash Position](index=4&type=section&id=Cash%20Position) As of June 30, 2025, cash and equivalents totaled $75.9 million, primarily from $21.3 million net proceeds of a May public offering Cash and Equivalents | Asset Category | Amount (million USD) | | :--- | :--- | | Cash and Cash Equivalents | $36.5 | | Short-Term Bank Deposits | $17.9 | | Long-Term Time Deposits | $21.5 | | **Total** | **$75.9** | - The increase in cash and cash equivalents primarily includes approximately **$21.3 million** in net proceeds from an underwritten public offering in **May 2025**[15](index=15&type=chunk) [Financial Results for the Three Months Ended June 30, 2025](index=4&type=section&id=Financial%20Results%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202025) Q2 2025 revenue grew from new product launches, but increased operating expenses led to a decline in operating and net income Condensed Consolidated Statements of Operations (Q2) | Metric | Q2 2025 (million USD) | Q2 2024 (million USD) | YOY Change (million USD) | YOY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $26.8 | $25.2 | ↑ $1.6 | ↑ 6.3% | | Cost of Revenue | $1.2 | $0.8 | ↑ $0.4 | ↑ 50.0% | | Selling and Marketing Expenses | $15.2 | $14.4 | ↑ $0.8 | ↑ 5.6% | | Research and Development Expenses | $3.4 | $3.3 | ↑ $0.1 | ↑ 3.0% | | General and Administrative Expenses | $4.8 | $3.4 | ↑ $1.4 | ↑ 41.2% | | Operating Income | $2.2 | $3.2 | ↓ $1.0 | ↓ 31.3% | | Net Income | $1.6 | $4.5 | ↓ $2.9 | ↓ 64.4% | | Non-GAAP Adjusted Net Income | $2.9 | $3.1 | ↓ $0.2 | ↓ 6.5% | - Revenue growth was primarily driven by Etorel launch (**$1.6 million**) and Contiva sales (**$1.5 million**), partially offset by a decrease in ETUARY® sales (**$1.5 million**)[16](index=16&type=chunk) - The decline in operating income was primarily due to a **$2.6 million** increase in total operating expenses, partially offset by a **$1.6 million** increase in revenue[16](index=16&type=chunk) [Financial Results for the Six Months Ended June 30, 2025](index=5&type=section&id=Financial%20Results%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025) H1 2025 revenue declined due to lower ETUARY® sales and increased operating expenses, leading to a significant drop in operating and net income Condensed Consolidated Statements of Operations (H1) | Metric | H1 2025 (million USD) | H1 2024 (million USD) | YOY Change (million USD) | YOY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $48.8 | $52.4 | ↓ $3.6 | ↓ 6.9% | | Cost of Revenue | $2.0 | $1.7 | ↑ $0.3 | ↑ 17.6% | | Selling and Marketing Expenses | $26.0 | $26.9 | ↓ $0.9 | ↓ 3.3% | | Research and Development Expenses | $6.5 | $5.5 | ↑ $1.0 | ↑ 18.2% | | General and Administrative Expenses | $9.8 | $6.8 | ↑ $3.0 | ↑ 44.1% | | Operating Income | $4.4 | $11.3 | ↓ $6.9 | ↓ 61.1% | | Net Income | $5.3 | $14.5 | ↓ $9.2 | ↓ 63.4% | | Non-GAAP Adjusted Net Income | $5.8 | $11.3 | ↓ $5.5 | ↓ 48.7% | - Revenue decline was primarily due to a **$6.8 million** decrease in ETUARY® sales, partially offset by new product sales growth from Contiva (**$1.8 million**) and Etorel (**$1.6 million**)[17](index=17&type=chunk) - The decrease in ETUARY® sales was mainly attributed to the non-recurrence of a one-time rural marketing campaign in H1 2024, a weak economic environment in China, and increased competition in the IPF treatment market[17](index=17&type=chunk) - The decline in operating income was primarily due to a **$3.6 million** decrease in revenue and a **$3.3 million** increase in total operating expenses[23](index=23&type=chunk) [Full Year 2025 Financial Guidance](index=6&type=section&id=Full%20Year%202025%20Financial%20Guidance) The company reaffirmed its full-year 2025 revenue guidance of $118-$128 million, projecting growth driven by new product commercialization and ETUARY® sales 2025 Financial Outlook | Metric | FY 2025 Guidance | | :--- | :--- | | Total Revenue | $118 - $128 million | | YOY Growth | 11.3% - 20.8% | | Driving Factors | Commercialization of Etorel and Contiva, and ETUARY® sales | - Revenue guidance assumes constant exchange rates and no significant economic disruptions or recession[21](index=21&type=chunk) [Use of Non-GAAP Financial Measures](index=6&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) Gyre Therapeutics uses non-GAAP adjusted net income, excluding specific items, to provide a clearer assessment of core operating performance - Adjusted net income excludes changes in fair value of warrant liabilities, share-based compensation expenses, and income tax provision[22](index=22&type=chunk) - Management believes adjusted net income provides investors with additional useful information for evaluating the company's performance and valuation[22](index=22&type=chunk) [About the Company](index=7&type=section&id=About%20the%20Company) [About Gyre Pharmaceuticals](index=7&type=section&id=About%20Gyre%20Pharmaceuticals) Gyre Pharmaceuticals focuses on organ fibrosis drug R&D, manufacturing, and commercialization, with flagship ETUARY® and a diverse pipeline - ETUARY® (pirfenidone capsules) was China's first approved IPF treatment in **2011**, with **$105 million** in net sales in **2024**[24](index=24&type=chunk) - Hydronidone showed statistically significant fibrosis reversal in a Phase III clinical trial for CHB-related liver fibrosis and is expected to have its NDA submitted in **Q3 2025**[24](index=24&type=chunk) - Gyre Therapeutics acquired a **65.2%** indirect majority stake in Gyre Pharmaceuticals in **October 2023**, increasing to **69.7%** in **Q3 2025**[24](index=24&type=chunk) [About Gyre Therapeutics](index=7&type=section&id=About%20Gyre%20Therapeutics) Gyre Therapeutics, based in San Diego, focuses on Hydronidone development for US MASH, and advances ETUARY® and other pipeline programs in China - Gyre Therapeutics, headquartered in San Diego, USA, primarily focuses on the development and commercialization of Hydronidone for liver fibrosis (including MASH) in the US[25](index=25&type=chunk) - Through indirect control of Gyre Pharmaceuticals, the company advances ETUARY®'s therapeutic indication expansion and development programs such as F573, F528, and F230 in China[25](index=25&type=chunk) [Forward-Looking Statements](index=8&type=section&id=Forward-Looking%20Statements) [Forward-Looking Statements](index=8&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements, subject to risks and uncertainties, where actual results may differ materially from expectations - Forward-looking statements cover expectations regarding R&D efforts, clinical trial timelines, regulatory filings and approvals, product sales, and financial condition[26](index=26&type=chunk) - Actual results may differ materially due to risks and uncertainties such as the ability to execute clinical development strategies, timing of regulatory approvals, competition, economic conditions, and sufficiency of capital resources[26](index=26&type=chunk) [Financial Statements](index=9&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations detail Q2 and H1 2025 revenue, expenses, and net income, reflecting profitability and cost structure Condensed Consolidated Statements of Operations | Metric (thousand USD) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 26,771 | 25,225 | 48,829 | 52,397 | | Total Operating Expenses | 24,600 | 22,031 | 44,385 | 41,132 | | Operating Income | 2,171 | 3,194 | 4,444 | 11,265 | | Net Income | 1,576 | 4,538 | 5,310 | 14,473 | | Net Income Attributable to Common Stockholders | 442 | 3,528 | 3,140 | 11,060 | | Basic Earnings Per Share | 0.00 | 0.04 | 0.04 | 0.13 | | Diluted Earnings Per Share | 0.00 | 0.01 | 0.01 | 0.04 | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets present assets, liabilities, and equity as of June 30, 2025, and December 31, 2024, showing asset growth and capital structure Condensed Consolidated Balance Sheets | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and Cash Equivalents | 36,491 | 11,813 | | Short-Term Bank Deposits | 17,874 | 14,858 | | Total Current Assets | 91,285 | 64,786 | | Total Assets | 152,646 | 125,406 | | **Liabilities and Stockholders' Equity** | | | | Total Current Liabilities | 16,920 | 19,516 | | Total Liabilities | 23,203 | 27,004 | | Equity Attributable to Gyre Stockholders | 92,026 | 63,319 | | Non-Controlling Interests | 37,417 | 35,083 | | Total Equity | 129,443 | 98,402 | | Total Liabilities and Stockholders' Equity | 152,646 | 125,406 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=11&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This reconciliation table details the calculation from GAAP to non-GAAP adjusted net income, excluding specific items for clearer core operating performance GAAP to Non-GAAP Reconciliation | Metric (thousand USD) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | 1,576 | 4,538 | 5,310 | 14,473 | | Loss (gain) from change in fair value of warrant liabilities | (212) | (2,913) | (2,467) | (7,201) | | Share-based compensation expenses | 906 | 16 | 1,413 | 27 | | Income tax provision | 662 | 1,497 | 1,563 | 4,043 | | **Non-GAAP Adjusted Net Income** | **2,932** | **3,138** | **5,819** | **11,342** |

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and related notes for Quest Resource Holding Corporation for the periods ended June 30, 2025 and 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) **Condensed Consolidated Balance Sheets (In Thousands):** | ASSETS (June 30, 2025) | Amount ($) | | :--------------------- | :--------- | | Cash and cash equivalents | 449 | | Accounts receivable, net | 53,660 | | Prepaid expenses and other current assets | 2,618 | | Assets held for sale | — | | **Total current assets** | **56,727** | | Goodwill | 81,065 | | Intangible assets, net | 9,316 | | Property and equipment, net, and other assets | 5,954 | | **Total assets** | **153,062** | | LIABILITIES AND STOCKHOLDERS' EQUITY (June 30, 2025) | Amount ($) | | :----------------------------------- | :--------- | | Accounts payable and accrued liabilities | 38,130 | | Deferred revenue | 146 | | Current portion of notes payable | 1,540 | | Liabilities held for sale | — | | **Total current liabilities** | **39,816** | | Notes payable, net | 69,680 | | Other long-term liabilities | 628 | | **Total liabilities** | **110,124** | | Total stockholders' equity | 42,938 | | **Total liabilities and stockholders' equity** | **153,062** | - Total assets decreased from **$175.6 million** at December 31, 2024, to **$153.1 million** at June 30, 2025, primarily due to the sale of assets held for sale and a decrease in accounts receivable[9](index=9&type=chunk) - Total liabilities decreased from **$121.5 million** at December 31, 2024, to **$110.1 million** at June 30, 2025, driven by reductions in accounts payable, deferred revenue, and notes payable[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) **Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Amounts):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $59,540 | $73,145 | $127,970 | $145,796 | | Cost of revenue | 48,503 | 59,613 | 106,002 | 118,228 | | Gross profit | 11,037 | 13,532 | 21,968 | 27,568 | | Operating income (loss) | 382 | 1,782 | (7,779) | 3,658 | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Net loss per share (Basic and Diluted) | $(0.09) | $(0.07) | $(0.59) | $(0.11) | - Revenue decreased by **18.6%** for the three months ended June 30, 2025, and by **12.2%** for the six months ended June 30, 2025, compared to the prior year periods[11](index=11&type=chunk) - The company reported an increased net loss for both the three-month and six-month periods ended June 30, 2025, with the six-month net loss significantly widening to **$(12.4) million** from **$(2.2) million**[11](index=11&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) **Changes in Stockholders' Equity (In Thousands):** | Item | Balance, Dec 31, 2024 | Stock-based Compensation | Net Loss | Other Adjustments | Balance, Jun 30, 2025 | | :-------------------------------- | :-------------------- | :----------------------- | :------- | :------------------ | :-------------------- | | Common Stock (Shares) | 20,606 | — | — | 106 | 20,712 | | Common Stock (Par Value) | $21 | — | — | — | $21 | | Additional Paid-in Capital | $179,246 | $1,112 | — | $47 | $180,405 | | Accumulated Deficit | $(125,111) | — | $(12,377) | — | $(137,488) | | **Total Stockholders' Equity** | **$54,156** | **$1,112** | **$(12,377)** | **$47** | **$42,938** | - Total stockholders' equity decreased from **$54.2 million** at December 31, 2024, to **$42.9 million** at June 30, 2025, primarily due to the net loss incurred during the period[13](index=13&type=chunk) - Stock-based compensation contributed **$1.1 million** to additional paid-in capital for the six months ended June 30, 2025[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) **Condensed Consolidated Statements of Cash Flows (In Thousands):** | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $2,845 | $(844) | | Net cash provided by (used in) investing activities | $4,234 | $(4,847) | | Net cash (used in) provided by financing activities | $(7,026) | $6,325 | | Net increase in cash and cash equivalents | $53 | $634 | | Cash and cash equivalents at end of period | $449 | $958 | - Operating activities generated **$2.8 million** in cash for the six months ended June 30, 2025, a significant improvement from **$(0.8) million** cash used in the prior year[15](index=15&type=chunk) - Investing activities provided **$4.2 million** in cash, primarily from the sale of assets, contrasting with **$4.8 million** cash used in the prior year for equipment purchases[15](index=15&type=chunk) - Financing activities used **$7.0 million** in cash, mainly due to debt repayments, compared to **$6.3 million** cash provided in the prior year from net borrowings[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. The Company and Description of Business](index=7&type=section&id=1.%20The%20Company%20and%20Description%20of%20Business) - Quest Resource Holding Corporation provides national waste and recycling services to large, multi-location businesses, focusing on maximizing resource utilization and supporting sustainability goals[17](index=17&type=chunk)[18](index=18&type=chunk) [2. Summary of Significant Accounting Policies](index=7&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The unaudited condensed consolidated financial statements are prepared under SEC rules, with the company operating as a single reportable segment managed at the consolidated level[19](index=19&type=chunk)[21](index=21&type=chunk) - Recent accounting pronouncements, ASU 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement), are being evaluated, with ASU 2023-09 not expected to significantly impact financial statements[23](index=23&type=chunk)[24](index=24&type=chunk) [3. Sale of Assets](index=8&type=section&id=3.%20Sale%20of%20Assets) - On March 31, 2025, Quest sold its mall-related business assets for approximately **$5.0 million** in cash, with potential additional milestone payments up to **$6.5 million**[26](index=26&type=chunk) - The company recognized a **$4.4 million** loss on asset sale in Q1 2025 and an additional **$61 thousand** loss in Q2 2025, with proceeds used for debt repayment[27](index=27&type=chunk) [4. Accounts Receivable, Net of Allowance for Doubtful Accounts](index=8&type=section&id=4.%20Accounts%20Receivable,%20Net%20of%20Allowance%20for%20Doubtful%20Accounts) - The allowance for doubtful accounts decreased from **$831 thousand** at December 31, 2024, to **$751 thousand** at June 30, 2025[29](index=29&type=chunk) **Allowance for Doubtful Accounts Activity (In Thousands):** | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Beginning balance | $873 | $831 | | Bad debt expense | $112 | $428 | | Uncollectible accounts written off, net of recoveries | $(234) | $(508) | | Ending balance | $751 | $751 | [5. Property and Equipment, Net, and Other Assets](index=8&type=section&id=5.%20Property%20and%20Equipment,%20Net,%20and%20Other%20Assets) **Property and Equipment, Net, and Other Assets (In Thousands):** | Asset Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Property and equipment, net | $4,210 | $4,507 | | Right-of-use operating lease assets | $1,071 | $1,305 | | Security deposits and other assets | $673 | $683 | | **Total** | **$5,954** | **$6,495** | - Depreciation expense for the six months ended June 30, 2025, was **$477 thousand**, with **$404 thousand** included in 'Cost of revenue'[30](index=30&type=chunk) [6. Goodwill and Other Intangible Assets](index=10&type=section&id=6.%20Goodwill%20and%20Other%20Intangible%20Assets) **Goodwill and Other Intangible Assets (In Thousands):** | Asset Category | June 30, 2025 (Net) | December 31, 2024 (Net) | | :-------------------------- | :------------------ | :---------------------- | | Customer relationships | $4,589 | $8,617 | | Software | $3,792 | $3,247 | | Trademarks | $935 | $1,079 | | Non-compete agreements | $— | $3 | | **Total finite lived intangible assets** | **$9,316** | **$12,946** | | Goodwill | $81,065 | $81,065 | - Amortization expense for finite-lived intangible assets decreased to **$2.8 million** for the six months ended June 30, 2025, from **$4.6 million** in the prior year[32](index=32&type=chunk) - A **$1.7 million** impairment charge was recognized in Q1 2025 for customer relationship intangible assets, though a qualitative assessment found no goodwill impairment as of June 30, 2025[34](index=34&type=chunk)[35](index=35&type=chunk) [7. Current Liabilities](index=11&type=section&id=7.%20Current%20Liabilities) **Accounts Payable and Accrued Liabilities (In Thousands):** | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accounts payable and accrued liabilities | $33,450 | $37,088 | | Accrued taxes | $611 | $626 | | Employee compensation | $2,230 | $1,323 | | Operating lease liabilities - current portion | $428 | $434 | | Miscellaneous | $1,411 | $428 | | **Total** | **$38,130** | **$39,899** | - Total accounts payable and accrued liabilities decreased from **$39.9 million** at December 31, 2024, to **$38.1 million** at June 30, 2025[36](index=36&type=chunk) [8. Notes Payable](index=11&type=section&id=8.%20Notes%20Payable) **Notes Payable (In Thousands):** | Debt Obligation | Interest Rate (June 30, 2025) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :---------------------------- | :------------ | :---------------- | | Monroe Term Loan | 11.94% | $51,363 | $54,000 | | PNC ABL Facility | 6.57% | $20,356 | $23,109 | | PNC Equipment Term Loan 1 | 7.33% | $1,431 | $2,729 | | PNC Equipment Term Loan 2 | 7.32% | $358 | $— | | Green Remedies Promissory Note | 3.00% | $296 | $564 | | **Total notes payable** | | **$73,804** | **$80,402** | | Less: Current portion, debt issuance costs, OID | | $(4,124) | $(4,137) | | **Notes payable, net** | | **$69,680** | **$76,265** | - Total notes payable, net, decreased from **$76.3 million** at December 31, 2024, to **$69.7 million** at June 30, 2025[37](index=37&type=chunk) - The company repaid **$1.5 million** on the ABL Facility, **$1.0 million** on Equipment Term Loan 1, and **$2.5 million** on the Monroe Term Loan using asset sale proceeds[42](index=42&type=chunk)[47](index=47&type=chunk) - The company secured waivers and revised leverage requirements through amendments to its PNC and Monroe credit agreements after non-compliance with debt covenants in Q1 2025[45](index=45&type=chunk) [9. Leases](index=15&type=section&id=9.%20Leases) - Operating lease expense for office space was approximately **$177 thousand** for the three months and **$354 thousand** for the six months ended June 30, 2025[50](index=50&type=chunk) **Lease Related Assets and Liabilities (In Thousands):** | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Right-of-use operating lease assets | $1,071 | $1,305 | | Total operating lease liabilities | $1,056 | $1,267 | [10. Revenue](index=15&type=section&id=10.%20Revenue) - Revenue is primarily generated from fees for waste and recycling services, commodity sales, and equipment rentals[54](index=54&type=chunk) **Revenue Disaggregated by Source (In Thousands):** | 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 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Services | $56,314 | $70,123 | $121,507 | $139,925 | | Product sales and other | $3,226 | $3,022 | $6,463 | $5,871 | | **Total revenue** | **$59,540** | **$73,145** | **$127,970** | **$145,796** | - One customer accounted for **22.0%** of revenue for the three months and **23.2%** for the six months ended June 30, 2025[57](index=57&type=chunk) [11. Income Taxes](index=17&type=section&id=11.%20Income%20Taxes) **Income Tax Expense (Benefit) (In Thousands):** | Period | Income Tax Expense (Benefit) | | :----------------------------- | :--------------------------- | | Three Months Ended June 30, 2025 | $(22) | | Three Months Ended June 30, 2024 | $684 | | Six Months Ended June 30, 2025 | $(44) | | Six Months Ended June 30, 2024 | $743 | - The company recorded an income tax benefit of **$(44) thousand** for the six months ended June 30, 2025, compared to an expense of **$743 thousand** in the prior year, due to state tax obligations and a valuation allowance[60](index=60&type=chunk)[61](index=61&type=chunk) - A valuation allowance of **$24.8 million** was recorded against deferred tax assets, with federal net operating loss carryforwards of approximately **$18.3 million** as of June 30, 2025[61](index=61&type=chunk) [12. Fair Value of Financial Instruments](index=17&type=section&id=12.%20Fair%20Value%20of%20Financial%20Instruments) - Fair values of financial instruments approximate carrying values due to short maturities or similar borrowing rates, with variable rate indebtedness exposing the company to interest rate risk[62](index=62&type=chunk) [13. Stockholders' Equity](index=17&type=section&id=13.%20Stockholders'%20Equity) - As of June 30, 2025, **20,712,204** shares of common stock were outstanding, with **45,261** shares issued to employees via the 2024 ESPP[63](index=63&type=chunk)[64](index=64&type=chunk) **Warrants Issued and Outstanding as of June 30, 2025:** | Description | Issuance Date | Expiration Date | Exercise Price | Shares of Common Stock | | :------------------ | :------------ | :-------------- | :------------- | :--------------------- | | Exercisable Warrants | 10/19/2020 | 3/19/2028 | $1.50 | 500,000 | | Exercisable Warrants | 10/19/2021 | 3/19/2028 | $1.50 | 350,000 | | **Total** | | | | **850,000** | - Stock-based compensation expense for the six months ended June 30, 2025, included **$220 thousand** for stock options, **$178 thousand** for DSUs, and **$594 thousand** for RSUs[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - **313,650** Performance Stock Units (PSUs) were granted under the 2024 Plan, with **$128 thousand** in compensation expense recorded for the six months ended June 30, 2025[69](index=69&type=chunk)[70](index=70&type=chunk) [14. Net Loss per Share](index=19&type=section&id=14.%20Net%20Loss%20per%20Share) **Net Loss per Share (In Thousands, Except Per Share Amounts):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss applicable to common stockholders | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Weighted average common shares outstanding, basic | 20,933 | 20,507 | 20,896 | 20,446 | | Net loss per share (Basic and Diluted) | $(0.09) | $(0.07) | $(0.59) | $(0.11) | - Net loss per basic and diluted share increased to **$(0.59)** for the six months ended June 30, 2025, from **$(0.11)** in the prior year, reflecting the higher net loss[73](index=73&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) Management discusses financial condition and operating results for the three and six months ended June 30, 2025, covering revenue, net losses, and liquidity [Business Overview](index=21&type=section&id=Business%20Overview) - Quest provides national waste and recycling services to large, multi-location businesses, supporting customer sustainability and ESG goals[75](index=75&type=chunk) - Primary revenue sources include fees for waste and recycling services, sales of recyclable materials, and product sales[76](index=76&type=chunk) [Operating Results](index=22&type=section&id=Operating%20Results) **Summary of Operating Results (In Thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $59,540 | $73,145 | $127,970 | $145,796 | | Gross profit | $11,037 | $13,532 | $21,968 | $27,568 | | Operating income (loss) | $382 | $1,782 | $(7,779) | $3,658 | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | [Global Economic Trends](index=22&type=section&id=Global%20Economic%20Trends) - Macroeconomic uncertainty, including unemployment, inflation, tariffs, and geopolitical concerns, could adversely affect the company by increasing costs and hindering financing[79](index=79&type=chunk) [Revenue Analysis](index=22&type=section&id=Revenue%20Analysis) - Revenue for the quarter decreased by **$13.6 million (18.6%)** to **$59.5 million**, and for the six months, it decreased by **$17.8 million (12.2%)** to **$128.0 million**[80](index=80&type=chunk) - The revenue decline was primarily due to the mall-related business divestiture (approx. **$5 million** for the quarter, **$9 million** for six months) and industrial market softness (approx. **$11 million** for the quarter, **$17 million** for six months)[81](index=81&type=chunk)[82](index=82&type=chunk) - New client revenue of **$3 million** for the quarter and **$8 million** for six months partially offset declines, while customer attrition reduced revenue by **$5 million** and **$9 million**, respectively[81](index=81&type=chunk)[82](index=82&type=chunk) [Cost of Revenue and Gross Profit Analysis](index=22&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit%20Analysis) - Cost of revenue decreased by **$11.1 million** to **$48.5 million** for the quarter and by **$12.2 million** to **$106.0 million** for the six months, mirroring revenue changes[83](index=83&type=chunk) - Gross profit margin remained flat at **18.5%** for the quarter but declined by **1.7%** to **17.2%** for the six months, primarily due to higher new customer implementation costs[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Operating Expenses Analysis](index=24&type=section&id=Operating%20Expenses%20Analysis) - Operating expenses decreased to **$10.7 million** for the quarter from **$11.8 million** in the prior year, but increased to **$29.7 million** for the six months from **$23.9 million**[88](index=88&type=chunk) - SG&A expenses increased for the six months due to **$0.7 million** in Q1 2025 severance and retirement expenses, partially offset by Q2 2025 headcount reductions[89](index=89&type=chunk) - Depreciation and amortization expense decreased due to lower intangible asset balances, while a **$4.5 million** loss on asset sale and a **$1.7 million** impairment charge were recognized in the six months ended June 30, 2025[90](index=90&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) [Interest Expense Analysis](index=24&type=section&id=Interest%20Expense%20Analysis) - Interest expense decreased to **$2.4 million** for the quarter and **$4.6 million** for the six months ended June 30, 2025, primarily due to lower interest rates despite increased borrowings[94](index=94&type=chunk) [Income Taxes Analysis](index=24&type=section&id=Income%20Taxes%20Analysis) - The company recorded an income tax benefit of **$(22) thousand** for the quarter and **$(44) thousand** for the six months ended June 30, 2025, primarily due to state tax obligations and a full valuation allowance[95](index=95&type=chunk)[96](index=96&type=chunk) [Net Loss and Loss per Share](index=26&type=section&id=Net%20Loss%20and%20Loss%20per%20Share) - Net loss for the quarter ended June 30, 2025, was **$(2.0) million**, and for the six months, it was **$(12.4) million**, significantly higher than prior year periods[97](index=97&type=chunk) - Net loss per basic and diluted share was **$(0.09)** for the quarter and **$(0.59)** for the six months ended June 30, 2025[99](index=99&type=chunk) [Adjusted EBITDA](index=26&type=section&id=Adjusted%20EBITDA) - Adjusted EBITDA decreased by **47.8%** to **$2.7 million** for the three months and by **58.7%** to **$4.2 million** for the six months ended June 30, 2025[101](index=101&type=chunk) **Reconciliation of Net Loss to Adjusted EBITDA (In Thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Depreciation and amortization | 1,500 | 2,605 | 3,246 | 5,101 | | Interest expense | 2,375 | 2,612 | 4,642 | 5,084 | | Stock-based compensation expense | 533 | 363 | 1,195 | 720 | | Loss on sale of assets | 61 | — | 4,491 | — | | Impairment loss | — | — | 1,707 | — | | Acquisition, integration and related costs | — | 19 | — | 61 | | Other adjustments | 208 | 370 | 1,379 | 719 | | Income tax expense (benefit) | (22) | 684 | (44) | 743 | | **Adjusted EBITDA** | **$2,684** | **$5,139** | **$4,239** | **$10,259** | [Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share](index=27&type=section&id=Adjusted%20Net%20Income%20(Loss)%20and%20Adjusted%20Net%20Income%20(Loss)%20per%20Diluted%20Share) - Adjusted net income (loss) was **$(0.8) million** for the three months and **$(3.7) million** for the six months ended June 30, 2025, compared to positive adjusted net income in prior year periods[104](index=104&type=chunk) **Adjusted Net Income (Loss) (In Thousands, Except Per Share Amounts):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Reported net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Amortization of intangibles | 1,104 | 2,221 | 2,468 | 4,441 | | Acquisition, integration and related costs | — | 19 | — | 61 | | Loss on sale of assets | 61 | — | 4,491 | — | | Impairment loss | — | — | 1,707 | — | | **Adjusted net income (loss)** | **$(806)** | **$726** | **$(3,711)** | **$2,333** | | Adjusted net income (loss) per diluted share | $(0.04) | $0.03 | $(0.18) | $0.10 | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) - Working capital decreased to **$16.9 million** at June 30, 2025, from **$30.7 million** at December 31, 2024, with cash and cash equivalents at **$0.4 million**[105](index=105&type=chunk) - The company expects existing cash, **$45.0 million** ABL Facility availability, and cash from operations to fund operations for the next 12 months and foreseeable future[107](index=107&type=chunk) [Cash Flows Analysis](index=28&type=section&id=Cash%20Flows%20Analysis) - Net cash provided by operating activities was **$2.8 million** for the six months ended June 30, 2025, a positive shift from **$(0.8) million** used in the prior year[110](index=110&type=chunk) - Cash provided by investing activities was **$4.2 million**, primarily from **$5.0 million** in proceeds from the sale of mall-related business assets[111](index=111&type=chunk) - Net cash used in financing activities was **$(7.0) million**, mainly due to **$3.5 million** in notes payable repayments from asset sale proceeds and **$2.8 million** net repayments on the ABL Facility[112](index=112&type=chunk) [Inflation Impact](index=28&type=section&id=Inflation%20Impact) - Inflation did not materially impact the company during the six months ended June 30, 2025 and 2024, with flexible pricing expected to offset cost increases[113](index=113&type=chunk) [Critical Accounting Estimates and Policies](index=29&type=section&id=Critical%20Accounting%20Estimates%20and%20Policies) - A qualitative assessment indicated a goodwill impairment triggering event due to share price decrease, but quantitative assessments found no impairment as of June 30, 2025[117](index=117&type=chunk)[118](index=118&type=chunk) [Recent Accounting Pronouncements](index=29&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 2 for details on recent accounting pronouncements[120](index=120&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company has no off-balance sheet debt, similar obligations, undisclosed related-party transactions, or third-party debt guarantees[121](index=121&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section confirms no applicable quantitative and qualitative disclosures about market risk for the company - The company has no applicable quantitative and qualitative disclosures about market risk[122](index=122&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, with no material changes in internal control over financial reporting[123](index=123&type=chunk)[124](index=124&type=chunk) - Control systems provide reasonable, not absolute, assurance and have inherent limitations, including potential for error, fraud, collusion, or management override[125](index=125&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any legal proceedings that could materially adversely affect its business - The company is not aware of any legal proceedings that could have a material adverse effect[128](index=128&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section reports no new material risk factors applicable for the current reporting period - No new material risk factors are applicable for this reporting period[129](index=129&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - No unregistered sales of equity securities or use of proceeds occurred[130](index=130&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[131](index=131&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Mine safety disclosures are not applicable to the company[132](index=132&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) Director S. Ray Hatch resigned from the Board of Directors effective August 8, 2025, with no disagreements cited - S. Ray Hatch resigned from the Board of Directors on August 8, 2025, with no disagreements with the company[133](index=133&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various agreements, certifications, and financial statements - Exhibits include various agreements, CEO/CFO Certifications, and financial statements in Inline XBRL format[134](index=134&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report was duly signed by the President and CEO, and Senior Vice President and CFO, on August 11, 2025 - The report was signed by Perry W. Moss, President and CEO, and Brett W. Johnston, SVP and CFO, on August 11, 2025[139](index=139&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-41753 KEEN VISION ACQUISITION CORPORATION (Exact name of registrant as specified in its charter) British Virgin Islands N/A (State or o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-41753 KEEN VISION ACQUISITION CORPORATION (Exact name of registrant as specified in its charter) British Virgin Islands N/A (State or o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-42167 DT Cloud Star Acquisition Corporation (Exact name of registrant as specified in its charter) Cayman Islands ...