[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 ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The company's total assets grew to $34.25 billion, with net earnings increasing to $82.0 million for the six-month period [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets rose to $34.25 billion, driven by loan growth, while stockholders' equity slightly decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$34,250,453** | **$33,542,864** | | Total Loans and Leases Held for Investment, net | $24,016,549 | $23,542,303 | | Total Investment Securities | $4,725,142 | $4,700,761 | | **Total Liabilities** | **$30,823,610** | **$30,042,915** | | Total Deposits | $27,528,433 | $27,191,909 | | Borrowings | $1,917,180 | $1,391,814 | | **Total Stockholders' Equity** | **$3,426,843** | **$3,499,949** | [Condensed Consolidated Statements of Earnings](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Q2 net earnings fell to $28.4 million due to higher credit loss provisions, though six-month earnings improved year-over-year Key Earnings Data (in thousands, except per share amounts) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $240,216 | $232,364 | $229,488 | | Provision for Credit Losses | $39,100 | $9,300 | $11,000 | | Noninterest Income | $32,633 | $33,650 | $29,792 | | Noninterest Expense | $185,869 | $183,653 | $203,643 | | **Net Earnings** | **$28,385** | **$53,568** | **$30,333** | | **Diluted EPS** | **$0.12** | **$0.26** | **$0.12** | Six-Month Earnings Comparison (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income | $472,580 | $458,590 | | Provision for Credit Losses | $48,400 | $21,000 | | **Net Earnings** | **$81,953** | **$61,185** | [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash decreased by $148.7 million due to loan growth, partially offset by increased deposits and borrowings Six Months Ended June 30, 2025 Cash Flow Summary (in thousands) | Cash Flow Category | Amount | | :--- | :--- | | Net cash provided by operating activities | $77,836 | | Net cash used in investing activities | ($878,282) | | Net cash provided by financing activities | $651,786 | | **Net decrease in cash and cash equivalents** | **($148,660)** | - Significant financing activities included a net increase in interest-bearing deposits of **$615.3 million** and proceeds from borrowings of **$700.0 million**, which were offset by common stock repurchases of **$151.8 million** and repayments of borrowings of **$176.2 million**[30](index=30&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment information, and subsequent events like dividend declarations - The company operates as one reportable segment, **Commercial Banking**, with the Chief Executive Officer identified as the Chief Operating Decision Maker (CODM)[233](index=233&type=chunk)[234](index=234&type=chunk) - Subsequent to the quarter end, on August 8, 2025, the Board of Directors declared a quarterly cash dividend of **$0.10 per common share** and **$0.4845 per Depositary Share** for preferred stock[242](index=242&type=chunk)[243](index=243&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=72&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth, a strategic loan sale, stock repurchases, and stable capital ratios - In Q2 2025, the company initiated a strategic loan sale process, reclassifying **$506.7 million** of loans to held for sale, resulting in charge-offs of **$36.9 million** and an incremental provision expense of **$26.3 million**[253](index=253&type=chunk)[254](index=254&type=chunk) - The company repurchased **11.5 million shares for $150.0 million** in the first half of 2025 under its stock repurchase program, with **$150.0 million** remaining under the authorization as of June 30, 2025[251](index=251&type=chunk)[277](index=277&type=chunk) - Q2 2025 results included a one-time non-cash income tax expense of **$9.8 million** due to the revaluation of deferred tax assets related to recent California state tax changes[275](index=275&type=chunk)[277](index=277&type=chunk) [Results of Operations](index=80&type=section&id=Results%20of%20Operations) Q2 results show increased net interest income, a higher provision for credit losses, and an elevated effective tax rate - Net interest income increased by **$7.9 million** sequentially in Q2 2025, driven by higher loan balances and yields, with the net interest margin expanding by **2 basis points to 3.10%**[286](index=286&type=chunk)[287](index=287&type=chunk) - The provision for credit losses was **$39.1 million** for Q2 2025, a sharp increase from **$9.3 million** in Q1 2025, including **$26.3 million** related to loans transferred to held for sale[296](index=296&type=chunk)[297](index=297&type=chunk) - The effective tax rate for Q2 2025 was **40.7%**, significantly higher than Q1's **26.7%**, due to a **$9.8 million** non-cash expense from the revaluation of deferred tax assets[309](index=309&type=chunk)[310](index=310&type=chunk) [Balance Sheet Analysis](index=89&type=section&id=Balance%20Sheet%20Analysis) The balance sheet reflects loan and deposit growth, improved credit quality, and a strong liquidity position - Total loans and leases held for investment increased by **$464.2 million to $24.2 billion** at June 30, 2025, from year-end 2024[321](index=321&type=chunk) - Credit quality metrics improved, with nonaccrual loans decreasing to **$167.5 million (0.69% of loans)** and special mention loans decreasing by **$435.7 million** from year-end 2024[343](index=343&type=chunk)[349](index=349&type=chunk) - Total deposits grew by **$336.5 million to $27.5 billion** since year-end 2024, with noninterest-bearing deposits representing **27% of total deposits**[350](index=350&type=chunk) - The company's available liquidity of **$14.8 billion** provided a coverage ratio of **196%** for uninsured and uncollateralized deposits as of June 30, 2025[351](index=351&type=chunk) [Regulatory Matters and Capital](index=105&type=section&id=Regulatory%20Matters%20and%20Capital) The company remains 'well capitalized' with strong capital ratios despite a slight decrease due to stock repurchases Consolidated Capital Ratios | Ratio | June 30, 2025 | December 31, 2024 | Minimum for Well Capitalized | | :--- | :--- | :--- | :--- | | CET1 Capital Ratio | 9.95% | 10.55% | 6.50% (Bank) | | Tier 1 Capital Ratio | 12.34% | 12.97% | 8.00% (Bank) | | Total Capital Ratio | 16.37% | 17.05% | 10.00% (Bank) | | Tier 1 Leverage Ratio | 9.74% | 10.15% | 5.00% (Bank) | - The decrease in capital ratios during the first six months of 2025 was mainly due to **stock repurchases**, lower net earnings, and growth in risk-weighted assets[360](index=360&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=110&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages a near 'neutral' interest rate risk profile using NII and EVE models and mitigates risks with derivatives Interest Rate Sensitivity Analysis as of June 30, 2025 | Change in Interest Rates | EVE Change (%) | NII Change (%) | | :--- | :--- | :--- | | +200 bps | (5.7)% | 2.0% | | +100 bps | (2.7)% | 1.1% | | 0 bps | -- | -- | | -100 bps | 3.1% | (0.7)% | | -200 bps | 4.2% | (1.8)% | - The company's interest rate risk profile was considered near **'neutral'** as of June 30, 2025[400](index=400&type=chunk) - When considering rate-sensitive noninterest expenses, the company's overall Earnings-at-Risk profile is considered **'liability sensitive'**, a risk mitigated by entering into **$1.0 billion** notional of interest rate collars[403](index=403&type=chunk)[404](index=404&type=chunk) [Item 4. Controls and Procedures](index=114&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures with no material changes in internal controls - Management concluded that disclosure controls and procedures were **effective** as of the end of the period[406](index=406&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, internal controls[407](index=407&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=114&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing legal actions are not expected to have a material adverse effect on the company's financial condition - The company is involved in various legal actions incidental to its business, but management does not expect them to have a **material adverse effect** on its financial condition[409](index=409&type=chunk)[410](index=410&type=chunk) [Item 1A. Risk Factors](index=114&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been identified for the risk factors previously disclosed in the Annual Report on Form 10-K - **No material changes** to the risk factors disclosed in the company's Form 10-K have occurred[411](index=411&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=115&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 8.9 million shares in Q2 2025 under an expanded $300 million stock repurchase program Common Stock Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | April 2025 | 8,811,011 | $12.65 | 8,809,814 | | May 2025 | 48,759 | $13.77 | 0 | | June 2025 | 119 | $13.97 | 0 | | **Total Q2** | **8,859,889** | **$12.66** | **8,809,814** | - The stock repurchase program was increased from **$150.0 million to $300.0 million** on April 23, 2025, with approximately **$150.0 million** remaining available for repurchase[412](index=412&type=chunk)[413](index=413&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheets, changes in equity, and cash flows, for Universal Health Services, Inc. and its subsidiaries - The financial statements are unaudited and prepared in accordance with SEC rules, reflecting normal recurring adjustments[29](index=29&type=chunk) - They are condensed and omit certain footnote disclosures typically found in audited statements, as permitted by SEC regulations[29](index=29&type=chunk) [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This item presents the core unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheets, changes in equity, and cash flows [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This statement details the company's revenues, operating charges, and net income for the three and six-month periods ended June 30, 2025 and 2024 Condensed Consolidated Statements of Income (amounts in thousands, except per share amounts) | 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 revenues | $4,283,816 | $3,907,604 | $8,383,536 | $7,751,186 | | Operating charges | $3,783,546 | $3,471,206 | $7,428,441 | $6,926,026 | | Income from operations | $500,270 | $436,398 | $955,095 | $825,160 | | Interest expense, net | $35,364 | $48,899 | $75,420 | $101,725 | | Income before income taxes | $473,385 | $382,006 | $893,813 | $718,092 | | Provision for income taxes | $110,773 | $87,676 | $209,573 | $157,940 | | Net income | $362,612 | $294,330 | $684,240 | $560,152 | | Less: Net income (loss) attributable to noncontrolling interests | $9,394 | $5,178 | $14,342 | $9,166 | | Net income attributable to UHS | $353,218 | $289,152 | $669,898 | $550,986 | | Basic earnings per share attributable to UHS | $5.49 | $4.32 | $10.36 | $8.22 | | Diluted earnings per share attributable to UHS | $5.43 | $4.26 | $10.23 | $8.08 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income and other comprehensive income components, such as foreign currency translation adjustments, for the three and six-month periods ended June 30, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (amounts in thousands) | 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 income | $362,612 | $294,330 | $684,240 | $560,152 | | Foreign currency translation adjustment | $35,247 | $907 | $50,148 | $(66) | | Other comprehensive income (loss) before tax | $35,247 | $907 | $50,148 | $(49) | | Total other comprehensive (loss) income, net of tax | $35,239 | $899 | $50,548 | $(477) | | Comprehensive income | $397,851 | $295,229 | $734,788 | $559,675 | | Less: Comprehensive income (loss) attributable to noncontrolling interests | $9,394 | $5,178 | $14,342 | $9,166 | | Comprehensive income attributable to UHS | $388,457 | $290,051 | $720,446 | $550,509 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :---------------- | :------------------ | | Cash and cash equivalents | $137,595 | $125,983 | | Accounts receivable, net | $2,302,247 | $2,177,751 | | Total current assets | $2,989,982 | $2,816,288 | | Property and equipment, net | $6,882,989 | $6,572,225 | | Goodwill | $3,977,976 | $3,932,879 | | Total Assets | $14,985,577 | $14,469,749 | | Current maturities of long-term debt | $40,897 | $40,059 | | Accounts payable and other liabilities | $2,197,635 | $2,081,479 | | Total current liabilities | $2,317,071 | $2,210,406 | | Long-term debt | $4,542,000 | $4,464,482 | | Redeemable noncontrolling interests | $59,569 | $13,293 | | UHS common stockholders' equity | $7,030,048 | $6,666,207 | | Noncontrolling interest | $55,465 | $83,316 | | Total equity | $7,085,513 | $6,749,523 | | Total Liabilities and Stockholders' Equity | $14,985,577 | $14,469,749 | [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This statement outlines the changes in equity attributable to UHS and noncontrolling interests, including net income, stock repurchases, and other adjustments - Net income attributable to UHS for the three months ended June 30, 2025, was **$353.2 million**, and for the six months ended June 30, 2025, was **$669.9 million**[21](index=21&type=chunk) - Total equity increased from **$6.749 billion** at January 1, 2025, to **$7.086 billion** at June 30, 2025[19](index=19&type=chunk)[22](index=22&type=chunk) - Repurchases of common stock, including excise tax, amounted to **$(156.6) million** for the three months ended June 30, 2025, and **$(381.1) million** for the six months ended June 30, 2025[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details cash flows from operating, investing, and financing activities for the six-month periods ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (amounts in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $909,026 | $1,075,687 | | Net cash used in investing activities | $(577,238) | $(437,479) | | Net cash used in financing activities | $(319,071) | $(628,467) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $3,931 | $(392) | | Increase in cash, cash equivalents and restricted cash | $16,648 | $9,349 | | Cash, cash equivalents and restricted cash, beginning of period | $224,752 | $214,470 | | Cash, cash equivalents and restricted cash, end of period | $241,400 | $223,819 | | Interest paid | $77,448 | $95,902 | | Income taxes paid, net of refunds | $251,786 | $131,499 | | Noncash purchases of property and equipment | $148,887 | $108,260 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the condensed consolidated financial statements, covering accounting policies, related parties, debt, equity, commitments, and segment reporting - The notes are an integral part of the condensed consolidated financial statements[11](index=11&type=chunk)[14](index=14&type=chunk)[17](index=17&type=chunk) - Certain information and footnote disclosures normally included in audited consolidated financial statements have been condensed or omitted[29](index=29&type=chunk) [(1) General](index=10&type=section&id=%281%29%20General) This note clarifies the scope of the Quarterly Report on Form 10-Q, defining company terms and stating that interim financial statements are unaudited with normal recurring adjustments - The report covers the quarterly period ended June 30, 2025[28](index=28&type=chunk) - The financial statements are unaudited and include only normal recurring adjustments[29](index=29&type=chunk) - The statements should be read in conjunction with the audited consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2024[29](index=29&type=chunk) [(2) Relationship with Universal Health Realty Income Trust and Other Related Party Transactions](index=10&type=section&id=%282%29%20Relationship%20with%20Universal%20Health%20Realty%20Income%20Trust%20and%20Other%20Related%20Party%20Transactions) This note details the Company's relationship with Universal Health Realty Income Trust, including ownership, advisory role, lease agreements, and other related party transactions - UHS holds approximately **5.7%** of Universal Health Realty Income Trust and serves as its Advisor, earning an advisory fee of **$1.4 million** for the three months ended June 30, 2025[30](index=30&type=chunk) - The Company leases five hospital facilities from the Trust, with lease terms extending to 2026, 2033, and 2040[39](index=39&type=chunk)[129](index=129&type=chunk) - Financial liabilities related to failed sale leaseback transactions with the Trust were approximately **$72 million** at June 30, 2025[35](index=35&type=chunk) - UHS has supplemental life insurance plans for its Executive Chairman and his wife, with projected premium payments of **$28 million** by UHS and **$9 million** by trusts, entitling UHS to at least **$37 million** in death benefits[45](index=45&type=chunk) - UHS holds equity securities in Premier, Inc. with a market value of **$49 million** as of June 30, 2025, and received cash dividends of **$0.47 million** for the three months ended June 30, 2025[46](index=46&type=chunk) [(3) Other Noncurrent liabilities and Redeemable/Noncontrolling Interests](index=14&type=section&id=%283%29%20Other%20Noncurrent%20liabilities%20and%20Redeemable%2FNoncontrolling%20Interests) This note outlines other noncurrent liabilities, including professional liability and workers' compensation reserves, and details redeemable noncontrolling interests held by outside owners - Other noncurrent liabilities include professional and general liability, workers' compensation reserves, pension, and deferred compensation liabilities[48](index=48&type=chunk) - Outside owners hold noncontrolling interests ranging from **5% to 49%** in various acute care and behavioral health facilities[49](index=49&type=chunk) - Redeemable noncontrolling interests, totaling **$60 million** at June 30, 2025, reflect minority ownerships with put options, requiring reclassification from noncontrolling interest[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - UHS purchased a **20%** ownership interest in a Pennsylvania behavioral health facility in April 2025 after the minority owners exercised their put option[52](index=52&type=chunk) [(4) Treasury](index=16&type=section&id=%284%29%20Treasury) This note details the Company's debt structure, including its $1.3 billion revolving credit facility, $1.2 billion Tranche A Term Loan, and $3.0 billion in senior secured notes - UHS's Credit Agreement was amended in September 2024, extending maturity to September 26, 2029, and establishing a **$1.3 billion** revolving credit facility and a **$1.2 billion** Tranche A Term Loan[53](index=53&type=chunk) - As of June 30, 2025, UHS had **$1.08 billion** of available borrowing capacity under its revolving credit facility and **$1.18 billion** outstanding on the Tranche A Term Loan[53](index=53&type=chunk) - UHS has **$3.0 billion** in senior secured notes outstanding, with maturities ranging from 2026 to 2034 and interest rates from **1.65% to 5.050%**[57](index=57&type=chunk)[58](index=58&type=chunk) - The average outstanding borrowings and effective interest rate for revolving credit, Tranche A Term Loan, and senior notes were approximately **$4.34 billion** and **4.1%** during Q2 2025, down from **$4.51 billion** and **5.0%** in Q2 2024[59](index=59&type=chunk) - UHS uses foreign currency forward exchange contracts to hedge its net investment in foreign operations, resulting in net cash outflows of **$66 million** during the six months ended June 30, 2025[63](index=63&type=chunk) - Cash, cash equivalents, and restricted cash totaled **$241.4 million** at June 30, 2025, including **$103.8 million** in restricted cash for commercial insurance subsidiary capital reserves[66](index=66&type=chunk) [(5) Fair Value Measurement](index=21&type=section&id=%285%29%20Fair%20Value%20Measurement) This note defines fair value, categorizes assets and liabilities into a three-level hierarchy, and presents tables of fair value measurements for various financial instruments - Fair value is categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[70](index=70&type=chunk) Assets and Liabilities Recorded at Fair Value (amounts in thousands) | (in thousands) | Balance at June 30, 2025 | Balance Sheet Location | Level 1 | Level 2 | Level 3 | | :----------------------------- | :----------------------- | :----------------------- | :------ | :------ | :------ | | **Assets:** | | | | | | | Money market mutual funds | $120,897 | Other noncurrent assets | $120,897 | - | - | | Certificates of deposit | $2,206 | Other noncurrent assets | - | $2,206 | - | | Equity securities | $48,963 | Other noncurrent assets | $48,963 | - | - | | Deferred compensation assets | $53,162 | Other noncurrent assets | $53,162 | - | - | | **Total Assets** | **$225,228** | | **$223,022** | **$2,206** | **-** | | **Liabilities:** | | | | | | | Foreign currency forward exchange contracts | $540 | Accounts payable and other liabilities | - | $540 | - | | Deferred compensation liability | $53,162 | Other noncurrent liabilities | $53,162 | - | - | | **Total Liabilities** | **$53,702** | | **$53,162** | **$540** | **-** | [(6) Commitments and Contingencies](index=22&type=section&id=%286%29%20Commitments%20and%20Contingencies) This note details self-insurance programs, significant legal proceedings including a $60 million verdict against Cumberland Hospital, and commitments for a new hospital in Washington, D.C. - UHS is self-insured for professional and general liability up to **$20 million** and **$3 million** per occurrence, respectively, with excess commercial coverage up to **$110 million** in 2025[71](index=71&type=chunk)[72](index=72&type=chunk) - The total net accrual for self-insured professional and general liability claims was **$487 million** at June 30, 2025, with no adjustments recorded in the first six months of 2025[74](index=74&type=chunk)[75](index=75&type=chunk) - A jury verdict against Cumberland Hospital for Children and Adolescents resulted in **$60 million** in compensatory damages and **$1.05 million** in punitive damages (reduced from **$120 million**) for three plaintiffs, with approximately 40 additional similar claims pending[79](index=79&type=chunk)[96](index=96&type=chunk) - UHS has aggregate insurance coverage of approximately **$147 million** remaining for matters applicable to the 2020 policy year, which could be materially impacted by the Cumberland matter[79](index=79&type=chunk) - UHS committed to develop, lease, and operate an acute care hospital in Washington, D.C., with construction completed and the hospital opened on April 15, 2025, funded by the District of Columbia (projected aggregate cost **$439 million**)[84](index=84&type=chunk) - UHS has committed to expend no less than **$75 million** over a projected 12-year period in healthcare infrastructure in Washington, D.C.[86](index=86&type=chunk) [(7) Segment Reporting](index=30&type=section&id=%287%29%20Segment%20Reporting) This note outlines the Company's two reportable segments, Acute Care Hospital Services and Behavioral Health Care Services, providing disaggregated financial information for each - UHS operates in two reportable segments: Acute Care Hospital Services and Behavioral Health Care Services[101](index=101&type=chunk) - Segment income before income taxes is the primary profitability measure used by the CODM group[101](index=101&type=chunk) Net Revenue from Reportable Segments (amounts in thousands) | Segment | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :----------------------- | :----------------------------- | :----------------------------- | | Acute Care Hospital Services | $2,401,034 | $4,750,263 | | Behavioral Health Care Services | $1,880,076 | $3,627,725 | | Non-segment revenue | $2,706 | $5,548 | | **Total Net Revenue** | **$4,283,816** | **$8,383,536** | - Behavioral health care facilities in the U.K. generated approximately **$247 million** in net revenues for the three-month period ended June 30, 2025, and approximately **$474 million** for the six-month period ended June 30, 2025[110](index=110&type=chunk) [(8) Earnings Per Share Data and Stock Based Compensation](index=33&type=section&id=%288%29%20Earnings%20Per%20Share%20Data%20and%20Stock%20Based%20Compensation) This note provides the computation of basic and diluted earnings per share for UHS and details stock-based compensation expense, including unrecognized costs Earnings Per Share Data (amounts in thousands, except per share data) | 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 income attributable to UHS | $353,218 | $289,152 | $669,898 | $550,986 | | Basic earnings per share attributable to UHS | $5.49 | $4.32 | $10.36 | $8.22 | | Diluted earnings per share attributable to UHS | $5.43 | $4.26 | $10.23 | $8.08 | | Weighted average number of common shares - basic | 64,356 | 66,878 | 64,663 | 67,041 | | Weighted average number of common shares and equivalents - diluted | 64,991 | 67,920 | 65,514 | 68,201 | - Pre-tax compensation costs for stock options were **$8.1 million** for the three-month period ended June 30, 2025, and **$17.5 million** for the six-month period ended June 30, 2025[108](index=108&type=chunk) - Pre-tax compensation costs for restricted stock awards were approximately **$15.5 million** for the three-month period ended June 30, 2025, and **$27.3 million** for the six-month period ended June 30, 2025[108](index=108&type=chunk) - As of June 30, 2025, there was approximately **$202.6 million** of unrecognized compensation cost related to unvested awards, expected to be recognized over a weighted average vesting period of **2.7 years**[108](index=108&type=chunk) [(9) Dispositions and acquisitions](index=34&type=section&id=%289%29%20Dispositions%20and%20acquisitions) This note summarizes the Company's acquisition and divestiture activities for the six-month periods ended June 30, 2025 and 2024, indicating minimal activity in both periods - UHS spent **$8 million** on the acquisition of businesses and property during the first six months of 2025[111](index=111&type=chunk) - UHS received **$3 million** from the sales of assets and businesses during the first six months of 2025[112](index=112&type=chunk) - There were no acquisitions during the first six months of 2024, and **$5 million** was received from the sales of assets and businesses[113](index=113&type=chunk)[114](index=114&type=chunk) [(10) Dividends](index=34&type=section&id=%2810%29%20Dividends) This note reports the dividends declared and paid by the Company for the three and six-month periods ended June 30, 2025 and 2024, including dividend equivalents for unvested restricted stock units - Dividends of **$12.9 million**, or **$0.20 per share**, were declared and paid during the second quarter of 2025[115](index=115&type=chunk) - Dividends of **$26.4 million**, or **$0.40 per share**, were declared and paid during the six-month period ended June 30, 2025[115](index=115&type=chunk) - Dividend equivalents applicable to unvested restricted stock units were accrued during 2025 and 2024 and will be paid upon vesting[115](index=115&type=chunk) [(11) Income Taxes](index=34&type=section&id=%2811%29%20Income%20Taxes) This note details the Company's effective income tax rates, explaining changes and discussing the impact of recent tax legislation and unrecognized tax benefits Effective Income Tax Rates | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Rate | 23.4% | 23.0% | 23.4% | 22.0% | - The increase in the effective tax rate during the six months ended June 30, 2025, was primarily due to a **$10 million** unfavorable change in tax benefit from employee share-based payments[116](index=116&type=chunk) - The One Big Beautiful Bill Act, signed into law on July 4, 2025, is not expected to have a material impact on the estimated annual effective tax rate in 2025[117](index=117&type=chunk) - As of January 1, 2025, unrecognized tax benefits were approximately **$2 million**, which would favorably affect the effective tax rate if recognized[118](index=118&type=chunk) [(12) Revenue Recognition](index=35&type=section&id=%2812%29%20Revenue%20Recognition) This note explains the Company's revenue recognition policy, including the portfolio approach for collectability and disaggregated revenue by major source - Revenue is recognized when promised goods or services are transferred to customers, reflecting the consideration expected[121](index=121&type=chunk) - The Company uses a portfolio approach for assessing collectability due to a large volume of similar contracts with similar classes of customers[123](index=123&type=chunk) Disaggregated Revenue by Major Source (amounts in thousands) | Revenue Source | 3 Months Ended June 30, 2025 | % of Total | 6 Months Ended June 30, 2025 | % of Total | | :-------------------------- | :----------------------------- | :--------- | :----------------------------- | :--------- | | Medicare | $449,247 | 10% | $917,286 | 11% | | Managed Medicare | $519,172 | 12% | $1,039,471 | 12% | | Medicaid | $644,120 | 15% | $1,171,028 | 14% | | Managed Medicaid | $619,608 | 14% | $1,222,437 | 15% | | Managed Care (HMO and PPOs) | $1,227,853 | 29% | $2,412,654 | 29% | | UK Revenue | $246,906 | 6% | $473,974 | 6% | | Other patient revenue and adjustments, net | $310,054 | 7% | $620,127 | 7% | | Other non-patient revenue | $266,856 | 6% | $526,559 | 6% | | **Total Net Revenue** | **$4,283,816** | **100%** | **$8,383,536** | **100%** | [(13) Lease Accounting](index=37&type=section&id=%2813%29%20Lease%20Accounting) This note describes the Company's operating leases, primarily for real estate, including hospital facilities, outpatient centers, and administrative offices. It highlights lease terms, renewal options, and supplemental cash flow information related to leases - Operating leases are primarily for real estate, including acute care facilities, outpatient facilities, medical office buildings, and corporate offices, with typical initial terms of five to ten years and renewal options[128](index=128&type=chunk) - Five hospital facilities are held under operating leases with Universal Health Realty Income Trust, with two leases expiring in 2026, two in 2033, and one in 2040[129](index=129&type=chunk) Supplemental Cash Flow Information Related to Leases (amounts in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Cash paid for operating leases | $66,779 | $65,765 | | Cash paid for finance leases (operating cash flows) | $1,770 | $1,850 | | Cash paid for finance leases (financing cash flows) | $1,345 | $2,183 | | Right-of-use assets obtained in exchange for lease obligations (operating leases) | $13,702 | $33,278 | | Right-of-use assets obtained in exchange for lease obligations (finance leases) | $1,372 | $- | [(14) Recent Accounting Standards](index=37&type=section&id=%2814%29%20Recent%20Accounting%20Standards) This note discusses recently adopted and issued accounting standards, including ASU 2023-07, ASU 2024-03, and ASU 2023-09, and the Company's evaluation of their potential impact - ASU 2023-07, "Improvements to Reportable Segment Disclosures," was adopted during 2024 and applied retrospectively to all periods presented[131](index=131&type=chunk) - ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures," is effective for fiscal years beginning after December 15, 2026, and is currently being evaluated for its impact[132](index=132&type=chunk) - ASU 2023-09, "Improvements to Income Tax Disclosures," is effective for fiscal years beginning after December 15, 2024, and is currently being evaluated for its impact[133](index=133&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management%27s%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, covering performance trends, key drivers, outlook, and critical accounting policies - As of June 30, 2025, UHS owned and/or operated **367** inpatient facilities and **61** outpatient and other facilities across 39 states, Washington, D.C., the United Kingdom, and Puerto Rico[135](index=135&type=chunk) - Net revenues from acute care hospitals accounted for **56%** of consolidated net revenues during the three-month period ended June 30, 2025, and **57%** during the six-month period ended June 30, 2025[135](index=135&type=chunk) - Net revenues from behavioral health care facilities in the U.K. were approximately **$247 million** for the three-month period and **$474 million** for the six-month period ended June 30, 2025[136](index=136&type=chunk) [Overview](index=38&type=section&id=Overview) This overview describes Universal Health Services, Inc.'s operational footprint, including the number and types of facilities it owns and operates across various geographies. It highlights the revenue contribution from its acute care and behavioral health segments and the services provided - As of June 30, 2025, UHS owned/operated **367** inpatient facilities and **61** outpatient/other facilities in 39 states, Washington D.C., the UK, and Puerto Rico[135](index=135&type=chunk) - Acute care facilities include **29** inpatient hospitals, **34** free-standing emergency departments, and **10** outpatient centers & **1** surgical hospital[139](index=139&type=chunk) - Behavioral health care facilities comprise **338** inpatient and **16** outpatient facilities in the U.S., **152** inpatient and **2** outpatient facilities in the U.K., and **3** inpatient facilities in Puerto Rico[139](index=139&type=chunk) - Acute care services accounted for **56%** of consolidated net revenues in Q2 2025, while behavioral health accounted for **44%**[135](index=135&type=chunk) [Forward-Looking Statements and Risk Factors](index=38&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) This section cautions readers about forward-looking statements and outlines key risk factors, including potential reductions in Medicaid funding, inflationary pressures, increased interest rates, and cybersecurity threats - Forward-looking statements are based on current estimates and expectations, but actual results may differ materially due to various factors[138](index=138&type=chunk)[140](index=140&type=chunk) - Risks include potential reductions in Medicaid and other state-based revenue programs, especially in states like California, Texas, and Nevada[141](index=141&type=chunk)[404](index=404&type=chunk) - The "One Big Beautiful Bill Act" (July 4, 2025) is expected to limit Medicaid enrollment and expenditures, reduce provider fees, and eliminate certain insurance exchange premium tax credits, potentially increasing uncompensated care[141](index=141&type=chunk)[405](index=405&type=chunk) - The healthcare industry faces inflationary pressures on salaries, wages, benefits, and supplies, which could increase expenses faster than anticipated[142](index=142&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) - Increased interest rates have significantly raised interest expense, reducing free cash flow and access to capital markets[142](index=142&type=chunk) - Cybersecurity threats, including ransomware attacks, pose a heightened risk, potentially leading to significant costs, data loss, and reputational damage[143](index=143&type=chunk) - The Cumberland Hospital litigation, with a **$60 million** compensatory and **$1.05 million** punitive damages verdict, could materially adversely impact future results and capital resources, potentially exhausting a significant portion of remaining commercial insurance coverage[143](index=143&type=chunk) [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms no significant changes to critical accounting policies or estimates since the 2024 Annual Report on Form 10-K and refers to Note 14 for recent accounting standards - No significant changes to critical accounting policies or estimates since the 2024 Annual Report on Form 10-K[146](index=146&type=chunk) - Recent accounting standards are summarized in Note 14 to the Condensed Consolidated Financial Statements[146](index=146&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance, detailing net revenues, operating charges, and net income, and discusses the impact of staffing, inflation, and Medicaid reductions - Net revenues increased by **9.6%** to **$4.284 billion** in Q2 2025 and by **8.2%** to **$8.384 billion** in H1 2025, primarily driven by Same Facility growth and newly opened hospitals[154](index=154&type=chunk)[156](index=156&type=chunk) - Net income attributable to UHS increased by **22%** to **$353 million** in Q2 2025 and by **22%** to **$670 million** in H1 2025[156](index=156&type=chunk)[159](index=159&type=chunk) - No adjustments were recorded to self-insured professional and general liability reserves in H1 2025, contrasting with increases of **$7 million** (Q2 2024) and **$14 million** (H1 2024) in prior periods[160](index=160&type=chunk) [Clinical Staffing, Inflation, future Medicaid reductions and Tariffs](index=46&type=section&id=Clinical%20Staffing%2C%20Inflation%2C%20future%20Medicaid%20reductions%20and%20Tariffs) This sub-section discusses inflationary pressures on labor and operating expenses, staffing shortages, and the potential negative impact of new Medicaid legislation and tariffs on medical supplies - Inflationary pressures, primarily on personnel costs, have moderated recently but could still materially impact future results if they persist or accelerate[147](index=147&type=chunk)[148](index=148&type=chunk) - The "One Big Beautiful Bill Act" (July 4, 2025) is expected to reduce Medicaid enrollment and expenditures, potentially increasing uncompensated care[149](index=149&type=chunk)[151](index=151&type=chunk) - Significant tariffs or other restrictions on imported pharmaceutical ingredients, medical devices, and equipment could escalate costs and disrupt supply chains[152](index=152&type=chunk) - UHS is requesting and negotiating increased rates from commercial insurers and implementing productivity enhancement and cost reduction initiatives[153](index=153&type=chunk) [Financial results for the three-month periods ended June 30, 2025 and 2024](index=48&type=section&id=Financial%20results%20for%20the%20three-month%20periods%20ended%20June%2030%2C%202025%20and%202024) This section compares the Company's financial performance for the three months ended June 30, 2025, versus 2024, highlighting increases in net revenues, operating income, and net income Financial Results for Three Months Ended June 30 (amounts in thousands) | Metric | June 30, 2025 | % of Net Revenues | June 30, 2024 | % of Net Revenues | Change (YoY) | | :-------------------------- | :-------------- | :---------------- | :-------------- | :---------------- | :----------- | | Net revenues | $4,283,816 | 100.0% | $3,907,604 | 100.0% | +9.6% | | Salaries, wages and benefits | $2,014,951 | 47.0% | $1,856,372 | 47.5% | +8.5% | | Other operating expenses | $1,162,566 | 27.1% | $1,043,116 | 26.7% | +11.4% | | Supplies expense | $418,785 | 9.8% | $388,063 | 9.9% | +7.9% | | Income from operations | $500,270 | 11.7% | $436,398 | 11.2% | +14.6% | | Interest expense, net | $35,364 | 0.8% | $48,899 | 1.3% | -27.7% | | Income before income taxes | $473,385 | 11.1% | $382,006 | 9.8% | +24.0% | | Net income attributable to UHS | $353,218 | 8.2% | $289,152 | 7.4% | +22.2% | - The net revenue increase of **$376 million** was primarily attributable to a **$317 million** (**8.4%**) increase from Same Facility operations and **$43 million** from two newly constructed acute care hospitals[154](index=154&type=chunk) - Income before income taxes increased by **$91 million**, driven by increases at acute care facilities (**$15 million**) and behavioral health care facilities (**$37 million**), a decrease in interest expense (**$14 million**), and an increase in the market value of certain equity securities (**$14 million**)[155](index=155&type=chunk)[157](index=157&type=chunk) [Financial results for the six-month periods ended June 30, 2025 and 2024](index=50&type=section&id=Financial%20results%20for%20the%20six-month%20periods%20ended%20June%2030%2C%202025%20and%202024) This section compares the Company's financial performance for the six months ended June 30, 2025, versus 2024, showing significant growth in net revenues, operating income, and net income Financial Results for Six Months Ended June 30 (amounts in thousands) | Metric | June 30, 2025 | % of Net Revenues | June 30, 2024 | % of Net Revenues | Change (YoY) | | :-------------------------- | :-------------- | :---------------- | :-------------- | :---------------- | :----------- | | Net revenues | $8,383,536 | 100.0% | $7,751,186 | 100.0% | +8.2% | | Salaries, wages and benefits | $3,966,055 | 47.3% | $3,698,996 | 47.7% | +7.2% | | Other operating expenses | $2,268,318 | 27.1% | $2,075,286 | 26.8% | +9.3% | | Supplies expense | $821,666 | 9.8% | $791,636 | 10.2% | +3.8% | | Income from operations | $955,095 | 11.4% | $825,160 | 10.6% | +15.7% | | Interest expense, net | $75,420 | 0.9% | $101,725 | 1.3% | -25.9% | | Income before income taxes | $893,813 | 10.7% | $718,092 | 9.3% | +24.5% | | Net income attributable to UHS | $669,898 | 8.0% | $550,986 | 7.1% | +21.6% | - The net revenue increase of **$632 million** was primarily attributable to a **$542 million** (**7.2%**) increase from Same Facility operations and **$70 million** from two newly constructed acute care hospitals[156](index=156&type=chunk) - Income before income taxes increased by **$176 million**, driven by increases at acute care facilities (**$70 million**) and behavioral health care facilities (**$54 million**), a decrease in interest expense (**$26 million**), and an increase in the market value of certain equity securities (**$10 million**)[158](index=158&type=chunk) [Adjustments to self-insured professional and general liability reserves](index=52&type=section&id=Adjustments%20to%20self-insured%20professional%20and%20general%20liability%20reserves) This section discusses the Company's self-insured liability reserves, noting no adjustments in the first six months of 2025, contrasting with increases in 2024 - No adjustments were recorded to our reserves for self-insured professional and general liability claims during the first six months of 2025[160](index=160&type=chunk) - In the first six months of 2024, reserves increased by **$14 million** (**$10 million** for acute care, **$4 million** for behavioral health) due to unfavorable trends[160](index=160&type=chunk) [Acute Care Hospital Services](index=52&type=section&id=Acute%20Care%20Hospital%20Services) This section analyzes the operating statistics and financial results for the Acute Care Hospital Services segment, distinguishing between Same Facility Basis and All Acute Care Hospital Services - Net revenues from acute care hospital services increased by **$222 million** (**10.2%**) in Q2 2025 and **$386 million** (**8.9%**) in H1 2025 compared to prior year[180](index=180&type=chunk)[185](index=185&type=chunk) - Income before income taxes for acute care increased by **$15 million** (**7%**) in Q2 2025 and **$70 million** (**17%**) in H1 2025[181](index=181&type=chunk)[186](index=186&type=chunk) - Salaries, wages and benefits expense increased by **$78 million** (**9.1%**) in Q2 2025 and **$127 million** (**7.4%**) in H1 2025, partly due to new hospitals[182](index=182&type=chunk)[187](index=187&type=chunk) [Acute Care Hospital Services-Same Facility Basis](index=52&type=section&id=Acute%20Care%20Hospital%20Services-Same%20Facility%20Basis) This sub-section details the performance of acute care hospitals operational in both periods, focusing on organic growth drivers like net revenue per adjusted admission and patient days Acute Care Hospital Services - Same Facility Basis (amounts in thousands) | 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 revenues | $2,272,316 | $2,105,189 | $4,516,378 | $4,213,234 | | Income before income taxes | $257,068 | $215,788 | $526,689 | $422,459 | | Salaries, wages and benefits | $905,960 | $858,559 | $1,800,061 | $1,719,645 | | Other operating expenses | $646,546 | $579,981 | $1,276,571 | $1,157,563 | | Supplies expense | $352,075 | $331,901 | $695,545 | $679,031 | - Net revenue per adjusted admission increased by **3.8%** in Q2 2025 and **3.2%** in H1 2025[168](index=168&type=chunk)[173](index=173&type=chunk) - Inpatient admissions increased by **2.2%** in Q2 2025 and **2.1%** in H1 2025[168](index=168&type=chunk)[173](index=173&type=chunk) - Salaries, wages and benefits expense increased by **$47 million** (**5.5%**) in Q2 2025 and **$80 million** (**4.7%**) in H1 2025, but decreased as a percentage of net revenues[169](index=169&type=chunk)[175](index=175&type=chunk) [All Acute Care Hospital Services](index=56&type=section&id=All%20Acute%20Care%20Hospital%20Services) This sub-section presents consolidated results for all acute care operations, including Same Facility performance, provider tax impacts, and contributions from new facilities All Acute Care Hospital Services (amounts in thousands) | 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 revenues | $2,401,034 | $2,178,686 | $4,750,263 | $4,363,767 | | Income before income taxes | $227,744 | $212,700 | $488,535 | $418,168 | | Salaries, wages and benefits | $937,105 | $859,147 | $1,847,829 | $1,720,694 | | Other operating expenses | $757,120 | $655,760 | $1,472,460 | $1,310,743 | | Supplies expense | $360,985 | $331,877 | $709,378 | $678,881 | - Net revenues increased by **$222 million** (**10.2%**) in Q2 2025 and **$386 million** (**8.9%**) in H1 2025, driven by Same Facility growth and new hospitals[180](index=180&type=chunk)[185](index=185&type=chunk) - Income before income taxes increased by **$15 million** (**7%**) in Q2 2025 and **$70 million** (**17%**) in H1 2025, partially offset by pre-tax losses from newly opened facilities[181](index=181&type=chunk)[186](index=186&type=chunk) - Salaries, wages and benefits expense increased by **$78 million** (**9.1%**) in Q2 2025 and **$127 million** (**7.4%**) in H1 2025, reflecting both Same Facility increases and new facility expenses[182](index=182&type=chunk)[187](index=187&type=chunk) [Charity Care and Uninsured Discounts](index=58&type=section&id=Charity%20Care%20and%20Uninsured%20Discounts) This sub-section quantifies uncompensated care provided by acute care hospitals, including charity care and uninsured discounts, and estimates the associated costs Uncompensated Care (amounts in millions) | 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 | | :------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Charity care | $217 | $200 | $486 | $417 | | Uninsured discounts | $710 | $632 | $1,387 | $1,220 | | Total uncompensated care | $927 | $832 | $1,873 | $1,637 | Estimated Cost of Providing Uncompensated Care (amounts in millions) | 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 | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Estimated cost of providing charity care | $19 | $18 | $42 | $37 | | Estimated cost of providing uninsured discounts | $63 | $57 | $121 | $109 | | Estimated cost of providing uncompensated care | $82 | $75 | $163 | $146 | [Behavioral Health Care Services](index=59&type=section&id=Behavioral%20Health%20Care%20Services) This section analyzes the operating statistics and financial results for the Behavioral Health Care Services segment, differentiating between Same Facility Basis and All Behavioral Health Care Services - Net revenues from behavioral health services increased by **$154 million** (**8.9%**) in Q2 2025 and **$246 million** (**7.3%**) in H1 2025[211](index=211&type=chunk)[216](index=216&type=chunk) - Income before income taxes increased by **$37 million** (**10.2%**) in Q2 2025 and **$54 million** (**8.0%**) in H1 2025[212](index=212&type=chunk)[217](index=217&type=chunk) - Salaries, wages and benefits expense increased by **$82 million** (**9.1%**) in Q2 2025 and **$138 million** (**7.8%**) in H1 2025[213](index=213&type=chunk)[218](index=218&type=chunk) [Behavioral Health Care Services-Same Facility Basis](index=59&type=section&id=Behavioral%20Health%20Care%20Services-Same%20Facility%20Basis) This sub-section details the performance of behavioral health facilities operational in both periods, focusing on key operating metrics like net revenue per adjusted admission and patient days Behavioral Health Care Services - Same Facility Basis (amounts in thousands) | 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 revenues | $1,827,519 | $1,677,876 | $3,533,381 | $3,294,117 | | Income before income taxes | $400,426 | $361,019 | $741,182 | $678,492 | | Salaries, wages and benefits | $974,476 | $890,855 | $1,900,013 | $1,759,511 | | Other operating expenses | $330,508 | $307,502 | $651,954 | $621,503 | | Supplies expense | $58,183 | $56,777 | $113,562 | $113,486 | - Net revenue per adjusted admission increased by **8.6%** in Q2 2025 and **7.9%** in H1 2025[199](index=199&type=chunk)[204](index=204&type=chunk) - Inpatient admissions increased by **0.6%** in Q2 2025, while adjusted admissions decreased by **0.6%** in H1 2025[199](index=199&type=chunk)[204](index=204&type=chunk) - Salaries, wages and benefits expense increased by **$84 million** (**9.4%**) in Q2 2025 and **$141 million** (**8.0%**) in H1 2025, driven by increases in per-employee expense and FTEs[200](index=200&type=chunk)[205](index=205&type=chunk) [All Behavioral Health Care Services](index=60&type=section&id=All%20Behavioral%20Health%20Care%20Services) This sub-section presents consolidated results for all behavioral health care operations, including Same Facility performance, provider tax impacts, and contributions from new facilities All Behavioral Health Care Services (amounts in thousands) | 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 revenues | $1,880,076 | $1,726,032 | $3,627,725 | $3,382,099 | | Income before income taxes | $396,188 | $359,500 | $733,613 | $679,438 | | Salaries, wages and benefits | $977,156 | $895,494 | $1,905,322 | $1,767,690 | | Other operating expenses | $383,841 | $351,579 | $747,425 | $698,847 | | Supplies expense | $58,401 | $57,084 | $113,848 | $114,008 | - Net revenues increased by **$154 million** (**8.9%**) in Q2 2025 and **$246 million** (**7.3%**) in H1 2025, primarily from Same Facility growth[211](index=211&type=chunk)[216](index=216&type=chunk) - Income before income taxes increased by **$37 million** (**10.2%**) in Q2 2025 and **$54 million** (**8.0%**) in H1 2025, partially offset by losses from recently closed facilities in H1 2025[212](index=212&type=chunk)[217](index=217&type=chunk) - Other operating expenses increased by **$32 million** (**9.2%**) in Q2 2025 and **$49 million** (**7.0%**) in H1 2025, partly due to increased provider tax assessments[214](index=214&type=chunk)[219](index=219&type=chunk) [Sources of Revenue](index=63&type=section&id=Sources%20of%20Revenue) This section overviews the Company's revenue streams, including private insurers, Medicare, and Medicaid, and discusses the impact of healthcare reform and legislative changes - Revenue sources include private insurers (managed care plans), Medicare, state Medicaid programs, and direct patient payments[220](index=220&type=chunk) - The "One Big Beautiful Bill Act" (July 4, 2025) is expected to significantly decrease federal funding for state Medicaid programs, potentially leading to reduced payments and increased uncompensated care[223](index=223&type=chunk) - The ACA's provisions, including DSH payment reductions and value-based purchasing programs, continue to impact reimbursement[224](index=224&type=chunk)[349](index=349&type=chunk)[351](index=351&type=chunk) - UHS receives substantial reimbursement from various state Medicaid supplemental payment programs, which are subject to annual approvals and potential reductions[262](index=262&type=chunk)[264](index=264&type=chunk) [Overview](index=63&type=section&id=Overview) This sub-section outlines the diverse sources of revenue for the Company's hospitals, emphasizing reliance on private insurers, Medicare, and Medicaid, and the trend of outpatient services - Revenue is derived from private insurers (including managed care), Medicare, state Medicaid programs, and direct patient payments[220](index=220&type=chunk) - Hospital revenues depend on inpatient occupancy levels, medical and ancillary services, outpatient procedures, and negotiated payment rates[221](index=221&type=chunk) - The percentage of patient service revenue from outpatient services has generally increased due to medical technology advancements and payer pressure[221](index=221&type=chunk) - Collection of amounts due from individuals is typically more difficult than from governmental or business payers, unfavorably impacting the collectability of patient accounts[222](index=222&type=chunk) [Sources of Revenues and Health Care Reform](index=63&type=section&id=Sources%20of%20Revenues%20and%20Health%20Care%20Reform) This sub-section discusses the significant influence of federal and state healthcare reforms on the Company's revenues, particularly potential reductions in Medicare and Medicaid funding - Federal and state governments are considering additional ways to limit increases in Medicare and Medicaid funding, which could adversely affect future payments[223](index=223&type=chunk) - The "One Big Beautiful Bill Act" (July 4, 2025) will substantially decrease federal funding for state Medicaid programs, likely resulting in states reducing Medicaid payments to UHS[223](index=223&type=chunk) - The ACA introduced reductions to Medicaid DSH payments, scheduled to begin in 2026[224](index=224&type=chunk) - The Supreme Court's ruling in California v. Texas dismissed a challenge to the ACA's constitutionality, but the impact of the Kennedy v. Braidwood Management decision on ACA HIV preventive care coverage is unknown[226](index=226&type=chunk)[227](index=227&type=chunk) - The ACA expanded fraud and abuse provisions, making it easier for government agencies and private plaintiffs to prevail in lawsuits against healthcare providers[228](index=228&type=chunk) [Medicare](index=65&type=section&id=Medicare) This sub-section details the Company's reimbursement under the Medicare program, including IPPS and Psych PPS, annual payment rule updates, DSH payments, and sequestration impacts - All acute care hospitals and many behavioral health centers are certified Medicare providers, with amounts received generally significantly less than customary charges[233](index=233&type=chunk) - Acute care hospitals are reimbursed under IPPS based on MS-DRGs; the IPPS 2026 final payment rule provides for a **3.3%** market basket increase, with an estimated overall increase of **2.7%** for UHS[234](index=234&type=chunk)[236](index=236&type=chunk) - Psychiatric hospitals are paid under Psych PPS; the Psych PPS final rule for FFY 2026 estimates a **2.5%** market basket increase, leading to an overall payment increase of **1.7%** for UHS[241](index=241&type=chunk)[243](index=243&type=chunk) - CMS is proposing to shorten the 340B Remedy recoupment transition from 16 years to 5 years, increasing the annual offset to **2%** from CY 2026, with an estimated **$13 million** impact on UHS's projected 2026 results[248](index=248&type=chunk)[253](index=253&type=chunk) - CMS is proposing to phase out the Inpatient Only (IPO) list over a 3-year period, beginning with removing 285 mostly musculoskeletal procedures for CY 2026[249](index=249&type=chunk) - The **2%** Medicare payment reduction (sequestration) has been extended through 2032[240](index=240&type=chunk) [Medicaid](index=71&type=section&id=Medicaid) This sub-section focuses on Medicaid as a significant revenue source, detailing state supplemental payment programs and the impact of the "One Big Beautiful Bill Act" on funding and eligibility - Medicaid is a joint federal-state funded health care benefit program, with most state payments made under PPS-like systems or negotiated rates, generally significantly less than customary charges[259](index=259&type=chunk)[261](index=261&type=chunk) - UHS receives annual Medicaid revenues of approximately **$100 million** or greater from each of California, Texas, Nevada, Illinois, Pennsylvania, Washington, D.C., Kentucky, Tennessee, Massachusetts, Virginia, Mississippi, and Florida[262](index=262&type=chunk)[404](index=404&type=chunk) - The "One Big Beautiful Bill Act" (July 4, 2025) will reduce SDP payments, limit provider taxes, and institute work requirements for Medicaid eligibility, potentially decreasing Medicaid revenues and increasing uncompensated care[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk)[327](index=327&type=chunk) - UHS estimates its aggregate annual net benefit from state Medicaid supplemental payment programs will be reduced by approximately **$360 million to $400 million** by 2032 due to the OBBBA[328](index=328&type=chunk) Aggregate Net Benefit from All Supplemental Medicaid Programs (amounts in millions) | Metric | Projected Full Year 2025 | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Supplemental Medicaid Programs Revenues | $1,754 | $464 | $352 | $817 | $666 | | Total Supplemental Medicaid Programs Provider Taxes | $(571) | $(134) | $(117) | $(251) | $(229) | | Aggregate net benefit from all Supplemental Programs | $1,183 | $330 | $235 | $566 | $437 | [Managed Care](index=87&type=section&id=Managed%20Care) This sub-section discusses the growing importance of managed care companies as a revenue source, noting lower payments per patient but secured price increases from commercial payers - The percentage of business from managed care programs is expected to continue to grow[343](index=343&type=chunk) - UHS typically receives lower payments per patient from managed care payers than from traditional indemnity insurers, but has secured price increases from many commercial payers[343](index=343&type=chunk) - The "Surprise Billing Interim Final Rule" and related litigation have caused significant delays in the processing of claims through the independent dispute resolution (IDR) process[346](index=346&type=chunk) [Commercial Insurance](index=89&type=section&id=Commercial%20Insurance) This sub-section addresses revenue from private health care insurance, noting that reimbursement rates are based on negotiated contracts and subject to efforts by insurers to limit payments - Private insurance reimbursement varies among payers and states and is generally based on contracts negotiated between the hospital and the payer[344](index=344&type=chunk) - Commercial insurers are continuing efforts to limit payments for hospital services by adopting discounted payment mechanisms, which may negatively impact operating results[345](index=345&type=chunk) [Other Sources](index=89&type=section&id=Other%20Sources) This sub-section describes services provided to uninsured patients, including evaluations for ability to pay, qualification for state assistance, and substantial discounts offered - UHS hospitals provide services to uninsured individuals, evaluating their ability to pay based on federal and state poverty guidelines and qualifications for Medicaid or other state assistance programs[347](index=347&type=chunk) - Patients without health care coverage who do not qualify for Medicaid or indigent care write-offs are offered substantial discounts to settle outstanding account balances[347](index=347&type=chunk) [Health Care Reform](index=89&type=section&id=Health%20Care%20Reform) This sub-section reiterates the impact of the ACA and subsequent legislation on healthcare reimbursement, focusing on Medicaid DSH reductions, value-based purchasing, and readmission programs - The ACA and subsequent federal legislation require annual aggregate reductions in federal Medicaid DSH allotment, with **$8 billion** annually from FFY 2026 through 2028[349](index=349&type=chunk) - Value-based purchasing programs, including public reporting of quality data and preventable adverse events, continue to impact hospital reimbursement, with HHS reducing inpatient hospital payments by **2%** in FFY 2017 and subsequent years to fund rewards for quality performance[350](index=350&type=chunk)[351](index=351&type=chunk) - Hospitals in the top **25%** of national risk-adjusted Hospital Acquired Conditions (HAC) rates face a **1%** reduction in total Medicare payments, with the program reinstated in FFY 2024 after being suppressed due to COVID-19[353](index=353&type=chunk) - The Hospital Readmission Reduction Program (HRRP) assesses penalties on hospitals with excessive readmissions for designated conditions, with payment adjustment factors up to a **3%** reduction[354](index=354&type=chunk) - UHS participates in Accountable Care Organizations (ACOs) to promote accountability and coordination of care, aiming to share in Medicare program savings from improved quality and operational efficiency[355](index=355&type=chunk) - All acute care hospitals have met the applicable meaningful use criteria under the HITECH Act; failure to continue meeting these criteria would adversely affect future net revenues[340](index=340&type=chunk) [Other Operating Results](index=92&type=section&id=Other%20Operating%20Results) This section analyzes key components of the Company's operating results, specifically focusing on interest expense and the provision for income taxes, and their impact on profitability - Interest expense decreased by **$14 million** (**28%**) during the three-month period ended June 30, 2025, and by **$26 million** (**26%**) during the six-month period ended June 30, 2025[360](index=360&type=chunk)[361](index=361&type=chunk) - The provision for income taxes increased by **$23 million** during the second quarter of 2025 and **$52 million** during the first six months of 2025, primarily due to higher pre-tax income and a decrease in tax benefit from share-based payments[364](index=364&type=chunk)[365](index=365&type=chunk) [Interest Expense](index=92&type=section&id=Interest%20Expense) This sub-section provides a detailed breakdown of interest expense, highlighting the decrease in both three-month and six-month periods ended June 30, 2025, compared to 2024 Interest Expense, Net (amounts in thousands) | 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 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revolving credit facility | $2,692 | $5,324 | $4,486 | $12,570 | | Tranche A term loan, extinguished | $- | $38,305 | $- | $77,777 | | Tranche A term loan, 2029 | $16,996 | $- | $34,188 | $- | | Senior Notes (various maturities) | $17,325 | $11,632 | $34,840 | $23,265 | | Amortization of financing fees | $1,252 | $1,258 | $2,504 | $2,514 | | Other combined interest expense | $(837) | $1,732 | $2,194 | $3,844 | | Capitalized interest on major projects | $(8,166) | $(8,999) | $(14,749) | $(17,577) | | Interest income | $(349) | $(353) | $(756) | $(668) | | **Interest expense, net** | **$35,364** | **$48,899** | **$75,420** | **$101,725** | - Interest expense decreased by **$14 million** (**28%**) in Q2 2025 and **$26 million** (**26%**) in H1 2025[360](index=360&type=chunk)[361](index=361&type=chunk) - The decrease was due to a net **$12 million** (Q2) and **$27 million** (H1) reduction in aggregate interest expense on revolving credit, term loan A, and senior notes, driven by lower average cost of borrowings (**3.95%** in Q2 2025 vs. **4.84%** in Q2 2024) and decreased average outstanding borrowings[360](index=360&type=chunk)[361](index=361&type=chunk) [Provision for Income Taxes and Effective Tax Rates](index=94&type=section&id=Provision%20for%20Income%20Taxes%20and%20Effective%20Tax%20Rates) This sub-section analyzes the Company's provision for income taxes and effective tax rates, explaining increases in both three-month and six-month periods ended June 30, 2025, compared to 2024 Provision for Income Taxes and Effective Tax Rates (amounts in thousands) | 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 | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $110,773 | $87,676 | $209,573 | $157,940 | | Income before income taxes | $473,385 | $382,006 | $893,813 | $718,092 | | Effective tax rate | 23.4% | 23.0% | 23.4% | 22.0% | - The provision for income taxes increased by **$23 million** during Q2 2025 and **$52 million** during H1 2025[364](index=364&type=chunk)[365](index=365&type=chunk) - This increase was primarily due to higher pre-tax income and a **$2 million** (Q2) and **$10 million** (H1) decrease in the net benefit recorded in connection with ASU 2016-09 related to share-based payments[364](index=364&type=chunk)[365](index=365&type=chunk) [Liquidity](index=94&type=section&id=Liquidity) This section assesses the Company's liquidity by analyzing cash flows from operating, investing, and financing activities, and outlines expected capital expenditures for the remainder of 2025 - Net cash provided by operating activities decreased by **$167 million** to **$909 million** in H1 2025, primarily due to unfavorable changes in accounts receivable and accrued/deferred income taxes[367](index=367&type=chunk)[368](index=368&type=chunk) - Net cash used in investing activities increased to **$577 million** in H1 2025 (from **$437 million** in H1 2024), mainly due to higher property and equipment additions and foreign exchange contract outflows[369](index=369&type=chunk) - Net cash used in financing activities decreased to **$319 million** in H1 2025 (from **$628 million** in H1 2024), driven by lower debt repayments and increased additional borrowings[369](index=369&type=chunk)[370](index=370&type=chunk) - Expected capital expenditures for the full year 2025 are **$950 million to $1.1 billion**, with **$445 million to $595 million** anticipated in the remainder of the year[371](index=371&type=chunk) [Net cash provided by operating activities](index=94&type=section&id=Net%20cash%20provided%20by%20operating%20activities) This sub-section details the changes in net cash provided by operating activities, which decreased by $167 million in the first six months of 2025 compared to 2024, primarily due to unfavorable changes in accounts receivable and income taxes - Net cash provided by operating activities was **$909 million** during the six-month period ended June 30, 2025, a decrease of **$167 million** from **$1.076 billion** in the comparable 2024 period[367](index=367&type=chunk) - The decrease was attributed to an unfavorable change of **$159 million** in accounts receivable and **$83 million** in accrued and deferred income taxes, partially offset by a **$142 million** favorable change from increased net income and non-cash adjustments[368](index=368&type=chunk) - Days sales outstanding (DSO) were **50 days** at June 30, 2025, compared to **51 days** at June 30, 2024[367](index=367&type=chunk) [Net cash used in investing activities](index=95&type=section&id=Net%20cash%20used%20in%20investing%20activities) This sub-section outlines the Company's investing activities, showing an increase in net cash used in the first six months of 2025, primarily driven by higher property and equipment additions and net cash outflows from foreign exchange contracts - Net cash used in investing activities was **$577 million** during the first six months of 2025, compared to **$437 million** in the comparable 2024 period[369](index=369&type=chunk) - Investing activities in H1 2025 included **$505 million** for property and equipment additions and **$66 million** in net cash outflows from foreign exchange contracts hedging U.K. investments[369](index=369&type=chunk) - Investing activities in H1 2024 included **$450 million** for property and equipment additions and **$7 million** in net cash inflows from foreign exchange contracts[369](index=369&type=chunk) [Net cash used in financing activities](index=95&type=section&id=Net%20cash%20used%20in%20financing%20activities) This sub-section details the Company's financing activities, indicating a decrease in net cash used in the first six months of 2025 compared to 2024, primarily due to lower debt repayments and increased additional borrowings, despite significant share repurchases - Net cash used in financing activities was **$319 million** during the first six months of 2025, a decrease from **$628 million** in the comparable 2024 period[369](index=369&type=chunk) - H1 2025 financing activities included **$379 million** for common share repurchases, **$95 million** from additional borrowings, and **$26 million** for dividends pa

[Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) This section presents the company's unaudited consolidated financial statements, management's discussion, market risks, and internal controls [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for FRP Holdings, Inc. as of June 30, 2025, including balance sheets, income statements, cash flows, and detailed notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$722,782** | **$728,485** | | Cash and cash equivalents | $153,167 | $148,620 | | Net real estate investments | $562,149 | $573,060 | | Investments in joint ventures | $139,098 | $153,899 | | **Total Liabilities** | **$261,368** | **$259,372** | | Secured notes payable | $180,371 | $178,853 | | **Total Equity** | **$461,414** | **$469,113** | - Total assets decreased slightly from **$728.5 million** at year-end 2024 to **$722.8 million** as of June 30, 2025, mainly driven by a reduction in investments in joint ventures[13](index=13&type=chunk) [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) This section outlines the company's financial performance over the three and six months ended June 30, 2025, detailing revenues, operating profit, and net income Consolidated Income Statement Highlights (in thousands, except per share data) | 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 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $10,850 | $10,477 | $21,156 | $20,610 | | Total Operating Profit | $1,657 | $2,820 | $3,982 | $5,702 | | Net Income | $624 | $2,059 | $2,258 | $3,394 | | Net Income Attributable to Company | $578 | $2,044 | $2,288 | $3,345 | | Diluted EPS | $0.03 | $0.11 | $0.12 | $0.18 | - Net income attributable to the company for Q2 2025 was **$578,000**, a significant decrease from **$2,044,000** in Q2 2024. Similarly, for the six-month period, net income fell to **$2,288,000** from **$3,345,000** year-over-year[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,172 | $15,082 | | Net cash provided by (used in) investing activities | $1,293 | $(14,219) | | Net cash used in financing activities | $(9,918) | $(1,489) | | **Net increase (decrease) in cash** | **$4,547** | **$(626)** | - For the first six months of 2025, cash from operations decreased to **$13.2 million** from **$15.1 million** in the prior year. Investing activities generated **$1.3 million** in cash, a significant shift from a **$14.2 million** use of cash in 2024, primarily due to lower investments in properties and joint ventures and higher return of capital from JVs[21](index=21&type=chunk) [Condensed Notes to Consolidated Financial Statements](index=12&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) This section provides additional details on the company's accounting policies, business segments, debt, and other financial matters, offering context to the financial statements - The company operates in four reportable segments: Industrial and Commercial, Mining Royalty Lands, Development, and Multifamily[24](index=24&type=chunk)[31](index=31&type=chunk) - On April 12, 2024, the company effected a **2-for-1 forward stock split**, with all share and per-share information retroactively adjusted[27](index=27&type=chunk) - As of June 30, 2025, the company had no debt outstanding on its **$35 million** revolving credit facility with Wells Fargo, with **$34.55 million** available for borrowing[40](index=40&type=chunk) - One lessee in the mining royalty segment accounted for **25.1%** of the company's consolidated revenues for the six months ended June 30, 2025[60](index=60&type=chunk) - Subsequent to the quarter end, on July 21, 2025, the company amended its credit agreement with Wells Fargo, establishing a five-year, **$50 million** revolving credit facility[72](index=72&type=chunk) - On July 23, 2025, the company entered into a new joint venture to develop two industrial warehouses totaling **377,892 square feet** in Lake County, Florida[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, noting a **72% Q2 net income decrease** despite **5% pro rata NOI growth**, driven by segment performance, liquidity, and strategic industrial expansion [Executive Overview and Reportable Segments](index=25&type=section&id=Executive%20Overview%20and%20Reportable%20Segments) This section outlines the company's four reportable business segments: Multifamily, Industrial and Commercial, Mining Royalty Lands, and Development, detailing their operations and strategic focus - The company's business is organized into four reportable segments: Multifamily, Industrial and Commercial, Mining Royalty Lands, and Development[79](index=79&type=chunk) - The Multifamily segment includes six stabilized joint ventures managing apartment buildings and associated retail in Washington, D.C. and Greenville, SC[80](index=80&type=chunk)[81](index=81&type=chunk) - The Industrial and Commercial segment owns and manages nine warehouses, an office building, and two ground leases, with a new **258,279 sq. ft.** speculative building added on April 1, 2025[32](index=32&type=chunk)[90](index=90&type=chunk) - The Mining Royalty Lands segment owns approximately **16,648 acres** leased for mining royalties, focusing on creating valuable "second lives" for these assets post-mining[85](index=85&type=chunk)[87](index=87&type=chunk) - The Development segment converts non-income producing lands into income-producing properties through construction, sale, or joint ventures, including industrial projects and significant land holdings[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [Second Quarter Highlights and Recent Developments](index=32&type=section&id=Second%20Quarter%20Highlights%20and%20Recent%20Developments) This section summarizes key financial results for Q2 2025, including net income and pro rata NOI, and highlights recent strategic initiatives and credit facility amendments Q2 2025 vs Q2 2024 Key Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $0.6M | $2.0M | -72% | | Pro Rata NOI | $9.7M | $9.2M | +5% | - The primary goal for 2025 is to set the stage for future growth by leasing vacancies and investing in new projects, particularly in the industrial sector[101](index=101&type=chunk) - A new joint venture was formed with SREP to develop **377,892 sq. ft.** of warehouse space in Lake County, FL, supporting the goal to double the industrial segment by 2030[102](index=102&type=chunk)[103](index=103&type=chunk) - The company's credit facility with Wells Fargo was amended and restated, increasing the revolving credit facility to **$50 million** for a five-year term[102](index=102&type=chunk)[72](index=72&type=chunk) [Comparative Results of Operations](index=34&type=section&id=Comparative%20Results%20of%20Operations) This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2025 and 2024, across key metrics and segments Three Months Ended June 30, 2025 vs 2024 (in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $10,850 | $10,477 | $373 | 3.6% | | Total Operating Profit | $1,657 | $2,820 | $(1,163) | -41.2% | | Net Income Attributable to Company | $578 | $2,044 | $(1,466) | -71.7% | Six Months Ended June 30, 2025 vs 2024 (in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $21,156 | $20,610 | $546 | 2.6% | | Total Operating Profit | $3,982 | $5,702 | $(1,720) | -30.2% | | Net Income Attributable to Company | $2,288 | $3,345 | $(1,057) | -31.6% | - For Q2 2025, Mining Royalty Lands NOI increased **21%** YoY, while Industrial and Commercial NOI decreased **15%** due to an eviction and lease expirations[102](index=102&type=chunk) - For the six months ended June 30, 2025, Mining Royalty Lands NOI increased **20.1%** YoY, Industrial and Commercial NOI decreased **8.4%**, and Multifamily pro rata NOI grew **2.2%**[122](index=122&type=chunk)[125](index=125&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's cash position, available credit facilities, and future investment commitments, outlining its financial flexibility and capital deployment plans - As of June 30, 2025, the company had **$153.2 million** in cash and cash equivalents[136](index=136&type=chunk) - The company had **$34.55 million** available to borrow under its **$35 million** Wells Fargo revolver as of June 30, 2025, which was subsequently increased to **$50 million** in July 2025[136](index=136&type=chunk)[72](index=72&type=chunk) - The company expects to invest **$73 million** into existing real estate holdings and joint ventures during the remainder of 2025 and **$153 million** beyond 2025 for projects in the pipeline[151](index=151&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risks](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) The company is exposed to interest rate risk through its variable-rate borrowings, but the amount of variable rate debt was not material enough to warrant a sensitivity analysis - The company's primary market risk is exposure to interest rate changes from its variable-rate borrowings[155](index=155&type=chunk) - As of June 30, 2025, the amount of variable rate debt was not considered material, so a sensitivity analysis was not performed[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[159](index=159&type=chunk) - There were no changes in internal controls over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[160](index=160&type=chunk) [Part II. Other Information](index=53&type=section&id=Part%20II.%20Other%20Information) This section covers additional information including risk factors, equity security purchases, and a list of exhibits filed with the report [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the detailed risk factors outlined in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - The company refers to its Annual Report on Form 10-K for the year ended December 31, 2024, for a detailed discussion of risk factors[161](index=161&type=chunk) [Item 2. Purchase of Equity Securities by the Issuer](index=53&type=section&id=Item%202.%20Purchase%20of%20Equity%20Securities%20by%20the%20Issuer) The company reports no share repurchases during Q3 2025, with approximately **$7.36 million** remaining available under its stock repurchase program - No shares were repurchased by the company from July 1 through September 30[163](index=163&type=chunk) - Approximately **$7,363,000** remains available for share repurchases under the company's publicly announced plans[163](index=163&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by key officers and XBRL data files - The report includes certifications from the CEO, CFO, and Controller/CAO as required by the Sarbanes-Oxley Act of 2002[168](index=168&type=chunk)[170](index=170&type=chunk)

ARCHIMEDES TECH SPAC PARTNERS II CO. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ 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: 001-42514 (Exact name of registrant as specified ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Securities registered pursuant to Section 12(b) of the Act: (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number: 001-42514 ARCHIMEDES TECH ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-9321 UNIVERSAL HEALTH REALTY INCOME TRUST (Exact name of registrant as specified in its charter) MARYLAND 23-6858580 (State or othe ...