[Q2 2025 Earnings Release Overview](index=1&type=section&id=Q2%202025%20Earnings%20Release%20Overview) Village Farms reported strong Q2 2025 earnings, driven by cannabis growth and a strategic produce segment privatization [Management Commentary and Key Highlights](index=1&type=section&id=Management%20Commentary%20and%20Key%20Highlights) Village Farms achieved record Q2 2025 profitability from continuing operations, fueled by global cannabis growth and a strategic produce segment privatization Q2 2025 Key Performance Indicators | Metric | Value | | :--- | :--- | | Income from Continuing Operations | **$9.9 million** ($0.09/Share) | | Net Income | **$26.5 million** ($0.24/Share) | | Adj. EBITDA from Continuing Operations | **$17.1 million** (28.6% of Sales) | | Canadian Cannabis Adj. EBITDA YoY Growth | **146%** | | YTD Operating Cash Flow from Continuing Ops | **$22 million** | | Cash Position at Quarter End | **$65 million** | - The company completed a transformative transaction on May 30, 2025, privatizing certain assets of its Produce segment, resulting in **$40 million in cash** and a **37.9% equity interest** in Vanguard Food LP[3](index=3&type=chunk) - Management emphasized growth catalysts including Holland's adult-use market sales, a shift to higher-margin products, and expanding international cannabis markets, self-funding a **40 metric ton** cultivation capacity expansion[4](index=4&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) Q2 2025 saw a significant financial turnaround, with consolidated net sales up 12% and a swing to $9.9 million net income from continuing operations [Consolidated Financial Results](index=2&type=section&id=Consolidated%20Financial%20Results) Q2 2025 consolidated results show robust growth, with net sales up 12% to $59.9 million and a return to $9.9 million net income Consolidated Financial Highlights (Q2 2025 vs Q2 2024, in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $59.9 | $53.6 | +12% | | Net Income from Continuing Ops | $9.9 | ($16.6) | N/A | | EPS from Continuing Ops | $0.09 | ($0.15) | N/A | | Net Income | $26.5 | ($23.5) | N/A | | EPS | $0.24 | ($0.21) | N/A | | Adj. EBITDA from Continuing Ops | $17.1 | $2.9 | +488% | - Year-to-date consolidated cash flow from continuing operations was **$22.3 million**, a significant improvement from a cash use of $3.7 million in the prior year period[10](index=10&type=chunk) [Segment Financial Results](index=2&type=section&id=Segment%20Financial%20Results) Canadian Cannabis drove segment profitability with 146% Adjusted EBITDA growth, while Netherlands Cannabis contributed positively Canadian Cannabis Performance (Q2 2025 vs Q2 2024, in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $44.5 | $40.7 | +9% | | Gross Margin | 39% | 26% | +1300 bps | | Net Income | $6.5 | $1.4 | +369% | | Adjusted EBITDA | $11.9 | $4.8 | +146% | - The Canadian Cannabis sales mix shifted dramatically, with international medical export sales increasing **690%**, while retail branded sales decreased **20%** due to a planned focus on higher-margin products[10](index=10&type=chunk)[24](index=24&type=chunk) Other Segment Performance (Q2 2025, in millions, except where noted) | Segment | Net Sales | Net Income (Loss) | Adjusted EBITDA | | :--- | :--- | :--- | :--- | | U.S. Cannabis | $3.8 | ($0.2) | $45k | | Netherlands Cannabis | $2.5 | $0.8 | $1.2 | | Village Farms Produce (Continuing) | $8.6 | $4.3 | $6.4 | [Financial Statements](index=15&type=section&id=Financial%20Statements) The balance sheet strengthened with increased cash, while the income statement showed a shift to net income and positive cash flow Condensed Balance Sheet Data (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $59,988 | $24,631 | | Total current assets | $137,573 | $116,019 | | Total assets | $403,744 | $389,306 | | Total current liabilities | $51,820 | $62,219 | | Total liabilities | $109,552 | $125,348 | | Total shareholders' equity | $284,337 | $254,005 | Condensed Statement of Operations Data (in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $59,899 | $53,597 | | Gross profit | $22,342 | $13,637 | | Income (loss) from continuing ops | $9,945 | ($16,555) | | Net income (loss) | $26,497 | ($23,549) | Condensed Statement of Cash Flows Data (in thousands, YTD) | Account | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash from operating (continuing) | $22,265 | ($3,713) | | Net cash from investing (continuing) | ($5,289) | ($2,813) | | Net cash from discontinued operations | $27,892 | $7,219 | | Net increase (decrease) in cash | $40,357 | ($5,634) | [Strategic and Operational Highlights](index=2&type=section&id=Strategic%20and%20Operational%20Highlights) Village Farms executed key strategic initiatives, including maintaining Canadian market share, surging international sales, and produce privatization [Canadian & International Cannabis](index=2&type=section&id=Canadian%20%26%20International%20Cannabis) The company maintained top Canadian market share, saw international sales surge 690%, and is expanding cultivation capacity - Maintained a **top-three overall market share** position in Canada and the **number one position in dried flower** year-to-date[10](index=10&type=chunk) - International export sales increased **690%** year-over-year in Q2, driven by new and existing customer relationships[12](index=12&type=chunk) - The Board approved an investment to expand cannabis cultivation capacity by an incremental **40 metric tons** annually, to be funded with cash on hand[11](index=11&type=chunk) [Netherlands Cannabis](index=3&type=section&id=Netherlands%20Cannabis) Leli Holland is successfully ramping up with 82.5% market penetration, and a Phase II facility will quintuple capacity - Leli Holland products are now represented in **66 of 80** participating coffeeshops, achieving **82.5% market penetration**[12](index=12&type=chunk) - Construction of the Phase II facility in Groningen is on track to be operational in Q1 2026 and is expected to **quintuple total annualized production capacity**[12](index=12&type=chunk) [U.S. Cannabis](index=3&type=section&id=U.S.%20Cannabis) The company's Texas medicinal marijuana license application remains under review, continuing its U.S. THC market positioning - The Company's application for a Texas medicinal marijuana license remains pending review[12](index=12&type=chunk) [Village Farms Produce](index=3&type=section&id=Village%20Farms%20Produce) The company privatized certain produce assets, receiving $40 million cash and a 37.9% equity stake in Vanguard Food LP - On May 30, 2025, the company closed the transaction to privatize certain assets and operations of its Produce segment, receiving **$40 million** and a **37.9% equity ownership interest** in Vanguard Food LP[13](index=13&type=chunk) - The company entered into service and supply agreements with Vanguard for produce production in its Delta 1 and Delta 2 greenhouses, with Delta 2 converting to cannabis cultivation after the 2025 tomato crop[13](index=13&type=chunk) [Corporate Updates](index=3&type=section&id=Corporate%20Updates) Village Farms regained Nasdaq compliance and appointed Michael Carey as Corporate Treasurer subsequent to quarter end - The company regained compliance with the Nasdaq minimum closing bid price of US$1.00 per share listing requirement[13](index=13&type=chunk) - Subsequent to quarter end, the company appointed Michael Carey as Corporate Treasurer[13](index=13&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=12&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section reconciles GAAP Net Income to Adjusted EBITDA from continuing operations, showing a significant increase to $17.1 million in Q2 2025 Reconciliation of Net Income to Adjusted EBITDA from Continuing Operations (Q2 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net income from continuing operations | $10,203 | | Amortization and depreciation | $5,068 | | Foreign currency exchange gain | ($1,743) | | Interest expense, net | $705 | | Provision for income taxes | $2,503 | | Other adjustments | $387 | | **Adjusted EBITDA from continuing operations** | **$17,111** | Reconciliation of Net Income to Adjusted EBITDA from Continuing Operations (Six Months 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net income from continuing operations | $8,503 | | Amortization and depreciation | $8,410 | | Foreign currency exchange gain | ($1,761) | | Interest expense, net | $1,332 | | Provision for income taxes | $3,486 | | Other adjustments | $590 | | **Adjusted EBITDA from continuing operations** | **$20,560** |

[Executive Summary & Outlook](index=1&type=section&id=WeightWatchers%20Announces%20Second%20Quarter%202025%20Results) The company completed a strategic reorganization, reducing debt by $1.15 billion, and reported Q2 2025 results with a 6% revenue decline offset by strong clinical growth, while issuing full-year 2025 guidance [Second Quarter 2025 Performance Highlights](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Highlights) WeightWatchers successfully completed its strategic reorganization, reducing debt by $1.15 billion, with second quarter 2025 combined revenues declining 6% year-over-year to $189 million due to Behavioral business headwinds, partially offset by 55% growth in the Clinical segment, ending the period with 3.2 million subscribers, a 17% decrease from the prior year, including 127,000 Clinical subscribers - Successfully completed a strategic reorganization, reducing debt by **$1.15 billion**, with the emergence from this process on June 24, 2025, leading to the quarter being split into 'Predecessor' and 'Successor' periods for accounting purposes[2](index=2&type=chunk) Q2 2025 Key Performance Indicators (Combined) | Metric | Value | Change vs. Prior Year | | :--- | :--- | :--- | | **Total Revenues** | $189 million | -6% | | **Clinical Revenues** | $31 million | +55% | | **End of Period Subscribers** | 3.2 million | -17% | | **End of Period Clinical Subscribers** | 127 thousand | +56.5% | | **Predecessor Adjusted EBITDA** | $61 million | N/A | | **Successor Adjusted EBITDA** | $4 million | N/A | - The Clinical business began transitioning subscribers from compounded semaglutide to FDA-approved medications starting May 22nd, in line with FDA guidance[9](index=9&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management expressed confidence in the company's future, highlighting a stronger financial footing post-reorganization, with CEO Tara Comonte emphasizing accelerating innovation through an integrated model and CFO Felicia DellaFortuna prioritizing business stabilization, growth investment, and long-term profitability - CEO Tara Comonte stated the company is well-positioned to meet the need for effective weight health support, marking a new chapter with a stronger financial foundation and clear opportunities[3](index=3&type=chunk) - CFO Felicia DellaFortuna highlighted that the swift reorganization provides greater financial flexibility, with the immediate focus on business stabilization, investment in growth, and maintaining financial discipline for long-term profitability[3](index=3&type=chunk) [Full Year Fiscal 2025 Guidance](index=2&type=section&id=Full%20Year%20Fiscal%202025%20Guidance) The company has issued its financial guidance for the full fiscal year of 2025, projecting total combined revenues to be in the range of $685 million to $700 million and Adjusted EBITDA between $140 million and $150 million Full Year 2025 Financial Outlook | Metric | Guidance Range | | :--- | :--- | | **Total Combined Revenues** | $685 million - $700 million | | **Adjusted EBITDA** | $140 million - $150 million | [Financial Statements](index=8&type=section&id=Financial%20Statements) This section presents the company's consolidated financial statements, including the balance sheets reflecting post-reorganization capital structure, statements of operations detailing revenue and net income, and cash flow activities for the period [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, following reorganization, the company's balance sheet reflects a significant capital structure change, with total assets increasing to $1.03 billion from $550 million, total liabilities decreasing substantially to $652 million from $1.66 billion primarily due to long-term debt reduction, and total equity shifting from a $1.11 billion deficit to a positive $381 million Balance Sheet Summary (in thousands) | Account | June 30, 2025 (Successor) | Dec 28, 2024 (Predecessor) | | :--- | :--- | :--- | | **Total Assets** | $1,033,118 | $550,276 | | Cash and cash equivalents | $152,379 | $53,024 | | **Total Liabilities** | $652,149 | $1,664,648 | | Long-term debt, net | $465,518 | $1,430,643 | | **Total Equity (Deficit)** | $380,969 | $(1,114,372) | [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) For the second quarter, combined revenues were $189.2 million, down from $202.1 million in the prior year, with the Predecessor period reporting a net income of $1.19 billion influenced by a $1.14 billion net reorganization gain, while the Successor period showed a net income of $1.3 million, and six-month combined revenues were $375.7 million compared to $408.6 million in the prior year Q2 Statement of Operations Highlights (in thousands) | Metric | Combined Q2 2025 | Q2 2024 (Predecessor) | | :--- | :--- | :--- | | **Revenues, net** | $189,164 | $202,073 | | Gross profit | $139,417 | $137,294 | | Operating income | $43,990 | $35,933 | | Reorganization items, net | $(1,143,918) | $0 | | **Net income** | $1,191,942 | $23,269 | Six Months Statement of Operations Highlights (in thousands) | Metric | Combined YTD 2025 | YTD 2024 (Predecessor) | | :--- | :--- | :--- | | **Revenues, net** | $375,735 | $408,621 | | Operating income (loss) | $23,789 | $(233,399) | | Reorganization items, net | $(1,143,918) | $0 | | **Net income (loss)** | $1,119,357 | $(324,633) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, combined cash used for operating activities was $22.9 million, an improvement from the prior year, with $6.5 million used for investing activities and $153.9 million provided by financing activities, primarily from revolving credit facility borrowings, ending the period with $185.5 million in cash, cash equivalents, and restricted cash Six Months Cash Flow Summary (in thousands) | Cash Flow Activity | Combined YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | **Cash from Operating Activities** | $(22,915) | $(37,976) | | **Cash from Investing Activities** | $(6,529) | $(10,111) | | **Cash from Financing Activities** | $153,898 | $(17,132) | | **Net Change in Cash** | $129,000 | $(66,657) | | **Cash at End of Period** | $185,484 | $42,709 | [Key Business Metrics & Non-GAAP Reconciliations](index=12&type=section&id=Key%20Business%20Metrics%20%26%20Non-GAAP%20Reconciliations) This section analyzes key business metrics, including detailed revenue and subscriber performance, ARPU trends, and reconciliations of non-GAAP financial measures such as Adjusted EBITDA [Revenue Analysis](index=12&type=section&id=Revenue%20Analysis) In Q2 2025, combined total revenues fell 6.4% year-over-year to $189.2 million, driven by a 12.7% decline in Behavioral Subscription Revenues partially mitigated by a 55.1% increase in Clinical Subscription Revenues, with similar trends for the first six months where total revenues were down 8.0% year-over-year Q2 2025 Combined Revenue Breakdown (in thousands) | Revenue Stream | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Behavioral Subscription | $157,258 | $180,233 | -12.7% | | Clinical Subscription | $30,593 | $19,723 | +55.1% | | **Total Subscription Revenues** | **$187,851** | **$199,956** | **-6.1%** | | Other Revenues | $1,312 | $2,117 | -38.0% | | **Total Revenues** | **$189,163** | **$202,073** | **-6.4%** | Six Months 2025 Combined Revenue Breakdown (in thousands) | Revenue Stream | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Behavioral Subscription | $312,981 | $365,537 | -14.4% | | Clinical Subscription | $60,051 | $38,475 | +56.1% | | **Total Subscription Revenues** | **$373,032** | **$404,012** | **-7.7%** | | Other Revenues | $2,703 | $4,609 | -41.4% | | **Total Revenues** | **$375,735** | **$408,621** | **-8.0%** | [Subscriber & ARPU Analysis](index=14&type=section&id=Subscriber%20%26%20ARPU%20Analysis) The company ended Q2 2025 with 3.17 million subscribers, a 17.4% decrease year-over-year reflecting Behavioral segment recruitment challenges, as Behavioral subscribers declined 19.0% to 3.04 million while Clinical subscribers grew 56.5% to 127,000, and overall Monthly Subscription Revenue Per Average Subscriber (ARPU) increased by 11.6% to $18.97 Q2 2025 End of Period Subscribers (in thousands) | Subscriber Type | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Behavioral | 3,040 | 3,756 | -19.0% | | Clinical | 127 | 81 | +56.5% | | **Total Subscribers** | **3,167** | **3,837** | **-17.4%** | Q2 2025 Monthly Subscription Revenue Per Average Subscriber (ARPU) | ARPU Type | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Behavioral | $16.54 | $15.66 | +5.6% | | Clinical | $78.00 | $78.37 | -0.5% | | **Overall** | **$18.97** | **$17.00** | **+11.6%** | [Adjusted EBITDA Reconciliation](index=18&type=section&id=Adjusted%20EBITDA%20Reconciliation) The company provides a reconciliation from Net Income (Loss) to Adjusted EBITDA, where the Predecessor period's Net Income of $1.19 billion was adjusted for a $1.14 billion net reorganization gain resulting in $60.8 million Adjusted EBITDA, and the Successor period's Net Income of $1.3 million was adjusted to $4.4 million Adjusted EBITDA, leading to a combined quarterly Adjusted EBITDA of approximately $65.3 million - The largest adjustment to reconcile Net Income to Adjusted EBITDA in the Predecessor period was the exclusion of a **$1.14 billion** net gain related to the Chapter 11 financial reorganization[61](index=61&type=chunk)[63](index=63&type=chunk) Q2 2025 Adjusted EBITDA Reconciliation Summary (in thousands) | Period | Net Income | Key Adjustments (Reorganization, etc.) | Adjusted EBITDA | | :--- | :--- | :--- | :--- | | **Successor (Jun 25-30)** | $1,254 | $3,195 | $4,449 | | **Predecessor (Mar 30-Jun 24)** | $1,190,688 | $(1,129,870) | $60,818 | [Notes and Disclosures](index=2&type=section&id=Notes%20and%20Disclosures) This section provides important disclosures regarding the accounting treatment of Predecessor and Successor periods post-reorganization, along with explanations of non-GAAP financial measures and forward-looking statement caveats [Explanation of Predecessor and Successor Periods](index=2&type=section&id=Explanation%20of%20Predecessor%20and%20Successor%20Periods) Due to the company's emergence from financial reorganization on June 24, 2025, and the application of fresh start accounting, the second quarter is divided into 'Predecessor' and 'Successor' periods for reporting, making financial statements after June 24 not directly comparable to prior periods, though management combines certain metrics for meaningful comparisons - The company's emergence from financial reorganization on June 24, 2025, necessitates splitting Q2 into a 'Predecessor' period and a 'Successor' period[6](index=6&type=chunk) - Fresh start accounting has been applied, making consolidated financial statements after June 24, 2025, not comparable with prior periods[6](index=6&type=chunk) - Management combines results from the Predecessor and Successor periods for certain metrics (e.g., revenue, subscribers) to offer a more meaningful comparison of operating trends[7](index=7&type=chunk)[10](index=10&type=chunk) [Non-GAAP Financial Measures and Forward-Looking Statements](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Forward-Looking%20Statements) The report includes non-GAAP financial measures like Adjusted EBITDA and constant currency results to supplement GAAP, which management believes provide useful period-over-period comparisons by excluding specific items, and also contains forward-looking statements subject to numerous risks and uncertainties including competition, subscriber retention, and regulatory changes - The company uses non-GAAP measures like EBITDA and Adjusted EBITDA, which exclude items such as reorganization costs, transaction costs, and restructuring charges, to better reflect ongoing operations[17](index=17&type=chunk)[19](index=19&type=chunk) - Results are also presented on a constant currency basis to remove the impact of foreign exchange rate fluctuations for better period-to-period comparison[18](index=18&type=chunk) - The report contains forward-looking statements that are subject to significant risks, including competition, ability to retain subscribers, regulatory risks associated with clinical offerings, and the impacts of the recent bankruptcy emergence[24](index=24&type=chunk)[25](index=25&type=chunk)

[CEO Statement & Q2 Execution Summary](index=1&type=section&id=CEO%20Statement%20%26%20Q2%20Execution%20Summary) The CEO reported significant progress in Symvess™ commercial launch, expanding hospital access and accelerating sales, alongside positive V007 trial data - The number of civilian hospitals eligible to purchase Symvess™ increased from 5 to **82** due to individual and healthcare system Value Analysis Committee (VAC) approvals[3](index=3&type=chunk) - Inclusion on the Electronic Catalog (ECAT) makes Symvess™ available to approximately **190** Military Treatment Facilities and U.S. Department of Veterans Affairs (VA) hospitals[3](index=3&type=chunk) - July 2025 product sales exceeded the total sales recorded during the first half of the year, and the first commercial sale to a U.S. military treatment facility was achieved[3](index=3&type=chunk) - The V007 trial data, highlighted by the Society of Vascular Surgery, showed superior functional patency for the ATEV™ over autologous fistula in key subgroups like women, and men with diabetes and obesity[3](index=3&type=chunk) [Corporate Highlights](index=1&type=section&id=Corporate%20Highlights) This section details Symvess™ market expansion through hospital and military approvals and updates on ATEV™ Phase 3 clinical trials [Symvess™ Market Launch](index=1&type=section&id=Symvess%E2%84%A2%20Market%20Launch) Symvess™ market access expanded significantly through VAC and ECAT approvals, driving a sharp increase in July sales and initial military facility orders - A total of **13** Value Analysis Committees (VACs) have approved Symvess, making it available to **82** civilian hospitals, with an additional **40** VACs currently in the review process[4](index=4&type=chunk) - July 2025 product sales reached **$0.3 million**, exceeding the total sales recorded during the first half of the year. To date, **12** hospitals have ordered Symvess[4](index=4&type=chunk)[5](index=5&type=chunk) - ECAT listing was granted in July 2025, making Symvess available to approximately **35** Military Treatment Facilities and **160** VA hospitals[8](index=8&type=chunk) [ATEV™ in Dialysis Clinical Trials](index=2&type=section&id=ATEV%E2%84%A2%20in%20Dialysis%20Clinical%20Trials) Positive V007 Phase 3 results showed superior ATEV™ patency, while the V012 study reached 100 patients, enabling interim analysis and a potential BLA submission - Results from the V007 Pivotal Phase 3 trial, presented at VAM25, showed significantly higher functional and secondary patency for ATEV recipients in a high-risk cohort compared to the AV fistula control group[8](index=8&type=chunk) - The V012 Phase 3 clinical trial has enrolled **100 patients**, achieving the threshold for a planned interim analysis when the first 80 patients reach one-year follow-up[8](index=8&type=chunk) - Humacyte plans to submit a supplemental Biologics License Application (BLA) in H2 2026 to expand the Symvess label for AV access in hemodialysis, subject to interim results from the V012 study[8](index=8&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) This section provides an overview of Humacyte's financial results, including revenue, net loss, operating expenses, and cash position [Second Quarter 2025 Financial Highlights](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Humacyte reported $0.3 million in Q2 2025 revenue, a narrowed net loss of $37.7 million, and maintained $88.4 million in cash Financial Highlights Table | Financial Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Total Revenue** | **$0.3M** | **$0** | | *Product Revenue* | *$0.1M* | *$0* | | *Contract Revenue* | *$0.2M* | *$0* | | **Net Loss** | **($37.7M)** | **($56.7M)** | - Selling, general and administrative (SG&A) expenses increased to **$7.8 million** from **$5.7 million** YoY, primarily due to the U.S. commercial launch of Symvess[9](index=9&type=chunk) - Research and development (R&D) expenses decreased to **$22.0 million** from **$23.8 million** YoY, mainly due to the capitalization of overhead costs for commercial manufacturing[9](index=9&type=chunk) - The company held **$88.4 million** in cash, cash equivalents, and restricted cash as of June 30, 2025[10](index=10&type=chunk) [Cost Reduction Plan](index=3&type=section&id=Cost%20Reduction%20Plan) Humacyte implemented a cost reduction plan, including a 30-employee workforce reduction, projected to save over $50 million through 2026 - The company implemented a plan to reduce its workforce by **30 employees**, defer new hires, and reduce other operating expenses[9](index=9&type=chunk) - A one-time cash expenditure of approximately **$0.7 million** for severance and termination benefits was incurred, with the majority recorded in Q2 2025[9](index=9&type=chunk) Estimated Net Savings from Cost Reduction Plan | Period | Estimated Net Savings | | :--- | :--- | | 2025 | ~$13.8 million | | 2026 | ~$38.0 million | | **Total (2025-2026)** | **> $50 million** | [Consolidated Financial Statements](index=7&type=section&id=Consolidated%20Financial%20Statements) This section presents detailed unaudited Condensed Consolidated Statements of Operations and Balance Sheets for the periods ended June 30, 2025 and 2024 [Statements of Operations](index=7&type=section&id=Statements%20of%20Operations) Humacyte reported $301,000 in Q2 2025 revenue with a $37.7 million net loss, while the six-month period showed $818,000 revenue and $1.5 million net income Three Months Ended June 30 (in thousands, except per share) | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $301 | $0 | | Loss from operations | ($29,727) | ($29,499) | | Net income (loss) | ($37,658) | ($56,663) | | Net income (loss) per share, basic | ($0.24) | ($0.48) | Six Months Ended June 30 (in thousands, except per share) | (in thousands, except per share) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $818 | $0 | | Loss from operations | ($52,911) | ($56,077) | | Net income (loss) | $1,481 | ($88,559) | | Net income (loss) per share, basic | $0.01 | ($0.78) | [Balance Sheets](index=8&type=section&id=Balance%20Sheets) As of June 30, 2025, total assets were $138.8 million, liabilities $134.7 million, and stockholders' equity improved to $4.1 million Balance Sheet Data (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $38,032 | $44,937 | | Total current assets | $51,730 | $47,859 | | **Total assets** | **$138,795** | **$137,872** | | **Liabilities & Equity** | | | | Total current liabilities | $21,085 | $19,954 | | **Total liabilities** | **$134,743** | **$190,541** | | **Total stockholders' equity (deficit)** | **$4,052** | **($52,669)** | [Product Information & Disclosures](index=4&type=section&id=Product%20Information%20%26%20Disclosures) This section provides essential information regarding Symvess™ indications, safety warnings, and standard forward-looking statement disclaimers [Symvess™ Indication and Safety Information](index=4&type=section&id=Symvess%E2%84%A2%20Indication%20and%20Safety%20Information) Symvess™ is indicated for urgent extremity revascularization, carrying a boxed warning for graft failure and risks like rupture, thrombosis, and anastomotic failure - Symvess is indicated for use in adults as a vascular conduit for extremity arterial injury when urgent revascularization is needed and autologous vein graft is not feasible[12](index=12&type=chunk) - The product has a BOXED WARNING for graft failure, noting that loss of integrity can result in life-threatening hemorrhage[13](index=13&type=chunk) - Key warnings and precautions include graft rupture, anastomotic failure, and thrombosis. Anti-platelet therapy is recommended following treatment[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section includes standard forward-looking statements, subject to significant risks and uncertainties that may cause actual results to differ materially - The press release contains forward-looking statements concerning the commercialization of Symvess, market acceptance, manufacturing capabilities, clinical trial execution, and the timing of regulatory filings[22](index=22&type=chunk)[23](index=23&type=chunk) - These statements are subject to numerous risks and uncertainties, and the company cautions that actual results may differ materially from those projected[23](index=23&type=chunk)

[PART I - FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents Rumble Inc.'s unaudited condensed consolidated financial statements and related notes for Q2 2025 and 2024 [Item 1. Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section details Rumble Inc.'s unaudited condensed consolidated financial statements for Q2 2025 and 2024, including operations, balance sheets, equity, cash flows, and comprehensive notes [Unaudited Condensed Consolidated Statements of Operations](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) This statement presents Rumble Inc.'s revenues, costs, and net loss for the three and six months ended June 30, 2025 and 2024 Financial Performance (Three Months Ended June 30) | Metric (Three months ended June 30) | 2025 (USD) | 2024 (USD) | Change (%) | | :---------------------------------- | :--------- | :--------- | :--------- | | Revenues | 25,084,631 | 22,469,543 | 12% | | Cost of services | 26,542,307 | 35,692,133 | (26)% | | General and administrative | 11,666,331 | 10,415,016 | 12% | | Sales and marketing | 7,891,526 | 6,274,749 | 26% | | Loss from operations | (26,639,241)| (38,813,572)| (31)% | | Net loss | (30,224,930)| (26,780,700)| 13% | | Loss per share – basic and diluted | (0.12) | (0.13) | (8)% | Financial Performance (Six Months Ended June 30) | Metric (Six months ended June 30) | 2025 (USD) | 2024 (USD) | Change (%) | | :---------------------------------- | :--------- | :--------- | :--------- | | Revenues | 48,791,421 | 40,202,999 | 21% | | Cost of services | 56,578,481 | 67,520,487 | (16)% | | General and administrative | 28,300,054 | 19,737,395 | 43% | | Sales and marketing | 11,530,452 | 9,571,491 | 20% | | Loss from operations | (63,022,510)| (73,818,114)| (15)% | | Net loss | (32,875,123)| (70,070,740)| (53)% | | Loss per share – basic and diluted | (0.13) | (0.35) | (63)% | [Unaudited Condensed Consolidated Balance Sheets](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This statement provides Rumble Inc.'s financial position, including assets, liabilities, and equity, as of June 30, 2025, and December 31, 2024 Unaudited Condensed Consolidated Balance Sheets | Balance Sheet Item | June 30, 2025 (USD) | December 31, 2024 (USD) | Change (USD) | Change (%) | | :----------------- | :------------------ | :---------------------- | :----------- | :--------- | | Cash and cash equivalents | 283,810,338 | 114,018,900 | 169,791,438 | 149% | | Digital assets | 22,593,025 | - | 22,593,025 | NM | | Total assets | 379,925,966 | 195,312,807 | 184,613,159 | 95% | | Current liabilities| 39,065,051 | 216,736,997 | (177,671,946)| (82)% | | Warrant liability | 24,948,459 | 40,391,302 | (15,442,843) | (38)% | | Total liabilities | 65,704,968 | 258,428,209 | (192,723,241)| (75)% | | Shareholders' equity (deficit) | 314,220,998 | (63,115,402) | 377,336,400 | NM | [Unaudited Condensed Consolidated Statements of Shareholder's Equity (Deficit)](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholder's%20Equity%20(Deficit)) This statement details changes in Rumble Inc.'s shareholders' equity for the six months ended June 30, 2025 and 2024 - For the six months ended June 30, 2025, Rumble's total shareholders' equity significantly increased from a deficit of **$(63.1) million** to a positive **$314.2 million**. This was primarily driven by a substantial increase in additional paid-in capital from the issuance of Class A Common Stock, partially offset by the net loss for the period and share issuance costs[21](index=21&type=chunk)[22](index=22&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=15&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes Rumble Inc.'s cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Unaudited Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Six months ended June 30) | 2025 (USD) | 2024 (USD) | Variance (USD) | | :-------------------------------------------- | :--------- | :--------- | :------------- | | Operating activities | (30,376,137)| (55,592,070)| 25,215,933 | | Investing activities | (20,752,005)| (9,149,739) | (11,602,266) | | Financing activities | 220,919,580 | (493,347) | 221,412,928 | | Increase/(decrease) in cash and cash equivalents | 169,791,438 | (65,235,156)| 235,026,594 | | Cash and cash equivalents, end of period | 283,810,338 | 153,103,502 | 130,706,836 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting Rumble Inc.'s unaudited condensed consolidated financial statements [Note 1. Overview and Basis of Presentation](index=17&type=section&id=Note%201.%20Overview%20and%20Basis%20of%20Presentation) This note outlines Rumble Inc.'s business operations and the foundational principles for financial statement preparation - Rumble Inc. operates as a high-growth video sharing platform and cloud services provider[28](index=28&type=chunk) - Financial statements are prepared in accordance with U.S. GAAP and presented in U.S. dollars[29](index=29&type=chunk) - Preparation of financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts[31](index=31&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=18&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note describes the key accounting principles and methods applied in preparing Rumble Inc.'s financial statements - Digital assets consist solely of bitcoin, initially recorded at cost and subsequently remeasured at fair value with changes recognized in operations[32](index=32&type=chunk)[33](index=33&type=chunk) - Trade and barter revenue and expense are recognized at fair value for exchanged media campaigns or promotional services[34](index=34&type=chunk) - The Company is evaluating the potential impact of ASU 2023-09 (Income Tax Disclosures) and ASU 2025-01/2024-03 (Expense Disaggregation Disclosures)[35](index=35&type=chunk)[36](index=36&type=chunk) [Note 3. Revenue from Contracts with Customers](index=19&type=section&id=Note%203.%20Revenue%20from%20Contracts%20with%20Customers) This note details Rumble Inc.'s revenue recognition policies and disaggregation of revenue by type Revenue from Contracts with Customers | Revenue Type (Three months ended June 30) | 2025 (USD) | 2024 (USD) | | :---------------------------------------- | :--------- | :--------- | | Audience Monetization | 21,469,232 | 19,742,569 | | Other Initiatives | 3,615,399 | 2,726,974 | | Total revenues | 25,084,631 | 22,469,543 | Revenue from Contracts with Customers | Revenue Type (Six months ended June 30) | 2025 (USD) | 2024 (USD) | | :---------------------------------------- | :--------- | :--------- | | Audience Monetization | 41,412,767 | 35,092,007 | | Other Initiatives | 7,378,654 | 5,110,992 | | Total revenues | 48,791,421 | 40,202,999 | - Deferred revenue balance was **$17,141,007** as of June 30, 2025, and **$12,812,984** as of December 31, 2024, expected to be fully recognized by June 30, 2026[39](index=39&type=chunk) [Note 4. Cash and Cash Equivalents](index=19&type=section&id=Note%204.%20Cash%20and%20Cash%20Equivalents) This note provides a breakdown of Rumble Inc.'s cash and cash equivalents and related financial instruments Cash and Cash Equivalents Breakdown | Cash and Cash Equivalents | June 30, 2025 (USD) | December 31, 2024 (USD) | | :------------------------ | :------------------ | :---------------------- | | Cash | 8,931,903 | 7,344,275 | | Treasury bills, money market funds and term deposits | 274,878,435 | 106,674,625 | | Total | 283,810,338 | 114,018,900 | - The Company has a guarantee/standby letter of credit in the amount of $1,362,500 as of June 30, 2025, and December 31, 2024[41](index=41&type=chunk) [Note 5. Digital Assets](index=20&type=section&id=Note%205.%20Digital%20Assets) This note details Rumble Inc.'s holdings and fair value measurement of digital assets Digital Asset Holdings | Digital Asset | Units | Cost Basis (USD) | Fair Value (USD) | | :------------ | :------- | :--------------- | :--------------- | | Bitcoin | 210.82 | 19,100,000 | 22,593,025 | - Reconciliation of digital asset holdings: Purchase of digital assets $19,100,000, Change in fair value $3,493,025, resulting in a June 30, 2025 balance of $22,593,025[42](index=42&type=chunk) [Note 6. Property and Equipment](index=20&type=section&id=Note%206.%20Property%20and%20Equipment) This note presents the composition and depreciation of Rumble Inc.'s property and equipment Property and Equipment Details | Property and Equipment | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--------------------- | :------------------ | :---------------------- | | Computer hardware | 24,891,175 | 24,577,345 | | Furniture and fixtures | 193,397 | 123,417 | | Leasehold improvements | 2,097,077 | 1,942,799 | | Accumulated depreciation | (12,144,311) | (9,575,485) | | Net carrying value | 15,037,338 | 17,068,076 | - Depreciation expense on property and equipment was **$2,584,287** for the six months ended June 30, 2025, compared to **$2,506,294** for the same period in 2024[43](index=43&type=chunk) [Note 7. Right-of-Use Assets and Lease Liabilities](index=21&type=section&id=Note%207.%20Right-of-Use%20Assets%20and%20Lease%20Liabilities) This note outlines Rumble Inc.'s right-of-use assets and corresponding lease liabilities Right-of-Use Assets and Lease Liabilities | Lease Information | June 30, 2025 (USD) | December 31, 2024 (USD) | | :----------------------- | :------------------ | :---------------------- | | Right-of-use assets, net | 2,343,925 | 1,753,100 | | Lease liabilities, current | 1,223,850 | 1,000,643 | | Lease liabilities, non-current | 1,191,458 | 799,910 | - Future minimum lease payments as of June 30, 2025: $717,845 for 2025, $1,312,237 for 2026, and $627,722 for 2027[47](index=47&type=chunk) [Note 8. Intangible Assets](index=22&type=section&id=Note%208.%20Intangible%20Assets) This note details Rumble Inc.'s intangible assets, including amortization expense and future amortization schedule Intangible Assets Net Carrying Value | Intangible Asset (Net Carrying Value) | June 30, 2025 (USD) | December 31, 2024 (USD) | | :------------------------------------ | :------------------ | :---------------------- | | Intellectual property | 248,248 | 282,100 | | Domain name | 363,676 | 380,359 | | Brand | 811,031 | 875,231 | | Software and technology | 19,231,445 | 22,251,545 | | Internal software development | 5,767,502 | 5,244,567 | | Assembled workforce | 90,777 | 272,333 | | Total | 26,512,679 | 29,306,135 | - Amortization expense related to intangible assets was **$4,310,582** for the six months ended June 30, 2025, compared to **$3,484,067** for the same period in 2024[48](index=48&type=chunk) - Future amortization expense for intangible assets: $4,292,505 for the remainder of 2025, $8,149,131 for 2026, and $7,457,204 for 2027[49](index=49&type=chunk) [Note 9. Derivative Liability](index=23&type=section&id=Note%209.%20Derivative%20Liability) This note describes the derivative liability arising from Rumble Inc.'s strategic investment transaction with Tether - Strategic investment of **$775 million** from Tether for **103,333,333 shares** of Class A Common Stock at **$7.50 per share**[50](index=50&type=chunk) - Company repurchased **70,000,000 shares** of Class A Common Stock for **$525 million** as part of the transaction[51](index=51&type=chunk)[53](index=53&type=chunk) - A gain on fair value of the derivative of **$9,700,000** was recognized during the six months ended June 30, 2025[53](index=53&type=chunk) [Note 10. Other Liability](index=23&type=section&id=Note%2010.%20Other%20Liability) This note provides information on Rumble Inc.'s other liabilities - Other liability balance: $500,000 as of June 30, 2025, and December 31, 2024[54](index=54&type=chunk) [Note 11. Shareholders' Equity (Deficit)](index=24&type=section&id=Note%2011.%20Shareholders'%20Equity%20(Deficit)) This note details the composition of Rumble Inc.'s share capital and contingently issuable shares Common Stock Issued & Outstanding | Common Stock Class | Number Issued & Outstanding (June 30, 2025) | Number Issued & Outstanding (Dec 31, 2024) | | :----------------- | :---------------------------------------- | :--------------------------------------- | | Class A | 215,171,066 | 118,808,857 | | Class C | 123,690,470 | 165,153,621 | | Class D | 95,791,120 | 105,782,403 | | Total | 434,652,656 | 389,744,881 | - Contingent earnout shares: Up to **105,000,000 Class A shares** for former Legacy Rumble holders and **1,973,750 for the Sponsor**, contingent on Class A stock price reaching **$15.00 and $17.50** by September 16, 2027[55](index=55&type=chunk) [Note 12. Share-Based Compensation Expense](index=25&type=section&id=Note%2012.%20Share-Based%20Compensation%20Expense) This note outlines Rumble Inc.'s share-based compensation expense and activity for RSUs and stock options - Total share-based compensation expense was **$14,064,097** for the six months ended June 30, 2025, compared to **$8,605,289** for the same period in 2024[26](index=26&type=chunk) - **Restricted Stock Units (RSUs) Activity (Six months ended June 30, 2025):** * Outstanding, December 31, 2024: 2,226,775 (Service), 676,243 (Market), 0 (Performance) * Granted: 884,758 (Service), 0 (Market), 161,551 (Performance) * Vested: (837,627) (Service), 0 (Market), 0 (Performance) * Outstanding, June 30, 2025: 2,195,322 (Service), 400,000 (Market), 161,551 (Performance)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - **Stock Options Activity (Six months ended June 30, 2025):** * Outstanding, December 31, 2024: 62,285,572 (Service), 580,139 (Performance) * Granted: 2,462,417 (Service), 0 (Performance) * Exercised: (20,906,170) (Service), 0 (Performance) * Outstanding, June 30, 2025: 43,631,372 (Service), 580,139 (Performance)[65](index=65&type=chunk)[66](index=66&type=chunk) - Unrecognized compensation cost as of June 30, 2025: **$11,593,164** for service-condition RSUs, **$868,977** for market-condition RSUs, **$1,374,799** for performance-condition RSUs. Unrecognized compensation cost as of June 30, 2025: **$23,988,360** for service-condition stock options, **$2,453,988** for performance-condition stock options[64](index=64&type=chunk)[68](index=68&type=chunk) [Note 13. Loss per Share](index=30&type=section&id=Note%2013.%20Loss%20per%20Share) This note explains the calculation of basic and diluted loss per share for Rumble Inc. - Basic loss per share is computed using Class A and ExchangeCo Shares, excluding contingently issuable shares and non-economic Class D shares[73](index=73&type=chunk) - Diluted loss per share is equal to basic loss per share because the inclusion of potentially issuable shares would be anti-dilutive[74](index=74&type=chunk) [Note 14. Commitments and Contingencies](index=30&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) This note discloses Rumble Inc.'s contractual commitments and potential legal contingencies - Non-cancelable contractual commitments: Approximately **$41 million** as of June 30, 2025, primarily for programming and content, to be paid over two years[75](index=75&type=chunk) - Lawsuit against Rumble and a shareholder seeking rescission of a share redemption or damages of approximately **$419.0 million**; the company considers the likelihood of payment remote[79](index=79&type=chunk) [Note 15. Fair Value Measurements](index=31&type=section&id=Note%2015.%20Fair%20Value%20Measurements) This note describes Rumble Inc.'s fair value measurements for financial instruments, including digital assets and liabilities Fair Value Measurements | Fair Value Item (June 30, 2025) | Level 1 (USD) | Level 2 (USD) | Level 3 (USD) | | :------------------------------ | :------------ | :------------ | :------------ | | Digital Assets | 22,593,025 | - | - | | Warrant Liability | - | 24,948,459 | - | | Derivative Liability | - | - | - | - Digital assets (Bitcoin) are remeasured at fair value based on exchange quoted prices[81](index=81&type=chunk) - Warrant liability is measured at fair value based on the trading price of Rumble's publicly traded warrants. Derivative liability related to the Tether transaction was settled on February 7, 2025, with a fair value of **$174,999,998** at settlement[82](index=82&type=chunk)[83](index=83&type=chunk)[144](index=144&type=chunk) [Note 16. Credit and Concentration Risks](index=31&type=section&id=Note%2016.%20Credit%20and%20Concentration%20Risks) This note discusses Rumble Inc.'s exposure to credit and concentration risks from customers and financial institutions - No single customer represented **10%** or more of total revenue for the three and six months ended June 30, 2025. For the three and six months ended June 30, 2024, one customer accounted for **26%** and **21%** of revenue, respectively[86](index=86&type=chunk) - Cash and cash equivalents are held in reputable banks, and the risk of loss is considered remote[85](index=85&type=chunk) [Note 17. Related Party Transactions](index=32&type=section&id=Note%2017.%20Related%20Party%20Transactions) This note details transactions and compensation involving Rumble Inc.'s related parties - Compensation to related parties: **$13,593,810** for the six months ended June 30, 2025 (vs. **$7,130,608** in 2024). Share-based compensation to key management: **$8,970,789** for the six months ended June 30, 2025 (vs. **$4,852,905** in 2024)[88](index=88&type=chunk) - Revenue from Tether Operations S.A. de C.V. (affiliate of significant shareholder): **$987,500** for the three and six months ended June 30, 2025[89](index=89&type=chunk) - Expenses to Cosmic Inc. (controlled by CEO and board member): **$1,562,034** for the six months ended June 30, 2025 (vs. **$1,663,609** in 2024)[90](index=90&type=chunk) [Note 18. Segment and Geographic Information](index=33&type=section&id=Note%2018.%20Segment%20and%20Geographic%20Information) This note provides information on Rumble Inc.'s operating segment and revenue distribution by geographic region - Rumble operates as one operating segment[93](index=93&type=chunk) Geographic Revenue Distribution | Geographic Region (Six months ended June 30) | 2025 (USD) | 2024 (USD) | | :------------------------------------------- | :--------- | :--------- | | United States | 44,305,508 | 37,808,444 | | Canada | 764,638 | 1,121,494 | | Other | 3,721,275 | 1,273,061 | | Total Revenues | 48,791,421 | 40,202,999 | - Long-lived assets (property and equipment, net) in the United States: **$14,798,425** as of June 30, 2025[95](index=95&type=chunk) [Note 19. Subsequent Events](index=34&type=section&id=Note%2019.%20Subsequent%20Events) This note discloses any material events occurring after the reporting period for Rumble Inc. - No material subsequent events were identified through August 11, 2025[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Rumble's financial condition, operational results, key metrics, liquidity, and accounting policies for Q2 2025 and 2024 [Overview](index=35&type=section&id=Overview) This section provides a high-level introduction to Rumble Inc.'s business and recent strategic developments - Rumble is a high-growth video sharing platform and cloud services provider[98](index=98&type=chunk) - Strategic investment of **$775 million** from Tether closed on February 7, 2025, involving the purchase of **103,333,333 Class A Common Stock shares** and a tender offer to repurchase **70,000,000 shares**[99](index=99&type=chunk) [Revenues](index=35&type=section&id=Revenues) This section defines Rumble Inc.'s revenue streams, including audience monetization and other initiatives - **Audience Monetization** includes advertising fees, subscription fees (Rumble Premium, Locals, badges), content licensing, pay-per-view, tipping, and platform hosting fees[101](index=101&type=chunk) - **Other Initiatives** includes digital advertisements on third-party publisher websites/mobile applications and cloud services (consumption-based fees, infrastructure subscriptions, professional services)[102](index=102&type=chunk) [Expenses](index=36&type=section&id=Expenses) This section outlines Rumble Inc.'s primary expense categories and expected future investment for growth - Primary expense categories: Cost of services (programming and content, service provider costs), general and administrative, research and development, sales and marketing, acquisition-related transaction costs, amortization and depreciation, changes in fair value of digital assets, and changes in fair value of contingent consideration[103](index=103&type=chunk) - The company expects to continue investing substantial resources to support growth, anticipating increases in absolute dollar amounts for these expense categories[104](index=104&type=chunk) [Key Business Metrics](index=38&type=section&id=Key%20Business%20Metrics) This section presents Rumble Inc.'s key operational metrics, including MAUs and ARPU, and their trends - MAUs (GA4) were **51 million** on average in Q2 2025, a **14% decrease** from Q1 2025, attributed to a slowdown in news and political commentary[126](index=126&type=chunk) - ARPU was **$0.42** in Q2 2025, a **24% increase** from Q1 2025, due to higher subscription and licensing revenue[128](index=128&type=chunk) - The transition from Universal Analytics (UA) to Google Analytics 4 (GA4) for MAU calculation may affect comparability with prior periods[120](index=120&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of Rumble Inc.'s financial performance for the periods presented [Comparisons for three months ended June 30, 2025 and 2024](index=40&type=section&id=Comparisons%20for%20three%20months%20ended%20June%2030,%202025%20and%202024) This section compares Rumble Inc.'s financial results for the three months ended June 30, 2025, against the prior year Financial Performance (Three Months Ended June 30) | Metric (Three months ended June 30) | 2025 (USD) | 2024 (USD) | Variance ($) | Variance (%) | | :---------------------------------- | :--------- | :--------- | :----------- | :----------- | | Revenues | 25,084,631 | 22,469,543 | 2,615,088 | 12% | | Cost of services | 26,542,307 | 35,692,133 | (9,149,826) | (26)% | | General and administrative | 11,666,331 | 10,415,016 | 1,251,315 | 12% | | Sales and marketing | 7,891,526 | 6,274,749 | 1,616,777 | 26% | | Acquisition-related transaction costs | 2,388,105 | - | 2,388,105 | NM | | Changes in fair value of digital assets | (5,192,441)| - | (5,192,441) | NM | | Change in fair value of warrant liability | (6,461,861)| 10,014,200 | (16,476,061) | (165)% | | Net loss | (30,224,930)| (26,780,700)| (3,444,230) | 13% | - Audience Monetization revenues increased by **$1.7 million**, driven by **$4.4 million** in higher subscriptions and **$1.0 million** from licensing/tipping, offset by a **$3.7 million** decrease in advertising revenue[132](index=132&type=chunk) - Cost of services decreased by **$9.1 million** due to a **$10.1 million** reduction in programming and content costs[133](index=133&type=chunk) [Comparisons for six months ended June 30, 2025 and 2024](index=43&type=section&id=Comparisons%20for%20six%20months%20ended%20June%2030,%202025%20and%202024) This section compares Rumble Inc.'s financial results for the six months ended June 30, 2025, against the prior year Financial Performance (Six Months Ended June 30) | Metric (Six months ended June 30) | 2025 (USD) | 2024 (USD) | Variance ($) | Variance (%) | | :---------------------------------- | :--------- | :--------- | :----------- | :----------- | | Revenues | 48,791,421 | 40,202,999 | 8,588,422 | 21% | | Cost of services | 56,578,481 | 67,520,487 | (10,942,006) | (16)% | | General and administrative | 28,300,054 | 19,737,395 | 8,562,659 | 43% | | Sales and marketing | 11,530,452 | 9,571,491 | 1,958,961 | 20% | | Acquisition-related transaction costs | 2,388,105 | - | 2,388,105 | NM | | Changes in fair value of digital assets | (3,493,025)| - | (3,493,025) | NM | | Change in fair value of warrant liability | 15,442,843 | (723,695) | 16,166,538 | (2,234)% | | Change in fair value of derivative | 9,700,000 | - | 9,700,000 | NM | | Net loss | (32,875,123)| (70,070,740)| 37,195,617 | (53)% | - Audience Monetization revenues increased by **$6.3 million**, driven by **$8.1 million** in higher subscription fees and **$1.8 million** from licensing/tipping, offset by a **$3.6 million** decrease in advertising[147](index=147&type=chunk) - General and administrative expenses increased by **$8.6 million**, including a one-time **$4.8 million** increase in compensation costs for executive/director departures and a **$2.3 million** increase in payroll taxes related to stock options[149](index=149&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Rumble Inc.'s cash position, digital assets, and sources and uses of capital - Cash and cash equivalents: **$284 million** as of June 30, 2025[160](index=160&type=chunk) - Digital asset holdings (Bitcoin): **$22.6 million (210.82 bitcoin)** as of June 30, 2025[161](index=161&type=chunk) - Net cash provided by financing activities: **$220,919,581** for the six months ended June 30, 2025, primarily from the Tether strategic investment[163](index=163&type=chunk)[166](index=166&type=chunk) - Minimum contractual cash commitment for programming and content agreements: **$34 million** as of June 30, 2025[162](index=162&type=chunk) [Summary of Quarterly Results](index=46&type=section&id=Summary%20of%20Quarterly%20Results) This section provides a historical overview of Rumble Inc.'s quarterly revenue and net loss performance Summary of Quarterly Results | Quarter | Total Revenue (USD) | Net Loss (USD) | | :-------- | :------------------ | :------------- | | Jun 30, 2025 | 25,084,631 | (30,244,930) | | Mar 31, 2025 | 23,706,790 | (2,650,193) | | Dec 31, 2024 | 30,228,287 | (236,752,626) | | Sep 30, 2024 | 25,056,904 | (31,539,413) | | Jun 30, 2024 | 22,469,543 | (26,780,700) | | Mar 31, 2024 | 17,733,456 | (43,290,040) | | Dec 31, 2023 | 20,391,872 | (29,277,227) | | Sep 30, 2023 | 17,982,150 | (29,021,042) | [Non-GAAP Financial Measures](index=47&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles Rumble Inc.'s non-GAAP financial measures, specifically Adjusted EBITDA, to GAAP net loss Adjusted EBITDA Reconciliation | Adjusted EBITDA Reconciliation (Six months ended June 30) | 2025 (USD) | 2024 (USD) | | :------------------------------------------------------ | :--------- | :--------- | | Net loss | (32,875,123)| (70,070,740)| | Amortization and depreciation | 6,894,869 | 5,990,361 | | Share-based compensation expense | 14,064,097 | 11,320,275 | | Interest income | (5,083,231)| (4,696,118)| | Other expense | 47,377 | 73,577 | | Income tax expense | 31,310 | 151,472 | | Change in fair value of warrants liability | (15,442,843)| 723,695 | | Change in fair value of digital assets | (3,493,025)| - | | Change in fair value of contingent consideration | - | 1,354,357 | | Change in fair value of derivative | (9,700,000)| - | | Acquisition-related transaction costs | 2,388,105 | - | | Adjusted EBITDA | (43,168,464)| (55,153,121)| - Adjusted EBITDA is defined as net income (loss) excluding interest income (expense), net, other income (expense), net, provision for income taxes, depreciation and amortization, share-based compensation expense, acquisition-related expense, change in fair value of warrants, change in fair value of digital assets, change in fair value of contingent consideration, and change in the fair value of derivative[168](index=168&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights Rumble Inc.'s accounting policies requiring significant management judgment and estimation - **Share-based Compensation:** Fair value estimated using Black-Scholes (service condition), Monte Carlo simulation (market condition), and probability assessment (performance condition)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) - **Income Taxes:** Significant judgment in determining provision and evaluating uncertain tax positions[178](index=178&type=chunk)[179](index=179&type=chunk) - **Trade and Barter Transactions:** Revenue recorded at fair value of products/services received or standalone selling price of advertising inventory[180](index=180&type=chunk) - **Arrangement to Sell Shares to Tether:** Accounted for as a single derivative unit due to contemporaneous agreements, contingency, and shared underlying price risk[181](index=181&type=chunk) [New Accounting Pronouncements](index=49&type=section&id=New%20Accounting%20Pronouncements) This section refers to disclosures regarding recently issued accounting pronouncements affecting Rumble Inc. - Refer to Note 2 of the Annual Financial Statements for new accounting pronouncements[182](index=182&type=chunk) [JOBS Act Accounting Election](index=49&type=section&id=JOBS%20Act%20Accounting%20Election) This section states Rumble Inc.'s election to adopt new accounting standards under private company timelines as an emerging growth company - Rumble, as an emerging growth company, elects to adopt new or revised accounting standards under private company adoption timelines[183](index=183&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Rumble is exposed to credit and concentration risk on its cash, cash equivalents, and accounts receivable, though cash is held in high-credit-standing institutions and customer concentration has decreased. The company also faces interest rate risk on its cash and cash equivalents, but due to short-term maturities and low-risk investments, a 10% interest rate change would not have a material effect - **Credit and Concentration Risk:** Exposed to credit risk on cash, cash equivalents, and accounts receivable. No single customer represented **10%** or more of total revenue or accounts receivable for the three and six months ended June 30, 2025[186](index=186&type=chunk) - **Interest Rate Risk:** Exposed to interest rate risk on **$283.8 million** in cash and cash equivalents; however, due to short-term maturities and low-risk profile, a **10%** interest rate change would not materially affect fair value[187](index=187&type=chunk) [Item 4. Control and Procedures](index=51&type=section&id=Item%204.%20Control%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025. While there were no material changes in internal control over financial reporting during the period, the company is actively remediating previously identified material weaknesses related to the design of key controls, particularly for content creator agreements, through hiring and formalizing policies - Disclosure controls and procedures were effective as of June 30, 2025[188](index=188&type=chunk) - No material changes in internal control over financial reporting during the period[189](index=189&type=chunk) - Material weaknesses in internal control over financial reporting as of December 31, 2024, related to inadequate design of certain key controls (e.g., account reconciliation, completeness/accuracy of content creator agreements) are being remediated through additional skilled personnel and formalization of policies[190](index=190&type=chunk) [PART II - OTHER INFORMATION](index=52&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part provides additional information on Rumble Inc.'s legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) Rumble is involved in various legal proceedings, including two antitrust lawsuits against Google (one dismissed on statute of limitations grounds, appealed; another transferred to MDL), a $419.0 million lawsuit alleging fraudulent misrepresentation (company considers remote), a successful preliminary injunction against New York's Social Media Law, an antitrust lawsuit against advertising entities, a dismissed copyright infringement case (appealed), a successful summary judgment against California's AB 2655, and ongoing actions against Brazilian Supreme Court Justice Alexandre de Moraes for content blocking - **Antitrust Lawsuits against Google:** * First lawsuit (**January 2021**) alleging self-preferencing by Google was dismissed on statute of limitations grounds in **May 2025**; Company filed an appeal[194](index=194&type=chunk) * Second lawsuit (**May 2024**) alleging monopolization of online advertising market was transferred to a Multidistrict Litigation proceeding[195](index=195&type=chunk) - **Kosmayer Investment Inc. (KII) Lawsuit:** Lawsuit seeking rescission of share redemption or **$419.0 million** in damages for alleged fraudulent misrepresentation; Company believes allegations are meritless[196](index=196&type=chunk) - **New York Social Media Law:** Court granted preliminary injunction halting enforcement of the law, with an appeal pending to the state high court for interpretation[197](index=197&type=chunk) - **Antitrust Lawsuit against World Federation of Advertisers, WPP plc, and GroupM Worldwide LLC:** Filed in **August 2024**, alleging conspiracy to withhold advertising revenue; defendants filed a motion to dismiss[198](index=198&type=chunk) - **Brazilian Content Blocking Orders:** Filed a complaint and amended complaints against Brazilian Supreme Court Justice Alexandre de Moraes related to content blocking orders[201](index=201&type=chunk) - **California AB 2655:** Judge granted summary judgment motion from the bench, ruling Section 230 preempted all of AB 2655[200](index=200&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously reported risk factors, but new risks include potential adverse effects from prolonged or escalating trade disputes on business, financial condition, and results of operations. Additionally, the upcoming transition to Large Accelerated Filer status by December 31, 2025, will impose more stringent reporting and compliance obligations, requiring significant resources and potentially diverting management's focus - **Trade Disputes Risk:** Prolonged or escalating trade disputes could adversely affect business, financial condition, and results of operations due to increased costs, supply chain disruptions, and reduced demand[206](index=206&type=chunk)[207](index=207&type=chunk) - **Large Accelerated Filer Transition Risk:** Transitioning to Large Accelerated Filer status by **December 31, 2025**, will require significant additional resources for compliance with more stringent reporting and internal control obligations, potentially straining financial/operational resources and diverting management's focus[208](index=208&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the quarter ended June 30, 2025 - None[210](index=210&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - Not applicable[211](index=211&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[212](index=212&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) None of the company's directors or Section 16 officers adopted or terminated trading arrangements during Q2 2025 - No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading arrangements during Q2 2025[213](index=213&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of, or incorporated by reference into, this Quarterly Report - List of exhibits includes certifications of principal executive and financial officers and Inline XBRL documents[216](index=216&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) The report is duly signed on behalf of Rumble Inc. by its Chief Executive Officer and Chief Financial Officer - Report signed by Chris Pavlovski (CEO and Chairman) and Brandon Alexandroff (CFO) on August 11, 2025[220](index=220&type=chunk)

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Village Farms International's unaudited condensed consolidated financial statements and notes [Condensed Consolidated Statements of Financial Position](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) This statement provides a snapshot of the company's assets, liabilities, and equity at specific reporting dates | ASSETS (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Total current assets | $137,573 | $116,019 | | Total assets | $403,744 | $389,306 | | Total current liabilities | $51,820 | $62,219 | | Total liabilities | $109,552 | $125,348 | | Total shareholders' equity | $284,337 | $254,005 | - Total assets increased by **$14.4 million (3.7%)** from December 31, 2024, to June 30, 2025, primarily driven by an increase in cash and cash equivalents[15](index=15&type=chunk) - Total current liabilities decreased by **$10.4 million (16.7%)** over the six-month period, contributing to an improved current asset to current liability ratio[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) This statement details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Sales | $59,899 | $53,597 | $99,579 | $95,584 | | Gross profit | $22,342 | $13,637 | $36,522 | $24,854 | | Income (loss) from continuing operations | $9,945 | $(16,555) | $7,833 | $(21,390) | | Income (loss) from discontinued operations, net of tax | $16,294 | $(7,003) | $11,291 | $(4,847) | | Net income (loss) attributable to Village Farms International, Inc. shareholders | $26,497 | $(23,549) | $19,794 | $(26,401) | | Basic EPS (Continuing Operations) | $0.09 | $(0.15) | $0.08 | $(0.20) | | Basic EPS (Discontinued Operations) | $0.15 | $(0.06) | $0.10 | $(0.04) | | Basic EPS (Total) | $0.24 | $(0.21) | $0.18 | $(0.24) | - Net income attributable to shareholders significantly improved to **$26,497 thousand** for the three months ended June 30, 2025, from a loss of **$(23,549) thousand** in the prior year, driven by improved gross profit and income from discontinued operations[17](index=17&type=chunk) - Sales from continuing operations increased by **11.8%** for the three months ended June 30, 2025, compared to the same period in 2024[17](index=17&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity and Mezzanine Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20and%20Mezzanine%20Equity) This statement tracks changes in the company's equity components, including common stock and retained earnings | Equity Item (in thousands of USD) | Balance at Dec 31, 2024 | Balance at Jun 30, 2025 | | :-------------------------------- | :---------------------- | :---------------------- | | Common Stock | $387,349 | $387,350 | | Additional Paid in Capital | $30,604 | $30,878 | | Accumulated Other Comprehensive Loss | $(18,932) | $(8,669) | | Retained Earnings | $(145,016) | $(125,222) | | Total Shareholders' Equity | $254,005 | $284,337 | | Redeemable Non-controlling Interest | $9,953 | $9,855 | - Total shareholders' equity increased by **$30,332 thousand** from December 31, 2024, to June 30, 2025, primarily due to net income and a positive cumulative translation adjustment[18](index=18&type=chunk) - Accumulated other comprehensive loss improved significantly, reducing from **$(18,932) thousand** to **$(8,669) thousand**, largely due to foreign currency translation adjustments[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by operating, investing, and financing activities over a period | Cash Flow Activity (in thousands of USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :------------------------------- | | Operating activities (continuing) | $22,265 | $(3,713) | | Investing activities (continuing) | $(5,289) | $(2,813) | | Financing activities (continuing) | $(4,986) | $(5,886) | | Discontinued Operations | $27,892 | $7,219 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $40,357 | $(5,634) | | Cash, cash equivalents and restricted cash, end of period | $64,988 | $29,657 | - Net cash provided by operating activities from continuing operations significantly improved to **$22,265 thousand** for the six months ended June 30, 2025, compared to a use of **$(3,713) thousand** in the prior year[20](index=20&type=chunk) - Cash flows from discontinued operations provided **$27,892 thousand**, a substantial increase from **$7,219 thousand** in the prior year, primarily due to the sale of certain Produce segment assets[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information for the financial statements [1. BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=1.%20BUSINESS%2C%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the company's business segments, financial presentation, and key accounting policies - Village Farms International, Inc. operates through subsidiaries including Pure Sunfarms (Canadian cannabis), Balanced Health (U.S. CBD), Rose LifeScience (Quebec cannabis), Leli Holland (Netherlands cannabis), VF Clean Energy (clean energy), and Village Farms, L.P. (produce)[22](index=22&type=chunk)[24](index=24&type=chunk)[97](index=97&type=chunk) - The company reclassified certain disposed assets as discontinued operations as of June 30, 2025, reflecting a strategic shift in its business model[26](index=26&type=chunk)[60](index=60&type=chunk) Exchange Rate (C$ to US$) | Exchange Rate (C$ to US$) | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :------------------------ | :------------ | :------------ | :---------------- | | Spot rate | 0.7324 | 0.7310 | 0.6957 | | Three-month period ended | 0.7226 | 0.7308 | N/A | | Six-month period ended | 0.7096 | 0.7363 | N/A | [2. INVENTORIES](index=13&type=section&id=2.%20INVENTORIES) This section details the composition and changes in the company's inventory balances Inventory Classification (in thousands of USD) | Inventory Classification (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--------------------------------------------- | :------------ | :---------------- | | Cannabis: Raw materials | $6,191 | $6,372 | | Cannabis: Work-in-progress | $9,766 | $7,052 | | Cannabis: Finished goods | $14,225 | $21,872 | | Cannabis: Packaging | $5,000 | $3,100 | | Produce: Crop inventory | $4,294 | $2,860 | | Total Inventory, net | $39,476 | $41,256 | - Total inventories decreased by **$1,780 thousand (4.3%)** from December 31, 2024, to June 30, 2025, primarily due to a reduction in cannabis finished goods[36](index=36&type=chunk) - Cannabis work-in-progress increased by **$2,714 thousand (38.5%)**, while finished goods decreased by **$7,647 thousand (34.9%)**[36](index=36&type=chunk) [3. REVENUES](index=13&type=section&id=3.%20REVENUES) This section provides a breakdown of the company's revenue streams by classification and segment Revenue Classification (in thousands of USD) | Revenue Classification (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Cannabis: Branded | $24,962 | $30,535 | $47,713 | $59,555 | | Cannabis: Non-Branded | $7,077 | $8,266 | $13,367 | $14,736 | | Cannabis: International | $11,980 | $1,505 | $17,368 | $3,003 | | Cannabis: U.S. Cannabis | $3,841 | $4,297 | $7,745 | $8,834 | | Cannabis: Netherlands Cannabis | $2,483 | — | $2,969 | — | | Produce | $8,574 | $8,434 | $8,601 | $8,438 | | Clean Energy | $483 | $121 | $909 | $121 | | Total Revenue | $59,899 | $53,597 | $99,579 | $95,584 | - Total revenue from continuing operations increased by **$6,302 thousand (11.8%)** for the three months ended June 30, 2025, and by **$3,995 thousand (4.2%)** for the six months ended June 30, 2025, compared to the prior year periods[39](index=39&type=chunk) - International Cannabis sales saw a significant increase, growing by **$10,475 thousand (696%)** for the three months and **$14,365 thousand (478%)** for the six months ended June 30, 2025, driven by new customer relationships and increased sales from existing customers[39](index=39&type=chunk) [4. PROPERTY, PLANT AND EQUIPMENT](index=15&type=section&id=4.%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT) This section details the company's property, plant, and equipment, including changes and depreciation expense Property, Plant and Equipment (in thousands of USD) | Classification (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Land | $14,082 | $13,451 | | Buildings | $187,102 | $180,091 | | Construction in progress | $13,624 | $10,971 | | Property, plant and equipment, net | $181,837 | $175,226 | - Net property, plant and equipment increased by **$6,611 thousand (3.8%)** from December 31, 2024, to June 30, 2025, primarily due to an increase in buildings and construction in progress[40](index=40&type=chunk) Depreciation Expense (in thousands of USD) | Depreciation Expense (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Depreciation expense | $3,796 | $3,494 | $6,779 | $6,706 | [5. GOODWILL AND INTANGIBLE ASSETS](index=15&type=section&id=5.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This section provides information on the company's goodwill and intangible assets, including impairment assessments Goodwill (in thousands of USD) | Goodwill (in thousands of USD) | December 31, 2024 | June 30, 2025 | | :----------------------------- | :---------------- | :------------ | | Cannabis - Canada | $42,315 | $44,544 | Intangible Assets (in thousands of USD) | Intangible Assets (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Licenses | $18,560 | $17,196 | | Brand and trademarks | $3,442 | $12,520 | | Customer relationships | $13,190 | $12,530 | | Intangibles, net | $24,980 | $25,105 | - Goodwill for Cannabis - Canada increased by **$2,229 thousand** due to foreign currency translation adjustment[42](index=42&type=chunk) - The Company recorded a goodwill and brand intangible asset impairment charge of **$11,939 thousand** for its U.S. Cannabis segment as of June 30, 2024, due to underperformance and market challenges, with no impairment indicators identified at June 30, 2025[47](index=47&type=chunk)[48](index=48&type=chunk)[51](index=51&type=chunk) [6. LINE OF CREDIT AND LONG-TERM DEBT](index=18&type=section&id=6.%20LINE%20OF%20CREDIT%20AND%20LONG-TERM%20DEBT) This section details the company's credit facilities and long-term debt obligations, including refinancing Debt Classification (in thousands of USD) | Debt Classification (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :---------------------------------------- | :------------ | :---------------- | | FCC Term Loan | $19,837 | $20,821 | | Pure Sunfarms Term Loan Facility | $19,266 | — | | Total Long-Term Debt | $31,206 | $32,420 | | Current maturities of long-term debt | $7,897 | $8,142 | - The Company refinanced its Pure Sunfarms Term Loans on April 17, 2025, consolidating previous facilities into a new secured credit facility with an aggregate borrowing capacity of **C$37.4 million**, including a **C$10.0 million** revolving credit facility and a **C$27.4 million** term loan facility[55](index=55&type=chunk)[229](index=229&type=chunk) - The weighted average annual interest rate on short-term borrowings decreased from **9.4%** at December 31, 2024, to **6.9%** at June 30, 2025[58](index=58&type=chunk) [7. DISCONTINUED OPERATIONS AND DISPOSALS](index=20&type=section&id=7.%20DISCONTINUED%20OPERATIONS%20AND%20DISPOSALS) This section outlines the financial impact of the company's discontinued operations and asset disposals - On May 30, 2025, the Company privatized certain assets and operations of its Fresh Produce segment through a transaction with Vanguard Food, LP, receiving **$40 million** in cash proceeds and a **37.9%** equity ownership interest in Vanguard[60](index=60&type=chunk) Discontinued Operations (in thousands of USD) | Discontinued Operations (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Sales | $25,358 | $38,586 | $62,753 | $74,675 | | Net income (loss) from discontinued operations, net of tax | $16,294 | $(7,003) | $11,291 | $(4,847) | | Gain on sale of assets | $19,985 | — | $19,985 | — | - The transaction resulted in a gain on sale of **$19,985 thousand** and led to the reclassification of the Produce segment's historical results as discontinued operations[60](index=60&type=chunk)[63](index=63&type=chunk) [8. EQUITY INVESTMENTS](index=21&type=section&id=8.%20EQUITY%20INVESTMENTS) This section describes the company's equity investments and their accounting treatment - The Company holds a **37.9%** equity ownership interest in Vanguard Food LP, valued at an estimated **$3,530 thousand**, and accounts for this investment using the Hypothetical Liquidation Book Value (HLBV) method[64](index=64&type=chunk) - No income on equity method investments attributable to Vanguard was recorded for the three and six months ended June 30, 2025[64](index=64&type=chunk) [9. FINANCIAL INSTRUMENTS](index=23&type=section&id=9.%20FINANCIAL%20INSTRUMENTS) This section discusses the fair value and classification of the company's financial instruments - The carrying values of cash and cash equivalents, trade receivables, trade payables, accrued liabilities, line of credit, lease liabilities, notes payable, and debt approximate their fair values due to their short-term maturity or the use of market interest rates[66](index=66&type=chunk) - No financial instruments were categorized as Level 3 at June 30, 2025, and December 31, 2024, other than minority investments, and no transfers between levels occurred[67](index=67&type=chunk) [10. RELATED PARTY TRANSACTIONS AND BALANCES](index=23&type=section&id=10.%20RELATED%20PARTY%20TRANSACTIONS%20AND%20BALANCES) This section outlines transactions and balances with related parties, including lease payments Related Party Transaction (in thousands of USD) | Related Party Transaction (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Lease payments to Company employee (C$) | $78 | $151 | $114 | $190 | | Salary and benefits to related employee | $63 | $24 | $99 | $54 | - Lease payments to a related party for the Rose office building decreased by **48.3%** for the three months and **40%** for the six months ended June 30, 2025, compared to the prior year[68](index=68&type=chunk) [11. INCOME TAXES](index=23&type=section&id=11.%20INCOME%20TAXES) This section details the company's income tax provision, deferred tax assets, and valuation allowances Income Tax Provision (in thousands of USD) | Income Tax Provision (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Provision for income taxes | $2,503 | $260 | $3,486 | $580 | - The provision for income taxes significantly increased for both the three and six months ended June 30, 2025, compared to the prior year, reflecting improved profitability[70](index=70&type=chunk) - The Company established a valuation allowance of **$44,084 thousand** as of June 30, 2025, against its deferred tax assets, concluding it is unlikely to fully utilize the benefits in future periods[73](index=73&type=chunk) [12. SEGMENT AND GEOGRAPHIC INFORMATION](index=25&type=section&id=12.%20SEGMENT%20AND%20GEOGRAPHIC%20INFORMATION) This section provides financial data broken down by the company's operating segments and geography - The Company operates in five reportable segments: Cannabis-Canada, Cannabis-U.S., Cannabis-Netherlands, Produce, and Clean Energy, with Leli Holland (Cannabis-Netherlands) becoming a reportable segment in Q4 2024[75](index=75&type=chunk)[77](index=77&type=chunk) - Segment performance is evaluated based on segment operating (loss) income, a change from gross margin in Q4 2024[75](index=75&type=chunk)[78](index=78&type=chunk) Segment Operating Income (Loss) (in thousands of USD) | Segment Operating Income (Loss) (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Cannabis - Canada | $8,864 | $1,956 | $12,577 | $3,760 | | Cannabis - U.S. | $(9) | $(331) | $49 | $(1,042) | | Cannabis - Netherlands | $879 | $(341) | $641 | $(704) | | Produce | $(271) | $(778) | $(2,428) | $(2,320) | | Clean Energy | $430 | $61 | $755 | $41 | | Total Segment Operating Income (Loss) | $9,893 | $567 | $11,594 | $(265) | Total Assets by Geographic Location (in thousands of USD) | Total Assets by Geographic Location (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------------------- | :------------ | :---------------- | | United States | $55,684 | $46,922 | | Canada | $330,528 | $285,942 | | Netherlands | $17,024 | $11,093 | | Total assets from continuing operations | $403,236 | $343,957 | [13. INCOME (LOSS) PER SHARE](index=28&type=section&id=13.%20INCOME%20%28LOSS%29%20PER%20SHARE) This section presents the basic and diluted earnings per share for continuing and discontinued operations EPS (USD) | EPS (USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Basic EPS (Continuing) | $0.09 | $(0.15) | $0.08 | $(0.20) | | Basic EPS (Discontinued) | $0.15 | $(0.06) | $0.10 | $(0.04) | | Basic EPS (Total) | $0.24 | $(0.21) | $0.18 | $(0.24) | | Diluted EPS (Continuing) | $0.10 | $(0.15) | $0.08 | $(0.20) | | Diluted EPS (Discontinued) | $0.14 | $(0.06) | $0.10 | $(0.04) | | Diluted EPS (Total) | $0.24 | $(0.21) | $0.18 | $(0.24) | - Basic and diluted EPS significantly improved across both continuing and discontinued operations for the three and six months ended June 30, 2025, compared to the prior year periods[86](index=86&type=chunk) [14. SHAREHOLDERS' EQUITY AND SHARE-BASED COMPENSATION](index=29&type=section&id=14.%20SHAREHOLDERS%27%20EQUITY%20AND%20SHARE-BASED%20COMPENSATION) This section details changes in shareholders' equity and share-based compensation expense Share-based Compensation (in thousands of USD) | Share-based Compensation (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Share-based compensation expense | $123 | $2,196 | $268 | $2,601 | - Share-based compensation expense decreased significantly by **94.4%** for the three months and **89.7%** for the six months ended June 30, 2025, compared to the prior year periods[87](index=87&type=chunk) Stock Option Activity | Stock Option Activity | Outstanding at Dec 31, 2024 | Granted | Forfeited/Expired | Outstanding at Jun 30, 2025 | | :-------------------- | :-------------------------- | :------ | :---------------- | :-------------------------- | | Number of Options | 6,968,409 | 450,000 | (78,000) | 7,340,409 | | Avg Exercise Price | $3.30 | $0.76 | $3.41 | $3.15 | [15. CHANGES IN NON-CASH WORKING CAPITAL ITEMS AND SUPPLEMENTAL CASH FLOW INFORMATION](index=29&type=section&id=15.%20CHANGES%20IN%20NON-CASH%20WORKING%20CAPITAL%20ITEMS%20AND%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) This section outlines the impact of non-cash working capital changes on the company's cash flows Non-Cash Working Capital Items (in thousands of USD) | Non-Cash Working Capital Items (in thousands of USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------------- | :----------------------------- | :------------------------------- | | Trade receivables | $(4,180) | $(6,549) | | Inventories | $3,473 | $7,946 | | Accrued liabilities | $9,788 | $(1,278) | | Total changes in non-cash working capital items | $6,207 | $(6,021) | - Changes in non-cash working capital items provided **$6,207 thousand** for the six months ended June 30, 2025, a significant improvement from a use of **$(6,021) thousand** in the prior year, primarily driven by an increase in accrued liabilities[89](index=89&type=chunk) [16. SUBSEQUENT EVENTS](index=29&type=section&id=16.%20SUBSEQUENT%20EVENTS) This section discloses significant events that occurred after the reporting period but before issuance - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the U.S., which includes tax provisions that the Company is currently assessing for impact on its financial statements[92](index=92&type=chunk) - On August 4, 2025, the Company made a principal payment of approximately **$3 million** on the FCC Term Loan[93](index=93&type=chunk) - On August 4, 2025, the Company announced plans to convert the remaining **550,000 sq. ft.** of its Delta 2 greenhouse to cannabis production to meet increasing demand[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, and strategic shifts for Q2 2025 [EXECUTIVE OVERVIEW](index=32&type=section&id=EXECUTIVE%20OVERVIEW) This overview highlights the company's strategic goals, operational expansions, and recent business model shifts - Village Farms International aims to be a global leader in plant-derived consumer products, leveraging its cultivation expertise in branded and wholesale cannabis[98](index=98&type=chunk)[103](index=103&type=chunk) - The company has expanded its Canadian cannabis operations, achieved EU GMP certification for international medical cannabis exports, and acquired full ownership of Leli Holland for Netherlands cannabis distribution[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - The Produce segment underwent a privatization transaction in May 2025, reclassifying certain operations as discontinued, allowing the company to focus on its growing international cannabis business[102](index=102&type=chunk)[111](index=111&type=chunk) [Our Operating Segments](index=34&type=section&id=Our%20Operating%20Segments) This section describes the company's diverse operating segments, including cannabis, produce, and clean energy - The Canadian Cannabis segment, including Pure Sunfarms and Rose LifeScience, focuses on low-cost, high-quality cannabis production for Canadian and international markets[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk) - The Netherlands Cannabis segment (Leli Holland) holds one of ten licenses for legal recreational cannabis cultivation and distribution in the Netherlands, with sales commencing in February 2025[108](index=108&type=chunk) - The U.S. Cannabis segment, Balanced Health, specializes in CBD and hemp-based health and wellness products distributed via e-commerce[109](index=109&type=chunk) - The Produce segment, now primarily VFCLP, grows greenhouse produce in British Columbia, with certain assets privatized in May 2025[110](index=110&type=chunk)[111](index=111&type=chunk) - The Clean Energy segment (VFCE) converts landfill gas into renewable natural gas (RNG) through the Delta RNG Project, generating royalty revenue[113](index=113&type=chunk) [Recent Developments and Updates](index=34&type=section&id=Recent%20Developments%20and%20Updates) This section highlights key operational achievements, market share performance, and strategic transactions - Canadian Cannabis maintained a top-three market share in Canada and achieved high-end gross margins (**30-40%**) and strongest adjusted EBITDA in six years, while refinancing its term loans at a lower interest rate[114](index=114&type=chunk) - International export sales increased by **690%** year-over-year in Q2 2025, with the company becoming one of Europe's largest medical cannabis importers[115](index=115&type=chunk) - Netherlands Cannabis operations are ramping up, with products in **82.5%** of participating coffeeshops, and Phase II facility construction on track to quintuple production capacity by Q1 2026[117](index=117&type=chunk) - The Produce segment completed its privatization transaction, receiving **$40 million** and a **37.9%** equity interest in Vanguard Food LP[120](index=120&type=chunk) - Subsequent to quarter end, the company announced an investment to expand cannabis cultivation capacity at its Delta, BC campus by **40 metric tonnes** annually[121](index=121&type=chunk) [Presentation of Financial Results](index=38&type=section&id=Presentation%20of%20Financial%20Results) This section clarifies the consolidation of financial results and the currency translation methods used - Consolidated results reflect varying ownership interests in Rose LifeScience (**70% to 80%**) and Leli Holland (**85% to 100%**) during the reported periods[122](index=122&type=chunk) - All financial amounts are stated in U.S. dollars, the reporting currency, with foreign operations' assets and liabilities translated at period-end exchange rates and income statements at average rates[123](index=123&type=chunk) Exchange Rate (C$ to US$) | Exchange Rate (C$ to US$) | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :------------------------ | :------------ | :------------ | :---------------- | | Spot rate | 0.7324 | 0.7310 | 0.6957 | | Three-month period ended | 0.7226 | 0.7308 | N/A | | Six-month period ended | 0.7096 | 0.7363 | N/A | [RESULTS OF OPERATIONS](index=39&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's consolidated and segmented financial performance for the reporting periods [Consolidated Financial Performance](index=39&type=section&id=Consolidated%20Financial%20Performance) This section provides an overview of the company's overall sales, gross profit, net income, and Adjusted EBITDA Consolidated Financial Performance (in thousands of USD) | Metric (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Sales | $59,899 | $53,597 | $99,579 | $95,584 | | Gross profit | $22,342 | $13,637 | $36,522 | $24,854 | | Net income (loss) attributable to Village Farms International, Inc. shareholders | $26,497 | $(23,549) | $19,794 | $(26,401) | | Adjusted EBITDA from continuing operations | $17,111 | $2,914 | $20,560 | $3,830 | | Basic EPS | $0.24 | $(0.21) | $0.18 | $(0.24) | - Consolidated sales increased by **12%** for the three months and **4%** for the six months ended June 30, 2025, compared to the prior year periods[125](index=125&type=chunk) - Net income attributable to shareholders saw a significant turnaround, reaching **$26,497 thousand** for the three months and **$19,794 thousand** for the six months ended June 30, 2025, from losses in the prior year[125](index=125&type=chunk) [Discussion of Financial Results](index=39&type=section&id=Discussion%20of%20Financial%20Results) This section provides a detailed analysis of the company's financial results, comparing current and prior periods [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=40&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial performance for Q2 2025 against the prior year - Sales increased by **$6,302 thousand (12%)** due to higher Canadian Cannabis sales (**$3,773 thousand**), initial Leli sales (**$2,483 thousand**), and increased Produce sales (**$140 thousand**), partially offset by a decrease in U.S. Cannabis sales (**$456 thousand**)[129](index=129&type=chunk) - Gross profit surged by **$8,705 thousand (64%)** to **$22,342 thousand**, driven by improved gross profit in Canadian Cannabis (**$6,763 thousand**) and Leli's first-year sales (**$1,436 thousand**)[131](index=131&type=chunk) - Net income attributable to shareholders increased by **$50,046 thousand**, primarily due to improved gross margins, a favorable vendor settlement, and a **$11,939 thousand** impairment charge in the prior year that did not recur[141](index=141&type=chunk) - Adjusted EBITDA improved from **$(3,559) thousand** to **$13,260 thousand**, mainly due to better Canadian Cannabis margins and the Produce segment's favorable vendor settlement[142](index=142&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=42&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial performance for H1 2025 against the prior year - Sales increased by **$3,995 thousand (4%)** to **$99,579 thousand**, primarily from Canadian Cannabis (**$1,164 thousand**) and Leli's first-year sales (**$2,969 thousand**), partially offset by a decline in U.S. Cannabis sales (**$1,089 thousand**)[143](index=143&type=chunk) - Gross profit increased by **$11,668 thousand (47%)** to **$36,522 thousand**, mainly due to higher gross profit in Canadian Cannabis (**$9,730 thousand**) and Leli's initial sales (**$1,637 thousand**)[145](index=145&type=chunk) - Net income attributable to shareholders improved by **$46,195 thousand**, driven by better gross margins, a favorable vendor settlement, and the absence of the prior year's **$11,939 thousand** impairment charge[153](index=153&type=chunk) - Adjusted EBITDA rose from **$32 thousand** to **$13,341 thousand**, reflecting improved margins in Canadian Cannabis and the Produce segment's favorable vendor settlement[154](index=154&type=chunk) [SEGMENTED RESULTS OF OPERATIONS](index=44&type=section&id=SEGMENTED%20RESULTS%20OF%20OPERATIONS) This section provides a detailed breakdown of the financial performance for each operating segment [CANADIAN CANNABIS SEGMENT RESULTS](index=47&type=section&id=CANADIAN%20CANNABIS%20SEGMENT%20RESULTS) This section analyzes the financial performance of the Canadian Cannabis segment, including sales and profit [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=47&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the Canadian Cannabis segment's performance for Q2 2025 against the prior year - Net sales increased by **$3,773 thousand (9%)** to **$44,518 thousand**, primarily due to a **$10,475 thousand** increase in international sales, partially offset by a **$5,573 thousand** decrease in branded sales[160](index=160&type=chunk) - Gross profit increased by **63%** to **$17,468 thousand**, with gross margin improving from **26%** to **39%**, driven by higher international bulk flower sales and lower sales of value brands[166](index=166&type=chunk) - Adjusted EBITDA for Canadian Cannabis increased by **$7,042 thousand (146%)** to **$11,860 thousand**, reflecting improved margins[169](index=169&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=51&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the Canadian Cannabis segment's performance for H1 2025 against the prior year - Net sales increased by **$1,164 thousand (1%)** to **$79,355 thousand**, driven by a **$14,365 thousand** increase in international sales, partially offset by a decrease in branded sales[170](index=170&type=chunk) - Gross profit increased by **48%** to **$29,943 thousand**, with gross margin improving from **26%** to **38%**, due to higher international bulk flower sales and a shift away from value brands[176](index=176&type=chunk) - Adjusted EBITDA for Canadian Cannabis increased by **$9,667 thousand (109%)** to **$18,558 thousand**, primarily due to improved margins[179](index=179&type=chunk) [U.S. CANNABIS SEGMENT RESULTS](index=53&type=section&id=U.S.%20CANNABIS%20SEGMENT%20RESULTS) This section analyzes the financial performance of the U.S. Cannabis segment, including sales and profit [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=53&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the U.S. Cannabis segment's performance for Q2 2025 against the prior year - Net sales decreased by **$456 thousand (11%)** to **$3,841 thousand**, attributed to new CBD sales restrictions in eight states and increased competition from unregulated hemp-derived products[181](index=181&type=chunk) - Gross profit decreased by **$193 thousand (7%)** to **$2,436 thousand**, but gross margin improved from **61%** to **63%** due to cost efficiencies from internalized gummy manufacturing[183](index=183&type=chunk) - Net loss significantly improved by **$12,044 thousand** to **$(226) thousand**, primarily due to the absence of the prior year's **$11,939 thousand** goodwill and intangible asset impairment charge[185](index=185&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=53&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the U.S. Cannabis segment's performance for H1 2025 against the prior year - Net sales decreased by **$1,089 thousand (12%)** to **$7,745 thousand**, due to new CBD sales restrictions and competition from unregulated hemp-derived products[187](index=187&type=chunk)[188](index=188&type=chunk) - Gross profit decreased by **$295 thousand (6%)** to **$5,029 thousand**, but gross margin improved from **60%** to **65%** due to cost efficiencies[190](index=190&type=chunk) - Net loss improved by **$12,813 thousand** to **$(168) thousand**, primarily due to the non-recurrence of the prior year's **$11,939 thousand** impairment charge[192](index=192&type=chunk) [NETHERLANDS CANNABIS SEGMENT RESULTS](index=55&type=section&id=NETHERLANDS%20CANNABIS%20SEGMENT%20RESULTS) This section analyzes the financial performance of the Netherlands Cannabis segment, including sales and profit [Three Months Ended June 30, 2025](index=55&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025) This section details the Netherlands Cannabis segment's financial performance for Q2 2025 Metric (in thousands of USD) | Metric (in thousands of USD) | Three Months Ended June 30, 2025 | | :----------------------------- | :------------------------------- | | Net sales | $2,483 | | Cost of sales | $1,047 | | Gross profit | $1,436 | | Gross margin | 58% | | Net income | $835 | | Adjusted EBITDA | $1,218 | - Leli Holland commenced sales in Q1 2025, reporting **$2,483 thousand** in net sales and a gross profit of **$1,436 thousand (58% gross margin)** for the three months ended June 30, 2025[194](index=194&type=chunk)[195](index=195&type=chunk)[197](index=197&type=chunk) [Six Months Ended June 30, 2025](index=55&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025) This section details the Netherlands Cannabis segment's financial performance for H1 2025 Metric (in thousands of USD) | Metric (in thousands of USD) | Six Months Ended June 30, 2025 | | :----------------------------- | :----------------------------- | | Net sales | $2,969 | | Cost of sales | $1,332 | | Gross profit | $1,637 | | Gross margin | 55% | | Net income | $593 | | Adjusted EBITDA | $1,295 | - For the six months ended June 30, 2025, Leli Holland generated **$2,969 thousand** in net sales, with a gross profit of **$1,637 thousand (55% gross margin)**[201](index=201&type=chunk)[204](index=204&type=chunk) [PRODUCE SEGMENT RESULTS](index=57&type=section&id=PRODUCE%20SEGMENT%20RESULTS) This section analyzes the financial performance of the Produce segment, including sales and profit [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=57&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the Produce segment's performance for Q2 2025 against the prior year - Produce sales increased by **$140 thousand (2%)** to **$8,574 thousand**[209](index=209&type=chunk) - Gross profit increased from **$225 thousand** to **$599 thousand**, with gross margin improving from **3%** to **7%**[211](index=211&type=chunk) - Net income from continuing operations improved by **$5,566 thousand** to **$4,269 thousand**, primarily due to favorable vendor settlements related to the ToBRFV infestation[213](index=213&type=chunk) - Adjusted EBITDA for Produce improved by **$8,902 thousand** to **$2,552 thousand**, mainly due to the favorable vendor settlement[215](index=215&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=58&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the Produce segment's performance for H1 2025 against the prior year - Produce sales increased by **$163 thousand (2%)** to **$8,601 thousand**[216](index=216&type=chunk) - Gross loss increased from **$761 thousand** to **$843 thousand**, with gross margin slightly declining from **(9%)** to **(10%)**[218](index=218&type=chunk) - Net income from continuing operations improved by **$4,854 thousand** to **$1,515 thousand**, primarily due to favorable vendor settlements related to the ToBRFV infestation[220](index=220&type=chunk) - Adjusted EBITDA for Produce improved by **$1,752 thousand** to **$(2,570) thousand**, mainly due to the favorable legal settlement[222](index=222&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its financial obligations and fund operations [Capital Resources](index=58&type=section&id=Capital%20Resources) This section outlines the company's available cash, cash equivalents, and working capital position Capital Resources (in thousands of USD) | Capital Resources (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Cash, cash equivalents, and restricted cash | $64,988 | $24,631 | | Working capital | $85,753 | $53,800 | - Cash, cash equivalents, and restricted cash increased significantly to **$64,988 thousand** at June 30, 2025, from **$24,631 thousand** at December 31, 2024[223](index=223&type=chunk) - Working capital improved to **$85,753 thousand** at June 30, 2025, from **$53,800 thousand** at December 31, 2024[223](index=223&type=chunk) [FCC Term Loan](index=60&type=section&id=FCC%20Term%20Loan) This section details the terms, outstanding balance, and recent amendments of the FCC Term Loan - The FCC Term Loan had an outstanding balance of **$19,837 thousand** at June 30, 2025, with a maturity date of May 3, 2027, and an interest rate of **7.83%** per annum[226](index=226&type=chunk) - On April 10, 2025, the Company entered into an Amended and Restated Credit Agreement with FCC, adding the Company as a new borrower and VF Clean Energy, Inc. as a new guarantor, and replacing the fixed charge ratio covenant with a more favorable liquidity ratio covenant[228](index=228&type=chunk) [Pure Sunfarms Loans](index=60&type=section&id=Pure%20Sunfarms%20Loans) This section describes the new Pure Sunfarms Secured Credit Facilities, including their terms and capacity - On April 17, 2025, the Company entered into new Pure Sunfarms Secured Credit Facilities with a Canadian chartered bank, providing **C$37.4 million** in aggregate borrowing capacity, replacing previous Pure Sunfarms Loans and revolving line of credit[229](index=229&type=chunk) - The new facilities include a **C$10.0 million** revolving credit facility and a **C$27.4 million** term loan facility, secured by the Delta 2 and Delta 3 greenhouse facilities, with the term loan repayable quarterly and maturing on February 7, 2028[229](index=229&type=chunk)[230](index=230&type=chunk) [Summary of Cash Flows](index=62&type=section&id=Summary%20of%20Cash%20Flows) This section provides a summary of cash flows from operating, investing, and financing activities Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :------------------------------- | | Operating activities | $22,265 | $(3,713) | | Investing activities | $(5,289) | $(2,813) | | Financing activities | $(4,986) | $(5,886) | | Discontinued operations | $27,892 | $7,219 | | Net increase (decrease) in cash | $39,882 | $(5,193) | | Cash, end of the period | $64,988 | $29,657 | [Operating Activities - Continuing Operations](index=62&type=section&id=Operating%20Activities%20-%20Continuing%20Operations) This section details the cash generated or used by the company's continuing operating activities - Cash provided by operating activities from continuing operations was **$22,265 thousand** for the six months ended June 30, 2025, a significant improvement from cash used of **$(3,713) thousand** in the prior year, driven by improved Canadian Cannabis gross margins[237](index=237&type=chunk) [Investing Activities - Continuing Operations](index=62&type=section&id=Investing%20Activities%20-%20Continuing%20Operations) This section details the cash used in the company's continuing investing activities - Cash used in investing activities increased to **$(5,289) thousand** for the six months ended June 30, 2025, from **$(2,813) thousand** in the prior year, primarily due to capital expenditures for the Leli Phase II indoor cultivation facility[238](index=238&type=chunk) [Financing Activities - Continuing Operations](index=62&type=section&id=Financing%20Activities%20-%20Continuing%20Operations) This section details the cash generated or used by the company's continuing financing activities - Cash used in financing activities decreased to **$(4,986) thousand** for the six months ended June 30, 2025, from **$(5,886) thousand** in the prior year, mainly due to debt repayments[239](index=239&type=chunk) [Contractual Obligations and Commitments](index=62&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's expected ability to meet its contractual obligations and commitments - The Company expects to meet its contractual obligations and commitments using existing working capital and other resources, with no material cash requirements in the near future beyond long-term debt[240](index=240&type=chunk) [Non-GAAP Measures](index=62&type=section&id=Non-GAAP%20Measures) This section provides reconciliations and explanations for the company's non-GAAP financial measures [Reconciliation of Net Loss to Adjusted EBITDA](index=63&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Adjusted%20EBITDA) This section reconciles net income (loss) from continuing operations to Adjusted EBITDA Reconciliation of Net Loss to Adjusted EBITDA (in thousands of USD) | Metric (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Net income (loss) from continuing operations | $10,203 | $(16,546) | $8,503 | $(21,554) | | Adjusted EBITDA from continuing operations | $17,111 | $2,914 | $20,560 | $3,830 | | Adjusted EBITDA | $13,260 | $(3,559) | $13,341 | $32 | - Adjusted EBITDA from continuing operations significantly increased to **$17,111 thousand** for the three months and **$20,560 thousand** for the six months ended June 30, 2025, compared to the prior year periods[242](index=242&type=chunk) [Reconciliation of Segmented Net Loss to Adjusted EBITDA](index=63&type=section&id=Reconciliation%20of%20Segmented%20Net%20Loss%20to%20Adjusted%20EBITDA) This section reconciles net income (loss) to Adjusted EBITDA for each operating segment Segment Adjusted EBITDA (in thousands of USD) | Segment Adjusted EBITDA (in thousands of USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Produce | $2,552 | $(6,350) | $(2,570) | $(4,322) | | Cannabis Canada | $11,860 | $4,818 | $18,558 | $8,891 | | Cannabis U.S. | $45 | $(240) | $159 | $(855) | | Clean Energy | $430 | $61 | $755 | $41 | | Cannabis Netherlands | $1,218 | $(23) | $1,295 | $(65) | | Corporate | $(2,845) | $(1,825) | $(4,856) | $(3,658) | | Total Adjusted EBITDA | $13,260 | $(3,559) | $13,341 | $32 | - Canadian Cannabis Adjusted EBITDA increased significantly by **146%** for the three months and **109%** for the six months ended June 30, 2025, driven by improved margins[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - Produce Adjusted EBITDA saw a substantial improvement, turning from a loss of **$(6,350) thousand** to a gain of **$2,552 thousand** for the three months ended June 30, 2025, primarily due to a favorable vendor settlement[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) [Adjusted EBITDA – Constant Currency](index=66&type=section&id=Adjusted%20EBITDA%20%E2%80%93%20Constant%20Currency) This section presents Adjusted EBITDA on a constant currency basis to isolate operational performance - The Company presents constant currency adjusted financial measures to assess underlying operations performance, excluding foreign currency rate fluctuations[246](index=246&type=chunk) Constant Currency Performance (Three Months Ended June 30) (in thousands of USD) | Metric (in thousands of USD) | As Reported (3M 2025) | As Reported (3M 2024) | Constant Currency (3M 2025) | Constant Currency Change ($) | Constant Currency Change (%) | | :----------------------------- | :-------------------- | :-------------------- | :-------------------------- | :--------------------------- | :--------------------------- | | Sales | $59,899 | $53,597 | $60,403 | $6,806 | 13% | | Adjusted EBITDA | $13,260 | $(3,559) | $13,394 | $16,953 | 476% | Constant Currency Performance (Six Months Ended June 30) (in thousands of USD) | Metric (in thousands of USD) | As Reported (6M 2025) | As Reported (6M 2024) | Constant Currency (6M 2025) | Constant Currency Change ($) | Constant Currency Change (%) | | :----------------------------- | :-------------------- | :-------------------- | :-------------------------- | :--------------------------- | :--------------------------- | | Sales | $99,579 | $95,584 | $102,601 | $7,017 | 7% | | Adjusted EBITDA | $13,341 | $32 | $14,068 | $14,036 | 3% | [Recent Accounting Pronouncements Not Yet Adopted](index=66&type=section&id=Recent%20Accounting%20Pronouncements%20Not%20Yet%20Adopted) This section confirms no material impact from recently issued accounting pronouncements - No recently issued or newly effective accounting pronouncements are expected to have a material impact on the Company's condensed consolidated financial statements[250](index=250&type=chunk) [Critical Accounting Estimates and Judgments](index=66&type=section&id=Critical%20Accounting%20Estimates%20and%20Judgments) This section discusses key accounting estimates and judgments, particularly goodwill impairment - The Company's financial statements rely on estimates and judgments, particularly regarding goodwill and intangible asset impairment assessments[252](index=252&type=chunk)[253](index=253&type=chunk) - At June 30, 2025, no impairment indicators were identified for the U.S. and Canadian Cannabis segments, indicating that the fair value of reporting units was not below their carrying amounts[253](index=253&type=chunk) - The carrying value of goodwill for the Cannabis – Canada segment was **$44.5 million**, and intangible assets were **$20.9 million** as of June 30, 2025[253](index=253&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, including interest rate and foreign exchange [Interest Rate Risk](index=69&type=section&id=Interest%20Rate%20Risk) This section assesses the company's exposure to interest rate fluctuations and their financial impact - As of June 30, 2025, the Company had approximately **$39,103 thousand** in variable interest rate term loans with a weighted average interest rate of **6.9%**[256](index=256&type=chunk) - A **50 basis point** increase in applicable interest rates would increase interest expense by approximately **$50 thousand** for the three months and **$100 thousand** for the six months ended June 30, 2025[257](index=257&type=chunk) [Foreign Exchange Risk](index=69&type=section&id=Foreign%20Exchange%20Risk) This section evaluates the company's exposure to foreign currency exchange rate fluctuations Impact of $0.10 Increase in C$ (in thousands of USD) | Impact of $0.10 Increase in C$ (in thousands of USD) | June 30, 2025 | June 30, 2024 | | :--------------------------------------------------- | :------------ | :------------ | | Net foreign exchange gain | $4,846 | $6,286 | - The Company is exposed to foreign exchange risk, particularly with the Canadian/U.S. dollar exchange rate (**C$1.00 = US$0.7324** at June 30, 2025)[259](index=259&type=chunk) - Management monitors foreign exchange risk and generally aims to match sales and vendor payments to mitigate material net impact[259](index=259&type=chunk) [Item 4. Controls and Procedures](index=69&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls, remediation of material weaknesses, and internal control changes [Evaluation of Disclosure Controls and Procedures](index=69&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that the Company maintained effective disclosure controls and procedures as of June 30, 2025[262](index=262&type=chunk) [Remediation of Previously Identified Material Weakness](index=69&type=section&id=Remediation%20of%20Previously%20Identified%20Material%20Weakness) This section details the successful remediation of prior material weaknesses in internal control - The Company remediated previously identified material weaknesses related to information technology general controls (ITGCs) and manual journal entry review processes in its Produce segment[264](index=264&type=chunk)[265](index=265&type=chunk) - Remediation actions included enhancing risk assessment, limiting privileged user access, implementing controls for timely identification and review of system access and changes, and strengthening review and approval processes for manual journal entries[265](index=265&type=chunk)[267](index=267&type=chunk) - Management conclu

Executive Summary Harvard Bioscience exceeded Q2 2025 revenue guidance, achieved positive cash flow, and extended its credit deadline [Q2 2025 Performance Highlights and Strategic Outlook](index=1&type=section&id=Q2%202025%20Performance%20Highlights%20and%20Strategic%20Outlook) Harvard Bioscience exceeded Q2 2025 revenue guidance, achieved positive operating cash flow, and extended its credit refinance deadline Q2 2025 Performance Metrics | Metric | Q2 2025 | Q2 2024 | | :------------- | :------ | :------ | | Revenues | $20.5M | $23.1M | | Gross Margin | 56.4% | 57.2% | | Cash Provided by Operations | $2.8M | ($0.8)M | - Credit Amendment: Refinance deadline extended to **December 5, 2025**[6](index=6&type=chunk)[7](index=7&type=chunk) - CEO's Priorities: Grow core business and restructure balance sheet for revenue growth and margin expansion in 2026 and beyond[2](index=2&type=chunk) Detailed Financial Performance Q2 and H1 2025 saw revenue and gross margin declines, with H1 net loss widening due to goodwill impairment [Second Quarter 2025 Results](index=1&type=section&id=Second%20Quarter%202025%20Results) Q2 2025 saw decreased revenue and gross margin, but improved net loss, positive cash flow, and increased Adjusted EBITDA [Revenue and Gross Margin Analysis](index=1&type=section&id=Revenue%20and%20Gross%20Margin%20Analysis_Q2) Q2 2025 revenues decreased by 11.25% to $20.5 million, with gross margin slightly declining to 56.4% Q2 2025 Revenue and Gross Margin | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :------------- | :------ | :------ | :----------- | | Revenues | $20.5M | $23.1M | -11.25% | | Gross Margin | 56.4% | 57.2% | -0.8 ppts | [Profitability and Cash Flow Metrics](index=1&type=section&id=Profitability%20and%20Cash%20Flow%20Metrics_Q2) Q2 2025 net loss improved to ($2.3 million), Adjusted EBITDA increased, and operating cash flow turned positive Q2 2025 Profitability and Cash Flow | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----------------------- | :------- | :------- | :----------- | | Net Loss | ($2.3)M | ($2.9)M | +20.69% | | Adjusted EBITDA | $1.5M | $1.3M | +15.38% | | Cash Provided by Operations | $2.8M | ($0.8)M | N/A (significant improvement) | [Six Months Ended June 30, 2025 Results](index=2&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Results) H1 2025 saw declining revenues and gross margin, a widened net loss due to impairment, but improved operating cash flow [Revenue and Gross Margin Analysis](index=2&type=section&id=Revenue%20and%20Gross%20Margin%20Analysis_6M) H1 2025 revenues decreased by 11.34% to $42.2 million, with gross margin declining to 56.2% H1 2025 Revenue and Gross Margin | Metric | 6M 2025 | 6M 2024 | Change (YoY) | | :------------- | :------ | :------ | :----------- | | Revenues | $42.2M | $47.6M | -11.34% | | Gross Margin | 56.2% | 58.8% | -2.6 ppts | [Profitability and Cash Flow Metrics](index=2&type=section&id=Profitability%20and%20Cash%20Flow%20Metrics_6M) H1 2025 net loss significantly widened to ($52.6 million) due to impairment, while operating cash flow substantially improved H1 2025 Profitability and Cash Flow | Metric | 6M 2025 | 6M 2024 | Change (YoY) | | :----------------------- | :-------- | :------- | :----------- | | Net Loss | ($52.6)M | ($7.6)M | -592.11% | | Adjusted EBITDA | $2.3M | $2.8M | -17.86% | | Cash Provided by Operations | $5.7M | $0.6M | +850.00% | - The significant increase in net loss was primarily due to a **$48.0 million goodwill impairment** in the first quarter of 2025[9](index=9&type=chunk)[20](index=20&type=chunk)[26](index=26&type=chunk) [Third Quarter 2025 Financial Guidance](index=2&type=section&id=Third%20Quarter%202025%20Guidance) Q3 2025 revenue guidance is $19-21 million, with an expected gross margin between 56% and 58% Q3 2025 Guidance | Metric | Q3 2025 Guidance | | :------------- | :--------------- | | Revenues | $19M - $21M | | Gross Margin | 56% - 58% | Financial Position and Liquidity Management The company amended its credit agreement, managing debt and liquidity amidst reduced assets and equity [Credit Agreement and Debt Management](index=1&type=section&id=Credit%20Agreement%20Update) Harvard Bioscience amended its credit agreement, waiving defaults and suspending Q3 2025 covenant testing - Lenders waived events of default for failure to achieve prior refinancing milestones and non-compliance with financial covenants as of **June 30, 2025**[5](index=5&type=chunk) - Financial covenants will not be tested for the fiscal quarter ended **September 30, 2025**, provided the company complies with payment obligations and minimum liquidity requirements[5](index=5&type=chunk) - Company agreed to accomplish steps towards the refinancing or repayment of the credit agreement by no later than **December 5, 2025**[6](index=6&type=chunk) [Balance Sheet Overview](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased significantly due to reduced goodwill, while cash increased and stockholders' equity declined Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $7,442 | $4,108 | +$3,334 | | Total current assets | $44,969 | $45,117 | -$148 | | Goodwill and other intangibles | $19,291 | $67,456 | -$48,165 | | Total assets | $80,093 | $126,644 | -$46,551 | | Debt | $34,864 | $36,956 | -$2,092 | | Total current liabilities | $55,202 | $54,958 | +$244 | | Stockholders' equity | $15,733 | $63,340 | -$47,607 | [Cash Flow Statement Analysis](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) H1 2025 saw increased net cash from operations, but outflows from investing and financing due to debt repayment Condensed Consolidated Statements of Cash Flows | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Net cash provided by operating activities | $5,741 | $557 | +$5,184 | | Net cash (used in) provided by investing activities | ($916) | $233 | -$1,149 | | Net cash used in financing activities | ($2,462) | ($878) | -$1,584 | | Increase (decrease) in cash and cash equivalents | $3,334 | ($235) | +$3,569 | - Repayment of term debt amounted to **$2.0 million** during the six months ended June 30, 2025[24](index=24&type=chunk) Non-GAAP Financial Reporting Non-GAAP measures clarify core operations, excluding items like goodwill impairment and stock-based compensation [Understanding Non-GAAP Measures](index=3&type=section&id=Use%20of%20Non-GAAP%20Financial%20Information) Non-GAAP measures clarify core business performance, excluding specific items, as a supplement to GAAP information - Non-GAAP financial information provides investors with an enhanced understanding of the underlying operations of the business[13](index=13&type=chunk) - Excluded items from non-GAAP measures include stock-based compensation, amortization of intangibles related to acquisitions, other operating expenses, loss on equity securities, income taxes, and the tax impact of reconciling items[13](index=13&type=chunk) - Non-GAAP financial information should be considered in addition to, not as a substitute for, GAAP financial information[14](index=14&type=chunk) [GAAP to Non-GAAP Reconciliation Tables](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP measures for Q2 and H1 2025/2024, detailing adjustments GAAP to Non-GAAP Reconciliation (Operating Income, Net Income, EBITDA, EPS) | Metric | Q2 2025 (GAAP, in thousands) | Q2 2025 (Adjusted, in thousands) | 6M 2025 (GAAP, in thousands) | 6M 2025 (Adjusted, in thousands) | | :-------------------------------- | :------------- | :----------------- | :------------- | :----------------- | | Operating loss (income) | ($819) | $1,045 | ($50,487) | $1,364 | | Net loss (income) | ($2,282) | ($235) | ($52,622) | ($787) | | Adjusted EBITDA | N/A | $1,500 | N/A | $2,314 | | Diluted loss (earnings) per share | ($0.05) | ($0.01) | ($1.19) | ($0.02) | Net Debt Reconciliation | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :------- | :--------------------------- | :--------------------------- | | Net debt | $27,908 | $31,992 | Corporate Information and Disclosures This section covers Harvard Bioscience's overview, forward-looking statements, and investor relations [Company Overview](index=3&type=section&id=About%20Harvard%20Bioscience) Harvard Bioscience develops and sells technologies for life science applications, serving global academic and pharmaceutical clients - Harvard Bioscience is a leading developer, manufacturer, and seller of technologies, products, and services enabling fundamental advances in life science applications[15](index=15&type=chunk) - Applications include research, drug and therapy discovery, bio-production, and preclinical testing for pharmaceutical and therapy development[15](index=15&type=chunk) - Customers range from academic institutions and government laboratories to leading pharmaceutical, biotechnology, and contract research organizations globally, with operations in the US, Europe, and China[15](index=15&type=chunk) [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements about future performance, subject to uncertainties, with no updates - Forward-looking statements concern expected future financial and operational performance, including revenues, gross margin, cash and debt position, balance sheet, growth, and new product introductions[17](index=17&type=chunk) - Statements also cover matters related to the company's ability to continue as a going concern, fund operations, comply with credit agreement terms, or refinance outstanding indebtedness[17](index=17&type=chunk) - Forward-looking statements do not guarantee future performance and involve known and unknown uncertainties, risks, assumptions, and contingencies, with no obligation for the company to update them[17](index=17&type=chunk) [Investor Relations and Communication](index=2&type=section&id=Investor%20Inquiries) Harvard Bioscience provided investor contact details and announced a Q2 2025 earnings call and webcast - Investor inquiries can be directed to **Mark Frost**, Interim Chief Financial Officer, via investors@harvardbioscience.com or **(508) 893-3120**[18](index=18&type=chunk) - A conference call and webcast were scheduled for **August 11, 2025**, at **8:00 a.m. Eastern Time**, with separate registration processes for analysts and audio-only participants[11](index=11&type=chunk)[12](index=12&type=chunk)

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information, including financial statements and management's discussion and analysis, for Compass Therapeutics, Inc [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for Compass Therapeutics, Inc. and its subsidiaries [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This table provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | Metric | June 30, 2025 (unaudited) (in thousands) | December 31, 2024 (Note 1) (in thousands) | | :-------------------------------- | :--------------------------------------- | :-------------------------------------- | | **Assets** | | | | Cash and cash equivalents | $22,856 | $43,483 | | Marketable securities | $78,093 | $83,239 | | Total current assets | $106,195 | $132,751 | | Total assets | $116,698 | $140,403 | | **Liabilities** | | | | Accounts payable | $2,595 | $2,249 | | Accrued expenses | $10,992 | $6,287 | | Total current liabilities | $13,858 | $8,874 | | Total liabilities | $23,491 | $15,170 | | **Stockholders' Equity** | | | | Total stockholders' equity | $93,207 | $125,233 | | Total liabilities and stockholders' equity | $116,698 | $140,403 | [Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20(Unaudited)) This statement outlines the Company's revenues, expenses, and net loss over specific reporting periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Licensing revenue | $— | $850 | $— | $850 | | Research and development expenses | $16,415 | $11,174 | $29,476 | $20,695 | | General and administrative expenses | $4,651 | $4,721 | $9,556 | $7,969 | | Total operating expenses | $21,066 | $15,895 | $39,032 | $28,664 | | Loss from operations | $(21,066) | $(15,045) | $(39,032) | $(27,814) | | Other income | $1,185 | $1,969 | $2,518 | $3,951 | | Net loss | $(19,881) | $(13,076) | $(36,514) | $(23,863) | | Net loss per share - basic and diluted | $(0.14) | $(0.10) | $(0.26) | $(0.17) | | Comprehensive loss | $(19,863) | $(13,077) | $(36,516) | $(23,991) | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) This statement details changes in the Company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Dec 31, 2024 | Balance at Mar 31, 2025 | Balance at Jun 30, 2025 | | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Common Stock | $14 | $14 | $14 | | Additional Paid-in Capital | $489,692 | $491,391 | $494,182 | | Accumulated Other Comprehensive (Loss) Income | $210 | $190 | $208 | | Accumulated Deficit | $(364,683) | $(381,316) | $(401,197) | | Total Stockholders' Equity | $125,233 | $110,279 | $93,207 | - Total stockholders' equity decreased from **$125.2 million** at December 31, 2024, to **$93.2 million** at June 30, 2025, primarily due to a net loss of **$36.5 million** for the six months ended June 30, 2025, partially offset by stock-based compensation[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(25,040) | $(24,642) | | Net cash provided by investing activities | $5,228 | $2,384 | | Net cash (used in) provided by financing activities | $(815) | $17,434 | | Net change in cash, cash equivalents and restricted cash | $(20,627) | $(4,824) | | Cash, cash equivalents and restricted cash at end of period | $23,424 | $19,404 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide additional information and explanations for the figures presented in the financial statements [1. Nature of Business and Basis of Presentation](index=8&type=section&id=1.%20Nature%20of%20Business%20and%20Basis%20of%20Presentation) This section describes the Company's core business as a clinical-stage biopharmaceutical company and its financial reporting basis - Compass Therapeutics, Inc. is a clinical-stage, oncology-focused biopharmaceutical company developing proprietary antibody-based therapeutics, with a scientific focus on the relationship between angiogenesis and the immune system[25](index=25&type=chunk) - The Company has funded operations primarily through equity securities sales, receiving **$430 million** in gross proceeds through June 30, 2025[29](index=29&type=chunk)[65](index=65&type=chunk) - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled **$101 million**, expected to fund operations into 2027[29](index=29&type=chunk)[67](index=67&type=chunk)[87](index=87&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and methods used in preparing the financial statements - There have been no material changes to the significant accounting policies previously disclosed in the Company's Annual Report[30](index=30&type=chunk) [3. Fair Value Measurements](index=9&type=section&id=3.%20Fair%20Value%20Measurements) This section details the fair value hierarchy and measurements for the Company's financial assets and liabilities Fair Value of Assets (in thousands) | Asset Category | Fair Value as of June 30, 2025 (in thousands) | Fair Value as of December 31, 2024 (in thousands) | | :--------------- | :------------------------------------------ | :--------------------------------------------- | | Corporate bonds | $61,175 | $44,963 | | Commercial paper | $9,415 | $12,084 | | Certificates of deposit | $918 | $15,269 | | U.S. government treasuries | $2,734 | $4,399 | | Asset-backed securities | $3,851 | $6,524 | | Money market funds | $3,730 | $23,880 | | Total assets | $81,823 | $107,119 | [4. Marketable Securities](index=9&type=section&id=4.%20Marketable%20Securities) This section provides information on the Company's investments in marketable securities, including their fair values and maturities - The Company invests excess cash in high-credit quality securities to ensure safety, preservation of funds, and liquidity[32](index=32&type=chunk) Marketable Securities (in thousands) | Marketable Securities (in thousands) | Fair Value as of June 30, 2025 | Fair Value as of December 31, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Corporate bonds | $61,175 | $44,963 | | Commercial paper | $9,415 | $12,084 | | Certificates of deposit | $918 | $15,269 | | U.S. government treasuries | $2,734 | $4,399 | | Asset-backed securities | $3,851 | $6,524 | | Total assets | $78,093 | $83,239 | | Maturing in one year or less | $42,338 | $56,386 | | Maturing after one year through two years | $35,755 | $26,853 | [5. Property and Equipment](index=10&type=section&id=5.%20Property%20and%20Equipment) This section details the Company's property and equipment, net of accumulated depreciation Property and Equipment (in thousands) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Equipment | $4,734 | $4,716 | | Leasehold improvements | $1,612 | $1,612 | | Software | $364 | $364 | | Furniture and fixtures | $22 | $22 | | Total property and equipment–at cost | $6,732 | $6,714 | | Less: Accumulated depreciation | $(6,601) | $(6,361) | | Property and equipment, net | $131 | $353 | - Net property and equipment decreased from **$353 thousand** at December 31, 2024, to **$131 thousand** at June 30, 2025, primarily due to accumulated depreciation[36](index=36&type=chunk) [6. Accrued Expenses](index=11&type=section&id=6.%20Accrued%20Expenses) This section provides a breakdown of the Company's accrued expenses, including project and compensation-related costs Accrued Expenses (in thousands) | Accrued Expenses (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Project expenses | $8,604 | $2,873 | | Compensation and benefits | $2,004 | $2,793 | | Other | $384 | $621 | | Total accrued expenses | $10,992 | $6,287 | - Total accrued expenses increased by **$4.7 million** to **$10.99 million** at June 30, 2025, from **$6.29 million** at December 31, 2024, primarily due to an **$8.2 million** increase in accrued manufacturing expenses, including **$3.6 million** for CTX-10726 contractual obligations[37](index=37&type=chunk) [7. Commitments and Contingencies](index=11&type=section&id=7.%20Commitments%20and%20Contingencies) This section outlines the Company's contractual obligations, including operating leases and 401(k) matching contributions - The Company's operating lease for its corporate office and laboratory facility was modified effective September 27, 2024, extending the non-cancelable term through May 2031 and adding 10,724 square feet[41](index=41&type=chunk) - Right-of-use assets increased by **$9.9 million** due to the lease modification, totaling **$9.8 million** as of June 30, 2025[41](index=41&type=chunk) Undiscounted Lease Cash Flows (in thousands) | Undiscounted Lease Cash Flows (in thousands) | Amount | | :------------------------------------------- | :----- | | Remainder of 2025 | $382 | | Years ending December 31, 2026 | $1,588 | | Years ending December 31, 2027 | $2,204 | | Years ending December 31, 2028 | $2,249 | | Years ending December 31, 2029 | $2,294 | | Years ending December 31, 2030 | $2,356 | | Thereafter | $995 | | Total minimum lease payments | $12,068 | | Present value of future minimum lease payments | $9,904 | - The Company matches employee 401(k) contributions up to 6% of salary, with matching contributions of **$0.1 million** for each of the three months ended June 30, 2025 and 2024, and **$0.2 million** for each of the six months ended June 30, 2025 and 2024[44](index=44&type=chunk) [8. Stock-Based Compensation](index=12&type=section&id=8.%20Stock-Based%20Compensation) This section details the stock-based compensation expense recognized and the activity of stock options and restricted stock units Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $857 | $458 | $1,664 | $1,382 | | General and administrative | $1,934 | $1,663 | $3,641 | $2,742 | | Total | $2,791 | $2,121 | $5,305 | $4,124 | - Total unrecognized stock-based compensation cost as of June 30, 2025, was **$24.8 million**[45](index=45&type=chunk) Stock Option Activity (2020 Plan) | Stock Option Activity (2020 Plan) | Outstanding at Dec 31, 2024 | Granted (6M ended Jun 30, 2025) | Outstanding at Jun 30, 2025 | | :-------------------------------- | :-------------------------- | :------------------------------ | :-------------------------- | | Number of Unvested Options (000's) | 14,062 | 4,482 | 18,544 | | Weighted Average Exercise Price | $2.83 | $3.61 | $3.02 | | Aggregate Intrinsic Value ($000's) | $579 | $2 | $7,064 | - As of June 30, 2025, the total unrecognized compensation cost related to outstanding options was **$19.5 million**, to be recognized over a weighted average period of 1.5 years[48](index=48&type=chunk) RSU Activity (2020 Plan) | RSU Activity (2020 Plan) | Unvested, Dec 31, 2024 | Vested (6M ended Jun 30, 2025) | Unvested, Jun 30, 2025 | | :----------------------- | :--------------------- | :------------------------------ | :--------------------- | | Shares (000's) | 3,766 | (823) | 2,943 | | Weighted Average Price Per Share | $2.41 | $2.48 | $2.39 | | Weighted Average Fair Value ($000's) | $9,076 | $(2,042) | $7,034 | - As of June 30, 2025, the remaining unrecognized compensation cost related to RSUs was **$5.3 million**, expected to be recognized over a weighted average period of 1.4 years[51](index=51&type=chunk) [9. Related Parties and Related-Party Transactions](index=14&type=section&id=9.%20Related%20Parties%20and%20Related-Party%20Transactions) This section confirms the absence of material related party transactions during the reporting periods - There were no material related party transactions during the six months ended June 30, 2025 and 2024[52](index=52&type=chunk) [10. Other Income](index=14&type=section&id=10.%20Other%20Income) This section reports the Company's other income, primarily consisting of interest income from marketable securities Other Income (Interest Income) (in thousands) | Other Income (Interest Income) (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest Income | $1,185 | $1,969 | $2,518 | $3,951 | - Other income, consisting exclusively of interest income, decreased by **40%** for the three months ended June 30, 2025, and by **36%** for the six months ended June 30, 2025, compared to the same periods in 2024, due to a lower cash and marketable securities balance[53](index=53&type=chunk)[81](index=81&type=chunk)[86](index=86&type=chunk) [11. License, Research and Collaboration Agreements](index=14&type=section&id=11.%20License,%20Research%20and%20Collaboration%20Agreements) This section describes the Company's key licensing and collaboration agreements, including potential milestone payments and royalties - The Company has an exclusive global license agreement with ABL Bio for tovecimig (ABL001), a bispecific antibody targeting DLL4 and VEGF-A, with potential milestone payments up to **$96 million** for development/regulatory and **$303 million** for commercial in oncology, plus tiered single-digit royalties[54](index=54&type=chunk) - The Company is eligible to receive royalty payments from ABL Bio for two bispecific antibodies previously licensed to Compass, following the termination of license agreements for preclinical assets in May 2021[55](index=55&type=chunk) - A collaboration agreement with Adimab, LLC includes provisions for single-digit royalties on future net sales for certain antibodies, including CTX-471, with future potential milestone payments of **$2.0 million** as of June 30, 2025[56](index=56&type=chunk) [12. Segment Information](index=15&type=section&id=12.%20Segment%20Information) This section clarifies that the Company operates as a single segment and provides a breakdown of research and development expenses by program - The Company operates in one segment focused on research and development of drug candidates[57](index=57&type=chunk) R&D Expenses by Program (in thousands) | R&D Expenses by Program (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Tovecimig | $7,749 | $6,413 | $14,426 | $10,911 | | CTX-471 | $1,760 | $828 | $2,459 | $1,507 | | CTX-8371 | $1,044 | $605 | $1,573 | $1,191 | | CTX-10726 | $1,736 | $— | $2,473 | $— | | Research and development (Total) | $16,415 | $11,174 | $29,476 | $20,695 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&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, operational results, and future funding requirements [Overview](index=16&type=section&id=Overview) This section introduces Compass Therapeutics as a clinical-stage biopharmaceutical company focused on oncology and its product pipeline - Compass Therapeutics is a clinical-stage, oncology-focused biopharmaceutical company developing proprietary antibody-based therapeutics targeting angiogenesis, the immune system, and tumor growth[59](index=59&type=chunk) - The pipeline includes three clinical product candidates: tovecimig (DLL4 x VEGF-A bispecific), CTX-471 (CD-137 agonistic antibody), CTX-8371 (PD-1 x PD-L1 bispecific), and CTX-10726 (PD-1 x VEGF-A bispecific) in IND-enabling studies[60](index=60&type=chunk) [Recent Developments](index=16&type=section&id=Recent%20Developments) This section highlights recent clinical trial updates and preclinical study results for the Company's key product candidates - Tovecimig (DLL4 x VEGF-A bispecific) Phase 2/3 study in advanced biliary tract cancer (BTC) shows a decreasing rate of overall survival (OS) events, suggesting a potential positive effect on OS[61](index=61&type=chunk) - The tovecimig study met its primary endpoint in April 2025, achieving a **17.1%** overall response rate (ORR) in combination with paclitaxel, compared to **5.3%** for paclitaxel alone (p=0.031)[62](index=62&type=chunk) - CTX-8371 (PD-1 x PD-L1 bispecific) Phase 1 data supports cohort expansion in non-small cell lung cancer (NSCLC) and triple-negative breast cancer (TNBC) based on two deep responses observed[63](index=63&type=chunk) - CTX-10726 (PD-1 x VEGF-A bispecific) demonstrated superiority in PD-1 potency and anti-tumor response compared to ivonescimab in preclinical studies; IND submission is planned for Q4 2025, with clinical data expected in 2026[64](index=64&type=chunk) [Operating Activities](index=17&type=section&id=OPERATING%20ACTIVITIES) This section discusses the Company's historical operating losses, accumulated deficit, and future funding needs - The Company has incurred significant operating losses since inception, with net losses of **$19.9 million** and **$13.1 million** for the three months ended June 30, 2025 and 2024, respectively[66](index=66&type=chunk) - Net losses for the six months ended June 30, 2025 and 2024 were **$36.5 million** and **$23.9 million**, respectively, leading to an accumulated deficit of **$401.2 million** as of June 30, 2025[66](index=66&type=chunk) - Substantial additional funding will be required to support continuing operations and growth strategy, expected to be financed through equity and debt financings, collaborations, or strategic transactions[67](index=67&type=chunk) [Components of Results of Operations](index=17&type=section&id=Components%20of%20Results%20of%20Operations) This section defines the primary components of the Company's financial results, including research and development, general and administrative expenses, and other income - Research and development expenses include clinical, manufacturing, employee-related, preclinical study, quality/regulatory compliance, and facilities/equipment costs, expensed as incurred[69](index=69&type=chunk)[70](index=70&type=chunk) - General and administrative expenses primarily cover salaries, legal fees, professional fees, administrative travel, and selling/marketing costs[74](index=74&type=chunk) - Other income consists exclusively of interest income on marketable securities[76](index=76&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the Company's financial performance across different reporting periods [Comparison of the Three Months Ended June 30, 2025 and 2024](index=20&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the Company's financial results for the three-month periods ended June 30, 2025 and 2024 Financial Performance (in thousands) | Metric (in thousands) | 2025 | 2024 | Change | | :-------------------- | :--- | :--- | :----- | | Licensing Revenue | $— | $850 | $(850) | | Research and development | $16,415 | $11,174 | $5,241 | | General and administrative | $4,651 | $4,721 | $(70) | | Total operating expenses | $21,066 | $15,895 | $5,171 | | Loss from operations | $(21,066) | $(15,045) | $(6,021) | | Other income | $1,185 | $1,969 | $(784) | | Net loss | $(19,881) | $(13,076) | $(6,805) | - Licensing revenue decreased by **$850 thousand** to **$0** for the three months ended June 30, 2025, as the prior year included a **$1 million** milestone payment from Elpiscience (net of sublicense royalty)[78](index=78&type=chunk) - Research and development expenses increased by **$5.2 million** (**47%**) to **$16.4 million**, primarily due to a **$5.7 million** increase in manufacturing expenses related to tovecimig and CTX-10726[79](index=79&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=21&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the Company's financial results for the six-month periods ended June 30, 2025 and 2024 Financial Performance (in thousands) | Metric (in thousands) | 2025 | 2024 | Change | | :-------------------- | :--- | :--- | :----- | | Licensing Revenue | $— | $850 | $(850) | | Research and development | $29,476 | $20,695 | $8,781 | | General and administrative | $9,556 | $7,969 | $1,587 | | Total operating expenses | $39,032 | $28,664 | $10,368 | | Loss from operations | $(39,032) | $(27,814) | $(11,218) | | Other income | $2,518 | $3,951 | $(1,433) | | Net loss | $(36,514) | $(23,863) | $(12,651) | - Research and development expenses increased by **$8.8 million** (**42%**) to **$29.5 million**, driven by an **$8.2 million** increase in manufacturing expenses for tovecimig and CTX-10726[84](index=84&type=chunk) - General and administrative expenses increased by **$1.6 million** (**20%**) to **$9.6 million**, primarily due to a **$1.6 million** increase in share-based compensation expense[85](index=85&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's current cash position, future funding needs, and sources of capital - As of June 30, 2025, the Company had **$101 million** in cash, cash equivalents, and marketable securities, which is expected to fund operating expenses and capital expenditure requirements into 2027[87](index=87&type=chunk)[94](index=94&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :----------------------------- | :----------------------------- | | Cash used in operating activities | $(25,040) | $(24,642) | | Cash provided by investing activities | $5,228 | $2,384 | | Cash provided by (used in) financing activities | $(815) | $17,434 | | Net change in cash and cash equivalents | $(20,627) | $(4,824) | - Cash used in operating activities was **$25.0 million** for the six months ended June 30, 2025, primarily due to a net loss of **$36.5 million**, partially offset by non-cash charges and changes in operating assets and liabilities[89](index=89&type=chunk) - Cash provided by investing activities was **$5.2 million** for the six months ended June 30, 2025, related to the net sale of marketable securities[91](index=91&type=chunk) - Cash used in financing activities was **$0.8 million** for the six months ended June 30, 2025, due to taxes paid for RSU share settlements, compared to **$17.4 million** provided in the prior year from common stock issuance[92](index=92&type=chunk) - The Company anticipates requiring additional funding to complete clinical development, commercialize product candidates, and pursue in-licenses or acquisitions, with financing expected through equity/debt, collaborations, or strategic alliances[94](index=94&type=chunk)[95](index=95&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Compass Therapeutics, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it is a smaller reporting company[97](index=97&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the management's evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Management's Evaluation of Our Disclosure Controls and Procedures](index=24&type=section&id=Management's%20Evaluation%20of%20Our%20Disclosure%20Controls%20and%20Procedures) This section confirms management's assessment of the effectiveness of the Company's disclosure controls and procedures - As of June 30, 2025, management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective[98](index=98&type=chunk) [Changes in Internal Control over Financial Reporting](index=24&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in the Company's internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[99](index=99&type=chunk) PART II. OTHER INFORMATION This section includes additional information such as legal proceedings, risk factors, equity sales, and other required disclosures [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the Company is not currently involved in any material legal proceedings, while acknowledging the potential for ordinary course legal activities - As of the filing date, the Company is not involved in any material legal proceedings, though it may be subject to various legal proceedings and claims in the ordinary course of business[102](index=102&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) This section highlights new risk factors related to adverse global conditions and executive actions on drug pricing, supplementing previously disclosed risks - New risk factors include potential negative impacts from adverse global conditions, such as economic uncertainty, tariffs, and geopolitical instability[104](index=104&type=chunk) - Executive actions on drug pricing, such as Executive Orders 14273 and 14297, could negatively impact the Company's ability to obtain adequate reimbursement for its products if approved[105](index=105&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report during the period - There were no unregistered sales of equity securities or use of proceeds to report[107](index=107&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that the Company has not defaulted on any senior securities - There were no defaults upon senior securities[108](index=108&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[109](index=109&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading agreements during the quarter - No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading agreements during the three-month period ended June 30, 2025[110](index=110&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, certifications, and XBRL-related files - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, certifications of principal executive and financial officers (31.1, 31.2, 32.1, 32.2), and various Inline XBRL documents[111](index=111&type=chunk) [Signatures](index=28&type=section&id=Signatures) This section contains the required signatures of the Company's Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer, certifying the filing of the report - The report is signed by Thomas Schuetz (Principal Executive Officer), Barry Shin (Principal Financial Officer), and Neil Lerner (Principal Accounting Officer) on August 11, 2025[114](index=114&type=chunk)

[Corporate Update and Highlights](index=1&type=section&id=Compass%20Therapeutics%20Reports%202025%20Second%20Quarter%20Financial%20Results%20and%20Provides%20Corporate%20Update) Compass Therapeutics reported positive clinical trial updates for key pipeline candidates and maintained a strong cash position [CEO Statement and Overall Summary](index=1&type=section&id=CEO%20Statement%20and%20Overall%20Summary) Compass Therapeutics reported positive clinical trial updates for its key pipeline candidates, including tovecimig and CTX-8371, and ended the quarter with a strong cash position - The analysis for secondary endpoints (progression-free survival and overall survival) for the tovecimig Phase 2/3 trial is now guided for Q1 2026, delayed from original projections due to fewer deaths observed in the study[3](index=3&type=chunk) - The Phase 1 study of CTX-8371 (PD-1 x PD-L1 bispecific) has shown two deep and confirmed partial responses, prompting the initiation of expansion cohorts in non-small cell lung cancer (NSCLC) and triple-negative breast cancer (TNBC) in Q4 2025[4](index=4&type=chunk) - Preclinical data for CTX-10726 (PD-1 x VEGF bispecific) suggests superiority to a leading candidate, ivonescimab, with an IND submission planned for Q4 2025[4](index=4&type=chunk) - The company's balance sheet remains strong, ending Q2 with **$101 million** in cash and marketable securities, which is expected to fund operations into 2027[4](index=4&type=chunk)[6](index=6&type=chunk)[17](index=17&type=chunk) [Development Pipeline Updates](index=1&type=section&id=Development%20Pipeline%20Updates) The company provided updates on its clinical pipeline, detailing progress for key candidates and anticipated milestones [Tovecimig (DLL4 and VEGF-A bispecific antibody)](index=1&type=section&id=Tovecimig%20(DLL4%20and%20VEGF-A%20bispecific%20antibody)) The Phase 2/3 COMPANION-002 study in biliary tract cancer (BTC) successfully met its primary endpoint of overall response rate, with secondary endpoint analysis rescheduled to Q1 2026 - In April 2025, the randomized Phase 2/3 COMPANION-002 study met its primary endpoint, showing tovecimig plus paclitaxel significantly improved overall response rate compared to paclitaxel alone in BTC patients[5](index=5&type=chunk) - The analysis of secondary endpoints, including Overall Survival (OS) and Progression-Free Survival (PFS), is now expected in Q1 2026 because the pre-specified number of deaths (80% pooled mortality) has not yet been reached[3](index=3&type=chunk)[6](index=6&type=chunk)[11](index=11&type=chunk) - A Phase 2 basket study of tovecimig in a broader set of DLL4+ cancers (e.g., gastric, ovarian, renal) is expected to begin following the secondary endpoint data analysis from the COMPANION-002 trial[11](index=11&type=chunk) [CTX-8371 (PD-1 x PD-L1 bispecific antibody)](index=2&type=section&id=CTX-8371%20(PD-1%20x%20PD-L1%20bispecific%20antibody)) The Phase 1 dose-escalation study demonstrated significant anti-tumor activity, leading to planned expansion cohorts in NSCLC and TNBC in Q4 2025 - Two deep partial responses were observed in the first four dosing cohorts (n=12): a **100% reduction** in target lesions for an NSCLC patient and a **>90% reduction** for a TNBC patient[4](index=4&type=chunk)[6](index=6&type=chunk)[11](index=11&type=chunk) - Expansion cohorts focusing on NSCLC and TNBC are planned to initiate in Q4 2025[4](index=4&type=chunk)[11](index=11&type=chunk) - Detailed results from the Phase 1 dose-escalation study are expected to be reported at a medical meeting in Q4 2025, with data from the cohort expansion stage anticipated in 2026[11](index=11&type=chunk) [CTX-10726 (PD-1 x VEGF-A bispecific antibody)](index=2&type=section&id=CTX-10726%20(PD-1%20x%20VEGF-A%20bispecific%20antibody)) Preclinical data indicates CTX-10726 is superior to ivonescimab, with an Investigational New Drug (IND) application planned for Q4 2025 - Demonstrated superior tumor control and PD-1 inhibition compared to ivonescimab in head-to-head preclinical studies[4](index=4&type=chunk)[11](index=11&type=chunk) - An IND submission for CTX-10726 is expected in Q4 2025, with initial clinical data anticipated in 2026[6](index=6&type=chunk)[11](index=11&type=chunk) - CTX-10726 was discovered in-house and leverages Compass's expertise in bispecific antibody drug development, including manufacturing processes which are already at commercially viable yields[4](index=4&type=chunk) [CTX-471 (CD137 agonist antibody)](index=2&type=section&id=CTX-471%20(CD137%20agonist%20antibody)) Compass plans to initiate a Phase 2 trial for CTX-471, a CD137 agonist antibody, in the second half of 2025 - A Phase 2 trial of CTX-471 is expected to be initiated in the second half of 2025[11](index=11&type=chunk) - The trial will enroll patients with tumors expressing NCAM (CD56)[11](index=11&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) Compass Therapeutics reported increased net losses in Q2 and H1 2025 due to higher R&D expenses, with cash sufficient into 2027 [Second Quarter 2025 Financial Performance](index=3&type=section&id=Second%20Quarter%202025%20Financial%20Performance) For the second quarter of 2025, Compass reported an increased net loss of **$19.9 million** ($0.14 per share), primarily driven by higher R&D expenses Net Loss Overview | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Loss** | $19.9M | $13.1M | $36.5M | $23.9M | | **Net Loss per Share** | $0.14 | $0.10 | $0.26 | $0.17 | [Operating Expenses](index=3&type=section&id=Operating%20Expenses) Total operating expenses increased in Q2 and the first six months of 2025 compared to the prior year, driven by higher R&D costs [Research and Development (R&D) Expenses](index=3&type=section&id=Research%20and%20Development%20(R%26D)%20Expenses) R&D expenses rose by **47%** to **$16.4 million** in Q2 2025, primarily due to increased manufacturing costs for clinical trial materials R&D Expense Summary | Period | R&D Expense | Prior Year Period | % Change | | :--- | :--- | :--- | :--- | | Q2 2025 | $16.4M | $11.2M | +47% | | H1 2025 | $29.5M | $20.7M | +42% | - The increase was primarily attributable to additional manufacturing expenses for tovecimig and CTX-10726[13](index=13&type=chunk) [General and Administrative (G&A) Expenses](index=3&type=section&id=General%20and%20Administrative%20(G%26A)%20Expenses) G&A expenses remained flat at **$4.7 million** for Q2 2025 but increased by **20%** for the first six months due to higher share-based compensation G&A Expense Summary | Period | G&A Expense | Prior Year Period | % Change | | :--- | :--- | :--- | :--- | | Q2 2025 | $4.7M | $4.7M | 0% | | H1 2025 | $9.6M | $8.0M | +20% | [Cash Position and Runway](index=3&type=section&id=Cash%20Position) As of June 30, 2025, Compass held **$101 million** in cash and marketable securities, expected to fund operations into 2027 Cash and Marketable Securities | Date | Cash & Marketable Securities | | :--- | :--- | | June 30, 2025 | $101.0M | | Dec 31, 2024 | $126.7M | - The current cash position provides an anticipated cash runway into 2027[4](index=4&type=chunk)[17](index=17&type=chunk) - During the first six months of 2025, **$25 million** of net cash was used in operating activities[17](index=17&type=chunk)

Condensed Interim Consolidated Financial Statements [Condensed Interim Consolidated Statements of Financial Position](index=1&type=section&id=Condensed%20interim%20consolidated%20statements%20of%20financial%20position) Total assets grew to $244.3 million, driven by cash, while liabilities increased to $188.0 million due to new loans and contracts Key Financial Position Data (in thousands of U.S. dollars) | As at | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total assets | $244,293 | $192,640 | $51,653 | 26.8% | | Cash and cash equivalents | $61,683 | $20,002 | $41,681 | 208.4% | | Total liabilities | $188,025 | $139,191 | $48,834 | 35.1% | | Total equity | $56,268 | $53,449 | $2,819 | 5.3% | - The increase in **total assets** was primarily driven by a significant rise in **cash and cash equivalents**[2](index=2&type=chunk) [Condensed Interim Consolidated Statements of Loss and Comprehensive Loss](index=2&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) Net loss significantly increased to $34.0 million, primarily due to higher G&A expenses and increased losses on metals contracts Key Loss and Comprehensive Loss Data (in thousands of U.S. dollars) | For the six-month period ended | June 30, 2025 | June 30, 2024 (Revised) | Change ($) | Change (%) | | :----------------------------- | :------------ | :---------------------- | :--------- | :--------- | | Revenue | $50,474 | $54,065 | $(3,591) | -6.6% | | Corporate general and administrative | $(12,588) | $(3,365) | $(9,223) | 274.1% | | Loss on metals contract liabilities | $(14,573) | $(4,714) | $(9,859) | 209.1% | | Net loss | $(34,021) | $(20,160) | $(13,861) | 68.7% | | Basic and diluted loss per share | $(0.05) | $(0.08) | $0.03 | -37.5% | - The significant increase in **net loss** was largely due to higher **corporate general and administrative expenses** and increased **losses on metals contract liabilities**[4](index=4&type=chunk) [Condensed Interim Consolidated Statements of Changes in Equity](index=3&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity rose to $56.3 million, driven by financing activities and conversions, despite a $34.0 million net loss Key Equity Changes (Six-month period ended June 30, 2025, in thousands of U.S. dollars) | Item | Amount | | :---------------------------------------- | :--------- | | Balance at January 1, 2025 | $53,449 | | Net loss for the period | $(34,021) | | Non-brokered private placements | $16,003 | | Conversion of convertible debenture | $11,526 | | Share-based payments | $6,194 | | Exercise of options, warrants, and deferred share units | $6,679 | | Balance at June 30, 2025 | $56,268 | - **Equity growth** was driven by **capital raises and conversions**, offsetting the **net loss** incurred during the period[6](index=6&type=chunk) [Condensed Interim Consolidated Statements of Cash Flows](index=4&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased significantly due to substantial cash generation from financing activities, offsetting operating and investing outflows Key Cash Flow Data (Six-month period, in thousands of U.S. dollars) | Cash Flow Activity | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :----------------- | :------------ | :------------ | :--------- | :--------- | | Operating activities | $(1,855) | $2,446 | $(4,301) | -175.8% | | Investing activities | $(16,767) | $(9,520) | $(7,247) | 76.1% | | Financing activities | $63,862 | $7,092 | $56,770 | 800.5% | | Increase in cash and cash equivalents | $41,681 | $1,576 | $40,105 | 2544.7% | - The substantial increase in **cash and cash equivalents** was primarily driven by significant cash generation from **financing activities**, particularly a new term loan facility and non-brokered private placements[9](index=9&type=chunk)[10](index=10&type=chunk) Notes to the Condensed Interim Consolidated Financial Statements [1. Corporate Information](index=5&type=section&id=1.%20Corporate%20Information) Americas Gold and Silver Corporation, incorporated in Canada, conducts mining operations in North America, with shares listed on TSX and NYSE American - The company was incorporated on **May 12, 1998**, under the Canada Business Corporations Act[11](index=11&type=chunk) - Its common shares are listed on the **Toronto Stock Exchange** (symbol 'USA') and the **New York Stock Exchange American** (symbol 'USAS')[11](index=11&type=chunk) - The unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2025, were approved by the **Board of Directors on August 11, 2025**[12](index=12&type=chunk) [2. Basis of Presentation and Going Concern](index=5&type=section&id=2.%20Basis%20of%20Presentation%20and%20Going%20Concern) Interim financial statements are prepared under IAS 34, but material uncertainties regarding going concern exist due to net loss and liquidity needs - Financial statements are prepared in accordance with **International Accounting Standard 34, Interim Financial Reporting**, using accounting policies consistent with IFRS[13](index=13&type=chunk) - **Material uncertainties** cast substantial doubt upon the **going concern assumption**, including a **net loss of $34.0 million** for the six-month period ended June 30, 2025, and potential insufficient liquidity for the next twelve months[14](index=14&type=chunk)[16](index=16&type=chunk) - Continuance as a going concern is dependent on achieving profitable operations, obtaining adequate equity or debt financing, or disposing of non-core properties[15](index=15&type=chunk) - The company completed the acquisition of the remaining **40% non-controlling interests of the Galena Complex** on December 19, 2024[15](index=15&type=chunk)[18](index=18&type=chunk) [3. Changes in Accounting Policies and Recent Accounting Pronouncements](index=6&type=section&id=3.%20Changes%20in%20Accounting%20Policies%20and%20Recent%20Accounting%20Pronouncements) The company is assessing the impact of new IASB standards, including IFRS 9, 7, and 18, not yet mandatory or early adopted - Amendments to **IFRS 9 and 7 – Classification and Measurement of Financial Instruments** are mandatory for annual reporting periods beginning on or after **January 1, 2026**[24](index=24&type=chunk) - **IFRS 18 – Presentation and Disclosure in Financial Statements** is mandatory for annual reporting periods beginning on or after **January 1, 2027**[24](index=24&type=chunk) - These standards are currently being assessed for their impact on the Company in current or future reporting periods[19](index=19&type=chunk) [4. Significant Accounting Judgments and Estimates](index=6&type=section&id=4.%20Significant%20accounting%20judgments%20and%20estimates) Management's significant judgments and estimates for interim statements are consistent with 2024 annual statements, alongside going concern considerations - Significant judgments and estimates made by management were consistent with those applied to the Company's annual consolidated financial statements as at and for the year ended December 31, 2024, in addition to the significant judgments mentioned in Note 2[21](index=21&type=chunk) - Actual results could differ significantly from these estimates[20](index=20&type=chunk) [5. Trade and Other Receivables](index=6&type=section&id=5.%20Trade%20and%20Other%20Receivables) Trade and other receivables increased to $10.4 million, primarily due to higher trade receivables and new value-added taxes receivable Trade and Other Receivables (in thousands of U.S. dollars) | As at | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------- | :------------ | :---------------- | :--------- | :--------- | | Trade receivables | $6,373 | $3,572 | $2,801 | 78.4% | | Value added taxes receivable | $941 | $- | $941 | N/A | | Other receivables | $3,112 | $3,560 | $(448) | -12.6% | | Total | $10,426 | $7,132 | $3,294 | 46.2% | [6. Inventories](index=6&type=section&id=6.%20Inventories) Total inventories decreased to $8.2 million, mainly due to a reduction in concentrates, with $1.9 million in inventory write-downs included in cost of sales Inventories (in thousands of U.S. dollars) | As at | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------ | :------------ | :---------------- | :--------- | :--------- | | Concentrates | $545 | $2,971 | $(2,426) | -81.7% | | Ore stockpiles | $1,715 | $1,767 | $(52) | -2.9% | | Spare parts and supplies | $5,909 | $5,966 | $(57) | -1.0% | | Total | $8,169 | $10,704 | $(2,535) | -23.7% | - **Inventory write-downs** included in cost of sales were **$1.9 million** for the six-month period ended June 30, 2025, compared to $0.8 million in 2024[23](index=23&type=chunk) [7. Property, Plant and Equipment](index=7&type=section&id=7.%20Property%2C%20Plant%20and%20Equipment) Carrying value of property, plant, and equipment increased to $155.8 million, driven by $20.0 million in asset additions during the period Property, Plant and Equipment Carrying Value (in thousands of U.S. dollars) | As at | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Carrying value | $155,837 | $147,399 | $8,438 | 5.7% | - **Asset additions** for the six-month period ended June 30, 2025, totaled **$20.024 million**[25](index=25&type=chunk) - **Depreciation and depletion** for the six-month period ended June 30, 2025, was **$12.006 million**[25](index=25&type=chunk) - No impairment or impairment reversals were identified for the six-month period ended June 30, 2025[25](index=25&type=chunk) [8. Precious Metals Delivery and Purchase Agreement](index=7&type=section&id=8.%20Precious%20metals%20delivery%20and%20purchase%20agreement) A $25 million precious metals agreement for Relief Canyon was amended, establishing a fixed gold delivery schedule and increasing net metals contract liability to $43.0 million - The company has a **$25 million precious metals delivery and purchase agreement** with Sandstorm Gold Ltd. for the Relief Canyon Mine[28](index=28&type=chunk) - The agreement was amended on **December 19, 2024**, establishing a quarterly fixed delivery schedule for gold with final delivery in December 2027[29](index=29&type=chunk) - Sandstorm has the right to subscribe for common shares of the Company for proceeds up to **$1.9 million per calendar quarter** to satisfy gold delivery obligations[29](index=29&type=chunk) Net Metals Contract Liability (in thousands of U.S. dollars) | As at | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Net metals contract liability | $43,026 | $40,868 | $2,158 | 5.3% | | Revaluation of metals contract liability (6-month period) | $10,203 | $10,083 | $120 | 1.2% | [9. Silver Metals Delivery Agreement](index=8&type=section&id=9.%20Silver%20metals%20delivery%20agreement) A new silver delivery agreement requires monthly deliveries of 18,500 ounces, resulting in a $4.4 million fair value loss due to commodity pricing changes - The company entered into a silver metals delivery agreement for monthly purchases and deliveries of **18,500 ounces of silver for 36 months**, starting January 2026[31](index=31&type=chunk) - The fixed deliveries are recognized as a financial liability measured at fair value through profit or loss, with an expected satisfaction through external purchase of silver[32](index=32&type=chunk) - A **$4.4 million loss to fair value** on metals contract liability was recorded during the six-month period ended June 30, 2025, due to changes in forward commodity pricing curves[32](index=32&type=chunk) [10. Convertible Debenture](index=8&type=section&id=10.%20Convertible%20debenture) The $12.5 million CAD convertible debenture was fully converted into 32.3 million common shares, leading to a $0.7 million gain from fair value changes - The **Convertible Debenture was fully converted** by holders as of January 31, 2025, at a conversion price of **$0.52 CAD**[36](index=36&type=chunk) - The conversion resulted in the issuance of **32,307,692 common shares**[36](index=36&type=chunk) - The Company recognized a **gain of $0.7 million** for the six-month period ended June 30, 2025, from the change in the estimated fair value of the combined Redemption Option and Retraction Option (2024: loss of $0.7 million)[36](index=36&type=chunk) [11. Pre-payment Facility](index=9&type=section&id=11.%20Pre-payment%20Facility) The company amended its offtake agreement to include a $3.0 million pre-payment facility for Galena Complex, drawn in full in June 2025 - The company amended its existing unsecured offtake agreement with Ocean Partners USA, Inc. to include a **pre-payment facility of $3.0 million**[38](index=38&type=chunk) - The Facility was **drawn in full for $3.0 million** in June 2025[38](index=38&type=chunk) - The interest rate was amended to **U.S. SOFR rate plus 4.75% per annum**[38](index=38&type=chunk) [12. Credit Facility](index=9&type=section&id=12.%20Credit%20Facility) A secured credit and offtake agreement with Trafigura for up to $15 million was signed, with $10.0 million drawn for the Zone 120 and El Cajón project - The company signed a credit and offtake agreement with Trafigura PTE Ltd. for a **secured credit facility of up to $15 million**[39](index=39&type=chunk) - The Credit Facility was **drawn for $10.0 million** in August 2024[39](index=39&type=chunk) - The term of the Credit Facility is **36 months**, including a 12-month principal repayment grace period, and bears interest of **U.S. SOFR rate plus 6% per annum** (6.5% thereafter for drawings above $12 million)[39](index=39&type=chunk) [13. Term Loan Facility](index=9&type=section&id=13.%20Term%20Loan%20Facility) A senior secured debt facility of up to $100 million with SAF Group was closed, with an initial $50 million advance and a 5-year term - The company closed a **senior secured debt facility with SAF Group for funds of up to $100 million** on June 24, 2025[40](index=40&type=chunk) - The Term Loan Facility consists of three tranches, with an initial **$50 million term loan advanced** upon closing[40](index=40&type=chunk) - The Initial Advance is due in **5 years**, subject to a **6.0% original issue discount**, and bears interest of **U.S. SOFR rate (4% floor) plus 6% per annum**[41](index=41&type=chunk) [14. Royalty Payable](index=9&type=section&id=14.%20Royalty%20payable) A $4.0 million net smelter returns royalty agreement with Sandstorm resulted in a $0.3 million fair value loss for the period - The company entered into a **$4.0 million net smelter returns royalty agreement** with Sandstorm on April 12, 2023[43](index=43&type=chunk) - The royalty is **2.5%** on attributable production from the Galena Complex and Cosalá Operations, reducing to 0.2% after $4.0 million repayment, with a **$1.9 million buyout option**[43](index=43&type=chunk) - A **loss of $0.3 million** was recognized for the six-month period ended June 30, 2025, due to the change in the estimated fair value of the Royalty Agreement[44](index=44&type=chunk) [15. Share Capital](index=10&type=section&id=15.%20Share%20Capital) The company raised $16.7 million through private placements and settled $1.4 million in payables by issuing common shares, significantly impacting share capital - During the six-month period ended June 30, 2025, the Company closed non-brokered private placements for total gross proceeds of **$16.7 million**, issuing **26,099,212 common shares** and **2,610,000 warrants**[45](index=45&type=chunk) - The Company settled **$1.4 million of transaction-related payables** through the issuance of **2,906,504 common shares** during the six-month period ended June 30, 2025[46](index=46&type=chunk) - On December 19, 2024, the Company completed the acquisition of the remaining 40% non-controlling interests of the Galena Complex by issuing **170,000,000 common shares** and **$10 million in cash**[48](index=48&type=chunk) [a. Authorized](index=10&type=section&id=15.a.%20Authorized) Authorized share capital consists of an unlimited number of common and preferred shares, with no preferred shares issued - Authorized share capital consists of an **unlimited number of common and preferred shares**[50](index=50&type=chunk) - No preferred shares have been issued to date[50](index=50&type=chunk) [b. Stock Option Plan](index=10&type=section&id=15.b.%20Stock%20Option%20Plan) Shares reserved for the stock option plan are limited to 10% of outstanding common shares, with 24.6 million options outstanding at period-end - The number of shares reserved for issuance under the stock option plan is limited to **10% of the number of common shares issued and outstanding**[51](index=51&type=chunk) Stock Options Outstanding (in thousands) | As at | Number (thousands) | Weighted average exercise price (CAD) | | :------------------------- | :----------------- | :------------------------------------ | | Balance, beginning of period (Jan 1, 2025) | 20,110 | $0.67 | | Granted (6-month period) | 9,750 | $0.56 | | Exercised (6-month period) | (1,250) | $0.39 | | Expired (6-month period) | (3,976) | $1.05 | | Balance, end of period (June 30, 2025) | 24,634 | $0.58 | [c. Share-based Payments](index=11&type=section&id=15.c.%20Share-based%20Payments) Share-based payments totaled $1.04 million for the six-month period, with fair value estimated using the Black-Scholes model - The weighted average fair value at grant date of stock options granted during the six-month period ended June 30, 2025, was **$0.23** (2024: $0.12)[54](index=54&type=chunk) - The **Black-Scholes Option Pricing Model** was used to estimate fair value[54](index=54&type=chunk) Total Share-based Payments (in thousands of U.S. dollars) | Period | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Six-month period ended | $1,040 | $311 | [d. Warrants](index=11&type=section&id=15.d.%20Warrants) The company had 22.95 million warrants outstanding at June 30, 2025, with various exercise prices and expiry dates Warrants Outstanding as at June 30, 2025 | Number of warrants | Exercise price (CAD) | Issuance date | Expiry date | | :----------------- | :------------------- | :------------ | :----------- | | 17,600 | 0.30 | Mar 2024 | Mar 27, 2026 | | 1,000,000 | 0.55 | Jun 2023 | Jun 21, 2026 | | 16,322,500 | 0.40 | Mar 2024 | Mar 27, 2027 | | 3,000,000 | 0.42 | Aug 2024 | Aug 14, 2027 | | 2,610,000 | 1.00 | Mar 2025 | Mar 31, 2028 | | **Total: 22,950,100** | | | | [e. Restricted Share Units](index=12&type=section&id=15.e.%20Restricted%20share%20units) 234,076 cash-settled restricted share units were outstanding, and 20.5 million share-settled units were included in equity reserve - As at June 30, 2025, **234,076 cash-settled restricted share units** were outstanding at an aggregate value of **$0.2 million**[56](index=56&type=chunk) - Effective January 1, 2025, the Company amended its accounting policy for share-settled restricted share units, with **20,516,115 units outstanding** at June 30, 2025, included in equity reserve[57](index=57&type=chunk) [f. Deferred Share Units](index=12&type=section&id=15.f.%20Deferred%20share%20units) 8.35 million deferred share units were outstanding, awarded to directors and settled in cash or shares upon departure - As at June 30, 2025, **8,350,376 deferred share units** were issued and outstanding (December 31, 2024: 3,562,917)[58](index=58&type=chunk) - Deferred share units are awarded to eligible directors as payment for 50% to 100% of their director fees and are settled in cash or common shares upon the director leaving the Board[58](index=58&type=chunk) [16. Weighted Average Basic and Diluted Number of Common Shares Outstanding](index=12&type=section&id=16.%20Weighted%20Average%20Basic%20and%20Diluted%20Number%20of%20Common%20Shares%20Outstanding) The weighted average common shares outstanding significantly increased to 639.2 million, reflecting recent equity issuances, with anti-dilutive options excluded Weighted Average Common Shares Outstanding | Period | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Basic and diluted (six-month period) | 639,174,498 | 237,268,113 | - Diluted weighted average number of common shares for the six-month period ended June 30, 2025, excludes **24,633,601 anti-dilutive stock options** and **22,950,100 anti-dilutive warrants**[59](index=59&type=chunk) [17. Non-controlling Interests](index=12&type=section&id=17.%20Non-controlling%20Interests) The company acquired the remaining 40% non-controlling interests of Galena Complex, making net loss 100% attributable to shareholders from December 2024 - The company completed the acquisition of the remaining **40% non-controlling interests of the Galena Complex** on December 19, 2024[60](index=60&type=chunk) - From December 19, 2024, consolidated net loss and other comprehensive loss are **100% attributable to the shareholders** of the Company[18](index=18&type=chunk)[60](index=60&type=chunk) [18. Revenue](index=12&type=section&id=18.%20Revenue) Total revenue decreased to $50.5 million, primarily due to lower silver, zinc, and lead sales, despite positive derivative pricing adjustments Revenue by Commodity (Six-month period, in thousands of U.S. dollars) | Commodity | June 30, 2025 | June 30, 2024 (Revised) | Change ($) | Change (%) | | :---------- | :------------ | :---------------------- | :--------- | :--------- | | Silver | $29,844 | $36,041 | $(6,197) | -17.2% | | Zinc | $11,857 | $20,577 | $(8,720) | -42.4% | | Lead | $5,130 | $9,950 | $(4,820) | -48.4% | | Other by-products | $413 | $805 | $(392) | -48.7% | | Total Revenue | $50,474 | $54,065 | $(3,591) | -6.6% | - Derivative pricing adjustments represent subsequent variations in revenue recognized as an embedded derivative from contracts with customers[63](index=63&type=chunk) [19. Cost of Sales](index=13&type=section&id=19.%20Cost%20of%20Sales) Cost of sales increased to $44.6 million, mainly due to higher raw materials and consumables costs and a significant rise in inventory write-downs Cost of Sales Components (Six-month period, in thousands of U.S. dollars) | Component | June 30, 2025 | June 30, 2024 (Revised) | Change ($) | Change (%) | | :------------------------ | :------------ | :---------------------- | :--------- | :--------- | | Salaries and employee benefits | $14,466 | $15,821 | $(1,355) | -8.6% | | Raw materials and consumables | $13,126 | $17,190 | $(4,064) | -23.6% | | Inventory write-downs | $1,924 | $818 | $1,106 | 135.2% | | Total Cost of Sales | $44,618 | $42,600 | $2,018 | 4.7% | - Certain transportation costs were reclassified from treatment and selling costs in revenue to cost of sales in fiscal 2024[64](index=64&type=chunk) [20. Corporate General and Administrative Expenses](index=13&type=section&id=20.%20Corporate%20General%20and%20Administrative%20Expenses) Corporate G&A expenses significantly increased to $12.6 million, driven by higher salaries, directors' fees, professional fees, and share-based payments Corporate G&A Expenses (Six-month period, in thousands of U.S. dollars) | Component | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------------------------ | :------------ | :------------ | :--------- | :--------- | | Salaries and employee benefits | $2,322 | $1,113 | $1,209 | 108.6% | | Directors' fees | $2,773 | $226 | $2,547 | 1127.9% | | Share-based payments | $3,601 | $311 | $3,290 | 1057.9% | | Professional fees | $2,156 | $676 | $1,480 | 218.9% | | Office and general | $1,736 | $1,039 | $697 | 67.1% | | Total | $12,588 | $3,365 | $9,223 | 274.1% | [21. Income Taxes](index=14&type=section&id=21.%20Income%20taxes) The estimated average annual income tax rate was 26.5%, with net deferred tax liabilities slightly increasing to $51 thousand - The estimated average annual income tax rate for the six-month period ended June 30, 2025, was **26.5%**, consistent with the rate for the year ended December 31, 2024[67](index=67&type=chunk) Net Deferred Tax Liabilities (in thousands of U.S. dollars) | As at | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------- | :------------ | :---------------- | :--------- | :--------- | | Net deferred tax liabilities | $51 | $48 | $3 | 6.3% | - Inventory write-downs and impairments may result in non-capital losses and timing differences which have not been recorded due to uncertainty of recoverability[68](index=68&type=chunk) [22. Financial Risk Management](index=14&type=section&id=22.%20Financial%20Risk%20Management) The company manages credit, liquidity, and market risks, with sensitivities disclosed for currency and commodity price fluctuations - This section details the company's exposure to **credit, liquidity, and market risks**, and how they are managed[69](index=69&type=chunk)[71](index=71&type=chunk)[74](index=74&type=chunk) [a. Financial Risk Factors](index=14&type=section&id=22.a.%20Financial%20Risk%20Factors) This section details the company's exposure to credit, liquidity, and market risks, and how they are managed [(i) Credit Risk](index=14&type=section&id=22.a.(i)%20Credit%20Risk) Credit risk is low, primarily from cash and trade receivables, managed by investing in strong institutions and prompt collection - **Credit risk** is primarily attributable to cash and cash equivalents and trade and other receivables[69](index=69&type=chunk) - Credit risk on cash is limited by investing in well-capitalized financial institutions; trade receivables risk is managed by receiving **85% to 100% of estimated value within one month of shipment**[69](index=69&type=chunk) - The Company's exposure to credit risk with respect to trade receivables was **$6.4 million** as of June 30, 2025 (December 31, 2024: $3.6 million), and is not considered significant[70](index=70&type=chunk) [(ii) Liquidity Risk](index=15&type=section&id=22.a.(ii)%20Liquidity%20risk) Liquidity is managed through cash, operations, and financing, with significant contractual maturities in the short to medium term - **Liquidity requirements** are met through cash, cash generated from operations, credit facilities, and debt and equity capital markets[71](index=71&type=chunk) Contractual Maturities of Financial Liabilities and Provisions (June 30, 2025, in thousands of U.S. dollars) | Item | Total | Less than 1 year | 2-3 years | 4-5 years | Over 5 years | | :------------------------ | :------- | :--------------- | :-------- | :-------- | :----------- | | Trade and other payables | $40,970 | $40,970 | $- | $- | $- | | Pre-payment facility | $3,000 | $3,000 | $- | $- | $- | | Credit facility | $10,000 | $6,000 | $4,000 | $- | $- | | Term loan facility | $53,191 | $798 | $13,165 | $39,228 | $- | | Metals contract liability | $43,026 | $17,404 | $25,622 | $- | $- | | Silver contract liability | $22,566 | $2,735 | $15,942 | $3,889 | $- | | Total | $230,584 | $82,597 | $74,238 | $52,482 | $21,267 | - Total lease liabilities discounted were **$3.448 million** at June 30, 2025, with **$1.534 million** due within 1 year[73](index=73&type=chunk) [(iii) Market Risk](index=16&type=section&id=22.a.(iii)%20Market%20risk) Market risk encompasses interest rate, currency, and price risks, with potential impacts on net loss and trade receivables - **Market risk** comprises interest rate risk, currency risk, and price risk[74](index=74&type=chunk) [(1) Interest Rate Risk](index=16&type=section&id=22.a.(iii).(1)%20Interest%20rate%20risk) The company is exposed to interest rate risk from variable rates on several credit and loan facilities tied to U.S. SOFR - The Company is subject to **interest rate risk** from variable rates on Cosalá Operations' advance payments (U.S. SOFR + 7.2%), the pre-payment facility (U.S. SOFR + 4.75%), the Credit Facility (U.S. SOFR + 6%), and the Term Loan Facility (U.S. SOFR + 6%)[75](index=75&type=chunk) [(2) Currency Risk](index=16&type=section&id=22.a.(iii).(2)%20Currency%20risk) The company faces foreign currency risk from CAD and MXN denominated assets and liabilities, with potential impacts on net loss - The Company is exposed to **foreign currency risk** through financial assets and liabilities denominated in CAD and MXN[76](index=76&type=chunk) Approximate Impact on Net Loss and Other Comprehensive Loss from +/- 10% Exchange Rate Change (June 30, 2025, in thousands of U.S. dollars) | Currency | Net loss | Other comprehensive loss | | :------- | :------- | :----------------------- | | CAD/USD | $1,424 | $324 | | MXN/USD | $2,393 | $32 | - The Company may employ derivative financial instruments to manage foreign currency exchange rate fluctuations, but had no non-hedge foreign exchange forward contracts outstanding or settled during the periods[77](index=77&type=chunk)[78](index=78&type=chunk) [(3) Price Risk](index=16&type=section&id=22.a.(iii).(3)%20Price%20risk) Commodity price fluctuations, particularly in silver, zinc, lead, and gold, could affect trade receivables by approximately $0.6 million - A **±10% fluctuation in silver, zinc, lead, and gold prices** would affect trade receivables by approximately **$0.6 million** as at June 30, 2025[79](index=79&type=chunk) - The Company did not have any non-hedge commodity forward contracts outstanding or settled during the six-month periods ended June 30, 2025 and 2024[80](index=80&type=chunk) - Total gain on derivative instruments, including the convertible debenture, was **$0.7 million** for the six-month period ended June 30, 2025 (2024: loss of $0.7 million)[81](index=81&type=chunk) [b. Fair Values](index=17&type=section&id=22.b.%20Fair%20values) Fair values of most financial instruments approximate carrying amounts due to short-term maturities, with a hierarchy classifying inputs - The fair value of cash, restricted cash, trade and other receivables, and other financial assets and liabilities approximate their carrying amounts due to short-term maturities[82](index=82&type=chunk) Fair Value Hierarchy (June 30, 2025, in thousands of U.S. dollars) | Level | Item | June 30, 2025 | | :------ | :------------------------ | :------------ | | Level 1 | Cash and cash equivalents | $61,683 | | | Restricted cash | $4,624 | | Level 2 | Trade and other receivables | $10,426 | | | Metals contract liability | $43,026 | | | Silver contract liability | $22,566 | | Level 3 | Royalty payable | $3,043 | - Valuation techniques classify inputs into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than quoted prices), and **Level 3** (unobservable inputs)[86](index=86&type=chunk) [23. Segmented and Geographic Information, and Major Customers](index=18&type=section&id=23.%20Segmented%20and%20Geographic%20Information%2C%20and%20Major%20Customers) The company operates four segments across Mexico and the United States, with all revenues earned in these countries and significant customer concentration - The Company's operations comprise four reporting segments: **Cosalá Operations, Galena Complex, Relief Canyon, and Corporate and Other**[88](index=88&type=chunk) - All revenues from sales of concentrates for the three-month and six-month periods ended June 30, 2025 and 2024, were earned in **Mexico and the United States**[89](index=89&type=chunk) - For the six-month period ended June 30, 2025, **three major customers** accounted for **46% of revenues from Cosalá Operations** and **54% of revenues from Galena Complex**[94](index=94&type=chunk) [a. Segmented Information](index=18&type=section&id=23.a.%20Segmented%20information) The company's operations are divided into four reporting segments for mineral resource properties in Mexico and the United States - The Company's operations comprise four reporting segments engaged in acquisition, exploration, development, and exploration of mineral resource properties in Mexico and the United States[88](index=88&type=chunk) - Management determines operating segments based on reports reviewed by chief operating decision makers for strategic decisions[88](index=88&type=chunk) [b. Geographic Information](index=18&type=section&id=23.b.%20Geographic%20information) All revenues are earned in Mexico and the United States, with total assets and net loss segmented by operational region - All revenues are earned in **Mexico** (Cosalá Operations) and the **United States** (Galena Complex and Relief Canyon)[89](index=89&type=chunk) Total Assets by Segment (June 30, 2025, in thousands of U.S. dollars) | Segment | Total Assets | | :---------------- | :----------- | | Cosalá Operations | $68,221 | | Galena Complex | $89,571 | | Relief Canyon | $27,949 | | Corporate and Other | $58,552 | | **Total** | **$244,293** | Net Loss by Segment (Six-month period ended June 30, 2025, in thousands of U.S. dollars) | Segment | Net Loss | | :---------------- | :----------- | | Cosalá Operations | $(4,168) | | Galena Complex | $(3,612) | | Relief Canyon | $(1,198) | | Corporate and Other | $(25,043) | | **Total** | **$(34,021)** | [c. Major Customers](index=20&type=section&id=23.c.%20Major%20customers) Three major customers accounted for 46% of Cosalá Operations' revenues and 54% of Galena Complex's revenues - For the six-month period ended June 30, 2025, **three major customers** accounted for **46% of revenues from Cosalá Operations** and **54% of revenues from Galena Complex**[94](index=94&type=chunk) [24. Contingencies](index=20&type=section&id=24.%20Contingencies) The company faces legal and tax contingencies, including an ongoing appeal against a Mexican tax reassessment with an accrued liability of $1.0 million - The Company accrues for legal and tax matters when a liability is both probable and the amount can be reasonably estimated[95](index=95&type=chunk) - An ongoing appeal exists against a Mexican tax reassessment from 2010 for its subsidiary, Minera Cosalá, related to the year ended December 31, 2007[96](index=96&type=chunk) - The accrued liability for the probable obligation from the ongoing appeal was **$1.0 million** as at June 30, 2025 (December 31, 2024: $1.0 million)[96](index=96&type=chunk)

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) Intermex experienced a decline in Q2 and year-to-date 2025 financial performance, with revenues and net income decreasing [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) Intermex reported a decline in financial performance for Q2 2025 compared to Q2 2024, with total revenues down 6.1% to $161.1 million, primarily due to fewer transactions Second Quarter 2025 Financial Performance Highlights (YoY) | Metric | Q2 2025 (Millions) | Change vs. Q2 2024 | | :---------------------- | :----------------- | :----------------- | | Total Revenues | $161.1 | -6.1% | | Net Income | $11.0 | -21.4% | | Diluted EPS | $0.37 | -11.9% | | Adjusted Net Income | $15.2 | -16.0% | | Adjusted Diluted EPS | $0.51 | -7.3% | | Adjusted EBITDA | $28.8 | -7.4% | - Total money transfer transactions decreased by 7.8% to **14.1 million**, while the average principal sent per transaction increased by 5.0% to **$441**[1](index=1&type=chunk) [Year-to-Date 2025 Financial Results](index=1&type=section&id=Year-to-Date%202025%20Financial%20Results) For the first six months of 2025, Intermex's revenues decreased by 5.1% to $305.4 million, with net income seeing a significant decline of 28.0% Year-to-Date 2025 Financial Performance Highlights (YoY) | Metric | YTD 2025 (Millions) | Change vs. YTD 2024 | | :---------------------- | :------------------ | :------------------ | | Revenues | $305.4 | -5.1% | | Net Income | $18.8 | -28.0% | | Diluted EPS | $0.62 | -20.5% | | Adjusted Net Income | $26.2 | -20.1% | | Adjusted Diluted EPS | $0.86 | -11.3% | | Adjusted EBITDA | $50.4 | -10.8% | - Money transfer transactions for the first six months decreased by 6.6% to **26.9 million**, while the average principal sent per transaction increased by 6.3% to **$439**[7](index=7&type=chunk) [Key Business Updates](index=2&type=section&id=Key%20Business%20Updates) The company detailed operational highlights, share repurchases, and announced its acquisition by The Western Union Company [Operational Highlights](index=2&type=section&id=Operational%20Highlights) Intermex ended Q2 2025 with $174.7 million in cash and cash equivalents, with Net Free Cash Generated showing strong growth despite significant expenses Cash and Cash Flow Metrics | Metric | Q2 2025 (Millions) | YTD 2025 (Millions) | | :----------------------------------- | :----------------- | :------------------ | | Cash and cash equivalents (end of Q2)| $174.7 | N/A | | Net Free Cash Generated | $14.7 (up 10.5%) | $25.0 (up 45.3%) | - The company incurred **$2.5 million** in advertising and marketing expenses for digital products year-to-date 2025 and **$3.4 million** in transaction costs for potential merger and acquisition activities year-to-date 2025[10](index=10&type=chunk)[11](index=11&type=chunk) [Share Repurchase Program](index=2&type=section&id=Share%20Repurchase%20Program) Intermex continued its share repurchase program, buying back 980,341 shares for $11.4 million in Q2 2025, positively impacting diluted earnings per share Share Repurchase Activity | Period | Shares Repurchased | Value (Millions) | | :---------- | :----------------- | :--------------- | | Q2 2025 | 980,341 | $11.4 | | YTD 2025 | 1.35 million | $16.3 | - The reduction in share count from stock repurchase activity positively impacted diluted earnings per share[2](index=2&type=chunk)[3](index=3&type=chunk)[12](index=12&type=chunk) [Western Union Acquisition Details](index=2&type=section&id=Western%20Union%20Acquisition%20Details) Intermex announced an agreement for The Western Union Company to acquire all outstanding shares in an all-cash merger for $16.00 per share - The Western Union Company will acquire Intermex in an all-cash merger[13](index=13&type=chunk) - Each outstanding share of Intermex common stock will be converted into the right to receive **$16.00 per share** in cash[13](index=13&type=chunk) - Intermex will not host a Q2 conference call and is no longer providing financial guidance due to the pending acquisition[14](index=14&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section defines key non-GAAP metrics used to assess Intermex's financial performance and operational results [Definition of Non-GAAP Measures](index=3&type=section&id=Definition%20of%20Non-GAAP%20Measures) Intermex utilizes several non-GAAP financial measures, including Adjusted Net Income and Adjusted EBITDA, to evaluate its financial performance by excluding certain non-cash or non-recurring items - Adjusted Net Income is defined as Net Income adjusted for non-cash amortization of intangible assets, non-cash compensation costs, and other non-core items[16](index=16&type=chunk) - Adjusted EBITDA is defined as Net Income before depreciation and amortization, interest expense, income taxes, and adjusted for non-cash compensation costs and other non-core items[18](index=18&type=chunk) - Net Free Cash Generated is defined as Net Income before provision for credit losses and depreciation and amortization, adjusted for non-cash charges, and reduced by cash used in investing activities and debt servicing[19](index=19&type=chunk) [Corporate Information & Disclosures](index=3&type=section&id=Corporate%20Information%20%26%20Disclosures) This section provides forward-looking statement disclaimers, company background, and acquisition-related investor information [Safe Harbor Compliance Statement for Forward-Looking Statements](index=3&type=section&id=Safe%20Harbor%20Compliance%20Statement%20for%20Forward-Looking%20Statements) This section highlights that the press release contains forward-looking statements subject to various risks and uncertainties, including the Western Union acquisition and regulatory compliance - Forward-looking statements are subject to risks including the Western Union acquisition, immigration law changes, digital service expansion, new technology, economic factors, and regulatory compliance[24](index=24&type=chunk) - The company cautions investors not to place undue reliance on forward-looking statements and undertakes no obligation to update them[25](index=25&type=chunk) [About International Money Express, Inc.](index=5&type=section&id=About%20International%20Money%20Express%2C%20Inc.) Founded in 1994, Intermex is a global omnichannel money transfer service provider, enabling consumers to send money to over 60 countries through various channels - Intermex was founded in 1994 and provides global omnichannel money transfer services[26](index=26&type=chunk) - Services are offered from the US, Canada, Spain, Italy, UK, and Germany to over 60 countries, through agent retailers, company-operated stores, mobile apps, and websites[26](index=26&type=chunk) - The company is headquartered in Miami, Florida, with international offices in Mexico, Guatemala, England, and Spain[26](index=26&type=chunk) [Additional Information and Participants in Solicitation](index=5&type=section&id=Additional%20Information%20and%20Participants%20in%20Solicitation) This section advises investors to read the Proxy Statement and other SEC filings regarding the proposed acquisition by Western Union, noting that Intermex's directors and executive officers may be participants in the solicitation - Investors are urged to read the Proxy Statement and other SEC filings for important information about the proposed acquisition[28](index=28&type=chunk) - Intermex's directors and executive officers may be deemed participants in the solicitation of proxies for the transaction[30](index=30&type=chunk) - Free copies of these documents can be obtained from the SEC website (http://www.sec.gov) or Intermex's website (www.Intermexonline.com)[29](index=29&type=chunk) [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents detailed consolidated financial statements and reconciliations of GAAP to non-GAAP measures [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Intermex's total assets increased to $518.0 million, primarily driven by increases in cash and accounts receivable, with total liabilities also rising due to wire transfers and money orders payable Condensed Consolidated Balance Sheet Highlights (in thousands of dollars) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :---------------- | | Cash and cash equivalents | $174,723 | $130,503 | | Accounts receivable, net | $141,651 | $107,077 | | Total current assets | $351,185 | $297,783 | | Total assets | $518,015 | $462,377 | | Wire transfers and money orders payable, net | $144,196 | $85,044 | | Total current liabilities | $215,486 | $151,998 | | Debt, net | $144,132 | $156,623 | | Total stockholders' equity | $142,253 | $134,924 | [Condensed Consolidated Statements of Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q2 2025, total revenues were $161.1 million, a decrease from the prior year, with net income falling to $11.0 million, and year-to-date figures showing similar declines Condensed Consolidated Statements of Income Highlights (in thousands of dollars, except per share data) | Metric | Three Months Ended June 30, 2025 (Unaudited) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 (Unaudited) | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------------------- | :------------------------------- | :----------------------------------------- | :------------------------------- | | Total revenues | $161,133 | $171,531 | $305,443 | $321,943 | | Operating income | $19,461 | $22,904 | $33,536 | $42,490 | | Net income | $11,007 | $14,033 | $18,776 | $26,139 | | Diluted Earnings per common share | $0.37 | $0.42 | $0.62 | $0.78 | | Transaction costs | $2,224 | $26 | $3,393 | $36 | [Reconciliation from Net Income to Adjusted Net Income](index=9&type=section&id=Reconciliation%20from%20Net%20Income%20to%20Adjusted%20Net%20Income) Adjusted Net Income for Q2 2025 was $15.2 million, a decrease from Q2 2024, with year-to-date Adjusted Net Income also declining, primarily due to adjustments for share-based compensation and transaction costs Reconciliation of Net Income to Adjusted Net Income (in thousands of dollars) | Metric | Three Months Ended June 30, 2025 (Unaudited) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 (Unaudited) | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------------------- | :------------------------------- | :----------------------------------------- | :------------------------------- | | Net Income | $11,007 | $14,033 | $18,776 | $26,139 | | Share-based compensation | $2,133 | $2,392 | $4,245 | $4,545 | | Transaction costs | $2,224 | $26 | $3,393 | $36 | | Amortization of intangibles | $1,437 | $958 | $2,148 | $1,935 | | Adjusted Net Income | $15,249 | $18,095 | $26,177 | $32,772 | [Reconciliation from Basic Earnings per Share to Adjusted Basic Earnings per Share](index=10&type=section&id=Reconciliation%20from%20Basic%20Earnings%20per%20Share%20to%20Adjusted%20Basic%20Earnings%20per%20Share) Adjusted Basic Earnings per Share for Q2 2025 was $0.51, compared to GAAP Basic EPS of $0.37, reflecting adjustments for non-GAAP items Basic vs. Adjusted Basic Earnings per Share | Metric | Three Months Ended June 30, 2025 (Unaudited) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 (Unaudited) | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------------------- | :------------------------------- | :----------------------------------------- | :------------------------------- | | Basic Earnings per Share | $0.37 | $0.43 | $0.62 | $0.79 | | Adjusted Basic Earnings per Share | $0.51 | $0.55 | $0.87 | $0.99 | [Reconciliation from Diluted Earnings per Share to Adjusted Diluted Earnings per Share](index=10&type=section&id=Reconciliation%20from%20Diluted%20Earnings%20per%20Share%20to%20Adjusted%20Diluted%20Earnings%20per%20Share) Adjusted Diluted Earnings per Share for Q2 2025 was $0.51, compared to GAAP Diluted EPS of $0.37, indicating the impact of non-GAAP adjustments Diluted vs. Adjusted Diluted Earnings per Share | Metric | Three Months Ended June 30, 2025 (Unaudited) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 (Unaudited) | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------------------- | :------------------------------- | :----------------------------------------- | :------------------------------- | | Diluted Earnings per Share | $0.37 | $0.42 | $0.62 | $0.78 | | Adjusted Diluted Earnings per Share | $0.51 | $0.55 | $0.86 | $0.97 | [Reconciliation from Net Income to Adjusted EBITDA](index=12&type=section&id=Reconciliation%20from%20Net%20Income%20to%20Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 was $28.8 million, a 7.4% decrease from Q2 2024, with year-to-date Adjusted EBITDA also declining by 10.8% Reconciliation of Net Income to Adjusted EBITDA (in thousands of dollars) | Metric | Three Months Ended June 30, 2025 (Unaudited) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 (Unaudited) | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------------------- | :------------------------------- | :----------------------------------------- | :------------------------------- | | Net Income | $11,007 | $14,033 | $18,776 | $26,139 | | EBITDA | $23,915 | $26,275 | $41,619 | $49,089 | | Adjusted EBITDA | $28,788 | $31,052 | $50,406 | $56,466 | [Reconciliation from Net Income Margin to Adjusted EBITDA Margin](index=12&type=section&id=Reconciliation%20from%20Net%20Income%20Margin%20to%20Adjusted%20EBITDA%20Margin) Adjusted EBITDA Margin for Q2 2025 was 17.9%, a slight decrease from 18.1% in Q2 2024, with the year-to-date margin also showing a decline Net Income Margin vs. Adjusted EBITDA Margin | Metric | Three Months Ended June 30, 2025 (Unaudited) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 (Unaudited) | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------------------- | :------------------------------- | :----------------------------------------- | :------------------------------- | | Net Income Margin | 6.8 % | 8.2 % | 6.1 % | 8.1 % | | Adjusted EBITDA Margin| 17.9 % | 18.1 % | 16.5 % | 17.6 % | [Reconciliation of Net Income to Net Free Cash Generated](index=14&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Net%20Free%20Cash%20Generated) Net Free Cash Generated for Q2 2025 increased by 10.5% to $14.7 million, with a substantial year-to-date increase of 45.3% to $25.0 million, reflecting investments despite lower net income Reconciliation of Net Income to Net Free Cash Generated (in thousands of dollars) | Metric | Three Months Ended June 30, 2025 (Unaudited) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 (Unaudited) | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------------------- | :------------------------------- | :----------------------------------------- | :------------------------------- | | Net income for the period | $11,007 | $14,033 | $18,776 | $26,139 | | Net Free Cash Generated during the period | $14,732 | $13,261 | $24,995 | $17,223 |