[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights that the quarterly report contains forward-looking statements regarding operations, taxes, earnings, financial performance, and dividends, cautioning that these are not guarantees of future performance and are subject to known and unknown risks, assumptions, and uncertainties, advising readers not to place undue reliance on them - The report contains forward-looking statements about operations, taxes, earnings, financial performance, and dividends, which are **not guarantees of future performance**[9](index=9&type=chunk) - Readers are cautioned that **actual results may differ materially** from expectations due to difficult-to-predict risks, assumptions, and uncertainties[9](index=9&type=chunk) - The company **does not plan to publicly update or revise** any forward-looking statements unless required by applicable law[11](index=11&type=chunk) [Certain Definitions](index=3&type=section&id=CERTAIN%20DEFINITIONS) This section provides definitions for key terms used throughout the quarterly report, including 'assets under management' (AUM), 'fee-earning AUM', and specific entity names, as well as details regarding the 'Merger Agreement' with Apollo Global Management, Inc - **Assets Under Management (AUM)** includes the fair value of managed funds/vehicles, uncalled capital commitments, and fair value of managed REITs, not reduced by indebtedness[14](index=14&type=chunk) - **Fee-earning AUM** refers to assets from which the company earns management fee or other revenue[15](index=15&type=chunk) - The **Merger Agreement**, dated February 23, 2025, outlines the acquisition of the Company by Apollo Global Management, Inc. in an **all-stock transaction valued at approximately $1.5 billion**, expected to close in **Q3 2025**[15](index=15&type=chunk)[16](index=16&type=chunk)[48](index=48&type=chunk) [Part I. Financial Information](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, and disclosures on market risk and controls [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Bridge Investment Group Holdings Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, comprehensive income (loss), changes in equity, and cash flows, along with detailed accompanying notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $72,819 | $90,599 | $(17,780) | -19.6% | | Total assets | $1,177,964 | $1,247,382 | $(69,418) | -5.6% | | Total liabilities | $723,658 | $741,482 | $(17,824) | -2.4% | | Total equity | $454,306 | $505,900 | $(51,594) | -10.2% | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations present the company's revenues, investment income (loss), expenses, and net income (loss) for the three and six months ended June 30, 2025, and 2024, highlighting a significant decrease in net income and a net loss for the six-month period in 2025 Condensed Consolidated Statements of Operations Summary | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenues | $96,539 | $104,760 | $192,844 | $207,549 | | Total investment income (loss) | $6,338 | $25,596 | $(1,360) | $(23,106) | | Total expenses | $96,759 | $87,098 | $212,475 | $184,027 | | Net income (loss) | $2,792 | $27,494 | $(34,810) | $(9,305) | | Net (loss) income attributable to Bridge Investment Group Holdings Inc. | $(482) | $(2,431) | $(12,657) | $7,387 | | Basic EPS | $(0.01) | $(0.11) | $(0.38) | $0.18 | | Diluted EPS | $(0.01) | $(0.11) | $(0.38) | $0.07 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The condensed consolidated statements of comprehensive income (loss) detail the net income (loss) and other comprehensive income (loss) components, primarily foreign currency translation adjustments, for the three and six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Comprehensive Income (Loss) Summary | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net income (loss) | $2,792 | $27,494 | $(34,810) | $(9,305) | | Other comprehensive (loss) income—foreign currency translation adjustments, net of tax | $(129) | $78 | $(141) | $27 | | Total comprehensive income (loss) | $2,663 | $27,572 | $(34,951) | $(9,278) | | Comprehensive (loss) income attributable to Bridge Investment Group Holdings Inc. | $(611) | $(2,353) | $(12,798) | $7,414 | [Condensed Consolidated Statements of Changes in Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This section outlines the changes in shareholders' equity for the three and six months ended June 30, 2025, and 2024, reflecting net income/loss, exchanges of Class A Units for Class A common stock, capital contributions, share-based compensation, and distributions Condensed Consolidated Statements of Changes in Equity Summary | Metric | Balance as of December 31, 2024 (in thousands) | Net loss (in thousands) | Exchange of Class A Units for Class A common stock (in thousands) | Share-based compensation, net of forfeitures (in thousands) | Distributions (in thousands) | Dividends on Class A Common Stock/Units (in thousands) | Balance as of June 30, 2025 (in thousands) | | :------------------------------------------------- | :------------------------------------------- | :---------------------- | :------------------------------------------------ | :------------------------------------------------ | :--------------------------- | :------------------------------------------------ | :------------------------------------------- | | Class A Common Stock | $417 | — | $24 | $25 | — | — | $466 | | Class B Common Stock | $793 | — | $(20) | — | — | — | $773 | | Additional Paid-In Capital | $104,397 | — | $(4,558) | $9,643 | — | — | $113,471 | | Accumulated Deficit | $(22,449) | $(12,657) | — | — | — | $(4,889) | $(39,818) | | Accumulated Other Comprehensive Income (Loss) | $265 | — | — | — | — | — | $124 | | Non-controlling interests in Bridge Investment Group Holdings LLC | $248,365 | $(11,243) | — | $190 | $(8,283) | — | $229,361 | | Non-controlling interests in Bridge Investment Group Holdings Inc. | $174,112 | $(10,910) | — | $11,397 | $(20,263) | — | $149,929 | | **Total Equity** | **$505,900** | **$(34,810)** | **$(4,554)** | **$21,255** | **$(28,546)** | **$(4,889)** | **$454,306** | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows provide a summary of cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024, showing a net decrease in cash for the current period Condensed Consolidated Statements of Cash Flows Summary | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $18,058 | $68,043 | | Net cash (used in) provided by investing activities | $(2,956) | $11,469 | | Net cash used in financing activities | $(33,480) | $(61,866) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(18,378) | $17,646 | | Cash, cash equivalents and restricted cash - end of period | $84,053 | $84,906 | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures that are an integral part of the condensed consolidated financial statements, covering the company's organization, significant accounting policies, revenue breakdown, investment details, debt obligations, equity changes, and other financial commitments and contingencies [Note 1. Organization](index=14&type=section&id=Note%201.%20Organization) This note describes Bridge Investment Group Holdings Inc. as a leading alternative investment manager, its organizational structure, the impact of its IPO, and the details of the pending merger with Apollo Global Management, Inc., which was approved by stockholders on June 17, 2025 - Bridge Investment Group Holdings Inc. is a leading alternative investment manager diversified across specialized asset classes, with a nationwide operating platform[37](index=37&type=chunk) - The Company's principal asset is a **controlling financial interest** in Bridge Investment Group Holdings LLC (the 'Operating Company'), holding **approximately 33% economic interest** as of June 30, 2025[38](index=38&type=chunk) - On February 23, 2025, the Company entered into a **Merger Agreement** with Apollo Global Management, Inc., valued at **approximately $1.5 billion**, which was **approved by stockholders on June 17, 2025**, and is **expected to close in Q3 2025**[48](index=48&type=chunk)[56](index=56&type=chunk) [Note 2. Significant Accounting Policies](index=18&type=section&id=Note%202.%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies used in preparing the condensed consolidated financial statements, including the basis of presentation, principles of consolidation for VIEs and voting interest entities, fair value measurements, revenue recognition methods for various fee types, and the impact of recently issued accounting standards - Financial statements are prepared in accordance with **GAAP for interim information**, consolidating entities where the Company has a controlling financial interest (VIEs or voting interest entities)[57](index=57&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) - Fair value measurements are categorized into a **three-level hierarchy (Level 1, 2, 3)** based on market price observability, with the **fair value option elected for General Partner Notes Payable**[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - **Revenue is recognized when performance obligations are satisfied**, with detailed policies for fund management fees, property management, construction, development, transaction, fund administration fees, insurance premiums, and performance allocations[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[101](index=101&type=chunk) - The Company **adopted ASU 2023-07 (Segment Reporting) retrospectively as of December 31, 2024**, and is **evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-01 (Profits Interest)**[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Note 3. Revenue](index=28&type=section&id=Note%203.%20Revenue) This note disaggregates the company's revenues by significant product offerings for the three and six months ended June 30, 2025, and 2024, and discusses deferred revenues and credit losses, particularly those related to the commercial office sector Revenue Breakdown | Revenue Type | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Fund management fees | $58,465 | $61,453 | $117,773 | $122,558 | | Property management and leasing fees | $16,693 | $17,763 | $33,686 | $37,700 | | Construction management fees | $1,705 | $1,814 | $2,994 | $3,511 | | Development fees | $1,038 | $828 | $2,084 | $1,659 | | Transaction fees | $4,816 | $6,404 | $8,009 | $13,204 | | Fund administration fees | $4,845 | $4,579 | $9,705 | $9,636 | | Insurance premiums | $5,811 | $6,405 | $11,597 | $11,102 | | Other asset management and property income | $3,166 | $5,514 | $6,996 | $8,179 | | **Total revenues** | **$96,539** | **$104,760** | **$192,844** | **$207,549** | - **Deferred revenues were $11.5 million as of June 30, 2025, down from $17.3 million as of December 31, 2024**, with $15.7 million recognized as revenue during the six months ended June 30, 2025[128](index=128&type=chunk) - **Credit losses of $1.9 million were recognized for the six months ended June 30, 2025**, **primarily related to Bridge Office Fund LP (BOF I) and Bridge Office Fund II LP (BOF II)**, due to unfavorable market conditions in the commercial office sector[129](index=129&type=chunk) [Note 4. Marketable Securities](index=29&type=section&id=Note%204.%20Marketable%20Securities) This note summarizes the company's marketable securities, which primarily consist of investments in exchange-traded funds and mutual funds held by BIGRM, reported at fair value Marketable Securities Summary | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Common shares in publicly traded company | $51 | $73 | | Exchange traded funds | $1,440 | $3,157 | | Mutual funds | $13,187 | $17,889 | | **Total marketable securities** | **$14,678** | **$21,119** | [Note 5. Investments](index=29&type=section&id=Note%205.%20Investments) This note details the company's investments, including accrued performance allocations and partnership interests in company-sponsored and third-party funds, which are generally valued using the Net Asset Value (NAV) of the respective vehicles Investments Summary | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Accrued performance allocations | $328,616 | $339,560 | | Partnership interests in Company-sponsored funds | $145,222 | $153,181 | | Investments in third-party partnerships | $16,132 | $15,364 | | Other | $13,403 | $12,615 | | **Total other investments** | **$174,757** | **$181,160** | - The Company recognized **income of $4.5 million and losses of $10.7 million** related to accrued performance allocations and other investments for the three and six months ended June 30, 2025, respectively[133](index=133&type=chunk) - Accrued performance allocations and partnership interests are **generally valued using the NAV of the respective vehicle**, with **managed funds reported on a three-month lag**[132](index=132&type=chunk)[135](index=135&type=chunk) [Note 6. Notes Receivable from Affiliates](index=30&type=section&id=Note%206.%20Notes%20Receivable%20from%20Affiliates) This note provides details on the company's notes receivable from affiliated funds and employees, including outstanding balances, weighted-average interest rates, and the recognition of credit loss expenses related to certain office funds Notes Receivable from Affiliates Summary | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Bridge Office Fund II | $18,375 | $15,800 | | Bridge Office Holdings LLC | $12,254 | $15,000 | | Bridge Single-Family Rental Fund IV | $8,454 | $4,924 | | Bridge Workforce and Affordable Housing Fund III LP | $0 | $200 | | **Total notes receivable from affiliates** | **$39,083** | **$35,924** | | Notes receivable from employees | $4,326 | $5,954 | | **Total notes receivable from affiliates (overall)** | **$43,409** | **$41,878** | - A **credit loss expense of $2.7 million (principal) and $0.7 million (interest and fees)** was recognized during the three and six months ended June 30, 2025, related to the Bridge Office Holdings LLC notes receivable[139](index=139&type=chunk) - Interest on notes receivable from affiliates accrued at a **weighted-average fixed rate of 5.39%** as of June 30, 2025[138](index=138&type=chunk) [Note 7. Fair Value Measurements](index=31&type=section&id=Note%207.%20Fair%20Value%20Measurements) This note details the company's fair value measurements, classifying assets and liabilities into a three-level hierarchy based on market price observability and explaining the valuation methods used for various financial instruments, including the use of NAV as a practical expedient for certain investments Fair Value Measurements Summary | Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Measured at NAV (in thousands) | Total (in thousands) | | :--------------------------------- | :--------------------- | :--------------------- | :--------------------- | :----------------------------- | :------------------- | | **June 30, 2025 Assets:** | | | | | | | Common shares in publicly traded company | $51 | — | — | — | $51 | | Exchange traded funds | $1,440 | — | — | — | $1,440 | | Mutual funds | $13,187 | — | — | — | $13,187 | | Accrued performance allocations | — | — | — | $328,616 | $328,616 | | Partnership interests | — | — | — | $161,354 | $161,354 | | Other investments | — | — | $13,403 | — | $13,403 | | **Total assets at fair value** | **$14,678** | **—** | **$13,403** | **$489,970** | **$518,051** | | **June 30, 2025 Liabilities:** | | | | | | | General Partner Notes Payable | — | — | — | $2,222 | $2,222 | - Accrued performance allocations and partnership interests are generally valued using the **NAV per share equivalent as a practical expedient**[147](index=147&type=chunk) - Fair values of private notes are estimated by discounting expected future cash outlays at **interest rates between 6.02% and 7.91%** as of June 30, 2025[153](index=153&type=chunk) [Note 8. Insurance Loss Reserves and Loss and Loss Adjustment Expenses](index=34&type=section&id=Note%208.%20Insurance%20Loss%20Reserves%20and%20Loss%20and%20Loss%20Adjustment%20Expenses) This note describes the insurance policies provided by BIGRM, a wholly-owned captive insurance subsidiary, and details the company's insurance loss reserves for property and casualty claims and self-insurance reserves for employee health benefits - BIGRM provides insurance policies for multifamily and commercial properties, covering risks like lease security deposit fulfillment, lessor legal liability, workers' compensation, property, and general liability deductibles[154](index=154&type=chunk)[158](index=158&type=chunk) - **Insurance loss reserves were $25.3 million as of June 30, 2025, and $21.3 million as of December 31, 2024**, based on estimated costs for reported and unreported claims[156](index=156&type=chunk) - **Medical self-insurance reserves for employee health benefits were $1.9 million as of June 30, 2025, and $2.8 million as of December 31, 2024**, with **stop-loss coverage for individual claims over $225,000**[157](index=157&type=chunk) [Note 9. General Partner Notes Payable](index=35&type=section&id=Note%209.%20General%20Partner%20Notes%20Payable) This note details the General Partner Notes Payable, which satisfy General Partner commitments to specific funds (BSH I GP and BMF III GP) and are measured at fair value, reflecting the related GP Lender's net asset value in the fund General Partner Notes Payable Summary | Fund | Commitment (in thousands) | Fair Value June 30, 2025 (in thousands) | Fair Value December 31, 2024 (in thousands) | | :-------------------------- | :------------------------ | :--------------------------------------- | :--------------------------------------- | | Bridge Seniors Housing Fund I | $4,775 | $2,125 | $2,681 | | Bridge Multifamily Fund III | $9,300 | $97 | $101 | | **Total** | **$14,075** | **$2,222** | **$2,782** | - The Company **elected the fair value option for General Partner Notes Payable**, with changes in value recorded in unrealized gains (losses)[159](index=159&type=chunk) [Note 10. Line of Credit](index=35&type=section&id=Note%2010.%20Line%20of%20Credit) This note provides information on the Operating Company's Credit Facility, including its $150.0 million revolving commitments, variable interest rates, financial covenants, and the fact that there was no outstanding balance as of June 30, 2025 - The Operating Company has a Credit Facility with **$150.0 million in revolving commitments**, **maturing on June 3, 2026**[162](index=162&type=chunk) - Borrowings bear interest based on a pricing grid over Term SOFR (**approximately 6.69% as of June 30, 2025**) and are subject to a quarterly unused commitment fee[163](index=163&type=chunk)[166](index=166&type=chunk) - As of June 30, 2025, there was **no outstanding balance on the Credit Facility**, and the Company was **in full compliance with all debt covenants**[166](index=166&type=chunk)[168](index=168&type=chunk) [Note 11. Notes Payable](index=36&type=section&id=Note%2011.%20Notes%20Payable) This note describes the company's Private Placement Notes, consisting of three tranches issued in 2020, 2022, and 2023, totaling $450.0 million, with various maturity dates and financial covenants - The Operating Company has **$450.0 million in Private Placement Notes**, issued in three tranches (2020, 2022, 2023), with **maturities ranging from July 2025 to March 2033**[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[174](index=174&type=chunk) Private Placement Notes Maturity Schedule | Year | Amount (in thousands) | | :--- | :-------------------- | | 2025 | $75,000 | | 2026 | — | | 2027 | $75,000 | | Thereafter | $300,000 | | **Total** | **$450,000** | - The Private Placement Notes contain financial covenants requiring maintenance of a **debt to EBITDA ratio, minimum liquidity, and minimum quarterly/trailing four fiscal quarters EBITDA**[172](index=172&type=chunk) [Note 12. Realized and Unrealized Gains (Losses)](index=37&type=section&id=Note%2012.%20Realized%20and%20Unrealized%20Gains%20(Losses)) This note summarizes the net realized and unrealized gains and losses on investments and other financial instruments for the three and six months ended June 30, 2025, and 2024, including those from General Partner Notes Payable Net Realized and Unrealized Gains (Losses) Summary (3 Months) | Category | 3 Months Ended June 30, 2025 (Net Realized) | 3 Months Ended June 30, 2025 (Net Unrealized) | 3 Months Ended June 30, 2024 (Net Realized) | 3 Months Ended June 30, 2024 (Net Unrealized) | | :-------------------------------- | :------------------------------------------ | :-------------------------------------------- | :------------------------------------------ | :-------------------------------------------- | | Investment in Company sponsored funds | $149 | $(2,484) | $962 | $(1,358) | | Investment in third-party partnerships | $(119) | $218 | $(117) | $(2,857) | | Other investments | $0 | $14 | $0 | $0 | | General Partner Notes Payable | $0 | $405 | $0 | $98 | | **Total realized and unrealized gains (losses), net** | **$30** | **$(1,847)** | **$845** | **$(4,117)** | Net Realized and Unrealized Gains (Losses) Summary (6 Months) | Category | 6 Months Ended June 30, 2025 (Net Realized) | 6 Months Ended June 30, 2025 (Net Unrealized) | 6 Months Ended June 30, 2024 (Net Realized) | 6 Months Ended June 30, 2024 (Net Unrealized) | | :-------------------------------- | :------------------------------------------ | :-------------------------------------------- | :------------------------------------------ | :-------------------------------------------- | | Investment in Company sponsored funds | $6 | $(9,637) | $(850) | $(8,688) | | Investment in third-party partnerships | $(194) | $82 | $(262) | $208 | | Other investments | $0 | $14 | $0 | $1,785 | | General Partner Notes Payable | $0 | $403 | $0 | $0 | | **Total realized and unrealized losses, net** | **$(188)** | **$(9,138)** | **$(1,112)** | **$(6,695)** | [Note 13. Income Taxes](index=37&type=section&id=Note%2013.%20Income%20Taxes) This note explains the company's income tax accounting, including its status as a corporation for U.S. federal income tax purposes, the deferred tax asset and liability related to the Tax Receivable Agreement (TRA), and the use of the discrete effective tax rate method for interim reporting - The Company is **taxed as a corporation for U.S. federal and state income tax purposes**, while the Operating Company and most subsidiaries are treated as partnerships[178](index=178&type=chunk)[179](index=179&type=chunk) - The **deferred income tax asset related to the TRA was $76.8 million and the corresponding TRA liability was $78.2 million** as of June 30, 2025, an increase from December 31, 2024[180](index=180&type=chunk) - The Company utilized the **discrete effective tax rate method** for the three and six months ended June 30, 2025, due to uncertainty in estimating the annual effective tax rate[182](index=182&type=chunk) [Note 14. Shareholders' Equity](index=38&type=section&id=Note%2014.%20Shareholders'%20Equity) This note details the changes in shareholders' equity, including the impact of the IPO, redemptions of non-controlling interests, activity in Class A and Class B common stock, and dividend declarations for Class A common stockholders - As of June 30, 2025, **46,570,329 shares of Class A common stock and 77,322,973 shares of Class B common stock were outstanding**[190](index=190&type=chunk) - During the six months ended June 30, 2025, **2,483,658 Class A Units were redeemed for Class A common stock on a one-for-one basis**[188](index=188&type=chunk) Dividends on Class A Common Stock/Units | Dividend Record Date | Dividend Payment Date | Dividend per Share of Common Stock | Dividend to Common Stockholders (in thousands) | | :------------------- | :-------------------- | :--------------------------------- | :------------------------------------------- | | March 14, 2025 | March 28, 2025 | $0.11 | $4,889 | | **Total (H1 2025)** | | **$0.11** | **$4,889** | | March 8, 2024 | March 22, 2024 | $0.07 | $2,582 | | May 31, 2024 | June 14, 2024 | $0.12 | $4,972 | | **Total (H1 2024)** | | **$0.19** | **$7,554** | [Note 15. Commitments and Contingencies](index=41&type=section&id=Note%2015.%20Commitments%20and%20Contingencies) This note discloses the company's operating lease liabilities, potential clawback obligations for performance income, ongoing legal matters, standby letters of credit, and various indemnification and other guarantees Operating Lease Liabilities | Year | Amount (in thousands) | | :--- | :-------------------- | | 2025 (excluding the six months ended June 30, 2025) | $2,538 | | 2026 | $4,662 | | 2027 | $4,000 | | 2028 | $1,430 | | 2029 | $1,308 | | Thereafter | $4,275 | | **Total lease liabilities** | **$18,213** | | Less: Imputed interest | $(2,630) | | **Total operating lease liabilities** | **$15,583** | - If all existing investments were worthless, the **performance income subject to potential repayment by Bridge GPs, net of tax distributions, would be approximately $203.2 million** as of June 30, 2025, with **$159.5 million reimbursable by certain professionals**[201](index=201&type=chunk) - The Company is party to certain legal claims and has **guaranteed standby letters of credit totaling $10.1 million** for its self-insurance program and $0.4 million for an operating lease[202](index=202&type=chunk)[203](index=203&type=chunk) [Note 16. Variable Interest Entities](index=43&type=section&id=Note%2016.%20Variable%20Interest%20Entities) This note explains the company's involvement with Variable Interest Entities (VIEs), its consolidation policies, and the maximum exposure to loss from unconsolidated sponsored private funds - The Company sponsors private funds as general partner, which are considered VIEs due to limited partners lacking substantive liquidation or kick-out rights[207](index=207&type=chunk) - The Company does not consolidate sponsored private funds where it has insignificant direct equity interests, accounting for them under the equity method[208](index=208&type=chunk) - The **maximum exposure to loss from unconsolidated private funds was $161.4 million** as of June 30, 2025[208](index=208&type=chunk) [Note 17. Related Party Transactions](index=43&type=section&id=Note%2017.%20Related%20Party%20Transactions) This note details the company's related party transactions, including receivables from affiliates for various fees and reimbursements, notes receivable from affiliates and employees, and payables due to affiliates in connection with the Tax Receivable Agreement (TRA) Receivables from Affiliates | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------- | :----------------------------- | :------------------------------- | | Fees receivable from non-consolidated funds | $12,716 | $35,246 | | Payments made on behalf of and amounts due from non-consolidated entities | $22,999 | $19,066 | | **Total receivables from affiliates** | **$35,715** | **$54,312** | - **Total notes receivable from affiliates were $43.4 million** as of June 30, 2025[215](index=215&type=chunk) - **Accrued due to affiliates was $78.2 million** as of June 30, 2025, primarily in connection with the Tax Receivable Agreement (TRA)[216](index=216&type=chunk) [Note 18. Share-Based Compensation and Profits Interests](index=44&type=section&id=Note%2018.%20Share-Based%20Compensation%20and%20Profits%20Interests) This note describes the company's share-based compensation plans, including Restricted Stock, Restricted Stock Units (RSUs), and profits interests awards, detailing their vesting schedules, valuation methods, and the associated compensation expense - The **2021 Incentive Award Plan reserved 6,600,000 shares of Class A common stock, increasing to 16,918,559 shares as of January 1, 2025, with 5,700,455 shares remaining available for future grants**[218](index=218&type=chunk) Share-Based Compensation Expense | Category | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Profits interests award shares | $2,305 | $2,721 | $4,638 | $5,879 | | Restricted Stock and RSUs | $7,700 | $10,011 | $16,617 | $18,663 | | **Total share-based compensation** | **$10,005** | **$12,732** | **$21,255** | **$24,542** | - As of June 30, 2025, the aggregate **unrecognized compensation cost for all unvested Restricted Stock, RSU, and profits interests awards was $57.6 million**, expected to be recognized over a **weighted-average period of 1.8 to 2.0 years**[223](index=223&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) [Note 19. (Loss) Earnings Per Share](index=47&type=section&id=Note%2019.%20(Loss)%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings (loss) per share for Class A common stock, considering net income (loss) attributable to Bridge Investment Group Holdings Inc. and the impact of participating securities Earnings Per Share Summary | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net (loss) income attributable to Bridge Investment Group Holdings Inc. | $(482) | $(2,431) | $(12,657) | $7,387 | | Basic EPS | $(0.01) | $(0.11) | $(0.38) | $0.18 | | Diluted EPS | $(0.01) | $(0.11) | $(0.38) | $0.07 | | Weighted-average shares of Class A common stock outstanding (Basic) | 35,889,995 | 32,461,347 | 35,602,217 | 31,902,163 | | Weighted-average shares of Class A common stock outstanding (Diluted) | 35,889,995 | 32,461,347 | 35,602,217 | 128,679,597 | - **Basic and diluted EPS for Class A common stock were $(0.01) for the three months ended June 30, 2025, and $(0.38) for the six months ended June 30, 2025**[228](index=228&type=chunk) [Note 20. Segment Reporting](index=48&type=section&id=Note%2020.%20Segment%20Reporting) This note states that Bridge operates as a single reportable and operating segment, an alternative investment manager, and provides a breakdown of consolidated expenses reviewed by the chief operating decision maker - The Company operates as **one reportable and operating segment: an alternative investment manager**[231](index=231&type=chunk) - The **chief operating decision maker (executive chairman) uses a consolidated approach** to assess financial performance and allocate resources[231](index=231&type=chunk) [Note 21. Subsequent Events](index=48&type=section&id=Note%2021.%20Subsequent%20Events) This note discloses significant events occurring after June 30, 2025, including the repayment of $75.0 million on 2020 Private Placement Notes, a change in management fee basis for Bridge Multifamily Fund V, the signing of the One Big Beautiful Bill Act (OBBBA), and the granting of RSUs to management - On July 22, 2025, **$75.0 million of principal on the 2020 Private Placement Notes was repaid** using proceeds from the Credit Facility[234](index=234&type=chunk) - Bridge Multifamily Fund V's management fee basis converted from committed to invested capital in July 2025, expected to reduce quarterly fund management fees by **approximately $2.0 million**[234](index=234&type=chunk) - On August 5, 2025, **2,575,429 RSUs were granted to certain management members, vesting over four years post-merger closing**[236](index=236&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of the business, recent events, trends affecting the business, key financial measures, operating metrics, and a detailed comparative analysis of financial performance for the three and six months ended June 30, 2025, and 2024 [Overview](index=49&type=section&id=Overview) The overview introduces Bridge Investment Group as a leading alternative investment manager with approximately $50.2 billion in AUM as of June 30, 2025, diversified across specialized asset classes, and highlights its vertically integrated structure and growth driven by strong investment returns - Bridge Investment Group is a leading alternative investment manager with **approximately $50.2 billion of AUM** as of June 30, 2025[238](index=238&type=chunk) - The company is diversified across specialized asset classes including real estate, credit, renewable energy, and secondaries strategies, utilizing a nationwide operating platform[238](index=238&type=chunk) [Business Segment](index=49&type=section&id=Business%20Segment) This section reiterates that the company operates as a single, fully integrated alternative investment manager, with the executive chairman serving as the chief operating decision maker who uses a consolidated approach to assess financial performance - The Company operates as **one business segment**, a fully integrated alternative investment manager[239](index=239&type=chunk) [Recent Events](index=49&type=section&id=Recent%20Events) This section highlights the significant recent event of the Merger Agreement with Apollo Global Management, Inc., which was approved by stockholders on June 17, 2025, and is expected to close in the third quarter of 2025 - On February 23, 2025, the Company entered into a Merger Agreement with Apollo Global Management, Inc. for an **all-stock transaction valued at approximately $1.5 billion**[240](index=240&type=chunk) - **Stockholders approved the Merger Proposal on June 17, 2025**, and the Mergers are **expected to close in the third quarter of 2025**[240](index=240&type=chunk)[241](index=241&type=chunk) [Trends Affecting Our Business](index=50&type=section&id=Trends%20Affecting%20Our%20Business) This section discusses various factors affecting the company's business, including global economic conditions, financial markets, and regulatory policies, emphasizing the importance of attracting new capital, generating strong returns, sourcing attractive investments, and maintaining a data advantage - Business performance is affected by financial markets, economic, and political conditions, with future performance dependent on attracting new capital, generating strong returns, sourcing attractive investments, and offering appealing products[244](index=244&type=chunk)[245](index=245&type=chunk)[249](index=249&type=chunk) - Ongoing economic headwinds, particularly in the **commercial office sector (2% of AUM)**, have led to the **cessation of fund management fees for Bridge Office Fund LP (BOF I) and reserving fees for Bridge Office Fund II LP (BOF II)**[245](index=245&type=chunk) - The company recognized a **credit loss expense of $2.7 million (principal) and $0.7 million (interest and fees) during Q2 2025** related to an unsecured loan to a subsidiary of BOF I[245](index=245&type=chunk) [Key Financial Measures](index=51&type=section&id=Key%20Financial%20Measures) This section defines and explains the company's key financial and operating measures, including various revenue streams (fund management, property management, construction, development, transaction, fund administration, insurance premiums, other asset management, performance fees) and expense categories (employee compensation, performance allocations compensation, loss and loss adjustment, third-party operating, general and administrative, depreciation and amortization, other income/expense, interest income/expense, income tax expense, net income attributable to non-controlling interests) - Fund management fees are generally based on a defined percentage of total commitments, invested capital, or NAV, with a **weighted-average management fee of 1.34%** as of June 30, 2025[250](index=250&type=chunk) - Performance fees include incentive fees and performance allocations (carried interest), with **approximately $18.0 billion of carry-eligible fee-earning AUM across 58 funds** as of June 30, 2025[257](index=257&type=chunk) - Employee compensation and benefits include salaries, bonuses, share-based compensation (Restricted Stock, RSUs, profits interests), and related benefits[262](index=262&type=chunk)[263](index=263&type=chunk) - General and administrative expenses cover professional services, occupancy, travel, communication, information services, and transaction costs[267](index=267&type=chunk) [Operating Metrics](index=55&type=section&id=Operating%20Metrics) This section presents key operating metrics, including Assets Under Management (AUM), Fee-Earning AUM, and Undeployed Capital, along with a summary of historical investment performance for closed-end funds by platform Assets Under Management (AUM) Evolution | Metric | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | AUM as of beginning of period | $49,350 | $48,029 | $49,845 | $47,702 | | New capital / commitments raised | $471 | $302 | $687 | $455 | | Distributions / return of capital | $(600) | $(431) | $(1,131) | $(770) | | Change in fair value and acquisitions | $1,010 | $1,025 | $830 | $1,538 | | **AUM as of end of period** | **$50,231** | **$48,925** | **$50,231** | **$48,925** | | Increase % | 1.8% | 1.9% | 0.8% | 2.6% | Fee-Earning AUM Evolution | Metric | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Fee-earning AUM as of beginning of period | $21,982 | $21,953 | $22,306 | $21,703 | | Increases (capital raised/deployment) | $209 | $127 | $606 | $502 | | Changes in fair market value | $5 | $10 | $11 | $33 | | Decreases (liquidations/other) | $(292) | $(605) | $(1,019) | $(753) | | **Fee-earning AUM as of end of period** | **$21,904** | **$21,485** | **$21,904** | **$21,485** | | Decrease % | (0.4)% | (2.1)% | (1.8)% | (1.0)% | - As of June 30, 2025, the company had **$3.2 billion of undeployed capital**, with **$1.5 billion currently fee-earning** and **$1.7 billion becoming fee-earning upon deployment**[286](index=286&type=chunk) [Results of Operations](index=62&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance, including revenues, investment income (loss), expenses, and other income (expense), for the three and six months ended June 30, 2025, versus the corresponding periods in 2024 [Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024](index=62&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202024) For the three months ended June 30, 2025, total revenues decreased by 8% to $96.5 million, total investment income decreased by 75% to $6.3 million, and total expenses increased by 11% to $96.8 million, resulting in a net income of $2.8 million, down from $27.5 million in the prior year - **Total revenues decreased by $8.2 million (8%) to $96.5 million for Q2 2025**, primarily due to decreases in fund management fees, property management and leasing fees, transaction fees, and other asset management income[294](index=294&type=chunk) - **Total investment income decreased by $19.3 million (75%) to $6.3 million**, driven by a **$17.1 million decrease in unrealized performance allocations**, reflecting underlying market fundamentals[301](index=301&type=chunk)[303](index=303&type=chunk) - **Total expenses increased by $9.7 million (11%) to $96.8 million**, largely due to an **$8.8 million (94%) increase in general and administrative expenses**, including **$4.7 million in merger-related transaction costs and a $3.5 million credit loss write-off**[304](index=304&type=chunk)[308](index=308&type=chunk) [Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024](index=66&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030,%202024) For the six months ended June 30, 2025, total revenues decreased by 7% to $192.8 million, total investment loss improved significantly from $(23.1) million to $(1.4) million, and total expenses increased by 15% to $212.5 million, resulting in a net loss of $(34.8) million, compared to a net loss of $(9.3) million in the prior year - **Total revenues decreased by $14.7 million (7%) to $192.8 million for H1 2025**, primarily due to decreases in fund management fees, property management and leasing fees, and transaction fees[314](index=314&type=chunk) - **Total investment loss improved by $21.7 million (94%) to $(1.4) million**, driven by a **$32.2 million increase in unrealized performance allocations**, reflecting underlying market fundamentals[321](index=321&type=chunk)[323](index=323&type=chunk) - **Total expenses increased by $28.4 million (15%) to $212.5 million**, largely due to a **$25.6 million (123%) increase in general and administrative expenses**, including **$22.8 million in merger-related transaction costs and a $3.5 million credit loss write-off**[324](index=324&type=chunk)[328](index=328&type=chunk) [Non-GAAP Financial Measures](index=70&type=section&id=Non-GAAP%20financial%20measures) This section explains the company's use of non-GAAP financial measures, including Distributable Earnings, Fee Related Earnings, Fee Related Revenues, and Fee Related Expenses, providing their definitions and reconciliations to the most directly comparable GAAP financial measures - **Distributable Earnings is a key performance measure** used by management, excluding depreciation, amortization, unrealized performance allocations, share-based compensation, and non-recurring items from GAAP net income before taxes[337](index=337&type=chunk)[338](index=338&type=chunk) - **Fee Related Earnings (FRE) assesses profitability from recurring fee-based revenues**, adjusting Distributable Earnings to exclude realized performance allocations, net insurance income, investment earnings, and net interest[339](index=339&type=chunk) Non-GAAP Financial Measures Summary | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total Fee Related Earnings attributable to the Operating Company | $27,970 | $35,883 | $52,538 | $69,827 | | Distributable Earnings attributable to the Operating Company | $25,725 | $35,487 | $42,704 | $67,660 | [Liquidity and Capital Resources](index=76&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity needs, sources of cash, and capital structure, including a summary of cash flows from operating, investing, and financing activities, and details regarding its corporate credit facilities and private placement notes [Summary of Cash Flows](index=77&type=section&id=Summary%20of%20Cash%20Flows) This sub-section provides a summary table of the company's net cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Summary of Cash Flows | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $18,058 | $68,043 | | Net cash (used in) provided by investing activities | $(2,956) | $11,469 | | Net cash used in financing activities | $(33,480) | $(61,866) | | **Net (decrease) increase in cash, cash equivalents, and restricted cash** | **$(18,378)** | **$17,646** | [Operating Activities](index=77&type=section&id=Operating%20Activities) Cash provided by operating activities was $18.1 million for the six months ended June 30, 2025, primarily driven by adjustments for non-cash items, offset by a net loss and cash used for operating assets and liabilities - **Net cash provided by operating activities was $18.1 million for H1 2025, a decrease from $68.0 million in H1 2024**[358](index=358&type=chunk)[360](index=360&type=chunk) - H1 2025 operating cash flow was driven by **$60.2 million in non-cash adjustments** (including share-based compensation, unrealized performance allocations reversal, equity in income of investments, depreciation, and credit losses) offset by a **$34.8 million net loss**[360](index=360&type=chunk) [Investing Activities](index=77&type=section&id=Investing%20Activities) Net cash used in investing activities was $3.0 million for the six months ended June 30, 2025, primarily due to issuances of notes receivable and purchases of investments, partially offset by collections on notes and marketable securities sales - **Net cash used in investing activities was $3.0 million for H1 2025, compared to $11.5 million provided by investing activities in H1 2024**[358](index=358&type=chunk)[363](index=363&type=chunk) - H1 2025 investing activities included **$17.3 million in notes receivable issuances and $9.0 million in investment purchases**, partially offset by **$11.3 million from notes receivable collections and $10.8 million from marketable securities sales**[363](index=363&type=chunk) [Financing Activities](index=77&type=section&id=Financing%20Activities) Net cash used in financing activities was $33.5 million for the six months ended June 30, 2025, primarily due to distributions to non-controlling interests and dividends paid on Class A common stock - **Net cash used in financing activities was $33.5 million for H1 2025, compared to $61.9 million used in H1 2024**[358](index=358&type=chunk)[366](index=366&type=chunk) - H1 2025 financing outflows included **$28.5 million in distributions to non-controlling interests and $4.9 million in dividends paid on Class A common stock**[366](index=366&type=chunk) [Corporate Credit Facilities](index=78&type=section&id=Corporate%20Credit%20Facilities) This sub-section details the Operating Company's Credit Facility, including its $150.0 million revolving commitments, variable interest rates, and financial covenants, noting full availability as of June 30, 2025, and a subsequent $75.0 million draw for debt repayment - The Operating Company has a Credit Facility with **$150.0 million in revolving commitments**, bearing interest based on Term SOFR (**approx. 6.69% as of June 30, 2025**)[370](index=370&type=chunk)[371](index=371&type=chunk)[373](index=373&type=chunk) - As of June 30, 2025, the Company had **full availability on the Credit Facility** and was **in full compliance with all debt covenants**[373](index=373&type=chunk)[378](index=378&type=chunk) - On July 21, 2025, the Company **drew $75.0 million from the Credit Facility to repay principal on the 2020 Private Placement Notes**[373](index=373&type=chunk) [Private Placement Notes](index=78&type=section&id=Private%20Placement%20Notes) This sub-section describes the Operating Company's $450.0 million in Private Placement Notes, issued in three tranches with varying interest rates and maturity dates, and outlines the associated financial covenants - The Operating Company has **$450.0 million in Private Placement Notes**, issued in 2020, 2022, and 2023, with maturities ranging from July 2025 to March 2033[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk) - The notes carry **fixed interest rates between 3.90% and 6.10%** and are subject to covenants limiting indebtedness, liens, mergers, and requiring maintenance of specific debt to EBITDA and liquidity ratios[374](index=374&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk) [Debt Covenants](index=79&type=section&id=Debt%20Covenants) This section confirms that the company was in full compliance with all debt covenants for both its Credit Facility and Private Placement Notes as of June 30, 2025, and December 31, 2024 - The Company was **in full compliance with all debt covenants as of June 30, 2025, and December 31, 2024**[378](index=378&type=chunk) [Critical Accounting Estimates](index=79&type=section&id=Critical%20Accounting%20Estimates) This section states that there have been no significant changes in the company's critical accounting estimates during the quarter ended June 30, 2025 - **No significant changes in critical accounting estimates occurred during the quarter ended June 30, 2025**[380](index=380&type=chunk) [Recent Accounting Pronouncements](index=79&type=section&id=Recent%20Accounting%20Pronouncements) This section refers readers to Note 2, 'Significant Accounting Policies,' for a discussion of new accounting pronouncements that have been recently adopted or are not yet adopted by the company - For a discussion of new accounting pronouncements, refer to Note 2, 'Significant Accounting Policies,' in the condensed consolidated financial statements[381](index=381&type=chunk) [JOBS Act](index=79&type=section&id=JOBS%20Act) This section explains the company's status as an emerging growth company under the JOBS Act, which allows it to take advantage of an extended transition period for complying with new or revised accounting standards and other exemptions - The Company is an emerging growth company under the JOBS Act, allowing it to use an extended transition period for new or revised accounting standards[382](index=382&type=chunk) - The Company intends to rely on exemptions provided by the JOBS Act, including not complying with auditor attestation requirements of Section 404(b) of Sarbanes-Oxley[382](index=382&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to various financial market risks, including market risk, interest rate risk, credit and counterparty risk, liquidity risk, and foreign exchange rate risk, and how these risks are managed or mitigated - The company is exposed to market risk primarily through its role as general partner or investment manager for specialized funds, affecting equity in income of affiliates[385](index=385&type=chunk) - Interest rate risk is limited, with most cash in interest-bearing accounts and the Credit Facility bearing variable interest over Term SOFR; no derivative financial instruments are used for interest rate risk management[386](index=386&type=chunk) - Credit and counterparty risk is managed by **limiting financial transactions to reputable financial institutions**[387](index=387&type=chunk) - Foreign exchange rate risk is **not expected to materially impact financial statements** due to **insignificant foreign assets or transactions in non-U.S. dollar currencies**[388](index=388&type=chunk) [Item 4. Controls and Procedures](index=80&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures, concluding they were effective at a reasonable assurance level as of June 30, 2025, and states that there have been no material changes in internal control over financial reporting - Management, with the participation of the principal executive and financial officers, concluded that **disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025**[390](index=390&type=chunk) - There have been **no material changes in internal control over financial reporting** during the three months ended June 30, 2025[391](index=391&type=chunk) [Part II. Other Information](index=82&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits [Item 1. Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses that the company is involved in various legal claims and proceedings in the ordinary course of business, including two lawsuits and eleven stockholder demands related to alleged omissions in the merger proxy statement, which the company addressed by filing supplemental information - The company is party to various claims and legal actions in the ordinary course of business, **not expected to have a material adverse effect**[394](index=394&type=chunk) - **Two lawsuits and eleven stockholder demands were filed alleging material omissions or misstatements in the merger proxy statement**, which the company addressed by **filed supplemental information on June 11, 2025**[395](index=395&type=chunk) [Item 1A. Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes from the risk factors previously disclosed in the company's annual report on Form 10-K for the fiscal year ended December 31, 2024 - **No material changes from the risk factors previously disclosed** in the annual report on Form 10-K for the fiscal year ended December 31, 2024[396](index=396&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered equity securities sold from April 1, 2025, to June 30, 2025, other than those previously disclosed in current reports on Form 8-K - **No unregistered equity securities were sold** from April 1, 2025, to June 30, 2025, beyond what was previously disclosed[397](index=397&type=chunk) [Item 3. Defaults Upon Senior Securities](index=82&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - **There were no defaults upon senior securities**[398](index=398&type=chunk) [Item 4. Mine Safety Disclosures](index=82&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that the disclosure requirements for mine safety are not applicable to the company [Item 5. Other Information](index=82&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report under this item [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation and Bylaws, Second Amended and Restated Tax Receivable Agreement, and various certifications - Key exhibits include the **Agreement and Plan of Merger (2.1), Amended and Restated Certificate of Incorporation (3.1) and Bylaws (3.2), Second Amended and Restated Tax Receivable Agreement (10.1), and CEO/CFO certifications (31.1, 31.2, 32.1, 32.2)**[401](index=401&type=chunk) [Signatures](index=84&type=section&id=SIGNATURES) This section contains the required signatures of the Chief Executive Officer and Chief Financial Officer, certifying the Form 10-Q report as of August 8, 2025 - The report is signed by **Jonathan Slager, Chief Executive Officer, and Katherine Elsnab, Chief Financial Officer, on August 8, 2025**[407](index=407&type=chunk)

PART I: FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents The Wendy's Company's unaudited condensed consolidated financial statements for the quarterly period ended June 29, 2025, including Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, along with detailed notes explaining the basis of presentation and key accounting policies [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 29, 2025, total assets decreased to **$4.89 billion** from **$5.03 billion** at year-end 2024, primarily due to a reduction in cash and cash equivalents, while total liabilities remained relatively stable at **$4.78 billion**, and total stockholders' equity decreased significantly from **$259.4 million** to **$112.9 million**, driven by treasury stock repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$4,894,148** | **$5,034,843** | | Cash and cash equivalents | $281,226 | $450,512 | | **Total Liabilities** | **$4,781,260** | **$4,775,491** | | Long-term debt | $2,650,907 | $2,662,130 | | **Total Stockholders' Equity** | **$112,888** | **$259,352** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the second quarter of 2025, total revenues slightly decreased to **$560.9 million** compared to **$570.7 million** in Q2 2024, yet operating profit increased to **$104.3 million** from **$99.5 million**, and net income was stable at **$55.1 million**, with diluted EPS rising to **$0.29** from **$0.27** year-over-year Q2 and H1 2025 vs 2024 Performance (in thousands, except EPS) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $560,929 | $570,727 | $1,084,401 | $1,105,480 | | Operating Profit | $104,260 | $99,507 | $187,386 | $180,663 | | Net Income | $55,110 | $54,643 | $94,342 | $96,636 | | Diluted EPS | $0.29 | $0.27 | $0.48 | $0.47 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 29, 2025, net cash from operating activities was stable at **$146.0 million**, cash used in investing activities increased to **$52.3 million**, and cash used in financing activities significantly increased to **$272.7 million**, primarily due to a large increase in common stock repurchases (**$186.5 million** in 2025 vs. **$34.2 million** in 2024), resulting in a net decrease in cash of **$173.5 million** Six Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,008 | $145,463 | | Net cash used in investing activities | ($52,264) | ($43,958) | | Net cash used in financing activities | ($272,687) | ($162,382) | | Net decrease in cash | ($173,506) | ($64,175) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on key financial statement components, outlining the basis of presentation, disaggregating revenue by segment, detailing lease accounting, long-term debt structure, stockholder equity activities including dividends and repurchases, and providing segment-level financial performance - The company's business is managed and reported in three segments: Wendy's U.S., Wendy's International, and Global Real Estate & Development[25](index=25&type=chunk) Total Revenues by Segment - Q2 2025 (in thousands) | Segment | Q2 2025 Revenue | | :--- | :--- | | Wendy's U.S. | $461,142 | | Wendy's International | $38,850 | | Global Real Estate & Development | $60,937 | | **Total** | **$560,929** | - During Q1 and Q2 2025, the company paid dividends of **$0.25** and **$0.14 per share**, respectively[66](index=66&type=chunk) - In the first six months of 2025, the company repurchased **12,957 thousand shares** for an aggregate price of **$186.0 million** under its January 2023 authorization, leaving **$49.0 million** available[67](index=67&type=chunk) [Management's Discussion and Analysis (MD&A)](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the second quarter and first half of 2025, covering a slight decrease in global systemwide sales and revenues, segment performance, revenue and expense fluctuations, and an overview of liquidity, capital resources, and cash flows [Executive Overview and Key Business Measures](index=28&type=section&id=Executive%20Overview%20and%20Key%20Business%20Measures) As of June 29, 2025, the Wendy's system comprised **7,334 restaurants**, with approximately **5%** being company-operated, and management tracks performance using key metrics such as Same-Restaurant Sales, Company-Operated Restaurant Margin, and Systemwide Sales - As of June 29, 2025, the Wendy's system had **7,334 restaurants**, with **5,967** in the U.S. and **1,367** internationally[119](index=119&type=chunk) - Key business measures used by management include **Same-Restaurant Sales**, **Company-Operated Restaurant Margin**, and **Systemwide Sales**[123](index=123&type=chunk)[124](index=124&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) In Q2 2025, revenues decreased **1.7%** to **$560.9 million**, and global same-restaurant sales fell **2.9%**, driven by a **3.6%** decline in the U.S. despite a **1.8%** increase internationally, primarily due to lower traffic partially offset by a higher average check Same-Restaurant Sales Growth - Q2 2025 vs Q2 2024 | Region/Type | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | U.S. Systemwide | (3.6)% | 0.6% | | International | 1.8% | 2.5% | | **Global Systemwide** | **(2.9)%** | **0.8%** | - The decrease in sales for company-operated restaurants was primarily due to a decrease in traffic, partially offset by a higher average check[140](index=140&type=chunk) - Cost of sales as a percentage of sales increased in Q2 2025, driven by higher commodity costs and restaurant labor rates, which was partially offset by labor efficiencies and higher average check[146](index=146&type=chunk) [Segment Information](index=37&type=section&id=Segment%20Information) In Q2 2025, Wendy's U.S. segment revenues declined to **$461.1 million** but profit slightly increased to **$137.2 million**, while Wendy's International segment saw revenue growth to **$38.9 million** and profit increase to **$13.2 million**, and Global Real Estate & Development segment's revenue and profit both slightly decreased Segment Profit (Adjusted EBITDA) - Q2 2025 vs Q2 2024 (in millions) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Wendy's U.S. | $137.2 | $136.7 | | Wendy's International | $13.2 | $10.7 | | Global Real Estate & Development | $27.3 | $28.2 | [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 29, 2025, the company held **$330.1 million** in cash, cash equivalents, and restricted cash, with management believing current cash and operating cash flows are sufficient for the next 12 months, despite significant cash used in financing activities due to **$186.0 million** in stock repurchases and **$76.2 million** in dividends - The company repurchased **13.0 million shares** for **$186.0 million** in the first six months of 2025[170](index=170&type=chunk) - Dividends paid in the first half of 2025 totaled **$76.2 million**[171](index=171&type=chunk) - The significant increase in cash used in financing activities was primarily due to a **$152.3 million** increase in common stock repurchases compared to the prior year[177](index=177&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports that as of June 29, 2025, there have been no material changes to the market risk information previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 29, 2024 - There were no material changes from the market risk information contained in the Company's Form 10-K for the fiscal year ended December 29, 2024[180](index=180&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Interim CEO and CFO, concluded the company's disclosure controls and procedures were effective as of June 29, 2025, with no material changes in internal control over financial reporting during the second quarter of 2025 - Based on evaluations, the Interim CEO and CFO concluded that as of June 29, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[181](index=181&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, its internal control[182](index=182&type=chunk) PART II: OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various litigation and claims incidental to its business, for which management believes it has established adequate accruals, though an aggregate possible range of loss cannot be estimated due to the preliminary stage of many proceedings - The Company believes it has adequate accruals for all of its legal and environmental matters but cannot estimate the aggregate possible range of loss for existing litigation and claims[186](index=186&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes from the risk factors that were previously disclosed in its Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Company's Form 10-K[187](index=187&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the second quarter of 2025, with **4.78 million shares** repurchased at an average price of **$12.97 per share**, leaving **$49.0 million** available under the existing plan Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Value Remaining Under Plan | | :--- | :--- | :--- | :--- | | **Total Q2 2025** | **4,777,483** | **$12.97** | **$49,037,650** | - The Board of Directors authorized a **$500.0 million** repurchase program in January 2023, effective through February 28, 2027[192](index=192&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including a marketing consulting agreement and certifications from the Interim CEO and CFO as required by the Sarbanes-Oxley Act - Exhibits filed include a Marketing Consulting Agreement, CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and financial data in Inline XBRL format[193](index=193&type=chunk)

[Part I - Financial Information](index=5&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited financial statements show a significant cash increase post-IPO, strong revenue growth, and a narrowing net loss, reflecting the conversion of preferred stock [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet reflects a substantial increase in assets and a shift to positive stockholders' equity, driven by IPO proceeds Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $223,146 | $76,392 | | Total current assets | $271,105 | $113,059 | | Total assets | $302,971 | $150,892 | | Total current liabilities | $57,988 | $53,953 | | Total liabilities | $88,757 | $86,261 | | Total stockholders' equity (deficit) | $214,214 | $(384,403) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company achieved strong revenue growth and a significantly narrowed net loss in Q2 2025, demonstrating improved operational efficiency Statement of Operations Summary (in thousands, except per-share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $61,371 | $41,212 | +49% | $116,334 | $76,307 | +52% | | Gross Profit | $40,306 | $24,834 | +62% | $72,206 | $42,182 | +71% | | Operating Loss | $(4,344) | $(10,037) | +57% | $(12,740) | $(28,030) | +55% | | Net Loss | $(5,311) | $(10,692) | +50% | $(14,759) | $(29,661) | +50% | | Net Loss Per Share | $(0.24) | $(1.40) | +83% | $(0.98) | $(3.92) | +75% | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) Stockholders' equity became positive due to the IPO proceeds and the conversion of all redeemable convertible preferred stock - The company received net proceeds of **$151.6 million** from its Initial Public Offering (IPO) in Q2 2025[30](index=30&type=chunk) - In connection with the IPO, all outstanding redeemable convertible preferred stock, valued at **$452.1 million**, was converted into common stock[30](index=30&type=chunk)[84](index=84&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations improved, and financing activities, driven by IPO proceeds, substantially increased total cash reserves Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,260) | $(28,748) | | Net cash used in investing activities | $(2,499) | $(1,826) | | Net cash provided by (used in) financing activities | $162,513 | $(898) | | **Net increase (decrease) in cash** | **$146,754** | **$(31,472)** | - The company received **$160.5 million** in proceeds from its IPO, net of underwriting discounts and commissions, during the first six months of 2025[33](index=33&type=chunk)[209](index=209&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key events including the IPO, a reverse stock split, significant customer concentration, and a subsequent debt repayment - The company completed its IPO on June 9, 2025, raising net proceeds of **$151.6 million** after deducting underwriting discounts and offering expenses[44](index=44&type=chunk) - A **one-for-three reverse stock split** of the company's common stock was effected on May 27, 2025[43](index=43&type=chunk) - Two significant channel partners, both affiliates of The Cigna Group, accounted for **32% and 33% of revenue**, respectively, for the three months ended June 30, 2025[49](index=49&type=chunk) - As a subsequent event, on July 31, 2025, the company fully repaid its outstanding MidCap Term Facility and MidCap Revolving Facility debt, with principal and accrued interest balances of **$31.0 million** and **$0.4 million**, respectively[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong revenue and member growth, improved gross margins from efficiency initiatives, and a strengthened liquidity position following the IPO and subsequent debt repayment [Overview and Business Model](index=30&type=section&id=Overview%20and%20Business%20Model) Omada provides virtual care programs for chronic conditions via a B2B2C model, serving over 752,000 members as of June 30, 2025 - Omada offers virtual care programs for cardiometabolic conditions, musculoskeletal (MSK) conditions, and provides support for members taking GLP-1 agonists[110](index=110&type=chunk)[113](index=113&type=chunk) - The company operates on a B2B2C model, selling primarily to employers, health plans, and PBMs[112](index=112&type=chunk)[121](index=121&type=chunk) - Total members enrolled reached over **752,000** as of June 30, 2025[114](index=114&type=chunk) [Key Factors Affecting Performance](index=33&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) Performance hinges on acquiring and retaining customers, expanding program adoption, and driving member enrollment and engagement - Key growth strategies include acquiring new customers and channel partners, retaining existing relationships, and expanding the number of programs used by each customer[126](index=126&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - Member enrollment and engagement are crucial for revenue, as most customer fees are based on these metrics, and some contracts include performance guarantees tied to clinical outcomes or cost savings[130](index=130&type=chunk)[131](index=131&type=chunk) [Key Metric](index=34&type=section&id=Key%20Metric) The primary performance metric, Total Members, grew 52% year-over-year to 752,000 as of June 30, 2025 Total Members Growth | As of | Total Members | | :--- | :--- | | June 30, 2024 | 496,000 | | March 31, 2025 | 679,000 | | June 30, 2025 | 752,000 | [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Q2 2025 revenue grew 49% YoY to $61.4 million, with gross margin improving to 65.7% due to operational efficiencies Revenue Comparison (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Three Months Ended June 30** | $61,371 | $41,212 | $20,159 | 49% | | **Six Months Ended June 30** | $116,334 | $76,307 | $40,027 | 52% | Gross Profit and Gross Margin Comparison | Period | 2025 | 2024 | | :--- | :--- | :--- | | **Three Months Ended June 30** | | | | Gross Profit (in thousands) | $40,306 | $24,834 | | Gross Margin | 65.7% | 60.3% | | **Six Months Ended June 30** | | | | Gross Profit (in thousands) | $72,206 | $42,182 | | Gross Margin | 62.1% | 55.3% | - Gross margin expansion was primarily driven by lower personnel costs per member due to strategic efficiency initiatives and the use of supporting technologies for the Care Team[171](index=171&type=chunk)[172](index=172&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was significantly enhanced by $151.6 million in net IPO proceeds, enabling the full repayment of its $31.0 million debt facility post-quarter - As of June 30, 2025, the company's principal sources of liquidity were cash and cash equivalents of **$223.1 million**[197](index=197&type=chunk) - The company completed its IPO on June 9, 2025, receiving net proceeds of **$151.6 million**[202](index=202&type=chunk) - On July 31, 2025, the company fully repaid its outstanding debt under the MidCap Term Facility and MidCap Revolving Facility, totaling **$31.0 million** in principal[203](index=203&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are identified as interest rate fluctuations affecting its cash and debt, and inflation impacting operating costs - **Interest Rate Risk:** The company is exposed to interest rate risk from its cash equivalents and its variable-rate financing arrangements, though a hypothetical 10% change was not expected to have a material impact[221](index=221&type=chunk) - **Inflation Risk:** The company believes that inflation is impacting customer spending decisions and could increase its own costs for labor, sales, marketing, and cloud hosting, potentially harming results if not offset by price increases[222](index=222&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2025, due to ongoing material weaknesses in internal control over financial reporting[223](index=223&type=chunk) - The material weaknesses relate to: (i) inadequate segregation of duties, (ii) insufficient personnel with appropriate technical accounting knowledge, and (iii) inadequate formalized financial close and reporting processes[225](index=225&type=chunk) - A remediation plan is underway, which includes hiring additional resources, implementing new controls, and formalizing business processes[226](index=226&type=chunk)[231](index=231&type=chunk) [Part II - Other Information](index=53&type=section&id=Part%20II%20-%20Other%20Information) [Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is not currently party to any **material legal proceedings**[233](index=233&type=chunk) [Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from its history of net losses, customer concentration, competition, regulations, and internal control weaknesses - **Financial and Operational Risks:** The company has a history of net losses and may not achieve or maintain profitability, with growth dependent on managing expansion effectively and retaining customers[238](index=238&type=chunk)[240](index=240&type=chunk) - **Customer Concentration Risk:** A substantial portion of sales comes from or through a limited number of customers and channel partners, with affiliates of **The Cigna Group** being particularly significant[260](index=260&type=chunk) - **Regulatory and Compliance Risks:** The business is subject to extensive healthcare regulations, including HIPAA, state privacy laws, consumer protection laws, and state laws prohibiting the corporate practice of physical therapy[345](index=345&type=chunk)[347](index=347&type=chunk)[361](index=361&type=chunk) - **Internal Control Risk:** The company has identified and is remediating **material weaknesses** in its internal control over financial reporting related to segregation of duties, technical expertise, and formalized processes[237](index=237&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=107&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details the use of its $151.6 million in net IPO proceeds, a portion of which was used to repay outstanding debt - The company completed its IPO on June 9, 2025, receiving net proceeds of approximately **$151.6 million** after deducting underwriting discounts and offering expenses[440](index=440&type=chunk) - A portion of the net proceeds from the IPO was used to repay outstanding borrowings under the MidCap Credit Agreement[442](index=442&type=chunk) [Defaults Upon Senior Securities](index=108&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - Not Applicable[444](index=444&type=chunk) [Mine Safety Disclosures](index=108&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not Applicable[445](index=445&type=chunk) [Other Information](index=108&type=section&id=Item%205.%20Other%20Information) No director or officer trading plans were adopted, modified, or terminated during the quarter - No director or officer trading plans under Rule 10b5-1 were adopted, modified, or terminated during the quarter[446](index=446&type=chunk) [Exhibits](index=109&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the report, including governance documents and required officer certifications - The report includes an index of all exhibits filed, such as corporate governance documents, material agreements, and required CEO/CFO certifications[448](index=448&type=chunk)[449](index=449&type=chunk)[450](index=450&type=chunk)

PART I FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements, management's discussion, market risks, and controls and procedures [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Pangaea Logistics Solutions Ltd. for the periods ended June 30, 2025, and December 31, 2024, highlighting key financial changes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets, highlighting changes in cash, assets, liabilities, and equity between June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $59,252,910 | $86,805,470 | $(27,552,560) | -31.74% | | Total current assets | $184,008,795 | $191,993,893 | $(7,985,098) | -4.16% | | Total assets | $915,995,446 | $936,457,081 | $(20,461,635) | -2.18% | | Total current liabilities | $126,009,715 | $109,108,111 | $16,901,604 | 15.49% | | Total stockholders' equity | $459,130,313 | $474,664,335 | $(15,534,022) | -3.27% | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the consolidated statements of operations, showing revenue, expenses, and net income/loss for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------ | :----------- | :----------- | :------- | :------- | | Total revenue | $156,689,442 | $131,497,852 | $25,191,590 | 19.16% | | Total expenses | $153,035,850 | $123,883,626 | $29,152,224 | 23.53% | | Income from operations | $3,653,592 | $7,614,226 | $(3,960,634) | -52.02% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(2,742,116) | $3,682,775 | $(6,424,891) | -174.45% | | Basic (loss) earnings per common share | $(0.04) | $0.08 | $(0.12) | -150.00% | | Diluted (loss) earnings per common share | $(0.04) | $0.08 | $(0.12) | -150.00% | Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------ | :----------- | :----------- | :------- | :------- | | Total revenue | $279,491,328 | $236,246,405 | $43,244,923 | 18.31% | | Total expenses | $272,911,290 | $217,604,060 | $55,307,230 | 25.42% | | Income from operations | $6,580,038 | $18,642,345 | $(12,062,307) | -64.70% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(4,722,993) | $15,356,951 | $(20,079,944) | -130.75% | | Basic (loss) earnings per common share | $(0.07) | $0.34 | $(0.41) | -120.59% | | Diluted (loss) earnings per common share | $(0.07) | $0.33 | $(0.40) | -121.21% | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in stockholders' equity, including share-based compensation, distributions, repurchases, dividends, and net loss for the six months ended June 30, 2025 Stockholders' Equity Changes (Six Months Ended June 30, 2025) | Item | Amount | | :------------------------------------------ | :------------- | | Balance at December 31, 2024 | $474,664,335 | | Share-based compensation | $2,080,781 | | Distribution to Non-Controlling Interests | $(1,941,667) | | Share repurchases | $(1,007,102) | | Common Stock Dividend | $(9,845,199) | | Net Loss | $(5,098,740) | | Balance at June 30, 2025 | $459,130,313 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Activity | 2025 | 2024 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Net cash provided by operating activities | $10,039,158 | $17,955,519 | $(7,916,361) | -44.09% | | Net cash used in investing activities | $(2,411,298) | $(9,139,000) | $6,727,702 | -73.61% | | Net cash used in financing activities | $(35,180,420) | $(29,907,430) | $(5,272,990) | 17.63% | | Net change in cash and cash equivalents | $(27,552,560) | $(21,090,911) | $(6,461,649) | 30.64% | | Cash and cash equivalents, end of period | $59,252,910 | $77,946,955 | $(18,694,045) | -24.00% | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes supporting the consolidated financial statements, covering general information, accounting policies, and specific financial accounts [Note 1 - General Information and Recent Events](index=8&type=section&id=Note%201%20-%20General%20Information%20and%20Recent%20Events) This note provides an overview of Pangaea Logistics Solutions Ltd.'s business, fleet composition, and recent corporate actions - Pangaea Logistics Solutions Ltd. is a Bermuda-incorporated holding company engaged in worldwide drybulk cargo ocean transportation through vessel ownership, chartering, and operation[18](index=18&type=chunk) - As of June 30, 2025, the Company owned **41 drybulk vessels**, including three Panamax, two Ultramax Ice Class 1C, two Ultramax, nine Supramax, four Post-Panamax Ice Class 1A, and fifteen Handysize vessels (acquired via merger with Strategic Shipping Inc. on December 30, 2024)[19](index=19&type=chunk)[20](index=20&type=chunk) - On July 31, 2025, the Company acquired the remaining **49% equity interest** in Seamar Management for **$2.7 million**, making it a wholly-owned subsidiary[20](index=20&type=chunk) [Note 2 - Basis of Presentation and Significant Accounting Policies](index=9&type=section&id=Note%202%20-%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note describes the basis of financial statement presentation, significant accounting policies, key estimates, and recent accounting pronouncements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, reflecting all normal recurring adjustments[22](index=22&type=chunk) - Significant estimates include voyage completion percentage, allowance for credit losses, vessel depreciation salvage value, and long-lived asset impairment evaluation[23](index=23&type=chunk) - One significant customer accounted for **31% of accounts receivable** as of June 30, 2025, indicating a concentration of credit risk[24](index=24&type=chunk) Advance Hire, Prepaid Expenses and Other Current Assets | Item | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Advance hire | $1,758,980 | $3,348,104 | | Prepaid expenses | $7,109,756 | $9,517,482 | | Accrued receivables | $13,359,656 | $7,352,376 | | Cash margin on deposit | $1,752,935 | $3,268,455 | | Derivative assets | $1,023,259 | $2,047,196 | | Other current assets | $4,296,067 | $4,435,739 | | **Total** | **$29,300,653** | **$29,969,352** | - The Company adopted ASU 2023-09 (Income Taxes) in Q1 2025 with no material impact and is assessing ASU 2024-03 (Expense Disaggregation), ASU 2025-03 (Business Combinations), and ASU 2025-04 (Share-Based Payments) for future impact[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 3 - Cash and Cash Equivalents](index=13&type=section&id=Note%203%20-%20Cash%20and%20Cash%20Equivalents) This note details the composition and changes in cash and cash equivalents, highlighting a significant decrease from the prior year-end Cash and Cash Equivalents (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Money market accounts | $22,632,333 | $33,239,201 | | Time deposit accounts | — | $10,204,382 | | Cash | $36,620,577 | $43,361,887 | | **Total cash and cash equivalents** | **$59,252,910** | **$86,805,470** | - Cash and cash equivalents decreased by **31.74%** from **$86.8 million** at December 31, 2024, to **$59.3 million** at June 30, 2025[45](index=45&type=chunk) [Note 4 - Fixed Assets](index=14&type=section&id=Note%204%20-%20Fixed%20Assets) This note provides information on the Company's owned dry bulk vessels and barge, including carrying amounts and asset reclassifications - As of June 30, 2025, the Company owned **41 dry bulk vessels** and one barge, with a total net carrying amount of **$694.4 million**, down from **$707.8 million** at December 31, 2024[46](index=46&type=chunk)[47](index=47&type=chunk) - On June 12, 2025, the M/V Strategic Endeavor was reclassified as held for sale at **$7.7 million** and was delivered to the buyer on July 21, 2025[48](index=48&type=chunk)[93](index=93&type=chunk) - No triggering event for long-lived asset impairment testing occurred during the first half of 2025 or 2024[49](index=49&type=chunk)[141](index=141&type=chunk) [Note 5 - Debt](index=16&type=section&id=Note%205%20-%20Debt) This note details the Company's outstanding long-term debt and financing obligations, confirming compliance with financial covenants Outstanding Long-Term Debt (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Total secured long-term debt | $123,049,844 | $131,319,017 | | Less: unamortized issuance costs | $(1,681,148) | $(2,022,277) | | Less: current portion | $(16,656,227) | $(16,576,195) | | **Secured long-term debt, net** | **$104,712,469** | **$112,720,545** | - The Company was in compliance with all financial covenants, including minimum liquidity and collateral maintenance ratios, as of June 30, 2025, and December 31, 2024[53](index=53&type=chunk) Financing Obligations from Failed Sale Leaseback Transactions (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total financing obligations | $244,686,536 | $257,183,904 | | Less: unamortized issuance costs, net | $(2,137,159) | $(2,387,007) | | Less: current portion | $(25,438,710) | $(25,267,105) | | **Financing Obligations, net** | **$217,110,667** | **$229,529,792** | [Note 6 - Finance Leases](index=19&type=section&id=Note%206%20-%20Finance%20Leases) This note describes the Company's finance lease arrangements for vessels, including outstanding balances and interest rate cap details - The Company's fleet includes two vessels, Bulk Xaymaca and Bulk Destiny, financed through sale and leaseback arrangements accounted for as finance leases[58](index=58&type=chunk) Finance Leases (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total finance leases | $11,947,395 | $13,369,270 | | Less: unamortized issuance costs, net | $(71,363) | $(91,222) | | Less: current portion | $(2,843,750) | $(2,843,750) | | **Long-term lease liabilities, net** | **$9,032,282** | **$10,434,298** | - An interest rate cap is effective from Q2 2026 through Q4 2026, capping SOFR at **3.51%** for certain finance leases[60](index=60&type=chunk) [Note 7 - Derivative Instruments and Fair Value Measurements](index=21&type=section&id=Note%207%20-%20Derivative%20Instruments%20and%20Fair%20Value%20Measurements) This note explains the Company's use of derivative instruments to manage market risks and their impact on financial results - The Company uses forward freight agreements (FFAs), fuel swap contracts, and interest rate caps to manage exposure to fluctuating freight rates, bunker prices, and interest rate movements[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - These economic hedges generally do not qualify for hedge accounting, leading to potential fluctuations in reported operating results[63](index=63&type=chunk)[64](index=64&type=chunk) Effect of Derivative Financial Instruments on Consolidated Statements of Operations (Six Months Ended June 30) | Derivative Instrument | 2025 (Unrealized Loss) | 2024 (Unrealized Gain) | | :-------------------- | :--------------------- | :--------------------- | | Forward freight agreements | $(238,660) | $1,808,866 | | Fuel Swap Contracts | $(505,883) | $2,111,232 | | Interest rate cap | $(850,169) | $236,738 | | **Total (loss) gain** | **$(1,117,392)** | **$4,156,836** | [Note 8 - Related Party Transactions](index=23&type=section&id=Note%208%20-%20Related%20Party%20Transactions) This note discloses transactions with related parties, including technical management fees and intercompany eliminations - The Company incurred technical management fees of approximately **$562,500** for the three months ended June 30, 2025, and **$1,125,000** for the six months ended June 30, 2025, under an agreement with MTM Ship Management[74](index=74&type=chunk) - Upon consolidation of Seamar Management in Q2 2025, the intercompany payable balance was eliminated[72](index=72&type=chunk) [Note 9 - Commitments and Contingencies](index=23&type=section&id=Note%209%20-%20Commitments%20and%20Contingencies) This note outlines the Company's non-cancelable office leases and management's assessment of potential legal claims - The Company has non-cancelable office leases in Copenhagen (expires Dec 2025, then month-to-month with 6-month non-cancelable period) and Singapore (renewed for **15 months** in June 2025)[75](index=75&type=chunk)[76](index=76&type=chunk) - Lease expenses for office leases were approximately **$50,000** for the three months ended June 30, 2025, and **$100,000** for the six months ended June 30, 2025[76](index=76&type=chunk)[77](index=77&type=chunk) - Management believes that the financial impact of asserted claims arising in the ordinary course of business will not be material to the Company's consolidated financial position, results of operations, or cash flows[78](index=78&type=chunk) [Note 10 – Stockholders' Equity](index=24&type=section&id=Note%2010%20%E2%80%93%20Stockholders%27%20Equity) This note details changes in stockholders' equity, including share repurchase programs, dividends, and common stock outstanding - On May 8, 2025, the Board authorized a **$15.0 million** share repurchase program, representing approximately **5.6%** of market capitalization[79](index=79&type=chunk) - During the six months ended June 30, 2025, the Company repurchased and retired **202,882 shares** at an average price of **$4.96 per share**, totaling approximately **$1.01 million**[80](index=80&type=chunk) - As of June 30, 2025, approximately **$14.0 million** remained available under the repurchase program[81](index=81&type=chunk) - Total cash dividends paid were approximately **$9.9 million** for the six months ended June 30, 2025[82](index=82&type=chunk) Changes in Common Stock Outstanding (Six Months Ended June 30, 2025) | Description | Number of Shares | | :-------------------------------- | :--------------- | | Shares outstanding at December 31, 2024 | 64,961,433 | | Shares issued (e.g., equity grants) | 661,504 | | Share forfeitures | (42,918) | | Shares repurchased and retired | (202,882) | | **Shares outstanding at June 30, 2025** | **65,377,137** | [Note 11 - Net Income per Common Share](index=24&type=section&id=Note%2011%20-%20Net%20Income%20per%20Common%20Share) This note presents the basic and diluted net income per common share calculations for the reporting periods Basic and Diluted Net Income per Share (Three Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net (loss) income | $(2,742,116) | $3,682,775 | | Weighted Average Shares - Basic | 64,042,209 | 45,276,791 | | Weighted Average Shares - Diluted | 64,042,209 | 46,028,902 | | Basic net (loss) income per share | $(0.04) | $0.08 | | Diluted net (loss) income per share | $(0.04) | $0.08 | Basic and Diluted Net Income per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net (loss) income | $(4,722,993) | $15,356,951 | | Weighted Average Shares - Basic | 63,988,996 | 45,245,655 | | Weighted Average Shares - Diluted | 63,988,996 | 45,922,272 | | Basic net (loss) income per share | $(0.07) | $0.34 | | Diluted net (loss) income per share | $(0.07) | $0.33 | - Restricted stock awards of approximately **380,000 shares** (three months) and **406,000 shares** (six months) were excluded from diluted EPS calculation for 2025 as their effect would have been anti-dilutive due to the net loss[85](index=85&type=chunk) [Note 12. Employee Benefit Plans](index=25&type=section&id=Note%2012.%20Employee%20Benefit%20Plans) This note describes the Company's 401(k) retirement savings plan and associated matching contributions expense - The Company sponsors a 401(k) retirement savings plan, providing a **100% match** on the first **4%** of eligible employee contributions, which vest immediately[87](index=87&type=chunk)[88](index=88&type=chunk) - Matching contributions expense was approximately **$55,000** for the three months ended June 30, 2025, and **$233,000** for the six months ended June 30, 2025[88](index=88&type=chunk) [Note 13 – Segment Information and Geographic Data](index=25&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information%20and%20Geographic%20Data) This note provides information on the Company's single reportable shipping segment and revenue breakdown by geographic area - The Company operates a single reportable segment: shipping, focused on seaborne dry bulk logistics and transportation services globally[89](index=89&type=chunk) - The CEO, as CODM, assesses profitability and asset performance using Time Charter Equivalent (TCE) rates, with voyage expenses as the primary expense analyzed[90](index=90&type=chunk) Shipping Segment Total Revenue (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Shipping segment total revenue | $153,103,042 | $127,942,525 | $25,160,517 | 19.67% | | Total consolidated revenue | $156,689,442 | $131,497,852 | $25,191,590 | 19.16% | Shipping Segment Total Revenue (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Shipping segment total revenue | $272,688,080 | $230,161,097 | $42,526,983 | 18.48% | | Total consolidated revenue | $279,491,328 | $236,246,405 | $43,244,923 | 18.31% | Revenue by Geographic Area (Six Months Ended June 30) | Region | 2025 | 2024 | Change | % Change | | :------------- | :----------- | :----------- | :------- | :------- | | United States | $81,468,643 | $83,063,706 | $(1,595,063) | -1.92% | | Singapore | $30,998,149 | $17,597,973 | $13,400,176 | 76.15% | | Germany | $29,992,228 | $20,866,516 | $9,125,712 | 43.74% | | Other | $137,032,308 | $114,718,210 | $22,314,100 | 19.45% | | **Total** | **$279,491,328** | **$236,246,405** | **$43,244,923** | **18.31%** | [Note 14 - Subsequent Events](index=26&type=section&id=Note%2014%20-%20Subsequent%20Events) This note discloses significant events occurring after the balance sheet date, including asset sales and acquisitions - The M/V Strategic Endeavor was sold for **$7.7 million** and delivered to the buyer on July 21, 2025[93](index=93&type=chunk) - On July 31, 2025, the Company acquired the remaining **49% equity interest** in Seamar Management for **$2.7 million**, making it a wholly-owned subsidiary[94](index=94&type=chunk) - On August 6, 2025, the Board declared a quarterly cash dividend of **$0.05 per common share**, payable September 15, 2025[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the Company's financial condition, operational results, liquidity, and capital resources, including industry context [Important Financial and Operational Terms and Concepts](index=27&type=section&id=Important%20Financial%20and%20Operational%20Terms%20and%20Concepts) This section defines key financial and operational terms used in the drybulk shipping industry, such as voyage revenue, charter revenue, and TCE rates - Voyage Revenue: Derived from voyage charters where the Company retains control over vessel operations, recognized straight-line over voyage days[98](index=98&type=chunk)[36](index=36&type=chunk) - Charter Revenue: Earned from time charters where the charterer directs vessel use, recognized straight-line over the charter term, and identified as operating leases under ASC 842[99](index=99&type=chunk)[37](index=37&type=chunk) - Voyage Expenses: Include bunkers, port charges, canal tolls, brokerage commissions, and cargo handling, expensed as incurred[100](index=100&type=chunk) - Time Charter Equivalent (TCE) rates: Total revenues less voyage expenses divided by voyage length, a key industry performance measure[107](index=107&type=chunk)[108](index=108&type=chunk) [Selected Financial Information](index=29&type=section&id=Selected%20Financial%20Information) This section presents selected financial data, including revenue, gross profit, net income, and Adjusted EBITDA, for the reported periods Selected Financial Data (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Total revenue | $156,689 | $131,498 | $25,191 | 19.16% | | Gross Profit | $10,865 | $12,671 | $(1,806) | -14.25% | | Income from operations | $3,654 | $7,614 | $(3,960) | -52.01% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(2,742) | $3,683 | $(6,425) | -174.45% | | Basic net (loss) income per share | $(0.04) | $0.08 | $(0.12) | -150.00% | | Adjusted EBITDA | $15,284 | $15,931 | $(647) | -4.06% | | TCE Rates ($/day) | $12,108 | $16,223 | $(4,115) | -25.37% | Selected Financial Data (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Total revenue | $279,491 | $236,246 | $43,245 | 18.31% | | Gross Profit | $21,093 | $31,005 | $(9,912) | -31.97% | | Income from operations | $6,580 | $18,642 | $(12,062) | -64.70% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(4,723) | $15,357 | $(20,080) | -130.75% | | Basic net (loss) income per share | $(0.07) | $0.34 | $(0.41) | -120.59% | | Adjusted EBITDA | $30,059 | $35,878 | $(5,819) | -16.22% | | TCE Rates ($/day) | $11,781 | $16,919 | $(5,138) | -30.37% | Selected Balance Sheet Data (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Cash and cash equivalents | $59,253 | $86,805 | | Total assets | $915,995 | $936,457 | | Total secured debt, including leases liabilities | $375,794 | $397,372 | | Total shareholders' equity | $459,130 | $474,664 | [Industry Overview](index=32&type=section&id=Industry%20Overview) This section provides an overview of the drybulk shipping industry, highlighting market cyclicality, BDI trends, and fleet expansion impacts - The drybulk shipping industry is cyclical and subject to macroeconomic shifts, geopolitical volatility, and fluctuations in vessel supply/demand and drybulk commodity demand[113](index=113&type=chunk) - The Baltic Dry Index (BDI) averaged **1,467** for Q2 2025, a **21% decrease** from **1,853** in Q2 2024, reflecting weakened market rates[114](index=114&type=chunk) - Average market rates for Panamax, Supramax, and Handysize vessels decreased by approximately **31%** from **$15,104** in Q2 2024 to **$10,347** in Q2 2025[114](index=114&type=chunk) - Fleet expansion from the December 2024 acquisition of **15 vessels** (**58% increase** in total vessel count) led to a **1,365-day increase** in available owned shipping days in Q2 2025[115](index=115&type=chunk) [Quarterly TCE Performance](index=32&type=section&id=Quarterly%20TCE%20Performance) This section analyzes the Company's Time Charter Equivalent (TCE) rates, comparing performance against market indexes for the quarter - For Q2 2025, TCE rates decreased by **25%** to **$12,108** from **$16,223** in Q2 2024, due to overall dry bulk market weakening[117](index=117&type=chunk) - Despite the market decline, Pangaea's TCE rates outperformed the average Baltic panamax, supramax, and handysize market indexes by approximately **17%** due to long-term contracts, specialized fleet, and cargo-focused strategy[117](index=117&type=chunk) [Second Quarter Highlights](index=32&type=section&id=Second%20Quarter%20Highlights) This section summarizes key financial results for the second quarter, including net loss, diluted EPS, Adjusted EBITDA, and cash position - Net loss attributable to Pangaea Logistics Solutions Ltd. was approximately **$2.7 million** for Q2 2025, compared to net income of **$3.7 million** for Q2 2024[120](index=120&type=chunk) - Diluted net loss per share was **$0.04** for Q2 2025, compared to diluted net income per share of **$0.08** for Q2 2024[120](index=120&type=chunk) - Adjusted EBITDA was **$15.3 million** for Q2 2025, a decrease from **$15.9 million** for Q2 2024[120](index=120&type=chunk) - Cash and cash equivalents stood at **$59.3 million** at the end of Q2 2025[120](index=120&type=chunk) [Revenues (Three Months Ended June 30, 2025 vs. 2024)](index=32&type=section&id=Revenues%20(Three%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section analyzes revenue changes for the three months ended June 30, 2025, driven by shipping days and market rates - Total revenue increased by **19%** to **$156.7 million** for Q2 2025, primarily due to a **51% rise** in total shipping days (**6,222 days**), partially offset by decreased market rates[119](index=119&type=chunk) - Voyage revenues increased by **18%** to **$146.3 million**, driven by a **43% increase** in voyage days (**5,575 days**) due to fleet expansion, despite declining market freight rates[121](index=121&type=chunk) - Charter revenues increased by **78%** (**$3.1 million**) to **$6.9 million**, mainly due to a **213% increase** in time charter days (**647 days**), partially offset by a **31% decline** in average market charter rates[122](index=122&type=chunk) - Terminal & Stevedore revenues remained stable at **$3.6 million**[123](index=123&type=chunk) [Operating and Business Expenses (Three Months Ended June 30, 2025 vs. 2024)](index=33&type=section&id=Operating%20and%20Business%20Expenses%20(Three%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section details changes in operating and business expenses for the three months ended June 30, 2025, influenced by fleet expansion and market rates - Voyage expenses increased by **27%** to **$77.8 million**, driven by a **43% increase** in voyage days, leading to higher bunker consumption and port expenses due to fleet expansion[125](index=125&type=chunk) - Charter hire expenses decreased by **4%** to **$31.4 million**, primarily due to a **31% decrease** in market rates for charter-in vessels, despite a **35% increase** in chartered-in days (**2,660 days**)[126](index=126&type=chunk) - Vessel operating expenses increased by **59%** to **$23.4 million**, mainly due to a **66% increase** in ownership days (**3,822 days**) from prior year vessel acquisitions[127](index=127&type=chunk) - General and administrative expenses increased by **43%** to **$7.2 million**, primarily due to the consolidation of Seamar in Q2 2025, which reclassified **$1.8 million** of expenses[129](index=129&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=34&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section provides a comparative analysis of financial performance for the six months ended June 30, 2025, versus the prior year [Revenues (Six Months Ended June 30, 2025 vs. 2024)](index=34&type=section&id=Revenues%20(Six%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section analyzes revenue changes for the six months ended June 30, 2025, highlighting impacts from fleet expansion and market rates - Total revenue increased by **18%** to **$279.5 million**, driven by a **46.5% increase** in total shipping days (**11,432 days**) due to fleet expansion, partially offset by declining market charter rates[130](index=130&type=chunk) - Voyage revenues increased by **21%** to **$255.9 million**, primarily due to a **45% increase** in voyage days (**9,771 days**) from SSI vessel acquisition, despite a **30% decline** in the Baltic Dry Index (BDI)[131](index=131&type=chunk) - Charter revenues decreased by **11%** to **$16.8 million**, mainly due to lower time charter revenue per day (**$10,140** in 2025 vs. **$17,776** in 2024), despite a **56% increase** in time charter days (**1,661 days**)[132](index=132&type=chunk) - Terminal & Stevedore revenues increased by **12%** to **$6.7 million**[133](index=133&type=chunk) [Operating and Business Expenses (Six Months Ended June 30, 2025 vs. 2024)](index=34&type=section&id=Operating%20and%20Business%20Expenses%20(Six%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section details changes in operating and business expenses for the six months ended June 30, 2025, influenced by fleet expansion and market rates - Voyage expenses increased by **41%** to **$138.1 million**, primarily due to higher bunker costs, port costs, and canal fees, corresponding to a **45% increase** in voyage days[134](index=134&type=chunk) - Charter hire expenses decreased by **18%** to **$49.1 million**, mainly due to a **34% decrease** in average market rates for charter-in vessels, despite a **25.6% increase** in chartered-in days (**4,405 days**)[135](index=135&type=chunk) - Vessel operating expenses increased by **66%** to **$45.6 million**, driven by the expansion of the owned fleet[136](index=136&type=chunk) - General and administrative expenses increased to **$14.4 million**, primarily due to the consolidation of Seamar Management[138](index=138&type=chunk) [Significant accounting estimates](index=35&type=section&id=Significant%20accounting%20estimates) This section identifies key accounting estimates that require management judgment and can significantly impact financial reporting - Key accounting estimates include voyage completion percentage, allowance for credit losses, vessel salvage value for depreciation, and long-lived asset impairment evaluation[139](index=139&type=chunk) [Long-lived Assets Impairment Considerations](index=35&type=section&id=Long-lived%20Assets%20Impairment%20Considerations) This section outlines the Company's policy for evaluating long-lived assets for impairment and confirms no triggering events occurred - The Company evaluates fixed assets for impairment when indicators are present and undiscounted cash flows are less than carrying amounts, assessing at the asset group level (vessel size/trade)[140](index=140&type=chunk) - No triggering event for impairment testing occurred during the first half of 2025 or 2024[141](index=141&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's sources of liquidity, working capital, and cash flow from operating, investing, and financing activities - The Company finances capital needs through cash flow from operations, common stock issuance, non-controlling interest contributions, and long-term debt and finance leases[142](index=142&type=chunk) - Working capital was **$58.0 million** as of June 30, 2025, down from **$82.9 million** at December 31, 2024[143](index=143&type=chunk) - Net cash provided by operating activities decreased by **$7.9 million** to **$10.0 million** for the six months ended June 30, 2025, primarily due to a net loss[146](index=146&type=chunk) - Net cash used in investing activities decreased by **$6.73 million** to **$2.4 million** for the six months ended June 30, 2025, mainly due to a prior year advance for vessel purchase[147](index=147&type=chunk) - Net cash used in financing activities decreased by **$5.3 million** to **$29.9 million** for the six months ended June 30, 2025, due to lower debt payments and absence of long-term debt proceeds[148](index=148&type=chunk)[149](index=149&type=chunk) [Capital Expenditures](index=37&type=section&id=Capital%20Expenditures) This section details the Company's capital expenditures related to vessel purchases, improvements, and drydocking costs - Capital expenditures relate to vessel purchases, capital improvements, and port & terminal operations, with funding from cash from operations[150](index=150&type=chunk)[151](index=151&type=chunk) - Drydocking costs capitalized totaled approximately **$11.9 million** for the six months ended June 30, 2025, significantly higher than **$3.2 million** in the prior year[151](index=151&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements as of the reporting dates - The Company had no off-balance sheet arrangements as of June 30, 2025, or December 31, 2024[152](index=152&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risks](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) This section states no significant changes to the Company's market risk profile since December 31, 2024, referring to the Annual Report for detailed discussion - No significant changes to market risk occurred since December 31, 2024[154](index=154&type=chunk) - Refer to the Annual Report on Form 10-K for the year ended December 31, 2024, for a discussion of market risks[154](index=154&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were not effective due to a material weakness in revenue recognition controls, with remediation efforts underway - Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[155](index=155&type=chunk) - The material weakness relates to the design and documentation of controls over the review and application of the revenue recognition policy under ASC 606[155](index=155&type=chunk) - Remediation actions include enhancing review/approval procedures for revenue recognition, strengthening supervisory review for ASC 606, and aligning general ledger account mapping[156](index=156&type=chunk) - The material weakness will be remediated only after controls are tested and proven effective over a sustained period[156](index=156&type=chunk) PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other information, and exhibits [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various ordinary course legal disputes and claims, primarily cargo claims, with no material financial impact expected - The Company is involved in ordinary course legal disputes and litigation, mainly cargo claims[158](index=158&type=chunk) - Management believes the financial impact of these matters will not be material to the Company's financial position, results of operations, or cash flows[158](index=158&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to consider risk factors from the Annual Report on Form 10-K and any new risks in this report that could materially affect the Company - Readers should consider risk factors from the Annual Report on Form 10-K for December 31, 2024, and any new risks in this report[159](index=159&type=chunk) - These risk factors could materially affect the Company's business, financial condition, or future results[159](index=159&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company's Board authorized a **$15 million** share repurchase program, with approximately **$1.01 million** in shares repurchased during the period - On May 8, 2025, the Board authorized a **$15 million** share repurchase program for common stock[160](index=160&type=chunk) - During the six months ended June 30, 2025, **202,882 shares** were repurchased and retired at an average price of **$4.96 per share**, totaling approximately **$1.01 million**[161](index=161&type=chunk) - As of June 30, 2025, approximately **$14 million** remained available for future repurchases[161](index=161&type=chunk) [Item 3. Defaults upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The Company reported no defaults upon senior securities - There were no defaults upon senior securities[162](index=162&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The Company reported no mine safety disclosures - There were no mine safety disclosures[164](index=164&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) The Company reported no other information - There was no other information to report[165](index=165&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - Exhibits include CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and XBRL instance and taxonomy documents[166](index=166&type=chunk) [Signatures](index=42&type=section&id=Signatures) The report is duly signed on behalf of Pangaea Logistics Solutions Ltd. by its Chief Executive Officer and Chief Financial Officer - The report was signed by Mark L. Filanowski (CEO) and Gianni Del Signore (CFO) on August 8, 2025[168](index=168&type=chunk)[171](index=171&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | | | Name of each exchange | | --- | --- | --- | | Title of each class | Trading Symbol(s) | on which registered | | Units, each consisting of one Class A | LWACU | T ...

[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) Femasys Inc. filed its Q2 2025 Form 10-Q, listed on Nasdaq, and is classified as an emerging growth and smaller reporting company - Femasys Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025[2](index=2&type=chunk) - The company's common stock (FEMY) is registered on The Nasdaq Capital Market[3](index=3&type=chunk) - Femasys Inc. is classified as an emerging growth company and a smaller reporting company[3](index=3&type=chunk)[4](index=4&type=chunk) - As of August 7, 2025, there were **32,575,407 shares** of common stock outstanding[5](index=5&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights forward-looking statements on financing, product commercialization, and regulatory approvals, cautioning readers about inherent risks - The report contains forward-looking statements identifiable by terms such as "may," "will," "expect," and "plan," which are not historical facts[9](index=9&type=chunk) - These statements cover areas including financing, product commercialization (FemaSeed, FemBloc EU), U.S. clinical development (FemBloc), regulatory approvals, market acceptance, and the ability to continue as a going concern[9](index=9&type=chunk) - Readers are cautioned that forward-looking statements are predictions based on current expectations and projections, subject to known and unknown risks and uncertainties, and actual results may differ materially[10](index=10&type=chunk) - The company does not plan to publicly update or revise these statements, and they are excluded from the safe harbor protection of the Private Securities Litigation Reform Act of 1995[10](index=10&type=chunk) [Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) This section presents Femasys Inc.'s unaudited condensed financial statements and notes for the periods ended June 30, 2025, and December 31, 2024 [Item 1. Condensed Financial Statements](index=5&type=section&id=Item%201%20Condensed%20Financial%20Statements) This section presents Femasys Inc.'s unaudited condensed financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of comprehensive loss, stockholders' equity, and cash flows, along with accompanying notes [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets) Femasys Inc.'s condensed balance sheets detail assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | % Change | | :-------------------------------- | :------------ | :---------------- | :------- | :------- | | Total Assets | $13,780,409 | $12,445,002 | $1,335,407 | 10.73% | | Total Liabilities | $12,272,974 | $10,140,580 | $2,132,394 | 21.03% | | Total Stockholders' Equity | $1,507,435 | $2,304,422 | $(796,987) | -34.58% | | Cash and cash equivalents | $3,218,067 | $3,451,761 | $(233,694) | -6.77% | | Inventory | $5,232,738 | $3,046,323 | $2,186,415 | 71.78% | | Accounts payable | $3,263,584 | $1,419,044 | $1,844,540 | 130.00% | | Convertible notes payable, net | $6,080,813 | $5,406,228 | $674,585 | 12.48% | | Accumulated deficit | $(137,681,018) | $(127,198,257) | $(10,482,761) | 8.24% | [Condensed Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Statements%20of%20Comprehensive%20Loss) Femasys Inc.'s condensed statements of comprehensive loss for the three and six months ended June 30, 2025 and 2024 Condensed Statements of Comprehensive Loss Highlights (Three Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Sales | $409,268 | $221,484 | $187,784 | 84.8% | | Cost of sales | $158,171 | $73,125 | $85,046 | 116.3% | | Research and development | $1,414,429 | $1,975,875 | $(561,446) | -28.4% | | Total operating expenses | $4,102,663 | $4,630,510 | $(527,847) | -11.4% | | Loss from operations | $(3,851,566) | $(4,482,151) | $630,585 | -14.1% | | Total other expense, net | $(734,356) | $(204,173) | $(530,183) | 259.7% | | Net loss | $(4,585,922) | $(4,684,574) | $98,652 | -2.1% | | Net loss per share (diluted) | $(0.16) | $(0.21) | $0.05 | -23.81% | Condensed Statements of Comprehensive Loss Highlights (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Sales | $750,532 | $492,624 | $257,908 | 52.4% | | Cost of sales | $275,437 | $161,657 | $113,780 | 70.4% | | Research and development | $4,382,901 | $3,746,606 | $636,295 | 17.0% | | Total operating expenses | $9,787,268 | $8,275,760 | $1,511,508 | 18.3% | | Loss from operations | $(9,312,173) | $(7,944,793) | $(1,367,380) | 17.2% | | Total other expense, net | $(1,174,776) | $(341,041) | $(833,735) | 244.5% | | Net loss | $(10,482,761) | $(8,284,084) | $(2,198,677) | 26.5% | | Net loss per share (diluted) | $(0.39) | $(0.38) | $(0.01) | 2.63% | [Condensed Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Statements%20of%20Stockholders'%20Equity) Femasys Inc.'s condensed statements of stockholders' equity detail changes in common stock and accumulated deficit for the six months ended June 30, 2025 - Total stockholders' equity decreased from **$2,304,422** at December 31, 2024, to **$1,507,435** at June 30, 2025, primarily due to the net loss incurred[22](index=22&type=chunk)[23](index=23&type=chunk) - The accumulated deficit increased to **$(137,681,018)** as of June 30, 2025[22](index=22&type=chunk)[23](index=23&type=chunk) - Common stock shares increased significantly due to at-the-market offerings and a June 2025 financing, contributing to additional paid-in capital[22](index=22&type=chunk)[23](index=23&type=chunk) [Condensed Statements of Cash Flows](index=12&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Femasys Inc.'s condensed statements of cash flows summarize operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | Change ($) | | :-------------------------------- | :------------ | :------------ | :------- | | Net cash used in operating activities | $(9,117,950) | $(8,894,780) | $(223,170) | | Net cash used in investing activities | $(193,567) | $(297,123) | $103,556 | | Net cash provided by financing activities | $9,077,823 | $1,001,724 | $8,076,099 | | Net change in cash and cash equivalents | $(233,694) | $(8,190,179) | $7,956,485 | - Cash and cash equivalents at the end of the period were **$3,218,067**[29](index=29&type=chunk) [Condensed Notes to Financial Statements](index=13&type=section&id=Condensed%20Notes%20to%20Financial%20Statements) Detailed notes accompany Femasys Inc.'s condensed financial statements, explaining accounting policies and specific financial items [(1) Organization, Nature of Business, and Liquidity](index=13&type=section&id=(1)%20Organization,%20Nature%20of%20Business,%20and%20Liquidity) This note describes Femasys Inc.'s business, product portfolio, EU approvals, liquidity, and going concern doubts - Femasys Inc. is a biomedical innovator in women's health, commercializing a portfolio of patent-protected therapeutic and diagnostic products globally, including FemaSeed, FemVue, FemCerv, FemBloc, FemChec, and FemCath[31](index=31&type=chunk) - FemBloc received CE mark certification for its delivery system (March 2025) and blended polymer component (June 2025), achieving full EU approval, and strategic distribution partnerships were announced in Spain[31](index=31&type=chunk) - The company reported a net loss of **$10,482,761** for the six months ended June 30, 2025, and an accumulated deficit of **$137,681,018**, leading to substantial doubt about its ability to continue as a going concern[37](index=37&type=chunk)[38](index=38&type=chunk) - As of June 30, 2025, cash and cash equivalents totaled **$3,218,067**, with plans to finance operations through existing cash, additional equity/debt financing, and anticipated revenue[36](index=36&type=chunk) [(2) Fair Value of Financial Instruments](index=15&type=section&id=(2)%20Fair%20Value%20of%20Financial%20Instruments) This note outlines Femasys Inc.'s application of the fair value hierarchy for financial instruments and their measurement - The company applies a fair value hierarchy (Level 1, 2, 3) to measure financial instruments[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - Certain financial instruments, including cash, accounts receivable, and other liabilities, approximate their fair value due to their short-term maturity[45](index=45&type=chunk) [(3) Cash and Cash Equivalents](index=15&type=section&id=(3)%20Cash%20and%20Cash%20Equivalents) This note details Femasys Inc.'s cash and cash equivalents, primarily money market funds and U.S. Treasury bills - Cash and cash equivalents primarily consist of money market funds and short-term U.S. Treasury bills[46](index=46&type=chunk) Cash and Cash Equivalents | Date | Amount ($) | | :--------------- | :----------- | | June 30, 2025 | $3,049,431 | | December 31, 2024 | $3,451,761 | - These are classified as Level 1 within the fair value hierarchy[46](index=46&type=chunk) [(4) Inventories](index=16&type=section&id=(4)%20Inventories) This note breaks down Femasys Inc.'s inventory, including materials, work in progress, and finished goods, and changes over time Inventory Breakdown | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------- | :------------ | :---------------- | | Materials | $2,000,538 | $1,308,863 | | Work in progress | $1,567,202 | $982,630 | | Finished goods | $1,664,998 | $754,830 | | **Total Inventory** | **$5,232,738** | **$3,046,323** | - Total inventory increased by **71.78%** from December 31, 2024, to June 30, 2025[48](index=48&type=chunk) [(5) Accrued Expenses](index=16&type=section&id=(5)%20Accrued%20Expenses) This note details the composition and changes in Femasys Inc.'s accrued expenses, including compensation, clinical trial costs, and interest Accrued Expenses Breakdown | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------------ | :------------ | :---------------- | | Incentive and other compensation costs | $369,117 | $650,768 | | Clinical trial costs | $327,906 | $354,762 | | Accrued interest | $248,863 | $44,525 | | Director fees | $71,250 | $70,000 | | Other | $35,616 | $30,994 | | **Total Accrued Expenses** | **$1,052,752** | **$1,151,049** | - Total accrued expenses decreased by **8.54%** from December 31, 2024, to June 30, 2025, primarily due to a reduction in incentive and other compensation costs, partially offset by an increase in accrued interest[49](index=49&type=chunk) [(6) Revenue Recognition](index=16&type=section&id=(6)%20Revenue%20Recognition) This note explains Femasys Inc.'s revenue recognition policies, including timing of recognition and sales by geographic region - Revenue is recognized at a point in time upon shipment of goods, with control transferring to the customer at the shipping point (FOB shipping point for U.S., generally EX-Works for international)[50](index=50&type=chunk)[51](index=51&type=chunk) - The company has not had a history of significant returns, and returns are subject to prior authorization and a 30% restocking fee[51](index=51&type=chunk) Sales by Geographic Region (Six Months Ended June 30) | Primary geographical markets | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------- | :----------- | :----------- | :------- | :------- | | U.S. | $678,574 | $492,624 | $185,950 | 37.75% | | International | $71,958 | $0 | $71,958 | N/A | | **Total** | **$750,532** | **$492,624** | **$257,908** | **52.35%** | [(7) Commitments and Contingencies](index=17&type=section&id=(7)%20Commitments%20and%20Contingencies) This note discusses Femasys Inc.'s legal claims assessment, liability recording, and indemnification policies for officers and directors - The company assesses legal claims and records liabilities when a loss is probable and estimable, but reported no material legal contingencies for the periods presented[54](index=54&type=chunk) - Femasys indemnifies its officers and directors, with potential future indemnification being unlimited, but exposure is limited by directors' and officers' insurance[55](index=55&type=chunk) [(8) Convertible Notes with Warrants (November 2023 Financing)](index=17&type=section&id=(8)%20Convertible%20Notes%20with%20Warrants%20(November%202023%20Financing)) This note details Femasys Inc.'s November 2023 convertible notes and warrants, including conversions and interest expense - In November 2023, the company issued **$6,850,000** in senior unsecured convertible notes (convertible at $1.18/share) and Series A and B Warrants[56](index=56&type=chunk) - In April 2025, $85,000 of convertible notes were converted into **72,033 shares** of common stock[58](index=58&type=chunk) - Series A Warrants are exercisable immediately and expire in November 2028; Series B Warrants expired unexercised in November 2024[59](index=59&type=chunk)[61](index=61&type=chunk)[117](index=117&type=chunk) - Total interest expense for the six months ended June 30, 2025, was **$950,949**, including **$746,612** in amortization of debt discount and issuance costs[62](index=62&type=chunk) [(9) Stockholders' Equity](index=18&type=section&id=(9)%20Stockholders'%20Equity) This note describes changes in Femasys Inc.'s stockholders' equity, including at-the-market offerings, public offerings, and warrant issuances - For the six months ended June 30, 2025, the company sold approximately **3.8 million shares** of common stock through its at-the-market facility for aggregate proceeds of approximately **$5.5 million**, with **$1.5 million** remaining available[64](index=64&type=chunk) - In June 2025, the company completed an underwritten public offering and concurrent private placement, selling **5,286,275 shares** for aggregate gross proceeds of **$4,510,001** (net proceeds of **$3,705,061**)[65](index=65&type=chunk)[118](index=118&type=chunk) - Warrants to purchase **105,726 shares** of common stock were issued to the underwriter as commission, exercisable beginning December 2, 2025, with a 5-year term and an exercise price of $1.0625 per share[66](index=66&type=chunk) - An Any Market Purchase Agreement was entered into with Alumni Capital LP, allowing the company to sell up to **$10 million** in common stock until December 31, 2026, at its discretion[67](index=67&type=chunk)[119](index=119&type=chunk) [(10) Equity Incentive Plans and Warrants](index=20&type=section&id=(10)%20Equity%20Incentive%20Plans%20and%20Warrants) This note outlines Femasys Inc.'s equity incentive plans, outstanding stock options, and share-based compensation expense - As of June 30, 2025, **4,398,497 stock options** were outstanding at a weighted average exercise price of $1.43[70](index=70&type=chunk) - Stockholders approved an amendment to the 2021 Equity Incentive Plan to increase authorized shares by **3,000,000**, with **3,133,620 shares** reserved for future awards[72](index=72&type=chunk) - Total share-based compensation expense for the six months ended June 30, 2025, was **$549,208**, with **$1,924,030** remaining unrecognized[76](index=76&type=chunk) - Under the Employee Stock Purchase Plan (ESPP), **49,247 shares** were issued for **$40,875** in H1 2025, and **719,668 shares** remain reserved for future awards[77](index=77&type=chunk) [(11) Related‑Party Transactions](index=21&type=section&id=(11)%20Related%E2%80%91Party%20Transactions) This note details Femasys Inc.'s transactions with related parties, including convertible notes and stock purchases by officers and directors - In November 2023, the company issued a **$5 million** convertible note and warrants to PharmaCyte Biotech, Inc., whose interim CEO serves on Femasys' board[78](index=78&type=chunk) - In November 2024, Femasys paid PharmaCyte **$300,000** in accrued interest on the convertible note through the issuance of **315,790 common shares**[78](index=78&type=chunk) - Certain officers and directors purchased **98,040 common shares** at $1.02 per share in the June 2025 private placement offering[79](index=79&type=chunk) [(12) Net Loss per Share Attributable to Common Stockholders](index=22&type=section&id=(12)%20Net%20Loss%20per%20Share%20Attributable%20to%20Common%20Stockholders) This note presents Femasys Inc.'s net loss per share calculations for basic and diluted common stockholders Net Loss per Share Attributable to Common Stockholders (Basic and Diluted) | Period | Net Loss ($) | Weighted Average Shares | Net Loss per Share ($) | | :--------------------------- | :----------- | :---------------------- | :----------------- | | Three Months Ended June 30, 2025 | $(4,585,922) | 28,880,704 | $(0.16) | | Six Months Ended June 30, 2025 | $(10,482,761) | 27,025,277 | $(0.39) | - Potentially dilutive securities totaling 10,769,754 shares (options and warrants) were excluded from diluted EPS calculations for H1 2025 due to their anti-dilutive effect[81](index=81&type=chunk) [(13) Income Taxes](index=22&type=section&id=(13)%20Income%20Taxes) This note explains Femasys Inc.'s income tax position, including the effective tax rate and valuation allowance - The effective tax rate was 0% for the six months ended June 30, 2025, and 2024, due to the company remaining in a full valuation allowance position[82](index=82&type=chunk) [(14) Segment Reporting](index=23&type=section&id=(14)%20Segment%20Reporting) This note clarifies Femasys Inc.'s single business segment operation and how chief operating decision makers assess performance - Femasys Inc. operates as a single business segment focused on the development and commercialization of therapeutic and diagnostic products for women's reproductive health[83](index=83&type=chunk) - The Chief Executive Officer and Chief Financial Officer serve as the chief operating decision makers (CODM), reviewing net income to assess performance and allocate resources[84](index=84&type=chunk) Significant Segment Expenses (Six Months Ended June 30, 2025) | Expense Category | Amount ($) | | :-------------------------------- | :----------- | | Sales | $750,532 | | Cost of sales | $275,437 | | Total research and development expense | $4,382,901 | | Sales and marketing expense | $1,893,544 | | General and administrative expense | $3,339,685 | | Net loss | $(10,482,761) | [(15) Subsequent Events](index=23&type=section&id=(15)%20Subsequent%20Events) This note reports significant events after the balance sheet date, including a promissory note for insurance premiums - In July 2025, the company executed a promissory note with AFCO Direct Insurance Premium Finance for **$367,450** to finance insurance premiums, with monthly installment payments through June 2026[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Femasys Inc.'s financial condition and results of operations for the three and six months ended June 30, 2025, discussing key business developments, financial performance, liquidity, and critical accounting estimates [Overview](index=24&type=section&id=Overview) This section overviews Femasys Inc.'s women's health business and key product developments, including FemBloc's EU approval - Femasys Inc. is a leading biomedical innovator in women's health, offering a broad portfolio of patent-protected therapeutic and diagnostic products globally[88](index=88&type=chunk) - Key products include FemaSeed (infertility), FemVue (fallopian tube assessment), FemCerv (cervical cancer diagnosis), and FemBloc (non-surgical permanent birth control)[88](index=88&type=chunk) - FemBloc achieved full EU approval with CE mark certification for its delivery system (March 2025) and blended polymer component (June 2025), and its U.S. pivotal clinical trial is currently enrolling participants[88](index=88&type=chunk) [Corporate Update](index=24&type=section&id=Corporate%20Update) This section highlights recent corporate milestones, including FemBloc's European commercial entry, regulatory approvals, and financing - Announced first commercial entry into Europe for FemBloc with an order of approximately **$400,000** in Spain (August 6, 2025)[89](index=89&type=chunk) - Received Australian and New Zealand regulatory approvals for FemaSeed and FemVue (July 1, 2025)[90](index=90&type=chunk) - Announced European Union Medical Device Regulation approval of FemBloc (June 25, 2025)[91](index=91&type=chunk) - Priced an underwritten public offering and concurrent private placement with gross proceeds of **$4.5 million** (May 30, 2025)[94](index=94&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes Femasys Inc.'s financial performance, comparing sales, expenses, and net loss for the three and six months ended June 30, 2025 and 2024 [Comparison of the Three Months Ended June 30, 2025 and 2024](index=26&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares Femasys Inc.'s financial results for the three months ended June 30, 2025 and 2024, detailing changes in sales, expenses, and net loss Financial Performance (Three Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Sales | $409,268 | $221,484 | $187,784 | 84.8% | | Cost of sales | $158,171 | $73,125 | $85,046 | 116.3% | | Research and development | $1,414,429 | $1,975,875 | $(561,446) | -28.4% | | Sales and marketing | $984,977 | $975,190 | $9,787 | 1.0% | | General and administrative | $1,616,972 | $1,611,817 | $5,155 | 0.3% | | Other expense, net | $(734,356) | $(204,173) | $(530,183) | 259.7% | | Net loss | $(4,585,922) | $(4,684,574) | $98,652 | -2.1% | | Net loss per share (diluted) | $(0.16) | $(0.21) | $0.05 | -23.81% | - Sales increased by **84.8%** due to increased sales of FemaSeed and FemVue[96](index=96&type=chunk) - R&D expenses decreased by **28.4%** primarily due to commercialization of development products into inventory and reduced clinical costs, partially offset by increased compensation[99](index=99&type=chunk) - Other expense, net, increased significantly by **259.7%** due to increased non-cash discount amortization related to convertible notes and expenses from the Any Market Purchase Agreement, partially offset by reduced interest income[103](index=103&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=27&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares Femasys Inc.'s financial results for the six months ended June 30, 2025 and 2024, detailing changes in sales, expenses, and net loss Financial Performance (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Sales | $750,532 | $492,624 | $257,908 | 52.4% | | Cost of sales | $275,437 | $161,657 | $113,780 | 70.4% | | Research and development | $4,382,901 | $3,746,606 | $636,295 | 17.0% | | Sales and marketing | $1,893,544 | $1,275,677 | $617,867 | 48.4% | | General and administrative | $3,339,685 | $3,114,621 | $225,064 | 7.2% | | Other expense, net | $(1,174,776) | $(341,041) | $(833,735) | 244.5% | | Net loss | $(10,482,761) | $(8,284,084) | $(2,198,677) | 26.5% | | Net loss per share (diluted) | $(0.39) | $(0.38) | $(0.01) | 2.63% | - Sales increased by **52.4%** due to sales of FemaSeed and FemVue[106](index=106&type=chunk) - R&D expenses increased by **17.0%** primarily due to increased compensation and regulatory costs, partially offset by reduced material and clinical costs[107](index=107&type=chunk) - Sales and marketing expenses increased by **48.4%** due to compensation and travel costs associated with recruiting a commercial team[108](index=108&type=chunk) - Other expense, net, increased by **244.5%** due to increased non-cash discount amortization related to convertible notes and expenses from the Any Market Purchase Agreement, partially offset by reduced interest income[112](index=112&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Femasys Inc.'s liquidity sources, funding requirements, and substantial doubt about its ability to continue as a going concern [Sources of liquidity](index=29&type=section&id=Sources%20of%20liquidity) This section details Femasys Inc.'s funding sources, including stock sales, convertible notes, and recent public and private offerings - Operations have been financed primarily by net proceeds from common stock and convertible preferred stock sales, indebtedness, and product revenue[114](index=114&type=chunk) - As of June 30, 2025, the company had **$3,218,067** in cash and cash equivalents and an accumulated deficit of **$137,681,018**[114](index=114&type=chunk) - Through its at-the-market facility, approximately **$15.2 million** in common stock had been sold as of June 30, 2025, with approximately **$1.5 million** remaining available[115](index=115&type=chunk) - The November 2023 financing provided **$6.3 million** in net proceeds from convertible notes and warrants, with Series A Warrants potentially yielding an additional **$6.8 million**[117](index=117&type=chunk) - The June 2025 public offering and private placement generated **$3,705,061** in net proceeds[118](index=118&type=chunk) - An Any Market Purchase Agreement with Alumni Capital LP allows the company to sell up to **$10 million** in common stock until December 31, 2026, at its discretion[119](index=119&type=chunk) [Funding requirements](index=30&type=section&id=Funding%20requirements) This section outlines Femasys Inc.'s capital needs for operations, product development, and commercialization, highlighting the going concern risk - Current cash and anticipated revenues are expected to fund operations only into **early Q4 2025**, which is insufficient for the next twelve months, raising substantial doubt about the company's ability to continue as a going concern[120](index=120&type=chunk) - Additional capital is needed to fund U.S. FemBloc regulatory approval, EU commercialization, future R&D, manufacturing, and sales & marketing[121](index=121&type=chunk)[122](index=122&type=chunk) - There is no assurance that additional financing will be available on acceptable terms, and failure to secure funds could lead to delays, modifications, or termination of product development/commercialization efforts[121](index=121&type=chunk)[151](index=151&type=chunk) - Future capital requirements depend on factors such as clinical trial costs, sales/marketing establishment, product sales timing, manufacturing capabilities, intellectual property costs, and potential acquisitions[124](index=124&type=chunk)[153](index=153&type=chunk) [Cash Flows](index=32&type=section&id=Cash%20Flows) This section analyzes Femasys Inc.'s cash flow activities, including operating, investing, and financing, for the six months ended June 30, 2025 and 2024 [Comparison of the Six Months Ended June 30, 2025 and 2024](index=32&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024%20(Cash%20Flows)) This section compares Femasys Inc.'s cash flow activities for the six months ended June 30, 2025 and 2024, detailing changes in operating, investing, and financing cash Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | Change ($) | | :-------------------------------- | :------------ | :------------ | :------- | | Net cash used in operating activities | $(9,117,950) | $(8,894,780) | $(223,170) | | Net cash used in investing activities | $(193,567) | $(297,123) | $103,556 | | Net cash provided by financing activities | $9,077,823 | $1,001,724 | $8,076,099 | | Net change in cash and cash equivalents | $(233,694) | $(8,190,179) | $7,956,485 | - Cash used in operating activities for H1 2025 was **$(9,117,950)**, primarily due to net loss and increased inventory, partially offset by non-cash charges and increased accounts payable[126](index=126&type=chunk) - Cash provided by financing activities significantly increased to **$9,077,823** in H1 2025, mainly from at-the-market sales and the June 2025 financing[129](index=129&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) This section describes Femasys Inc.'s critical accounting estimates and policies, particularly regarding revenue recognition and financial statement preparation - The preparation of financial statements requires estimates and assumptions in accordance with U.S. GAAP[131](index=131&type=chunk) - Revenue recognition is a critical accounting policy, with revenue recognized upon shipment when the customer obtains control of goods[133](index=133&type=chunk) - Shipping terms are FOB shipping point for U.S. customers and generally EX-Works for international distributors, and the company has not experienced significant returns[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to Femasys Inc. for the reporting period - This item is not applicable to the company for the reporting period[135](index=135&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Femasys Inc.'s management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025. No material changes in internal control over financial reporting were identified during the quarter - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[136](index=136&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2025[137](index=137&type=chunk) - The company acknowledges the inherent limitations of control systems, which can provide only reasonable, not absolute, assurance[138](index=138&type=chunk) [Part II. Other Information](index=34&type=section&id=Part%20II.%20Other%20Information) This section provides additional information not covered in financial statements, including legal proceedings, risk factors, and equity security sales [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Femasys Inc. may occasionally be involved in legal proceedings but has no currently pending material actions against it as of June 30, 2025. The company believes any potential losses from future actions would not be material to its financial condition or cash flows, though they could impact operating results - The company may be involved in legal proceedings from time to time but has no currently pending material actions as of June 30, 2025[140](index=140&type=chunk) - Any reasonably possible losses from potential actions are not expected to be material to financial condition or cash flows, but could be material to operating results for a particular future period[140](index=140&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) Femasys Inc. updated its risk factors to include recent deficiency letters from Nasdaq regarding non-compliance with listing requirements (Minimum Market Value of Listed Securities and Minimum Bid Price), which could lead to delisting if not resolved. The company also reiterated its need for substantial additional funding to continue operations and product development - Received Nasdaq deficiency letters for non-compliance with the **$35.0 million** Minimum Market Value of Listed Securities (MVLS) requirement (May 19, 2025) and the **$1.00** Minimum Bid Price Requirement (July 16, 2025)[142](index=142&type=chunk)[144](index=144&type=chunk) - The company has 180 calendar days to regain compliance for each deficiency (MVLS by **November 17, 2025**; Bid Price by **January 12, 2026**), with potential delisting if not resolved[143](index=143&type=chunk)[146](index=146&type=chunk) - Current cash and anticipated revenues are only sufficient to fund operations into **early Q4 2025**, necessitating substantial additional funding for commercialization and product development (e.g., U.S. FemBloc approval)[148](index=148&type=chunk) - Failure to raise additional capital could force delays, reductions in commercialization efforts, or relinquishing rights to technologies/products, potentially leading to a complete loss of investment[151](index=151&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report for the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report[152](index=152&type=chunk)[154](index=154&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[154](index=154&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to Femasys Inc. - Mine safety disclosures are not applicable[155](index=155&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) During the reporting period, none of Femasys Inc.'s directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or executive officers during the period[156](index=156&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate documents, purchase agreements, warrants, and certifications - Exhibits include corporate documents (Certificate of Incorporation, Bylaws), purchase warrants, common stock purchase agreements, the Any Market Purchase Agreement, and various certifications (e.g., 31.1, 31.2, 32.1, 32.2)[157](index=157&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) The Quarterly Report on Form 10-Q is officially signed by Kathy Lee-Sepsick, Chief Executive Officer and President, and Dov Elefant, Chief Financial Officer, on August 8, 2025 - The report was signed by Kathy Lee-Sepsick (CEO and President) and Dov Elefant (CFO) on August 8, 2025[158](index=158&type=chunk)[160](index=160&type=chunk)

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section details Auddia Inc.'s Form 10-Q filing, its Nasdaq listings, and company classifications [Filing Details](index=1&type=section&id=Filing%20Details) Auddia Inc.'s Form 10-Q details its Nasdaq listings and classifications as a Non-accelerated Filer, Smaller Reporting Company, and Emerging Growth Company - Auddia Inc. is a Delaware corporation, with its common stock (AUUD) and warrants (AUUDW) listed on The Nasdaq Stock Market[2](index=2&type=chunk)[3](index=3&type=chunk)[4](index=4&type=chunk) - The company is classified as a Non-accelerated Filer, a Smaller Reporting Company, and an Emerging Growth Company[4](index=4&type=chunk)[5](index=5&type=chunk) - As of August 7, 2025, there were **1,147,683 shares** of the registrant's common stock outstanding[5](index=5&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section cautions readers about forward-looking statements, highlighting inherent risks and uncertainties [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) The report contains forward-looking statements, subject to risks and uncertainties, with actual results potentially differing due to factors like capital needs and revenue generation - The report contains forward-looking statements, subject to inherent uncertainties, risks, and changes in circumstances, and are not guarantees of future performance[14](index=14&type=chunk)[15](index=15&type=chunk) - Key factors that could cause actual results to differ include the sufficiency of existing cash, ability to generate revenue from new software services, limited operating history, and the need to raise additional capital[15](index=15&type=chunk)[17](index=17&type=chunk) - The company does not undertake to update or revise forward-looking statements unless required by law[16](index=16&type=chunk) [PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents Auddia Inc.'s unaudited condensed financial statements and management's discussion and analysis [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Auddia Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations, equity changes, and cash flows, with accompanying notes [Condensed Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Balance%20Sheets%20(Unaudited)) This section provides a snapshot of Auddia Inc.'s financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Cash and cash equivalents | $1,067,756 | $2,706,319 | | Total current assets | $1,173,804 | $2,762,378 | | Total assets | $3,435,748 | $5,298,328 | | Total current liabilities | $528,415 | $550,920 | | Total liabilities | $563,841 | $604,008 | | Total shareholders' equity | $2,871,907 | $4,694,320 | | Accumulated deficit | $(92,852,762) | $(89,428,436) | - The company's common stock outstanding as of December 31, 2024, has been retroactively restated for the effect of the 1-for-17 reverse stock split effective March 28, 2025[21](index=21&type=chunk) [Condensed Statements of Operations (Unaudited)](index=6&type=section&id=Condensed%20Statements%20of%20Operations%20(Unaudited)) This section presents Auddia Inc.'s unaudited financial performance, detailing revenues, expenses, and net loss for the three and six months ended June 30, 2025 and 2024 | Metric (Unaudited) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $– | $– | $– | $– | | Total operating expenses | $1,567,208 | $1,654,390 | $3,318,220 | $3,709,010 | | Loss from operations | $(1,567,208) | $(1,654,390) | $(3,318,220) | $(3,709,010) | | Net loss | $(1,568,653) | $(2,303,425) | $(3,321,218) | $(4,510,753) | | Net loss per share (Basic & Diluted) | $(2.95) | $(14.62) | $(6.73) | $(40.54) | | Weighted average common shares outstanding (Basic & Diluted) | 532,314 | 157,512 | 493,448 | 111,268 | - The company reported **no revenue** for both the three and six months ended June 30, 2025 and 2024[23](index=23&type=chunk) - Net loss decreased for both the three-month period (from **$(2,303,425) to $(1,568,653)**) and the six-month period (from **$(4,510,753) to $(3,321,218)**) year-over-year[23](index=23&type=chunk) [Condensed Statements of Changes in Shareholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20(Unaudited)) This section outlines the changes in Auddia Inc.'s shareholders' equity, including preferred and common stock activity, for the period ended June 30, 2025 | Metric | Balance, Dec 31, 2024 | Balance, June 30, 2025 | | :--------------------------------- | :-------------------- | :--------------------- | | Series B Preferred Stock (Shares) | 2,314 | 1,535 | | Series C Preferred Stock (Shares) | – | 750 | | Common Stock (Shares) | 397,731 | 654,959 | | Additional Paid-In Capital | $94,122,356 | $95,724,012 | | Accumulated Deficit | $(89,428,436) | $(92,852,762) | | Total Shareholders' Equity | $4,694,320 | $2,871,907 | - Issuance of common shares, net of costs, contributed **$672,795** and **$82,500** during the first and second quarters of 2025, respectively[26](index=26&type=chunk) - Series B preferred stock conversions to common stock and issuance of Series C preferred stock significantly impacted equity composition[26](index=26&type=chunk) [Condensed Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section details Auddia Inc.'s cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(2,508,649) | $(2,633,821) | | Net cash used in investing activities | $(490,650) | $(537,120) | | Net cash provided by financing activities | $1,360,736 | $4,248,590 | | Net (decrease) increase in cash | $(1,638,563) | $1,077,649 | | Cash, beginning of year | $2,706,319 | $804,556 | | Cash and restricted cash, end of period | $1,067,756 | $1,882,205 | - Cash used in operating activities decreased slightly in 2025 compared to 2024, primarily due to a lower net loss[28](index=28&type=chunk) - Net cash provided by financing activities significantly decreased from **$4,248,590** in 2024 to **$1,360,736** in 2025[28](index=28&type=chunk) [Notes to Condensed Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and additional information supporting the unaudited condensed financial statements [Note 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%20%E2%80%93%20Description%20of%20Business%2C%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Auddia Inc.'s business, accounting policies, impact of reverse stock splits, and going concern considerations - Auddia Inc. is a technology company developing a proprietary AI platform for audio and innovative podcast technologies[30](index=30&type=chunk) - The company effectuated a **1-for-25 reverse stock split** on February 27, 2024, and a **1-for-17 reverse stock split** on March 28, 2025, retroactively adjusting all share and per-share data[33](index=33&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern, as cash and cash equivalents of **$1,067,756** as of June 30, 2025, along with recent funding, are only sufficient into the fourth quarter of 2025[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [Note 2 – Property & Equipment, Intangible Assets, and Software Development Costs](index=12&type=section&id=Note%202%20%E2%80%93%20Property%20%26%20Equipment%2C%20Intangible%20Assets%2C%20and%20Software%20Development%20Costs) This note details the company's property, equipment, intangible assets, and software development costs, including changes and amortization expenses | Asset Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Total property and equipment, net | $9,584 | $12,281 | | Total intangible assets, net | $17,406 | $3,416 | | Total software development costs, net | $1,997,550 | $2,308,230 | - Amortization of capitalized software development costs decreased to **$356,227** for the three months ended June 30, 2025, from **$486,764** in the prior year, and to **$787,286** for the six months ended June 30, 2025, from **$963,682** in the prior year[56](index=56&type=chunk) - Patents increased significantly from **$0 to $14,174**, contributing to the rise in intangible assets[55](index=55&type=chunk) [Note 3 – Accounts Payable and Accrued Liabilities](index=13&type=section&id=Note%203%20%E2%80%93%20Accounts%20Payable%20and%20Accrued%20Liabilities) This note provides a breakdown of Auddia Inc.'s accounts payable and accrued liabilities as of June 30, 2025, and December 31, 2024 | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Accounts payable and accrued liabilities | $474,398 | $495,312 | | Credit cards payable | $5,765 | $12,351 | | Total | $480,163 | $507,663 | [Note 4 – Notes Payable to Related Party, net of debt issuance costs](index=13&type=section&id=Note%204%20%E2%80%93%20Notes%20Payable%20to%20Related%20Party%2C%20net%20of%20debt%20issuance%20costs) This note details the repayment of related party notes and the conversion of accrued interest and discount into equity securities - The company repaid **$2.75 million** of principal on its outstanding Secured Bridge Notes on April 26, 2024[59](index=59&type=chunk) - Unpaid accrued interest and original issue discount totaling **$911,384** were converted into **27,256 prefunded common stock warrants** and **27,256 non-prefunded warrants**[60](index=60&type=chunk)[61](index=61&type=chunk) - The non-prefunded warrants and fee warrants had a total valuation of **$811,402**, and prefunded warrants had a valuation of **$732,370**[64](index=64&type=chunk) [Note 5 – Commitments and Contingencies](index=14&type=section&id=Note%205%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the company's operating lease obligations and a pre-IPO investor claim for damages - The company entered into a 37-month operating lease for office space commencing April 1, 2024, with monthly base rent escalating over the term[65](index=65&type=chunk) - Rent expense was **$8,960** for the three months ended June 30, 2025 and 2024, and **$17,920** and **$25,385** for the six months ended June 30, 2025 and 2024, respectively[65](index=65&type=chunk) - A pre-IPO investor has claimed damages of less than **$300,000**, but no complaint has been filed, and the outcome is neither probable nor estimable[66](index=66&type=chunk) [Note 6 – Share-based Issuances](index=14&type=section&id=Note%206%20%E2%80%93%20Share-based%20Issuances) This note details the activity and expense related to stock options and restricted stock units Stock Options Activity | Stock Options Activity | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :---------------- | :------------ | | Outstanding (Number) | 34,341 | 34,341 | | Weighted Average Exercise Price | $123.88 | $123.88 | Restricted Stock Units Activity | Restricted Stock Units Activity | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :---------------- | :------------ | | Outstanding (Number) | 309 | – | - Share-based compensation expense decreased from **$132,488** for the three months ended June 30, 2024, to **$21,158** for the same period in 2025, and from **$305,777** to **$98,064** for the six-month periods[69](index=69&type=chunk) [Note 7 – Equity Financings](index=16&type=section&id=Note%207%20%E2%80%93%20Equity%20Financings) This note describes the company's equity financing activities, including agreements with White Lion and At-the-Market sales - The company has an Equity Line Common Stock Purchase Agreement with White Lion for up to **$10,000,000**, under which **$0.1 million** was raised in April 2025[70](index=70&type=chunk)[71](index=71&type=chunk) - An At-the-Market Issuance Sales Agreement allowed the company to issue **78,901 shares** for approximately **$0.7 million** during the six months ended June 30, 2025[72](index=72&type=chunk) - On June 30, 2025, the company closed a Series C Preferred Stock and Warrants Financing, receiving **$750,000** in gross proceeds and issuing **750 shares** of Series C preferred stock and warrants for **314,466 common shares**[80](index=80&type=chunk)[81](index=81&type=chunk) [Note 8 – Leases under ASC 842](index=18&type=section&id=Note%208%20%E2%80%93%20Leases%20under%20ASC%20842) This note outlines the accounting treatment for the company's operating lease under ASC 842, including lease term and discount rate - The company recognizes operating lease expense on a straight-line basis over the lease term[84](index=84&type=chunk) | Metric | June 30, 2025 | | :--------------------------------- | :-------------- | | Weighted-average remaining lease term | 1.57 years | | Weighted-average discount rate | 8.6% | Undiscounted Cash Flows | Years Ended December 31, | Undiscounted Cash Flows | | :----------------------- | :---------------------- | | 2025 | $18,419 | | 2026 | $41,749 | | 2027 | $14,735 | | Less imputed interest | $(6,078) | | Total | $68,825 | [Note 9 – Segment Reporting](index=19&type=section&id=Note%209%20%E2%80%93%20Segment%20Reporting) This note states that Auddia Inc. operates as a single operating segment, with the CFO as the Chief Operating Decision Maker - The company operates as a single operating segment, focused on technology for consumer engagement with audio through its proprietary AI platform and podcast innovations[87](index=87&type=chunk) - The Chief Financial Officer (CFO) is identified as the Chief Operating Decision Maker (CODM), reviewing entity-wide financial and operational performance[87](index=87&type=chunk) [Note 10 – Subsequent Events](index=19&type=section&id=Note%2010%20%E2%80%93%20Subsequent%20Events) This note discloses significant events after June 30, 2025, including a proposed business combination and additional equity issuances - On August 5, 2025, the company announced a non-binding letter of intent for a proposed business combination with Thramann Holdings, LLC, where Holdings' equity holders would receive an **80% ownership interest** in the combined company[90](index=90&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - Subsequent to June 30, 2025, the company issued an additional **360,000 shares** of common stock under its Equity Line Common Stock Purchase Agreement for total proceeds of **$1.9 million**[90](index=90&type=chunk) - On August 5, 2025, the company entered into exchange agreements to convert **569 outstanding shares** of Series B preferred stock (including accrued dividends) into **132,724 shares** of common stock[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Auddia Inc.'s financial condition and results, including its AI platform, recent developments, and liquidity challenges [Overview](index=20&type=section&id=Overview) This section provides an overview of Auddia Inc.'s AI-driven faidr app, its commercialization efforts, and significant accumulated deficit - Auddia's faidr app uses proprietary AI to personalize radio and podcast listening by replacing ad breaks with streaming music and offering commercial-free content[94](index=94&type=chunk)[95](index=95&type=chunk)[98](index=98&type=chunk) - The company is implementing new paywalls and testing various price points and marketing strategies to optimize subscription conversions[100](index=100&type=chunk) - As of June 30, 2025, Auddia had an accumulated deficit of **$92,851,762** and requires substantial additional funding to support operations and growth[102](index=102&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) [Recent Developments](index=22&type=section&id=Recent%20Developments) This section highlights recent events, including a proposed business combination, Nasdaq compliance, and reverse stock splits - Auddia entered a non-binding LOI for a business combination with Thramann Holdings, LLC, where Holdings' equity holders would receive an **80% ownership interest** in the combined company[107](index=107&type=chunk)[108](index=108&type=chunk) - The company regained compliance with Nasdaq's minimum stockholders' equity requirement on May 24, 2024, and the **$1.00 minimum bid price** requirement on April 14, 2025[112](index=112&type=chunk)[114](index=114&type=chunk) - A **1-for-25 reverse stock split** was effective on February 27, 2024, and a **1-for-17 reverse stock split** was effective on March 28, 2025[115](index=115&type=chunk) [Components of our results of operations](index=23&type=section&id=Components%20of%20our%20results%20of%20operations) This section outlines the primary components of Auddia's operating expenses and other income/expense - Direct cost of services primarily consists of technology and development costs, expected to increase with app enhancements[118](index=118&type=chunk) - Research and development expenses include capitalized software development costs, amortized over three years, and are expected to continue as apps are enhanced[120](index=120&type=chunk) - General and administrative expenses are expected to increase due to public company operating costs and preparations for product commercialization[121](index=121&type=chunk) [Results of operations](index=24&type=section&id=Results%20of%20operations) This section analyzes Auddia Inc.'s financial performance, detailing revenue, operating expenses, and net loss for recent periods Three Months Ended June 30, 2025 vs 2024 | Metric | June 30, 2025 | June 30, 2024 | Change $ | Change % | | :--------------------------------- | :-------------- | :-------------- | :------- | :------- | | Revenue | $– | $– | $– | 0.0% | | Direct cost of services | $58,566 | $50,227 | $8,339 | 16.6% | | Sales and marketing | $185,157 | $216,868 | $(31,711)| -14.6% | | Research and development | $236,415 | $159,588 | $76,827 | 48.1% | | General and administrative | $729,442 | $734,325 | $(4,883) | -0.7% | | Depreciation and amortization | $357,628 | $493,382 | $(135,754)| -27.5% | | Total operating expenses | $1,567,208 | $1,654,390 | $(87,182)| -5.3% | | Net loss | $(1,568,653) | $(2,303,425) | $734,772 | -31.9% | Six Months Ended June 30, 2025 vs 2024 | Metric | June 30, 2025 | June 30, 2024 | Change $ | Change % | | :--------------------------------- | :-------------- | :-------------- | :------- | :------- | | Revenue | $– | $– | $– | 0.0% | | Direct cost of services | $114,136 | $98,400 | $15,736 | 16.0% | | Sales and marketing | $420,598 | $363,263 | $57,335 | 15.8% | | Research and development | $633,118 | $325,095 | $308,023 | 94.7% | | General and administrative | $1,360,333 | $1,945,124 | $(584,791)| -30.1% | | Depreciation and amortization | $790,035 | $977,128 | $(187,093)| -19.1% | | Total operating expenses | $3,318,220 | $3,709,010 | $(390,790)| -10.5% | | Net loss | $(3,321,218) | $(4,510,753) | $1,189,535| -26.4% | - The significant decrease in 'Other expense, net' for both periods (**99.8%** for three months, **99.6%** for six months) was entirely due to the repayment of notes payable to a related party in April 2024[129](index=129&type=chunk)[137](index=137&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Auddia Inc.'s cash position, financing activities, and ongoing need for additional funding to support operations - As of June 30, 2025, cash and cash equivalents were **$1,067,756**, and the company had working capital of approximately **$0.6 million**[138](index=138&type=chunk) - Additional financing of **$1.5 million** (H1 2025) and **$1.9 million** (post-June 30, 2025) is only sufficient to fund current operating plans into the fourth quarter of 2025, necessitating further funding[138](index=138&type=chunk)[152](index=152&type=chunk) Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :------------ | :------------ | | Operating activities | $(2,508,649) | $(2,633,821) | | Investing activities | $(490,650) | $(537,120) | | Financing activities | $1,360,736 | $4,248,590 | | Change in cash | $(1,638,563) | $1,077,649 | [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) This section highlights key accounting estimates, including software development costs and equity-based compensation, and the company's reporting status - Software development costs are capitalized after the preliminary project stage and amortized over an estimated **three-year useful life**[156](index=156&type=chunk) - Equity-based compensation awards are valued using the Black-Scholes option-pricing model, considering factors like stock price, expected life, volatility, and risk-free interest rate[159](index=159&type=chunk) - As an emerging growth company and smaller reporting company, Auddia has elected to use extended transition periods for new accounting standards and benefits from reduced disclosure obligations[160](index=160&type=chunk)[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Auddia Inc. is not required to provide quantitative and qualitative disclosures about market risk - Auddia Inc. is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that Auddia Inc.'s disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - The company's disclosure controls and procedures were evaluated as effective as of June 30, 2025[163](index=163&type=chunk) - No changes in internal control over financial reporting occurred during the six months ended June 30, 2025[164](index=164&type=chunk) [PART II – OTHER INFORMATION](index=31&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part provides additional information on legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) Auddia Inc. is involved in various legal disputes, but believes their resolution will not materially affect its financial condition - The company is party to litigation from time to time but believes current pending legal matters will not have a material adverse effect[166](index=166&type=chunk) - Further details on commitments and contingencies are provided in Note 4 to the financial statements[166](index=166&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the Annual Report on Form 10-K for risk factors, noting no material changes since the last filing - Readers should refer to the risk factors in the Annual Report on Form 10-K for the year ended December 31, 2024[167](index=167&type=chunk) - There have been no material changes to the company's risk factors since the last Annual Report[167](index=167&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the quarter ended June 30, 2025, with subsequent sales detailed in Item 5 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025, that were not previously reported[168](index=168&type=chunk) - Information on unregistered sales of equity securities during July and August 2025 is detailed in Item 5[169](index=169&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Auddia Inc. reported no defaults upon senior securities during the period - There were no defaults upon senior securities[171](index=171&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Auddia Inc. reported no mine safety disclosures - There were no mine safety disclosures[172](index=172&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) This section discloses no Rule 10b5-1 trading arrangements and details subsequent equity issuances and conversions - No director or officer adopted or terminated Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[173](index=173&type=chunk) - In July and August 2025, **360,000 shares** of common stock were issued under the Equity Line Common Stock Purchase Agreement for total proceeds of **$1.9 million**[173](index=173&type=chunk) - On August 5, 2025, exchange agreements were entered into to convert **569 shares** of Series B preferred stock into **132,724 shares** of common stock at an exchange price of **$4.486 per share**[174](index=174&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all required exhibits, including various agreements, certificates, and certifications, incorporated by reference - The exhibit index lists documents incorporated by reference, including the At-The-Market Issuance Sales Agreement, Certificates of Incorporation and Designations for preferred stock, and various equity agreements[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) - Key exhibits filed herewith include the Form of Exchange Agreement dated August 5, 2025, and Section 302 and 906 Certifications by the CEO and CFO[178](index=178&type=chunk) [Signatures](index=36&type=section&id=Signatures) The report is duly signed by Auddia Inc.'s President, CEO, and CFO on August 8, 2025 - The report was signed by Jeffrey Thramann, President, CEO, and Director, and John Mahoney, CFO, on August 8, 2025[181](index=181&type=chunk)[182](index=182&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Oragenics, Inc., including the balance sheets, statements of operations, stockholders' deficit, and cash flows, along with their accompanying notes, highlighting an increase in cash, a significant rise in short-term notes payable, and a reduced net loss, influenced by a reverse stock split and recent financing activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $1,973,745 | $864,840 | | Total current assets | $2,139,708 | $1,472,510 | | Total assets | $2,139,708 | $1,472,510 | | Accounts payable and accrued expenses | $1,267,423 | $1,355,867 | | Short-term notes payable, net | $3,000,000 | $328,528 | | Total liabilities | $4,267,423 | $1,684,395 | | Accumulated deficit | $(221,275,200) | $(216,786,172) | | Total stockholders' deficit | $(2,127,715) | $(211,885) | - Cash and cash equivalents increased by **$1,108,905** from December 31, 2024, to June 30, 2025[10](index=10&type=chunk) - Short-term notes payable significantly increased from **$328,528** to **$3,000,000**, contributing to a rise in total liabilities[10](index=10&type=chunk) - The accumulated deficit worsened from **$(216,786,172)** to **$(221,275,200)**, indicating continued operating losses[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $449,679 | $906,779 | $791,221 | $1,570,193 | | General and administrative | $1,264,523 | $1,399,221 | $2,949,208 | $3,195,910 | | Total operating expenses | $1,714,202 | $2,306,000 | $3,740,429 | $4,766,103 | | Loss from operations | $(1,714,202) | $(2,306,000) | $(3,740,429) | $(4,766,103) | | Interest income | $16,793 | $6,405 | $26,996 | $25,640 | | Interest expense | $(572,310) | $(1,803) | $(771,437) | $(8,888) | | Net loss | $(2,272,035) | $(2,305,090) | $(4,489,028) | $(4,755,923) | | Basic and diluted net loss per share | $(3.10) | $(15.27) | $(6.62) | $(35.56) | - Net loss for the three months ended June 30, 2025, slightly decreased to **$(2,272,035)** from **$(2,305,090)** in the prior year[13](index=13&type=chunk) - Interest expense dramatically increased to **$(572,310)** for the three months ended June 30, 2025, from **$(1,803)** in the prior year, primarily due to amortization of debt discount on a new promissory note[13](index=13&type=chunk)[102](index=102&type=chunk) - Basic and diluted net loss per share significantly improved to **$(3.10)** for the three months ended June 30, 2025, from **$(15.27)** in the prior year, influenced by the **1-for-30 reverse stock split**[13](index=13&type=chunk)[6](index=6&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) | Metric | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :-------------------------------- | :------------------ | :--------------- | :-------------- | | Common Stock Shares | 419,003 | 715,843 | 822,927 | | Common Stock Amount | $419 | $716 | $823 | | Additional Paid In Capital | $216,573,868 | $219,140,137 | $219,146,662 | | Accumulated Deficit | $(216,786,172) | $(219,003,165) | $(221,275,200) | | Total Stockholders' Deficit | $(211,885) | $137,688 | $(2,127,715) | - The company's total stockholders' deficit increased from **$(211,885)** at December 31, 2024, to **$(2,127,715)** at June 30, 2025, primarily due to net losses[16](index=16&type=chunk) - Common stock shares outstanding increased from **419,003** to **822,927** during the six months ended June 30, 2025, reflecting sales of common stock and conversion of prefunded warrants[16](index=16&type=chunk) - A **1-for-30 reverse stock split** was effected on June 3, 2025, retroactively adjusting all share and per share amounts[6](index=6&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(4,489,028) | $(4,755,923) | | Net cash used in operating activities | $(3,426,460) | $(4,608,778) | | Net cash provided by financing activities | $4,535,365 | $2,473,898 | | Net increase (decrease) in cash and cash equivalents | $1,108,905 | $(2,134,880) | | Cash and cash equivalents at end of period | $1,973,745 | $1,348,621 | - Net cash used in operating activities decreased by **$1,182,318** (from **$4,608,778** to **$3,426,460**) for the six months ended June 30, 2025, compared to the prior year, reflecting lower net loss and R&D expenditures[18](index=18&type=chunk)[109](index=109&type=chunk) - Net cash provided by financing activities increased by **$2,061,467** (from **$2,473,898** to **$4,535,365**) for the six months ended June 30, 2025, primarily due to new debt financing[18](index=18&type=chunk)[111](index=111&type=chunk) - The company experienced a net increase in cash and cash equivalents of **$1,108,905** for the six months ended June 30, 2025, a significant improvement from a net decrease of **$2,134,880** in the prior year[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation and Nature of Operations](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Nature%20of%20Operations) - Oragenics, Inc. is a development-stage biopharmaceutical company focused on nasally delivered pharmaceutical therapies for neurological conditions and infectious diseases, with a lead product candidate, ONP-002, for mild traumatic brain injury[26](index=26&type=chunk) - The company has incurred recurring losses, an accumulated deficit of **$221 million**, and negative cash flows, leading to substantial doubt about its ability to continue as a going concern[27](index=27&type=chunk)[28](index=28&type=chunk) - A **1-for-30 reverse stock split** was effected on June 3, 2025, with all share and per share amounts retroactively adjusted[24](index=24&type=chunk) - Subsequent to quarter-end, a public offering of Series H Preferred Stock and warrants on July 2, 2025, generated approximately **$15.2 million** in net proceeds, extending the cash runway, but substantial doubt about going concern remains[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) [Note 2. New Accounting Pronouncements](index=10&type=section&id=Note%202.%20New%20Accounting%20Pronouncements) - The company plans to adopt ASU 2023-09 (improvements to income tax disclosures) for fiscal years beginning after December 15, 2024, expecting no material effect on financial statements aside from disclosure changes[34](index=34&type=chunk) - The company plans to adopt ASU 2024-03 (disaggregation of certain income statement expenses) for fiscal years beginning after December 15, 2026, expecting no material effect on financial statements aside from disclosure changes[35](index=35&type=chunk) [Note 3. Prepaid Expenses and Other Current Assets](index=10&type=section&id=Note%203.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) - Prepaid expenses and other current assets decreased to **$165,963** as of June 30, 2025, from **$607,670** as of December 31, 2024, primarily due to amortization of prepaid insurance and timing of R&D vendor milestone payments[36](index=36&type=chunk) [Note 4. Accounts Payable and Accrued Expenses](index=10&type=section&id=Note%204.%20Accounts%20Payable%20and%20Accrued%20Expenses) - Accounts payable and accrued expenses decreased to **$1.3 million** as of June 30, 2025, from **$1.4 million** as of December 31, 2024, mainly due to timing of vendor payments and lower accrued external R&D and corporate services[38](index=38&type=chunk) [Note 5. Short-Term Notes Payable](index=10&type=section&id=Note%205.%20Short-Term%20Notes%20Payable) - On March 13, 2025, the company issued a **$3.0 million** promissory note with a **17% original issue discount**, resulting in net proceeds of approximately **$2.2 million**[39](index=39&type=chunk) - The promissory note was non-interest bearing unless an event of default occurred, maturing on July 14, 2025, or upon closing of a subsequent offering[40](index=40&type=chunk) - Subsequent to quarter-end, on July 2, 2025, the **$3.0 million** promissory note was repaid in full using proceeds from the Series H Preferred Stock offering[42](index=42&type=chunk) Short-Term Notes Payable | Short-Term Notes Payable | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Insurance premium financing | $— | $328,528 | | $3.0 million non-interest-bearing promissory note | $3,000,000 | $— | | Total | $3,000,000 | $328,528 | [Note 6. Stock-Based Compensation](index=11&type=section&id=Note%206.%20Stock-Based%20Compensation) - The 2021 Equity Incentive Plan authorizes grants covering **3,166,667 shares** of common stock, with **3,142,655 shares** remaining available for awards as of June 30, 2025[43](index=43&type=chunk) Stock Option Activity | Stock Option Activity | Number of Shares | Weighted Average Exercise Price per Share | | :-------------------------------- | :--------------- | :-------------------------------------- | | Outstanding at December 31, 2024 | 33,150 | $142.71 | | Cancelled or expired | (9,138) | $105.90 | | Outstanding at June 30, 2025 | 24,012 | $156.72 | | Exercisable at June 30, 2025 | 22,844 | $164.00 | - Unrecognized stock-based compensation expense related to unvested stock options was approximately **$6,040** as of June 30, 2025, expected to be recognized over approximately **0.25 years**[47](index=47&type=chunk) [Note 7. Warrants](index=11&type=section&id=Note%207.%20Warrants) Warrants Outstanding | Warrants Outstanding | Number | Exercise Price | Expiration Date | | :-------------------------------- | :----- | :------------- | :-------------- | | | 1,770 | $1,800 | 7/17/2025 | | | 2,341 | $56.25 | 2/27/2029 | | | 1,834 | $37.50 | 6/29/2029 | | | 13,512 | $20.70 | 9/4/2029 | | Total | 19,457 | | | - All share amounts for warrants have been retroactively adjusted to reflect the **1-for-30 Reverse Stock Split** effected on June 3, 2025[48](index=48&type=chunk) [Note 8. Shareholders' Equity](index=13&type=section&id=Note%208.%20Shareholders'%20Equity) - In February 2025, the company sold **260,000 shares** through an At-the-Market Sales Agreement, generating net proceeds of **$2.6 million**[51](index=51&type=chunk) - As of June 30, 2025, **7,488,692 shares** of Series F Convertible Preferred Stock remain outstanding, convertible into **249,624 shares** of common stock upon certain conditions[52](index=52&type=chunk) - Series G Mirroring Preferred Stock, issued in March 2025 in connection with a **$3.0 million** promissory note, was automatically cancelled on May 2, 2025, following shareholder approval of a reverse stock split proposal[53](index=53&type=chunk) [Note 9. Net Loss Per Share](index=14&type=section&id=Note%209.%20Net%20Loss%20Per%20Share) - Basic and diluted net loss per share are the same for all periods presented as the inclusion of potentially dilutive securities would have been antidilutive[56](index=56&type=chunk) - All shares and per share amounts have been retroactively adjusted to reflect the **1-for-30 Reverse Stock Split** effective June 3, 2025[57](index=57&type=chunk) Potentially Dilutive Securities | Potentially Dilutive Securities | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Stock options | 24,012 | 7,431 | | Warrants | 19,457 | 11,628 | | Total | 43,469 | 19,059 | [Note 10. Commitments and Contingencies](index=14&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) - The company is involved in an arbitration action with Ladenburg Thalmann regarding a disputed **$2.5 million** fee related to an asset purchase from Odyssey Health, Inc., with the FINRA action set to be heard from September 29 – October 3, 2025[58](index=58&type=chunk) - While the company believes Ladenburg's claims are unlikely to prevail, an unfavorable outcome could materially impact its business and financial position[58](index=58&type=chunk) [Note 11. Subsequent Events](index=14&type=section&id=Note%2011.%20Subsequent%20Events) - On May 2, 2025, Janet Huffman was appointed Chief Executive Officer, in addition to her role as Chief Financial Officer[59](index=59&type=chunk) - On June 3, 2025, the company effected a **1-for-30 Reverse Stock Split**[60](index=60&type=chunk) - On July 2, 2025, the company completed a public offering of Series H Convertible Preferred Stock and warrants, generating net proceeds of approximately **$15.2 million**[61](index=61&type=chunk) - The **$3.0 million** promissory note was repaid in full on or about July 2, 2025, using proceeds from the Series H Preferred Stock and warrants offering[62](index=62&type=chunk) [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 and operational results, highlighting its focus on ONP-002, recent funding, and the ongoing need for capital, detailing changes in expenses, interest, and cash flow activities [Forward-Looking Statements](index=16&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements regarding future performance, business prospects, and product development plans, based on current expectations and estimates[64](index=64&type=chunk) - Actual results may differ materially due to various factors, including funding availability, technical risks, and regulatory approvals, as detailed in the 'Risk Factors' section[66](index=66&type=chunk) [Overview](index=16&type=section&id=Overview) - Oragenics is a development-stage biopharmaceutical company focused on nasal delivery therapies for neurological conditions and infectious diseases[67](index=67&type=chunk) - The primary focus is on advancing ONP-002, a neurosteroid for mild traumatic brain injury (mTBI), designed for rapid and direct brain accessibility via intranasal administration[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk) ONP-002 Product Development Timeline | ONP-002 Product Development Timeline | Status | | :-------------------------------- | :------- | | Pre-clinical Animal Studies | Complete | | Phase 1 | Complete | | Phase 2a | Estimated Q3 2025 start | | Phase 2b | Estimated Q4 2026 start | | Phase 3 | Estimated Q4 2027 start | [Business Development Strategy](index=17&type=section&id=Business%20Development%20Strategy) - The company expects to seek strategic opportunities through various forms of business development, including alliances, licensing, joint ventures, and M&A, to enhance shareholder value and expand its pipeline[72](index=72&type=chunk) [Recent Funding](index=17&type=section&id=Recent%20Funding) - In February 2025, the company sold **260,000 shares** via an At-the-Market Sales Agreement, yielding **$2.6 million** in net proceeds[73](index=73&type=chunk) - In March 2025, a **$3.0 million** promissory note was issued, providing **$2.2 million** in net proceeds after discounts and expenses[75](index=75&type=chunk) - Subsequent to quarter-end, on July 2, 2025, a public offering of Series H Convertible Preferred Stock and warrants generated approximately **$15.2 million** in net proceeds, which was used to repay the **$3.0 million** promissory note[74](index=74&type=chunk)[75](index=75&type=chunk) [Going Concern](index=17&type=section&id=Going%20Concern) - The company refers to Note 1 for a detailed discussion on its going concern status, which indicates substantial doubt due to recurring losses and negative cash flows[76](index=76&type=chunk)[27](index=27&type=chunk) [Significant Accounting Policies and Use of Estimates](index=17&type=section&id=Significant%20Accounting%20Policies%20and%20Use%20of%20Estimates) - There were no significant changes to the company's accounting policies and estimates during the three and six months ended June 30, 2025, compared to those disclosed in the 2024 Annual Report on Form 10-K[77](index=77&type=chunk) [Future Capital Requirements](index=19&type=section&id=Future%20Capital%20Requirements) - The company expects substantial expenditures for developing its neurology assets, particularly ONP-002, including costs for research, nonclinical testing, clinical trials, and regulatory submissions[80](index=80&type=chunk) - The **$15.2 million** net proceeds from the July 2025 public offering are expected to fund operations through the first half of 2026, but additional capital will be required to complete planned clinical trials and commercialization efforts[82](index=82&type=chunk)[83](index=83&type=chunk) - Future funding may involve additional equity and debt financings, strategic alliances, or licensing agreements, with potential for significant dilution to existing shareholders[81](index=81&type=chunk)[84](index=84&type=chunk) [New Accounting Pronouncements](index=19&type=section&id=New%20Accounting%20Pronouncements) - The company refers to Note 2 for details on new accounting pronouncements, ASU 2023-09 and ASU 2024-03, which are expected to primarily impact disclosures without material financial statement effects[86](index=86&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [Business Segments](index=20&type=section&id=Business%20Segments) - The company operates in a single reportable segment, focusing on the development of ONP-002 for mild traumatic brain injury, consistent with how its Chief Operating Decision Maker reviews financial information[88](index=88&type=chunk) - No revenue was generated for the three and six months ended June 30, 2025, and 2024[89](index=89&type=chunk)[90](index=90&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Three Months Ended June 30, 2025 vs 2024 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Research and development | $449,679 | $906,779 | $(457,100) | (50.41)% | | General and administrative | $1,264,523 | $1,399,221 | $(134,698) | (9.63)% | | Total operating expenses | $1,714,202 | $2,306,000 | $(591,798) | (25.66)% | | Loss from operations | $(1,714,202) | $(2,306,000) | $(591,798) | (25.66)% | | Interest income | $16,793 | $6,405 | $10,388 | 162.19% | | Interest expense | $(572,310) | $(1,803) | $(570,507) | 31,642.10% | | Net loss | $(2,272,035) | $(2,305,090) | $33,055 | (1.43)% | Six Months Ended June 30, 2025 vs 2024 | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Research and development | $791,221 | $1,570,193 | $(778,972) | (49.61)% | | General and administrative | $2,949,208 | $3,195,910 | $(246,702) | (7.72)% | | Total operating expenses | $3,740,429 | $4,766,103 | $(1,025,674) | (21.52)% | | Loss from operations | $(3,740,429) | $(4,766,103) | $(1,025,674) | (21.52)% | | Interest income | $26,996 | $25,640 | $1,356 | 5.29% | | Interest expense | $(771,437) | $(8,888) | $(762,549) | 8,579.53% | | Net loss | $(4,489,028) | $(4,755,923) | $266,895 | (5.61)% | [Research and Development](index=20&type=section&id=Research%20and%20Development) - R&D expenses decreased by **50.4%** to **$449,679** for the three months ended June 30, 2025, and by **49.6%** to **$791,221** for the six months, primarily due to a shift in program focus solely to ONP-002 regulatory submissions and Phase IIa trial initiation, compared to broader vaccine and antibiotic programs in 2024[92](index=92&type=chunk)[93](index=93&type=chunk) - R&D expenses are anticipated to increase in future periods with the initiation of the Phase IIa trial in Australia, IND-enabling work for a Phase IIb trial in the U.S., and manufacturing of ONP-002 clinical trial material[94](index=94&type=chunk) [General and Administrative](index=21&type=section&id=General%20and%20Administrative) - G&A expenses decreased by **9.6%** to **$1.3 million** for the three months ended June 30, 2025, and by **7.7%** to **$3.0 million** for the six months, driven by lower legal and professional fees and reduced headcount[96](index=96&type=chunk)[97](index=97&type=chunk) - Offsetting decreases were higher public company expenses, insurance costs, and a reclassification of patent expense from R&D to G&A starting Q1 2025[97](index=97&type=chunk)[98](index=98&type=chunk) - G&A expenses are expected to increase in future periods to support expanded ONP-002 development, public company compliance, and investor communications[95](index=95&type=chunk)[99](index=99&type=chunk) [Other Income (Expense)](index=23&type=section&id=Other%20Income%20(Expense)) - Total other expense was **$557,833** for the three months ended June 30, 2025, compared to **$910** of income in the prior year, primarily due to a **$570,507** increase in interest expense[102](index=102&type=chunk) - The increase in interest expense is attributed to the amortization of debt discount and financing costs associated with the **$3.0 million** promissory note issued in March 2025[102](index=102&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) - The company has historically funded operations through equity sales, debt financing, and warrant exercises, and had an accumulated deficit of **$221 million** as of June 30, 2025[104](index=104&type=chunk) Cash Flow Activity | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,426,460) | $(4,608,778) | | Net cash provided by financing activities | $4,535,365 | $2,473,898 | | Net increase (decrease) in cash and cash equivalents | $1,108,905 | $(2,134,880) | [Operating Activities](index=23&type=section&id=Operating%20Activities) - Cash used in operating activities decreased to **$3.4 million** for the six months ended June 30, 2025, from **$4.6 million** in the prior year, driven by a lower net loss and reduced R&D expenditures[106](index=106&type=chunk)[109](index=109&type=chunk) - Significant non-cash adjustments included **$771,437** for amortization of debt discount and closing costs, and **$24,485** for stock-based compensation expense[107](index=107&type=chunk) [Financing Activities](index=23&type=section&id=Financing%20Activities) - Net cash provided by financing activities increased to **$4.5 million** for the six months ended June 30, 2025, from **$2.5 million** in the prior year[110](index=110&type=chunk)[111](index=111&type=chunk) - This increase was primarily due to **$2.6 million** in net proceeds from common stock issuance and **$2.2 million** from short-term notes payable, partially offset by **$328,528** in note repayments[110](index=110&type=chunk) [Short-Term Notes Payable](index=23&type=section&id=Short-Term%20Notes%20Payable) - A **$3.0 million** promissory note was issued on March 13, 2025, yielding approximately **$2.2 million** in net proceeds, which was subsequently repaid in full on July 2, 2025, using proceeds from the Series H Preferred Stock offering[113](index=113&type=chunk)[115](index=115&type=chunk) Short-Term Notes Payable | Short-Term Notes Payable | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Insurance premium financing | $— | $328,528 | | $3.0 million non-interest-bearing promissory note | $3,000,000 | $— | | Total | $3,000,000 | $328,528 | [Inflation](index=25&type=section&id=Inflation) - Inflation may impact costs of services and supplies, but the company, being in the development stage without significant manufacturing, has not experienced a material inflationary effect on its operating results for the six months ended June 30, 2025 and 2024[117](index=117&type=chunk) [Off Balance Sheet Arrangements](index=25&type=section&id=Off%20Balance%20Sheet%20Arrangements) - The company does not have any off-balance sheet arrangements[118](index=118&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Oragenics, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information under this item[119](index=119&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective, while acknowledging inherent limitations in control systems, emphasizing they provide reasonable, not absolute, assurance - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[120](index=120&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by this report[121](index=121&type=chunk) - Management acknowledges that control systems provide only reasonable assurance and have inherent limitations, such as potential for errors, circumvention, or management override[122](index=122&type=chunk)[123](index=123&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) Oragenics, Inc. is engaged in an ongoing arbitration with Ladenburg Thalmann over a disputed $2.5 million fee, with the FINRA action scheduled for September-October 2025, and an unfavorable outcome could materially impact the company - The company is in a legal dispute with Ladenburg Thalmann over a **$2.5 million** fee related to an asset purchase, with arbitration ongoing at FINRA[124](index=124&type=chunk) - Ladenburg's attempt to move the venue to federal court was denied, and the FINRA arbitration is scheduled for September 29 – October 3, 2025[124](index=124&type=chunk) - An unfavorable outcome in the litigation could negatively and materially impact the company's business, financial position, and results of operations[124](index=124&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors previously disclosed in the Annual Report on Form 10-K, highlighting new and continuing risks, including anti-dilution provisions of Series H Convertible Preferred Stock, the ongoing need for additional capital, and potential for significant dilution to existing common shareholders from future equity issuances - The Series H Convertible Preferred Stock contains anti-dilution provisions that may reduce its conversion price in future offerings, potentially leading to an indeterminate number of common shares issued upon conversion and greater dilution for existing shareholders[126](index=126&type=chunk) - The company will need to raise additional capital to complete product development and commercialization, and its auditor has expressed substantial doubt about its ability to continue as a going concern[127](index=127&type=chunk) - Future sales of common stock or other equity securities could result in significant dilution to existing common shareholders and depress the market price of the common stock[130](index=130&type=chunk)[131](index=131&type=chunk) - The exercise price of Series H Warrants is **$25 per share**, and if the common stock market price remains below the conversion price, warrant holders may not exercise, potentially requiring the company to raise additional capital sooner[129](index=129&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=28&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) On March 13, 2025, the company issued a $3.0 million promissory note and Series G Mirroring preferred stock in a private placement, generating approximately $2.25 million in net proceeds, with the Series G Preferred Stock subsequently cancelled in connection with a reverse stock split - On March 13, 2025, the company issued a **$3.0 million** promissory note to a single investor at a **17% original issue discount**, resulting in net proceeds of **$2.25 million**[132](index=132&type=chunk) - In connection with the note, **1,000,000 shares** of Series G Mirroring preferred stock were issued and subsequently cancelled due to the reverse stock split[133](index=133&type=chunk) - The note and Series G Preferred Stock were issued in a private placement under Section 4(a)(2) of the Securities Act of 1933 and Regulation D[134](index=134&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) During the quarter ended June 30, 2025, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[135](index=135&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various articles of incorporation amendments, bylaws, forms of preferred stock warrants, and certifications - The exhibit list includes amendments to the Articles of Incorporation, Bylaws, Form of Series H Preferred Warrant, Warrant Agency Agreement, and certifications from the CEO and CFO[137](index=137&type=chunk) [Signatures](index=32&type=section&id=Signatures) The report is duly signed on behalf of Oragenics, Inc. by Janet Huffman, in her capacity as Chief Financial Officer, Secretary, Treasurer, President, and Chief Executive Officer, as of August 8, 2025 - The report was signed by Janet Huffman, Chief Financial Officer, Secretary, Treasurer, President, and Chief Executive Officer, on August 8, 2025[141](index=141&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for June 30, **2025**, and December 31, **2024**, including balance sheets, operations, equity, cash flows, and notes [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Snapshot of **assets**, **liabilities**, and **equity** as of **June 30, 2025**, and **December 31, 2024**, showing increased **total assets** from digital asset investment Consolidated Balance Sheets | **Metric** | **June 30, 2025 (Unaudited)** | **December 31, 2024 (Audited)** | | :----------------------------------- | :-------------------------- | :-------------------------- | | **Cash** | **$5,298,142** | **$1,352,373** | | **Total current assets** | **$7,295,518** | **$3,462,457** | | **Investment in digital assets – Related Party** | **$102,198,840** | - | | **Total assets** | **$112,196,561** | **$6,307,303** | | **Total Liabilities** | **$751,576** | **$1,016,352** | | **Total Shareholders' Equity (Deficit)** | **$111,444,985** | **$5,290,951** | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Details revenues, costs, and **net income/loss**, shifting from **loss** to **income** due to **unrealized digital asset gains** Consolidated Statements of Operations | **Metric** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2024** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2024** | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Sales** | **$1,342,929** | **$1,507,927** | **$2,432,563** | **$2,514,284** | | **Gross profit** | **$292,203** | **$324,666** | **$558,738** | **$488,213** | | **Operating loss** | **$(744,203)** | **$(526,476)** | **$(1,391,578)** | **$(2,241,482)** | | **Unrealized gain on digital asset investment** | **$2,154,071** | - | **$2,154,071** | - | | **Net income (loss)** | **$1,467,855** | **$(520,971)** | **$821,269** | **$(2,230,975)** | | **Basic Net (loss) per share** | **$0.07** | **$(0.05)** | **$0.04** | **$(0.22)** | | **Fully diluted Net (loss) per share** | **$0.01** | **$(0.05)** | **$0.00** | **$(0.22)** | [Consolidated Statements of Changes in Shareholders' Equity (Deficit)](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20(Deficit)) Outlines **equity** changes, reflecting increased **paid-in capital** from preferred stock and digital asset investments Consolidated Statements of Changes in Shareholders' Equity (Deficit) | **Metric** | **June 30, 2025** | **December 31, 2024** | | :--------------------------------- | :------------ | :---------------- | | **Series B Preferred Stock** (Shares) | **100,000** | - | | **Series B Preferred Stock** (Amount) | **$10** | - | | **Common Stock** (Shares) | **27,425,983** | **15,956,477** | | **Common Stock** (Amount) | **$2,743** | **$1,596** | | **Additional Paid-In Capital** | **$115,996,204** | **$10,195,598** | | **Accumulated earnings (deficit)** | **$(4,875,972)** | **$(5,697,241)** | | **Total Shareholders' Equity (Deficit)** | **$111,444,985** | **$5,290,951** | - Issuance of **100,000 Series B Preferred Stock** shares for **$100,000,000** in **digital assets** (**TRX tokens**) significantly increased **additional paid-in capital**[72](index=72&type=chunk)[82](index=82&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Presents **cash flows** from operating, investing, and financing activities, showing a **net cash increase** from financing Consolidated Statements of Cash Flows | **Metric** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2024** | | :--------------------------------------- | :----------------------------- | :----------------------------- | | **Net Income (loss)** | **$821,269** | **$(2,230,975)** | | **Net cash provided by (used in) operating activities** | **$(165,653)** | **$(1,504,704)** | | **Cash flows (used in) investing activities** | - | **$(23,264)** | | **Cash (used in) financing activities** | **$4,111,422** | - | | **Net increase (decrease) in cash and cash equivalents** | **$3,945,769** | **$(1,527,968)** | | **Cash and cash equivalents at the end of the period** | **$5,298,142** | **$1,452,773** | | **Fair value of preferred shares issued for digital assets** | **$100,000,000** | - | [Notes to the Financial Statements](index=12&type=section&id=Notes%20to%20the%20Financial%20Statements) Provides detailed information on organization, accounting policies, financial items, capital structure, and subsequent events [Note 1 - Organization and Business Operations](index=12&type=section&id=Note%201%20-%20Organization%20and%20Business%20Operations) **Tron Inc.** is a **NASDAQ-listed Nevada corporation** with a **Hong Kong subsidiary**, focusing on merchandise and **TRX token** holdings - **Tron Inc.** (formerly **SRM Entertainment, Inc.**) is a **Nevada corporation**, listed on **NASDAQ**, incorporated on **April 22, 2022**. Its **wholly-owned subsidiary**, **SRM Ltd**, was incorporated in **Hong Kong** on **January 23, 1981**[28](index=28&type=chunk) - The company's **business operations** include designing, developing, and manufacturing **custom merchandise** (**toys and souvenirs**) for **theme parks and entertainment venues**, and holding **TRON** (**TRX tokens**), which constitutes the **largest public ownership of TRX tokens**[29](index=29&type=chunk) [Note 2 - Significant Accounting Policies](index=12&type=section&id=Note%202%20-%20Significant%20Accounting%20Policies) Outlines policies for **emerging growth company** status, recent accounting pronouncements, revenue, digital assets, and related parties - The Company is an '**emerging growth company**' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, which may affect **comparability** with other public companies[31](index=31&type=chunk)[32](index=32&type=chunk) - The Company adopted **ASU 2023-07 (Segment Reporting)** for fiscal years beginning after **December 15, 2023**, and **ASU 2023-08 (Accounting for and Disclosure of Crypto Assets)** effective **January 1, 2025**, requiring **crypto assets** to be recognized at **fair value** with changes in **net income**[36](index=36&type=chunk)[37](index=37&type=chunk) - **Digital assets** (**TRX tokens**) are accounted for at **fair value**, with changes recognized in **net income**, and are classified as current or noncurrent based on intended holding period and liquidity. **Staking activities** with **JustLend DAO** result in **sTRX liquid staking tokens**, measured at **fair value**, with appreciation considered **unrealized staking income**[42](index=42&type=chunk)[43](index=43&type=chunk)[59](index=59&type=chunk) - The Company operates **two operating segments**: (i) the design, manufacture, and sale of **toys** to premier **theme parks** and (ii) a **Digital Asset Treasury Strategy** using **TRX Tokens**[66](index=66&type=chunk) [Note 3 – Inventory](index=18&type=section&id=Note%203%20%E2%80%93%20Inventory) Provides **inventory** balances for finished goods at reporting periods Inventory | **Metric** | **June 30, 2025** | **December 31, 2024** | | :------- | :------------ | :---------------- | | **Inventory** | **$731,934** | **$783,800** | [Note 4 - Accounts Receivable](index=18&type=section&id=Note%204%20-%20Accounts%20Receivable) Details **accounts receivable** balances at reporting periods Accounts Receivable | **Metric** | **June 30, 2025** | **December 31, 2024** | | :--------------- | :------------ | :---------------- | | **Accounts receivable** | **$637,013** | **$794,158** | [Note 5 – Prepaid Expenses](index=18&type=section&id=Note%205%20%E2%80%93%20Prepaid%20Expenses) Outlines the composition and balances of **prepaid expenses** and deposits Prepaid Expenses | **Metric** | **June 30, 2025** | **December 31, 2024** | | :-------------------------- | :------------ | :---------------- |\n| **Total prepaid expenses** | **$318,669** | **$488,746** | | **Deposits on orders** | **$128,769** | **$396,489** | | **Prepaid insurance** | **$116,968** | **$33,382** | | **Other expenses** | **$72,932** | **$58,875** | [Note 6 - Investment in digital assets – held by an Affiliate](index=18&type=section&id=Note%206%20-%20Investment%20in%20digital%20assets%20%E2%80%93%20held%20by%20an%20Affiliate) Describes significant **TRX token** investment, acquired via preferred stock, staked, and generating **unrealized gains** - On **June 16, 2025**, the Company acquired **365,096,845 TRX tokens** for **$100,000,000** by issuing **Series B Convertible Preferred Stock** and warrants[72](index=72&type=chunk) - The **TRX tokens** were staked through an affiliate, resulting in **297,543,246 sTRX liquid staking tokens**[72](index=72&type=chunk) Investment in Digital Assets | **Metric** | **Fair Value** | | :-------------------------------- | :--------- | | **Balance at December 31, 2024** | **$ -** | | **Receipt of TRX tokens** | **$100,000,000** | | **Change in fair value** | **$2,154,071** | | **Unrealized income from staking TRX** | **$44,769** | | **Balance at June 30, 2025** | **$102,198,840** | - Potential conflicts of interest exist due to directors' affiliations with **BiT Global** (custodian of Treasury Wallet) and the **TRON blockchain ecosystem** (e.g., **Weike Sun** is father of **Justin Sun**, founder of **TRON**; **Mr. Liu** is senior advisor to **Tron DAO**; **Mr. Yang** holds senior positions for **Tronscan**)[76](index=76&type=chunk) [Note 7 - Investment in Gameverse Interactive Corp](index=18&type=section&id=Note%207%20-%20Investment%20in%20Gameverse%20Interactive%20Corp) Details the company's **equity investment** in **Gameverse Interactive Corp** through a **stock exchange** - On **January 24, 2025**, the Company exchanged **500,000 shares** of its restricted **common stock** for **132,000 shares** of **Gameverse Interactive Corp's** restricted **common stock**, valued at **$190,500**[74](index=74&type=chunk) [Note 8 – Fixed Assets and Other Assets](index=18&type=section&id=Note%208%20%E2%80%93%20Fixed%20Assets%20and%20Other%20Assets) Provides a breakdown of **fixed assets**, **net of depreciation**, including **tooling, molds, and computer equipment** Fixed Assets and Other Assets | **Asset Category** | **June 30, 2025** | **December 31, 2024** | | :----------------------- | :------------ | :---------------- | | **Tooling and Molds** | **$73,325** | **$56,425** | | **Computer equipment and software** | **$21,285** | **$21,285** | | **Total** | **$94,610** | **$77,710** | | **Accumulated depreciation** | **$(44,322)** | **$(29,431)** | | **Net Fixed Assets** | **$50,288** | **$48,279** | [Note 9 – Intangible Assets and Secured Note – Related Party](index=19&type=section&id=Note%209%20%E2%80%93%20Intangible%20Assets%20and%20Secured%20Note%20%E2%80%93%20Related%20Party) Details **intangible asset** acquisition and **secured note** repayment, including **waived interest** - On **September 3, 2024**, the Company acquired assets related to the movie '**The Kid**' from **Suretone Entertainment, Inc.** (a related party) for **$2,893,000**, paid via cash, restricted **common stock**, and a **$1,500,000 secured promissory note**[78](index=78&type=chunk)[79](index=79&type=chunk) - The **secured note** was fully paid off by **June 14, 2025**, and **$41,877** in accrued interest was waived and recorded as an adjustment to **additional paid-in capital**[79](index=79&type=chunk) Amortization Expense | **Metric** | **Six Months Ended June 30, 2025** | **Year Ended December 31, 2024** | | :------------------- | :----------------------------- | :--------------------------- | | **Amortization expense** | **$144,650** | **$96,433** | [Note 10 - Capital Structure](index=20&type=section&id=Note%2010%20-%20Capital%20Structure) Describes authorized and outstanding stock, recent issuances, conversions, and **capital structure** impact - As of **June 30, 2025**, the Company had **10,000,000 authorized preferred shares** (**$0.0001 par value**), with **1,000,000** designated as **Series A** and **100,000** as **Series B**[80](index=80&type=chunk) - In **May 2025**, **5,000 Series A Preferred shares** were issued for **$5,000,000** (net **$4,591,392**) and subsequently converted into **8,928,571 common shares**[81](index=81&type=chunk) - On **June 16, 2025**, **100,000 Series B Preferred shares** were issued for **$100,000,000** in **digital assets**, convertible into **200,000,000 common shares**, and warrants for **220,000,000 common shares**[82](index=82&type=chunk) - The issuances of **Series A** and **B Preferred Stock** resulted in a **change of control** of the Company[85](index=85&type=chunk) Capital Structure | **Metric** | **June 30, 2025** | **December 31, 2024** | | :--------------------------------------- | :------------ | :---------------- | | **Common Stock Issued and Outstanding** | **27,425,983** | **15,956,977** | | **Common Stock Payable** | **$322,000** | **$790,998** | [Note 11 – Options](index=22&type=section&id=Note%2011%20%E2%80%93%20Options) Details **stock options** granted to officers, directors, and employees, including **exercise prices, terms, and compensation expense** - During the **six months ended June 30, 2025**, the Company granted **2,025,000 options** to Directors with **exercise prices** ranging from **$0.56** to **$0.68**, resulting in an expense of **$460,821**[100](index=100&type=chunk) - The **fair value** of options was measured using the **Black-Scholes valuation model**[101](index=101&type=chunk) Stock Options Granted | **Reporting Date** | **Number of Options** | **Term (Years)** | **Exercise Price** | **Market Price on Grant Date** | **Volatility Percentage** | **Fair Value** | | :------------- | :---------------- | :----------- | :------------- | :------------------------- | :-------------------- | :--------- | | **02/21/2024** | **995,000** | **2.5** | **$1.21** | **$1.21** | **62.6%** | **$573,548** | | **12/31/2024** | **25,000** | **5.0** | **$0.63** | **$0.63** | **86.4%** | **$11,045** | | **01/07/2025** | **375,000** | **2.5** | **$0.68** | **$0.68** | **75.0%** | **$119,635** | | **5/22/2025** | **1,650,000** | **2.5** | **$0.56** | **$0.52** | **64.5%** | **$341,186** | [Note 12 - Segment Reporting](index=23&type=section&id=Note%2012%20-%20Segment%20Reporting) Identifies **two reportable segments: toy business and digital assets**, with respective revenues and **gross profits** - The Company has **two reportable segments**: (i) the **toy business** (design, development, and manufacture of **toys and souvenir items**) and (ii) **digital assets** (investing for growth and staking tokens for income)[103](index=103&type=chunk) - **Gross profit** (**loss**) is the segment performance measure used by the **CODM** (**CEO**, **Richard Miller**)[104](index=104&type=chunk) Segment Performance | **Metric** | **June 30, 2025** | **June 30, 2024** | | :-------------------------------- | :------------ | :------------ | | **Revenue from Toy sales** | **$2,432,563** | **$2,514,284** | | **Cost of sales** | **$1,873,825** | **$2,026,071** | | **Gross profit (Toy segment)** | **$558,738** | **$488,213** | | **Unrealized Gain on digital asset investments** | **$2,154,071** | - | | **Unrealized income from staking activities** | **$44,769** | - | | **Total income from digital assets** | **$2,198,840** | - | | **Operating (expenses)** | **$(1,950,316)** | **$(2,729,695)** | | **Net interest income** | **$14,007** | **$10,507** | | **Net Income (loss)** | **$821,269** | **$(2,230,975)** | [Note 13 - Commitments and Contingencies](index=23&type=section&id=Note%2013%20-%20Commitments%20and%20Contingencies) States **no material legal proceedings or claims** are known that could **adversely affect financial position** - Management is not aware of any pending or threatened litigation that could have a **material adverse effect** on the company's **financial position**, **results of operations**, or **liquidity**[107](index=107&type=chunk) [Note 14 – Subsequent Events](index=23&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) Discloses **post-June 30, 2025 events**, including **warrant exercises, S-3 filing, and stockholder approvals** - Subsequent to **June 30, 2025**, **5,678,000 warrants** were exercised, generating **$3,690,700** in proceeds[108](index=108&type=chunk) - On **July 28, 2025**, the Company filed an **S-3 Registration Statement** to offer and sell up to **$1,000,000,000** in various securities[108](index=108&type=chunk)[109](index=109&type=chunk) - Stockholders approved a **change in control** via the issuance of **Series B Preferred Stock** and warrants to an institutional investor (making them the largest shareholder with over **20%** of **common stock**) and an amendment to increase **authorized common stock** from **100,000,000** to **1,000,000,000 shares**, effective **August 14, 2025**[110](index=110&type=chunk)[111](index=111&type=chunk)[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on **financial condition**, operations, **business segments**, **strategic developments**, and performance [General Overview](index=25&type=section&id=General%20Overview) **Tron Inc.** is a **NASDAQ-listed Nevada corporation**; recent **PIPE offerings** and name change reflect a **TRON blockchain treasury strategy** - **Tron Inc.** (formerly **SRM Entertainment, Inc.**) is a **Nevada corporation**, listed and traded on **NASDAQ**, incorporated on **April 22, 2022**, with **SRM Entertainment Limited** as a **wholly-owned subsidiary**[121](index=121&type=chunk) - Recent **May** and **June 2025 PIPE Offerings**, name change to '**Tron Inc.**', and ticker change to '**TRON**' signify a **strategic transformation** to align with the **TRON blockchain ecosystem** and a **Tron-focused treasury strategy**[122](index=122&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) [Business](index=26&type=section&id=Business) Operates a **TRX Tokens Treasury strategy** for **long-term holdings and staking**, plus a **traditional toy and souvenir business** - The **TRX Tokens Treasury strategy** involves acquiring **TRX tokens** through **debt/equity issuances** or **liquid assets**, viewing them as **long-term holdings**, and potentially generating **income streams through staking**[125](index=125&type=chunk)[126](index=126&type=chunk) - The company currently holds **365,096,845 TRX tokens** with **no dispositions to date**[127](index=127&type=chunk) - The **toy and souvenir business** designs and develops **custom merchandise** for major **theme parks** (e.g., **Walt Disney Parks**, **Universal Studios**) and **entertainment venues**, leveraging **pop culture trends** and **licensed intellectual property**[128](index=128&type=chunk)[129](index=129&type=chunk)[133](index=133&type=chunk) [Recent Developments](index=27&type=section&id=Recent%20Developments) Two significant **PIPE offerings** in **May** and **June 2025** led to **board changes, executive agreement amendments**, and a **name/ticker symbol change** - **May 2025 PIPE Offering**: Issued **5,000 Series A Convertible Preferred Stock** shares (convertible into **8,928,571 common shares**) and warrants for **$5 million** gross proceeds, used for **general corporate and working capital purposes**[136](index=136&type=chunk)[137](index=137&type=chunk) - **June 2025 PIPE Offering**: Issued **100,000 Series B Convertible Preferred Stock** shares (convertible into **200,000,000 common shares**) and warrants for **$100 million**, paid in **TRX tokens**, with the investor's sole shareholder (**Weike Sun**) appointed to the Board[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - **Board Changes**: **Hans Haywood**, **Gary Herman**, and **Douglas McKinnon** resigned from the Board. **Weike Sun** (Chairman), **Zhihong Liu** (senior advisor to **Tron DAO**), and **Zi Yang** (senior positions for **Tronscan**) were appointed[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) - **Employment Agreement Amendments**: **Executive compensation** for **incentive/bonus payments** will now be measured solely against the **licensed consumer products business**, not **TRON** (**TRX tokens**)-related operations[163](index=163&type=chunk) - **Name and Symbol Change**: Effective **July 17, 2025**, the company changed its name to '**Tron Inc.**' and its **NASDAQ ticker symbol** to '**TRON**' to reflect its **strategic transformation** into a **TRON treasury strategy company**[165](index=165&type=chunk)[166](index=166&type=chunk) [Significant Accounting Policies and Estimates](index=31&type=section&id=Significant%20Accounting%20Policies%20and%20Estimates) Reiterate **key policies**, including **emerging growth company** status, **revenue recognition**, and recent pronouncements - The Company is an '**emerging growth company**' and has elected to use the extended transition period for new accounting standards, which may impact **financial statement comparability**[167](index=167&type=chunk)[168](index=168&type=chunk) - **Revenue** is recognized when **control of goods or products is transferred to a customer**, typically upon **FOB shipping point**, with **no specific right of return, refund, or warranty**[174](index=174&type=chunk)[175](index=175&type=chunk) - The Company adopted **ASU 2023-07 (Segment Reporting)** for fiscal years beginning after **December 15, 2023**, and **ASU 2023-08 (Accounting for and Disclosure of Crypto Assets)** effective **January 1, 2025**[183](index=183&type=chunk)[185](index=185&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Shift from **net loss** in **2024** to **net income** in **2025**, driven by **unrealized digital asset gains** despite slightly lower sales Three Months Ended June 30, 2025 vs. 2024 | **Metric** | **2025** | **2024** | **Change** | | :---------------------- | :----------- | :----------- | :------- | | **Sales Revenue** | **$1,342,929** | **$1,507,927** | **-11.07%** | | **Gross profit** | **$292,203** | **$324,666** | **-10.00%** | | **Operating (expense)** | **$(1,036,406)** | **$(851,142)** | **+21.76%** | | **Total other income** | **$2,212,058** | **$5,505** | **+40,100%** | | **Net income (loss)** | **$1,467,855** | **$(520,971)** | **N/A (swing to profit)** | Six Months Ended June 30, 2025 vs. 2024 | **Metric** | **2025** | **2024** | **Change** | | :---------------------- | :----------- | :----------- | :------- | | **Sales Revenue** | **$2,432,563** | **$2,514,284** | **-3.25%** | | **Gross profit** | **$558,738** | **$488,213** | **+14.44%** | | **Operating (expense)** | **$(1,950,316)** | **$(2,729,695)** | **-28.55%** | | **Total other income** | **$2,212,847** | **$10,507** | **+20,961%** | | **Net income (loss)** | **$821,269** | **$(2,230,975)** | **N/A (swing to profit)** | - The **decrease in sales revenue** for both periods is primarily attributed to the **expansion of a major theme park opening** in **Orlando** in **2025**, with an expectation of **future benefit from associated publicity**[189](index=189&type=chunk)[196](index=196&type=chunk) - **Significant unrealized gain on digital asset investment** (**$2,154,071**) and **unrealized income from staking activities** (**$44,769**) were **key drivers** for the **positive net income** in **2025**[191](index=191&type=chunk)[198](index=198&type=chunk) [Impact of Inflation](index=37&type=section&id=Impact%20of%20Inflation) Management believes inflation has had a **negligible effect**, offset by **increasing sales and improving operating efficiency** - **Inflation** has had a **negligible effect on operations** since inception, and the company aims to offset it by **increasing sales and improving operating efficiency**[200](index=200&type=chunk) [Off Balance Sheet Arrangements](index=37&type=section&id=Off%20Balance%20Sheet%20Arrangements) The company has **no off-balance sheet arrangements, financings, or relationships with unconsolidated entities** - The Company has **no off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or variable interest entities**[201](index=201&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) **Liquidity significantly improved** by **June 30, 2025**, with **increased cash and working capital** from **private placements and warrants** Liquidity and Capital Resources | **Metric** | **June 30, 2025** | **December 31, 2024** | **Change** | | :-------------------- | :------------ | :---------------- | :------- | | **Cash and cash equivalents** | **$5,298,142** | **$1,352,373** | **+$3,945,769** | | **Working capital** | **$6,543,942** | **$2,446,105** | **+$4,097,837** | - **Net cash used in operating activities decreased significantly** to **$165,653** for the **six months ended June 30, 2025**, compared to **$1,504,704** in the prior year[202](index=202&type=chunk) - **Financing activities generated $4,111,422** in cash, including **$4,592,344** net proceeds from the **May PIPE Offering** and **$341,186** from **stock option exercises**, partially offset by **$500,000 promissory note payment** and **$325,000 legal fees** for the **June PIPE transaction**[203](index=203&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a **smaller reporting company**, **Tron Inc.** is **exempt from market risk disclosures** - As a '**smaller reporting company**,' **Tron Inc.** is **not required to provide quantitative and qualitative disclosures about market risk**[207](index=207&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management deems **disclosure controls effective**, with **no material changes in internal control over financial reporting** - The company's **disclosure controls and procedures** are designed to provide reasonable assurance and are deemed effective by certifying officers[208](index=208&type=chunk) - **No material changes in internal control over financial reporting** were identified during the **six months ended June 30, 2025**, and the **year ended December 31, 2024**[209](index=209&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance due to inherent limitations and resource constraints[210](index=210&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company reports **no material legal proceedings** - There are **no legal proceedings**[212](index=212&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) As a **smaller reporting company**, **Tron Inc.** is **not required to provide risk factor disclosures** - As a '**smaller reporting company**,' **Tron Inc.** is **not required to provide risk factors**[213](index=213&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details **unregistered equity sales** for services and an **equity investment** during **H1 2025** - During the **six months ended June 30, 2025**, the Company issued **75,000 shares** of **common stock** for services rendered, valued at **$44,387**[214](index=214&type=chunk) - The Company also issued **500,000 shares** of **common stock** as an **equity investment** in **Gameverse Inc.**, valued at **$190,500**[214](index=214&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports **no defaults upon senior securities** - There are **no defaults upon senior securities**[215](index=215&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) **Mine safety disclosures are not applicable** to the company's operations - **Mine Safety Disclosures are not applicable**[216](index=216&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Updates on **capital structure**, including **preferred stock filings**, **increased authorized common stock**, and **change of control approval** - The Company filed **Amended & Restated Certificate of Designation of Series A Preferred Stock** (**May 23, 2025**) and **Certificate of Designation of Series B Preferred Stock** (**June 16, 2025**)[217](index=217&type=chunk) - As of **July 30, 2025**, **authorized capital** includes **100,000,000 common shares** and **10,000,000 preferred shares** (**1,000,000 Series A**, **100,000 Series B**). Outstanding shares: **33,468,011 common**, no **Series A preferred**, **100,000 Series B preferred**[218](index=218&type=chunk) - Stockholders approved a potential **change in control** via a **$100,000,000 PIPE Offering** to an institutional investor, involving **Series B Preferred Stock** convertible into **200,000,000 common shares** and warrants for **220,000,000 common shares**[219](index=219&type=chunk) - Stockholders also approved an amendment to increase **authorized common stock** from **100,000,000** to **1,000,000,000 shares**[219](index=219&type=chunk) - **Common Stock** holders have dividend rights (subject to preferred stock), **one vote per share**, no preemptive rights, and liquidation distribution rights after preferred stock[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - **Series A Preferred Stock** has a stated value of **$1,000 per share**, dividend rights equal to **common stock** on an as-if-converted basis, and voting rights based on a **$0.56 conversion price**[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - **Series B Preferred Stock** has a stated value of **$1,000 per share**, voting rights based on a **$0.50 conversion price** (limited to **19.99%** of outstanding **common stock** without further approval), dividend rights equal to **common stock** on an as-if-converted basis, and liquidation preference over other preferred and **common stock**[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) Lists **all exhibits filed with Form 10-Q**, including **certificates, warrants, agreements, and certifications** - **Exhibits** include **Amended and Restated Certificate of Designation of Series A Preferred Stock**, **Certificate of Designation of Series B Preferred Stock**, various forms of **Common Stock Purchase Warrants** and **Placement Agent Warrants**[235](index=235&type=chunk) - Also included are **Securities Purchase Agreements**, **Placement Agency Agreement**, **Registration Rights Agreement**, **Sun Advisory Agreement**, **American Ventures Agreement**, and **Amendment No. 1 to Employment Agreements** for key officers[235](index=235&type=chunk) - **Certifications** required by **Rule 13a-14(d)/15d-14(d)** and **Section 906 of the Sarbanes-Oxley Act of 2002** are attached as **Exhibits 31.1, 31.2, 32.1, and 32.2**[235](index=235&type=chunk)[236](index=236&type=chunk) SIGNATURES [SIGNATURES](index=44&type=section&id=SIGNATURES) The report is **duly signed** on behalf of **Tron Inc.** by its **Principal Executive Officer**, **Richard Miller** - The report is **signed** by **Richard Miller**, **Chief Executive Officer** and **Principal Executive Officer**, on **August 08, 2025**[239](index=239&type=chunk)[240](index=240&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION or Washington, D.C. 20549 FORM 10-Q (Mark One) £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 001-41684 CALIFORNIA BANCORP (Exact name of registrant as specified in its charter) California 84-3288397 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) T QUARTERLY REPORT PURSUANT TO SECTION 13 ...