Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The information set forth below should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in the Form 10-Q as well as the audited consolidated financial statements and the notes thereto contained in our Annual Report on 10-K filed with the Securities and Exchange Commission (the "SEC") on April 3, 2025. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to "us," "we," "our," or our "Company" and similar terms refer to Firefly Neuroscience, Inc., a Delaware corporation and its subsidiaries. All amounts are disclosed in thousands, except share and per share amounts and price.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this Form 10-Q may constitute "forward-looking statements" for purposes of the federal securities laws and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that look to future events and include, but are not limited to, statements regarding our business strategy, plans and objectives; anticipated future operating results and operating expenses, cash flows, capital resources, and liquidity; trends, opportunities and risks affecting our business, industry and financial results; the expected benefits of use of our solutions; future expansion or growth plans and potential for future growth; our business prospects; our systems and technology, future profitability; the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next twelve months; acquisitions; and our expectations or beliefs concerning future events. In addition, the words "anticipates," "appear," "approximate," "believe," "continue," "could," "estimate," "expect," "foresee," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "seek," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, and many of which are outside of our control. Therefore, you should not place undue reliance on these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

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fluctuation and volatility in market price of our common stock due to market and industry factors, as well as general economic, political and market conditions;

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our ability to continue as a going concern;

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the impact of dilution on our stockholders, including through the issuance of additional equity securities in the future;

	●	our ability to realize the intended benefits of the Merger;
	●	our ability to realize the intended benefits of the Acquisition;

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the impact of our ability to realize the anticipated tax impact of the Merger;

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the outcome of litigation or other proceedings may become subject to in the future;

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delisting of our common stock from the Nasdaq Capital Market ("Nasdaq") or the failure for an active trading market to develop;

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the failure of our altered business operations, strategies and focus to result in an improvement for the value of our common stock;

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the availability of and our ability to continue to obtain sufficient funding to conduct planned operations and realize potential profits;

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our limited operating history;

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the impact of the complexity of the regulatory landscape on our ability to seek and obtain regulatory approval for our products, both within and outside of the U.S.;

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challenges that we may face with maintaining regulatory approval;

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the impact of the concentration of capital stock ownership with our insiders on stockholders' ability to influence corporate matters.

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the impacts of future acquisitions of businesses or products and the potential to fail to realize intended benefits of such acquisition;

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the potential impact of changes in the legal and regulatory landscape, both within and outside of the U.S.;

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our dependence on third parties;

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challenges we may face with respect to our products achieving market acceptance;

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the impact of pricing of our products;

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our ability to obtain, maintain and protect its trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on its proprietary rights;

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our ability to maintain adequate cyber security and information systems;

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our ability to generate sufficient revenue to achieve and sustain profitability;

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the risk that our significant increased expenses and administrative burdens as a public company could have an adverse effect on our business, financial condition and results of operations; and

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the other factors set forth in the "Risk Factors" section of this Form 10-Q and our other documents filed with the SEC under the heading "Risk Factors."

These forward-looking statements are based on information available as of the date of this Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on April 3, 2025 (the "2024 Annual Report"). If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events or information as of the date on which the statements are made in this Quarterly Report on Form 10-Q. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

Overview

We are an Artificial Intelligence ("AI") technology company developing innovative neuroscientific solutions with goals to improve brain health outcomes for patients with mental illnesses and neurological disorders. Our FDA-510(k) cleared BNA™, or Brain Network Analytics, is an advanced neurophysiological assessment tool that uses AI and machine learning to analyze EEG data recorded during rest and cognitive activity. In addition, the Evox System is FDA-510(k) cleared, and is intended for the acquisition, display, and storage, of electrical activity of a patient's brain including electroencephalograph (EEG) and event-related potentials (ERP) obtained by placing two or more electrodes on the head to aid in diagnosis. Our products may enhance neurological assessments by providing objective, data-driven insights that allow for the early and longitudinal detection of neurophysiological deviations. These insights into brainwave patterns underlying cognitive function may help in tailoring personalized treatment plans and improving patient outcomes more effectively than traditional EEG analysis.

As of the date of this filing, our products are in market. We believe there is further potential for such commercialization, both with respect to pharmaceutical companies in their drug research and clinical trial activities, as well as medical practitioners in their clinics. In concert with the further commercialization of our products, we are collaborating with neuroscience drug development companies to support their clinical strategies. We plan to generate revenue through the use of our products by United States healthcare professionals and through collaborations with pharmaceutical companies in support of neuroscience drug development. The proposed business model for healthcare provider clinics consists of a base service fee for licensing the product and a per use fee based on volume. The proposed business model for pharmaceutical companies will be tailored to each customer based on the volume and costs associated with providing such services. In order to further grow our products in the medical community, the company has hired sales staff and plans to continue marketing efforts to secure new accounts. The company will continue to focus on targeted outreach and client engagement in the clinics segment. Using its database of potential customers, the company will identify key targets in select markets and connect with them through personalized emails and calls to schedule meetings with decision-makers. The sales team, equipped with marketing materials, case studies, peer-reviewed publications, and knowledge gained from our current research partners, are focused on presenting the benefits of our products and practical applications during these meetings. Follow-up efforts, including addressing questions and offering support by our scientific team, will aim to build strong client relationships and drive adoption of the platform.

The clinical utility of EEG technology to support better outcomes for patients with mental illnesses and cognitive disorders has been well documented. Historically, clinical adoption of EEG by medical professionals, including psychiatrists, neurologists, nurse practitioners and general practitioners, we believe has been limited due to the complexity of interpreting EEG recordings and the inability to practically compare a patient's brain function to that of a clinically normal age-matched patient. Firefly believes that without defining a standard deviation to the norm, it is not possible to objectively assess brain function. By establishing an objective baseline measurement of brain function, our products enable clinicians to optimize patient care, leading to improved outcomes for people suffering from mental illnesses and cognitive disorders.

Our value proposition is supported by the real-world use of our products. Incorporating our products as part of a patient management protocol demonstrated improved response rates, enhanced therapy compliance, reduced non-responder rates, and a reduction in need for medication switching among patients. Further, we believe that our extensive clinical database, when combined with advanced AI, provides the opportunity to identify clinically relevant biomarkers that will support better patient outcomes through precision medicine and companion diagnostics. We expect to gather additional data through the clinical deployments and clinical studies conducted by drug companies. This additional data may allow us to discover new biomarkers and objectively measure the impact of therapeutic interventions on patients of different types, further enhancing our platform's effectiveness. We believe that we will be able to enhance accurate diagnosis and predict what therapy or drug, or a combination thereof, may be best suited to optimize patient outcomes. This represents a paradigm shift in how clinicians manage patients with mental illnesses and cognitive disorders, holding the potential to transform brain health.

Recent Developments

June 2025 Units Offering

On June 16, 2025, we entered into a securities purchase agreement ("the June 2025 Purchase Agreement") with the Investors, pursuant to which we issued and sold 400,000 of Units, at a purchase price of $3.00 per June 2025 Unit. Each Unit consists of (i) either (A) one share of common stock, or (B) a prefunded warrant to purchase one share of common stock at a nominal exercise price of $0.0001 per share, to the extent that acquiring the shares of common stock instead of the Pre-Funded Warrant would have caused the investors to own in excess of 4.99% of the outstanding common stock on a post-issuance basis; (ii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $3.50 per share; and (iii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $4.00 per share. The Prefunded Warrant, the $3.50 Warrant and the $4.00 Warrant include a beneficial ownership limitation, which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise any portion of the warrants, to the extent that, after giving effect to such exercise, the holder (together with the holder's affiliates) would beneficially own more than 4.99% of the outstanding shares of common stock immediately after the issuance of the common stock issuable upon exercise. On the same date, the closing under the June 2025 Purchase Agreement occurred, and the Company issued 400,000 Units to investors at a total purchase price of $1,200.

Acquisition

On April 30, 2025, we acquired all outstanding stock of Evoke, a privately held company which provides customers with a package of hardware and software to measure the electrical activity of the brain. The consideration transferred of approximately $6,000 and consists of $3,000 in cash and 857,142 shares of our common stock valued at $3.50 per share.

March 2025 Units Offering

On March 28, 2025, we entered into the private placement subscription agreement (the "Subscription Agreement") with the subscribers ("Subscribers"), pursuant to which we issued and sold 547,737 of units (each "March 2025 Unit", and collectively, the "March 2025 Units"), at a purchase price of $3.00 per Unit. Each March 2025 Unit consists of (i) either (A) one share of common stock or (B) a prefunded warrant to purchase common stock to the extent that acquiring the shares of common stock instead of such prefunded warrants would have caused the Subscriber to own in excess of 4.99% of the shares of outstanding common stock on a post-issuance basis and (ii) one common stock purchase warrant to purchase common stock over thirty-six (36) months at an exercise price of $4.00 per share. On the same date, the closing under the Subscription Agreement occurred, and we issued the March 2025 Units to the Subscribers.

The prefunded warrants have a nominal exercise price of $0.0001 (subject to standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions) and may be exercised on a cashless basis. The prefunded warrants also contain a beneficial ownership limitation which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise, any portion of a prefunded to the extent that, after giving effect to the exercise, such holder (together with such holder's affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days' prior notice to the Company.

In connection with the March 2025 Units Offering, we entered into a finder's fee agreement with Canaccord Genuity Corp. ("Canaccord"), pursuant to which the Company paid Canaccord at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Canaccord, paid in cash; and (ii) the issuance of the Finder's Warrant to Canaccord of up to 7.5% of the Units subscribed for by person introduced to the Company by Canaccord. Each Finder's Warrant is exercisable to purchase one additional common stock at $4.00 per share for a period of 36 months from the closing of the March 2025 Units Offering.

In connection with the March 2025 Units Offering, we entered into a finder's fee agreement with Research Capital Corporation ("Research Capital"), pursuant to which the Company paid Research Capital at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Research Capital, paid in cash; and (ii) the issuance of the Finder's Warrant of the Company to Research Capital of up to 7.5% of the March 2025 Units subscribed for by person introduced to the Company by Research Capital. Each Finder's Warrant is exercisable to purchase one additional common stock at $3.00 per share for a period of 3 years from the date of issuance of such Finder's Warrant.

Reverse Merger with WaveDancer

On November 15, 2023, we entered into the Agreement and Plan of Merger (as amended, the "Merger Agreement") with WaveDancer and FFN Merger Sub, Inc. ("Merger Sub"), pursuant to which, among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub merged with and into Private Firefly, with Private Firefly becoming a wholly-owned subsidiary of WaveDancer and the surviving corporation of the merger (the "Merger"). On August 12, 2024, the Merger closed, and on August 13, 2024, we began trading on the Nasdaq Capital Market under the ticker symbol "AIFF."

Warrants Exercises

During the week of February 21, 2025, we received total proceeds of $8,825 from the exercise of warrants to purchase 823,530 shares of the common stock, at an exercise price of $6.83, and warrants to purchase 800,000 shares of commons stock, at an exercise price of $4.00, respectively. The warrants were issued pursuant to private placements that closed on August 12, 2024, and December 20, 2024, and no new warrants were issued by the Company as a result of the exercises.

Financial Operations Overview

Revenue

Revenue consists of equipment sales, equipment rentals, per-use fees, and the undertaking of projects and/or clinical studies. In the future, we plan to generate revenue through two segments: through the use of our products by healthcare professionals in the United States and through collaborations with pharmaceutical companies in support of neuroscience drug development.

Operating Expense

Costs of goods sold

Cost of goods sold consists of product manufacturing expenses related to the Evoke and Versus products acquired in the Evoke transaction.

Research and Development Expense

Research and development expenses represent costs incurred to conduct research and development, such as the development of the BNA Platform and further enhancing the Evoke product portfolio. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:

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salaries and benefits;

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consulting arrangements; and

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other expenses incurred to advance our research and development activities.

We expect research and development expenses to continue to increase in the future as we further refine and optimize our products and invest in their evolution. It is likely that we will continue to evaluate opportunities and strategic partnerships to acquire or license other products and technologies, which may result in higher research and development expenses due to licensing fees and/or integrations.

Selling and Marketing Expenses

Selling and marketing expenses consist of employee-related expenses, including salaries, benefits, travel, clinical fees and other marketing functions, as well as fees paid for consulting services.

General and Administrative Expenses

General and administrative expenses consist of employee-related expenses, including salaries, benefits, travel and noncash stock-based compensation, and other administrative functions, as well as fees paid for legal, and accounting services, consulting fees and facilities costs not otherwise included in research and development expense. Legal costs include general corporate legal fees and patent costs. We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance, investor relations and other administrative expenses and professional services.

Other (Income) Expense

Other (income) expenses consist primarily of interest bank fees and loan fees, foreign exchange gain or loss and penalties.

Critical Accounting Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and the disclosure of our contingent liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

See Note 3 to our financial statements elsewhere in this Quarterly Report, as well as our previously filed 2024 Annual Report for information about our significant accounting policies and how estimates are involved in the preparation of our financial statements.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table sets forth amounts from our condensed consolidated statements of operations for the three months ended September 30, 2025, and 2024:

		Three Months Ended
		September 30,
		$US, in thousands
		2025				2024				Change ($)
REVENUE		$	388			$	33			$	355
COST OF GOODS SOLD			242				-				242
GROSS PROFIT			146				33				113
OPERATING EXPENSES:
Research and development expenses			378				878				(500	)
Selling and marketing expenses			265				431				(166	)
General and administration expenses			2,007				2,992				(985	)
Impairment of intangible assets			152				-				152
TOTAL OPERATING EXPENSES			2,802				4,301				(1,499	)
OPERATING LOSS			(2,656	)			(4,268	)			(1,612	)
OTHER INCOME (EXPENSE)
Interest and bank fees			(10	)			(24	)			14
Interest income			29				-				29
Foreign exchange gain (loss)			-				(2	)			2
Other income (expenses)			(2	)			5				(7	)
TOTAL OTHER INCOME (EXPENSES)			17				(21	)			38
LOSS BEFORE INCOME TAX			(2,639	)			(4,289	)			1,650
Provision for income tax			-				-				-
NET LOSS		$	(2,639	)		$	(4,289	)		$	1,650

Revenue

Revenue for the three months ended September 30, 2025, was $388, as compared to $33, in the three months ended September 30, 2024, representing an increase of $355, or 1,076%. The increase is primarily due to revenue from the acquisition of Evoke Neuroscience.

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2025, was $242, up from $nil in the same period of 2024, reflecting Evoke product sales and related operating costs. This included an $85 inventory adjustment; excluding this, gross profit margin would have been 60%.

Operating Expenses

Research and Development Expenses

Research and development expenses for the three months ended September 30, 2025, were $378, as compared to $878, for the three months ended September 30, 2024, representing a decrease of $500, or 57%. The decrease was primarily due to equity vesting in conjunction with the merger in August 2024.

Selling and Marketing Expenses

Selling and marketing expenses for the three months ended September 30, 2025, were $265, as compared to $431, for the three months ended September 30, 2024, representing a decrease of $166, or 39%. The decrease was primarily due to a reduction in the use of consultants that were used in a rebranding in 2024.

General and Administration Expenses

General and administration expenses for the three months ended September 30, 2025, were $2,007 as compared to $2,992, for the three months ended September 30, 2024, representing a decrease of $985, or 33%. The decrease was primarily due to the reduction in legal fees incurred during 2024 in conjunction with the merger in August 2024.

Impairment of Intangible Assets

Impairment expenses for the three months ended September 30, 2025, were $152, as compared to $nil for the three months ended September 30, 2024, representing an increase of $152. The increase is due to one of the capitalized upgrades no longer being expected to be utilized as a result of a change in management and subsequent direction. Consequently, the upgrade was deemed fully impaired, resulting in the recording of an impairment charge of $152.

Other Income (Expense)

Other Income (Expense) for the three months ended September 30, 2025, was $17, as compared to $(21), for the three months ended September 30, 2024, representing an increase in income of $38 or 543%. The primary reason for the increase is a result of interest income for held funds during the quarter.

Comparison of the Nine Months Ended September 30, 2025 and 2024

The following table sets forth amounts from our condensed consolidated statements of operations for the nine months ended September 30, 2025, and 2024:

		Nine Months Ended
		September 30,
		$US, in thousands
		2025				2024				Change ($)
REVENUE		$	730			$	55			$	675
COST OF GOODS SOLD			267				-				267
GROSS PROFIT			463				55				408
OPERATING EXPENSES:
Research and development expenses			1,026				1,517				(491	)
Selling and marketing expenses			672				973				(301	)
General and administration expenses			4,968				4,183				785
Impairment of intangible assets			152				-				152
TOTAL OPERATING EXPENSES			6,818				6,673				145
OPERATING LOSS			(6,355	)			(6,618	)			263
OTHER INCOME (EXPENSE)
Interest and bank fees			(153	)			(36	)			(117	)
Interest income			59				-				59
Foreign exchange gain (loss)			(4	)			1				(5	)
Change in derivative fair value			(9,369	)			-				(9,369	)
Loss on settlement of convertible promissory note			(1,353	)			-				(1,353	)
Other income (expense)			(223	)			(22	)			(201	)
TOTAL OTHER INCOME (EXPENSE)			(11,043	)			(57	)			(10,986	)
NET LOSS AND COMPREHENSIVE LOSS			(17,398	)			(6,675	)			(10,723	)
Provision for income tax			4				-				4
NET LOSS		$	(17,402	)		$	(6,675	)		$	(10,727	)

Revenue

Revenue for the nine months ended September 30, 2025, was $730, as compared to $55, in the nine months ended September 30, 2024, representing an increase of $675, or 1,227%. The increase is primarily due to revenue from the acquisition of Evoke Neuroscience.

Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2025, was $267, up from $nil in the same period of 2024, reflecting Evoke product sales and related operating costs. This included an $85 inventory adjustment; excluding this, gross profit margin would have been 75%.

Operating Expenses

Research and Development Expenses

Research and development expenses for the nine months ended September 30, 2025, were $1,026, as compared to $1,517, for the nine months ended September 30, 2024, representing a decrease of $491, or 32%. The decrease is primarily due to equity vesting in conjunction with the merger in August 2024.

Selling and Marketing Expenses

Selling and marketing expenses for the nine months ended September 30, 2025, were $672, as compared to $973, for the nine months ended September 30, 2024, representing a decrease of $301, or 31%. The decrease was primarily due to a reduction in consultant use driven by a rebranding in 2024.

General and Administration Expenses

General and administration expenses for the nine months ended September 30, 2025, were $4,968, as compared to $4,183, for the nine months ended September 30, 2024, representing an increase of $785, or 19%. The increase primarily reflects additional costs related to directors and officers (D&O) insurance following the August 2024 Merger, which accounted for approximately 48% of the increase. The remaining 51% of the increase was attributable to accrued fees associated with the cancellation of the Equity Line of Credit.

Impairment of Intangible Assets

Impairment expenses for the three months ended September 30, 2025, were $152, as compared to $nil for the three months ended September 30, 2024, representing an increase of $152. The increase is due to one of the capitalized upgrades no longer being expected to be utilized as a result of a change in management and subsequent direction. Consequently, the upgrade was deemed fully impaired, resulting in the recording of an impairment charge of $152.

Other Income (Expense)

Other income (expense) for the nine months ended September 30, 2025, were $11,043, as compared to $57, for the nine months ended September 30, 2024, representing an increase of $10,986, mainly due to the change in derivative fair value and loss on settlement of promissory note.

Liquidity and Capital Resources

The following discussion provides an analysis of our liquidity and capital resources and should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included in this Quarterly Report on Form 10-Q. Management evaluates liquidity and capital resources by reviewing cash flows from operating, investing, and financing activities and assessing whether existing cash balances and anticipated cash flows are sufficient to meet current and anticipated operating requirements, working-capital needs, and planned capital expenditures.

For the next 12 months, we expect to continue to incur negative cash flows from operations as we integrate the Evoke and BNA products and continue to invest in the expansion of our sales organization. On April 30, 2025, we acquired all outstanding stock of Evoke for approximately $6,000, consisting of $3,000 in cash and 857,142 shares of our common stock.

Beyond the next 12 months, our ability to achieve profitability will depend on the successful commercialization of our combined Evoke and BNA product portfolio. We expect to incur significant costs associated with continued product development, commercialization, and distribution activities. As a result, we will require substantial additional capital to fund ongoing operations and to implement our business strategy prior to achieving positive cash flows from operating activities.

Until we generate sufficient revenues from product sales to cover operating expenses, working-capital requirements, and capital expenditures, we expect to finance our operations through the issuance of equity, debt financing, or other sources of capital. There can be no assurance that such financing will be available to us on commercially reasonable terms, or at all. If we are unable to obtain additional financing as needed, we may be required to delay, reduce, or discontinue portions of our business plan, which could adversely affect our ability to continue operations.

There is substantial doubt about our ability to continue as a going concern, as evidenced by our accumulated deficit of $108,896 and negative cash flows from operating activities of $6,389 as of September 30, 2025. The report of our independent registered public accounting firm for the year ended December 31, 2024, also expressed substantial doubt about our ability to continue as a going concern.

Management's plan to address the conditions giving rise to substantial doubt includes: (i) disciplined operating expense management and integration synergies from the Evoke acquisition; and (ii) targeted commercial expansion to drive recurring revenue. These plans involve assumptions about capital markets and customer demand that may occur as expected.

Our expectations regarding the sufficiency of our capital resources in the near term and our ability to obtain additional capital in the long term are based on estimates and assumptions that may prove to be inaccurate. As a result, we could exhaust our available capital resources sooner than anticipated and may not be able to obtain additional funding on favorable terms, or at all.

We have no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that would be material to investors.

Cash flows

The following table sets forth the significant sources and uses of cash for the periods noted below:

		Nine Months Ended
		September 30,
		2025				2024				Change
						(in thousands)
Net cash (used in) provided by
Operating activities		$	(6,389	)		$	(4,937	)		$	(1,452	)
Investing activities		$	(2,465	)		$	(401	)		$	(2,064	)
Financing activities		$	11,369			$	4,425			$	6,944

Operating Activities

For the nine months ended September 30, 2025, net cash used in operating activities was $6,389 as compared to $4,937, for the nine months ended September 30, 2024, representing an increase of $1,452, or 29%. This increase in net cash used in operating activities is primarily due to an increase in operating costs, a reduction in liabilities, and costs related to the Evoke acquisition.

Investing Activities

For the nine months ended September 30, 2025, net cash used in investing activities was $2,465, as compared to $401, cash used in investing activities for the nine months ended September 30, 2024, representing an increase of $2,064, or 515%. The increase in cash used in investing activities is primarily attributed to the acquisition of Evoke Neuroscience.

Financing Activities

For the nine months ended September 30, 2025, net cash provided from financing activities was $11,369, as compared to $4,425, for the nine months ended September 30, 2024, representing an increase of $6,944, or 157%. The increase was primarily due to warrant exercises and unit offerings in both March and June.

Recent Financings

June 2025 Units Offering

On June 16, 2025, we entered into the June 2025 Purchase Agreement with the Investors, pursuant to which we issued and sold 400,000 Units, at a purchase price of $3.00 per Unit. Each Unit consists of (i) either (A) one share of common stock, or (B) a prefunded warrant to purchase one share of common stock at a nominal exercise price of $0.0001 per share, to the extent that acquiring the shares of common stock instead of the Pre-Funded Warrant would have caused the investors to own in excess of 4.99% of the outstanding common stock on a post-issuance basis; (ii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $3.50 per share; and (iii) one common stock purchase warrant to purchase one share of common stock over five (5) years at an exercise price of $4.00 per share. The Prefunded Warrant, the $3.50 Warrant and the $4.00 Warrant include a beneficial ownership limitation, which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise any portion of the warrants, to the extent that, after giving effect to such exercise, the holder (together with the holder's affiliates) would beneficially own more than 4.99% of the outstanding shares of common stock immediately after the issuance of the common stock issuable upon exercise. On the same date, the closing under the June 2025 Purchase Agreement occurred, and the Company issued 400,000 Units to investors at a total purchase price of $1,200.

March 2025 Units Offering

On March 28, 2025, we entered into the Subscription Agreement with the Subscribers, pursuant to which we issued and sold 547,737 of March 2025 Units, at a purchase price of $3.00 per March 2025 Unit. Each March 2025 Unit consists of (i) either (A) one share of common stock or (B) a prefunded warrant to purchase common stock to the extent that acquiring the shares of common stock instead of such prefunded warrants would have caused the Subscriber to own in excess of 4.99% of the shares of outstanding common stock on a post-issuance basis and (ii) one common stock purchase warrant to purchase common stock over thirty-six (36) months at an exercise price of $4.00 per share. On the same date, the closing under the Subscription Agreement occurred, and we issued the March 2025 Units to the Subscribers.

The prefunded warrants have a nominal exercise price of $0.0001 (subject to standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions) and may be exercised on a cashless basis. The prefunded warrants also contain a beneficial ownership limitation which provides that the Company shall not affect any exercise, and a holder shall not have the right to exercise, any portion of a prefunded to the extent that, after giving effect to the exercise, such holder (together with such holder's affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days' prior notice to the Company.

In connection with the March 2025 Units Offering, we entered into a finder's fee agreement with Canaccord, pursuant to which the Company will pay Canaccord at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Canaccord, payable in cash; and (ii) the issuance of the Finder's Warrant to Canaccord of up to 7.5% of the Units subscribed for by person introduced to the Company by Canaccord. Each Finder's Warrant will be exercisable to purchase one additional common stock at $4.00 per share for a period of 36 months from the closing of the March 2025 Units Offering.

In connection with the March 2025 Units Offering, we entered into a finder's fee agreement with Research Capital, pursuant to which the Company will pay Research Capital at the closing of the March 2025 Units Offering (i) a payment of up to 7.5% of the gross proceeds raised from subscriptions in the March 2025 Units Offering from persons introduced to the Company by Research Capital, payable in cash; and (ii) the issuance of the Finder's Warrant of the Company to Research Capital of up to 7.5% of the March 2025 Units subscribed for by person introduced to the Company by Research Capital. Each Finder's Warrant will be exercisable to purchase one additional common stock at $3.00 per share for a period of 3 years from the date of issuance of such Finder's Warrant.

Warrants Exercises

Over the week of February 21, 2025, we received total proceeds of $8,825 from the exercise of warrants to purchase 823,530 shares of the common stock, at an exercise price of $6.83, and warrants to purchase 800,000 shares of commons stock, at an exercise price of $4.00, respectively. The warrants were issued pursuant to private placements that closed on August 12, 2024, and December 20, 2024, and no new warrants were issued by the Company as a result of the exercises.

Known Trends, Events, and Uncertainties

We are increasingly reliant on machine learning models for EEG/ERP interpretation. Model performance depends on training data diversity and ongoing monitoring to ensure generalizability. Evolving regulatory guidance (including the FDA's approach to AI/ML-enabled medical devices) and payer expectations could impact timelines and costs. Additionally, our handling of PHI and clinical data requires robust cybersecurity, vendor oversight, and compliance with HIPAA and CFR Part 11. A significant data reach, integrity failure, or model drift could adversely affect adoption, revenues, and our reputation.

As with other companies that are in our industry, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In addition, the emergence and effects of public health crises, such as endemics and epidemics are difficult to predict, changes in Economic and trade policies could have a material and significant impact and the consequences of the ongoing war between Israel and Hamas, including related sanctions and countermeasures and the effects of such war on our employees in Israel, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. Furthermore, other than as discussed in this Form 10-Q, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

Other than as discussed above and elsewhere in this Form 10-Q, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.